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CHRG-118hhrg54726

American Confidence in Elections: The Role of the Election Assistance Commission in Free, Fair, and Secure Elections

United States Congress House of Representatives

[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] AMERICAN CONFIDENCE IN ELECTIONS: THE ROLE OF THE ELECTION ASSISTANCE COMMISSION IN FREE, FAIR, AND SECURE ELECTIONS ======================================================================= HEARING BEFORE THE COMMITTEE ON HOUSE ADMINISTRATION HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ JUNE 14, 2023 __________ Printed for the use of the Committee on House Administration [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] www.govinfo.gov www.cha.house.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 54-726 WASHINGTON : 2024 COMMITTEE ON HOUSE ADMINISTRATION BRYAN STEIL, WISCONSIN, Chairman BARRY LOUDERMILK, Georgia JOSEPH MORELLE, New York, H. MORGAN GRIFFITH, Virginia Ranking Member GREG MURPHY, North Carolina TERRI A. SEWELL, Alabama STEPHANIE BICE, Oklahoma DEREK KILMER, Washington MIKE CAREY, Ohio NORMA TORRES, California ANTHONY D'ESPOSITO, New York LAUREL LEE, Florida Tim Monahan, Staff Director Jamie Fleet, Minority Staff Director C O N T E N T S ---------- Page Opening Statements Chairman Bryan Steil, Representative from the State of Wisconsin. 1 Prepared statement of Chairman Bryan Steil................... 3 Ranking Member Joseph Morelle, Representative from the State of New York....................................................... 4 Prepared statement of Ranking Member Joseph Morelle.......... 6 Witnesses Christy McCormick, chairwoman, Election Assistance Commission.... 8 Prepared statement of Christy McCormick...................... 11 Benjamin Hovland, vice chairman, Election Assistance Commission.. 26 Prepared statement of Benjamin Hovland....................... 28 Donald Palmer, commissioner, Election Assistance Commission...... 43 Prepared statement of Donald Palmer.......................... 45 Thomas Hicks, commissioner, Election Assistance Commission....... 60 Prepared statement of Thomas Hicks........................... 62 Brianna Schletz, inspector general, Election Assistance Commission..................................................... 125 Prepared statement of Brianna Schletz........................ 128 Submissions for the Record Inspector general report......................................... 80 The Brennan Center June 2023 Voting Laws Roundup................. 91 Inspector general management advisory............................ 105 New York Times article........................................... 114 Albert Hunt article.............................................. 119 AMERICAN CONFIDENCE IN ELECTIONS: THE ROLE OF THE ELECTION ASSISTANCE COMMISSION IN FREE, FAIR, AND SECURE ELECTIONS ---------- June 14, 2023 House of Representatives, Committee on House Administration, Washington, DC. The Committee met, pursuant to notice, at 10:07 a.m., in room 1310, Longworth House Office Building, Hon. Bryan Steil [Chairman of the Committee] presiding. Present: Representatives Steil, Loudermilk, Griffith, Murphy, Carey, Lee, and Morelle. Also present: Representative Good. Staff present: Tim Monahan, Staff Director; Caleb Hays, Deputy Staff Director, General Counsel, Acting Parliamentarian; Hillary Lassiter, Clerk; Alex Deise, Elections Counsel, Assistant Parliamentarian; Jordan Wilson, Director of Member Services; Thomas Lane, Elections Counsel and Director of Elections Coalitions; Khalil Abboud, Minority Deputy Staff Director, Chief Counsel; Eddie Flaherty, Minority Chief Clerk; Jamie Fleet, Minority Staff Director; Sarah Nasta, Minority Elections Counsel; Owen Reilly, Minority Shared Staff; and Sean Wright, Minority Senior Elections Counsel. OPENING STATEMENT OF HON. BRYAN STEIL, CHAIRMAN OF THE COMMITTEE ON HOUSE ADMINISTRATION, A U.S. REPRESENTATIVE FROM WISCONSIN Chairman Steil. The Committee on House Administration will come to order. I note that a quorum is present. Without objection, the chair may declare a recess any time. Also, without objection, the meeting record will remain open for 5 legislative days so Members may submit any materials they wish to be included therein. Thank you, Ranking Member Morelle, Members of the Committee, and our witnesses, for participating in today's hearing. The purpose of today's hearing is twofold. First, it serves as a long overdue Oversight hearing with the Elections Assistance Commission, or EAC. This is the Committee's first Oversight hearing of the Elections Assistance Commission since 2011. As Chairman of the Committee on House Administration, I can assure you times are changing. I am excited. We are committed to a robust oversight of our Federal agencies to make sure we are protecting taxpayer dollars. Second, today's hearing will examine what improvements can be made to the EAC through the American Confidence in Elections Act to help improve voters' confidence that our Nation's elections are free, fair, and secure. Congress serves as an important check on Federal agencies to ensure they are fulfilling their purpose. The EAC was established to serve as an independent, bipartisan commission charged with helping voters participate in the electoral process and to help confirm election officials improve the administration of elections. Following the 2000 election, Congress decided that election administration problems were big enough that a new Federal agency needed to be created. In its first 6 years, the EAC doled out $3 billion in Federal taxpayer dollars in grants to States and has spent billions since. While some States have used the money effectively, we know some States have not. As part of the CARES Act, the EAC received $400 million in additional grant funding to prepare for the 2020 election cycle. The GAO found that the EAC is unable to account for the full $400 million due to poor accounting policies. The GAO also found that EAC conducted minimal oversight. Reporting made it--the reporting made, it, quote, difficult to determine how grant funds were spent across States, end quote. The failure to accurately track how States use these Federal grants has potentially enabled significant waste, fraud, and abuse. I am also concerned that some States spent the funds for political purpose rather than improving election administration. Let us look at how California spent their 2020 funds. The State of California was awarded $35 million in Federal funds. California spent the money on a ``get out the vote'' campaign. The campaign targeted specific voters. The contract was awarded through an expedited process. The firm that was awarded the contract was SKDKnickerbocker. SKDKnickerbocker was Biden's campaign advisory firm. If you went to the company's website, you would see they listed themselves as part of, quote, Team Biden. If that is not a conflict of interest, I do not know what is. It is a violation of Federal law to use HAVA grant funds for ``get out the vote'' activity. The former EAC inspector general stated that the contract between the California secretary of state and SKDKnickerbocker presented a risk of improper use that required further examination. The American people demand more transparency and accountability in their Government, especially with respect with to elections. Today will bring much needed oversight to the EAC to examine how we can eliminate waste, fraud, and abuse. In doing so, we can help improve voters' confidence in both the EAC and our election process as a whole. I will now recognize the Ranking Member, Mr. Morelle, for 5 minutes for the purpose of providing his opening statement. [The prepared statement of Chairman Steil follows:] PREPARED STATEMENT OF CHAIRMAN OF THE COMMITTEE ON HOUSE ADMINISTRATION BRYAN STEIL [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] OPENING STATEMENT OF HON. JOSEPH MORELLE, RANKING MEMBER OF THE COMMITTEE ON HOUSE ADMINISTRATION, A U.S. REPRESENTATIVE FROM NEW YORK Mr. Morelle. Good morning. Thank you, Chairman Steil, for welcoming us all today. I want to thank our witnesses for being here this morning. The role of the Election Assistance Commission, EAC, is a critical one. Every American must be able to cast their ballots, freely, fairly, and securely, and to have their vote counted as cast. Voters cannot do that without the hard work of the officials and poll workers who administer elections, and EAC's support of these officials is crucial. The EAC was established more than 20 years ago by the Help America Vote Act, also known as HAVA, with broad bipartisan support. In the past two decades, the EAC has evolved to meet its mission and to adapt new elections landscape. We should maintain this spirit of bipartisan support through all of this. As election-related myths and disinformation has grown, voters bear a growing burden of having to sort fact from fiction. A trusted clearinghouse of information and resources such as the EAC is invaluable to providing voters with resources they urgently need and ensuring election officials have the tools to educate voters and conduct safe and secure elections in an ever-changing environment. The EAC provides assistance as election officials face growing threats and partners with other Federal agencies to address critical infrastructure needs. In recent years, we have seen attempts to undermine public trust and confidence in our elections and the electoral process, and while voter confidence has improved in the last couple of years, having a trusted messenger of election information is vital to our democracy. One of the most significant needs in election administration is robust and consistent funding. Since 2018, Congress has provided more than $950 million in HAVA security grants and $400 million in CARES Act funding, but more is needed. Indeed, President Biden's budget calls for investing $5 billion over the next 10 years, and I fully support the President's budget request. Maintaining our democracy requires resources, and budgets reflect society's priorities. We need to make sure that we are consistent about this because that reflects our support for fair and open accessible elections. The need for funding is acute. Estimates for what it could cost to adequately fund elections over the next decade are in the billions of dollars, billions of dollars. Despite being designated critical infrastructure in 2017, Federal investment in elections is irregular, unpredictable, and insufficient. Simply will not do. We must provide for sufficient, regular, and predictable funding for States and local election administrators through HAVA grants, as well as fully funding the EAC. As a Ranking Member of this Committee and a Member of the House Appropriations Committee, I look forward to working with my colleagues to provide an adequate amount of election funding as an investment in protecting democracy, empowering election officials to do their good work, and to improve and modernize Federal elections. For years, the EAC was underfunded, targeted by my colleagues on the other side with measures to eliminate the agency. I hope we have moved on from the past days, and can all agree that the EAC has a critical role in our electoral process. It should be equipped with the funding necessary to meet its mandate and the evolving needs of our election officials. I was heartened to hear in recent testimony from Vice Chair Hovland and Commissioner Palmer about educational tools the EAC has developed for election officials to utilize new programs the EAC is working on, such as the field services program and the regular engagement of the commission with State and local officials, and other Federal partners. I look forward to hearing from all the Commissioners today about work the EAC is doing with election officials around the country about the implementation of the updated guidelines for voting systems and how the Commission is preparing for the 2024 elections. Additionally, there is always room for program improvements. We all want to ensure taxpayer dollars are spent effectively and efficiently. I look forward to hearing from Inspector General Schletz about opportunities for those improvements. The work we do now laying a bedrock of education about the voting process, strengthening partnerships among Federal, State, and local governments, will further bolster voter confidence under the 2024 Presidential election. The 2020 and 2022 elections showed that our national democratic experiment can hold, but we must remain steadfast in our commitment to democratic principles as we head into this next election cycle. I look forward to hearing from our witnesses today, and thank you all, again, for being here, for the important work that you do each and every day. With that, Mr. Chairman, thank you, and I yield back. [The prepared statement of Ranking Member Morelle follows:] PREPARED STATEMENT OF RANKING MEMBER OF THE COMMITTEE ON HOUSE ADMINISTRATION JOSEPH MORELLE [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. Thank you very much. Without objection, all Members' opening statements will be made part of the hearing record if they are submitted to the Committee clerk by 5 p.m. today. Today we have two witness panels. We welcome the Commissioners on our first panel, and Ms. Brianna Schletz, Inspector General of the Elections Assistance Commission, will participate on our second panel. Commissioners, we appreciate you being with us today, and we look forward to your testimony. Pursuant to paragraph B of Committee rule 6, the witnesses will please stand and raise your right hand. [Witnesses sworn.] Chairman Steil. Let the record show the witnesses answered in the affirmative and may be seated. I will now introduce our first witness panel. Our first witness, Chairwoman Christy McCormick was confirmed by unanimous consent by the U.S. Senate on December 16, 2014, to serve on the U.S. Elections Assistance Commission. Chairwoman McCormick has twice served as Chair and currently serves as the Chairwoman of the EAC and is the designated Federal officer for the Technical Guidelines Development Committee. Our next witness, Commissioner Benjamin Hovland, was confirmed by the U.S. Senate on January 2, 2019, and currently serves as Vice Chairman of the U.S. Elections Assistance Commission and as the designated Federal officer for the Local Leadership Council. With 20 years of experience in elections, Commissioner Hovland's career has focused on legal issues related to campaign finance regulation, the administration of State and Federal elections, including recent poll worker training, voter registration list maintenance, statewide data base matching, voter education, and ballot initiative litigation. Our next witness, Commissioner Donald Palmer was nominated by President Trump, confirmed by unanimous consent to the U.S. Senate on January 2, 2019. Commissioner Palmer is a former secretary of the Virginia State Board of Elections and served as the Commonwealth's chief election official from 2011 to 2014. He also previously served as Florida's State election director. Finally, Commissioner Thomas Hicks was nominated by President Obama, confirmed by unanimous consent to the U.S. Senate in 2014 to serve on the U.S. Elections Assistance Commission. Prior to his appointment with EAC, Commissioner Hicks spent nearly 10 at the Committee on House Administration serving as senior elections counsel and minority elections counsel. We appreciate you being here today and look forward to testimony. As a reminder, we have read your written statement, and it will appear in full in the hearing record. Under Committee rule 9, you are to limit your oral presentation to a brief summary of your written statement unless I extend the time in consultation with the Ranking Member. Please remember to press the button on the microphone in front of you so the Members can hear you. When you begin to speak, you will see a light that will turn green; 4 minutes, it will turn yellow; then it will turn red, and we will ask you to wrap up. I now recognize you, Ms. McCormick, for 5 minutes for the purposes of making an opening statement. STATEMENTS OF HON. CHRISTY MCCORMICK, CHAIRWOMAN, ELECTION ASSISTANCE COMMISSION; THE HONORABLE BENJAMIN HOVLAND, VICE CHAIRMAN, ELECTION ASSISTANCE COMMISSION; THE HONORABLE DONALD PALMER, COMMISSIONER, ELECTION ASSISTANCE COMMISSION; AND THE HONORABLE THOMAS HICKS, COMMISSIONER, ELECTION ASSISTANCE COMMISSION. STATEMENT OF HON. CHRISTY MCCORMICK Ms. McCormick. Chairman Steil, Ranking Member Morelle, and Members of the Committee, thank you for the opportunity to appear before you today to discuss the work of the U.S. Election Assistance Commission as we prepare for the 2024 elections. We appreciate the Committee's crucial oversight efforts and close attention to the EAC. Our Nation's elections have faced increased scrutiny in recent years, and the Committee has responded by demonstrating leadership in helping to support election administrators. By conducting this important series of congressional hearings, the House Administration Committee has shined a spotlight on increasing America's confidence in elections. As you move forward and consider election administration reform, the EAC stands ready to assist and carry out the provisions of that legislation. It is essential that U.S. elections are conducted with integrity and transparency, and are free, fair, and trustworthy. The bipartisan EAC works to uphold this charge each day. Over the past decade, the field of election administration has faced ever-growing challenges and the need for increased technology improvements to our election systems. Many of these challenges, including questions about adequate funding and security for voting systems, are not new. Others, however, have increased suddenly in recent years. For example, social media continues to evolve with new platforms and generative AI tools, making voter education more challenging. In addition to administering elections in voter education, officials must still prepare for cyber, physical, and personal security threats. Many election officials have left the field citing safety, increased requirements and expectations, and a lack of resources. Some communities have seen their entire elections department resign. Now more than ever our election officials need our support. With the help of this Committee, the EAC is determined to do all it can to meet these challenges. Over the past year, Commissioners have redoubled outreach by resuming travel across the country for in-person meetings, presentations, and visits with State and local election officials. Discussions during these visits underscored not only the outstanding work of election administrators in 2022 midterms but also the significant impact of efforts by the Federal Government to provide guidance, monetary resources, and best practice materials. Election officials have expressed sincere gratitude for recent assistance, especially for resources dedicated to safety and security. This includes $955 million in HAVA security grants provided by Congress and administered by the EAC. With support from Congress in the form of increased agency operating budget and more consistent HAVA funding to the States, the Commission continues to fulfill the agency's mission to improve the administration of Federal elections and to help Americans vote. As you are aware, the decentralized nature of U.S. elections results in a wide variety of practices, laws, and regulations. To support the country's multitude of election situations and meet HAVA's charge with developing election guidance, the EAC's Clearinghouse Division has generated a depth of informative products, including updated quick start guides, a new version of the election management guidelines, which is a primary for election administration, guides, checklists, and one-pagers, white papers, simulation videos, toolkits, and other products to assist election officials. These documents reflect the need for unbiased, trusted source of guidance as election officials navigate the complexities of election administration. This is especially important now as we welcome and train the many new officials across country. Earlier this year, the agency hired an experienced Government leader, Steven Frid, to serve as our new executive director. The EAC has also hired needed support staff to assist the election process and specifically the role it plays as critical infrastructure. Additionally, the EAC marked the 20th anniversary of HAVA in 2022, commemorating the historic milestone with the launch of Help America Vote Day and the celebration of the second national poll worker recruitment day. With more than 3,000 countries and thousands of localities, it takes nearly 1 million poll workers to operate election polling sites. This process supports more than 209 million registered voters. The EAC continues to strategically promote election worker information on social media and on our website. We created helpamericavote.gov a permanent outreach platform in 2020 in service of the first national poll worker recruitment day. Over the course of 2022, through the agency's poll worker web pages had over 263,000 page views. We regularly receive modifications from election offices, and based on the responses, information is updated consistently. Looking forward to 2024 with ongoing support from Congress, the Commission will provide the necessary assistance to election officials to mitigate challenges and protect the integrity of U.S. elections. I would like to, again, thank the Committee for its oversight in support of the EAC, as well as for the opportunity to speak here today. I will now turn the discussion over to Commissioner Ben Hovland to discuss the Commission's internal financial oversight and grants management. [The prepared statement of Ms. McCormick follows:] PREPARED STATEMENT OF CHRISTY MCCORMICK [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. Thank you very much, Chairwoman McCormick. Vice Chair Hovland, you are now recognized for 5 minutes. STATEMENT OF HON. BENJAMIN HOVLAND Mr. Hovland. Thank you, Chairman Steil, Ranking Member Morelle, and Members of the Committee for inviting us to testify about the work of the U.S. Election Assistance Commission. My name is Ben Hovland, and I am the current Vice Chair of the EAC. A core component of the EAC's mission is distributing, monitoring, and auditing the use of Federal grants for the improvement of election administration and security. Federal HAVA funds, including the $955 million provided since 2018, are a key resource for election administrators responding to increased technology and the changing demands of the field. To emphasize the importance and impact of this funding, I would note the election infrastructure sector-specific plan states, quote, it is impossible to make an honest assessment of the election infrastructure subsector's risk and the potential to mitigate that risk without an understanding of the chronic resource issues the subsector faces at all levels of government, end quote. As we look forward to 2024, I believe it has never been more challenging to administer elections or more expensive. That is why grant funding in partnership with the States is so crucial, and we value your efforts to address the needs of the State and local governments through the congressional appropriations process. As of this March, 95 percent of the Fiscal Year 2018 election security grant funds have been expended, including additional election security funds from Fiscal Year 2020, 2022, and 2023. States have spent a total of $529 million in funds awarded between 2018 and 2023, which is approximately 56 percent of the available grant funding. The spending rate depends on States' planned use with some States allocating the funds for long-term programs or resources. Some States provide these funds to local governments in the form of subgrants, while others rely on funds for staff and materials of the State level. With each States' different security priorities and timetables for significant purchases, such as voting system replacement or new statewide voter registration data bases, usage rates have varied across the country. The next expenditure reports are due to the EAC on July 30th. As set forth under HAVA, audits of election security grants are conducted after a State begins to expend the provided funds. Alongside distribution and administration efforts, EAC's office of inspector general recently added resources and staff to better monitor State spending of election security grants. With new staff leadership in place, the agency has invested in building up staff capacity strategically across the agency. However, the EAC still faces significant attrition challenges. It is essential that we maintain adequate staffing levels in mission-critical functions to ensure statutorily mandated requirements are met. The EAC's Inspector General has raised structural issues related to HAVA that are discussed in her report on management challenges for the U.S. Election Assistance Commission in Fiscal Year 2023. My colleagues and I concur with those observations and have included them in our legislative recommendations. Of particular note, the inability to pay competitive wages compared to Congress or other Federal agencies hampers our ability to attract and retain talent. We are, however, committed to doing everything we can with the resources we have. The EAC is grateful for the increased funding provided by Congress in recent years. After facing over a decade of significant fiscal constraints, EAC returned to pre-2010 budget levels for the first time in Fiscal Year 2023. For Fiscal Year 2021, and 2022, the EAC successfully adapted and executed the operating budget provided by Congress, ending each year with an obligation rate over 99 percent. Congressional funding has been fully utilized, enabling the agency to provide much needed assistance to address some of the pressing challenges facing the election community. Thank you for the opportunity to testify before you today, and I look forward to any questions you may have. [The prepared statement of Mr. Hovland follows:] PREPARED STATEMENT OF HON. BENJAMIN HOVLAND [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. Thank you, Vice Chair Hovland. Commissioner Palmer, you are now recognized. STATEMENT OF HON. DONALD PALMER Mr. Palmer. Thank you, Chairman Steil, Ranking Member Morelle, and Members of the Committee. I echo my fellow Commissioners in our appreciation of the investment you have made in the Nation's elections through continued support of the EAC. In preparation for the 2024 election, the EAC will continue to test and certify the Nation's voting systems and will continue--and the American public should be confident that their ballot will be counted. In 2023, the EAC will advance our testing and certification efforts in several areas. A voting system certification does not end with a successful test in an accredited laboratory; rather, the review of these voting systems continues during the lifespan of the voting equipment. As a result, the agency is preparing to launch an innovative field services program to help election officials strengthen their overall posture and preparedness with EAC-certified systems. This onsite collaboration is important for several reasons. First, the implementation assisting reviews in the field will ensure that equipment delivered to jurisdictions is equivalent to what was purchased. The effort will analyze system hardware and software configurations to verify the equivalency of the equipment to EAC certifications. Additionally, there will be jurisdiction site surveys of voting systems, the best practices assessments, collection of system census information, and analysis of anomaly reports. We recently onboarded the field services program manager and look forward to building out this initiative. In 2022, the Commission made some considerable progress by fully operationalizing version 2.0 of the Voluntary Voting Systems Guidelines, or VVSG. The new guidelines incorporate technological advancements in cybersecurity, accuracy, accessibility, usability, and audibility. Adoption of the EAC's new lifecycle policy along with the accreditation of two voting system test laboratories are necessary steps toward the realization of voting systems that are VVSG 2.0 tested and certified. The EAC has one system that is being currently tested against VVSG 2.0, and the Commissioners just recently visited the Pro V&V, the test lab, and got to see firsthand some of the testing that is going on in Huntsville, Alabama. We would also like to take this opportunity to emphasize that VVSG 1.0 and 1.1 certified systems will not be decertified by the EAC as a result of migration to the new guidelines. Voting systems that are currently deployed are still accurate and reliable, and they continue to be used and do not need to be immediately replaced or recertified to 2.0. In addition, they will continue to be tested and updated with security patches. It will take time and significant monetary expenditures for jurisdictions to implement VVSG 2.0, so it is unlikely that systems certified to 2.0 will be used in the 2024 elections. Congress and the American people, though, should have absolute confidence in this process. The EAC has amplified this message by publishing a communications toolkit to assist election officials in communicating about VVSG standards, updates in election security, and helping to boost confidence in the critical infrastructure of our election systems. As part of our election technology efforts, the agency launched the Election Supporting Technology Evaluation Program, or ESTEP. This technology includes electronic poll books, electronic ballot delivery systems, election night reporting data bases, and voter registration portals. These crucial election-supporting technologies are crucial tools for both election officials and voters. As more States and localities adopt these technologies, officials are looking to the Federal Government for voluntary standards and guidance similar to what is provided currently in the VVSG. Election administrators today must rely on a patchwork of State laws, regulation, and certification programs of varying degrees and review. An establishment of the EAC program will provide for the development of robust voluntary security standards, testing guidance, and training materials covering these election-supporting technologies. Attacks from nation-state actors against our election infrastructure have specifically targeted election systems as, I pointed out, in the past, and these attacks are only going to escalate. The first technology pilot for ESTEP is electronic poll books, and these are critical election supporting technology for election officials as they are used in the polling place. As the cyber security threat landscape across the election community continues to evolve, the EAC is planning a voluntary coordinated vulnerability disclosure program. The EAC will lead a program to quickly identify and respond to vulnerabilities in our voting system alongside our Federal partners. Development of this program is in its preliminary stages and will require staff and resources to be fully realized. I would like to thank, again, the Committee for allowing us to speak with you today. I will now turn it over--the discussion over to Commissioner Tom Hicks to further expand on the Commonwealth's wealth of clearinghouse products further briefly mentioned by Chairwoman McCormick. [The prepared statement of Mr. Palmer follows:] PREPARED STATEMENT OF HON. DONALD PALMER [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. Thank you, Commissioner Palmer. Commissioner Hicks, you are now recognized. STATEMENT OF HON. THOMAS HICKS Mr. Hicks. Thank you, Chairman Steil, Ranking Member Morelle, and Members of the Committee for having us here today. My name is Thomas Hicks. In addition to the developments my fellow Commissioners have shared, the agency has also invested in increasing our clearinghouse capabilities. The EAC's Clearinghouse Division, composed of former election officials and subject-matter experts, help the agency share and develop resources for both the public and election administrators. In this role, the EAC serves as a trusted source of nonpartisan election information, especially in the ever-evolving election landscape as the field of election administration continues to see high levels of turnover. Leading up to the 2024 elections, the Clearinghouse Division has released more than 60 products over the past 2 years, including a rise--range of best practices and toolkits. Topics range from resources on physical security threats against election officials to EAVS data collection and analysis. Clearinghouse products offer overall guidance to new election officials in conducting elections, such as improving chain-of-custody procedures, auditing, and better serving voters with disabilities. This includes new management guidelines, updates with increased focus on relevant election technologies that have changed since the last release 15 years ago. All of the products developed by the Clearinghouse Division are guided by the parameters set forth in HAVA. We have heard from election officials across the country about the escalation of threats they, their colleagues, and poll workers have faced. The agency has developed and distributed clearinghouse resources and information from other Federal partners, such as our dedicated landing page, as well as issuing guidance with the election security grants assistance. Another issue of concern are risks to the supply chain. While specific rules relating to paper ballot ordering are determined at State level, there are areas where the Clearinghouse Division can provide guidance moving forward, particularly in the event of an emergency. In the summer of 2022, the EAC released an alert about the nationwide paper shortage and guidance on how to plan for depletions of paper inventory on election day. Additionally, States may use HAVA election security grant funding for procuring ballot stock that has security features, such as watermarks and unique ballot identifiers. Our grants team also issued guidance on this matter. The EAC will publish the 2022 Election Administration and Voting Survey, or EAVS, at the end of this month. This biennial report collects data on election administration from nearly 6,500 local election jurisdictions across all 50 States, the District of Columbia, and U.S. Territories. EAVS data is utilized by countless stakeholders in the election community. The EAC also remains committed to election officials fulfilling the requirements of the Americans with Disabilities Act and HAVA's promise of a private and independent vote for all eligible Americans. We have hired a full-time subject- matter expert for accessibility to lead these efforts. The EAC is working on a national study to document the experience of voters with disabilities in the 2022 midterms. The survey will be released this summer. The Commission intends to use the results to produce actionable items that are necessary to meet HAVA's vision of fully accessible elections. Our other voting accessibility resources include toolkits for in-person voting, voter registration, vote by mail, and assistance for voters with language access needs. These language resources were updated following the most recent update to section 203 of the Voting Acts requirements, which requires 333 jurisdictions to provide language assistance. With the 2024 election cycle already here, election officials face an ever-growing list of responsibilities and challenges. The EAC is working diligently to help them prepare for the expected and the unexpected to provide the best voting experience possible for every voter. Thank you for the opportunity to share some of the work of the EAC and your commitment to election administrators, poll workers, and voters. There is still a lot that needs to be done, and we look forward to working with you on these issues. Thank you for the opportunity to testify today, and I look forward to answering questions and feedback you may have. [The prepared statement of Mr. Hicks follows:] PREPARED STATEMENT OF HON. THOMAS HICKS [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. Thank you, Commissioner Hicks. We thank all of our witnesses for being here today. I will begin our questions today followed by the Ranking Member. We will then alternate between sides. I now recognize myself for the purpose of questioning our witnesses. We will hear from EAC Inspector General Schletz soon on the recently submitted OIG semiannual report to Congress. Commissioner and Chairwoman McCormick, you submitted a response to that report 2 weeks ago stating that you were pleased that the California audit recommendations have all been resolved and closed. The audit was conducted because California awarded a $35 million contract through an expedited process to Joe Biden's main election advisory firm. This does not inspire confidence that our funds EAC has a responsibility for are being properly used. Relating to the funds, the EAC budget 5 years ago was $9 million. The 2024 budget request asks for almost $34 million, a roughly $25 million increase from just 5 years ago and an almost 300- percent increase in funds. Commissioner McCormick, has the EAC's jurisdiction increased since its creation under HAVA in 2002? Ms. McCormick. Only by the addition of the Northern Mariana Islands, Chairman Steil. We do have increased work on the Commission. There has been an expansion in concern over cybersecurity. We do have a lot more work to do to train election officials across the country. We do have increased responsibilities with grant management and making sure that the grants provided by Congress are appropriately used. We were also concerned about the California contract between SKD Knickbocker and the California secretary of state's office. In fact, we received several letters from this Committee, and we also asked our inspector general to look into that contract because of the concern of the inappropriate use of HAVA funds for ``get out the vote'' and voter registration activity. Chairman Steil. Commissioner McCormick, I mean, if we look at the website, I mean, SKD Knickbocker, I mean, this was not overly complicated. I mean, you go to their website, and it is Joe Biden for President. They are a--SKD is proud to be part of Team Biden. They are taking $35 million of Federal taxpayer money to run an election. They run an expedited grant process, and the grant process cannot be for ``get out the vote''; it has got to be to properly administer their elections. They give $35 million of Federal taxpayer money to someone that is a proud member of Team Biden, and they expect that the American people should have confidence that there is not political gamesmanship in this grant? Ms. McCormick. We agree with you, Congressman. This is not an appropriate use of HAVA funds, and that is why our inspector general--our new inspector general came in and did an investigation and audit of those HAVA funds that were provided to California. Chairman Steil. What do we do about it? The $35 million went out, went to California, and was spent. What are ramifications for spending $35 million to a proud member of Team Biden? Ms. McCormick. Well, the inspector general's office found that the money that was used for those activities was actually State funds and not HAVA funds. The inappropriate use of those moneys was not by Federal funds. It was utilized by State funds, and she resolved that investigation and closed that question out. However, that does mean we still remain concerned about how HAVA funds are used and whether they are being used appropriately, documented appropriately, and whether they are in--can be reconciled with the plans that the States provide to us on how they are going to use the funds. Chairman Steil. I read your written testimony. In your written testimony, you note that you are going to use some of this increase--the $25 million increase you are requesting--to enhance the auditing and oversight---- Ms. McCormick. Correct. Chairman Steil [continuing]. of the grantmaking. How big is the team now? How big is it going to be? What are your needs in that respect? Ms. McCormick. Well, we have several members of--we have maybe three members in our Grants Division right now. We hope to expand that. We also are expanding--the inspector general is expanding her team as well, and you know, we need to have more resources to be able to have appropriate oversight. One of the issues that we have is that we have a short timeline when we do get this money from Congress to get that money out to the States. That does not excuse us not overseeing those funds appropriately, and it takes resources to do that. We appreciate that Congress has provided that to us. Chairman Steil. In 2022, you had 49 employees. It grew last year to 65. The request is to take it to 87, almost doubling in just 2 years. We think about the new 16 people that you are looking to bring on, you referenced increasing, improving the audit and oversight. Are there other specific things that they are going to work on? Ms. McCormick. Well, we have personnel that we are trying to place into the field to do field services following up on the testing and certification program. Right now we have no visibility of the voting systems once they leave our laboratories. We plan on hiring field service auditors to go out into the country and to make sure those machines stay up to date and are still meeting the certification requirements and to assist election officials in any kind of issues that they have with maintaining their voting systems. Chairman Steil. OK. I am going to go back because I pulled up your--while you are saying--the office of inspector general report, that according to SOS $11.8 million in EAC HAVA funds were used for SKDK contract, $9.9 million of which were CARES Act funds, and $1.9 million of 2018 consolidated funds. I just think it is broadly concerning to the American people when we see the appearance of political activity with Federal taxpayer dollars, and we are looking for an increase in your budget, you are overseeing a lot of the grants that are going out to the States. Some of our States are using these funds in productive and thoughtful ways to better administer elections. The reason I am pushing back is because some States are not, and I am uniquely concerned about this contract with California where they gave it to--all you had do was go to their website, and they were self-listing themselves as a proud member of Team Biden. I think that that should be concerning across the board. I appreciate all of our Commissioners being here. I will now recognize the Ranking Member, Mr. Morelle, for the purposes of asking questions. Mr. Morelle. Thank you, Mr. Chair. A couple things I just point out. I do want to correct the record. I believe EAC Commissioners were here in May 2019 on the question of election security, not 2011. I just wanted to make sure I made that point. I must admit, as much as I appreciate you holding up the Joe Biden for President sign--in fact, you could hold it up behind me, Mr. Chairman--I do want to just take a moment--I only have 5 minutes, but I do want to first of all submit, with unanimous consent, like to submit a copy of the inspector general's actual report on the issue that is being talked about. It is dated February 9th, 2022, and it comes from Inspector General Schletz. I just want to--I will read at least--a couple of things I do want to note since we are going to spend some time here apparently talking about this. First of all, the contract was not sole-sourced. It says that in the inspector general's report. Actually, a number of firms bid on the work, and SKDK was one of the vendors chosen. As it relates to the conclusions of the inspector general, first of all, the--in the first part, Federal funds were not used for registration drives. California launched a public education campaign called Vote Safe California. It indicates that nothing that SDKD--SKDK--I am going to get that right--did not violate anything in that regard nor did the contract, and as it relates to ``get out the vote,'' it says the EAC grants funds for messages educating a specific population about safety voting during the population is allowed. Similarly, EAC said an advertisement directing the public to California's voting website is allowable because the website has additional--educational information on how to vote safely or procedures for voting. We found no specific activities or messaging in the definition of ``get out the vote.'' It concludes--and this is the important part, I would think, the operative part, the conclusion by the inspector general is based on the evidence California secretary of state's office executed the SKDK contract in accordance with EAC guidelines. Funds were not used for unallowable costs, such as registration drives or activities meeting the definition of ``get out the vote''. I just wanted the record to reflect. We can talk about this, I suppose, all day long. The actual inspector general who you are referring to basically concluded that they had followed all the rules, California had, and there is no there there. I just want to just make sure that enters into the record with unanimous consent. Chairman Steil. Without objection. [The report referred to follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Morelle. Using just my last few minutes, perhaps, Commissioner Hicks, our elections environment is constantly changing. Election administrators deal with ever-evolving cybersecurity threats and the rapid spread of mis- and disinformation. We need to consider the physical safety of election workers and now must respond to an increasing number of records requests, analysis requests, and respond to threats AI may pose to us all, and, on top of that, actually run elections. Could you please comment on how increased and reliable funding could alleviate some of this significant burden? Mr. Hicks. Thank you, Congressman, for that question. Increased funding--when we go to election offices, the No. 1 thing they ask for is additional funding. It is usually one or two people in the office that is trying to do nine different jobs in an office. They are looking to--the Congressman--the Chairman had asked a little bit earlier, have we increased our authority. We have not increased our authority, but the scope of your jobs have increased in terms of cybersecurity issues that no one thought of in 2003 and 2002 when HAVA was enacted. Also the fact that we are also fighting nation-states in terms of mis- and disinformation. It is not really feasible to ask a city clerk in a small town to fight against a superpower for mis- and disinformation when the U.S. Government should be doing that. We have worked with our partners, with the Federal Government, that being the DHS. When elections were elevated to critical infrastructure, we were able to do a lot more things in that sort of realm. I do believe that, with increased funding, increased responsibility, we will have to be able to do that so that votes can be counted accurately. Mr. Morelle. Very good. I had a number of other questions, but my time is going to come to an end. Before I do that, Mr. Chairman, I also ask unanimous consent that the Brennan Center's June 2023 Voting Laws Roundup, which found, between January 1 and May 29, at least 11 States have enacted 13 restrictive laws, including 7 that curb access to mail-in voting and an onerous law in Florida which would significantly reduce voter drives in advance of the 2024 election. Chairman Steil. Without objection. [The Brennan Center's June 2023 Voting Laws Roundup referred to follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Morelle. Thank you. Mr. Chairman, I yield back. Chairman Steil. The gentleman yields back. Mr. Loudermilk is recognized for 5 minutes. Mr. Loudermilk. Hit the wrong button. Thank you, Mr. Chair. Thank you to each of our panelists for being here today. Chairwoman McCormick, last year, in 2022, the EAC received $75 million in elections security grants. In 2024, the EAC has requested $300 million in election security grants. Now, my calculation, that is about a 300-percent increase. Now, I know the entire Nation has been affected by the out-of-control Biden-flation that we have right now, but I do not even think that is at 300 percent. That leaves us to question, you know, what are these grants going for, and can you explain such a massive increase? Ms. McCormick. Thank you for the question, Congressman Loudermilk. The EAC itself is not requesting that money for our operations. We constantly hear from States and localities of the need for additional funding. Part of that is they are in the process of purchasing new and updated voting equipment. A lot of the equipment that is out there has been certified to standards that were passed in 2007. We need to update election equipment across the country. Additionally, we need to provide cybersecurity measures on all of the machines and all of our systems to make sure that we are fighting against any kind of intrusion on our election systems. It is a question of national security, and that is why there has been an increase in the request. We are approaching the 2024 elections. We have heard from our partners at CISA and other agencies that they expect a ramp up in attacks on our systems, and election officials need to defend those election systems in advance of the 2024 elections. Mr. Loudermilk. In summary, this is election integrity types of security? Ms. McCormick. A lot of it is election integrity and security. Mr. Loudermilk. OK. Security being securing ballots, securing individuals? Ms. McCormick. Securing the voting systems, securing the ballots, physical security, and cybersecurity. Mr. Loudermilk. OK. How are you going to ensure that the grants are distributed and used properly? Ms. McCormick. Well, there is a distribution formula that we have to follow. We make sure that our grants team follows all the Federal rules on grantmaking and requires all the Federal financial reports and progress reports, which are required usually semiannual. The last tranche of money required them to be filed quarterly. We follow up with the States on any issues that they have in using the grants appropriately. We also, then, make sure that the inspector general is aware of all of the ways that the States are utilizing that money, and she does the audits for the EAC. Mr. Loudermilk. OK. Hypothetically, if the--if there was a suspicion that grants were not used properly, what measures do you take to investigate that? Ms. McCormick. Well, the inspector general is the person who investigates whether funds were used appropriately or not, and then it can mean that that money can be repaid into the Federal Treasury if it is found to be used inappropriately. Mr. Loudermilk. OK. Thank you. On December 12, 2022, the EAC inspector general put out a management advisory, 23-01, over concerns that the Help America Vote Act does not define ``voter registration,'' ``voter education,'' or ``get out the vote''. Yet HAVA funds cannot be used for these purposes. Are you aware of jurisdictions using HAVA funds to engage in these efforts in violation of HAVA? Ms. McCormick. We monitor the use of the election--the HAVA funds, and we have not found that to be the case. We are constantly making sure that the funds are used for allowable purposes only. Mr. Loudermilk. Thank you. I yield my remaining time to the Chairman. Chairman Steil. Thank you very much. I just want to go back to a point my colleague made regarding the grant in California. I just think it is worth taking 10 seconds to clean up. I think it is technically true that the inspector general came back and noted that it was not for a technical ``get out the vote''. The challenge is the OIG issued the alert to the U.S. Elections Assistance Commission to identify risks because of the terms, the following terms ``voter registration,'' ``voter education,'' and ``get out the vote'' are not defined in HAVA, and EAC has not adopted its own formal definition. If we walk away with anything, it is, man, we have got some cleanup work to do to make sure that we are not allowing Federal funds to go to Team Biden to do--get out what I would call, and I think most Americans would call, ``get out the vote'' efforts. I just think that is an important piece cognizant of the time. I will now recognize Mr. Murphy--Dr. Murphy for 5 minutes. Dr. Murphy. Thank you, Mr. Chairman. I appreciate y'all coming today. I had some interesting reading this morning. I just want to--I had not read the President's executive order, and you know guys, I just cannot help think, if we want clear and we want free and fair elections and everybody to vote, to legally vote, how much mail-in voting was pushed. I remember patients telling me so many times that, on different occasions, they would receive five or six ballots in the mail from their neighbors or somebody else. In testimony a few weeks ago, one of the gentlemen noted that secretary of state of Michigan did not want to remove 25,000 dead people on a roll. To push out mail-in voting--I think it is great for our folks that cannot get out, but to push it out, I see no other method that is so ripe for the potential of fraud than mail-in voting. I just--I have to make that comment. I know my Democratic colleagues see very much differently, and the President sure is pushing that, but I just--it just seems like an absolute recipe for attempted fraud in that matter. Ms. McCormick, I am very interested--you know, everybody is talking about cybersecurity. Can you give me an example of what is being done and what we have found in the past as attempts to infiltrate our election process? Ms. McCormick. Thank you for the question, Dr. Murphy. We had found--CISA had found, in the 2016 election, that some of the--some of the nation-state actors had tried to utilize online voter registration systems and other election-supporting technology to intrude into the election system. They were not successful, but we have to---- Dr. Murphy. I just ask--I need specifics on that when they get into the system. Do they mean actually go in and change ballots? What do you actually technically mean? Ms. McCormick. It was not changing ballots, sir. It was getting---- Dr. Murphy. Machines and---- Ms. McCormick. Getting information from the voting registration systems. We do not have the details of that. That is something you would have to ask CISA about. They have not shared that information, nor has the FBI, with us. We do take the security of our systems very, very seriously. We just recently passed an updated version of the VVSG 2.0 that has many increased requirements for security, and I can give you some of those. Dr. Murphy. Let me just continue. Ms. McCormick. Okay. Dr. Murphy. Thank you. You know, with the great Russian hoax that one of our colleagues persisted with a lot of the-- you know, one of the former President candidates, I do not think we have to hopefully worry too much about Russia. I think China is going to be--is right now our greatest enemy. I fear for what they would do. We have a President that is very pro- China, and I am very fearful in that regard. Let me just go back to this executive order. Did you or anybody in your office consult with the White House about this executive order, or did this just come out from somebody in a cubicle with their grand ideas? Ms. McCormick. I am not aware of anyone in our office coordinating with the White House on that order. We are not tasked under that order to do anything. You know---- Dr. Murphy. You are not in charge of implementing anything with that executive order? Ms. McCormick. We are not. We had a couple of Federal agencies ask us for assistance. The National Institute of Standards and Technology asked us for information on--and a white paper on disability as they were tasked to look into disability issues with regard to that order. I believe GSA also asked us for some advice. We did not do anything other than what we already do to reply to that order. Dr. Murphy. Okay. Alright. Thank you. You know, there has been a lot of dark money or whatever, a lot of political influence from people who have a lot of money in this country. Mr. Hovland, can you expound our your support--you had voiced support for Mark Zuckerberg's private funding of the election administration? Why do you think he has the great--since he is one of the richest men in the world, why he should be determining our election outcomes? Mr. Hovland. Thank you for the question, Congressman. I do not believe that he had any determination in the outcomes, and what I testified to House Appropriations in 2021 was that I thought it was unfortunate that our election officials had to be dependent on the charity billionaires, that I feel that it is a failure of Government to not provide adequate funding for elections. I think philanthropic dollars have gone to do a lot of great things, but as far as funding elections, I think that is a responsibility of Government. I think it is critical that we provide adequate funding so that---- Dr. Murphy. You do not feel the actions of Zuckerberg are really a good patriotic thing? That is what I am hearing you say. Mr. Hovland. From interviewing elections officials who received that money, I know so much of it went to get PPE, to have protective equipment, to have hand sanitizer to be able to---- Dr. Murphy. You can understand the appearance of such, that it's influence, and we know of all those things happening. You know, I do not agree with the Supreme Court decision many years ago that allowed all this extra money to come in. I absolutely think it was the wrong thing to do. We just want free and fair elections across this country. Thank you, Mr. Chairman. I yield back. Chairman Steil. The gentleman yields back. I seek unanimous consent to insert the inspector general's management advisory previously referenced. Without objection, so ordered. [The management advisory referred to follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. I now recognize Mr. Carey for 5 minutes for the purpose of asking questions. Mr. Carey. Thank you, Mr. Chairman. I want to thank the witnesses for being here today. I have a series of questions that I want to go to, but I just had one question for you, Ms. McCormick. When we are talking about the needs--the State requests and the needs, and you talk about the distribution formula. I think you mentioned that to the Chairman, there is a formula. I had not seen the Chairman--I had not seen that graph of the President on--before until today, but should that formula--should that not also include making sure that the vendors do not have--do not side with one side or the other, that they are completely bipartisan as it relates to receiving the HAVA grants? Ms. McCormick. The vendors do not receive the HAVA grants, Congressman. Those go straight to the States. Mr. Carey. The States, but then they in turn---- Ms. McCormick. Well, the States usually provide subgrants to their counties. Mr. Carey. Right. Ms. McCormick. Then the counties and the States decide how that money will be used as long as it is allowable within HAVA. The vendors to not receive the money. However, they do get contracted by the States and the local jurisdictions to provide---- Mr. Carey. They do not do it for free, right? Ms. McCormick. The vendors do not do it for free no, sir. Mr. Carey. Where do they get their money? Ms. McCormick. The vendors are hired--the States and local jurisdictions contract with the vendors. Oftentimes, they use HAVA money, but they also use other funds that are provided by the local government. Mr. Carey. The vendor may not receive HAVA grant directly? Ms. McCormick. Correct. Mr. Carey. Vis-a-vis a State or some other entity would then pay the vendor, but it is not directly related to the HAVA grant; is that what you are saying? Ms. McCormick. That is right. I do agree with you that it should be a nonpartisan provision of---- Mr. Carey. Yes. Because I do not--whether it was President Biden or President Trump, it does not matter to me. I am just saying that I think it should be--that entity should not be partisan. Ms. McCormick. I would agree with you, Congressman. Mr. Carey. Okay. One other thing, I was reading through your testimony. You mentioned in here--and again, it is a question. I am not trying to--but you mentioned AI tools making it harder for voter education. Can you just give me briefly because I got some other questions I want to go to? Ms. McCormick. Yes, sir. That is something new that we are now combating and how to respond to possible mis- and disinformation and the use of AI in election information. We have created an internal working group to work on the ways that could happen, and what we might do to combat those AI- generated---- Mr. Carey. I may want to follow up with you on that just because I have a keen interest in that. Ms. McCormick. Sure. Mr. Carey. Mr. Palmer, No. 1, I want to thank you for your service to the country. Appreciate that. Where are most of the election equipment manufacturers, where are they located? Are they in the United States, or are they outside of the United States? Mr. Palmer. The manufacturers themselves are in the United States, yes. Mr. Carey. Do we have any of the manufacturers that are located outside of the United States? Mr. Palmer. No. If you are asking, are the voting machines manufactured overseas, that is yes. Mr. Carey. OK. When the EAC adopts a new VVSG standard, what happens to election equipment certified under a previous standard? Mr. Palmer. Well, it remains certified. We have--those standards were earlier standards. We have new standards. It takes time to migrate to the new higher standards, get the manufacturers to design and bring those to a test lab to be tested. We have full confidence that the systems that we tested are still operational. Those decisions on when to transition to let us say another 1.0 version or the new generation of systems, that is going to be a local decision or a State decision on when they feel they need to move on from their equipment. Mr. Carey. If--they can still be used, in other words? Mr. Palmer. Yes, sir. Mr. Carey. Okay. Are there security threats that exist with still using the older type machines? Mr. Palmer. The--one--yes, I would say, yes, there are security concerns. That is why we take measures like, for example, we have added penetration testing to all our older systems. If there are any updates or upgrades before it goes to a lab, it needs to go through penetration testing. That was a new feature that we brought in. There was concerns, and so we are addressing those. Mr. Carey. Okay. Alright. Well, I want to thank all of the witnesses here today. Mr. Chairman, I yield back. Chairman Steil. The gentleman yields back. Ms. Lee is now recognized for 5 minutes. Ms. Lee. Well, I would like to begin by thanking you for being here today, to have all four of you present with your collective experience and expertise is really valuable thing for us. I thank you for spending your time with us today. Commissioner Palmer, I would like to pick up right where you left off and spend a little more time talking about VVSG 2.0, what that means for the election community, and how it can be implemented. You were speaking just a moment ago in response to Mr. Carey's questions about the continued use of voting systems that had been certified under--and tested under the previous guidelines. If you would share with me a little bit about how, if a State is interested in coming--in using systems that are compliant with 2.0, you mentioned that might take time to do. Share with us a little bit more about the logistical and expense considerations that are associated with replacing and updating a State's certified voting systems. Mr. Palmer. OK, sure. I mean, at the State level, for example, if you want to move to a 2.0 system, the reality, though, is that the manufacturers have to design those systems to meet the new standards. Once they feel confident that they can undergo a campaign at the EAC for that testing, they are going to make a submission. It is going to be tested, and it will eventually be approved or disapproved at some point in the process. That is only the first step. That only makes it available for that vendor to then take it to the States. There may be testing. There may be State testing, but at some point, the goal is to make sure that these are fully tested machines that are available to be purchased by the localities and for use by the voters, but it takes some time because we have got to go through that testing process first to make sure we are confident. Ms. Lee. At this point, have any of the voting systems' manufacturers developed and submitted a voting system that is compliant or that they report will be compliant with VVSG 2.0, or are those still being developed now? Mr. Palmer. We do have one system that is in an accredited lab undergoing testing, and, you know, every day you hear rumors that they will be bringing it in sooner than later, but then things get pushed. I cannot really give any definite details on the calendar or a timeline, but you generally hear that in 1925, 1926, you will have some systems that will be tested and, perhaps, going out to market at some point. Ms. Lee. OK, but so today---- Mr. Palmer. There will not be 2.0 systems for 2024. Ms. Lee. Right now today, even if election officials were interested in converting, there is not a system that is ready, tested, available on the shelf for them to implement that is VVSG 2.0? Mr. Palmer. That is correct, Congresswoman. Ms. Lee. Share, if you would, a little bit more about the testing and the ongoing review and testing for the systems that are currently in use and some of the reasons you have confidence in the fact that they are secure and accurate and appropriate for use in American elections. Mr. Palmer. Well, the testing program does not end. I mean, we do have a lifecycle policy that we will continue to test these systems until 1 year after there is a new system in place, and so there are still systems that are being submitted, and we are undergoing testing. The Federal testing is really the first step. You know, we do have the penetration testing that we undergo at the Federal level, and then a lot of States will have their own testing program to either supplement that process. Then voters should be confident, the localities. They do logic and accuracy tests on the front end and after an election. It really is sort of an overwhelming number of sort of audits that take place and sort of testing of the voting equipment, and these are why we can be confident that the systems that are on the street, to say, are still as reliable and accurate as they were, you know, 6 months ago. Ms. Lee. You just touched on another thing that I think is so important and that is opportunities for the public to be engaged and to observe both in the development of new standards and also the testing of equipment and these pre-imposed election audits that occur. Would you share with us--and I know you have multiple forms of experience that are relevant to this question, both as an EAC Commissioner and as a former State elections director. Share with us, if you will, some of the opportunities for the public to be a participant, an observer in the development of new technology standards and also the testing of this equipment. Mr. Palmer. Well, the public had a large role in the development of these standards. When you go back to 2.0, that process of developing standards for 2.0 involved election officials, but it involved experts. It involved the public. It was out for public comment multiple times. When we would have hearings with our advisory boards, made up of election officials and experts, the public was often available for public comment. Then, when, you know, when you go to any State, for example, we were in Louisiana, Commissioner Hicks and I, on their discussions on new voting systems, and they would bring in the EAC and other experts to talk about what the standards would mean, what were the new security standards, what were the new audit standards. The public was there to make comment and to hear that testimony, including legislators and Congressmen. Ms. Lee. Alright. Thank you all. I have used my time. Thank you all again so much for being here. Mr. Chairman, I yield back. Chairman Steil. The gentlewoman yields back. I request unanimous consent to enter into the record two articles. Anita Dunn was the managing director of SKDKnickerbocker, and so I seek unanimous consent to enter into the record a New York Times article titled ``Strategizing for the President and Corporate Clients, Too,'' from 2012, as well as an article published by Albert Hunt, ``Biden Needs to Institute a New Era in Public Ethics.'' Without objection, so ordered. [The articles referred to follow:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. In consultation with the Ranking Member, we have one more Member who is in a foot race to get here. Knowing that we would otherwise switch panels, I ask our witnesses just to stand by for 2 minutes, with the hope that Mr. Good makes it before we wrap up this panel. We will pause in place for about 2 minutes. [Recess.] Chairman Steil. Alright. As our colleague gets seated, I will add one note here. Pursuant to paragraph (h) of Committee rule 9, and in consultation with the Ranking Member, I move that counsel for the majority and counsel for the minority be permitted to question our witnesses--we will utilize this on the next panel--our witnesses for up to 20 minutes, the time equally divided and available in 5-minute increments. Without objection, so ordered. Again, that will be for the next panel. Mr. Good, are you---- Mr. Good. All good here, sir. I am ready to go. Chairman Steil. We appreciate you coming. Mr. Good. I think that is on. Chairman Steil. Alright. Mr. Good. It is taking a moment. If you would hold the clock for just a few seconds until it--we have got the old spinning going on here. The answers are in here. Actually, the answers are over there, right? Mr. Chairman, I am sorry, but it is taking a moment here. Chairman Steil. Take a second. Mr. Good. Alright. We are pretty dang close now. OK. Thank you. Chairman Steil. We appreciate you being here, Mr. Good. We have waived Mr. Good on from the great State of Virginia. Mr. Good, you are now recognized for 5 minutes for the purpose of asking questions. Mr. Good. Thank you very much, Mr. Chairman. Thanks for letting me join this Committee for this special hearing today. I have got a couple of questions for Commissioner McCormick, if I may. In June 2022, the Cyber Infrastructure Security Agency, or CISA, conducted a vulnerability analysis of Dominion Voting Systems Democracy Suite ImageCast X, which is an in-person voting system used to allow voters to mark their ballot. CISA's report outlined nine vulnerabilities. With that said, how confident are you that our voting systems can be protected or even ideally made immune from hacking or other vulnerabilities? Ms. McCormick. Thank you for the question, Congressman Good. No system is immune from attack, but we do our best to protect the systems, and we are working to increase the security on our systems with our new VVSG 2.0 requirements. Additionally, we will be starting a consolidated vulnerability disclosure program to make sure that any kind of vulnerabilities are identified and addressed in a very efficient and quick manner to make sure that the voting systems remain secure. We also are just going to see the report ourselves today. We are interested in looking at that report, and we understood from the CISA's report of reviewing the Dominion machines that most of those vulnerabilities have been closed. Mr. Good. If you were going to compare how protected versus how vulnerable, say, November 2020, compared to how you hope it to be in 1924, how would you sort of quantify that in a guesstimate, an estimate? How much better are we, hopefully, in 1924 than we were maybe in 1920? Ms. McCormick. You know, we did not see any vulnerabilities exploited in 2022, and I think we would---- Mr. Good. Not any? Ms. McCormick. We did not see them exploited, no, sir. We believed that the machines were secure in 2022, and they will be secure or more secure in 2024. Mr. Good. Well, we all certainly hope so and trust so. The National Election Defense Coalition, according to them, has said that e-voting machines have added and subtracted votes not cast by voters, changed voters' choices on the screen, given voters the wrong ballot, passed pre-election testing and failed on election day. You know, they passed the pre-election testing, but they failed on election day, reversed election outcomes, broken down generally, and just caused long lines during elections. That is according to the National Election Defense Coalition. I will tell you, we held a roundtable discussion on this issue in my district, three Members of Congress and a number of State delegates and senators in Virginia and had some experts come in. I can tell you that I witnessed, I witnessed a demonstration. I am trying to bring it before this larger body. I and my colleagues witnessed a demonstration. This is a part-- this was a few months ago, apart from an actual election. It was not part of the--but where a tech expert appeared to hack into the voting systems and change results before our very eyes. We watched it happen. Changed things, changed them back to show us how easy it was to do. The CISA report--well, let me just pause. What is your reaction to that? Ms. McCormick. I am not aware of the demonstration that you are talking about. I would be interested---- Mr. Good. Right. You would not be aware of that, but I am saying I watched this by this whom I believed to be a credible, trusted resource, do this before mine and two other colleagues' eyes, along with a number of other individuals that were there. What I mean is just the fact that that could possibly happen, what would be your reaction to that? Ms. McCormick. Well, I think, yes, vulnerabilities can be exploited for sure, but it depends on the environment we are in, how the setup is, how much time people have, what the machine is, has it been certified. There are a lot of questions that would need to be answered, and we would love to be able to see that and look at it. There are definitely anomalies that happen in the systems, but we do have a defense in-depth program through our VVSG and through other programs through CISA, and we are working to keep those machines as secure as possible. Mr. Good. To my colleagues on this Committee, we would like to try to bring this individual before individuals on this Committee. The last thing I will just ask: What is the likelihood that a foreign power, such as China, who has, obviously, an active spy operation, including trying to put the facility in Cuba, that they could leverage vulnerabilities for their interest with our election system? Ms. McCormick. Well, our machines are not--our voting systems are air gapped from the internet. It would be difficult for them to get to every machine across the country to exploit any kind of vulnerability. Mr. Good. Did I understand you to say they are gapped, meaning disconnected from the internet? Ms. McCormick. Correct. Mr. Good. OK. The demonstration I saw literally was through the internet, connecting that I saw. Ms. McCormick. Well, our machines are not connected to the internet, and they are not connected to each other. Each machine stands on its own. There are cases where the machines do get connected at the time that results are modemed in, in some cases. We require an air gap system in 2.0, and we will make sure that the machines are not connected to the internet. Mr. Good. Thank you, Commissioner. Thank you, Chairman. I appreciate it. Chairman Steil. The gentleman yields back. We thank our colleague from Virginia for joining us today on the Committee on House Administration. We thank our witnesses today for appearing before us. It has been very helpful. Members of the Committee may have additional questions for you, and we ask you please to respond to those questions in writing. We will dismiss this panel, and we will begin our second witness panel momentarily. Thank you for being here. [Recess.] Chairman Steil. I am going to bring us back to order, if everyone is ready. Ms. Schletz, we appreciate you being with us today and look forward to your testimony. Pursuant to paragraph (b) of Committee Rule 6, the witness will please stand and raise your right hand. [Witness sworn.] Chairman Steil. You may be seated. Let the record reflect that the witness responded in the affirmative. I will now introduce our witness. Inspector General Schletz was appointed unanimously by the Commissioners of the U.S. Election Assistance Commission and began serving as the inspector general in November 2021. Prior to assuming the role of inspector general at the EAC, Ms. Schletz spent 8 years at the U.S. Agency for International Development Office of Inspector General where she served as director and established a new strategic division within the office. As a reminder, we have read your written statement, and it will appear in full in the hearing record. Under Committee Rule 9, you are to limit your oral presentation to a brief summary of your written statement. Please remember to push the button on the microphone in front of you. After 5 minutes, we will ask you to wrap up. Thank you for being here today, and I now recognize you, Ms. Schletz, for 5 minutes. STATEMENT OF BRIANNA SCHLETZ, INSPECTOR GENERAL, ELECTION ASSISTANCE COMMISSION Ms. Schletz. Thank you, Chairman Steil and distinguished Members of the Committee for inviting me to testify about the work of the office of inspector general of the Election Assistance Commission. We appreciate your interest and ongoing support for our work. Our mission is to safeguard the Federal investment in our electoral system by conducting objective and meaningful oversight. We do this through audits, reviews, investigations. Much of our work is mandated by the Help America Vote Act and the Inspector General Act. EAC funds and assists States and territories in improving election processes, and it is our role to offer information and recommendations that will help EAC build and run programs that promote public confidence by preventing waste, fraud, and abuse. I am proud that our efforts contribute toward ensuring confidence in America's election process. OIG's vision is to operate as a high-performing organization and help EAC be as efficient and effective as it can be. Our office has grown to a staff of now six, as of yesterday, allowing us to conduct audits with independent public accounting firms and also with our own team. We demonstrated that conducting work internally allows us to be more nimble and more responsive to incoming requests and areas of risk. For example, we recently identified issues with EAC's contracting practices. We investigated the problem. We issued an advisory to alert them, and then we announced an audit so that we can understand the scope of the issue and make recommendations for improvement. Another risk area that we are watching closely is related to grantees using HAVA funds for voter education. We issued a management advisory in December to alert EAC to the related risks because terms, such as ``voter education'' and ``get out the vote'' are not defined in HAVA. Our office maintains an OIG hotline for EAC employees and members of the public to report suspected fraud, waste, abuse, and mismanagement. Our increased stakeholder outreach over the last year has resulted in an awareness that our office exists, what our role is, and that this reporting mechanism is out there. As a result, we processed 375 unique hotline complaints in the first half of Fiscal Year 2023. We refer to the Department of Justice and the FBI any potential criminal acts related to Federal elections and voter fraud, and when we get complaints related to voter registration or the administration of elections, we refer individuals to the appropriate State election office. Our team reads every complaint that comes in, and to be responsive, when we noticed an up tick related to the misunderstandings about EAC's testing and certification program, we launched an audit. That recently issued audit report includes seven recommendations to improve the program. I commend the EAC staff and the Commissioners for their commitment to the mission of the Commission and supporting election officials in the spirit of HAVA. OIG is required to report annually on management challenges facing the EAC, and last fall we outlined four challenges impacting the EAC that I will discuss briefly. The first relates to balancing expectations of funding, and the second addresses challenges with attracting and retaining a highly skilled workforce. EAC's budget recently increased, and with that increase, it must responsibly spend the funds while meeting stakeholder's expanding expectations. However, we have noted that conditions, such as salary caps, make that difficult for EAC to attract and retain staff. EAC is using some of the additional resources it received to buildup divisions, and as new staff enters the agency, there is an expanded need for strong policies, complete records, and standard operating procedures. Our work has noted areas where EAC is making progress and others that still need attention. The third challenge relates to meeting customer service and critical infrastructure goals. Stakeholders are increasingly calling on the EAC to communicate election information at the Federal level. For EAC to fulfill its role as a customer service agency supporting critical infrastructure, it must continue to overcome challenges related to Federal coordination, Paperwork Reduction Act, and visibility, as not everyone is familiar with the EAC. Last, providing effective oversight of grantees. The EAC awards grants and monitors how States and territories spend those funds. We have noted that EAC's ability to do this can be hampered by both the grant type and grantee capacity. We acknowledge that EAC has taken some steps to strengthen its grant oversight, invested in a grants management system, and added new staff to its team, but our recent reports highlight the need for continued diligence in this area. For our part, OIG has seven ongoing HAVA audits right now. We are also being more strategic about how we do our work. For example, we recently announced an audit of 34 States' compliance with the requirements for interest earned. Our goal with that audit is to understand the challenges related to the requirement and then to also identify best practices to help grantees navigate it in the future. In conclusion, I want to thank you for the opportunity to provide this testimony on OIG activities. Our accomplishments are a credit to the dedicated staff that I have the privilege to lead, and I am thankful for their hard work. We are committed to independent and transparent oversight. As State officials work to prepare for the 2024 election, we realize the importance of ensuring that EAC is set up to support them. We believe our oversight can help position EAC to do just that. Thank you. I am happy to address any questions. [The prepared statement of Ms. Schletz follows:] PREPARED STATEMENT OF BRIANNA SCHLETZ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Steil. Inspector General Schletz, thanks for being here. Thanks for your testimony. We will begin with questions from Members. We will then proceed to questions from counsel, both from the minority and majority side as well. I will now recognize myself for 5 minutes for the purpose of asking questions. Ms. Schletz, you recently submitted a report at the EAC OIG, a semiannual report to Congress, and I want to discuss some of the key findings in there. At the time the report was submitted, your office, you said, processed, I think you said, 175--I had 174 in my notes--unique complaints so far this fiscal year. That is already an increase over the last Fiscal Year in 2022, which I believe had about 271 complaints that came through. Are there any common themes that you are seeing inside the complaints over the last 2 years or so? Ms. Schletz. The complaints vary. What we do see is an up tick when States are having elections. We will see more things come in. Quite a few of our complaints are related to the administration of elections. We are referring States to the right officials within that State to get closure on whatever that allegation may be. I cannot say that we have seen a specific trend, but I do have a breakdown of even more---- Chairman Steil. Let me dive in maybe then specifically, so--if nothing jumps out to you. As we think about this last year, Georgia passed a voter integrity bill, made a lot of noise, right, a lot of news came out of this. The President of the United States called it Jim Crow 2.0. Major League Baseball took the All-Star Game and moved it out of Atlanta, really draconian and over-the-top rhetoric from my colleagues on the left. Did you see a huge up tick in calls from the State of Georgia following the passage of this law? Ms. Schletz. No. I can say that, for the fiscal 2023 numbers, what we have seen, we had 374 unique complaints and only 5 of those involved Georgia. They all were around the general election and the Senate runoff. Chairman Steil. Less than 2 percent fiscal year, for folks that maybe are not always aware of fiscal years. There are annual years. You guys run on fiscal year, and Congress runs on a fiscal year, but that includes the election. Ms. Schletz. Yes. Chairman Steil. The election of last year, in 2022, after, quote, Jim Crow 2.0, voter integrity laws are passed in Georgia, less than 2 percent of your calls came from the State of Georgia. Is that accurate? Ms. Schletz. Yes, I can say only five involved it. Chairman Steil. Five out of 375. Less than 2 percent. The reason I say 2 percent is because it was randomly averaged over 50 States, and Georgia is bigger than average. It should show up at an even larger percentage if we assume it is based on population. What we are seeing is no real up tick at all. Why? Because people actually like the voter integrity law that was passed in Georgia. The evidence not only shows up that people are not calling in because they do not have compliance; it also shows up because people were happy, if you look at the polling data on how people felt about the process of voting in Georgia. Also, voter turnout increased in the State of Georgia and across all key demographic groups. Let me shift gears, if I can. Again, your office recently completed the audit of HAVA funds, and particularly as it relates to the CARES Act, awarded to California. How much money was awarded to California? Ms. Schletz. They had a total for all of the HAVA funds of $216.3 million. Chairman Steil. $216.3 million total funds awarded to California. Was the main group--the main group that it was awarded to in California was what firm? Ms. Schletz. Oh, so that is the total pot of money of election security funds, 251 funds, the 101 HAVA funds, and then also CARES funds. Chairman Steil. Then the CARES funds. Ms. Schletz. Okay. If you are speaking about the CARES funds, let me get you the exact number. I believe you are referring to the SKDK contract, how much was awarded there? Chairman Steil. Yes. Ms. Schletz. What we found is that $11.8 million in EAC HAVA funds were used for that contract. $9.9 million of those were CARES Act funds. Chairman Steil. Does it concern you that this entity, through an expedited grant process, has ties to the Biden campaign? Ms. Schletz. We issued a December advisory that outlined some of the risks that we see with there being no mention in HAVA about restrictions around voter education campaigns. We think it is just an area of risk in general. Chairman Steil. Would you recommend that policymakers put in place parameters to make sure that these types of grants are not going to entities with clear political, ideological leanings? Ms. Schletz. It is always, yes, more helpful for us to have strong criteria to audit against. Without that, we are reliant on kind of the EAC and what their guidance is on each individual case-by-case basis on a State. That is what we point out in the advisory, that that just raises increased risk that you are not providing the same guidance to each State without-- -- Chairman Steil. I appreciate that. I think you pointed out a huge risk, and I think it is incumbent upon EAC and policymakers to put forward the guardrails that are needed to make sure that grant funding does not go to entities where you can simply go look on their website and claiming that they are part of a Presidential campaign. I think that is an affront. If you told somebody in Wisconsin we spent millions of dollars and gave it to an entity that was part of Team Biden or team anybody, I think they would look at you and think you are nuts. That is what happened, and I think we have got to put the guardrails in place, and I appreciate your review and examination. I now recognize Mr. Carey for 5 minutes for the purpose of asking questions. Mr. Carey. Thank you, Mr. Chairman. I want to thank the witness for being here today. Can you briefly describe the audit process at the EAC? Just kind of briefly describe how you go about doing that. Ms. Schletz. Sure. We do a risk-assessment process to determine what we are going to audit. We have a couple different types of audits. Some of our work is mandated by law, and those are, you know, required audits that we do annually. We also have the HAVA audits, which we do that based on a risk-based approach to determine which States are audited. Then we have discretionary audit work. The discretionary audit work is often launched when there is a risk area that we see or like a complaint comes in. For example, the testing and certification audit. We were getting, you know, additional complaints around that. We launched an audit to describe it. That is how we select an audit. Did you want me to also touch on the process or? Mr. Carey. Yes, I mean, because where I am going to go is in HAVA funds. Ms. Schletz. OK. For the HAVA funds, yes, we make a determination if we are going to do the audit internally or if we are going to hire a contracted independent public auditing firm or accounting firm in order to conduct that work. We have a scope determined of how many or how much of the funds is going to be audited, and then that audit follows the normal audit procedures. Mr. Carey. How many would you say were done? Ms. Schletz. We have--let me pull up the numbers. We currently have five ongoing audits that an independent public accounting firm is conducting. With the conclusion of those five audits, all States and territories will have been audited once at least. That was our goal is to get there. The additional factors that impact whether we are auditing can be, you know, if complaints come in, if something is raised from the grants team, we might highlight it for an additional audit, or if the findings are particularly significant. Mr. Carey. Along with that, so what steps does the EAC take to--how do I want to say--how do they respond to the audits? Ms. Schletz. EAC? Mr. Carey. Yes. Ms. Schletz. EAC is the responsible party for working with the State in order to close recommendations. They sort of act as an intermediary, as, you know, the one issuing the grants. We or the audit firm would put our recommendations to the State for things to correct our findings. EAC would be the one that looks at whatever they return and determines closure on those recommendations. Mr. Carey. Let me ask you--and, again, and probably some of my colleagues probably understand this process a little better than I do. When you make the recommendations or you say that these are the things, who rectifies the things that you have identified that are issues? Ms. Schletz. That would be the State office that is responsible for receiving the grant money. It can vary from State to State, but it would be the office within the specific State or territory that receives grant funds. Mr. Carey. What happens if they do not rectify? Ms. Schletz. The recommendation would remain open. I can, you know, say right now typically States have been pretty good about closing those. Right now we have eight open recommendations, four for the Northern Mariana Islands and four for Delaware. Mr. Carey. In the case where you have recommendations, what generally is the timeframe that you see on average per State or territory that they rectify? Ms. Schletz. Typically, we like to see closure within 6 months, but we understand that, in some cases, depending on what the recommendation is, that could take longer. Usually the target is 6 months. Otherwise, those are reported in our semiannual report to Congress as open recommendations, open longer than 6 months. Mr. Carey. How many would you say have not been--do you have some that still--you have eight. You said five ongoing investigations or audits right now? Ms. Schletz. We have five audits, seven that we plan to start within this fiscal year. Mr. Carey. Okay. Then you have eight that are ongoing, you said? Ms. Schletz. I am sorry. We have eight that we expect by the end of the fiscal year. Two HAVA audits have been issued this fiscal year, and then we plan to start six more. We have quite a few that we are trying to do this year. Mr. Carey. Let me ask you: Are there any steps that the EAC should be taken that they are not taking in response to your audits? Ms. Schletz. I think the EAC generally has been responsive to our recommendations and working with the States in order to resolve those things. There are some areas where there could be improvement. Mr. Carey. Could you maybe elaborate on what you think there could be improvement? Ms. Schletz. Sure. We have noticed that there could be opportunities for capacity building. Specifically, we saw that with the Northern Mariana Islands. They just did not have the internal controls in place in order to receive those funds. They received them for the first time in 2020. I think that is an area for improvement. Additionally, we have identified findings where the Federal financial reports that are required to be submitted do not reconcile to the general ledger. That is an area where EAC oversight, you know, getting those Federal reports, they could be checking things like that. Mr. Carey. Well, listen, I want to thank the witness. Thank you for your time. Mr. Chairman, I yield back. Mr. Loudermilk. [Presiding.] The gentleman yields. Okay. I now recognize myself for 5 minutes. I apologize. I am popping in and out from different hearings. Ms. Schletz--Schletz? Is that right? Ms. Schletz. That is correct. Mr. Loudermilk. Alright. In March 2023, your office completed an audit of the EAC's testing and certification program. What was audited, and what led you to conduct the audit? Ms. Schletz. Yes. That audit was initiated based on us getting an up tick of complaints into our hotline mainly related to concerned citizens that had a misunderstanding of how the program operated. We launched that audit with two objectives. One was descriptive in nature, to just describe the program. The second that was going to identify or was meant to identify factors that could be improved on the program or that impact the program. Mr. Loudermilk. Okay. Did you have any key findings of the audit, and what were they? Ms. Schletz. Yes. We, I think, overall, on that first descriptive objective, found that the EAC has a robust lab accreditation program and voting system certification process. However, the second objective that we had noted some areas that the program could be improved, specifically related to stakeholder coordination, policies, procedures, communication, and staffing. Then we also found that they had not done a formal assessment of risk with the program, which could help them in determining, you know, areas to focus attention or where staffing resources are needed. Mr. Loudermilk. Did you recommend any actions in response? Ms. Schletz. Yes. We made seven recommendations in that report. Mr. Loudermilk. Okay. I do not have any other questions at this time. I now recognize the majority counsel for 5 minutes for questions. Mr. Hays. Well, good afternoon at this point. It is a little bit different being in this seat, and it is nice to see you in person, Ms. Schletz. We have really appreciated your regular contact with Committee staff and the updates that we have done virtually. Thank you for being here today. I want to start going back to the management advisory that Mr. Steil was discussing earlier. It was Management Advisory 2301 that was released by your office on December 12th of last year. This is the one where you were discussing the difficulties that States have because the terms ``voter registration,'' ``voter education,'' and ``get out the vote'' are not defined in HAVA. That creates some of the, I think generously we will say, confusion, perhaps, that happened in some States. Are there other areas of Federal law that you are familiar with that might define these terms that the Commission could look at for some guidance? Ms. Schletz. Yes. Our advisory pointed out I believe two differing definitions. One being the Bipartisan Campaign Reform Act of 2002 offers a definition, and then also there is another definition that we pointed to as well that could have been used. Mr. Hays. Do you recommend that the Commission adopt one of these existing definitions, as opposed to writing its own? Ms. Schletz. I do not know that we have an opinion about that. It is more just helpful if there is clear guidance so that when we are looking at things, it is easier for us to identify if the cost is allowable or not. Mr. Hays. Understood. Has the Commission, EAC's guidance on these terms, the three I mentioned, has it always been the same, or has it evolved a bit over time? Ms. Schletz. Historically, what we have seen is there has been quite a few previous OIG reports that have pointed to challenges around this area. I am not sure if their definition has necessarily evolved or stayed consistent, but we do know that, you know, the findings related to this have been at least 19 recommendations and over a million dollars questioned. I will say many of those end up not actually being sustained question costs because the EAC determines that the cost is allowable. I think that, for us, is where it is a challenge. Mr. Hays. Where it is difficult to understand getting to allowable whenever there is not a set definition? Ms. Schletz. Correct. Mr. Hays. Can you talk about the importance of consistency--not just with these three terms but consistency with guidance and definitions given to States on how to use HAVA grant funds and why that is important? Ms. Schletz. Sure. The criteria, like the Uniform Federal Guidance that guides all grants, that is very prescriptive. It has a lot of guidelines, and that is on purpose so that it is very clear when someone wants to know if they can do something or not, they can go and look that up. I think without having that consistent guidance, what we have found is it is often a grant team member providing guidance to a State on a one-off basis either through email or through even a phone call. That makes it very difficult for us to track, you know, that there is consistency and then also just that the communication is clear. Mr. Hays. It is probably all very well-intentioned. You know, this is a big process, but the way that this works is someone is going to call in and ask the question, and they want to get an answer. I think we understand that, but we definitely, on the staff, have been very in favor, as you know, of encouraging the development of consistent definitions to help our State partners. Going back to these definitions, has your office thought at all--you know, we are talking about where this is in the code or otherwise. Would it be more helpful for Congress to add definitions to HAVA itself? Or is this something that the Commission is able to do, that you would recommend that they would do and handle on their own? Ms. Schletz. I think it is kind of up to the legislators to decide. The way it stands right now, there is nothing in HAVA restricting the funds from being used, and what the restriction is, is it is through an EAC advisory opinion. The Commissioners essentially voted to put some limitations on those funds. When you are asking if they could put further limitations, yes, they could. If I think that it should be in HAVA? I mean, I think if there is an interest in putting more guardrails on the funds, and there are certain things that the voter education should or should not be spent on, then that could be in HAVA as well. Mr. Hays. Very good. Okay, so I have about a half a minute left. We have been watching. We saw, of course, that the territories that had been left out of HAVA, just because they had not sent a delegate to Congress at that point, the Commonwealth of the Northern Mariana Islands, has recently received HAVA funds, and there has been an audit process going through there. It is the first time that they had HAVA funds. Can you talk just a little bit about the work that your office does to make sure everyone stays on the straight and narrow? Ms. Schletz. Yes. This specific one was flagged for us by the grants team because the Northern Mariana Islands were not doing their regular reporting requirements. We initiated an audit internally with our own staff to take a look at things. I think there is an opportunity here. There was a need for the money and an opportunity to do capacity building. I acknowledge that they received the funds during the pandemic. It made a site visit challenging, but that would have been a helpful thing for the grant team to do. Mr. Hays. Very good. Thank you, Mr. Chairman. Mr. Loudermilk. The Chair now recognizes minority counsel for 5 minutes for purposes of asking questions. Mr. Wright. Thank you, Mr. Chair. Inspector Schletz, good afternoon to you as well. Thank you for your hard work of the Commission and on behalf of the American people. It has been, I agree with my colleague, wonderful chatting with you in advance of this hearing and our ongoing oversight work. I wanted to pick up a bit where my colleague started, and you have done a bit to contextualize your management advisory as well. A lot of discussion today about California and the conduct related to the CARES Act funding for California, which your February 9th letter that the Ranking Member introduced into the record demonstrates that those funds were used appropriately and were not used for GOTV funding. Your management advisory also lists the 19 recommendations and identifies specific States that were flagged for using those funds, including Mississippi, Florida, South Dakota, and Colorado, among others. I want the record to be clear on that fact. Am I correct in that assessment? Ms. Schletz. Can you repeat that? I sorry. Mr. Wright. Yes. Am I correct in my assessment that other States have been flagged for recommendations on using funds for GOTV and voter registration? Ms. Schletz. Yes, that is correct. Mr. Wright. Great. Thank you. I want to draw your attention to the Ace Act as introduced in the last Congress. One of the provisions provides a statutory cap on your office at seven full-time employees. In your written and oral testimony today, you have discussed how increased capacity for your office has allowed you to improve processes, have more resources, to use a mix of contracting and independent accounting firm assistance, as well as other outside Federal agencies, and that you are now, quote, well- positioned to conduct audits internally, which allow you to be more nimble and more responsive to incoming requests and areas of risk. I want to ask you a few questions related to that. Would your office benefit from additional staff? Ms. Schletz. There is always more work that can be done. I think we have a good size right now in order to meet our mission, but there are areas where we could improve and do more oversight. Mr. Wright. Those are areas include having additional staff capacity to allow you to be more nimble or to internalize outside costs usually associated with independent accounting firms? Ms. Schletz. Yes. I think there are also other benefits of doing work internally. It allows us, you know, to pivot. If we have a contracted audit, we are, you know, bound by the terms of those contracts or the period of performance, you know, the scope. Those limitations can sometimes be challenging. Mr. Wright. That is great. What information would you want Congress, so all of us, to have so that we can more accurately understand the staffing needs of your office? Ms. Schletz. Well, I appreciate the confidence, you know, in our work. I have no plans currently of growing our office, but I do think that the limitation or the FTE cap would potentially contradict with the IG Act, which provides that the inspector general can appoint employees as needed to fulfill the mission. That said, to my knowledge, EAC OIG would be the only one with such a type of cap. Having the flexibility to be able to pivot from contracting to internal staff is critical, I think, in finding that right mix and having the flexibility to do so is important. Mr. Wright. Thank you. I want to draw back on a point you made, which, if I correctly heard you, you are not aware of any other statutory cap on the full-time employees of an inspector general office. Is that right? Ms. Schletz. Correct. Usually, the OIG has its own specific budget line item. There is a couple of us small ones that do not, but usually, yes, there is no FTE cap. Mr. Wright. Great. Thank you. Are there steps that Congress can take to help further and improve your office's independence? Ms. Schletz. I think, you know, speaking of just the budget, one of the things that we have raised with some of the other small OIGs is that our budget is combined with the agency budget, despite us having a separate request. It would increase our independence if we had a line item or even just not-less- than language that allowed our budget to be separate so that we could, you know, put our resources toward that and not have to work with the agency on budgeting. Mr. Wright. Understandable. I think it is helpful for the--in this conversation, we have talked a lot about questions funds or unsubstantiated funds or funds spent for or put to better use. In your office's review and in all its capacities, is it fair to say that the majority or the vast majority of funds that the EAC is granting are used appropriately? Ms. Schletz. Yes. From our work, I mean, I think we have generally seen that States are administering grant funds in accordance with the guidelines. As far as the numbers, I mean, I think it is less than 1 percent of the cost or question of what we have audited in Fiscal Year 1922 and 1923. There are some States, you know, like the Mariana Islands where that number is higher, but generally, it is less than 1 percent. Mr. Wright. Within that less than 1 percent cap, I know you have identified something around $2 million of questionable funds, and cognizant that most of the funds are used appropriately, do you have a sense of how effectively the Commission is working to clawback the unallowable funds or work with States to enter compliance? Ms. Schletz. Yes. The grants team works really hard. We actually partner with them quite closely to make sure that we are not duplicating efforts and we are, you know, working with the same interest in mind. They do take it seriously, and they do work with States as much as they can to try to build capacity and get them to have the internal controls needed so that there is no repeat findings and so that money that needs to be returned is returned. Mr. Wright. Thank you. Thank you, Mr. Chairman. I yield back. Mr. Loudermilk. The Chair now recognizes the majority counsel for purposes of asking questions. Mr. Hays. Thank you very much. I wanted to just note a couple things here at the outset, that when, you know, we were looking through--and I know you do not have anything to do with legislative recommendations, but looking through the legislative recommendations that the Commission sent to us, we make it a priority to read what you send us, what the Commission sends us, et cetera. We just found it interesting that providing some of these clear definitions of the terms I was talking about earlier and terms related to grants in general, that that did not seem to be included in their legislative recommendation. Whether or not that is the right course of action is something we noted and something that, you know, we are looking through to find the right way to handle that. Can you talk a little bit--speaking of reading things that you send us, could you please talk a little bit about the mandatory reports that the EAC has planned for 2023? Just a brief summary of what it is expected to cover. I know that a lot of this is going to come from your oversight plan for the Fiscal Year 1923. Ms. Schletz. You mean mandatory audits? Mr. Hays. Mandatory reports. Ms. Schletz. The mandatory reports that we are required to do is FISMA, which is really just IT controls. The financial statement audit is an annual report that we are required to issue out on. Payment Integrity Information Act is a mandatory report. We have our semiannual reports to Congress. We also have the annual management challenges report. Mr. Hays. What else do you have planned this year in terms of discretionary projects or other planned work? Is there anything that our Committee Members should be apprised of as we partner with you, your office, and the Commission? Ms. Schletz. Ongoing we are looking at EAC's contracting practices. That is ongoing work that we hope to have completed either this Fiscal Year or next, early next. The other discretionary work that we are looking at is to also balance the contracted HAVA audits with some of our own work. Doing some of that work internally. We also have plans to try to look at more of the impact of the HAVA funds. Right now our audits focused largely on compliance. Did they use the funds appropriately? We would like to see how were those funds helpful, or were their needs assessed appropriately. Mr. Hays. I think that brings us to another really good point. You know, as our Committee Members say, and I do not want to put words into anyone's mouth, but, you know, many have said elections administration is not partisan. The election is, but not the administration. I think that is really important. I think that that carries over to the EAC, and as you can see from the questioning today, a lot of Members are headed in a similar direction with the EAC. I think one of those, too, you know, in our conversations, and I am glad to hear that the resources for your office are looking good, and they are in a good spot, but, you know, one of our things, too, is making sure that the inspector general's office has reserved spaces for staff, especially at a smaller agency. I know our Members look forward to working with you throughout this next year as they are working on legislation, however that ends up looking in the final piece, to make sure that you do continue to have the flexibility and the resources that you need, especially since we are talking about having the option of bringing audits internally so that there is a little bit more of that institutional process that plays out. As I wrap up here, can you talk just a little bit about your relationship with the four Commissioners? Just in the sense of, you know, is it a good working relationship? Are they responding to your reports in a good way? As my colleague mentioned, anything else about the independence of your office. Ms. Schletz. Thank you for that. The relationship that I have with the Commissioners is great. They are very receptive to the work that we are doing, very responsive, and I think also, you know, welcomed kind of the oversight that our office brings. It is quite a bit, you know, different, and we are doing some new and different work, and they have been receptive to that. I do not have anything, you know, else to add on the relationship piece. I think as far as the independence, coming from a larger OIG, there are challenges with the smaller OIG with independence particularly. We share IT services. We share budget. We share human resources, things that would be ideal if they were more independent, but also not wanting to, you know, create a whole new entity. I understand kind of the budget constraints there, but those are areas that we grapple with independence. Mr. Hays. Last question that I have: The EAC is a small agency, and it has moved several times in the 20 years, 20 so years of its existence. Has your office looked at the frequent movement of headquarters? Has that been an issue that is come up? Ms. Schletz. That is not something that we have looked at, but, you know, if you would like us to consider work, we would be happy to. I know the recent move happened during the pandemic. We have not taken a look at that. Part of the costs are audited as part of a financial statement on it, but specifically looking at the relocations we have not looked at. Mr. Hays. Thank you. Thank you, Mr. Chairman. Mr. Loudermilk. I now recognize the minority counsel for 5 minutes for asking questions. Mr. Wright. Thank you, Mr. Chairman. Inspector, in your written testimony, you discussed a critical management challenge in addressing the gap between expectation on one hand and funding on the other, and I was really interested in that challenge. You noted that to fully address this challenge, the Commission must continue to, quote, advocate for funding, demonstrate progress, and work with stakeholders to manage expectations. Why is the need to match funding and expectation so critical? Ms. Schletz. I think just looking at kind of good business, if the EAC is trying to do more than they have the resources to do, they are going to fall short, and that is not good for anybody. I think just being able to do that. Then, also, allocate resources where risk is. One of the things that we pointed out in the testing and certification audit is the need for the EAC to look at both staffing and risk. There are lots of Federal guidance out there on how to do that, and that would help them determine what resources and staffing are needed in order to meet the areas to fulfill their mission. Mr. Wright. I think you touched on part of this, but what is your assessment of the Commission's efforts to address this management challenge? Ms. Schletz. I think there is an opportunity to do it in a more formal manner. Our strategic workforce planning guidance that is out there is fairly robust, but it would be helpful. Then also the same thing with the enterprise risk management framework that is out there for Federal agencies to comply with. It is a robust process, but I think that would help them to tailor it. I do think they are assessing risk and they are assessing staffing, but to do it more formally would be a good opportunity for them to improve. Mr. Wright. Thank you. This touches upon a question that the Chairman asked related to the OIG hotline. You noted, I think the Chairman noted as well, that you processed more complaints in the first half of the year than all of last year. Can you tell us a bit more about the process for receiving complaints, the percentages of complaints that are nonviable, and what your process is for referring those complaints out? Ms. Schletz. Of course. Of the 374 unique complaints, and I say ``unique'' because we get a lot of duplicates, 61 percent of those were nonviable. We had 13 percent that we referred to the Department of Justice. Those would be things related to election crimes or election fraud. There were 22 percent, so that is the highest referred out percentage, that go to State election offices. Those would be individuals that, you know, for example, went to go vote and they had challenges or they had challenges with registering in their State, whatever it might be, and we refer those individuals back to the specific State office where they can get the help that they need. The rest of those complaints, which are much smaller in percentage, are ones that we either look into internally because it actually deals with something that EAC OIG has jurisdiction over, or they are referred to another entity. Mr. Wright. Post referral, do you get any information from the entity that receives the referral? Ms. Schletz. We do not, no. Mr. Wright. Great. I think just very briefly I want to go through a quick battery of questions related to the California audit and SKDK funding. I think the record should reflect that. We have talked about it a lot. Again, for your context, you sent a letter on February 9th to a series of Members. I believe it was Representatives Comer, Davis, and Hice. In that, you discussed HAVA funding, CARES Act funding, and the contract. You noted that based on sample testing, that funds were not used by the California secretary of state when executing the contract. Isn't that right? Ms. Schletz. Were not used inappropriately? Mr. Wright. Inappropriately. Ms. Schletz. Yes, correct. Mr. Wright. Did you find any instances of lobbying or use of funds for lobbying in your investigation? Ms. Schletz. No, we did not. Mr. Wright. Did SKDK receive inappropriate access to voter information? Ms. Schletz. Not that we found, no. Mr. Wright. Were you able to ascertain the purpose of the Vote Safe California messaging and whether or not it was appropriate under law? Ms. Schletz. Yes. The Vote Safe ad campaign was appropriate based on what we looked at. Mr. Wright. Great. Ms. Schletz. The information we had. Mr. Wright. Thank you so much. I yield back. Mr. Loudermilk. The gentleman yields back. I would like to thank Ms. Schletz for your testimony and appearing with us today. It has been very helpful. Members of the Committee may have some additional questions that they will submit in writing. We ask that you respond in writing as well. Without objection, each Member will have 5 legislative days to insert additional material into the record or to revise and extend their remarks. If there is no further business, I thank the Members for their participation. Without objection, the Committee stands adjourned. [Whereupon, at 12:24 p.m., the Committee was adjourned.] [all]

usgpo

2024-10-08T13:26:29.698572

BILLS

BILLS-118s5086is

Survivor Outreach and Support Campus Act; SOS Campus Act

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 5086 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 5086 To amend the Higher Education Act of 1965 to require institutions of higher education to have an independent advocate for campus sexual assault prevention and response. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES September 18, 2024 Mr. Kaine (for himself, Ms. Hirono, and Ms. Baldwin) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions _______________________________________________________________________ A BILL To amend the Higher Education Act of 1965 to require institutions of higher education to have an independent advocate for campus sexual assault prevention and response. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Survivor Outreach and Support Campus Act'' or the ``SOS Campus Act''. SEC. 2. INDEPENDENT ADVOCATE FOR CAMPUS SEXUAL ASSAULT PREVENTION AND RESPONSE. Part B of title I of the Higher Education Act of 1965 (20 U.S.C. 1011 et seq.) is amended by adding at the end the following: ``SEC. 124. INDEPENDENT ADVOCATE FOR CAMPUS SEXUAL ASSAULT PREVENTION AND RESPONSE. ``(a) Advocate.-- ``(1) In general.-- ``(A) Designation.--Each institution of higher education that receives Federal financial assistance under title IV shall designate an independent advocate for campus sexual assault prevention and response (referred to in this section as the `Advocate') who shall be appointed based on experience and a demonstrated ability of the individual to effectively provide sexual assault victim services. ``(B) Notification of existence of and information for the advocate.--Each employee of an institution described in subparagraph (A) who receives a report of sexual assault shall notify the victim of the existence of, contact information for, and services provided by the Advocate of the institution. ``(C) Appointment.--Not later than 180 days after the date of enactment of the Survivor Outreach and Support Campus Act, the Secretary shall prescribe regulations for institutions to follow in appointing Advocates under this section. At a minimum, each Advocate shall-- ``(i) report to an individual outside the body responsible for investigating and adjudicating sexual assault complaints at the institution; and ``(ii) submit to such individual an annual report summarizing how the resources supplied to the Advocate were used, including the number of male and female sexual assault victims assisted. ``(2) Role of the advocate.--In carrying out the responsibilities described in this section, the Advocate shall represent the interests of the student victim even when in conflict with the interests of the institution. The Advocate may not be disciplined, penalized, or otherwise retaliated against by the institution for representing the interest of the victim, in the event of a conflict of interest with the institution. ``(b) Sexual Assault.--In this section, the term `sexual assault' means an offense classified as a forcible or nonforcible sex offense under the uniform crime reporting system of the Federal Bureau of Investigation. ``(c) Responsibilities of the Advocate.--Each Advocate shall carry out the following, regardless of whether the victim wishes the victim's report to remain confidential: ``(1)(A) Ensure that victims of sexual assault at the institution receive, with the victim's consent, the following sexual assault victim's assistance services available 24 hours a day: ``(i) Information on how to report a campus sexual assault to law enforcement. ``(ii) Emergency medical care, including follow up medical care as requested. ``(iii) Medical forensic or evidentiary examinations. ``(B) Ensure that victims of sexual assault at the institution receive, with the victim's consent, the following sexual assault victim's assistance services: ``(i) Crisis intervention counseling and ongoing counseling. ``(ii) Information on the victim's rights and referrals to additional support services. ``(iii) Information on legal services. ``(C) Provide the services described in subparagraphs (A) and (B) either-- ``(i) pursuant to a memorandum of understanding (that includes transportation services) at a rape crisis center, legal organization, or other community- based organization located within a reasonable distance from the institution; or ``(ii) on the campus of the institution in consultation with a rape crisis center, legal organization, or other community-based organization. ``(D) Ensure that a victim of sexual assault may not be disciplined, penalized, or otherwise retaliated against for reporting such assault to the Advocate. ``(2) Guide victims of sexual assault who request assistance through the reporting, counseling, administrative, medical and health, academic accommodations, or legal processes of the institution or local law enforcement. ``(3) Attend, at the request of the victim of sexual assault, any administrative or institution-based adjudication proceeding related to such assault as an advocate for the victim. ``(4) Maintain the privacy and confidentiality of the victim and any witness of such sexual assault, and shall not notify the institution or any other authority of the identity of the victim or any such witness or the alleged circumstances surrounding the reported sexual assault, unless otherwise required by the applicable laws in the State where such institution is located. ``(5) Conduct a public information campaign to inform the students enrolled at the institution of the existence of, contact information for, and services provided by the Advocate, including-- ``(A) posting information-- ``(i) on the website of the institution; ``(ii) in student orientation materials; and ``(iii) on posters displayed in dormitories, cafeterias, sports arenas, locker rooms, entertainment facilities, and classrooms; and ``(B) training coaches, faculty, school administrators, resident advisors, and other staff to provide information on the existence of, contact information for, and services provided by the Advocate. ``(d) Clery Act and Title IX.--Nothing in this section shall alter or amend the rights, duties, and responsibilities under section 485(f) or title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.) (also known as the `Patsy Takemoto Mink Equal Opportunity in Education Act').''. <all>

usgpo

2024-10-08T13:26:56.726528

CHRG

CHRG-116hhrg55868

Improving Access to Care: Legislation to Reauthorize Key Public Health Programs

United States Congress House of Representatives

[House Hearing, 116 Congress] [From the U.S. Government Publishing Office] IMPROVING ACCESS TO CARE: LEGISLATION TO REAUTHORIZE KEY PUBLIC HEALTH PROGRAMS ======================================================================= VIRTUAL HEARING BEFORE THE SUBCOMMITTEE ON HEALTH OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS SECOND SESSION __________ JULY 29, 2020 __________ Serial No. 116-123 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Printed for the use of the Committee on Energy and Commerce govinfo.gov/committee/house-energy energycommerce.house.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 55-868 PDF WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON ENERGY AND COMMERCE FRANK PALLONE, Jr., New Jersey Chairman BOBBY L. RUSH, Illinois GREG WALDEN, Oregon ANNA G. ESHOO, California Ranking Member ELIOT L. ENGEL, New York FRED UPTON, Michigan DIANA DeGETTE, Colorado JOHN SHIMKUS, Illinois MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio DORIS O. MATSUI, California CATHY McMORRIS RODGERS, Washington KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland PETE OLSON, Texas JERRY McNERNEY, California DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York GUS M. BILIRAKIS, Florida YVETTE D. CLARKE, New York, Vice BILL JOHNSON, Ohio Chair BILLY LONG, Missouri DAVID LOEBSACK, Iowa LARRY BUCSHON, Indiana KURT SCHRADER, Oregon BILL FLORES, Texas JOSEPH P. KENNEDY III, SUSAN W. BROOKS, Indiana Massachusetts MARKWAYNE MULLIN, Oklahoma TONY CARDENAS, California RICHARD HUDSON, North Carolina RAUL RUIZ, California TIM WALBERG, Michigan SCOTT H. PETERS, California EARL L. ``BUDDY DEBBIE DINGELL, Michigan CARTER, Georgia MARC A. VEASEY, Texas JEFF DUNCAN, South Carolina ANN M. KUSTER, New Hampshire GREG GIANFORTE, Montana ROBIN L. KELLY, Illinois NANETTE DIAZ BARRAGAN, California A. DONALD McEACHIN, Virginia LISA BLUNT ROCHESTER, Delaware DARREN SOTO, Florida TOM O'HALLERAN, Arizona ------ Professional Staff JEFFREY C. CARROLL, Staff Director TIFFANY GUARASCIO, Deputy Staff Director MIKE BLOOMQUIST, Minority Staff Director Subcommittee on Health ANNA G. ESHOO, California Chairwoman ELIOT L. ENGEL, New York MICHAEL C. BURGESS, Texas G. K. BUTTERFIELD, North Carolina, Ranking Member Vice Chair FRED UPTON, Michigan DORIS O. MATSUI, California JOHN SHIMKUS, Illinois KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon BILLY LONG, Missouri JOSEPH P. KENNEDY III, LARRY BUCSHON, Indiana Massachusetts SUSAN W. BROOKS, Indiana TONY CARDENAS, California MARKWAYNE MULLIN, Oklahoma PETER WELCH, Vermont RICHARD HUDSON, North Carolina RAUL RUIZ, California EARL L. ``BUDDY'' CARTER, Georgia DEBBIE DINGELL, Michigan GREG GIANFORTE, Montana ANN M. KUSTER, New Hampshire GREG WALDEN, Oregon (ex officio) ROBIN L. KELLY, Illinois NANETTE DIAZ BARRAGAN, California LISA BLUNT ROCHESTER, Delaware BOBBY L. RUSH, Illinois FRANK PALLONE, Jr., New Jersey (ex officio) C O N T E N T S ---------- Page Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement............................... 2 Prepared statement........................................... 3 Hon. Michael C. Burgess, a Representative in Congress from the State of Texas, opening statement.............................. 4 Prepared statement........................................... 5 Hon. Frank Pallone, Jr., a Representative in Congress from the State of New Jersey, opening statement......................... 6 Prepared statement........................................... 8 Hon. Greg Walden, a Representative in Congress from the State of Oregon, opening statement...................................... 9 Prepared statement........................................... 10 Witnesses Linda Goler Blount, M.P.H., President and CEO, Black Women's Health Imperative.............................................. 12 Prepared statement........................................... 14 Robert Boyd, M.C.R.P., M. Div., President, School-Based Health Alliance....................................................... 16 Prepared statement........................................... 18 Answers to submitted questions............................... 160 Nancy Goodman, M.P.P., J.D., Founder and Executive Director, Kids V Cancer....................................................... 25 Prepared statement........................................... 27 Aaron Seth Kesselheim, M.D., J.D., M.P.H., Professor Of Medicine, Harvard Medical School......................................... 30 Prepared statement........................................... 33 Brian Lindberg, Chief Legal Officer and General Counsel, National Bone Marrow Donor Program...................................... 43 Answers to submitted questions............................... 46 Prepared statement........................................... 164 Travis T. Tygart, Chief Executive Officer, U.S. Anti-Doping Agency......................................................... 53 Prepared statement........................................... 55 Answers to submitted questions............................... 168 Submitted Material H.R. 2075, School-Based Health Centers Reauthorization Act of 2019........................................................... 106 H.R. 4078, EARLY Act Reauthorization of 2019..................... 108 H.R. 4439, Creating Hope Reauthorization Act..................... 110 H.R. 4764, Transplant Act of 2019................................ 112 H.R. 5373, United States Anti-Doping Agency Reauthorization Act of 2019........................................................ 116 Statement of July 13, 2020, from the National Marrow Donor Program, submitted by Ms. Eshoo................................ 121 Letter of July 28, 2020, to Mr. Pallone and Mr. Walden, from Council of State Bioscience Associations, submitted by Ms. Eshoo.......................................................... 123 Letter of July 28, 2020, to Mr. Pallone and Mr. Walden, from Rep. Mike Thompson, submitted by Ms. Eshoo.......................... 126 Statement of July 29, 2020, Joanna Kurtzberg, President, Cord Blood Association, submitted by Ms. Eshoo...................... 128 Report of January 2020, ``Drug Development: FDA's Priority Review Voucher Programs''\1\ Article of February 2019, ``Impact Of the Priority Review Vouches Program on Drug Development For Rare Pediatric Diseases,'' from Thomnas J. Hwang, et al., Pharmaceuticals and Medical Technology, submitted by Ms. Eshoo............................. 135 Letter of July 23, 2020, to Mr. Pallone and Mr. Walden, from the Bone Marrow, PBSC, Cell Therapy, and Cord Blood Transplant Coalition, submitted by Ms. Eshoo.............................. 142 Letter of July 29, 2020, to Ms. Eshoo and Mr. Burgess, by Rachel Sher, J.D., M.P.H., Vice President, Policy and Regulatory Affairs, National Organization for Rare Disorders, submitted by Ms. Eshoo...................................................... 146 Letter of July 28, 2020, to Ms. Eshoo and Mr. Burgess, by Victoria A. M. Wolodzko, Senior Vice President, Mission, Susan G. Kome, submitted by Ms. Eshoo................................ 148 Letter of July 28, 2020, to Mr. Pallone and Mr. Walden, Biotechnology Companies Coalition, submitted by Ms. Eshoo...... 150 Letter of July 22, 2020, to Mr. Alexander, et al., from Coalition Pediatric Medical Research, submitted by Ms. Eshoo\2\ Letter on July 29, 2020, to Mr. Pallone and Mr. Walden, by Nancy Houlihan, MA, RN, AOCN, President, Oncology Nursing Society, submitted by Ms. Eshoo......................................... 152 Slides of July 29, 2020, by Robert Boyd, President, School-Based Health Alliance, submitted by Ms. Eshoo \3\ Guide, School-Based Health Alliance, submitted by Ms. Eshoo...... 153 Addendum, Slide Presentation--Written Testimony for the Record, submitted by Ms. Eshoo......................................... 154 ---------- \1\ The information has been retained in committee files and also is available at https://docs.house.gov/meetings/IF/IF14/ 20200729/110949/HMTG-116-IF14-20200729-SD007.pdf. \2\ The information has been retained in committee files and also is available at https://docs.house.gov/meetings/IF/IF14/ 20200729/110949/HMTG-116-IF14-20200729-SD013.pdf. \3\ The information has been retained in committee files and also is available at https://docs.house.gov/meetings/IF/IF14/ 20200729/110949/HMTG-116-IF14-20200729-SD015.pdf. IMPROVING ACCESS TO CARE: LEGISLATION TO REAUTHORIZE KEY PUBLIC HEALTH PROGRAMS ---------- WEDNESDAY, JULY 29, 2020 House of Representatives, Subcommittee on Health, Committee on Energy and Commerce, Washington, DC. The subcommittee met, pursuant to call, at 10:00 a.m., via Cisco Webex online video conferencing, Hon. Anna G. Eshoo (chairwoman of the subcommittee) presiding. Members present: Representatives Eshoo, Engel, Butterfield, Matsui, Castor, Sarbanes, Schrader, Kennedy, Cardenas Welch, Ruiz, Dingell, Kuster, Kelly, Barragan, Blunt Rochester, Rush, Pallone (ex officio), Burgess (subcommittee ranking member), Upton, Guthrie, Griffith, Bilirakis, Long, Bucshon, Brooks, Mullin, Carter, Gianforte, and Walden (ex officio). Also present: Representatives O'Halleran and Johnson of Ohio. Staff present: Joe Banez, Professional Staff Member; Billy Benjamin, Systems Administrator; Jeffrey C. Carroll, Staff Director; Kimberly Espinosa, Professional Staff Member; Waverly Gordon, Deputy Chief Counsel; Stephen Holland, Health Counsel; Aisling McDonough, Policy Coordinator; Meghan Mullon, Policy Analyst; Joe Orlando, Staff Assistant; Kaitlyn Peel, Digital Director; Tim Robinson, Chief Counsel; Rebecca Tomilchik, Staff Assistant; Kimberlee Trzeciak, Chief Health Advisor; C. J. Young, Press Secretary; Nolan Ahern, Minority Professional Staff, Health; Mike Bloomquist, Minority Staff Director; S. K. Bowen, Minority Press Secretary; William Clutterbuck, Minority Staff Assistant; Theresa Gambo, Minority Human Resources/Office Administrator; Caleb Graff, Minority Professional Staff, Health; Tyler Greenberg, Minority Staff Assistant; Tiffany Haverly, Minority Communications Director; Peter Kielty, Minority General Counsel; Ryan Long, Minority Deputy Staff Director; James Paluskiewicz, Minority Chief Counsel, Health; Brannon Rains, Minority Policy Analyst; Kristin Seum, Minority Counsel, Health; Kristen Shatynski, Minority Professional Staff Member, Health; and Everett Winnick, Minority Director of Information Technology. Ms. Eshoo. OK. I am going to gavel in, and the Subcommittee on Health will now come to order. Due to COVID-19, today's hearing is being held remotely, and all members and witnesses will be participating via video conferencing. As part of our hearing, the microphones--as you know, but it is a reminder--the microphones will be on mute to eliminate background noise, and members and witnesses will need to unmute your microphone each time you wish to speak. So that is every time. So turn it on when you go to speak. Turn it off so that there isn't any background noise when you are not speaking. Documents for the record can be sent to Meghan Mullon at the email address that we have provided your staff with, and all documents will be entered into the record at the conclusion of the hearing. The Chair now recognizes herself for 5 minutes for an opening statement. OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA Today our subcommittee is considering five bills to reauthorize important public health programs that support and improve the health and well-being of children in our country, as well as adults. While so much of our subcommittee's focus and work is on the COVID-19 pandemic that has taken the lives of 150,000 Americans, we also have to continue our essential work during the crisis, which means making sure that health programs nearing their expiration are continued, that they are improved, and in some cases expanded. So today we are going to hear testimony on five bipartisan reauthorization bills. Several of these bills support individuals in the fight against cancer. The Creating Hope Reauthorization Act, sponsored by Representatives Butterfield and McCaul, help children access pediatric cancer drugs. Pediatric cancer is the number one disease killer of American children, but pharmaceutical companies often avoid developing pediatric cancer drugs because of the very small market and the high risks that are associated with studying and testing drugs for children. The Creating Hope Act provides incentives for the research and development of pediatric cancer drugs by providing the developers with the valuable priority review vouchers which allow the recipient to speed up the FDA review of any one of its new drug products. The next bill, the TRANSPLANT Act, sponsored by Representatives Matsui and Bilirakis, helps those with blood cancers, like leukemia and lymphoma, to be matched with a potential bone marrow and cord blood donor. Through this matching program, over 100,000 lives have been saved, so clearly this works. And that law is a source of pride to all of us. The EARLY Act, sponsored by Representatives Wasserman Schultz and Brooks, increases funding for the successful CDC outreach and education campaign that informs young people about breast cancer risks. Each year, over 300,000 women are diagnosed with breast cancer. I have spent my entire service in Congress to make sure women have access to breast cancer treatment, including reconstructive surgery after mastectomies, and I am really pleased to consider this important program today. Now, outside of public health programs that help in the fight against cancer, we are also considering a bill to reauthorize the School-Based Health Center Program, sponsored by Representatives Sarbanes and Stefanik. About 2,500 school-based health centers serve 3.6 million American children. These health centers provide children with immunizations, mental health support, asthma, and allergy screenings, and many other vital services. It really is a terrifically effective program. And finally, we are considering a bill to make sure that the U.S. Anti-Doping Agency is prepared for the 2028 Olympics in Los Angeles. The sponsors are Representatives Mike Thompson, Diana DeGette, and Mr. Johnson. The Agency is an independent body that manages the anti- doping program for America's athletes to ensure they are playing clean. So as we struggle with the pandemic, with COVID-19, and the crisis that it is in our country, we have to keep up our work for the American people, those with cancer, our Nation's children, and our athletes training for future events, and that is exactly what we are doing today. So I stand ready to work with each of you to make sure that these programs are reauthorized. [The prepared statement of Ms. Eshoo follows:] Prepared Statement of Hon. Anna G. Eshoo Today our Subcommittee will consider five bills to reauthorize important public health programs that support and improve the health and wellbeing of children and adults. While so much of our Subcommittee's focus and work is on the COVID-19 pandemic which has killed 150,000 Americans, we also have to continue our essential work during the crisis, which means making sure that health programs nearing their expiration are continued, improved, and in some cases expanded. Today we will hear testimony on five bipartisan reauthorization bills. Several of these bills support individuals in the fight against cancer. The Creating Hope Reauthorization Act sponsored by Representatives Butterfield and McCaul helps children access pediatric cancer drugs. Pediatric cancer is the number one disease killer of American children, but pharmaceutical companies often avoid developing pediatric cancer drugs because of the small market and the high risks associated with studying and testing drugs for children. The Creating Hope Act provides incentives for the research and development of pediatric cancer drugs by providing the developers with the valuable Priority Review Vouchers which allow the recipient to speed up the FDA review of any one of its new drug products. The TRANSPLANT Act sponsored by Representatives Matsui and Bilirakis helps those with blood cancers like leukemia and lymphoma to be matched with a potential bone marrow and cord blood donor. Through this matching program, over 100,000 lives have been saved. The EARLY Act sponsored by Representatives Wasserman- Schultz and Brooks increases funding for the successful CDC outreach and education campaign that informs young people about breast cancer risks. Each year, over 300,000 women are diagnosed with breast cancer. I've spent my entire service in Congress to make sure women have access to breast cancer treatment, including reconstructive surgery after mastectomies, and I'm pleased to consider this important program today. Outside of public health programs that help the fight against cancer, we're also considering a bill to reauthorize the School-Based Health Center program sponsored by Representatives Sarbanes and Stefanik. About 2,500 school-based health centers serve 3.6 million children. These health centers provide children with immunizations, mental health support, asthma and allergy screenings, and many other vital services. Finally, we're considering a bill to make sure that the U.S. Anti-Doping Agency is prepared for the 2028 Olympics in Los Angeles. The sponsors of this bill are Representatives Thompson, DeGette, and Johnson. The Agency is an independent body that manages the anti-doping program for America's athletes to ensure they're playing "clean."vAs we struggle with the COVID-19 crisis, we have to keep up our work for Americans with cancer, our nation's children, and athletes training for future events. I stand ready to work with my colleagues to make sure these programs are reauthorized. Ms. Eshoo. And with that, I will yield back my time. And the chair now recognizes Dr. Burgess, the ranking member of our subcommittee, for 5 minutes for his opening statement. And please remember to unmute. Thank you, colleagues. OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS Mr. Burgess. Very well. I thank the Chair. I trust I have successfully unmuted. This is an important hearing today to discuss the reauthorization of five public health programs: the school- based health centers, the young women's breast health education and awareness, the Stem Cell and Therapeutic Research Act, and the United States Anti-Doping Agency Reauthorization Act, and perhaps most importantly, the Pediatric Priority Review Voucher Program. All five of these bills provide tools for individuals in all stages of life to stay healthy and to save lives. So I am grateful that the committee has organized this discussion on these important measures of expiring reauthorizations and potentially providing hope and reassurance to many Americans in what has turned out to be a very difficult time. Often serving as a lifeline for access to care to many children, H.R. 2075 would reauthorize Federal support for school-based health centers, while also including federally qualified health centers as eligible providers. Generally administered as a partnership between hospital, schools, and local organizations, school-based health centers provide comprehensive care for students through important services, such as primary medical care, behavioral care, and even substance disorder counseling. These services are offered in school, a setting with which students are familiar and comfortable. This convenient setting makes these services more accessible for many students, especially those high risk, and certainly underscores the importance of opening schools. Furthermore, ensuring access to preventive care allows for early intervention and treatment before a condition might worsen. This was first authorized in 2010. The EARLY Act reauthorizes the Young Women's Breast Health Education and Awareness Requires Learning Young Act. This piece of legislation provides women with meaningful information, teaching women, especially young women, the importance of breast health and the risk factors associated with breast cancer, education and awareness, and the critical steps in preventive care. With a history starting in the 1980s, the C.W. Bill Young Cell Transplantation Program has supported over 92,000 blood stem cell transplants. With 12,000 Americans diagnosed with blood cancer and disorder every year, H.R. 4764, the TRANSPLANT Act, would reauthorize the C.W. Bill Young Transplantation Program and the National Cord Blood Inventory, providing resources and support to those who need a donor or a cord blood unit. Diseases like sickle cell anemia or blood cancer often rely on bone marrow or cord blood transplant for treatment. However, 70 percent of those with a blood disorder or cancer do not have a matched donor. H.R. 4764 will help maintain that program. And I do want to acknowledge over the years this program has been one that has been championed by Representative Chris Smith of New Jersey, and certainly he has been responsible for getting us to where we are today with the cord blood industry. In 1999, the U.S. Olympic Committee launched the United States Anti-Doping Agency to oversee and enforce anti-doping programs for our Nation's athletes. The Anti-Doping Agency Reauthorization Act would ensure that the USADA has the resources needed to encourage healthy sportsmanship among American athletes, especially as sports teams begin playing again. Our athletes often serve as role models for our children, making the mission of USADA all the more significant. Our children must learn the value and importance of clean sportsmanship. Parenthetically, it is interesting that in 2014 one of the earliest attacks of Russian interference was in the anti-doping agency that was actually administered through, it turned out to be, the Russian military. Finally, I am encouraged to see H.R. 4439, the Creating Hope Reauthorization Act, included in today's hearing. It is an important bill that would make permanent the Pediatric Rare Disease Priority Review Voucher Program, an incentive program to encourage American drug innovation for rare and pediatric diseases. Because of the complexity and expense required to invest in pediatric drugs, the FDA had only approved two pediatric oncology drugs in 22 years leading up to the Creating Hope Act, which was first signed into law in 2012. Since the enactment of this program, the FDA has approved 22 drugs. Unfortunately, the program does expire on September 30 of this year, so it does require our immediate attention. So I hope we can continue to work on these bills in a bipartisan manner and get these reauthorizations across the finish line. They are all critical. I thank our witnesses for sharing their time and expertise today. And I will yield back the balance of my time. [The prepared statement of Mr. Burgess follows:] Prepared Statement of Hon. Michael C. Burgess Thank you, Madam Chair. Today we are here to discuss the importance of reauthorizing five public health programs: School-Based Health Centers, the Young Women's Breast Health Education and Awareness Requires Learning Young Act, the Stem Cell Therapeutic and Research Act, the United States Anti- Doping Agency Reauthorization Act, and the Pediatric Priority Review Voucher Program. All five of these bills provide various tools for individuals in all stages in life, to stay healthy and even save lives. I am grateful that the committee organized this discussion on these important measures, potentially providing hope and reassurance to many Americans depending on these programs in this difficult time. Often serving as lifeline for access to care for many children, H.R. 2075, would reauthorize federal support for School-Based Health Centers while also including Federally Qualified Health Centers as eligible providers. Generally administrated as a partnership between hospitals, schools, and local organizations, school-based health centers provide comprehensive care for students through important services such as primary medical care, behavioral care, and even substance disorder counseling to 3.6 million k-12 students nationwide. These services are offered in school, a setting with which students are familiar and comfortable, this convenient setting makes these services more accessible for many students, especially those of high-risk. Furthermore, ensuring access to preventative care allows for early intervention and treatment before the condition worsens. First authorized in 2010, The EARLY Act reauthorizes the Young Women's Breast Health Education, and Awareness Requires Learning Young Act. This piece of legislation provides women with meaningful information, teaching women, especially young women, the importance of breast health and the risk factors associated with breast cancer. Education and awareness are a critical steps in preventative care, and with the breast cancer survival rate averaging 93 percent if detected at an early stage, we know it can help save lives. With a history starting in the 1980s, the C.W. Bill Young Cell Transplantation Program has supported over 92,000 blood stem cell transplants. With 12,000 Americans diagnosed with blood cancer and disorders every year, H.R. 4764, the TRANSPLANT Act, would reauthorize the C.W. Bill Young Cell Transplantation Program and the National Cord Blood Inventory, providing resources and support to those who need a donor or cord blood unit. Diseases like sickle cell anemia or blood cancer often rely on bone marrow or cord blood transplant for treatment; however 70 percent of those with a blood disorder or cancer do not have a matched donor. H.R. 4764 will help maintain this program. In 1999, the U.S. Olympic Committee launched the United States Anti-Doping Agency, or USADA, to oversee and enforce anti-doping programs for our Nations' athletes. The Anti-Doping Agency Reauthorization Act would ensure that the USADA has the resources needed to encourage healthy sportsmanship among American athletes, especially as sports teams begin playing again. Our athletes often serve as role models for our children, making the mission of the USADA all the more significant. Our children must learn the value and importance in clean sportsmanship, and what better way to learn about these values than through the athletes they so admire. Finally, I am encouraged to see H.R. 4439, the Creating Hope Reauthorization Act, included in today's hearing. This important piece of legislation would make permanent the pediatric rare disease priority review voucher program, an incentive program to encourage American drug innovation for rare pediatric diseases. Because of the complexity and expense required to invest in pediatric drugs, the FDA had only approved two pediatric oncology drugs in the twenty years leading up to the Creating Hope Act, which was first signed into law in 2012. Since the enactment of this program, the FDA has approved 22 drugs for rare pediatric diseases. Consider all the young lives this program has helped improve and maybe even save. Clearly these outcomes signal success and the importance in passing this piece of legislation. I do hope we can continue to work in a bipartisan manner to get these reauthorizations across the finish line in a timely manner. I thank our witnesses for sharing their time and expertise today. Ms. Eshoo. Mr. Pallone. I couldn't hear Anna. Am I supposed to speak now? Ms. Eshoo. Yes. I just introduced you. OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY Mr. Pallone. All right. Thank you. Mr. Pallone. So today we continue the committee's ongoing work to improve the health and well-being of Americans by discussing legislation that will reauthorize five important public health programs. While we continue to prioritize the critical response to the COVID-19 pandemic that is devastating our Nation, it is also essential that we continue our work to improve access to care. So we are going to hear from public health experts about what is working and what considerations this committee should take into account as we move forward on the five bills. I know that Chairwoman Eshoo has already described the bills, but let me just a say little more about them. The first bill, H.R. 2075, the School-Based Health Centers Reauthorization Act, authored by Representatives Sarbanes, Tonko, and Upton, would reauthorize these centers. Those health centers are a powerful tool for achieving health equity among children and adolescents who unjustly experience disparities in outcomes because of their race and family income. The authorization for school-based health centers lapsed in 2014, and it is important that we strengthen those programs with additional Federal funds. The next bill, H.R. 4078, The EARLY Act Reauthorization was introduced by Representatives Wasserman Schultz and Brooks, and it authorizes the Centers for Disease Control and Prevention to develop initiatives to increase knowledge of breast cancer among women, particularly for women under the age of 40 and those at heightened risk for developing the disease. Breast cancer, we know, has impacted too many families, and it is important that the CDC continue its work. We are also going to bring up H.R. 4439, the Creating Hope Reauthorization Act, cosponsored by many members of the committee. This bill would permanently authorize the Rare Pediatric Disease Priority Review Voucher Program. This program has provided value to pharmaceutical companies who have made investments in rare disease programs, but it also places a strain on the FDA. So we have to keep in mind that we should think carefully about whether a permanent authorization makes sense as opposed to shorter term. Next, H.R. 4764, the TRANSPLANT Act of 2019, reauthorizes the C.W. Bill Young Transplantation Program. This provides patients who need life-saving bone marrow and umbilical cord blood transplants with info and support as they go through the process. It also maintains an efficient process for identifying donor matches, increases the number of nonfamilial donors available for transplant, and expands data and research to improve patient outcomes. Our colleagues Representatives Matsui and Bilirakis have authored this and worked to secure funding for this program for many years. And finally H.R. 5373, the U.S. Anti-Doping Agency Reauthorization Act. The Anti-Doping Agency is the national organization in the U.S. for Olympic, Paralympic, Pan American, and Parapan American sports. This reauthorization would not only promote clean sports through testing, education, and research, but also use a portion of its funding to promote a positive youth sport experience. So I want to thank all the witnesses, and I would like to yield the time that remains to Representative Sarbanes. [The prepared statement of Mr. Pallone follows:] Prepared Statement of Mr. Pallone Today we continue this Committee's ongoing work to improve the health and wellbeing of Americans by discussing legislation that will reauthorize five important public health programs. While we continue to prioritize the critical response to the COVID-19 pandemic that is devastating our nation, it is also essential that we continue our work to improve access to care. Today we will hear from public health experts about what is working and what considerations this Committee should take into account as we move forward on these five bills. The first bill, H.R. 2075, the "School-Based Health Centers Reauthorization Act," which is authored by Representatives Sarbanes, Tonko, and Upton, would reauthorize school-based health centers. These health centers are a powerful tool for achieving health equity among children and adolescents who unjustly experience disparities in outcomes because of their race and family income. The authorization for school-based health centers lapsed in 2014, and it is important that we strengthen these programs with additional federal funding. The next bill, H.R. 4078, the "EARLY Act Reauthorization," was introduced by Representatives Wasserman Schultz and Brooks. The EARLY Act authorizes the Centers for Disease Control and Prevention (CDC) to develop initiatives to increase knowledge of breast cancer among women, particularly for women under the age of 40 and those at heightened risk for developing the disease. Breast cancer is a tragic disease that has impacted too many families and it is important that the CDC continues this work. We will also discuss H.R. 4439, "The Creating Hope Reauthorization Act," which is cosponsored by many Members of this Committee. This legislation would permanently authorize the Rare Pediatric Disease Priority Review Voucher Program. While this program has provided value to some pharmaceutical companies who have made investments in rare disease programs, it also places a strain on the Food and Drug Administration (FDA). We must keep that in mind and we should think carefully about whether a permanent reauthorization makes sense at this time. Next, H.R. 4764, the "TRANSPLANT Act of 2019," will reauthorize the C.W. Bill Young Transplantation Program. This important program provides patients who need life-saving bone marrow and umbilical cord blood transplants with information and support as they go through this process. It also maintains an efficient process for identifying donor matches, increases the number of non-familial donors available for transplant, and expands data and research to improve patient outcomes. Representatives Matsui and Bilirakis, who have authored this legislation, have worked to secure funding for this program for many years. Finally, we have H.R. 5373, the "United States Anti-Doping Agency Reauthorization Act of 2019." The U.S. Anti-Doping Agency is the national anti-doping organization in the U.S. for Olympic, Paralympic, Pan American, and Parapan American sports. This reauthorization will not only promote clean sport through testing, education, and research efforts, but it will also use a portion of its funding to promote a positive youth sport experience. I want to thank all of the witnesses for joining us today, and I would like to yield the remainder of my time to Representative Sarbanes. Mr. Sarbanes. Thanks, Mr. Pallone. I want to just thank Chairwoman Eshoo and Chairman Pallone for having this very important hearing today regarding reauthorization of all these key public health programs. I have been working on the School-Based Health Centers Reauthorization Act for a very long time, and I am very appreciative that that is a bipartisan bill, and we certainly have bipartisan sponsorship of it within the committee. And it would authorize, as you have indicated, Federal support for school-based health centers through 2024, which provide critical primary and mental health services to vulnerable and youth, certainly very important in this moment. I have seen it in Maryland for sure, and I know that the witness we have today, Robert Boyd, who is president of the School-Based Health Alliance, will certainly be able to testify to this as well. And that is that when a student has access to school-based health centers the negative health outcomes, such as asthma, morbidity, rate of hospital admissions, those decrease, while the educational outcome, such as school performance and graduation rates, increase. And now, of course, the services of school-based health centers are needed more than ever given the coronavirus pandemic, young people grappling with changes in their lives, the uncertainty. And being able to get care in a familiar and supportive setting is very important. So I look forward to the testimony today. Again, thank you, Chairwoman Eshoo, Chairman Pallone, and my colleagues, for support of this bill. And I yield back. [The prepared statement of Mr. Sarbanes follows:] Ms. Eshoo. The gentleman yields back. The Chair now has the pleasure of recognizing Mr. Walden, the ranking member of the full committee, for his 5 minutes for an opening statement. OPENING STATEMENT OF HON. GREG WALDEN A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON Mr. Walden. Thank you very much, Madam Chair. Thanks for having this hearing. As we have heard, these are really important pieces of legislation. I am glad we are having the hearing on them. Obviously, there is a lot of uncertainty about the authorizations as they are due to lapse or expire in just a matter of months. So reauthorizing the funding of these public health programs could be literally life-saving for Americans, and because of that it is critical. I hope we swiftly move these bills. And as we have heard, the first bill, H.R. 2075, the School-Based Health Centers Reauthorization Act of 2019, by Representatives Sarbanes, Upton, Tonko, and others, reauthorizes funding for school-based health center programs, which support health centers operating as a partnership between a school and a community health organization in order to provide quality healthcare for our students. H.R. 4078, the EARLY Act Reauthorization of 2019, sponsored by Representatives Wasserman Schultz and Brooks, reauthorizes programs related to breast cancer outreach, on which you have been a real leader, Madam Chair, on this effort, and other education initiatives, along with survivor support services at the Centers for Disease Control and Prevention. H.R. 4764, the TRANSPLANT Act of 2019, spearheaded by Representatives Matsui and Bilirakis, reauthorizes the C.W. Bill Young Cell Transplantation Program. That provides critical support and life-saving treatments to patients in need of bone marrow or umbilical cord blood transplants. There are approximately 7,000 rare diseases affecting an estimated 30 million people. It is also estimated about half of these diseases affect children. That is why I am glad that we are also considering H.R. 4439, the Creating Hope Reauthorization Act. This bipartisan legislation makes the Priority Review Voucher Program permanent for rare pediatric diseases. The PRV was first created in 2012 with the passage of the Food and Drug Administration Safety and Innovation Act to incentivize the development of therapies to treat rare pediatric diseases. While progress has been made in the development of pediatric therapies, in fact, 22 therapies have been approved for the treatment of 18 rare pediatric diseases since the inception of the pediatric PRV program, we all know we still have a long way to go. Nearly 95 percent of all rare diseases do not have an FDA-approved treatment, leaving many patients and their families with no options. Research and development for rare disease therapies is often scarce because each drug is only intended to serve a very small population, and of course the opportunity to recoup investments is limited. Drug development is extremely costly, as we all know. It is often time-intensive and often requires billions of dollars and nearly a decade before receiving FDA approval, if it makes it all way through the process. The permanent reauthorization of the pediatric PRV program would provide some certainty to drug developers considering whether to invest in therapies for rare pediatric diseases as they evaluate the feasibility of devoting significant resources to products that may not provide a return on significant investments given the limited population of patients, but that could be life-changing for those that receive them. So again I want to thank all of our witnesses for participating in our hearing today, and I want to thank the chairwoman for having this hearing and helping move these bills along. They are commonsense, they are bipartisan, and we hope to get them through the markup quickly and on down to the White House. So with that, Madam Chair, I yield back the balance of the time. [The prepared statement of Mr. Walden follows:] Prepared Statement of Hon. Greg Walden Madam Chairwoman, I am glad we are convening this hearing to discuss the reauthorization of several important public health programs, many of which face uncertainty as their authorizations have either lapsed or will expire in just a matter of months. Reauthorizing the funding of these public health programs could be life-saving for many Americans and because of that it is critical that we swiftly move these bills. The first bill, H.R. 2075, the School-Based Health Centers Reauthorization Act of 2019, sponsored by Reps. Sarbanes, Upton, and Tonko, reauthorizes funding for the school-based health center program, which supports health centers operating as a partnership between a school and community health organizations in order to provide quality health care services to students. H.R. 4078, the EARLY Act Reauthorization of 2019, sponsored by Reps. Wasserman Schultz and Brooks reauthorizes programs related to breast cancer outreach and education initiatives, along with survivor support services at the Centers for Disease Control and Prevention (CDC). H.R. 4764, the TRANSPLANT Act of 2019, spearheaded by Reps. Matsui and Bilirakis, reauthorizes the C.W. "Bill" Young Cell Transplantation Program, which provides critical support and life-saving treatment to patients in need of bone marrow or umbilical cord blood transplants. There are approximately 7,000 known rare diseases affecting an estimated 30 million people. It is also estimated that about half of these diseases affect children. That is why I am glad that we are also considering H.R. 4439, the Creating Hope Reauthorization Act. This bipartisan legislation will make the priority review voucher (PRV) program permanent for rare pediatric diseases. The PRV was first created in 2012 with the passage of the Food and Drug Administration Safety and Innovation Act (FDASIA) to incentivize the development of therapies to treat rare pediatric diseases. While progress has been made in the development of pediatric therapies--in fact, 22 therapies have been approved for the treatment of 18 rare pediatric diseases since the inception of the pediatric PRV program--we still have a long way to go. Nearly 95-percent of all rare diseases do not have an FDA-approved treatment, leaving many patients without options. Research and development for rare disease therapies is often scarce because each drug is only intended to serve a small number of patients, meaning the opportunity to earn a profit is limited. Drug development is extremely costly and time-intensive, often requiring billions of dollars and nearly a decade before receiving FDA approval--if it makes it through the approval process at all. The permanent reauthorization of the pediatric PRV program would provide some certainty to drug developers considering whether to invest in therapies for rare pediatric diseases as they evaluate the feasibility of devoting significant resources to products that may not provide a return on the significant investment given the limited population of patients, but that could be life-changing for those that receive them. I thank the witnesses for being here today and look forward to hearing their testimony. I hope we can move these commonsense, bipartisan bills through the mark up process as quickly as possible. I yield back. Ms. Eshoo. The Chair thanks the ranking member for his good comments, and he yields back. The Chair would now like to remind members that pursuant to committee rules, all members' written opening statements shall be made part of the record. I now would like to introduce our witnesses that are with us today. First, Ms. Linda Blount. She is the President and CEO of the Black Women's Health Imperative. Welcome to you. We are thrilled that you are here with us today. Mr. Robert Boyd, the president of the School-Based Health Alliance. Thank you, Mr. Boyd, for your willingness to testify today. Ms. Nancy Goodman. She is the founder and executive director of Kids v Cancer. Thank you for your extraordinary work, and we are thrilled to have you as a witness. And Dr. Aaron Kesselheim. He is a professor of medicine at Harvard Medical School. Welcome, Doctor, and thank you for your willingness to be here with us. Mr. Brian Lindberg is the chief legal officer and general counsel of the National Bone Marrow Donor Program. Welcome to you. And Travis Tygart is the chief executive officer of the U.S. Anti-Doping Agency. So welcome to each one of you. Thank you for being willing to share your time, your important time, with us on these important bills. I now will recognize Linda Blount. You are recognized for 5 minutes. And please remember to unmute. Welcome. It is wonderful to see you. STATEMENTS OF ROBERT BOYD, M.C.R.P., M.DIV., PRESIDENT, SCHOOL- BASED HEALTH ALLIANCE; LINDA GOLER BLOUNT, M.P.H., PRESIDENT AND CEO, BLACK WOMEN'S HEALTH IMPERATIVE; NANCY GOODMAN, M.P.P., J.D., FOUNDER AND EXECUTIVE DIRECTOR, KIDS V CANCER; AARON SETH KESSELHEIM, M.D., J.D., M.P.H., PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL; BRIAN LINDBERG, CHIEF LEGAL OFFICER AND GENERAL COUNSEL, NATIONAL BONE MARROW DONOR PROGRAM; AND TRAVIS T. TYGART, CHIEF EXECUTIVE OFFICER, U.S. ANTI-DOPING AGENCY STATEMENT OF LINDA GOLER BLOUNT Ms. Blount. Thank you very much. Good morning, Chairwoman Eshoo, Ranking Member Burgess, members of the Committee on Energy and Commerce. Thank you for the opportunity to appear before this committee to discuss the EARLY Act Reauthorization of 2019, introduced by Representatives Wasserman Schultz and Brooks. I am testifying today as president and CEO of the Black Women's Health Imperative. And this week, we celebrate our 38th year as the only national organization solely focused on improving the health and wellness of our Nation's 21 million Black women and girls. We are proud to work with Congresswomen Robin Kelly, Yvette Clarke, and Lisa Blunt Rochester, members of the Congressional Black Caucus and of this committee. In this role, and as a Black woman, I see every day how young Black women are disproportionately impacted by this terrible disease, and I know we can do more to prevent needless suffering and death from breast cancer through early education and screening. Black women develop breast cancer on average 5 to 7 years younger than White women, and until recently, the good news was that Black women got breast cancer at lower rates than White women. But as of 2015, that is no longer the case. But that is where the good news ends. Black women are 40 percent more likely than White women to die of breast cancer. This is, in part, for three reasons. First, Black women are more likely than other racial and ethnic groups to have an aggressive breast cancer subtype. Second, they are less likely to receive the most effective therapeutics for their cancers. The first is an issue of biology, and the second is an issue of behavior. The third reason is why we are here today. Black women die at such high rates because their breast cancers are too often detected at late stages when treatment of any kind is less effective. And researchers know that most breast cancers are detectable long before a woman gets a mammogram. Consider that 30 percent of all breast cancers in Black women occur under the age of 50; 18 percent occur under the age of 45. The CDC projects that for this year roughly 30,000 breast cancers will be diagnosed in women under 45. That is 5,000 among Black women under 45. We know that early education, awareness, and screening saves lives. When breast cancer is detected early and quality treatment is received, the 5-year survival rate is 100 percent for all women. If we just increase the rate of screening mammography by 50 percent among women 45 and under, the survival rate would be increased by an additional 3,000 women every year, and that is 700 to 1,000 more Black mothers, daughters, and sisters. That is good news. Younger women are less likely to undergo breast cancer screening than women age 50 to 74, and they are less likely to have access to the latest digital breast screening technologies, including 3D tomosynthesis, which have been shown to detect breast cancers earlier. We must do better to educate and improve access, which is where the EARLY Act comes in. The EARLY--Breast Cancer Education and Awareness Requires Learning Young--Act, sponsored by Representatives Wasserman Schultz and Brooks, would reauthorize and increase funding originally authorized in 2010, giving needed attention to the education of younger and high- risk women about their breast health. The program not only educates women ages 45 and younger on breast cancer risk, but it supports initiatives and research to identify high-risk women, collect family histories, and educate healthcare providers. The EARLY Act has already benefited women. Mortality rates from breast cancer have dropped in the past ten years, in large part due to early detection. The need for earlier screening and diagnosis is critical for women with inherited genetic mutations, such as BRCA genes, Ashkenazi Jewish women, and women who were treated with radiation therapy for cancer as children. I add Black women to this list not because of biology or genetics, but because of the systemic racism that has limited their access to preventive care. The COVID-19 pandemic is yet another example of disparities in our public health approach to the Black community. Black people are at much higher risk of contracting COVID-19, and they are much more likely than White people to die from the virus. We are on the verge of a seismic shift in this country when it comes to valuing Black lives and health. I see a future when we can stop talking about how Black women disproportionately and needlessly die from breast cancer. Reauthorize the EARLY Act and make 2020 the year we do what we know works and save lives. Thank you. [The prepared statement of Ms. Blount follows:] [GRAPHIC] [TIFF OMITTED] T5868.008 [GRAPHIC] [TIFF OMITTED] T5868.009 Ms. Eshoo. Thank you very much for your excellent testimony, Ms. Blount. The Chair now recognizes Mr. Robert Boyd. You are recognized for 5 minutes for your statement. STATEMENT OF ROBERT BOYD Mr. Boyd. Thank you, Congresswoman Eshoo. Good morning to you and to Ranking Member Burgess and to members of the Health Subcommittee. Thank you for inviting me to speak with you this morning on H.R. 2075. I would like to thank Congressman Sarbanes for being the tireless champion for school-based health centers. Without your leadership and your dedicated staff, we wouldn't be here today. My name is Robert Boyd, and I am the son and nephew of public school teachers. I am here today as the President of the School-Based Health Alliance, a nonprofit organization based here in Washington, DC. Since 1995, the Alliance has served as the national voice for more than 2,500 school-based health centers that collectively provide healthcare for over 3.6 million children, youth, and others from predominantly low- income families from across the country. School-based health centers have been located in public schools since the early 1970s. As you all know, schools are more than just places of learning. Schools are pillars of the community, whether located in large cities, suburbs, or rural America. For millions of low-income students, school-based health centers are their sole source of healthcare. They allow parents to remain at work and students to stay in school while getting the healthcare that they need. Now, the data is clear: Healthy kids learn better, healthy kids earn better grades, and healthy kids achieve higher promotion and graduation rates. Healthy kids also grow up to be healthy adults. School-based health centers sit at the critical intersection of education and healthcare. Currently, we hear extensive discussion about how schools will operate this fall. It will be difficult to safely resume in-person learning. Many schools will continue remote learning or in some hybrid combination. But what cannot be up for debate is the ability of school- based health centers to continue providing essential healthcare services to our most vulnerable students. Many people do not realize it, but even during the pandemic many school-based health centers are still delivering ongoing care. Throughout the pandemic, school-based health centers have continued to provide health services to K-12 students directly, sometimes onsite at the school, sometimes at school-linked clinics, via mobile vans, even drive-through visits in school parking lots. Some students have been able to receive life-saving medications, immunizations, and even participate in socially distanced counseling sessions. Unfortunately, far too many have not. We also provide care through telehealth services. As a result of the pandemic, the U.S. Centers for Medicare and Medicaid Services has given State Medicaid programs increased authority and flexibility to expand telehealth services, including telephonic and video conference care, and has removed some cross-State licensing requirements. Going forward, telehealth will remain an important strategy for increasing access to care, allowing us to reach the students and families with the greatest needs, including almost one-third of school-based health centers located in rural communities. Telehealth is not a substitute for in-person care. It is a technological enhancement in the tool chest of healthcare providers. Ladies and gentlemen, please be clear, the School-Based Health Alliance believes in a comprehensive definition of health that includes protecting the mental, emotional, and social health needs of students. Even as education and health leaders are urgently purchasing hand sanitizer and marks, we cannot forget to care for the entire student. We are here to help. The mental and emotional health of students is an issue that has too often been overlooked in the current debate about reopening school buildings. It is more important than ever that we think comprehensively and act with urgency. We must treat this pandemic as we would a mass incident, like tornadoes, hurricanes, or school shootings, that wreak multiple levels of havoc on an entire community. As with a mass incident, some of the pandemic's harm is visible and immediately apparent. But other damage may be less visible, such as increases in depression, anxiety, sleep problems, hunger, and stress, caused by children's struggles with online learning and social isolation. A lingering concern is the potential for child abuse to remain unchecked, given that the primary reporters of violence and neglect are educators and healthcare workers. Communities need maximum flexibility to ensure that the doors of school-based health centers, both our literal doors as well as our virtual online gateways, remain open to deliver critical primary and mental healthcare services to students. By passing the bipartisan School-Based Health Centers Reauthorization Act, you will recognize the critical role that school-based health centers play in both the immediate and long-term health needs of our Nation's schoolchildren. Thank you, and I am happy to answer questions. [The prepared statement of Mr. Boyd follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Eshoo. Thank you very much, Mr. Boyd, for your excellent testimony. The chair now recognizes Ms. Nancy Goodman for 5 minutes for your testimony. Welcome again, and thank you. STATEMENT OF NANCY GOODMAN Ms. Goodman. My name is Nancy Goodman, and I am here as founder and executive director of Kids v Cancer, a nonprofit that has been the driving force of the Creating Hope Act, as well as the RACE for Children Act, which requires novel therapies to be studied in children's cancers. Kids v Cancer promotes programs that are in the best interest of seriously ill children, regardless of whether the pharmaceutical industry supports or opposes them. Toward that end, we do not accept donations from drug companies. In addition, I have drafted and am solely responsible for the following comments. I am here not only in my capacity as the executive director of Kids v Cancer but also as a mother. More than a decade ago, I lived in Manhattan with my husband and sons, Jacob and Benjamin. When Jacob was eight years old, he began waking up with nausea and headaches. We went to our pediatrician again and again, and on a Sunday morning, sitting on an examination bed, wearing a Mickey Mouse tie, our pediatrician told us Jacob might have a brain tumor. We learned Jacob had medulloblastoma, a rare pediatric cancer. The drugs available to treat Jacob were 40 years old, and they were unlikely to work. How could that be, I wondered, when there are so many exciting innovations in adult cancer therapies? Jacob died in the early hours of a wintry Friday morning. He was ten years old. That day I founded Kids v Cancer. We started with drafting the Creating Hope Act. The challenge we sought to address was that there were inadequate market incentives to bring drug companies to develop drugs for small children with life-threatening illnesses. Yet we wanted to create a program largely funded by major pharmaceutical companies. So let me repeat that. The Creating Hope Act basically transfers value from large pharmaceutical companies to smaller and oftentimes more innovative biotech companies to facilitate their investment in creating drugs for seriously ill children. Since the passage of the Creating Hope Act, the Pediatric Voucher Program has been very successful and has created a pathway for companies to develop many drugs for children with life-threatening illnesses. So let me review some of these measures of success. The first measure of success is the value of the vouchers. The Pediatric Voucher Program has mobilized well over $1 billion in incentives in the form of payments for vouchers, creating opportunities for market-based, risk-adjusted returns on investment, and rare pediatric disease drug development. A second measure of success is the number of new drugs that have been approved for seriously ill kids since the Creating Hope Act's passage, more than 20 so far. A third mark of success is the number of drugs in the development pipeline. As measured by the number of rare pediatric disease designations, this number is increasing by leaps and bounds, from 3 in 2013 to over 60 today. Fourth, as Dr. Kesselheim, my co-witness, notes in his Health Affairs article, drugs qualifying for a pediatric voucher are more likely to proceed through the phases of drug development and at the speed at which it would do so. Fifth, and perhaps the most important, at the time of Jacob's illness there were no companies whose core mission was pediatric cancer drug development. Now there are several. The Creating Hope Act has been a great success, but its short duration has created uncertainty and limited its impact. Since 2012, the program has been reauthorized three times, each for 1 to 4 years. However, this time horizon for drug development from idea to FDA approval can be 7 to 10 years or longer. The start of the drug development process is a critical moment. It is when developers choose whether to develop a drug for kids. If we reauthorize the Pediatric Voucher Program on a permanent basis, we can affect this early stage of drug development as well. The Creating Hope Act has increased the number of reviews in the FDA's Priority Review Program. That is why, when originally drafting the Creating Hope Act, we were careful to include a provision by which the FDA could compensate itself for any additional burden, allowing the FDA to set voucher user fees. In 2020, voucher user fees are $2.1 million on top of a $2.9 million user fee. If there are remaining issues around the management of this program, I thank the FDA leadership as they work to address them head on so that we do not have to abandon or shorten a program that promises hope to so many critically ill children. All evidence available indicates that the Pediatric Voucher Program is effective. I urge you to support its permanent reauthorization by passing the Creating Hope Reauthorization Act. Thank you for including me in today's hearing, and I am happy to take your questions. [The prepared statement of Ms. Goodman follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Eshoo. Thank you very much, Ms. Goodman. I can't help but think that, as a mother myself, out of the extraordinary tragedy and loss of your son, your work is nothing short of remarkable. And it is so important for us to take up this reauthorization and that it be made permanent, as you indicated. So thank you very, very much. You are a source of inspiration to us. Next, Dr. Aaron Kesselheim, you are recognized for 5 minutes for your testimony. And thank you again for your willingness to be with us today. STATEMENT OF AARON KESSELHEIM Dr. Kesselheim. Thank you. Chairwoman Eshoo, Ranking Member Burgess, members of the subcommittee, thank you for this opportunity to talk today. I am an internal medicine physician and lawyer, and I lead the Program on Regulation, Therapeutics, and Law, one of the largest and most prolific nonindustry-funded research groups in the country that focuses on the pharmaceutical market. My remarks today will cover the rare pediatric disease priority review voucher, or PRV, why it is a poor way to support research into rare pediatric disease treatments, and what some better options are. A PRV entitles drugmakers to speed FDA review of the 10- month timeframe it applies to standard drugs that lack any sort of special innovative or clinical qualities to the priority review 6-month timeframe reserved for drugs representing therapeutic advances, like those meeting unmet medical needs. Economists assume that drugmakers would value reaching the market four months sooner, so Congress created the voucher in 2012 to stimulate investment into rare diseases affecting children, unquestionably an important public health issue. Unfortunately, it hasn't turned out that way. There are four major problems: It doesn't work, it wastes public and FDA resources, it is potentially dangerous, and it isn't very valuable. First, from 2012 to 2018, the FDA awarded 14 rare pediatric disease PRVs, which is more treatments than in years before 2012, but the important question is whether the initiation of the PRV program changed the research trajectory. To study this question, in a study led by my colleague here at Harvard, Thomas Hwang, we compared how drugs treating rare pediatric diseases progressed through development in the years before and after the voucher program with drugs treating rare adult diseases, which would not earn a voucher. We found no variation in the rate at which drugs eligible for a rare pediatric PRV were introduced into clinical testing. That is, the baseline trajectory didn't change. Rather, there has been an increase in recent years in rare diseases of all kinds, pediatric and adult. That is obviously great, but it doesn't mean that the PRV works, and I would be happy to submit this paper for the record. Second, the voucher wastes public resources. It derives its market value from the prospect that manufacturers with more likely run-of-the-mill drugs would come to market sooner and start selling those drugs at high prices to be reimbursed by payers like Medicare and Medicaid. It also wastes regulatory resources. FDA officials have raised concerns that the PRV interferes with the way it prioritizes drugs by hastening review of unremarkable products that would not otherwise merit an expedited timeline, straining resources since the FDA cannot quickly hire and train new staff with the necessary expertise to review the drugs. Third, the voucher is dangerous, since too speedy FDA review may lead to bad decisionmaking. For drugs that are a major advance in treatment, accelerating FDA review is reasonable, but one study showed the risks of imposing arbitrarily short deadlines on FDA review times for drugs that did not deserve such acceleration, such as increased risk of subsequent safety-related withdrawals or botched warnings. And finally, the vouchers' value has plummeted. Because vouchers can now be earned for FDA-approved drugs for neglected tropical diseases and medical countermeasures, as well as rare pediatric diseases, there are a lot of vouchers available on the market. In recent years, vouchers have sold for approximately $80 to $110 million, a far cry from the lofty values predicted by the economists who devised this scheme. One way to try to address these issues would be to make necessary improvements in the voucher program. For example, drugs qualifying for the voucher could be limited to first-in- class products or products meeting unmet medical need. Manufacturers should also not be allowed to earn a voucher immediately for drugs approved via the "special accelerated approval" pathway, since accelerated approval of drugs has not yet demonstrated meaningful patient benefits. Most importantly, rare pediatric disease manufacturers earning a voucher should be required to ensure that the product is sold to U.S. patients at value-based prices, or at no higher than prices sold to rare pediatric disease patients in other high-income countries, to help ensure that the children who need the drug can be assured of access to it. A better pathway forward for Congress would be to consider more direct ways of encouraging drug development for such medical conditions. For example, the U.S. Government supports pharmaceutical innovation with substantial amounts of taxpayer dollars each year, mostly through the NIH. One study found that all new drugs approved from 2010 to 2019, or their molecular targets, could be linked back to this government-funded research. The U.S. Government also offers various tax concessions and refunds directed at research and development spending by private firms. Thus, greater upfront funding, or tax credits, could be offered for research into rare pediatric diseases. And unlike the PRV, this method of stimulating innovation has a track record of success. Another approach would be to provide greater support for late-stage development, perhaps through nonprofit organizations via public-private partnerships. Recent funding through BARDA to support vaccines for COVID-19 is related to this model. Naturally, such partnerships should include guarantees about affordable access to the rare pediatric disease drugs that emerge because of the public's involvement in reducing the risks and costs of drug research and development. Children with rare diseases need more investment in scientific discovery and clinical trials to get them the treatments that they deserve. It is time to move past the pediatric rare disease priority review voucher mistake and let it sunset, and instead direct efforts towards better solutions known to lead to transformative drugs, including direct public investment in research and development for treatments for rare pediatric diseases. Thank you very much. [The prepared statement of Dr. Kesselheim follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Eshoo. Thank you very much, Doctor. Now we will recognize Brian Lindberg. Thank you again for being with us today, and you have 5 minutes for your testimony. STATEMENT OF BRIAN LINDBERG Mr. Lindberg. Madam Chair, Ranking Member Burgess, and distinguished members of the subcommittee, I am Brian Lindberg. I have the honor to serve as chief legal officer and chief policy officer of National Marrow Donor Program/Be The Match. For over three decades, through public-private partnership with the Federal Government, we have been entrusted to operate the C.W. Bill Young Cell Transplantation Program, which provides life-saving bone marrow and umbilical cord blood transplants to patients in need. As you know, this is the program that houses the national registry of volunteer bone marrow donors, as well as the National Cord Blood Inventory and the Stem Cell Therapeutics Outcomes Database. On behalf of the entire team at NMDP/Be The Match and the patients we serve, I would also like to thank all the members of the Health Subcommittee for the opportunity to speak with you today and for allowing me the privilege to share with you the successes of the program over the past 5 years, but more specifically during the current crisis of the global pandemic. Finally, I would also like to extend my special thanks to Congresswoman Matsui and Congressman Bilirakis for their leadership in introducing H.R. 4764, to reauthorize the program for another five years. Ms. Matsui and Mr. Bilirakis have been tireless champions for patients whose only chance at life is bone marrow transplant. Today, I am so pleased to be able to tell you that this past December, NMDP/Be The Match marked the 100,000th time it facilitated a transplant in which a heroic volunteer donor stepped up to save the life of a person they had never met by making this life-giving gift of bone marrow donation. This is because 35 years ago the founders of our program refused to accept the conventional wisdom that a national registry wouldn't work because, after all, who would do this, who would step up to donate their marrow for a stranger. They persevered because they knew that a national registry would work, that this must work, and needed to be established by Congress. I can say without hesitation that this same spirit, that refusal to take "no" for an answer, has served this program well over the past year. In addition to celebrating our 100,000th transplant in 2019, we have facilitated more transplants than in any other year in our history. And then global pandemic arrived, and it threatened the very foundational underpinnings of our ability to fulfill our obligation to those patients. And that is specifically why I am here before you today. As you are no doubt aware, the success of this program and the lives of the patients we serve rely on our ability to move couriers who carry donated cells, not only across the country but also across the world. The complexity of matching patients and donors results in half of these cellular donations crossing an international border. Domestic and international travel bans, border closings, declining availability of passenger airline service, quarantine and shelter-in-place orders, and an ever-changing patchwork of State and local restrictions during the COVID pandemic have created near catastrophic barriers to our ability to facilitate timely transplant and threaten to impede every one of these life-or-death missions at multiple points along what is now a tenuous path from donor to waiting patient. But despite all of that, I am thrilled to be able to report to you today that throughout the course of the pandemic, NMDP/ Be The Match, through innovation and determination, has since March delivered more than 2,500 life-saving therapies to patients who are relying on them without a single failure. Not one patient prepped for transplant has gone without. Everyone associated with this program understands the consequences of failure are the direst consequences of all. But these successes have been hard-earned, and in many cases involve days-long, around-the-clock, extraordinary interventions across multiple Federal agencies, as well as State and foreign governments. Due in material part to the national program status awarded us under the authorizing statute, over the past few months we have been granted a waiver in the national interest by the CDC to the European travel ban, allowing international bone marrow couriers to deliver products to U.S. patients. We have designated our couriers and donors as essential critical infrastructure by the Department of Homeland Security's CISA. We have leveraged private aircraft, donated for use by HHS, to deliver life-saving cells to patients when commercial flights were no longer available. We have accessed support from U.S. embassies and consulates to obtain from foreign governments timely travel authorizations for donor and courier travel and to coordinate private and humanitarian flights in and out of countries that had otherwise closed their borders. And we have been granted clearance from Customs and Border Protection that ensures donations coming from Canada to American patients will have uninterrupted transport into the country. The examples I have just described share two common but two extraordinarily important threads. First, this would not have been achieved without our national program status. And second, patients in the U.S. would have died had these things not happened. And that is why I am before you today, urging your help to ensure timely reauthorization of the program to mitigate any unnecessary risk to patient life. Thank you again for the opportunity to submit this testimony and for the committee's longstanding support of this program that has given so many a second chance at life. On behalf of those whose lives have been extended, those who are searching the registry for a match donor today, and those who will need to look to the program for help in the future, we urge to once again reauthorize the C.W. Bill Young Cell Transplantation Program, and we would respectfully ask you do so prior to the program lapsing at the end of September. Thank you. [The prepared statement of Mr. Lindberg follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Eshoo. Thank you so much, Mr. Lindberg. What a powerful story, given all the challenges of COVID that you have had to deal with. Each one of you has a powerful story in your testimony, and Mr. Lindberg's was as well. Thank you. I served with Bill Young, and I think that he would be very, very proud. Very proud. Mr. Lindberg. Thank you. Ms. Eshoo. He was a gentleman, a lovely, good man. Next, the chair recognizes Travis Tygart. Mr. Tygart, you are recognized for 5 minutes for your testimony, and thank you for being with us today. Welcome. STATEMENT OF TRAVIS T. TYGART Mr. Tygart. Thank you. Chair Eshoo, Ranking Member Burgess, members of the subcommittee, good morning. My name is Travis Tygart. I am the CEO of the United States Anti-Doping Agency, or USADA. Thank you for inviting me to appear before you today to discuss our reauthorization and our important mission. It is a huge honor to be here representing our North Star, which are our clean athletes. We greatly appreciate the ongoing support of Congress and the President's Office of National Drug Control Policy, or ONDCP, to protect, along with us, the health, safety, and rights of clean athletes to a fair and level playing field. USADA, as you know, is charged with implementing a robust, fair program, which includes both in- and out-of-competition testing, results management, and athlete education for all U.S. Olympic, Paralympic, and Pan Am athletes. Importantly, we also contribute to the advancement of all clean sport through scientific research and education initiatives focused on values and healthy and safe competition. Chair Eshoo, members of the subcommittee, we cannot perform this essential mission without your support. As many of you know, we opened our doors in late 2000, thanks to the bipartisan efforts of Congress in recognizing the need to create an independent anti-doping system. Throughout the 1990s, many viewed the U.S. and our athletes as dirty. There was no independent effort, because the Olympic sports movement, whose job it is to promote sport, was also handling the anti-doping program. It was the epitome of the fox guarding the henhouse. As a result, Congress took action and established an independent organization to implement a fair and robust national program. This landmark decision literally changed the game for U.S. athletes for the good. This independence is our lifeblood, and it is possible only through government support that we receive each year. We received Federal funding in the fall of 2000 and every year since. We were first formally authorized by the committee and Congress in 2006, and we were reauthorized in 2014. Our congressional funding comes through ONDCP and is combined with our private funding to achieve our mission. Since we opened, we have educated tens of thousands of athletes and others on the reason that playing fair is the only way. Our True Sport Partner program has reached over 13.8 million since its founding in 2017. Deterrence is the foundation of the entire program, and we have conducted approximately 175,000 drug tests. In 2019, we completed a total of 7,300 blood and urine tests. We have also earned the trust that we fairly enforce the rules even when not easy or popular to do so. This is essential to our success. In 2019, we received 533 tips to our Play Clean whistleblower line and resolved 49 cases. Importantly, when we were sued by Lance Armstrong, a Federal court ruled that the USADA process provides due process. This will likely be the most important legal legacy ever, that due process is afforded our Olympic and Paralympics athletes. The final component is our scientific and research efforts. Along with others, we have advanced the science to now have reliable laboratory methods to detect and, thus, deter things like EPO or human growth hormone or designer steroid use. We also joined forces and raised additional private money with Major League Baseball and the National Football League to establish a scientific research entity that has become a world leader. Of course, you can see from our independent audit that we send to Congress every year we are efficient and we are good stewards of the funding. We are lean and mean, and for just a small amount of government funding we have changed the game for the good. Comparatively, the U.S. Government is funding less on average per athlete than many other countries. As one example, the U.K. Government provided its agency a million dollars more in funding than us, yet they have less than half the athletes we do. USADA's reauthorization, as was mentioned by the chair, is even more important this time around since the Summer Olympic and Paralympic Games are coming to the United States in L.A. In 2028. By passing this reauthorization, you can help make sure the 2028 Olympic Games are the cleanest games ever. Finally, our authorization strengthens our ability to influence globally. Congress' backing gives us the standing to advocate so that our athletes' rights are also protected when they compete abroad. USADA's independent model has become a beacon to others, and we are humbled to be in the position to lead within the global community. Just last month, at the request of Congress, ONDCP sent a report to Congress detailing the World Anti-Doping Agency's governance problems, including its lack of independence and failure to provide fair athlete and U.S. representation. We applaud ONDCP for its work on this issue. And hopefully you all have seen that several leading athlete groups from Canada, the United States, Germany, and others have come out strongly in favor and support of these principles. Chair Eshoo, Ranking Member Burgess, members of the subcommittee, Congress did the right thing almost 20 years ago by establishing an independent anti-doping organization, and you all have continued to support this model to this day. Along with the millions of athletes we represent, we thank you for your ongoing support and hopefully for the swift passage of H.R. 5373, and I look forward to taking any of your questions. [The prepared statement of Mr. Tygart follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Eshoo. Thank you for your wonderful testimony and for being with us today. We will now move to member questions, and I recognize myself for 5 minutes. To the witnesses that I don't get to with questions, it doesn't mean that I don't respect your program. You have all given superb testimony. They are very important programs. I want to zero in on the Creating Hope Reauthorization Act, because we have some differing views here. So to Dr. Kesselheim, the GAO found that drug developers said the voucher program plays a major part--has played a major part in their decision to invest in the development of rare pediatric drugs, but your research found no increase in the development of rare pediatric drugs after the voucher program began. So my first question to you is--and I want to get my questions in first and then take the answers--how do you explain the differences in these findings? To Ms. Goodman, Dr. Kesselheim's research paper used drug development for rare adult diseases as the comparison group for rare pediatric diseases. But in your experience, how is the drug development process different for pediatric drugs versus adult drugs? And to both of you, do you believe that the Pediatric Voucher Program has existed long enough to prove whether it is beneficial or harmful, and if so, what benefits have you seen, and what harm? And so why don't we start with Dr. Kesselheim. Please try to keep your comments brief so that I can get all of the answers to my questions. Dr. Kesselheim. I will do my best, Chairwoman, to be brief. I would say that the difference is that the GAO report was based on anecdotal interviews with individual companies, and the study that we did was a comprehensive study that looked at all new drug development. And so it would be possible for, in subjective interviews, for companies to say, sure, why not, but if you actually look at the data across the board, it doesn't look like there is any difference. Ms. Eshoo. Well, I represent Stanford University, the Stanford Medical Center, and Dr. Crystal Mackall, she is the leading cancer researcher at the Stanford Medical School, and she is a clinician. She said the voucher program has been remarkably impactful for childhood cancer. She said before the program, she used to go with her hat in hand to beg investors to consider a potential drug, and now people take a second look and are interested in developing drugs. And she named them. She said something very interesting, that a bean counter may be disappointed by the sheer numbers of approved pediatric drugs. But she said that that disregards the lengthy drug development cycle, and it is more important to look at the impact of the approved drugs. And then she named them. So I just wanted to insert that. When you say the GAO interviewed people and it was anecdotal, the GAO usually does very thorough work. So I don't know how you--how did you get to identify the GAO's report as anecdotal? Dr. Kesselheim. Because that is how the GAO describes it in its report. It says that the way that they identified the--how drug companies thought--what drug companies thought about it is by interviewing some of them. Ms. Eshoo. OK. Ms. Goodman, can you answer my questions, please, and anything else you want to add? Ms. Goodman. Yes, and thank you so much for giving me this opportunity. Look, I think there is a lot of evidence that this has been a very successful program. There are more approved drugs. There are loads of new drugs in the development pipeline which we can measure by designation. And how do we explain that away? Even Mr.--Dr. Kesselheim, in his health affairs piece, notes that the program has been--you know, has shown that for drugs that qualify for vouchers, they speed through the drug development process faster, and they are more likely to go from one phase to the other. It is true that the program's weakest point of effectiveness is, at the very start, when drug developers decide will I develop a drug for seriously ill children or for some other indication, right? And so I agree with Mr. Kesselheim--Dr. Kesselheim, in part on that point. But the reason there is this problem is that drug development takes, you know, ten or more years, and we keep on reauthorizing this program for very short periods of time. If we reauthorize it for permanent length of time, we are going to see Dr. Kesselheim very happy about the effect of this program on early drug decisions. Dr. Kesselheim. If I could just clarify, just a mentioned mistake about the way that my--what my study actually shows. So my study didn't show any difference in the ways that drugs progressed from phase 2 to phase 3, or phase 3 through approval. Although, it did show that there was a statistically significant effect on the progress from phase 1 to phase 2. Phase 1 is also--tends to be the shortest phase of clinical trials and drug development, so it is unclear of how meaningful that is overall. The most important finding was that it doesn't appear that there are any new drugs that come into the system before or after the voucher program as compared to rare adult diseases. And I will just point out that over the last couple of decades---- Ms. Eshoo. Doctor, my time has run out. But I think it is important to note of the drugs that have been approved, as Dr. Mackall says at Stanford Medical School, and she also works out of Lucile Packard Children's Hospital in my district. It is now--let's see, we go to--who is next? Who is? To the ranking member of the subcommittee, Dr. Burgess, for his questions, 5 minutes. Mr. Burgess. I thank the chair. Maybe we can continue this discussion that we just started a little bit. Dr. Kesselheim, Ms. Goodman mentioned in her testimony that the number of rare pediatric disease drugs approved by the FDA since the enactment of the Creating Hope Act--the Creating Hope Act has increased by over 120 percent. Do you have a sense of how the United States compares to other nations when it comes to rare pediatric drug development? Dr. Kesselheim. Well, I believe that the United States is-- you know, helps contribute substantially to rare pediatric disease drug development because of the substantial amount of money through the NIH that goes into the discovery and development of the--of some of the key, you know, drugs that-- that emerged for all kinds of conditions, including rare pediatric diseases. And I--my presumption is, is that those drugs also are available in other countries around the world, although, I haven't studied that. Mr. Burgess. But as far as development for a drug to treat a rare pediatric cancer--I would suspect that it is likely, more likely to happen in the United States than other countries. But perhaps we can find that out on our own. Ms. Goodman. If I could intervene? Mr. Burgess. Yes, yes. Sure. Ms. Goodman. Yes, you know, the vast predominant--the vast majority of drugs developed for seriously-ill kids are right here in the United States. And if we don't get our incentives right, kids all over the world are going to suffer. And so I think this is a real issue. I think you hit it right on the head. Mr. Burgess. So let me just ask you, because you brought up the point about the reauthorization date, and I don't know if a lot of people are aware of--this program was started in a Food and Drug Administration reauthorization act back in 2012, but it is not linked to the reauthorization or the FDA reauthorizations that we do every five years. So this program expires September 30th kind of all on its own--talk about an orphan--and it is out there by itself. And you may have an excellent point that it ought to be reauthorized, but perhaps the permanence or a longer period of time because we do have a long time horizon with these products that are in development. Ms. Goodman. That is correct. Look, the first drug to get a voucher for pediatric cancer is the Dinutuximab by Unituxin, and this drug was in development for 30 years. So even if we do--even if we extend this program by 7 or 10 years, there is still going to be a large portion of drugs that we don't incentivize and we can't support. Mr. Burgess. You know, as I was listening to you and one of the earlier witnesses, of course, we are so fortunate on this committee, the full committee, to have worked on the 21st century CARES Act and championed and got through. Also pointed out to me in 2015, having been no new therapeutic for sickle cell disease approved for 40 years, FDA approved therapy for sickle cell for 40 years, very reminiscent of your comments about no new children's drugs developed for 40 years. So we don't--we don't always do things perfectly in this committee, but sometimes we can make things a priority that actually do make a difference in people's lives. And from time to time, we have to acknowledge that, celebrate that success, and recognize that that is equity that we can push forward if we are willing to do that. So definitely making things a priority, thumbs up. That is an important point. Now, Mr. Lindberg, just before my time runs out, I had signed up to be a donor. I have been in the donor program to see if I can be a donor match, because there was some drive going on in my community, long before I ever came to Congress. I have been here for a while. Is that--is that enlistment still active? Does a citizen need to reup that from time to time? What can you tell us, as we are here highlighting your program, what the people need to know about signing up and the length of time that they may be signed up for a marrow donor program? Mr. Lindberg. Thank you, Ranking Member Burgess. So--thank you for signing up to join the registry. Our criteria-- eligibility criteria do state that once a volunteered registry member reaches the age of 61, that person ages off the registry. That is a cell efficacy issue. Mr. Burgess. What difference does it make? I object. Mr. Lindberg. We like people objecting to aging off. One thing that we know is that over 30 years of this program and our work with outcomes database, we know that--we know that despite a very good HLA or DNA match, that as a donor ages, that there are poorer outcomes for the recipient. So we know that our network transplant physician community looks for young, healthy donors, and will prioritize those over those-- like me--who are a bit more aged than others. Mr. Burgess. OK. Well, I actually did not know that. So that is useful information that came in this morning. I didn't realize it had been so insensitive as to bump me off for being old. Thank you, Madam Chair. Again, I have learned something this morning. I will yield back. Ms. Eshoo. The gentleman yields back. The chair is now pleased to recognize the chairman of the full committee, Mr. Pallone, for his 5 minutes of questions. The Chairman. Thank you, Madam Chair. I wanted to ask my questions of Dr. Kesselheim and they are all about the Rare Pediatric Disease Priority Review Voucher. I wanted to say that--while I believe that we--while I think we all agree that more has to be done to expand research into treatments and cures for diseases that affect children and adolescents, and that those treatments and cures should be accessible to those who need it, I think the committee needs to carefully consider whether the Rare Pediatric PRV Program is tailored to achieve those ends. And that requires an analysis of the cost and benefits. And when making policy decisions to reauthorize programs, generally, we have to analyze how they have worked in the past, and that can be particularly challenging when we are looking at an incentive program, we have to determine whether the desired effect would have happened without the incentive provided by Congress. So, Dr. Kesselheim, with that, by way of background, I interested in the portion of your testimony when you described how you do an empirical study into how the Rare Pediatric PRV program acted an incentive. Could you describe the way or the methods you used in your study in your findings in that regard? Dr. Kesselheim. Sure. So what we did was we identified all new drugs that are coming into the pipeline, not drugs that are FDA-approved, drugs that coming into the pipeline, and we identified whether or not they were directed towards pediatric rare diseases and adult rare diseases. And then we looked to see in the years before the Pediatric Review Voucher Program in 2012 was extended to rare pediatric diseases, and in the years after, whether or not there was a difference between the number of new rare pediatric drugs entering into the pipeline and the number of new adult rare drugs entering into the pipeline, which theoretically wouldn't have been incentivized at all, because they wouldn't have gotten--they wouldn't have been eligible to get a voucher. We found no difference in the trajectory before and after. What we did notice was that the trajectory has been increasing, which is a good thing, but what it just means is that, it just means that rare diseases, in general, are a point of a lot of research for drug companies and the--and public funding, and we are just getting a lot more new drugs for rare diseases across the board over the last couple decades. The Rare Pediatric Disease Voucher Program was extended to rare pediatric diseases in 2012 doesn't seem to have affected the trajectory at all. Mr. Pallone. Well, now, let me ask you this: I know the program does not have a budget score or really cost the Federal Government any money, but there may be, you know, other costs associated with this. So in that regard, can you describe how the program affects FDA resources? Dr. Kesselheim. Sure. And I will actually disagree that the program doesn't cost the government any money. The government-- the program does cost the government a lot of money, because what the program does is it lets run-of-the-mill, non- innovative drugs onto the market sooner so that they can start being charged extremely high prices to Medicare and Medicaid, which, of course, are government-funded insurance programs. That is where the voucher gets its value from. But in terms of the FDA, yes, in those--in that same GAO study where they interviewed drug companies, they also interviewed people at the FDA, and the people of the FDA said, Look, this is a real burden on our resources, even though there is an additional user fee associated with it, it is just not something that it--you know, it strains our ability to prioritize what we think are important public health drugs and put those at the top of the queue. Mr. Pallone. Well, let me ask you one last question. The bill before us would fully remove the sunset and authorize the program indefinitely. I know in your testimony you said it would prefer to see this program expire. But if the program were to continue, which I think is likely, what improvements would you recommend? Dr. Kesselheim. Well, so first of all I would say, I would say, first of all, that the PRV should not be able to apply to drugs that are--that it should only be able to apply to drugs that are first in class or to drugs that meet an un-medical need. I would say that the PRV should not be able to apply to drugs that are approved via the accelerated approval pathway, because those drugs do not have a demonstrated effect on actual patient outcomes. And I would say that any drug that gets a PRV should be required to make the drug available to patients at a value-based price that is consistent with the same price for which it is available to pediatric rare disease patients in other countries, so that patients can have access to the drugs that they really need. Ms. Goodman. Congressman, if I may jump in here for a moment. And I am going to also say that I would disagree with Dr. Kesselheim on every single point he has made. Let's just start with the pricing issue. You know, there are two kinds of ways to provide access to drugs, access to drugs for patients. And there are two groups of patients. One are patients who already have drugs. And so for those patients, of course, we would like the drugs to be as low as--the pricing as low as possible. But the other group of patients don't have the therapies to treat their illnesses yet, and that includes my son, Jacob. And we can't expect that we are going to give that class of patients best access to drugs if we are going to be suppressing prices of therapies that haven't even been developed yet. The second point I just want to make is with respect to, you know, we are talking a lot about this health affairs article. I think Dr. Kesselheim is, you know, playing fast and loose with a bunch of numbers. If you look at his charts, there are notable deltas, which means pediatric and adults, the adult curves. And, of course, the weakest point in the efficacy of the program is right at the start when people--when developers decide do they want to develop drugs for kids? That is why we need a permanent program. Mr. Pallone. My time has expired, but--what did you say, Doctor? I am sorry. Thank you, Madam Chair. MS. Eshoo. Yes, well, I know that it went over by almost a minute, but it is a very important discussion, and perhaps other members will follow up on the--on the points that are being made. It is a pleasure to recognize the gentleman from Michigan, the former chairman of the full committee, Mr. Upton, for his 5 minutes of questions. Mr. Upton. Thank you. Thank you, Madam Chair, and I am delighted to be here. And I also just want to say, I want to thank Mr. Sarbanes and others--Republicans and Democrats that are a cosponsor of this important legislation on school-based health centers, something that we need to reauthorize. For me, I have been terribly supportive of this program. I would note that in my district I have a number of these facilities. And I am very concerned that, particularly, as schools are going to have limited openings, it appears, from e-learning, limited days, how exactly are we going to make sure that our kids, and school kids and their families then are able to benefit from these school-based clinics? And I guess that question is for Mr. Boyd--Dr. Boyd, if you mind commenting on that. I will put the earphones back on. Thank you. Mr. Boyd. Yes, Congressman, it is "Mr." Schools did not close. They went to remote learning. School-based health centers, to the best of their abilities, did not close, they went to remote operations through telehealth. Our dilemma--and I am not an alarmist, I worked with Congresswoman Brooks for a number of years on school safety--we have a pending healthcare crisis coming in our schools that is shared by all of the major education groups, all of the major school-based health partners that we have, and the nurses, the psychologists, the counselors, and the social workers. And it is not just mental health. Kids are not getting their vaccines. They are not getting their lifesaving medications for diabetes and treatments for asthma. We have to address these issues. The school-based health centers are going to continue to try to serve their students. I know anecdotally, we don't have a lot of good data, but we have been in close touch with school-based health centers around the country. I know anecdotally of stories of clinicians asking school resource officers and educators to go check up on children that they haven't heard from. We don't know how many Title 1 school kids have not been served by the continuing of education through remote learning, or the continuing of healthcare through telehealth. We just don't know what the numbers are yet. So, I want to make clear that--that we are going to continue to operate to the best of our abilities, whether school buildings reopen or not. One of our great concerns at the Alliance is the ability of school-based health centers to reopen. A number of them are sponsored by federally qualified health centers, some by public health agencies, some by hospital systems, some by school districts. In the cases where they could take those workers and put them back on the front line, keep them on the front line, in the primary community health center or the primary hospital, they did just that. The question will be whether or not they will be able to move them back to the schools should that building reopen. And so, we have a pending crisis and, you know, we are going to be right there on the front lines with our partners in education to address the needs of the students that we serve, but the resources are short. The resources are scant. Mr. Upton. So a quick question to finish up on my time. So schools in Michigan pretty much closed in March, in March, and they were shut down through their Easter break. And it is somewhat unclear as schools struggle--I talked to a number of our superintendents--my superintendents this past week as they are trying to prepare for opening up at some point in the next number of weeks. Usually, the end of August is when they do it. Do we have any sense of how many children in any of the States actually missed a vaccination, or perhaps got into--any even anecdotal evidence of kids running into trouble because their health needs were unmet as it related not only to the school closings in the spring, but, also, the preparations as they--they have to include that when they begin to open up this fall? Mr. Boyd. Yes, it is only anecdotal at this point, Mr. Upton. It is--it is not--there is no data at this point for us to be able to know how many children have missed vaccinations and how many children have--that no one has even heard from. Anecdotally, I have heard from colleagues at the Coalition of Community Schools that it could be as many as a third of Title 1 school children that no one has heard from in some districts. That is a scary number, because it is not just the education side that we are not hearing from them, they are not getting their healthcare because the school-based health center was their health home. We may see that start to turn up in reports from emergency rooms, because that is where they would seek help if they are not getting it at the school. But we don't have those kinds of numbers. They have got their hands full right now just with the coronavirus. We do know that we are all very concerned, as I said in my remarks, about abuse. That we have no idea what the numbers are of--going on with school children around abuse. We just don't know. Mr. Upton. Thank you. I know my time has expired. I yield back. Thank you very much. Mr. Boyd. Thank you, sir. Ms. Eshoo. The gentleman yields back. A pleasure to recognize the gentleman from North Carolina, Mr. Butterfield, for his 5 minutes of questions. Mr. Butterfield. Thank you very much, Ms. Eshoo, for convening this hearing today, and thank you for your passionate leadership, not just on these issues, but so many issues that we have dealt with as a committee. Thank you to our full committee chairman, my friend, Frank Pallone, I thank you, Frank, for your leadership. I certainly respect your views on PRVs and just look forward, look forward to working with you to get this right. I know you have a strong conviction for helping young children who are affected with cancer, and I know we will--we will find some common ground to get this thing right. And, finally, thank you to the six witnesses, thank you so very much for your passion. I can literally feel your passion as you testify today. Let me just hone in on Ms. Goodman, and I have met you before, Ms. Goodman, and just thank you for your strength and what you bring to this debate. Ms. Goodman, your testimony indicates that the Rare Pediatric Disease Priority Review Voucher--of course, we call it PRV--that this program is working as intended. You mentioned that both the number of rare pediatric disease designations and the number of drugs approved for these conditions actually increased after the creation of the program. A scientist at Duke University, which is located in my congressional district in North Carolina, whose invention is in clinical trials in children with brain tumors, this, this doc told my office that even though brain tumors are the most common cause of death from cancer in children and infants, they are still rare. And for most children, there is no effective, safe therapy available. He said that this program serves a very, very unique role in assuring continued clinical research efforts on behalf of a vulnerable and underserved patient community. And so, Ms. Goodman, it has been eight years, eight long years since the rare pediatric disease, the PRV was created, yet we know that that--that it often takes a decade, ten years or more to develop the drug. My bill, which is cosponsored by 16 members, and I think one more has joined us this morning, 17 members of this committee, would permanently reauthorize this lifesaving program. How would a long-term extension of the PRV impact research and drug development for children? Please help me with this, and put your comments in the record. Ms. Goodman. Thank you, Congressman Butterfield. Look, even though this program has been in effect for eight years due to your leadership, each time we have had to reauthorize the program, we have only had an opportunity to do reauthorizations of three months, one year, one year and four years. So drug developers, at the very beginning of the drug development process, when they are looking 10 or 15 years out, they don't have any assurance that the program is going to be there for them. And so they may or may not be persuaded by the existence of the Pediatric Voucher Program, and they may or may not use the possibility of getting the voucher if the program is reauthorized to start developing drugs for seriously-ill children. If we have a permanent program, we are going to see many, many more drugs for seriously ill kids. Mr. Butterfield. Well, you know, as legislators, we are always concerned about the cost of a program to the taxpayer. Can you tell me if this program has cost our taxpayers any money at all? Ms. Goodman. No, sir. No money at all. The CBO scored this program at zero. Mr. Butterfield. Very good. Ms. Goodman, as Jacob's mom, and as the founder of Kids Versus Cancer, do you think--do you think that the Rare Pediatric Disease Program should be permanently reauthorized, not only your view, but the viewpoint of our stakeholders and our friends that you associate with every day? Ms. Goodman. I do. I believe that permanent reauthorization will ensure that this incentive has maximum effect. And I have not received a cent from any of these vouchers, but I don't mind if other biotechs are well-funded so that they develop drugs for seriously-ill kids. Mr. Butterfield. And, finally, let me close out by speaking directly to Mr. Boyd. Dr. Boyd, thank you very much for your testimony today. I realize that COVID is different in every State, in every jurisdiction. But does it matter that a school district has insufficient funding? The tier 1 school systems that I specifically have in mind, has funding become a factor in the decision to reopen? Mr. Boyd. Yes, as of right now, sir, we don't receive any funding from educational sources. Our funding is through grants that help get the school-based health center open, and then from reimbursements from, primarily, Medicaid and SHIP. Although, some are set up to take private health insurance. But for the most part, the kids we serve don't--don't have private insurance. We are hopeful in the Senate bill that is being considered, the Republican Senate bill that school-based health centers will become an eligible use, so we would hope that you would consider that if it comes before the House so that we can have money to reopen and restart. Mr. Butterfield. Thank you very much. Those negotiations are taking place as we talk. Thank you very much. Ms. Eshoo. Am I unmuted? Mr. Butterfield. I yield back. Ms. Eshoo. The gentleman yields back. A pleasure to recognize the gentleman from Kentucky, Mr. Guthrie, for his 5 minutes of questions. Mr. Guthrie. Thank you, Madam Chair. Thanks for having this and hosting this meeting. And to Ms. Goodman, thanks for being here and honoring your son Jacob with your effort. I guess, we are--according to your timeframe, so when I was in junior high, which was about 40 years ago, I lost a friend. And every time I see St. Jude ads, I always think of her. We were from the South, and so she went to St. Jude. And in this day and with her category, she probably would have survived. So what we are doing here is important, and research really changes family's lives. So thanks for that. My question, though, is for Mr. Lindberg. And I am on the registry as well. We had a big bone marrow drive for someone in our community's son, there was a young person too that needed bone marrow, so I had a huge drive. And I didn't match him, but later on, I matched and got called and went and did all of the process. It is a lot when you--when you donate, actually. And I got right to the point where I was supposedly scheduled to go donate, and it was cancelled. And I always hoped and prayed that it was because they found a better match. They wouldn't tell me why. That is what I always kind of wondered, who that other person was. We never were able to get that far down the process. But, hopefully, he or she found a better match and is still with us today. I just would love to know that, but I know there is no way to know. But during June, what is remarkable is that the bone--your program facilitated more transplants in June than ever before, and it was encouraging just to see during the pan--in the middle of a global pandemic. So my questions are, could you please speak to your work with the Health and Human Services in order to ensure these transplants were possible in June? And moving forward, what needs to be done to ensure transplants can continue during the coronavirus pandemic, and how do we--how can we prepare better? So you--as you work at HHS, to ensure that we can continue moving forward, and then what do you think we can do to make it better during--if another pandemic comes to be better prepared? Thank you. Mr. Lindberg. Thank you, Congressman Guthrie. And thank you for going through the process, almost getting to that point where you donated. I can tell you that after 15 years of working with this program myself, just that hope that having a donor, a potentially matching donor available for a patient, that hope means an awful lot. And, like you, I will hope that there was just simply a better DNA match donor for that patient out there. Thanks for your question. With respect to HHS, we have enjoyed so, so many decades of public private partnerships with our colleagues at HRSA and HHS. They have been extraordinarily helpful to us throughout the course of pandemic. We work shoulder to shoulder with them. One example that I will provide is that as we were very much struggling with commercial flights being cancelled, one of the things that I will mention to the committee quickly is that we take these courier trips so seriously, many times, many, many times patients have been mild-like, meaning their immune systems have been removed before a product that is collected internationally can be delivered to their transplant center. So if we--if we miss, that has very, very dire consequences. So we can't miss. We take--our couriers take these products in coolers, and they enter into the passenger compartment of a commercial airline many times and fly overseas to bring those products back to the patient's bedside. As those commercial flights started to dry up, as schedules started to be eviscerated as the pandemic hit, one of the things that we have worked with HHS around was they had received an in-kind donation of private flight time from an entity that I can't name because they have added--a private entity that has asked to remain confidential. But those--those flight hours were donated to us, and we were able to work through HHS to procure these private flights to move donors and couriers overseas, so that we didn't miss-- like I said, we didn't miss one time. I think that is a remarkable thing. And it is just--it is grit and determination and incredible help. So I am so proud of my colleagues here at National Marrow Donor Program/Be the Match, and I am proud of our partnership with the government over 30 years. It has been extraordinary. In terms of what we can do going forward, this program reauthorization and doing it in a timely way is of immediate importance to us. And my colleagues here at the NMDP, so much of our success over the course of the last four months has pivoted on our national program status. I fear that if a program lapses, we may lose some of that really important leverage that we have had with foreign governments, in particular. If we lose the full force of the Federal Government behind us, all of a sudden we are a nonprofit here sitting here in Minneapolis, Minnesota. It is a really great profit---- Mr. Guthrie. I am about out of time. Mr. Lindberg. Yes. Thank you. Mr. Guthrie. I am out of time. Thank you very much. I am 56. So, hopefully, I will get called within the next 5 years. Mr. Lindberg. Thank you, sir. Mr. Guthrie. So I appreciate it very much. And thank you all for everybody else, and I am sorry I didn't get to your questions. I yield back. Ms. Eshoo. The gentleman yields back. It is a pleasure to recognize our wonderful colleague from California, Ms. Matsui, for her 5 minutes of questions. Ms. Matsui. Thank you very much, Madam Chair, for having this important hearing. And I thank the witnesses for being here today. These are all important bills, and we all want them to pass. And a special thank you to Mr. Lindberg for testifying today about the importance of the National Bone Marrow Program and Cord Blood Inventory. You can tell it is a popular subject, because many people have already talked about it, and some of the questions have already been covered. But I think we should keep talking about it more, because the bone marrow program is really very critical. In fact, my late husband, Bob Matsui, had MDS, and there was a time, I guess, 15 years ago or more, when he was ill, when it wasn't really possible for him to get the bone marrow that he needed. So the more we have, the better it is. Every three minutes, we know that someone is diagnosed with blood cancer. And for patients and families facing these fatal diseases, a bone marrow or cord blood transplant may be the best treatment or only potential for a cure. Congress recognized a need to coordinate these lifesaving transplants in creating the C.W. Bill Young Cell Transplantation Program, a strong bipartisan public health priority. I am proud to say that in working with my colleagues, the program's authorization has never lapsed since it was first enacted in 2005. Because most patients diagnosed do not have a suitable donor in their family, the program's national registry known as the Be The Match which matches patients in need with possible unrelated volunteer bone marrow, or cord blood donors, is truly a lifeline. We have to continue to encourage donors and give these patients with otherwise fatal blood cancers a second chance at life. And that is why I was pleased to join Representatives Bilirakis and Pingree to introduce the Transplant Act of 2019, legislation to reauthorize the C.W. Bill Young Cell Transplantation Program and the National Cord Blood Inventory for another five years. So, anyway, just to continue on, you mentioned in your testimony some of the roles that the National Marrow Donor Program plays in addition to running the national registry. Can you elaborate a bit on the work that Be The Match and NMDP plays? Mr. Lindberg. I would be thrilled to do that, Congresswoman Matsui. And thank you, again, for unwavering support over the years. I see a direct line of sight between your advocacy for this program and thousands of patients' lives saved here, so thank you for that. NMDP/Be the Match, is the largest, I would argue, most sophisticated registry of volunteered bone marrow donors in the world. We have, I think, been now, again, a world leader over the course of the last four months as the globe has been hit with a pandemic. We have been able to, with the help of you and your colleagues, pull levers that we would not have been able to pull otherwise, with the State and foreign governments in order to continue to move these lifesaving products in a timely way all across the world. And we continue--and we intend to continue to do that. Ms. Matsui. OK. You know, the number of transplants of racial and ethnic minority patients has increased substantially in the year 2000 to today. What effort is Be The Match making continue to expand the diversity of the registry to ensure that minority patients can find matches? Mr. Lindberg. Yes. Thank you for that question, Congresswoman Matsui. I was about to go there and decided that I would hold a moment. I wanted to mention that our 5-year strategic plan--our mission is to save lives through self- therapy. Our vision to do that is--we talk about democratizing self-therapy. And what we mean by that when we say that, is that no matter who you are, no matter your race, your ethnicity, your religion, your creed, your economic status, that it is our obligation to find for you that match and to deliver that match to you and hope that your life can be saved. And what we know today is that because of the peculiarities of our DNA and our HLA, that it is unfortunately far more difficult for those who are in historically underserved populations to find that good match. So we have doubled down on our efforts to serve underserved communities, and we have set up a metric that we are moving well towards to double the number of transplants in ethnic populations in five years. Ms. Matsui. Well, thank you very much. I appreciate your hard work. And we know this has to be reauthorized. It is such important work. So, thank you very much, and I yield back. Ms. Eshoo. The gentlewoman yields back. The gentleman from Virginia, Mr. Griffith, is recognized for his 5 minutes of questions. We are so happy to see you and know that you are doing well. Mr. Griffith. Thanks. I am glad to be with you all. And, yes, things are going very well. It is really interesting, I was the 17th member who signed on to continuing and permanently funding Chairman--Mr. Butterfield's bill. And I will just relate to you what happened. Sometimes timing is important. I was at the pool within the last couple of days with my boys who are 14 and 12. And I was talking to a dad whose son is entering the 6th grade, and he has just gotten over leukemia, or is at least in remission. We were talking about this very program, and I reiterated to him my support for it. I couldn't think of a better way to show that support than signing onto the bill, and, hopefully, we can get this through and we were very pleased to have done that. But we all know somebody who is affected, or might be affected by this, and it just brings it all home. That being said, and I appreciate that. I do want to go to---- Mr. Butterfield. Thank you, sir. Thank you. Mr. Griffith. Thank you. I appreciate you carrying it. I do want to go to the Anti-Doping Agency, and I want to talk a little about that. Mr. Tygart, are you available for a question there, or I guess you are somewhere---- Mr. Tygart. I sure am. Yes, sir. Mr. Griffith [continue]. In the internet? In your written testimony you talk about the World Anti-Doping Agency, and you reference that the United States is not able to be on the executive committee. What is the stated reason for that? Because we have been leading and pushing hard to make the Olympics better. Why aren't we on that executive committee of the World Anti-Doping Agency? Mr. Tygart. Yes, the process for selection of the countries around the executive committee, we fall into the Americas region, which is 43 countries in South Latin, the Caribbean, North America as well. And they had a rule change that says the chair of a council of sports ministers gets the seat at the WADA executive committee. And you may know, we don't have a sports minister in the United States. So while you know there may be some technical ability to take that position, I think the reality is that no way the U.S. is going to have that seat. Both us and Canada have been extremely disappointed because we are the two largest funders to WADA as well. Mr. Griffith. And do you think the rules change, specifically, to exclude Canada and the U.S. because of our strong anti-doping position? Mr. Tygart. It is a--certainly, that suggestion has been put out there. I don't have the--as a lawyer, I don't have the proof that I would want to prove it, but certainly that skepticism and question has to be asked. Mr. Griffith. But what you are saying is, is that it is not just a conspiracy theory, there might be a little something there, if there is smoke, there might be some fire? Mr. Tygart. It is just hard for me to believe that the largest funder and one of the powerful sport countries as well as a country that has been leading with an independent model since 2000 does not have a seat at the most powerful committee at the World Anti-Doping Agency, and, realistically, does not look to have one in the near future. Mr. Griffith. And that is very disappointing. While I certainly hope that we will continue to fund your agency, is there any action we should be taking to, as a Nation, to express our disappointment and perhaps roll back our funding to that World Anti-Doping Agency if they are going to exclude us? Mr. Tygart. I think what ONDCP and we, as I said in my testimony, applaud the effort that they went to, at the request of congressional appropriators for ONDCP to provide them a report, they lay it out perfectly well, and they ask for the opportunity to have discretion in their funding. I think up until now, they have seen it only as a contract that they had to pay, regardless of what WADA did, reform-wise or otherwise. And so we would--we would love--and we were thrilled that the House Appropriations Subcommittee FSGG has given them, in its markup, the discretion that they asked for, and we hope that the Senate does the same, and then allow ONDCP, who has the status within WADA's eyes, to be able to sit down with WADA and negotiate before just removing the money. But at the end of the day, without any leverage, money being the biggest leverage, the likelihood of change there is not realistic. Mr. Griffith. Well, and I think that is important as well. As many members of this committee may recall, and I don't remember if it was this subcommittee or not, but we had Michael Phelps and a number of others in a couple of years ago talking about this very issue. And I think it is important--I think it is extremely important, and I think this committee thinks it is important that we make sure that we don't have doping in our sports in the United States, or in our sports across the world as our athletes compete. But I think do appreciate your hard work. Is there anything else that you want us to know before I finish my questioning? Mr. Tygart. I think you are absolutely right, and there is no better testament to the number of household names in the Olympic movement, Paralympic movement who stand beside us, arm in arm, to fight for their right to clean and healthy and safe sporting. And we really appreciate the government's effort on this to give them the hope that they can compete in the right way. Mr. Griffith. Well, I appreciate that. I see my time is up. Madam Chair, I yield back. Ms. Eshoo. The gentleman yields back. It is a pleasure to recognize the gentlewoman from Florida, Ms. Castor, for her 5 minutes of questions. Nice to see you, Kat. Ms. Castor. Nice to see you. Thank you, Chairwoman Eshoo. This is an important hearing with a lot of terrific bills, so thank you. And thanks to our witnesses who are here today. We need more school-based, safe health centers across America, so I want to thank my colleagues, Representative Sarbanes, Representative Tonko, for leading that effort. I am a cosponsor of that bill. I also appreciate the focus on rare pediatric diseases and Creating Hope for Families, and what else we need to do in stem cells and then anti-doping sphere as well. I want to focus on the EARLY Act. I am a cosponsor of the Early Act, and I am grateful to Congresswoman Debbie Wasserman Schultz and Congresswoman Brooks for joining together to stand up for young women. Ms. Blount---- Ms. Blount. Yes. Ms. Castor [continue]. Congratulations to you. I understand the Black Women's Health Imperative is celebrating 38 years of advocacy---- Ms. Blount. We are. Ms. Castor [continue]. Advocacy for health equity for Black women and girls across the country. I am hopeful that the EARLY Act will help improve the diagnosis rates for African American women contracting breast cancer. And I hope the EARLY Act would also help--help improve their care after they are diagnosed. In your testimony, you cite a number of very troubling statistics. Black women develop breast cancer typically 5 to 7 years younger than White women. And African American women are 40 percent more likely to die after a breast cancer diagnosis. That is not acceptable in this country. Would you mind walking us through the reasons for that, and what else we should be doing about it? Ms. Blount. Yes, thank you for your question and your concern, Congresswoman, I appreciate that. There are a number reasons, as you might imagine. A lot of researchers will point to obesity rates, they will point to underlying chronic conditions, they will point to childbearing patterns among Black women as an explanation for why they are getting breast cancer younger. And that may be true, to some degree, but that can't explain it all, because if you look at Black women and White women in control for obesity rates, control for childbearing patterns, age at when they had their first child, that doesn't explain the difference in breast cancer rates. So the answer is, we don't know exactly. There is something going on. And what a lot of researchers are now exploring, and frankly, have been for quite a number of years is looking at the impact of elevated cortisol levels. Black women have, on average, about 15 percent more cortisol in their bloodstream than White women. And we know a lot about what that does to the body. It triggers our inflammatory response, which, in fact, raises our risks for chronic disease. But we also now know that elevated--chronically elevated cortisol also raises our risk for things like incompetent cervixes. Infant mortality and maternal mortality have been demonstrated for years. So what we need to understand more about is what this--what is happening, because we know it is not biology, we know it is not genetics, but what is happening in the lived experiences of the Black woman that actually raises their risk for chronic diseases, particularly, breast cancer? Ms. Castor. So what is the most effective--what successful outreach initiatives have you seen that you would recommend to us? Ms. Blount. Well, I have seen a number of community-based outreach initiatives. I mean, our organization, is of course, among many to make sure to educate Black women on the importance of screening mammography, in particular, and starting at age 40. This is very much a grassroots kind of activity where we have got to make sure that providers recommend screening mammography. You would be amazed at the percentage of providers who don't suggest that their patients get the screening mammogram, starting at age 40, and to explain the process. So we and other organizations have been involved working with federally qualified health centers, and with the NMA and other medical associations to help educate Black women on the importance--and Latinas on the importance of getting that first mammogram, understanding your family history, and getting that early mammogram so that you know what your risks might be, and can take the proper steps. Ms. Castor. That would save lives. Ms. Blount. It would indeed. Ms. Castor. Thanks for your important work. Ms. Blount. Thank you, Congresswoman. Ms. Eshoo. The gentlewoman yields back. It is a pleasure to recognize--oh, God, every time I say Representative Brooks, my heart sinks because we don't want you to leave. But I am going to recognize you for your questions. It is wonderful to see you. Mrs. Brooks. Thank you, Madam Chairwoman, And thank you so much for those kind words. But thank you to all of the witnesses for your passionate testimony. All of these bills are critically important in ensuring that we reauthorize all of these very important five public health bills. It is also good to see you, Mr. Boyd. We have done work together in the past on school safety. And as the mother of a Title 1 teacher, all that you said about the concerns for our school-based programs, health centers are critically important. I want to focus my time today, though, and continue to follow up on what my colleague, Ms. Castor, was just talking about with respect to breast cancer. It is not just another disease. It is personal for so many of us. I think it is safe to assume that everyone in this hearing has been impacted in one way or another by someone who suffered from breast cancer. And, in fact, our colleague and dear friend, Debbie Wasserman Schultz, suffered from early breast cancer at the age of 41 back in 2007, and she has been a passionate advocate, as has the chairwoman in fighting to make sure that young women have access to screening. And I want to continue to talk about the importance of early detection, because we know that--we know that the higher chance a woman has in getting detected, they will beat that cancer. And, then, Ms. Blount, you stated in your testimony, I think it is worth repeating, that if we can increase breast cancer screenings in women under 45 by just 50 percent, 3,000 more women per year will survive their diagnosis. Yet, I think many young women, in particular, don't think about the importance of getting screened. And as you have said, the providers often don't encourage them to get screened. So while we are--let's talk a little bit further about what is the state of our Nation's public awareness and education efforts, in your opinion, particularly focused on younger women? Can you please share with us what you view as the state of our Nation's public awareness campaigns and education efforts? Ms. Blount. I can. And thank you for that question, Representative Brooks. It is certainly not where it needs to be. You know, young people often feel invincible, as we have seen with COVID-19 recently, and, you know, a young woman doesn't want to think about breast cancer. I understand it. I understand it completely. But we have got to do more about making sure that she understands her risk and, particularly, her family history. So, you know, we have got the National Breast and Cervical Cancer Early Detection Program which helps, but we also know there are funding challenges with that program. In some States, the program may run out of money 6, 7, 8 months into the year. And while there is outreach that is done, and we hope treatment occurs when there is a suspicious finding, you know, there is not the resources to reach all the women and, particularly, young women, frankly, in the way they need to hear the message. Our public health conversation, our public health programs, the kind of language, imagery we use is, frankly, fairly old school. So, a lot of what we in my organization are trying to do is use modern-day images, terminology, communications mechanisms to make this message relevant to where women are today. And if we can do that, we can get them into screening early. Mrs. Brooks. Thank you very much. Can you actually discuss a few of the strategies that your organization, Black Women's Health Imperative, is using to educate these women? What kind of strategies, specifically, is your organization using, and how can we ensure that these young women get the access that they need? Ms. Blount. We are, of course, using social media. We are going right to where these young women are on Instagram to talk about the importance of breast health. We have launched what we call Black & Well TV where we have conversations with notable influencers and celebrities and medical professionals and public health professionals to talk about the importance of early screening. It is, you know--it is delivered via streaming. And we hope in the not-too-distant future to actually have a partnership where we can have a more national spokesperson convey this kind of information in the way Black women need to hear it in order to act on it, so that they understand that this is important, but, most importantly, that they don't need to be afraid. We are particularly concerned now that COVID-19 may actually keep women out of mammography centers, and that screening rates may go down. So we have got to make sure that Black women understand that it is still important to do, and that there are safe ways to do it. Mrs. Brooks. Well, thank you. Thank you for your important advocacy, and we do know that early detection works and will save lives. So thank you for your important work. I yield back. Ms. Blount. Thank you. Ms. Eshoo. The gentlewoman yields back. It is a pleasure to recognize our colleague from California, Mr. Cardenas, for his 5 minutes of questions. You need to unmute. Mr. Cardenas? Mr. Cardenas. Yes. Thank you. Can you hear me? I am on. OK. Thank you. Thank you, Madam Chair, and Ranking Member Burgess, for holding this important legislative hearing. Reauthorizing critical public health programs is very, very important to our country, and I hope people understand that critical need, especially during this pandemic. And a big thank you to our witnesses. I really appreciate your expertise and your opinions today. My first question has to do with schools. So I am going to ask Mr. Boyd a question. I am a longtime supporter of the School-Based Health Centers Program, and I am very glad to see prioritizing legislation today to reauthorize this program that provides healthcare for 3.6 million youth, predominantly from low-income families. I am very, very proud to say that I grew up in the second largest school district in the country. And the school-based health clinic--I think it was the first one in the entire district, was at San Fernando High School, my high school. And what is really important in all aspects of healthcare is cultural competency, and especially when it comes to linguistic differences. So that school was very--and that clinic that sponsored it was very smart in carrying my brother, who was a clinical psychologist of linguistics and competent in two languages, Spanish and English, and also culturally competent as well. He grew up in that neighborhood. He and my ten brothers and sisters went to that high school. So he was able to really provide a service above and beyond what he learned in college to get his degrees. So I worry about the massive wave of behavioral health issues experts warn about when we are talking about this pandemic, staying-at-home orders, virtual learning, and more. People having to educate their own children, that in and of itself is a big issue these days. My question has to do with how could additional school- based health funding support students with mental health and substance abuse disorders? Like I said, my brother, the psychologist, was at the school-based clinic. So it was mental and physical health provided there. Mr. Boyd? Mr. Boyd. Yes, Congressman, you raised two important issues: one, access. The number of school-based health centers from my perspective, from our organization's perspective is unacceptable. There are few within 3,000 of us pre-pandemic, and we have got 25,000 fully eligible Title 1 schools. So we have got to grow the number. That then poses a human capital problem. We can't take people out of the--out of colleges and just throw them to work in school-based health centers. They have got to licensed, certified, trained professionals. So over the next ten years, we have to address that human capital issue, and it has to address cultural competence. In seminary, I was always taught to look for the good news. The good news in the pandemic is that a lot of behavioral health specialists have said, OK, we accept the fact that telehealth is here to stay. Now the opportunity that that presents is how do we get culturally competent mental health professionals to the schools that need them, potentially using telehealth? And that is something that a number of us are working on right now, trying to put together a strategy to bring to the Federal agencies to say, we have the capability of doing this through telehealth. We have got to address the State licensing issues post-pandemic. Right now, it is not as much of an issue. But you are right on point: Human capital is the number one issue as we look to expand the number of school-based health centers over the next ten years. Mr. Cardenas. Thank you, Mr. Boyd. And I just want to state for the record: Tomorrow, I am introducing the bipartisan bill with some of my NC colleagues, behavioral health technical assistance and training centers for schools within SAMHSA. SAMHSA, for those who don't--who are viewing this, is the Substance Abuse and Mental Health Service Administration. This would help schools and school systems better support students with mental health and substance use disorders. I hope this important legislation gains momentum and would welcome support from the School-Based Health Alliance. Mr. Boyd, what impact do you think COVID-19 will have on the health and well-being of our students? And, also, how can we better help prepare you all to address this in the coming school year? Mr. Boyd. It is--like I said, it is a disaster. It is a disaster on the mental health side. It is going to be a disaster for the children that need daily medicine management and behavioral health services. We need more of us. The opportunity using telehealth is a great one because the cost of privacy-protected platforms have come down, and the cost of equipment that primary care providers use has come down literally 90 percent in the last 18 months. Where it was $23,000 a unit this time last year, it is $2,300 a unit for that primary care equipment. So, you know, to those of you on Energy and Commerce that are also on Communications, turning to the FCC and saying, Use some of the universal services fund to enable us to buy that equipment and provide those platforms through school-based health centers, is critical. We need those resources. We simply don't have them. It is one thing to get reimbursed, but if you don't have the capacity to be there and you don't have the trained professionals to serve, it is not going to matter. We have got to have the equipment, and we have got to have that kind of funding. Mr. Cardenas. Thank you, Mr. Boyd. Madam Chair, if you will allow me a point of personal privilege about our colleague, Mrs. Brooks. I agree with your sentiment, sad to see her leave. And I just want to quote my 2- year-old granddaughter who is bilingual. Every time I leave, she touches me by saying, "No te vayas, no te vayas." That is "Don't go. Don't go." Take care. Ms. Eshoo. That is beautiful. Thank you. And the gentleman yields back. Pleasure to recognize the gentleman from Montana, Mr. Gianforte, for his 5 minutes of questions. Mr. Gianforte. Yes, thank you, Madam Chair. Ms. Eshoo. Oh, I am sorry. I am sorry, I am sorry. I need to withdraw that. I was wrong. Mr. Mullin, our colleague from Oklahoma, I am sorry. I apologize to you, Mark. You are now recognized for 5 minutes. Mr. Mullin. Madam Chair, thank you so much. Ms. Eshoo. Mr. Gianforte, promise you. Mr. Mullin. Well, Madam Chair, thank you so much. I would have gladly yield to hopefully the next Governor of Montana, Greg Gianforte. But I got to say this, Tony, you said that you hate to see Susan go, I am mixed feelings because I don't want her to go, but at the same time, I get to move up on the dais as she does. So I am kind of mixed on this one. No, I thank you so much for having this important hearing, Madam Chair. Ms. Goodman, my question is going to be referred to you, and I just got to--reading your story about your son, I just want to tell you how much I appreciate you continuing, even a decade later, advocating for these important causes. Literally, I just ran out of where I am staying temporarily. I am not even at my house or in the office, because my son had a major brain injury, and I had to just drop him off with specialists at the Centre For Neuro Skills in Bakersfield and ran back in here to answer questions. And as you know with pediatric care, there is a disconnect between adult care and pediatric care; what is available to our children, versus what is available to adults, and it is disproportionately wrong. And, so, I just want to tell you how much I appreciate your advocacy, but not just on medication, but on rehab and development, and the encouragement of biotech companies to be involved in this area. So personally, Ms. Goodman, I just want to tell you, thank you so much for being such an advocate for all of our kids. In your testimony, you mentioned pediatric rare disease drug development is mostly done by small biotech companies, which is true. Can you comment on how Rare Pediatric Disease Priority Review Voucher Program works to get more funding to these small inventors? Ms. Goodman. Sure. Thank you so much, Congressman Mullin, and first of all, we are all keeping your son in our thoughts and our prayers for a, you know, a full and speedy recovery. Mr. Mullin. Thank you. Ms. Goodman. So the voucher program is really critical for biotech, many of which are thinly capitalized, because the opportunity for them to create a voucher, it gives them a chance to attract additional investors and even to sell their designation early in the drug development process and monetize the designation, you know, phase 1 or phase 2, as soon as they receive it, so that they can use that funding for development of the drugs for kids who really need these novel therapies. Mr. Mullin. How is the program funded to support the FDA reviewers as needed to review products on the expedited timeline? Are you familiar with that? Ms. Goodman. Yes, sir. Thank you for that question. So every year, the FDA calculates what the expense was to the FDA of this program, and the FDA sets a new pediatric voucher user fee for the following year. And the current user fee is $2.1 million, and that is on top of the PDUFA user fee that a sponsor would pay, which is about $2.9 million. Mr. Mullin. Do you know if the program has a CBO score on either what it costs or what it saves the American taxpayers? Ms. Goodman. Yes. The score is zero. Mr. Mullin. And I think, obviously in asking these questions, I know the answer, but I think a lot of people need to understand that, that we are not--we can invest in this without costing us anything because of the return. And once again, your advocacy on this is something that I think every parent that has been through what you have been through, commends you on, and I just can't thank you enough. What measures does the FDA have in place to ensure that the safety and the efficiency of these drugs go through the expedited approval process? Ms. Goodman. So, I think your question is, how can we be sure that the FDA approves drugs in a safe manner? Mr. Mullin. Yes. Ms. Goodman. Is that your question? Mr. Mullin. Yes. Absolutely, yes. Ms. Goodman. Look, I think that people who choose to work at the FDA are just smart and incredibly impassioned and dedicated people, and they make sure that any drugs that they approve, you know, meet their rigorous standards. The targets they need to meet under this, or any other PDUFA program, are not required. They are not mandatory on the FDA, they are optional. They are only--FDA is only going to approve drugs if they are safe. Mr. Mullin. Right. And I, once again, know the answer to this, but without congressional action, the Pediatric Rare Disease Priority Review Voucher is set to expire at the end of this year. What would that mean to you, and to parents that are going through the same things that you went through? Ms. Goodman. Thank you. You know, we have had almost two dozen new drugs for seriously ill kids approved in the past eight years since the program was developed, and I think it is going to dry up. Mr. Mullin. Right. Well, Ms. Goodman, thank you again for your time and for being here. Madam Chair, thank you for holding this important hearing, and with that, I yield back. Ms. Eshoo. The gentleman yields back. It is a pleasure to recognize the gentlemen from Maryland, Mr. Sarbanes, for 5 minutes, for his questions. Mr. Sarbanes. Thank you very much, Madam Chair. Can you hear me? Voice. Yes, sir. Mr. Sarbanes. OK. Appreciate all of the bills that we are discussing here today. Again, very gratified that among them is the School-Based Health Center Reauthorization bill, and I want to thank my colleagues for their support of it and their interest in the topic. And Mr. Boyd, I want to thank you for your leadership at School-Based Health Alliance and the testimony that you have given us today. I can say, having visited many, many school- based health centers over the last few years, trying to understand all the dimensions in which they can provide support for children and families, that some of the most impressive practitioners and health professionals I have ever met are the people that staff these school-based health centers. The amount of support they give to the school, to the students, to the families, and to the community, really can't be overstated. So you are representing a very proud and resourceful group of people, and we thank you for being with us today. The school-based health centers, I kind of look at them as having two basic functions, or opportunities. One is obviously to serve what is a captive audience, which are the children that are located in that school, and to take full advantage of the fact that you have them there, or that you are connected to them if we look at it now through the lens of the pandemic and what that is doing to kind of change the status quo. But the other is that through children who come to these school-based health centers, or are served by them, they act as a link to the families of those students and can help connect families to healthcare resources that are more broadly available. Sometimes that is through actual partnerships with community health clinics, including federally qualified health centers. Other times it is more through referral to other providers that are in the community. But maybe you could speak a little bit to that, how the health centers in these schools can be a gateway of opportunity to access broader health supports, whether it is physical health or mental health, emotional health, that are needed in those communities? Mr. Boyd. That is a great question, Congressman. Pre- pandemic--and I have to keep speaking of that because we don't know how many school-based health centers are going to have the resources to reopen--but pre-pandemic, the majority, over 51 percent of the school-based health centers were sponsored by federally qualified health centers. So that gave a tremendous link between the families' overall healthcare needs and addressing the healthcare needs of the students. The NACHC, the National Association of Community Health Centers, has identified, and put in their strategic plan for this next year, an interest and a direction for federally qualified health centers to look more carefully at school-based health centers as an opportunity for them to expand their business models. You speak to the quality of the people that work in the school-based health centers. Clearly, they could make more money. This is their calling. They are like teachers. They are not there because it is the best-paying job in the world; they are there because of their dedication and their commitment to serve, and particularly to serve children, and in particular, to serve children in low-income communities because that is where most of the SBHCs are located. So, yes, absolutely, and pre-pandemic, we were in process of arranging a visit, for us to go with you to visit some of those centers in your district, and hopefully we will get the opportunity to do that in the future. Mr. Sarbanes. Well, I look forward to that, and I appreciate very much your raising the issue of compensation for those who staff the school-based health centers. If you think about it, there is no more important position, given all of the different dimensions that can be brought to bear by those professionals. And we got to make sure that we recruit them with the opportunity to, you know, make a good living, and that we keep them. Because that is critical as well, because they build relationships. That was one of the most powerful testimonies I got from a most recent visit to a school-based health center, was the relationship that that center had built with certain students--this was a high school--over the course of their time. And it meant when those students had issues and stresses, they felt like it was a place to turn, there was a relationship there. That is exactly what we need to provide for our young people. So thank you for your testimony, we appreciate it very much, and I yield my time back. Mr. Boyd. Thank you, sir. Ms. Eshoo. The gentleman yields back. A pleasure to recognize the gentleman from Montana once again, Mr. Gianforte, 5 minutes for questions. Mr. Gianforte. Thank you, Madam Chair. I appreciate the committee meeting today to advance several bipartisan reauthorization bills. As we know, we are reauthorizing the School-Based Health Center Program, a program to promote awareness and education about breast cancer in younger women, the Cord Blood Inventory and Bone Marrow Transplant Programs, and the U.S. Anti-Doping Agency. This is the entity that ensures that Olympic and Paralympic athletes are not using performance-enhancing drugs. I know we are all looking forward to having the Olympics next year and cheering for the Americans that will be competing. The piece of legislation we are working on today that I am most appreciative of is the Creating Hope Reauthorization Act. This bill reauthorizes the Rare Pediatric Disease Priority Review Voucher Program. This program creates an incentive for drug companies to develop therapies for rare pediatric diseases. If we develop a therapy for one of these diseases affecting children, they get a voucher to speed the FDA review of another drug. This program has already led to the development of 22 therapies. I have heard from Montanans dealing with the loss of their children from DIPG, a currently untreatable brain tumor. DIPG is the second most common cause of child cancer deaths. Encouraging more therapies and treatments for these rare pediatric diseases is something we should all support. Ms. Goodman, thank you for sharing your story with us today, and you were very articulate in your response to Markwayne Mullin's questions. Is there anything else you would like to add about the reauthorization of this program and the impact it has been having for children in this country. Ms. Goodman. Thank you, Congressman Gianforte for that question. I would just really like to just emphasize that this program has, as you said, 22 new drugs, many new drugs in the pipeline. The FDA has the opportunity to incorporate all of the costs of executing this program in their user fee, and so, I hope we can find a way to reauthorize it on a permanent basis. Mr. Gianforte. Well, I think we have strong bipartisan support, and you being here today and telling your story has had quite an impact. I want to thank you for that. I look forward to supporting these pieces of legislation, and with that, Madam Chair, I yield back. Ms. Eshoo. The gentleman yields back. A pleasure to recognize the gentleman from Massachusetts, Mr. Kennedy, for his 5 minutes of questions. Mr. Kennedy. Madam Chair, thank you, and thank you for holding this important hearing, as always. Mr. Boyd, in your testimony, you mentioned that it is still unclear how and if students will be able to go back at in- person learning in the fall. It is a hard thing to balance--the importance of in-person education, while also ensuring the health and safety for our children, their families, and their communities. Because opening schools will not just impact students, it impacts everyone around them. Because of this, we need to ensure that if schools do allow for in-person learning, we follow scientific guidelines, learn from other countries that either began too soon, or took a more strategic approach, and ensure we have all the necessary stakeholders at the table in making these decisions. So Mr. Boyd, I want to ask you if you can talk a little bit about how you think school-based health centers should be involved in these decisions and the planning processes for the re-open. Mr. Boyd. That is a great question. Thank you, Congressman. We are part of a series of networks in Washington that include all of the major organizations on the education side, including the unions, the superintendents, the principals, as well as on the health delivery side, in the nurses, the counselors, the psychologists, the social workers, and us. Everybody, across the board, sees the value of the work that we do. We don't see ourselves in competition with each other. We see ourselves in full support of each other. We are not sure how schools should open. We think that is a local decision that is going to have to be made on a scientific basis, case by case. But again, I want to come back to the point that schools are--schools, for the most part, remained open. The question was the ability of the school to deliver their services. It was the buildings that closed. I don't think that most school districts today are looking necessarily at not reopening. They are looking at whether or not to reopen their buildings. School-based health centers have to be a part of that conversation, and we are, at the national level; it has to filter down to the district level. School districts can't put out plans that don't include parents, and in some situations, students, as well as major employers in their communities, as well as all of the disciplines that I have referenced. Mr. Kennedy. And I wanted to build on that a little bit, Mr. Boyd, because you spoke about the importance of mental health and emotional well-being of children during this pandemic, and it has been a big area of focus of mine, as perhaps you know. We have seen how the pandemic has highlighted the gaps in our own health system when it comes to mental health, and now what has happened with the need to shelter in place, with additional isolation and diminished care connections and how that can negatively impact one's mental health. We have seen the devastating impacts of a far increased need for mental and behavioral health services, increasing rates of suicide, long-standing racial inequities that still exist between Black, Native, and Latinx children and families. So just walk me through how you are thinking of providing-- meeting that need for mental/behavioral health services for our children and in our schools? Mr. Boyd. Yes, I think there is several challenges. Telehealth does provide that opportunity. For many mental health care providers throughout this pandemic, that has been the telephone. And while children are left--schoolchildren are left reluctant to do that kind of a telehealth visit, it has been the adults that have resisted it. I think many have gotten past that. Our dilemma then is to make sure that we protect the privacy of those students. It is to give them a greater opportunity to participate, but make sure that when they are participating, they are doing it in an environment that allows them to be honest and open without sharing confidences or the invasion of their privacy because someone's able to hear it, or someone's able to hear the healthcare provider on the other end. We have got to come up with technological solutions and platforms that work for the kids but also protect their privacy and work for the practitioners. That is going to be the major challenge and the major opportunity for us going forward if we wind up being in this situation for an extended period of time, as it seems we are going to. We are going to have to use technology. Mr. Kennedy. Time is limited, so I might follow up with a question for the record for you, but I am grateful for your time and your willingness to highlight these issues as we try to navigate our way forward. Thank you very much, sir. I yield back. Mr. Boyd. At your convenience, sir. Ms. Eshoo. The gentleman yields back. The chair now recognizes the gentleman from Florida, Mr. Bilirakis, for his 5 minutes of questions. Mr. Bilirakis. Ms. Eshoo. Are you unmuted, Mr. Bilirakis? Mr. Bilirakis. Ms. Eshoo. Mr. Bilirakis, you need to unmute. I guess if I sing it, it doesn't make any difference, right? Mr. Bilirakis. Ms. Eshoo. Let's see, how are we going to get his attention? Unmute. Voice. Looks like he is trying to unmute. Ms. Eshoo. Let's see if we have--why don't we go to Congressman Ruiz of California, and then circle back with Mr. Bilirakis, because I think he has some technological issues there. Mr. Ruiz. OK. Ms. Eshoo. Somebody is laughing. I don't know. Mr. Ruiz. My good friend, Gus, you are going to have to go get a staffer to help you, my friend. I have been there. It is a black hole for sure. So thank you, everybody, for being here. School-based health centers are essential for many families in my district and around the country. I grew up in an underserved community with poor access to healthcare. It is a farm worker community of Coachella, California. In fact, my alma mater, Coachella Valley High School, has a school-based health center. While some of these, quote/unquote, health centers consist of one exam room, limited supplies, and are often in a tiny trailer on campus, they are critical to a child's health and well-being, providing services such as dental prevention and treatment, health education, mental health services, and preventative health screenings. Not only that, but they also serve the families of the students, providing important continuity of care within the family. Students and their families rely on school-based health centers for their healthcare, because oftentimes, that is the only access to healthcare that the family has. These facilities tend to serve families in otherwise underserved areas where health disparities are acute, where people might not have insurance, or maybe can't find a doctor who takes Medicaid, or can't take off work in the middle of a Tuesday to take their child to the doctor. School-based health centers fill this need, and they are critical to families who have limited access to care. My question to Mr. Boyd, how do school-based health centers address health equity and the needs of underserved children and adolescents? Mr. Boyd. Thank you, Congressman. You raised three important issues, and the first one I want to speak to is the infrastructure. The average age of a public school building in the United States of America is north of 50 years--I have built a lot of buildings in my life--and the guts, the roofing systems, the HVAC, et cetera, are built with a 20- to 30-year life. So they are holding them together with nothing, and the reason you probably had a trailer was, there was no room in the school building for them to put that school-based health center, but they really wanted one. The other issue you raise is access, and I am a believer that if you took all of the rural schools in America and you put them into one school district, you would probably have the poorest school district in America. So even if there was a desire to build out space for that school-based health center in your community, they probably did not have the resources. The pandemic has given us an interesting opportunity, technology, to be able to expand the reach and beam into that trailer other kinds of services that might not be available readily in the community, is a unique one for this time that we are in. That is why I say to those of you that sit on the Communications Subcommittee, make the FCC give us money for telehealth. It is critical-- Mr. Ruiz. Thank you. Mr. Boyd [continue]. If we are going to continue to serve and expand. It is all about what Linda Blount said. It is all about equity. Mr. Ruiz. Thank you, Mr. Boyd. You said in your testimony that there is an intersection between education and health. What are the health outcomes of these centers, and can you expound on the correlation between health and education outcomes? Mr. Boyd. I love--thank you for that. I love when people ask questions that other people have answered. Included in your written testimony is a document from the Community Preventative Services Task Force of the CDC, and they list access to all of their findings, but they point out two major ones. School-based health centers led to improved educational outcomes, including school performance, grade promotion, and high school completion. School-based health centers also led to improved health outcomes, including the delivery of vaccinations and other recommended preventative services, and decreases in asthma morbidity, and emergency department and hospital admission rates. Mr. Ruiz. That is very interesting, because, oftentimes, in poor communities, the rate of asthma is high, and that is particularly true in my desert, rural community with farm workers. It seems like a lot of people will refer to cost- effectiveness of these programs. Are there any data that shows the cost effectiveness of these school-based health centers? Mr. Boyd. I may have to get back to you on that one. Understand that school-based health centers don't cost the schools any money. They are reimbursed by Medicaid, and oftentimes, if that child is not being seen by a school-based health center, they may not be seen by anybody. They are not necessarily going to the local, federally qualified health center or to an independent pediatrician. Mr. Ruiz. Well, I think we can agree that if we have preventative services, mental health services, that we provide in the schools efficiently, then it lowers healthcare costs overall in the long run. Mr. Boyd. Absolutely. Healthy kids grow up to be healthy adults and are less of a drain on our financial system. Absolutely. Mr. Ruiz. Thank you very much. I yield back. Mr. Boyd. Thank you. Ms. Eshoo. The gentleman yields back. Let's circle back to our wonderful colleague, the gentleman from Florida. Mr. Bilirakis. Are you unmuted? Mr. Bilirakis. Can you hear me? Ms. Eshoo. Now I can. Now we can. Mr. Bilirakis. OK. Very good. Yes, we--I had to switch to my iPhone because the computer was not working. I did unmute several times, and I apologize for that, Madam Chair. Many of you know that the National Marrow Donor Registry was established more than 30 years ago by our former colleague and friend, Bill Young. You mentioned that, Madam Chair. What a wonderful man. Actually, my district was adjacent to his. He was passionate about this program, and often said it was his proudest accomplishment in Congress. That is saying something. Because of Bill Young and, of course, Chris Smith's passion, the gentleman from New Jersey, I am familiar with the work of the National Registry. However, what I didn't realize until I met with Mr. Lindbergearlier this year is the special requirement that bone marrow must be hand-carried by volunteer couriers from donor to patient. Because of this perishability, there are serious time constraints. Many times, marrow travels internationally. So again, the question is for Mr. Lindberg--by the way, an outstanding job on your presentation today, sir--the question is, can you discuss the challenges this creates for the program, especially during this pandemic, please? Thank you. Mr. Lindberg. Mr. Bilirakis, thank you. Thank you for cosponsoring H.R. 4764, and for picking up the torch that Mr. Young lit. We appreciate that so very much. You know, as you can imagine, the COVID pandemic has created incredible barriers for us, obstacles that perhaps back in March I wasn't sure we were going to be able to overcome. But I am so proud of my colleagues who have done incredible work to make sure that no patients have missed their transplant. I will share briefly, only anecdotally, things like, Mr. Bilirakis, there was a donor in the country of Colombia. That donor, because of inability to collect her cells in Colombia, needed to get to the United States. We needed to get her to the United States in a matter of days. I will share only briefly that on a Saturday afternoon at 2:00, I was told by an embassy official, Brian, it is impossible, this can't--we are not going to be able to make this work in time. And by 10:00 that evening, we had the authorization for her to leave the country. We had the authorizations to open up a closed airport. We brought in a private aircraft and flew this young woman out of the country of Colombia. She flew to your home State, Mr. Bilirakis, and donated her bone marrow just a couple of days later in time for that patient's life to be saved. So, yes, this has been an incredibly trying time, but I have been so thankful for my colleagues, and, frankly, the support of you, your colleagues, and the Federal Government agencies in allowing us to make that happen. Mr. Bilirakis. Well, that shows you, we should never give up. And I know Harry Glenn has been working on this as well. He is the former chief of staff for Bill Young. So let me go on to the next question. As referenced previously, the nonpartisan Government Accountability Office stated in their January 2020 report on Priority Review Vouchers, that all seven drug developers we speak to indicated that the vouchers were a factor in their decision. So this question is for Ms. Goodman. The bottom line, as a patient advocate, do you believe the Rare Pediatric PRV Program, has been effective at incentivizing the development of new target therapy and immunotherapy drugs for rare, pediatric cancers, to extend and save lives and provide hope to pediatric patients and their families? If so, can you also describe for this committee what would occur if this program failed to be reauthorized or reauthorized permanently? That is the question. And these are all great bills, I tell you what. This is a wonderful hearing. We hope we put them in the markup in September. But anyway, if you could answer, Ms. Goodman, I would appreciate that very much. Ms. Goodman. Thank you so much, Congressman Bilirakis, and thank you for your support on this bill throughout the past 10 years. Look, the evidence that the program is successful goes from the 22 drugs that have been approved since it was passed, to the over 60 drugs in the development pipeline for seriously ill kids. You know, we don't want to lose this opportunity by letting this program lapse, and by making it permanent, we can hit the one area that we haven't--where we haven't maximized the incentive, and that is at the very earliest stage of drug development when drug developers say, am I going to develop a drug for seriously ill kids; they need to know the voucher is going to be out there whenever they get the drug approved so that they can develop those drugs for kids. Thank you. Mr. Bilirakis. Thank you. A question for Mr. Lindberg, for many diseases, including blood cancers and sickle cell anemia, cellular therapy offers the best hope for a cure. The question is for Mr. Lindberg. Has the calculated need for unrelated cellular transplants, in other words, non-family members increased? If so, what demographic has seen the largest increase in need? If you can share that with the committee, I would really appreciate it. Mr. Lindberg. Thanks, Mr. Bilirakis. I will do that with pace here. Yes. We know as the number of diseases that are treatable by bone marrow transplant, purple blood stem cell transplant, and other cell therapies increases, the need thereby increases as well. And we know that our largest obstacles are making sure that as we become more and more diverse as a country, that we are able to serve more and more diverse patients through more and more members of our registry of varying ethnic descents that are willing to step up and make those donations. Mr. Bilirakis. Thank you very much. I think my time is expired, Madam Chair. Is that correct? I believe so. Ms. Eshoo. Your time is expired---- Mr. Bilirakis. Thank you very much. Appreciate it. Ms. Eshoo [continue]. And the gentleman yields back. Glad you got the---- Mr. Bilirakis. Yes, we got it straightened out. Ms. Eshoo [continue]. Got it all straightened out there. Mr. Bilirakis. Thank you. Ms. Eshoo. OK. It is a pleasure to recognize the very patient gentlewoman from New Hampshire, Congresswoman Kuster, for your 5 minutes of questions. Ms. Kuster. Wonderful to be with you. Thank you, Madam Chair. Ms. Eshoo. Sure. Ms. Kuster. I want--can you hear me? We are good? Ms. Eshoo. Yes. Ms. Kuster. It is a very important discussion, and thank you for hosting this hearing today. While this committee has been keenly focused on the coronavirus pandemic, there are many public health programs that we need to continue to support, and one of those is school-based health centers. So I am a proud cosponsor of H.R. 2075, introduced by my colleague, Congressman Sarbanes. These health centers are critical in providing comprehensive care, including care to identify at-risk students before they develop substance dependence and addiction. In New Hampshire and communities across the country, we are battling two crises: the opioid epidemic and the COVID-19 epidemic. In fact, preliminary data shows that COVID is worsening preexisting issues with substance misuse, and the current pandemic and resulting economic downturn are exacerbating behavioral health risk factors, such as social isolation and stress. Prior to COVID-19, I heard from teachers regarding the generational effects of the opioid epidemic and how children cope with adverse childhood events, or ACEs, outside of their home. As the COVID-19 pandemic continues, how can school-based health centers ensure that we continue to address adverse childhood events closer to the occurrence of the event, which increases the ability to treat an acute condition before it becomes chronic? And I am asking Mr. Boyd, if you could speak to the role of school-based health centers in nurturing age-appropriate resilience that is helpful to mitigate self-medication, and to further substance-use disorders in early adulthood? Mr. Boyd. Yes, this is another great question. We work very closely with youth as well. We have a youth advisory committee that, you know, feeds into our programmatic work, and actually a part of one of our Federal grants is to work with the youth. The dilemma right now, as you know, is that the pandemic has exponentially grown, potentially, the abuse and use of alcohol and drugs. We have seen it in liquor store sales. We don't have, you know, good numbers on any increases in sales of opioids, in particular. Our need right now is to get the school-based health centers that we have reopened, and to expand that reach. Part of expanding that reach is also expanding the services that are offered, and substance-abuse services are critical in school- based environments. One of our---- Ms. Kuster. Thank you. My time is limited. I am sorry to have to cut you off. Mr. Boyd. No problem. Ms. Kuster. I really find this very important, and I want to support you and your work and your colleagues all across the country, including here. Another program I want to focus on is the USADA, United States Anti-Doping Agency, recognized by Congress as the national anti-doping organization for our Olympic community, and I am the niece and cousin of Olympic alpine ski racers. And I wanted to ask you, Mr. Tygart, in your testimony, you discuss a culture change in terms of the way the United States was perceived on the international sports stage. Can you talk about this shift, and why it is so important for youth when they look up to Olympic athletes, to know that they are drug- free? Mr. Tygart. Yes, ma'am, and thank you for the question. Well, it is absolutely critical to have true heroes today, and we may be more desperate today in the world of sport than we ever have been, to have people that our young kids can look up to and try to emulate and attempt to become. And so when Congress set up an independent organization to ensure that the fox was no longer guarding the henhouse, what it did was gave confidence to athletes that this independent organization is not there just to promote them, but is there to ensure that they follow the rules. And we know whether a young person becomes an Olympic athlete and becomes one of those heroes, or goes into any other, you know, industry or career in their life outside of sport, the lessons they learn on the playing field are important life lessons that they will take with them. And respecting the rule of law, respecting, yes, we want to win, but we want to win the right way, is absolutely essential. And our athletes today, you know, 20 years ago, since we were established, have embodied that notion and are truly the heroes that we want them to be. Not to say that some won't attempt to cut the rules, but we are here to have a fair program that ensures that their decision to do it right is enforced. Ms. Kuster. Well, my time is up, but I can certainly say as a parent, I appreciate the role that you play, and thank you again. Thank you, Madam Chair, and I yield back. Ms. Eshoo. The gentlewoman yields back. It is a pleasure to recognize the only pharmacist in the Congress, my colleague, Mr. Carter, from Georgia, for 5 minutes of questions. Mr. Carter. Thank you, Madam Chair, and thank everyone for being on this call. This is certainly important. I want to start with you, Ms. Goodman. There are those who have been somewhat critical, if you will, of the Rare Pediatric Disease Priority Review Voucher, and have said that it hasn't been successful in achieving what it was intended to. You cited some figures, I believe, when Congressman Mullin was asking you some questions. Could you repeat those and the number of drugs that have come out as a result of the PRV, and how you would respond to those claims, those critics who say that it hasn't operated like it should have? Ms. Goodman. Sure. You know, there have been 22 new drugs approved by the FDA--that is a very high bar, approval--since the program was enacted in 2012. I think that is pretty good proof that the program has been successful. Mr. Carter. How was it before the program? Can you compare it before and after? Ms. Goodman. Sure. Well, in the case of pediatric cancer, which is not all rare diseases of course, there had only been two drugs approved expressly for kids with cancer in the 25 years leading up to the Creating Hope Act enactment. Just couldn't get funding. Mr. Carter. OK. Good. Obviously, the program has helped. Obviously, we have seen results. Ms. Goodman. The program has helped with small biotechs, with academics who want to get their ideas out into industry. It has just really been a very successful program. Mr. Carter. Well, staying on that, on the program itself and the vouchers that get the priority review by the FDA, and allowing them to be completed in six months, do you have any evidence that any of the drugs approved with a voucher under this program have had to be pulled from the market because it was unsafe? Have you seen any instances of that at all? Ms. Goodman. So that is a terrific question, Congressman Carter. I am going to have to get back to you on specifics, but I will say that, you know, because of the voucher program, because of the user fees charged for this program and for PDUFA, FDA has been able to almost double the number of employees working at the FDA on reviewing drug approvals from 2008 until now. So we really have so many more people, so much more FDA technology, and better management practices reviewing these drugs. I really trust the FDA not to be--do a quick and dirty job. I really trust them to only approve drugs that are safe. Mr. Carter. Well, you know, I am one who believes. And listen, as was mentioned earlier, as a practicing pharmacist for over 30 years, I have seen this, and I have dispensed some of these medications, and I can tell you that they are needed, and we need to improve the process by which they are approved. And certainly, you know, we still need to be careful, there is no question about that, but I am still one who believes that, you know, no matter how long the process is, you still run that risk. There will be some that--and I have seen it over my years of practice--of drugs that have gone through a thorough review, that regardless of how good a review it was, we had to pull them from the market at some point. And that is going to happen, but to keep them from getting on the market, I think, is far worse than what we have experienced. Dr. Kesselheim, are you still with us? Yes. Mr. Kesselheim. I am. And happy to answer questions. Mr. Carter. Yes. Have you seen any instances where any drugs have had to be pulled back as a result of this accelerated approval program? Mr. Kesselheim. Yes. There was a study that was published in The New England Journal of Medicine about a decade ago that said that drugs that are approved within a short period of time, just before the FDA approval deadline, were more likely to be pulled from the market, were more likely to have boxed warnings added to it or other safety-related information added to it. And I think that study shows that if you impose arbitrarily fast deadlines on reviews, that that can increase the risk of those kinds of things happening. Again, I agree it doesn't happen very often, but we want to try to minimize it happening as much as possible. The FDA doesn't approve drugs--when the FDA approves a drug, it doesn't mean the drug is safe. It just means that the drugs benefits outweigh its risks, and we have a lot more to learn about those risks once the drug hits the market. Mr. Carter. Now, I am not going to dispute what you just said, but, again, as a practicing pharmacist for over 30 years, I can tell you, I have witnessed where no matter how long the review is, you are still going to have those instances, and I do think that the risk does outweigh--or the benefits do outweigh the risks in this particular case. That is why I do hope that the program is permanently renewed, and that we can move on from there. And Madam Chair, I see I am out of time, and I will yield back. Thank you both. Thank you all. Ms. Eshoo. The gentleman yields back. Thank you for your good questions. A pleasure to recognize the gentlewoman from Delaware, Ms. Blunt Rochester, and thank you for your patience. Ms. Blunt Rochester. Thank you. Thank you, Chairwoman, and thank you so much to all of our witnesses today. As a cosponsor of H.R. 2075, the School-Based Health Centers Reauthorization Act, H.R. 4078, the EARLY Act Reauthorization, and H.R. 4439, the Creating Hope Reauthorization Act, I am glad that the subcommittee is taking the opportunity to discuss legislation that would reauthorize a number of critically important public health programs. Delaware leads the Nation in rates of triple-negative breast cancer, an aggressive form of cancer that disproportionately affects young African American women. In fact, a 2019 study found that more than 21 percent of Black women were diagnosed with triple-negative cancer, compared to 11 percent for all other types of breast cancer, and women under the age of 40 had twice the odds of a triple-negative breast cancer diagnosis than women aged 50 to 64 years. Ms. Blount, what are the unique challenges that young, Black women face in finding out about this type of cancer and what their risks might be? Ms. Blount. Thank you, Congresswoman. You actually highlight a very serious concern that we have in breast cancer as we think about what we can do to reduce our risk. The number one talent is information, is understanding their own risk, understanding their family history, understanding the need to go in for a screening mammography, and being in a system where their providers are likely to ask certain questions, and then make those recommendations. So this is really critical. The other really important point is, we don't quite understand why Black women have twice the rates in some States--as you mentioned in Delaware and others--nationally about 30 percent more triple-negative breast cancer. We need to do a large study to understand that, and I understand a large randomized control trial will take years. We need to do that, but in the meantime, what we need to make sure is that Black women get screened early. Because we know even if it is triple- negative breast cancer, if we catch it in its earliest stages, Black women can have wonderful outcomes and die of old age, and not from breast cancer. So the important thing is to make sure that they know to get in and get screened early. Ms. Blunt Rochester. Thank you so much. And in your testimony, you also talked about access to the latest digital breast screening technologies. How does the EARLY Act improve access to better diagnostic care, and what more can Congress do to reduce disparities in access, in addition to the incredible work that you are doing? Ms. Blount. Well, the EARLY Act makes sure that women understand their risk, understand the need for screening mammography gets to providers so providers understand that, but the important thing is, Black women tend to have dense breast tissue, and so, if they have a lesion, 2D or standard film mammography is less likely to pick it up as compared with 3D or tomosynthesis. So as a part of that education program for providers and for women, to help them understand that if they have a choice, try to find a facility that will provide 3D mammography is going to be much better for them, more likely to pick up their cancer, more likely to pick it up early when it can be treated. Ms. Blunt Rochester. Thank you. Thank you so much for your work. Ms. Blount. Thank you. Ms. Blunt Rochester. I want to get to my questions to Dr. Boyd. I had the opportunity to serve over almost 30 years ago as a policy adviser to our current Senator, Tom Carper, who, at the time, was our governor, and he had a vision for making sure that every school in our State had a wellness center. We started off with all of the high schools, and now today, I can report that every public non-charter high school operates a wellness center in the State, and is looking to expand to elementary and middle schools. Dr. Boyd, how do early intervention services provided by elementary school wellness centers help improve health outcomes throughout a child's life and save healthcare dollars? Mr. Boyd. Great question, and Delaware has an extraordinary program. I am a former Delaware resident, so I am very appreciative of it. First, it gets the students used to understanding it is just health. Tearing down the barriers so that they are comfortable and confident in interacting with healthcare professionals, and learning to look after their health and speak up when there are issues addressing those. But two, that CDC guide I pointed to, we know that it has significant impact on the academic performance of the students. Time on task. It keeps them in front of the classroom longer than not having to leave school, and it solves the problem for the parent, often women, often low-income, that have to leave an hourly job to go take that child to a doctor. Nine times out of ten it doesn't happen. Ms. Blunt Rochester. Thank you so much. Thank you so much, Dr. Boyd. And also the mental health aspect of it is so important, especially now more than ever. Thank you. I yield back, Madam Chairwoman. Ms. Eshoo. The gentlewoman yields back. It is a pleasure to recognize the gentleman from Illinois, Mr. Rush, for his 5 minutes of questions. You need to unmute. Mr. Rush. And thank you for that gentle reminder to unmute. Ms. Goler Blount, I want to thank you for the work that your organization does for Black women and girls all around this Nation. As a cancer survivor myself, it is heartening to hear the progress that is being made to prevent unnecessary deaths among Black women from cancer. As I listen to your testimony, the parallels to heart disease were overwhelming. As I am sure you know, more than 60 percent of Black women are not aware that heart disease is their number one health threat. I recently wrote to the National Institutes of Health, asking that they create a Black women's healthy heart program, which would focus directly on increasing awareness among Black women about the risk of and the prevention to the variables for heart disease. What best practices, Ms. Goler Blount, from your work on raising breast cancer awareness could be applied to heart disease awareness, specifically for Black women? Ms. Blount. Well, thank you, Congressman Rush. You raise a very important point. Heart disease is the number one killer, and a lot of us don't know that. And heart disease is an issue of both lifestyle and circumstances. So the things that we know--for example, my organization, the Black Women's Health Imperative, has a program called Change Your Lifestyle, Change Your Life, which was originally conceived as diabetes prevention, but the risk factors for diabetes and heart disease and hypertension are the same. And so, we start with managing stress and how you eat, why you eat, what emotionally you bring to eating, and active living, moving around. We know if women can manage their stress--particularly Black women--manage their stress, and have access to fresh fruits and vegetables, and can get physical activity, this can significantly reduce their rates for all chronic diseases, and we also know that about 70 percent of chronic disease mortality is completely avoidable. So what we need are programs like this program implemented across the country--and we are in 12 States right now--and to partner with the CDC on its chronic disease awareness program, and to make sure women understand what they can do, and that, in fact, they can do things. And to your point, if women can manage their stress and their diet and their physical activity, that also lowers their risk for breast cancer. Mr. Rush. Right. Mr. Boyd, and also Ms. Goler Blount, this pandemic, the coronavirus, in my opinion, gives us an extraordinary opportunity to completely reimagine, and revitalize, and re-create a permanent health system. Do you agree, and what are some of the things that this Congress should be doing in order to really just create a whole new perspective, reimagining what a public health system could mean to all Americans, particularly the least of these? Ms. Blount. Yes. I agree with you. Our public health response was not, in any way, sufficient. What we need to do is listen to scientists. What we could have done to prevent where we are now with COVID-19 is to reflect back 40 years with HIV. We needed to do testing. We needed to do contact tracing and follow-up. We can still do that now, but what we have got to do is make sure that people have access to resources, that we are reaching out to people with the kinds of information and resources they need---- Mr. Rush. Thank you. Ms. Blount [continue]. And make sure our providers and researchers are involved in the conversation. Mr. Rush. Thank you. Mr. Boyd, can you chime in with the few seconds that I have remaining? Mr. Boyd. Yes, Congressman. Access, access, access. People of low income don't have access to adequate care. It is that simple. Mr. Rush. Thank you very much. Madam Chair, I yield back the balance of my time. Ms. Eshoo. The gentleman yields back and thank him for his excellent questions. It is a pleasure to recognize the gentlewoman from California, very patient, Ms. Barragan, for your 5 minutes of questions. Ms. Barragan. Thank you, Madam Chairwoman, and thank you to all our panelists today. I appreciate the conversation and want to go back to continue to highlight the issue of breast cancer disparities that we continue to see. As with many other health conditions plaguing our communities, there are significant and unacceptable health disparities when it comes to breast cancer. My own sister got breast cancer at an early age, so it continues to be a concern, and in our communities, it is something that I don't hear of talked about a lot. Ms. Blount, as you have mentioned in your testimony, you know, African American women are almost 40 percent more likely to die from breast cancer compared to non-Hispanic, White women. In part, I think that is because they are screened less frequently, they are more likely to have advanced disease when a diagnosis is made, and have less access to medical care. You just mentioned something that I don't think a lot of people hear about, the 3D mammography availability. Is that something that a community clinic would have available if, let's say, I told my constituents to ask about it, or is that something they would have to have more advanced access to a different level of healthcare? Ms. Blount. Yes. Thank you for that question, Congresswoman. Right now, most 3D mammography is available in upper-income areas, I will just be honest with you, in suburban areas. And we need to make sure that all women have access to 3D mammography. That is critically--particularly Black women, Latinas, particularly women who are going to have dense breast tissue. We have to make it more available. As Mr. Boyd said, access is critical. I do want to highlight one point, that screening rates, actually between Black and White women, are about the same, both annually and biannually. The problem is, Black women tend to get their cancers detected much later. So while about 60 percent of us are screening every year, our cancers don't get diagnosed until much later, because we tend to wait later. So if we had access and we were screening at the same rates, our outcomes would be much better. Ms. Barragan. Well, thanks for pointing that out because I think what you just said about what is available in the upper- income areas versus the lower-income areas goes to the disparities that we face, and really the different access to care that people have in this country. Can you elaborate on how the EARLY Act may help reduce the intolerable disparities that we are seeing in this area? Ms. Blount. I can. We have seen over the last ten years, particularly among younger women, a slight uptick in screening rates. I mean, we have gone from about--annual--from about 58 percent to 62 percent, so I am going to declare success. But what the Act will do is make sure women understand the importance of screening mammography, and most importantly, that they don't need to be afraid of it. You know, women aren't being recommended, but also women are afraid to be screened. They are afraid, what happens if I have a breast cancer, and the fact is, you know, screening doesn't impact whether or not you are going to develop breast cancer, but it can impact how well you will do if a breast cancer is detected. So the EARLY Act is critical to help women understand that they need to get in early, starting at age 40, screen every year, and that if it so happens a breast cancer gets detected, you have had this experience, it can be treated in its earlier stages when outcomes are excellent. Ms. Barragan. Great. Thank you so much. Ms. Blount. Thank you. Ms. Barragan. The National Cancer Institute has also found that social economic status factors, like access to education, access to health insurance, living conditions, including exposure to environmental toxins, are associated with an individual's, or a group's risk of developing and surviving cancer. I have been advocating for investments in these social determinants of health, including introducing a bill called the Improving Social Determinants of Health Act which would give the CDC resources to invest in communities to tackle these issues. This would help lower health--would actually help improve health outcomes, especially for those who are low income and living in underserved communities. Can you discuss how investing in social determinants of health can help reduce the rate of breast cancer in underserved communities and also lead to better outcomes? Ms. Blount. Yes, I can. Thank you. And that is an important point. Social determinants covers a variety of things from community, to neighborhoods, to food, to transportation, housing. One of the things we can do is by focusing on social determinants is actually lower our risk. And another issue is to understand how environmental factors impact our--whether or not we are going to develop disease, and, critically, and I have to come back to this, access. Social determinants of health are the leading impediment to access to healthcare of any kind. Ms. Barragan Great. Thank you. Madam Chairwoman, I yield back. Ms. Blount. Thank you. Ms. Eshoo. The gentlewoman yields back. It is a pleasure to recognize the gentleman from Ohio, Mr. Johnson, who has, I believe, waived on to our subcommittee today, and one of the authors of the bills that we are taking up. Mr. Johnson. Well, thank you, Madam Chairwoman and Mr. Ranking Member for the opportunity to waive on to the Health Subcommittee today in support of H.R. 5373, the United States Anti-Doping Agency Reauthorization Act. Mr. Tygart, it is good to see you again as well. Thanks for your decades of tireless work to make USADA the gold standard across the world for its anti-doping efforts. You know, this bipartisan legislation, which I am proud to sponsor, along with my colleague, Congresswoman DeGette, will reauthorize funding for USADA, improve education to youth sports, and for both programs and coaches, and includes provisions to direct Federal law enforcement to coordinate with USADA to combat the trafficking and illicit use of performance enhancing drugs. With the summer Olympics in Tokyo next year, and the return of the Olympics to the United States in 2028 in Los Angeles, it is critical that USADA has the resources it needs to continue its work. So, Mr. Tygart, as we heard in your testimony, it is essential that America takes the global lead in anti-doping in clean sports. In the past, this has not always been the case. Can you explain the benefit to the standing of the United States abroad when we can demonstrate that our athletes compete and win the right way? Mr. Tygart. Thank you, Congresswoman Johnson. I really appreciate the question. You are absolutely right for the rule of law. We are a democracy that functions when all of us who agree to a set of rules that are designed to provide certain benefits for those that follow the rules and ensure that equality can be provided in the athletic context for our athletes who are competing. And so, when the United States sends athletes around the world and they demonstrate that, I think there is no better example of the values that this country stands for that our athletes abide by the rule of sport. They compete healthy. They compete clean. And you can actually look at them as the role models that they are, and that they represent this great country and the values that we espouse around the world like no other instrument we almost have. And that is kind---- Mr. Johnson. It is kind of like they are ambassadors, right? Mr. Tygart. It is absolutely right. And not just to win, but importantly win the right way. And that is the difference between our athletes today and what the world saw back in the late 1990s, when the speculation--and there was some evidence to suggest it when our system was so poor that our athletes weren't winning the right way. Today, they know they are being held to the highest standards, and that they can upgrade confidence when they go and win medals at the games and represent this country that they are doing it to the right way. Mr. Johnson. Sure. Well, what does it mean for global sports more broadly to have an organization that does things the right way, like USADA does, and doesn't operate under malign influences like we have seen with countries like Russia and others? Mr. Tygart. It is critically important. That independent model has become a beacon to many around the world, and I think is demonstrated, as my written testimony that I submitted indicates, has shown. I mean, two whistleblowers inside of Russia, all benefits of the independent model, and specifically USADA's work, and it motivated them and said there are people outside of Russia, despite what they were being told, that do stand for these values. That the rules matter. That integrity in sport matters. And it motivated them and inspired them to come forward and ultimately expose a state that was abusing its own athletes, as we saw in the state-sponsored scandal that has been exposed now dealing with Russia. So, it is a beacon to many around the world that winning the right way is the only way to play. Mr. Johnson. OK. Well, I mentioned youth sports. You know, I have got a teenage son, Nathan, who is a competitive high school swimmer, and he has his dreams set on swimming in college and maybe even beyond. He is really very good. I am a little biased, I am his dad, but I think he is really, really good. His time sure reflects that. But he looks up to our incredible Olympians, and is looking forward to watching them compete in Tokyo next year. Can you explain how USADA's work is essential for the next generation of top athletes, why taking early action on educating them on the importance of competing fairly and ensuring clean drug-free sports in the future, why that is so important? Mr. Tygart. Well, it is critically important, and you should have confidence that your--he does have a number of role models that he can watch and be proud of and attempt to emulate. And can you imagine a young athlete, you know, first grade, second grade as they are growing up one day dreaming of making it to the elite level, only then to realize they have to inject themselves with dangerous performance enhancing drugs? You know, nobody goes into sport for that reason. And that is why to protect the value of sport, whether he ultimately becomes an Olympic level swimmer, or just goes into another profession, doing it the right way is the only way. And our program is to educate, but also provide true role models for him--are critically important to his future success. Ms. Eshoo. The gentleman's time has expired. Mr. Johnson. Thank you, Madam Chairman, I yield. Ms. Eshoo. Thank you. And we share your pride in your son, Mr. Johnson. Mr. Johnson. Thank you. Ms. Eshoo. It is a pleasure to recognize the gentleman from Arizona, Mr. O'Halleran, for his 5 minutes of questions. And I believe he is the last member, unless someone walks out and I see them on the screen. So, Mr. O'Halleran, you are recognized. Mr. O'Halleran. Thank you, Madam Chair, and thank you also ranking member, for allowing me to waive on. This issue speaks to a really important issue in rural America, not only in Arizona, but throughout America. And as school-based health centers provide a wide variety of potential health services to students and their families, many of them lack health insurance, and, otherwise, would have no ability to see a national provider. School-based health centers can treat chronic conditions like asthma and provide services like immunization and physical examination. School-based health centers play a critical role in providing care to children and families throughout Arizona. In fact, according to the Arizona School-Based Health Alliance, 45 percent of school-based health centers are located in rural areas. Rural America already is suffering from the lack of access to high quality and affordable healthcare. Additionally, 82 percent of the children who use these services are uninsured. That is why School-Based Health Centers Reauthorization Act of 2019 is so critical. I fear that if Congress fails to act, many children will lose access to the important services provided by these sectors. The COVID-19 pandemic has exploded, as those of us in rural America already know. Many of us lack affordable access to high-quality healthcare, in particular, and concern about the mental healthcare of students and families whose lives have been upended and whose social structure has completely changed in light of COVID-19. Dr. Boyd, thank you for your testimony here today and all the work you and your members do. In your testimony, you talked quite a bit about the importance of reimbursing mental health of our students and remembering. What changes have you and your members already seen in the mental health of our students given the COVID-19 situation? Also, what are the long-term health and educational paths of these sorts of mental health issues? And whether the students are going to go back into schools or stay home and do it virtually, this is having a profound impact on students across our country. Dr. Boyd? Mr. Boyd. This is a great question, Congressman. We are in process of putting some polls in field, but it is very, very difficult. As I said earlier, there are estimates that could be as many as a third of Title 1 students people haven't heard from. And so, knowing exactly what is happening in those households, we don't know. We are hopeful that as schools come back online, you know, after--after this summer break, that they will be able to give us more information. Our fear is that enough--we may lose a number of school-based health centers because their sponsoring agency does not have the resources for them to reopen. The impact we believe, along with our colleagues and the school psychologists and counseling areas and the nurses are going to be devastating. And students are going to be typecast when they come back and they show behaviors that to a student going through trauma is actually normal for a person going through trauma, but because they are acting out, may then get typecast and put into the system. That is a problem that we are really, really concerned about. And I don't think anybody at this point has good solutions to it. But we just, frankly, don't know what is happening with a lot of kids at home. And that is where the telehealth opportunity is great, and support from the FCC would be great to provide those kinds of platforms and resources to get out there and find out and communicate with the kids. Mr. O'Halleran. And, also, do school-based health centers look to serve as COVID-19 testing centers? Mr. Boyd. They would be if they had access to the test, yes, sir. Mr. O'Halleran. Madam Chair, I yield. Ms. Eshoo. Mr. O'Halleran yields back. I don't see any other members, so I think that we have heard from subcommittee members from both sides of the aisle, as well as our colleagues that waived on. I have documents to submit to the record, and I see my friend, Mr. Griffith, standing by. I have four pages. So I would like to ask for a unanimous consent request that all of the documents that are contained in this stack be entered into the record. Mr. Griffith. As long as it has been provided to our Committee staff as well, no objection. [The information appears at the conclusion of the hearing.] Ms. Eshoo. It all has. I haven't added anything to what was presented to the minority staff, and I thank the gentleman. Let me close on this note. First of all, our deepest thanks to each one of you. We have been together for 3 hours and 15 minutes, not that you were counting the seconds or the minutes. But, boy, was it time well spent. These are such important programs, and you have taken a very deep dive into why they are so important, how they work, who has served, and really the original motivations for these programs. In the case of Ms. Goodman, it was the tragedy of losing her son. So I can't thank you enough for enlightening us. And these reauthorizations are very important. And for the--if anyone is listening in in the country to this virtual hearing, reauthorization means that we are going--we are reviewing the program, we may add, we may subtract, but we are renewing the contract on it, so to speak, so that the program can keep running. So from our children to the diseases that they--the rare diseases that they have, to saving lives through the--the donors and cord blood, to doping, and making sure that our sports are absolutely clean, to our friend from Harvard who has offered, I think, in a very clear way what his position is on some of the legislation--I hope I haven't missed anyone--but we appreciate you. We appreciate you and the testimony that you have given. Continue to work with us. We always need the expert advice. We are, bettered as a result of it. And with that, I will now adjourn the Health Subcommittee. And thank you all for your participation. The committee is adjourned. [Whereupon, at 1:16 p.m., the subcommittee was adjourned.] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]

usgpo

2024-10-08T13:26:21.708929

CHRG

CHRG-118hhrg55613

Addressing America's Data Privacy Shortfalls: How a National Standard Fills Gaps to Protect Americans' Personal Information

United States Congress House of Representatives

[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] ADDRESSING AMERICA'S DATA PRIVACY SHORT- FALLS: HOW A NATIONAL STANDARD FILLS GAPS TO PROTECT AMERICANS' PERSONAL INFORMATION ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON INNOVATION, DATA, AND COMMERCE OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ APRIL 27, 2023 __________ Serial No. 118-29 Published for the use of the Committee on Energy and Commerce [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] govinfo.gov/committee/house-energy energycommerce.house.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 55-613 PDF WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON ENERGY AND COMMERCE CATHY McMORRIS RODGERS, Washington Chair MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey ROBERT E. LATTA, Ohio Ranking Member BRETT GUTHRIE, Kentucky ANNA G. ESHOO, California H. MORGAN GRIFFITH, Virginia DIANA DeGETTE, Colorado GUS M. BILIRAKIS, Florida JAN SCHAKOWSKY, Illinois BILL JOHNSON, Ohio DORIS O. MATSUI, California LARRY BUCSHON, Indiana KATHY CASTOR, Florida RICHARD HUDSON, North Carolina JOHN P. SARBANES, Maryland TIM WALBERG, Michigan PAUL TONKO, New York EARL L. ``BUDDY'' CARTER, Georgia YVETTE D. CLARKE, New York JEFF DUNCAN, South Carolina TONY CARDENAS, California GARY J. PALMER, Alabama RAUL RUIZ, California NEAL P. DUNN, Florida SCOTT H. PETERS, California JOHN R. CURTIS, Utah DEBBIE DINGELL, Michigan DEBBBIE LESKO, Arizona MARC A. VEASEY, Texas GREG PENCE, Indiana ANN M. KUSTER, New Hampshire DAN CRENSHAW, Texas ROBIN L. KELLY, Illinois JOHN JOYCE, Pennsylvania NANETTE DIAZ BARRAGAN, California KELLY ARMSTRONG, North Dakota, Vice LISA BLUNT ROCHESTER, Delaware Chair DARREN SOTO, Florida RANDY K. WEBER, Sr., Texas ANGIE CRAIG, Minnesota RICK W. ALLEN, Georgia KIM SCHRIER, Washington TROY BALDERSON, Ohio LORI TRAHAN, Massachusetts RUSS FULCHER, Idaho LIZZIE FLETCHER, Texas AUGUST PFLUGER, Texas DIANA HARSHBARGER, Tennessee MARIANNETTE MILLER-MEEKS, Iowa KAT CAMMACK, Florida JAY OBERNOLTE, California ------ Professional Staff NATE HODSON, Staff Director SARAH BURKE, Deputy Staff Director TIFFANY GUARASCIO, Minority Staff Director Subcommittee on Innovation, Data, and Commerce GUS M. BILIRAKIS, Florida Chairman LARRY BUCSHON, Indiana JAN SCHAKOWSKY, Illinois TIM WALBERG, Michigan, Vice Chair Ranking Member JEFF DUNCAN, South Carolina KATHY CASTOR, Florida NEAL P. DUNN, Florida DEBBIE DINGELL, Michigan DEBBIE LESKO, Arizona ROBIN L. KELLY, Illinois GREG PENCE, Indiana LISA BLUNT ROCHESTER, Delaware KELLY ARMSTRONG, North Dakota DARREN SOTO, Florida RICK W. ALLEN, Georgia LORI TRAHAN, Massachusetts RUSS FULCHER, Idaho YVETTE D. CLARKE, New York DIANA HARSHBARGER, Tennessee FRANK PALLONE, Jr., New Jersey (ex KAT CAMMACK, Florida officio) CATHY McMORRIS RODGERS, Washington (ex officio) C O N T E N T S ---------- Page Hon. Gus M. Bilirakis, a Representative in Congress from the State of Florida, opening statement............................ 1 Prepared statement........................................... 4 Hon. Jan Schakowsky, a Representative in Congress from the State of Illinois, opening statement................................. 6 Prepared statement........................................... 8 Hon. Cathy McMorris Rodgers, a Representative in Congress from the State of Washington, opening statement..................... 10 Prepared statement........................................... 12 Hon. Frank Pallone, Jr., a Representative in Congress from the State of New Jersey, opening statement......................... 15 Prepared statement........................................... 17 Witnesses Morgan Reed, President, ACT-The App Association.................. 19 Prepared statement........................................... 21 Answers to submitted questions............................... 158 Donald Codling, Senior Advisor for Cybersecurity and Privacy, REGO Payment Architectures, Inc................................ 40 Prepared statement........................................... 42 Answers to submitted questions............................... 162 Edward Britan, Vice President, Associate General Counsel, and Head of Global Privacy, Salesforce, Inc........................ 48 Prepared statement........................................... 50 Answers to submitted questions............................... 164 Amelia Vance, Founder and President, Public Interest Privacy Center......................................................... 62 Prepared statement........................................... 64 Answers to submitted questions \1\ Submitted Material Inclusion of the following was approved by unanimous consent. List of documents submitted for the record....................... 117 Article of May 24, 2022, ``Remote learning apps shared children's data at a `dizzying scale,''' by Drew Harwell, Washington Post. 118 Letter of April 26, 2023, from Brad Thaler, Vice President of Legislative Affairs, National Association of Federally-Insured Credit Unions, to Mr. Bilirakis and Ms. Schakowsky............. 123 Letter of April 26, 2023, from Ashkan Soltani, Executive Director, California Privacy Protection Agency, to Mr. Bilirakis and Ms. Schakowsky................................... 127 Letter of April 27, 2023, from Privacy for America to Mrs. Rodgers, et al................................................. 131 Letter of April 27, 2023, from 1Huddle, et al., to Mr. Pallone, et al.......................................................... 134 ---------- \1\ Ms. Vance's reply to submitted questions for the record has been retained in committee files and is available at https://docs.house.gov/ meetings/IF/IF17/20230427/115819/HMTG-118-IF17-Wstate-VanceA-20230427- SD001.pdf. Report of the Information Technology and Innovation Foundation, ``The Looming Cost of a Patchwork of State Privacy Laws,'' January 2022\2\ Letter of April 27, 2023, from Jim Nussle, President and Chief Executive Officer, Credit Union National Association, to Mr. Bilirakis and Ms. Schakowsky................................... 137 Letter of April 27, 2023, from Ed Mierzwinski, Senior Director, Federal Consumer Program, U.S. PIRG, to Mr. Bilirakis and Ms. Schakowsky..................................................... 140 Statement to the House Committee on Financial Services by Edmund Mierzwinski, Senior Director, Federal Consumer Program, U.S. Public Interest Research Group, February 26, 2019.............. 141 ---------- \2\ The report has been retained in committee files and is included in the Documents for the Record at https://docs.house.gov/meetings/IF/ IF17/20230427/115819/HMTG-118-IF17-20230427-SD035.pdf. ADDRESSING AMERICA'S DATA PRIVACY SHORTFALLS: HOW A NATIONAL STANDARD FILLS GAPS TO PROTECT AMERICANS' PERSONAL INFORMATION ---------- THURSDAY, APRIL 27, 2023 House of Representatives, Subcommittee on Innovation, Data, and Commerce, Committee on Energy and Commerce, Washington, DC. The subcommittee met, pursuant to call, at 2:02 p.m. in the John D. Dingell Room 2123 Rayburn House Office Building, Hon. Gus Bilirakis (chairman of the subcommittee) presiding. Members present: Representatives Bilirakis, Bucshon, Walberg, Duncan, Dunn, Lesko, Pence, Armstrong, Allen, Fulcher, Harshbarger, Cammack, Rodgers (ex officio), Schakowsky (subcommittee ranking member), Castor, Dingell, Kelly, Blunt Rochester, Soto, Trahan, Clarke, and Pallone (ex officio). Also present: Representatives Obernolte. Staff present: Kate Arey, Digital Director; Michael Cameron, Professional Staff Member; Jessica Herron, Clerk; Nate Hodson, Staff Director; Tara Hupman, Chief Counsel; Sean Kelly, Press Secretary; Peter Kielty, General Counsel; Emily King, Member Services Director; Tim Kurth, Chief Counsel; Brannon Rains, Professional Staff Member; Lacey Strahm, Fellow; Teddy Tanzer, Senior Counsel; Hannah Anton, Minority Policy Analyst; Ian Barlow, Minority FTC Detailee; Waverly Gordon, Minority Deputy Staff Director and General Counsel; Daniel Greene, Minority Professional Staff Member; Tiffany Guarascio, Minority Staff Director; Lisa Hone, Minority Chief Counsel, Innovation, Data, and Commerce; Joe Orlando, Minority Junior Professional Staff Member. Mr. Bilirakis. The subcommittee will come to order. The Chair recognizes himself for an opening statement. OPENING STATEMENT OF HON. GUS M. BILIRAKIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA Again, good afternoon and welcome to the 36th hearing the U.S. Congress has held on privacy and data security over the last 5 years. I am using a bit of math there from one of our previous witnesses. As for the Energy and Commerce Committee, this will be our sixth hearing in the 118th Congress. We have now examined in depth how a Federal data privacy and security law can make us more competitive with China. While a Federal standard is needed to protect Americans and balance the needs of business, government, and civil society, what happens when malicious actors like TikTok and the CCP, through ByteDance, exploit access to data, where the FTC's lines of jurisdiction and authority are and how that interplays with the comprehensive privacy law, the role of data brokers, and the lack of consumer protections over one's data, and, finally, our hearing today, which will examine how consumers may not be covered by sector-specific laws in a way that is consistent with their expectations. The fact is that the data privacy and security concerns permeate across multiple areas within Congress, even in seemingly unrelated topics, which highlights just how important it is for us to work together across the aisle and across Capitol Hill to protect the American people. In today's hearing we will discuss sectoral data privacy regimes like the Financial Sectors Gramm-Leach-Bliley Act; and the Fair Credit Reporting Act; and the healthcare's--health sector's Health Insurance Portability and Accountability Act, or HIPAA; the education sector's Family Education Rights and Privacy Act, FERPA; and, of course, the Children's Online Privacy Protection Act, COPPA, which this subcommittee knows very well, and the gaps in coverage that a piecemeal, sector- specific approach has created for consumers. We will hear from the witnesses about how these gray areas for Americans also result in risks and uncertainty that businesses could better avoid if we had clearer rules of the road. This only gets more complicated as 50 different States move towards their own data privacy laws, meaning an increasingly complicated and confusing landscape for consumers and for businesses. Having clear rules in place will protect Americans, particularly our kids, as well as fuel innovation in the American marketplace. Sounds good to me. Each of the witnesses has a unique story to tell when it comes to these gaps, but the challenges are the same: Consumers think their data is protected, but the sector-specific law in place does not extend as far as consumers expect. Mr. Codling, with REGO Payment Architectures, will discuss how it is possible to operate a payments infrastructure that has strong protections for children. REGO has filled the gaps that exist with the GLBA and COPPA by protecting all kids under 18. We appreciate that very much. Ms. Vance, with the Public Interest Privacy Center, is a recognized expert in FERPA and kids' privacy. She will speak about how current gaps exist in educational privacy and child- specific laws that a comprehensive privacy law would cover. Thanks very much for being here. Mr. Britan, with Salesforce, helps clients collect data in a way that is compliant with the Federal sectors--sectoral laws and State privacy laws. His clients do business in every sector, and will speak to compliance burdens that the patchwork of State laws has created. Thanks for being here. Mr. Reed, with the App Association, will discuss how the piecemeal approach of State laws creates confusion for member companies. App Association members are regulated by all of the sector-specific laws and must spend significant resources complying with all of the various State data privacy laws. That is so tough. It has got to be very difficult. In closing, I want to thank all the witnesses for coming today. I also want to thank Chair Rodgers and the ranking member, Ranking Member Pallone, for all of the progress we have made so far and the continued commitment to get this done--we will get it done--as well as Ranking Member Schakowsky, who has made this effort a true bipartisan partnership. Thank you so much. [The prepared statement of Mr. Bilirakis follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Bilirakis. Lastly, I want to recognize and thank a valuable member of our team, whose last day is tomorrow and has served as a technology fellow on our subcommittee, on our staff for this past year. We are really going to miss you, Lacey-- Lacey Strahm. Lacey, your insights and contribution, particularly with the NIL, to the team have been invaluable over these past years. I really appreciate all your hard work. And don't be a stranger. We are going to miss you tremendously. Ms. Schakowsky. Let's give her a round---- Mr. Bilirakis. Yes, why not? [Applause.] Mr. Bilirakis. Hey, Lacey, second thoughts? [Laughter.] Mr. Bilirakis. No? I wish you would stay, but I understand. I look forward to hearing from our witnesses today on providing protections for Americans and certainty for businesses. So with that I will now recognize the gentlelady from Illinois, Ms. Schakowsky, for her 5 minutes for an opening statement. OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS Ms. Schakowsky. Thank you so much, Mr. Chairman. You know, you mentioned that we have been working in the subcommittee and the full committee for at least 5 years, talking about how are we going to protect consumers' data. And rather than things getting better, despite our being able to pass it out of the full committee, which was a tremendous achievement in a totally bipartisan way, I think consumers are increasingly, every day, concerned about their inability to protect their private information. And you outlined some of the sectoral ways that consumers are supposedly protected but don't do the full job and don't fill the gaps. You mentioned healthcare, so--and I am really anxious to hear about that, among other things, because I think, at first, when HIPAA was put into place, the idea that doctors and hospitals would not be able to share information-- there weren't so many applications out there that went well beyond that, and opportunities to go beyond that. But now we know that there are all kinds of apps that collect information and may share that, even sell that, about you and your health-- one example of what we have to do. You mentioned financial information. Now, you know, there were days where we just went to our banks, and we were pretty sure that that information wasn't going to be shared, and there were some protections. But we now know that there are retailers, for example, who have plenty of information when we do shopping online, and lots of our data, the--that leads back to all of our financial information becomes available. And then you also mentioned FERPA, which is--I didn't actually know the acronym, but I am going to say it--it is the Family Education Rights and Privacy Act, for our kids. Well, you would hope that all of our--and we know that all of the information about our children isn't--is not protected right now. And for example, the student data. But children who attend private schools, they are not going to find that their information is protected. We know that there are a number of educational apps that our kids and, even as parents, that we are connecting them to, that may have lots more information about our children than we want. And that is always a primary concern for members of these committee--of this committee. So I think I want to just conclude by going back to what we have already done. We have passed the American Data Privacy and Protection Act out of this committee, and it is time for us to return to that. If there are things that we still need to do, if we want to continue negotiations on various parts--but we passed a really good bill, and it is that that we ought to build on, that we ought to move forward on so that all those gaps that are now in protecting consumers' information, the information they do not want stolen, sold, the manipulations that are happening right now to our kids online, ourselves online--we can address this right now and get going once again on the ADPPA legislation and move forward as quickly as we can. [The prepared statement of Ms. Schakowsky follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Schakowsky. With that, I yield back, Mr. Chair. Mr. Bilirakis. Thanks so very much. I appreciate it. And we are going to make a good bill even better. I now recognize the chair of the full committee, Mrs. Rodgers, for her 5 minutes for an opening statement. OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON Mrs. Rodgers. Thank you, Mr. Chairman. Good afternoon and welcome. This is our sixth privacy and data security hearing this year. It gives us another chance to discuss our efforts to enact a comprehensive national standard. Currently, there are sector-specific Federal statutes on the books to protect data, ranging from healthcare to financial to youth-oriented laws. While preserving those laws, the American Data and Privacy Protection Act passed out of committee with near unanimous 53 to 2 vote, and it included many safeguards to ensure activities in these various sectors remain governed by the appropriate State and Federal regulators. Many of these laws were crafted in this very hearing room over the last 30 years. The level of innovation and competition that resulted since then is amazing, and it represents some of the greatest accomplishments in American history. That said, these technologies come with challenges that must be addressed. These companies have developed tools that interact to track Americans both online and offline, and they are also using their data to manipulate what we see and what we think. This is especially true for children. I am very proud of our work last Congress to pass ADPPA out of committee. It included the strongest privacy protections for kids online. These protections have support from several stakeholders as being stronger than any proposals from any other Federal or State laws or proposals to date. It would make it illegal to target advertising to children and treats data about kids under 17 as sensitive. This means establishing higher barriers for the transfer of personal information. This provision, along with the overarching data minimization provisions and the ability to delete personal information, will make it tougher for kids' personal identifiable information, like their physical location, to land in the hands of drug dealers, sex traffickers, and other evil actors attempting to find and track them. It would also require assessments for how their algorithms amplify harmful content. This will keep them accountable for stories like the one reported by Bloomberg last week about Tiktok's algorithm continuing to push suicide content to vulnerable children. Child privacy protection advocates, including many parent groups, are already on the record in support of a national data privacy standard. It is just one piece of protecting children online. This is difficult to get right, but it is imperative that we do. Through many discussions with stakeholders, we determined that an underlying framework of protections must be strong and consistent, no matter the user, young or old. For this reason, any legislation to protect kids online must be rooted in a comprehensive national standard for data privacy and security to ensure there are broad protections. As long as there are regulatory gaps, companies will exploit them in order to monetize the data captured and refuse to do more to shield children from bad actors like cyberbullies, sex predators, drug dealers, and others trying to do harm. This can't be allowed to continue. I can't emphasize this enough: We need legislation like ours that protects children from having their information harvested, like geolocation data--gives everyone the power to delete the information collected on them, and opt out of collection together--altogether, provides greater transparency over the algorithms these companies use to manipulate and amplify the information we see, and requires assessments for how algorithms harm children. Last week, we had a hearing with the Federal Trade Commission. We raised concerns about the direction of the agency related to the unilateral rulemaking efforts. I believe the FTC should be the preeminent data protection agency in the world, but it needs to be at the direction of Congress. I appreciate the work of the people in this room to ensure that we get this legislation right. Our efforts have shown us that the single best way to protect Americans in today's digital ecosystem is with a national privacy and data security standard, and the American people agree. More than 80 percent of Americans say that they are looking for Congress to act. It is our responsibility to ensure their data privacy and security, and to even higher levels of protections for their kids. It is time to rein in Big Tech. [The prepared statement of Mrs. Rodgers follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mrs. Rodgers. I look forward to your testimony, and I yield back. Mr. Bilirakis. Thank you very much, Madam Chair. And now I recognize the gentleman from New Jersey, Mr. Pallone, for 5 minutes for an opening statement. OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY Mr. Pallone. Thank you, Chairman Bilirakis. For decades we have sought to safeguard Americans' fundamental right to privacy with a series of fragmented sector-by-sector laws. Anyone with a smartphone, laptop, or tablet can tell you that we are not getting the job done. The alphabet soup of well-intentioned Federal privacy laws--HIPAA, COPPA, FERPA, GLBA--have failed to rein in the collection, use, and transfer of Americans' sensitive data. That is partly because they were not designed for our modern online economy. FERPA, or the Federal Educational Rights and Privacy Act, passed in 1974. HIPAA, or the Health Insurance Portability Accountability Act, passed in 1996. GLBA, or the Gramm-Leach- Bliley Act, which addresses privacy within the financial sector, passed in 1999. And COPPA, or the Children's Online Privacy Protection Act, became law in 2000. So the phone wasn't released--or I should say that the iPhone wasn't released until 2007. In internet years, these laws are dinosaurs. So today, health information is no longer confined to the relative safety of a doctor's filing cabinet. Fitness trackers monitor our heart rates, sleep patterns, and oxygen saturation levels. Health information websites provide diagnosis and treatment information on every possible medical condition. Mobile applications track dietary, mental, and reproductive health. But the HIPAA privacy rules only restrict the use and sharing of health information by healthcare providers, clearinghouses, and health plans. As a result, some of the most commonly used websites, apps, and devices have the green light to mine and use Americans' health information without meaningful limitations. The lack of strong privacy protections threatens Americans' financial information, as well. Existing financial privacy laws largely do not apply to retailers and online marketplaces, nor do they provide protection from discriminatory algorithms. Likewise, existing children's privacy laws leave vast amounts of children and teens' sensitive information unprotected. FERPA, the privacy law protecting educational records, does not apply to private and parochial elementary and secondary schools. It also doesn't apply to EdTech downloaded and used at home or in afterschool programs to supplement or complement children's schoolwork. And COPPA only restricts online operators from collecting data from children under the age of 13 without obtaining verifiable parental consent, but only under limited circumstances. Children's data collected on sites like TikTok, Instagram, Google, Facebook, and Snapchat is not protected unless the site knows it is collecting information from kids under 13. So this honor system has become a get-out-of-jail-free card for Big Tech companies, which often claim that their services are intended for users 13 or older. But we know children are on these sites and apps. Sixty-four percent of children between 8 and 12 years old report watching online videos on platforms like TikTok and YouTube every day. Nearly one in five say they use social media every day. So simply tweaking current child privacy laws will not sufficiently protect our nation's youth. That is because age verification is notoriously challenging and has proven to be ineffective. After all, children today are digital natives. They know how to bypass popups asking for their age or birth date and can enter these virtual playgrounds with little parental supervision and meager privacy protections. So we also know that parents' use of the internet routinely provides information about their children, either directly or by inference. When a parent or guardian goes online to research and sign up for summer camps, family vacations, Little League teams, gymnastic classes, or a broad variety of other activities, they share data about their children, and that information is then used and shared for targeted marketing and other purposes. As a result, protecting kids and teens' privacy requires us to protect everyone's privacy. So that is why we must pass a comprehensive privacy bill that closes the gap and enshrines Americans' right to privacy in law. We need a bill that reins in the overcollection of information by mandating data minimization. And we need a bill that puts all Americans back in control of how the data is collected, used, and shared. Last Congress, as, you know, most of my colleagues have already mentioned, this committee overwhelmingly passed such a bill with broad bipartisan support. I am committed to getting a bill over the finish line, and look forward to continuing to work with Chair Rodgers and our subcommittee chairs to that effect. [The prepared statement of Mr. Pallone follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Pallone. And with that, Mr. Chairman, I yield back. But thank you and Chair Rodgers and Ranking Member Schakowsky for all that you are doing to push this national privacy bill and framework. I appreciate it. Mr. Bilirakis. Good. Let's get this done. Now--thank you very much, I appreciate it, the gentleman yields back. Our first witness is Morgan Reed, president of ACT-The App Association. You are recognized, sir, for your 5 minutes. STATEMENTS OF MORGAN REED, PRESIDENT, ACT-THE APP ASSOCIATION; DONALD CODLING, SENIOR ADVISOR FOR CYBERSECURITY AND PRIVACY, REGO PAYMENT ARCHITECTURES, INC.; EDWARD BRITAN, VICE PRESIDENT, ASSOCIATE GENERAL COUNSEL, AND HEAD OF GLOBAL PRIVACY, SALESFORCE, INC.; AND AMELIA VANCE, FOUNDER AND PRESIDENT, PUBLIC INTEREST PRIVACY CENTER STATEMENT OF MORGAN REED Mr. Reed. Chairman Bilirakis, Ranking Member Schakowsky, and members of the subcommittee, my name is Morgan Reed, and I am the president of the App Association. The App Association is part of a $1.8 trillion global ecosystem that supports 6 million American jobs. Our members are often tiny companies but quite literally serve all 435 congressional districts. And most importantly, our member companies are building products that help your constituents manage their health, their finances, and their education. For example, two companies--Thinkamingo in your district, Mr. Chair, and Kidz Learn in your district, Ms. Schakowsky-- must manage the intersection between COPPA and FERPA and the gaps that exist. In healthcare our companies like Podimetrics help veteran warfighters manage their diabetic foot issues, and Rimidi gives doctors a platform to manage remote patient monitoring, all while dealing with HIPAA rules for both data portability, but also how to govern data that may be outside of HIPAA's very narrow scope. But regardless of the regulatory silo, what our members hear from consumers is loud and clear: They want access to their information--health, education, and financial--in digital form, and they want to manage it on their smartphone. Moreover, they want all of that to happen in an environment that meets their expectations around privacy and security. This is a tall order, but one that is made more difficult by the lack of Federal privacy legislation, the current odd silos of privacy regulation that put parts of their personal data under HIPAA, others under FERPA, some under GLB. And what consumers feel like as a random mishmash really devalues the trust that we need in the system. And consumers need to trust our members are delivering the next wave of digital tools and services in a manner that protects privacy and secures data against bad actors. With this in mind, I want to focus on three concepts. First, expanding HIPAA is a nonstarter. HIPAA is a portability and interoperability regime. It is right there in the name. The P stands for portability, not privacy. It is designed for insurers and providers as part of a narrow set of covered entities providing healthcare services to patients. Expanding HIPAA to all entities processing data with any connection to health--like grocery stores--under the concept of social determinants of health would turn the Office of Civil Rights into a second FTC. Practically speaking, consumers don't need another FTC, especially when the staff of 72 that already oversees 6,000 annual complaints, many of them unrelated to privacy. And we also don't need grocery stores, mapping apps, and smart ag platforms to make all of their data interoperable with electronic health records, which is HIPAA's primary purpose. But we can't shrug and walk away. Instances where digital health apps process or transfer sensitive personal data in ways that go against consumers' expectations are numerous. After the FTC entered a consent order with period trapping--tracking app Flo, we sent a letter to this committee arguing that the conduct of Flo is one of the most important reasons for a comprehensive privacy bill. But that privacy bill cannot be an outgrowth of a health record portability law. We need your bill to become law. Number two, financial services go beyond Gramm-Leach- Bliley, and we need a risk-based framework to better empower consumers. Like HIPAA, GLBA only applies to a narrow, already defined group of entities. We need to, A, ensure that after financial data is passed from a GLBA-covered entity to the consumer, it is treated as sensitive PII; and B, provide a risk-based framework so that the financial services industry understands where their liability risks are and, most importantly, aren't, so that the industry can spur innovation. Lastly, FERPA overlaps with the FTC Act and its child requirements under COPPA, resulting in uncertainty for parents, commercial industries, and the education institutions alike. We need to improve clarity and avoid making confusion worse. Some data is opt-out under FERPA but opt-in under COPPA. This helps no one. We need to focus on ensuring that a Federal bill benefits all persons of any age and avoids convoluted fictions like adding a constructive knowledge threshold to COPPA, which will neither be constructive or add knowledge. And we need to modernize verifiable parental consent requirements currently in place so that parents and developers can actually make VPC work and make it harder for some to simply pretend that all of their audience is over 13. Ultimately, privacy enforcers need better tools. When Tom Hanks' character was stranded on a remote island in the movie Cast Away, he used an ice skate to remove a tooth. What the FTC needs is not more ice skates, tools that don't fit the job and cause more pain than is necessary. The FTC and my members need a statute that specifically prohibits privacy harms resulting from processing, collection, and transfer that go against consumer expectations. Thank you for inviting me to this important discussion, and I look forward to your questions. [The prepared statement of Mr. Reed follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Bilirakis. Thank you. Thank you very much. Our next witness is Donald Codling, senior advisor for cybersecurity and privacy for REGO, the REGO Payment Architectures. You are recognized, sir, for 5 minutes. STATEMENT OF DONALD CODLING Mr. Codling. Commerce Committee Chair McRodgers, Ranking Member Pallone, Subcommittee Chair Bilirakis and Ranking Member Schakowsky, and members of the subcommittee, thank you for inviting me to testify. My name is Donald Codling, and I am the senior advisor for cybersecurity and privacy. For over 23 years, I worked in the FBI in various investigative programs focusing on international cyber crime and national cybersecurity operations. These programs particularly emphasize cybersecurity challenges that impact the global financial services, energy, and healthcare industries. I also served as the FBI's chairman of an international cyber crime working group that consisted of the heads of cyber investigative departments of Australia, Canada, New Zealand, the United Kingdom, and the United States. My experience in cybersecurity and the FBI have taught me to identify areas of cyber risk and assess its threats. What we are now experiencing in the financial industry is the convergence of several trends that, though individually benign, will collectively cause unnecessary harm to our Nation's children. The first trend is the rapid adoption of mobile devices by children under the age of 18. According to Statista, 97 percent of households with children under the age of 8 either have a smartphone or tablet that the children use exclusively. Secondly, according to a report by Mastercard, the COVID-19 pandemic doubled consumer adoption of cashless payments. Finally, the purchasing power of the under-18 demographic has significantly increased in recent years. The National Retail Federation reports that children influence 87 percent of a family's purchases, and preteens are spending their own money at over twice the volume compared to 10 years ago. Businesses know the enormous potential of the under-18 market. Yet this perfect storm of financial and technology trends is worsened because Federal laws and regulations have not kept up with the advent of a cashless society. It is true that the Children's Online Privacy Protection Act of 1998 makes it unlawful for online companies to collect the personal information of children under 13. This is an opt- in process, while the parent must actively engage and agree to that data collection. However, most fintech companies that provide financial services products to children adhere to the privacy protections of the Gramm-Leach-Bliley Act of 1999. Under GLBA, companies must offer an opt-out option for nonaffiliate data sharing. But there is no opt-out option for affiliate sharing. This means the default setting for these websites and financial apps allows for the collecting and sharing of data between the ages of 13 and 17 for children with nonaffiliated third parties, unless the parent proactively opts out. In fact, there is often no ability for the parents to opt out of sharing of their children's financial transactions between affiliated companies. Keep in mind that, according to a report by Superawesome, a London-based child privacy firm, by the age of 13, mobile applications have collected over 72 million data points from just one child. Though Federal laws are currently not adequate to make it unlawful for such behavior, it must be the responsibility of companies to take steps to protect our children's privacy. I am proud to be an advisor for REGO, who has developed the only certified COPPA and third-party GDPR-compliant financial platform for families and children of all ages. REGO is designed to be implemented as a white label offering for banks and credit unions, giving them the ability to provide a secure family banking platform that is fully integrated with their bank's brands and systems. Since its inception in 2008, the core of REGO was built around the concept of data minimization, where the only information collected for children under 17 is the date of birth. That is it. REGO has created a family digital wallet experience that cannot function without the explicit consent and approval of the parent. This includes requiring parental approval for others to deposit money into the child's account or restricting children to purchase items only from parental- approved vendors, critical security features that many popular mobile payment apps do not have but should. In my experience, no other financial technology company has child data and privacy protections so integrated into its foundational strategy except REGO. On behalf of REGO, we support the enactment of strong, comprehensive, and bipartisan Federal privacy legislation like ADPPA that includes strong data minimization and the data security standards and will update privacy laws to protect children. We believe that REGO is a perfect example of how you can create innovative fintech products and services that incorporate ADPPA standards and treat your users as customers instead of as products. Thank you very much for giving us the opportunity to participate today. I look forward to your questions. Thank you. [The prepared statement of Mr. Codling follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Bilirakis. Thank you. Next we have a witness, Edward Britan, from the head of global privacy for Salesforce. You are recognized, sir, for 5 minutes. STATEMENT OF EDWARD BRITAN Mr. Britan. Thank you. Chairman Bilirakis, Ranking Member Schakowsky, and members of the subcommittee, my name is Ed Britan. I lead Salesforce's global privacy team, a team of professionals located across the U.S., Europe, and Asia Pacific regions. Thank you for this opportunity to testify. It is a privilege to be here today. I am passionate about privacy and the urgent need for a comprehensive U.S. Federal privacy law. I have spent almost two decades focused on helping companies comply with global privacy and data protection laws, including roughly 2 years at Salesforce, 7 years at Microsoft, and 7 years helping a range of companies at Alston and Bird. Global privacy laws have changed significantly during my career, with a particular inflection point being effectuation of the EU General Data Protection Regulation, GDPR, in May of 2018. Since then, comprehensive privacy laws frequently modeled on GDPR have passed all over the world. The U.S. is now one of the few developed nations lacking a comprehensive privacy law. The UK, Japan, Brazil, Kenya, and Thailand have all passed comprehensive privacy laws since the GDPR went into effect. This is not to say that the U.S. has never been a thought leader in this space. In fact, the core concepts in GDPR and most other global privacy laws build upon ideas first introduced in 1973 in a report published by the Department of Health, Education, and Welfare, the HEW Report. The HEW Report introduced rights to access, delete, and correct personal information, the data minimization inaccuracy principles, and restrictions on automated decision making. Further, it called for these concepts to be included in comprehensive Federal privacy legislation. Had the U.S. taken that action, our industry, a crucial driver of global innovation and economic growth, might not be facing the current crisis of trust that led our CEO, Marc Benioff, to call for a comprehensive Federal privacy law beginning in 2018. But it is not too late for Congress to act. The world has advanced the concepts that the U.S. first introduced. Now, as we approach the 15th anniversary of the HEW Report, the U.S. can reassert its leadership by passing a comprehensive Federal law that builds on the current global standard and advances global privacy law for the next 50 years and beyond. So why do we need a comprehensive Federal privacy law, and what should that law look like? We need a Federal privacy law because privacy is a fundamental human right. It is also essential for preserving other human rights, such as life, liberty, speech, and freedom from discrimination. Polls show that a majority of Americans, regardless of political affiliation, strongly favor increased legal protections governing companies' use of personal information. The right to privacy cannot be sufficiently protected by the current sectoral approach at the Federal level or by the individual State laws. The current U.S. sectoral laws are effective and influential, but they are not sufficient. Without comprehensive legislation, there are significant gaps in protection. For example, the Health Insurance Portability and Accountability Act, HIPAA, effectively protects data related to health conditions and provision of healthcare held--data held by providers and health plans. HIPAA fails, however, to cover health-related data that may be collected by noncovered entities such as through connected devices and online services that monitor and improve health and fitness. States have sought to fill the national gap in privacy protection by passing comprehensive privacy laws of their own. Salesforce welcomes this development. These State-led efforts, which have taken place in red States and blue States, are important and demonstrate the need and demand for comprehensive privacy law. However, one's level of privacy should not depend on their ZIP Code. Congress should be inspired to build upon these State-led efforts in setting a national standard which ensures that these privacy protections are held by all Americans. That Federal law should address core privacy principles, including transparency, individual control, data minimization, security, individual rights of access, correction and deletion, risk management, and accountability. More specifically, the Federal law should include enhanced protections for sensitive data, children's data, mandatory data impact, and algorithmic assessments, prohibitions on using personal information to discriminate, the controller processor distinction, and restrictions on third-party targeted advertising. Congress has made great strides toward passing a comprehensive Federal privacy law. Last year this committee passed the American Data Privacy Protection Act, ADPPA, by a resoundingly bipartisan vote of 53 to 2. While there are undoubtedly aspects of ADPPA that every stakeholder would like to change, ADPPA reflected a hard-fought compromise that would meaningfully protect privacy, increase trust in industry, and position the U.S. as a world leader on tech issues. Salesforce welcomes the role of regulators in shaping responsible innovation. Presently, the world is looking to EU regulators and GDPR to write the rules of the road for emerging technologies like generative AI. With ADPPA, the U.S. has proposed important ideas that should be part of the global conversation. The path to providing world-leading privacy protections for all Americans is clear. Now is the time for Congress to pass a comprehensive privacy law that builds upon the existing global standard and reasserts U.S. leadership on privacy and data protection. Thank you. [The prepared statement of Mr. Britan follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Bilirakis. And last but not least, certainly not least, Amelia Vance from the founder and president of the Public Interest Privacy Center. You are recognized for 5 minutes. Thank you. STATEMENT OF AMELIA VANCE Ms. Vance. Chair Bilirakis, Ranking Member Schakowsky, Chair McMorris Rodgers, Ranking Member Pallone, and members of the subcommittee, thank you for inviting me to testify on the need for better child and student privacy protections. My name is Amelia Vance, and I am president of the Public Interest Privacy Center; chief counsel of the Student and Child Privacy Center at AASA, the School Superintendents Association; and an adjunct professor teaching privacy law at William and Mary Law School. For the last decade I have focused exclusively in my career on child and student privacy. Children require exceptional privacy protections. They are not yet equipped to weigh the potential benefits and risks of data collection and use. Gaps in Federal laws and a patchwork of State laws mean privacy protections for kids and students are outdated and confusing. Even when clear, these protections contain numerous loopholes that leave children unprotected from companies, predators, and other threats that endanger their health, support systems, and social development, and future opportunities. Congress should enact baseline Federal privacy protections for all consumers that include additional protections for children and students that recognize children's unique vulnerabilities. Without proper privacy safeguards, children's lives and futures could be irreparably harmed. I would like to focus my testimony today on a few key points: first, existing Federal law does not adequately protect children and students online; second, efforts by States has-- have primarily created confusion and hampered efforts by schools, districts, and parents to protect kids online; and third, baseline consumer privacy law with special protections for children would be a meaningful step forward to protect kids online. As discussed in the opening statements, two major Federal laws provide the bulk of privacy protections for children and students online: the Children's Online Privacy Protection Act, COPPA, and the Family Educational Rights and Privacy Act, FERPA. However, both of these have significant gaps that fail to provide children and students with the protections they deserve. For instance, COPPA only applies when apps or websites collect data directly from children under 13. It does not protect children when websites or data brokers collect information about them. Even more concerning, most of COPPA's limited protections can be easily waived by one click of parental consent. FERPA only directly regulates schools, not EdTech companies, saddling schools and educators with the burden of policing large companies and corporate data practices. This is an enormous problem, especially since those school vendors are responsible for more than half of student data breaches. FERPA also only protects student information when EdTech is used in the classroom. The minute that a child goes home and stops using that app for homework, or the teacher suggesting it, FERPA protections go away and companies have free rein. These are serious shortcomings in Federal law created in large part by lightning-fast growth in tech. Recognizing some of these issues, States have introduced and passed child, teen, and student privacy protections at an astounding rate. But even when these laws have been successful and have not created confusion, we are still left with a legal landscape riddled with far more gaps than many people realize. We need updated Federal data privacy protections. ADPPA is a strong and important step forward. But when addressing general consumer privacy protections, it is critical to remember children are uniquely vulnerable to certain harms, and we must create meaningful protections to safeguard them. We have all seen recent headlines of dire consequences of insufficient privacy protections. For example, student information including detailed mental health and sexual assault records was posted online after a Minneapolis school district was hacked. The lives of these students are forever changed, and the worst moment of their lives may follow them every time someone Googles their name. While increasing data security is one method, new protections must also minimize the data that is collected in the first place and ensure data is deleted when it is no longer necessary. Action to address these harms must be balanced with the real benefits that technology can provide to children learning and social connection. However, we need to make sure that those protections are rooted in a strong underlying, comprehensive consumer privacy law so children are still protected the day after they turn 13 and the day after they turn 18. Thank you so much. [The prepared statement of Ms. Vance follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Bilirakis. Thank you so very much, and excellent testimony by all of you. We appreciate it so much. I will begin the questioning. I recognize myself for 5 minutes. In the 1990s Congress responded to the rapid growth of online marketing tactics that targeted children by passing the Children's Online Protection Act mentioned many times, COPPA. In the decades since COPPA's enactment, unfortunately, we have seen far too many violation settlements between the FTC and Big Tech. Instead of protecting children under COPPA's guardrails, Big Tech has determined the value of exploiting kids' data is higher than the cost of FTC fines. In fact, they seem to operate their budgets to account for these fines. This is an unacceptable business practice, I think you all agree. So this question is for the entire panel, but please be brief in your questions, because I only have a limited amount of time--in answering the questions. In your experience, what are the ways in which COPPA does not go far enough in its protection of children? And what are some circumstances where a parent might expect their child's data to be covered, but in reality it is not? Could you provide us with some concrete examples? We will start from here, sir. Mr. Codling, please. Mr. Codling. Thank you, sir. REGO protects the child's financial data, whether online or purchasing in a retail store, as an example. And part of its basic foundation is data minimization constantly, continuously. And quite frankly, sometimes that hasn't been super popular with the marketing folks. But the mantra has always been, ``Do not collect more than the absolute necessary amount of data on that child in particular.'' Therefore, you don't have to protect something that you have never collected. Mr. Bilirakis. Very good. Ms. Vance, please. Ms. Vance. As I mentioned, COPPA is limited to information collected from children, which I think many parents would be surprised by. But there is also confusion about whether COPPA protects information when you have a label of ``family-friendly'' or ``kid-safe.'' And many parents assume that, when they download an app or have their child access a website with those labels, it is protected not only from an appropriateness standard, but also from a privacy standard. And it, generally, is not. Mr. Bilirakis. Yes, sir. Mr. Britan. I think the greatest shortcoming with COPPA, as has already been mentioned, is that it only protects children of 13. Children 13 to 18 aren't protected under COPPA. It is also really hard to identify children. So the best way to protect children broadly is to pass baseline comprehensive privacy law that broadly regulates personal data of everyone, including children. Mr. Bilirakis. I am happy to agree with that, sir. Mr. Reed, please. Mr. Reed. I will make this quick. Pretty much everything everybody else said, but I will say one aspect that has been phenomenally important: verifiable parental consent has to work for parents. Right now we call it the over-the-shoulder test. If the device has to go over the shoulder, come back to the parent, and they have to enter in something, the parent then says, ``You know what, just go to the general audience app.'' So as--we think your bill is really important because it protects people of all ages. Because when we are building the technology, if you make it too hard for the parent to use, then they won't always use it. Mr. Bilirakis. Thank you. Congress needs to do--to once again respond to the new wave of online marketing tactics that fuel Big Tech's ad-based revenue stream and enact a comprehensive, as I said, Federal data privacy law--everyone is in agreement on that--to close these gaps. That is why we are having this hearing. All Americans, no matter their age, deserve privacy protections, just as you said, sir. It is clear that privacy protections should not end when you turn 13. So my last question, because I am running out of time, Mr. Codling, it seems like you already--you are already practicing a data minimization principle, as we included in last year's bill. It seems clear that REGO cannot only comply but continue to succeed if a comprehensive data privacy law is enacted. Is that accurate? Mr. Codling. Yes, sir. That is completely accurate. Mr. Bilirakis. OK. You note in your testimony that REGO is the only certified COPPA-compliant financial platform for families and children. Can you explain what that certification means and what you have to do to--what do you go--how do you get that certification? How do you go through it? Mr. Codling. Yes, sir. It requires a very, very detailed audit where a third party--in our case, a company called PRIVO--is granted full access not only to our website, but our internal workings, our internal platform. They run tests of placing data in certain areas of an app, as an example, determine how that data is utilized, where is it stored, how is it processed, and, more importantly, how is it protected. And that audit goes every single year. You look through any time there is a significant change in the app's performance or the app's features, it is run again through this audit, and we are told, ``Yes, you are in compliance. Here are some areas you need to fix.'' Mr. Bilirakis. So it is a valuable tool. How many companies are part of this, the certification program, now? Mr. Codling. I do not know that, sir, but we can certainly get you that---- Mr. Bilirakis. Yes, please get back to me on that. Mr. Codling. Yes, sir. Mr. Bilirakis. All right. I appreciate it very much. Thank you. All right. Now I recognize Ms. Schakowsky from the great State of Illinois for your 5 minutes of questioning. Ms. Schakowsky. Thank you so much, and I really appreciate the testimony that we are hearing. The--we had a hearing last week that dealt with data brokers who are buying and selling Americans' information. And I would like to focus first on healthcare information. And Mr. Reed, let me ask you about that. So what kind of sensitive information do health apps have right now? You know, we talked about what is covered, but what are the kinds of things that people ought to avoid, maybe giving it a little alert that their health data could be collected? Mr. Reed. Well, I think right now you are highlighting the problem by having this hearing and pushing for the Federal bill. We actually operate under multiple State laws that have different perspectives. California has its own tweak on sensitive health information. The reality is, in many instances, it depends on the platform itself and the product itself. Generally, it is the State laws. And for a lot of our members, they have to abide by GDPR. But, as we--everybody has pointed out, it should be the United States Government that is also providing that insight. Right now, too much data that people consider to be sensitive personal health information is available in conditions that I don't think people are aware of. Ms. Schakowsky. What kind--can you describe what kind of an app would it be that people---- Mr. Reed. Well, I think---- Ms. Schakowsky [continuing]. Should avoid? Mr. Reed [continuing]. One of the things that--the best example I can give is there is a very well-known website that has a portion of it that is COPPA that--I mean, sorry, that follows HIPAA and is a HIPAA-compliant entity, and another part of the website allows people to report their symptoms and have discussions about their symptoms and have a sense of community about it. But the information that they are typing into that website is available to be harvested for providing targeted behavioral advertising. So I think that people oftentimes are misled by, as you said--heard earlier--by the names of the product in a way that can allow that data to flow to data brokers in a way that doesn't meet their expectations, and that harms the healthcare industry as well as the mobile app industry. Ms. Schakowsky. I want to--your--in your testimony--maybe it is just really naive of me, but it says 97 percent of kids 8 and under. Was that the number? Voice. Yes. Ms. Schakowsky. Are--either have a smartphone or a tablet. Mr. Reed. They have access to a smartphone or a tablet, right. Especially nowadays, when schools are providing this technology as part of the curricula and the way that students are receiving their curricula. So as Amelia Vance talked about, this gets very important on this overlay between what you are doing at school--you take your homework home--or for a growing community, for home schooling, what happens with that information? Does it meet the parents' expectations? And I would go back to, for my industry, the key thing we need is trust. And when we don't have trust, nobody will buy our products. So it is important that there is a good Federal comprehensive privacy law that help us better eliminate the bad actors, and so that we are not pushed out and we lose that trust. Ms. Schakowsky. I wanted to go to Ms. Vance about this issue too. Just--I mean, of course, when I think about education now, kids, little kids, are online. I wonder if you wanted to add it to that--add to that, what we need to--how much more we need to do, and why this is a problem. Ms. Vance. Specifically related to data brokers? Ms. Schakowsky. About children. Ms. Vance. About children in general? Yes, I mean---- Ms. Schakowsky. Especially---- Ms. Vance. I think---- Ms. Schakowsky. I guess beyond the educational, but that they are on their phones. Ms. Vance. Absolutely. So as I think everyone knows by now, your phone is the computer in your pocket that tells everybody where you are, what you are doing, sometimes what you are thinking. And that is, of course, so much more sensitive when you are talking about kids who--their brains are still developing, they may post things or say things that they immediately regret or shouldn't have shared. And that information is already out there. And particularly when we are talking about outside of the school context, when we are talking about the information coming from someone over the age of 13 or where there is another gap in COPPA, all of that is fair game for bad actors to take it and use it to market products, to potentially sell it, or otherwise---- Ms. Schakowsky. Let me ask one final question about kids. Can we fully protect our kids' privacy if we don't also protect the parents' privacy? Ms. Vance. Absolutely, we need to protect parents' privacy. Just think of the last Amazon search you did, and the presents that you may have gotten your kids, or a workbook or a book about a learning disability. That information is incredibly sensitive, and so parental information needs to be protected, as well. Ms. Schakowsky. Thank you. Thank you. I yield back. Mr. Bilirakis. Thank you for that question. It is so true. That is why we need the comprehensive bill, because one goes with the other. And so we are filling the gaps. All right. Now I recognize the chairwoman from the great State of Washington, my friend Mrs. Rodgers, for your 5 minutes. Mrs. Rodgers. Thank you, Mr. Chairman. A big thank you to all our witnesses for being here today. I wanted to continue down this line about how we have these layered laws around privacy. We have the FTC Act, we have FERPA, HIPAA, other sector-specific laws, and kind of what Ms. Schakowsky was getting to, the ranking member: Americans think their data privacy is being protected, and yet there's many examples where it actually is not. And part of our goal with a comprehensive privacy bill is to address the gaps and make sure that people are protected, but also that innovation will thrive. And, you know, this is our sixth hearing, as others have mentioned. It is also--it is just--we continue to feel like we--you know, I want to make sure--and I wanted to ask Mr. Reed about this--we celebrate the small businesses, the entrepreneurs, the innovators, and we want that competition to continue as we enact a national data privacy law. So would you speak to what we have learned as far as the regulatory framework, and what resources do your members have to navigate not only this emerging patchwork of laws now that we see at the State level--the sixth State just implemented their own State law--but also the gaps in the other laws? Mr. Reed. Well, absolutely. And look, the reality is that, when you are a small business, trust is the most important thing that you can sell. Yes, your product has to work. Yes, it has to be a change element for the company or person who is buying it. But ultimately, nobody is going to use it if they don't trust you. And if you don't have the money to buy a Super Bowl ad, then you need to have an environment where trust is assumed. Therefore, having comprehensive privacy laws help. And you talked about the State bills that have passed, but I don't know if you realize this: There are 289 currently introduced State privacy bills happening right now. I have a member of staff, my staff, who literally builds a State map of all of the privacy bills and how they are changing right now. We are happy to provide it for you. The reality of that is that most of our members--and this is something superinteresting from an entrepreneurship perspective--my smallest member, including the ones in your district, are actually international businesses. They might only be 2 people, but they are selling mobile applications in 100 countries around the world. So having a bill that you pass mesh with GDPR is crucial for them to be able to innovate and sell globally while making domestically. So from a tools perspective, I hope our trade association can help. That is my job, is to help them navigate it. But what you can do is provide them clear rules of the road that apply to the large companies that provide the infrastructure that we depend on, whether it is the platforms, whether it is the edge providers, whether it is our cloud computing services. If everyone in the food chain has the same set of rules, then small businesses can follow the rules in a way that gets them there. Mrs. Rodgers. Thank you. I also wanted to ask you--because in your testimony you caution us on deferring entirely to the agency rules--Health and Human Services, HIPAA. As you know, FTC just announced their commercial surveillance rulemaking. It just--well, it was just weeks after we actually passed our bill out of committee last July. But would you speak to your concerns around the FTC going its own way to establish rules in this space? And do you think the FTC by itself has the ability to fill all the gaps created by these current---- Mr. Reed. Well, the answer to your final--the last part of the question is no. And we just touched on it with the 289 State bills. The Federal Trade Commission can't issue the kind of preemption that we are absolutely going to need for small businesses to be able to manage their compliance. Mrs. Rodgers. OK. Mr. Reed. We don't have 100-person compliance departments in order to do that. Mrs. Rodgers. OK, thank you. Mr. Reed. So right off the bat, we can't do it. Mrs. Rodgers. Thank you. I want to get to Mr. Britan too. I wanted to get to some of the new AI models that are--we see. We see reports every day about companies that are using AI, and there is--you know, and using reckless, transparent methods when they are incorporating AI into their products. Just--would you speak to how risky some of the AI use is in processing of the data, in the heightened risk, and just how a data privacy law might help these new applications for AI? In 30 seconds, yes. Mr. Britan. Absolutely, yes. There is no doubt that AI is powered by data, so the best way to ensure that AI is built responsibly is comprehensive regulation of data. And that is how the EU is presently looking at AI and regulating AI and examining generative AIs through the GDPR. And so advancements in AI hold great promise, but they also highlight the need for a Federal comprehensive privacy law, so that the U.S. has a voice in how these technologies develop responsibly. Mrs. Rodgers. I appreciate that. We will dig into that more. Thank you, Mr. Chairman. I yield back. Mr. Bilirakis. Thank you. And now I will recognize Ms. Blunt Rochester for her 5 minutes of questioning. Ms. Kelly, I didn't see Ms. Kelly. Ms. Kelly, I will recognize you for your 5 minutes of questioning. Ms. Kelly. Thank you, Chair Bilirakis and Ranking Member Schakowsky, for holding this important hearing this afternoon. It is critical that this subcommittee continues the discussions to ensure our Nation's laws provide adequate protections for Americans' personal information. So I want to thank the four witnesses for sharing your expertise. As a chair of the CBC Health Braintrust, I am deeply concerned that sector-specific healthcare privacy law does not cover vast amounts of consumers' health-related data. Although many think their personal health data is secure, the reality is that consumers have few protections under the Health Insurance Portability and Accountability Act. In fact, HIPAA does not provide privacy protections for health information, and only limits health data using and sharing by healthcare providers, healthcare clearinghouses, and health plans. This allows many health apps, websites, and devices to share information with a host of advertising companies and other uncovered entities. Reports confirm that some of this data transfers include terms like ``HIV,'' ``diabetes,'' and ``pregnancy.'' Common sense tells us that highly personal, intimate health information should be protected, regardless of the context in which that data is collected and used. Mr. Reed, I have a couple of yes-or-no questions for you. Does information about cardiovascular health become any less sensitive when collected by a fitness tracker rather than a cardiologist? Mr. Reed. No. Ms. Kelly. Does information about a patient's symptoms become any less sensitive when collected by a website rather than a physician? Mr. Reed. No. Ms. Kelly. Does information about reproductive health become any less sensitive when collected by an app rather than a gynecologist? Mr. Reed. No. Ms. Kelly. Thank you for those quick responses. Lastly, Mr. Reed, is there any good reason why apps, websites, and fitness trackers shouldn't be required to safeguard consumers' sensitive health information and treat it with the same care as a physician? And please feel free to explain. Mr. Reed. This is the hard part. The legislation you are all proposing has important factors like data minimization and the right to delete. But when something is in your electronic health record and you are a physician, that information, it is really important that it not be deleted and the physician have the full totality of your record. So we have to be very careful when we consider who the audience is for the product. A physician that doesn't know about your hypertension because you have deleted it might give you the wrong medication. So when we talk about it in that way, we have to look at it as, what does the physician need to know to treat you? And that is critical. Separately from that, we also want fulsome data so that patients can treat themselves. By 2030 we will be 90,000 physicians short, and communities of color are more affected by that than anywhere else. At the same time, you see tools that allow the management of obesity and type 2 diabetes being absolutely critical to those communities. So what we need--and your legislation helps to provide, the committee's legislation helps to provide--are some rules of the road for sensitive personal information. But I want to be careful that we don't suggest that what the doctor gets is covered in the same way, because the physician must know about your condition over time to properly treat you. Ms. Kelly. Thank you for your response. I also think it is important that any Federal privacy law we consider must strive to end data-driven discrimination. Simply put, any legislative proposal must strengthen civil rights protections by prohibiting discrimination using personal information. That is why last Congress I was proud to support the American Data Privacy and Protection Act, which prohibited covered entities and their service providers from collecting, processing, or transferring data in any way that discriminates or otherwise makes unavailable the equal enjoyment of any goods or services on the basis of race, color, religion, national origin, sex, or disability. Mr. Britan, how would enhanced protections for specific types of sensitive data, notably data related to race, color, religion, national origin, sex, or disability, promote equality and civil rights? Mr. Britan. Absolutely. We support those provisions of ADPPA, as well. And those types of protections will give individuals more power to control these sensitive categories of data and how they are used by companies. And I think giving individuals that power is what privacy law should be and data protection law should be all about, adjusting that power balance and giving power to people. We also support the civil rights provisions that you mentioned that were included in the ADPPA around prohibiting discriminatory uses of data. That is a very important means to protect individuals, regardless of any actions they may take on their own behalf to protect their data. Ms. Kelly. Thank you so much. And again, thank you to all the witnesses, and I yield back. Mr. Bilirakis. Thank you. I appreciate it very much, and I will--5 minutes to Dr. Bucshon. You are recognized for your 5 minutes of questioning. Mr. Bucshon. Thank you, Chair Bilirakis, for calling today's hearing. Before coming to Congress I was president of a medical practice. I was a surgeon in southern Indiana and was acutely aware of how important it was to protect the health data and personally identifiable information of our patients and to comply with the requirements laid out in HIPAA. As technology has advanced and society is gathering and utilizing ever greater amounts of data, it is very clear there are gaps in health data protections, as we have talked about some in this hearing. This committee needs to be thinking about the best ways to cover these gaps as it considers a national privacy and data security framework. Interestingly, I was just with Chair Rodgers in Europe, and we met in Brussels with the EU. We did talk about this and about GDPR. And one of the things I want to make sure we avoid is the effect that we can possibly have on small and medium- sized businesses if we do the wrong thing here. So there is a fine line to be drawn. Mr. Reed, in your testimony you mentioned cases where nonhealth information can be used to extrapolate health-related information that--and that putting extra restrictions on such information would limit consumers' access to digital health tools. I understand that concern and agree that we do not want to limit access to such tools, but I still believe private health information probably deserves greater protection than many other kinds of data. In fact, for the most part, it is the most monetizable data in the world, health information, in many people's estimation. By that I mean people get your data and they can make money with it, as people know. Would it be feasible to require disclosures from an entity to a consumer if the entity does use or gather data to extrapolate private health information? Mr. Reed. So, Doctor, I think that is something that we continually work on. In your district there is a company called Anew that helps with---- Mr. Bucshon. Yes. Mr. Reed [continuing]. Farm elements and agriculture. One of the problems we run into there is, as you know, under social determinants of health you could run into what they do, which is agriculture and food, being considered health data. So I agree with you. And you are right, what we--we calculate that, if I get your full health profile, including key information, it is about $7 a person. It is the most valuable information on the black market possible. Mr. Bucshon. Yes. Mr. Reed. And so, completely right. I do think, though, we have to think about the totality and that we don't end up with grocery stores and the company in your district that provides agriculture technologies being there. So yes---- Mr. Bucshon. What---- Mr. Reed. Absolutely. Mr. Bucshon. Yes, what would be the biggest challenges implementing something like that, if we---- Mr. Reed. Exactly, exactly what we just talked about: How do we make sure that it is sensitive information about you? We look at things like physiologic data. Does it record physiologic data about you? We already have that. The FDA already explores these questions of collection of physiologic data. I think those are elements of it. But as you know, we have to preserve the ability to do research, as well. And whether it is through an IRB or other methodologies, we need to be very careful about not requiring such extreme data minimization that you can't do the research we need to do. Mr. Bucshon. Sure, I understand. Mr. Reed. Or cancer clusters, et cetera. Mr. Bucshon. And most research is de-identified information---- Mr. Reed. Correct. Mr. Bucshon [continuing]. Anyway, right? Mr. Reed. Right. Well, you have to be very careful because, depending on which lawyer you talk to, the definition of de- identified is a moving line. Mr. Bucshon. I understand frequently you can extrapolate who it is, based on that. Mr. Britan, you had comments on that, the same issue? Mr. Britan. I would say the same thing, you know, and I would just say be on notice--notifying people of when that information is being used. We need a regime that protects the data--that protects data use for these purposes, regardless of whether an individual takes action to protect themselves and providing all these notices---- Mr. Bucshon. Agreed. Mr. Britan [continuing]. It has to be actionable, and I think people should be protected, regardless of whether they take action. Mr. Bucshon. Agreed. In fact, I would say the vast majority of people don't know that their health information is very, very valuable, and that it is one of the things that is at biggest risk of all of their privacy data. I am focusing on health here because I was a doctor. Mr. Reed, are there any guardrails for the use or transmission of personal health information not covered by HIPAA that could protect users in these cases without limiting access to digital health tools? So what can we--what should we do? Mr. Reed. So I think we are going to be a broken record on this entire panel. I think that we need to move forward with the bill that you have. There are some sections, section 702--I mean, sorry, 207--where there are elements that could affect doctors like you in terms of having to kind of double dip and be covered by both in a way that I don't think is helpful. But overall, I think comprehensive privacy reform that, as this panel has discussed, provides notice, provides actionable items, gives tools to the FTC when it is outside the domain of healthcare is the way to move. Mr. Bucshon. OK. As I said, the--even some of the EU people who we talked to, they didn't directly admit it, but you could tell by their comments that they do have the concerns with GDPR because of startups, small and large businesses--small and medium-sized businesses struggling to comply. And we want to avoid that situation here in the United States. With that, I yield back. Mr. Bilirakis. Thank you, Doctor. I now recognize Ms. Blunt Rochester for her 5 minutes of questioning. Ms. Blunt Rochester. Thank you, Mr. Chairman, and thank you so much to the witnesses. Your testimony makes it abundantly clear that a comprehensive Federal data privacy law is desperately needed in this country. Last year I was proud to support and vote out of committee the American Data Privacy and Protection Act, and I am ready to work with my colleagues on both sides of the aisle to get this bill passed and to the President's desk for signature. While there are several gaps in our current sectoral privacy regulation system, I am alarmed by the rise of dark patterns, especially for children, and the use of health data without effective regulation. Over the last several years the FTC has detailed the ubiquity of dark patterns that misled consumers, as well as the misuse of health data on apps not covered by HIPAA. To follow up on Ms. Schakowsky's questions, Ms. Vance, your testimony highlights the issues surrounding manipulative device design practices, often known as dark patterns, that are intended to trick people, including children, into making ill- informed choices. While deception isn't a new problem, deception and manipulation in the age of social media and mobile apps has changed the game. That is why I am planning to reintroduce the DETOUR Act, which would crack down on deceptive design practices that undermine user autonomy. Ms. Vance, in your opinion, how pervasive a problem are dark patterns? Ms. Vance. I think we see across the internet that they are everywhere. Every, you know, smaller ``no, I don't want this'' button, every ``no, I don't want to be smart when I don't subscribe to this newsletter,'' and sort of pushing people to stay on and keep on the apps and the games and the website, which is maybe good in the case of a math app and getting kids to read more but incredibly problematic in manipulating people against their will with no idea that it is happening. Ms. Blunt Rochester. Yes. I have to tell you, I--for a while there I thought it was me, but I literally could not find these little X's to X out of things. I mean, I know I am not the only one now, and it is just ridiculous. And, you know, are dark patterns especially pernicious when it comes to children's usage of online products? Ms. Vance. Absolutely. Children's brains are still developing, and they won't necessarily notice as easily as an adult might that they are being pushed in a certain direction or driven further down a rabbit hole of videos they are watching or monetization from games. Ms. Blunt Rochester. Yes. Well, given the examples that you noted in your testimony, do you believe a comprehensive privacy bill that includes regulations on dark patterns is a more effective approach than a privacy bill that only protects children? Ms. Vance. Absolutely, especially since those, when they turn 18, go to higher ed, and that affects all of their futures. Ms. Blunt Rochester. Yes. Ms. Vance. It is essential. Ms. Blunt Rochester. Thank you. And any other--Mr. Reed, I see you have got your hand up-- on dark patterns? Mr. Reed. I think it is important to note that the issues you are talking about, about not being able to find the X, that actually hurts small businesses a lot. If I have a mobile app, the numbers are very simple. If I build an application and I charge $1 for it on the store, I get 1 download for every 100 I get of an ad-supported application. But if you download my ad-supported application where I am using someone else to provide that ad, and you can't find the X, you stop using my app. Ms. Blunt Rochester. So true. Mr. Reed. So the issue, as she points out, I don't care how developed your brain is, if you can't find that X, you stop using my product. Ms. Blunt Rochester. Right. Mr. Reed. And so, as we clean up the industry, as we have this kind of legislation, it helps everyone do a better job. Ms. Blunt Rochester. Yes, yes. Mr. Reed. Thanks. Ms. Blunt Rochester. Thank you, Mr. Reed. Mr. Britan, did you have something you wanted to share on dark patterns? Mr. Britan. Sure, yes. I would just say Salesforce strongly believes that people should not be misled or tricked into making decisions based on dark patterns. I think the DETOUR Act would help in this regard, and the DETOUR Act as part of a comprehensive bill would be even better. Ms. Blunt Rochester. Thank you so much. And Mr. Codling, is there anything you want to share on dark patterns? Mr. Codling. Not directly with dark patterns, but as an example, because REGO is COPPA-certified, part of that certification process is to review the privacy policies, to look at the websites and specifically not allow certain dark pattern kind of behavior, to make the privacy policy age appropriate. So there is one privacy policy for the parent and there is one for the child to say, here is what we are doing with your stuff and here is what we are not doing with it. It goes to your point, ma'am, about can I find the X quickly? Yes. Ms. Blunt Rochester. Yes. Thank you so much. I have some additional questions that I will enter for the record for Mr. Reed, particularly on HIPAA and the health aspect of this, the health--I am on the Health Subcommittee, as well. And so I will yield back the--actually, I don't have time to yield back, but I will yield back the time I don't have. Thank you. Mr. Walberg [presiding]. You always have time. You always have time to yield back. Ms. Blunt Rochester. Thank you. Mr. Walberg. I thank the gentlelady, and I recognize myself for my 5 minutes of questioning. And thanks so much to the panel for being here. This is a topic, as we have said, we must continue looking for solutions. Children's privacy protections need to be updated. That is very clear. Whether at school or at home, there are significant gaps in how their information is protected. The pandemic and forced school closures made that even more clear. I am glad that there were so many online resources for parents and teachers and grandparents to turn to when their children were unable to go to school. Educational apps and websites offer immense benefits, and I would much rather my grandkids use them over social media. We at least can choose those apps. But there are also very concerning reports of these apps and tools collecting and selling children's data for advertising. An article by the Washington Post last May reported that nearly 90 percent of educational apps and websites were designed to send the information they collected to advertising tech companies to help them predict potential buying habits of kids. Some EdTech platforms unnecessarily request access to students' cameras and locations. And so I would ask for unanimous consent to include that article for the record. Without objection, and I--hearing none, it will be included. [The information appears at the conclusion of the hearing.] Mr. Walberg. I serve on the Education and Workforce Committee, as well, which has jurisdiction over the Family Educational Rights and Privacy Act, or FERPA. I have also been an avid supporter on this committee for updates to COPPA and kids privacy overall. With at least a decade behind us since either of these laws were updated, neither of these laws reflect the realities of today's digital world. Mr. Vance, there are clearly gaps and confusion on when and to what extent--excuse me, Ms. Vance--these two laws protect children's privacy. What is the result of this confusion for kids, parents, and schools, and how do we provide greater clarity? Ms. Vance. As Morgan was saying, they lose trust in vendors, in their schools, in other parents, in society itself. It undermines everything we do if we can't do the digital equivalent of step outside our front door without some harm potentially falling from the sky. And so it is incredibly important that we have these comprehensive privacy protections, with heightened protections for children. Mr. Walberg. Mr. Reed, as I said, the explosion of digital education services is great, but I am extremely concerned how common and easy it is for apps to collect, store, and sell children's data. In your testimony you indicated that COPPA and the FTC's guidance sufficiently holds EdTech and schools accountable for their privacy practices. But obviously, significant amounts of information about kids are being collected and sold by these tools every day. Where does the issue lie? Mr. Reed. I think, in the case of my testimony, I misspoke in the sense of sufficient, in the sense that they have authority over sufficient areas, but the gaps are huge. One of the areas that creates the greatest concern--I think it is really important you talk about--is verifiable parental consent issues. I appeared before this committee, I think, in 2010 as a vociferous advocate for VPC. Unfortunately, verifiable parental consent has not taken the world by storm. And instead what you see is even limited amount of friction causes parents to basically say, ``Well, use the general audience portion of the application.'' One of our members actually provides--is a safe harbor and provides services to another person on this panel. And what they find is the cost of getting the parent engaged and to do these steps is oftentimes something the parent doesn't want to do. As I talked about earlier, we call it the over-the-shoulder problem. The moment the parent can say, ``Oh, go to the Kids YouTube, it is too hard, go to regular YouTube,'' we have lost them. I testified multiple times at the FTC about this. We need to have the platforms that are part of our ecosystem have more flexibility to provide either credentialing or flags to my members to say, ``Hi. To the best of our knowledge, this user is a child. You need to behave in this manner when we pass that flag.'' Unfortunately, right now you heard my fellow panelists talk about auditing. The platforms are not in a stage where they want to audit 1.5 million applications that are currently on their platforms. But if there were a way for the FTC to be more flexible in providing that flag, then that is something that the FTC, through your authority, can use to say, ``Hey, you were provided this flag, you didn't use it, you didn't get rid of that information.'' It is a tool the FTC can use to get to what you want. But merely expecting more from parents is not going to get the solution that you are after and that, frankly, all of your panelists are after. Mr. Walberg. Well, clearly, yes, we are--a comprehensive privacy law would fill many of the gaps we discussed today, but I also believe that we need to take another look at both FERPA and COPPA. Thank you. My time is ended. I yield back, and now I recognize Representative Clarke. Ms. Clarke. Thank you very much, Mr. Chairman, and I thank our ranking member for holding today's hearing. I would also like to thank our witnesses for being here to testify on such an important issue. Passing legislation to fill the gaps in current privacy laws is long overdue, and I remain committed to working with my colleagues across the aisle to pass a bill that protects all Americans' data. Mr. Britan, in your testimony you cite the EU's GDPR as a driver of core privacy concepts like data minimization, the right to access, delete, and correct data, and guardrails on automated decision making. In your opinion, does the U.S.'s lack of a comprehensive national privacy standard inhibit our ability to lead or even participate in the global conversation on rights to data privacy and human rights? Mr. Britan. Absolutely. And it is table stakes to enter those conversations. I believe we share these values with our allies all over the world, but at some point we have to demonstrate that through action. Ms. Clarke. Absolutely. I see you nodding your head, Mr. Reed. Would you like to add your position on that? Mr. Reed. I think Mr. Britan said it as well as any of us can, which is we need to demonstrate through action. Ms. Clarke. Very well. Mr. Britan, I would like to follow up and ask how the lack of a clear national standard will impact the U.S.'s ability to lead in data-intensive innovations like generative AI, quantum computing, and smart cities. Mr. Britan. Salesforce welcomes regulation, and regulation is really important for ensuring that these new, innovative technologies are released in a responsible manner. Because if we release it in a way that reduces trust, it is virtually impossible to regain that trust. And there's important global conversations happening right now. This is an amazing time for tech innovation, and the U.S. needs to be part of that conversation. In order for the U.S. to be an effective part of that conversation, we need comprehensive privacy law. Ms. Clarke. We can't be the weakest link, in other words. [Pause.] Ms. Clarke. Absolutely. OK. Mr.--sorry--Ms. Vance, do any parts of COPPA require analysis of how algorithms may disproportionately cause harm to certain groups? For example, some algorithms may show content that may be more dangerous if shown to children than the general population. Is there anything in COPPA requiring companies to look into how their algorithms affect children? And what about FERPA? Ms. Vance. No, there is not in either law. And that is part of the reason why ADPPA was so exciting for me, because that is an invaluable and important protection. Ms. Clarke. Very well. Well, it is my position that comprehensive privacy legislation is long overdue and absolutely necessary for the U.S. to maintain leadership in a range of industries driving innovation. Our laws have failed to keep pace with revolutionary innovations, leaving Americans more vulnerable to discriminatory algorithms, invasive data collection, and cyber attacks. Increases in the amount of data available have earned--have created enormous and unprecedented consumer benefits. But we need legislation to ensure vulnerable populations are not--are, excuse me, are protected against discrimination, exploitation, and manipulation. So I want to thank all of you for your expertise and bringing it to bear today in this--in today's hearing. We look forward to working with you as we move us into the 21st century, as I like to say. And with that, Mr. Chairman, I yield back. Mr. Bilirakis [presiding]. I appreciate that very much. Now I will recognize Mr. Duncan from the State of South Carolina for 5 minutes of questioning. Mr. Duncan. Thank you, Mr. Chairman, for holding this hearing and the continued work that you are doing on this important issue. I want to ask all four witnesses--and I will start with Mr. Britan--from whom should we be protecting the data of American citizens? Who is the greatest threat here, is it Russian hackers, Communist Chinese, big American companies, identity thefts, predators? And from your unique perspectives, who is the threat that we, as policymakers, need most to focus on to protect our citizens, especially kids and teenagers? Mr. Britan. Those are all significant threats that I think a comprehensive privacy law would help us to address. The greatest threat is going to be the one that we don't know about, and it is really hard to predict. And I think baseline protections that include data minimization and treating data as a potential liability and the reduction of data and managing data responsibly and in an organized fashion, understanding who has access to the data and that sort of data management capabilities is the best way to address all of those threats. Mr. Duncan. OK. Mr. Reed? Mr. Reed. I think we have to be thoughtful. All of those are good, but there is a company in your district, Topography Digital, that does drone and a lot of other really cutting-edge technology. I think we have to realize that the biggest threat to the success of the companies in your district, like them, is the unexpected, for the loss of trust that happens. So when we talk about threats from outside influences, what you really see is most of the data ends up in the hands of somebody who isn't going to do harm, just wants to make money off of it. But that destroys the trust and degrades the value of the systems we are providing. So on the one hand, you absolutely should be focused on the international threats and the security, but we also need a comprehensive bill so that consumers know what to do and what the products are going to do to them, so they know if they are going to share the data. So it is the insidious ones that aren't there to harm, just there to make money off of it, that create the loss of trust sometimes. Mr. Duncan. Yes. Ms. Vance? Ms. Vance. I can't agree enough with my fellow panelists. I would add anything that has the opportunity to destroy a child's future, whether it be information that data brokers are collecting and sharing with anyone who asks for it, or the use of that information by stalkers, parents with restraining orders, pedophiles, et cetera, that is really, I think, the greatest threat. Mr. Duncan. Mr. Codling? Mr. Codling. Your question is excellent, sir, so I will split it into two areas. There is the criminal activity, and then there is the national security activity. Criminal activity, cyber crime organizations, have become truly globalized. They have vertically integrated their capabilities to the state that they are as good as nation states, some of these criminal activities. A national security standpoint, of course, you have got to be very concerned about the Chinese, Russians, Iranians, North Korea. But a perfect example from a child's privacy protection standpoint, the worst-case scenario is something like TikTok or some other social media platform that can come in, aggregate the data that the child in this case is utilizing from the social media standpoint, and if that company platform also offered financial services capabilities, because those are affiliated companies that data is going to flow back and forth between those two. And Lord only knows where that stuff will end up. So in my FBI career we spent a lot of time finding out where that stuff ended up. Mr. Duncan. Yes. Mr. Codling. Typically, it was not in your home district. It was overseas someplace. So just last week, TikTok made an announcement that they are very interested in working with large American retailers to allow individuals on the TikTok platform to purchase, buy, engage in commerce. To me, as an uncle, that is a nightmare. There is no good end of that with that particular company. I am not going to paint everybody in the same way. It does scare me, because I can now build a complete data dossier on that individual as a young person and have now those last couple of little gaps filled in. I know who you are and what you are and what you have been doing since--pick an age. That is very, very concerning. Mr. Duncan. Yes. OK. If Congress were to pass a Federal privacy law, what single provision would be the most essential factor in that new law being successful? And I will ask Mr. Codling. Mr. Codling. I think having a comprehensive law, sir, puts the United States, to my--the panelists' opinion--back in the game. We should be the leaders. We were the leaders. Mr. Duncan. Yes. Mr. Codling. We can be again. Mr. Duncan. Let me ask Mr. Britan real quick. Mr. Britan, same question, yes. Eight seconds. Mr. Britan. Yes, I think the key is to build these responsibilities and apply these responsibilities to the companies that process data, and ensure they are processing it responsibly. I think the notice-and-choice regime has failed. It puts too much burden on the individual. We need a comprehensive law that comprehensively regulates data. Mr. Duncan. Yes, identify the threat---- Mr. Reed. I am going to say one word: preemption. Mr. Duncan. Yes, yes, oh, yes. Identify the threat and then craft something to combat it. And you do that in football, you do that in war. So I yield back. Mr. Bilirakis. I thank the gentleman, and I will recognize Ms. Castor from the great State of Florida, and my fellow Tampa Bay resident. Go Rays. Ms. Castor. Go Rays. All right. Thank you, Mr. Chairman, and thank you to all of our witnesses for being here to discuss data privacy. I strongly support this committee moving forward expeditiously with a comprehensive data privacy law that protects the personal privacy of all Americans, and I have been particularly focused on the harms to children and just recently filed--refiled my Kids PRIVACY Act that was developed with advocates like you and parents and pediatricians from all across the country. And it is time to act. I was heartened last session that the committee included portions of the Kids PRIVACY Act in ADPPA, but we really need to move forward quickly. And on kids, one of the things that we aim to do is raise the age. Right now there is--really, it is just kids 12 and under who are protected. Ms. Vance, is there any reason that we shouldn't give all adolescents a fighting chance here and protect their privacy by increasing the age? Ms. Vance. I think that is absolutely vital. We also need to recognize, though, that teenagers have different needs, are at a different developmental stage. And so making sure we are taking that into account, as well, is really important. Ms. Castor. That is why, in the Kids PRIVACY Act, I created a protected class, so it is not quite as stringent as COPPA, but the Children's Online Privacy Protection law right now, it is so outdated. When was it first adopted? Ms. Vance. In 1998. Ms. Castor. In 1998. Think of all the technological changes since 1998 in this huge surveillance and data-gathering enterprise that exists right now. We have got to move now to update this. You also, Ms. Vance, in your testimony highlight the fact-- you kind of compare what the Europeans did in the GDPR, which is their privacy law, and then explained in your testimony that they followed on with an age-appropriate design code. So that is actually missing from ADPPA. Do you recommend that the committee also begin to develop an age-appropriate design code? Some States have done this, as well, but--what is your recommendation? Ms. Vance. I think it definitely needs to be based on the foundation of a comprehensive consumer privacy law, and that is really what has led to a lot of the successes in the UK with their age-appropriate design code. Obviously, the EU legal landscape versus the U.S. legal landscape is not the same. So there's a lot of details to work out, as California is finding out. But the principles, the underlying, you know, location, off-by-default, just-in-time notifications, consideration of different age ranges and what is appropriate, all of that are protections that should be here. Ms. Castor. Isn't it interesting that some States are moving to banning social media outright? And it is such--it seems like, you know, it is appealing, it is kind of a--based upon all the harm that we know that it is causing to mental health, addiction, and things like that. But wouldn't privacy protections come first, and then a design code to require that apps and platforms actually design their products with kids in mind? Isn't that the most important thing that we can do right now, and is--I don't know that banning social media is even--if that is even realistic. What do you think? Ms. Vance. I completely agree. We shouldn't punish kids for the bad actors, whether it be the companies, individuals on social media, or websites or apps. We should acknowledge we need to protect the spaces that they are going to go into. We all know how innovative kids can be when it comes to getting around particular restrictions. And so it really is important to make the world that they are living in, that they are going to go into safe, no matter what website or what app it is. Ms. Castor. And we have the ability and the authority to do that by passing new, modern laws that put the kids' interests first and direct that apps and platforms actually develop these with kids in mind, and then not allow them to target children with advertising. That is pretty basic in privacy laws that are being adopted across the country towards--for children, isn't it? Ms. Vance. Absolutely. Almost every one of the 140 State student privacy and child privacy laws that have passed in the past decade ban targeted advertising across the board for kids. Ms. Castor. Well, I encourage the committee to move expeditiously, and I thank the witnesses and Ms. Vance for being here. Thank you. Mr. Bilirakis. Thank you. I now recognize Dr. Dunn from the State of Florida for your 5 minutes of questioning. Mr. Dunn. Thank you very much, Mr. Chairman. At our last hearing I mentioned that the Chinese Communist Party seeks to sabotage freedom and democracy everywhere that it exists. And this mentality permeates throughout all of China's corporations, as well, including those that operate in America. Despite American leadership and technology, we still do not have a comprehensive national privacy standard. Ironically, China does. However, China's privacy law, the personal information protection law, is in reality a national surveillance plan. Their law forces data sharing of every person and business in China with their government. Their law puts everyone's personal details at grave risk of government surveillance, and their law enables their government to individually target citizens for concentration camps, enslavement, and even death. It literally enables the Chinese Communist Party to target individuals who are a potential source for organ transplantation, and the government knows whose genetic codes match whose, and they will murder and steal organs at will. Thus, their law does not protect privacy at all. It gives all their data to the government. Most of all, it certainly doesn't keep China from hacking Americans' data. I want to remind my colleagues and my fellow Americans of some of the largest data breaches in the last decade, all of which left millions, hundreds of millions, of Americans' data exposed. [Chart displayed.] Mr. Dunn. I refer you to the poster behind me, starting with Yahoo and going down to the final entry there, U.S. Government employees with security clearances, 20 million hacked. The American Data Privacy and Protection Act is both a privacy bill and a cybersecurity bill, and we need both. Protecting Americans from privacy invasion by domestic and foreign companies is important. And when we choose to share our data voluntarily with them, the security of our data in that company is also essential. Information that is not secure cannot be private. Without a comprehensive privacy standard, we can't stop Big Tech, the Communist Chinese Party, TikTok, or anyone else. When Big Tech and data brokers compile large troves of data, they are creating massive targets for malicious Chinese hackers and others. We cannot allow them to profit from our loss or inattention. Mr. Britan, thank you for your testimony. You have spent the last two decades working on global privacy and data protection policies. In hindsight, what are the key Federal provisions you would recommend to protect Americans' data? Mr. Britan. I think a strong Federal law has to have all the rights that were first introduced in the HEW Report that exist in GDPR and most global laws: the rights to access data, obtain a copy of data, to delete your data. I think that the-- but that is not enough. That is the first step. We couldn't--we can't--we shouldn't put the burden of protecting privacy entirely on individuals. I think what really sets ADPPA apart are the obligations it puts on companies to protect individuals, regardless of whether or not they exercise their rights. And those are obligations around mandatory assessments, obligations around corporate responsibility, and the duty--the duties that are included in ADPPA for companies. Mr. Dunn. Excellent, excellent. So there are certain guardrails we think should be put--we talk about it as minimization of data, but guardrails on what data is being allowed to be collected and by whom. Can you comment on that, Mr. Britan? Mr. Britan. Yes, absolutely. I think data minimization is-- we view it as a good thing. It is not a new concept. As I mentioned, it is something that has existed since the HEW Report. I think the key thing that ADPPA does is it forces data collection to be purposeful. It forces you to think about the data you are collecting and why you are collecting it, and have a strategy. And as you mentioned, that is going to be so critical for minimizing the data we have, ensuring we have it for the right purposes, ensuring that we have proper access controls around that data. That all has to be documented and analyzed under ADPPA, and that is going to be some of the best protection we have against the threats that you identified. Mr. Dunn. Thank you very much. Mr. Codling, in your testimony you mentioned that your experience with the FBI has informed your conducting cybersecurity assessments. What, in your opinion, is the most vital and vulnerable personal information the government collects on individuals? Mr. Codling. I am going to follow some of Mr. Britan's comments of data minimization, data minimization, data minimization, all day long. Then you have less material to defend. You have less material to be concerned about if you never collected it. Data thieves are completely going to go after children's data, particularly their financial data. And the fact that you have a blank slate when you are a young person, data thieves, nation states can come in and destroy your credit before you even realize that you needed credit. Mr. Dunn. Ah, the Equifax hack. Well, thank you very much to the entire panel for your time and testimony. Mr. Chairman, I yield back. Mr. Bilirakis. Thank you very much, Doctor. I will recognize now Mrs. Trahan for her 5 minutes of questioning. Mrs. Trahan. Thank you. Thank you, Chairman Bilirakis and Ranking Member Schakowsky, for calling this important hearing. Today's meeting is just another example of the bipartisan consensus on this committee that the current laws governing the internet fail to protect users and our most sensitive information. And it further highlights the importance of passing a strong, comprehensive privacy law like the American Data Privacy and Protection Act, and doing so urgently. As many of my colleagues on the committee are aware, I am deeply concerned about what the emergence and embrace of education technology means for privacy and data of our children. Students and parents rarely have the option to withhold consent when using education technology or providing their data for platforms and devices used by schools. That is why I unveiled draft legislation 2 years ago to detail concrete steps Congress should take to protect student privacy and rein in tech companies. And I am grateful that, when this subcommittee met to consider ADPPA last Congress, the chairman and ranking member worked closely with me to improve the bill to specifically protect students, including an important clarification that EdTech companies are not exempt from the bill simply because they work with schools. Ms. Vance, in your testimony you mentioned that EdTech companies must comply with FERPA only to the extent that schools negotiate those restrictions in their contracts. In your opinion, do you think it is right to place that burden on schools? And do you believe they have secured sufficient privacy protections for their students in those negotiations? Ms. Vance. It is absolutely unfair to put that burden on schools, just as it is to put child privacy protections burden on parents. You often don't have a dedicated privacy person, security experts, and others who can adequately protect that. And whether a company is small or large, they have more personnel who can do that than an individual school. Mrs. Trahan. Well, I couldn't agree more. I don't think superintendents or principals should be responsible for negotiating our kids' data rights with multibillion-dollar companies. And I certainly don't believe that parents should have to pore over school district contracts with EdTech service providers to understand where the protections negotiated by their schools are strong enough. At the end of the day, the burden should be on the companies to design their services with privacy at the forefront and minimize the data that they collect. There is bipartisan agreement that data on minors should be considered sensitive data, but there are different views on how we should set standards for when a company knows a user is a minor. Ms. Vance, again, would you agree that, regardless of the company's size, a company should protect user data as sensitive children's data when the company targets and markets the products to serve K-through-12 students? Ms. Vance. Absolutely. Mrs. Trahan. I agree. And we have discussed three circumstances where companies generally must take extra measures to protect kids data: first, in the school setting, where education records collected--excuse me, where education records collected by most schools are protected; second, when companies direct services towards children; and third, when companies have actual knowledge that users are children. Are there other circumstances where you think companies should give heightened protection to kids' data, and can you explain how you think about those requirements? Ms. Vance. Absolutely. We briefly mentioned the UK's age- appropriate design code in a previous question. The creator of it asked a question on a working group I was in several years ago: What if kids didn't have to lie to be on the internet? What if they could have the same experience? And that doesn't mean making the internet kid-proof; it means I can say that I am a kid, I can say that I am a teen, under 18, and have tracking pixels and other things turned off. Mrs. Trahan. Yes. Ms. Vance. And I think that isn't something that we have necessarily considered here. It doesn't have to be a kid- proofed internet or a Wild West. It can be a good place for kids to grow up in. Mrs. Trahan. Well, I share those concerns and that view of how the internet could be. And I think that there are important lessons here. As our committee discusses the failures that exist in other laws, we always need to be on the lookout to strengthen the legislation that we work on and pass today. So I am grateful, certainly to the chairman and ranking member, members of the subcommittee, for their continued attention to these important issues, but really grateful for your expertise and bringing that to the subcommittee today. I yield back. Mr. Bilirakis. The gentlelady yields back. Now I will recognize the gentlelady from the State of Arizona, site of the NFL draft tonight. I will recognize you for 5 minutes of questioning. Mrs. Lesko. Thank you, Mr. Chair. Mr. Reed, according to a January 2022 report from the Information Technology and Innovation Foundation, the growing patchwork of State laws will cost small businesses at least $200 billion over the next 10 years. Given the differing levels of size and sophistication that businesses may have, how important is it to small businesses that a data privacy law is clear and consistent throughout all of the 50 States? Mr. Reed. It is absolutely essential for all the reasons you outlined. And I think what is most important about what you are trying to do is, it is not just the small businesses that will end up complying. It is all of the third parties that we depend on to build our products. Software is built like Lego. We write something special, but it is built of parts from other things, whether it is a software development kit or any other tools that we need. When everybody has the same rules, it helps the small business build something unique and special out of the pieces that we all see out in the table. Mrs. Lesko. Well, and related to that, my next question, followup, is if we keep the status quo and the patchwork of State laws continues to grow, how can we expect entrepreneurs to take risks and innovate? Will they? Mr. Reed. No. And a very good example during GDPR, which we have kind of all gotten to deal with, one of our members came to me and said, ``Well, so for the past year I have had one of my programmers, a full FTE for an entire year, just going back through to make sure we complied with GDPR.'' It is a five- person shop. Now it was--for a year it was a four-person shop. That means there were jobs they didn't bid on, projects they didn't build, innovations they weren't able to put into it. And if I have to do that for 50 States, hire 50 different people doing a single year's worth of FTE to comply, it is simply unworkable. Mrs. Lesko. Yes, I can definitely see that. The next question is to any of you: Is there a State data privacy law that this committee should look at that is a good example that we should either replicate or use parts of it? Mr. Codling. Yes, I will throw out California, because California Consumer Rights Act and California Consumer Privacy Act were leading edge. They actually said, ``We have a problem, let's tackle it. It may be a fight in the mud puddle, but let's tackle it, and let's move the ball forward.'' So kudos to them. And several other States have followed suit with that. Mr. Reed. I am going to go in a different direction. Virginia and five other States--Virginia, Colorado, Connecticut, and others--have done bipartisan legislation that I think is worth looking at. Mrs. Lesko. All right, very good. One last question, and this is, quite frankly, to any of you: What changes, if any, should be made to the American Data Privacy Protection Act that we passed out of committee last Congress to make sure we put consumers in control of the data shared through their smart home systems? Ms. Vance. I think one of the really important things, as I mentioned, there is a lot of intangible privacy harms when it comes to kids, when it comes to all of us. And so making sure that we are really looking at protecting not only a physical safety issue, but also something that may happen down the road, the misuse of information that we don't know yet is going to happen but history tells us it almost certainly will. So including more protections against those sorts of intangible harms would be invaluable. Mrs. Lesko. OK. And does anybody have any input on specifically smart home systems? [No response.] Mrs. Lesko. No? All right. Well, thank you. Oh, Mr. Reed? Mr. Reed. Just that a smart home system is, at the end of the day, a way to collect data that should serve the consumer who buys it, right? I get a smart home system because I want to be able to answer questions in my kitchen. I want the Alexa when I say ``Don't forget that I need to buy milk'' to do it. The question is, what is done with that data moving forward? So I think, when we look at smart home systems, I think, as Ms. Vance said, there's some physical security elements when it locks your door, when it shuts off your lights that are in question. But I think you should look at the totality of it, which is it is collecting data on you that should be used for the purpose that you want it to do--remind you to take out the garbage, play a song, not ship that data to somebody else, to a broker that you didn't expect, that ends up shipping you something that you didn't want. So for that reason, I think smart homes are sensitive, but it is part of the larger picture of, ``Hey, I am--I want a service,'' and this is what you are doing with the data. Mrs. Lesko. Thank you. Thank you for all of you coming here and spending hours with us. I appreciate it. And I yield back. Mr. Bilirakis. Well, I tell you what, you asked some great questions, Mrs. Lesko. Thank you very much. I yield back--she yields back, and we are going to ask Mrs. Dingell to ask her--she has 5 minutes of questioning. You are recognized. Mrs. Dingell. Thank you, Mr. Chairman. And I want you to know the NLF draft is in Detroit next year. Mr. Bilirakis. Next year. Mrs. Dingell. The Debbie Caucus is cheering for the NFL. But thank you, Mr. Chairman and Ranking Member---- Mr. Bilirakis. That should be exciting. Am I invited? Am I invited? Mrs. Dingell. Well, did she invite you? I will. Mr. Bilirakis. I will hold you to that. Mrs. Dingell. I will. Anyway, thanks for both you and Ranking Member Schakowsky for holding this important hearing, and this is a subject that is very important to me. As I have highlighted at several of these hearings focused on privacy, we have got to ensure that consumers are the ultimate arbiter of the data while allowing companies to perform any action that consumers should reasonably expect from the use of a platform device or any other technology. And as we all know, but--we do, but too many consumers don't--many platforms are already collecting far more data than most consumers expect or know, and it is much to their detriment. But we must also take into consideration how gaps in current privacy law have led to vulnerabilities, such as those presented by notice-and-consent regimes and their impact on consumer and industry behavior that we must ensure are addressed. Neither a consumer that dutifully reads the terms of service of a platform nor one--and I think this is most people--that immediately click yes to this consent request currently have sufficient baseline privacy protections and availability of consumer choice in the current landscape. And I think it is crucial that Congress address this gap in any comprehensive privacy legislation we advance through committee and the Congress. So notice and consent. To best safeguard America's sensitive information we need privacy by design, not privacy through popups. Unfortunately, our fragmented Federal privacy laws heavily rely on the failed notice-and-consent regime. As anyone who has ever opened up a checking account or filled out paperwork at a doctor's office or applied for a credit card online can tell you, notice and consent does not actually involve meaningful consent or consumer choice. It is simply impractical, especially online, where consumers may visit dozens of websites in any given day. And quite frankly, they want to get rid of the popup. They don't realize how it is impacting their life. Mr. Britan, do existing privacy laws provide consumers with a meaningful opportunity to understand and say no to an entity's data practices? Mr. Britan. Thank you for this question. I 100 percent agree with you that notice and choice has failed as a privacy regime. It puts too much burden on the individual. It is unfair to the individual. There is no--most individuals don't have the time or the wherewithal or the ability to find all the information they need to make meaningful decisions. And individuals should be protected, regardless of the decisions they may or may not make. There need to be baseline protections. I think--that is not to say that notice and choice isn't helpful and that we should get rid of notice and choice altogether. I think it just should not be the end of the story. And there need to be clear obligations and protections that apply to individuals, regardless of any decisions they may or may not make. Mrs. Dingell. Thank you. I believe that we must move away from this failed approach and support data minimization. By the way, I don't think most people know how much data they are giving away. I just think 98 percent of the people-- and that may be generous--don't. But I think we got--the practice of only collecting, processing, and transferring data that is reasonably necessary, this is what I think we need to move to, and proportionate to provide or maintain a specific product or a service. Mr. Britan, do you believe that all entities should be required to minimize the amount of data they collect on consumers by default? Mr. Britan. I do. I think data minimization is a good thing. It is not a new concept. It is something that existed since the HEW Report in 1973. I think data collection should be purposeful. Companies should know the purposes for which they are collecting data and only collect the data that they believe they need to fulfill those purposes. This is--this sort of proactive, planful approach to managing data will produce better privacy results. Mrs. Dingell. Consumers are deluged with constant breaches of their privacy and trust: weather apps collecting and selling users' location data to the highest bidder; data brokers selling--and that is what--this is what people don't realize is happening--data brokers selling information collected from wellness apps about users' mental health conditions; and kids and teens' banking apps that collect sensitive data, name, birth dates, email addresses, GPS location history, purchase history, behavioral profiles, all about our Nation's youth. Mr. Britan, without data minimization requirements in place, are companies incentivized to collect, process, and transfer user data that is not necessary to provide a specific product's services? And does overcollection of data increase the potential impact of a data breach? Mr. Britan. Absolutely. I think we need to shift the mindset of companies to, rather than thinking of data as an asset, to thinking of it as a potential liability. The more data you have, the more surface area you create for potential issues and--such as improper access or misuse of that data. So even seemingly innocuous data can produce significant impacts if it is combined with other data sets or used in different contexts than what were contemplated. So yes, we need data minimization, and the more data you have, the more chances you have of a breach. Mrs. Dingell. Thank you, and I yield back with an invitation to Detroit for next year. Mr. Bilirakis. Thank you very, very much. The gentlelady yields back, and I will recognize Mr. Armstrong for his 5 minutes of questioning. Mr. Armstrong. Thank you, Mr. Chairman. Mr. Reed, COPPA imposes an actual knowledge standard on operators, meaning various duties are only imposed when an operator has information verifying that they are collecting or maintaining personal data on a minor. ADPPA imposes a constructive knowledge standard on high- impact social media platforms that should have known the individual was a minor. Your testimony states that the constructive knowledge requirement may result in further data collection on all individuals, not just minors, in order to verify age. Can you explain that further? Mr. Reed. Sure. One of the problems that has existed from the initial step of COPPA was--remember, COPPA's initial purpose was--COPPA--was to prevent advertising to children. COPPA is a collection standard, right? If you collect the information, you need to first receive verifiable parental consent. The problem when you start moving from an actual knowledge standard to a constructive knowledge standard is it essentially requires companies to start gathering more data on you to know whether or not--what the condition of it is. And I said earlier in my testimony here, one of the problems is that we aren't empowering some of the platforms that might be able to send a signal or add a flag as a way for our developers to have that information before we ever collect something. Instead, it puts us on the mouse wheel of verifiable parental consent, which the parents don't like, which leads to problems. So overall, though, we think that ADPPA--can we say ADPPA now--ADPPA moves us in the right direction. But that is the thing to make sure, that we are not actually burdening parents with more, not less. Mr. Armstrong. Do you think there is any interaction between that and the First Amendment right to anonymous free speech? Mr. Reed. Well, not--we are focused here, instead of being on a constitutional law panel on apps. But absolutely, First Amendment is something that is critical to my members. They care about it. They talk about it. They send me emails about it. So absolutely, we need to make sure that whatever we are doing here around the privacy, that we do allow for anonymous speech in a manner that is--since the birth of our Nation and in the Federalist Papers. Mr. Armstrong. Your testimony also cautions against expanding the use of verifiable parental consent under COPPA, which you argue puts the onus on--of privacy protections on the consumers. Can you explain those concerns? Mr. Reed. Yes, that is exactly what we were just saying, that VPC essentially requires the developer to affirmatively identify that it is the parent that is providing the permission to do things. Once you are through that gate, you can do a lot, and that has its own questions. As I know Ms. Vance testified in her testimony, once you are through that COPPA verifiable parental consent gate, your access and ability to use the child's data raises its own questions. So I think VPC is onerous on the small businesses who impose it, although there are good companies like PRIVO and others that provide solutions. But it is also onerous--it also creates uncertainty once you have gathered that data, especially if you have done it in a way that doesn't comport with PRIVO or other VPC safe harbors. Mr. Armstrong. Mr. Britan, this hearing is largely focused on sectoral privacy laws at the Federal level. But your testimony also states that Salesforce would welcome the passage of strong, comprehensive privacy laws at the State level. Does Salesforce support State privacy laws only in the absence of preemptive Federal comprehensive privacy law, or do you suggest that States should enact laws in addition to Federal privacy law? Mr. Britan. I think States should continue to be the laboratories for democracy, but I think we need a strong national standard. We need to speak with one voice as a country. And I think that the States have done great work, and we have supported that work because it has advanced the fundamental right to privacy in ways that didn't exist previously. But I think ADPPA is objectively the strongest privacy bill I have seen in the United States, and so I think it would set a strong national standard. Mr. Armstrong. But we also already exempted--I mean, as part of ADPPA was, like, the Illinois Biometric Information Privacy Act. The case law that is produced from those laws is an important--it has to be a risk for this community. And one of the--to consider. You know, an Illinois Supreme Court case that was decided months after we actually voted on ADPPA fundamentally altered the legal ramifications in Illinois and, by extension, the ADPPA. That court held that each scan or transmission of a biometric identifier or information constitutes a separate violation. So you are working at White Castle. You have to open a cash register with your fingerprint. You do it 10,000 times. That is 10,000 unique individual counts that can be brought against you. So when we talk about national privacy, I mean, it just-- how does--well, I will just ask you. How does Salesforce plan to mitigate for such compliance risks? Mr. Britan. These are tough issues. I think, on the issue of preemption, Salesforce understands that we need a Federal law. And we understand that preemption is one of the issues that is going to have to be a matter of compromise. And I think the compromise that was reached on ADPPA seemed reasonable. And if that is the compromise that has to be reached to get us a Federal law, that is--then Salesforce would support that. Mr. Armstrong. And I think--I mean, I can agree with that to some degree, except then you have a case that comes out exactly like this. And I just wonder how smaller businesses with less resources are going to be able to deal with it. So I would love to, but I am out of time and they have called votes, so I will yield back. Mr. Bilirakis. The gentleman yields back. I know they called votes. We are going to try to get through this so that we won't have to come back, but we are going to do the best we can. I will recognize Mr. Allen for his 5 minutes of questioning. Mr. Allen. Thank you, Chair Bilirakis, for convening this hearing, and I want to thank the witnesses for enduring this and talking about this important issue. I would like to follow up on Chair Rodgers'--the point she made in her questions about the dangers of tech companies recklessly testing their new AI models on the masses, specifically children. Snapchat has a new feature called MyAI that integrates OpenAI's GPT technology into Snapchat's platform offering users which are on Snapchat, mainly teens, a new chat bot featured to interact with. This interaction can lead to hyperspecialized data sets on teens, including their thoughts, their questions, and their fears--namely, anything a teen would think to ask chat bots. Snapchat would own this data and plans to monetize it. Mr. Britan, how should we think about data processing privacy in a world where users interact with chat bots on a wide array of topics? Mr. Britan. Yes, I think the best thing that we can do is pass comprehensive privacy law. I know I sound like a broken record. Mr. Allen. Yes. Mr. Britan. But I think these advancements hold great promise. There is also great potential pitfalls. And I think AI is powered by data, and the best thing we could do to ensure responsible AI and responsible chat bots is to pass comprehensive law regulating data broadly. That is missing in the U.S. Mr. Allen. Yes. Mr. Britan. And in the absence of that law in the U.S., the rest of the world is looking at this issue and examining it and pushing for responsible regulation. I think the U.S. has a very important voice in that conversation and should be a part of that conversation, and can be if we pass ADPPA or a law like it. Mr. Allen. Right. Well, we keep harping on data minimization. And certainly, this is the opposite of data minimization. You know, as a Member of Congress, I am concerned that we should be about--I am concerned about what should be about AI- powered chat bots in the hands of our children. I have got 14 grandchildren, and I am worried about their interaction and the harm that this would do to their future. How valuable would this data set be to a business? Mr. Britan. It is hard for me to speak. I have worked at Salesforce, and I have worked at Microsoft to primarily B2B company Salesforce, entirely B2B. So I haven't had in-depth experience with understanding the value of children's data at Salesforce. We do have some educational projects, but we don't sell any of the children's data related to those products. So I am happy to say I haven't had to examine that issue in my career. Mr. Allen. And I assume you agree that this development makes a data privacy bill, which you said, even more timely. And does everyone on this panel agree that this needs to be done as soon as possible? Mr. Britan. Yes. I am not in the business of working--don't do children. I have three kids. Mr. Allen. Yes. Mr. Britan. I want them to be protected. We need a comprehensive privacy law to protect our kids. Mr. Allen. Good. With that, is there anything that you would like to add that might accelerate this process as far as the Congress is concerned? Mr. Reed. Congressman, I think the most important thing that would be helpful on this is reminding the Members of Congress that the small businesses in their district are actually part of this. And the better that you can do a preemptive privacy bill that helps the small businesses, it has as much of an impact. I have heard a lot of discussion about Big Tech, but the people that rely on the technology are the people in the factories, in the companies. In your district there is Zapata Technologies that does some military contracts and other work. They depend on a robust data system and a robust privacy system. So if you are talking to your members on the floor and want to make the case, don't make the case about regulating Big Tech. It is for the benefit of their small businesses and U.S. innovation, so that we can compete on the global scale. Mr. Allen. Right. And I am in meetings, I am having meetings all week with small businesses from my district, and I am hearing the same thing. So with that, I am out of time. Thank you so much for your time. Mr. Pence [presiding]. The gentleman yields back. The Chair now recognizes Congresswoman Harshbarger for 5 minutes. Mrs. Harshbarger. I will be as quick as I can. Thank you all for being here. You know, I believe it is tremendously important that we establish a single national standard, really, before Chair Khan and her posse have the opportunity to go rogue and create more disastrous regulations, which they are prone to do. And I want to focus on the idea of creating a private right of action as part of any legislation this committee is considering. And one consideration when we create a private right of action is running the risk of differing interpretations in different court districts, which results in more confusion of the rules rather than more clarity. So what can be done to mitigate some of these concerns with the private right of action so that our Federal standard brings real clarity to the regulated community? And I guess I could start by asking you, Mr. Reed. Mr. Reed. Well, I think that we have all seen appropriate give-and-take on the question of private right of action. I think the main thing for small business is going to be not implementing a private right-of-action system that allows for what we call sue-and-settle, where you are going to send a letter to a small business, it is going to be for 50K. You talk to your attorney who is in your small town, they say, ``I don't handle that stuff.'' And they say, ``You know what, 50K? Just pay it.'' Mrs. Harshbarger. Yes. Mr. Reed. So that is the part that we have to do. But I think the work, the bipartisan work that this committee has done to handle those questions, and hopefully some of their fellow members on the Senate side can get us through that hump by limiting it to a certain cadre of actions that can be taken. Mrs. Harshbarger. Yes, I have been a small business owner. And so, you know, and having pharmacies, that leads me right into my next question. You know, I have had pharmacies, and what we do is we have to get licensed in several States. And listen, every State has different rules and regulations for my profession. So I have learned that the most stringent regulation is the one we have to follow. It could be a Federal guideline from the FDA or it could be a State board guideline. So if State data privacy standards are conflicting with the Federal standard, then companies may well have to listen to those, you know, stringent regulations. For example, you have talked about California, the blue State regulations, rather than the ones we set if there are conflicts. And so, you know, I don't want California telling me what I have to do in east Tennessee when it comes to how I practice pharmacy. So how important is preemption in ensuring that we have clarity at a Federal level? And I go to you first, Mr. Reed. Mr. Reed. It is critical. And you raised an interesting point about levels. Some of the problems aren't levels, they are definitions. If one State says you call this data this, and this something else, or says---- Mrs. Harshbarger. Yes. Mr. Reed [continuing]. If you have a breach for a breach notification, you must immediately report. Others say you have to tell the police first. It isn't just that we have levels. I think too often when we discuss this issue, people say, ``Well, one State can be a floor and another State''--and that doesn't create a ceiling. For small businesses, it might just be the definitions that are in that compliance regime that create the problem. It is not always about levels. So absolutely critical. Mrs. Harshbarger. Mr. Britan? Mr. Britan. Yes, we need to set a national standard for privacy. Privacy can't depend on ZIP Code, and we can't have more powerful States dictating rights for other States. I think preemption is going to require compromise. But I think, at the end of the day, it has--it can't be a compromise that sets no level of preemption. It has to be a clear national standard that sets the rules of the road for the country. Mrs. Harshbarger. Yes. You know, if there are carve-outs to get this on the President's desk, my question is what provisions of the framework should we absolutely refuse to concede? Anybody? [No response.] Mrs. Harshbarger. Or nobody. Mr. Reed. I think you have heard from everyone on the panel that data minimization is something that I don't think we can give up. And I think that making sure that the exceptions--that whatever you have to give up doesn't do some kind of odd carve- out that puts small businesses on an unbeneficial footing. We want to--we want privacy laws to apply to us. We want to abide--because that creates trust, and that helps us get from small businesses to big businesses. Mrs. Harshbarger. It is almost like when you are audited by a PBM, and they ask for certain information. Don't give them any more than they ask for. It is just inviting more questions and more audits. So with that, Mr. Chairman, I yield back. Mr. Pence. I thank the gentlelady. I now recognize myself for 5 minutes. I would like to thank Chair Bilirakis and Ranking Member Schakowsky for holding this meeting, and all of you being here today at the end of the day. You know, as the chairman already noted, this marks the 36th time Congress has had a hearing on the--on privacy in the last 5 years. I heard that a couple of hearings ago, and I was just shocked. I couldn't believe it. And here, really, we are talking--it is like a chipmunk in the wheel. We are just talking about the same thing over and over again, getting nothing done. And I don't think we are really getting the attention of Big Tech and those--the violators in this environment. You know, like many of my colleagues have discussed today, our increasingly digital world leaves Hoosiers and all Americans in the dark about who has access to their information. It is striking to me how little the consumers back home know about how much of their information is being collected, shared with third parties, and monetized without their informed consent. And that really bothers me. What am I getting for all the information you are taking from me all the time? Just as truth in lending--years ago I served on bank boards for many years--was enacted to protect consumers from bad actors manipulating a complex financial industry, Congress needs to enact similar protections for all Americans where no current protections exist, like for internet platforms that are becoming all but required to participate in modern society. Unfortunately, this growth-at-any-cost mindset has led to more divisive interactions online and harmful rhetoric that is impacting social fabric. There is nothing wrong with making money, but it seems to me that mass collection and sale of our information has become foundational to Big Tech's big business model, and now many other industries, as well. Consumers deserve to have control over their information, how their information is collected, who has access to their data, the right to remove, private right of action, and where their data might be shared. Mr. Britan, Axiom is commonly cited as one of the largest data brokers in the United States, collecting and selling information on hundreds of millions of Americans with whom they have no direct relationship. In the 12-month period preceding July 1st, 2022, Axiom reported receiving just 279 right-to- delete requests, despite at least 25 million American adults being eligible to make such a request under State laws. One reason for this low participation rate could be that Axiom, like many of its peers, requires individuals to navigate a complex web portal in order to submit a relatively simple privacy request. It seems likely that data brokers have an incentive to make this process as difficult for individuals as possible. Even some of the non-Big Tech folks, it is difficult to get out of that. Get--the question. What is your opinion--like--the gentlelady asked this--but the right-to-delete requests, especially for those directed at data brokers, what can we do about--should we treat the data brokers differently than others? Mr. Britan. Absolutely, and I have supported a lot of the data broker legislation that we have seen across the country. I think in order for the rights to be effective, people have to know who is processing their data so that they can make requests of those organizations. And I think that we need to make clear to people who has their data so that they can exercise their rights effectively. I also think that we need to impose responsibilities on these companies that apply regardless of whether or not people take that action. Mr. Pence. Thank you. Mr. Reed, though it was not mentioned today, we have discussed private right of action in past hearings. Without a well-defined private right of action in Federal law, how will consumers be able to actually enforce their right to delete and other important privacy rights? I know you touched on that a moment ago, but what is the Federal way to do it? Mr. Reed. Well, I think right now, as you know, State AGs have power, and a bill like this would help them deal with it from a Federal--from a national perspective. I think that we--the main caution that we would say--and we have supported the work that you guys are doing on this legislation--is to avoid making it so easy that we end up with a sue-and-settle system, which is hard on small business. But I think there are some ways to belts-and-suspenders this to put it into the hands of State AGs or other actions. Mr. Pence. Well, thank you for that. I hope we differentiate between the size of the folks involved. And with that I yield back. I now recognize Mr. Obernolte for 5 minutes. Mr. Obernolte [presiding]. Thank you. Well, thank you very much for the hearing, and thanks to all of you for being here. Mr. Reed, I would like to start with a question for you. First of all, very--I have a lot of respect for your organization. As an app developer myself, thank you for the good work that you do. You had some really interesting testimony about preemption and the need to take all of these disparate sectoral privacy standards and unify them under one universal rule at the Federal level. But I would like to ask kind of a followup question on preemption, because this is one of the big debates that we are having about the ADPPA here coming out of this committee, is the degree to which it should preempt State law. So do you believe that we should fully preempt State law in the issue of digital data privacy, or do you believe that, as some States have requested that we do, that we merely establish a floor and allow the individual States to go above that floor in their requirements on privacy if they wish to? Mr. Reed. I think we need fully--a full Federal preemptive legislation. I think, without it, you cause international problems. As I said earlier, tiny app developers will be in the international trade business. They will be selling their apps or making them available in 100 countries. So if the privacy laws aren't federally mandated across the board, then we have a problem even on international trade. Secondarily, as you point out--and I said this earlier-- there is this idea or conflagration of this idea that it is levels. But sometimes it is just the definitions. So I might do the right thing, but I call it one thing in one State and one thing in another. And that means the compliance costs for a small business go up, because I have to create separate documents to talk about separate regimes with slightly different definitions. It is not always about levels. Sometimes it is just about what you call it. Mr. Obernolte. Yes, I completely agree with you. You know, I think sometimes we forget about the fact that when we allow this patchwork of regulation to exist with 50 different laws and 50 different States, it is very destructive to entrepreneurialism because the people that have the regulatory sophistication to deal with that are the big companies that have offices full of lawyers. And the people that don't have the sophistication to deal with that are two people in a garage that have to pay lawyers by the hour. So I am--completely agree with you. I think that we have to be very careful about preemption. I think we need to decide what areas we are legislating in with our privacy bill, totally preempt within those areas, and then carve out the other areas to make it clear where States can act independently and where they can't. And then, you know, just following up to that, I was in the California State Legislature. I was one of the leads in drafting the California Consumer Privacy Act, and I think it is very important that we avoid some of the mistakes that were made with CCPA. We got a lot of things right. We were under time pressure--without getting into detail--to get that passed, but there were some kind of unexpected consequences that arose after that. One of the main ones was that, much to our surprise, we thought this was going to be an iterative process, and once we passed it we knew we were going to have things that were missed as it was implemented, and we thought we were going to come along in subsequent years and fix it. You know, we would have a fix-up bill that--the year after, another fix-up bill the year after that. And what we had not anticipated is that when you create, even unintentionally, a regulatory landscape with winners and losers, all of the winners will then get together and try and prevent you from changing the rule the subsequent year, even if the rule was arbitrary, unintentional, or unfair. And that is just a fact of political life. And I had underestimated how much that came to play. So that is why it is so important that you are here, because I think stakeholder engagement is how you guard against that. And so I think we need to be very careful and deliberate about that. Another thing that I think we need to be very careful about is that we are very specific in our choice of language in the bill. When you allow ambiguity to creep into what should be technical terms, particularly when it comes to things like data minimization, you need to be very careful that you are specific about what you mean when you say the data that you collect has to be necessary. Or if you say that it has to be related to the core business of your company, you better define what that means. If you use a technical term, you better very carefully define it, because otherwise you will find yourself in the situation that we were in of having to watch a roomful of lawyers argue in front of a judge about what the intent of the author was, and that is something that, you know, when we abdicate our responsibility as legislators to the judicial branch, it serves no purpose. So I am hoping that we can avoid some of that--some of those complications this time around. And again, it is going to be through the engagement of stakeholders like the groups that you represent that we are able to get that done. So thank you very much for your testimony today, and we are looking forward to continuing to work with you to make sure we get this right. So I will yield 5 minutes--do we have anyone else up? Mr. Bilirakis. Do you want to close it? Mr. Obernolte. Sure. Mr. Bilirakis. Close it. But you don't get it next time. [Laughter.] Mr. Obernolte. So I ask unanimous consent to insert in the record the documents included on the staff hearing documents list. Without objection, that will be the order, and--as there is no one here to object. [The information appears at the conclusion of the hearing.] Mr. Obernolte. I remind members they have 10 business days to submit questions for the record, and I ask the witnesses to respond to the questions promptly. I know you will. Members should submit their questions by the close of business on May 11th. Without objection, the subcommittee stands adjourned. [Whereupon, at 4:27 p.m., the subcommittee was adjourned.] [Material submitted for inclusion in the record follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]

usgpo

2024-10-08T13:26:19.463491

CHRG

CHRG-118hhrg55918

How Scotus's Decision on Race-Based Admissions Is Shaping University Policies

United States Congress House of Representatives

[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] HOW SCOTUS'S DECISION ON RACE-BASED ADMISSIONS IS SHAPING UNIVERSITY POLICIES ======================================================================= HEARING Before The SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE DEVELOPMENT OF THE COMMITTEE ON EDUCATION AND THE WORKFORCE U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ HEARING HELD IN WASHINGTON, DC, SEPTEMBER 28, 2023 __________ Serial No. 118-25 __________ Printed for the use of the Committee on Education and the Workforce [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via: edworkforce.house.gov or www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 55-918 PDF WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON EDUCATION AND THE WORKFORCE VIRGINIA FOXX, North Carolina, Chairwoman JOE WILSON, South Carolina ROBERT C. ``BOBBY'' SCOTT, GLENN THOMPSON, Pennsylvania Virginia, TIM WALBERG, Michigan Ranking Member GLENN GROTHMAN, Wisconsin RAUL M. GRIJALVA, Arizona ELISE M. STEFANIK, New York JOE COURTNEY, Connecticut RICK W. ALLEN, Georgia GREGORIO KILILI CAMACHO SABLAN, JIM BANKS, Indiana Northern Mariana Islands JAMES COMER, Kentucky FREDERICA S. WILSON, Florida LLOYD SMUCKER, Pennsylvania SUZANNE BONAMICI, Oregon BURGESS OWENS, Utah MARK TAKANO, California BOB GOOD, Virginia ALMA S. ADAMS, North Carolina LISA McCLAIN, Michigan MARK DeSAULNIER, California MARY MILLER, Illinois DONALD NORCROSS, New Jersey MICHELLE STEEL, California PRAMILA JAYAPAL, Washington RON ESTES, Kansas SUSAN WILD, Pennsylvania JULIA LETLOW, Louisiana LUCY McBATH, Georgia KEVIN KILEY, California JAHANA HAYES, Connecticut AARON BEAN, Florida ILHAN OMAR, Minnesota ERIC BURLISON, Missouri HALEY M. STEVENS, Michigan NATHANIEL MORAN, Texas TERESA LEGER FERNANDEZ, New Mexico JOHN JAMES, Michigan KATHY E. MANNING, North Carolina LORI CHAVEZ-DeREMER, Oregon FRANK J. MRVAN, Indiana BRANDON WILLIAMS, New York JAMAAL BOWMAN, New York ERIN HOUCHIN, Indiana Cyrus Artz, Staff Director Veronique Pluviose, Minority Staff Director ------ SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE DEVELOPMENT BURGESS OWENS, Utah, Chairman GLENN THOMPSON, Pennsylvania FREDERICA WILSON, Florida, GLENN GROTHMAN, Wisconsin Ranking Member ELISE M. STEFANIK, New York MARK TAKANO, California JIM BANKS, Indiana PRAMILA, JAYAPAL, Washington LLOYD SMUCKER,Pennsylvania TERESA LEGER FERNANDEZ, New Mexico BOB GOOD, Virginia KATHY E. MANNING, North Carolina NATHANIEL MORAN, Texas LUCY McBATH, Georgia JOHN JAMES, Michigan RAUL M. GRIJALVA, Arizona, LORI CHAVEZ-DeREMER, Oregon JOE COURTNEY, Connecticut ERIN HOUCHIN, Indiana GREGORIO KILILI CAMACHO SABLAN, BRANDON WILLIAMS, New York Northern Mariana Islands VIRGINIA FOXX, North Carolina SUZANNE BONAMICI, Oregon ALMA ADAMS, North Carolina C O N T E N T S ---------- Page Hearing held on September 28, 2023............................... 1 OPENING STATEMENTS Owens, Hon. Burgess, Chairman, Subcommittee on Higher Education and Workforce Development........................ 1 Prepared statement of.................................... 4 Scott, Hon. Robert C. ``Bobby'', Ranking Member, Committee on Education and the Workforce................................ 7 Prepared statement of.................................... 9 WITNESSES Somin, Allison, Legal Fellow, Pacific Legal Foundation....... 11 Prepared statement of.................................... 14 Zhao, Yukong Mike, President, Asian American Coalition for Education.................................................. 22 Prepared statement of.................................... 24 Hinojosa, David, Director of the Educational Opportunities Project, Lawyers' Committee for Civil Rights Under Law..... 46 Prepared statement of.................................... 48 Squires, Delano, Research Fellow, Richard and Helen DeVos Center for Life, Religion and Family, The Heritage Foundation................................................. 65 Prepared statement of.................................... 67 ADDITIONAL SUBMISSIONS Ranking Member Scott: Affirmative Action Report................................ 115 Bonamici, Hon. Suzanne, a Representative in Congress from the State of Oregon: Article dated July 3, 2023 from Forbes................... 85 Amicus brief excerpt..................................... 91 HOW SCOTUS'S DECISION ON RACE-BASED ADMISSIONS IS SHAPING UNIVERSITY POLICIES ---------- Thursday, September 28, 2023 House of Representatives, Subcommittee on Higher Education and Workforce Development, Committee on Education and The Workforce, Washington, DC. The subcommittee met, pursuant to notice, at 10:18 a.m., 2175 Rayburn House Office Building, Hon. Burgess Owens [Chairman of the subcommittee] presiding. Present: Representatives Owens, Grothman, Stefanik, Good, Moran, Williams, Foxx, Takano, Jayapal, Leger Fernandez, Courtney, Bonamici, Adams, and Scott (Ex Officio). Staff present: Cyrus Artz, Staff Director; Nick Barley, Deputy Communications Director; Mindy Barry, General Counsel; Hans Bjontegard, Legislative Assistant; Isabel Foster, Press Assistant; Daniel Fuenzalida, Staff Assistant; Sheila Havenner, Director of Information Technology; Paxton Henderson, Intern; Amy Raaf Jones, Director of Education and Human Services Policy; Marek Laco, Professional Staff Member; Georgie Littlefair, Clerk; John Martin, Deputy Director of Workforce Policy/Counsel; Hannah Matesic, Deputy Staff Director; Audra McGeorge, Communications Director; Rebecca Powell, Staff Assistant; Mary Christina Riley, Professional Staff Member; Chance Russell, Economist and Policy Advisor; Brad Thomas, Deputy Director of Education and Human Services Policy; Maura Williams, Director of Operations; Amaris Benavidez, Minority Professional Staff; Ilanad Brunner, Minority General Counsel; Rashage Green, Minority Director of Education Policy & Counsel; Christian Haines, Minority General Counsel; Emma T. Johnson, Minority Legal Intern; Stephanie Lalle, Minority Communications Director; Raiyana Malone, Minority Press Secretary; Shyann McDonald, Minority Staff Assistant; Kota Mizutani, Minority Deputy Communication Director; Veronique Pluviose, Minority Staff Director; Clinton Spencer IV, Minority Staff Assistant; Banyon Vassar, Minority IT Administrator. Chairman Owens. The Subcommittee on Higher Education and Workforce Development will come to order. I note that a quorum is present. Without objections, the Chair recognizes the call to recess at any time. The Committee has gathered today to discuss the aftermath of the Supreme Court decision in Students for Fair Admission v. Harvard, and the Students for Fair Admission v. University of North Carolina, to explore the future possibilities of college admissions without racial discrimination. The Court in its 6 to 2 decision, held that race-based admissions are a violation of the Constitution and a violation of the Civil Rights Act. For too long, the gatekeepers of postsecondary education have treated applicants differently based on the color of their skin. For far too long within the walls of our educational institutions, generations of Americans have been taught to accept the theory of eugenics as normal. This theory assumes that as a race, black Americans think with their skin, that based on their skin color they are monolithic in their politics, reasoning and most importantly their intellectual potential. Those who do not fit within certain expectations and boundaries are considered traitors to their race. The theory of Eugenics has a prescribed baseline of expectations. This baseline accepts as a fact that the white race is inherently and intellectually superior, privileged and destined to dominate other races. It also believes that the black race is inherently hopeless, hapless and forever broken due to slavery 200 years ago. Not taught in our educational institutions is our proud history as national leaders and a love of faith, family, the free market, education and our country. Americans are always shocked to hear that the black community once led our country in categories of success that all communities sought after. During the 40's to 60's, black men led our Nation in percentage matriculating college, commitment to marriage, and percentage of entrepreneurs, over 40 percent. We had a thriving community of which between 50 to 60 percent were middle class. Today's history is purposely silent on this community's commitment to hard work, grit, tenacity, resilience, intelligence, loyalty and leadership. Instead, our story has been transformed into that of a weak race, hopelessly oppressed and not to be respected but pitied. The decades of demeaning messages our country has accepted that black Americans are overall incapable of competing against white Americans when it comes to intellectual merit. Affirmative action has been a subtle and stealth Trojan horse that has effectively messaged this racist attack of low intellectual expectations. Thankfully, the Supreme Court has recently granted us a major win for equal opportunity and for meritocracy, the two principles essential for the attainment of the American dream. Students across America, whether black, white, Hispanic, Asian or other, can now realize their potential without fear of overt racial discrimination or subtle bigotry. We are already seeing small changes due to racial blind, merit-based acceptance that's slowing the assiduous pace of the Radical Left's agenda. For example, Columbia Law Review temporarily froze hiring because of the Court's ruling, disrupting their long-standing practices of selecting senior editors based on race versus merit. Columbia Law Review has since resumed hiring without unfairly discriminating, and hopefully more law schools will follow this example. As our Nation celebrates the Supreme Court's ruling, we must remain diligent in identifying those who are defiant, those who despite the Supreme Court's ruling are determined to implement unconstitutional policies of affirmative action. There remain administrators who expressed their intent to selectively ignore both the substance and the spirit of the Supreme Court ruling. Americans should never accept these subversive attempts to preserve race-based admissions, and I promise you this congressional body will not. Chief Justice John Roberts was very clear when he wrote, and I quote ``Despite the dissent's assertion to the contrary, universities may not simply establish through application, essays or other means the regime that we hold unlawful today. What cannot be done directly cannot be done indirectly. The Constitution deals with substance, not shadows, and the prohibition against racial discrimination is leveled at the thing, not the name.'' Let me repeat, and I quote, ``what cannot be done directly cannot be done indirectly.'' Those institutions who think the Supreme Court ruling is a pretty please ask, this Committee will keep a close eye on the 2024 application process as it unfolds. Racism hidden or overt will not be tolerated by this oversight body. Today's admission process must not resemble yesterday's. Further, we will watch as the ruling disrupts the landscape of other race-based institutions across America, as they have been also put on notice. The Constitution is color blind. The Civil Rights Act is color blind. In these tumultuous times, we should all be grateful that our democracy is steadfast dedicated to treating everyone equally under the law, regardless of race, creed, color or zip code. With that, I yield to the Ranking Member's opening statement. Mr. Scott. [The prepared statement of Chairman Owens follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Scott. Thank you, Chairman Owens. I thank the witnesses for your testimony today. Our nation still has a compelling interest in fostering racially diverse campuses, and the Supreme Court ruling in the Harvard/UNC cases does not change that. In fact, it was the Supreme Court in 1978 in the Bakke decision that established that institutions could pursue a diverse student body to advance academic freedom and consider race as one of many factors to evaluate prospective candidates. While the consideration of race is one of many factors in admissions is vital, it is important that we put the conversation in appropriate context. Of approximately 4,200 degree granting institutions in the United States, less than 100 selective schools consider race as a factor in admissions, and only ten consider race as an important factor. Before the adoption of race-conscious admissions policies at the University of Texas at Austin in 2005, black students never made up more than 4-1/2 percent of the freshman class. Following implementation of race-conscious admissions procedures, blacks, Hispanics and Asian Americans enrollment increased, as did classroom diversity. Narrowly tailored race conscious admissions practices actually leveled the playing field and counterbalance discriminatory admissions factors that are otherwise in place, such as standardized tests and legacy admissions. For example, the district court in the Harvard case illustrated how recruited athletes, legacy applicants, applicants whose family have a history of donating money to the school and children of Harvard faculty make up a large percentage of each admitted class. In fact, while the applicants make up less than 5 percent of the, what the--these applicants make up 5 percent of Harvard applicants every year, they constitute 30 percent of the applicants admitted each year, and nearly 70 percent of these applicants are white. Research also shows that standardized tests that many institutions require for admissions have a discriminatory impact, and in fact reduced scores that correlate more with students' income, zip code, family wealth, socioeconomic background and parents' educational attainment than the student's ability to succeed in college. To blindly allow the use of admissions without further examining their discriminatory effect is in fact unacceptable. When my colleagues across the aisle say they want a system based on merit, I agree. The problem is the current system is not based solely on merit, and without policies to counterbalance the discriminatory factors, the outcome of the system will remain discriminatory. After the Supreme Court's ruling in June, the administration's responsibility to eliminate disparities in higher education and achieve diverse learning environments did not end. I called on the Department of Education to issue comprehensive guidance to ensure schools and colleges fulfill their Title VI obligations and address existing discriminatory factors in college admissions, now that the discriminatory factors are not counterbalanced by affirmative action. One tool we could have is to achieve equal opportunity would be the Equity and Inclusion Enforcement Act, which is pending--which has been pending in Congress for several years, and it restores the private--would restore the private right of action for students and parents to bring disparate impact cases under Title VI. We also have pending is the Strengthen Diversity Act, which Representative Jayapal and I reintroduced this Congress, to provide resources to states and school districts that want to voluntarily develop plans to integrate their public schools. Finally, if we are serious about expanding access to higher education, then we must focus on ensuring that the system is available to all. That means instituting reforms such as those that we have proposed in the Loan Act, which will make going to college more affordable for both current and prospective college students. Justice Sotomayor said it best in her dissent. ``Ignoring race will not equalize a society that is racially unequal.'' What was true in the 1860's and again in 1954 is true today. Equality requires acknowledgment of inequality. Thank you, Mr. Chairman, and I yield back the balance of my time. [The prepared statement of Ranking Member Scott follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Owens. Thank you. Thank you so much, Mr. Scott. Pursuant to Committee Rule 8(c), all Members who wish to insert written statements into the record may do so by submitting them to the Committee Clerk electronically in Microsoft Word format by 5 p.m., 14 days after the hearing, which is October 4th, 2023. Without objections, the hearing record will remain open for 14 days, to allow such statements and other material referenced during the hearing to be submitted for the official hearing record. I will now turn to introducing our four witnesses, distinguished witnesses, and thank you again for being here. The first witness is Ms. Allison Somin, who is a Legal Fellow at the Pacific Legal Foundation, located in Arlington, Virginia. Our next witness is Mike Zhao, who is president of the Asian American Coalition for Education in Orlando, Florida. Our third witness is Mr. David Hinojosa, J.D., who is the Director of the Educational Opportunities Project in the Lawyers Committee for Civil Rights Under Law in Washington, DC. Our final witness is Mr. Delano Squires, who is a Research Fellow at the Richard and Helen DeVos Center for Life, Religion and Family at the Heritage Foundation, which is located in Washington, DC, and who is testifying on his own behalf. We thank the witnesses for being here today and look forward to your testimony. Pursuant to Committee rules, I would like to ask each to limit your oral presentation to a 5-minute summary of your written statement. I would also like to remind the witnesses to be aware of your responsibility to provide accurate information to the Subcommittee. I would first like to recognize Ms. Somin. STATEMENT OF ALLISON SOMIN, LEGAL FELLOW, PACIFIC LEGAL FOUNDATION, ARLINGTON, VIRGINIA Ms. Somin. Chair Owens, Ranking Member Scott, distinguished Members of Congress, thank you for the opportunity to present testimony on behalf of Pacific Legal Foundation. We are a non- profit legal organization that defends Americans' liberties when threatened by government overreach and abuse. I want to make three main points today. The Students for Fair Admissions decisions were important because they uphold the vital principle that individuals should be treated as individuals and not on the basis of their race. Two, followup litigation is necessary to realize the promise of these decisions. Three, the Education Department's guidance is a missed opportunity to inform schools of their important obligations in this area. Under the Constitution and Title VI of the Civil Rights Act of 1964, government and recipients of government money may not discriminate based on race. Before Students for Fair Admissions, there was a limited exception for universities to achieve a compelling interest in student body diversity. Universities largely slipped the leash of the Supreme Court's opinions and used race very broadly. The Students for Fair Admissions plaintiffs challenged this exception, bringing one case against Harvard University and a second against the University of North Carolina. The Court held that these universities had not met their burden. As the Chief Justice wrote, ``Each student must be treated as an individual, not on the basis of her race. Many universities have for far too long done just the opposite, and in doing so they have concluded wrongly that the touchtone of an individual's identity is not challenges vested, skills built, lessons learned but the color of their skin. Our Constitutional history does not tolerate that choice. That is not likely to be the end of race preferences in admissions. Chief Justice Roberts anticipated schools would use proxy discrimination to evade the opinion's core prohibitions. The majority acknowledges that universities may consider admissions essays about how a student's race affects her life. It also firmly states that universities may not simply establish through essays the regime held unlawful in the case, and further quotes an earlier Supreme Court opinion. ``What cannot be done directly cannot be done indirectly.'' Unfortunately, the early evidence suggests evasion is going to be rampant. We see statements of intention to defy the ruling from the deans of major law schools, from presidents of universities and even the statements of State Governors telling universities in their State that they can safely ignore the decision. If these evasions go unchecked, Students for Fair Admissions guarantees of equal treatment will ring hollow. At the Pacific Legal Foundation, we have been fighting back against proxy discrimination at the K through 12 level. Several other attorneys from there and I represent the Coalition for T.J., a group of parents challenging a reengineered proxy discrimination admission scheme at top science and magnet technology school Thomas Jefferson High School in Fairfax County, Virginia. In the summer of 2020, Fairfax County restructured its admission process to in effect lower the numbers of Asian American students that could attend T.J. The text messages and emails produced in discovery make it clear that admissions were restructured because of, not in spite of, these effects on the number of Asian American students there. Yes, Fairfax County's discrimination was the proxy kind, not the direct kind. Is it no less pernicious and certainly no less hurtful to the kids, told that they could not go to their dream high school because of their race. Right now, that case is pending before the Supreme Court on a petition for certiorari. My PLF colleagues also have three other cases pending in the pipeline in the Federal appellate courts, involving proxy discrimination at high schools in Boston, New York City, Montgomery County, Maryland that all follow the same general pattern. While litigation by non-profit groups is an important way to enforce the core promise at Students for Fair Admissions, it is not the only way. The Department of Education has an important role to play in making sure that the civil rights laws are followed. Unfortunately, the frequently asked questions document that the Office for Civil Rights issued following the Students for Fair Admissions decision indicates they are not going to do that. It basically ignores the large and looming problem of proxy discrimination, and essentially tells universities that whatever they want to do is fine, as long as they are not too open about it. That is not right, that is not the law, and these universities need to be held to account to realize the core American promise that individuals should be treated as individuals and not on the basis of their race. Thank you. [The prepared statement of Ms. Somin follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Owens. Thank you. Now Mr. Zhao, Mr. Zhao. STATEMENT OF MR. YUKONG MIKE ZHAO, PRESIDENT, ASIAN AMERICAN COALITION FOR EDUCATION, ORLANDO, FLORIDA Mr. Zhao. Yes. Chairman Owens and distinguished Members of Congress, I am Yukong Mike Zhao, a survivor of China's Cultural Revolution, during which my family endured political persecution, devasting personal loss and extreme poverty. In 1992, I came to American as poor foreign student. In this land of opportunity, I achieved my American dream, later becoming the Director of Global Planning at Siemens Energy. Through affirmative action, as shown in Appendix A of my testimony, colleges used higher admission standards, de facto racial quotas and racial stereotypes to discriminate against Asian American applicants. This discrimination unjustly created unbearable study loads, stress and psychological harm to our children. Many Asian American applicants even hide their racial identity when applying to colleges. In 2014, I and other co-founders of Asian American Coalition for Education (AACE) started our journey of galvanizing the Asian community to support Students for Fair Admissions for its lawsuit against Harvard and UNC. AACE and partner organizations filed civil rights complaints against Harvard, Yale and other colleges. We organized rallies, encouraged students to join the lawsuits, and filed five amicus briefs in support. Today, our alliance has grown into over 300 organizations nationwide. This June, the Supreme Court rightly struck down race-based affirmative action. This is a historic victory for Asian-Americans, as our children should no longer be treated as second class citizens in college admissions. This is also a historic victory for all Americans, as the ruling will help restore meritocracy, the bedrock of the American dream. It will also advance America toward a color-blind society, as Martin Luther King dreamed of 60 years ago. However, advocates of diversity, equity and inclusion have not given up. On August the 14th, the Department of Education and Justice issued guidance that advocates continued use of race and race proxies in outreach and other programs. This guidance again misses the point. The root cause of racial disparity in college enrollment is the failure of the K through 12 education, particularly in inner cities, to prepare black and Hispanic children for colleges. Improving K through 12 education is a better and a constitutional way to enhance racial diversity in higher education. Further, while America is faced with a STEM talent shortage and our K through 12 education is behind other industrial nations, the Biden administration irresponsibly suggests colleges should further eliminate objective and rigorous admissions standards. In response, AACE issued a policy statement attached as Appendix B, where we urge American colleges to stop the use of race and race proxies in college admissions, adopt a blind rating system by hiding student's name and other information that would disclose race, make students race data inaccessible to admissions evaluators, base admissions criteria on the needs of educational program, not racial diversity or equity, restore standardized testing as major criterion in admissions. The troubling fact is today nearly 81 percent of all colleges have made the standardized testing optional. In China, I witnessed during the Cultural Revolution Chairman Mao abolished the National College Entrance Exam in order to achieve class equity. After destroying the meritocracy, Chinese colleges produced millions of revolutionaries who could not conduct research or managing enterprise. As a result, China's innovation stopped, and its economy collapsed. America cannot afford to repeat this mistake by destroying meritocracy in the name of racial equity. When our Nation is faced unprecedented competition from international rivals, it is imperative to restore meritocracy in our educational institutions in order to maintain America's technological leadership and economic prosperity. The Supreme Court's landmark ruling provides historic opportunity for American colleges to correct their mistakes by promoting equality and a meritocracy. I hereby call upon Federal, State and local governments to support our policy recommendations to do just that. Thank you. [The prepared statement of Mr. Zhao follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Owens. Thank you, Mr. Zhao. I would now like to recognize Mr. Hinojosa. STATEMENT OF DAVID HINOJOSA, J.D., DIRECTOR OF EDUCATIONAL OPPORTUNITIES PROJECT, LAWYERS' COMMITTEE FOR CIVIL RIGHTS UNDER LAW, WASHINGTON, D.C. Mr. Hinojosa. Good morning, Chairman Owens, Ranking Member Scott and Members of the House Subcommittee. My name is David Hinojosa, and I am the Director of the Educational Opportunities Project with the Lawyers' Committee for Civil Rights Under Law. Thank you for the opportunity to testify today on the Supreme Court's decisions. The Lawyers' Committee has been a leader in the fight for racial equity, access and justice in higher education for many years. We have worked with coalitions nationally and in two Midwestern states, to ensure that all students may access, be supported, graduate and into the workforce fully prepared for our pluralistic society. We have also had the distinct privilege and honor of representing an incredible multiracial group of students and organizations in the Harvard, UNC and UT-Austin cases, including black, Latino and Asian American students. Together with pro bono law firms, Asian Americans Advancing Justice (AAJC) and the North Carolina Justice Center, we represented the only State, the only students who have bravely testified in the UNC and Harvard cases about the tremendous academic and social benefits of diverse student bodies. When I argued the UNC case in the Supreme Court last October, I carried with me their powerful stories of resilience, unity and determination. These included Luis Augusta, a child of Mexican immigrant parents, who wanted to become a doctor after visiting his grandmother as a young child in Mexico and seeing her with an abscess in her knee because she lacked access to adequate health care. Luis had to fight his way into AP classes at his rural high school in North Carolina because a counselor did not think he could compete. Luis had strong grades, but did not have the highest test scores, because he did not even know that he could study for the SAT. Luis persevered and today he is in his fourth year of medical school. Sally Chen, a child of Chinese immigrant parents, who grew up in San Francisco in a one-bedroom apartment with her family and siblings. Sally often translated for her parents in stores, schools and doctor's offices. She thought about whether in her application she should discuss her family story and decided that she would be true to herself and share those experiences that inspired her. She was admitted to Harvard as a first-generation student, graduated and now helps lead work with the Chinese for Affirmative Action. Andrew Brennan, a second-generation black college student, who grew up in Kentucky and wrote in his college application that he did not always fit into the black stereotype, because he identified as gay and did not just listen to rap music. He is among less than 125 black men in his class at UNC. Andrew graduated, continued as a strong advocate for student voice, and today is enrolled at Columbia Law School. These are only a fraction of the deep, profound stories of many of our students, whose range of academic and social achievements, attributes, experiences and talents, including those impacted by race, were fully vetted under affirmative action admissions plans, and still should be fully vetted today. These students earned their seats, succeeded in school and are now succeeding in life. Our country needs more success stories like these, and we cannot allow others to use the Supreme Court's tortured history of the Equal Protection Clause and the promise of Brown v. Board, to take those seats away from other well-deserving students. Let us be real, that is what many supporters of the decision want to do, and not just in education but all facets of life, where built in, unearned and bought up privileges for the few determine who has opportunity and who does not. That may be somebody's dream, but that is not the American dream. Universities can do their part by instituting comprehensive reforms, including race-neutral programs of recruitment and outreach and student support, as well as deconstructing systemic barriers. We need Congress to do its part in helping to bring unity, opportunity and justice for all. We have several of these recommendations in our written testimony, and I will just highlight a couple. Providing grant funding to analyze and implement fair and meaningful race- neutral alternatives that advance fair access and opportunity; increasing Pell grant funding and expanding eligibility; increasing dedicated funding for social and academic counselors in K-12; and investigating systemic barriers to higher education such as legacy admissions and the consideration of biased SAT and ACT exams for admissions and scholarships. Thank you. [The prepared statement of Mr. Hinojosa follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Owens. Thank you, Mr. Hinojosa. Appreciate it. Mr. Hinojosa. Thank you. Chairman Owens. Last but not least, I would like to recognize Mr. Squires. STATEMENT OF DELANO SQUIRES, RESEARCH FELLOW, RICHARD AND HELEN DEVOS CENTER FOR LIFE, RELIGION AND FAMILY, THE HERITAGE FOUNDATION, WASHINGTON, D.C. Mr. Squires. Good morning. My name is Delano Squires, and I am a research fellow in the Richard and Helen DeVos Center for Life, Religion and Family at the Heritage Foundation. I would like to thank Chairman Owens, Ranking Member Scott and the Subcommittee for the opportunity to testify this morning. The views that I express in this testimony are my own and should not be construed as representing any official position of the Heritage Foundation. The predictions of gloom and doom in a world without racial preferences resonate with some people, only because affirmative action has been debated for over 40 years, but it is still largely misunderstood. For starters, racial preferences were most common at highly selective universities like Harvard, Yale and Stanford, that admitted less than 10 percent of their applicants. There were less common in schools like Virginia Tech or the University of Missouri that admit well over half of their applicants. During the 2018 Federal court case on this issue, Harvard's Dean of Admissions acknowledged that the school used different standards based on race to determine which prospective students received recruitment letters. The university ranked applicants using an academic index comprising SAT scores and grades. These scores were broken into deciles, where the first decile is lowest and the tenth is highest. Harvard's own student data proved the school's two-tiered recruitment efforts were reflected in its admissions decisions. For instance, a black student in the fourth decile and Hispanic student in the sixth decile had a higher chance of being admitted than an Asian student in the tenth decile. In the words of Justice John Harlan, the lone dissenter in Plessy v. Ferguson, ``Our Constitution is color blind and neither knows nor tolerates classes among citizens. In respect of civil rights, all citizens are equal before the law.'' The Supreme Court struck down the use of racial preferences in college admissions because they subjected Asian and white students to higher standards than their black and Hispanic counterparts. What of the claim held by many progressive commentators that eliminating these policies will return American to a pre- civil rights era of segregation and discrimination? It's simply not true. The highest-performing black applicants at Harvard have close to a 60 percent chance of being admitted, and for legacy black students, that number rose to 99.9 percent. Put simply, no selective university is turning away black students with the top grades and test scores. The main issue regarding race and enrollment at Harvard is that 75 percent of black and 57 percent of Hispanic applicants are clustered in the bottom three deciles, compared to 16 percent of their Asian American and 24 percent of their white peers. The solution to this problem is higher performance at the K through 12 level, not racial preferences at the collegiate level. Pity and paternalism do not lead to equality. Equality cannot be enforced through mandates or quotas. It cannot be declared through fiat or executive order. Any of the policies that apply different standards based on race in order to achieve demographic representation only reinforce inequality because it is impossible to lower expectations and raise performance at the same time. If we want to cultivate a truly diverse college campus that passes constitutional muster, we must pursue several long-term strategies at the K through 12 level. First, promote and advance education choice, specifically through options like education savings accounts which have been implemented in Arizona, Arkansas, Florida, Iowa, North Carolina, Utah and West Virginia. Second, local policymakers should create pathways for gifted students to receive progressively challenging work in school, as well as specialized education programs outside the classrooms. Third, we need to focus on one of the most important drivers of educational outcomes, family structure. Decades of research have strengthened the conclusion that children raised in homes with their married biological parents have better academic and behavioral outcomes than children raised in any other family arrangement. Today, 40 percent of American children are born to unmarried parents, and 23 percent live in single parent homes, the highest rate in the world. Any attempts to improve education outcomes, whether on a K through 12 or postsecondary level, must include changes in policy and culture that encourage marriage and strengthen families. This is why some schools are looking to incorporate the success sequence into the classroom. Students need to know that people who finish high school, secure stable employment and marry before having children have a single digit poverty rate by their mid-30's. The takeaway for politicians, policymakers and pundits should be clear. A student's family, home environment, study habits and school quality play a much larger role in determining their academic outcomes than their skin color. Public policy should reflect these facts, not be used to socially engineer outcomes in ways that violate basic constitutional principles. Thank you very much for your time and attention. [The prepared statement of Mr. Squires follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Owens. Thank you, Mr. Squires. Under Committee Rule 9, we will now question witnesses under 5-minute rule. I will begin the process. Mr. Squires, in this Subcommittee, there has been many discussions of what diversity should mean. Too many people focus exclusively on identity diversity. In contrast, you have spoken about a need for a wider net diversity. What is wider net diversity and why should it be a standard adopted to today's college campuses? Mr. Squires. Put simply, when I talk about ``wider net diversity,'' I am talking about extending and expanding opportunity to groups or individuals who may not have access to opportunity at a particular time. The key for wider net diversity is to uphold the same standards across the board. Now a perfect example of that from history, and where we could talk about real racial discrimination, I would say would be the Tuskegee Airmen, who obviously could not serve as aviators because of racial discrimination in the armed forces. When those opportunities came, they demanded that they had to meet the same standards as their counterparts, and in fact obviously they have a stellar service record and won the United States Air Force's first top gun competition in the late 40's. Now wider net diversity I would contrast with lower bar diversity, which seeks to prioritize superficial identity categories in order to create a demographically representative population. I am always for wider net, and I think that lower bar does anyone a grave disservice. Chairman Owens. Thank you. Ms. Somin, after the Supreme Court's decision against race-based admissions, some colleges and universities seem dedicated to continue race preferences. If universities are practicing affirmative action called by another name, why should the courts consider these policies illegal? Ms. Somin. Thank you. The name does not matter. What matters for the purposes of the law and the purpose of justice is whether or not universities are discriminating on the basis of race. If they are discriminating on the basis of race and admissions, even if they call that discrimination something else, it is illegal and they should be held to account. Chairman Owens. Interesting, faculty hiring has also been subject to race-based preferences. George Mason University published draft recommendations of a plan to enact race- balancing by hiring staff to reflect the democratic diversity of the student, quote ``student population'' through diversity cluster hiring initiatives. This is just one example of professors being weeded out not by their expertise, but because they do not fit the university's imposed racial makeup. Given the Supreme Court's recent decision, do you think race-based preferences and faculty hiring also--do you consider that legal or not legal? Ms. Somin. The decision does not directly address race preferences in faculty hiring, but at public schools under the Constitution and under Title VI, which prohibits race preferences by recipients of government money, and Title VII, which generally prohibits race preferences in hiring, yes, racial preferences in hiring are generally illegal. While I believe the decision doesn't directly speak to it, the decision does change the climate and make it clear that the current court is not going to sit by and tolerate discrimination based on race. Chairman Owens. Thank you. Mr. Zhao, there are many who believe the racial discrimination in college admissions is a thing of the past, but you hear from exceptional students every day of being denied admissions despite their academic qualifications. Can you provide an example of students, of a student harmed by racial discrimination in college admissions? Mr. Zhao. Sure. Just this week, we received a complaint from outstanding student--He has a talent in programming. You know, everybody says that computer science is the future for the 21st century. He was hired directly from high school by Google but rejected by 16 of American's top schools like MIT, CMU, and he has outstanding credentials, academic performance. He also started up a--startup. He won the finalist of major global programming competitions. I want to say it is a shame, you know, our colleges should welcome him because we have STEM talent shortage in this country. It is appalling for the colleges to ignore this kind of talents. He already filed a civil rights complaint 2 days ago. I hope that the U.S. Congress will support his equal treatment complaint. Chairman Owens. Thank you. I would like to now recognize Mr. Takano. Mr. Takano. Thank you, Mr. Chairman. Mr. Zhao, I want to understand more about your definition of meritocracy in college admissions. I am speaking in the context of liberal arts undergraduate programs. You seem to want to return to a heavy reliance on standardized testing for admissions decisions, as a fair and a reasonable approach. Am I correct in that? Mr. Zhao. No. Actually, I support holistic evaluation, but it should be based primarily on objective like measurement, like standardized testing plus like leadership, other things. Very importantly educational---- Mr. Takano. Okay, thank you. Thank you for your response. How much would you weight standardized testing in the process? Mr. Zhao. It depends on the educational program. For example, for STEM education, that would be weighted---- Mr. Takano. Sir, sir, just--I want to confine our conversation to admittance into liberal arts institutions such as Harvard, a liberal arts undergraduate. I mean that is an important part of our educational system. How much would you say Harvard would be allowed to weight or should weight standardized testing? Mr. Zhao. I think it would be a major criteria---- Mr. Takano. Major criterion. Would that be more than 50 percent of the weight, less than 50 percent? Mr. Zhao. I do not have the number for that, but we should---- Mr. Takano. I think it is fair to say that you would weight, your emphasis is on objectivity. We know that grades can sometimes be subjective, dependent on what school that the grade may or may not. Would you--is it fair to say you would weight the testing as more than 50 percent? Mr. Zhao. No. Mr. Takano. No? Mr. Zhao. For liberal arts, probably not that high. For STEM education, it should be very important. Mr. Takano. Okay. We are not talking about STEM education. We are talking about a liberal arts undergraduate program. Mr. Zhao. Yes. Mr. Takano. What is fair in that case? Mr. Zhao. Sure. I agree, it should not be weighted more than 50 percent---- Mr. Takano. More than 50 percent, thank you. More than 50 percent. That would mean that students that score the highest should be given greater preference. People who score in the top decile, you would say that is a fair system? Mr. Zhao. I support a holistic evaluation. Mr. Takano. Can you answer? Holistic. Your definition of holistic means that more than 50 percent be weighted---- Mr. Zhao. No, no, no. I did not say ``more than.'' I said it could be less than 50 percent for liberal arts. I believe for STEM education---- Mr. Takano. Okay. Well, so it could be less than 50 percent for liberal arts. Mr. Zhao. Yes. Mr. Takano. Other, other criteria. What other objective criteria are there? Grades, would you say, are objective? Mr. Zhao. Grades, yes. Grade is not consistently across the board. Mr. Takano. That is right, that is right. How would you measure leadership ability? Mr. Zhao. Leadership can be measured by student--like take leadership roles in different clubs. It depends. If you say-- management, absolutely it should be important. But if say, like---- Mr. Takano. Would you say it is difficult to measure leadership objectively through some measure? Is there an objective measure for leadership. Mr. Zhao. No. That is why---- Mr. Takano. I would conclude sir, that you really think that--you say several times that we need to return--actually, you criticize the fact that you say over 1,000 universities dropped the requirement for students to take an objective, standardized test, and you say this--you give that reasoning. You attribute that to the fact of the COVID-19 pandemic and George Floyd's tragic death. Do you think that George Floyd's death caused the universities to drop objective? Mr. Zhao. No. Mr. Takano. You stated, you say in the wake, I am quoting, ``In the wake of COVID-19 and George Floyd's''---- Mr. Zhao. The advocates took advantage of that. The advocates of racial equity took advantage of that. Mr. Takano. Well, my recollection is that the universities could not rely on the SAT because the tests could not be administered because of, you know, the proctoring and large numbers of students taking these tests was a danger to public health. Mr. Zhao. Yes, but it is time to restore that. Mr. Takano. You, but you want to attribute it to George Floyd's death. That is kind of a curious thing. Mr. Zhao. No. I said that advocates took advantage of that. Mr. Takano. Well, it is curious that you would say that George Floyd was--his death was the reason why universities---- Mr. Zhao. No, I did not say that. Advocates of racial equity, you know, took advantage of that. Mr. Takano. You actually say it. It is in your testimony, sir. It is in your testimony. I want to point that out to you. It is in your testimony. Well, you know, there is many--it is more questions I would like to ask, but I do not think you are being completely genuine in your answer about how much you would rely on an objective quote-unquote, measure, quote- unquote ``an objective measure'' such as standardized testing in the admissions process. Mr. Zhao. I was saying it would be part of a measurement-- -- Mr. Takano. I yield back, Mr. Chairman. Mr. Zhao. It depends on the educational program, should give different rate, weight based on the educational program. Mrs. Foxx. The gentleman's time has expired. Mr. Grothman, you are recognized for 5 minutes. Mr. Grothman. First of all, I would like to thank all of you for being here today. I want to explore a little bit what is behind this drive for so-called diversity or this tremendous obsession with where one's ancestors come from. As I understand it, and we can ask really either one of you here, as I understand it, the drive for diversity is based on forms that people fill out as to what their ancestry is. For example, I have a Peruvian grandmother and was raised in a northern suburb here. I could fill out a form and say I am so-called Hispanic; correct? For the purposes, for diversity purposes I would be labeled Hispanic; correct? Mr. Zhao. Who did you ask? I am sorry. Mr. Grothman. Okay. We are here talking about diversity, and that diversity is defined ethnically, okay, on where somebody's ancestors came from; correct? Mr. Zhao. Yes. Mr. Grothman. Okay. Which means, for example, that if I apply to college and I have a grandmother who was from South America, I could check on the form that I am Hispanic; correct? Mrs. Foxx. Mr. Grothman, I think people are asking to whom are you addressing your question? Mr. Grothman. To Mrs. Somin there. Ms. Somin. Yes. Mr. Grothman. Right, and could you explain to me, because they say what they are looking for here is diversity. Now, I may have never been south of the border. I may not know a word of Spanish, but I am filling out the form that I am Hispanic. What type of diversity would I be bringing to that institution, or how would the fact that I had a Peruvian grandmother give me a different viewpoint that would enrich that institution? Ms. Somin. I think you put your finger on something very important, which is that universities have tended to emphasize skin color or ethnic diversity over true diversity of thought. Mr. Grothman. Is there any diversity there at all? I mean that is what I do not understand. If I have a Peruvian grandmother who for all I know died before I was born, the whole edifice is built on the idea that therefore I am going to bring a different viewpoint or something to the university. Ms. Somin. I agree that it is very concerning, that many universities seem to have relied on crude stereotypes, rather than looking at true individuality and at the full depth of an individual's experience in what they cast as diversity. Universities should care about individuals and individuality, rather than reducing students to their ethnic or racial identities. I am glad the Supreme Court ruled the way it did, so that we can get back to a focus on treating individuals as individuals. Mr. Grothman. Okay. Elizabeth Warren, when she wanted to become a professor at Harvard it was, she claimed that she was apparently partly Native American, apparently on the idea that therefore she would bring a different viewpoint to the faculty lounge. Could you even imagine wildly why she would--she would get preferences for that job based on presumably a different viewpoint in the world or something that she would know that other students would not know? Ms. Somin. I am not familiar with the details of how Senator Warren views her identity. However, I agree that it is concerning that these preferences tend to reduce individuals to stereotypes, rather than looking at the full range of what they bring to the table as individuals. Mr. Grothman. Is anybody that you know in their own life, when they have to make own hiring decisions, a doctor, a dentist, an accountant, anybody, take into account people's ethnic background or even ask what their ethnic background is? Ms. Somin. I agree that that would be unusual, and that for many individuals, individuals that value competence or what they bring to the job in their role as doctor or dentist, rather than racial stereotypes. Mr. Grothman. Mr. Squires, could you comment on that, I mean this idea that somebody's view of the world is based on where their ancestors came from and that they're a monolith? Could you, could you comment on that? Mr. Squires. Sure. I mean it is unfortunate that we have taken that perspective. This is one of the reasons why I believe quite frankly many black conservatives are easy targets in the media, is because the moment they say things that sort of the progressive left don't agree with, that they are attacked. Mr. Grothman. Is that part of the problem too? Is this a pretext design to force people of a certain ancestry to allow them to be promoted based on their ideology? I mean I can think of an example that I have heard of in my own life in just employment, where somebody was--a person of color let us say, and they were therefore educated, that they should have a certain viewpoint because they are of that ancestry. Is that part of the motivation here? Quick, a very quick quick answer. Mr. Squires. I will say this in general. I do not define diversity as having people of different skin colors who all think the same. To the extent that postsecondary institutions want to promote diversity, I think diversity of ethnic background is fine, diversity of region. It is particularly diversity of thought. I think those should be their goals, and not just the color composition in the classroom. Chairman Owens. Thank you. I would like to now recognize Ms. Jayapal. Ms. Jayapal. Thank you, Mr. Chair. Race-conscious admissions was a critical tool for diversifying classrooms, for reducing racial bias and addressing racial disparities in enrollment for students of color. Right wing activists unfortunately waged a decades-long challenge to the use of race, and unfortunately, they succeeded when the Supreme Court struck down this tool for achieving diverse classrooms by ending race-conscious admissions policies. My home State of Washington has had its own affirmative action ban unfortunately since 1998, restricting public colleges in considering race as an admissions factor. Despite the ban, half of Washington public college students are of color, and just as diverse as their private college counterparts. One way that our Washington public colleges did this is through their guaranteed admission policy. These policies promise seats to eligible students from local high schools if they meet grade or other academic requirements. It is not unique to my State. Colleges throughout the country have adopted similar policies without standardized testing requirements. Mr. Hinojosa, there may not be a policy that could help achieve racial diversity as the same level that race-conscious admissions has, but why are policies that eliminate reliance on testing helpful in diversifying student bodies? Mr. Hinojosa. Thank you, Congresswoman. First, you have to know a little bit about standardized testing, right? They are incredibly biased instruments. They were started way back based on eugenic science, you know, which has obviously been dismissed by the scientific community. They are poor predictors of college success and college readiness, so there is no real connection to that, and they are basically or essentially your test score is predicted based on your zip code and the quality of education that you have received or your socioeconomic status, I should say, rather than any other quality that an applicant would cover. I think it is imperative that universities, especially in light of the ban, which is always been followed with substantial drops in students of color, that they consider race-neutral alternatives as those in Washington, you know, because those are trying to take students for where they are coming from the high schools. There are lots of inequality still in K-12 education within, across all states, and I think it is imperative that they look to solutions that allow students to still show up with their talents and experiences and the like, and not just reduce them a single test score, as though that tells something about their talents. Ms. Jayapal. Very important. You know, it is interesting, but guaranteed admissions have even shown to help students graduate debt free. For example, Washington State University has a guaranteed admissions policy, and their low-income students can attend tuition free with our Washington college grant. Supporting students in that way I feel like should be non- partisan, should be bipartisan, but instead the same right-wing organizations behind the affirmative action decision have also waged attacks against guaranteed admissions. They claim it could be a form, get this, of race-based discrimination. Are you aware of any of these policies considering race as an admission factor? Mr. Hinojosa. Absolutely not. I mean whether or not there are intentions to further diversity across socioeconomic status, across first generations, across language, etcetera, there are lots of qualities that even rural communities as well. I am most familiar with Texas' Top Ten Percent Plan, because I was at MALDEF for many years and worked on both policy and litigation around the Texas Top Ten Percent, and that has helped improve. Sometimes it doesn't work as well. This is how and why universities need the resources to be able to explore exactly how these race-neutral alternatives may impact it. These absolutely have nothing to do with racial discrimination. They are not treating any individual differently based on their race. Ms. Jayapal. In fact, your witnesses next to you have been arguing for not reducing people down to one factor. Seems like standardized testing should not be a factor that people get reduced down to. Alternative admissions policies do not--do not sound like a veiled racial quota like some on the right allege. In fact, guaranteed admissions seem to be the same type of race-neutral policies that these activists claim to want in a postsecondary education. Today, a witness argued that black students are harmed by policies that promise to uplift them, but instead result in mismatching them into academically challenging programs. As selective colleges reflect on their role in ensuring racial representation, should they be concerned about creating pipelines for under-represented students in their competitive programs? Mr. Hinojosa. Yes. Absolutely they should. If we are supposed to think of our universities as engineering, economic opportunity for all, then those universities need to be open to those students. The whole mismatch theory has already been debunked by real science. That soft science has been dismissed repeatedly by peer reviewed studies, and really should not be echoed in any chamber. Ms. Jayapal. Real science, what a concept. I yield back. Thank you, Mr. Chairman. Chairman Owens. Thank you. Thank you so much. I would like now to recognize Ms. Stefani. Ms. Stefani. Thank you, Mr. Chairman. The Supreme Court correctly decided Students for Fair Admissions v. President and Fellows of Harvard College when they held that Harvard College's admissions did not comply with the principles of the Equal Protection Clause embodied in the Civil Rights Act. Now Ms. Somin, previously Grutter v. Bollinger, assumed that race would be only treated as a plus in the admissions process. We saw at Harvard that in some cases, this was treated as a minus. Is this correct? Ms. Somin. Yes. Ms. Stefani. Can you expound upon that? Ms. Somin. Absolutely. When there are only a limited number of seats available at any given university, it is inevitable that a plus factor for some students will be a minus factor for others. Ms. Stefani. Particularly as a Harvard College graduate, I am very concerned that in 2013 Harvard's own Office of Institutional Research concluded that the university system was indeed biased with negative effects in the admissions process. Is it a fact, Ms. Somin, that they buried this report? Ms. Somin. Yes. Ms. Stefani. I have concerns in the wake of the Supreme Court's decision, in one of the mailings that was sent out to alumni. The headline was ``Harvard United in Resolve in Face of Supreme Court's Admissions Ruling.'' Do you have concerns about the compliance of the Supreme Court decision at some universities? Ms. Somin. Well, I am not familiar with that particular mailing from Harvard. I have seen similar statements from the heads of other university officials. In an amicus brief filed in support of the Coalition for T.J. cert petition, the Cato Institute documented many such examples of evasions. I am very concerned about lack of compliance, yes. Ms. Stefani. How would you identify potential lack of compliance? Ms. Somin. Statements from university officials would certainly be concerning. Changes in policy too, that do not seem to make sense in slight of academic qualifications, but that instead seem targeted at engineering a particular racial composition I would be concerned about. Ms. Stefani. Mr. Squires, I wanted to turn to you. In your testimony, you mentioned that it is universities themselves that benefit, not the students, from race-based discrimination. How does Harvard and how do other schools actively maintain internal incentives to keep discriminatory policies in place? Mr. Squires. Well, what I meant by that is that oftentimes universities will particularly focus, for instance, on the incoming class, the freshman class, and talk about how diverse it is. Part of the reason is because they, they want to receive the social benefits that come with being able to say, you know, look at all the black and brown students we have. Again, there is a lot less emphasis on the graduating class. This happens oftentimes when individuals will say they are choosing a particular candidate for a particular position based on race and sex, and what it does it saddles that person with the burden of feeling as if they are not being judged by their qualifications and allows the person doing the choosing to say how virtuous they are because of how progressive they are. Ms. Stefani. Mr. Squires, how will the end of discriminatory race-based admissions help the next generation of college applicants? Mr. Squires. I think one of the things that it would do is allow everyone on campus ideally to be able to understand that we are all here because we are based on the same set of qualifications. I can guarantee you that if in 2043, the highest-performing students on the SATs in terms of grades were black and Hispanic, no one on the other side of the aisle would say that too many of them are going to Harvard and Yale. If we believe in equality, it has to be equal across the board, which means everyone has to be judged by the same set of standards. If we want to consider socioeconomic status, that has to be the same across the board. What we cannot do is say for one group of students you can come in at this particular bar, and for another group of students you have to come in at a much higher bar. Ms. Stefani. Thank you. I yield back. Chairman Owens. Thank you. I would like to recognize Ms. Bonamici. Ms. Bonamici. Thank you, Mr. Chairman. I want to start by just noting that one of the witnesses contended that although qualified black applicants at highly selective schools have earned their place, they are a small number of the total black applicants who are admitted. I would like to enter into the record an article by Forbes titled ``Black Harvard and Princeton Students Graduate at Higher Rates Than Their Classmates Overall and Equally at Yale.'' The article highlights Department of Education data that shows that 99 percent graduation rate for black students at Harvard, compared to 98 for all students. 99 percent graduation rate for black students at Princeton, compared to 97 percent of bachelor degree seekers overall, and 98 percent of Yale students graduate within 6 years, exactly the same for black Yale students. I would like to enter that into the record, Mr. Chairman. Chairman Owens. Yes, with no objections. [The information of Ms. Bonamici follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Bonamici. Thank you. Mr. Chairman, our Nation's colleges and universities play a key role in preparing people for the jobs of today and the jobs of the future. They are an important part of preparing, for example, the highly qualified workforce we need to maintain our Nation's technological leadership and advance our national security interests. In all of these areas, we benefit from the multiracial and multicultural student population that brings a wide range of perspectives and life experiences, including at elite colleges and universities. In fact, Chief Justice Roberts noted this in his point in the opinion in Students for Fair Admissions, saying that race-based admissions programs at military academies could further compelling interest at such academies. Mr. Zhao, do you agree that there are a range of factors to consider in advancing the United States national security interests and its global economic and technological leadership, including preparing a workforce that reflects our Nation's racial and ethnic diversity, and that is a yes or no question? Mr. Zhao. I think No. 1, colleges should promote the diversity of ideas, right. Students benefit from that. Also, our Nation would benefit recruiting the best and brightest, and give them best education. Ms. Bonamici. Yes. I am going to reclaim my time, and I just want to enter into the record again, Mr. Chairman, an excerpt from an amicus brief submitted in the case by major American companies, including American Airlines, GE, GM, Intel, Johnson and Johnson and others, titled ``American businesses rely on universities to create a pipeline of diverse leaders, equipped with the skills to thrive in the global marketplace.'' Chairman Owens. No objection. [The information of Ms. Bonamici follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Bonamici. Thank you, Mr. Chairman. Mr. Zhao, in your written testimony, you mention your concerns with unfair admissions practices such as legacy preferences, and I am glad we share that concern. You also mentioned that legacy preferences are driven by, and I quote, ``racial equity ideologies.'' Are you aware that legacy students are disproportionately white; for example, seven in ten at Harvard? That is a yes or no question. Mr. Zhao. That is a historic fact, I believe. Ms. Bonamici. Okay, thank you. I want to followup on Mr. Takano's line of questioning, Mr. Zhao, because you discuss meritocracy several times. In your testimony, you talk about restoring meritocracy and do not destroy meritocracy. You appeared to define that meritocracy based on test scores and grades. The dictionary definition of meritocracy means based on ability and talent rather than wealth or social position. I submit that many people have tremendous ability and tremendous talent and potential and might not have high test scores or high grades. It seems like it is sort of counter to what you are saying, and I wholeheartedly reject the notion that meritocracy and racial diversity are somehow exclusive. Saying so is really tantamount to claiming that black and brown students are not academically talented enough, or as Mr. Squires claimed, mismatched. Now that view, that view ignores a whole range of assets, experiences and perspectives that black and brown students bring to our Nation's colleges and universities. In fact, do you know what the PISA scores are, international test scores? Mr. Zhao. Yes. I think Congresswoman, you misinterpret my statement. I was saying, you know, the test score should be one of the key criteria, not the whole---- Ms. Bonamici. Yes. I understand that that is what you are saying. I am reclaiming my time, and I just want to note--I am reclaiming my time, Mr. Zhao. I just want to note for the record that in country with high PISA scores, like China, South Korea and Singapore, they are pretty low on entrepreneurial skills. In the United States, where we might on PISA scores have lower test scores, we have higher confidence and entrepreneurial skills. I think that is important to keep in mind. Real quickly Mr. Hinojosa, based on your understanding of the Supreme Court opinions, would targeted outreach and recruitment policies and other policies that are outlined in the recent joint guidance from the Department of Education and Justice run afoul of the opinion, as some of my colleagues have claimed? Mr. Hinojosa. Are they prohibited? Ms. Bonamici. Are they--would they run afoul of the opinion. Mr. Hinojosa. Absolutely not. Ms. Bonamici. All right, thank you, and I appreciate that, and I am just about out of time, so I yield back. Thank you, Mr. Chairman. Chairman Owens. Thank you so much. I would like to now recognize Ms. Foxx, Dr. Foxx. Mrs. Foxx. Thank you, Mr. Chairman. Thank you for leading this hearing today. For far too long, college admissions have pitted students against students based on race. This is undoubtedly a great stain on our postsecondary education system. Today should be a day when this Committee can look forward to a brighter future for all students. I am most encouraged by universities that have committed to change, and am proud that the University of North Carolina-Chapel Hill has chosen to look forward. On the day of the Supreme Court's decision, UNC Chancellor Kevin Guskiewicz shared with UNC campus community ``we will follow the Supreme Court's decision in all respects. That means race will not be a factor in admissions decisions at the university,'' and did not stop with just words. UNC is educating undergraduate admissions officers on the new legal standard. The university has reviewed admissions applicants for graduate degree programs and the university has made technology changes, so no one who makes admissions decisions has access to applicant's racial demographic data during the admissions season. It is my hope that many other colleges and universities are taking the same step. Mr. Squires, we know it is important to provide more than just access to college. Schools should be equally focused on helping students complete college. You mentioned in your testimony that highly selective schools use race-based preferences--using race-based preferences run the risk of creating a mismatch between the student and the university. How important is it for a student to be prepared to meet the academic rigor of a university, and what might a mismatch result in? Mr. Squires. Well, thank you for that question. It is incredibly important, particularly in the hard sciences. If you are an engineering student who comes into a school and let us say you scored a 650 on the SATs in the math portion, a very good score, but your peers on average scored a 750 and you are in a class that is taught at 750 speed, Physics or Calculus, you are going to fall behind. What some of the research has shown is that oftentimes black students are more likely to major in STEM disciplines at selective schools and then--but also more likely to switch out of those majors. Mismatch is an issue, but I want to say something really quick. I think part of the problem is that we have adopted in this country a college or bust, and particularly an Ivy League or bust attitude that makes people believe that if you do not attend college or an Ivy League institution, that you know, to some extent you are wasting your life. I think that is the wrong way to go about talking about higher education. Again, regardless of what school we are talking about or what institution we are discussing, at the end of the day the admission standards should be consistent across the board, and not based on a person's skin color or ethnic background. Mrs. Foxx. Well, thank you very much for that. Ms. Somin, do you have anything to add to that? Ms. Somin. I thought Mr. Squires gave a very nice summary of the basic concept, and how it applies in the engineering area. I would add that there has been similar empirical work showing mismatch effects in law and on law students eventual ability to pass the bar exam. There has been further work conducted by Eleanor Barber, showing that it affects minority students' ability to obtain graduate degrees and go into careers in academia. Finally, I would add that there is nothing that is unique about mismatch effects to the racial context. When Peter Arcidiacono and his colleagues at Duke University were studying mismatch, they found that students who received legacy preferences in admissions also tended to drift away from science and engineering because they tended to come in with lower average academic credentials than their peers. This is not about race. This is about differences in preparation, affecting your likelihood of success in a particular curriculum. Mrs. Foxx. Well, thank you very much for adding that about the legacy admissions. I think that is useful. Mr. Zhao, you talked about how you lived your American dream. You have worked tirelessly to represent AACE's mission to achieve equal education rights for Asian Americans. Why is this mission still important today, even after the Supreme Court's decision against race-based preferences in admissions? Mr. Zhao. Yes. It is very important that we notice, like U.S. Department of Justice and Education issue the guidance that even encourage the continued use of race and proxies at the national level. In California, the Democrats have reintroduced AC, ACA-7, try to reintroduce race back in the admission of the California school system. As Ms. Somin mentioned, in high schools around the country, they have assault on the meritocracy to cancel the admission test for Thomas Jefferson--exam schools. Basically unfortunately, the advocates of the, you know, racial diversity and the diversity, they have not given up. We have to continue on this fight. Mrs. Foxx. Thank you, Mr. Zhao. Thank you, Mr. Chairman. Chairman Owens. Thank you so much. I would like to recognize now Dr. Adams. Mrs. Adams. Thank you very much and thank you all for your testimony. Mr. Squires, you stated in your written testimony that the highest performing black applicants at Harvard have close to a 60 percent chance of being admitted and for black legacy students, that number rose to 99. When you are talking about high performance students, are you referring to their test score and the grades for admittance? Mr. Squires. Yes. That was in reference to how Harvard categorizes and breaks down the scores of students by decile. I was talking about the ninth and tenth decile. They, they use test scores and grades, correct. Mrs. Adams. Okay. I just want to just note that because a student is not ``high-performing,'' and when we are talking about affirmative action, it does not mean that they do not deserve the chance to have access, and that is really what affirmative action provided for these young people. Let me move on. Doctor or Mr. Hinojosa, the media has portrayed the holding in this case to be that affirmative action has completely been overruled. Some of the witnesses here have interpreted the opinions holding to be even broader, eliminating any consideration of race in higher education at all. Your oral testimony gave us your legal take on the Court's holding. As an advocate who represented UNC student intervenors at the Supreme Court, what does this holding mean to those students and to their interests at UNC? Mr. Hinojosa. It means that racial equity still matters in America. We hear about lots of testimony here today about individuals being treated individually. For 300 plus years, individuals were not treated individually, and those people were black, Native American, brown students among others, even Asian American students for far too long, and they should have opportunity. Just because you cannot consider race, so let us remember, the decision says that the way that Harvard and UNC considered race was unlawful. It does not mean that you still cannot pursue diversity in its broader breadth, including racial diversity, through race-neutral means. What they were concerned, and Chief Justice Roberts was specifically concerned with, was a student getting an automatic bump just because of their race. That actually was not really happening in many places, not even at Harvard and UNC if you look at the real record, but that is what they suggest, you know, are these race-based considerations. For the students, it means having all their talents, all their experiences fully evaluated and them being able to express this in their applications and have that fully considered, and they should not be censored. Mrs. Adams. Okay, I agree. You stated also, that increased funding levels for historically black colleges and universities, HBCUs, Hispanic-serving institutions, tribal colleges and universities, Asian American and Pacific Islander institutions, that they may see a dramatic increase in applicants and admitted students who are no longer able to gain admission into colleges and universities that severely restrict the use of race. Can you talk a little bit more about the impact that restricting the use of race in admission will have on these institutions, and the ways in which these HBCUs, HSIs, TCUs can prepare the universities for the influx of applications? Mr. Hinojosa. Sure. Typically, what follows bans on affirmative action, we know this from Oklahoma, Michigan, California, Texas back in 1997, you have large dips in under- represented students of color. Some of that is because students are no longer applying to universities, because they do not feel like they might not get it, so they are undermatching themselves to other institutions. Others want to feel more welcome, and they may not feel as welcomed at certain universities, especially State flagships and other universities as well. It is imperative that HBCUs and other institutions that you named, and we name in our report, they are going to be experiencing a large influx of applications from students who want to go there for lots of incredibly important reasons. They are incredible institutions and show a lot of promise. They will increase with the applications they receive because students are not applying to other colleges that they may end up applying, but instead apply to HBCUs and the like. Mrs. Adams. Okay. Just quickly, how can admission officers comply with both the SSFA holding and Title IV? Mr. Hinojosa. The holding in what? Mrs. Adams. The SSFA holding and Title, Title VI? Are there any strategies that--or policies that can widen this area for them? Mr. Hinojosa. Yes. We have many of those in our written testimony, and the Department of Education/Department of Justice also lists a number of options. The door is not completely closed to ensuring equal opportunity for all. Mrs. Adams. Thank you. I am out of time. Thank you, I yield back. Chairman Owens. Thank you. I would like to recognize Mr. Good. Mr. Good. Thank you, Mr. Chairman. Thank you to all of our witnesses. Mr. Zhao, a review of the 65 universities that are in the so-called Power Five athletic conferences found that the typical institution has 45 DEI staff members on its payroll. 45 of the typical Power Five institutions, which is four times the typical number of employees devoted to supporting students with special needs. By the way, colleges are increasingly offering, as you know, DEI programs of study for students. Given this growing number of DEI offices and positions on campus, how might that impact discrimination in other aspects of campus life? Mr. Zhao. I want to tell you, China, in China it has been similar since the Cultural Revolution. Colleges and institutions established revolutionary committees to distract the institutions, right? We, I think all, you know, in educational institutions, should be going back to its basics. Its goal to really educate, to make sure the best and brightest, and provide the best education, instead of like, you know, promoting some ideology. That is my take on that. Mr. Good. Focus on education, academic excellence. Is there any return on investment for this spending on DEI positions besides raising tuition costs for the university? Mr. Zhao. I have not seen that. I have seen more negative impact, just like the revolutionary committee did to China about 50 years ago. Mr. Good. Thank you. Mr. Squires, I know this has been talked about today, but can you just characterize the difference for us again between equity and equal opportunity? What is the difference when you use that term ``equity'' and what the goal of that is, versus equal opportunity? Mr. Squires. The way equity is typically used in sort of common parlance is suggesting that people from all different types of backgrounds end up in the same place. The actual definition of equity is the consistent and impartial application of a particular standard. The equality of opportunity, again to me you are talking about being able to bring people from different backgrounds, and again, subject them to the same types of standards. For instance, a city may say we want to see SAT scores improve. We will provide free testing at high schools across the city. Those types of things provide equal opportunities. Equity is when you turn around on the back end and say, and again particularly in the college context and say okay, we see that everyone is not coming in with the same types of score. Now we are going to socially engineer the demographic balance on the back end. Mr. Good. I appreciate that, and I would submit that the focus on equity is perpetuating the harm done from previous years of discrimination and a lack of equal opportunity. Would you suggest that those who support equal opportunity should also support school choice? Mr. Squires. Absolutely. I believe school, education choice, whether through the expansion of charter schools, vouchers, and particularly education savings accounts have to be one of the highest priorities as we move forward in a world post-preferences. A lot of people like to talk about race as it relates to higher education. Here is how the interaction of race, class, education, and politics actually works today. Black progressives, particularly politicians and the media, will rail against school choice on the K through 12 level, particularly vouchers, oftentimes being supported by teachers' unions. They send their own children to private schools. Mr. Good. Right. Mr. Squires. Right. They summer on Martha's Vineyard, and then when it is time to apply to Harvard, they turn around and cite education disparities in the inner city to justify why their children need racial preferences. To me, if anyone wants to talk about race, education, and outcomes, and they are not for education choice, I think that is a big problem. I would submit, I will make a quick policy suggestion for the Committee's hearing. I think any elected official, regardless of their jurisdiction, who stands against school choice should be required to send their child to the lowest- performing school in their district, because if the schools are not good enough for your child, then they should not be good enough for mine neither. Mr. Good. Well said, Mr. Squires, and I encourage everyone on the Committee to support my Choice Act, which allows Federal dollars to go and follow the child to the educational opportunity of their choice, the parents' choice, and particularly obviously for those who are of lower income. Last question. Ms. Somin, thank you for being with us today. Fairfax County in Virginia, the State where I am from, has moved toward equitable grading. Could you talk briefly about that equitable grading and the harm that is being done from that? Ms. Somin. I am not familiar with the policy. Mr. Good. Okay. Well equitable grading is, its stated goal is to combat institutional bias and eliminate racial disparities in grade outcomes, and it removes grade penalties for late assignments. I see I am out of time as well. I yield back, Mr. Chairman. Chairman Owens. Thank you so much, appreciate that. I would like to now recognize Mr. Courtney. Mr. Courtney. Thank you, Mr. Chairman. Mr. Hinojosa, one of the traditional strengths of our system of law is common law as well as legislation, is the principle of legal certainty, which is that to the--it has been expressed is that the law must be accessible and so far as possible intelligible, clear and predictable. I mean people rely, in terms of just organizing their lives and their enterprises, in terms of just having clear signals from courts and legislative bodies, in terms of following what I think has really always been a really important and positive principle. Your testimony on page five notes that for those who think that the Court made the admissions process completely race blind, in fact as you point out, there is language in there that suggests that there still is under the law the ability to conduct admissions in terms of how race has affected an applicant's life, be it through discrimination, inspiration or otherwise. I have been--I was home in August and talking to some educators in higher education, as well as, you know, other secondary school institutions in Connecticut. I have to tell you, the principle of legal certainty was completely trampled by this Court. Setting aside all of the political arguments that are here today, I mean, the fact of the matter is that if you are an admissions office right now trying to figure out, you know, with this decision about how to make choices in terms of applications, I mean it is really almost just chaos in terms of just trying to decipher this. I mean they are talking about actually bringing on legal counsel to really screen sort of what the Court actually left them with in terms of this decision. I was wondering, again I know the DoE is talking about trying to get some guidance out there. The fact of the matter is this Court has really left a mess as a result of this decision, regardless of how people feel about the merits of affirmative action. Mr. Hinojosa. Yes, and that mess started with the Court's own unjust, tortuous interpretation of the Equal Protection Clause, even suggesting that Brown v. Board somehow would support excluding black and brown students, highly qualified black and brown students from our Nation's most selected institutions. That is sad, you know. I carry a copy of the same pocket guide that I got from the University of Texas School of Law when I went there back in the 1990's, and but what is most troubling about the more recent opinion is that you have Chief Justice Roberts almost trying to dictate educational policy. He is a chief justice. He should limit his opinion to the issues that are before him, but he did not do that, and he started trying to write, you know, policy, and which has thrown confusion. It is been made even worse by organizations like Students for Fair Admissions, suggesting that the whole process has to be race blind. That absolutely is not. If Chief Justice Roberts, just as an example, if Chief Justice Roberts says yes, you can consider race as a notion of resilience and the like, right, and overcoming discrimination. How can you talk about racial discrimination, overcoming racial discrimination and somehow have to divorce race from overcoming race discrimination. It does not make sense. When you talk to lawyers, they will tell you that is what the opinion means, and that is why we have some chaos that has been created in many board rooms at colleges and universities, and in K12. Mr. Courtney. Well again, this seems to be a trademark of the Roberts court. I mean if you look at the Dobbs decision, I mean it is the same situation that is happening in hospitals and clinics all across the country, where OB/GYNs are feeling the need to have legal counsel to advise them about how to practice medicine, because again, it is just they created all these cross-currents of possible criminal liability, as well as professional liability in terms of just stepping outside lines that are not clear, in terms of just how they are supposed to practice medicine. Again, moving forward though, I mean it is clear that in my opinion, Congress needs to act to set some clarity, so that we can again allow our legal system to achieve a goal that has always been, you know, recognized as essential. Mr. Hinojosa. Yes, and we need to make sure that students understand that their full experiences should be represented, and that universities shouldn't shy away from that. In fact, they might be running afoul of students' First Amendment and Fourteenth Amendment rights if they try to censor students' stories simply because they're related to race. Chairman Owens. Thank you. I would like to now recognize Mr. Moran. Mr. Moran. Thank you, Mr. Chairman. Ms. Somin, I want to come to you just for a little bit of response for Mr. Hinojosa's criticism of Chief Justice Roberts. When you look at his writings, and he said in particular in the most recent opinion, where folks were talking today in the--about the dissenting opinion, that he said the dissenting opinion defends ``a judiciary that picks winners and losers based on the color of their skin.'' What would be the consequences if our judicial system applies different laws based on race? Ms. Somin. I agree that that would be very concerning. Individuals should be treated as individuals when they come before the law, and a judiciary that does not do that would be--I would be very concerned about it. Mr. Moran. Last week, the Students for Fair Admissions filed another lawsuit against West Point Military Academy, that is the military academy at West Point and the Department of Defense, citing the military academy's use of race as a preference in admissions. In fact, West Point publishes racial composition goals for every class, and these goals are adjusted yearly to reflect enlisted population. During the Students for Fair Admissions Harvard and UNC oral arguments, what was the discussion around the military academy's race preferences? Ms. Somin. There was a discussion concerning whether this was the kind of compelling interest that would evade scrutiny, that would allow the military academies to use race. Mr. Moran. Given the Students for Fair Admissions decision, how might the courts rule in the West Point Military Academy lawsuit? Do you have an opinion about that? Ms. Somin. The Students for Fair Admissions decisionmakes it clear that what is known as strict scrutiny applies to the use of race in admissions everywhere, including the military academies. Any use of race must serve a compelling interest and must be narrowly tailored to serve that compelling interest. That is, the institution cannot use race any more than is necessary. In the military context, what that compelling interest might look like might look a little different than the civilian context. Nonetheless, given the toughness of the standard enunciated in Students for Fair Admissions, I am skeptical that the military academies will be able to meet that heavy burden. Mr. Moran. Mr. Squires, I want to come to you now for a few questions if you do not mind. In an article that you and your colleagues from Heritage wrote titled ``Created Equal, A Road Map for an America Free of the Discrimination of Racial Preferences,'' it states ``Any racial preferences will provide opportunities for policymakers to focus on often-neglected factors that contribute to student success.'' My question to you generally is what are those neglected factors that you were referring to and your colleagues when you wrote that article? Mr. Squires. I believe what we were referring to in our special report that came out after the decision particularly was around family and family structure, and as I said, the research is conclusive at this point, that children raised in two parent homes by married parents tend to do better on a host of educational and social outcomes, better than any other family arrangement. For some reason, this is not seen as a priority oftentimes with respect to our policy, and I think it is something that we need to discuss more. Obviously we cannot fix this in one particular generation, but that is part of the reason I talked about the success sequence, so that children way before they start a family, understand that they have a sense of agency. If they finish school, get a job, get married before they have children, their chances of being in poverty will be in the single digits. I think it is something that every student should know before they graduate from high school. Mr. Moran. You anticipated my very next question, because I wanted to raise that quote from your testimony, because it was astonishing to me to look at that and know that that is in fact a great recipe and a great formula to getting out of poverty, is to stay in school, to secure stable employment, to get married before you have children. Those factors are much more prominent than anything else, and so that traditional family environment is so important to raise our kids up and to allow them then to succeed, and to do much better than we did. That was one of the things as I look back on my upbringing, that I credit a lot of where I am today to is---- Certainly was not money, certainly was not influence, but it was the stability and the security of loving parents that guided me through that time, to understand that my decisions would help me get further in life by working hard and by serving others and by instilling good values in me. Would you agree that that is a good formula ultimately to lead to success in this world? Mr. Squires. Absolutely. If your child--if the first time your child is read to is when they start on their first day of kindergarten, something has gone wrong, regardless of what skin color that child is. Home environment matters a great deal as it relates to education, and I think of my own father, who was the chief educational officer in our home, who stayed on me consistently because he refused to allow me to settle for a B+ when he knew that I could be an A student. Students need obviously quality schools with dedicated teachers and administrators, but they also need to have the types of home environments that cultivate a sense of wonder and a lifelong love of learning. Mr. Moran. I love what you just said, and I will yield back by finishing, by saying this. I started my day out this morning talking to my first grader and my second grader back home on FaceTime, getting them to show me the books they had checked out from the library and talking about their reading levels, and what they needed to accomplish this week in school. It is very important. I yield back. Chairman Owens. Thank you. I would like to now recognize Ms. Leger Fernandez. Ms. Leger Fernandez. Thank you so very much, Mr. Chairman and Ranking Member and our witnesses. In New Mexico in Revo Mexico, we pride ourselves on our diversity. It is the foundation of our state's unique and beautiful culture and actually looked at across the country as what could a diverse nation look like. Well, it looks like New Mexico, and we are very proud of that. New Mexico's colleges and universities, while they also reflect that diversity, we have 30 minority serving institutions including four tribal colleges. I am here to say it wasn't always that way. Latino and Native American communities have to fight for their rightful place in our higher education system, because we know it is not just how much love you have at home, it is how much education you can get to go on and accomplish the things like sitting in Congress. Under the GI Bill, this is a story I say often, because people do not think about it when applied to New Mexico. Under the GI Bill, my father and other Hispanos and Jews could go to our local university. Guess what? The white only fraternity barred them, banned them. We can see that there has been an indisputable State of mind, active racism, active discrimination. What happened to that university? It became the country's first university with a Latino president at its head, and at UNM, which is our flagship university, it went and--went from about a 31 to about a 51 percent Latino population in 25 years because they worked at it. They wanted their universities to reflect their State. You have to put in the hard work to make sure that our institutions reflect like I like to quote John Adams, in miniature the diversity that is our country. That is our Founding Father who recognizes the importance of diversity. We have seen study after study that economic, education, Democrats, democratic benefits that flow when you have diversity, that in so many different ways the Supreme Court and Students for Fair Admissions v. Harvard ignored that fact. I want to thank you, Mr. Hinojosa, for the amazing work you did to bring those benefits to life. The decision is the decision. There are those of us who do not agree with it, but we must live by it. That does not mean that we cannot still work to diversify our educational institutions. Can you tell us in Congress what we can do to make sure there is more diversity at our colleges? Mr. Hinojosa. Yes, and I do want to say I am a New Mexico State University grad, to go Aggies. Ms. Leger Fernandez. Oh, maybe not flagship. One of our important universities, how about that? Mr. Hinojosa. The other flagship, as we like to say. There are lots of options for universities, and they have to think of things comprehensively, right? Affirmative action was never the silver bullet, right? It was not going to get us where we needed to go. Again, it was not these automatic admissions. There are plenty of extremely talented students across races and backgrounds who have been admitted through affirmative action programs. Now we do not have that as an option at most universities. We still have it available at the military academies and possibly others for other reasons. There are still other opportunities. There are the analyzing race-neutral programs such as percentage plans that were mentioned earlier in Washington State. Students attending their schools should be able to attend their State flagships. These are State flagships that should be representative of the State. We are not talking about racial balancing; we are talking about access in a true democracy. We are talking about need-based financial aid that needs to be increased considerably, climate support. These DEI programs that were mentioned earlier, those are actually pivotal to providing the support and building a healthy, inclusive climate that does help broaden perspectives across campuses and the like. There are many things that Congress can do. We have a lot of options in our written testimony about how Congress can also help move the bar to ensure that racial equity is not written out of policy in our universities and institutions. Ms. Leger Fernandez. In your written testimony that you just referenced, you also pointed out the importance of Pell grants, because Pell grants will help students from diverse socioeconomic, diverse racial backgrounds but with socioeconomic need access. I would point out that House Republicans proposed earlier this year to reduce Pell grant funding by 22 percent. Imagine that, 22 percent, 80,000 Pell grant opportunities go away. I am going to have to ask you to perhaps elaborate on that in writing, because I have run out of time. That is a way where we are cutting opportunities across our country for our most deserving students. Thank you, Mr. Chairman. I yield back. Chairman Owens. Thank you. I now recognize Mr. Scott. Mr. Scott. Thank you, Mr. Chairman. Mr. Squires, you mentioned that race should not be the only measure of diversity. I think everybody would agree with that. You want to look at all kinds of diversity. Does the college have the right to try to have a truly diverse college student, students because they are going to learn from each other and they are trying to be prepared for a diverse workforce. Does a college have a right to try to have a diverse student body? Mr. Squires. I think colleges have a right to determine admission standards. Again, I am not opposed to a diverse student body. I am actually very much in favor of a diverse student body. Again, part of that may be ethnic. Again, a big part of it is in terms of---- Mr. Scott. There is value, there is value to diversity of the student body because students are learning from each other, and you are not going to learn much from a socioeconomically homogeneous student body. Mr. Squires. Well, a selective college has 100 students equally broken up into black, white, Hispanic and Asian, and all 100 went to Sidwell Academy. I am not sure how much diversity you are actually going to get. You may have people who look differently, but in terms of their life experiences they very much may be very much the same. I think---- Mr. Scott. They should try to diversify that? Mr. Squires. What I am saying is people on the outside will look at say this is very much a diverse class, and what I am saying is the people will look the same. Mr. Scott. Okay. You can define diversity, but I think you are trying to say we should have as diverse as possible. Ms. Somin, you mentioned that the military academies should be diversified. Can you show why they need to be diversified and why that argument would not apply to other colleges? Ms. Somin. What I said was that the military, the compelling interest in diversity may look a bit different in the military context than the civilian context, that said strict scrutiny still applies to any cases involving the military academies. I am not certain that the military academies will be able to prove though that their use of diversity is in fact a compelling interest, and that the way that they are using race is narrowly tailored to serve that compelling interest. Mr. Scott. You do not think diversity in the military academies is a compelling State interest? Ms. Somin. That will need to be developed in the course of litigation. I agree that whether it is compelling, the analysis will look a little bit different than in a civilian context. The legal standard they have to meet is still high. Mr. Scott. If a plaintiff could prove that an admissions test is in fact discriminatory, should it be allowed? Ms. Somin. If a plaintiff can prove that a test is discriminatory, intentionally so, then that violates Title VI and possibly the Constitution at a public university. Mr. Scott. A legacy program where the State like Virginia had a policy that essentially prevented most African-Americans from attending predominantly white institutions like UVA and Virginia Tech, would a legacy program where they would not benefit having grandparents that went there, should that legacy program with a discriminatory impact against African-Americans be allowed? Ms. Somin. Under Title VI, a program has to be intentionally discriminatory to be prohibited. The plaintiffs or challengers would have to show that a particular program is intentionally discriminatory. Mr. Scott. If it is discrimination but not intentional---- Ms. Somin. I would distinguish between programs that have a disparate impact, that is those that have an adverse effect on a particular racial group, but that are not necessarily intended to be discriminatory. Title VI is not a disparate impact statute. It is what is known as a disparate treatment statute. Mr. Scott. Mr. Hinojosa, we know these tests are discriminatory, that legacy is discriminatory, athletic admissions can be discriminatory. Wealthy donors get in at a higher rate. When people talk merit, how fair is it to have merit without offsetting all those discriminatory impacts with affirmative action? Mr. Hinojosa. Yes. I think certain parts of America, some of which are represented here today at the hearing, have such a jaded view of what meritocracy really is about and what merit is about, trying to suggest that it is anchored in many of these systemic, oppressive barriers such as legacy admissions and such as standardized test scores that really tell you nothing else about students. They are simply used as barriers to admission, to prevent certain people, including the black and brown communities, Native American communities, from attending certain universities. It helps them excuse it and perhaps to sleep a little better on it, suggesting these are objective. Mr. Scott. Sorry. My time is up. Well, you indicated that the Supreme Court did allow race to be used to a certain extent. Can you elaborate on that? Mr. Hinojosa. Yes. The Supreme Court held not that affirmative action itself is completely done away with. Race- based admissions programs in the way that the Supreme Court suggested that they are operated, cannot, you know, continue in the way that Harvard and UNC were doing it. They can occur still at military academies, because of their national security interests. There might be other interests that are defined as compelling. The Court said that the way that Harvard and University measured their compelling interest in diversity was not measurable, that it was not linked to their specific goals, and that they had no end time limit on. If a university was to identify compelling interest, for example if a university wanted to make sure that all its doctors were leaving a medical school community and they were leaving certain parts of the community---- Chairman Owens. I am going to have to interrupt. You have to close up. Thank you so much, appreciate that---- Mr. Hinojosa. All right. Thank you, Chairman. Chairman Owens. Okay. I would like to first of all thanks again, everybody, for answering those questions, and I wouldd like to now recognize Mr. Scott for his closing statement. Mr. Scott. Thank you. Mr. Chairman, I think it is clear that colleges have a right to have a diverse, and diverse in many ways student bodies. They learn from each other. The experience of a 4-year on campus liberal arts degree is such as that you come out as a different person, and a lot of that transformation has nothing to do with what happens in the classroom. It is working with the other students, and if you have a homogeneous student body, you are not going to learn nearly as much from your students as you have from if you have a diverse student body, and that is part of the educational process. We have heard some of the solutions, school choice. Let me just say just very briefly. School choice helps a few people that can choose, but it diverts money from the overwhelming majority and some of us are trying to help all students, not just a privileged few. The so called merit that we are talking about, and Mr. Hinojosa has gone into good detail on this, most of that is in fact discriminatory. The standardized tests have been studied and they have discriminatory impact against African-Americans. You can say whether it is intentional or not, but that is a fact. It is not fair to have a discriminatory test, discriminatory legacy admissions when African-Americans could not, because of public policy, go to predominantly white institutions in Virginia, and therefore cannot today benefit by having a grandparent that graduated from UVA or Virginia Tech. That should not be a factor. The fact that your parents can have, make huge donations, I think the wealth disparity between black and white is well-known. All of those factors have discriminatory impact, but they were offset by affirmative action. Now without the affirmative action, all you have are these discriminatory impacts, and that is a clear violation of Title VI. It is discrimination, and we have to do something about it. Now I do not know what we are going to do about it. You have got to have some kind of standards. If all the standards you come up with are discriminatory, that is a problem. If you want to know what to do, ask the Supreme Court. They are the ones that came up with this idea, not me. You cannot end up with just factors that have a discriminatory impact and then try to hide behind the fact that it was not intentional and therefore not actionable under Title VI because we don't have a private right of action. I want to thank our witnesses, particularly Mr. Hinojosa, who pointed out the discriminatory impact of what is left after affirmative action, and the challenges we have to make sure that equal opportunity is alive and well. Chairman Owens. Thank you again for our witnesses here. This is such an important topic. Let me just kind of set the record straight, for those who are not aware of this. Failure is not in the DNA of black Americans. Black Americans can think as well, if given the same opportunity, as any other American. For us to enter this conversation thinking that black Americans because they are black and because they had slavery 200 years ago are inherently less intelligent is indeed racist. Do not, and I will kind of go back to a real quick point. My dad was born in 1928. Segregation was very strong in those days. His dad was--dropped out of second-third grade and went on to be a business owner. My dad in 1950 got his Ph.D. at Ohio State in Agronomy and went on to make circles around men and women at that same time that were not his color because he was taught about meritocracy. That generation was taught that if you want to go out and win, you work harder, you study harder, you run harder, and you do not feel sorry for yourself if bad things do happen. You man up, woman up, grit and get through it. Today, if that same success story would be to my dad, they would say he got through because of affirmative action, which is an insult to him and everybody else before and after him. We have an issue, a problem right now where black Americans, 75 percent in 2017 of black boys in the State of California could not pass standard reading and writing tests. Do you think they'll ever sit in this room succeeding? Do you think they will ever go to college or whatever and succeed? No. Just recently, a couple of days ago, Baltimore, 13 districts, zero proficiency in math. Now affirmative action could get them to a college, but guess what is going to happen? They are going to fail. They are going to be upset. They are going to think the system is against them because they have not been prepared. We are going to look at the Super Bowl game this coming year. No one will ever talk about the fact that it is discrimination and meritocracy, because they know the best, the best talent is on the field that day. Those guys who got on that field, whether they are black, white, Hispanic, it does not matter how tall or short they are. They are there because they have proved themselves to be the best prepared to win the game. We can do the same thing intellectually. Do not allow this country to go down that pathway of thinking because of our color, we cannot think, we cannot compete. It is very, very--what is the word I am looking for-- insulting. I want to thank you guys for this conversation. This very helpful. I want to thank my colleagues. For America to have this process of thinking through this what we are going through right now, for us to be on the other side of affirmative action, which for 60 years has been a detriment to too many good people, we are now in the process of seeing how can we now make sure that we have a level playing field, that our kids come out of the school system they can compete, feel good about themselves and when they get to that position of success, never feel they have to apologize because they were given a head start because of their color. I am excited about this process, and we are going to find some solutions. I would like to again thank our witnesses for taking the time to testify before the Subcommittee today, and without objections and no further business, this Subcommittee stands adjourned. Thank you so much. [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [Whereupon, at 12:07 p.m., the hearing was adjourned.] [all]

usgpo

2024-10-08T13:26:48.642984

BILLS

BILLS-118s4713is

Inventor Diversity for Economic Advancement Act of 2024; IDEA Act

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4713 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 4713 To amend chapter 11 of title 35, United States Code, to require the voluntary collection of demographic information for patent inventors, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES July 11 (legislative day, July 10), 2024 Ms. Hirono (for herself, Mr. Tillis, Mr. Durbin, Mr. Coons, Mr. Blumenthal, Mr. Padilla, Ms. Klobuchar, and Mr. Grassley) introduced the following bill; which was read twice and referred to the Committee on the Judiciary _______________________________________________________________________ A BILL To amend chapter 11 of title 35, United States Code, to require the voluntary collection of demographic information for patent inventors, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Inventor Diversity for Economic Advancement Act of 2024'' or the ``IDEA Act''. SEC. 2. COLLECTION OF DEMOGRAPHIC INFORMATION FOR PATENT INVENTORS. (a) Amendment.--Chapter 11 of title 35, United States Code, is amended by adding at the end the following: ``Sec. 124. Collection of demographic information for patent inventors ``(a) Voluntary Collection.--The Director shall provide for the collection of demographic information, including gender, race, military or veteran status, and any other demographic category that the Director determines appropriate, related to each inventor residing in the United States who is listed with an application for patent, that may be submitted voluntarily by that inventor. ``(b) Protection of Information.--The Director shall-- ``(1) keep any information submitted under subsection (a) confidential and separate from the application for patent; and ``(2) establish appropriate procedures to ensure-- ``(A) the confidentiality of any information submitted under subsection (a); and ``(B) that demographic information is not made available to examiners or considered in the examination of any application for patent. ``(c) Direct Submission by Inventors.-- ``(1) In general.--In carrying out subsection (a), the Director is authorized to implement a system to collect demographic information directly from an inventor on a voluntary basis. ``(2) Avoiding repeated collection.--In implementing a system under paragraph (1), the Director shall make reasonable efforts to design the system to avoid repeated collection of the same information from each inventor on subsequent applications for patents. ``(3) Collection of contact information.--In implementing a system under paragraph (1), the Director shall design the system to capture the information necessary to directly reach inventors. ``(d) Relation to Other Laws.-- ``(1) Freedom of information act.--Any demographic information submitted under subsection (a) shall be exempt from disclosure under section 552(b)(3) of title 5. ``(2) Federal information policy law.--Subchapter I of chapter 35 of title 44 shall not apply to the collection of demographic information under subsection (a). ``(e) Publication of Demographic Information.-- ``(1) Report required.--Not later than 18 months after the date on which the Director publishes in the Federal Register a notice relating to the demographic information described in subsection (a), in accordance with section 552a(e)(4) of title 5, and not later than January 31 of each year thereafter, the Director shall make publicly available a report that, except as provided in paragraph (3)-- ``(A) includes the total number of patent applications filed during the previous year disaggregated-- ``(i) by demographic information described in subsection (a); and ``(ii) by technology class number, technology class title, and State of residence of the inventor in the United States; ``(B) includes the total number of patents issued during the previous year disaggregated-- ``(i) by demographic information described in subsection (a); and ``(ii) by technology class number, technology class title, and State of residence of the inventor in the United States; and ``(C) includes a discussion of the data collection methodology and summaries of the aggregate responses. ``(2) Data availability.--In conjunction with issuance of the report under paragraph (1), the Director shall make publicly available data based on the demographic information collected under subsection (a) that, except as provided in paragraph (3), allows the information to be cross-tabulated to review subgroups. ``(3) Privacy.--The Director, in making publicly available the report under paragraph (1) and the data under paragraph (2)-- ``(A) subject to subparagraph (B) of this paragraph, shall anonymize any personally identifying information related to the demographic information collected under subsection (a); and ``(B) may omit any personally identifying information that cannot reasonably be anonymized. ``(f) Biennial Report.--Not later than 2 years after the date on which the Director publishes in the Federal Register a notice relating to the demographic information described in subsection (a), in accordance with section 552a(e)(4) of title 5, and not later than March 31 of every other year thereafter, the Director shall submit to Congress a biennial report that evaluates the data collection process under this section, ease of access to the information by the public, and recommendations on how to improve data collection.''. (b) Technical and Conforming Amendment.--The table of sections at the beginning of chapter 11 of title 35, United States Code, is amended by adding at the end the following: ``124. Collection of demographic information for patent inventors.''. <all>

usgpo

2024-10-08T13:26:23.190989

BILLS

BILLS-118hres1469ih

Ensuring accountability for key officials in the Biden-Harris administration responsible for decisionmaking and execution failures throughout the withdrawal from Afghanistan.

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H. Res. 1469 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. RES. 1469 Ensuring accountability for key officials in the Biden-Harris administration responsible for decisionmaking and execution failures throughout the withdrawal from Afghanistan. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES September 19, 2024 Mr. McCaul submitted the following resolution; which was referred to the Committee on Foreign Affairs, and in addition to the Committee on Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned _______________________________________________________________________ RESOLUTION Ensuring accountability for key officials in the Biden-Harris administration responsible for decisionmaking and execution failures throughout the withdrawal from Afghanistan. Whereas, throughout the Biden-Harris administration, key White House, National Security Council, Department of State, and Department of Defense officials prioritized the politics and optics of the withdrawal from Afghanistan over the security of United States personnel and civilians on the ground and failed to plan for foreseeable contingencies, causing a chaotic, precipitous withdrawal that resulted in the death of 13 servicemembers and the wounding of 45 servicemembers in the Abbey Gate terrorist attack on August 26, 2021; Whereas, in 2020, the Trump administration negotiated a conditional plan to withdraw from Afghanistan called ``The Agreement for Bringing Peace to Afghanistan'', commonly known as the Doha Agreement, which required the Taliban to cease terrorist activities, renounce linkages with al Qaeda, reduce violence, establish a ceasefire, and participate in Afghan-to- Afghan negotiations with the Government of Afghanistan; Whereas the Biden-Harris administration was determined to withdraw from Afghanistan regardless of the Doha Agreement and the costs of withdrawal; Whereas, in 2021, under the Biden-Harris administration, Special Representative for Afghanistan Reconciliation, Zalmay Khalilzad, baselessly asserted the Taliban would honor their commitments and respect basic human rights; Whereas, in 2021, President Biden selected National Security Advisor, Jake Sullivan to conduct an interagency review of the policy of the United States toward Afghanistan, including the Taliban's compliance with the Doha Agreement; Whereas the review process led by National Security Advisor Sullivan, Deputy National Security Advisor Jonathan Finer, and Homeland Security Advisor Elizabeth Sherwood-Randall completely disregarded the failure of the Taliban to comply with the Doha Agreement, did not seek input from key government officials, and blatantly ignored warnings from senior national security experts and allies of the United States that a complete withdrawal of troops would cause a total unraveling and collapse of the Government of Aghanistan; Whereas President Biden, supported by Vice President Harris, issued a ``go-to- zero order'' without any regard for the safety of Americans and without making appropriate plans for noncombatant evacuation operations; Whereas the Department of State's leadership responsible for the safety of embassy personnel and civilian evacuation plans included Secretary of State Antony Blinken, Deputy Secretary of State Brian McKeon, and Counselor for the Department of State Derek Chollet; Whereas, during the military withdrawal from April to July 2021, Secretary of State Blinken, Ambassador Ross Wilson, other Department of State officials, and the National Security Council willfully disregarded warnings of the Taliban's imminent takeover in Afghanistan and instead increased the footprint of Embassy Kabul rather than plan for a noncombatant evacuation operation; Whereas, in early August 2021, as the Taliban made gains across Afghanistan, Secretary of Defense Lloyd Austin, Under Secretary of Defense for Policy Colin Kahl, and other senior officials purportedly advised that positioning United States military forces to assist with a noncombatant evacuation operation was not immediately necessary, contrary to urgent warnings from United States military personnel on the ground; Whereas Secretary of State Blinken and his State Department did not call for a noncombatant evacuation operation until the Taliban began marching into Kabul on August 15, 2021; Whereas Secretary of State Blinken and his State Department had not made determinations about who would be eligible for evacuation, and had not effectuated agreements with third countries to serve as transit points prior to the noncombatant evacuation operation; Whereas the willful refusal to plan for a timely civilian evacuation caused chaos in Kabul and an untenable security situation at the Hamid Karzai International Airport; Whereas, on August 26, 2021, the Biden-Harris administration's chaotic, precipitous withdrawal, willful refusal to properly plan for a noncombatant evacuation operation, and decision to rely on the Taliban to run checkpoints surrounding the airport resulted in a terrorist attack by ISIS-K at Abbey Gate that killed 185 people, including 13 United States servicemembers; Whereas the suicide bomber at Abbey Gate was among thousands of militants released by the Taliban from Afghan prisons as they marched on Kabul; Whereas, in August 2021, the Biden-Harris administration left behind approximately 1,000 Americans; Whereas the Biden-Harris administration left behind $7,000,000,000 worth of United States weapons and up to $57,000,000 in United States currency that could be used by the Taliban and other terrorist regimes; Whereas President Biden, Vice President Harris, National Security Advisor Sullivan, White House Press Secretary Jen Psaki, White House National Security Communications Advisor, and Defense Department Spokesperson John Kirby, and the Department of State Spokesperson Ned Price repeatedly and materially misrepresented to the people of the United States the state of affairs in Afghanistan and the withdrawal; Whereas, since the Biden-Harris administration's withdrawal, the Taliban has carried out brutal reprisal killings of Afghan Government officials and individuals who assisted the United States and our allies, and created a safe haven for terrorist groups who seek to harm the United States; Whereas the Biden administration had been warned the precipitous withdrawal would cause women's rights to ``go back to the Stone Age'', and since the withdrawal, women's rights have been rescinded and child marriages have skyrocketed; Whereas the Biden-Harris administration's catastrophic withdrawal has emboldened our adversaries, and once again made the United States vulnerable to terrorist attacks; Whereas the Biden-Harris administration refuses any accountability for the disastrous withdrawal; instead, Under Secretary of Defense Colin Kahl said ``Americans should be immensely proud'' and Press Secretary Psaki stated the withdrawal was ``a success''; Whereas Vice President Harris said she was the last person in the room before President Biden made the final decision on the withdrawal and was described by an advisor as being ``100 percent all in'' on the decision; and Whereas our Nation's most senior leaders, including the President and Vice President, failed in their responsibilities on behalf of the people of the United States and have not been held accountable for the death and destruction their failures caused: Now, therefore, be it Resolved, That the House of Representatives condemns each of the following individuals for their role in the Biden-Harris administration's withdrawal from Afghanistan and noncombatant evacuation operation, which led to the injury and death of United States servicemembers, injury and death of Afghan civilians, abandonment of American civilians and our Afghan allies, and harm to the national security and international stature of the United States: (1) Joseph R. Biden, President of the United States. (2) Kamala D. Harris, Vice President of the United States. (3) Jake Sullivan, National Security Advisor. (4) Jonathan Finer, Assistant to the President and Deputy National Security Advisor. (5) Elizabeth Sherwood-Randall, Assistant to the President for Homeland Security and Deputy National Security Advisor. (6) John Kirby, White House National Security Communications Advisor; former Spokesperson, the Department of Defense. (7) Jen Psaki, Former Press Secretary, White House. (8) Antony Blinken, Secretary, the Department of State. (9) Brian McKeon, Former Deputy Secretary of State for Management and Resources, the Department of State. (10) Ross Wilson, Ambassador and former Chief of Mission to United States Embassy Kabul, Afghanistan, the Department of State. (11) Zalmay Khalilzad, Ambassador and former United States Special Representative for Afghanistan Reconciliation, the Department of State. (12) Ned Price, Deputy to the United States Representative to the United Nations and former Spokesperson, the Department of State. (13) Lloyd Austin, Secretary, the Department of Defense. (14) Derek Chollet Chief of Staff to the Secretary, the Department of Defense; Former Counselor, the Department of State. (15) Colin Kahl, Former Under Secretary of Defense for Policy, the Department of Defense. <all>

usgpo

2024-10-08T13:26:48.347035

BILLS

BILLS-118hr9328ih

K2 Veterans Total Coverage Act of 2024

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9328 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9328 To amend title 38, United States Code, to establish additional presumptions of service connection for certain diseases that occur in veterans who suffered toxic exposure while serving at Karshi Khanabad Air Base, Uzbekistan. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 9, 2024 Mr. Green of Tennessee (for himself and Mr. Lynch) introduced the following bill; which was referred to the Committee on Veterans' Affairs _______________________________________________________________________ A BILL To amend title 38, United States Code, to establish additional presumptions of service connection for certain diseases that occur in veterans who suffered toxic exposure while serving at Karshi Khanabad Air Base, Uzbekistan. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``K2 Veterans Total Coverage Act of 2024''. SEC. 2. PRESUMPTION OF SERVICE CONNECTION FOR CERTAIN DISEASES THAT OCCUR IN VETERANS WHO SERVED AT KARSHI KHANABAD AIR BASE, UZBEKISTAN. Section 1120(b) of title 38, United States Code, is amended-- (1) by redesignating paragraph (15) as paragraph (16); and (2) by inserting, after paragraph (14), the following new paragraph (15): ``(15) In the case of a veteran who served at Karshi Khanabad Air Base, Uzbekistan, the following diseases, in addition to those diseases specified in this subsection: ``(A) Any cancer. ``(B) Any thyroid disease. ``(C) Any bone disease. ``(D) Any cardiovascular disease. ``(E) Any skin disease. ``(F) Any neurological disease. ``(G) Any reproductive disease. ``(H) Any respiratory disease. ``(I) Any endocrine disease. ``(J) Any liver disease. ``(K) Any kidney disease. ``(L) Cataracts.''. <all>

usgpo

2024-10-08T13:26:33.988070

CFR

CFR-2024-title24-vol4

Housing and Urban Development

United States National Archives and Records Administration Office of the Federal Register

[Title 24 CFR ] [Code of Federal Regulations (annual edition) - April 1, 2024 Edition] [From the U.S. Government Publishing Office] [[Page i]] Title 24 Housing and Urban Development ________________________ Parts 700 to 1699 Revised as of April 1, 2024 Containing a codification of documents of general applicability and future effect As of April 1, 2024 Published by the Office of the Federal Register National Archives and Records Administration as a Special Edition of the Federal Register [[Page ii]] U.S. GOVERNMENT OFFICIAL EDITION NOTICE Legal Status and Use of Seals and Logos The seal of the National Archives and Records Administration (NARA) authenticates the Code of Federal Regulations (CFR) as the official codification of Federal regulations established under the Federal Register Act. Under the provisions of 44 U.S.C. 1507, the contents of the CFR, a special edition of the Federal Register, shall be judicially noticed. The CFR is prima facie evidence of the original documents published in the Federal Register (44 U.S.C. 1510). It is prohibited to use NARA's official seal and the stylized Code of Federal Regulations logo on any republication of this material without the express, written permission of the Archivist of the United States or the Archivist's designee. Any person using NARA's official seals and logos in a manner inconsistent with the provisions of 36 CFR part 1200 is subject to the penalties specified in 18 U.S.C. 506, 701, and 1017. Use of ISBN Prefix This is the Official U.S. Government edition of this publication and is herein identified to certify its authenticity. Use of the 0-16 ISBN prefix is for U.S. Government Publishing Office Official Editions only. The Superintendent of Documents of the U.S. Government Publishing Office requests that any reprinted edition clearly be labeled as a copy of the authentic work with a new ISBN. U . S . G O V E R N M E N T P U B L I S H I N G O F F I C E ------------------------------------------------------------------ U.S. Superintendent of Documents Washington, DC 20402-0001 http://bookstore.gpo.gov Phone: toll-free (866) 512-1800; DC area (202) 512-1800 [[Page iii]] Table of Contents Page Explanation................................................. v Title 24: SUBTITLE B--Regulations Relating to Housing and Urban Development (Continued) Chapter VII--Office of the Secretary, Department of Housing and Urban Development (Housing Assistance Programs and Public and Indian Housing Programs) 5 Chapter VIII--Office of the Assistant Secretary for Housing-Federal Housing Commissioner, Department of Housing and Urban Development (Section 8 Housing Assistance Programs, Section 202 Direct Loan Program, Section 202 Supportive Housing for the Elderly Program and Section 811 Supportive Housing for Persons With Disabilities Program) 37 Chapter IX--Office of Assistant Secretary for Public and Indian Housing, Department of Housing and Urban Development 241 Finding Aids: Table of CFR Titles and Chapters........................ 855 Alphabetical List of Agencies Appearing in the CFR...... 875 List of CFR Sections Affected........................... 885 [[Page iv]] ---------------------------- Cite this Code: CFR To cite the regulations in this volume use title, part and section number. Thus, 24 CFR 700.100 refers to title 24, part 700, section 100. ---------------------------- [[Page v]] EXPLANATION The Code of Federal Regulations is a codification of the general and permanent rules published in the Federal Register by the Executive departments and agencies of the Federal Government. The Code is divided into 50 titles which represent broad areas subject to Federal regulation. Each title is divided into chapters which usually bear the name of the issuing agency. Each chapter is further subdivided into parts covering specific regulatory areas. Each volume of the Code is revised at least once each calendar year and issued on a quarterly basis approximately as follows: Title 1 through Title 16.................................as of January 1 Title 17 through Title 27..................................as of April 1 Title 28 through Title 41...................................as of July 1 Title 42 through Title 50................................as of October 1 The appropriate revision date is printed on the cover of each volume. LEGAL STATUS The contents of the Federal Register are required to be judicially noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie evidence of the text of the original documents (44 U.S.C. 1510). HOW TO USE THE CODE OF FEDERAL REGULATIONS The Code of Federal Regulations is kept up to date by the individual issues of the Federal Register. These two publications must be used together to determine the latest version of any given rule. To determine whether a Code volume has been amended since its revision date (in this case, April 1, 2024), consult the ``List of CFR Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative List of Parts Affected,'' which appears in the Reader Aids section of the daily Federal Register. These two lists will identify the Federal Register page number of the latest amendment of any given rule. EFFECTIVE AND EXPIRATION DATES Each volume of the Code contains amendments published in the Federal Register since the last revision of that volume of the Code. Source citations for the regulations are referred to by volume number and page number of the Federal Register and date of publication. Publication dates and effective dates are usually not the same and care must be exercised by the user in determining the actual effective date. In instances where the effective date is beyond the cut-off date for the Code a note has been inserted to reflect the future effective date. 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For the convenience of the reader, a ``List of CFR Sections Affected'' is published at the end of each CFR volume. For changes to the Code prior to the LSA listings at the end of the volume, consult previous annual editions of the LSA. For changes to the Code prior to 2001, consult the List of CFR Sections Affected compilations, published for 1949-1963, 1964-1972, 1973-1985, and 1986-2000. ``[RESERVED]'' TERMINOLOGY The term ``[Reserved]'' is used as a place holder within the Code of Federal Regulations. An agency may add regulatory information at a ``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used editorially to indicate that a portion of the CFR was left vacant and not dropped in error. INCORPORATION BY REFERENCE What is incorporation by reference? Incorporation by reference was established by statute and allows Federal agencies to meet the requirement to publish regulations in the Federal Register by referring to materials already published elsewhere. For an incorporation to be valid, the Director of the Federal Register must approve it. The legal effect of incorporation by reference is that the material is treated as if it were published in full in the Federal Register (5 U.S.C. 552(a)). This material, like any other properly issued regulation, has the force of law. What is a proper incorporation by reference? The Director of the Federal Register will approve an incorporation by reference only when the requirements of 1 CFR part 51 are met. Some of the elements on which approval is based are: (a) The incorporation will substantially reduce the volume of material published in the Federal Register. (b) The matter incorporated is in fact available to the extent necessary to afford fairness and uniformity in the administrative process. (c) The incorporating document is drafted and submitted for publication in accordance with 1 CFR part 51. What if the material incorporated by reference cannot be found? 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[[Page vii]] The Federal Register Index is issued monthly in cumulative form. This index is based on a consolidation of the ``Contents'' entries in the daily Federal Register. A List of CFR Sections Affected (LSA) is published monthly, keyed to the revision dates of the 50 CFR titles. REPUBLICATION OF MATERIAL There are no restrictions on the republication of material appearing in the Code of Federal Regulations. INQUIRIES For a legal interpretation or explanation of any regulation in this volume, contact the issuing agency. The issuing agency's name appears at the top of odd-numbered pages. For inquiries concerning CFR reference assistance, call 202-741-6000 or write to the Director, Office of the Federal Register, National Archives and Records Administration, 8601 Adelphi Road, College Park, MD 20740-6001 or e-mail [email protected]. SALES The Government Publishing Office (GPO) processes all sales and distribution of the CFR. For payment by credit card, call toll-free, 866-512-1800, or DC area, 202-512-1800, M-F 8 a.m. to 4 p.m. e.s.t. or fax your order to 202-512-2104, 24 hours a day. For payment by check, write to: U.S. Government Publishing Office Superintendent of Documents, P.O. Box 37082, Washington, DC 20013-7082. ELECTRONIC SERVICES The full text of the Code of Federal Regulations, the LSA (List of CFR Sections Affected), The United States Government Manual, the Federal Register, Public Laws, Compilation of Presidential Documents and the Privacy Act Compilation are available in electronic format via www.govinfo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Publishing Office. Phone 202-512-1800, or 866- 512-1800 (toll-free). E-mail, [email protected]. The Office of the Federal Register also offers a free service on the National Archives and Records Administration's (NARA) website for public law numbers, Federal Register finding aids, and related information. Connect to NARA's website at www.archives.gov/federal-register. The eCFR is a regularly updated, unofficial editorial compilation of CFR material and Federal Register amendments, produced by the Office of the Federal Register and the Government Publishing Office. It is available at www.ecfr.gov. Oliver A. Potts, Director, Office of the Federal Register April 1, 2024. [[Page ix]] THIS TITLE Title 24--Housing and Urban Development is composed of five volumes. The first four volumes containing parts 0-199, parts 200-499, parts 500- 699, parts 700-1699, represent the regulations of the Department of Housing and Urban Development. The fifth volume, containing part 1700 to end, continues with regulations of the Department of Housing and Urban Development and also includes regulations of the Board of Directors of the Hope for Homeowners Program, and the Neighborhood Reinvestment Corporation. The contents of these volumes represent all current regulations codified under this title of the CFR as of April 1, 2024. For this volume, Susannah C. Hurley was Chief Editor. The Code of Federal Regulations publication program is under the direction of John Hyrum Martinez, assisted by Stephen J. Frattini. [[Page 1]] TITLE 24--HOUSING AND URBAN DEVELOPMENT (This book contains parts 700 to 1699) -------------------------------------------------------------------- SUBTITLE B--Regulations Relating to Housing and Urban Development (Continued) Part chapter vii--Office of the Secretary, Department of Housing and Urban Development (Housing Assistance Programs and Public and Indian Housing Programs)....................... 700 chapter viii--Office of the Assistant Secretary for Housing- Federal Housing Commissioner, Department of Housing and Urban Development (Section 8 Housing Assistance Programs, Section 202 Direct Loan Program, Section 202 Supportive Housing for the Elderly Program and Section 811 Supportive Housing for Persons With Disabilities Program)............ 811 chapter ix--Office of Assistant Secretary for Public and Indian Housing, Department of Housing and Urban Development............................................... 901 [[Page 3]] Subtitle B--Regulations Relating to Housing and Urban Development (Continued) [[Page 5]] CHAPTER VII--OFFICE OF THE SECRETARY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HOUSING ASSISTANCE PROGRAMS AND PUBLIC AND INDIAN HOUSING PROGRAMS) -------------------------------------------------------------------- Editorial Note: Nomenclature changes to chapter VII appear at 59 FR 14090, Mar. 25, 1994. Part Page 700 Congregate Housing Services Program......... 7 701-760 [Reserved] 761 Drug Elimination Programs................... 17 762-790 [Reserved] 791 Allocations of housing assistance funds..... 30 792 Public housing agency Section 8 fraud recoveries.............................. 34 793-799 [Reserved] [[Page 7]] PART 700_CONGREGATE HOUSING SERVICES PROGRAM--Table of Contents Sec. 700.100 Purpose. 700.105 Definitions. 700.110 Announcement of fund availability, application process and selection. 700.115 Program costs. 700.120 Eligible supportive services. 700.125 Eligibility for services. 700.130 Service coordinator. 700.135 Professional assessment committee. 700.140 Participatory agreement. 700.145 Cost distribution. 700.150 Program participant fees. 700.155 Grant agreement and administration. 700.160 Eligibility and priority for 1978 Act recipients. 700.165 Evaluation of Congregate Housing Services Programs. 700.170 Reserve for supplemental adjustment. 700.175 Other Federal requirements. Authority: 42 U.S.C. 3535(d) and 8011. Source: 61 FR 42943, 42949, Aug. 19, 1996, unless otherwise noted. Sec. 700.100 Purpose. The requirements of this part augment the requirements of section 802 of the National Affordable Housing Act of 1990 (approved November 28, 1990, Public Law 101-625) (42 U.S.C. 8011), (hereinafter, section 802), as amended by the Housing and Community Development Act of 1992 (Public Law 102-550, approved October 28, 1992), which authorizes the Congregate Housing Services Program (hereinafter, CHSP or Program). Sec. 700.105 Definitions. In addition to the definitions in section 802(k), the following definitions apply to CHSP: Activity of Daily Living (ADL) means an activity regularly necessary for personal care. (1) The minimum requirements of ADLs include: (i) Eating (may need assistance with cooking, preparing or serving food, but must be able to feed self); (ii) Dressing (must be able to dress self, but may need occasional assistance); (iii) Bathing (may need assistance in getting in and out of the shower or tub, but must be able to wash self); (iv) Grooming (may need assistance in washing hair, but must be able to take care of personal appearance); (v) Getting in and out of bed and chairs, walking, going outdoors, using the toilet; and (vi) Household management activities (may need assistance in doing housework, grocery shopping or laundry, or getting to and from one location to another for activities such as going to the doctor and shopping, but must be mobile. The mobility requirement does not exclude persons in wheelchairs or those requiring mobility devices.) (2) Each of the Activities of Daily Living noted in paragraph (1) of this definition includes a requirement that a person must be able to perform at a specified minimal level (e.g., to satisfy the eating ADL, the person must be able to feed himself or herself). The determination of whether a person meets this minimal level of performance must include consideration of those services that will be performed by a person's spouse, relatives or other attendants to be provided by the individual. For example, if a person requires assistance with cooking, preparing or serving food plus assistance in feeding himself or herself, the individual would meet the minimal performance level and thus satisfy the eating ADL, if a spouse, relative or attendant provides assistance with feeding the person. Should such assistance become unavailable at any time, the owner is not obligated at any time to provide individualized services beyond those offered to the resident population in general. The Activities of Daily Living analysis is relevant only with regard to determination of a person's eligibility to receive supportive services paid for by CHSP and is not a determination of eligibility for occupancy; Adjusted income means adjusted income as defined in 24 CFR parts 813 or 913. Applicant means a State, Indian tribe, unit of general local government, public housing authority (PHA), Indian housing authority (IHA) or local nonprofit housing sponsor. A State, Indian tribe, or unit of general local government may apply on behalf of a local [[Page 8]] nonprofit housing sponsor or a for-profit owner of eligible housing for the elderly. Area agency on aging means the single agency designated by the State Agency on Aging to administer the program described in Title III of the Older Americans Act of 1965 (45 CFR chapter 13). Assistant Secretary means the HUD Assistant Secretary for Housing- Federal Housing Commissioner or the HUD Assistant Secretary for Public and Indian Housing. Case management means implementing the processes of: establishing linkages with appropriate agencies and service providers in the general community in order to tailor the needed services to the program participant; linking program participants to providers of services that the participant needs; making decisions about the way resources are allocated to an individual on the basis of needs; developing and monitoring of case plans in coordination with a formal assessment of services needed; and educating participants on issues, including, but not limited to, supportive service availability, application procedures and client rights. Eligible housing for the elderly means any eligible project including any building within a mixed-use project that was designated for occupancy by elderly persons, or persons with disabilities at its inception or, although not so designated, for which the eligible owner or grantee gives preference in tenant selection (with HUD approval) for all units in the eligible project (or for a building within an eligible mixed-use project) to eligible elderly persons, persons with disabilities, or temporarily disabled individuals. For purposes of this part, this term does not include projects assisted under the Low-Rent Housing Homeownership Opportunity program (Turnkey III (24 CFR part 905, subpart G)). Eligible owner means an owner of an eligible housing project. Excess residual receipts mean residual receipts of more than $500 per unit in the project which are available and not committed to other uses at the time of application to HUD for CHSP. Such receipts may be used as matching funds and may be spent down to a minimum of $500/unit. For-profit owner of eligible housing for the elderly means an owner of an eligible housing project in which some part of the project's earnings lawfully inure to the benefit of any private shareholder or individual. Grantee or Grant recipient means the recipient of funding under CHSP. Grantees under this Program may be states, units of general local government, Indian tribes, PHAs, IHAs, and local nonprofit housing sponsors. Local nonprofit housing sponsor means an owner or borrower of eligible housing for the elderly; no part of the net earnings of the owning organization shall lawfully inure to the benefit of any shareholder or individual. Nonprofit includes a public housing agency as that term is defined in section 3(b)(6) of the United States Housing Act of 1937. Person with disabilities means a household composed of one or more persons, at least one of whom is an adult who has a disability. (1) A person shall be considered to have a disability if such person is determined under regulations issued by the Secretary to have a physical, mental, or emotional impairment which: (i) Is expected to be of long-continued and indefinite duration; (ii) Substantially impedes his or her ability to live independently; and (iii) Is of such a nature that the person's ability could be improved by more suitable housing conditions. (2) A person shall also be considered to have a disability if the person has a developmental disability as defined in section 102(5) of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6001-7). Notwithstanding the preceding provisions of this paragraph, the terms ``person with disabilities'' or ``temporarily disabled'' include two or more persons with disabilities living together, one or more such persons living with another person who is determined (under regulations prescribed by the Secretary of HUD) to be essential to their care or well-being, and the surviving member or members of any household where at least one or more persons was an adult with a disability who was living, in a [[Page 9]] unit assisted under this section, with the deceased member of the household at the time of his or her death. Program participant (participant) means any project resident as defined in section 802(e)(1) who is formally accepted into CHSP, receives CHSP services, and resides in the eligible housing project served by CHSP grant. Qualifying supportive services means those services described in section 802(k)(16). Under this Program, ``health-related services'' mean non-medical supervision, wellness programs, preventive health screening, monitoring of medication consistent with state law, and non-medical components of adult day care. The Secretary concerned may also approve other requested supportive services essential for achieving and maintaining independent living. Rural Housing Service (RHS) means a credit agency for rural housing and rural development in the U.S. Department of Agriculture (USDA). Secretary concerned means (1) The Secretary of Housing and Urban Development, with respect to eligible federally assisted housing administered by HUD; and (2) The Secretary of Agriculture with reference to programs administered by the Administrator of the Rural Housing Service. Service coordinator means CHSP staff person responsible for coordinating Program services as described in section 700.130. Service provider means a person or organization licensed or otherwise approved in writing by a State or local agency (e.g., Department of Health, Department of Human Services or Welfare) to provide supportive services. State agency means the State or an agency or instrumentality of the State. State agency on aging means the single agency designated by the Governor to administer the program described in Title III of the Older Americans Act of 1965 (See 45 CFR part 13). Sec. 700.110 Announcement of fund availability, application process and selection. (a) Notice of funding availability. A Notice of Funding Availability (NOFA) will be published periodically in the Federal Register by the Secretary concerned containing the amounts of funds available, allocation or distribution of funds available among eligible applicant groups, where to obtain and submit applications, the deadline for submissions, and further explanation of the selection criteria, review and selection process. The Secretary concerned will designate the maximum allowable size for grants. (b) Selection criteria are set forth in section 802(h)(1) and shall include additional criteria specified by the Secretary concerned. Sec. 700.115 Program costs. (a) Allowable costs. (1) Allowable costs for direct provision of supportive services includes the provision of supportive services and others approved by the Secretary concerned for: (i) Direct hiring of staff, including a service coordinator; (ii) Supportive service contracts with third parties; (iii) Equipment and supplies (including food) necessary to provide services; (iv) Operational costs of a transportation service (e.g., mileage, insurance, gasoline and maintenance, driver wages, taxi or bus vouchers); (v) Purchase or leasing of vehicles; (vi) Direct and indirect administrative expenses for administrative costs such as annual fiscal review and audit, telephones, postage, travel, professional education, furniture and equipment, and costs associated with self evaluation or assessment (not to exceed one percent of the total budget for the activities approved); and (vii) States, Indian tribes and units of general local government with more than one project included in the grant may receive up to 1% of the total cost of the grant for monitoring the projects. (2) Allowable costs shall be reasonable, necessary and recognized as expenditures in compliance with 2 CFR part 200, subpart E. (b) Nonallowable costs. (1) CHSP funds may not be used to cover expenses related to any grantee program, service, or activity existing at the time of application to CHSP. (2) Examples of nonallowable costs under the program are: [[Page 10]] (i) Capital funding (such as purchase of buildings, related facilities or land and certain major kitchen items such as stoves, refrigerators, freezers, dishwashers, trash compactors or sinks); (ii) Administrative costs that represent a non-proportional share of costs charged to the Congregate Housing Services Program for rent or lease, utilities, staff time; (iii) Cost of supportive services other than those approved by the Secretary concerned; (iv) Modernization, renovation or new construction of a building or facility, including kitchens; (v) Any costs related to the development of the application and plan of operations before the effective date of CHSP grant award; (vi) Emergency medical services and ongoing and regular care from doctors and nurses, including but not limited to administering medication, purchase of medical supplies, equipment and medications, overnight nursing services, and other institutional forms of service, care or support; (vii) Occupational therapy and vocational rehabilitation services; or (viii) Other items defined as unallowable costs elsewhere in this part, in CHSP grant agreement, and 2 CFR part 200, subpart E. (c) Administrative cost limitation. Grantees are subject to the limitation in section 802(j)(4). [61 FR 42943, 42949, Aug. 19, 1996, as amended at 80 FR 75940, Dec. 7, 2015] Sec. 700.120 Eligible supportive services. (a) Supportive services or funding for such services may be provided by state, local, public or private providers and CHSP funds. A CHSP under this section shall provide meal and other qualifying services for program participants (and other residents and nonresidents, as described in Sec. 700.125(a)) that are coordinated on site. (b) Qualifying supportive services are those listed in section 802(k)(16) and in section 700.105. (c) Meal services shall meet the following guidelines: (1) Type of service. At least one meal a day must be served in a group setting for some or all of the participants; if more than one meal a day is provided, a combination of a group setting and carry-out meals may be utilized. (2) Hot meals. At least one meal a day must be hot. A hot meal for the purpose of this program is one in which the principal food item is hot at the time of serving. (3) Special menus. Grantees shall provide special menus as necessary for meeting the dietary needs arising from the health requirements of conditions such as diabetes and hypertension. Grantees should attempt to meet the dietary needs of varying religious and ethnic backgrounds. (4) Meal service standards. Grantees shall plan for and provide meals which are wholesome, nutritious, and each of which meets a minimum of one-third of the minimum daily dietary allowances as established by the Food and Nutrition Board of the National Academy of Sciences- National Research Council (or State or local standards, if these standards are higher). Grantees must have an annual certification, prepared and signed by a registered dietitian, which states that each meal provided under CHSP meets the minimum daily dietary allowances. (5) Food stamps and agricultural commodities. In providing meal services grantees must apply for and use food stamps and agricultural commodities as set forth in section 802(d)(2)(A). (6) Preference for nutrition providers: In contracting for or otherwise providing for meal services grantees must follow the requirements of section 802(d)(2)(B). These requirements do not preclude a grantee or owner from directly preparing and providing meals under its own auspices. Sec. 700.125 Eligibility for services. (a) Participants, other residents, and nonresidents. Such individuals are eligible either to participate in CHSP or to receive CHSP services, if they qualify under section 802(e)(1), (4) and (5). Under this paragraph, temporarily disabled persons are also eligible. (b) Economic need. In providing services under CHSP, grantees shall give priority to very low income individuals, and shall consider their service needs in selecting program participants. [[Page 11]] Sec. 700.130 Service coordinator. (a) Each grantee must have at least one service coordinator who shall perform the responsibilities listed in section 802(d)(4). (b) The service coordinator shall comply with the qualifications and standards required by the Secretary concerned. The service coordinator shall be trained in the subject areas set forth in section 802(d)(4), and in any other areas required by the Secretary concerned. (c) The service coordinator may be employed directly by the grantee, or employed under a contract with a case management agency on a fee-for- service basis, and may serve less than full-time. The service coordinator or the case management agency providing service coordination shall not provide supportive services under a CHSP grant or have a financial interest in a service provider agency which intends to provide services to the grantee for CHSP. (d) The service coordinator shall: (1) Provide general case management and referral services to all potential participants in CHSP. This involves intake screening, upon referral from the grantee of potential program participants, and preliminary assessment of frailty or disability, using a commonly accepted assessment tool. The service coordinator then will refer to the professional assessment committee (PAC) those individuals who appear eligible for CHSP; (2) Establish professional relationships with all agencies and service providers in the community, and develop a directory of providers for use by program staff and program participants; (3) Refer proposed participants to service providers in the community, or those of the grantee; (4) Serve as staff to the PAC; (5) Complete, for the PAC, all paperwork necessary for the assessment, referral, case monitoring and reassessment processes; (6) Implement any case plan developed by the PAC and agreed to by the program participant; (7) Maintain necessary case files on each program participant, containing such information and kept in such form as HUD and RHS shall require; (8) Provide the necessary case files to PAC members upon request, in connection with PAC duties; (9) Monitor the ongoing provision of services from community agencies and keep the PAC and the agency providing the supportive service informed of the progress of the participant; (10) Educate grant recipient's program participants on such issues as benefits application procedures (e.g. SSI, food stamps, Medicaid), service availability, and program participant options and responsibilities; (11) Establish volunteer support programs with service organizations in the community; (12) Assist the grant recipient in building informal support networks with neighbors, friends and family; and (13) Educate other project management staff on issues related to ``aging-in-place'' and services coordination, to help them to work with and assist other persons receiving housing assistance through the grantee. (e) The service coordinator shall tailor each participant's case plan to the individual's particular needs. The service coordinator shall work with community agencies, the grantee and third party service providers to ensure that the services are provided on a regular, ongoing, and satisfactory basis, in accordance with the case plan approved by the PAC and the participant. (f) Service coordinators shall not serve as members of the PAC. Sec. 700.135 Professional assessment committee. (a) General. (1) A professional assessment committee (PAC), as described in this section, shall recommend services appropriate to the functional abilities and needs of each eligible project resident. The PAC shall be either a voluntary committee appointed by the project management or an agency in the community which provides assessment services and conforms to section 802(e)(3)(A) and (B). PAC members are subject to the conflict of interest provisions in section 700.175(b). (2) The PAC shall utilize procedures that ensure that the process of determining eligibility of individuals for congregate services affords individuals fair treatment, due process, and a right [[Page 12]] of appeal of the determination of eligibility, and shall ensure the confidentiality of personal and medical records. (3) The dollar value of PAC members' time spent on regular assessments after initial approval of program participants may be counted as match. If a community agency discharges the duties of the PAC, staff time is counted as its imputed value, and if the members are volunteers, their time is counted as volunteer time, according to sections 700.145(c)(2) (ii) and (iv). (b) Duties of the PAC. The PAC is required to: (1) Perform a formal assessment of each potential elderly program participant to determine if the individual is frail. To qualify as frail, the PAC must determine if the elderly person is deficient in at least three ADLs, as defined in section 700.105. This assessment shall be based upon the screening done by the service coordinator, and shall include a review of the adequacy of the informal support network (i.e., family and friends available to the potential participant to assist in meeting the ADL needs of that individual), and may include a more in- depth medical evaluation, if necessary; (2) Determine if non-elderly disabled individuals qualify under the definition of person with disabilities under section 700.105. If they do qualify, this is the acceptance criterion for them for CHSP. Persons with disabilities do not require an assessment by the PAC; (3) Perform a regular assessment and updating of the case plan of all participants; (4) Obtain and retain information in participant files, containing such information and maintained in such form, as HUD or RHS shall require; (5) Replace any members of the PAC within 30 days after a member resigns. A PAC shall not do formal assessments if its membership drops below three, or if the qualified medical professional leaves the PAC and has not been replaced. (6) Notify the grantee or eligible owner and the program participants of any proposed modifications to PAC procedures, and provide these parties with a process and reasonable time period in which to review and comment, before adoption of a modification; (7) Provide assurance of nondiscrimination in selection of CHSP participants, with respect to race, religion, color, sex, national origin, familial status or type of disability; (8) Provide complete confidentiality of information related to any individual examined, in accordance with the Privacy Act of 1974; (9) Provide all formal information and reports in writing. (c) Prohibitions relating to the PAC. (1) At least one PAC member shall not have any direct or indirect relationship to the grantee. (2) No PAC member may be affiliated with organizations providing services under the grant. (3) Individuals or staff of third party organizations that act as PAC members may not be paid with CHSP grant funds. (d) Eligibility and admissions. (1) Before selecting potential program participants, each grantee (with PAC assistance) shall develop a CHSP application form. The information in the individual's application is crucial to the PAC's ability to determine the need for further physical or psychological evaluation. (2) The PAC, upon completion of a potential program participant's initial assessment, must make a recommendation to the service coordinator for that individual's acceptance or denial into CHSP. (3) Once a program participant is accepted into CHSP, the PAC must provide a supportive services case plan for each participant. In developing this plan, the PAC must take into consideration the participant's needs and wants. The case plan must provide the minimum supportive services necessary to maintain independence. (e) Transition-out procedures. The grantee or PAC must develop procedures for providing for an individual's transition out of CHSP to another setting. Transition out is based upon the degree of supportive services needed by an individual to continue to live independently. If a program participant leaves the program, but wishes to retain supportive services, he or she may do so, as long as he or she continues to live in an eligible project, pays the full [[Page 13]] cost of services provided, and management agrees (section 802(e)(4) and (5)). A participant can be moved out of CHSP if he or she: (1) Gains physical and mental health and is able to function without supportive services, even if only for a short time (in which case readmission, based upon reassessment to determine the degree of frailty or the disability, is acceptable); (2) Requires a higher level of care than that which can be provided under CHSP; or (3) Fails to pay services fees. (f) Procedural rights of participants. (1) The PAC must provide an informal process that recognizes the right to due process of individuals receiving assistance. This process, at a minimum, must consist of: (i) Serving the participant with a written notice containing a clear statement of the reasons for termination; (ii) A review of the decision, in which the participant is given the opportunity to present written or oral objections before a person other than the person (or a subordinate of that person) who made or approved the termination decision; and (iii) Prompt written notification of the final decision to the participant. (2) Procedures must ensure that any potential or current program participant, at the time of initial or regular assessment, has the option of refusing offered services and requesting other supportive services as part of the case planning process. (3) In situations where an individual requests additional services, not initially recommended by the PAC, the PAC must make a determination of whether the request is legitimately a needs-based service that can be covered under CHSP subsidy. Individuals can pay for services other than those recommended by the PAC as long as the additional services do not interfere with the efficient operation of the program. Sec. 700.140 Participatory agreement. (a) Before actual acceptance into CHSP, potential participants must work with the PAC and the service coordinator in developing supportive services case plans. A participant has the option of accepting any of the services under the case plan. (b) Once the plan is approved by the PAC and the program participant, the participant must sign a participatory agreement governing the utilization of the plan's supportive services and the payment of supportive services fees. The grantee annually must renegotiate the agreement with the participant. Sec. 700.145 Cost distribution. (a) General. (1) Grantees, the Secretary concerned, and participants shall all contribute to the cost of providing supportive services according to section 802(i)(A)(i). Grantees must contribute at least 50 percent of program cost, participants must contribute fees that in total are at least 10 percent of program cost, and the Secretary concerned will provide funds in an amount not to exceed 40 percent. (2) Section 802(i)(1)(B)(ii) creates a cost-sharing provision between grantee and the Secretary concerned if total participant fees collected over a year are less than 10 percent of total program cost. This provision is subject to availability of appropriated grant funds. If funds are not available, the grantee must assume the funding shortfall. (b) Prohibition on substitution of funds and maintenance of existing supportive services. Grantees shall maintain existing funding for and provision of supportive services prior to the application date, as set forth in section 802(i)(1)(D). The grantee shall ensure that the activities provided to the project under a CHSP grant will be in addition to, and not in substitution for, these previously existing services. The value of these services do not qualify as matching funds. Such services must be maintained either for the time the participant remains in CHSP, or for the duration of CHSP grant. The grantee shall certify compliance with this paragraph to the Secretary concerned. (c) Eligible matching funds. (1) All sources of matching funds must be directly related to the types of supportive services prescribed by the PAC or used for administration of CHSP. (2) Matching funds may include: [[Page 14]] (i) Cash (which may include funds from Federal, State and local governments, third party contributions, available payments authorized under Medicaid for specific individuals in CHSP, Community Development Block Grants or Community Services Block Grants, Older American Act programs or excess residual funds with the approval of the Secretary concerned), (ii) The imputed dollar value of other agency or third party- provided direct services or staff who will work with or provide services to program participants; these services must be justified in the application to assure that they are the new or expanded services of CHSP necessary to keep the program participants independent. If services are provided by the state, Indian tribe, unit of general local government, or local nonprofit housing sponsor, IHA, PHA, or for-profit or not-for- profit owner, any salary paid to staff from governmental sources to carry out the program of the grantee and any funds paid to residents employed by the Program (other than from amounts under a contract under section 700.155) is allowable match. (iii) In-kind items (these are limited to 10 percent of the 50 percent matching amount), such as the current market value of donated common or office space, utility costs, furniture, material, supplies, equipment and food used in direct provision of services. The applicant must provide an explanation for the estimated donated value of any item listed. (iv) The value of services performed by volunteers to CHSP, at the rate of $5.00 an hour. (d) Limitation. (1) The following are not eligible for use as matching funds: (i) PHA operating funds; (ii) CHSP funds; (iii) Section 8 funds other than excess residual receipts; (iv) Funds under section 14 of the U.S. Housing Act of 1937, unless used for service coordination or case management; and (v) Comprehensive grant funds unless used for service coordination or case management; (2) Local government contributions are limited by section 802(i)(1)(E). (e) Annual review of match. The Secretary concerned will review the infusion of matching funds annually, as part of the program or budget review. If there are insufficient matching funds available to meet program requirements at any point after grant start-up, or at any time during the term of the grant (i.e., if matching funds from sources other than program participant fees drop below 50 percent of total supportive services cost), the Secretary concerned may decrease the federal grant share of supportive services funds accordingly. Sec. 700.150 Program participant fees. (a) Eligible program participants. The grantee shall establish fees consistent with section 700.145(a). Each program participant shall pay CHSP fees as stated in paragraphs (d) and (e) of this section, up to a maximum of 20 percent of the program participant's adjusted income. Consistent with section 802(d)(7)(A), the Secretary concerned shall provide for the waiver of fees for individuals who are without sufficient income to provide for any payment. (b) Fees shall include: (1) Cash contributions of the program participant; (2) Food Stamps; and (3) Contributions or donations to other eligible programs acceptable as matching funds under section 700.145(c). (c) Older Americans Act programs. No fee may be charged for any meals or supportive services under CHSP if that service is funded under an Older Americans Act Program. (d) Meals fees: (1) For full meal services, the fees for residents receiving more than one meal per day, seven days per week, shall be reasonable and shall equal between 10 and 20 percent of the adjusted income of the project resident, or the cost of providing the services, whichever is less. (2) The fees for residents receiving meal services less frequently than as described in paragraph (d)(1) of this section shall be in an amount equal to 10 percent of the adjusted income of the project resident, or the cost of providing the services, whichever is less. (e) Other service fees. The grantee may also establish fees for other supportive services so that the total fees collected [[Page 15]] from all participants for meals and other services is at least 10 percent of the total cost of CHSP. However, no program participants may be required to pay more than 20 percent of their adjusted incomes for any combination of services. (f) Other residents and nonresidents. Fees shall be established for residents of eligible housing projects (other than eligible project residents) and for nonresidents who receive meals and other services from CHSP under section 700.125(a). These fees shall be in an amount equal to the cost of providing the services. Sec. 700.155 Grant agreement and administration. (a) General. HUD will enter into grant agreements with grantees, to provide congregate services for program participants in eligible housing projects, in order to meet the purposes of CHSP. (b) Term of grant agreement and reservation of amount. A grant will be for a term of five years and the Secretary concerned shall reserve a sum equal to the total approved grant amount for each grantee. Grants will be renewable at the expiration of a term, subject to the availability of funds and conformance with the regulations in this part, except as otherwise provided in section 700.160. (c) Monitoring of project sites by governmental units. States, Indian tribes, and units of general local government with a grant covering multiple projects shall monitor, review, and evaluate Program performance at each project site for compliance with CHSP regulations and procedures, in such manner as prescribed by HUD or RHS. (d) Reports. Each grantee shall submit program and fiscal reports and program budgets to the Secretary concerned in such form and at such times, as the Secretary concerned requires. (e) Enforcement. The Secretary concerned will enforce the obligations of the grantee under the agreement through such action as may be necessary, including terminating grants, recapturing grant funds, and imposing sanctions. (1) These actions may be taken for: (i) A grantee's non-compliance with the grant agreement or HUD or RHS regulations; (ii) Failure of the grantee to provide supportive services within 12 months of execution of the grant agreement. (2) Sanctions include but are not limited to the following: (i) Temporary withholding of reimbursements or extensions or renewals under the grant agreement, pending correction of deficiencies by the grantee; (ii) Setting conditions in the contract; (iii) Termination of the grant; (iv) Substitution of grantee; and (v) Any other action deemed necessary by the Secretary concerned. (f) Renewal of grants. Subject to the availability of funding, satisfactory performance, and compliance with the regulations in this part: (1) Grantees funded initially under this part shall be eligible to receive continued, non-competitive renewals after the initial five-year term of the grant. (2) Grantees will receive priority funding and grants will be renewed within time periods prescribed by the Secretary concerned. (g) Use of Grant Funds. If during any year, grantees use less than the annual amount of CHSP funds provided to them for that year, the excess amount can be carried forward for use in later years. Sec. 700.160 Eligibility and priority for 1978 Act recipients. Grantees funded initially under 42 U.S.C. 8001 shall be eligible to receive continued, non-competitive funding subject to its availability. These grantees will be eligible to receive priority funding under this part if they comply with the regulations in this part and with the requirements of any NOFA issued in a particular fiscal year. Sec. 700.165 Evaluation of Congregate Housing Services Programs. (a) Grantees shall submit annually to the Secretary concerned, a report evaluating the impact and effectiveness of CHSPs at the grant sites, in such form as the Secretary concerned shall require. [[Page 16]] (b) The Secretaries concerned shall further review and evaluate the performance of CHSPs at these sites and shall evaluate the Program as a whole. (c) Each grantee shall submit a certification with its application, agreeing to cooperate with and to provide requested data to the entity responsible for the Program's evaluation, if requested to do so by the Secretary concerned. Sec. 700.170 Reserve for supplemental adjustment. The Secretary concerned may reserve funds subject to section 802(o). Requests to utilize supplemental funds by the grantee shall be transmitted to the Secretary concerned in such form as may be required. Sec. 700.175 Other Federal requirements. In addition to the Federal Requirements set forth in 24 CFR part 5, the following requirements apply to grant recipient organizations in this program: (a) Uniform administrative requirements, cost principles, and audit requirements for Federal awards. The policies, guidelines, and requirements in 2 CFR part 200, including the audit requirements described in subpart F, apply to the acceptance and use of assistance under this program. (b) Conflict of interest. In addition to the conflict of interest requirements in 2 CFR 200.112 (for all recipients and subrecipients); 200.317 (for recipients and subrecipients that are States); and 200.318(c) and 200.319(a)(5) (for recipients and subrecipients that are not States), no person who is an employee, agent, consultant, officer, or elected or appointed official of the applicant, and who exercises or has exercised any function or responsibilities with respect to activities assisted with CHSP grant funds, or who is in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subcontract, or agreement with respect thereto, or any proceeds thereunder, either for himself or herself or for those with whom he or she has family or business ties during his or her tenure, or for one year thereafter. CHSP employees may receive reasonable salary and benefits. (c) Disclosures required by Reform Act. Section 102(c) of the HUD Reform Act of 1989 (42 U.S.C. 3545(c)) requires disclosure concerning other government assistance to be made available with respect to the Program and parties with a pecuniary interest in CHSP and submission of a report on expected sources and uses of funds to be made available for CHSP. Each applicant shall include information required by 24 CFR part 12 on form HUD-2880 ``Applicant/Recipient Disclosure/Update Report,'' as required by the Federal Register Notice published on January 16, 1992, at 57 FR 1942. (d) Nondiscrimination and equal opportunity. (1) The fair housing poster regulations (24 CFR part 110) and advertising guidelines (24 CFR part 109); (2) The Affirmative Fair Housing Marketing Program requirements of 24 CFR part 200, subpart M, and the implementing regulations at 24 CFR part 108; and (3) Racial and ethnic collection requirements--Recipients must maintain current data on the race, ethnicity and gender of program applicants and beneficiaries in accordance with section 562 of the Housing and Community Development Act of 1987 and section 808(e)(6) of the Fair Housing Act. (e) Environmental requirements. Support services, including the operating and administrative expenses described in section 700.115(a), are categorically excluded from the requirements of the National Environmental Policy Act (NEPA) of 1969. These actions, however, are not excluded from individual compliance requirements of other environmental statutes, Executive Orders, and agency regulations where appropriate. When the responsible official determines that any action under this part may have an environmental effect because of extraordinary circumstances, the requirements of NEPA shall apply. [61 FR 42943, 42949, Aug. 19, 1996, as amended at 80 FR 75940, Dec. 7, 2015] PARTS 701 760 [RESERVED] [[Page 17]] PART 761_DRUG ELIMINATION PROGRAMS--Table of Contents Subpart A_General Sec. 761.1 Purpose and scope. 761.5 Public housing; encouragement of resident participation. 761.10 Definitions. Subpart B_Grant Funding 761.13 Amount of funding. 761.15 Qualifying for funding. 761.17 Eligible and ineligible activities for funding. Subpart C_Application and Selection 761.20 Selection requirements. 761.21 Plan requirement. 761.23 Grantee performance requirements. 761.25 Resident comments on grant application. Subpart D_Grant Administration 761.30 Grant administration. 761.35 Periodic grantee reports. 761.40 Other Federal requirements. Authority: 42 U.S.C. 3535(d) and 11901 et seq. Editorial Note: Nomenclature changes to part 761 appear at 64 FR 49917, Sept. 14, 1999. Source: 61 FR 13987, Mar. 28, 1996, unless otherwise noted. Subpart A_General Sec. 761.1 Purpose and scope. This part 761 contains the regulatory requirements for the Assisted Housing Drug Elimination Program (AHDEP) and the Public Housing Drug Elimination Program (PHDEP). The purposes of these programs are to: (a) Eliminate drug-related and violent crime and problems associated with it in and around the premises of Federally assisted low-income housing, and public and Indian housing developments; (b) Encourage owners of Federally assisted low-income housing, public housing agencies and Indian housing authorities (collectively referred to as HAs), and resident management corporations to develop a plan that includes initiatives that can be sustained over a period of several years for addressing drug-related and violent crime and problems associated with it in and around the premises of housing proposed for funding under this part; and (c) Make available Federal grants to help owners of Federally assisted low-income housing, HAs, and RMCs carry out their plans. [61 FR 13987, Mar. 28, 1996, as amended at 64 FR 49917, Sept. 14, 1999] Sec. 761.5 Public housing; encouragement of resident participation. For the purposes of the Public Housing Drug Elimination Program, the elimination of drug-related and violent crime within public housing developments requires the active involvement and commitment of public housing residents and their organizations. To enhance the ability of PHAs to combat drug-related and violent crime within their developments, Resident Councils (RCs), Resident Management Corporations (RMCs), and Resident Organizations (ROs) will be permitted to undertake management functions specified in this part, notwithstanding the otherwise applicable requirements of part 964 of this title. [64 FR 49917, Sept. 14, 1999] Sec. 761.10 Definitions. The definitions Department, HUD, and Public Housing Agency (PHA) are defined in part 5 of this title. Controlled substance shall have the meaning provided in section 102 of the Controlled Substance Act (21 U.S.C. 802). Drug intervention means a process to identify assisted housing or public housing resident drug users, to assist them in modifying their behavior, and/or to refer them to drug treatment to reduce or eliminate drug abuse. Drug prevention means a process to provide goods and services designed to alter factors, including activities, environmental influences, risks, and expectations, that lead to drug abuse. Drug-related and violent crime shall have the meaning provided in 42 U.S.C. 11905(2). Drug treatment means a program for the residents of an applicant's development that strives to end drug abuse and to eliminate its negative effects [[Page 18]] through rehabilitation and relapse prevention. Federally assisted low-income housing, or assisted housing, shall have the meaning provided in 42 U.S.C. 11905(4). However, sections 221(d)(3) and 221(d)(4) market rate projects with tenant-based assistance contracts and section 8 projects with tenant-based assistance are not considered federally assisted low-income housing and are not eligible for funding under this part 761. Governmental jurisdiction means the unit of general local government, State, or area of operation of an Indian tribe in which the housing development administered by the applicant is located. In and around means within, or adjacent to, the physical boundaries of a housing development. Indian tribe means any tribe, band, pueblo, group, community, or nation of Indians, or Alaska Natives. Local law enforcement agency means a police department, sheriff's office, or other entity of the governmental jurisdiction that has law enforcement responsibilities for the community at large, including the housing developments owned or administered by the applicant. In Indian jurisdictions, this includes tribal prosecutors that assume law enforcement functions analogous to a police department or the Bureau of Indian Affairs (BIA). More than one law enforcement agency may have these responsibilities for the jurisdiction that includes the applicant's developments. Problems associated with drug-related and violent crime means the negative physical, social, educational, and economic impact of drug- related and violent crime on assisted housing residents or public and Indian housing residents, and the deterioration of the assisted housing or public and Indian housing environment because of drug-related and violent crime. Program income means gross income received by a grantee and directly generated from the use of program funds. When program income is generated by an activity only partially assisted with program funds, the income shall be prorated to reflect the percentage of program funds used. Recipient of assistance under the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA recipient) shall have the same meaning as recipient provided in section 4 of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.). Resident council (RC), for purposes of the Public Housing Program, means an incorporated or unincorporated nonprofit organization or association that meets each of the following requirements: (1) It must be representative of the residents it purports to represent; (2) It may represent residents in more than one development or in all of the developments of a HA, but it must fairly represent residents from each development that it represents; (3) It must adopt written procedures providing for the election of specific officers on a regular basis (but at least once every three years); and (4) It must have a democratically elected governing board. The voting membership of the board must consist of residents of the development or developments that the resident organization or resident council represents. Resident Management Corporation (RMC), for purposes of the Public Housing Program, means the entity that proposes to enter into, or that enters into, a management contract with a PHA under part 964 of this title in accordance with the requirements of that part. State means any of the several States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or any agency or instrumentality of a State exclusive of local governments. The term does not include any public or Indian housing agency under the United States Housing Act of 1937 (42 U.S.C. 1437 note). Unit of general local government means any city, county, town, municipality, township, parish, village, local public authority (including any public or Indian housing agency under the United States Housing Act of 1937) or other general purpose political subdivision of a State. [61 FR 13987, Mar. 28, 1996, as amended at 64 FR 49918, Sept. 14, 1999] [[Page 19]] Subpart B_Grant Funding Sec. 761.13 Amount of funding. (a) PHDEP formula funding--(1) Funding share formula--(i) Per unit amount. Subject to the availability of funding, the amount of funding made available each FFY to an applicant that qualifies for funding in accordance with Sec. 761.15(a) is based upon the applicant's share of the total number of units of all applicants that qualify for funding, with a maximum award of $35 million and a minimum award of $25,000, except that qualified applicants with less than 50 units will not receive more than $500 per unit. (ii) Calculation of number of units. For purposes of determining the number of units counted for purposes of the PHDEP formula, HUD shall count as one unit each existing rental and Section 23 bond-financed unit under the ACC. Units that are added to a PHA's inventory will be added to the overall unit count so long as the units are under ACC amendment and have reached DOFA by the date HUD establishes for the Federal Fiscal Year in which the PHDEP formula is being run (hereafter called the ``reporting date''). Any such increase in units shall result in an adjustment upwards in the number of units under the PHDEP formula. New units reaching DOFA after this date will be counted for PHDEP formula purposes as of the following Federal Fiscal Year. Federalized units that are eligible for operating subsidy will be counted for PHDEP formula purposes based on the unit count reflected on the PHA's most recently approved Operating Budget (Form HUD-52564) and/or subsidy calculation (Form HUD-52723), or successor form submitted for that program. Units approved for demolition/disposition continue to be counted for PHDEP formula funding purposes until actual demolition/disposition of the unit. (2) Consortium funding. The amount of funding made available to a consortium will be the total of the amounts that each individual member would otherwise qualify to receive under the PHDEP funding formula in accordance with paragraph (a)(1) of this section. (3) Adjustments to funding. The amount of funding made available each FFY to an applicant in accordance with paragraphs (a)(1) and (a)(2) of this section may be adjusted as follows: (i) An applicant must submit a PHDEP plan that meets the requirements of Sec. 761.21, as required by Sec. 761.15(a)(5), each FFY year to receive that FFY's funding. An applicant that does not submit a PHDEP plan for a FFY as required will not receive that FFY's funding. (ii) Ineligible activities, described at Sec. 761.17(b), are not eligible for funding. Activities proposed for funding in an applicant's PHDEP plan that are determined to be ineligible will not be funded, and the applicant's funding for that FFY may be reduced accordingly. (iii) In accordance with Sec. 761.15(a)(6), an applicant that does not meet the performance requirements of Sec. 761.23 will be subject to the sanctions listed in Sec. 761.30(f)(2). (iv) Both the amount of and continuing eligibility for funding is subject to the sanctions in Sec. 761.30(f). (v) Any amounts that become available because of adjustments to an applicant's funding will be distributed to every other applicant that qualifies for funding in accordance with paragraphs (a)(1) and (a)(2) of this section. (b) AHDEP funding. Information concerning funding made available under AHDEP for a given FFY will be contained in Notices of Funding Availability (NOFAs) published in the Federal Register. [64 FR 49918, Sept. 14, 1999] Sec. 761.15 Qualifying for funding. (a) Qualifications for PHDEP funding--(1) Eligible applicants. The following are eligible applicants for PHDEP funding: (i) A PHA; (ii) An RMC; and (iii) A consortium of PHAs. (2) Preference PHAs. A PHA that successfully competed for PHDEP funding under at least one of the PHDEP NOFAs for FFY 1996, FFY 1997 or FFY 1998 qualifies to receive PHDEP funding. (3) Needs qualification for funding. An eligible applicant that does not qualify to receive PHDEP funding under paragraph (a)(2) of this section must be in one of the following needs categories to qualify for funding: [[Page 20]] (i) The eligible applicant must be in the top 50% of the unit- weighted distribution of an index of a rolling average rate of violent crimes of the community, as computed for each Federal Fiscal Year (FFY). The crime rate used in this needs determination formula is the rate, from the most recent years feasible, of FBI violent crimes per 10,000 residents of the community (or communities). If this information is not available for a particular applicant's community, HUD will use the average of data from recipients of a comparable State and size category of PHA (less than 500 units, 500 to 1249 units, and more than 1250 units). If fewer than five PHAs have data for a given size category within a State, then the average of PHAs for a given size category within the census region will be used; or (ii) The eligible applicant must have qualified for PHDEP funding, by receiving an application score of 70 or more points under any one of the PHDEP NOFAs for FFY 1996, FFY 1997 or FFY 1998, but not have received an award because of the unavailability of funds. (4) Consortium of eligible applicants. Eligible applicants may join together and form a consortium to apply for funding, whether or not each member would individually qualify for PHDEP funding under paragraphs (a)(2) or (a)(3) of this section. The act of two or more eligible applicants joining together to form a consortium, and identifying related crime problems and eligible activities to address those problems pursuant to a consortium PHDEP plan, qualifies the consortium for PHDEP funding of an amount as determined under Sec. 761.13(a)(2). (5) PHDEP plan requirement. (i) PHAs. Except as provided in paragraph (a)(5)(ii), below, of this section, to receive PHDEP funding, a PHA that qualifies to receive PHDEP funding for Federal Fiscal Year 2000 and beyond must include a PHDEP plan that meets the requirements of Sec. 761.21 with its PHA Plan submitted pursuant to part 903 of this title for each Federal Fiscal Year for which it qualifies for funding. (ii) To receive PHDEP funding, a PHA that qualifies to receive PHDEP funding and is operating under an executed Moving To Work (MTW) agreement with HUD must submit a PHDEP plan that meets the requirements of Sec. 761.21 with its required MTW plan for each Federal Fiscal Year for which it qualifies for funding. (iii) RMCs. To receive PHDEP funding, an RMC operating in an PHA that qualifies to receive PHDEP funding must submit a PHDEP plan for the units managed by the RMC that meets the requirements of Sec. 761.21 to its PHA. Upon agreement between the RMC and PHA, the PHA must submit to HUD, with its PHA Plan submitted pursuant to part 903 of this title, the RMC's PHDEP plan. The RMC will implement its plan as a subrecipient of the PHA. (iv) Consortia. To receive PHDEP funding, the consortium members must prepare and submit a consortium PHDEP plan that meets the requirements of Sec. 761.21, including the additional requirements that apply to consortia. Each member must submit the consortium plan with its PHA plan, submitted pursuant to part 903 of this title, or IHP, submitted pursuant to subpart C of part 1000 of this title, as appropriate. (6) An otherwise qualified recipient PHA, RMC or consortium may not be funded if HUD determines, on a case-by-case basis, that it does not meet the performance requirements of Sec. 761.23. (b) Qualifications for AHDEP funding. Under AHDEP, eligible applicants are owners of federally assisted low-income housing, as the term Federally assisted low-income housing is defined in Sec. 761.10. Notices of Funding Availability (NOFAs) published in the Federal Register will contain specific information concerning funding requirements and eligible and ineligible applicants and activities. [64 FR 49918, Sept. 14, 1999] Sec. 761.17 Eligible and ineligible activities for funding. (a) Eligible activities. One or more of the eligible activities described in 42 U.S.C. 11903 and in this Sec. 761.17(a) are eligible for funding under PHDEP or AHDEP, as further explained or limited in paragraph (b) of this section and, for AHDEP, in separate annual Notices of [[Page 21]] Funding Availability (NOFAs). All personnel funded by these programs in accordance with an eligible activity must meet, and demonstrate compliance with, all relevant Federal, State, tribal, or local government insurance, licensing, certification, training, bonding, or other similar law enforcement requirements. (1) Employment of security personnel, as provided in 42 U.S.C. 11903(a)(1), with the following additional requirements: (i) Security guard personnel. (A) Contract security personnel funded by this program must perform services not usually performed by local law enforcement agencies on a routine basis. The applicant must identify the baseline services provided by the local law enforcement agency. (B) The applicant, the provider (contractor) of the security personnel and, only if the local law enforcement agency is receiving any PHDEP funds from the applicant, the local law enforcement agency, are required, as a part of the security personnel contract, to enter into and execute a written agreement that describes the following: (1) The activities to be performed by the security personnel, their scope of authority, and how they will coordinate their activities with the local law enforcement agency; (2) The types of activities that the security personnel are expressly prohibited from undertaking. (ii) Employment of HA police. (A) If additional HA police are to be employed for a service that is also provided by a local law enforcement agency, the applicant must undertake and retain a cost analysis that demonstrates the employment of HA police is more cost efficient than obtaining the service from the local law enforcement agency. (B) Additional HA police services to be funded under this program must be over and above those that the existing HA police, if any, provides, and the tribal, State or local government is contractually obligated to provide under its Cooperation Agreement with the applying HA (as required by the HA's Annual Contributions Contract). An applicant seeking funding for this activity must first establish a baseline by describing the current level of services provided by both the local law enforcement agency and the HA police, if any (in terms of the kinds of services provided, the number of officers and equipment and the actual percent of their time assigned to the developments proposed for funding), and then demonstrate that the funded activity will represent an increase over this baseline. (C) If the local law enforcement agency is receiving any PHDEP funds from the applicant, the applicant and the local law enforcement agency are required to enter into and execute a written agreement that describes the following: (1) The activities to be performed by the HA police, their scope of authority, and how they will coordinate their activities with the local law enforcement agency; (2) The types of activities that the HA police are expressly prohibited from undertaking. (2) Reimbursement of local law enforcement agencies for additional security and protective services, as provided in 42 U.S.C. 11903(a)(2), with the following additional requirements: (i) Additional security and protective services to be funded must be over and above those that the tribal, State, or local government is contractually obligated to provide under its Cooperation Agreement with the applying HA (as required by the HA's Annual Contributions Contract). An application seeking funding for this activity must first establish a baseline by describing the current level of services (in terms of the kinds of services provided, the number of officers and equipment, and the actual percent of their time assigned to the developments proposed for funding) and then demonstrate that the funded activity will represent an increase over this baseline. (ii) Communications and security equipment to improve the collection, analysis, and use of information about drug-related or violent criminal activities in a public housing community may be eligible items if used exclusively in connection with the establishment of a law enforcement substation on the funded premises or scattered site developments of the applicant. Funds for activities under this section may not be drawn until the grantee has [[Page 22]] executed a contract for the additional law enforcement services. (3) Physical improvements to enhance security, as provided in 42 U.S.C. 11903(a)(3). For purposes of PHDEP, the following provisions in paragraphs (a)(3)(i) through (a)(3)(iv) of this section apply: (i) An activity that is funded under any other HUD program shall not also be funded by this program. (ii) Funding is not permitted for physical improvements that involve the demolition of any units in a development. (iii) Funding is not permitted for any physical improvements that would result in the displacement of persons. (iv) Funding is not permitted for the acquisition of real property. (4) Employment of investigating individuals, as provided in 42 U.S.C. 11903(a)(4). For purposes of PHDEP, the following provisions in paragraphs (a)(4)(i) and (a)(4)(ii) of this section apply: (i) If one or more investigators are to be employed for a service that is also provided by a local law enforcement agency, the applicant must undertake and retain a cost analysis that demonstrates the employment of investigators is more cost efficient than obtaining the service from the local law enforcement agency. (ii) The applicant, the investigator(s) and, only if the local law enforcement agency is receiving any PHDEP funds from the applicant, the local law enforcement agency, are required, before any investigators are employed, to enter into and execute a written agreement that describes the following: (A) The nature of the activities to be performed by the investigators, their scope of authority, and how they will coordinate their activities with the local law enforcement agency; (B) The types of activities that the investigators are expressly prohibited from undertaking. (5) Voluntary tenant patrols, as provided in 42 U.S.C. 11903(a)(5). For purposes of PHDEP, the following provisions in paragraphs (a)(5)(i) through (a)(5)(iv) of this section apply: (i) The provision of training, communications equipment, and other related equipment (including uniforms), for use by voluntary tenant patrols acting in cooperation with officials of local law enforcement agencies is permitted. Grantees are required to obtain liability insurance to protect themselves and the members of the voluntary tenant patrol against potential liability for the activities of the patrol. The cost of this insurance will be considered an eligible program expense. (ii) The applicant, the members of the tenant patrol and, only if the local law enforcement agency is receiving any PHDEP funds from the applicant, the local law enforcement agency, are required, before putting the tenant patrol into effect, to enter into and execute a written agreement that describes the following: (A) The nature of the activities to be performed by the tenant patrol, the patrol's scope of authority, and how the patrol will coordinate its activities with the local law enforcement agency; (B) The types of activities that a tenant patrol is expressly prohibited from undertaking, to include but not limited to, the carrying or use of firearms or other weapons, nightsticks, clubs, handcuffs, or mace in the course of their duties under this program; (C) The type of initial tenant patrol training and continuing training the members receive from the local law enforcement agency (training by the local law enforcement agency is required before putting the tenant patrol into effect). (iii) Tenant patrol members must be advised that they may be subject to individual or collective liability for any actions undertaken outside the scope of their authority and that such acts are not covered under a HA's or RMC's liability insurance. (iv) Grant funds may not be used for any type of financial compensation for voluntary tenant patrol participants. However, the use of program funds for a grant coordinator for volunteer tenant foot patrols is permitted. (6) Drug prevention, intervention, and treatment programs, as provided in 42 U.S.C. 11903(a)(6). (7) Funding resident management corporations (RMCs), resident councils (RCs), and resident organizations (ROs). For purposes of the Public Housing Program, funding may be provided for PHAs that receive grants to contract [[Page 23]] with RMCs and incorporated RCs and ROs to develop security and drug abuse prevention programs involving site residents, as provided in 42 U.S.C. 11903(a)(7). (8) Youth sports. Sports programs and sports activities that serve primarily youths from public or other federally assisted low-income housing projects and are operated in conjunction with, or in furtherance of, an organized program or plan designed to reduce or eliminate drugs and drug-related problems in and around such projects, as provided in 42 U.S.C. 11903(a)(8). (9) Eliminating drug-related and violent crime in PHA-owned housing, under the Public Housing Program, as provided in 42 U.S.C. 11903(b). (b) Ineligible activities. For purposes of PHDEP, funding is not permitted: (1) For activities not included under paragraph (a) of this section; (2) For costs incurred before the effective date of the grant agreement; (3) For the costs related to screening or evicting residents for drug-related crime. However, investigators funded under this program may participate in judicial and administrative proceedings; (4) For previously funded activities determined by HUD on a case-by- case basis to be unworthy of continuation. [64 FR 49919, Sept. 14, 1999] Subpart C_Application and Selection Sec. 761.20 Selection requirements. (a) PHDEP selection. Every PHA, RMC and consortium that meets the requirements of Sec. 761.15 in a FFY will be selected for funding in that FFY and, subject to meeting the performance requirements of Sec. 761.23, for four additional FFYs. (b) AHDEP selection. HUD will publish specific Notices of Funding Availability (NOFAs) in the Federal Register to inform the public of the availability of AHDEP grant amounts under this part 761. The NOFAs will provide specific guidance with respect to the grant process, including identifying the eligible applicants; deadlines for the submission of grant applications; the limits (if any) on maximum grant amounts; the information that must be submitted to permit HUD to score each of the selection criteria; the maximum number of points to be awarded for each selection criterion; the contents of the plan for addressing drug- related and violent crime that must be included with the application; the listing of any certifications and assurances that must be submitted with the application; and the process for ranking and selecting applicants. NOFAs will also include any additional information, factors, and requirements that HUD has determined to be necessary and appropriate to provide for the implementation and administration of AHDEP under this part 761. [64 FR 49920, Sept. 14, 1999] Sec. 761.21 Plan requirement. (a) General requirement. To receive funding under this part, each PHDEP qualified recipient or AHDEP applicant must submit to HUD, for Federal Fiscal Year (FFY) 2000 and each following FFY, a plan for addressing the problem of drug-related and violent crime in and around the housing covered by the plan. If the plan covers more than one development, it does not have to address each development separately if the same activities will apply to each development. The plan must address each development separately only where program activities will differ from one development to another. The plan must include a description of the planned activity or activities, a description of the role of plan partners and their contributions to carrying out the plan, a budget and timetable for implementation of the activities, and the funding source for each activity, identifying in particular all activities to be funded under this part. In addition, the plan must set measurable performance goals and interim milestones for the PHDEP- supported activities and describe the system for monitoring and evaluating these activities. Measurable goals must be established for each category of funded activities, including drug prevention, drug intervention, drug treatment, tenant patrols, and physical improvements. The plan under this section serves as the application for PHDEP funding, and an otherwise qualified recipient that does not [[Page 24]] submit a PHDEP plan as required will not be funded. For AHDEP funding, NOFAs published in the Federal Register may provide additional information on plan requirements for purposes of this section. Plans must meet the requirements of this section before grant funds are distributed. HUD will review the submitted plans for a determination of whether they meet the requirements of this section. (b) Additional requirements for consortia. In addition to meeting the requirements of paragraph (a) of this section, to receive funding under this part, a consortium's plan must include a copy of the consortium agreement between the PHAs which are participating in the consortium, and a copy of the payment agreement between the consortium and HUD. [64 FR 49920, Sept. 14, 1999] Sec. 761.23 Grantee performance requirements. (a) Basic grantee requirements--(1) Compliance with civil rights requirements. Grantees must be in compliance with all fair housing and civil rights laws, statutes, regulations, and executive orders as enumerated in 24 CFR 5.105(a). Federally recognized Indian tribes must comply with the Age Discrimination Act of 1975 and the Indian Civil Rights Act. (2) Adherence to the grant agreement. The grant agreement between HUD and the grantee incorporates the grantee's application and plan for the implementation of grant-funded activities. (3) Compliance with ``baseline'' funding requirement. Grantees may not use grant funds to reimburse law enforcement agencies for ``baseline'' community safety services. Grantees must adhere to Sec. 761.17(a)(2)(i), reimbursement of local law enforcement agencies for additional security and protective services. In addition, grantees must provide to HUD a description of the baseline of services for the unit of general local government in which the jurisdiction of the agency is located. (4) Partnerships. Grantees must provide HUD with evidence of partnerships--in particular, firm commitments by organizations providing funding, services, or other in-kind resources for PHDEP-funded activities (e.g., memorandum of agreement, letter of firm commitment). The partnership agreement must cover the applicable funding period. (5) MTCS reporting. Grantees must maintain a level of compliance with MTCS reporting requirements that is satisfactory to HUD. (b) Planning and reporting requirements--(1) Planning consistency. PHDEP funded activities must be consistent with the most recent HUD- approved PHA Plan or Indian Housing Plan, as appropriate. AHDEP funded activities must be consistent with the most recent Consolidated Plan under part 91 of this title for the community. (2) Demonstration of coordination with other law enforcement efforts. Each grantee must consult with local law enforcement authorities and other local entities in the preparation of its plan for addressing the problem of drug-related and violent crime under Sec. 761.21 and must maintain documentation of such consultation. Furthermore, a grantee must coordinate its grant-funded activities with other anti-crime and anti-drug programs, such as Operation Safe Home, Operation Weed and Seed, and the Safe Neighborhoods Action Program operating in the community, if applicable and maintain documentation of such coordination. (3) Compliance with reporting requirements. Grantees must provide periodic reports consistent with this part at such times and in such form as is required by HUD. (4) Reporting on drug-related and violent crime. Grantees must report any change or lack of change in crime statistics--especially drug-related crime and violent crime--or other relevant indicators drawn from the applicant's or grantee's evaluation and monitoring plan, IHP or PHA Plan. The grantee must also indicate, if applicable, how it is adequately addressing any recommendations emanating from other anti- crime and anti-drug programs, such as Operation Safe Home, Operation Weed and Seed, and the Safe Neighborhoods Action Program, operating in the community and is taking appropriate actions, in view of available resources, such as post-enforcement measures, to take full advantage of these programs. [[Page 25]] (c) Funding and evaluation requirements--(1) Timely obligation and expenditure of grant funds. The HA must obligate and expend funds in compliance with all funding notifications, regulations, notices, and grant agreements. In addition, the HA must obligate at least 50 percent of funds under a particular grant within 12 months of the execution of the grant agreement, and must expend at least 25 percent of funds under a particular grant within 12 months of the execution of the grant agreement. (2) Operational monitoring and evaluation system. The grantee must demonstrate that it has a fully operational system for monitoring and evaluating its grant-funded activities. A monitoring and evaluation system must collect quantitative evidence of the number of persons and units served, including youth served as a separate category, types of services provided, and the impact of such services on the persons served. Also, the monitoring and evaluation system must collect quantitative and qualitative evidence of the impact of grant-funded activities on the public housing or other housing, the community and the surrounding neighborhood. (3) Reduction of violent crime and drug use. The grantee must demonstrate that it has established, and is attaining, measurable goals including the overall reduction of violent crime and drug use. (d) Other requirements. HUD reserves the right to add additional performance factors consistent with this rule and other related statutes and regulations on a case-by-case basis. (e) Sanctions. A grantee that fails to satisfy the performance requirements of this section will be subject to the sanctions listed in Sec. 761.30(f)(2). [64 FR 49921, Sept. 14, 1999] Sec. 761.25 Resident comments on grant application. The applicant must provide the residents of developments proposed for funding under this part 761, as well as any RMCs, RCs, or ROs that represent those residents (including any HA-wide RMC, RC, or RO), if applicable, with a reasonable opportunity to comment on its application for funding under these programs. The applicant must give these comments careful consideration in developing its plan and application, as well as in the implementation of funded programs. Grantees must maintain copies of all written comments submitted for three years. Subpart D_Grant Administration Sec. 761.30 Grant administration. (a) General. Each grantee is responsible for ensuring that grant funds are administered in accordance with the requirements of this part 761, any specific Notices of Funding Availability (NOFAs) issued for these programs, 2 CFR part 200, applicable laws and regulations, applicable OMB circulars, HUD fiscal and audit controls, grant agreements, grant special conditions, the grantee's approved budget (SF- 424A), budget narrative, plan, and activity timetable. (b) Grant term extensions--(1) Grant term. Terms of the grant agreement may not exceed 12 months for the Assisted Housing Program, and 24 months for the Public Housing Program, unless an extension is approved by the local HUD Office or local HUD Office of Native American Programs. Any funds not expended at the end of the grant term shall be remitted to HUD. (2) Extension. HUD may grant an extension of the grant term in response to a written request for an extension stating the need for the extension and indicating the additional time required. HUD will not consider requests for retroactive extension of program periods. HUD will permit only one extension. HUD will only consider extensions if the grantee meets the extension criteria of paragraph (b)(5) of this section at the time the grantee submits for approval the request for the extension. (3) Receipt. The request must be received by the local HUD Office or local HUD Office of Native American Programs prior to the termination of the grant, and requires approval by the local HUD Office or local HUD Office of Native American Programs with jurisdiction over the grantee. (4) Term. The maximum extension allowable for any program period is 6 months. [[Page 26]] (5) Extension criteria. The following criteria must be met by the grantee when submitting a request to extend the expenditure deadline for a program or set of programs. (i) Financial status reports. There must be on file with the local HUD Office or local HUD Office of Native American Programs current and acceptable Financial Status Reports, SF-269As. (ii) Grant agreement special conditions. The grantee must have satisfied all grant agreement special conditions except those conditions that the grantee must fulfill in the remaining period of the grant. This also includes the performance and resolution of audit findings in a timely manner. (iii) Justification. The grantee must submit a narrative justification with the program extension request. The justification must provide complete details, including the circumstances that require the proposed extension, and an explanation of the impact of denying the request. (6) HUD action. The local HUD Office or local HUD Office of Native American Programs will attempt to take action on any proposed extension request within 15 days after receipt of the request. (c) Duplication of funds. To prevent duplicate funding of any activity, the grantee must establish controls to assure that an activity or program that is funded by other HUD programs, or programs of other Federal agencies, shall not also be funded by the Drug Elimination Program. The grantee must establish an auditable system to provide adequate accountability for funds that it has been awarded. The grantee is responsible for ensuring that there is no duplication of funds. (d) Insurance. Each grantee shall obtain adequate insurance coverage to protect itself against any potential liability arising out of the eligible activities under this part. In particular, applicants shall assess their potential liability arising out of the employment or contracting of security personnel, law enforcement personnel, investigators, and drug treatment providers, and the establishment of voluntary tenant patrols; evaluate the qualifications and training of the individuals or firms undertaking these functions; and consider any limitations on liability under tribal, State, or local law. Grantees shall obtain liability insurance to protect the members of the voluntary tenant patrol against potential liability as a result of the patrol's activities under Sec. 761.15(b)(5). Voluntary tenant patrol liability insurance costs are eligible program expenses. Subgrantees shall obtain their own liability insurance. (e) Failure to implement program. If the grant plan, approved budget, and timetable, as described in the approved application, are not operational within 60 days of the grant agreement date, the grantee must report by letter to the local HUD Office or the local HUD Office of Native American Programs the steps being taken to initiate the plan and timetable, the reason for the delay, and the expected starting date. Any timetable revisions that resulted from the delay must be included. The local HUD Office or local HUD Office of Native American Programs will determine if the delay is acceptable, approve/disapprove the revised plan and timetable, and take any additional appropriate action. (f) Sanctions. (1) HUD may impose sanctions if the grantee: (i) Is not complying with the requirements of this part 761, or of other applicable Federal law; (ii) Fails to make satisfactory progress toward its drug elimination goals, as specified in its plan and as reflected in its performance and financial status reports; (iii) Does not establish procedures that will minimize the time elapsing between drawdowns and disbursements; (iv) Does not adhere to grant agreement requirements or special conditions; (v) Proposes substantial plan changes to the extent that, if originally submitted, the applications would not have been selected for funding; (vi) Engages in the improper award or administration of grant subcontracts; (vii) Does not submit reports; or (viii) Files a false certification. (2) HUD may impose the following sanctions: [[Page 27]] (i) Temporarily withhold cash payments pending correction of the deficiency by the grantee or subgrantee; (ii) Disallow all or part of the cost of the activity or action not in compliance; (iii) Wholly or partly suspend or terminate the current award for the grantee's or subgrantee's program; (iv) Require that some or all of the grant amounts be remitted to HUD; (v) Condition a future grant and elect not to provide future grant funds to the grantee until appropriate actions are taken to ensure compliance; (vi) Withhold further awards for the program; or (vii) Take other remedies that may be legally available. [61 FR 13987, Mar. 28, 1996, as amended at 80 FR 75941, Dec. 7, 2015] Sec. 761.35 Periodic grantee reports. Grantees are responsible for managing the day-to-day operations of grant and subgrant supported activities. Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved. Grantee monitoring must cover each program, function or activity of the grant. (a) Semi-annual (nonconstruction) performance reports. For purposes of the Public Housing Program only, the following provisions in paragraph (a) of this section apply: (1) In accordance with 2 CFR 200.328, grantees are required to provide the local HUD Office or the local HUD Office of Native American Programs with a semi-annual performance report that evaluates the grantee's performance against its plan. These reports shall include (but are not limited to) the following in summary form: (i) Any change or lack of change in crime statistics or other indicators drawn from the applicant's plan assessment and an explanation of any difference; (ii) Successful completion of any of the strategy components identified in the applicant's plan; (iii) A discussion of any problems encountered in implementing the plan and how they were addressed; (iv) An evaluation of whether the rate of progress meets expectations; (v) A discussion of the grantee's efforts in encouraging resident participation; and (vi) A description of any other programs that may have been initiated, expanded, or deleted as a result of the plan, with an identification of the resources and the number of people involved in the programs and their relation to the plan. (2) Reporting period. Semi-annual performance reports (for periods ending June 30 and December 31) are due to the local HUD Office or the local HUD Office of Native American Programs on July 30 and January 31 of each year. If the reports are not received by the local HUD Office or the local HUD Office of Native American Programs on or before the due date, grant funds will not be advanced until the reports are received. (b) Final performance report. For purposes of both the Assisted Housing Program and the Public Housing Program, the following provisions in paragraph (b) of this section apply: (1) Evaluation. Grantees are required to provide the local HUD Office or the local HUD Office of Native American Programs, as applicable, with a final cumulative performance report that evaluates the grantee's overall performance against its plan. This report shall include (but is not limited to) the information listed in paragraphs (a)(1)(i) through (a)(1)(vi) of this section, in summary form. (2) Reporting period. The final performance report shall cover the period from the date of the grant agreement to the termination date of the grant agreement. The report is due to the local HUD Office or the local HUD Office of Native American Programs, as applicable, within 90 days after termination of the grant agreement. (c) Semi-annual financial status reporting requirements. For purposes of both the Assisted Housing Program and the Public Housing Program, the following provisions in paragraph (c) of this section apply, as specified below: (1) Forms. The grantee shall provide a semi-annual financial status report. For purposes of the Public Housing [[Page 28]] Program, this report shall be in accordance with 2 CFR 200.327. For both the Assisted Housing and Public Housing Programs, the grantee shall use the form SF-269A, Financial Status Report-Long Form, to report the status of funds for nonconstruction programs. The grantee shall use SF- 269A, block 12, ``Remarks,'' to report on the status of programs, functions, or activities within the program. (2) Reporting period. Semi-annual financial status reports (SF-269A) must be submitted as follows: (i) For purposes of the Assisted Housing Program, semi-annual financial status reports covering the first 180 days of funded activities must be submitted to the local HUD Office between 190 and 210 days after the date of the grant agreement. If the SF-269A is not received on or before the due date (210 days after the date of the grant agreement) by the local HUD Office, grant funds will not be advanced until the reports are received. (ii) For purposes of the Public Housing Program, semi-annual financial status reports (for periods ending June 30 and December 31) must be submitted to the local HUD Office or the local Office of Indian Programs, as applicable, by July 30 and January 31 of each year. If the local HUD Office or the local HUD Office of Native American Programs, as applicable, does not receive the SF-269A on or before the due date, the grant funds will not be advanced until the reports are received. (d) Final financial status report (SF-269A). For purposes of both the Assisted Housing Program and the Public Housing Program, the following provisions in paragraph (d) of this section apply: (1) Cumulative summary. The final report will be a cumulative summary of expenditures to date and must indicate the exact balance of unexpended funds. The grantee shall remit all Drug Elimination Program funds owed to HUD, including any unexpended funds, as follows: (i) For purposes of the Assisted Housing Program, the grantee must remit such funds to HUD within 90 days after the termination of the grant agreement. (ii) For purposes of the Public Housing Program, the local HUD Office or the local HUD Office of Native American Programs shall notify the grantee, in writing, of the requirement to remit such funds to HUD. The grantee shall remit such funds prior to or upon receipt of the notice. (2) Reporting period. The final financial status report shall cover the period from the date of the grant agreement to the termination date of the grant agreement. The report is due to the local HUD Office or the local HUD Office of Native American Programs, as applicable, within 90 days after the termination of the grant agreement. [61 FR 13987, Mar. 28, 1996, as amended at 80 FR 75941, Dec. 7, 2015] Sec. 761.40 Other Federal requirements. In addition to the nondiscrimination and equal opportunity requirements set forth in 24 CFR part 5, subpart A, use of grant funds requires compliance with the following Federal requirements: (a) Labor standards. (1) When grant funds are used to undertake physical improvements to increase security under Sec. 761.15(b)(3), the following labor standards apply: (i) The grantee and its contractors and subcontractors must pay the following prevailing wage rates, and must comply with all related rules, regulations and requirements: (A) For laborers and mechanics employed in the program, the wage rate determined by the Secretary of Labor pursuant to the Davis-Bacon Act (40 U.S.C. 276a et seq.) to be prevailing in the locality with respect to such trades; (B) For laborers and mechanics employed in carrying out nonroutine maintenance in the program, the HUD-determined prevailing wage rate. As used in paragraph (a) of this section, nonroutine maintenance means work items that ordinarily would be performed on a regular basis in the course of upkeep of a property, but have become substantial in scope because they have been put off, and that involve expenditures that would otherwise materially distort the level trend of maintenance expenses. Nonroutine maintenance may include replacement of equipment and materials rendered unsatisfactory because of normal wear [[Page 29]] and tear by items of substantially the same kind. Work that constitutes reconstruction, a substantial improvement in the quality or kind of original equipment and materials, or remodeling that alters the nature or type of housing units is not nonroutine maintenance. (ii) The employment of laborers and mechanics is subject to the provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333). (2) The provisions of paragraph (a)(1) of this section shall not apply to labor contributed under the following circumstances: (i) Upon the request of any resident management corporation, HUD may, subject to applicable collective bargaining agreements, permit residents (for purposes of the Public Housing Program, residents of a program managed by the resident management corporation) to volunteer a portion of their labor. (ii) An individual may volunteer to perform services if: (A) The individual does not receive compensation for the voluntary services, or is paid expenses, reasonable benefits, or a nominal fee for voluntary services; and (B) Is not otherwise employed at any time in the work subject to paragraphs (a)(1)(i)(A) or (a)(1)(i)(B) of this section. (b) Flood insurance. Grants will not be awarded for proposed activities that involve acquisition, construction, reconstruction, repair or improvement of a building or mobile home located in an area that has been identified by the Federal Emergency Management Agency (FEMA) as having special flood hazards unless: (1) The community in which the area is situated is participating in the National Flood Insurance Program in accordance with 44 CFR parts 59 through 79; or (2) Less than a year has passed since FEMA notification to the community regarding such hazards; and (3) Flood insurance on the structure is obtained in accordance with section 102(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001). (c) Lead-based paint. The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, H, and R of this title. (d) Conflicts of interest. In addition to the conflict of interest requirements in 2 CFR 200.112 (for all recipients and subrecipients), 200.317 (for recipients and subrecipients that are States), and 200.318(c) and 200.319(a)(5) (for recipients and subrecipients that are not States) for the Public Housing Program, no person, as described in paragraphs (d)(1) and (d)(2) of this section, may obtain a personal or financial interest or benefit from an activity funded under these drug elimination programs, or have an interest in any contract, subcontract, or agreement with respect thereto, or the proceeds thereunder, either for him or herself or for those with whom he or she has family or business ties, during his or her tenure, or for one year thereafter: (1) Who is an employee, agent, consultant, officer, or elected or appointed official of the grantee, that receives assistance under the program and who exercises or has exercised any functions or responsibilities with respect to assisted activities; or (2) Who is in a position to participate in a decisionmaking process or gain inside information with regard to such activities. (e) For IHAs, Sec. 950.115 of this title, ``Applicability of civil rights requirements,'' and Sec. 950.120 of this title, ``Compliance with other Federal requirements,'' apply and control to the extent they may differ from other requirements of this section; (f) Intergovernmental Review. The requirements of Executive Order 12372 (3 CFR, 1982 Comp., p. 197) and the regulations issued under the Order in part 52 of this title, to the extent provided by Federal Register notice in accordance with 24 CFR 52.3, apply to these programs. (g) Environmental review. Certain eligible activities under this part 761 are categorically excluded from review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321) and are not subject to review under related laws, in accordance with 24 CFR 50.19(b)(4), (b)(12), or (b)(13). If the PHDEP plan proposes the use of grant [[Page 30]] funds to assist any non-exempt activities, HUD will perform an environmental review to the extent required by 24 CFR part 50, prior to grant award. [61 FR 13987, Mar. 28, 1996, as amended at 64 FR 49921, Sept. 14, 1999; 64 FR 50227, Sept. 15, 1999, 80 FR 75941, Dec. 7, 2015] PARTS 762 790 [RESERVED] PART 791_ALLOCATIONS OF HOUSING ASSISTANCE FUNDS--Table of Contents Subpart A_General Provisions Sec. 791.101 Applicability and scope. 791.102 Definitions. Subparts B-C [Reserved] Subpart D_Allocation of Budget Authority for Housing Assistance 791.401 General. 791.402 Determination of low-income housing needs. 791.403 Allocation of housing assistance. 791.404 Field Office allocation planning. 791.405 Reallocations of budget authority. 791.406 Competition. 791.407 Headquarters Reserve. Authority: 42 U.S.C. 1439 and 3535(d). Source: 61 FR 10849, Mar. 15, 1996, unless otherwise noted. Subpart A_General Provisions Sec. 791.101 Applicability and scope. This part describes the role and responsibility of HUD in allocation of budget authority (pursuant to section 213 of the Housing and Community Development Act of 1974 (42 U.S.C. 1439)) for housing assistance under the United States Housing Act of 1937 (Section 8 and public housing) and under section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s), and of budget authority for housing assistance under section 202 of the Housing Act of 1959 (12 U.S.C. 1710q). This part does not apply to budget authority for the public housing operating fund or capital fund. [64 FR 26639, May 14, 1999] Sec. 791.102 Definitions. Act. The Housing and Community Development Act of 1974 (42 U.S.D. 1437), as amended. Allocation area. A municipality, county, or group of municipalities or counties identified by the HUD field office for the purpose of allocating housing assistance. Assistant Secretary. The Assistant Secretary for Housing or the Assistant Secretary for Public and Indian Housing, as appropriate to the housing assistance under consideration. Budget authority. The maximum amount authorized by the Congress for payments over the term of assistance contracts. Fiscal year. The official operating period of the Federal government, beginning on October 1 and ending on September 30. Metropolitan area. See MSA. MSA. A metropolitan statistical area established by the Office of Management and Budget. The term also includes primary metropolitan statistical areas (PMSAs), which are the component parts of larger urbanized areas designated as consolidated metropolitan statistical areas (CMSAs). Where an MSA is divided among two or more field offices, references to an MSA mean the portion of the MSA within the State/Area Office jurisdiction. Public housing agency (PHA). (1) Any State, county, municipality, or other governmental entity or public body which is authorized to administer a program under the 1937 Act (or an agency or instrumentality of such an entity). (2) In addition, for purposes of the program of Section 8 tenant- based assistance under part 982 of this title, the term PHA also includes any of the following: (i) A consortia of housing agencies, each of which meets the qualifications in paragraph (1) of this definition, that HUD determines has the capacity and capability to efficiently administer the program (in which case, HUD may enter into a consolidated ACC with any legal entity authorized to act as the legal representative of the consortia members); [[Page 31]] (ii) Any other public or private non-profit entity that was administering a Section 8 tenant-based assistance program pursuant to a contract with the contract administrator of such program (HUD or a PHA) in effect on October 21, 1998; or (iii) For any area outside the jurisdiction of a PHA that is administering a tenant-based program, or where HUD determines that such PHA is not administering the program effectively, a private non-profit entity or a governmental entity or public body that would otherwise lack jurisdiction to administer the program in such area. [61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26639, May 14, 1999] Subparts B-C [Reserved] Subpart D_Allocation of Budget Authority for Housing Assistance Sec. 791.401 General. This subpart D establishes the procedures for allocating budget authority under section 213(d) of the Act for the programs identified in Sec. 791.101. It describes the allocation of budget authority by the appropriate Assistant Secretary to the applicable Program Office Director in the HUD field office, and by the Program Office Director to allocation areas within their jurisdiction. [61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26639, May 14, 1999] Sec. 791.402 Determination of low-income housing needs. (a) Before budget authority is allocated, the Assistant Secretary for Policy Development and Research shall determine the relative need for low-income housing assistance in each HUD field office jurisdiction. This determination shall be based upon data from the most recent, available decennial census and, where appropriate, upon more recent data from the Bureau of the Census or other Federal agencies, or from the American Housing Survey. (b) Except for paragraph (c) of this section, the factors used to determine the relative need for assistance shall be based upon the following criteria: (1) Population. The renter population; (2) Poverty. The number of renter households with annual incomes at or below the poverty level, as defined by the Bureau of the Census; (3) Housing overcrowding. The number of renter-occupied housing units with an occupancy ratio of 1.01 or more persons per room; (4) Housing vacancies. The number of renter housing units that would be required to maintain vacancies at levels typical of balanced market conditions; (5) Substandard housing. The number of housing units built before 1940 and occupied by renter households with annual incomes at or below the poverty level, as defined by the Bureau of the Census; and (6) Other objectively measurable conditions. Data indicating potential need for rental housing assistance, such as the number of renter households with incomes below specified levels and paying a gross rent of more than 30 percent of household income. (c) For the section 202 elderly program, the data used shall reflect relevant characteristics of the elderly population. The data shall use the criteria specified in paragraph (b)(1) and (6) of this section, as modified to apply specifically to the needs of the elderly population. (d) Based on the criteria in paragraphs (b) and (c) of this section, the Assistant Secretary for Policy Development and Research shall establish housing needs factors for each county and independent city in the field office jurisdiction, and shall aggregate the factors for such jurisdiction. The field office total for each factor is then divided by the respective national total for that factor. The resulting housing needs ratios under paragraph (b) of this section are then weighted to provide housing needs percentages for each field office, using the following weights: population--20 percent; poverty--20 percent; housing overcrowding--10 percent; housing vacancies--10 percent; substandard housing--20 percent; other objectively measurable conditions--20 percent. For the section 202 elderly program, the two criteria described in paragraph (c) of this section are weighted equally. (e) The Assistant Secretary for Policy Development and Research shall [[Page 32]] adjust the housing needs percentages derived in paragraph (d) of this section to reflect the relative cost of providing housing among the field office jurisdictions. [61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26639, May 14, 1999] Sec. 791.403 Allocation of housing assistance. (a) The total budget authority available for any fiscal year shall be determined by adding any available unreserved budget authority from prior fiscal years to any newly appropriated budget authority for each housing program. (b) Budget authority available for the fiscal year, except for that retained pursuant to Sec. 791.407, shall be allocated to the field offices as follows: (1) Budget authority shall be allocated as needed for uses that the Secretary determines are incapable of geographic allocation by formula, including-- (i) Amendments of existing contracts, renewal of assistance contracts, assistance to families that would otherwise lose assistance due to the decision of the project owner to prepay the project mortgage or not to renew the assistance contract, assistance to prevent displacement or to provide replacement housing in connection with the demolition or disposition of public housing, assistance in support of the property disposition and loan management functions of the Secretary; (ii) Assistance which is-- (A) The subject of a line item identification in the HUD appropriations law, or in the table customarily included in the Conference Report on the appropriation for the Fiscal Year in which the funds are to be allocated; (B) Reported in the Operating Plan submitted by HUD to the Committees on Appropriations; or (C) Included in an authorization statute where the nature of the assistance, such as a prescribed set-aside, is, in the determination of the Secretary, incapable of geographic allocation by formula, (iii) Assistance determined by the Secretary to be necessary in carrying out the following programs authorized by the Cranston-Gonzalez National Affordable Housing Act: the Homeownership and Opportunity Through HOPE Act under title IV and HOPE for Elderly Independence under section 803. (2) Budget authority remaining after carrying out allocation steps outlined in paragraph (b)(1) of this section shall be allocated in accordance with the housing needs percentages calculated under paragraphs (b), (c), (d), and (e) of Sec. 791.402. HUD may allocate assistance under this paragraph in such a manner that each State shall receive not less than one-half of one percent of the amount of funds available for each program referred to in Sec. 791.101(a) in each fiscal year. If the budget authority for a particular program is insufficient to fund feasible projects, or to promote meaningful competition, at the field office level, budget authority may be allocated among the ten geographic areas of the country. The funds so allocated will be assigned by Headquarters to the field office(s) with the highest ranked applications within the ten geographic areas. (c) At least annually HUD will publish a notice in the Federal Register informing the public of all allocations under Sec. 791.403(b)(2). [61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26640, May 14, 1999] Sec. 791.404 Field Office allocation planning. (a) General objective. The allocation planning process should provide for the equitable distribution of available budget authority, consistent with the relative housing needs of each allocation area within the field office jurisdiction. (b) Establishing allocation areas. Allocation areas, consisting of one or more counties or independent cities, shall be established by the field office in accordance with the following criteria: (1) Each allocation shall be to the smallest practicable area, but of sufficient size so that at least three eligible entities are viable competitors for funds in the allocation area, and so that all applicable statutory requirements can be met. (It is expected that in many instances individual MSAs will be established as metropolitan allocation areas.) For the section 202 program for the elderly, the allocation [[Page 33]] area must include sufficient units to promote a meaningful competition among disparate types of providers of such housing (e.g., local as well as national sponsors, minority as well as non-minority sponsors). The preceding sentence shall not apply to projects acquired from the Resolution Trust Corporation under section 21A(c) of the Federal Home Loan Bank Act. (2) Each allocation area shall also be of sufficient size, in terms of population and housing need, that the amount of budget authority being allocated to the area will support at least one feasible program or project. (3) In establishing allocation areas, counties and independent cities within MSAs should not be combined with counties that are not in MSAs. (c) Determining the amount of budget authority. Where the field office establishes more than one allocation area, it shall determine the amount of budget authority to be allocated to each allocation area, based upon a housing needs percentage which represents the needs of that area relative to the field office jurisdiction. For each program, a composite housing needs percentage developed under Sec. 791.402 for those counties and independent cities comprising the allocation area shall be aggregated into allocation area totals. (d) Planning for the allocation. The field office should develop an allocation plan which reflects the amount of budget authority determined for each allocation area in paragraph (c). The plan should include a map or maps clearly showing the allocation areas within the field office jurisdiction. The relative share of budget authority by individual program type need not be the same for each allocation area, so long as the total amount of budget authority made available to the allocation area is not significantly reduced. [61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26640, May 14, 1999] Sec. 791.405 Reallocations of budget authority. (a) The field office shall make every reasonable effort to use the budget authority made available for each allocation area within such area. If the Program Office Director determines that not all of the budget authority allocated for a particular allocation area is likely to be used during the fiscal year, the remaining authority may be allocated to other allocation areas where it is likely to be used during that fiscal year. (b) If the Assistant Secretary determines that not all of the budget authority allocated to a field office is likely to be used during the fiscal year, the remaining authority may be reallocated to another field office where it is likely to be used during that fiscal year. (c) Any reallocations of budget authority among allocation areas or field offices shall be consistent with the assignment of budget authority for the specific program type and established set-asides. (d) Notwithstanding the requirements of paragraphs (a) through (c) of this section, budget authority shall not be reallocated for use in another State unless the Program Office Director or the Assistant Secretary has determined that other allocation areas within the same State cannot use the available authority during the fiscal year. Sec. 791.406 Competition. (a) All budget authority allocated pursuant to Sec. 791.403(b)(2) shall be reserved and obligated pursuant to a competition. Any such competition shall be conducted pursuant to specific criteria for the selection of recipients of assistance. These criteria shall be contained in a regulation promulgated after notice and public comment or, to the extent authorized by law, a notice published in the Federal Register. (b) This section shall not apply to assistance referred to in Sec. Sec. 791.403(b)(1) and 791.407. Sec. 791.407 Headquarters Reserve. (a) A portion of the budget authority available for the housing programs listed in Sec. 791.101(a), not to exceed an amount equal to five percent of the total amount of budget authority available for the fiscal year for programs under the United States Housing Act of 1937 listed in Sec. 791.101(a), may be retained by the Assistant Secretary for subsequent allocation to specific areas and communities, and may only be used for: [[Page 34]] (1) Unforeseen housing needs resulting from natural and other disasters, including hurricanes, tornadoes, storms, high water, wind driven water, tidal waves, tsunamis, earthquakes, volcanic eruptions, landslides, mudslides, snowstorms, drought, fires, floods, or explosions, which in the determination of the Secretary cause damage of sufficient severity and magnitude to warrant Federal housing assistance; (2) Housing needs resulting from emergencies, as certified by the Secretary, other than disasters described in paragraph (a)(1) of this section. Emergency housing needs that can be certified are only those that result from unpredictable and sudden circumstances causing housing deprivation (such as physical displacement, loss of Federal rental assistance, or substandard housing conditions) or causing an unforeseen and significant increase in low-income housing demand in a housing market (such as influx of refugees or plant closings); (3) Housing needs resulting from the settlement of litigation; and (4) Housing in support of desegregation efforts. (b) Applications for funds retained under paragraph (a) of this section shall be made to the field office, which will make recommendations to Headquarters for approval or rejection of the application. Applications generally will be considered for funding on a first-come, first-served basis. Specific instructions governing access to the Headquarters Reserve shall be published by notice in the Federal Register, as necessary. (c) Any amounts retained in any fiscal year under paragraph (a) of this section that are not reserved by the end of such fiscal year shall remain available for the following fiscal year in the program under Sec. 791.101(a) from which the amount was retained. Such amounts shall be allocated pursuant to Sec. 791.403(b)(2). PART 792_PUBLIC HOUSING AGENCY SECTION 8 FRAUD RECOVERIES--Table of Contents Subpart A_General Provisions Sec. 792.101 Purpose. 792.102 Applicability. 792.103 Definitions. Subpart B_Recovery of Section 8 Funds 792.201 Conduct of litigation. 792.202 PHA retention of proceeds. 792.203 Application of amounts recovered. 792.204 Recordkeeping and reporting. Authority: 42 U.S.C. 1437f note and 3535(d). Source: 59 FR 9409, Feb. 28, 1994, unless otherwise noted. Editorial Note: Nomenclature changes to part 792 appear at 64 FR 26640, May 14, 1999. Subpart A_General Provisions Sec. 792.101 Purpose. The purpose of this part is to encourage public housing agencies (PHAs) to investigate and pursue instances of tenant and owner fraud and abuse in the operation of the Section 8 housing assistance payments programs. [64 FR 26640, May 14, 1999] Sec. 792.102 Applicability. (a) This part applies to a PHA acting as a contract administrator under an annual contributions contract with HUD in any section 8 housing assistance payments program. To be eligible to retain section 8 tenant or owner fraud recoveries, the PHA must be the principal party initiating or sustaining an action to recover amounts from families. (b) This part applies only to those instances when a tenant or owner committed fraud, and the fraud recoveries are obtained through litigation brought by the PHA (including settlement of the lawsuit), a court-ordered restitution pursuant to a criminal proceeding, or an administrative repayment agreement with the family or owner as a result of a PHA administrative grievance procedure pursuant to, or incorporating the requirements of, Sec. 982.555 of this title. This part does not apply to cases of owner fraud in PHA- [[Page 35]] owned or controlled units, or where incorrect payments were made or benefits received because of calculation errors instead of willful fraudulent activities. (c) This part applies to all tenant and owner fraud recoveries resulting from litigation brought by the PHA (including settlement of the lawsuit), or a court-ordered restitution pursuant to a criminal proceeding obtained on or after October 8, 1986, and to all tenant and owner fraud recoveries obtained through administrative repayment agreements signed on or after October 28, 1992. [59 FR 9409, Feb. 28, 1994, as amended at 64 FR 26640, May 14, 1999] Sec. 792.103 Definitions. Fraud and abuse. Fraud and abuse means a single act or pattern of actions: (1) That constitutes false statement, omission, or concealment of a substantive fact, made with intent to deceive or mislead; and (2) That results in payment of section 8 program funds in violation of section 8 program requirements. The terms Public Housing Agency (PHA) and Indian Housing Authority (IHA) are defined in 24 CFR part 5. Judgment. Judgment means a provision for recovery of section 8 program funds obtained through fraud and abuse, by order of a court in litigation or by a settlement of a claim in litigation, whether or not stated in a court order. Litigation. A lawsuit brought by a PHA to recover section 8 program funds obtained as a result of fraud and abuse. Principal party in initiating or sustaining an action to recover. Principal party in initiating or sustaining an action to recover means the party that incurs more than half the costs incurred in: (1) Recertifying tenants who fraudulently obtained section 8 rental assistance; (2) Recomputing the correct amounts owed by tenants; and (3) Taking needed actions to recoup the excess benefits received, such as initiating litigation. Costs incurred to detect potential excessive benefits in the routine day-to-day operations of the program are excluded in determining the principal party in initiating or sustaining an action to recover. For example, the cost of income verification during an annual recertification would not be counted in determining the principal party in initiating or sustaining an action to recover. Public housing agency (PHA). A public housing agency as defined in Sec. 791.102. Repayment agreement. Repayment agreement means a formal document signed by a tenant or owner and provided to a PHA in which a tenant or owner acknowledges a debt, in a specific amount, and agrees to repay the amount due at specific time period(s). [59 FR 9409, Feb. 28, 1994, as amended at 61 FR 5212, Feb. 9, 1996; 64 FR 26640, May 14, 1999] Subpart B_Recovery of Section 8 Funds Sec. 792.201 Conduct of litigation. The PHA must obtain HUD approval before initiating litigation in which the PHA is requesting HUD assistance or participation. Sec. 792.202 PHA retention of proceeds. (a) Where the PHA is the principal party initiating or sustaining an action to recover amounts from tenants that are due as a result of fraud and abuse, the PHA may retain, the greater of: (1) Fifty percent of the amount it actually collects from a judgment, litigation (including settlement of lawsuit) or an administrative repayment agreement pursuant to, or incorporating the requirements of, Sec. 982.555 of this title; or (2) Reasonable and necessary costs that the PHA incurs related to the collection from a judgment, litigation (including settlement of lawsuit) or an administrative repayment agreement pursuant to, or incorporating the requirements of, Sec. 982.555 of this title. Reasonable and necessary costs include the costs of the investigation, legal fees and collection agency fees. (b) If HUD incurs costs on behalf of the PHA in obtaining the judgment, [[Page 36]] these costs must be deducted from the amount to be retained by the PHA. [59 FR 9409, Feb. 28, 1994, as amended at 64 FR 26640, May 14, 1999] Sec. 792.203 Application of amounts recovered. (a) The PHA may only use the amount of the recovery it is authorized to retain in support of the section 8 program in which the fraud occurred. (b) The remaining balance of the recovery proceeds (i.e., the portion of recovery the PHA is not authorized to retain) must be applied as directed by HUD. Sec. 792.204 Recordkeeping and reporting. To permit HUD to audit amounts retained under this part, an PHA must maintain all records required by HUD, including: (a) Amounts recovered on any judgment or repayment agreement; (b) The nature of the judgment or repayment agreement; and (c) The amount of the legal fees and expenses incurred in obtaining the judgment or repayment agreement and recovery. (Approved by the Office of Management and Budget under Control Number 2577-0053) PARTS 793 799 [RESERVED] [[Page 37]] CHAPTER VIII--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (SECTION 8 HOUSING ASSISTANCE PROGRAMS, SECTION 202 DIRECT LOAN PROGRAM, SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY PROGRAM AND SECTION 811 SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES PROGRAM) -------------------------------------------------------------------- Editorial Note: Nomenclature changes to chapter VIII appear at 59 FR 14090, Mar. 25, 1994. Part Page 800-810 [Reserved] 811 Tax exemption of obligations of public housing agencies and related amendments. 39 850 Housing development grants.................. 45 880 Section 8 housing assistance payments program for new construction............ 48 881 Section 8 housing assistance payments program for substantial rehabilitation.. 69 882 Section 8 moderate rehabilitation programs.. 76 883 Section 8 housing assistance payments program--State housing agencies......... 106 884 Section 8 housing assistance payments program, new construction set-aside for Section 515 rural rental housing projects................................ 118 886 Section 8 housing assistance payments program--Special allocations............ 138 [[Page 38]] 887 Section 8 housing assistance payments programs--Family self-sufficiency program................................. 175 888 Section 8 housing assistance payments program--Fair market rents and contract rent annual adjustment factors.......... 177 891 Supportive housing for the elderly and persons with disabilities............... 187 892-899 [Reserved] [[Page 39]] PARTS 800 810 [RESERVED] PART 811_TAX EXEMPTION OF OBLIGATIONS OF PUBLIC HOUSING AGENCIES AND RELATED AMENDMENTS--Table of Contents Sec. 811.101 Purpose and scope. 811.102 Definitions. 811.103 General. 811.104 Approval of Public Housing Agencies (other than agency or instrumentality PHAS). 811.105 Approval of agency or instrumentality PHA. 811.106 Default under the contract. 811.107 Financing documents and data. 811.108 Debt service reserve. 811.109 Trust indenture provisions. 811.110 Refunding of obligations issued to finance Section 8 projects. Authority: Sec. 7(d), Dept. of HUD Act (42 U.S.C. 3535(d)); secs. 3(6), 5(b), 8, 11(b) of the U.S. Housing Act of 1937 (42 U.S.C. 1437a, 1437c, 1437f, and 1437). Source: 44 FR 12360, Mar. 6, 1979, unless otherwise noted. Sec. 811.101 Purpose and scope. (a) The purpose of this part is to provide a basis for determining tax exemption of obligations issued by public housing agencies pursuant to Section 11(b) of the United States Housing Act of 1937 (42 U.S.C. 1437i) to refund bonds for Section 8 new construction or substantial rehabilitation projects. (b) This part does not apply to tax exemption pursuant to Section 11(b) for low-income housing projects developed pursuant to 24 CFR parts 950 and 941. [61 FR 14460, Apr. 1, 1996] Sec. 811.102 Definitions. The terms HUD and Public Housing Agency (PHA) are defined in 24 CFR part 5. Act. The United States Housing Act of 1937 (42 U.S.C. 1437, et seq.). Agency or Instrumentality PHA. A not-for-profit private or public organization that is authorized to engage in or assist in the development or operation of low-income housing and that has the relationship to a parent entity PHA required by this subpart. Agreement. An Agreement to Enter Into Housing Assistance Payments Contract as defined in the applicable Section 8 regulations. The form of agreement for projects financed with tax-exempt obligations shall be amended in accordance with this subpart. Annual Contributions Contract (ACC). An Annual Contributions Contract as defined in the applicable Section 8 regulations. The form of ACC for projects financed with tax-exempt obligations shall be amended in accordance with this subpart. Applicable Section 8 Regulations. The provisions of 24 CFR parts 880, 881, or 883 that apply to the project. Contract. A Housing Assistance Payments Contract as defined in the applicable Section 8 regulations. The form of contract for projects financed with tax-exempt obligations shall be amended in accordance with this subpart. Cost of issuance. Ordinary, necessary, and reasonable costs in connection with the issuance of obligations. These costs shall include attorney fees, rating agency fees, trustee fees, printing costs, bond counsel fees, feasibility studies (for non-FHA-insured projects only), consultant fees and other fees or expenses approved by HUD. Debt service reserve. A fund maintained by the trustee as a supplemental source of money for the payment of debt service on the obligations. Financing Agency. The PHA (parent entity PHA or agency or instrumentality PHA) that issues the tax-exempt obligations for financing of the project. Low-income Housing Project. Housing for families and persons of low- income developed, acquired or assisted by a PHA under Section 8 of the Act and the improvement of any such housing. Obligations. Bonds or other evidence of indebtedness that are issued to provide permanent financing of a low-income housing project. Pursuant to Section 319(b) of the Housing and Community Development Act of 1974, the term obligation shall not include any obligation secured by a mortgage insured under Section 221(d)(3) of the National Housing Act (12 U.S.C. 1715l) and issued by a public agency as mortgagor in connection with the financing of a project assisted under Section 8 of the Act. This exclusion does not apply to a public agency as mortgagee. [[Page 40]] Owner. An owner as defined in the applicable Section 8 regulations. Parent Entity PHA. Any state, county, municipality or other governmental entity or public body that is authorized to engage in or assist in the development or operation of low-income housing and that has the relationship to an agency or instrumentality PHA required by this subpart. Servicing fees. The annual costs of servicing the obligations 0including any debt service reserve), including trustee fees, mortgage servicing fees, PHA expenses in connection with annual reviews, maintenance of books and accounts, audit expenses, agent fees and other costs of servicing the obligations. Trust indenture. A contract setting forth the rights and obligations of the issuer, bondholders, owner and trustee in connection with the tax-exempt obligations. The trust indenture may also include provisions regarding the loan to the owner or these may be set forth in a separate mortgage. Trustee. The entity that has legal responsibility under the trust indenture for disposition of the proceeds of a bond issuance and servicing of the debt represented by the obligations. The trustee must be a bank or other financial institution that is legally qualified and experienced in performing fiduciary responsibilities with respect to the care and investment of funds of a magnitude comparable to those involved in the financing. Yield. That percentage rate at which the present worth of all payments of principal and interest to be paid on the obligations is equal to the purchase price. [44 FR 12360, Mar. 6, 1979, as amended at 61 FR 5212, Feb. 9, 1996; 61 FR 14460, Apr. 1, 1996] Sec. 811.103 General. (a) In order for obligations to be tax-exempt under this subpart the obligations must be issued by a PHA in connection with a low-income housing project approved by HUD under the Act and the applicable Section 8 regulations. (1) Except as needed for a resident manager or similar requirement, all dwelling units in a low-income housing project that is to be financed with obligations issued pursuant to this subpart must be Section 8 contract units. (2) A low-income housing project that is to be financed with obligations issued pursuant to this subpart may include necessary appurtenances. Such appurtenances may include commercial space not to exceed 10% of the total net rentable area. (b) Where the parent entity PHA is not the owner of the project, the parent entity PHA or other PHA approvable under Sec. 811.104 must agree to administer the contract pursuant to an ACC with HUD, and such a PHA must agree that in the event there is a default under the contract it will pursue all available remedies to achieve correction of the default, including operation and possession of the project, if called upon by HUD to do so. If the field office finds that the PHA does not have the capacity to perform these functions, the Assistant Secretary may approve alternative contractual arrangements for performing these functions. Sec. 811.104 Approval of Public Housing Agencies (other than agency or instrumentality PHAS). (a)(1) An application to the field office for approval as a Public Housing Agency, other than an agency or instrumentality PHA, for purposes of this subpart shall be supported by evidence satisfactory to HUD to establish that: (i) The applicant is a PHA as defined in this subpart, and has the legal authority to meet the requirements of this subpart and applicable Section 8 regulations, as described in its application. This evidence shall be supported by the opinion of counsel for the applicant. (ii) The applicant has or will have the administrative capability to carry out the responsibilities described in its application. (2) The evidence shall include any facts or documents relevant to the determinations required by paragraph (a)(1) of this section, including identification of any pending application the applicant has submitted under the Act. In the absence of evidence indicating the applicant may not be qualified, the [[Page 41]] field office may accept as satisfactory evidence: (i) Identification of any previous HUD approval of the applicant as a PHA pursuant to this section; (ii) Identification of any prior ACC with the applicant under the Act; or (iii) A statement, where applicable, that the applicant is an approved participating agency under 24 CFR Part 883 (State Housing Finance and Development Agencies). (b) The applicant shall receive no compensation in connection with the financing of a project, except for its expenses. Such expenses shall be subject to approval by HUD in determining the development cost, cost of issuance and servicing fee, as appropriate. Should the applicant receive any compensation in excess of such expenses, the excess is to be placed in the debt service reserve. (c) Where the applicant acts as the financing agency, the applicant shall be required to furnish to HUD an audit by an independent public accountant of its books and records in connection with the financing of the project within 90 days after the execution of the contract or final endorsement and at least biennially thereafter. (d) Any subsequent amendments to the documents submitted to HUD pursuant to this section must be approved by HUD. Sec. 811.105 Approval of agency or instrumentality PHA. (a) An application to the field office for approval as an agency or instrumentality PHA for purposes of this subpart shall: (1) Identify the parent entity PHA. (2) Establish by evidence satisfactory to HUD that: (i) The parent entity PHA meets the requirements of Sec. 811.104. (ii) The applicant was properly created pursuant to state law as a not-for-profit entity; is an agency or instrumentality PHA, as defined in this subpart; has the legal authority to meet the requirements of this subpart and applicable Section 8 regulations, as described in its application; and the actions required to establish the legal relationship with the parent entity PHA prescribed by paragraph (c) of this section have been taken and are not prohibited by State law. This evidence shall be supported by the opinion of counsel for the applicant and counsel for the parent entity PHA. (iii) The applicant has, or will have, the administrative capability to carry out the responsibilities described in its application. (b) The charter or other organic document establishing the applicant shall limit the activities to be performed by the applicant, and funds and assets connected therewith, to carrying out or assisting in carrying out Section 8 projects and other low-income housing projects approved by the Secretary. Such organic documents shall provide that the applicant shall receive no compensation in connection with the financing of a project, except for its expenses. Such expenses shall be subject to approval by HUD in determining the development cost, cost of issuance and servicing fee, as appropriate. Should the applicant receive any compensation in excess of such expenses, the excess is to be placed in the debt service reserve. (c) The documents submitted by the applicant shall include the following with respect to the relationship between the parent entity PHA and the agency or instrumentality PHA: (1) Provisions requiring approval by the parent entity PHA of the charter or other organic instrument and of the bylaws of the applicant, which organic instrument and bylaws shall specify that any amendments are subject to approval by the parent entity PHA and by HUD. (2) Provisions requiring approval by the parent entity PHA of each project and of the program and expenditures of the applicant. (3) Provisions requiring approval by the parent entity PHA of each issue of obligations by the applicant not more than 60 days prior to the date of issue and approval of any substantive changes to the terms and conditions of the issuance prior to date of issue. (4) Provisions requiring the applicant to furnish an audit of all its books and records by an independent public accountant to the parent entity PHA within 90 days after execution of the contract or final endorsement and at [[Page 42]] least bennially thereafter; and provisions requiring the parent entity PHA to perform an annual review of the applicant's performance and to provide HUD with a copy of such review together with any audits performed during the reporting period. (5) Provisions giving the parent entity PHA right of access at any time to all books and records of the applicant. (6) Provisions that upon dissolution of the applicant, title to or other interest in any real or personal property that is owned by such applicant at the time of dissolution shall be transferred to the parent entity PHA or to another PHA or to another not-for-profit entity as determined by the parent entity PHA and approved by HUD, to be used only for purposes approved by HUD. (7) Evidence of agreement by the parent entity PHA, or other entity as may be provided for in alternative contractual arrangements pursuant to Sec. 811.103(b), to accept title to any real or personal property pursuant to paragraph (c)(6) of this section. (d) Any subsequent amendments to the documents submitted to HUD pursuant to this section must be approved by HUD. (e) Members, officers, or employees of the parent entity PHA may be directors or officers of the applicant unless this is contrary to state law. [44 FR 12360, Mar. 6, 1979, as amended at 61 FR 14461, Apr. 1, 1996] Sec. 811.106 Default under the contract. If HUD finds there is a default under the Contract, the field office shall so notify the trustee and give the trustee a specified reasonable time to take action to require the owner to correct such default prior to any suspension or termination of payments under the contract. In the event of a default under the contract, HUD may terminate or suspend payments under the contract, may seek specific performance of the contract and may pursue other remedies. [44 FR 12360, Mar. 6, 1979, as amended at 61 FR 14461, Apr. 1, 1996] Sec. 811.107 Financing documents and data. (a) The financing agency shall assure that any official statement or prospectus or other disclosure statement prepared in connection with the financing shall state on the first page that: (1) In addition to any security cited in the statement, the bonds may be secured by a pledge of an Annual Contributions Contract and a Housing Assistance Payments Contract, executed by HUD; (2) The faith of the United States is solemnly pledged to the payment of annual contributions pursuant to the Annual Contributions Contact or to the payment of housing assistance payments pursuant to the Housing Assistance Payments Contract, and funds have been obligated by HUD for such payments; (3) Except as provided in any contract of mortgage insurance, the bonds are not insured by HUD; (4) The bonds are not to be construed as a debt or indebtedness of HUD or the United States, and payment of the bonds is not guaranteed by the United States; (5) Nothing in the text of a disclosure statement is to be interpreted to conflict with the above; and (6) HUD has not reviewed or approved and bears no responsibility for the content of disclosure statements. (b) The financing agency shall retain in its files the documentation relating to the financing. A copy of this documentation shall be furnished to HUD upon request. [61 FR 14461, Apr. 1, 1996] Sec. 811.108 Debt service reserve. (a) FHA-Insured projects. (1) The debt service reserve shall be invested and the income used to pay principal and interest on that portion of the obligations which is attributable to the funding of the debt service reserve. Any excess investment income shall be added to the debt service reserve. In the event such investment income is insufficient, surplus cash or residual receipts, to the extent approved by the field office, may be used to pay such principal and interest costs. [[Page 43]] (2) The debt service reserve and its investment income shall be available only for the purpose of paying principal or interest on the obligations. The use of the debt service reserve for this purpose shall not be a cure for any failure by the owner to make required payments. (3) Upon full payment of the principal and interest on the obligations (including that portion of the obligations attributable to the funding of the debt service reserve), any funds remaining in the debt service reserve shall be remitted to HUD. (b) Non-FHA-insured projects. (1) Investment income from the debt service reserve, up to the amount required for debt service on the bonds attributable to the debt service reserve, shall be credited toward the owner's debt service payment. Any excess investment income shall be added to and become part of the debt service reserve. (2) The debt service reserve and investment income thereon shall be available only for the purpose of paying principal or interest on the obligations. The use of the debt service reserve for this purpose shall not be a cure for any failure by the owner to make required payments. (3) Upon full payment of the principal and interest on the obligations (including that portion of the obligations attributable to the funding of the debt service reserve), any funds remaining in the debt service reserve shall be remitted to HUD. [61 FR 14461, Apr. 1, 1996] Sec. 811.109 Trust indenture provisions. Obligations shall be prepaid only under such conditions as HUD shall require, including reduction of contract rents and continued operation of the project for the housing of low-income families. [44 FR 12360, Mar. 6, 1979. Redesignated at 61 FR 14461, Apr. 1, 1996] Sec. 811.110 Refunding of obligations issued to finance Section 8 projects. (a) This section states the terms and conditions under which HUD will approve refunding or defeasance of certain outstanding debt obligations which financed new construction or substantial rehabilitation of Section 8 projects, including fully and partially assisted projects. (b) In the case of bonds issued by State Agencies qualified under 24 CFR part 883 to refund bonds which financed projects assisted pursuant to 24 CFR part 883, HUD requires compliance with the prohibition on duplicative fees contained in 24 CFR part 883 and with paragraphs (f) and (h) of this section, as applicable to the projects to be refunded. (c) No agency shall issue obligations to refund outstanding 11(b) obligations until the Office of the Assistant Secretary for Housing sends the financing agency a Notification of Tax Exemption based on approval of the proposed refunding's terms and conditions as conforming to this part's requirements, including continued operation of the project as housing for low-income families, and where possible, reduction of Section 8 assistance payments through lower contract rents or an equivalent cash rebate to the U.S. Treasury (i.e. Trustee Sweep). The agency shall submit such documentation as HUD determines is necessary for review and approval of the refunding transaction. Upon conclusion of the closing of refunding bonds, written confirmation must be sent to the Office of Multifamily Housing by bond counsel, or other acceptable closing participant, including a schedule of the specific amount of savings in Section 8 assistance where applicable, CUSIP number information, and a final statement of Sources and Uses. (d)(1) HUD approval of the terms and conditions of a Section 8 refunding proposal requires evaluation by HUD's Office of Multifamily Housing of the reasonableness of the terms of the Agency's proposed financing plan, including projected reductions in project debt service where warranted by market conditions and bond yields. This evaluation shall determine that the proposed amount of refunding obligations is the amount needed to: pay off outstanding bonds; fund a debt service reserve to the extent required by credit enhancers or bond rating agencies, or bond underwriters in the case of unrated refunding bonds; pay credit enhancement fees acceptable to HUD; and [[Page 44]] pay transaction costs as approved by HUD according to a sliding scale ceiling based on par amount of refunding bond principal. Exceptions may be approved by HUD, if consistent with applicable statutes, in the event that an additional issue amount is required for project purposes. (2) The stated maturity of the refunding bonds may not exceed by more than one year the remaining term of the project mortgage, or in the case of an uninsured loan, the later of expiration date of the Housing Assistance Payments Contract (the ``HAPC'') or final maturity of the refunded bonds. (3) The bond yield may not exceed by more than 75 basis points the 20 Bond General Obligation Index published by the Daily Bond Buyer for the week immediately preceding the sale of the bonds, except as otherwise approved by HUD. An amount not to exceed one-fourth of one percent annually of the bonds' outstanding principal balance may be allowed for servicing and trustee fees. (e) For projects for which the Agreement to enter into the HAPC was executed between January 1, 1979, and December 31, 1984 (otherwise known as ``McKinney Act Projects''), for which a State or local agency initiates a refunding, the Secretary shall make available to an eligible issuing agency 50 percent of the Section 8 savings of a refunding, as determined by HUD on a project-by-project basis, to be used by the agency in accordance with the terms of a Refunding Agreement executed by the Agency and HUD which incorporates the Agency's Housing Plan for use of savings to provide decent, safe, and sanitary housing for very low- income households. In determining the amount of savings recaptured on a project-by-project basis, as authorized by section 1012(b) of the McKinney Act, HUD will take into account the physical condition of the projects participating in the refunding which generate the McKinney Act savings and, if necessary, HUD will finance in refunding bond debt service correction of existing deficiencies which cannot be funded completely by existing project replacement reserves or by a portion of reserves released from the refunded bond's indenture. For McKinney Act refundings of projects which did not receive a Financing Adjustment Factor (``FAF''), HUD will allow up to 50 percent of debt service savings to be allocated to the project account; in which case, the remainder will be shared equally by the Agency and the U.S. Treasury. (f) For refundings of Section 8 projects other than McKinney Act Projects, and for all transactions which substitute collateral for, but do not redeem, outstanding obligations, and for which a HUD approval is needed (such as assignment of a HAPC or insured mortgage note), the Office of Multifamily Housing in consultation with HUD Field Office Counsel will review the HAPC, the Trust Indenture for the outstanding obligations, applicable HUD regulations, and reasonableness of proposed financing terms. In particular, HUD review should be obtained for the release of reserves from the trust indenture of the outstanding 11(b) bonds that are being refunded, defeased, or pre-paid. A proposal to distribute to a non-Federal entity the benefits of a refinancing, such as debt service savings and/or balances in reserves held under the original Trust Indenture, should be referred to the Office of Multifamily Housing for further review. In proposals submitted for HUD approval, HUD will consent to release reserves, as provided by the Trust Indenture, in an amount remaining after correction of project physical deficiencies and/or replenishment of replacement reserves, where needed. In the case of a refunding of 11(b) bonds by a public agency issuer which is the owner of the project and is entitled to reserves held under the Trust Indenture, HUD requires execution by the project owner of a use agreement, and amendment of a regulatory agreement, if applicable, to extend low-income tenant occupancy for ten years after expiration of the original HAPC term. In the case of HAP contracts with renewable 5- year terms, the Use Agreement shall extend for 10 years after the project owners first opt-out date. The Use Agreement may also be required of private entity owners, unless the refunding is incidental to a transfer of project ownership or a transaction which provides a substantial public [[Page 45]] benefit, as determined by the Office of Multifamily Housing. Proposed use of benefits shall be consistent with applicable appropriations law, the HAPC, and other requirements applicable to the original project financing, and the proposed financing terms must be reasonable in relation to bond market yields and transaction fees, as approved by the HUD Office of Multifamily Housing. (g) Agencies shall have wide latitude in the design of specific delivery vehicles for use of McKinney Act savings, subject to HUD audit of each Agency's performance in serving the targeted income eligible population. Savings may be used for shelter costs of providing housing, rental, or owner-occupied, to very low-income households through new construction, rehabilitation, repairs, and acquisition with or without rehab, including assistance to very low-income units in mixed-income developments. These include programs designed to assist in obtaining shelter, such as rent or homeownership subsidies. Self-sufficiency services in support of very low-income housing are also eligible, and may include, but are not limited to, homeownership counseling, additional security measures in high-crime areas, construction job training for residents' repair of housing units occupied by very low- income families, and empowerment activities designed to support formation and growth of resident entities. Except for the cost of providing third-party program audit reports to HUD, eligible costs exclude consultant fees or reimbursement of Agency staff expenses, but may include fees for professional services required in the Agency's McKinney Act programs of assistance to very low-income families. Unless otherwise specified by HUD in a McKinney Agreement, savings shall be subject to the above use requirements for 10 years from the date of receipt of the savings. (h) Refunding bonds, including interest thereon, approved under this Section shall be exempt from all taxation now or hereafter imposed by the United States, and the notification of approval of tax exemption shall not be subject to revocation by HUD. Whether refunding bonds approved under this section meet the requirements of Section 103 or any other provisions of the Internal Revenue Code is not within the responsibilities of HUD to determine. Such bonds shall be prepaid during the HAPC term only under such conditions as HUD shall require. [61 FR 14461, Apr. 1, 1996] PART 850_HOUSING DEVELOPMENT GRANTS--Table of Contents Subpart A_General Provisions Sec. 850.1 Applicability and savings clause. Subparts B-E [Reserved] Subpart F_Project Management 850.151 Project restrictions. 850.153 Rent control. 850.155 Securing owner's responsibilities. Authority: 42 U.S.C. 1437o, 3535(d). Source: 49 FR 24641, June 14, 1984, unless otherwise noted. Subpart A_General Provisions Sec. 850.1 Applicability and savings clause. (a) Applicability. This part implements the Housing Development Grant Program contained in section 17 of the United States Housing Act of 1937 (42 U.S.C. 1437o). The Program authorized the Secretary to make housing development grants to support the new construction or substantial rehabilitation of real property to be used primarily for residential rental purposes. Section 289(b)(1) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12839) repealed section 17 effective October 1, 1991. Section 289(a) prohibited new grants under the Housing Development Grant Program except for projects for which binding commitments had been entered into prior to October 1, 1991. (b) Savings clause. Any grant made pursuant to a binding commitment entered into before October 1, 1991 will continue to be governed by subparts A [[Page 46]] through E of this part in effect immediately before April 1, 1996, and by subpart F of this part as currently in effect. [61 FR 7944, Feb. 29, 1996] Subparts B-E [Reserved] Subpart F_Project Management Sec. 850.151 Project restrictions. (a) Owner-grantee agreement. The grantee and the owner must enter into an agreement that requires the owner (including its successors in interest) to carry out the requirements of this section and of the grant agreement, as appropriate. The grantee-owner agreement must require the grantee to monitor (where required) and to take appropriate legal action to enforce compliance with the owner's responsibilities thereunder. The owner's compliance with its obligations under this section must be secured by a mortgage or other security instrument meeting the requirements of Sec. 850.155. Nothing in this section shall preclude enforcement by the Federal government of grant agreement provisions, civil rights statutes, or other provisions of law that apply to the Housing Development Grant Program. (b) Restriction on conversion. The owner shall not convert the units in the project to condominium ownership or to a form of cooperative ownership that is not eligible to receive a housing development grant, during the 20-year period from the date on which the units in the project are available for occupancy. (c) Tenant selection. The owner shall determine the eligibility of applicants for lower income units in accordance with the requirements of 24 CFR parts 812 and 813, including the provisions of these parts concerning citizenship or eligible immigration status and income limits, and certain assistance to mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status.). The owner shall not, during the 20-year period from the date on which the units in the project are available for occupancy, discriminate against prospective tenants on the basis of their receipt of, or eligibility for, housing assistance under any Federal, State, or local housing assistance program or, except for an elderly housing project, on the basis that they have a minor child or children who will be living with them. (d) Restriction on leasing assisted units. The owner shall assure that the percentage of low-income units specified in the grant agreement is occupied, or is available for occupancy, by low-income households during the period beginning on the date on which the units in the project are available for occupancy through 20 years from the date on which 50 percent of the units are occupied. The owner may lease a low- income unit only to a tenant that is a low-income household at the time of its initial occupancy. An owner may continue to lease a low-income unit to a tenant that ceases to qualify as a low-income household only as provided in paragraph (f) of this section. (e) Low-income unit rent. (1) Section 17(d)(8)(A) of the U.S. Housing Act of 1937 prohibits the rents for low-income units from exceeding ``30 per centum of the adjusted income of a family whose income equals 50 per centum of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families.'' This paragraph describes how these maximum rent determinations are made. (2) The maximum rents that may be charged for low-income units are based on the size of the unit by number of bedrooms, and are calculated in accordance with the following procedure. For each unit size, HUD will provide the Section 8 very low-income limits. HUD will also provide income adjustments for each unit size, consistent with 24 CFR part 813. An adjusted income amount for each unit size is calculated by the owner or grantee by subtracting the income adjustment from the Section 8 limit. The adjusted income amount is multiplied by 30 percent and divided by 12 to obtain the maximum monthly gross rent for each low- income unit. A monthly allowance for the utilities and services (excluding telephone) to be paid by the tenant is subtracted from the maximum monthly gross rent to obtain the maximum [[Page 47]] monthly rent that may be charged for low-income units. Information to be provided by HUD will be available from the responsible HUD Field Office. (3) The initial monthly allowance for utilities and services to be paid by the tenant must be approved by HUD. Subsequent calculations of this allowance must be approved by the grantee in connection with its review and approval of rent schedules under paragraph (e)(4) of this section. The maximum monthly rent must be recalculated annually, and may change as changes in the Section 8 very low-income limit, the income adjustments, or the monthly allowance for utilities and services warrant. (4) The grantee must review and approve any schedule of rents proposed by the owner for low-income units. Any schedule submitted by an owner within the permissible maximum will be deemed approved, unless the grantee informs the owner, within 60 days after receiving the schedule, that it is disapproved. (5) Any increase in rents for low-income units is subject to the provisions of outstanding leases, in any event, the owner must provide tenants of those units not less than 30 days prior written notice before implementing any increase in rents. (f) Reexamination of tenant income and composition. (1) The owner shall reexamine the income of each tenant household living in low-income units at least once a year. At the first regular reexamination after June 19, 1995 the owner shall follow the requirements of 24 CFR part 812 concerning obtaining and processing evidence of citizenship or eligible immigration status of all family members. Thereafter, at each regular reexamination, the owner shall follow the requirements of 24 CFR part 812 concerning verification of the immigration status of any new family member. (2) If this reexamination indicates that the tenant no longer qualifies as a low-income household, the owner must take one of the following actions, as appropriate: (i) If the unit occupied by the tenant must be leased to a low- income household to maintain the percentage of low-income units specified in the grant agreement, the owner must notify the tenant that it must move when the current lease expires or six months after the date of the notification, whichever is later; (ii) If the owner can meet this percentage without the unit occupied by the tenant (for example, by designating another comparable unit as a low-income unit), the owner may continue to lease to that tenant, but is free to renegotiate the rent at the expiration of the current lease. (3) For provisions related to termination of assistance for failure to establish citizenship or eligible immigration status, see 24 CFR 812.9, and also 24 CFR 812.10 for provisions related to certain assistance to mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions related to deferral of termination of assistance. (g) Affirmative fair housing marketing. Marketing must be done in accordance with the HUD-approved Affirmative Fair Housing Marketing Plan, Form HUD-935.2, and all fair housing and equal opportunity requirements. The purpose of the Plan and the requirements is to provide for affirmative marketing through the provision of information regarding the availability of units in projects assisted. Affirmative marketing steps consist of good faith efforts to provide information and otherwise attract eligible persons from all racial, ethnic and gender groups in the housing market area to the available housing. (h) Management and maintenance functions. The owner must perform all management and maintenance functions in compliance with equal opportunity requirements. These functions include selection of tenants, reexamination of family income, evictions and other terminations of tenancy, and all ordinary and extraordinary maintenance and repairs, including replacement of capital items. (i) Residency preferences. Local residency requirements are prohibited. Local residency preferences may be applied in selecting tenants only to the extent that they are not inconsistent with affirmative fair housing marketing objectives and the owner's HUD- [[Page 48]] approved AFHM Plan. With respect to any residency preference, persons expected to reside in the community as a result of current or planned employment will be treated as residents. [49 FR 24641, June 14, 1984, as amended at 60 FR 14841, Mar. 20, 1995] Sec. 850.153 Rent control. A project constructed or substantially rehabilitated with a housing development grant is not subject to State or local rent control unless the rent control requirements or agreements (a) (1) were entered into under a State law or local ordinance of general applicability that was enacted and in effect in the jurisdiction before November 30, 1983 and (2) apply generally to rental housing projects not assisted under the Housing Development Grant Program, or (b) are imposed under this subpart. State and local rent controls expressly preempted by this section include, but are not limited to, rent laws or ordinances, rent regulating agreements, rent regulations, occupancy agreements, or financial penalties for failure to achieve certain occupancy or rent projections. Sec. 850.155 Securing owner's responsibilities. Assistance provided under this part shall constitute a debt of the owner (including its successors in interest) to the grantee, and shall be secured by a mortgage or other security instrument. The debt shall be repayable in the event of a substantive, uncorrected violation by an owner of the obligations contained in paragraphs (b), (c), (d) and (e) of Sec. 850.151. The instruments securing this debt shall provide for repayment to the grantee in an amount equal to the total amount of housing development grant assistance outstanding, plus interest which is determined by the Secretary by adding two percent to the average yield on outstanding marketable long-term obligations of the United States during the month preceding the date on which assistance was made available. The amount to be repaid shall be reduced by 10 percent for each full year in excess of 10 years that intervened between the beginning of the term of the owner-grantee agreement and the violation. PART 880_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW CONSTRUCTION--Table of Contents Subpart A_Summary and Applicability Sec. 880.101 General. 880.104 Applicability of part 880. 880.105 Applicability to proposals and projects under 24 CFR part 811. Subpart B_Definitions and Other Requirements 880.201 Definitions. 880.205 Limitation on distributions. 880.207 Property standards. 880.208 Financing. 880.211 Audit. 880.212 Broadband infrastructure. Subparts C-D [Reserved] Subpart E_Housing Assistance Payments Contract 880.501 The contract. 880.502 Term of contract. 880.503 Maximum annual commitment and project account. 880.504 Leasing to eligible families. 880.505 Contract administration and conversions. 880.506 Default by owner (private-owner/HUD and PHA-owner/HUD projects). 880.507 Default by PHA and/or owner (private-owner/PHA projects). 880.508 Notice upon contract expiration. Subpart F_Management 880.601 Responsibilities of owner. 880.602 Replacement reserve. 880.603 Selection and admission of assisted tenants. 880.604 Tenant rent. 880.605 Overcrowded and underoccupied units. 880.606 Lease requirements. 880.607 Termination of tenancy and modification of lease. 880.608 Security deposits. 880.609 Adjustment of contract rents. 880.610 Adjustment of utility allowances. 880.611 Conditions for receipt of vacancy payments. 880.612 Management and occupancy reviews. 880.612a Preference for occupancy by elderly families. [[Page 49]] 880.613 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 13611- 13619. Source: 44 FR 59410, Oct. 15, 1979, unless otherwise noted. Subpart A_Summary and Applicability Sec. 880.101 General. (a) The purpose of the Section 8 program is to provide low-income families with decent, safe and sanitary rental housing through the use of a system of housing assistance payments. This part contains the policies and procedures applicable to the Section 8 new construction program. The assistance may be provided to public housing agency owners or to private owners either directly from HUD or through public housing agencies. (b) This part does not apply to projects developed under other Section 8 program regulations, including 24 CFR parts 881, 882, 883, 884, and 885, except to the extent specifically stated in those parts. Portions of subparts E and F of this part 880 have been cross-referenced in 24 CFR parts 881 and 883. [61 FR 13587, Mar. 27, 1996] Sec. 880.104 Applicability of part 880. (a) Part 880, in effect as of November 5, 1979, applies to all proposals for which a notification of selection was not issued before the November 5, 1979 effective date of part 880. (See 24 CFR part 880, revised as of April 1, 1980.) Where a notification of selection was issued for a proposal before the November 5, 1979 effective date, part 880, in effect as of November 5, 1979, applies if the owner notified HUD within 60 calendar days that the owner wished the provisions of part 880, effective November 5, 1979, to apply and promptly brought the proposal into conformance. (b) Subparts E (Housing Assistance Payments Contract) and F (Management) of this part apply to all projects for which an Agreement was not executed before the November 5, 1979, effective date of part 880. Where an Agreement was so executed: (1) The owner and HUD may agree to make the revised subpart E of this part applicable and to execute appropriate amendments to the Agreement and/or Contract. (2) The owner and HUD may agree to make the revised subpart F of this part applicable (with or without the limitation on distributions) and to execute appropriate amendments to the Agreement and/or Contract. (c) Section 880.607 (Termination of tenancy and modification of leases) applies to all families. (d) Notwithstanding the provisions of paragraph (b) of this section, the provisions of 24 CFR part 5 apply to all projects, regardless of when an Agreement was executed. [61 FR 13587, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000] Sec. 880.105 Applicability to proposals and projects under 24 CFR part 811. Where proposals and projects are financed with tax-exempt obligations under 24 CFR part 811, the provisions of part 811 will be complied with in addition to all requirements of this part. In the event of any conflict between this part and part 811, part 811 will control. Subpart B_Definitions and Other Requirements Sec. 880.201 Definitions. Annual Contributions Contract (ACC). As defined in part 5 of this title. Agency. As defined in 24 CFR part 883. Agreement. (Agreement to Enter into Housing Assistance Payments Contract) The Agreement between the owner and the contract administrator which provides that, upon satisfactory completion of the project in accordance with the HUD-approved final proposal, the administrator will enter into the Contract with the owner. Annual income. As defined in part 5 of this title. Contract. (Housing Assistance Payments Contract) The Contract entered into by the owner and the contract administrator upon satisfactory completion of the project, which sets forth the rights and duties of the parties with respect to the project and the payments under the Contract. [[Page 50]] Contract Administrator. The entity which enters into the Contract with the owner and is responsible for monitoring performance by the owner. The contract administrator is a PHA in the case of private-owner/ PHA projects, and HUD in private-owner/HUD and PHA-owner/HUD projects. Contract rent. The total amount of rent specified in the contract as payable to the owner for a unit. Covered housing provider. For the Section 8 Housing Assistance Payment Program for New Construction, ``covered housing provider,'' as such term is used in HUD's regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers to the owner. Decent, safe, and sanitary. Housing is decent, safe, and sanitary if it meets the physical condition requirements in 24 CFR part 5, subpart G. Drug-related criminal activity. The illegal manufacture, sale, distribution, use or possession with the intent to manufacture, sell, distribute, or use, of a controlled substance as defined in section 102 of the Controlled Substances Act, 21 U.S.C. 802. Elderly family. As defined in part 5 of this title. Fair Market Rent (FMR). As defined in part 5 of this title. Family. As defined in part 5 of this title. Final proposal. The detailed description of a proposed project to be assisted under this part, which an owner submits after selection of the preliminary proposal, except where a preliminary proposal is not required under Sec. 880.303(c). (The final proposal becomes an exhibit to the Agreement and is the standard by which HUD judges acceptable construction of the project.) Housing assistance payment. The payment made by the contract administrator to the owner of an assisted unit as provided in the contract. Where the unit is leased to an eligible family, the payment is the difference between the contract rent and the tenant rent. An additional payment is made to the family when the utility allowance is greater than the total tenant payment. A housing assistance payment, known as a ``vacancy payment''. may be made to the owner when an assisted unit is vacant, in accordance with the terms of the contract. HUD. Department of Housing and Urban Development. Independent Public Accountant. A Certified Public Accountant or a licensed or registered public accountant, having no business relationship with the owner except for the performance of audit, systems work and tax preparation. If not certified, the Independent Public Accountant must have been licensed or registered by a regulatory authority of a State or other political subdivision of the United States on or before December 31, 1970. In States that do not regulate the use of the title ``public accountant,'' only Certified Public Accountants may be used. Low income family. As defined in part 5 of this title. NOFA. As defined in part 5 of this title. Owner. Any private person or entity (including a cooperative) or a public entity which qualifies as a PHA, having the legal right to lease or sublease newly constructed dwelling units assisted under this part. The term owner also includes the person or entity submitting a proposal under this part. Partially-assisted Project. A project for non-elderly families under this part which includes more than 50 units of which 20 percent or fewer are assisted. PHA-Owner/HUD Project. A project under this part which is owned by a PHA. For this type of project, the Agreement and the Contract are entered into by the PHA, as owner, and HUD, as contract administrator. Private-Owner/HUD Project. A project under this part which is owned by a private owner. For this type of project, the Agreement and Contract are entered into by the private owner, as owner, and HUD, as contract administrator. Private-Owner/PHA Project. A project under this part which is owned by a private owner. For this type of project, the Agreement and Contract are entered into by the private owner, as owner, and the PHA, as contract administrator, pursuant to an ACC between the PHA and HUD. The term also covers the situation where the [[Page 51]] ACC is with one PHA and the owner is another PHA. Project Account. A specifically identified and segregated account for each project which is established in accordance with Sec. 880.503(b) out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the Contract or ACC, as applicable, each year. Public Housing Agency (PHA). As defined in part 5 of this title. Rent. In the case of an assisted unit in a cooperative project, rent means the carrying charges payable to the cooperative with respect to occupancy of the unit. Replacement cost. The estimated construction cost of the project when the proposed improvements are completed. The replacement cost may include the land, the physical improvements, utilities within the boundaries of the land, architect's fees, and miscellaneous charges incident to construction as approved by the Assistant Secretary. Secretary. The Secretary of Housing and Urban Development (or designee). Small Project. A project for non-elderly families under this part which includes a total of 50 or fewer (assisted and unassisted) units. Tenant rent. As defined in part 5 of this title. Total tenant payment. As defined in part 5 of this title. Utility allowance. As defined in part 5 of this title. Utility reimbursement. As defined in part 5 of this title. Vacancy payment. The housing assistance payment made to the owner by the contract administrator for a vacant assisted unit if certain conditions are fulfilled as provided in the Contract. The amount of the vacancy payment varies with the length of the vacancy period and is less after the first 60 days of any vacancy. Very low income family. As defined in part 5 of this title. [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18923, Mar. 24, 1980; 48 FR 12703, Mar. 28, 1983; 49 FR 6714, Feb. 23, 1984; 49 FR 17449, Apr. 24, 1984; 49 FR 19943, May 10, 1984; 61 FR 5212, Feb. 9, 1996; 61 FR 13587, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 63 FR 46578, Sept. 1, 1998; 65 FR 16722, Mar. 29, 2000; 81 FR 80811, Nov. 16, 2016] Sec. 880.205 Limitation on distributions. (a) Non-profit owners are not entitled to distributions of project funds. (b) For the life of the Contract, project funds may only be distributed to profit-motivated owners at the end of each fiscal year of project operation following the effective date of the Contract after all project expenses have been paid, or funds have been set aside for payment, and all reserve requirements have been met. The first year's distribution may not be made until cost certification, where applicable, is completed. Distributions may not exceed the following maximum returns: (1) For projects for elderly families, the first year's distribution will be limited to 6 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 6 percent return on the value in subsequent years, as determined by HUD, of the approved initial equity. Any such adjustment will be made by Notice in the Federal Register. (2) For projects for non-elderly families, the first year's distribution will be limited to 10 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 10 percent return on the value in subsequent years, as determined by HUD, of the approved initial equity. Any such adjustment will be made by Notice in the Federal Register. (c) For the purpose of determining the allowable distribution, an owner's equity investment in a project is deemed to be 10 percent of the replacement cost of the part of the project attributable to dwelling use accepted by HUD at cost certification (see Sec. 880.405) unless the owner justifies a higher equity contribution by cost certification documentation in accordance with HUD mortgage insurance procedures. (d) Any short-fall in return may be made up from surplus project funds in future years. (e) If HUD determines at any time that project funds are more than the amount needed for project operations, reserve requirements and permitted [[Page 52]] distribution, HUD may require the excess to be placed in an account to be used to reduce housing assistance payments or for other project purposes. Upon termination of the Contract, any excess funds must be remitted to HUD. (f) Owners of small projects or partially-assisted projects are exempt from the limitation on distributions contained in paragraphs (b) through (d) of this section. (g) In the case of HUD-insured projects, the provisions of this section will apply instead of the otherwise applicable mortgage insurance program provisions. (h) HUD may permit increased distributions of surplus cash, in excess of the amounts otherwise permitted, to profit-motivated owners who participate in a HUD-approved initiative or program to preserve below-market housing stock. The increased distributions will be limited to a maximum amount based on market rents and calculated according to HUD instructions. Funds that the owner is authorized to retain under section 236(g)(2) of the National Housing Act are not considered distributions to the owner. (i) Any State or local law or regulation that restricts distributions to an amount lower than permitted by this section or permitted by the Commissioner under this paragraph (i) is preempted to the extent provided by section 524(f) of the Multifamily Assisted Housing Reform and Affordability Act of 1997. [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18923, Mar. 24, 1980; 49 FR 6714, Feb. 23, 1984; 61 FR 5212, Feb. 9, 1996; 65 FR 61074, Oct. 13, 2000] Sec. 880.207 Property standards. Projects must comply with: (a) [Reserved] (b) In the case of manufactured homes, the Federal Manufactured Home Construction and Safety Standards, pursuant to Title VI of the Housing and Community Development Act of 1974, and 24 CFR part 3280; (c) In the case of congregate or single room occupant housing, the appropriate HUD guidelines and standards; (d) HUD requirements pursuant to section 209 of the Housing and Community Development Act of 1974 for projects for the elderly or handicapped; (e) HUD requirements pertaining to noise abatement and control; and (f) Applicable State and local laws, codes, ordinances and regulations. (g) Smoke detectors--(1) Performance requirement. After October 30, 1992, each dwelling unit must include at least one battery-operated or hard-wired smoke detector, in proper working condition, on each level of the unit. If the unit is occupied by hearing-impaired persons, smoke detectors must have an alarm system, designed for hearing-impaired persons, in each bedroom occupied by a hearing-impaired person. (2) Acceptability criteria. The smoke detector must be located, to the extent practicable, in a hallway adjacent to a bedroom, unless the unit is occupied by a hearing-impaired person, in which case each bedroom occupied by a hearing-impaired person must have an alarm system connected to the smoke detector installed in the hallway. [44 FR 59410, Oct. 15, 1979, as amended at 50 FR 9269, Mar. 7, 1985; 57 FR 33851, July 30, 1992; 63 FR 46578, Sept. 1, 1998] Sec. 880.208 Financing. (a) Types of financing. Any type of construction financing and long- term financing may be used, including: (1) Conventional loans from commercial banks, savings banks, savings and loan associations, pension funds, insurance companies or other financial institutions; (2) Mortgage insurance programs under the National Housing Act; (3) Mortgage and loan programs of the Farmers' Home Administration of the Department of Agriculture compatible with the Section 8 program; and (4) Financing by tax-exempt bonds or other obligations. (b) HUD approval. HUD must approve the terms and conditions of the financing to determine consistency with these regulations and to assure they do not purport to pledge or give greater rights or funds to any party than are provided under the Agreement, Contract, and/or ACC. Where the project is financed with tax-exempt obligations, the terms and conditions will be approved in accordance with the following: [[Page 53]] (1) An issuer of obligations that are tax-exempt under any provision of Federal law or regulation, the proceeds of the sale of which are to be used to purchase GNMA mortgage-backed securities issued by the mortgagee of the Section 8 project, will be subject to 24 CFR part 811, subpart B. (2) Issuers of obligations that are tax-exempt under Section 11(b) of the U.S. Housing Act of 1937 will be subject to 24 CFR part 811, subpart A if paragraph (b)(1) of this section is not applicable. (3) Issuers of obligations that are tax-exempt under any provision of Federal law or regulation other than section 11(b) of the U.S. Housing Act of 1937 will be subject to 24 CFR part 811, subpart A if paragraph (b)(1) of this section is not applicable, except that such issuers that are State Agencies qualified under 24 CFR part 883 are not subject to 24 CFR part 811 subpart A and are subject solely to the requirements of 24 CFR part 883 with regard to the approval of tax- exempt financing. (c) Pledge of Contracts. An owner may pledge, or offer as security for any loan or obligation, an Agreement, Contract or ACC entered into pursuant to this part: Provided, however, That such financing is in connection with a project constructed pursuant to this part and approved by HUD. Any pledge of the Agreement, Contract, or ACC, or payments thereunder, will be limited to the amounts payable under the Contract or ACC in accordance with its terms. If the pledge or other document provides that all payments will be paid directly to the mortgagee or the trustee for bondholders, the mortgagee or trustee will make all payments or deposits required under the mortgage or trust indenture or HUD regulations and remit any excess to the owner. (d) Foreclosure and other transfers. In the event of foreclosure, assignment or sale approved by HUD in lieu of foreclosure, or other assignment or sale approved by HUD: (1) The Agreement, the Contract and the ACC, if applicable, will continue in effect, and (2) Housing assistance payments will continue in accordance with the terms of the Contract. (e) Financing of manufactured home parks. In the case of a newly constructed manufactured home park, the principal amount of any mortgage attributable to the rental spaces in the park may not exceed an amount per space determined in accordance with Sec. 207.33(b) of this title. [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 62797, Sept. 22, 1980; 48 FR 12704, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984] Sec. 880.211 Audit. Where a non-Federal entity (as defined in 2 CFR 200.69) is the eligible owner of a project or a contract administrator under Sec. 880.505 receiving financial assistance under this part, the audit requirements in 2 CFR part 200, subpart F, shall apply. [80 FR 75941, Dec. 7, 2015] Sec. 880.212 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and that is subject to a Housing Assistance Payments contract executed or renewed after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92637, Dec. 20, 2016] Subparts C-D [Reserved] Subpart E_Housing Assistance Payments Contract Sec. 880.501 The contract. (a) Contract. The Housing Assistance Payments Contract sets forth rights [[Page 54]] and duties of the owner and the contract administrator with respect to the project and the housing assistance payments. The owner and contract administrator execute the Contract in the form prescribed by HUD upon satisfactory completion of the project. (b) [Reserved] (c) Housing Assistance Payments to Owners under the Contract. The housing assistance payments made under the Contract are: (1) Payments to the owner to assist eligible families leasing assisted units, and (2) Payments to the owner for vacant assisted units (``vacancy payments'') if the conditions specified in Sec. 880.610 are satisfied. The housing assistance payments are made monthly by the contract administrator upon proper requisition by the owner, except payments for vacancies of more than 60 days, which are made semi-annually by the contract administrator upon requisition by the owner. (d) Amount of Housing Assistance Payments to Owner. (1) The amount of the housing assistance payment made to the owner of a unit being leased by an eligible family is the difference between the contract rent for the unit and the tenant rent payable by the family. (2) A housing assistance payment will be made to the owner for a vacant assisted unit in an amount equal to 80 percent of the contract rent for the first 60 days of vacancy, subject to the conditions in Sec. 880.611. If the owner collects any tenant rent or other amount for this period which, when added to this vacancy payment, exceeds the contract rent, the excess must be repaid as HUD directs. (3) For a vacancy that exceeds 60 days, a housing assistance payment for the vacant unit will be made, subject to the conditions in Sec. 880.611, in an amount equal to the principal and interest payments required to amortize that portion of the debt attributable to the vacant unit for up to 12 additional months. (e) Payment of utility reimbursement. Where applicable, the owner will pay a utility reimbursement in accordance with Sec. 5.632 of this title. HUD will provide funds for the utility reimbursement to the owner in trust solely for the purpose of paying the utility reimbursement. [44 FR 59410, Oct. 15, 1979, as amended at 49 FR 19943, May 10, 1984; 61 FR 13587, Mar. 27, 1996; 65 FR 16722, Mar. 29, 2000] Sec. 880.502 Term of contract. (a) Term (except for Manufactured Home Parks). The term of the contract will be as follows: (1) For assisted units in a project financed with the aid of a loan insured or co-insured by the Federal government or a loan made, guaranteed or intended for purchase by the Federal government, the term will be 20 years. (2) For assisted units in a project financed other than as described in paragraph (a)(1) of this section, the term will be the lesser of (i) the term of the project's financing (but not less than 20 years), or (ii) 30 years, or 40 years if (A) the project is owned or financed by a loan or loan guarantee from a state or local agency, (B) the project is intended for occupancy by non-elderly families and (C) the project is located in an area designated by HUD as one requiring special financing assistance. (b) Term for Manufactured Home Parks. For manufactured home units or spaces in newly constructed manufactured home parks, the term of the Contract will be 20 years. (c) Staged Projects. If the project is completed in stages, the term of the Contract must relate separately to the units in each stage. The total Contract term for the units in all stages, beginning with the effective date of the Contract for the first stage, may not exceed the overall maximum term allowable for any one unit under this section, plus two years. [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18924, Mar. 24, 1980; 48 FR 12705, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984] Sec. 880.503 Maximum annual commitment and project account. (a) Maximum Annual Commitment. Where HUD is the contract administrator, the maximum annual amount that may be committed under the Contract is the total of the contract rents and utility allowances for all assisted units in the project. Where the PHA is [[Page 55]] the contract administrator, the maximum annual contribution that may be contracted for in the ACC is the total of the contract rents and utility allowances for all assisted units plus an administrative fee for the PHA as approved by HUD. (b) Project Account. (1) A project account will be established and maintained by HUD as a specifically identified and segregated account for each project. The account will be established out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the Contract or ACC each year. Payments will be made from this account for housing assistance payments (and fees for PHA administration, if appropriate) when needed to cover increases in contract rents or decreases in tenant rents and for other cost specifically approved by the Secretary. (2) Whenever a HUD-approved estimate of required annual payments under the Contract or ACC for a fiscal year exceeds the maximum annual commitment and would cause the amount in the project account to be less than 40 percent of the maximum, HUD will, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the U.S. Housing Act of 1937, as may be necessary, to assure that payments under the Contract or ACC will be adequate to cover increases in Contract rents and decreases in tenant rents. Sec. 880.504 Leasing to eligible families. (a) Availability of units for occupancy by Eligible Families. During the term of the Contract, an owner shall make available for occupancy by eligible families the total number of units for which assistance is committed under the Contract. For purposes of this section, making units available for occupancy by eligible families means that the owner: (1) Is conducting marketing in accordance with Sec. 880.601(a); (2) has leased or is making good faith efforts to lease the units to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; and (3) has not rejected any such applicant family except for reasons acceptable to the contract administrator. If the owner is temporarily unable to lease all units for which assistance is committed under the Contract to eligible families, one or more units may be leased to ineligible families with the prior approval of the contract administrator in accordance with HUD guidelines. Failure on the part of the owner to comply with these requirements is a violation of the Contract and grounds for all available legal remedies, including specific performance of the Contract, suspension or debarment from HUD programs, and reduction of the number of units under the Contract as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by Contract--(1) Part 880 and 24 CFR part 881 projects. HUD (or the PHA at the direction of HUD, as appropriate) may reduce the number of units covered by the Contract to the number of units available for occupancy by eligible families if: (i) The owner fails to comply with the requirements of paragraph (a) of this section; or (ii) Notwithstanding any prior approval by the contract administrator to lease such units to ineligible families, HUD (or the PHA at the direction of HUD, as appropriate) determines that the inability to lease units to eligible families is not a temporary problem. (2) For 24 CFR part 883 projects. HUD and the Agency may reduce the number of units covered by the Contract to the number of units available for occupancy by eligible families if: (i) The owner fails to comply with the requirements of paragraph (a) of this section; or (ii) Notwithstanding any prior approval by the Agency to lease such units to ineligible families, HUD and the Agency determine that the inability to lease units to eligible families is not a temporary problem. (c) Restoration. For this part 880 and 24 CFR part 881 projects, HUD will agree to an amendment of the ACC or the Contract, as appropriate, to provide for subsequent restoration of any reduction made pursuant to paragraph (b) of this section, and for 24 CFR part 883 projects, HUD will agree to an amendment of the ACC and the Agency [[Page 56]] may agree to an amendment to the Contract to provide for subsequent restoration of any reduction made pursuant to paragraph (b) of this section, if: (1) HUD determines (for 24 CFR part 883 projects, HUD and the Agency determine) that the restoration is justified by demand, (2) The owner otherwise has a record of compliance with his obligations under the Contract, and (3) Contract and budget authority is available. (d) Applicability. In accordance with section 555 of the Cranston- Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and (b) of this section apply to all Contracts. An owner who had leased an assisted unit to an ineligible family consistent with the regulations in effect at the time will continue to lease the unit to that family. However, the owner must make the unit available for occupancy by an eligible family when the ineligible family vacates the unit. (e) Termination of assistance for failure to submit evidence of citizenship or eligible immigration status. If an owner who is subject to paragraphs (a) and (b) of this section is required to terminate housing assistance payments for the family in accordance with 24 CFR part 5 because the owner determines that the entire family does not have U.S. citizenship or eligible immigration status, the owner may allow continued occupancy of the unit by the family without Section 8 assistance following the termination of assistance, or if the family constitutes a mixed family, as defined in 24 CFR part 5, the owner shall comply with the provisions of 24 CFR part 5 concerning assistance to mixed families, and deferral of termination of assistance. (f) Protections for victims of domestic violence, dating violence, sexual assault, or stalking. The regulations of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), apply to this section. [44 FR 59410, Oct. 15, 1979, as amended at 49 FR 31397, Aug. 7, 1984; 51 FR 11224, Apr. 1, 1986; 53 FR 846, Jan. 13, 1988; 53 FR 6601, Mar. 2, 1988; 59 FR 13652, Mar. 23, 1994; 60 FR 14841, Mar. 20, 1995; 61 FR 13587, Mar. 27, 1996; 73 FR 72342, Nov. 28, 2008; 75 FR 66260, Oct. 27, 2010; 81 FR 80811, Nov. 16, 2016] Sec. 880.505 Contract administration and conversions. (a) Contract administration. For private-owner/PHA projects, the PHA is primarily responsible for administration of the Contract, subject to review and audit by HUD. For private-owner/HUD and PHA-owner/HUD projects, HUD is responsible for administration of the Contract. The PHA or HUD may contract with another entity for the performance of some or all of its contract administration functions. (b) PHA fee for Contract administration. A PHA will be entitled to a reasonable fee, determined by HUD, for administering a Contract except under certain circumstances (see 24 CFR part 883) where a state housing finance agency is the PHA and finances the project. (c) Conversion of Projects from one Ownership/Contractual arrangement to another. Any project may be converted from one ownership/ contractual arrangement to another (for example, from a private-owner/ HUD to a private-owner/PHA project) if: (1) The owner, the PHA and HUD agree, (2) HUD determines that conversion would be in the best interest of the project, and (3) In the case of conversion from a private-owner/HUD to a private- owner/PHA project, contract authority is available to cover the PHA fee for administering the Contract. Sec. 880.506 Default by owner (private-owner/HUD and PHA-owner/HUD projects). The Contract will provide: (a) That if HUD determines that the owner is in default under the Contract, HUD will notify the owner and the lender of the actions required to be taken to cure the default and of the remedies to be applied by HUD including specific performance under the [[Page 57]] Contract, reduction or suspension of housing assistance payments and recovery of overpayments, where appropriate; and (b) That if the owner fails to cure the default, HUD has the right to terminate the Contract or to take other corrective action. Sec. 880.507 Default by PHA and/or owner (private-owner/PHA projects). (a) Rights of Owner if PHA defaults under Agreement or Contract. The ACC, the Agreement and the Contract will provide that, in the event of failure of the PHA to comply with the Agreement or Contract with the owner, the owner will have the right, if he is not in default, to demand that HUD investigate. HUD will first give the PHA a reasonable opportunity to take corrective action. If HUD determines that a substantial default exists, HUD will assume the PHA's rights and obligations under the Agreement or Contract and meet the obligations of the PHA under the Agreement or Contract including the obligations to enter into the Contract. (b) Rights of HUD if PHA defaults under ACC. The ACC will provide that, if the PHA fails to comply with any of its obligations, HUD may determine that there is a substantial default and require the PHA to assign to HUD all of its rights and interests under the Contract; however, HUD will continue to pay annual contributions in accordance with the terms of the ACC and the Contract. Before determining that a PHA is in substantial default, HUD will give the PHA a reasonable opportunity to take corrective action. (c) Rights of PHA and HUD if Owner defaults under Contract. (1) The Contract will provide that if the PHA determines that the owner is in default under the Contract, the PHA will notify the owner and lender, with a copy to HUD, (i) of the actions required to be taken to cure the default, (ii) of the remedies to be applied by the PHA including specific performance under the Contract, abatement of housing assistance payments and recovery of overpayments, where appropriate, and (iii) that if he fails to cure the default, the PHA has the right to terminate the Contract or to take other corrective action, in its discretion or as directed by HUD. (2) If the PHA is the lender, the Contract will also provide that HUD has an independent right to determine whether the owner is in default and to take corrective action and apply appropriate remedies, except that HUD will not have the right to terminate the Contract without proceeding in accordance with paragraph (b) of this section. Sec. 880.508 Notice upon contract expiration. (a) The Contract will provide that the owner will notify each assisted family, at least 90 days before the end of the Contract term, of any increase in the amount the family will be required to pay as rent which may occur as a result of its expiration. If the Contract is to be renewed but with a reduction in the number of units covered by it, this notice shall be given to each family who will no longer be assisted under the Contract. (b) The notice provided for in paragraph (a) of this section shall be accomplished by: (1) Sending a letter by first class mail, properly stamped and addressed, to the family at its address at the project, with a proper return address; and (2) serving a copy of the notice on any adult person answering the door at the leased dwelling unit, or if no adult responds, by placing the notice under or through the door, if possible, or else by affixing the notice to the door. Service shall not considered to be effective until both required notices have been accomplished. The date on which the notice shall be considered to be received by the family shall be the date on which the owner mails the first class letter provided for in this paragraph, or the date on which the notice provided for in this paragraph is properly given, whichever is later. (c) The notice shall advise each affected family that, after the expiration date of the Contract, the family will be required to bear the entire cost of the rent and that the owner will be free (to the extent the project is not otherwise regulated by HUD) to alter the rent without HUD approval, but subject to any applicable requirements or restrictions under the lease or under State or local law. The notice shall also state: [[Page 58]] (1) The actual (if known) or the estimated rent which will be charged following the expiration of the Contract; (2) the difference between the rent and the Total Tenant Payment toward rent under the Contract; and (3) the date the Contract will expire. (d) The owner shall give HUD a certification that families have been notified in accordance with this section with an example of the text of the notice attached. (e) This section applies to all Contracts entered into pursuant to an Agreement executed on or after October 1, 1981, or entered into pursuant to an Agreement executed before October 1, 1981, but renewed or amended on or after October 1, 1984. [49 FR 31283, Aug. 6, 1984] Subpart F_Management Sec. 880.601 Responsibilities of owner. (a) Marketing. (1) The owner must commence diligent marketing activities in accordance with the Agreement not later than 90 days prior to the anticipated date of availability for occupancy of the first unit of the project. (2) Marketing must be done in accordance with the HUD-approved Affirmative Fair Housing Marketing Plan and all Fair Housing and Equal Opportunity requirements. The purpose of the Plan and requirements is to assure that eligible families of similar income in the same housing market area have an equal opportunity to apply and be selected for a unit in projects assisted under this part regardless of their race, color, creed, religion, sex or national origin. (3) With respect to non-elderly family units, the owner must undertake marketing activities in advance of marketing to other prospective tenants in order to provide opportunities to reside in the project to non-elderly families who are least likely to apply, as determined in the Affirmative Fair Housing Marketing Plan, and to non- elderly families expected to reside in the community by reason of current or planned employment. (4) At the time of Contract execution, the owner must submit a list of leased and unleased units, with justification for the unleased units, in order to qualify for vacancy payments for the unleased units. (b) Management and maintenance. The owner is responsible for all management functions, including determining eligibility of applicants, selection of tenants, reexamination and verification of family income and composition, determination of family rent (total tenant payment, tenant rent and utility reimbursement), collection of rent, termination of tenancy and eviction, and performance of all repair and maintenance functions (including ordinary and extraordinary maintenance), and replacement of capital items. (See part 5 of this title.) All functions must be performed in accordance with applicable equal opportunity requirements. (c) Contracting for services. (1) For this part 880 and 24 CFR part 881 projects, with HUD approval, the owner may contract with a private or public entity (except the contract administrator) for performance of the services or duties required in paragraphs (a) and (b) of this section. (2) For 24 CFR part 883 projects, with approval of the Agency, the owner may contract with a private or public entity (but not with the Agency unless temporarily necessary for the Agency to protect its financial interest and to uphold its program responsibilities where no alternative management agent is immediately available) for performance of the services or duties required in paragraphs (a) and (b) of this section. (3) However, such an arrangement does not relieve the owner of responsibility for these services and duties. (d) Submission of financial and operating statements. After execution of the Contract, the owner must submit to the contract adminstrator: (1) Financial information in accordance with 24 CFR part 5, subpart H; and (2) Other statements as to project operation, financial conditions and occupancy as HUD may require pertinent to administration of the Contract and monitoring of project operations. (e) Use of project funds. (1) Project funds must be used for the benefit of the project, to make required deposits to the replacement reserve in accordance with Sec. 880.602 and to provide distributions to the owner as provided in [[Page 59]] Sec. 880.205, Sec. 881.205 of this chapter, or Sec. 883.306 of this chapter, as appropriate. (2) For this part 880 and 24 CFR part 881 projects: (i) Any remaining project funds must be deposited with the mortgagee or other HUD-approved depository in an interest-bearing residual receipts account. Withdrawals from this account will be made only for project purposes and with the approval of HUD. (ii) Partially-assisted projects are exempt from the provisions of this section. (iii) In the case of HUD-insured projects, the provisions of this paragraph (e) will apply instead of the otherwise applicable mortgage insurance provisions. (3) For 24 CFR part 883 projects: (i) Any remaining project funds must be deposited with the Agency, other mortgagee or other Agency-approved depository in an interest- bearing account. Withdrawals from this account may be made only for project purposes and with the approval of the Agency. (ii) In the case of HUD-insured projects, the provisions of this paragraph will apply instead of the otherwise applicable mortgage insurance provisions, except in the case of partially-assisted projects which are subject to the applicable mortgage insurance provisions. (Approved by the Office of Management and Budget under control number 2502-0204) [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18924, Mar. 24, 1980; 51 FR 11224, Apr. 1, 1986; 53 FR 846, Jan. 13, 1988; 53 FR 1145, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39702, Sept. 27, 1989; 56 FR 7536, Feb. 22, 1991; 60 FR 14841, Mar. 20, 1995; 61 FR 13588, Mar. 27, 1996; 63 FR 46593, Sept. 1, 1998; 65 FR 16722, Mar. 29, 2000] Sec. 880.602 Replacement reserve. (a) A replacement reserve must be established and maintained in an interest-bearing account to aid in funding extraordinary maintenance and repair and replacement of capital items. (1) Part 880 and 24 CFR part 881 projects. (i) For this part 880 and 24 CFR part 811 projects, an amount equivalent to .006 of the cost of total structures, including main buildings, accessory buildings, garages and other buildings, or any higher rate as required by HUD from time to time, will be deposited in the replacement reserve annually. This amount will be adjusted each year by the amount of the automatic annual adjustment factor. (ii) The reserve must be built up to and maintained at a level determined by HUD to be sufficient to meet projected requirements. Should the reserve achieve that level, the rate of deposit to the reserve may be reduced with the approval of HUD. (iii) All earnings including interest on the reserve must be added to the reserve. (iv) Funds will be held by the mortgagee or trustee for bondholders, and may be drawn from the reserve and used only in accordance with HUD guidelines and with the approval of, or as directed by, HUD. (v) Partially-assisted part 880 and 24 CFR part 881 projects are exempt from the provisions of this section. (2) Part 883 of this chapter projects. (i) For 24 CFR part 883 projects, an amount equivalent to at least .006 of the cost of total structures, including main buildings, accessory buildings, garages and other buildings, or any higher rate as required from time to time by: (A) The Agency, in the case of projects approved under 24 CFR part 883, subpart D; or (B) HUD, in the case of all other projects, will be deposited in the replacement reserve annually. For projects approved under 24 CFR part 883, subpart D, this amount may be adjusted each year by up to the amount of the automatic annual adjustment factor. For all projects not approved under 24 CFR part 883, subpart D, this amount must be adjusted each year by the amount of the automatic annual adjustment factor. (ii) The reserve must be built up to and maintained at a level determined to be sufficient by the Agency to meet projected requirements. Should the reserve achieve that level, the rate of deposit to the reserve may be reduced with the approval of the Agency. (iii) All earnings, including interest on the reserve, must be added to the reserve. (iv) Funds will be held by the Agency, other mortgagee or trustee for [[Page 60]] bondholders, as determined by the Agency, and may be drawn from the reserve and used only in accordance with Agency guidelines and with the approval of, or as directed by, the Agency. (v) The Agency may exempt partially-assisted projects approved under 24 CFR part 883, subpart D, from the provisions of this section. All partially-assisted projects not approved under the Fast Track Procedures formerly in 24 CFR part 883, subpart D, are exempt from the provisions of this section. (b) In the case of HUD-insured projects, the provisions of this section will apply instead of the otherwise applicable mortgage insurance provisions, except in the case of partially-assisted insured projects which are subject to the applicable mortgage insurance provisions. [61 FR 13588, Mar. 27, 1996] Sec. 880.603 Selection and admission of assisted tenants. (a) Application. The owner must accept applications for admission to the project in the form prescribed by HUD. Both the owner (or designee) and the applicant must complete and sign the application. For this part 880 and 24 CFR part 881 projects, on request, the owner must furnish copies of all applications to HUD and the PHA, if applicable. For 24 CFR part 883 projects, on request, the owner must furnish to the Agency or HUD copies of all applications received. (b) Determination of eligibility and selection of tenants. The owner is responsible for obtaining and verifying information related to income eligibility in accordance with 24 CFR part 5, subpart F, and evidence related to citizenship and eligible immigration status in accordance with 24 CFR part 5, subpart E, to determine whether the applicant is eligible for assistance in accordance with the requirements of 24 CFR part 5, and to select families for admission to the program, which includes giving selection preferences in accordance with 24 CFR part 5, subpart D. (1) If the owner determines that the family is eligible and is otherwise acceptable and units are available, the owner will assign the family a unit of the appropriate size in accordance with HUD standards. If no suitable unit is available, the owner will place the family on a waiting list for the project and notify the family of when a suitable unit may become available. If the waiting list is so long that the applicant would not be likely to be admitted for the next 12 months, the owner may advise the applicant that no additional applications are being accepted for that reason, provided the owner complies with the procedures for informing applicants about admission preferences as provided in 24 CFR part 5, subpart D. (2) If the owner determines that an applicant is ineligible on the basis of income or family composition, or because of failure to meet the disclosure and verification requirements for Social Security Numbers (as provided by 24 CFR part 5), or because of failure by an applicant to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies (as provided by 24 CFR parts 5 and 813), or that the owner is not selecting the applicant for other reasons, the owner will promptly notify the applicant in writing of the determination and its reasons, and that the applicant has the right to meet with the owner or managing agent in accordance with HUD requirements. Where the owner is a PHA, the applicant may request an informal hearing. If the PHA determines that the applicant is not eligible, the PHA will notify the applicant and inform the applicant that he or she has the right to request HUD review of the PHA's determination. The applicant may also exercise other rights if the applicant believes that he or she is being discriminated against on the basis of race, color, creed, religion, sex, or national origin. See 24 CFR part 5 for the informal review provisions for the denial of a Federal preference or the failure to establish citizenship or eligible immigration status and for notice requirements where assistance is terminated, denied, suspended, or reduced based on wage and claim information obtained by HUD from a State Wage Information Collection Agency. (3) Records on applicants and approved eligible families, which provide racial, ethnic, gender and place of previous residency data required by HUD, [[Page 61]] must be maintained and retained for three years. (c) Reexamination of family income and composition--(1) Regular reexaminations. The owner must reexamine the income and composition of all families at least every 12 months. After consultation with the family and upon verification of the information, the owner must make appropriate adjustments in the Total Tenant Payment in accordance with part 5 of this title and determine whether the family's unit size is still appropriate. The owner must adjust Tenant Rent and the Housing Assistance Payment to reflect any change in Total Tenant Payment and must carry out any unit transfer required by HUD. At the time of the annual reexamination of family income and composition, the owner must require the family to disclose the verify Social Security Numbers, as provided by 24 CFR part 5. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see 24 CFR part 5. At the first regular reexamination after June 19, 1995, the owner shall follow the requirements of 24 CFR part 5 concerning obtaining and processing evidence of citizenship or eligible immigration status of all family members. Thereafter, at each regular reexamination, the owner shall follow the requirements of 24 CFR part 5 and verify the immigration status of any new family member. (2) Interim reexaminations. The family must comply with provisions in its lease regarding interim reporting of changes in income. If the owner receives information concerning a change in the family's income or other circumstances between regularly scheduled reexaminations, the owner must consult with the family and make any adjustments determined to be appropriate. Any change in the family's income or other circumstances that results in an adjustment in the Total Tenant Payment, Tenant Rent and Housing Assistance Payment must be verified. See 24 CFR part 5 for the requirements for the disclosure and verification of Social Security Numbers at interim reexaminations involving new family members. For requirements regarding the signing and submitting of consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, see 24 CFR part 5. At any interim reexamination after June 19, 1995, when a new family member has been added, the owner shall follow the requirements of 24 CFR part 5 concerning obtaining and processing evidence of the citizenship or eligible immigration status of any new family member. (3) Continuation of housing assistance payments. A family's eligibility for Housing Assistance Payments continues until the Total Tenant Payment equals the contract rent plus any utility allowance. The termination of eligibility at such point will not affect the family's other rights under its lease, nor will such termination preclude the resumption of payments as a result of later changes in income, rents, or other relevant circumstances during the term of the Contract. However, eligibility also may be terminated in accordance with HUD requirements, for such reasons as failure to submit requested verification information, including failure to meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, or failure to sign and submit consent forms for the obtaining wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5. See 24 CFR part 5 for provisions requiring termination of assistance for failure to establish citizenship or eligible immigration status and also for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions concerning deferral of termination of assistance. (4) Streamlined income determination. An owner may elect to follow the provisions of 24 CFR 5.657(d). (Approved by the Office of Management and Budget under control number 2502-0204) [61 FR 13589, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000; 70 FR 77744, Dec. 30, 2005; 81 FR 12371, Mar. 8, 2016] [[Page 62]] Sec. 880.604 Tenant rent. The eligible Family pays the Tenant Rent directly to the Owner. [49 FR 19943, May 10, 1984] Sec. 880.605 Overcrowded and underoccupied units. If the contract administrator determines that because of change in family size an assisted unit is smaller than appropriate for the eligible family to which it is leased, or that the unit is larger than appropriate, housing assistance payments with respect to the unit will not be reduced or terminated until the eligible family has been relocated to an appropriate alternative unit. If possible, the owner will, as promptly as possible, offer the family an appropriate unit. The owner may receive vacancy payments for the vacated unit if he complies with the requirements of Sec. 880.611. Sec. 880.606 Lease requirements. (a) Term of Lease. The term of the lease will be for not less than one year. The lease may, or in the case of a lease for a term of more than one year must, contain a provision permitting termination on 30 days advance written notice by the family. (b) Form--(1) Part 880 and 24 CFR part 881 projects. For this part 880 and 24 CFR part 881 projects, the form of lease must contain all required provisions, and none of the prohibited provisions specified in the developer's packet, and must conform to the form of lease included in the approved final proposal. (2) 24 CFR part 883 projects. For 24 CFR part 883 projects, the form of lease must contain all required provisions, and none of the prohibited provisions specified below. (i) Required provisions (Addendum to lease). Addendum to Lease The following additional Lease provisions are incorporated in full in the Lease between ____________________ (Landlord) and ____________________ (Tenant) for the following dwelling unit: __________________. In case of any conflict between these and any other provisions of the Lease, these provisions will prevail. a. The total rent will be $________ per month. b. Of the total rent, $________ will be payable by the State Agency (Agency) as housing assistance payments on behalf of the Tenant and $__________ will be payable by the Tenant. These amounts will be subject to change by reason of changes in the Tenant's family income, family composition, or extent of exceptional medical or other unusual expenses, in accordance with HUD-established schedules and criteria; or by reason of adjustment by the Agency of any applicable Utility Allowance; or by reasons of changes in program rules. Any such change will be effective as of the date stated in a notification to the Tenant. c. The Landlord will not discriminate against the Tenant in the provision of services, or in any other manner, on the grounds of race, color, creed, religion, sex, or national origin. d. The Landlord will provide the following services and maintenance: ____________ e. A violation of the Tenant's responsibilities under the Section 8 Program, as determined by the Agency, is also a violation of the lease. Landlord________________________________________________________________ By______________________________________________________________________ Date____________________________________________________________________ Tenant__________________________________________________________________ Date____________________________________________________________________ [End of addendum] (ii) Prohibited provisions. Lease clauses which fall within the classifications listed below must not be included in any Lease. Lease Clauses a. Confession of Judgment. Consent by the tenant to be sued, to admit guilt, or to accept without question any judgment favoring the landlord in a lawsuit brought in connection with the lease. b. Seize or Hold Property for Rent or Other Charges. Authorization to the landlord to take property of the tenant and/or hold it until the tenant meets any obligation which the landlord has determined the tenant has failed to perform. c. Exculpatory Clause. Prior agreement by the tenant not to hold the landlord or landlord's agents legally responsible for acts done improperly or for failure to act when the landlord or landlord's agent was required to do so. d. Waiver of Legal Notice. Agreement by the tenant that the landlord need not give any notices in connection with (1) a lawsuit against the tenant for eviction, money damages, or other purposes, or (2) any other action affecting the tenant's rights under the lease. [[Page 63]] e. Waiver of Legal Proceeding. Agreement by the tenant to allow eviction without a court determination. f. Waiver of Jury Trial. Authorization to the landlord's lawyer to give up the tenant's right to trial by jury. g. Waiver of Right to Appeal Court Decision. Authorization to the landlord's lawyer to give up the tenant's right to appeal a decision on the ground of judicial error or to give up the tenant's right to sue to prevent a judgment being put into effect. h. Tenant Chargeable with Cost of Legal Actions Regardless of Outcome of Lawsuit. Agreement by the tenant to pay lawyer's fees or other legal costs whenever the landlord decides to sue the tenant whether or not the tenant wins. (Omission of such a clause does not mean that the tenant, as a party to a lawsuit, may not have to pay lawyer's fees or other costs if the court so orders.) [End of clauses] [44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13590, Mar. 27, 1996] Sec. 880.607 Termination of tenancy and modification of lease. (a) Applicability. The provisions of this section apply to all decisions by an owner to terminate the tenancy of a family residing in a unit under Contract during or at the end of the family's lease term. (b) Entitlement of Families to occupancy--(1) Grounds. The owner may not terminate any tenancy except upon the following grounds: (i) Material noncompliance with the lease; (ii) Material failure to carry out obligations under any State landlord and tenant act; (iii) Criminal activity by a covered person in accordance with sections 5.858 and 5.859, or alcohol abuse by a covered person in accordance with section 5.860. If necessary, criminal records can be obtained for lease enforcement purposes under section 5.903(d)(3). (iv) Other good cause, which may include the refusal of a family to accept an approved modified lease form (see paragraph (d) of this section). No termination by an owner will be valid to the extent it is based upon a lease or a provisions of State law permitting termination of a tenancy solely because of expiration of an initial or subsequent renewal term. All terminations must also be in accordance with the provisions of any State and local landlord tenant law and paragraph (c) of this section. (2) Notice of good cause. The conduct of a tenant cannot be deemed ``other good cause'' under paragraph (b)(1)(iv) of this section unless the owner has given the family prior notice that the grounds constitute a basis for termination of tenancy. The notice must be served on the family in the same manner as that provided for termination notices under paragraph (c) of this section and State and local law. (3) Material noncompliance. (i) Material noncompliance with the lease includes: (A) One or more substantial violations of the lease; or (B) Repeated minor violations of the lease that disrupt the livability of the building; adversely affect the health or safety of any person or the right of any tenant to the quiet enjoyment of the leased premises and related facilities; interfere with the management of the building or have an adverse financial effect on the building. (ii) Failure of the family to timely submit all required information on family income and composition, including failure to submit required evidence of citizenship or eligible immigration status (as provided by 24 CFR part 5), failure to disclose and verify Social Security Numbers (as provided by 24 CFR part 5), failure to sign and submit consent forms (as provided by 24 CFR part 5), or knowingly providing incomplete or inaccurate information, shall constitute a substantial violation of the lease. (c) Termination notice. (1) The owner must give the family a written notice of any proposed termination of tenancy, stating the grounds and that the tenancy is terminated on a specified date and advising the family that it has an opportunity to respond to the owner. (2) When a termination notice is issued for other good cause (paragraph (b)(1)(iv) of this section), the notice will be effective, and it will so state, at the end of a term and in accordance with the termination provisions of the lease, but in no case earlier than 30 days after receipt by the family of the [[Page 64]] notice. Where the termination notice is based on material noncompliance with the lease or material failure to carry out obligations under a State landlord and tenant act pursuant to paragraph (b)(1)(i) or (b)(1)(ii) of this section, the time of service must be in accord with the lease and State law. (3) In any judicial action instituted to evict the family, the owner may not rely on any grounds which are different from the reasons set forth in the notice. (4) See 24 CFR part 5 for provisions related to termination of assistance because of failure to establish citizenship or eligible immigration status, including informal hearing procedures and also for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions concerning deferral of termination of assistance. (5) In actions or potential actions to terminate tenancy, the owner shall follow 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). (6) In the case of failure to pay rent, if the Secretary determines that tenants must be provided with adequate notice to secure Federal funding that is available due to a Presidential declaration of a national emergency: (i) The termination notice must provide such information as required by the Secretary; and (ii) The notice must provide the tenant with at least 30 days before termination. (d) Modification of Lease form. The owner, with the prior approval of HUD or, for a 24 CFR part 883 project, the Agency, may modify the terms and conditions of the lease form effective at the end of the initial term or a successive term, by serving an appropriate notice on the family, together with the offer of a revised lease or an addendum revising the existing lease. This notice and offer must be received by the family at least 30 days prior to the last date on which the family has the right to terminate the tenancy without being bound by the modified terms and conditions. The family may accept the modified terms and conditions by executing the offered revised lease or addendum, or may reject the modified terms and conditions by giving the owner written notice in accordance with the lease that the family intends to terminate the tenancy. Any increase in rent must in all cases be governed by Sec. 880.609 and other applicable HUD regulations. (Approved by the Office of Management and Budget under control number 2502-0204) [44 FR 59410, Oct. 15, 1979, as amended at 51 FR 11225, Apr. 1, 1986; 53 FR 846, Jan. 13, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39703, Sept. 27, 1989; 56 FR 7537, Feb. 22, 1991; 60 FR 14842, Mar. 20, 1995; 61 FR 13590, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 66 FR 28797, May 24, 2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66260, Oct. 27, 2010; 81 FR 80811, Nov. 16, 2016; 86 FR 55701, Oct. 7, 2021] Sec. 880.608 Security deposits. (a) At the time of the initial execution of the lease, the owner will require each family to pay a security deposit in an amount equal to one month's Total Tenant Payment or $50, whichever is greater. The family is expected to pay the security deposit from its own resources and/or other public sources. The owner may collect the security deposit on an installment basis. (b) The owner must place the security deposits in a segregated, interest-bearing account. The balance of this account must at all times be equal to the total amount collected from the families then in occupancy, plus any accrued interest. The owner must comply with any applicable State and local laws concerning interest payments on security deposits. (c) In order to be considered for the return of the security deposit, a family which vacates its unit will provide the owner with its forwarding address or arrange to pick up the refund. (d) The owner, subject to State and local law and the requirements of this paragraph, may use the security deposit, plus any accrued interest, as reimbursement for any unpaid family contribution or other amount which the family owes under the lease. Within 30 days (or shorter time if required by State, or local law) after receiving [[Page 65]] notification of the family's forwarding address, the owner must: (1) Refund to a family owing no rent or other amount under the lease the full amount of the security deposit, plus accrued interest; (2) Provide to a family owing rent or other amount under the lease a list itemizing any unpaid rent, damages to the unit, and estimated costs for repair, along with a statement of the family's rights under State and local law. If the amount which the owner claims is owed by the family is less than the amount of the security deposit, plus accrued interest, the owner must refund the unused balance to the family. If the owner fails to provide the list, the family will be entitled to the refund of the full amount of the security deposit plus accrued interest. (e) In the event a disagreement arises concerning reimbursement of the security deposit, the family will have the right to present objections to the owner in an informal meeting. The owner must keep a record of any disagreements and meetings in a tenant file for inspection by the contract administrator. The procedures of this paragraph do not preclude the family from exercising its rights under State and local law. (f) If the security deposit, including any accrued interest, is insufficient to reimburse the owner for any unpaid tenant rent or other amount which the family owes under the lease, and the owner has provided the family with the list required by paragraph (d)(2) of this section, the owner may claim reimbursement from the contract administrator, as appropriate, for an amount not to exceed the lesser of: (1) The amount owed the owner, or (2) One month's contract rent, minus the amount of the security deposit plus accrued interest. Any reimbursement under this section will be applied first toward any unpaid tenant rent due under the lease. No reimbursement may be claimed for unpaid rent for the period after termination of the tenancy. [44 FR 59410, Oct. 15, 1979, as amended at 49 FR 19943, May 10, 1984; 61 FR 13591, Mar. 27, 1996] Sec. 880.609 Adjustment of contract rents. (a) Automatic annual adjustment of Contract Rents. Upon request from the owner to the contract administrator, contract rents will be adjusted on the anniversary date of the contract in accordance with 24 CFR part 888. (b) Special additional adjustments. For all projects, special additional adjustments will be granted, to the extent determined necessary by HUD (for 24 CFR part 883 projects, by the Agency and HUD), to reflect increases in the actual and necessary expenses of owning and maintaining the assisted units which have resulted from substantial general increases in real property taxes, assessments, utility rates, and utilities not covered by regulated rates, and which are not adequately compensated for by annual adjustments under paragraph (a) of this section. The owner must submit to the contract administrator required supporting data, financial statements and certifications. (c) Overall limitation. Any adjustments of contract rents for a unit after Contract execution or cost certification, where applicable, must not result in material differences between the rents charged for assisted units and comparable unassisted units except to the extent that the differences existed with respect to the contract rents set at Contract execution or cost certification, where applicable. [44 FR 59410, Oct. 15, 1979, as amended at 59 FR 22755, May 3, 1994; 61 FR 13591, Mar. 27, 1996] Sec. 880.610 Adjustment of utility allowances. In connection with annual and special adjustments of contract rents, the owner must submit an analysis of the project's Utility Allowances. Such data as changes in utility rates and other facts affecting utility consumption should be provided as part of this analysis to permit appropriate adjustments in the Utility Allowances. In addition, when approval of a utility rate change would result in a cumulative increase of 10 percent or more in the most recently approved Utility Allowances, the project owner must advise the contract administrator and request approval of new Utility Allowances. Whenever a Utility Allowance for a [[Page 66]] unit is adjusted, the owner will promptly notify affected families and make a corresponding adjustment of the tenant rent and the amount of the housing assistance payment for the unit. (Approved by the Office of Management and Budget under control number 2502-0161) [50 FR 39097, Sept. 27, 1985] Sec. 880.611 Conditions for receipt of vacancy payments. (a) General. Vacancy payments under the Contract will not be made unless the conditions for receipt of these housing assistance payments set forth in this section are fulfilled. (b) Vacancies during Rent-up. For each assisted unit that is not leased as of the effective date of the Contract, the owner is entitled to vacancy payments in the amount of 80 percent of the contract rent for the first 60 days of vacancy if the owner: (1) Conducted marketing in accordance with Sec. 880.601(a) and otherwise complied with Sec. 880.601; (2) Has taken and continues to take all feasible actions to fill the vacancy; and (3) Has not rejected any eligible applicant except for good cause acceptable to the contract administrator. (c) Vacancies after Rent-Up. If an eligible family vacates a unit, the owner is entitled to vacancy payments in the amount of 80 percent of the contract rent for the first 60 days of vacancy if the owner: (1) Certifies that he did not cause the vacancy by violating the lease, the Contract or any applicable law; (2) Notified the contract administrator of the vacancy or prospective vacancy and the reasons for the vacancy immediately upon learning of the vacancy or prospective vacancy; (3) Has fulfilled and continues to fulfill the requirements specified in Sec. 880.601(a) (2) and (3) and paragraph (b) (2) and (3) of this section; and (4) For any vacancy resulting from the owner's eviction of an eligible family, certifies that he has complied with Sec. 880.607. (d) Vacancies for longer than 60 days. If an assisted unit continues to be vacant after the 60-day period specified in paragraph (b) or (c) of this section, the owner may apply to receive additional vacancy payments in an amount equal to the principal and interest payments required to amortize that portion of the debt service attributable to the vacant unit for up to 12 additional months for the unit if: (1) The unit was in decent, safe and sanitary condition during the vacancy period for which payments are claimed; (2) The owner has fulfilled and continues to fulfill the requirements specified in paragraph (b) or (c) of this section, as appropriate; and (3) The owner has (for 24 CFR part 883 projects, the owner and the Agency have) demonstrated to the satisfaction of HUD that: (i) For the period of vacancy, the project is not providing the owner with revenues at least equal to project expenses (exclusive of depreciation), and the amount of payments requested is not more than the portion of the deficiency attributable to the vacant unit, and (ii) The project can achieve financial soundness within a reasonable time. (e) Prohibition of double compensation for vacancies. The owner is not entitled to vacancy payments for vacant units to the extent he can collect for the vacancy from other sources (such as security deposits, payments under Sec. 880.608(f), and governmental payments under other programs). [44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13591, Mar. 27, 1996] Sec. 880.612 Management and occupancy reviews. (a) The contract administrator will conduct management and occupancy reviews to determine whether the owner is in compliance with the Contract. Such reviews will be conducted in accordance with a schedule set out by the Secretary and published in the Federal Register, following notice and the opportunity to comment. Where a change in ownership or management occurs, a management and occupancy review must be conducted within six months following the change in ownership or management. (b) HUD or the Contract Administrator may inspect project operations and units at any time. [[Page 67]] (c) Equal Opportunity reviews may be conducted by HUD at any time. [87 FR 37997, June 27, 2022] Sec. 880.612a Preference for occupancy by elderly families. (a) Election of preference for occupancy by elderly families--(1) Election by owners of eligible projects. (i) An owner of a project assisted under this part (including a partially assisted project) that was originally designed primarily for occupancy by elderly families (an ``eligible project'') may, at any time, elect to give preference to elderly families in selecting tenants for assisted, vacant units in the project, subject to the requirements of this section. (ii) For purposes of this section, a project eligible for the preference provided by this section, and for which the owner makes an election to give preference in occupancy to elderly families is referred to as an ``elderly project.'' ``Elderly families'' refers to families whose heads of household, their spouses or sole members are 62 years or older. (iii) An owner who elects to provide a preference to elderly families in accordance with this section is required to notify families on the waiting list who are not elderly that the election has been made and how the election may affect them if: (A) The percentage of disabled families currently residing in the project who are neither elderly nor near-elderly (hereafter, collectively referred to as ``non-elderly disabled families'') is equal to or exceeds the minimum required percentage of units established for the elderly project in accordance with paragraph (c)(1) of this section, and therefore non-elderly families on the waiting list (including non- elderly disabled families) may be passed over for covered section 8 units; or (B) The project, after making the calculation set forth in paragraph (c)(1) of this section, will have no units set aside for non-elderly disabled families. (iv) An owner who elects to give a preference for elderly families in accordance with this section shall not remove an applicant from the project's waiting list on the basis of having made the election. (2) HUD approval of election not required. (i) An owner is not required to solicit or obtain the approval of HUD before exercising the election of preference for occupancy provided in paragraph (a)(1) of this section. The owner, however, if challenged on the issue of eligibility of the project for the election provided in paragraph (a)(1) of this section must be able to support the project's eligibility through the production of all relevant documentation in the possession of the owner that pertains to the original design of the project. (ii) The Department reserves the right at any time to review and make determinations regarding the accuracy of the identification of the project as an elderly project. The Department can make such determinations as a result of ongoing monitoring activities, or the conduct of complaint investigations under the Fair Housing Act (42 U.S.C. 3601 through 3619), or compliance reviews and complaint investigations under section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and other applicable statutes. (b) Determining projects eligible for preference for occupancy by elderly families--(1) Evidence supporting project eligibility. Evidence that a project assisted under this part (or portion of a project) was originally designed primarily for occupancy by elderly families, and is therefore eligible for the election of occupancy preference provided by this section, shall consist of at least one item from the sources (``primary'' sources) listed in paragraph (b)(1)(i) of this section, or at least two items from the sources (``secondary'' sources) listed in paragraph (b)(1)(ii) of this section: (i) Primary sources. Identification of the project (or portion of a project) as serving elderly (seniors) families in at least one primary source such as: The application in response to the notice of funding availability; the terms of the notice of funding availability under which the application was solicited; the regulatory agreement; the loan commitment; the bid invitation; the owner's management plan, or any underwriting or financial document collected at or before loan closing; or [[Page 68]] (ii) Secondary sources. Two or more sources of evidence such as: lease records from the earliest two years of occupancy for which records are available showing that occupancy has been restricted primarily to households where the head, spouse or sole member is 62 years of age or older; evidence that services for elderly persons have been provided, such as services funded by the Older Americans Act, transportation to senior citizen centers, or programs coordinated with the Area Agency on Aging; project unit mix with more than fifty percent of efficiency and one-bedroom units [a secondary source particularly relevant to distinguishing elderly projects under the previous section 3(b) definition (in which disabled families were included in the definition of ``elderly families'') from non-elderly projects and which in combination with other factors (such as the number of accessible units) may be useful in distinguishing projects for seniors from those serving the broader definition of ``elderly families'' which includes disabled families]; or any other relevant type of historical data, unless clearly contradicted by other comparable evidence. (2) Sources in conflict. If a primary source establishes a design contrary to that established by the primary source upon which the owner would base support that the project is an eligible project (as defined in this section), the owner cannot make the election of preferences for elderly families as provided by this section based upon primary sources alone. In any case where primary sources do not provide clear evidence of original design of the project for occupancy primarily by elderly families, including those cases where primary sources conflict, secondary sources may be used to establish the use for which the project was originally designed. (c) Reservation of units in elderly projects for non-elderly disabled families. The owner of an elderly project is required to reserve, at a minimum, the number of units specified in paragraph (c)(1) of this section for occupancy by non-elderly disabled families. (1) Minimum number of units to be reserved for non-elderly disabled families. The number of units in an elderly project required to be reserved for occupancy by non-elderly disabled families, shall be, at a minimum, the lesser of: (i) The number of units equivalent to the higher of-- (A) The percentage of units assisted under this part in the elderly project that were occupied by non-elderly disabled families on October 28, 1992; and (B) The percentage of units assisted under this part in the elderly project that were occupied by non-elderly disabled families upon January 1, 1992; or (ii) 10 percent of the number of units assisted under this part in the eligible project. (2) Option to reserve greater number of units for non-elderly disabled families. The owner, at the owner's option, and at any time, may reserve a greater number of units for non-elderly disabled families than that provided for in paragraph (c)(1) of this section. The option to provide a greater number of units to non-elderly disabled families will not obligate the owner to always provide that greater number to non-elderly disabled families. The number of units required to be provided to non-elderly disabled families at any time in an elderly project is that number determined under paragraph (c)(1) of this section. (d) Secondary preferences. An owner of an elderly project also may elect to establish secondary preferences in accordance with the provisions of paragraph (d) of this section. (1) Preference for near-elderly disabled families in units reserved for elderly families. If the owner of an elderly project determines, in accordance with paragraph (f) of this section, that there are an insufficient number of elderly families who have applied for occupancy to fill all the vacant units in the elderly project reserved for elderly families (that is, all units except those reserved for the non-elderly disabled families as provided in paragraph (c) of this section), the owner may give preference for occupancy of such units to disabled families who are near-elderly families. (2) Preference for near-elderly disabled families in units reserved for non-elderly disabled families. If the owner of an elderly project determines, in accordance with paragraph (f) of this section, that [[Page 69]] there are an insufficient number of non-elderly disabled families to fill all the vacant units in the elderly project reserved for non- elderly disabled families as provided in paragraph (c) of this section, the owner may give preference for occupancy of these units to disabled families who are near-elderly families. (e) Availability of units to families without regard to preference. An owner shall make vacant units in an elderly project generally available to otherwise eligible families who apply for housing, without regard to the preferences and reservation of units provided in this section if either: (1) The owner has adopted the secondary preferences and there are an insufficient number of families for whom elderly preference, reserve preference, and secondary preference has been given, to fill all the vacant units; or (2) The owner has not adopted the secondary preferences and there are an insufficient number of families for whom elderly preference, and reserve preference has been given to fill all the vacant units. (f) Determination of insufficient number of applicants qualifying for preference. To make a determination that there are an insufficient number of applicants who qualify for the preferences, including secondary preferences, provided by this section, the owner must: (1) Conduct marketing in accordance with Sec. 880.601(a) to attract applicants qualifying for the preferences and reservation of units set forth in this section; and (2) Make a good faith effort to lease to applicants who qualify for the preferences provided in this section, including taking all feasible actions to fill vacancies by renting to such families. (g) Prohibition of evictions. An owner may not evict a tenant without good cause, or require that a tenant vacate a unit, in whole or in part because of any reservation or preference provided in this section, or because of any action taken by the Secretary pursuant to subtitle D (sections 651 through 661) of title VI of the Housing and Community Development Act of 1992 (42 U.S.C. 13611 through 13620). [59 FR 65850, Dec. 21, 1994, as amended at 61 FR 9046, Mar. 6, 1996; 65 FR 16722, Mar. 29, 2000] Sec. 880.613 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. (a) Covered housing providers must develop and implement an emergency transfer plan that meets the requirements in 24 CFR 5.2005(e). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking, covered housing providers have discretion to adopt new, and modify any existing, admission preferences or transfer waitlist priorities. (c) In addition to following requirements in 24 CFR 5.2005(e), when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, or stalking who qualifies for an emergency transfer, covered housing providers must: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, covered housing providers must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), including data on the outcomes of such requests. [81 FR 80811, Nov. 16, 2016] PART 881_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR SUBSTANTIAL REHABILITATION--Table of Contents Subpart A_Summary and Applicability Sec. 881.101 General. 881.104 Applicability of part 881. 881.105 Applicability to proposals and projects under 24 CFR part 811. [[Page 70]] Subpart B_Definitions and Other Requirements 881.201 Definitions. 881.205 Limitation on distributions. 881.207 Property standards. 881.208 Financing. 881.211 Audit. 881.212 Broadband infrastructure. Subparts C-D [Reserved] Subpart E_Housing Assistance Payments Contract 881.501 The contract. 881.502 Term of contract. 881.503 Cross-reference. Subpart F_Management 881.601 Cross-reference. Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 13611- 13619. Source: 45 FR 7085, Jan. 31, 1980, unless otherwise noted. Subpart A_Summary and Applicability Sec. 881.101 General. (a) The purpose of the Section 8 program is to provide low-income families with decent, safe and sanitary rental housing through the use of a system of housing assistance payments. This part contains the policies and procedures applicable to the Section 8 substantial rehabilitation program. The assistance may be provided to public housing agency owners or to private owners either directly from HUD or through public housing agencies. (b) This part does not apply to projects developed under other Section 8 program regulations, including 24 CFR parts 880, 882, 883, 884, and 885, except to the extent specifically stated in those parts. [61 FR 13591, Mar. 27, 1996] Sec. 881.104 Applicability of part 881. (a) Part 881, in effect as of February 20, 1980, applies to all proposals for which a notification of selection was not issued before the February 20, 1980 effective date of part 881. (See 24 CFR part 881, revised as of April 1, 1980). Where a notification of selection was issued for a proposal before the February 20, 1980, effective date, part 881 in effect as of February 20, 1980 applies if the owner notified HUD within 60 calendar days that the owner wished the provisions of part 881, effective February 20, 1980, to apply and promptly brought the proposal into conformance. (b) Subparts E (Housing Assistance Payments Contract) and F (Management) of this part apply to all projects for which an Agreement was not executed before the February 20, 1980, effective date of part 881. Where an Agreement was so executed: (1) The owner and HUD may agree to make the revised subpart E of this part applicable and to execute appropriate amendments to the Agreement and/or Contract. (2) The owner and HUD may agree to make the revised subpart F of this part applicable (with or without the limitation on distributions) and to execute appropriate amendments to the Agreement and/or Contract. (c) Section 881.607 (Termination of tenancy and modification of leases) applies to all families. (d) Notwithstanding the provisions of paragraph (b) of this section, the provisions of 24 CFR part 5 apply to all projects, regardless of when an Agreement was executed. [61 FR 13591, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000] Sec. 881.105 Applicability to proposals and projects under 24 CFR part 811. Where proposals and projects are financed with tax-exempt obligations under 24 CFR part 811, the provisions of part 811 will be complied with in addition to all requirements of this part. In the event of any conflict between this part and part 811, part 811 will control. Subpart B_Definitions and Other Requirements Sec. 881.201 Definitions. Agreement. (Agreement to Enter into Housing Assistance Payments Contract) The Agreement between the owner and the contract administrator which provides that, upon satisfactory completion of the project in accordance with the HUD-approved final proposal, the administrator will enter into the Contract with the owner. [[Page 71]] Annual Contributions Contract (ACC). As defined in part 5 of this title. Annual income. As defined in part 5 of this title. Assisted unit. A dwelling unit eligible for assistance under a Contract. Contract. (Housing Assistance Payments Contract) The Contract entered into by the owner and the contract administrator upon satisfactory completion of the project, which sets forth the rights and duties of the parties with respect to the project and the payments under the Contract. Contract Administrator. The entity which enters into the Contract with the owner and is responsible for monitoring performance by the owner. The contract administrator is a PHA in the case of private-owner/ PHA projects, and HUD is private-owner/HUD and PHA-owner/HUD projects. Contract rent. The total amount of rent specified in the contract as payable to the owner for a unit. Decent, safe, and sanitary. Housing is decent, safe, and sanitary if it meets the physical condition requirements in 24 CFR part 5, subpart G. Elderly family. As defined in part 5 of this title. Fair Market Rent (FMR). As defined in part 5 of this title. Family. As defined in part 5 of this title. Final proposal. The detailed description of a proposed project to be assisted under this part, which an owner submits after selection of the preliminary proposal, except where a preliminary proposal is not required under Sec. 881.303(c). The final proposal becomes an exhibit to the Agreement and is the standard by which HUD judges acceptable construction of the project. Housing assistance payment. The payment made by the contract administrator to the owner of an assisted unit as provided in the contract. Where the unit is leased to an eligible family, the payment is the difference between the contract rent and the tenant rent. An additional payment is made to the family when the utility allowance is greater than the total tenant payment. A housing assistance payment, known as a ``vacancy payment''. may be made to the owner when an assisted unit is vacant, in accordance with the terms of the contract. HUD. Department of Housing and Urban Development. Independent Public Accountant. A Certified Public Accountant or a licensed or registered public accountant, having no business relationship with the owner except for the performance of audit, systems work and tax preparation. If not certified, the Independent Public Accountant must have been licensed or registered by a regulatory authority of a State or other political subdivision of the United States on or before December 31, 1970. In States that do not regulate the use of the title ``public accountant,'' only Certified Public Accountants may be used. Low income family. As defined in part 5 of this title. NOFA. As defined in part 5 of this title. Owner. Any private person or entity (including a cooperative) or a public entity which qualifies as a PHA, having the legal right to lease or sublease substantially rehabilitated dwelling units assisted under this part. The term owner also includes the person or entity submitting a proposal under this part. Partially-assisted Project. A project for non-elderly families under this part which includes more than 50 units of which 20 percent or fewer are assisted. PHA-Owner/HUD Project. A project under this part which is owned by a PHA. For this type of project, the Agreement and the Contract are entered into by the PHA, as owner, and HUD, as contract administrator. Private-Owner/HUD Project. A project under this part which is owned by a private owner. For this type of project, the Agreement and Contract are entered into by the private owner, as owner, and HUD, as contract administrator. Private-Owner/PHA Project. A project under this part which is owned by a private owner. For this type of project, the Agreement and Contract are entered into by the private owner, as owner, and the PHA, as contract administrator, pursuant to an ACC between the PHA and HUD. The term also covers the situation where the [[Page 72]] ACC is with one PHA and the owner is another PHA. Project Account. A specifically identified and segregated account for each project which is established in accordance with Sec. 881.503(b) out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the Contract or ACC, as applicable, each year. Public Housing Agency (PHA). As defined in part 5 of this title. Rent. In the case of an assisted unit in a cooperative project, rent means the carrying charges payable to the cooperative with respect to occupancy of the unit. Replacement cost. The sum of the ``as is'' value before rehabilitation of the property as determined by HUD and the estimated cost of rehabilitation, including carrying and finance charges. Secretary. The Secretary of Housing and Urban Development (or designee). Single Room Occupancy (SRO) Housing. A unit for occupancy by a single eligible individual capable of independent living, which does not contain food preparation and/or sanitary facilities and is located within a multifamily structure consisting of more than 12 units. Small project. A project for non-elderly families under this part which includes a total of 50 or fewer (assisted and unassisted) units. Substantial rehabilitation. (a) The improvement of a property to decent, safe and sanitary condition in accordance with the standards of this part from a condition below those standards. Substantial rehabilitation may vary in degree from gutting and extensive reconstruction to the cure of substantial accumulation of deferred maintenance. Cosmetic improvements alone do not qualify as substantial rehabilitation under this definition. (b) Substantial rehabilitation may also include renovation, alteration or remodeling for the conversion or adaptation of structurally sound property to the design and condition required for use under this part or the repair or replacement of major building systems or components in danger of failure. Tenant rent. As defined in part 5 of this title. Total tenant payment. As defined in part 5 of this title. Utility allowance. As defined in part 5 of this title. Utility reimbursement. As defined in part 5 of this title. Vacancy payment. The housing assistance payment made to the owner by the contract administrator for a vacant assisted unit if certain conditions are fulfilled as provided in the Contract. The amount of the vacancy payment varies with the length of the vacancy period and is less after the first 60 days of any vacancy. Very low income family. As defined in part 5 of this title. [45 FR 7085, Jan. 31, 1980, as amended at 48 FR 12705, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 49 FR 19944, May 10, 1984; 61 FR 5212, Feb. 9, 1996; 61 FR 13591, Mar. 27, 1996; 63 FR 46578, Sept. 1, 1998; 65 FR 16722, Mar. 29, 2000] Sec. 881.205 Limitation on distributions. (a) Non-profit owners are not entitled to distributions of project funds. (b) For the life of the Contract, project funds may only be distributed to profit-motivated owners at the end of each fiscal year of project operation following the effective date of the Contract after all project expenses have been paid, or funds have been set aside for payment, and all reserve requirements have been met. The first year's distribution may not be made until cost certification, where applicable, is completed. Distributions may not exceed the following maximum returns: (1) For projects for elderly families, the first year's distribution will be limited to 6 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 6 percent return on the value in subsequent years, as determined by HUD, of the approved initial equity. Any such adjustment will be made by Notice in the Federal Register. (2) For projects for non-elderly families, the first year's distribution will be limited to 10 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 10 [[Page 73]] percent return on the value in subsequent years, as determined by HUD, of the approved initial equity. Any such adjustment will be made by Notice in the Federal Register. (c) For the purpose of determining the allowable distribution, an owner's equity investment in a project is deemed to be 10 percent of the replacement cost of the part of the project attributable to dwelling use accepted by HUD at cost certification (see Sec. 881.405), unless the owner justifies a higher equity contribution by cost certification documentation in accordance with HUD mortgage insurance procedures. (d) Any short-fall in return may be made up from surplus project funds in future years. (e) If HUD determines at any time that project funds are more than the amount needed for project operations, reserve requirements and permitted distribution, HUD may require the excess to be placed in an account to be used to reduce housing assistance payments or for other project purposes. Upon termination of the Contract, any excess funds must be remitted to HUD. (f) Owners of small projects or partially-assisted projects are exempt from the limitation on distributions contained in paragraphs (b) through (d) of this section. (g) In the case of HUD-insured projects, the provisions of this section will apply instead of the otherwise applicable mortgage insurance program provisions. (h) HUD may permit increased distributions of surplus cash, in excess of the amounts otherwise permitted, to profit-motivated owners who participate in a HUD-approved initiative or program to preserve below-market housing stock. The increased distributions will be limited to a maximum amount based on market rents and calculated according to HUD instructions. Funds that the owner is authorized to retain under section 236(g)(2) of the National Housing Act are not considered distributions to the owner. (i) Any State or local law or regulation that restricts distributions to an amount lower than permitted by this section or permitted by the Commissioner under this paragraph (i) is preempted to the extent provided by section 524(f) of the Multifamily Assisted Housing Reform and Affordability Act of 1997. [45 FR 7085, Jan. 31, 1980, as amended at 65 FR 61074, Oct. 13, 2000] Sec. 881.207 Property standards. Projects must comply with: (a) [Reserved] (b) In the case of congregate or single room occupant housing, the appropriate HUD guidelines and standards; (c) HUD requirements pursuant to section 209 of the Housing and Community Development Act of 1974 for projects for the elderly or handicapped; (d) HUD requirements pertaining to noise abatement and control; (e) The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821- 4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, H, and R of this title; and (f) Applicable State and local laws, codes, ordinances and regulations. (g) Smoke detectors--(1) Performance requirement. After October 30, 1992, each dwelling unit must include at least one battery-operated or hard-wired smoke detector, in proper working condition, on each level of the unit. If the unit is occupied by hearing-impaired persons, smoke detectors must have an alarm system, designed for hearing-impaired persons, in each bedroom occupied by a hearing-impaired person. (2) Acceptability criteria. The smoke detector must be located, to the extent practicable, in a hallway adjacent to a bedroom, unless the unit is occupied by a hearing-impaired person, in which case each bedroom occupied by a hearing-impaired person must have an alarm system connected to the smoke detector installed in the hallway. [45 FR 7085, Jan. 31, 1980, as amended at 52 FR 1893, Jan. 15, 1987; 57 FR 33851, July 30, 1992; 63 FR 46578, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999] Sec. 881.208 Financing. (a) Types of financing. Any type of construction financing and long- term financing may be used, including: (1) Conventional loans from commercial banks, savings banks, savings and [[Page 74]] loan associations, pension funds, insurance companies or other financial institutions; (2) Mortgage insurance programs under the National Housing Act; and (3) Financing by tax-exmpt bonds or other obligations. (b) HUD approval. HUD must approve the terms and conditions of the financing to determine consistency with these regulations and to assure they do not purport to pledge or give greater rights or funds to any party than are provided under the Agreement, Contract, and/or ACC. Where the project is financed with tax-exempt obligations, the terms and conditions will be approved in accordance with the following: (1) An issuer of obligations that are tax-exempt under any provision of Federal law or regulation, the proceeds of the sale of which are to be used to purchase GNMA mortgage-backed securities issued by the mortgagee of the Section 8 project, will be subject to 24 CFR part 811, subpart B. (2) Issuers of obligations that are tax-exempt under Section 11(b) of the U.S. Housing Act of 1937 will be subject to 24 CFR part 811, subpart A if paragraph (b)(1) of this section is not applicable. (3) Issuers of obligations that are tax-exempt under any provision of Federal law or regulation other than Section 11(b) of the U.S. Housing Act of 1937 will be subject to 24 CFR 811, subpart A if paragraph (b)(1) of this section is not applicable, except that such issuers that are State Agencies qualified under 24 CFR part 883 are not subject to 24 CFR part 811, subpart A and are subject solely to the requirements of 24 CFR part 883 with regard to the approval of tax- exempt financing. (c) Pledge of contracts. An owner may pledge, or offer as security for any loan or obligation, an Agreement, Contract or ACC entered into pursuant to this part: Provided, however, That such financing is in connection with a project constructed pursuant to this part and approved by HUD. Any pledge of the Agreement, Contract, or ACC, or payments thereunder, will be limited to the amounts payable under the Contract or ACC in accordance with its terms. If the pledge or other document provides that all payments will be paid directly to the mortgagee or the trustee for bondholders, the mortgagee or trustee will make all payments or deposits required under the mortgage, trust indenture of HUD regulations and remit any excess to the owner. (d) Foreclosure and other transfers. In the event of foreclosure, assignment or sale approved by HUD in lieu of foreclosure, or other assignment or sale approved by HUD: (1) The Agreement, the Contract and the ACC, if applicable, will continue in effect, and (2) Housing assistance payments will continue in accordance with the terms of the Contract. (e) Financing of manufactured home parks. In the case of a substantially rehabilitated manufactured home park, the principal amount of any mortgage attributable to the rental spaces in the park may not exceed an amount per space determined in accordance with Sec. 207.33(b) of this Title. [45 FR 7085, Jan. 31, 1980, as amended at 45 FR 62797, Sept. 22, 1980; 48 FR 12706, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984] Sec. 881.211 Audit. (a) Where a non-Federal entity (as defined in 2 CFR 200.69) is the eligible owner of a project or a contract administrator under Sec. 881.505 receiving financial assistance under this part, the audit requirements in 2 CFR part 200, subpart F, shall apply. [80 FR 75941, Dec. 7, 2015] Sec. 881.212 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and that is subject to a Housing Assistance Payments contract executed or renewed after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; [[Page 75]] (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92637, Dec. 20, 2016] Subparts C-D [Reserved] Subpart E_Housing Assistance Payments Contract Sec. 881.501 The contract. (a) Contract. The Housing Assistance Payments Contract sets forth rights and duties of the owner and the contract administrator with respect to the project and the housing assistance payments. The owner and contract administrator execute the Contract in the form prescribed by HUD upon satisfactory completion of the project. (b) [Reserved] (c) Housing assistance payments to owners under the contract. The housing assistance payments made under the Contract are: (1) Payments to the owner to assist eligible families leasing assisted units, and (2) Payments to the owner for vacant assisted units (``vacancy payments'') if the conditions specified in Sec. 881.611 are satisfied. The housing assistance payments are made monthly by the contract administrator upon proper requisition by the owner, except payments for vacancies of more than 60 days, which are made semi-annually by the contract administrator upon requisition by the owner. (d) Amount of housing assistance payments to owner. (1) The amount of the housing assistance payment made to the owner of a unit being leased by an eligible family is the difference between the contract rent for the unit and the tenant rent payable by the family. (2) A housing assistance payment will be made to the owner for a vacant assisted unit in an amount equal to 80 percent of the contract rent for the first 60 days of vacancy, subject to the conditions in Sec. 881.611. If the owner collects any tenant rent or other amount for this period which, when added to this vacancy payment, exceeds the contract rent, the excess must be repaid as HUD directs. (3) For a vacancy that exceeds 60 days, a housing assistance payment for the vacant unit will be made, subject to the conditions in Sec. 881.611, in an amount equal to the principal and interest payments required to amortize that portion of the debt attributable to the vacant unit for up to 12 additional months. (e) Payment of utility reimbursement. Where applicable, the Utility Reimbursement will be paid to the Family as an additional Housing Assistance Payment. The Contract will provide that the Owner will make this payment on behalf of the contract administrator. Funds for this purpose will be paid to the Owner in trust solely for the purpose of making the additional payment. If the Family and the utility company consent, the Owner may pay the Utility Reimbursement jointly to the Family and the utility company or directly to the utility company. [45 FR 7085, Jan. 31, 1980, as amended at 49 FR 19944, May 10, 1984; 61 FR 13591, Mar. 27, 1996] Sec. 881.502 Term of contract. (a) Term (except for Manufactured Home Parks). The term of the Contract will be as follows: (1) Where the estimated cost of the rehabilitation is less than 25 percent of the estimated value of the project after completion of the rehabilitation, the contract will be for a term of 20 years for any dwelling unit. (2) Where the estimated cost of rehabilitation is 25 percent or more of the estimated value of the project after completion of rehabilitation, the contract may be for a term which: (i) Will cover the longest term, but not less than 20 years, of a single credit instrument covering: (A) The cost of rehabilitation, or (B) The existing indebtedness, or (C) The cost of rehabilitation and the refinancing of the existing indebtedness, or (D) The cost of rehabilitation and the acquisition of the property; and [[Page 76]] (ii) For assisted units in a project financed with the aid of a loan insured or co-insured by the Federal government or a loan made, guaranteed or intended for purchase by the Federal government, will be 20 years for any dwelling unit; or (iii) For units in a project financed other than as described in paragraph (a)(2)(ii) of this section will not exceed 30 years for any dwelling unit except that this limit will be 40 years if (A) the project is owned or financed by a loan or loan guarantee from a state or local agency, (B) the project is intended for occupancy by non-elderly families and (C) the project is located in an area designated by HUD as one requiring special financing assistance. (b) Term for manufactured home parks. For manufactured home units or spaces in substantially rehabilitated manufactured home parks, the term of the Contract will be 20 years. (c) Staged projects. If the project is completed in stages, the term of the Contract must relate separately to the units in each stage. The total Contract term for the units in all stages, beginning with the effective date of the Contract for the first stage, may not exceed the overall maximum term allowable for any one unit under this section, plus two years. [48 FR 12707, Mar. 28, 1983, and 49 FR 17449, Apr. 24, 1984] Sec. 881.503 Cross-reference. All of the provisions of Sec. Sec. 880.503, 880.504, 880.505, 880.506, 880.507, and 880.508 of this chapter apply to projects assisted under this part, subject to the requirements of Sec. 881.104. [61 FR 13592, Mar. 27, 1996] Subpart F_Management Sec. 881.601 Cross-reference. All of the provisions of part 880, subpart F, of this chapter apply to projects assisted under this part, subject to the requirements of Sec. 881.104. [61 FR 13592, Mar. 27, 1996] PART 882_SECTION 8 MODERATE REHABILITATION PROGRAMS--Table of Contents Subpart A_Applicability, Scope and Basic Policies Sec. 882.101 Applicability. 882.102 Definitions. 882.103-882.122 [Reserved] 882.123 Conversion of Section 23 Units to Section 8 and Section 23 monitoring. 882.124 Audit. Subparts B-C [Reserved] Subpart D_Special Procedures for Moderate Rehabilitation_Basic Policies 882.401 Eligible properties. 882.402 [Reserved] 882.403 ACC, housing assistance payments contract, and lease. 882.404 Physical condition standards; physical inspection requirements. 882.405 Financing. 882.406 [Reserved] 882.407 Other federal requirements. 882.408 Initial contract rents. 882.409 Contract rents at end of rehabilitation loan term. 882.410 Rent adjustments. 882.411 Payments for vacancies. 882.412 Subcontracting of owner services. 882.413 Responsibility of the Family. 882.414 Security and utility deposits. Subpart E_Special Procedures for Moderate Rehabilitation_Program Development and Operation 882.501-882.506 [Reserved] 882.507 Completion of rehabilitation. 882.508 [Reserved] 882.509 Overcrowded and under occupied units. 882.510 Adjustment of utility allowance. 882.511 Lease and termination of tenancy. 882.512 Reduction of number of units covered by contract. 882.513 Public notice to low-income families; waiting list. 882.514 Family participation. 882.515 Reexamination of family income and composition. 882.516 Maintenance, operation, and inspections. 882.517 HUD review of contract compliance. 882.518 Denial of admission and termination of assistance for criminals and alcohol abusers. [[Page 77]] Subparts F-G [Reserved] Subpart H_Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals 882.801 Purpose. 882.802 Definitions. 882.803 Project eligibility and other requirements. 882.804 Other Federal requirements. 882.805 HA application process, ACC execution, and pre-rehabilitation activities. 882.806 Agreement to enter into housing assistance payments contract. 882.807 Housing assistance payments contract. 882.808 Management. 882.809 Waivers. 882.810 Displacement, relocation, and acquisition. Authority: 42 U.S.C. 1437f and 3535(d). Source: 43 FR 61246, Dec. 29, 1978, unless otherwise noted. Subpart A_Applicability, Scope and Basic Policies Sec. 882.101 Applicability. (a) The provisions of this part apply to the Section 8 Moderate Rehabilitation program. (b) This part states the policies and procedures to be used by a PHA in administering a Section 8 Moderate Rehabilitation program. The purpose of this program is to upgrade substandard rental housing and to provide rental subsidies for low-income families. (c) Subpart H of this part only applies to the Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals. [63 FR 23853, Apr. 30, 1998] Sec. 882.102 Definitions. (a) Terms found elsewhere. The following terms are defined in part 5, subpart A of this title: 1937 Act, covered person, drug, drug-related criminal activity, federally assisted housing, guest, household, HUD, MSA, other person under the tenant's control, public housing agency (PHA), Section 8, and violent criminal activity. (b) In addition, the following definitions apply to this part: ACC reserve account (or ``project account''). The account established and maintained in accordance with Sec. 882.403(b). Agreement to enter into Housing Assistance Payments Contract (``Agreement''). A written agreement between the Owner and the PHA that, upon satisfactory completion of the rehabilitation in accordance with requirements specified in the Agreement, the PHA will enter into a Housing Assistance Payments Contract with the Owner. Annual Contributions Contract (``ACC''). The written agreement between HUD and a PHA to provide annual contributions to the PHA to cover housing assistance payments and other expenses pursuant to the 1937 Act. Assisted lease (or ``lease''). A written agreement between an Owner and a Family for the leasing of a unit by the Owner to the Family with housing assistance payments under a Housing Assistance Payments Contract between the Owner and the PHA. Congregate housing. Housing for elderly persons or persons with disabilities that meets the HQS for congregate housing. Contract. See definition of Housing Assistance Payments Contract. Contract rent. The total amount of rent specified in the Housing Assistance Payments Contract as payable to the Owner by the Family and by the PHA to the Owner on the Family's behalf. Covered housing provider. For the Section 8 Moderate Rehabilitation Programs, as provided in subparts A, D, and E of this part, ``covered housing provider,'' as such term is used in HUD's regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers to the PHA or owner, as applicable given the responsibilities of the covered housing provider as set forth in 24 CFR part 5, subpart L. For example, the PHA is the covered housing provider responsible for providing the notice of occupancy rights under VAWA and certification form described at 24 CFR 5.2005(a), though the PHA may provide this notice and form to owners, and charge owners with distributing the notice and form to tenants. In addition, the owner is the covered housing provider that may choose to bifurcate [[Page 78]] a lease as described at 24 CFR 5.2009(a), while both the PHA and owner are both responsible for ensuring that an emergency transfer plan is in place in accordance with 24 CFR 5.2005(e), and the owner is responsible for implementing the emergency transfer plan when an emergency occurs. Decent, safe, and sanitary. Housing is decent, safe, and sanitary if it meets the physical condition standards in 24 CFR part 5, subpart G. Gross rent. The total monthly cost of housing an eligible Family, which is the sum of the Contract Rent and any utility allowance. Group home. A dwelling unit that is licensed by a State as a group home for the exclusive residential use of two to twelve persons who are elderly or persons with disabilities (including any live-in aide). Housing Assistance Payment. The payment made by the PHA to the Owner of a unit under lease by an eligible Family, as provided under the Contract. The payment is the difference between the Contract Rent and the tenant rent. An additional payment (the ``utility reimbursement'') is made by the PHA when the utility allowance is greater than the total tenant payment. Housing Assistance Payments Contract (``Contract''). A written contract between a PHA and an Owner for the purpose of providing housing assistance payments to the Owner on behalf of an eligible Family. Moderate rehabilitation. Rehabilitation involving a minimum expenditure of $1000 for a unit, including its prorated share of work to be accomplished on common areas or systems, to: (1) Upgrade to decent, safe and sanitary condition to comply with the Housing Quality Standards or other standards approved by HUD, from a condition below these standards (improvements being of a modest nature and other than routine maintenance); or (2) Repair or replace major building systems or components in danger of failure. Owner. Any person or entity, including a cooperative, having the legal right to lease or sublease existing housing. Single room occupancy housing (SRO). A unit that contains no sanitary facilities or food preparation facilities, or contains either, but not both, types of facilities. Statement of Family responsibility. An agreement in the form prescribed by HUD, between the PHA and a Family to be assisted under the Program, stating the obligations and responsibilities of the Family. [63 FR 23853, Apr. 30, 1998, as amended at 63 FR 46578, Sept. 1, 1998; 66 FR 28797, May 24, 2001; 81 FR 80812, Nov. 16, 2016] Sec. Sec. 882.103-882.122 [Reserved] Sec. 882.123 Conversion of Section 23 Units to Section 8 and Section 23 monitoring. (a)-(d) [Reserved] (e) Section 23 policies for units planned for conversion on or before September 30, 1981. (1) PHAs shall not enter into new leases with owners for additional units nor shall they renew or extend leases with owners except consistent with the conversion schedules. (2) Subject to the rights of families under existing leases, PHAs may continue to lease units to families under Section 23 only on a month-to-month basis. (3) PHAs shall conduct annual inspections of all units to determine whether the units are decent, safe and sanitary. (4) PHAs shall certify with their requisitions to HUD for payments under the ACC that the units are decent, safe and sanitary, or the PHA shall furnish HUD with a report of the nature of the deficiencies of the units which are not so certified. If an owner's units are not decent, safe and sanitary. (i) Where the owner is responsible under the terms of the lease for correcting the deficiencies, the PHA shall send the owner written notification requiring the owner to take specified corrective action within a specified time. The notification shall also state that, if the owner fails to comply, rent payments will be suspended. If the owner fails to comply with the first notification, he shall be notified by the PHA of the noncompliance and rent payments shall be suspended immediately. In the [[Page 79]] event of such suspension of rent payments, the PHA shall requisition a correspondingly lower ACC payment. (ii) Where the PHA is responsible under the terms of the lease for correcting the deficiencies, the Field Office shall send written notification requiring the PHA to take specified corrective action within a specified time. The notification shall also state that, if the PHA fails to comply, HUD will make reduced payments to the PHA only in the amount of the rent due the owner. If the PHA fails to comply with the first notification, the PHA shall be notified of the noncompliance, and the PHA shall not receive any fees for performing management functions until the PHA has complied with the Field Office request and has corrected the noted deficiencies. (f) [Reserved] (g) Section 23 policies for units not planned to be converted. (1) PHAs shall not enter into new leases with owners for additional units nor shall they renew or extend leases with owners for more than one year. (2) The provisions contained in paragraphs (e) (3) and (4) of this section shall apply. (h) Request for rent increases. An owner may submit to the PHA a request for rent increase because of increases in operating cost, when the rents to the owner, after adjustments based on provisions in the lease, are insufficient to provide decent, safe and sanitary housing. Such a request shall be supported by an audited financial statement, and the data shall clearly show that failure to obtain additional revenue will result in deterioriation of units and loss of decent, safe and sanitary housing for low-income families. The PHA shall inspect the units to determine whether the units are decent, safe and sanitary. Where the need for an adjustment under this paragraph is shown: (1) Subject to available contract authority and prior approval by the HUD Field Office, the PHA may grant an adjustment to the extent documented and justified for those items of expenses (excluding debt service) for which the owner is responsible under the lease. (2) The amount of the adjustment must be reasonable when compared with similar items under the Section 8 Existing Housing program. (3) The adjusted amount for expenses shall not exceed the result of applying the appropriate Section 8 Existing Housing Annual Adjustment Factor (24 CFR part 888) most recently published by HUD in the Federal Register to the appropriate expense base in effect under the lease prior to this adjustment. (4) The adjustment shall not be retroactive to pay for costs that the owner had previously incurred. (5) The adjustment shall be effective for a period not to exceed one year. [44 FR 28276, Nov. 14, 1979, as amended at 60 FR 34694, July 3, 1995] Sec. 882.124 Audit. PHAs receiving financial assistance under this part are subject to audit requirements in 2 CFR part 200, subpart F. [50 FR 39091, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986; 80 FR 75941, Dec. 7, 2015] Subparts B-C [Reserved] Subpart D_Special Procedures for Moderate Rehabilitation_Basic Policies Source: 47 FR 34379, Aug. 9, 1982, unless otherwise noted. Sec. 882.401 Eligible properties. (a) Eligible properties. Except as provided in paragraph (b) of this section, housing suitable for moderate rehabilitation as defined in Sec. 882.102 is eligible for inclusion under the Moderate Rehabilitation Program. Existing structures of various types may be appropriate for this program, including single-family houses, multi- family structures and group homes. (b) Ineligible properties. (1) Nursing homes, units within the grounds of penal, reformatory, medical, mental and similar public or private institutions, and facilities providing continual psychiatric, medical or nursing services are not eligible for assistance under the Moderate Rehabilitation Program. [[Page 80]] (2) Housing owned by a State or unit of general local government is not eligible for assistance under this program. (3) High rise elevator projects for families with children may not be utilized unless HUD determines there is no practical alternative. (HUD may make this determination for a locality's Moderate Rehabilitation Program in whole or in part and need not review each building on a case-by-case basis.) (4) Single room occupancy (SRO) housing may not be utilized unless: (i) The property is located in an area in which there is a significant demand for such units as determined by the HUD Field Office; and (ii) The PHA and the unit of general local government in which the property is located approve of such units being utilized for such purpose. (5) No Section 8 assistance may be provided with respect to any unit occupied by an Owner; however, cooperatives will be considered as rental housing for purposes of the Moderate Rehabilitation Program. [63 FR 23854, Apr. 30, 1998, as amended at 64 FR 14832, Mar. 29, 1999] Sec. 882.402 [Reserved] Sec. 882.403 ACC, housing assistance payments contract, and lease. (a) Maximum Total ACC Commitments. The maximum total annual contribution that may be contracted for is the total of the Moderate Rehabilitation Fair Market Rents for all the units. The fee for the costs of PHA administration is payable out of the annual contribution. (b) Project account. (1) A project account will be established and maintained by HUD as a specifically identified and segregated account for each project. The account will contain the sum of the amounts by which the maximum annual commitment exceeds the amount actually paid out for the project under the ACC each year. Payments will be made from this account when needed to cover increases in Contract Rents or decreases in Gross Family Contributions for (i) housing assistance (including vacancy) payments, (ii) the amount of the fee for PHA costs of administration, and (iii) other costs specifically approved by the Secretary. (2) When a HUD-approved estimate of required payments under the ACC for a fiscal year exceeds the maximum annual commitment, and would cause the amount in the project account to be less than 40 percent of the maximum, HUD will, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the U.S. Housing Act of 1937, as may be necessary, to assure that payments under the ACC will be adequate to cover increases in Contract Rents and decreases in Gross Family Contributions. (c) Term of Housing Assistance Payments Contract. The Contract for any unit rehabilitated in accordance with the Program must be for a term of 15 years. (d) Term of Lease. (1) The initial lease between the family and the Owner must be for at least one year or the term of the HAP contract, whichever is shorter. In cases where there is less than one year remaining on the HAP contract, the owner and the PHA may mutually agree to terminate the unit from the HAP contract instead of leasing the unit to an eligible family. (2) Any renewal or extension of the lease term for any unit must in no case extend beyond the remaining term of the HAP contract. [47 FR 34379, Aug. 9, 1982, as amended at 64 FR 53869, Oct. 4, 1999] Sec. 882.404 Physical condition standards; physical inspection requirements. (a) Compliance with physical condition standards. Housing in this program must be maintained and inspected in accordance with the requirements in 24 CFR part 5, subpart G. (b) Space and security. In addition to the standards in 24 CFR part 5, subpart G, a dwelling unit used in the Section 8 moderate rehabilitation program that is not SRO housing must have a living room, a kitchen area, and a bathroom. Such a dwelling unit must have at least one bedroom or living/sleeping room for each two persons. (c) Special housing types. The following provisions in 24 CFR part 982, subpart M (Special Housing Types) apply to the Section 8 moderate rehabilitation program: [[Page 81]] (1) 24 CFR 982.605(b) (for SRO housing). For the Section 8 moderate rehabilitation SRO program under subpart H of this part 882, see also Sec. 882.803(b). (2) 24 CFR 982.609(b) (for congregate housing). (3) 24 CFR 982.614(c) (for group homes). [63 FR 46579, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999; 88 FR 30499, May 11, 2023] Sec. 882.405 Financing. (a) Types. Any type of public or private financing may be utilized with the exception of the rehabilitation loan program under Section 312 of the Housing Act of 1964. (b) Use of Contract as security for financing. An Owner may pledge, or offer as security for any loan or obligation, an Agreement or Contract entered into pursuant to this Program, Provided That (1) such security is in connection with a unit(s) rehabilitated pursuant to this Program and (2) the terms of the financing or any refinancing must be approved by the PHA in accordance with standards provided by HUD. Any pledge of the Agreement or Contract, or payments thereunder, will be limited to the amounts payable under the Contract in accordance with its terms. Sec. 882.406 [Reserved] Sec. 882.407 Other Federal requirements. (a) The moderate rehabilitation program is subject to applicable Federal requirements in 24 CFR 5.105 and to the requirements for protection for victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, or stalking, covered housing providers have discretion to adopt and modify any existing admission preferences or transfer waitlist priorities for victims of domestic violence, dating violence, sexual assault, or stalking. (c) Covered housing providers must develop and implement an emergency transfer plan that meets the requirements in 24 CFR 5.2005(e), and when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, and stalking who qualifies for an emergency transfer, covered housing providers must, at a minimum: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, the covered housing provider must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), pertaining to victims of domestic violence, dating violence, sexual assault, or stalking, including data on the outcomes of such requests. [81 FR 80812, Nov. 16, 2016] Sec. 882.408 Initial contract rents. (a) Fair Market Rent limitation. The Fair Market Rent Schedule for Moderate Rehabilitation is 120 percent of the Existing Housing Fair Market Rent Schedule, except that the Fair Market Rent limitation applicable to single room occupancy housing is 75 percent of the Moderate Rehabilitation Fair Market Rent for a 0-bedroom unit. The initial Gross Rent for any Moderate Rehabilitation unit must not exceed the Moderate Rehabilitation Fair Market Rent applicable to the unit on the date that the Agreement is executed except by up to 10 percent as provided in paragraph (b) of this section. Additionally, to the extent provided in paragraph (d) of this section, the PHA may approve changes in the Contract Rent subsequent to execution of the Agreement which result in an initial Gross Rent which exceeds the Moderate Rehabilitation Fair Market Rent applicable to the unit by up to 20 percent. (b) Exception rents. With HUD Field Office approval, the PHA may approve initial Gross Rents which exceed the applicable Moderate Rehabilitation Fair Market Rents by up to 10 percent for all units of a given size in specified areas where HUD has determined that the rents for standard units suitable [[Page 82]] for the Existing Housing Program are more than 10 percent higher than the Existing Housing Fair Market Rents. The PHA must submit documentation demonstrating the necessity for such exception rents in the area to the HUD Field Office. In areas where HUD has approved the use of exception rents for 0-bedroom units, the single room occupancy housing exception rent will be 75 percent of the exception rent applicable to Moderate Rehabilitation 0-bedroom units. (c) Determination Initial Contract Rents. (1) The initial Contract Rent and base rent for each unit must be computed in accordance with HUD requirements. These amounts may be determined in accordance with paragraph (c)(2), or in accordance with an alternative method prescribed by HUD. However, the initial Contract Rent may in no event be more than-- (i) The Moderate Rehabilitation Fair Market Rent or exception rent applicable to the unit on the date that the Agreement is executed, minus (ii) Any applicable allowance for utilities and other services attributable to the unit. (2) When the initial Contract Rent is computed under this paragraph, the rent will be equal to the base rent plus the monthly cost of a rehabilitation loan (but not more than the maximum stated in paragraph (c)(1)). The base rent must be calculated using the rent charged for the unit or the estimated costs to the Owner of owning, managing and maintaining the rehabilitated unit. The monthly cost of a rehabilitation loan must be calculated using: (i) The actual interest rate on the portion of the rehabilitation costs borrowed by the Owner, (ii) The HUD-FHA maximum interest rate for multifamily housing (or another rate prescribed by HUD) for rehabilitation costs paid by the Owner out of nonborrowed funds, and (iii) At least a 15 year loan term, except that if the total amount of rehabilitation is less than $15,000, the actual loan term will be used for the portion of the rehabilitation costs borrowed by the Owner. (HUD Field Offices may authorize loan terms which differ from the above in accordance with HUD requirements.) (d) Changes in Initial Contract Rents during rehabilitation. (1) The initial Contract Rents established pursuant to paragraph (c) of this section will be the Contract Rents on the effective date of the Contract except under the following circumstances: (i) When, during rehabilitation, work items (including substantial and necessary design changes) which (A) could not reasonably have been anticipated or are necessitated by a change in local codes or ordinances, and (B) were not listed in the work write-up prepared or approved by the PHA, are subsequently required and approved by the PHA. (ii) When the actual cost of the rehabilitation performed is less than that estimated in the calculation of Contract Rents for the Agreement or the actual, certified costs are more than estimated due to unforeseen factors beyond the owner's control (e.g., strikes, weather delays or unexpected delays caused by local governments). (iii) When the PHA (or HUD) approves changes in financing. (iv) When the actual relocation payments made by the Owner to temporarily relocated Families varies from the cost estimated in the calculation of Contract Rents for the Agreement. (v) When necessary to correct errors in computation of the base and Contract Rents to comply with the HUD requirements. (2) Should changes occur as specified in paragraph (d)(1) (either an increase or decrease), the PHA will approve any necessary change in work and amendment of the work write-up and cost estimate, recalculate the initial Contract Rents in accordance with paragraph (d)(3) of this section, and amend the Contract or Agreement, as appropriate, to reflect the revised rents. (3) In establishing the revised Contract Rents, the PHA must determine that the resulting Gross Rents do not exceed the Moderate Rehabilitation Fair Market Rent or the exception rent in effect at the time of execution of the Agreement. The Fair Market Rent or exception rent, as appropriate, may only be exceeded when the PHA determines in accordance with paragraph [[Page 83]] (d)(1) of this section that it will be necessary for the revised Gross Rent to exceed the Moderate Rehabilitation Fair Market Rent or exception rent. Should this determination be made, the PHA may not execute a revised Agreement or Contract for Gross Rents exceeding the Fair Market Rents by more than 10 percent until it receives HUD Field Office approval. The HUD Field Office may approve revised Gross Rents which exceed the Fair Market Rents by up to 20 percent for reasons specified in paragraph (d)(1) of this section upon proper justification by the PHA of the necessity for the increase. [47 FR 34379, Aug. 9, 1982, as amended at 52 FR 19725, May 27, 1987] Sec. 882.409 Contract rents at end of rehabilitation loan term. For a Contract where the initial Contract Rent was based upon a loan term shorter than 15 years, the Contract must provide for reduction of the Contract Rent effective with the rent for the month following the end of the term of the rehabilitation loan. The amount of the reduction will be the monthly cost of amortization of the rehabilitation loan. This reduction should result in a new Contract Rent equal to the base rent established pursuant to Sec. 882.408(c) plus all subsequent adjustments. Sec. 882.410 Rent adjustments. (a) Annual and special adjustments. Contract Rents will be adjusted as provided in paragraphs (a) (1) and (2) of this section upon submittal to the PHA by the Owner of a revised schedule of Contract Rents, provided that the unit is in decent, safe, and sanitary condition and that the Owner is otherwise in compliance with the terms of the Lease and Contract. Subject to the foregoing, adjustments of Contract Rents will be as follows: (1) The Annual Adjustment Factors which are published annually by HUD (see Schedule C, 24 CFR part 888) will be utilized. On or after each annual anniversary date of the Contract, the Contract Rents may be adjusted in accordance with HUD procedures, effective for the month following the submittal by the Owner of a revised schedule of Contract Rents. The changes in rent as a result of the adjustment cannot exceed the amount established by multiplying the Annual Adjustment Factor by the base rents. However, if the amounts borrowed to finance the rehabilitation costs or to finance purchase of the property are subject to a variable rate or are otherwise renegotiable, Contract Rents may be adjusted in accordance with other procedures as prescribed by HUD, and specified in the Contract, provided that the adjusted Contract Rents cannot exceed the rents established by multiplying the Annual Adjustment Factor by the Contract Rents. Adjusted Contract Rents must then be examined in accordance with paragraph (b) of this section and may be adjusted accordingly. Contract Rents may be adjusted upward or downward, as may be appropriate. (2) Special Adjustments. (i) A special adjustment, to the extent determined by HUD to reflect increases in the actual and necessary expenses of owning and maintaining the unit which have resulted from substantial general increases in real property taxes, assessments, utility rates and utilities not covered by regulated rates, may be recommended by the PHA for approval by HUD. Subject to appropriations, a special adjustment may also be recommended by the PHA for approval by HUD when HUD determines that a project is located in a community where drug-related criminal activity is generally prevalent, and not specific to a particular project, and the project's operating, maintenance, and capital repair expenses have substantially increased primarily as a result of the prevalence of such drug-related activity. HUD may, on a project-by-project basis, provide adjustments to the maximum monthly rents, to a level no greater than 120 percent of the current gross rents for each unit size under a Housing Assistance Payments Contract, to cover the costs of maintenance, security, capital repairs and reserves required for the Owner to carry out a strategy acceptable to HUD for addressing the problem of drug-related criminal activity. Prior to approval of a special adjustment to cover the cost of physical improvements, HUD will perform an environmental review to [[Page 84]] the extent required by HUD's environmental regulations at 24 CFR part 50, including the applicable related authorities at 24 CFR 50.4. (ii) The aforementioned special rent adjustments will only be approved if and to the extent the Owner clearly demonstrates that these general increases have caused increases in the owners operating costs which are not adequately compensated for by annual adjustments. (iii) The Owner must submit financial information to the PHA which clearly supports the increase. For Contracts of more than twenty units, the Owner must submit audited financial information. (b) Overall limitation. Notwithstanding any other provisions of this part, adjustments as provided in this section must not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by the PHA (and approved by HUD in the case of adjustments under paragraph (a)(2) of this section). However, unless the rents have been adjusted in accordance with Sec. 882.409, this limitation should not be construed to prohibit differences in rents between assisted and comparable unassisted units to the extent that differences existed with respect to the initial Contract Rents. (Approved by the Office of Management and Budget under OMB approval number 2577-0196) [47 FR 34379, Aug. 9, 1982, as amended at 59 FR 47773, Sept. 16, 1994] Sec. 882.411 Payments for vacancies. (a) Vacancies from execution of Contract to initial occupancy. If a Contract unit which has been rehabilitated in accordance with this Program is not leased within 15 days of the effective date of the Contract, the Owner will be entitled to housing assistance payments in the amount of 80 percent of the Contract Rent for the unit for a vacancy period not exceeding 60 days from the effective date of the Contract, provided that the Owner (1) has complied with Sec. Sec. 882.506(d) and 882.508(c); (2) has taken and continues to take all feasible actions to fill the vacancy; and (3) has not rejected any eligible applicant except for good cause acceptable to the PHA. (b) Vacancies after initial occupancy. (1) If an Eligible Family vacates its unit (other than as a result of action by the Owner which is in violation of the Lease or the Contract or any applicable law), the Owner may receive the housing assistance payments due under the Contract for so much of the month in which the Family vacates the unit as the unit remains vacant. Should the unit continue to remain vacant, the Owner may receive from the PHA a housing assistance payment in the amount of 80 percent of the Contract Rent for a vacancy period not exceeding an additional month. However, if the Owner collects any of the Family's share of the rent for this period, the payment must be reduced to an amount which, when added to the Family's payment, does not exceed 80 percent of the Contract Rent. Any such excess must be reimbursed by the Owner to the PHA. The Owner will not be entitled to any payment under this paragraph (b)(1) of this section unless the Owner: (i) Immediately upon learning of the vacancy, has notified the PHA of the vacancy or prospective vacancy, and (ii) has taken and continues to take all feasible actions specified in paragraphs (a) (2) and (3) of this section. (2) If the Owner evicts an Eligible Family, the Owner will not be entitled to any payment under paragraph (b)(1) of this section unless the PHA determines that the Owner complied with all requirements of the Contract. (c) Prohibition of double compensation for vacancies. The Owner will not be entitled to housing assistance payments with respect to vacant units under this section if the Owner is entitled to payments from other sources (for example, payments for losses of rental income incurred for holding units vacant for relocatees pursuant to Title I of the HCD Act of 1974 or payments for unpaid rent under Sec. 882.414 (Security and Utility Deposits)). [47 FR 34379, Aug. 9, 1982, as amended at 63 FR 23855, Apr. 30, 1998] [[Page 85]] Sec. 882.412 Subcontracting of owner services. (a) General. Any Owner may contract with any private or public entity to perform for a fee the services required by the Agreement, Contract or Lease, provided that such contract may not shift any of the Owner's responsibilities or obligations. (b) PHA management. If the Owner and a PHA wish to enter into a management contract, they may do so provided that: (1) The Housing Assistance Payments Contract with respect to the housing involved is administered by another PHA, or (2) Should another PHA not be available and willing to administer the Housing Assistance Payments Contract and no other management alternative exists, the HUD Field Office may authorize PHA management of units administered by the PHA in accordance with specified criteria. (3) Notwithstanding the provisions of Sec. 882.408 (b) and (c), a PHA may not approve, without prior HUD approval, rents which exceed the appropriate Moderate Rehabilitation Fair Market Rent for a unit for which it provides the management functions under this section. Sec. 882.413 Responsibility of the Family. (a) A family receiving housing assistance under this Program must fulfill all of its obligations under the Lease and Statement of Family Responsibility. (b) No family member may engage in drug-related criminal activity or violent criminal activity. Failure of the Family to meet its responsibilities under the Lease, the Statement of Family Responsibility, or this section shall constitute rounds for termination of assistance by the PHA. Should the PHA determine to terminate assistance to the Family, the provisions of Sec. 882.514(f) must be followed. [55 FR 28546, July 11, 1990, as amended at 63 FR 23855, Apr. 30, 1998] Sec. 882.414 Security and utility deposits. (a) If at the time of the initial execution of the Lease the Owner wishes to collect a security deposit, the maximum amount shall be the greater of one month's Total Tenant Payment or $50. However, this amount shall not exceed the maximum amount allowable under State or local law. For units leased in place, security deposits collected prior to the execution of a Contract which are in excess of this maximum amount do not have to be refunded until the Family vacates the unit subject to the lease terms. The Family is expected to pay security deposits and utility deposits from its resources and/or other public or private sources. (b) If a Family vacates the unit, the Owner, subject to State and local law, may use the security deposit as reimbursement for any unpaid Tenant Rent or other amount which the Family owes under the Lease. If a Family vacates the unit owing no rent or other amount under the Lease consistent with State or local law or if such amount is less than the amount of the security deposit, the Owner shall refund the full amount or the unused balance to the Family. (c) In those jurisdictions where interest is payable by the Owner on security deposits, the refunded amount shall include the amount of interest payable. The Owner shall comply with all State and local laws regarding interest payments on security deposits. (d) If the security deposit is insufficient to reimburse the Owner for the unpaid Tenant Rent or other amounts which the Family owes under the Lease, or if the Owner did not collect a security deposit, the Owner may claim reimbursement from the PHA for an amount not to exceed the lesser of: (1) The amount owed the Owner, or (2) Two month's Contract Rent; minus, in either case, the greater of the security deposit actually collected or the amount of security deposit the Owner could have collected under the program (pursuant to paragraph (a) of this section). Any reimbursement under this section must be applied first toward any unpaid Tenant Rent due under the Lease and then to any other amounts owed. No reimbursement may [[Page 86]] be claimed for unpaid rent for the period after the Family vacates. [43 FR 61246, Dec. 29, 1978, as amended at 44 FR 31176, May 31, 1979; 49 FR 19945, May 10, 1984. Redesignated at 63 FR 23854, Apr. 30, 1998] Subpart E_Special Procedures for Moderate Rehabilitation_Program Development and Operation Source: 47 FR 34383, Aug. 9, 1982, unless otherwise noted. Sec. Sec. 882.501-882.506 [Reserved] Sec. 882.507 Completion of rehabilitation. (a) Notification of completion. The Owner must notify the PHA when the work is completed and submit to the PHA the evidence of completion and certifications described in paragraphs (b) and (c) of this section. (b) Evidence of completion. Completion of the unit(s) must be evidenced by furnishing the PHA with the following: (1) A certificate of occupancy and/or other official approvals as required by the locality. (2) A certification by the Owner that: (i) The unit(s) has been completed in accordance with the requirements of the Agreement; (ii) The unit(s) is in good and tenantable condition; (iii) The unit(s) has been rehabilitated in accordance with the applicable zoning, building, housing and other codes, ordinances or regulations, as modified by any waivers obtained from the appropriate officials; (iv) The unit(s) are in compliance with part 35, subparts A, B, H, and R of this title. (iv) Any unit(s) built prior to 1973 are in compliance with Sec. 882.404(c)(3) and Sec. 882.404(c)(4). (v) If applicable, the Owner has complied with the provisions of the Agreement relating to the payment of not less than prevailing wage rates and that to the best of the Owner's knowledge and belief there are no claims of underpayment concerning alleged violations of said provisions of the Agreement. In the event there are any such pending claims to the knowledge of the Owner, PHA or HUD, the Owner will be required to place sufficient amount in escrow, as determined by the PHA or HUD, to assure such payments. (c) Actual cost and rehabilitation loan certifications. The Owner must provide the PHA with a certification of the costs incurred for the rehabilitation and any temporary relocation as well as the interest rate and term of any rehabilitation loan. The Owner must certify that these are the actual costs, interest rate, and term. The PHA must review for completeness and accuracy and accept these certifications subject to the right of post audit. The PHA must then establish the Contract Rents as provided in Sec. 882.408 which will be subject to reduction based on a post audit. (d) Review and inspections. The PHA must review the evidence of completion for compliance with paragraph (b) of this section. The PHA also must inspect the unit(s) to be assisted to determine that the unit(s) has been completed in accordance with the Agreement and meets the Housing Quality Standards or other standards approved by HUD for the Program. If the inspection discloses defects or deficiencies, the inspector must report these in detail. (e) Acceptance. (1) If the PHA determines from the review and inspection that the unit(s) has been completed in accordance with the Agreement, the unit(s) will be accepted. (2) If there are any items of delayed completion which are minor items or which are incomplete because of weather conditions, and in any case which do not preclude or affect occupancy, and all other requirements of the Agreement have been met, the unit(s) must be accepted. An escrow fund determined by the PHA to be sufficient to assure completion for items of delayed completion must be required, as well as a written agreement between the PHA and the Owner, to be included as an exhibit to the Contract, specifying the schedule for completion. If the items are not completed within the agreed time period, the PHA may terminate the Contract or exercise other rights under the Contract. (3) If other deficiencies exist, the PHA must determine whether and to [[Page 87]] what extent the deficiencies are correctable, and whether the Contract Rents should be reduced. The Owner must be notified of the PHA's decision. If the corrections required by the PHA are possible, the PHA and the Owner must enter into an agreement for the correction of the deficiencies within a specified time. If the deficiencies are corrected within the agreed period of time, the PHA must accept the unit(s). (4) Otherwise, the unit(s) may not be accepted, and the Owner must be notified with a statement of the reasons for nonacceptance. [47 FR 34383, Aug. 9, 1982, as amended at 52 FR 1895, Jan. 15, 1987; 64 FR 50227, Sept. 15, 1999] Sec. 882.508 [Reserved] Sec. 882.509 Overcrowded and under occupied units. If the PHA determines that a Contract unit is not decent, safe, and sanitary by reason of increase in Family size, or that a Contract unit is larger than appropriate for the size of the Family in occupancy, housing assistance payments with respect to the unit will not be abated; However, the Owner must offer the Family a suitable alternative unit should one be available and the Family will be required to move. If the Owner does not have a suitable available unit, the PHA must assist the Family in locating other standard housing in the locality within the Family's ability to pay and require the Family to move to such a unit as soon as possible. In no case will a Family be forced to move nor will housing assistance payments under the Contract be terminated unless the Family rejects without good reason the offer of a unit which the PHA judges to be acceptable. Sec. 882.510 Adjustment of utility allowance. The PHA must determine, at least annually, whether an adjustment is required in the Utility Allowance applicable to the dwelling units in the Program, on grounds of changes in utility rates or other change of general applicability to all units in the Program. The PHA may also establish a separate schedule of allowances for each building of 20 or more assisted units, based upon at least one year's actual utility consumption data following rehabilitation under the Program. If the PHA determines that an adjustment should be made in its Schedule of Allowances or if it establishes a separate schedule for a building which will change the allowance, the PHA must then determine the amounts of adjustments to be made in the amount of rent to be paid by affected Families and the amount of housing assistance payments and must notify the Owners and Families accordingly. Any adjustment to the Allowance must be implemented no later than at the Family's next reexamination or at lease renewal, whichever is earlier. [47 FR 34383, Aug. 9, 1982, as amended at 49 FR 19946, May 10, 1984] Sec. 882.511 Lease and termination of tenancy. (a) Lease. (1) The lease must include all provisions required by HUD, and must not include any provisions prohibited by HUD. (2) The lease must provide that drug-related criminal activity engaged in on or near the premises by any tenant, household member, or guest, and any such activity engaged in on the premises by any other person under the tenant's control is grounds for the owner to terminate tenancy. In addition, the lease must provide that the owner may terminate the tenancy of a family when the owner determines that a household member is illegally using a drug or when the owner determines that a pattern of illegal use of a drug interferes with the health, safety, or right to peaceful enjoyment of the premises by other residents. (b) Applicability. The provisions of this section apply to decisions by an Owner to terminate the tenancy of a Family during or at the end of the Family's lease term. (c) Grounds for termination of or refusal to renew the lease. The Owner must not terminate or refuse to renew the lease except upon the following grounds: (1) Serious or repeated violation of the terms and conditions of the lease. (2) Violation of applicable Federal, State or local law. (3) Other good cause. [[Page 88]] (d) Notice of termination of tenancy. (1) The Owner must serve a written notice of termination of tenancy on the Family which states the date the tenancy shall terminate. Such date must be in accordance with the following: (i) When termination is based on failure to pay rent, the date of termination must be not less than five working days after the Family's receipt of the notice; or, if the Secretary determines that tenants must be provided with adequate notice to secure Federal funding that is available due to a Presidential declaration of a national emergency, the date of termination must be not less than 30 days after the Family's receipt of the notice. (ii) When termination is based on serious or repeated violation of the terms and conditions of the lease or on violation of applicable Federal, State or local law, the date of termination must be in accordance with State and local law. (iii) When termination is based on other good cause, the date of termination must be no earlier than 30 days after the notice is served on the Family. (2) The notice of termination must: (i) State the reasons for such termination with enough specificity to enable the Family to prepare a defense. (ii) Advise the Family that if a judicial proceeding for eviction is instituted, the tenant may present a defense in that proceeding. (iii) Be served on the Family by sending a prepaid first class properly addressed letter (return receipt requested) to the tenant at the dwelling unit or by delivering a copy of the notice to the dwelling unit. (iv) Include such information to tenants during a national emergency, as required by the Secretary. (3) Substitution of State and local requirements. In the case of failure to pay rent, a notice of termination which is issued pursuant to State or local law or is common practice in the locality and which satisfies paragraphs (d)(1) and (2) of this section may be substituted for or run concurrently with the notice required herein. (e) Eviction. All evictions must be carried out through judical process under State and local law. ``Eviction'' means the dispossession of the Family from the dwelling unit pursuant to State or local court action. (f) Lease. The requirements of this section shall be incorporated into the dwelling lease between the Owner and the Family. (g) In actions or potential actions to terminate tenancy, the owner shall follow 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). [47 FR 34383, Aug. 9, 1982, as amended at 63 FR 23855, Apr. 30, 1998; 66 FR 28797, May 24, 2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66261, Oct. 27, 2010; 81 FR 80812, Nov. 16, 2016; 86 FR 55701, Oct. 7, 2021] Sec. 882.512 Reduction of number of units covered by contract. (a) Limitation on leasing to ineligible Families. Owners must lease all assisted units under Contract to Eligible Families. Leasing of vacant, assisted units to ineligible tenants is a violation of the Contract and grounds for all available legal remedies, including suspension or debarment from HUD programs and reduction of the number of units under the Contract, as set forth in paragraph (b) of this section. Once the PHA has determined that a violation exists, the PHA must notify HUD of its determination and the suggested remedies. At the direction of HUD, the PHA must take the appropriate action. (b) Reduction for failure to lease to Eligible Families. If, at any time beginning six months after the effective date of the Contract, the Owner fails for a period of six continuous months to have at least 90 percent of the assisted units leased or available for leasing by Eligible Families (because families initially eligible have become ineligible), the PHA may, on at least 30 days' notice, reduce the number of units covered by the Contract. The PHA may reduce the number of units to the number of units actually leased or available for leasing by Eligible Families plus 10 percent (rounded up). If the Owner has only one unit under Contract and if one year has elapsed since the date of the last housing assistance payment, the Contract may be terminated with the consent of the Owner. [[Page 89]] (c) Restoration. The PHA will agree to an amendment of the Contract, to provide for subsequent restoration of any reduction made pursuant to paragraph (b) if: (1) The PHA determines that the restoration is justified by demand, (2) The Owner otherwise has a record of compliance with obligations under the Contract, and (3) Contract authority is available. Sec. 882.513 Public notice to low-income families; waiting list. (a) Public notice to low-income Families. (1) If the PHA does not have a waiting list which is sufficient to provide applicants for the units under the Moderate Rehabilitation Program, the PHA must, promptly after receiving the executed ACC, make known to the public the availability of the Program. (i) The notice must state that assistance under this Program will be available only in specified units which have been rehabilitated under the Program. (ii) The notice must be made in accordance with the PHA's HUD- approved application and with the HUD guidelines for fair housing requiring the use of the equal housing opportunity logotype, statement and slogan. (b) Waiting list. The PHA must maintain a waiting list for applicants for the Moderate Rehabilitation Program. This requirement may be met through the use of waiting lists for other subsidized housing programs such as the Existing Housing Program. Sec. 882.514 Family participation. (a) Initial determination of family eligibility. (1) The PHA is responsible for receipt and review of applications, and determination of family eligibility for participation in accordance with HUD regulations (see 24 CFR parts 5, 750 and 760). The PHA is responsible for verifying the sources and amount of the family's income and other information necessary for determining income eligibility and the amount of the assistance payments. (2) PHA records on applicants and Families selected to participate must be maintained so as to provide HUD with racial, gender, and ethnic data. (b) Selection of Families for participation. When vacancies occur, the PHA will refer to the Owner one or more appropriate size Families on its waiting list. The PHA must select Families for participation in accordance with the provisions of the Program and in accordance with the PHA's application, including any PHA requirement or preferences as approved by HUD. The PHA must select Families eligible for housing assistance payments currently residing in units that are designated for rehabilitation under the Program without requiring that these Families be placed on the waiting list. Notwithstanding the fact that the PHA may not be accepting additional applications for participation because of the length of the waiting list, the PHA may not refuse to place an applicant on the waiting list if the applicant is otherwise eligible for partcipation and claims that he or she qualifies for a Federal preference as provided in 24 CFR part 5, unless the PHA determines, on the basis of the number of applicants who are already on the waiting list and who claim a Federal preference, and the anticipated number of admissions under this part, that-- (1) There is an adequate pool of applicants who are likely to qualify for a Federal preference and (2) It is unlikely that, on the basis of the PHA's system for applying the Federal preferences, the preference or preferences that the applicant claims, and the preferences claimed by applicants on the waiting list, the applicant would qualify for assistance before other applicants on the waiting list. (c) Owner selection of Families. All vacant units under Contract must be rented to Eligible Families referred by the PHA from its waiting list. However, if the PHA is unable to refer a sufficient number of interested applicants on the waiting list to the Owner within 30 days of the Owner's notification to the PHA of a vacancy, the Owner may advertise or solicit applications from Low-Income Families and refer such Families to the PHA to determine eligibility. Since the Owner is responsible for tenant selection, the Owner may refuse any family, provided that the Owner does not unlawfully discriminate. However, the owner must not deny program assistance or admission to an applicant based on the fact [[Page 90]] that the applicant is or has been a victim of domestic violence, dating violence, sexual assault, or stalking, if the applicant otherwise qualifies for assistance or admission. Should the Owner reject a Family, and should the Family believe that the Owner's rejection was the result of unlawful discrimination, the Family may request the assistance of the PHA in resolving the issue. If the issue cannot be resolved promptly, the Family may file a complaint with HUD, and the PHA may refer the Family to the next available Moderate Rehabilitation unit. (d) Briefing of Families. (1) When a Family is initially determined to be eligible for housing assistance payments or is selected for participation in accordance with this section, the PHA must provide the Family with information as to the Tenant Rent and the PHA's schedule of Utility Allowances. Each Family must also, either in group or individual sessions, be provided with a full explanation of the following: (i) Family and Owner responsibilities under the Lease and Contract; (ii) Significant aspects of the applicable State and local laws; (iii) Significant aspects of Federal, State and local fair housing laws; (iv) The fact that the subsidy is tied to the unit and the Family must occupy a unit rehabilitated under the Program; (v) The Family's options under the Program should the Family be required to move due to an increase or decrease in Family size; and (vi) The advisability and availability of blood lead level screening for children under 6 years of age and HUD's lead-based paint requirements in part 35, subparts A, B, H, and R of this title. (2) For all Families to be temporarily relocated, the briefing must include a discussion of the relocation policies. (e) Continued participation of Family when Contract is terminated. If an Owner evicts an assisted family in violation of the Contract or otherwise breaches the Contract, and the Contract for the unit is terminated, and if the Family was not at fault and is eligible for continued assistance, the Family may continue to receive housing assistance through the conversion of the Moderate Rehabilitation assistance to tenant-based assistance under the Section 8 certificate or voucher program. The Family must then be issued a certificate or voucher, and treated as any participant in the tenant-based programs under 24 CFR part 982, and must be assisted by the PHA in finding a suitable unit. All requirements of 24 CFR part 982 will be applicable except that the term of any housing assistance payments contract may not extend beyond the term of the initial Moderate Rehabilitation Contract. If the Family is determined ineligible for continued assistance, the certificate or voucher may be offered to the next Family on the PHA's waiting list. The unit will remain under the Moderate Rehabilitation ACC which provides for such a conversion of the units; therefore no amendment to the ACC will be necessary to convert to the Section 8 tenant-based assistance programs. (f) Families determined by the PHA to be ineligible. If a Family is determined to be ineligible in accordance with the PHA's HUD-approved application, either at the application stage or after assistance has been provided on behalf of the Family, the PHA shall promptly notify the Family by letter of the determination and the reasons for it and the letter shall state that the Family has the right within a reasonable time (specified in the letter) to request an informal hearing. If, after conducting such an informal hearing, the PHA determines, based on a preponderance of the evidence, that the Family is ineligible, it shall notify the Family in writing. The procedures of this paragraph do not preclude the Family from exercising its other rights if it believes it is being discriminated against on the basis of race, color, religion, sex, age, handicap, familial status, or national origin. The informal review provisions for the denial of a Federal selection preference under Sec. 882.517 are contained in paragraph (k) of that section. The informal hearing requirements for denial and termination of assistance on [[Page 91]] the basis of ineligible immigration status are contained in 24 CFR part 5. (Approved by the Office of Management and Budget under control number 2502-0123) [47 FR 34383, Aug. 9, 1982, as amended at 49 FR 19945, May 10, 1984; 51 FR 11226, Apr. 1, 1986; 52 FR 1895, Jan. 15, 1987; 53 FR 847, Jan. 13, 1988; 53 FR 1155, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39705, Sept. 27, 1989; 55 FR 28547, July 11, 1990; 56 FR 7539, Feb. 22, 1991; 60 FR 14844, Mar. 20, 1995; 61 FR 9046, Mar. 6, 1996; 61 FR 13625, Mar. 27, 1996; 63 FR 23855, Apr. 30, 1998; 64 FR 50227, Sept. 15, 1999; 66 FR 28797, May 24, 2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66261, Oct. 27, 2010; 81 FR 80812, Nov. 16, 2016] Sec. 882.515 Reexamination of family income and composition. (a) Regular reexaminations. The PHA must reexamine the income and composition of all families at least once every 12 months. After consultation with the family and upon verification of the information, the PHA must make appropriate adjustments in the Total Tenant Payment in accordance with part 813 of this chapter and determine whether the family's unit size is still appropriate (see Sec. 882.213). The PHA must adjust Tenant Rent and the Housing Assistance Payment to reflect any change in Total Tenant Payment. At the time of the annual reexamination of family income and composition, the PHA must require the family to disclose and verify Social Security Numbers. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see part 5, subpart B, of this title. At the first regular reexamination after June 19, 1995, the PHA shall follow the requirements of 24 CFR part 5 concerning obtaining and processing evidence of citizenship or eligible immigration status of all family members. Thereafter, at each regular reexamination, the PHA shall follow the requirements of 24 CFR part 5 concerning verification of immigration status of any new family member. For a family with net family assets (as the term is defined in Sec. 5.603 of this title) equal to or less than $50,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes of recertification of income, a family's declaration under Sec. 5.618(b) of this title, except that the PHA must obtain third-party verification of all family assets every 3 years. (b) Interim reexaminations. (1) A family may request an interim determination of family income or composition because of any changes since the last determination. The PHA must conduct any interim reexamination within a reasonable period of time after the family request or when the PHA becomes aware of an increase in family adjusted income under paragraph (b)(3) of this section. What qualifies as a ``reasonable time'' may vary based on the amount of time it takes to verify information, but generally should not be longer than 30 days after changes in income are reported. (2) The PHA may decline to conduct an interim reexamination of family income if the PHA estimates the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or a lower threshold established by the PHA. (3) The PHA must conduct an interim reexamination of family income when the PHA becomes aware that the family's adjusted income (Sec. 5.611 of this title) has changed by an amount that the PHA estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except: (i) The PHA may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and (ii) The PHA may choose not to conduct an interim reexamination in the last three months of a certification period. (4)(i) If the family has reported a change in family income or composition in a timely manner according to [[Page 92]] the PHA's policies, the PHA must provide the family with 30 days advance notice of any increase in the Total Tenant Payment and Tenant Rent, and such increases will be effective the first day of the month beginning after the end of that 30-day period. Total Tenant Payment and Tenant Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income. (ii) If the family has failed to report a change in family income or composition in a timely manner according to the PHA's policies, PHAs must implement any resulting Total Tenant Payment and Tenant Rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting Total Tenant Payment and Tenant Rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, a PHA may apply a Total Tenant Payment and Tenant Rent decrease retroactively at the discretion of the PHA, in accordance with the conditions established by the PHA in the administrative plan and subject to paragraph (c)(4)(iii) of this section. (iii) A retroactive Total Tenant Payment and Tenant Rent decrease may not be applied prior to the later of the first of the month following: (A) The date of the change leading to the interim reexamination of family income; or (B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination). (5) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination. (c) Obligation to supply information. The family must supply such certification, release, information or documentation as the PHA or HUD determine to be necessary, including submission of required evidence of citizenship or eligible immigration status, submission of social security numbers and verifying documentation, submission of signed consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, and submissions required for an annual or interim reexamination of family income and composition. See 24 CFR part 5. (d) Continuation of housing assistance payments. A family's eligibility for Housing Assistance Payments shall continue until the Total Tenant Payment equals the Gross Rent. The termination of eligibility at such point will not affect the family's other rights under its lease, nor will such termination preclude the resumption of payments as a result of later changes in income, rents or other relevant circumstances during the term of the Contract. However, eligibility also may be terminated in accordance with HUD requirements for such reasons as failure to submit requested verification information, including failure to meet the disclosure and verification requirements for Social Security Numbers, as provided by part 5, subpart B, of this title, failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by part 5, subpart B, of this title, or because of the restrictions on net assets and property ownership as provided by Sec. 5.618 of this title. For provisions requiring termination of assistance when the PHA determines that a family member is not a U.S. citizen or does not have eligible immigration status, see 24 CFR parts 5 and 982 for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions concerning deferral of termination of assistance. (e) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition. (f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant [[Page 93]] or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income). (1) The PHA must take any corrective action necessary to credit or repay a family if the family has been overcharged for their Tenant Rent or Total Tenant Payment as a result of an error (including a de minimis error) in the income determination. Families will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in a family being undercharged for Tenant Rent or Total Tenant Payment. (2) HUD may revise the amount of de minimis error in this paragraph (f) through a notice published in the Federal Register for public comment. [56 FR 7539, Feb. 22, 1991, as amended at 60 FR 14844, Mar. 20, 1995; 61 FR 11118, Mar. 18, 1996; 61 FR 13625, Mar. 27, 1996; 63 FR 23855, Apr. 30, 1998; 88 FR 9667, Feb. 14, 2023] Sec. 882.516 Maintenance, operation, and inspections. (a) Maintenance and operation. The Owner must provide all the services, maintenance and utilities as agreed to under the Contract, subject to abatement of housing assistance payments or other applicable remedies if the Owner fails to meet these obligations. (b) Periodic inspection. In addition to the inspections required prior to execution of the Contract, the PHA must inspect or cause to be inspected the contract units in accordance with the physical inspection requirements under 24 CFR part 5, subpart G, at least annually, and at such other times as may be necessary to assure that the Owner is meeting the obligations to maintain the units so they are compliant with 24 CFR part 5, subpart G, and to provide the agreed upon utilities and other services. The PHA must take into account complaints and any other information coming to its attention in scheduling inspections. (c) Units with health and safety hazards. If the PHA notifies the Owner that the unit(s) under Contract are not being maintained in compliance with the standards under 24 CFR part 5, subpart G, and the Owner fails to take corrective action (including corrective action with respect to the Family where the condition of the unit is the fault of the Family) within the time prescribed in the notice, the PHA may exercise any of its rights or remedies under the Contract, including abatement of housing assistance payments (even if the Family continues in occupancy) or termination of the Contract on the affected unit(s) and assistance to the Family in accordance with Sec. 882.514(e). (d) PHA management. Where the PHA is managing units on which it is also administering the Housing Assistance Payments Contract pursuant to a management contract approved by HUD in accordance with Sec. 882.412, HUD will make reviews of project operations, including inspections, in addition to required PHA reviews. These HUD reviews will be sufficient to assure that the Owner and the PHA are in full compliance with the terms and conditions of the Contract and the ACC. Should HUD determine that there are deficiencies, it may exercise any rights or remedies specified for the PHA under the Contract or reserved for HUD in the ACC, require termination of the management contract, or take other appropriate action. (e) Periodic reviews. Periodic PHA audits must be conducted as required by HUD, in accordance with 2 CFR part 200, subpart F. [47 FR 34383, Aug. 9, 1982, as amended at 53 FR 8065, Mar. 11, 1988; 80 FR 75941, Dec. 7, 2015; 88 FR 30499, May 11, 2023] Sec. 882.517 HUD review of contract compliance. HUD will review program operations at such intervals as it deems necessary to ensure that the Owner and the PHA are in full compliance with the terms and conditions of the Contract and the ACC. Equal Opportunity review may be [[Page 94]] conducted with the scheduled HUD review or at any time deemed appropriate by HUD. [43 FR 61246, Dec. 29, 1978. Redesignated at 63 FR 23854, Apr. 30, 1998] Sec. 882.518 Denial of admission and termination of assistance for criminals and alcohol abusers. (a) Requirement to deny admission--(1) Prohibiting admission of drug criminals. (i) The PHA must prohibit admission to the program of an applicant for three years from the date of termination of tenancy if any household member's federally assisted housing tenancy has been terminated for drug-related criminal activity. However, the PHA may admit the household if the PHA determines: (A) The household member who engaged in drug-related criminal activity and whose tenancy was terminated has successfully completed an approved supervised drug rehabilitation program, or (B) The circumstances leading to the termination of tenancy no longer exist (for example, the criminal household member has died or is imprisoned). (ii) The PHA must establish standards that permanently prohibit admission to the program if any household member has ever been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of federally assisted housing. (iii) The PHA must establish standards that prohibit admission of a household to the program if the PHA determines that any household member is currently engaging in illegal use of a drug or that it has reasonable cause to believe that a household member's pattern of illegal use of a drug, as defined in Sec. 5.100 of this title, may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents. (2) Prohibiting admission of sex offenders. The PHA must establish standards that prohibit admission to the program if any member of the household is subject to a lifetime registration requirement under a State sex offender registration program. In this screening of applicants, the PHA must perform criminal history background checks necessary to determine whether any household member is subject to a lifetime sex offender registration requirement in the State where the housing is located and in other States where household members are known to have resided. (b) Authority to deny admission--(1) Prohibiting admission of other criminals. The PHA may prohibit admission of a household to the program under standards established by the PHA if the PHA determines that any household member is currently engaged in or has engaged in during a reasonable time before the admission decision: (i) Drug-related criminal activity; (ii) Violent criminal activity; (iii) Other criminal activity which may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents; (iv) Other criminal activity which may threaten the health or safety of the owner or any employee, contractor, subcontractor or agent of the owner who is involved in the owner's housing operations. (2) Reasonable time. The PHA may establish a period before the admission decision during which an applicant must not have engaged in the activities specified in paragraph (b)(1) of this section ``reasonable time''. (3) Sufficient evidence. If the PHA has denied admission to an applicant because a member of the household engaged in criminal activity in accordance with paragraph (b)(1) of this section, the PHA may reconsider the applicant if the PHA has sufficient evidence that the members of the household are not currently engaged in, and have not engaged in criminal activity during a reasonable period, as determined by the PHA, before the admission decision. (i) The PHA would have ``sufficient evidence'' if the household member submitted a certification that she or he is not currently engaged in and has not engaged in such criminal activity during the specified period and provided supporting information from such sources as a probation officer, a landlord, neighbors, social service agency workers and criminal records, which the PHA verified. [[Page 95]] (ii) For purposes of this section, a household member is ``currently engaged in'' criminal activity if the person has engaged in the behavior recently enough to justify a reasonable belief that the behavior is current. (4) Prohibiting admission of alcohol abusers. The PHA must establish standards that prohibit admission to the program if the PHA determines that it has reasonable cause to believe that a household member's abuse or pattern of abuse of alcohol may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents. (c) Terminating assistance--(1) Terminating assistance for drug criminals. (i) The PHA may terminate assistance for drug-related criminal activity engaged in on or near the premises by any tenant, household member, or guest, and any such activity engaged in on the premises by any other person under the tenant's control. In addition, the PHA may terminate assistance if the PHA determines that a household member is illegally using a drug or when the PHA determines that a pattern of illegal use of a drug interferes with the health, safety, or right to peaceful enjoyment of the premises by other residents. (ii) The PHA must immediately terminate assistance for a family under the program if the PHA determines that any member of the household has ever been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of federally assisted housing. (2) Terminating assistance for other criminals. (i) The PHA must establish standards that allow the PHA to terminate assistance for a family if the PHA determines that any household member is engaged in criminal activity that threatens the health, safety, or right of peaceful enjoyment of the premises by other residents or by persons residing in the immediate vicinity of the premises. (ii) The PHA may terminate assistance for a family if the PHA determines that a member of the household is: (A) Fleeing to avoid prosecution, or custody or confinement after conviction, for a crime, or attempt to commit a crime, that is a felony under the laws of the place from which the individual flees, or that, in the case of the State of New Jersey, is a high misdemeanor; or (B) Violating a condition of probation or parole imposed under Federal or State law. (3) Evidence of criminal activity. (i) The PHA may terminate assistance for criminal activity in accordance with this section if the PHA determines, based on a preponderance of the evidence, that a covered person has engaged in the criminal activity, regardless of whether the covered person has been arrested or convicted for such activity. (ii) See part 5, subpart J, of this title for provisions concerning access to criminal records. (4) Terminating assistance for alcohol abusers. The PHA must establish standards that allow termination of assistance for a family if the PHA determines that a household member's abuse or pattern of abuse of alcohol threatens the health, safety, or right to peaceful enjoyment of the premises by other residents. [66 FR 28797, May 24, 2001] Subparts F-G [Reserved] Subpart H_Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals Source: 61 FR 48057, Sept. 11, 1996, unless otherwise noted. Sec. 882.801 Purpose. The purpose of the Section 8 Moderate Rehabilitation Program for Single Room Occupancy (SRO) Dwellings for Homeless Individuals is to provide rental assistance for homeless individuals in rehabilitated SRO housing. The Section 8 assistance is in the form of rental assistance payments. These payments equal the rent for the unit, including utilities, minus the portion of the rent payable by the tenant under the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.). [[Page 96]] Sec. 882.802 Definitions. In addition to the definitions set forth in 24 CFR part 5 and Sec. 882.102 (except for the definition of ``Single Room Occupancy (SRO) Housing'' therein) the following will apply: Agreement to enter into housing assistance payments contract (Agreement). A written agreement between the owner and the HA that, upon satisfactory completion of the rehabilitation in accordance with requirements specified in the Agreement, the HA will enter into a housing assistance payments contract with the owner. Applicant. A public housing agency or Indian housing authority (collectively referred to as HAs), or a private nonprofit organization that applies for assistance under this program. HUD will require private nonprofit applicants to subcontract with public housing agencies to administer their rental assistance. Covered housing provider. For the Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals, ``covered housing provider,'' as such term is used in HUD's regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers to the owner. Eligible individual (``individual''). An individual who is capable of independent living and is authorized for admission to assisted housing under 24 CFR part 5. Homeless individual. An individual as described in section 103 of the McKinney Act (42 U.S.C. 11302). McKinney Act. The Stewart B. McKinney Homeless Assistance Act (42 U.S.C. 11301 et seq.). Moderate rehabilitation. Rehabilitation involving a minimum expenditure of $3,000 for a unit, including its prorated share of work to be accomplished on common areas or systems, to upgrade to decent, safe, and sanitary condition to comply with the Housing Quality Standards or other standards approved by HUD, from a condition below those standards (improvements being of a modest nature and other than routine maintenance). Private nonprofit organization. An organization, no part of the net earnings of which inures to the benefit of any member, founder, contributor, or individual. The organization must: (1) Have a voluntary board; (2) Have a functioning accounting system that is operated in accordance with generally accepted accounting principles, or designate an entity that will maintain a functioning accounting system for the organization in accordance with generally accepted accounting principles; and (3) Practice nondiscrimination in the provision of assistance. Single room occupancy (SRO) housing. A unit for occupancy by one person, which need not but may contain food preparation, sanitary facilities, or both. Statement of individual responsibility. An agreement, in the form prescribed by HUD, between the HA and an individual to be assisted under the program, stating the obligations and responsibilities of the two parties. [61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23855, Apr. 30, 1998; 81 FR 80812, Nov. 16, 2016] Sec. 882.803 Project eligibility and other requirements. (a) Eligible and ineligible properties. (1) Except as otherwise provided in paragraph (a) of this section, housing suitable for moderate rehabilitation is eligible for inclusion under this program. Existing structures of various types may be appropriate for this program, including single family houses and multifamily structures. (2) Housing is not eligible for assistance under this program if it is receiving Federal funding for rental assistance or operating costs under other HUD programs. (3) Nursing homes and related facilities such as intermediate care or board and care homes; units within the grounds of penal, reformatory, medical, mental, and similar public or private institutions; and facilities providing continual psychiatric, medical, or nursing services are not eligible for assistance under this program. (4) No Section 8 assistance may be provided with respect to any unit occupied by an owner. (5) Housing located in the Coastal Barrier Resources System designated [[Page 97]] under the Coastal Barriers Resources Act is not eligible. (6) Single-sex facilities are allowable under this program, provided that the HA determines that because of the physical limitations or configuration of the facility, considerations of personal privacy require that the facility (or parts of the facility) be available only to members of a single sex. (b)(1) Physical condition standards. Section 882.404 applies to this program. (2) Site standards. (i) The site must be adequate in size, exposure, and contour to accommodate the number and type of units proposed; adequate utilities and streets must be available to service the site. (The existence of a private disposal system and private sanitary water supply for the site, approved in accordance with local law, may be considered adequate utilities.) (ii) The site must be suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d-4), title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601-19), E.O. 11063 (as amended by E.O. 12259; 3 CFR, 1959-1963 Comp., p. 652 and 3 CFR, 1980 Comp., p. 307), and HUD regulations issued pursuant thereto. (iii) The site must be accessible to social, recreational, educational, commercial, and health facilities, and other appropriate municipal facilities and services. (c) Financing. Section 882.405 applies to this program. (d) Relocation. Section 882.406 applies to a project assisted under this program. (e) HA-owned housing. (1) A unit that is owned by the HA that administers the assistance under the ACC (including a unit owned by an entity substantially controlled by the HA) may only be assisted if: (i) The unit is not ineligible under Sec. 882.803(a); and (ii) HUD approves the base and contract rent calculations prior to execution of the Agreement and prior to execution of the HAP contract. (2) The HA as owner is subject to the same program requirements that apply to other owners in the program. [61 FR 48057, Sept. 11, 1996, as amended at 63 FR 46579, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999] Sec. 882.804 Other Federal requirements. (a) Participation in this program requires compliance with the Federal requirements set forth in 24 CFR 5.105, with the Americans with Disabilities Act (42 U.S.C. 12101 et seq.), and with the regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, or stalking, covered housing providers have discretion to adopt and modify any existing admission preferences or transfer waitlist priorities for victims of domestic violence, dating violence, sexual assault, or stalking. (c) Covered housing providers must develop and implement an emergency transfer plan that meets the requirements in 24 CFR 5.2005(e), and when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, and stalking who qualifies for an emergency transfer, covered housing providers must, at a minimum: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, the covered housing provider must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), pertaining to victims of domestic violence, dating violence, sexual assault, or stalking, including data on the outcomes of such requests. (e) For agreements covering nine or more assisted units, the following requirements for labor standards apply: [[Page 98]] (1) Not less than the wages prevailing in the locality, as determined by the Secretary of Labor under the Davis-Bacon Act (40 U.S.C. 276a through 276a-5), must be paid to all laborers and mechanics employed in the development of the project, other than volunteers under the conditions set out in 24 CFR part 70; (2) The employment of laborers and mechanics is subject to the provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333); and (3) HAs, owners, contractors, and subcontractors must comply with all related rules, regulations, and requirements. (f) The environmental review requirements of 24 CFR part 58, implementing the National Environmental Policy Act and related environmental laws and authorities, apply to this program. [61 FR 48057, Sept. 11, 1996, as amended at 81 FR 80812, Nov. 16, 2016] Sec. 882.805 HA application process, ACC execution, and pre-rehabilitation activities. (a) Review. When funds are made available for assistance, HUD will publish a notice of funding availability (NOFA) in the Federal Register in accordance with the requirements of 24 CFR part 4. HUD will review and screen applications in accordance with the guidelines, rating criteria, and procedures published in the NOFA. (b) ACC Execution. (1) Before execution of the annual contributions contract (ACC), the HA must submit to the appropriate HUD field office the following: (i) Estimates of Required Annual Contributions, Forms HUD-52672 and HUD-52673; (ii) Administrative Plan, which should include: (A) Procedures for tenant outreach; (B) A policy governing temporary relocation; and (C) A mechanism to monitor the provision of supportive services. (iii) Proposed Schedule of Allowances for Tenant-Furnished Utilities and Other Services, Form HUD-52667, with a justification of the amounts proposed; (iv) If applicable, proposed variations to the acceptability criteria of the Housing Quality Standards (see Sec. 882.803(b)); and (v) The fire and building code applicable to each structure. (2) After HUD has approved the HA's application, the review and comment requirements of 24 CFR part 791 have been complied with, and the HA has submitted (and HUD has approved) the items required by paragraph (b)(1) of this section, HUD and the HA must execute the ACC in the form prescribed by HUD. The initial term of the ACC must be 11 years. This term allows one year to rehabilitate the units and place them under a 10-year HAP contract. The ACC must give HUD the option to renew the ACC for an additional 10 years. (3) Section 882.403(a) (Maximum Total ACC Commitments) applies to this program. (4) Section 882.403(b) (Project account) applies to this program. (c)(1) If an owner is proposing to accomplish at least $3000 per unit of rehabilitation by including work to make the unit(s) accessible to a person with disabilities occupying the unit(s) or expected to occupy the unit(s), the PHA may approve such units not to exceed 5 percent of the units under its Program, provided that accessible units are necessary to meet the requirements of 24 CFR part 8, which implements section 504 of the Rehabilitation Act of 1973. The rehabilitation must make the unit(s), and access and egress to the unit(s), barrier-free with respect to the disability of the individual in residence or expected to be in residence. (2) The PHA must take the applications and determine the eligibility of all tenants residing in the approved units who wish to apply for the Program. After eligibility of all the tenants has been determined, the Owner must be informed of any adjustment in the number of units to be assisted. In order to make the most efficient use of housing assistance funds, an Agreement may not be entered into covering any unit occupied by a family which is not eligible to receive housing assistance payments. Therefore, the number of units approved by the PHA for a particular proposal must be adjusted to exclude any unit(s) determined by the [[Page 99]] PHA to be occupied by a family not eligible to receive housing assistance payments. Eligible Families must also be briefed at this stage as to their rights and responsibilities under the Program. (3) Should the Owner agree with the assessment of the PHA as to the work that must be accomplished, the preliminary feasibility of the proposal, and the number of units to be assisted, the Owner, with the assistance of the PHA where necessary, must prepare detailed work write- ups including specifications and plans (where necessary) so that a cost estimate may be prepared. The work write-up will describe how the deficiencies eligible for amortization through the Contract Rents are to be corrected including minimum acceptable levels of workmanship and materials. From this work write-up, the Owner, with the assistance of the PHA, must prepare a cost estimate for the accomplishment of all specified items. (4) The owner is responsible for selecting a competent contractor to undertake the rehabilitation. The PHA must propose opportunities for minority contractors to participate in the program. (5) The PHA must discuss with the Owner the various financing options available. The terms of the financing must be approved by the PHA in accordance with standards prescribed by HUD. (6) Before execution of the Agreement, the HA must: (i)(A) Inspect the structure to determine the specific work items that need to be accomplished to bring the units to be assisted up to the Housing Quality Standards (see Sec. 882.803(b)) or other standards approved by HUD; (B) Conduct a feasibility analysis, and determine whether cost- effective energy conserving improvements can be added; (C) Ensure that the owner prepares the work write-ups and cost estimates required by paragraph (c)(3) of this section; (D) Determine initial base rents and contract rents; (ii) Assure that the owner has selected a contractor in accordance with paragraph (c)(4) of this section; (iii) After the financing and a contractor are obtained, determine whether the costs can be covered by initial contract rents, computed in accordance with paragraph (d) of this section; and, if a structure contains more than 50 units to be assisted, submit the base rent and contract rent calculations to the appropriate HUD field office for review and approval in sufficient time for execution of the Agreement in a timely manner; (iv) Obtain firm commitments to provide necessary supportive services; (v) Obtain firm commitments for other resources to be provided; (vi) Determine that the $3,000 minimum amount of work requirement and other requirements in paragraph (c)(1) of this section are met; (vii) Determine eligibility of current tenants, and select the units to be assisted, in accordance with paragraph (c)(2) of this section; (viii) Comply with the financing requirements in paragraph (c)(5) of this section; (ix) Assure compliance with all other applicable requirements of this subpart; and (x) If the HA determines that any structure proposed in its application is infeasible, or the HA proposes to select a different structure for any other reason, the HA must submit information for the proposed alternative structure to HUD for review and approval. HUD will rate the proposed structure in accordance with procedures in the applicable notice of funding availability. The HA may not proceed with processing for the proposed structure or execute an Agreement until HUD notifies the HA that HUD has approved the proposed alternative structure and that all requirements have been met. (d) Initial contract rents. Section 882.408 (Initial contract rents), including the establishment of fair market rents for SRO units at 75 percent of the O-bedroom Moderate Rehabilitation Fair Market Rent, applies to this program, except as follows: (1)(i) In determining the monthly cost of a rehabilitation loan, in accordance with Sec. 882.408(c)(2), a loan term of a least 10 years (instead of 15 years) may be used. The exception in Sec. 882.408(c)(2)(iii) for using the actual [[Page 100]] loan term if the total amount of the rehabilitation is less than $15,000 continues to apply. In addition, the cost of the rehabilitation that may be included for the purpose of calculating the amount of the initial contract rent for any unit must not exceed the lower of: (A) The projected cost of rehabilitation; or (B) The per unit cost limitation that is established by Federal Register notice, plus the cost of the fire and safety improvements required by 24 CFR 982.605(b)(4). HUD may, however, increase the limitation in paragraph (d)(1)(i)(B) of this section by an amount HUD determines is reasonable and necessary to accommodate special local conditions, including high construction costs or stringent fire or building codes. HUD will publish future cost limitation changes in the Federal Register in the Notice of Funding Availability issued each year. (ii) If the Federal Housing Administration (FHA) believes that high construction costs warrant an increase in the per unit cost limitation in paragraph (d)(1)(i)(B) of this section, the HA must demonstrate to HUD's satisfaction that a higher average per unit amount is necessary to conduct this program, and that every appropriate step has been taken to contain the amount of the rehabilitation within the published per unit cost limitation established at that time, plus the cost of the required fire and safety improvements. These higher amounts will be determined as follows: (A) HUD may approve a higher per unit amount up to, but not to exceed, an amount computed by multiplying the HUD-approved High Cost Percentage for Base Cities (used for computing FHA high cost area adjustments) for the area, by the current published cost limitation plus the cost of the required fire and safety improvements. (B) HUD may, on a structure-by-structure basis, increase the level approved in paragraph (d)(1)(i) of this section to up to an amount computed by multiplying 2.4 by the current published cost limitation plus the cost of the required fire and safety improvements. (2) In approving changes to initial contract rents during rehabilitation in accordance with Sec. 882.408(d), the revised initial contract rents may not reflect an average per unit rehabilitation cost that exceeds the limitation specified in paragraph (d)(1) of this section. (3) If the structure contains four or fewer SRO units, the Fair Market Rent for that size structure (the Fair Market Rent for a 1-, 2-, 3-, or 4-bedroom unit, as applicable) must be used to determine the Fair Market Rent limitation instead of using the separate Fair Market Rent for each SRO unit. To determine the Fair Market Rent limitation for each SRO unit, the Fair Market Rent for the structure must be apportioned equally to each SRO unit. (4) Contract rents must not include the costs of providing supportive services, transportation, furniture, or other nonhousing costs, as determined by HUD. SRO program assistance may be used for efficiency units selected for rehabilitation under this program, but the gross rent (contract rent plus any Utility Allowance) for these units will be no higher than for SRO units (i.e., 75 percent of the 0-bedroom Moderate Rehabilitation Fair Market Rent). (Approved by the Office of Management and Budget under control number 2506-0131) [61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23855, Apr. 30, 1998] Sec. 882.806 Agreement to enter into housing assistance payments contract. (a) Rehabilitation period--(1) Agreement. Before the owner begins any rehabilitation, the HA must enter into an Agreement with the owner in the form prescribed by HUD. (2) Timely performance of work. (i) After execution of the Agreement, the Owner must promptly proceed with the rehabilitation work as provided in the Agreement. If the work is not so commenced, diligently continued, or completed, the PHA will have the right to rescind the Agreement, or take other appropriate action. (ii) The Agreement must provide that the work must be completed and the contract executed within 12 months of execution of the ACC. HUD may reduce the number of units or the amount of the annual contribution commitment [[Page 101]] if, in HUD's determination, the HA fails to demonstrate a good faith effort to adhere to this schedule or if other reasons justify reducing the number of units. (3) Inspections. The PHA must inspect, as appropriate, during rehabilitation to ensure that work is proceeding on schedule and is being accomplished in accordance with the terms of the Agreement, particularly that the work meets the acceptable levels of workmanship and materials specified in the work write-up. (4) Changes. (i) The Owner must submit to the PHA for approval any changes from the work specified in the Agreement which would alter the design or the quality of the required rehabilitation. The PHA may condition its approval of such changes on a reduction of the Contract Rents. If changes are made without prior PHA approval, the PHA may determine that Contract Rents must be reduced or that the Owner must remedy any deficiency as a condition for acceptance of the unit(s). (ii) Contract rents may not be increased except in accordance with Sec. Sec. 882.408(d) and 882.805(d)(2). (b) Completion of rehabilitation--(1) Notification of completion. Section 882.507(a) applies to this program. (2) Evidence of completion. Section 882.507(b) applies to this program, except that Sec. 882.507(b)(2)(iv), concerning lead-based paint requirements, does not apply. (3) Actual cost and rehabilitation loan certifications. Section 882.507(c) applies to this program, except that contract rents must be established in accordance with Sec. 882.805(d). (4) Review and inspections. Section 882.507(d) applies to this program. (5) Acceptance. Section 882.507(e) applies to this program. (Approved by the Office of Management and Budget under control number 2502-0367) [61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23856, Apr. 30, 1998] Sec. 882.807 Housing assistance payments contract. (a) Time of execution. Upon PHA acceptance of the unit(s) and certifications pursuant to Sec. 882.507, the Contract will be executed by the Owner and the PHA. The effective date must be no earlier than the PHA inspection which provides the basis for acceptance as specified in Sec. 882.507(e). (b) Term of contract. The contract for any unit rehabilitated in accordance with this program must be for a term of 10 years. The contract must give the HA the option to renew the contract for an additional 10 years. (c) Changes in contract rents from agreement. The contract rents may be higher or lower than those specified in the Agreement, in accordance with Sec. 882.805(d). (d) Unleased unit(s). At the time of execution of the Contract, the Owner will be required to submit a list of dwelling unit(s) leased and not leased as of the effective date of the Contract. (e) Contract rents at end of rehabilitation loan term. For a contract in which the initial contract rent was based upon a loan term shorter than 10 years, the contract must provide for reduction of the contract rent effective with the rent for the month following the end of the term of the rehabilitation loan. The amount of the reduction will be the monthly cost of amortization of the rehabilitation loan. This reduction should result in a new contract rent equal to the base rent plus all subsequent adjustments. (Approved by the Office of Management and Budget under control number 2502-0367) [61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23856, Apr. 30, 1998] Sec. 882.808 Management. (a) Outreach to homeless individuals and appropriate organizations. (1) The HA or the owner must undertake outreach efforts to homeless individuals so that they may be brought into the program. The outreach effort should include notification to emergency shelter providers and other organizations that could provide referrals of homeless individuals. If the owner conducts the outreach effort, the owner must notify the HA so that it may provide referrals of homeless individuals. (2) Additional outreach concerns. If the procedures that the HA or owner intends to use to publicize the availability of this program are unlikely to reach persons of any particular race, [[Page 102]] color, religion, sex, age, national origin, or mental or physical disability who may qualify for admission to the program, the HA or owner must establish additional procedures that will ensure that such persons are made aware of the availability of the program. The HA or owner must also adopt and implement procedures to ensure that interested persons can obtain information concerning the existence and location of services and facilities that are accessible to persons with disabilities. (3) First priority for homeless individuals. Homeless individuals must have the first priority for occupancy of housing rehabilitated under this program. (b) Individual participation--(1) Initial determination of individual eligibility. Section 882.514(a) applies to this program. (2) Owner selection of individuals. The owner must rent all vacant units under contract to homeless individuals located through HA or owner outreach efforts and determined by the HA to be eligible. The owner is responsible for tenant selection and may refuse any individual, provided the owner does not unlawfully discriminate. If the owner rejects an individual, and the individual believes that the owner's rejection was the result of unlawful discrimination, the individual may request the assistance of the HA in resolving the issue and may also file a complaint with HUD's Office of Fair Housing and Equal Opportunity in accordance with 24 CFR 103.25. If the individual requests the assistance of the HA, and if the HA cannot resolve the complaint promptly, the HA should advise the individual that he or she may file a complaint with HUD, and provide the individual with the address of the nearest HUD Office of Fair Housing and Equal Opportunity. (3) Briefing of individuals. Section 882.514(d) applies to this program, except that Sec. 882.514(d)(1)(vi) does not apply. (4) Continued participation of individual when contract is terminated. Section 882.514(e) applies to this program. (5) Individuals determined by the HA to be ineligible. Section 882.514(f) applies to this program. In addition, individuals are not precluded from exercising other rights if they believe they have been discriminated against on the basis of age. (c) Lease. Sections 882.403(d) and 882.511(a) apply to this program. In addition, the lease must limit occupancy to one eligible individual. (d) Security and utility deposits. Section 882.414 applies to this program. (e) Rent adjustments. Section 882.410 applies to this program. (f) Payments for vacancies. Section 882.411 applies to this program. (g) Subcontracting of owner services. Section 882.412 applies to this program. (h) Responsibility of the individual. Section 882.413 applies to this program. (i) Reexamination of individual income--(1) Regular reexaminations. The HA must reexamine the income of all individuals at least once every 12 months. After consultation with the individual and upon verification of the information, the HA must make appropriate adjustments in the Total Tenant Payment in accordance with 24 CFR part 5, subpart F, and verify that only one individual is occupying the unit. The HA must adjust Tenant Rent and the Housing Assistance Payment to reflect any change in Total Tenant Payment. At each regular reexamination, the HA must follow the requirements of 24 CFR part 5, subpart E concerning verification of immigration status of any new family member. For an individual with net family assets (as the term is defined in Sec. 5.603 of this title) equal to or less than $50,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes of recertification of income, an individual's declaration under Sec. 5.618(b) of this title, except that the PHA must obtain third-party verification of all family assets every 3 years. (2) Interim reexaminations. The individual shall supply such certification, release, information, or documentation as the PHA or HUD determines to be necessary, including submissions required for interim reexaminations of individual income and determinations as to whether only one individual is occupying the unit. In addition Sec. 882.515(b) shall apply. [[Page 103]] (3) Continuation of Housing Assistance Payments. Section 882.515(d) applies to this program. (4) Individual reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the individual must report a change in family income or composition. (5) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant individuals is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income). (A) The PHA must take any corrective action necessary to credit or repay an individual if the individual has been overcharged for their Tenant Rent or Total Tenant Payment as a result of an error (including a de minimis error) in the income determination. Individuals will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in an individual being undercharged for Tenant Rent or Total Tenant Payment. (B) HUD may revise the amount of de minimis error in this paragraph (i)(5) through a rulemaking published in the Federal Register for public comment. (j) Overcrowded units. If the HA determines that anyone other than, or in addition to, the eligible individual is occupying an SRO unit assisted under this program, the HA must take all necessary action, as soon as reasonably feasible, to ensure that the unit is occupied by only one eligible individual. (k) Adjustment of utility allowance. Section 882.510 applies to this program. (l) Termination of tenancy. Section 882.511 applies to this program. For provisions requiring termination of assistance when the HA determines that a family member is not a U.S. citizen or does not have eligible immigration status, see 24 CFR part 5, subpart E for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, or for provisions concerning deferral of termination of assistance. (m) Reduction of number of units covered by contract. Section 882.512 applies to this program. (n) Maintenance, operation, and inspections. Section 882.516 applies to this program. (o) HUD review of contract compliance. Section 882.517 applies to this program. (p) Records and reports. Each recipient of assistance under this subpart must keep any records and make any reports that HUD may require within the timeframe required. (q) Participation of homeless individuals. (1) Each approved applicant receiving assistance under this program, except HAs, must provide for the participation of not less than one homeless individual or formerly homeless individual on the board of directors or other equivalent policymaking entity of such applicant, to the extent that the entity considers and makes policies and decisions regarding the rehabilitation of any housing with assistance under this subpart. This requirement is waived if the applicant is unable to meet this requirement and presents a plan that HUD approves to consult with homeless or formerly homeless individuals in considering and making such policies and decisions. (2) To the maximum extent practicable, each approved applicant must involve homeless individuals and families, through employment, volunteer services, or otherwise, in rehabilitating and operating facilities assisted under this subpart, and in providing services for occupants of such facilities. (Approved by the Office of Management and Budget under control number 2506-0131) [61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23857, Apr. 30, 1998; 88 FR 9668, Feb. 14, 2023] Sec. 882.809 Waivers. Section 5.405(b) of this title does not apply to this program. [[Page 104]] Sec. 882.810 Displacement, relocation, and acquisition. (a) Minimizing displacement. (1) Consistent with the other goals and objectives of this part, owners must assure that they have taken all reasonable steps to minimize the displacement of persons (households, businesses, nonprofit organizations, and farms) as a result of a project assisted under this part. To the extent feasible, residential tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary, and affordable dwelling unit in the project upon its completion. (2) Whenever a building/complex is rehabilitated, and some but not all of the rehabilitated units will be assisted upon completion of the rehabilitation, the relocation requirements described in this section apply to the occupants of each rehabilitated unit, whether or not Section 8 assistance will be provided for the unit. (b) Temporary relocation. The following policies cover residential tenants who will not be required to move permanently but who must relocate temporarily for the project. Such tenants must be provided: (1) Reimbursement for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation; (2) Appropriate advisory services, including reasonable advance written notice of: (i) The date and approximate duration of the temporary relocation; (ii) The location of the suitable, decent, safe, and sanitary dwelling to be made available for the temporary period; (iii) The terms and conditions under which the tenant may lease and occupy a suitable, decent, safe, and sanitary dwelling in the project upon completion; and (iv) The assistance required under paragraph (b)(1) of this section. (c) Relocation assistance for displaced persons. A ``displaced person'' (defined in paragraph (g) of this section) must be provided relocation assistance at the levels described in, and in accordance with the requirements of, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4601-4655) and implementing regulations in 49 CFR part 24. A displaced person must be advised of his or her rights under the Fair Housing Act (42 U.S.C. 3601-19) and, if the comparable replacement dwelling used to establish the amount of the replacement housing payment to be provided to a minority is located in an area of minority concentration, such person also must be given, if possible, referrals to comparable and suitable, decent, safe, and sanitary replacement dwellings not located in such areas. (d) Real property acquisition requirements. The acquisition of real property for a project is subject to the URA and the requirements described in 49 CFR part 24, subpart B. (e) Appeals. A person who disagrees with the HA's determination concerning whether the person qualifies as a displaced person, or the amount of relocation assistance for which the person is eligible, may file a written appeal of that determination with the HA. A person who is dissatisfied with the HA's determination on his or her appeal may submit a written request for review of that determination to the HUD field office. (f) Responsibility of HA. (1) The HA must certify (i.e., provide assurance of compliance as required by 49 CFR part 24) that it will comply with the URA, the regulations in 49 CFR part 24, and the requirements of this section, and must ensure such compliance notwithstanding any third party's contractual obligation to the HA to comply with these provisions. (2) The cost of required relocation assistance is an eligible project cost in the same manner and to the same extent as other project costs. Such costs may be paid for with local public funds or funds available from other sources. The cost of HA advisory services for temporary relocation of tenants to be assisted under the program also may be paid from preliminary administrative funds. (3) The HA must maintain records in sufficient detail to demonstrate compliance with the provisions of this section. The HA must maintain data on the racial, ethnic, gender, and disability status of displaced persons. [[Page 105]] (g) Definition of displaced person. (1) For purposes of this section, the term displaced person means a person (household, business, nonprofit organization, or farm) that moves from real property, or moves personal property from real property, permanently, as a direct result of acquisition, rehabilitation, or demolition for a project assisted under this part. The term displaced person includes, but may not be limited to: (i) A person who moves permanently from the real property after receiving notice requiring such move, if the move occurs on or after the date the owner submits to the HA the owner proposal that is later approved; (ii) A person, including a person who moves from the property before the date the owner submits the proposal to the HA, if the HA or HUD determines that the displacement resulted directly from acquisition, rehabilitation, or demolition for the assisted project; or (iii) A tenant-occupant of a dwelling unit who moves from the building/complex permanently after the execution of the Agreement between the owner and the HA (or, for projects assisted under subpart H of this part, after the ``initiation of negotiations'' (see paragraph (h) of this section)), if the move occurs before the tenant is provided a written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe, and sanitary dwelling in the same building/ complex, under reasonable terms and conditions, upon its completion. Such reasonable terms and conditions must include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: (A) The tenant's monthly rent before the execution of the agreement and estimated average monthly utility costs; or (B) Thirty percent of gross household income. (C) For projects assisted under subpart H of this part, the amount cannot exceed the greater of the tenant's monthly rent before the ``initiation of negotiations'' and estimated average monthly utility costs; or (if the tenant is low-income) the total tenant payment, as determined under 24 CFR 5.613, or (if the tenant is not low-income) 30 percent of gross household income; or (iv) A tenant-occupant of a dwelling, who is required to relocate temporarily, but does not return to the building/complex, if either: (A) The tenant is not offered payment for all reasonable out-of- pocket expenses incurred in connection with the temporary relocation; or (B) Other conditions of the temporary relocation are not reasonable; or (v) A tenant-occupant of a dwelling who moves from the building/ complex permanently after he or she has been required to move to another dwelling unit in the building/complex, if either: (A) The tenant is not offered reimbursement for all reasonable out- of-pocket expenses incurred in connection with the move; or (B) Other conditions of the move are not reasonable. (2) Notwithstanding the provisions of paragraph (g)(1) of this section, a person does not qualify as a displaced person (and is not eligible for relocation assistance under the URA or this section), if: (i) The person has been evicted for serious or repeated violation of the terms and conditions of the lease or occupancy agreement, violation of applicable Federal, State, or local law, or other good cause, and the HA determines that the eviction was not undertaken for the purpose of evading the obligation to provide relocation assistance; (ii) The person moved into the property after the submission of the preliminary proposal (or application, if there is no preliminary proposal), and before signing a lease and commencing occupancy, received written notice of the project and its possible impact on the person (e.g., the person may be displaced, temporarily relocated, or suffer a rent increase) and the fact that the person would not qualify as a displaced person (or for any assistance provided under this section) as a result of the project; (iii) The person is ineligible under 49 CFR 24.2(g)(2); or (iv) HUD determines that the person was not displaced as a direct result of [[Page 106]] acquisition, rehabilitation, or demolition for the project. (3) The HA may request, at any time, HUD's determination of whether a displacement is or would be covered by this section. (h) Definition of initiation of negotiations. For purposes of determining the formula for computing the replacement housing assistance to be provided to a residential tenant displaced as a direct result of private-owner rehabilitation or demolition of the real property, the term initiation of negotiations means the execution of the Agreement between the owner and the HA. (Approved by the Office of Management and Budget under OMB control number 2506-0121) [61 FR 48056, Sept. 11, 1996. Redesignated and amended at 63 FR 23857, Apr. 30, 1998] PART 883_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM_STATE HOUSING AGENCIES--Table of Contents Subpart A_Summary and Guide Sec. 883.101 General. 883.105 Applicability of part 883 in effect as of February 29, 1980. 883.106 Applicability and relationships between HUD and State agencies. Subpart B [Reserved] Subpart C_Definitions and Other Requirements 883.301 Applicability. 883.302 Definitions. 883.306 Limitation on distributions. 883.307 Financing. 883.308 Adjustments to reflect changes in terms of financing. 883.310 Property standards. 883.313 Audit. 883.314 Broadband infrastructure. Subparts D-E [Reserved] Subpart F_Housing Assistance Payments Contract 883.601 Applicability. 883.602 The contract. 883.603 Term of contract. 883.604 Maximum annual commitment and project account. 883.605 Leasing to eligible families. 883.606 Administration fee. 883.607 Default by owner and/or agency. 883.608 Notice upon contract expiration. Subpart G_Management 883.701 Cross-reference. Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619. Source: 45 FR 6889, Jan. 30, 1980, unless otherwise noted. Subpart A_Summary and Guide Sec. 883.101 General. (a) The purpose of the Section 8 program is to provide decent, safe and sanitary housing for low-income families through the use of a system of housing assistance payments. These needs may be met by statewide or special purpose housing agencies established by the various States. (b) The regulations in this part 883 contain the policies and procedures applicable to the Section 8 program for these State agencies. [61 FR 13592, Mar. 27, 1996] Sec. 883.105 Applicability of part 883 in effect as of February 29, 1980. (a) Part 883, in effect as of February 29, 1980, applies to projects for which the initial application was submitted on or after the February 29, 1980, effective date. (See 24 CFR part 883, revised as of April 1, 1980.) Projects for which applications or proposals were submitted before the February 29, 1980, effective date of part 883 have been processed under the part 883 regulations and procedures in effect at the date of submission. If, however, the agency notified HUD within 60 calendar days of the February 29, 1980, effective date of the part 883 regulations that they chose to have the provisions of part 883, in effect as of February 29, 1980, apply to a specific case, it must have promptly modified the application(s) and proposal(s) to comply. (b) Subpart F of this part, dealing with the HAP contract and subpart G of this part, dealing with management, apply to all projects for which an Agreement was not executed before the February 29, 1980, effective date of part 883. In cases where an Agreement has been executed: (1) The Agency, owner and HUD may agree to make the revised subpart F of [[Page 107]] this part applicable and execute appropriate amendments to the Agreement or Contract; (2) The Agency, Owner and HUD may agree to make the revised subpart G of this part applicable (with or without the limitation on distributions) and execute appropriate amendments to the Agreement or Contract. (c) Section 883.708, Termination of Tenancy and Modifications of Leases, applies to new families who begin occupancy or execute a lease on or after 30 days following the February 29, 1980, effective date of part 883. This section also applies to families not covered by the preceding sentence, including families currently under lease, who have a lease in which a renewal becomes effective on or after the 60th day following the February 29, 1980 effective date of part 883. A lease is considered renewed when both the landlord and the family fail to terminate a tenancy under a lease permitting either to terminate. (d) Notwithstanding the provisions of paragraph (b) of this section, the provisions of 24 CFR part 5 (concerning preferences for selection of applicants) apply to all projects, regardless of when am Agreement was executed. [61 FR 13592, Mar. 27, 1996] Sec. 883.106 Applicability and relationships between HUD and State agencies. (a) Applicability. This subpart A applies to contract authority set aside for a State Agency. (b) General responsibilities and relationships. Subject to audit and review by HUD to assure compliance with Federal requirements and objectives, Housing Finance Agencies (HFAs) shall assume responsibility for project development and for supervision of the development, management and maintenance functions of owners. (c) Certifications and HUD monitoring. (1) Generally, when reviewing any of the certifications of an HFA required by this part, HUD shall accept the certification as correct. If HUD has substantial reason to question the correctness of any element in a certification, HUD shall promptly bring the matter to the attention of the HFA and ask it to provide documentation supporting the certifications. When the HFA provides such evidence, HUD will act in accordance with the HFA's judgment or evaluation unless HUD determines that the certification is clearly not supported by the documentation. (2) HUD will periodically monitor the activities of HFA's participating under this part only with respect to Section 8 or other HUD programs. This monitoring is intended primarily to ensure that certifications submitted and projects operated under this part reflect appropriate compliance with Federal law and requirements. [61 FR 13592, Mar. 27, 1996] Subpart B [Reserved] Subpart C_Definitions and Other Requirements Sec. 883.301 Applicability. The provisions of this subpart are applicable to newly constructed and substantially rehabilitated housing allocated contract authority under subpart B of this part and processed and constructed under the Fast Tract Procedures of subpart D. The definitions contained in Sec. 883.302 and the provisions of Sec. 883.307(b) regarding review and approval of financing documents, however, apply to all of this part. Sec. 883.302 Definitions. The terms Fair Market Rent (FMR), HUD, and Public Housing Agency (PHA) are defined in 24 CFR part 5. ACC (Annual Contributions Contract). The contract between the State Agency and HUD under which HUD commits to provide the Agency with the funds needed to make housing assistance payments to the Owner and to pay the Agency for administrative fees in cases where it is eligible for them. Agency. See State Agency. Agreement--(Agreement to enter into Housing Assistance Payments Contract). The agreement between the owner and the State Agency on new construction and substantial rehabilitation projects which provides that, upon satisfactory completion of the project in accordance with the HUD-approved proposal or final proposal, the Agency will enter into a Housing Assistance Payments Contract with the owner. [[Page 108]] Annual Income. As defined in part 5 of this title. Assisted unit. A dwelling unit eligible for assistance under a Contract. Application. A request, submitted by a State Agency, to assign a portion of its set-aside to a specific jurisdiction or project. Contract--(Housing Assistance Payments Contract). The Contract entered into by the owner and the State Agency upon satisfactory completion of a new construction or substantial rehabilitation project which sets forth the rights and duties of the parties with respect to the project and the payments under the Contract. Contract Rent. The total amount of rent specified in the Contract as payable by the Agency and the tenant to the owner for an assisted unit. In the case of the rental of only a manufactured home space, ``contract rent'' is the total rent specified in the Contract as payable by the Agency and the tenant to the owner for rental of the space, including fees or charges for management and maintenance services with respect to the space, but excluding utility charges for the manufactured home. Covered housing provider. For the Section 8 Housing Assistance Payments Programs--State Housing Agencies, ``covered housing provider,'' as such term is used in HUD's regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers to the HFA or owner, as applicable given the responsibilities of the covered housing provider as set forth in 24 CFR part 5, subpart L. For example, the PHA is the covered housing provider responsible for providing the notice of occupancy rights under VAWA and certification form described at 24 CFR 5.2005(a), though the PHA may provide this notice and form to owners, and charge owners with distributing the notice and form to tenants. In addition, the owner is the covered housing provider that may choose to bifurcate a lease as described at 24 CFR 5.2009(a), while both the PHA and owner are both responsible for ensuring that an emergency transfer plan is in place in accordance with 24 CFR 5.2005(e), and the owner is responsible for implementing the emergency transfer plan when an emergency occurs. Decent, safe, and sanitary. Housing is decent, safe, and sanitary if it meets the physical condition requirements in 24 CFR part 5, subpart G. Existing Housing. Housing assisted under a contract entered into pursuant to 24 CFR part 882. (See subpart E of this part.) Fast Track procedures. The procedures contained in subpart D for processing and construction of new construction and substantial rehabilitation projects. In order to be eligible for these procedures, a State Agency must provide permanent financing without Federal mortgage insurance or a Federal guarantee except coinsurance under Section 244 of the National Housing Act. Financing Cost Contingency (FCC). The maximum amount of contract authority which may be used to amend the Annual Contributions Contract (ACC) and Housing Assistance Payments Contract (HAP Contract) to provide increased contract rents to cover higher than anticipated debt service on the loan for a new construction or substantial rehabilitation project. Gross Rent. As defined in part 813 of this chapter. Household type. The three household types are (1) elderly and handicapped, (2) family, and (3) large family. Housing Assistance Payment. The payment made to the Owner of an assisted unit by the State Agency as provided in the Contract. Where the unit is leased to an eligible Family, the payment is the difference between the Contract Rent and the Tenant Rent. An additional payment is made to the Family when the Utility Allowance is greater than Total Tenant Payment. In the case of a Family renting only a manufactured home space as provided in Sec. 883.303(i), the Housing Assistance Payment is the difference between Gross Rent and the Total Tenant Payment, but such payment may not exceed the Contract Rent for the space, and no additional payment is made to the Family. A Housing Assistance Payment, known as a ``vacancy payment'', may be made to the Owner when an assisted unit is vacant, as provided in Sec. 883.712. [[Page 109]] Housing Assistance Plan (HAP). A housing plan submitted by a unit of general local or State government and approved by HUD as being acceptable under the standards of 24 CFR part 570. Housing type. The three housing types are new construction, substantial rehabilitation, and existing housing/moderate rehabilitation. HFA (Housing Finance Agency). A State Agency which provides permanent financing for newly constructed or substantially rehabilitated housing processed under subpart D and financed without Federal mortgage insurance or a Federal guarantee except coinsurance under Section 244 of the National Housing Act. Independent Public Accountant. Certified Public Accountant or a licensed or registered public accountant, none of which has a business relationship with the owner or State Agency except for the performance of audit, systems work and tax preparation. If not certified, the Independent Public Accountant must have been licensed or registered by a regulatory authority of a State or other political subdivision of the United States on or before December 31, 1970. In States that do not regulate the use of the title ``public accountant,'' only Certified Public Accountants may be used. Moderate rehabilitation. The improvement of dwelling units in accordance with HUD requirements, under 24 CFR part 882. New construction. Housing for which construction starts after execution of an Agreement, or housing which is already under construction when the Agreement is executed provided that: (a) At the date an application is submitted to HUD, a substantial amount of construction (generally at least 25 percent) remains to be completed; (b) At the date of application to HUD, the project cannot be completed and occupied by eligible families without assistance under this part; and (c) At the time construction was initiated, all of the parties reasonably expected that the project would be completed without assistance under this part. Override. The difference between an HFA's cost of borrowing on obligations issued to finance a new construction or substantial rehabilitation project and the lending rate at which they provide permanent financing for the project. Owner. Any private person or entity (including a cooperative) or a public entity, having the legal right to lease or sublease dwelling units assisted under this part. The term Owner also includes the person or entity submitting a proposal to a State Agency under this part. Partially-assisted Project. A project for non-elderly families under this part which includes more than 50 units, of which the number of assisted units does not exceed the greater of (a) 20 percent of the units in the project, rounded to the next highest whole number of units, or (b) the minimum percentage required by State law as a condition of HFA permanent financing, if the Assistant Secretary approves such minimum percentage for purposes of applicability of this definition. Permanent financing. An Agency is determined to provide permanent financing if HUD determines that (a) the Agency permanently finances a project from its own funds, including the sale of its obligations; or (b) permanent financing for projects developed or administered by the Agency is provided by the State government or by an agency or instrumentality thereof other than the Agency; or (c) the permanent financing (by a public or private entity other than the Agency) is backed by the commitment of the Agency to assume the risks of loss on default or foreclosure of the loan. Project Account. A specifically identified and segregated account for each project which is established in accordance with Sec. 883.604(b) out of the amounts by which the maximum Annual Contributions Contract commitment exceeds the amount actually paid out under the ACC each year. Proposal. A proposal for a project that is submitted by an HFA to HUD for Section 8 assistance under this part. Rent. In the case of an assisted unit in a cooperative project, rent means the carrying charges payable to the cooperative with respect to occupancy of the unit. Replacement cost--(a) New construction. The estimated construction cost [[Page 110]] of the project when the proposed improvements are completed. The replacement cost may include the land, the physical improvements, utilities within the boundaries of the land, architect's fees, miscellaneous charges incident to construction as approved by the Assistant Secretary. (b) Substantial rehabilitation. The sum of the ``as is'' value before rehabilitation of the property as determined by the Agency and the estimated cost of rehabilitation, including carrying and finance charges. Single Room Occupancy (SRO) Housing. A unit for occupancy by a single eligible individual capable of independent living, which does not contain food preparation and/or sanitary facilities and is located within a multifamily structure consisting of more than 12 units. Secretary. The Secretary of Housing and Urban Development (or designee). Small Project. A project for non-elderly families under this part which includes a total of 50 or fewer units (assisted and unassisted). State Agency (Agency). An agency which has been notified by HUD in accordance with Sec. 883.203 that it is authorized to apply for a set- aside and/or to use the Fast Track Procedures of this part. Substantial rehabilitation. (a) The improvement of a property to decent, safe and sanitary condition in accordance with the standards of this part from a condition below these standards. Substantial Rehabilitation may vary in degree from gutting and extensive reconstruction to the cure of substantial accumulation of deferred maintenance. Cosmetic improvements alone do not qualify as Substantial Rehabilitation under this definition. (b) Substantial Rehabilitation may also include renovation, alteration or remodeling for the conversion or adaptation of structurally sound property to the design and condition required for use under this part, or the repair or replacement of major building systems or components in danger of failure. (c) Housing on which rehabilitation work has already started when the Agreement is executed is eligible for assistance as a Substantial Rehabilitation project under this part provided: (1) At the date of application to HUD, a substantial amount of construction (generally at least 25 percent) remains to be completed; (2) At the date of application to HUD, the project cannot be completed and occupied by eligible families without assistance under this part; and (3) At the time construction was initiated, all of the parties reasonably expected that the project would be completed without assistance under this part. Tenant Rent. The monthly amount defined in, and determined in accordance with part 813 of this chapter. Total Tenant Payment. The monthly amount defined in, and determined in accordance with part 813 of this chapter. Utility Allowance. As defined in part 813 of this chapter, made or approved by HUD. Utility reimbursement. As defined in part 813 of this chapter. Vacancy payments. The housing assistance payment made to the owner by the State Agency for a vacant, assisted unit if certain conditions are fulfilled as provided in the Contract. The amount of vacancy payment varies with the length of the vacancy period and is less after the first 60 days of any vacancy. Very Low-Income Family. As defined in part 813 of this chapter. [45 FR 6889, Jan. 30, 1980, as amended at 45 FR 56326, Aug. 22, 1980; 48 FR 12708, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 49 FR 19946, May 10, 1984; 61 FR 5213, Feb. 9, 1996; 61 FR 13592, Mar. 27, 1996; 63 FR 46579, Sept. 1, 1998; 70 FR 77744, Dec. 30, 2005; 81 FR 80813, Nov. 16, 2016] Sec. 883.306 Limitation on distributions. (a) Non-profit owners are not entitled to distributions of project funds. (b) For the life of the Contract, project funds may only be distributed to profit-motivated owners at the end of each fiscal year of project operation following the effective date of the Contract and after all project expenses have been paid, or funds have been set aside for payment, and all reserve requirements have been met. The first year's distribution may not be made until the HFA certification of project costs, (See Sec. 883.411), where applicable, [[Page 111]] has been submitted to HUD. The HFA must certify that distributions will not exceed the following maximum returns: (1) For projects for elderly families, the first year's distribution will be limited to 6 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 6 percent return on the value, in subsequent years, as determined in accordance with HUD guidelines, of the approved initial equity. Any such adjustments will be made in accordance with a Notice in the Federal Register. The HFA may approve a lesser increase or no increase in subsequent years' distributions. (2) For projects for non-elderly families the first year's distribution will be limited to 10 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 10 percent return on the value, in subsequent years, as determined in accordance with HUD guidelines, of the approved initial equity. Any such adjustments will be made in accordance with a Notice in the Federal Register. The HFA may approve a lesser increase or no increase in subsequent years' distributions. (c) For the purpose of determining the allowable distribution, an owner's equity investment in a project is deemed to be 10 percent of the replacement cost of the part of the project attributable to dwelling use accepted by the HFA at cost certification (See Sec. 883.411), or as specified in the Proposal where cost certification is not required, unless the owner justifies a higher equity contribution through cost certification documentation accepted by the HFA. (d) Any short-fall in return may be made up from surplus project funds in future years. (e) If the HFA determines at any time that surplus project funds are more than the amount needed for project operations, reserve requirements and permitted distributions, the HFA may require the excess to be placed in a separate account to be used to reduce housing assistance payments or for other project purposes. Upon termination of the Contract, any excess project funds must be remitted to HUD. (f) Owners of small projects or partially assisted projects are exempt from the limitation on distributions contained in paragraphs (b) through (d) of this section. (g) HUD may permit increased distributions of surplus, in excess of the amounts otherwise permitted, to profit-motivated owners who participate in a HUD-approved initiative or program to preserve below- market housing stock. The increased distributions will be limited to a maximum amount based on market rents and calculated according to HUD instructions. Funds that the owner is authorized to retain under section 236(g)(2) of the National Housing Act are not considered distributions to the owner. (h) Any State or local law or regulation that restricts distributions to an amount lower than permitted by this section or permitted by the Commissioner under this paragraph (h) is preempted as provided by section 524(f) of the Multifamily Assisted Housing Reform and Affordability Act of 1997. [45 FR 6889, Jan. 30, 1980, as amended at 65 FR 61075, Oct. 13, 2000; 65 FR 68891, Nov. 15, 2000] Sec. 883.307 Financing. (a) Types of financing. A State Agency that used the Fast Track Procedures formerly in this part must provide permanent financing for any new construction or substantial rehabilitation project without Federal mortgage insurance, except coinsurance under section 244 under the National Housing Act (12 U.S.C. 1701 et seq). Obligations issued by the HFA for this purpose may be taxable under section 802 of the Housing and Community Development Act of 1974 (42 U.S.C. 1440) or tax-exempt under section 103 of the Internal Revenue Code (26 U.S.C. 103), 24 CFR part 811 or other Federal Law. (b) HUD approval. (1) A State Agency, prior to receiving HUD approval of its first New Construction or Substantial Rehabilitation Proposal using contract authority under this part, must submit copies of the documents relating to the [[Page 112]] method of financing Section 8 projects to HUD for review. These documents shall include bond resolutions or indentures, loan agreements, regulatory agreements, notes, mortgages or deeds of trust and other related documents, if any, but does not need to include the ``official statement'' or copies of the prospectus for individual bond issues. HUD review will be limited to making certain that the documents are not inconsistent with or in violation of these regulations and the administrative procedures used to implement them. After review, HUD must notify the Agency that the documents are acceptable or, if unacceptable, will request clarification or changes. This review and approval will meet the requirements of 24 CFR 811.107(a). (2) When an Agency which has received HUD approval of its financing documents proposes substantive changes in them which affect the Section 8 program, the revised documents must be submitted for review. HUD review will be limited to the areas indicated in paragraph (b)(1) of this section and must be carried out promptly. HUD will notify the Agency that the revised documents are acceptable, or, if unacceptable, will request clarification or changes. (3) The review and approval of financing documents required under 24 CFR part 811 will constitute HUD approval under this section. (4) The Agency must retain in its files, and make available for HUD inspection, the documentation relating to its financing of Section 8 projects, including any relating to the certifications of compliance with applicable Department of Treasury or HUD regulations (24 CFR part 811) regarding tax-exempt financing. (c) Pledge of Contracts. The HFA or owner may pledge, or offer as security for any loan or obligation, an Agreement, Contract, or ACC entered into pursuant this part provided that such security is in connection with a project constructed pursuant to this part. Any pledge of the Agreement, Contract, or ACC, or payments thereunder will be limited to the amounts payable under the Contract or ACC in accordance with its terms. If the pledge or other document provides that all payments will be paid directly to the HFA, other mortgagee or the trustee for bondholders, the HFA, other mortgagee or trustee may make all payments or deposits required under the mortgage or trust indenture and remit any excess to the owner. (d) Foreclosure and other transfers. In the event of assignment, sale, or other disposition of the project or the contracts agreed to by the HFA and approved by HUD (which approval shall not be unreasonably delayed or withheld), foreclosure, or assignment of the mortgage or deed in lieu of foreclosure, (1) The Agreement, the Contract and the ACC will continue in effect, and (2) Housing assistance payments will continue in accordance with the terms of the Contract, unless approval to amend or terminate the Agreement, the Contract or the ACC has been obtained from the Assistant Secretary. (e) In the case of a newly constructed or substantially rehabilitated manufactured home park, the principal amount of any mortgage attributable to the rental spaces in the park may not exceed an amount per space determined in accordance with Sec. 207.33(b) of this title. [45 FR 6889, Jan. 30, 1980, as amended at 45 FR 56327, Aug. 22, 1980; 48 FR 12709, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 61 FR 13592, Mar. 27, 1996] Sec. 883.308 Adjustments to reflect changes in terms of financing. (a) Certifications of projected financing terms. When an HFA, under this part, provides permanent financing for a project through the issuance of obligations and these are not sold until after the contract rents for a project have been set, the HFA must submit, with the Proposal, a certification of: (1) Its projected rate of borrowing (net interest cost), based on a reasonable evaluation of market conditions, on obligations issued to provide interim and permanent financing for the project, (2) The projected cost of borrowing to the owner on interim financing for the project, (3) The projected loan amount for the project, [[Page 113]] (4) The projected cost of borrowing and the term of the permanent financing to be provided to the owner for the project, (5) The projected annual debt service for the permanent financing on which the Contract Rents are based, and (6) The override, if any. (b) Revised certifications. If, at any time prior to the execution of the Agreement, the terms and conditions of financing change, other than the HFA's projected cost of borrowing, the HFA must submit revised certifications based upon the new terms. (c) Certifications of actual financing terms. After a project has been permanently financed, the HFA must submit a certification which specifies the actual financing terms. The items that must be included in this certification include: (1) The HFA's actual cost of borrowing (net interest cost) on obligations from which funds were used to permanently finance the project, (2) The override, if any, added to the actual cost of borrowing on obligations in setting the rate of lending to the owner, (3) The annual debt service to the owner for the permanent financing on which contract rents are based; and, (4) The actual loan amount and the term on which the annual debt service is based. (d) Reduction of Contract Rents. If the actual debt service to the owner under the permanent financing is lower than the anticipated debt service on which the Contract Rents were based, the initial Contract Rents, or the Contract Rents currently in effect, must be reduced commensurately, and the amount of the savings credited to the project account. (e) Increase of Contract Rents. This paragraph (e) applies only if the HFA is using its set-aside for the project and it is processed under subpart D. If the actual debt service to the owner under the permanent financing is higher than the anticipated debt service on which the Contract Rents are based, the initial Contract Rents or the Contract Rents currently in effect may, if sufficient contract and budget authority is available, be increased commensurately based on the certification submitted under paragraph (c) of this section. The amount of this increase may not exceed the amount of the Financing Cost Contingency (FCC) authorized but not reserved for the project at the time the proposal is approved. The adjustment must not exceed the amount necessary to reflect an increase in debt service (based on the difference between the projected and actual terms of the permanent financing) resulting from an increase over the projected interest rate of not more than: (1) One and one-half percent if the projected override was three- fourths of one percent or less, or (2) One percent if such projected override was more than three- fourths of one percent but not more than one percent, or (3) One-half of one percent if such projected override was more than one percent. (f) Recoupment of savings in financing costs. In the event that interim financing is continued after the first year of the term of the Contract and the debt service of the interim financing for any period of three months after such first year is less than the anticipated debt service under the permanent financing on which the Contract Rents were based, an appropriate amount reflecting the savings in financing cost will be credited by HUD to the Project Account and withheld from housing assistance payments payable to the owner. If during the course of the same year there is any period of three months in which the debt service is greater than the anticipated debt service under the projected permanent financing, an adjustment will be made so that only the net amount of savings in debt service for the year is credited by HUD to the Project Account and withheld from housing assistance payments to the owner. No increased payments will be made to the owner on account of any net excess for the year of actual interim debt service over the anticipated debt service under the permanent financing. Nothing in this paragraph will be construed as requiring a permanent reduction in the Contract Rents or precluding adjustments of Contract Rents in accordance with paragraphs (d) or (e) of this section. [[Page 114]] (g) Compliance with other regulations. The HFA must also submit a certification specifying: (1) That the terms of financing, the amount of the obligations issued with respect to the project and the use of the funds will be in compliance with any regulation governing the issuance of the obligations, e.g., Department of the Treasury regulations regarding arbitrage or HUD regulations regarding Tax Exemption of Obligations of Public Housing Agencies (24 CFR part 811), and (2) That the override, if any, on the permanent financing for the project will not be greater than the projected override nor greater than the override allowed for the borrowing as a whole under applicable regulations, e.g., the Department of Treasury regulations regarding arbitrage. The certifications required under 24 CFR 811.107(a)(2) will be sufficient to meet the certification requirements of this paragraph (g). Sec. 883.310 Property standards. (a) New Construction. Projects must comply with: (1) [Reserved] (2) In the case of manufactured homes, the Federal Manufactured Home Construction and Safety Standards, pursuant to Title VI of the Housing and Community Development Act of 1974, and 24 CFR part 3280; (3) In the case of congregate or single room occupant housing, the appropriate HUD guidelines and standards, (4) HUD requirements pursuant to Section 209 of the Housing and Community Development Act of 1974 for projects for the elderly or the handicapped; (5) HUD requirements pertaining to noise abatement and control; and (6) Applicable state and local laws, codes, ordinances, and regulations. (b) Substantial Rehabilitation. Projects must comply with: (1) [Reserved] (2) In the case of congregate or single room occupant housing, the appropriate HUD guidelines and standards, (3) HUD requirements pursuant to Section 209 of the HCD Act for projects for the elderly or the handicapped; (4) HUD requirements pertaining to noise abatement and control; (5) The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821- 4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, H, and R of this title. (6) Applicable State and local laws, codes, ordinances, and regulations. (c) Smoke detectors--(1) Performance requirement. After October 30, 1992, each dwelling unit must include at least one battery-operated or hard-wired smoke detector, in proper working condition, on each level of the unit. If the unit is occupied by hearing-impaired persons, smoke detectors must have an alarm system, designed for hearing-impaired persons, in each bedroom occupied by a hearing-impaired person. (2) Acceptability criteria. The smoke detector must be located, to the extent practicable, in a hallway adjacent to a bedroom, unless the unit is occupied by a hearing-impaired person, in which case each bedroom occupied by a hearing-impaired person must have an alarm system connected to the smoke detector installed in the hallway. [45 FR 6889, Jan. 30, 1980, as amended at 50 FR 9269, Mar. 7, 1985; 57 FR 33851, July 30, 1992; 63 FR 46579, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999] Sec. 883.313 Audit. Where housing assistance under the Section 8 Program is provided for projects developed or owned by non-Federal entities (as defined in 2 CFR 200.69), the audit requirements in 2 CFR part 200, subpart F, shall apply. [80 FR 75941, Dec. 7, 2015] Sec. 883.314 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and that is subject to a Housing Assistance Payments contract executed or renewed after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation [[Page 115]] makes installation of broadband infrastructure infeasible; (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92638, Dec. 20, 2016] Subparts D-E [Reserved] Subpart F_Housing Assistance Payments Contract Sec. 883.601 Applicability. The provisions of this subpart apply to new construction and substantial rehabilitation projects using contract authority allocated under subpart B, Allocation and Assignment of Contract Authority, or processed and constructed under subpart D, Fast Track Procedures. Sec. 883.602 The contract. (a) Contract. The Housing Assistance Payments Contract sets forth rights and duties of the owner and State Agency with respect to the project and the Housing Assistance payments. (b) Housing Assistance Payments to Owners under the Contract. The Housing Assistance Payments made under the Contract are: (1) Payments to the owner to assist eligible families leasing assisted units, and (2) Payments to the owner for vacant assisted units (``vacancy payments'') if the conditions specified in Sec. 880.611 of this chapter are satisfied. The housing assistance payments are made monthly by the State Agency upon proper requisition by the owner, except payments for vacancies of more than 60 days, which are made semi-annually by the Agency upon proper requisition by the owner. (c) Amount of Housing Assistance Payments to the Owner. (1) The amount of the housing assistance payments made to the owner of a unit being leased by an eligible family is the difference between the contract rent for the unit and the tenant rent payable by the family. (2) A housing assistance payment will be made to the owner for a vacant assisted unit in an amount equal to 80 percent of the contract rent for the first 60 days of vacancy, subject to the conditions in Sec. 880.611 of this chapter. If the owner collects any tenant rent or other amount for this period which, when added to this vacancy payment, exceeds the contract rent, the excess must be repaid as the Agency directs in accordance with HUD guidelines. (3) For a vacancy that exceeds 60 days, a housing assistance payment for the vacant unit will be made, subject to the conditions in Sec. 880.611 of this chapter, in an amount equal to the principal and interest payments required to amortize that portion of the debt attributable to the vacant unit for up to 12 additional months. (d) Payment of utility reimbursement. Where applicable, the Utility Reimbursement will be paid to the Family as an additional Housing Assistance Payment. The Contract will provide that the Owner will make this payment on behalf of the Agency. Funds will be paid to the Owner in trust solely for the purpose of making this additional payment. If the Family and the utility company consent, the Owner may pay the Utility Reimbursement jointly to the Family and the utility company or directly to the utility company. [45 FR 6889, Jan. 30, 1980, as amended at 49 FR 19946, May 10, 1984; 61 FR 13593, Mar. 27, 1996] Sec. 883.603 Term of contract. (a) New Construction. The term of the Contract will be governed by the following provisions: (1) For assisted units in a project financed with the aid of a loan insured by the Federal government (including coinsurance under Section 244 of the National Housing Act) or a loan made, guaranteed or intended for purchase by the Federal government and for assisted units in newly constructed manufactured home parks, the term of the Contract will be 20 years. (2) For assisted units in a project owned by or financed by a loan or loan [[Page 116]] guarantee from a State or local agency, where the assisted units are intended for occupancy by non-elderly families and where it is located in an area designated by the Assistant Secretary as one requiring special financial assistance, the Contract will be for an initial term of 20 years for any dwelling unit, with provision for renewal for additional terms of not more than 5 years each. The total term of initial and renewal terms will not exceed the lesser of (i) 40 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years). (3) For assisted units in all other projects, the Contract will be for an initial term of 20 years for any dwelling unit, with provision for renewal for additional terms of not more than 5 years each. The total term of initial and renewal terms will not exceed the lesser of (i) 30 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years). (b) Substantial Rehabilitation. The Contract will be for a term which is consistent with paragraph (b)(1) and with paragraph (b) (2), (3), or (4) of this section. (1) The Contract term will cover the longest term, but not less than 20 years, of a single credit instrument covering: (i) The cost of rehabilitation or (ii) The existing indebtedness, or (iii) The cost of rehabilitation and the refinancing of the existing indebtedness, or (iv) The cost of rehabilitation and the acquisition of the property; and (2) For assisted units in a project financed with the aid of a loan (including coinsurance under Section 244 of the National Housing Act), or a loan made, guaranteed or intended for purchase by the Federal Government, and for assisted units in a substantially rehabilitated manufactured home park, the term of the Contract will not exceed 20 years; or (3) For assisted units in a project owned or financed by a loan or loan guarantee from a State or local agency where the assisted units are intended for occupancy by non-elderly families and where it is located in an area designated by the Assistant Secretary as one requiring special financial assistance, the Contract will be for an initial term of 20 years for any dwelling unit. There will be a provision for renewal for additional terms of not more than 5 years each. The total of initial and renewal terms will not exceed the lesser of (i) 40 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years); or (4) For assisted units in projects financed other than as described in paragraph (b) (2) or (3) of this section, the Contract will be for an initial term of 20 years for any dwelling unit. There will be a provision for renewal for additional terms of not more than 5 years each. The total of initial and renewal terms will not exceed the lesser of (i) 30 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years). (c) Staged Projects. If a project is completed in stages, the term of the Contract must relate separately to the units in each stage unless the Agency and the owner agree that only the units in the first stage will be assisted for the maximum term of the Contract. The total Contract term, for the units in all stages, beginning with the effective date of the Contract for the first stage, may not exceed the overall maximum term allowable for any one unit under this section, plus two years. [45 FR 56327, Aug. 22, 1980, as amended at 48 FR 12710, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984] Sec. 883.604 Maximum annual commitment and project account. (a) Maximum annual commitment. The maximum annual contribution that may be contracted for in the ACC is the total of the contract rents and utility allowances for all assisted units in the project, plus the HUD- approved fees, if any, for State Agency administration of the Contract. (See Sec. 883.606) (b) Project Account. (1) A project account will be established and maintained by HUD as a specifically identified and segregated account for each project. The account will be established out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the ACC each year. Payments will be made [[Page 117]] from this account for housing assistance payments (and fees for Agency admininstration, if appropriate) when needed to cover increases in contract rents or decreases in tenant rents and for other costs specifically approved by the Secretary. (2) Whenever a HUD-approved estimate of required payments under the ACC for a fiscal year exceeds the maximum annual commitment and would cause the amount in the project account to be less than 40 percent of the maximum, HUD will, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the 1937 Act, as may be necessary, to assure that payments under the ACC will be adequate to cover increases in contract rents and decreases in tenant rents. [45 FR 6889, Jan. 30, 1980, as amended at 61 FR 13593, Mar. 27, 1996] Sec. 883.605 Leasing to eligible families. The provisions of 24 CFR 880.504 apply to this section, including reference at 24 CFR 880.504(f) to the requirements of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), subject to the requirements of Sec. 883.105. [81 FR 80813, Nov. 16, 2016] Sec. 883.606 Administration fee. (a) The State Agency is responsible for administration of the Contract subject to periodic review and audit by HUD. (b) The Agency is entitled to a reasonable fee, determined by HUD, for administering a Contract on newly constructed or substantially rehabilitated units provided there is no override on the permanent loan granted by the Agency to the owner for a project containing assisted units. Sec. 883.607 Default by owner and/or agency. (a) Rights of Owner if Agency defaults under Agreement or Contract. The ACC, the Agreement and the Contract will provide that, in the event of failure of the Agency to comply with the Agreement or Contract with the owner, the owner will have the right, if he/she is not in default, to demand that HUD investigate. HUD will first give the Agency a reasonable opportunity to take corrective action. If HUD determines that a substantial default exists, HUD will assume the Agency's rights and obligations under the Agreement or Contract and meet the obligations of the Agency under the Agreement or Contract including the obligation to enter into the Contract. (b) Rights of HUD if Agency defaults under ACC. The ACC will provide that, if the Agency fails to comply with any of its obligations, HUD may determine that there is a substantial default and require the Agency to assign to HUD all of its rights and interests under the Contract; however, HUD will continue to pay annual contributions in accordance with the terms of the ACC and the Contract. Before determining that an Agency is in substantial default, HUD will give the Agency a reasonable opportunity to take corrective action. (c) Rights of Agency and HUD if Owner defaults under Contract. (1) The Contract will provide that if the Agency determines that the owner is in default under the Contract, the Agency will notify the owner, and lender, if applicable, with a copy to HUD, (i) Of the actions required to be taken to cure the default, (ii) Of the remedies to be applied by the Agency including specific performance under the Contract, abatement of housing assistance payments and recovery of overpayments, where appropriate; and (iii) That, if he/she fails to cure the default, the Agency has the right to terminate the Contract or to take other corrective action, in its discretion. (2) If the Agency provided the permanent financing, the Contract will also provide that HUD has an independent right to determine whether the owner is in default and to take corrective action and apply appropriate remedies, except that HUD will not have the right to terminate the Contract without proceeding in accordance with paragraph (c) of this section. [[Page 118]] Sec. 883.608 Notice upon contract expiration. The provisions of Sec. 880.508 of this chapter apply, subject to the requirements of Sec. 883.105. [61 FR 13593, Mar. 27, 1996] Subpart G_Management Sec. 883.701 Cross-reference. All of the provisions of part 880, subpart F, of this chapter apply to projects assisted under this part, subject to the requirements of Sec. 883.105. For purposes of this subpart G, all references in part 880, subpart F, of this chapter to ``contract administrator'' shall be construed to refer to ``Agency''. [61 FR 13593, Mar. 27, 1996] PART 884_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING PROJECTS--Table of Contents Subpart A_Applicability, Scope and Basic Policies Sec. 884.101 Applicability and scope. 884.102 Definitions. 884.104 Maximum total annual contract commitment and project account (private-owner or PHA-owner projects). 884.105 Maximum total ACC commitment and project account (private-owner/ PHA projects). 884.106 Housing assistance payments to owners. 884.108 Term of housing assistance payments contract. 884.108a Notice upon contract expiration. 884.109 Rent adjustments. 884.110 Types of housing and property standards. 884.114 Financing. 884.115 Security and utility deposits. 884.116 Establishment of income limit schedules; 30 percent occupancy by very-low income families. 884.117 Disclosure and verification of Social Security and Employer Identification Numbers by owners. 884.118 Responsibilities of the owner. 884.119 Responsibility for contract administration and defaults (private-owner and PHA-owner projects). 884.120 Responsibility for contract administration and defaults (private-owner/PHA projects). 884.121 Rights of owner if PHA defaults under agreement (private-owner/ PHA projects). 884.122 Separate project requirement. 884.123 Conversions. 884.124 Audit. 884.125 Broadband infrastructure. Subpart B_Project Development and Operation 884.212 Project completion. 884.213 Execution of housing assistance payments contract. 884.214 Marketing. 884.215 Lease requirements. 884.216 Termination of tenancy. 884.217 Maintenance, operation, and inspections. 884.218 Reexamination of family income and composition. 884.219 Overcrowded and underoccupied units. 884.220 Adjustment of utility allowances. 884.221 Continued family participation. 884.222 Inapplicability of low-rent public housing model lease and grievance procedures. 884.223 Leasing to eligible families. 884.223a Preference for occupancy by elderly families. 884.224 Management and occupancy reviews. 884.225 PHA reporting requirements. [Reserved] 884.226 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619. Source: 41 FR 47168, Oct. 27, 1976, unless otherwise noted. Redesignated at 45 FR 6909, Jan. 30, 1980. Subpart A_Applicability, Scope and Basic Policies Sec. 884.101 Applicability and scope. (a) The policies and procedures in subparts A and B of this part apply to the making of Housing Assistance Payments on behalf of Eligible Families leasing newly constructed housing pursuant to the provisions of section 8 of the 1937 Act. They are applicable only to proposals submitted by the Department of Agriculture/Farmers Home Administration (now the Department of Agriculture/Rural Housing and Community Development Service) that have been charged against the set-aside [[Page 119]] of section 8 contract authority specifically established for projects to be funded under section 515 of title V of the Housing Act of 1949 (42 U.S.C. 1485). (b) For the purpose of these subparts A and B, ``new construction'' shall mean newly constructed housing for which, prior to the start of construction, an Agreement to Enter into Housing Assistance Payments Contract is executed between the Owner and HUD or a Public Housing Agency. [41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996] Sec. 884.102 Definitions. The terms Fair Market Rent (FMR), HUD, Public housing agency (PHA), and Secretary are defined in 24 CFR part 5. Agreement to enter into housing assistance payments contract (``agreement''). (a) In the case of a Private-Owner Project or a PHA- Owner Project, a written agreement between the Owner and HUD that, upon satisfactory completion of the housing in accordance with the HUD- approved Proposal and submission by RHCDS of the required certifications, HUD will enter into a Housing Assistance Payments Contract with the Owner. (b) In the case of a Private-Owner/PHA Project, a written agreement between the private owner and the PHA, approved by HUD, that, upon satisfactory completion of the housing in accordance with the HUD- approved Proposal and submission by RHCDS of the required certifications, the PHA will enter into a Housing Assistance Payments Contract with the Private Owner. Annual contributions contract (``ACC''). In the case of a Private- Owner/PHA Project, a written agreement between HUD and the PHA to provide annual contributions to the PHA with respect to the project. Annual income. As defined in part 5 of this title. Contract. See definition of Housing Assistance Payments Contract. Contract rent. The rent payable to the Owner under his Contract including the portion of the rent payable by the Family. In the case of a cooperative, the term ``Contract Rent'' means charges under the occupancy agreements between the members and the cooperative. Covered housing provider. For the Section 8 Housing Assistance Payments Programs, New Construction Set-Aside for Section 515 Rural Rental Housing, ``covered housing provider,'' as such term is used in HUD's regulations at 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers to the owner. Decent, safe, and sanitary. Housing is decent, safe, and sanitary if it meets the physical condition requirements in 24 CFR part 5, subpart G. Drug-related criminal activity. The illegal manufacture, sale, distribution, use or possession with the intent to manufacture, sell, distribute, or use, of a controlled substance as defined in section 102 of the Controlled Substances Act, 21 U.S.C. 802. Family. As defined in part 5 of this title. HCD Act. The Housing and Community Development Act of 1974. Housing Assistance Payment. The payment made by the contract administrator to the Owner of an assisted unit as provided in the Contract. Where the unit is leased to an eligible Family, the payment is the difference between the Contract Rent and Tenant Rent. An additional Housing Assistance Payment is made to the Family when the Utility Allowance is greater than the Total Tenant Payment. A Housing Assistance Payment may be made to the Owner when a unit becomes vacant, in accordance with the terms of the Contract. Housing assistance payments contract (``Contract''). (a) In the case of a Private-Owner Project or a PHA-Owner Project, a written contract between the Owner and HUD for the purpose of providing housing assistance payments to the Owner on behalf of Eligible Families. (b) In the case of a Private-Owner/PHA Project, a written contract between the private Owner, and the PHA, approved by HUD, for the purpose of providing housing assistance payments to the Owner on behalf of Eligible Families. [[Page 120]] Income. Income from all sources of each member of the household as determined in accordance with criteria established by HUD and as defined in 24 CFR part 5, subpart F. Lease. A written agreement between an Owner and an Eligible Family for the leasing of a Decent, Safe, and Sanitary dwelling unit in accordance with the applicable Contract, which agreement is in compliance with the provisions of this part. Local housing assistance plan. A housing assistance plan submitted by a unit of general local government and approved by HUD under Section 104 of the HCD Act or, in the case of a unit of general local government not participating under Title I of the HCD Act, a housing plan which contains the elements set forth in Section 104(a)(4) of the HCD Act and which is approved by the Secretary as meeting the requirements of Section 213 of that Act. Low-income family. As defined in part 5 of this title. Owner. Any private person or entity, including a cooperative or a PHA, having the legal right to lease or sublease newly constructed dwelling units. PHA-owner proposal and PHA-owner project. A proposal for a project under this part (and the resulting project) to be owned by a PHA throughout the term of the Agreement and Contract where such Agreement and Contract are to be entered into between the PHA and HUD. Private-owner/PHA proposal and private-owner/PHA project. A proposal for a project under this part (and the resulting project) to be owned by a private Owner throughout the term of the Agreement and Contract where such Agreement and Contract are to be entered into between the private Owner and the PHA pursuant to an ACC between the PHA and HUD. The term also covers the situation where the ACC is with one PHA and the Owner is another PHA. Private-owner proposal and private-owner project. A proposal for a project under this part (and the resulting project) to be owned by a private Owner throughout the term of the Agreement and Contract where such Agreement and Contract are to be entered into between the private Owner and HUD. Project account. The account established and maintained in accordance with Sec. 884.104 or Sec. 884.105. Proposal. A proposal for a Private-Owner or PHA-Owner/PHA Project to provide newly constructed housing submitted to HUD by RHCDS on the prescribed RHCDS form. RHCDS. The Rural Housing and Community Development Service. Tenant rent. As defined in part 5 of this title. Total tenant payment. As defined in part 5 of this title. Utility allowance. As defined in part 5 of this title. Utility reimbursement. As defined in part 5 of this title. Very low-income family. As defined in part 5 of this title. [41 FR 47168, Oct. 27, 1976, as amended at 42 FR 63745, Dec. 19, 1977. Redesignated at 45 FR 6909, Jan. 30, 1980, and amended at 48 FR 12710, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 49 FR 19947, May 10, 1984; 50 FR 38795, Sept. 25, 1985; 61 FR 5213, Feb. 9, 1996; 61 FR 13593, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 63 FR 46579, Sept. 1, 1998; 65 FR 16723, Mar. 29, 2000; 70 FR 77744, Dec. 30, 2005; 81 FR 80813, Nov. 16, 2016] Sec. 884.104 Maximum total annual contract commitment and project account (private-owner or PHA-owner projects). (a) Maximum total annual contract commitment. The maximum total annual housing assistance payments that may be committed under the Contract shall be the total of the Gross Rents for all the Contract units in the project. (b) Project account. In order to assure that housing assistance payments will be increased on a timely basis to cover increases in Contract Rents or decreases in Family Incomes: (1) A Project Account shall be established and maintained in an amount as determined by the Secretary consistent with his responsibilities under Section 8(c)(6) of the Act, out of amounts by which the maximum annual Contract commitment per year exceeds amounts paid under the Contract for any year. This account shall be established and maintained by HUD as a specifically identified and segregated account, and [[Page 121]] payment shall be made therefrom only for the purposes of (i) housing assistance payments, and (ii) other costs specifically authorized or approved by the Secretary. (2) Whenever a HUD-approved estimate of required housing assistance payments for a fiscal year exceeds the maximum annual Contract commitment, and would cause the amount in the Project Account to be less than an amount equal to 40 percent of such maximum annual Contract commitment, HUD shall, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the Act as may be necessary to carry out this assurance, including (as provided in that section of the Act) ``the reservation of annual contributions authority for the purpose of amending housing assistance contracts or the allocation of a portion of new authorizations for the purpose of amending housing assistance contracts.'' Sec. 884.105 Maximum total ACC commitment and project account (private-owner/PHA projects). (a) Maximum total ACC commitment. The maximum total annual contribution that may be contracted for in the ACC for a project shall be the total of the Contract Rents plus any utility allowances for all the Contract units in the project, plus a fee for the regular costs of PHA administration. HUD-approved preliminary costs for administration (including administrative costs in connection with PHA activities related to relocation of occupants) shall be payable out of this total. (b) Project account. In order to assure that housing assistance payments will be increased on a timely basis to cover increases in Contract Rents or decreases in Family Incomes: (1) A Project Account shall be established and maintained, in an amount as determined by the Secretary consistent with his responsibilities under Section 8(c)(6) of the 1937 Act, out of amounts by which the maximum ACC commitment per year exceeds amounts paid under the ACC for any year. This account shall be established and maintained by HUD as a specifically identified and segregated account, and payment shall be made therefrom only for the purposes of (i) housing assistance payments and (ii) other costs specifically authorized or approved by the Secretary. (2) Whenever a HUD-approved estimate of required Annual Contribution exceeds the maximum ACC commitment then in effect, and would cause the amount in the Project Account to be less than an amount equal to 40 percent of such maximum ACC commitment, HUD shall, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the 1937 Act as may be necessary to carry out this assurance, including (as provided in that section of the Act) ``the reservation of annual contributions authority for the purpose of amending housing assistance contracts or the allocation of a portion of new authorizations for the purpose of amending housing assistance contracts.'' [41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996; 65 FR 16723, Mar. 29, 2000] Sec. 884.106 Housing assistance payments to owners. (a) General. Housing Assistance Payments shall be paid to Owners for units under lease by eligible families, in accordance with the Contract and as provided in this section. These Housing Assistance Payments will cover the difference between the Contract Rent and the Tenant Rent. Where applicable, the Utility Reimbursement will be paid to the Family as an additional Housing Assistance Payment. The Contract will provide that the Owner will make this payment on behalf of the contract administrator. Funds will be paid to the Owner in trust solely for the purpose of making this additional payment. If the Family and the utility company consent, the Owner may pay the utility reimbursement jointly to the Family and the utility company or directly to the utility company. No Section 8 assistance may be provided for any unit occupied by an Owner; however, cooperatives are considered rental housing, rather than Owner-occupied housing, for this purpose. (b) Vacancies during rent-up. If a Contract Unit is not leased as of the effective date of the Contract, the Owner [[Page 122]] shall be entitled to housing assistance payments in the amount of 80 percent of the Contract Rent for the unit for a vacancy period not exceeding 60 days from the effective date of the Contract, in accordance with the procedure set forth in Sec. 884.213(b): Provided, That the Owner: (1) Commenced marketing and otherwise complied with Sec. 884.211(e), (2) has taken and continues to take all feasible actions to fill the vacancy, including, but not limited to, contacting applicants on his waiting list, if any, requesting the PHA and other appropriate sources to refer eligible applicants, and advertising the availability of the unit, and (3) has not rejected any eligible applicant, except for good cause acceptable to HUD or the PHA, as the case may be. (c) Vacancies after rent-up. (1) If an Eligible Family vacates its unit (other than as a result of action by the Owner which is in violation of the Lease or the Contract or any applicable law), the Owner shall receive housing assistance payments in the amount of 80 percent of the Contract Rent for a vacancy period not exceeding 60 days; provided, however, That if the Owner collects any of the Family's share of the rent for this period in an amount which, when added to the 80 percent payments, results in more than the Contract Rent, such excess shall be payable to HUD or as HUD may direct. (See also Sec. 884.115). The Owner shall not be entitled to any payment under this paragraph (c)(1) unless he: (i) Immediately upon learning of the vacancy, has notified HUD or the PHA, as the case may be, of the vacancy or prospective vacancy and the reasons for the vacancy, and (ii) has taken and continues to take the actions specified in paragraphs (b) (2) and (3) of this section. (2) If the Owner evicts an Eligible Family, he shall not be entitled to any payment under paragraph (c)(1) of this section unless the request for such payment is supported by a certification that: (i) He gave such Family a written notice of the proposed eviction, stating the grounds and advising the Family that it had 10 days within which to present its objections to the Owner in writing or in person and (ii) the proposed eviction was not in violation of the Lease or the Contract or any applicable law. (d) Debt-service vacancy payments. (1) If a unit continues to be vacant after the 60-day period specified in paragraph (b) or (c) of this section, the owner may submit a claim to receive additional housing assistance payments on a semiannual basis with respect to the vacant unit in an amount equal to the principal and interest payments required to amortize the portion of the debt attributable to that unit for the period of the vacancy, whether the vacancy commenced during rent-up or after rent-up. (2) Additional payments under this paragraph (d) for any unit shall not be for more than 12 months for any vacancy period, and shall be made only if: (i) The unit was in decent, safe and sanitary condition during the vacancy period for which payments are claimed. (ii) The Owner has taken and is continuing to take the actions specified in paragraphs (b) (1), (2) and (3) or paragraphs (c)(1) (i) and (ii) and (c)(2) of this section, as appropriate. (iii) The owner has demonstrated, in connection with the semiannual claim on a form and in accordance wih the standards prescribed by HUD with respect to the period of the vacancy, that the project is not providing the owner with revenues at least equal to the project costs incurred by the owner and that the amount of the payments requested is not in excess of the amount needed to make up the deficiency. (iv) The owner has submitted to HUD or the PHA, as appropriate, in connection with the semiannual claim, a statement with relevant supporting evidence that there is a reasonable prospect that the project can achieve financial soundness within a reasonable time. The statement shall indicate the causes of the deficiency; the corrective steps that have been and will be taken; and the time by which it is expected that the project revenues will at least equal project costs without the additional payments provided under this paragraph. (3) HUD or the PHA, as appropriate, may deny any claim for additional payments or suspend or terminate payments if it determines that, based on [[Page 123]] the owner's statement and other evidence, there is not a reasonable prospect that the project can achieve financial soundness within a reasonable time. (e) Prohibition of double compensation for vacancies. The Owner shall not be entitled to housing assistance payments with respect to vacant units under this section to the extent he is entitled to payments from other sources (for example, payments for losses of rental income incurred for holding units vacant for relocatees pursuant to Title I of the HCD Act or payments under Sec. 884.115). [41 FR 47168, Oct. 27, 1976, as amended at 42 FR 12983, Mar. 7, 1977; 43 FR 33880, Aug. 1, 1978. Redesignated at 45 FR 6909, Jan. 30, 1980; 49 FR 19947, May 10, 1984] Sec. 884.108 Term of housing assistance payments contract. (a) Except in the case of a Contract described in paragraph (b) of this section, the Contract shall be for an initial term of 20 years: Provided, That at the end of such Contract term and at the request of RHCDS, HUD may, subject to the availability of contract and budget authority, authorize the execution of a new Contract providing for a total Contract term of an additional 20 years. (b) In the case of a Contract under which housing assistance payments are made with respect to a project owned by a State or local agency, the total Contract term may be equal to the term of such financing but may not exceed 40 years for any dwelling unit. (c) If the project is completed in stages, the dates for the initial and the renewal terms shall be separately related to the units in each stage: Provided, however, That the total Contract term for the units in all the stages, beginning with the effective date of the Contract with respect to the first stage, may not exceed the overall maximum term allowable for any one unit, plus two years. [41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, and amended at 48 FR 12710, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 61 FR 13593, Mar. 27, 1996] Sec. 884.108a Notice upon contract expiration. (a) The Contract will provide that the owner will notify each assisted family, at least 90 days before the end of the Contract term, of any increase in the amount the family will be required to pay as rent which may occur as a result of its expiration. If the Contract is to be renewed but with a reduction in the number of units covered by it, this notice shall be given to each family who will no longer be assisted under the Contract. (b) The notice provided for in paragraph (a) of this section shall be accomplished by: (1) Sending a letter by first class mail, properly stamped and addressed, to the family at its address at the project, with a proper return address, and (2) serving a copy of the notice on any adult person answering the door at the leased dwelling unit, or if no adult responds, by placing the notice under or through the door, if possible, or else by affixing the notice to the door. Service shall not be considered to be effective until both required notices have been accomplished. The date on which the notice shall be considered to be received by the family shall be the date on which the owner mails the first class letter provided for in this paragraph, or the date on which the notice provided for in this paragraph is properly given, whichever is later. (c) The notice shall advise each affected family that, after the expiration date of the Contract, the family will be required to bear the entire cost of the rent and that the owner will be free (to the extent the project is not otherwise regulated by HUD) to alter the rent without HUD approval, but subject to any applicable requirements or restrictions under the lease or under State or local law. The notice shall also state: (1) The actual (if known) or the estimated rent which will be charged following the expiration of the Contract; (2) the difference between the rent and the Total Tenant Payment toward rent under the Contract; and (3) the date the Contract will expire. (d) The owner shall give HUD a certification that families have been notified in accordance with this section [[Page 124]] with an example of the text of the notice attached. (e) This section applies to all Contracts entered into pursuant to an Agreement executed on or after October 1, 1981, or entered into pursuant to an Agreement executed before October 1, 1981, but renewed or amended on or after October 1, 1984. [49 FR 31284, Aug. 6, 1984] Sec. 884.109 Rent adjustments. (a) Funding of adjustments. Housing assistance payments will be made in increased amounts commensurate with Contract Rent adjustments under this paragraph, up to the maximum amount authorized under the Contract. (See Sec. Sec. 884.104 and 884.105). (b) Automatic annual adjustments. (1) Automatic Annual Adjustment Factors will be determined by HUD at least annually; interim revisions may be made as market conditions warrant. Such Factors and the basis for their determination will be published in the Federal Register. These published Factors will be reduced appropriately by HUD where utilities are paid directly by Families. (2) On each anniversary date of the Contract, the Contract Rents shall be adjusted by applying the applicable Automatic Annual Adjustment Factor most recently published by HUD. Contract Rents may be adjusted upward or downward, as may be appropriate; however, in no case shall the adjusted rents be less than the Contract Rents on the effective date of the Contract. (c) Special additional adjustments. Special additional adjustments shall be granted, when approved by HUD, to reflect increases in the actual and necessary expenses of owning and maintaining the Contract Units which have resulted from substantial general increases in real property taxes, utility rates, or similar costs (i.e., assessments, and utilities not covered by regulated rates), but only if and to the extent that the Owner clearly demonstrates that such general increases have caused increases in the Owner's operating costs which are not adequately compensated for by automatic annual adjustments. The Owner shall submit to HUD financial statements which clearly support the increase. (d) Overall limitation. Notwithstanding any other provisions of this part, adjustments as provided in this section shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by HUD: Provided, however, That this limitation shall not be construed to prohibit differences in rents between assisted and comparable unassisted units to the extent that such differences may have existed with respect to the initial Contract Rents. Sec. 884.110 Types of housing and property standards. (a) Newly constructed single-family houses and multifamily structures may be utilized in this program. Congregate housing may be developed for elderly, disabled, or handicapped Families and individuals. Except in the case of housing predominantly for the elderly, high-rise elevator projects for Families with children may not be utilized unless HUD determines there is no practical alternative. (b) Participation in this program requires compliance with: (1) [Reserved] (2) In the case of congregate housing, the appropriate HUD guidelines and standards; (3) HUD requirements pursuant to section 209 of the HCD Act for projects for the elderly, disabled, or handicapped; (4) HUD requirements pertaining to noise abatement and control; and (5) Applicable State and local laws, codes, ordinances, and regulations. (c) Housing assisted under this part shall be modest in design. Amenities in projects assisted under this part (except partially assisted projects) will be limited to those amenities, as determined by HUD, which are generally provided in unassisted, decent, safe and sanitary housing for low-income families, in the market area. The use of more durable, high-quality materials to control or reduce maintenance, repair and replacement costs will not be considered an excess amenity. (d) Smoke detectors--(1) Performance requirement. After October 30, 1992, each dwelling unit must include at least one battery-operated or hard-wired smoke detector, in proper working condition, [[Page 125]] on each level of the unit. If the unit is occupied by hearing-impaired persons, smoke detectors must have an alarm system, designed for hearing-impaired persons, in each bedroom occupied by a hearing-impaired person. (2) Acceptability criteria. The smoke detector must be located, to the extent practicable, in a hallway adjacent to a bedroom, unless the unit is occupied by a hearing-impaired person, in which case each bedroom occupied by a hearing-impaired person must have an alarm system connected to the smoke detector installed in the hallway. [48 FR 12710, Mar. 28, 1983, as amended at 57 FR 33852, July 30, 1992; 63 FR 46579, Sept. 1, 1998] Sec. 884.114 Financing. (a) Types. Eligible projects under this program shall be financed under Section 515, Title V of the Housing Act of 1949. (b) Use of contract as security for financing. (1) An Owner may pledge, or offer as security for any loan or obligation, an Agreement or Contract entered into pursuant to this part: Provided, however, That such security is in connection with a project constructed pursuant to this part, and the terms of the financing or any refinancing have been approved by HUD. It is the Owner's responsibility to request such approval in sufficient time before he needs the financing to permit review of the method and terms of the financing and the instrument of pledge, offer or other assignment that HUD is requested to approve. (2) Any pledge of the Agreement, Contract, or ACC, or payments thereunder, shall be limited to the amounts payable under the Contract or ACC in accordance with its terms. (3) In the event of foreclosure and in the event of assignment or sale agreed to by HUD, housing assistance payments shall continue in accordance with the Terms of the Contract. Sec. 884.115 Security and utility deposits. (a) An Owner may require Families to pay a security deposit in an amount equal to one month's Gross Family Contribution. If a Family vacates its unit, the Owner, subject to State and local laws, may utilize the deposit as reimbursement for any unpaid rent or other amount owed under the Lease. If the Family has provided a security deposit, and it is insufficient for such reimbursement, the Owner may claim reimbursement from HUD or the PHA, as appropriate, not to exceed an amount equal to the remainder of one month's Contract Rent. Any reimbursement under this section shall be applied first toward any unpaid rent. If a Family vacates the unit owing no rent or other amount under the Lease or if such amount is less than the amount of the security deposit, the Owner shall refund the full amount or the unused balance, as the case may be, to the Family. (b) In those jurisdictions where interest is payable by the Owner on security deposits, the refunded amount shall include the amount of interest payable. All security deposit funds shall be deposited by the Owner in a segregated bank account, and the balance of this account, at all times, shall be equal to the total amount collected from tenants then in occupancy, plus any accrued interest. The Owner shall comply with all State and local laws regarding interest payments on security deposits. (c) Families shall be expected to obtain the funds to pay security and utility deposits, if required, from their own resources and/or other private or public sources. Sec. 884.116 Establishment of income limit schedules; 30 percent occupancy by very-low income families. (a) HUD will establish schedules of Income limits for determining whether families qualify as Low-Income Families and Very Low-Income Families. (b) In the leasing of units, the Owner shall comply with HUD requirements concerning the permissible income levels of families, as prescribed in part 5 of this title. [41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, and amended at 49 FR 19947, May 10, 1984; 65 FR 16723, Mar. 29, 2000] Sec. 884.117 Disclosure and verification of Social Security and Employer Identification Numbers by owners. To be eligible to become an owner of housing assisted under this part, the owner (other than a PHA) must meet [[Page 126]] the disclosure and verification requirements for Social Security and Employer Identification Numbers, as provided by 24 CFR part 5. (Approved by the Office of Management and Budget under control number 2502-0204) [54 FR 39707, Sept. 27, 1989, as amended at 61 FR 13593, Mar. 27, 1996] Sec. 884.118 Responsibilities of the owner. (a) The Owner shall be responsible (subject to post-review or audit by HUD or the PHA, as the case may be) for management and maintenance of the project. These responsibilities shall include but not be limited to: (1) Payment for utilities and services (unless paid directly by the Family), insurance and taxes; (2) Performance of all ordinary and extraordinary maintenance; (3) Performance of all management functions, including the taking of applications; determining eligibility of applicants in accordance with part 5 of this title; selection of families, including verification of income, provision of Federal selection preferences in accordance with 24 CFR part 5, obtaining and verifying Social Security Numbers submitted by applicants (as provided by 24 CFR part 5), obtaining signed consent forms from applicants for the obtaining of wage and claim information from State Wage Information Collection Agencies (as provided in 24 CFR part 5), and other pertinent requirements; and determination of the amount of tenant rent in accordance with HUD established schedules and criteria; (4) Collection of Tenant Rents; (5) Termination of tenancies, including evictions; (6) Preparation and furnishing of information required under the Contract; (7) Reexamination of family income and composition; redetermination, as appropriate, of the amount of Tenant Rent and the amount of housing assistance payment in accordance with part 5 of this title; obtaining and verifying Social Security Numbers submitted by participants, as provided by 24 CFR part 5; and obtaining signed consent forms from participants for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5; (8) Redetermination of amount of Tenant Rent and amount of housing assistance payment in accordance with part 5 of this title as a result of an adjustment by the PHA or HUD, as appropriate, of any applicable Utility Allowance; and (9) Compliance with equal opportunity requirements issued by RHCDS and HUD with respect to project operation. (b) Subject to HUD approval, any Owner may contract with any private or public entity to perform for a fee the services required by paragraph (a) of this section: Provided, That such contract shall not relieve the Owner of his responsibilities or obligations. However, no entity which is responsible for administration of the Contract (for example, a PHA in the case of a Private-Owner/PHA Project) may contract to perform management and maintenance of the project: Provided, however, That this prohibition shall not preclude management by the PHA in the event it takes possession as the result of foreclosure or assignment in lieu of foreclosure. (See, however, Sec. 884.123(b), which permits conversion of a Private-Owner/PHA Project to a Private-Owner Project.) (Approved by the Office of Management and Budget under control number 2502-0204) [41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, and amended at 49 FR 19947, May 10, 1984; 51 FR 11227, Apr. 1, 1986; 53 FR 847, Jan. 13, 1988; 53 FR 1162, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39707, Sept. 27, 1989; 56 FR 7540, Feb. 22, 1991; 60 FR 14845, Mar. 20, 1995; 61 FR 13593, Mar. 27, 1996; 65 FR 16723, Mar. 29, 2000] Sec. 884.119 Responsibility for contract administration and defaults (private-owner and PHA-owner projects). (a) Contract administration. HUD is responsible for administration of the Contract. HUD may contract with another entity for the performance of some or all of its Contract administration functions. (b) Defaults by owner. The Contract shall contain a provision to the effect (1) that if HUD determines that the Owner is in default under the Contract, HUD shall notify the Owner (with a [[Page 127]] copy to RHCDS) of the actions required to be taken to cure the default and of the remedies to be applied by HUD including abatement of housing assistance payments and recovery of overpayments, where appropriate; and (2) that if he fails to cure the default, HUD has the right to terminate the Contract or to take other corrective action. [41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996] Sec. 884.120 Responsibility for contract administration and defaults (private-owner/PHA projects). (a) Contract administration. The PHA is primarily responsible for administration of the Contract, subject to review and audit by HUD. (b) Defaults by PHA and/or owner. (1) The ACC and the Contract shall contain a provision to the effect that in the event of failure of the PHA to comply with the Contract with the Owner, the Owner shall have the right, if he is not in default, to demand that HUD determine, after notice to the PHA giving it a reasonable opportunity to take corrective action, whether a substantial default exists, and if HUD determines that such a default exists, that HUD assure that the obligations of the PHA to the Owner are carried out. (2) The ACC shall contain a provision to the effect that if the PHA fails to comply with any of its obligations (including specifically failure to enforce its rights under the Contract, in the event of any default by the Owner, to achieve compliance to the satisfaction of HUD or to terminate the Contract in whole or in part, as directed by HUD), HUD may, after notice to the PHA giving it a reasonable opportunity to take corrective action, determine that there is a substantial default and require the PHA to assign to HUD all of the PHA's rights and interests under the Contract. In such case, HUD will continue to pay annual contributions in accordance with the terms of the ACC and the Contract. (3) The Contract shall contain a provision to the effect (i) that if the PHA determines that the Owner is in default under the Contract, the PHA shall notify the Owner, with a copy to HUD and RHCDS, of the actions required to be taken to cure the default and of the remedies to be applied by the PHA including abatement of housing assistance payments and recovery of overpayments, where appropriate; and (ii) that if he fails to cure the default, the PHA has the right to terminate the Contract or to take other corrective action, in its discretion or as directed by HUD. [41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996] Sec. 884.121 Rights of owner if PHA defaults under agreement (private-owner/PHA projects). The ACC and the Agreement shall contain a provision to the effect that in the event of failure of the PHA to comply with the Agreement with the Owner, the Owner shall have the right, if he is not in default, to demand that HUD determine, after notice to the PHA giving it a reasonable opportunity to take corrective action, whether a substantial default exists, and if HUD determines that such a default exists, that HUD assume the PHA's rights and obligations under the Agreement, and carry out the obligations of the PHA under the Agreement, including the obligation to enter into the Contract. Sec. 884.122 Separate project requirement. (a) In the case of a Private-Owner Project or a PHA-Owner Project, each Agreement and Contract shall constitute a separate project. (b) In the case of a Private-Owner/PHA Project such project may not include more than one type of Section 8 assistance, shall be processed with a separate ACC List and ACC Part I and shall be assigned a separate project number. All new construction units to be placed under a single Contract shall comprise a separate project. However, the field office director may designate as a single project the units to be covered by two or more such Contracts for new construction projects where: (1) The units are placed under ACC on the same date; and (2) Such consolidation is necessary in the interest of administrative efficiency. [[Page 128]] Sec. 884.123 Conversions. (a) Conversion of private-owner project to private-owner/PHA project. HUD may request the Owner of a Private-Owner Project and an appropriate PHA to agree, if they are willing, to a conversion of any such project to a Private-Owner/PHA Project if HUD determines that such conversion would promote efficient project administration. (b) Conversion of private-owner/PHA project to private-owner project. The Private Owner and the PHA, in the case of a Private-Owner/ PHA Project, may request HUD to agree to a conversion of any such project to a Private-Owner or PHA-Owner Project. HUD shall agree to such conversion if it determines it to be in the best interest of the project. Sec. 884.124 Audit. Where a non-Federal entity (as defined in 2 CFR 200.69) is the eligible owner of a project, or is a contract administrator under Sec. 884.119 or Sec. 884.120, receiving financial assistance under this part, the audit requirements in 2 CFR part 200, subpart F, shall apply. [80 FR 75941, Dec. 7, 2015] Sec. 884.125 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and that is subject to a Housing Assistance Payments contract executed or renewed after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92638, Dec. 20, 2016] Subpart B_Project Development and Operation Sec. 884.212 Project completion. (a) FmHA certifications upon completion. Upon completion of the project, FmHA shall inspect the project and, if determined to be acceptable, submit to the HUD field office the following certifications: (1) The project has been completed in accordance with the requirements of the Agreement; (2) The project is in good and tenantable condition; (3) There are no defects or deficiencies in the project other than punchlist items, or incomplete work awaiting seasonal opportunity; (4) There has been no change in management capability. (b) HUD review. HUD shall promptly review the certifications submitted pursuant to paragraphs (a) and (b) of this section (see Sec. 884.203(b)). (c) HUD acceptance. If HUD determines from the review that the certifications are acceptable in accordance with these subparts, the project shall be accepted. (d) Acceptance where defects or deficiencies reported. If the only defects or deficiencies are punchlist items or incomplete items awaiting seasonal opportunity, the project may be accepted and the Contract executed. If the Owner fails to complete the items within a reasonable time to the satisfaction of HUD (and the PHA, if applicable), HUD may, after consultation with FmHA, upon 30 days notice to the Owner (and the PHA, if applicable), terminate the Contract and/or exercise its other rights thereunder or, if the Contract is with a PHA, cancel its approval of the Contract and require its termination and/or exercise its other rights under the Contract and the ACC. (e) Arbitration. In the event the Owner disputes HUD determinations, he may submit the controversy to third-party arbitration at his expense, provided that the arbitration is advisory only. (f) Completion in stages. If the project is to be completed in stages, the procedures of this section shall apply to each stage. [[Page 129]] Sec. 884.213 Execution of housing assistance payments contract. (a) Time of execution. Upon acceptance of the project by HUD pursuant to Sec. 884.212, the Contract shall be executed first by the Owner and then by HUD, or, in the case of a Private-Owner/PHA Project, executed by the Owner and the PHA and then approved by HUD. (b) Unleased units. At the time of execution of the Contract, HUD (or the PHA, as appropriate) shall examine the lists of dwelling units leased and not leased, referred to in Sec. 884.211(e) and shall determine whether or not the Owner has met his obligations under that section with respect to any unleased units. HUD (or the PHA, as appropriate) shall state in writing its determination with respect to the unleased units and for which of those units it will make housing assistance payments. The Owner shall indicate in writing his concurrence with this determination or his disagreement, reserving his rights to claim housing assistance payments for the unleased units pursuant to the Contract, without prejudice by reason of his signing the Contract. Copies of all documents referred to this paragraph shall be furnished to HUD in the case of a Private-Owner/PHA Project. Sec. 884.214 Marketing. (a) Compliance with equal opportunity requirements. Marketing of units and selection of Families by the Owner shall be in accordance with the Owner's FmHA-approved Affirmative Fair Housing Marketing Plan, if required, and with all regulations relating to fair housing advertising including use of the equal opportunity logotype statement and slogan in all advertising. Projects shall be managed and operated without regard to race, color, creed, religion, sex, or national origin. (b) Eligibility, selection and admission of families. (1) The owner is responsible for determination of eligibility of applicants in accordance with the procedure of 24 CFR part part 5, selection of families from among those determined to be eligible (including provision of Federal selection preferences in accordance with 24 CFR part 5), and computation of the amount of housing assistance payments on behalf of each selected family, in accordance with schedules and criteria established by HUD. (2) For every family that applies for admission, the owner and the applicant will complete and sign the form of application prescribed by HUD. However, if there are no vacant units and the owner's waiting list is such that there would be an unreasonable length of time before the applicant could be admitted, the owner may advise the applicant that the owner is not accepting applications for that reason. The owner must retain copies of all completed applications together with any related correspondence for three years. For each family selected for admission, the owner must submit one copy of the completed and signed application to the HUD field office (in the case of private-owner/PHA projects, the owner simultaneously must send a copy of the form to the PHA). Housing assistance payments will not be made on behalf of an admitted family unit after this copy has been received by the HUD field office (or, in the case of private-owner/PHA projects, until the copy has been received by the PHA with a certification by the owner that the owner has sent a copy to HUD). (3) If the Owner determines that the applicant is eligible on the basis of Income and family composition and is otherwise acceptable but the Owner does not have a suitable unit to offer, the Owner shall place such Family on his waiting list and so advise the Family. (4) If the Owner determines that the applicant is eligible on the basis of Income and family composition and is otherwise acceptable and if the Owner has a suitable unit, the Owner and the Family shall enter into a Lease. Such Lease shall be on the form of Lease included in the Owner's approved Final Proposal and shall otherwise be in conformity with the provisions of this part. (5) Records on applicant families and approved Families shall be maintained by the Owner so as to provide HUD with racial, ethnic and gender data and shall be retained by the Owner for three years. (6) In the case of a PHA-Owner project, (i) if the PHA places a Family [[Page 130]] on its waiting list, it shall notify the Family of the approximate date of availability of a suitable unit insofar as such date can be reasonably determined, and (ii) if the PHA determines that an applicant is ineligible on the basis of income or family composition, or that the PHA is not selecting the applicant for other reasons, the PHA shall promptly send the applicant a letter notifying him of the determination and the reasons and that the applicant has the right within a reasonable time (specified in the letter) to request an informal hearing. If, after conducting such an informal hearing, the PHA determines that the applicant shall not be admitted, the PHA shall so notify the applicant in writing and such notice shall inform the applicant that he has the right to request a review by HUD of the PHA's determination. The procedures of this subparagraph do not preclude the applicant from exercising his other rights if he believes he is being discriminated against on the basis of race, color, creed, religion, sex, or national origin. The PHA shall retain for three years a copy of the application, the letter, the applicant's response if any, the record of any informal hearing, and a statement of final disposition. (7) See 24 CFR part 5 for the informal review provisions for the denial of a Federal selection preference. (8) For the informal hearing provisions related to denial of assistance based upon failure to establish citizenship or eligible immigration status, see part 5 of this title for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of denial of assistance. [41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, and amended at 53 FR 1162, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 60 FR 14845, Mar. 20, 1995; 61 FR 9047, Mar. 6, 1996; 61 FR 13594, Mar. 27, 1996; 65 FR 16723, Mar. 29, 2000] Sec. 884.215 Lease requirements. The Lease shall contain all required provisions specified in paragraph (b) of this section and none of the prohibited provisions listed in paragraph (c) of this section. (a) Term of lease. The term of the Lease shall be for not less than one year. The Lease may (or, in the case of a Lease for a term of more than one year, shall) contain a provision permitting termination upon 30 days advance written notice by either party. (b) Required provisions. The Lease between the Owner (Lessor) and the Family (Lessee) shall contain the following provisions: Addendum to Lease The following additional Lease provisions are incorporated in full in the Lease between ____________________ (Lessor) and ____________________ (Lessee) for the following dwelling unit: ____________________. In case of any conflict between these and any other provisions of the Lease, these provisions shall prevail. a. The total rent shall be $____________ per month. b. Of the total rent, $____________ shall be payable by or at the direction of the Department of Housing and Urban Development (``HUD'') as housing assistance payments on behalf of the Lessee and $____________ shall be payable by the Lessee. These amounts shall be subject to change by reason of changes in the Lessee's family income, family composition, or extent of exceptional medical or other unusual expenses, in accordance with HUD-established schedules and criteria; or by reason of adjustment by HUD, or the PHA, if appropriate, of any applicable Allowance for Utilities and Other Services. Any such change shall be effective as of the date stated in a notification to the Lessee. c. The Lessor shall not discriminate against the Lessee in the provision of services, or in any other manner, on the grounds of race, color, creed, religion, sex, or national origin. d. The Lessor shall provide the following services and maintenance: Lessor__________________________________________________________________ By______________________________________________________________________ Date____________________________________________________________________ Lessee__________________________________________________________________ Date____________________________________________________________________ (c) Prohibited provisions. Lease clauses which fall within the classifications listed below shall not be included in any Lease. (1) Confession of judgment. Prior consent by tenant to any lawsuit the landlord may bring against him in connection with the Lease and to a judgment in favor of the landlord. [[Page 131]] (2) Distraint for rent or other charges. Authorization to the landlord to take property of the tenant and hold it as a pledge until the tenant performs any obligation which the landlord has determined the tenant has failed to perform. (3) Exculpatory clause. Agreement by tenant not to hold the landlord or landlord's agents liable for any acts or omissions whether intentional or negligent on the part of the landlord or the landlord's authorized representative or agents. (4) Waiver of legal notice to tenant prior to actions for eviction or money judgments. Agreement by tenant that the landlord may institute suit without any notice to the tenant that the suit has been filed. (5) Waiver of legal proceedings. Authorization to the landlord to evict the tenant or hold or sell the tenant's possessions whenever the landlord determines that a breach or default has occurred, without notice to the tenant or any determination by a court of the rights and liabilities of the parties. (6) Waiver of jury trial. Authorization to the landlord's lawyer to appear in court for the tenant and to waive the tenant's right to a trial by jury. (7) Waiver of right to appeal judicial error in legal proceedings. Authorization to the landlord's lawyer to waive the tenant's right to appeal on the ground of judicial error in any suit or the tenant's right to file a suit in equity to prevent the execution of a judgment. (8) Tenant chargeable with costs of legal actions regardless of outcome. Agreement by the tenant to pay attorney's fees or other legal costs whenever the landlord decides to take action against the tenant even though the court finds in favor of the tenant. (Omission of such clause does not mean that the tenant as a party to a lawsuit may not be obligated to pay attorney's fee or other costs if he loses the suit.) Sec. 884.216 Termination of tenancy. (a) The owner is responsible for termination of tenancies, including evictions. However, conditions for payment of housing assistance payments for any resulting vacancies must be as set forth in Sec. 884.106(c)(1). Failure of the family to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, shall be grounds for termination of tenancy. For provisions requiring termination of assistance for failure to establish citizenship or eligible immigration status, including the applicable informal requirements, see 24 CFR part 5 and also for provisions concerning assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions concerning deferral of termination of assistance. (b) Termination of tenancy for criminal activity by a covered person is subject to 24 CFR 5.858 and 5.859, and termination of tenancy for alcohol abuse by a covered person is subject to 24 CFR 5.860. (c) In actions or potential actions to terminate tenancy, the owner shall follow 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). (d) In the case of failure to pay rent, if the Secretary determines that tenants must be provided with adequate notice to secure Federal funding that is available due to a Presidential declaration of a national emergency: (1) The owner must provide the tenant with written termination notification that includes such information as required by the Secretary; and (2) The written termination notification described in paragraph (d)(1) of this section must be provided to the tenant at least 30 days before termination. [56 FR 7541, Feb. 22, 1991, as amended at 60 FR 14845, Mar. 20, 1995; 61 FR 13594, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 66 FR 28798, May 24, 2001; 73 FR 72343, Nov. 28, 2008; 75 FR 66261, Oct. 27, 2010; 81 FR 80813, Nov. 16, 2016; 86 FR 55701, Oct. 7, 2021] Sec. 884.217 Maintenance, operation, and inspections. (a) Maintenance and operation. The Owner shall maintain and operate the project consistent with 24 CFR part 5, subpart G, and shall provide all the services, maintenance, and utilities [[Page 132]] which the Owner agrees to provide under the Contract, subject to abatement of housing assistance payments or other applicable remedies if the Owner fails to meet these obligations. (b) Inspection prior to occupancy. Prior to occupancy of any unit by a Family, the Owner and the Family shall inspect the unit. On forms prescribed by HUD, the Owner and Family shall certify, that they have inspected the unit and the owner shall certify that the unit is compliant with 24 CFR part 5, subpart G, and the criteria provided in the prescribed forms. Copies of these reports shall be kept on file by the Owner for at least 3 years, and may be required to be electronically submitted to HUD. (c) Periodic inspections. HUD (or the PHA, as appropriate) will inspect or cause to be inspected the contract units and related facilities in accordance with the physical inspection requirements in 24 CFR part 5, subpart G, and at such other times (including prior to initial occupancy and renting of any unit) as HUD (or the PHA) may determine to be necessary to assure that the Owner is meeting the obligation to maintain the units in accordance with 24 CFR part 5, subpart G, and to provide the agreed upon utilities and other services. (d) Units with health and safety hazards. If HUD (or the PHA, as appropriate) notifies the Owner that the Owner has failed to maintain a unit that in accordance with 24 CFR part 5, subpart G, and the Owner fails to take corrective action within the time prescribed by notice, HUD (or the PHA) may exercise any of its rights or remedies under the Contract, including abatement of housing assistance payments, even if the Family continues to occupy the unit. If, however, the Family wishes to be rehoused in another unit with Section 8 assistance and HUD (or the PHA) does not have other Section 8 funds for such purposes, HUD (or the PHA) may use the abated housing assistance payments for the purpose of rehousing the Family in another unit. Where this is done, the Owner shall be notified that the Owner will be entitled to resumption of housing assistance payments for the vacated unit if: (1) The unit is restored to in accordance with 24 CFR part 5, subpart G; (2) The Family is willing to and does move back to the restored dwelling unit; and (3) A deduction is made for the expenses incurred by the Family for both moves. [88 FR 30499, May 11, 2023] Sec. 884.218 Reexamination of family income and composition. (a) Regular reexaminations. The owner must reexamine the income and composition of all families at least once each year. Upon verification of the information, the owner must make appropriate adjustments in the Total Tenant Payment in accordance with part 5 of this title and determine whether the family's unit size is still appropriate. The owner must adjust Tenant Rent and the Housing Assistance Payment to reflect any change in Total Tenant Payment and carry out any unit transfer required by HUD. At the time of the annual reexamination of family income and composition, the owner must require the family to disclose and verify Social Security Numbers, as provided by 24 CFR part 5. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see 24 CFR part 5. At the first regular reexamination after June 19, 1995, the owner shall follow the requirements of 24 CFR part 5 concerning obtaining and processing evidence of citizenship or eligible immigration status of all family members. Thereafter, at each regular reexamination, the owner shall follow the requirements of 24 CFR part 5 concerning verification of the immigration status of any new family member. (b) Interim reexaminations. The family must comply with provisions of its lease regarding interim reporting of changes in income. If the owner receives information concerning a change in the family's income or other circumstances between regularly scheduled reexaminations, the owner must consult with the family and make any adjustments determined to be appropriate. Any change in the family's income or other circumstances that results in an adjustment in the Total Tenant Payment, Tenant Rent and [[Page 133]] Housing Assistance Payment must be verified. See 24 CFR 750.10(d)(2)(i) for the requirements for the disclosure and verification of Social Security Numbers at interim reexaminations involving new family members. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see 24 CFR part 5. At any interim reexamination after June 19, 1995 when there is a new family member, the owner shall follow the requirements of 24 CFR part 5 concerning obtaining and processing evidence of citizenship or eligible immigration status of the new family member. (c) Continuation of housing assistance payments. A family's eligibility for Housing Assistance Payments continues until the Total Tenant Payment equals the Contract Rent plus any utility allowance, or until the family loses eligibility for continued occupancy under Farmer's Home Administration regulations. However, eligibility also may be terminated in accordance with HUD requirements, for such reasons as failure to submit requested verification information, including failure to meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, or failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5. For provisions requiring termination of assistance for failure to establish citizenship or eligible immigration status, see 24 CFR part 5 and also for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions concerning deferral of termination of assistance. (d) Streamlined income determination. An owner may elect to follow the provisions of 24 CFR 5.657(d). [56 FR 7541, Feb. 22, 1991, as amended at 60 FR 14845, Mar. 20, 1995; 61 FR 13594, Mar. 27, 1996; 65 FR 16723, Mar. 29, 2000; 81 FR 12371, Mar. 8, 2016] Sec. 884.219 Overcrowded and underoccupied units. If HUD or the PHA, as the case may be, determines that a Contract unit assisted under this part is not Decent, Safe, and Sanitary by reason of increase in Family size, or that a Contract unit is larger than appropriate for the size of the Family in occupancy, housing assistance payments with respect to such unit will not be abated, unless the Owner fails to offer the Family a suitable unit as soon as one becomes vacant and ready for occupancy. In the case of an overcrowded unit, if the Owner does not have any suitable units or if no vacancy of a suitable unit occurs within a reasonable time, HUD (or the PHA) will assist the Family in finding a suitable dwelling unit and require the Family to move to such a unit as soon as possible. The Owner may receive housing assistance payments for the vacated unit if he complies with the requirements of Sec. 884.106(c)(1). Sec. 884.220 Adjustment of utility allowances. In connection with annual and special adjustments of contract rents, the owner must submit an analysis of the project's Utility Allowances. Such data as changes in utility rates and other facts affecting utility consumption should be provided as part of this analysis to permit appropriate adjustments in the Utility Allowances. In addition, when approval of a utility rate change would result in a cumulative increase of 10 percent or more in the most recently approved Utility Allowances, the project owner must advise the Secretary and request approval of new Utility Allowances. Whenever a Utility Allowance for a unit is adjusted, the owner will promptly notify affected families and make a corresponding adjustment of the tenant rent and the amount of the housing assistance payment for the unit. (Approved by the Office of Management and Budget under control number 2502-0161) [50 FR 39098, Sept. 27, 1985] [[Page 134]] Sec. 884.221 Continued family participation. A Family must continue to occupy its approved unit to remain eligible for participation in the Housing Assistance Payments Program except that if the Family (a) wishes to vacate its unit at the end of the Lease term (or prior thereto but in accordance with the provisions of the Lease), or (b) is required to move for reasons other than violation of the Lease on the part of the Family, and if the Family wishes to receive the benefit of housing assistance payments in another approvable unit, the Family should give reasonable notice of the circumstances to HUD or to the PHA, as appropriate, so that HUD or the PHA may have the opportunity to consider the Family's request. Sec. 884.222 Inapplicability of low-rent public housing model lease and grievance procedures. Model lease and grievance procedures established by HUD for PHA- owned low-rent public housing are applicable only to PHA-Owner Projects under the Section 8 Housing Assistance Payments Program. Sec. 884.223 Leasing to eligible families. (a) Availability of units for occupancy by Eligible Families. During the term of the Contract, an owner shall make available for occupancy by eligible families the total number of units for which assistance is committed under the Contract. For purposes of this section, making units available for occupancy by eligible families means that the owner: (1) Is conducting marketing in accordance with Sec. 884.214; (2) has leased or is making good faith efforts to lease the units to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; and (3) has not rejected any such applicant family except for reasons acceptable to HUD (or the PHA in accordance with HUD guidelines and at the direction of HUD, as appropriate). If the owner is temporarily unable to lease all units for which assistance is committed under the Contract to eligible families, one or more units may be leased to ineligible families with the prior approval of HUD (or the PHA in accordance with HUD guidelines and at the direction of HUD, as appropriate). Failure on the part of the owner to comply with these requirements is a violation of the Contract and grounds for all available legal remedies, including specific performance of the Contract, suspension or debarment from HUD programs, and reduction of the number of units under the Contract as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by Contract. HUD (or the PHA at the direction of HUD, as appropriate), after consultation with the Farmers Home Administration, may reduce the number of units covered by the Contract to the number of units available for occupancy by eligible families if: (1) The owner fails to comply with the requirements of paragraph (a) of this section; or (2) Notwithstanding any prior approval by HUD (or the PHA at the direction of HUD, as appropriate) to lease such units to ineligible families, HUD (or the PHA at the direction of HUD, as appropriate) determines that the inability to lease units to eligible families is not a temporary problem. (c) Restoration. HUD will agree to an amendment of the ACC or the Contract, as appropriate, to provide for subsequent restoration of any reduction made pursuant to paragraph (b) of this section if: (1) HUD determines that the restoration is justified by demand; (2) The owner otherwise has a record of compliance with his or her obligations under the Contract; and (3) Contract and budget authority are available. (d) Applicability. In accordance with section 555 of the Cranston- Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and (b) of this section apply to all contracts. An owner who had leased an assisted unit to an ineligible family consistent with the regulations in effect at the time will continue to lease the unit to that family. However, the owner must make the unit available for occupancy by an eligible family when the ineligible family vacates the unit. (e) Termination of assistance for failure to establish citizenship or eligible immigration status. If an owner subject to [[Page 135]] paragraphs (a) and (b) of this section is required to terminate housing assistance payments for the family in accordance with 24 CFR part 5 because the owner determines that the entire family does not have U.S. citizenship or eligible immigration status, the owner may allow continued occupancy of the unit by the family without Section 8 assistance following the termination of assistance, or if the family constitutes a mixed family, as defined in 24 CFR part 5, the owner shall comply with the provisions of 24 CFR part 5 concerning assistance to mixed families, and deferral of termination of assistance. (f) The regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to this section. [49 FR 31398, Aug. 7, 1984, as amended at 53 FR 847, Jan. 13, 1988; 53 FR 6601, Mar. 2, 1988; 59 FR 13653, Mar. 23, 1994; 60 FR 14846, Mar. 20, 1995; 61 FR 13594, Mar. 27, 1996; 73 FR 72343, Nov. 28, 2008; 75 FR 66261, Oct. 27, 2010; 81 FR 80813, Nov. 16, 2016] Sec. 884.223a Preference for occupancy by elderly families. (a) Election of preference for occupancy by elderly families--(1) Election by owners of eligible projects. (i) An owner of a project assisted under this part (including a partially assisted project) that was originally designed primarily for occupancy by elderly families (an ``eligible project'') may, at any time, elect to give preference to elderly families in selecting tenants for assisted, vacant units in the project, subject to the requirements of this section. (ii) For purposes of this section, a project eligible for the preference provided by this section, and for which the owner makes an election to give preference in occupancy to elderly families is referred to as an ``elderly project.'' ``Elderly families'' refers to families whose heads of household, their spouses or sole members are 62 years or older. (iii) An owner who elects to provide a preference to elderly families in accordance with this section is required to notify families on the waiting list who are not elderly that the election has been made and how the election may affect them if: (A) The percentage of disabled families currently residing in the project who are neither elderly nor near-elderly (hereafter, collectively referred to as ``non-elderly disabled families'') is equal to or exceeds the minimum required percentage of units established for the elderly project in accordance with paragraph (c)(1) of this section, and therefore non-elderly families on the waiting list (including non- elderly disabled families) may be passed over for covered section 8 units; or (B) The project, after making the calculation set forth in paragraph (c)(1) of this section, will have no units set aside for non-elderly disabled families. (iv) An owner who elects to give a preference for elderly families in accordance with this section shall not remove an applicant from the project's waiting list solely on the basis of having made the election. (2) HUD approval of election not required. (i) An owner is not required to solicit or obtain the approval of HUD before exercising the election of preference for occupancy provided in paragraph (a)(1) of this section. The owner, however, if challenged on the issue of eligibility of the project for the election provided in paragraph (a)(1) of this section must be able to support the project's eligibility through the production of all relevant documentation in the possession of the owner that pertains to the original design of the project. (ii) The Department reserves the right at any time to review and make determinations regarding the accuracy of the identification of the project as an elderly project. The Department can make such determinations as a result of ongoing monitoring activities, or the conduct of complaint investigations under the Fair Housing Act (42 U.S.C. 3601 through 3619), or compliance reviews and complaint investigations under section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and other applicable statutes. (b) Determining projects eligible for preference for occupancy by elderly families--(1) Evidence supporting project eligibility. Evidence that a project assisted under this part (or portion of a project) [[Page 136]] was originally designed primarily for occupancy by elderly families, and is therefore eligible for the election of occupancy preference provided by this section, shall consist of at least one item from the sources (``primary'' sources) listed in paragraph (b)(1)(i) of this section, or at least two items from the sources (``secondary'' sources) listed in paragraph (b)(1)(ii) of this section: (i) Primary sources. Identification of the project (or portion of a project) as serving elderly (seniors) families in at least one primary source such as: the application in response to the notice of funding availability; the terms of the notice of funding availability under which the application was solicited; the regulatory agreement; the loan commitment; the bid invitation; the owner's management plan, or any underwriting or financial document collected at or before loan closing; or (ii) Secondary sources. Two or more sources of evidence such as: lease records from the earliest two years of occupancy for which records are available showing that occupancy has been restricted primarily to households where the head, spouse or sole member is 62 years of age or older; evidence that services for elderly persons have been provided, such as services funded by the Older Americans Act, transportation to senior citizen centers, or programs coordinated with the Area Agency on Aging; project unit mix with more than fifty percent of efficiency and one-bedroom units [a secondary source particularly relevant to distinguishing elderly projects under the previous section 3(b) definition (in which disabled families were included in the definition of ``elderly families'') from non-elderly projects and which in combination with other factors (such as the number of accessible units) may be useful in distinguishing projects for seniors from those serving the broader definition of ``elderly families'' which includes disabled families]; or any other relevant type of historical data, unless clearly contradicted by other comparable evidence. (2) Sources in conflict. If a primary source establishes a design contrary to that established by the primary source upon which the owner would base support that the project is an eligible project (as defined in this section), the owner cannot make the election of preferences for elderly families as provided by this section based upon primary sources alone. In any case where primary sources do not provide clear evidence of original design of the project for occupancy primarily by elderly families, including those cases where sources documents conflict, secondary sources may be used to establish the use for which the project was originally designed. (c) Reservation of units in elderly projects for non-elderly disabled families. The owner of an elderly project is required to reserve, at a minimum, the number of units specified in paragraph (c)(1) of this section for occupancy by non-elderly disabled families. (1) Minimum number of units to be reserved for non-elderly disabled families. The number of units in an elderly project required to be reserved for occupancy by non-elderly disabled families, shall be, at a minimum, the lesser of: (i) The number of units equivalent to the higher of-- (A) The percentage of units assisted under this part in the elderly project that were occupied by non-elderly disabled families on October 28, 1992; and (B) The percentage of units assisted under this part in the elderly project that were occupied by non-elderly disabled families upon January 1, 1992; or (ii) 10 percent of the number of units assisted under this part in the eligible project. (2) Option to reserve greater number of units for non-elderly disabled families. The owner, at the owner's option, and at any time, may reserve a greater number of units for non-elderly disabled families than that provided for in paragraph (c)(1) of this section. The option to provide a greater number of units to non-elderly disabled families will not obligate the owner to always provide that greater number to non-elderly disabled families. The number of units required to be provided to non-elderly disabled families at any time in an elderly project is that number determined under paragraph (c)(1) of this section. [[Page 137]] (d) Secondary preferences. An owner of an elderly project also may elect to establish secondary preferences in accordance with the provisions of this paragraph (d) of this section. (1) Preference for near-elderly disabled families in units reserved for elderly families. If the owner of an elderly project determines, in accordance with paragraph (f) of this section, that there are an insufficient number of elderly families who have applied for occupancy to fill all the vacant units in the elderly project reserved for elderly families (that is, all units except those reserved for the non-elderly disabled families as provided in paragraph (c) of this section), the owner may give preference for occupancy of such units to disabled families who are near-elderly families. (2) Preference for near-elderly disabled families in units reserved for non-elderly disabled families. If the owner of an elderly project determines, in accordance with paragraph (f) of this section, that there are an insufficient number of non-elderly disabled families to fill all the vacant units in the elderly project reserved for non-elderly disabled families as provided in paragraph (c) of this section, the owner may give preference for occupancy of these units to disabled families who are near-elderly families. (e) Availability of units to families without regard to preference. An owner shall make vacant units in an elderly project generally available to otherwise eligible families who apply for housing, without regard to the preferences and reservation of units provided in this section if either: (1) The owner has adopted the secondary preferences and there are an insufficient number of families for whom elderly preference, reserve preference, and secondary preference has been given, to fill all the vacant units; or (2) The owner has not adopted the secondary preferences and there are an insufficient number of families for whom elderly preference, and reserve preference has been given to fill all the vacant units. (f) Determination of insufficient number of applicants qualifying for preference. To make a determination that there are an insufficient number of applicants who qualify for the preferences, including secondary preferences, provided by this section, the owner must: (1) Conduct marketing in accordance with Sec. 884.214(a) to attract applicants qualifying for the preferences and reservation of units set forth in this section; and (2) Make a good faith effort to lease to applicants who qualify for the preferences provided in this section, including taking all feasible actions to fill vacancies by renting to such families. (g) Prohibition of evictions. An owner may not evict a tenant without good cause, or require that a tenant vacate a unit, in whole or in part because of any reservation or preference provided in this section, or because of any action taken by the Secretary pursuant to subtitle D (sections 651 through 661) of title VI of the Housing and Community Development Act of 1992 (42 U.S.C. 13611 through 13620). [59 FR 65855, Dec. 21, 1994, as amended at 61 FR 9047, Mar. 6, 1996; 65 FR 16723, Mar. 29, 2000] Sec. 884.224 Management and occupancy reviews. (a) The contract administrator will conduct management and occupancy reviews to determine whether the owner is in compliance with the Contract. Such reviews will be conducted in accordance with a schedule set out by the Secretary and published in the Federal Register, following notice and the opportunity to comment. Where a change in ownership or management occurs, a management and occupancy review must be conducted within six months. (b) HUD or the Contract Administrator may inspect project operations and units at any time. (c) Equal Opportunity reviews may be conducted by HUD at any time. [87 FR 37997, June 27, 2022] Sec. 884.225 PHA reporting requirements. [Reserved] Sec. 884.226 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. (a) Covered housing providers must develop and implement an emergency [[Page 138]] transfer plan that meets the requirements in 24 CFR 5.2005(e). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking, covered housing providers have discretion to adopt new, and modify any existing, admission preferences or transfer waitlist priorities. (c) In addition to following requirements in 24 CFR 5.2005(e), when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, or stalking who qualifies for an emergency transfer, covered housing providers must: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, covered housing providers must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), including data on the outcomes of such requests. [81 FR 80813, Nov. 16, 2016] PART 886_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM_SPECIAL ALLOCATIONS--Table of Contents Subpart A_Additional Assistance Program for Projects With HUD-Insured and HUD-Held Mortgages Sec. 886.101 Applicability. 886.102 Definitions. 886.103 Allocation of Section 8 contract authority. 886.104 Invitations to participate. 886.105 Content of application; Disclosure. 886.106 Notices. 886.107 Approval of applications. 886.108 Maximum annual contract commitment. 886.109 Housing assistance payments to owners. 886.110 Contract rents. 886.111 Term of contract. 886.111a Notice upon contract expiration. 886.112 Rent adjustments. 886.113 Physical condition standard; physical inspection requirements. 886.114 Equal opportunity requirements. 886.115 [Reserved] 886.116 Security and utility deposits. 886.117 [Reserved] 886.118 Amount of housing assistance payments in projects receiving other HUD assistance. 886.119 Responsibilities of the owner. 886.120 Responsibility for contract administration. 886.121 Marketing. 886.122 [Reserved] 886.123 Maintenance, operation, and inspections. 886.124 Reexamination of family income and composition. 886.125 Overcrowded and underoccupied units. 886.126 Adjustment of utility allowances. 886.127 Lease requirements. 886.128 Termination of tenancy. 886.129 Leasing to eligible families. 886.130 Management and occupancy reviews. 886.131 Audit. 886.132 Tenant selection. 886.138 Displacement, relocation, and acquisition. 886.139 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. 886.140 Broadband infrastructure. Subpart B [Reserved] Subpart C_Section 8 Housing Assistance Program for the Disposition of HUD-Owned Projects 886.301 Purpose. 886.302 Definitions. 886.303 Allocation and reservation of Section 8 contract authority and budget authority. 886.304 Project eligibility criteria. 886.305 Disclosure and verification of Social Security and Employer Identification Numbers by owners. 886.306 Notices. 886.307 Physical condition standards; physical inspection requirements. 886.308 Maximum total annual contract commitment. 886.309 Housing assistance payment to owners. 886.310 Initial contract rents. 886.311 Term of contract. 886.311a Notice upon contract expiration. 886.312 Rent adjustments. 886.313 Other Federal requirements. 886.314 Financial default. 886.315 Security and utility deposits. 886.316-886.317 [Reserved] 886.318 Responsibilities of the owner. 886.319 Responsibility for contract administration. [[Page 139]] 886.320 Default under the contract. 886.321 Marketing. 886.322 [Reserved] 886.323 Maintenance, operation, and inspections. 886.324 Reexamination of family income and composition. 886.325 Overcrowded and underoccupied units. 886.326 Adjustment of utility allowances. 886.327 Lease requirements. 886.328 Termination of tenancy. 886.329 Leasing to eligible families. 886.329a Preferences for occupancy by elderly families. 886.330 Work write-ups and cost estimates. 886.331 Agreement to enter into housing assistance payments contract. 886.332 Rehabilitation period. 886.333 Completion of rehabilitation. 886.334 Execution of housing assistance payments contract. 886.335 Management and occupancy reviews. 886.336 Audit. 886.337 Selection preferences. 886.338 Displacement, relocation, and acquisition. 886.339 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. 886.340 Broadband infrastructure. Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619. Subpart A_Additional Assistance Program for Projects With HUD-Insured and HUD-Held Mortgages Source: 42 FR 5603, Jan. 28, 1977, unless otherwise noted. Sec. 886.101 Applicability. (a) The policies and procedures of this subpart apply to Housing Assistance Payments under Section 8 of the United States Housing Act of 1937 on behalf of Eligible Families in Eligible Projects (see definitions in Sec. 886.102). (b) The primary goal of the Section 8 Loan Management Set-Aside Program is to reduce claims on the Department's insurance fund by aiding those FHA-insured or Secretary-Held projects with immediately or potentially serious financial difficulties. A first priority should be given to projects with presently serious financial problems, which are likely to result in a claim on the insurance fund in the near future. To the extent resources remain available, assistance also may be provided to projects with potentially serious financial problems which, on the basis of financial and/or management analysis, appear to have a high probability of producing a claim on the insurance fund within approximately the next five years. [42 FR 5603, Jan. 28, 1977, as amended at 53 FR 3368, Feb. 5, 1988] Sec. 886.102 Definitions. The terms Fair Market Rent (FMR), HUD, Public Housing Agency (PHA), and Secretary are defined in 24 CFR part 5. Act. The United States Housing Act of 1937. Annual income. As defined in part 5 of this title. Contract (See Section 8 Contract). Contract Rent. The rent payable to the Owner as required by HUD in connection with its mortgage insurance and/or lending functions, including the portion of the rent payable by the Family, not to exceed the amount stated in the Section 8 Contract as such amount may be adjusted in accordance with Sec. 886.112. In the case of a cooperative, the term ``Contract Rent'' means charges under the occupancy agreements between the members and the cooperative. Covered housing provider. For the Section 8 Housing Assistance Payments Programs--Special Allocations, subpart A of this part, ``covered housing provider,'' as such term is used in HUD's regulations at 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) refers to the owner. Decent, Safe, and Sanitary. Housing is decent, safe, and sanitary if it meets the physical condition requirements in 24 CFR part 5, subpart G. Eligible Project. Any existing subsidized or unsubsidized multifamily residential project that is subject to a mortgage insured or any section of the National Housing Act; any such project subject to a mortgage that has been assigned to the Secretary; any such project acquired by the Secretary and thereafter sold under a Secretary-held purchase money mortgage; or a project for the elderly financed under section 202 of the Housing Act of 1959 (except [[Page 140]] projects receiving assistance under 24 CFR part 885). Family. As defined in part 5 of this title. HCD Act. The Housing and Community Development Act of 1974. Housing Assistance Payment. The payment made by HUD to the Owner of an assisted unit as provided in the Contract. Where the unit is leased to an eligible Family, the payment is the difference between the Contract Rent and the Tenant Rent. An additional Housing Assistance Payment is made when the Utility Allowance is greater than the Total Tenant Payment. A Housing Assistance Payment may be made to the Owner when a unit is vacant, in accordance with Sec. 886.109. Income. Income from all sources of each member of the household as determined in accordance with criteria established by HUD and as defined in part 5 of this title. Lease. A written agreement between the owner and a family for leasing of a decent, safe and sanitary dwelling unit to the family. Low-income family. As defined in part 5 of this title. Owner. The mortgagor of record under a multifamily project mortgage insured, or held by the Secretary, including purchase money mortgages; the owner of a Section 202 project. Project. See Sec. 886.101. Project Account. The account established and maintained in accordance with Sec. 886.108. Section 8 Contract (``Contract''). A written Contract between the Owner of an Eligible Project and HUD for providing Housing Assistance Payments to the Owner on behalf of Eligible Families pursuant to this part. Subsidized Rent. In Section 221(d)(3) BMIR, Section 202, or Section 236 projects, the rent payable to the project, based on the particular circumstances of any assisted tenant in the absence of any Housing Assistance Payment. Tenant rent. As defined in part 5 of this title. Total tenant payment. As defined in part 5 of this title. Utility allowance. As defined in part 5 of this title. Utility reimbursement. As defined in part 5 of this title. Very low-income family. As defined in part 5 of this title. [42 FR 5603, Jan. 28, 1977, as amended at 42 FR 63745, Dec. 19, 1977; 49 FR 19948, May 10, 1984; 50 FR 38795, Sept. 25, 1985; 53 FR 3368, Feb. 5, 1988; 61 FR 5213, Feb. 9, 1996; 63 FR 46579, Sept. 1, 1998; 65 FR 16723, Mar. 29, 2000; 70 FR 77744, Dec. 30, 2005; 81 FR 80813, Nov. 16, 2016] Sec. 886.103 Allocation of Section 8 contract authority. HUD will allocate to field offices contract authority for Section 8 project commitments for metropolitan and nonmetropolitan areas in conformance with Section 213(d) of the HCD Act. Sec. 886.104 Invitations to participate. (a) HUD shall identify Eligible Projects which are most likely to meet the selection criteria set forth in Sec. 886.117, and shall invite the Owners of such projects to make application for Section 8 assistance under this part. (b) An Owner of an Eligible Project who has not been notified pursuant to paragraph (a) of this section may also make application for such assistance. Sec. 886.105 Content of application; Disclosure. Applications shall be in the form and in accordance with the instructions prescribed by HUD, and shall include: (a) Information on Gross Income, family size, and amount of rent paid to the project by Families currently in residence; (b) Information on vacancies and turnover; (c) Estimate of effect of the availability of Section 8 assistance on marketability of units in the project; (d) For projects having a history of financial default, financial difficulties or deferred maintenance, a plan and a schedule for remedying such defaulted or deferred obligations; (e) Total number of units by unit size (by bedroom count) for which Section 8 assistance is requested; and (f) Affirmative Fair Housing Marketing Plan on a HUD-prescribed form. To be eligible to become an owner of housing assisted under this subpart, the owner must meet the disclosure [[Page 141]] and verification requirements for Social Security and Employer Identification Numbers, as provided by part 5, subpart B, of this title. (Approved by the Office of Management and Budget under control number 2502-0204) [42 FR 5603, Jan. 28, 1977, as amended at 54 FR 39708, Sept. 27, 1989; 61 FR 11118, Mar. 18, 1996] Sec. 886.106 Notices. (a) Within 10 days of receipt of each completed application by the HUD field office, the field office shall send to the chief executive officer of the unit of general local government in which the proposed assistance is to be provided, a notification in a form prescribed by HUD for purposes of compliance with Section 213 of the HCD Act. (b) If an application is approved, HUD shall send to the Owner a notice of application approval. If an application can be approved only on certain conditions, HUD shall notify the Owner of the conditions and specify a time limit by which those conditions must be met. If an application is disapproved, HUD shall so notify the Owner by letter indicating the reasons for disapproval. [42 FR 5603, Jan. 28, 1977, as amended at 53 FR 3368, Feb. 5, 1988] Sec. 886.107 Approval of applications. HUD shall approve applications, after considering all pertinent information including comments (if any) received during the comment period from the unit of general local government, based on the following criteria: (a) The Owner's Affirmative Fair Housing Marketing Plan is approvable. (b) The HUD-approved unit rents are approvable within the Fair Market Rent limitations contained in Sec. 886.110. (c) The residential units meet the housing quality standards set forth in Sec. 886.113, except for such variations as HUD may approve. Local climatic or geological conditions or local codes are examples which may justify such variations. (d) A significant number of residents, or potential residents, in the case of projects having a vacancy rate over 10 percent, are eligible for and in need of Section 8 assistance. (e) The infusion of Section 8 assistance into the subject project should not affect other HUD-related multifamily housing within the same neighborhood in a substantially adverse manner. Examples of such adverse effects are (1) substantial move-outs from nearby HUD-related projects precipitated by much lower rents in the subject project, or (2) substantial diversion of prospective applicants from such projects to the subject project. (f) A first priority is given to HUD-Insured or Secretary-Held projects with presently serious financial problems, which are likely to result in a claim on the insurance fund in the near future. To the extent resources remain available, assistance also may be provided to projects with potentially serious financial problems which, on the basis of financial and/or management analysis, appear to have a high probability of producing a claim on the insurance funds within approximately the next five years. (g) The infusion of Section 8 assistance into the subject project solves an identifiable problem, e.g., high vacancies and/or turnover, and provides a reasonable assurance of long-term project viability. A determination of long-term viability shall be based upon the following considerations: (1) The project is not subject to any serious problems that are non- economic in nature. Examples of such problems are poor location, structural deficiencies or disinterested ownership. (2) The Owner is in substantial compliance with the Regulatory Agreement. Owners are not diverting project funds for personal use. No dividends are being paid during any period of financial difficulty. (3) The management agent is in substantial compliance with the management agreement. The current management agreement has been approved by HUD. Financial records are adequately kept. Occupancy requirements are being met. Marketing and maintenance programs are being carried out in an adequate manner, based upon available financial resources. (4) The project's problems are primarily the result of factors beyond the control of the present ownership and management. [[Page 142]] (5) The major problems are traceable to an inadequate cash flow. (6) The infusion of Section 8 assistance will solve the cash flow problem by: (i) Making it possible to grant needed rent increases; (ii) Reducing turnover, vacancies and collection losses. (7) The Owner's plan for remedying any deferred maintenance, financial problems, or other problems is realistic and achievable. There is positive evidence that the Owner will carry out the plan. Examples of such evidence are the Owner's past performance in correcting problems and, in the case of profit-motivated Owners, any cash contributions made to correct project problems. (h) Any plan submitted pursuant to Sec. 886.105(d) is found by HUD to be adequate. Sec. 886.108 Maximum annual contract commitment. (a) Number of units assisted. Based on analysis of housing assistance needs of families residing or expected to reside in the project, HUD shall determine the number of units to be assisted up to 100 percent of the units in the project. All units currently assisted under section 23 or section 8 shall be converted and included under the Contract pursuant to this subpart, unless the parties to the Lease or Contract object to such conversion. Units assisted under section 101 of the Housing and Urban Development Act of 1965 or under section 236(f)(2) of the National Housing Act shall not be included under the Contract pursuant to this subpart unless the Owner proposes and HUD approves such conversion. (b) Maximum annual Contract commitment. The maximum annual housing assistance payments that may be committed under the Contract shall be that amount which, when paid annually over the term of the Contract, is determined by HUD to be sufficient to provide for all housing assistance payments and fees under the Contract. (c) Project Account. In order to assure that housing assistance payments will be increased on a timely basis to cover increases in Contract Rents or decreases in Family Incomes: (1) A Project Account shall be established and maintained, in an amount as determined by the Secretary consistent with his responsibilities under section 8(c)(6) of the Act, out of amounts by which the maximum annual Contract commitment per year exceeds amounts paid under the Contract for any year. This account shall be established and maintained by HUD for each project as a specifically identified and segregated account, and payment shall be made therefrom only for the purposes of (i) housing assistance payments, and (ii) other costs specifically authorized or approved by the Secretary. (2) Whenever a HUD-approved estimate of required housing assistance payments for a fiscal year exceeds the maximum annual Contract commitment, and would cause the amount in the Project Account to be less than an amount equal to 40 percent of such maximum annual Contract commitment, HUD shall, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the Act as may be necessary to carry out this assurance, including (as provided in that section of the Act) ``the allocation of a portion of new authorizations for the purpose of amending housing assistance contracts.'' Sec. 886.109 Housing assistance payments to owners. (a) General. Housing Assistance Payments shall be paid to Owners for units under lease by eligible families, in accordance with the Contract and as provided in this section. These Housing Assistance Payments will cover the difference between the Contract Rent and the Tenant Rent. Where applicable, the Utility Reimbursement will be paid to the Family as an additional Housing Assistance Payment. The Contract will provide that the Owner will make this payment on behalf of HUD. Funds will be paid to the Owner in trust solely for the purpose of making this additional payment. If the Family and the utility company consent, the Owner may pay the Utility Reimbursement jointly to the Family and the utility company or directly to the utility company. (b) No Section 8 assistance may be provided for any unit occupied by an [[Page 143]] Owner; cooperatives are considered rental housing. (c) If an Eligible Family vacates its unit (other than as a result of action by the Owner which is in violation of the Lease or the Contract or any applicable law), the Owner shall receive housing assistance payments in the amount of 80 percent of the Contract Rent for a vacancy period not exceeding 60 days: Provided, however, That if the Owner collects any of the Family's share of the rent for this period, or applies security deposits for unpaid rent, in amounts which when added to the 80 percent payments, results in more than the Contract Rent, such excess shall be payable to HUD or as HUD may direct. (See also Sec. 886.116.) The Owner shall not be entitled to any payment under this paragraph unless he: (1) Immediately upon learning of the vacancy, has notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy, and (2) Has taken and continues to take all feasible actions to fill the vacancy including, but not limited to, contacting applicants on his waiting list (if any), and advising them of the availability of the unit, and (3) Has not rejected any eligible applicant except for good cause. [42 FR 5603, Jan. 28, 1977, as amended at 49 FR 19948, May 10, 1984] Sec. 886.110 Contract rents. (a) The sum of the Contract Rents plus an Allowance for Utilities and Other Services shall not exceed the published Section 8 Fair Market Rents for Existing Housing, except that they may be exceeded by: (1) Up to 10 percent if the Field Office Director determines that special circumstances warrant such higher rents, or (2) By up to 20 percent where the Regional Administrator determines that special circumstances warrant such higher rents, and in either case, such higher rents meet the test of reasonableness in paragraph (c) of this section. (b) In the case of any project completed not more than six years prior to the application for assistance under that part, or in the case of units converted to Section 8 which were previously assisted under Section 101 of the Housing and Urban Development Act of 1965 or Section 236(f)(2) of the National Housing Act, contract rents plus any allowance for utilities and other services may be as high as 75 percent of the published Section 8 Fair Market Rents for New Construction, which limitation may be increased: (1) By up to 10 percent if the Field Office Director determines that special circumstances warrant such higher rents, or (2) by up to 20 percent where the Regional Administrator determines that special circumstances warrant such higher rents, and in either case, such higher rents meet the test of reasonableness contained in paragraph (c) of this section. The project shall be converted using the current HUD approved rent level established pursuant to 24 CFR 207.19(e)(2)(i). (c) In any case, HUD shall determine and so certify that the Contract Rents for the project do not exceed rents which are reasonable for the location, quality, amenities, facilities, and management and maintenance services in relation to the rents paid for comparable units in the private unassisted market, nor shall the Contract Rents exceed the rents charged by the Owner to unassisted Families for comparable units. HUD shall maintain for three years all certifications and relevant documentation under this paragraph (c). [42 FR 5603, Jan. 28, 1977, as amended at 48 FR 36103, Aug. 9, 1983; 48 FR 56949, Dec. 27, 1983] Sec. 886.111 Term of contract. A Contract may be for an initial term of not more than 5 years, renewable for successive 5 year terms by agreement between HUD and the Owner: Provided, That the total Contract term, including renewals, shall not exceed 15 years. Sec. 886.111a Notice upon contract expiration. (a) The Contract will provide that the owner will notify each assisted family, at least 90 days before the end of the Contract term, of any increase in the amount the family will be required to pay as rent which may occur [[Page 144]] as a result of its expiration. If the Contract is to be renewed but with a reduction in the number of units covered by it, this notice shall be given to each family who will not longer be assisted under the Contract. (b) The notice provided for in paragraph (a) of this section shall be accomplished by: (1) Sending a letter by first class mail, properly stamped and addressed, to the family at its address at the project, with a proper return address, and (2) serving a copy of the notice on any adult person answering the door at the leased dwelling unit, or if no adult responds, by placing the notice under or through the door, if possible, or else by affixing the notice to the door. Service shall not be considered to be effective until both required notices have been accomplished. The date on which the notice shall be considered to be received by the family shall be the date on which the owner mails the first class letter provided for in this paragraph, or the date on which the notice provided for in this paragraph is properly given, whichever is later. (c) The notice shall advise each affected family that, after the expiration date of the Contract, the family will be required to bear the entire cost of the rent and that the owner will be free (to the extent the project is not otherwise regulated by HUD) to alter the rent without HUD approval, but subject to any applicable requirements or restrictions under the lease or under State or local law. The notice shall also state: (1) The actual (if known) or the estimated rent which will be charged following the expiration of the Contract; (2) the difference between the rent and the Total Tenant Payment toward rent under the Contract; and (3) the date the Contract will expire. (d) The owner shall give HUD a certification that families have been notified in accordance with this section with an example of the text of the notice attached. (e) This section applies to all Contracts executed, renewed or amended on or after October 1, 1984. [49 FR 31285, Aug. 6, 1984] Sec. 886.112 Rent adjustments. This section applies to adjustments of the dollar amount stated in the Contract as the Maximum Unit Rent. It does not apply to adjustments in rents payable to Owners as required by HUD in connection with its mortgage insurance and/or lending functions. (a) Funding of adjustments. Housing Assistance Payments will be made in increased amounts commensurate with Contract Rent adjustments up to the maximum annual amount of housing assistance payments specified in the Contract pursuant to Sec. 886.108(b). (b) Annual adjustments. The contract rents may be adjusted annually, or more frequently, at HUD's option, either (1) on the basis of a written request for a rent increase submitted by the owner and properly supported by substantiating evidence, or (2) by applying, on each anniversary date of the contract, the applicable Automatic Annual Adjustment Factor most recently published by HUD in the Federal Register in accordance with 24 CFR part 888, subpart B. Published Automatic Annual Adjustment Factors will be reduced appropriately by HUD where utilities are paid directly by Families. If HUD requires that the owner submit a written request, HUD, within a reasonable time, shall approve a rental schedule that is necessary to compensate for any increase in taxes (other than income taxes) and operating and maintenance costs over which owners have no effective control, or shall deny the increase stating the reasons therefor. Increases in taxes and maintenance and operating costs shall be measured against levels of such expenses in comparable assisted and unassisted housing in the area to ensure that adjustments in the Contract Rents shall not result in material differences between the rents charged for assisted and comparable unassisted units. Contract Rents may be adjusted upward or downward as may be appropriate; however, in no case shall the adjusted rents be less than the contract rents on the effective date of the contract. (c) Special additional adjustments. Special additional adjustments shall be [[Page 145]] granted, when approved by HUD, to reflect increases in the actual and necessary expenses of owning and maintaining the Contract units which have resulted from substantial general increases in real property taxes, utility rates or similar costs (i.e., assessment, and utilities not covered by regulated rates), but only if and to the extent that the Owner clearly demonstrates that such general increases have caused increases in the Owner's operating costs which are not adequately compensated for by automatic annual adjustments. The Owner shall submit to HUD financial statements which clearly support the increase. (d) Overall limitation. Notwithstanding any other provisions of the subpart, adjustments as provided in this section shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by HUD. (e) Incorporation of rent adjustments. Any adjustment in Maximum Unit Rents shall be incorporated into the Contract by a dated addendum to the Contract establishing the effective date of the adjustment. [42 FR 5603, Jan. 28, 1977, as amended at 45 FR 59149, Sept. 8, 1980; 47 FR 24700, June 8, 1982] Sec. 886.113 Physical condition standard; physical inspection requirements. (a) General. Housing used in this program must be maintained and inspected in accordance with the requirements in 24 CFR part 5, subpart G. (b)-(m) [Reserved] (n) Congregate housing. In addition to the foregoing standards, the following standards apply to congregate housing: (1) The unit shall contain a refrigerator of appropriate size. (2) The central dining facility (and kitchen facility, if any) shall contain suitable space and equipment to store, prepare and serve food in a sanitary manner, and there shall be adequate facilities and services for the sanitary disposal of food wastes and refuse, including facilities for temporary storage where necessary (e.g., garbage cans). [42 FR 5603, Jan. 28, 1977, as amended at 52 FR 1895, Jan. 15, 1987; 52 FR 9828, Mar. 27, 1987; 53 FR 20802, June 6, 1988; 57 FR 33852, July 30, 1992; 63 FR 46579, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999; 88 FR 30500, May 11, 2023] Sec. 886.114 Equal opportunity requirements. Participation in the program authorized in this subpart requires compliance with (a) Title VI of the Civil Rights Act of 1964, Title VIII of the Civil Rights Act of 1968, Executive Orders 11063 and 11246, and section 3 of the Housing and Urban Development Act of 1968; and (b) all rules, regulations, and requirements issued pursuant thereto. Sec. 886.115 [Reserved] Sec. 886.116 Security and utility deposits. (a) An Owner may require Families to pay a security deposit in an amount up to, but not more than, one month's Gross Family Contribution. If a Family vacates its unit, the Owner, subject to State and local laws, may utilize the deposit as reimbursement for any unpaid rent or other amount owed under the Lease. If the Family has provided a security deposit and it is insufficient for such reimbursement, the Owner may claim reimbursement from HUD, not to exceed an amount equal to the remainder of one month's Contract Rent. Any reimbursement under this section shall be applied first toward any unpaid rent. If a Family vacates the unit owing no rent or other amount under the Lease or if such amount is less than the amount of the security deposit, the Owner shall refund the full amount or the unused balance, as the case may be, to the Family. (b) In those jurisdictions where interest is payable by the Owner on security deposits, the refunded amount shall include the amount of interest payable. All security deposit funds shall be deposited by the Owner in a segregated bank account, and the balance of this account, at all times, shall be equal to the total amount collected from tenants then in occupancy, plus any accrued interest. The Owner shall comply with all State and local laws regarding interest payments on security deposits. [[Page 146]] (c) Families shall be expected to obtain the funds to pay security and utility deposits, if required, from their own resources and/or other private or public sources. Sec. 886.117 [Reserved] Sec. 886.118 Amount of housing assistance payments in projects receiving other HUD assistance. (a) For any Section 221(d)(3) BMIR, Section 236, or Section 202 project, the Housing Assistance Payment shall be the amount by which the rent payable by the eligible Family under Section 8 is less than the subsidized rent (which subsidy shall not be reduced by reason of any Section 8 assistance). (b) In no event may any tenant benefit from more than one of the following subsidies: Rent Supplements, Section 236 deep subsidies, Section 23 leasing assistance, and Section 8 housing assistance. [42 FR 5603, Jan. 28, 1977, as amended at 49 FR 19948, May 10, 1984] Sec. 886.119 Responsibilities of the owner. (a) The Owner shall be responsible for management and maintenance of the project in conformance with requirements of the Regulatory Agreement. These responsibilities shall include but not be limited to: (1) Payment for utilities and services (unless paid directly by the Family), insurance and taxes; (2) Performance of all ordinary and extraordinary maintenance; (3) Performance of all management functions, including the taking of applications; determining eligibility of applicants in accordance with part 5 of this title; selection of families, including verification of income, in accordance with part 5 of this title, obtaining and verifying Social Security Numbers submitted by applicants (as provided by part 5, subpart B, of this title), obtaining signed consent forms from applicants for the obtaining of wage and claim information from State Wage Information Collection Agencies (as provided in part 5, subpart B, of this title), and other pertinent requirements; and determination of the amount of tenant rent in accordance with HUD established schedules and criteria. (4) Collection of Tenant Rents; (5) Termination of tenancies, including evictions; (6) Preparation and furnishing of information required under the Contract; (7) Reexamination of family income and composition, redetermination, as appropriate, of the amount of Tenant Rent and the amount of housing assistance payment in accordance with part 5 of this title; collection of rent; obtaining and verifying participant Social Security Numbers, as provided by part 5, subpart B, of this title; and obtaining signed consent forms from participants for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by part 5, subpart B, of this title. (8) Redeterminations of amount of Tenant Rent and amount of Housing Assistance Payment in accordance with part 5 of this title as a result of an adjustment by HUD of any applicable Utility Allowance; and (9) Compliance with equal opportunity requirements. (b) In the event of a financial default under the project mortgage, HUD shall have the right to make subsequent Housing Assistance Payments to the mortgagee until such time as the default is cured, or, at the option of the mortgagee and subject to HUD approval, until some other agreed-upon time. (c) Subject to HUD approval, any Owner may contract with any private or public entity to perform for a fee the services required by paragraph (a) of this section: Provided, That such contract shall not shift any of the Owner's responsibilities or obligations. (Approved by the Office of Management and Budget under control number 2502-0204) [42 FR 5603, Jan. 28, 1977, as amended at 49 FR 19948, May 10, 1984; 51 FR 11227, Apr. 1, 1986; 53 FR 847, Jan. 13, 1988; 53 FR 1165, Jan. 15, 1988; 53 FR 3368, Feb. 5, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39708, Sept. 27, 1989; 56 FR 7542, Feb. 22, 1991; 60 FR 14846, Mar. 20, 1995; 61 FR 9047, Mar. 6, 1996; 61 FR 11119, Mar. 18, 1996; 65 FR 16723, Mar. 29, 2000] [[Page 147]] Sec. 886.120 Responsibility for contract administration. (a) HUD is responsible for administration of the Contract. HUD may contract with another entity for the performance of some or all of its Contract administration functions. (b) The Contract shall contain a provision to the effect (1) that if HUD determines that the Owner is not in compliance under the Contract, HUD shall notify the Owner of the actions required to be taken to restore compliance and of the remedies to be applied by HUD including abatement of Housing Assistance Payments and recovery of overpayments, where appropriate; and (2) that if he fails to comply, HUD has the right to terminate the Contract or to take other corrective action. A default under the Regulatory Agreement shall be treated as non-compliance under the Contract. Sec. 886.121 Marketing. (a) Marketing of units and selection of Families by the Owner shall be in accordance with the Owner's HUD-approved Affirmative Fair Housing Marketing Plan, if required, and with all regulations relating to fair housing advertising including use of the equal opportunity logotype, statement, and slogan in all advertising. Projects shall be managed and operated without regard to race, color, creed, religion, sex, or national origin. (b) The Owner shall comply with the applicable provisions of the Contract, this subpart A, and the procedures of part 5 of this title in taking applications, selecting families, and all related determinations. (c) For the informal hearing provisions related to denial of assistance based upon failure to establish citizenship or eligible immigration status, see part 5, subpart E, of this title for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of denial of assistance. [42 FR 5603, Jan. 28, 1977, as amended at 53 FR 1166, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 60 FR 14846, Mar. 20, 1995; 65 FR 16723, Mar. 29, 2000] Sec. 886.122 [Reserved] Sec. 886.123 Maintenance, operation, and inspections. (a) Maintenance and operation. The Owner shall maintain and operate the project so as to provide housing that is compliant with 24 CFR part 5, subpart G, and the Owner shall provide all the services, maintenance, and utilities which the Owner agrees to provide under the Contract, subject to abatement of housing assistance payments or other applicable remedies if the Owner fails to meet these obligations. (b) Inspection prior to occupancy. Prior to occupancy of any unit by a Family, the Owner and the Family shall inspect the unit. On forms prescribed by HUD, the Owner and Family shall certify that they have inspected the unit, and the owner shall certify that the unit is compliant with 24 CFR part 5, subpart G, and with the criteria provided in the prescribed forms. Copies of these reports shall be kept on file by the Owner for at least three years. (c) Periodic inspections. HUD will inspect or cause to be inspected the contract units in accordance with the requirements in 24 CFR part 5, subpart G, and at such other times as may be necessary to assure that the owner is meeting contractual obligations. (d) Units not free of health and safety hazards. If HUD notifies the Owner that the Owner has failed to maintain a unit that is compliant with the requirements in 24 CFR part 5, subpart G, and the Owner fails to take corrective action within the time prescribed by notice, HUD may exercise any of its rights or remedies under the Contract, including abatement of housing assistance payments, even if the Family continues to occupy the unit. [88 FR 30500, May 11, 2023] Sec. 886.124 Reexamination of family income and composition. (a) Regular reexaminations. The owner must reexamine the income and composition of all families at least once each year. Upon verification of the information, the owner must make appropriate adjustments in the Total Tenant Payment in accordance with part 5 of this title and determine whether the family's unit size is still [[Page 148]] appropriate. The owner must adjust Tenant Rent and the Housing Assistance Payment to reflect any change in Total Tenant Payment and carry out any unit transfer required by HUD. At the time of the annual reexamination of family income and composition, the owner must require the family to disclose and verify Social Security Numbers. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see part 5, subpart B, of this title. At the first regular reexamination after June 19, 1995, the owner shall follow the requirements of part 5, subpart E, of this title concerning obtaining and processing evidence of citizenship or eligible immigration status of all family members. Thereafter, at each regular reexamination, the owner shall follow the requirements of part 5, subpart E, of this title concerning verification of the immigration status of any new family member. (b) Interim reexaminations. The family must comply with provisions in its lease regarding interim reporting of changes in income. If the owner receives information concerning a change in the family's income or other circumstances between regularly scheduled reexaminations, the owner must consult with the family and make any adjustments determined to be appropriate. Any change in the family's income or other circumstances that results in an adjustment in the Total Tenant Payment, Tenant Rent and Housing Assistance Payment must be verified. See part 5, subpart B, of this title for the requirements for the disclosure and verification of Social Security Numbers at interim reexaminations involving new family members. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see part 5, subpart B, of this title. At any interim reexamination after June 19, 1995, when there is a new family member, the owner shall follow the requirements of part 5, subpart E, of this title concerning obtaining and processing evidence of citizenship or eligible immigration status of the new family member. (c) Continuation of housing assistance payments. A family's eligibility for housing assistance payments will continue until the Total Tenant Payment equals the Gross Rent. The termination of eligibility will not affect the family's other rights under its lease, nor will such termination preclude the resumption of payments as a result of later changes in income, rents, or other relevant circumstances during the term of the Contract. However, eligibility also may be terminated in accordance with program requirements, for such reasons as failure to submit requested verification information, including failure to meet the disclosure and verification requirements for Social Security Numbers, as provided by part 5, subpart B, of this title, or failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by part 5, subpart B, of this title. For provisions requiring termination of assistance for failure to establish citizenship or eligible immigration status, see part 5, subpart E, of this title for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions concerning deferral of termination of assistance. (d) Streamlined income determination. An owner may elect to follow the provisions of 24 CFR 5.657(d). [56 FR 7542, Feb. 22, 1991, as amended at 60 FR 14846, Mar. 20, 1995; 61 FR 11119, Mar. 18, 1996; 65 FR 16723, Mar. 29, 2000; 81 FR 12371, Mar. 8, 2016] Sec. 886.125 Overcrowded and underoccupied units. If HUD determines that a contract unit assisted under this part is not Decent, Safe, and Sanitary by reason of increase in Family size or that a Contract unit is larger than appropriate for the size of the Family in occupancy, housing assistance payments with respect to such unit will not be abated, unless the Owner fails to offer the Family a suitable unit as soon as [[Page 149]] one becomes vacant and ready for occupancy. The Owner may receive housing assistance payments for the vacated unit if he complies with the requirements of Sec. 886.109. Sec. 886.126 Adjustment of utility allowances. When the owner requests HUD approval of adjustment in Contract Rents under Sec. 886.112, an analysis of the project's Utility Allowances must be included. Such data as changes in utility rates and other facts affecting utility consumption should be provided as part of this analysis to permit appropriate adjustments in the Utility Allowances. In addition, when approval of a utility rate change would result in a cumulative increase of 10 percent or more in the most recently approved Utility Allowances, the owner must advise the Secretary and request approval of new Utility Allowances. (Approved by the Office of Management and Budget under control numbers 2502-0352 and 2502-0354) [51 FR 21863, June 16, 1986] Sec. 886.127 Lease requirements. (a) Term of lease. (1) The term of a lease, including a new lease or a lease amendment, executed by the owner and the family must be for at least one year, or the remaining term of the contract if the remaining term of the contract is less than one year. (2) During the first year of the lease term, the owner may not terminate the tenancy for ``other good cause'' under 24 CFR 247.3(a)(3), unless the termination is based on family malfeasance or nonfeasance. For example, during the first year of the lease term, the owner may not terminate the tenancy for ``other good cause'' based on the failure by the family to accept the offer of a new lease. (3) The lease may contain a provision permitting the family to terminate the lease on 30 days advance written notice to the owner. In the case of a lease term for more than one year, the lease must contain this provision. (b) Required and prohibited provisions. The lease between the owner and the family must comply with HUD regulations and requirements, and must be in the form required by HUD. The lease may not contain any of the following types of prohibited provisions: (1) Admission of guilt. Agreement by the family (i) to be sued, (ii) to admit guilt, or (iii) to a judgment in favor of the owner, in a court proceeding against the family in connection with the lease. (2) Treatment of family property. Agreement by the family that the owner may take or hold family property, or may sell family property, without notice to the family and a court decision on the rights of the parties. (3) Excusing owner from responsibility. Agreement by the family not to hold the owner or the owner's agents responsible for any action or failure to act, whether intentional or negligent. (4) Waiver of notice. Agreement by the family that the owner does not need to give notice of a court proceeding against the family in connection with the lease, or does not need to give any notice required by HUD. (5) Waiver of court proceeding for eviction. Agreement by the family that the owner may evict the family (i) without instituting a civil court proceeding in which the family has the opportunity to present a defense, or (ii) before a decision by the court on the rights of the parties. (6) Waiver of jury trial. Agreement by the family to waive any right to a trial by jury. (7) Waiver of appeal. Agreement by the family to waive the right to appeal, or to otherwise challenge in court, a court decision in connection with the lease. (8) Family chargeable with legal costs regardless of outcome. Agreement by the family to pay lawyer's fees or other legal costs of the owner, even if the family wins in a court proceeding by the owner against the family. (However, the family may have to pay these fees and costs if the family loses.) [53 FR 3368, Feb. 5, 1988] Sec. 886.128 Termination of tenancy. Part 247 of this title (24 CFR part 247) applies to the termination of tenancy and eviction of a family assisted under this subpart. For cases involving termination of tenancy because of a failure to establish citizenship or eligible immigration status, the procedures of [[Page 150]] 24 CFR parts 247 and 5 shall apply. The provisions of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), apply to this section. The provisions of 24 CFR part 5, subpart E, of this title concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and concerning deferral of termination of assistance, also shall apply. [81 FR 80813, Nov. 16, 2016] Sec. 886.129 Leasing to eligible families. (a) Availability of units for occupancy by Eligible Families. During the term of the Contract, an owner shall make available for occupancy by eligible families the total number of units for which assistance is committed under the Contract. For purposes of this section, making units available for occupancy by eligible families means that the owner: (1) Is conducting marketing in accordance with Sec. 886.121; (2) has leased or is making good faith efforts to lease the units to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; and (3) has not rejected any such applicant family except for reasons acceptable to HUD. If the owner is temporarily unable to lease all units for which assistance is committed under the Contract to eligible families, one or more units may be leased to ineligible families with the prior approval of HUD. Failure on the part of the owner to comply with these requirements is a violation of the Contract and grounds for all available legal remedies, including specific performance of the Contract, suspension or debarment from HUD programs, and reduction of the number of units under the Contract as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by Contract. HUD may reduce the number of units covered by the Contract to the number of units available for occupancy by eligible families if: (1) The owner fails to comply with the requirements of paragraph (a) of this section; or (2) Notwithstanding any prior approval by HUD to lease such units to ineligible families, HUD determines that the inability to lease units to eligible families is not a temporary problem. (c) Restoration. HUD will agree to an amendment of the Contract to provide for subsequent restoration of any reduction made pursuant to paragraph (b) of this section if: (1) HUD determines that the restoration is justified by demand; (2) The owner otherwise has a record of compliance with his or her obligations under the Contract; and (3) Contract and budget authority are available. (d) Applicability. Paragraphs (a) and (b) of this section apply to Contracts executed on or after October 3, 1984. (e) Termination of assistance for failure to establish citizenship or eligible immigration status. If an owner subject to paragraphs (a) and (b) of this section is required to terminate housing assistance payments for the family in accordance with part 5, subpart E, of this title because the owner determines that the entire family does not have U.S. citizenship or eligible immigration status, the owner may allow continued occupancy of the unit by the family without Section 8 assistance following the termination of assistance, or if the family constitutes a mixed family, as defined in part 5, subpart E, of this title, the owner shall comply with the provisions of part 5, subpart E, of this title concerning assistance to mixed families, and deferral of termination of assistance. [49 FR 31399, Aug. 7, 1984, as amended at 53 FR 847, Jan. 13, 1988; 53 FR 6601, Mar. 2, 1988; 60 FR 14846, Mar. 20, 1995; 65 FR 16724, Mar. 29, 2000] Sec. 886.130 Management and occupancy reviews. (a) The contract administrator will conduct management and occupancy reviews to determine whether the owner is in compliance with the Contract. Such reviews will be conducted in accordance with a schedule set out by the Secretary and published in the Federal Register, following notice and the opportunity to comment. [[Page 151]] Where a change in ownership or management occurs, a management and occupancy review must be conducted within six months. (b) HUD or the Contract Administrator may inspect project operations and units at any time. (c) Equal Opportunity reviews may be conducted by HUD at any time. [87 FR 37997, June 27, 2022] Sec. 886.131 Audit. Where a non-Federal entity (as defined in 2 CFR 200.69) is the eligible owner of a project, or is a contract administrator under Sec. 886.120, receiving financial assistance under this part, the audit requirements in 2 CFR part 200, subpart F, shall apply. [80 FR 75941, Dec. 7, 2015] Sec. 886.132 Tenant selection. Subpart F of 24 CFR part 5 governs selection of tenants and occupancy requirements applicable under this subpart A of part 886. Subpart L of 24 CFR part 5 (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) applies to this section. [81 FR 80814, Nov. 16, 2016] Sec. 886.138 Displacement, relocation, and acquisition. (a) Minimizing displacement. Consistent with the other goals and objectives of this part, owners shall assure that they have taken all reasonable steps to minimize the displacement of persons (families, individuals, businesses, nonprofit organization, and farms) as a result of a project assisted under this part. (b) Temporary relocation. The following policies cover residential tenants who will not be required to move permanently but who must relocate temporarily for the project. Such tenants must be provided; (1) Reimbursement for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, including the cost of moving to and from the temporary housing and any increase in monthly rent/utility costs; and (2) Appropriate advisory services, including reasonable advance written notice of: (i) The date and approximate duration of the temporary relocation; (ii) The location of the suitable, decent, safe, and sanitary dwelling to be made available for the temporary period; (iii) The terms and conditions under which the tenant may lease and occupy a suitable, decent, safe, and sanitary dwelling in the building/ complex following completion of the rehabilitation; and (iv) The provisions of paragraph (b)(1) of this section. (c) Relocation assistance for displaced persons. A ``displaced person'' (as defined in paragraph (g) of this section) must be provided relocation assistance at the levels described in, and in accordance with the requirements of, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and implementing regulations at 49 CFR part 24. A ``displaced person'' shall be advised of his or her rights under the Fair Housing Act (42 U.S.C. 3601-19), and, if the representative comparable replacement dwelling used to establish the amount of the replacement housing payment to be provided to a minority person is located in an area of minority concentration, such person also shall be given, if possible, referrals to comparable and suitable, decent, safe, and sanitary replacement dwellings not located in such areas. (d) Real property acquisition requirements. The acquisition of real property for a project is subject to the URA and the requirements described in 49 CFR part 24, subpart B. (e) Appeals. A person who disagrees with the Owner's determination concerning whether the person qualifies as a ``displaced person,'' or the amount of relocation assistance for which the person is found to be eligible, may file a written appeal of that determination with the owner. A low-income person who is dissatisfied with the owner's determination on such appeal may submit a written request for review of that determination to the HUD Field Office. [[Page 152]] (f) Responsibility of owner. (1) The owner shall certify (i.e., provide assurance of compliance, as required by 49 CFR part 24) that he or she will comply with the URA, the regulations at 49 CFR part 24, and the requirements of this section. The owner is responsible for such compliance notwithstanding and third party's contractual obligation to the owner to comply with these provisions. (2) The cost of providing required relocation assistance is an eligible project cost to the same extent and in the same manner as other project costs. Such costs also may be paid for with funds available from other sources. (3) The owner shall maintain records in sufficient detail to demonstrate compliance with the provisions of this section. The owner shall maintain data on the race, ethnic, gender, and handicap status of displaced persons. (g) Definition of displaced person. (1) for purposes of this section, the term displaced person means a person (family, individual, business, nonprofit organization, or farm) that moves from real property, or moves personal property from real property, permanently, as a direct result of acquisition, rehabilitation, or demolition for a project assisted under this part. This includes any permanent, involuntary move for an assisted project, including any permanent move from the real property that is made: (i) After notice by the owner to move permanently from the property, if the move occurs on or after the date of the submission of the application to HUD; (ii) Before submission of the application to HUD, if HUD determines that the displacement resulted directly from acquisition, rehabilitation, or demolition for the assisted project; or (iii) By a tenant-occupant of a dwelling unit, if any one of the following three situations occurs; (A) The tenant moves after execution of the Housing Assistance Payments Contract, and the move occurs before the tenant is provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe, and sanitary dwelling in the same building/ complex, under reasonable terms and conditions, upon completion of the project. Such reasonable terms and conditions include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: (1) The tenant's monthly rent before execution of the Housing Assistance Payments Contract and estimated average monthly utility costs; or (2) The total tenant payment, as determined under part 5 of this title, if the tenant is low-income, or 30 percent of gross household income, if the tenant is not low-income; (B) The tenant is required to relocate temporarily, does not return to the building/complex, and either: (1) The tenant is not offered payment for all reasonable out-of- pocket expenses incurred in connection with the temporary relocation, or (2) Other conditions of the temporary relocation are not reasonable; or (C) The tenant is required to move to another dwelling unit in the same building/complex but is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move, or other conditions of the move are not reasonable. (2) Notwithstanding the provisions of paragraph (g)(1) of this section, a person does not qualify as a ``displaced person'' (and is not eligible for relocation assistance under the URA or this section), if: (i) The person has been evicted for serious or repeated violation of the terms and conditions of the lease or occupancy agreement, violation of applicable Federal, State or local law, or other good cause, and HUD determines that the eviction was not undertaken for the purpose of evading the obligation to provide relocation assistance; (ii) The person moved into the property after the submission of the application and, before signing a lease and commencing occupancy, received written notice of the project, its possible impact on the person (e.g., the person may be displaced, temporarily relocated, or suffer a rent increase) and the fact that he or she would not qualify as a ``displaced person'' (or for assistance under this section) as a result of the project; (iii) The person is ineligible under 49 CFR 24.2(g)(2); or [[Page 153]] (iv) HUD determines that the person was not displaced as a direct result of acquisition, rehabilitation, or demolition for the project. (3) The owner may ask HUD, at any time, to determine whether a displacement is or would be covered by this section. (h) Definition of initiation of negotiations. For purposes of determining the formula for computing the replacement housing assistance to be provided to a residential tenant displaced as a direct result of private-owner rehabilitation, demolition or acquisition of the real property, the term ``initiation of negotiations'' means the owner's execution of the Housing Assistance Payments Contract. (Approved by Office of Management and Budget under OMB Control Number 2506-0121) [58 FR 43721, Aug. 17, 1993. Redesignated at 59 FR 36643, July 18, 1994, as amended at 65 FR 16724, Mar. 29, 2000] Sec. 886.139 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. (a) Covered housing providers must develop and implement an emergency transfer plan that meets the requirements in 24 CFR 5.2005(e). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking, covered housing providers have discretion to adopt new, and modify any existing, admission preferences or transfer waitlist priorities. (c) In addition to following requirements in 24 CFR 5.2005(e), when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, or stalking who qualifies for an emergency transfer, covered housing providers must: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, covered housing providers must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), including data on the outcomes of such requests. [81 FR 80814, Nov. 16, 2016] Sec. 886.140 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and that is subject to a Housing Assistance Payments contract executed or renewed after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92638, Dec. 20, 2016] Subpart B [Reserved] Subpart C_Section 8 Housing Assistance Program for the Disposition of HUD-Owned Projects Source: 44 FR 70365, Dec. 6, 1979, unless otherwise noted. Sec. 886.301 Purpose. The purpose of this subpart is to provide for the use of Section 8 housing assistance in connection with the sale of HUD-owned multifamily rental housing projects and the foreclosure of HUD-held mortgages on rental housing projects (as defined in 24 CFR 290.5). [58 FR 43722, Aug. 17, 1993] [[Page 154]] Sec. 886.302 Definitions. The terms Fair Market Rent (FMR), HUD, and Public Housing Agency (PHA) are defined in 24 CFR part 5. Act. The United States Housing Act of 1937. Agreement. An Agreement to Enter into a Housing Assistance Payments Contract. See Sec. 886.332. Annual income. As defined in part 5 of this title. Contract. (See Section 8 contract.) Contract rent. The rent payable to the owner under the contract, including the portion of the rent payable by the family. In the case of a cooperative, the term ``contract rent'' means charges under the occupancy agreements between the members and the cooperative. Covered housing provider. For the Section 8 Housing Assistance Program for the Disposition of HUD-Owned Projects, under subpart C of this part, ``covered housing provider,'' as such term is used in HUD's regulations at 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers to the owner. Decent, safe, and sanitary. Housing is decent, safe, and sanitary if it meets the physical condition requirements in 24 CFR part 5, subpart G. Eligible project or project. A multifamily housing project (see 24 CFR part 290): (1) For which the disposition in accordance with the provisions of 24 CFR part 290 involves sale with Section 8 housing assistance to enable the project to be used, in whole or in part, to provide housing for lower income families; and (2) The units of which are decent, safe, and sanitary. Family. As defined in part 5 of this title. HCD Act. The Housing and Community Development Act of 1974. Housing Assistance Payment. The payment made by the contract administrator to the Owner of an assisted unit as provided in the Contract. Where the unit is leased to an eligible Family, the payment is the difference between the Contract Rent and the Tenant Rent. A Housing Assistance Payment may be made to the Owner when a unit is vacant, in accordance with the terms of the Contract. An additional Housing Assistance Payment is made when the Utility Allowance is greater than the Total Tenant Payment. Lease. A written agreement between the owner and a family for leasing of decent, safe and sanitary dwelling unit to the family. Low-income family. As defined in part 5 of this title. Owner. The purchaser, including a cooperative entity or an agency of the Federal Government, under this subpart, of a HUD-owned project; or the purchaser, including a cooperative entity or an agency of the Federal Government, through a foreclosure sale of a project that was subject to a HUD-held mortgage. Project account. The account established and maintained in accordance with Sec. 886.308. Rehabilitation. The rehabilitation of an eligible project to upgrade the property to decent, safe, and sanitary condition to comply with the Housing Quality Standards described in Sec. 886.307 of this part, or other standards approved by HUD, from a condition below those standards and requiring repairs that may vary in degree from gutting and extensive reconstruction to the cure of deferred maintenance. Rehabilitation may exceed the requirements of Sec. 886.307 of this part. Section 8 contract (``Contract''). A written contract between the owner of an eligible project and HUD providing housing assistance payments to the owner on behalf of eligible families pursuant to this subpart. Tenant rent. As defined in part 5 of this title. Total tenant payment. As defined in part 5 of this title. Utility allowance. As defined in part 5 of this title. Utility reimbursement. As defined in part 5 of this title. Very low-income family. As defined in part 5 of this title. [44 FR 70365, Dec. 6, 1979, as amended at 49 FR 19949, May 10, 1984; 50 FR 9269, Mar. 7, 1985; 50 FR 38795, Sept. 25, 1985; 53 FR 3369, Feb. 5, 1988; 58 FR 43722, Aug. 17, 1993; 60 FR 11859, Mar. 2, 1995; 61 FR 5213, Feb. 9, 1996; 63 FR 46580, Sept. 1, 1998; 65 FR 16724, Mar. 29, 2000; 81 FR 80814, Nov. 16, 2016] [[Page 155]] Sec. 886.303 Allocation and reservation of Section 8 contract authority and budget authority. Allocation. The contract authority and budget authority for this program will be provided from the Headquarters reserve authority approved specifically for use in connection with the sale of eligible projects. Sec. 886.304 Project eligibility criteria. (a) Selection of projects. HUD shall select projects for sale with assistance under this subpart on the basis of the final disposition programs developed and approved in accordance with part 290 and the requirements of this subpart. In the evaluation of projects, consideration shall be given to whether there are site occupants who would have to be displaced, whether the relocation of site occupants is feasible, and the degree of hardship which displacement might cause. (b) Projects needing rehabilitation. A project, which is sold subject to the condition that following sale the project will be rehabilitated by the owner so as to become decent, safe and sanitary, will be sold with an Agreement that Section 8 assistance will be provided after the repairs are completed by the owner and the project is inspected and accepted by HUD. In these projects, Section 8 payments may be made only for project units which are determined to be decent, safe and sanitary. (c) High-rise elevator projects. High-rise elevator projects for families with children will not be assisted under this subpart unless the final disposition program, prepared in accordance with 24 CFR part 290 indicates that there is a need for assisted housing for families and there is no other practical alternative for providing the needed housing. [44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993] Sec. 886.305 Disclosure and verification of Social Security and Employer Identification Numbers by owners. To be eligible to become an owner of housing assisted under this subpart, the owner must meet the disclosure and verification requirements for Social Security and Employer Identification Numbers, as provided by part 5, subpart B, of this title. (Approved by the Office of Management and Budget under control number 2502-0204) [54 FR 39709, Sept. 27, 1989; 55 FR 11905, Mar. 30, 1990, as amended at 61 FR 11119, Mar. 18, 1996] Sec. 886.306 Notices. Before a project is approved for sale in accordance with this subpart, and as a part of the process of preparing a disposition recommendation in accordance with 24 CFR part 290, the field office manager must notify in writing the chief executive officer of the unit of general local government in which the project is located (or the designee of that officer) of the proposed sale with housing assistance, and must afford the unit of local government an opportunity to review and comment upon the proposed sale in accordance with 24 CFR part 791. Local government review should address consistency with the housing needs and strategy of the community, rather than strict conformance to the limitations on variations from housing assistance plan goals which are contained in part 791. [53 FR 3369, Feb. 5, 1988] Sec. 886.307 Physical condition standards; physical inspection requirements. (a) General. Housing assisted under this part must be maintained and inspected in accordance with the requirements in 24 CFR part 5, subpart G. (b)-(m) [Reserved] (n) Independent group residence. In addition to the foregoing standards, the standards in 24 CFR 887.467 (a) through (g) apply to independent group residences. [44 FR 70365, Dec. 6, 1979, as amended at 50 FR 9269, Mar. 7, 1985; 52 FR 1986, Jan. 15, 1987; 57 FR 33852, July 30, 1992; 58 FR 43722, Aug. 17, 1993; 63 FR 46580, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999; 88 FR 30500, May 11, 2023] Sec. 886.308 Maximum total annual contract commitment. (a) Number of units assisted. Based on the final disposition program developed in accordance with 24 CFR part 290, HUD shall determine the number of [[Page 156]] units to be assisted up to 100 percent of the units in the project. (b) Maximum assistance. The maximum total annual housing assistance payments that may be committed under the contract shall be the total of the gross rents for all the contract units in the project. (c) Changes in contract amounts. In order to assure that housing assistance payments will be increased on a timely basis to cover increases in contract rents, changes in family composition, or decreases in family incomes: (1) A project account shall be established and maintained, in an amount as determined by HUD consistent with section 8(c)(6) of the Act, out of amounts by which the maximum annual contract commitment per year exceeds amounts paid under the contract for any fiscal year. This account shall be established and maintained by HUD as a specifically identified and segregated account, and payment shall be made therefrom only for the purposes of: (i) Housing assistance payments, and (ii) Other costs specifically authorized or approved by HUD. (2) Whenever a HUD-approved estimate of required housing assistance payments for a fiscal year exceeds the maximum annual contract commitment, causing the amount in the project account to be less than an amount equal to 40 percent of the maximum annual contract commitment, HUD, within a reasonable period of time, shall take such additional steps authorized by Section 8(c)(6) of the Act as may be necessary to carry out this assurance, including (as provided in that section of the Act) ``the reservation of annual contributions authority for the purpose of amending housing assistance contracts or the allocation of a portion of new authorizations for the purpose of amending housing assistance contracts.'' Sec. 886.309 Housing assistance payment to owners. (a) General. Housing Assistance Payments shall be paid to Owners for units under lease by eligible Families, in accordance with the Contract and as provided in this section. These Housing Assistance Payments will cover the difference between the Contract Rent and the Tenant Rent. Where applicable, the Utility Reimbursement will be paid to the Family as an additional Housing Assistance Payment. The Contract will provide that the Owner will make this payment on behalf of HUD. Funds will be paid to the Owner in trust solely for the purpose of making this additional payment. If the Family and the utility company consent, the Owner may pay the Utility Reimbursement jointly to the Family and the utility company or directly to the utility company. (b) No assistance for owners. No Section 8 assistance may be provided for any unit occupied by an owner. However, cooperatives are considered rental housing rather than owner-occupied housing under this subpart. (c) Payments for vacancies from execution of contract to initial occupancy. If a Contract unit which is decent, safe and sanitary and has been accepted by HUD as available as of the effective date of the Contract is not leased within 15 days of the effective date of the Contract, the Owner will be entitled to housing assistance payments in the amount of 80 percent of the Contract Rent for the unit for a vacancy period not exceeding 60 days from the effective date of the Contract provided that the Owner (1) has submitted a list of units leased as of the effective date and a list of the units not so leased; (2) 60 days prior to the completion of the rehabilitation or the date the agreement was executed, whichever is later, had notified the PHA of any units which the owner anticipated would be vacant on the anticipated effective date of the contract; (3) has taken and continues to take all feasible actions to fill the vacancy including, but not limited to: contracting applicants on the Owner's waiting list, if any, requesting the PHA and other appropriate sources to refer eligible applicants, and advertising the availability of the units in a manner specifically designed to reach low-income families; and (4) has not rejected any eligible applicant except for good cause acceptable to HUD. (d) Payments for vacancies after initial occupancy. If an eligible family vacates its unit (other than as a result of action by the Owner which is in violation [[Page 157]] of the Lease or the Contract or any applicable law), the owner may receive housing assistance payments for so much of the month in which the Family vacates the unit as the unit remains vacant. Should the unit remain vacant, the Owner may receive from HUD a housing assistance payment in the amount of 80 percent of Contract Rent for a vacancy period not exceeding an additional month. However, if the owner collects any of the family's share of the rent for this period, the payment must be reduced to an amount which, when added to the family's payments, does not exceed 80 percent of the Contract Rent. Any such excess shall be reimbursed by the Owner to HUD or as HUD may direct. (See also Sec. 886.315.) The owner shall not be entitled to any payment under this paragraph unless he or she: (1) Immediately upon learning of the vacancy, has notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy, and (2) has made and continues to make a good faith effort to fill the vacancy, including but not limited to, contacting applicants on the waiting list, if any, requesting the PHA and other appropriate sources to refer eligible applicants, and advertising the availability of the unit, and (3) has not rejected any eligible applicant, except for good cause acceptable to HUD. (e) Payments for units where family is evicted. If the owner evicts a family, the owner shall not be entitled to any payments pursuant to paragraph (d) of this section unless the request for such payment is supported by a certification that the provisions of Sec. 886.328 and part 247 of this title have been followed. (f) Prohibition for double compensation for vacancies. The owner shall not be entitled to housing assistance payments with respect to vacant units under this section to the extent he or she is entitled to payments from other sources (for example, payments for losses of rental income incurred for holding units vacant for relocatees pursuant to Title I of the HCD Act or payments under Sec. 886.315). (g) Debt service payments. (1) If a contract unit continues to be vacant after the 60-day period specified in paragraph (c) or (d) of this section, the Owner may submit a claim and receive additional housing assistance payments on a semiannual basis with respect to such a vacant unit in an amount equal to the principal and interest payments required to amortize the portion of the debt attributable to that unit for the period of the vacancy, whether such vacancy commenced during rent-up or after rent-up. (2) Additional payments under this paragraph (g) for any unit shall not be for more than 12 months for any vacancy period, and shall be made only if: (i) The unit is not in a project insured under the National Housing Act except pursuant to section 244 of that Act. (ii) The unit was in decent, safe, and sanitary condition during the vacancy period for which payments are claimed. (iii) The owner has taken and is continuing to take the actions specified in paragraphs (c)(1), (2) and (3) or paragraphs (d)(1) and (2) of this section, as appropriate. (iv) The Owner has demonstrated in connection with the semiannual claim on a form and in accordance with the standards prescribed by HUD with respect to the period of the vacancy, that the project is not providing the Owner with revenues at least equal to the project costs incurred by the Owner, and that the amount of the payments requested is not in excess of that portion of the deficiency which is attributable to the vacant units for the period of the vacancies. (v) The Owner has submitted, in connection with the semiannual claim, a statement with relevant supporting evidence that there is a reasonable prospect that the project can achieve financial soundness within a reasonable time. The statement shall indicate the causes of the deficiency; the corrective steps that have been and will be taken; and the time by which it is expected that the project revenues will at least equal project costs without the additional payments provided under this paragraph. (3) HUD may deny any claim for additional payments or suspend or terminate payments if it determines that based on the Owner's statement and other evidence, there is not a reasonable prospect that the project can [[Page 158]] achieve financial soundness within a reasonable time. [44 FR 70365, Dec. 6, 1979, as amended at 49 FR 19949, May 10, 1984; 53 FR 3369, Feb. 5, 1988; 58 FR 43722, Aug. 17, 1993; 87 FR 37997, June 27, 2022] Sec. 886.310 Initial contract rents. HUD will establish contract rents at levels that, together with other resources available to the purchasers, provide sufficient amounts for the necessary costs of rehabilitating and operating the multifamily housing project and do not exceed 120 percent of the most recently published Section 8 Fair Market Rents for Existing Housing (24 CFR part 888, subpart A). [60 FR 11859, Mar. 2, 1995] Sec. 886.311 Term of contract. The contract term for any unit shall not exceed 15 years, except that the term may be less than 15 years as provided under either paragraph (a) or (b) of this section. (a) The contract term may be less than 15 years if HUD finds that, based on the rental charges and financing for the multifamily housing project to which the contract relates, the financial viability of the project can be maintained under a contract having a term less than 15 years. Where a contract of less than 15 years is provided under this paragraph, the amount of rent payable by tenants of the project for units assisted under such a contract shall not exceed the amount payable for rent under section 3(a) of the United States Housing Act of 1937 for a period of at least 15 years. (b) The contract term may be less than 15 years if the assistance is provided under a contract authorized under section 6 of the HUD Demonstration Act of 1993, and pursuant to a disposition plan under this part for a project that is determined by the HUD to be otherwise in compliance with this part. [60 FR 11859, Mar. 2, 1995] Sec. 886.311a Notice upon contract expiration. (a) The Contract will provide that the owner will notify each assisted family, at least 90 days before the end of the Contract term, of any increase in the amount the family will be required to pay as rent which may occur as a result of its expiration. If the Contract is to be renewed but with a reduction in the number of units covered by it, this notice shall be given to each family who will no longer be assisted under the Contract. (b) The notice provided for in paragraph (a) of this section shall be accomplished by: (1) Sending a letter by first class mail, properly stamped and addressed, to the family at its address at the project, with a proper return address, and (2) serving a copy of the notice on any adult person answering the door at the leased dwelling unit, or if no adult responds, by placing the notice under or through the door, if possible, or else by affixing the notice to the door. Service shall not be considered to be effective until both required notices have been accomplished. The date on which the notice shall be considered to be received by the family shall be the date on which the owner mails the first class letter provided for in this paragraph, or the date on which the notice provided for in this paragraph is properly given, whichever is later. (c) The notice shall advise each affected family that, after the expiration date of the Contract, the family will be required to bear the entire cost of the rent and that the owner will be free (to the extent the project is not otherwise regulated by HUD) to alter the rent without HUD approval, but subject to any applicable requirements or restrictions under the lease or under State or local law. The notice shall also state: (1) The actual (if known) or the estimated rent which will be charged following the expiration of the Contract; (2) The difference between the rent and the Total Tenant Payment toward rent under the Contract; and (3) The date the Contract will expire. (d) The owner shall give HUD a certification that families have been notified in accordance with this section with an example of the text of the notice attached. (e) This section shall apply to (1) Contracts involving Substantial Rehabilitation entered into pursuant to [[Page 159]] Agreements executed on or after October 1, 1981, or Contracts involving Substantial Rehabilitation entered into pursuant to Agreements executed before October 1, 1981, but renewed or amended on or after October 1, 1984 and (2) all other Contracts executed, renewed or amended on or after October 1, 1984. [49 FR 31285, Aug. 6, 1984] Sec. 886.312 Rent adjustments. (a) Limits. Housing assistance payments will be made in amounts commensurate with contract rent adjustments under this paragraph, up to the maximum amount authorized under the contract. (See Sec. 886.308.) (b) Annual adjustments. The contract rents may be adjusted annually, at HUD's option, either (1) on the basis of a written request for a rent increase submitted by the owner and properly supported by substantiating evidence, or (2) by applying, on each anniversary date of the contract, the applicable automatic annual adjustment factor most recently published by HUD in the Federal Register. If HUD requires that the owner submit a written request, HUD within a reasonable time shall approve a rental schedule that is necessary to compensate for any increase occurring since the last approved rental schedule in taxes (other than income taxes) and operating and maintenance costs over which owners have no effective control, or shall deny the increase stating the reasons therefor. Increases in taxes and maintenance and operating costs shall be measured against levels of such expenses in comparable assisted and unassisted housing in the area to ensure that adjustments in the contract rents shall not result in material differences between the rents charged for assisted and comparable unassisted units. Contract rents may be adjusted upward or downward as may be appropriate; however, in no case shall the adjusted rents be less than the contract rents on the effective date of the contract, provided there was no fraud or mistake adverse to the Department's interest in determining the initial contract rent. (c) Special adjustments. Special adjustments in the contract rents shall be requested in writing by the owner and may be authorized by HUD to the extent HUD determines such adjustments are necessary to reflect increases in the actual and necessary expenses of owning and maintaining the contract units which have resulted from substantial general increases in real property taxes, utility rates or similar costs (i.e., assessments and utilities not covered be regulated rates) which are not adequately compensated for by the adjustment authorized by paragraph (b) of this section. (d) Comparability between assisted and unassisted units. Notwithstanding any other provisions of this subpart, adjustments as provided in this section shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by HUD: Provided, however, That this limitation shall not be construed to prohibit differences in rents between assisted and comparable unassisted units to the extent that such differences may have existed with respect to the initial contract rents assuming no fraud or mistake adverse to the Department's interest. (e) Addendums to contract and leases. Any adjustment in contract rents shall be incorporated into the contract and leases by dated addendums to the contract and leases establishing the effective date of the adjustment. Sec. 886.313 Other Federal requirements. Participation in this program requires: (a) Compliance with (1) title VI of the Civil Rights Act of 1964, title VIII of the Civil Rights Act of 1968, Executive Orders 11063 and 11246, and Section 3 of the Housing and Urban Development Act of 1968, and (2) all rules, regulations, and requirements issued pursuant thereto. (b) Submission of an approvable Affirmative Fair Housing Marketing Plan. (c) For projects where rehabilitation is to be completed by or at the direction of the owner, compliance with: (1) The Clean Air Act and Federal Water Pollution Control Act; (2) Where the property contains nine or more units to be assisted, the requirement to pay not less than the wage rates prevailing in the locality, [[Page 160]] as predetermined by the Secretary of Labor under the Davis-Bacon Act (40 U.S.C. 276a-276a-5) to all laborers and mechanics (other than volunteers under the conditions set out in 24 CFR part 70) who are employed in the rehabilitation work, and the labor standards provisions contained in the Contract Work Hours and Safety Standards Act, Copeland Anti-Kickback Act, and implementing regulations of the Department of Labor. (3) Section 504 of the Rehabilitation Act of 1973; (4) The National Historic Preservation Act (Pub. L. 89-665); (5) The Archeological and Historic Preservation Act of 1974 (Pub. L. 93-291); (6) Executive Order 11593 on Protection and Enhancement of the Cultural Environment, including the procedures prescribed by the Advisory Council on Historic Preservation at 36 CFR part 800; (7) The National Environmental Policy Act of 1969; (8) The Flood Disaster Protection Act of 1973; (9) Executive Order 11988, Flood Plains Management; (10) Executive Order 11990, Protection of Wetlands. [44 FR 70365, Dec. 6, 1979, as amended at 57 FR 14760, Apr. 22, 1992] Sec. 886.314 Financial default. In the event of a financial default under the project mortgage, HUD shall have the right to make subsequent housing assistance payments to the mortgagee until such time as the default is cured, or until some other time agreeable to the mortgagee and approved by HUD. Sec. 886.315 Security and utility deposits. (a) Amount of deposits. If at the time of the initial execution of the Lease the Owner wishes to collect a security deposit, the maximum amount shall be the greater of one month's Gross Family Contribution or $50. However, this amount shall not exceed the maximum amount allowable under State or local law. For units leased in place, security deposits collected prior to the execution of a Contract which are in excess of this maximum amount do not have to be refunded until the Family is expected to pay security deposits and utility deposits from its resources and/or other public or private sources. (b) When a Family vacates. If a Family vacates the unit, the Owner, subject to State and local law, may use the security deposit as reimbursement for any unpaid Family Contribution or other amount which the Family owes under the Lease. If a Family vacates the unit owing no rent or other amount under the Lease consistent with State or local law or if such amount is less than the amount of the security deposit, the Owner shall refund the full amount or the unused balance to the Family. (c) Interest payable on deposits. In those jurisdictions where interest is payable by the Owner on security deposits, the refunded amount shall include the amount of interest payable. The Owner shall comply with all State and local laws regarding interest payments on security deposits. (d) Insufficient deposits. If the security deposit is insufficient to reimburse the Owner for the unpaid Family Contribution or other amounts which the Family owes under the Lease, or if the Owner did not collect a security deposit, the Owner may claim reimbursement from HUD for an amount not to exceed the lesser of: (1) The amount owed the Owner, (2) two months' Contract Rent, minus, in either case, the greater of the security deposit actually collected or the amount of security deposit the owner could have collected under the program (pursuant to paragraph (a) of this section). Any reimbursement under this section must be applied first toward any unpaid Family Contribution due under the Lease and then to any other amounts owed. No reimbursement shall be claimed for unpaid rent for the period after the family vacates. Sec. Sec. 886.316-886.317 [Reserved] Sec. 886.318 Responsibilities of the owner. (a) Management and maintenance. The owner shall be responsible for the management and maintenance of the project in accordance with requirements established by HUD. These responsibilities shall include but not be limited to: [[Page 161]] (1) Payment for utilities and services (unless paid directly by the family), insurance and taxes; (2) Performance of all ordinary and extraordinary maintenance; (3) Performance of all management functions, including the taking of applications; determining eligibility of applicants in accordance with 24 CFR part 5 of this title; selection of families, including verification of income, obtaining and verifying Social Security Numbers submitted by applicants (as provided by part 5, subpart B, of this title), obtaining signed consent forms from applicants for the obtaining of wage and claim information from State Wage Information Collection Agencies (as provided in part 5, subpart B, of this title), and other pertinent requirements; and determination of the amount of tenant rent in accordance with HUD established schedules and criteria. (4) Collection of Tenant Rents; (5) Preparation and furnishing of information required under the contract; (6) Reexamination of family income, composition, and extent of exceptional medical or other unusual expenses; redeterminations, as appropriate, of the amount of Tenant Rent and amount of housing assistance payment in accordance with part 5 of this title; obtaining and verifying Social Security Numbers submitted by participants, as provided by CFR part 750; and obtaining signed consent forms from participants for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by part 5, subpart B, of this title. (7) Redeterminations of the amount of Tenant Rent and the amount of housing assistance payment in accordance with part 5 of this title as a result of an adjustment by HUD of any applicable utility allowance; (8) Notifying families in writing when they are determined to be qualified for assistance under this subpart where they have not already been notified by HUD prior to sale; (9) Reviewing at least annually the allowance for utilities and other services; (10) Compliance with equal opportunity requirements; and (11) Compliance with Federal requirements set forth in Sec. 886.313(c). (b) Contracting for Services. Subject to HUD approval, any owner may contract with any private or public entity to perform for a fee the services required by paragraph (a) of this section: Provided, That such contract shall not shift any of the owner's responsibilities or obligations. (c) HUD review. The owner shall permit HUD to review and audit the management and maintenance of the project at any time. (d) Submission of financial and operating statements. After execution of the Contract, the owner must submit to HUD: (1) Financial information in accordance with 24 CFR part 5, subpart H; and (2) Other statements as to project operation, financial conditions and occupancy as HUD may require pertinent to administration of the Contract and monitoring of project operations. (Approved by the Office of Management and Budget under control numbers 2502-0204 and 2505-0052) [44 FR 70365, Dec. 6, 1979, as amended at 49 FR 19949, May 10, 1984; 53 FR 1169, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39709, Sept. 27, 1989; 56 FR 7542, Feb. 22, 1991; 58 FR 43722, Aug. 17, 1993; 60 FR 14846, Mar. 20, 1995; 61 FR 11119, Mar. 18, 1996; 63 FR 46593, Sept. 1, 1998; 65 FR 16724, Mar. 29, 2000] Sec. 886.319 Responsibility for contract administration. HUD is responsible for administration of the Contract. HUD may contract with another entity for the performance of some or all of its Contract administration functions. [60 FR 11860, Mar. 2, 1995] Sec. 886.320 Default under the contract. The contract shall contain a provision to the effect that if HUD determines that the owner is in default under the contract, HUD shall notify the owner of the actions required to be taken to cure the default and of the remedies to be applied by HUD including recovery of overpayments, where appropriate, and that if the owner fails to cure the default within a reasonable time as determined by HUD, HUD has the right to terminate the contract or [[Page 162]] to take other corrective action, including recission of the sale. When contract termination is under consideration by HUD, HUD shall give eligible families an opportunity to submit written and other comments. Where the project is sold under the arrangement that involves a regulatory agreement between HUD and the owner, a default under the regulatory agreement shall be treated as default under the contract. Sec. 886.321 Marketing. (a) Marketing in accordance with HUD-Approved Plan. Marketing of units and selection of families by the owner shall be in accordance with the owner's HUD-approved Affirmative Fair Housing Marketing Plan, HUD- approved tenant selection factors and with all regulations relating to fair housing advertising including use of the equal opportunity logotype, statement, and slogan in all advertising. Projects shall be managed and operated without regard to race, color, creed, religion, sex, or national origin. (b)(1) HUD will determine the eligibility of assistance of families in occupancy before sales closing. After the sale, the owner shall be responsible for taking applications, selecting families, and all related determinations, in accordance with part 5 of this title. (See especially, 24 CFR part 5, subpart F). (2) For every family that applies for admission, the owner and the applicant must complete and sign the form of application prescribed by HUD. When the owner decides no longer to accept applications, the owner must publish a notice to that effect in a publication likely to be read by potential applicants. The notice must state the reasons for the owner's refusal to accept additional applications. When the owner agrees to accept applications again, a notice to this effect must also be published. The owner must retain copies of all completed applications together with any related correspondence for three years. For each family selected for admission, the owner must submit one copy of the completed and signed application to HUD. Housing assistance payments will not be made on behalf of an admitted family until after this copy has been received by HUD. (3) If the owner determines that the applicant is eligible on the basis of income and family composition and is otherwise acceptable but the owner does not have a suitable unit to offer, the owner shall place such family on the waiting list and so advise the family indicating approximately when a unit may be available. (4) If the owner determines that the applicant is eligible on the basis of income and family composition and is otherwise acceptable in accordance with the HUD approved tenant selection factors and if the owner has a suitable unit, the owner and the family shall enter into a lease. The lease shall be on a form approved by HUD and shall otherwise be in conformity with the provisions of this subpart. (5) Records on applicant families and approved families shall be maintained by the owner so as to provide HUD with racial, ethnic, and gender data and shall be retained by the owner for 3 years. (6) If the owner determines that an applicant is not eligible, or, if eligible, not selected, the owner must notify the applicant in writing of the determination, the reasons upon which the determination is made, and inform the applicant that the applicant has the right within a reasonable time (specified in the letter) to request an informal hearing if the applicant believes that the owner's determination is based on erroneous information. The procedures of this paragraph (b)(6) do not preclude an applicant from exercising his or her other rights if the applicant believes that he or she is being discriminated against on the basis of race, color, religion, sex, national origin, age, or handicap. The owner must retain for three years a copy of the application, the letter, the applicant's response, if any, the record of any informal hearing, and a statement of final disposition. The informal review provisions for the denial of a tenant selection preference under Sec. 886.337 are contained in paragraph (k) of that section. (7) For the informal hearing provisions related to denial of assistance based upon failure to establish citizenship or eligible immigration status, see part 5 of this title for provisions concerning certain assistance for mixed [[Page 163]] families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of denial of assistance. (c) Initial occupancy. (1) Where rehabilitation is involved, sixty days prior to the completion of the rehabilitation, or when the rehabilitation is begun, whichever is later, the Owner shall determine whether the tenant population of the project generally reflects the racial/ethnic makeup of the housing market area. Based on this determination, the Owner shall then conduct appropriate marketing activities in accordance with a HUD-approved Affirmative Fair Housing Marketing Plan. Such activities may include special outreach to those groups identified as not ordinarily expected to apply for these units without special outreach; notification to PHA's in the housing market area of any anticipated vacancies; and formulation of waiting lists based on the Owner's HUD-approved tenant selection factors. (2) Where a PHA is notified, the PHA shall notify an appropriate size family (families) on its waiting list of the availability of the unit and refer the family (families) to the owner. (Since the Owner is responsible for tenant selection, the owner is not required to lease to a PHA selected family, but the owner must comply with Sec. 886.321(b)(6).) [44 FR 70365, Dec. 6, 1979, as amended at 53 FR 1169, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 58 FR 43722, Aug. 17, 1993; 60 FR 14846, Mar. 20, 1995; 65 FR 16724, Mar. 29, 2000; 70 FR 77744, Dec. 30, 2005] Sec. 886.322 [Reserved] Sec. 886.323 Maintenance, operation, and inspections. (a) Maintain housing free of health and safety hazards. The Owner shall maintain and operate the project so as to be compliant with 24 CFR part 5, subpart G, and the Owner shall provide all the services, maintenance, and utilities which the Owner agrees to provide under the contract and the lease. Failure to do so shall be considered a material default under the contract and Regulatory Agreement, if any. (b) HUD inspection. Prior to execution of the contract, HUD shall inspect (or cause to be inspected) each proposed contract unit and related facilities to ensure that they comply with the requirements at 24 CFR part 5, subpart G. (c) Owner and family inspection. Prior to occupancy of any vacant unit by a Family, the Owner and the Family shall inspect the unit. The Owner shall certify that they have inspected the unit, and the owner shall certify that the unit is compliant with 24 CFR part 5, subpart G. Copies of these reports shall be kept on file by the owner for at least 3 years. (d) Periodic inspections. HUD will inspect the project (or cause it to be inspected) in accordance with the requirements in 24 CFR part 5, subpart G, and at such other times as HUD may determine to be necessary to assure that the owner is meeting the Owner's obligation to maintain the units and the related facilities in accordance with 24 CFR part 5, subpart G, and to provide the agreed-upon utilities and other services. (e) Failure to maintain housing. If HUD notifies the Owner that he/ she has failed to maintain a unit that is compliant with 24 CFR part 5, subpart G, and the Owner fails to take corrective action within the time prescribed in the notice, HUD may exercise any of its rights or remedies under the Contract, or Regulatory Agreement, if any, including abatement of housing assistance payments (even if the Family continues to occupy the unit) and rescission of the sale. If the Family wishes to be rehoused in another unit, HUD shall provide assistance in finding such a unit for the Family. [88 FR 30500, May 11, 2023] Sec. 886.324 Reexamination of family income and composition. (a) Regular reexaminations. The owner must reexamine the income and composition of all families at least once each year. Upon verification of the information, the owner must make appropriate adjustments in the Total Tenant Payment in accordance with part 5 of this title and determine whether the family's unit size is still appropriate. The owner must adjust Tenant Rent and the Housing Assistance Payment to reflect any change in Total Tenant Payment and carry out [[Page 164]] any unit transfer required by HUD. At the time of the annual reexamination of family income and composition, the owner must require the family to disclose and verify Social Security Numbers, as provided by part 5, subpart B, of this title. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see part 5, subpart B, of this title. At the first regular reexamination after June 19, 1995, the owner shall follow the requirements of part 5 of this title concerning obtaining and processing evidence of citizenship or eligible immigration status of all family members. Thereafter, at each regular reexamination, the owner shall follow the requirements of part 5 of this title concerning verification of the immigration status of any new family member. (b) Interim reexaminations. The family must comply with provisions in its lease regarding interim reporting of changes in income. If the owner receives information concerning a change in the family's income or other circumstances between regularly scheduled reexaminations, the owner must consult with the family and make any adjustments determined to be appropriate. Any change in the family's income or other circumstances that results in an adjustment in the Total Tenant Payment, Tenant Rent and Housing Assistance Payment must be verified. See part 5, subpart B, of this title for the requirements for the disclosure and verification of Social Security Numbers at interim reexaminations involving new family members. For requirements regarding the signing and submitting of consent forms by families for the obtaining of wage and claim information from State Wage Information Collection Agencies, see part 5, subpart B, of this title. At any interim reexamination after June 19, 1995 when there is a new family member, the owner shall follow the requirements of part 5 of this title concerning obtaining and processing evidence of citizenship or eligible immigration status of the new family member. (c) Continuation of housing assistance payments. A family's eligibility for Housing Assistance Payments will continue until the Total Tenant Payment equals the Contact Rent plus any applicable Utility Allowance. The termination of eligibility at such point will not affect the family's other rights under its lease, nor will such termination preclude the resumption of payments as a result of later changes in income, rents, or other relevant circumstances during the term of the contract. However, eligibility also may be terminated in accordance with HUD requirements, for such reasons as failure to submit requested verification information, including failure to meet the disclosure and verification requirements for Social Security Numbers, as provided by part 5, subpart B, of this title, or failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by part 5, subpart B, of this title. For provisions requiring termination of assistance for failure to establish citizenship or eligible immigration status, see part 5, subpart E, of this title for provisions concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and for provisions concerning deferral of termination of assistance. (d) Streamlined income determination. An owner may elect to follow the provisions of 24 CFR 5.657(d). [56 FR 7543, Feb. 22, 1991, as amended at 60 FR 14847, Mar. 20, 1995; 61 FR 11119, Mar. 18, 1996; 65 FR 16724, Mar. 29, 2000; 81 FR 12371, Mar. 8, 2016] Sec. 886.325 Overcrowded and underoccupied units. (a) Change in family composition, family's notification. The family shall notify the owner of a change in family composition and shall transfer to an appropriate size dwelling unit, based on family composition, upon appropriate notice by the owner of HUD that such a dwelling unit is available. Such a family shall have priority over a family on the owner's waiting list seeking the same size unit. (b) Change in family composition, owner's responsibilities. Upon receipt by the [[Page 165]] owner of a notification by the family of a change in the family size, the owner agrees to offer the family a suitable unit as soon as one becomes vacant and ready for occupancy. If the owner does not have any suitable units or if no vacancy of a suitable unit occurs within a reasonable time, HUD may assist the family in finding a suitable dwelling unit and require the family to move to such unit as soon as possible. (c) HUD actions if appropriate size unit is not made available. If the owner fails to offer the family a unit appropriate for the size of the family when such unit becomes vacant and ready for occupancy, HUD may abate housing assistance payments to the owner for the unit occupied by the family and assist the family in finding a suitable dwelling unit elsewhere. [46 FR 19467, Mar. 31, 1981] Sec. 886.326 Adjustment of utility allowances. When the owner requests HUD approval of an adjustment in Contract Rents under Sec. 886.312, an analysis of the project's Utility Allowances must be included. Such data as changes in utility rates and other facts affecting utility consumption should be provided as part of this analysis to permit appropriate adjustments in the Utility Allowances. In addition, when approval of a utility rate change would result in a cumulative increase of 10 percent or more in the most recently approved Utility Allowances, the owner must advise the Secretary and request approval of new Utility Allowances. (Approved by the Office of Management and Budget under control numbers 2502-0352 and 2502-0354) [51 FR 21864, June 16, 1986] Sec. 886.327 Lease requirements. (a) Term of lease. (1) The term of a lease, including a new lease or a lease amendment, executed by the owner and the family must be for at least one year, or the remaining term of the contract if the remaining term of the contract is less than one year. (2) During the first year of the lease term, the owner may not terminate the tenancy for ``other good cause'' under 24 CFR 247.3(a)(3), unless the termination is based on family malfeasance or nonfeasance. For example, during the first year of the lease term, the owner may not terminate the tenancy for ``other good cause'' based on the failure of the family to accept the offer of a new lease. (3) The lease may contain a provision permitting the family to terminate on 30 days advance written notice to the owner. In this case of a lease term for more than one year, the lease must contain this provision. (b) Required and prohibited provisions. The lease between the owner and the family must comply with HUD regulations and requirements, and must be in the form required by HUD. The lease may not contain any of the following types of prohibited provisions: (1) Admission of guilt. Agreement by the family (i) to be sued, and (ii) to admit guilt, or (iii) to a judgment in favor of the owner, in a court proceeding against the family in connection with the lease. (2) Treatment of family property. Agreement by the family that the owner may take or hold family property, or may sell family property, without notice to the family and a court decision on the rights of the parties. (3) Excusing owner from responsibility. Agreement by the family not to hold the owner or the owner's agents responsible for any action or failure to act, whether intentional or negligent. (4) Waiver of notice. Agreement by the family that the owner does not need to give notice of a court proceeding against the family in connection with the lease, or does not need to give any notice required by HUD. (5) Waiver of court proceeding for eviction. Agreement by the family that the owner may evict the family (i) without instituting a civil court proceeding in which the family has the opportunity to present a defense, or (ii) before a decision by the court on the rights of the parties. (6) Waiver of jury trial. Agreement by the family to waive any right to a trial by jury. (7) Waiver of appeal. Agreement by the family to waive the right to appeal, or to otherwise challenge in court, a court decision in connection with the lease. [[Page 166]] (8) Family chargeable with legal costs regardless of outcome. Agreement by the family to pay lawyer's fees or other legal costs of the owner, even if the family wins in a court proceeding by the owner against the family. (However, the family may have to pay these fees and costs if the family loses.) [53 FR 3369, Feb. 5, 1988] Sec. 886.328 Termination of tenancy. Part 247 of this title (24 CFR part 247) applies to the termination of tenancy and eviction of a family assisted under this subpart. For cases involving termination of tenancy because of a failure to establish citizenship or eligible immigration status, the procedures of 24 CFR part 247 and 24 CFR part 5 shall apply. The provisions of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to this section. The provisions of 24 CFR part 5, subpart E, concerning certain assistance for mixed families (families whose members include those with eligible immigration status, and those without eligible immigration status) in lieu of termination of assistance, and concerning deferral of termination of assistance, also shall apply. [81 FR 80814, Nov. 16, 2016] Sec. 886.329 Leasing to eligible families. (a) Availability of units for occupancy by Eligible Families. During the term of the Contract, an owner shall make available for occupancy by eligible families the total number of units for which assistance is committed under the Contract. For purposes of this section, making units available for occupancy by eligible families means that the owner: (1) Is conducting marketing in accordance with Sec. 886.321; (2) has leased or is making good faith efforts to lease the units to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; and (3) has not rejected any such applicant family except for reasons acceptable to HUD. If the owner is temporarily unable to lease all units for which assistance is committed under the Contract to eligible families, one or more units may be leased to ineligible families with the prior approval of HUD. Failure on the part of the owner to comply with these requirements is a violation of the Contract and grounds for all available legal remedies, including specific performance of the Contract, suspension or debarment from HUD programs, and reduction of the number of units under the Contract as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by Contract. HUD may reduce the number of units covered by the Contract to the number of units available for occupancy by eligible families if: (1) The owner fails to comply with the requirements of paragraph (a) of this section; or (2) Notwithstanding any prior approval by HUD to lease such units to ineligible families, HUD determines that the inability to lease units to eligible families is not a temporary problem. (c) Restoration. HUD will agree to an amendment of the Contract to provide for subsequent restoration of any reduction made pursuant to paragraph (b) of this section if: (1) HUD determines that the restoration is justified by demand; (2) The owner otherwise has a record of compliance with his or her obligations under the Contract; and (3) Contract and budget authority are available. (d) Applicability. In accordance with section 555 of the Cranston- Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and (b) of this section apply to all contracts involving substantial rehabilitation. These paragraphs apply to all other Contracts executed on or after October, 3, 1984. An owner who had leased an assisted unit to an ineligible family consistent with the regulations in effect at the time will continue to lease the unit to that family. However, the Borrower must make the unit available for occupancy by an eligible family when the ineligible family vacates the unit. (e) Termination of assistance for failure to establish citizenship or eligible immigration status. If an owner who is subject to paragraphs (a) and (b) of this section is required to terminate housing assistance payments for the family in accordance with part 5, subpart E, of [[Page 167]] this title because the owner determines that the entire family does not have U.S. citizenship or eligible immigration status, the owner may allow continued occupancy of the unit by the family without Section 8 assistance following the termination of assistance, or if the family constitutes a mixed family, as defined in part 5, subpart E, of this title, the owner shall comply with the provisions of part 5, subpart E, of this title concerning assistance to mixed families, and deferral of termination of assistance. (f) The regulations of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to this section. [49 FR 31399, Aug. 7, 1984, as amended at 53 FR 847, Jan. 13, 1988; 53 FR 6601, Mar. 2, 1988; 58 FR 43722, Aug. 17, 1993; 59 FR 13653, Mar. 23, 1994; 60 FR 14847, Mar. 20, 1995; 65 FR 16724, Mar. 29, 2000; 73 FR 72343, Nov. 28, 2008; 75 FR 66261, Oct. 27, 2010; 81 FR 80814, Nov. 16, 2016] Sec. 886.329a Preferences for occupancy by elderly families. (a) Election of preference for occupancy by elderly families--(1) Election by owners of eligible projects. (i) An owner of a project involving substantial rehabilitation and assisted under this part (including a partially assisted project) that was originally designed primarily for occupancy by elderly families (an ``eligible project'') may, at any time, elect to give preference to elderly families in selecting tenants for assisted, vacant units in the project, subject to the requirements of this section. (ii) For purposes of this section, a project eligible for the preference provided by this section, and for which the owner makes an election to give preference in occupancy to elderly families is referred to as an ``elderly project.'' ``Elderly families'' refers to families whose heads of household, their spouses or sole members are 62 years or older. (iii) An owner who elects to provide a preference to elderly families in accordance with this section is required to notify families on the waiting list who are not elderly that the election has been made and how the election may affect them if: (A) The percentage of disabled families currently residing in the project who are neither elderly nor near-elderly (hereafter, collectively referred to as ``non-elderly disabled families'') is equal to or exceeds the minimum required percentage of units established for the elderly project in accordance with paragraph (c)(1) of this section, and therefore non-elderly families on the waiting list (including non- elderly disabled families) may be passed over for covered section 8 units; or (B) The project, after making the calculation set forth in paragraph (c)(1) of this section, will have no units set aside for non-elderly disabled families. (iv) An owner who elects to give a preference for elderly families in accordance with this section shall not remove an applicant from the project's waiting list solely on the basis of having made the election. (2) HUD approval of election not required. (i) An owner is not required to solicit or obtain the approval of HUD before exercising the election of preference for occupancy provided in paragraph (a)(1) of this section. The owner, however, if challenged on the issue of eligibility of the project for the election provided in paragraph (a)(1) of this section must be able to support the project's eligibility through the production of all relevant documentation in the possession of the owner that pertains to the original design of the project. (ii) The Department reserves the right at any time to review and make determinations regarding the accuracy of the identification of the project as an elderly project. The Department can make such determinations as a result of ongoing monitoring activities, or the conduct of complaint investigations under the Fair Housing Act (42 U.S.C. 3601 through 3619), or compliance reviews and complaint investigations under section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and other applicable statutes. (b) Determining projects eligible for preference for occupancy by elderly families--(1) Evidence supporting project eligibility. Evidence that a project assisted under this part (or portion of a project) was originally designed primarily for occupancy by elderly families, and is [[Page 168]] therefore eligible for the election of occupancy preference provided by this section, shall consist of at least one item from the sources (``primary'' sources) listed in paragraph (b)(1)(i), or at least two items from the sources (``secondary'' sources) listed in paragraph (b)(1)(ii) of this section: (i) Primary sources. Identification of the project (or portion of a project) as serving elderly (seniors) families in at least one primary source such as: the application in response to the notice of funding availability; the terms of the notice of funding availability under which the application was solicited; the regulatory agreement; the loan commitment; the bid invitation; the owner's management plan, or any underwriting or financial document collected at or before loan closing; or (ii) Secondary sources. Two or more sources of evidence such as: lease records from the earliest two years of occupancy for which records are available showing that occupancy has been restricted primarily to households where the head, spouse or sole member is 62 years of age or older; evidence that services for elderly persons have been provided, such as services funded by the Older Americans Act, transportation to senior citizen centers, or programs coordinated with the Area Agency on Aging; project unit mix with more than fifty percent of efficiency and one-bedroom units [a secondary source particularly relevant to distinguishing elderly projects under the previous section 3(b) definition (in which disabled families were included in the definition of ``elderly families'') from non-elderly projects and which in combination with other factors (such as the number of accessible units) may be useful in distinguishing projects for seniors from those serving the broader definition of ``elderly families'' which includes disabled families]; or any other relevant type of historical data, unless clearly contradicted by other comparable evidence. (2) Sources in conflict. If a primary source establishes a design contrary to that established by the primary source upon which the owner would base support that the project is an eligible project (as defined in this section), the owner cannot make the election of preferences for elderly families as provided by this section based upon primary sources alone. In any case where primary sources do not provide clear evidence of original design of the project for occupancy primarily by elderly families, including those cases where primary sources conflict, secondary sources may be used to establish the use for which the project was originally designed. (c) Reservation of units in elderly projects for non-elderly disabled families. The owner of an elderly project is required to reserve, at a minimum, the number of units specified in paragraph (c)(1) of this section for occupancy by non-elderly disabled families. (1) Minimum number of units to be reserved for non-elderly disabled families. The number of units in an elderly project required to be reserved for occupancy by non-elderly disabled families, shall be, at a minimum, the lesser of: (i) The number of units equivalent to the higher of-- (A) The percentage of units assisted under this part in the elderly project that were occupied by non-elderly disabled families on October 28, 1992; and (B) The percentage of units assisted under this part in the elderly project that were occupied by non-elderly disabled families upon January 1, 1992; or (ii) 10 percent of the number of units assisted under this part in the eligible project. (2) Option to reserve greater number of units for non-elderly disabled families. The owner, at the owner's option, and at any time, may reserve a greater number of units for non-elderly disabled families than that provided for in paragraph (c)(1) of this section. The option to provide a greater number of units to non-elderly disabled families will not obligate the owner to always provide that greater number to non-elderly disabled families. The number of units required to be provided to non-elderly disabled families at any time in an elderly project is that number determined under paragraph (c)(1) of this section. [[Page 169]] (d) Secondary preferences. An owner of an elderly project also may elect to establish secondary preferences in accordance with the provisions of this paragraph (d) of this section. (1) Preference for near-elderly disabled families in units reserved for elderly families. If the owner of an elderly project determines, in accordance with paragraph (f) of this section, that there are an insufficient number of elderly families who have applied for occupancy to fill all the vacant units in the elderly project reserved for elderly families (that is, all units except those reserved for the non-elderly disabled families as provided in paragraph (c) of this section), the owner may give preference for occupancy of such units to disabled families who are near-elderly families. (2) Preference for near-elderly disabled families in units reserved for non-elderly disabled families. If the owner of an elderly project determines, in accordance with paragraph (f) of this section, that there are an insufficient number of non-elderly disabled families to fill all the vacant units in the elderly project reserved for non-elderly disabled families as provided in paragraph (c) of this section, the owner may give preference for occupancy of these units to disabled families who are near-elderly families. (e) Availability of units to families without regard to preference. An owner shall make vacant units in an elderly project generally available to otherwise eligible families who apply for housing, without regard to the preferences and reservation of units provided in this section if either: (1) The owner has adopted the secondary preferences and there are an insufficient number of families for whom elderly preference, reserve preference, and secondary preference has been given, to fill all the vacant units; or (2) The owner has not adopted the secondary preferences and there are an insufficient number of families for whom elderly preference, and reserve preference has been given to fill all the vacant units. (f) Determination of insufficient number of applicants qualifying for preference. To make a determination that there are an insufficient number of applicants who qualify for the preferences, including secondary preferences, provided by this section, the owner must: (1) Conduct marketing in accordance with Sec. 886.321(a) to attract applicants qualifying for the preferences and reservation of units set forth in this section; and (2) Make a good faith effort to lease to applicants who qualify for the preferences provided in this section, including taking all feasible actions to fill vacancies by renting to such families. (g) Prohibition of evictions. An owner may not evict a tenant without good cause, or require that a tenant vacate a unit, in whole or in part because of any reservation or preference provided in this section, or because of any action taken by the Secretary pursuant to subtitle D (sections 651 through 661) of title VI of the Housing and Community Development Act of 1992 (42 U.S.C. 13611 through 13620). [59 FR 65857, Dec. 21, 1994, as amended at 65 FR 16724, Mar. 29, 2000] Sec. 886.330 Work write-ups and cost estimates. (a) HUD preparation of work write-ups. If needed, a work write-up, including plans and specifications, will be made by HUD specifying necessary rehabilitation. (b) HUD specifies deficiencies and corrective action. The work write-up will specify deficiencies noted by HUD and describe the manner in which the deficiencies are to be corrected, including minimum acceptable levels of workmanship and materials. (c) HUD preparation of cost estimates. HUD shall perform or cause to be performed a cost estimate to complete rehabilitation. The cost of any necessary relocation, as determined by HUD as being necessary to expedite the rehabilitation and the estimated cost to the owner of maintaining project rents at the Section 8 level, as required by HUD prior to execution of the Contract, plus other costs allowable by HUD will be included in the cost estimate. The work write-up and cost estimate shall become part of the disposition package and will be used in determining the sales price of the project. [44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993] [[Page 170]] Sec. 886.331 Agreement to enter into housing assistance payments contract. (a) Execution of agreement. At the sales closing and prior to the Owner's commencement of any rehabilitation under this subpart, HUD will enter into an Agreement with the Owner which contains the following: (1) A statement that the Owner agrees to rehabilitate the project unit(s) to make the unit(s) decent, safe, and sanitary in accordance with the work write-up, cost estimates, and this subpart. (2) A date by which rehabilitation will have commenced and a deadline date by which the rehabilitated project unit(s) will be completed and ready for occupancy. The Agreement may provide for staged rehabilitation, occupancy, and payments under the contract. (3) The Contract Rent which will be paid to the Owner once rehabilitation is completed, the Contract is executed, and the unit(s) is/are occupied by an eligible family. (4) A date for final inspection of the unit(s) by HUD and the owner shall be specified. This date shall be as soon as possible after the deadline date specified pursuant to paragraph (a)(2) of this section. (5) The term of the contract. (b) Agreement part of sales contract. The Agreement will be prepared by HUD and incorporated into the Contract of Sale and Purchase. The Agreement shall include all required information in paragraph (a) of this section and a statement specifying the Owner's responsibility for making relocation payments to Families temporarily displaced. [44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993] Sec. 886.332 Rehabilitation period. (a) Immediate start of rehabilitation after sales closing. After the execution of the Agreement and the sales closing, the owner shall immediately proceed with the rehabilitation work as provided in the Agreement. In the event the work is not immediately commenced, diligently continued, and/or completed by the deadline date stated on the Agreement, HUD will have the right, upon written notification to the owner, to rescind the Agreement and the sale, or take other appropriate action. (b) Extensions. Although extensions of time may be granted by HUD upon a written request from the owner stating the grounds for the extension, no increases in Contract Rents shall be granted for delays. (c) Changes. (1) The Owner must submit to HUD for approval any changes from the work specified in the Agreement which would materially reduce or alter the Owner's obligations or the quality or amenities of the project. HUD may condition its approval of such changes on a reduction of the Contract Rents. If changes are made without prior HUD approval, HUD will have the right to take action consistent with the purpose of this subpart, including action intended to preclude the owner from benefiting from a change in the work specified without HUD approval. HUD action shall include but is not limited to reducing the Contract Rents, requiring the owner to remedy the deficiency, or rescission of the Contract of Sale with reimbursement to the owner for the HUD determined reasonable cost of work items completed by the Owner and acceptable to HUD. (2) Contract Rents for project units being rehabilitated shall not be increased except in accordance with this subpart. Should an increase in Contract Rents be necessitated by changes in local codes or ordinances or other unanticipated changes in work items which could not have been anticipated by HUD, an increase will only be approved if HUD approval is obtained prior to incorporation of any changes in the project. [44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993] Sec. 886.333 Completion of rehabilitation. (a) Notification of completion. The owner must notify HUD in writing when work is completed and submit to HUD the evidence of completion and cost certifications described in paragraph (b) and (c) of this section. (b) Evidence of completion. Completion of the project must be evidenced by furnishing HUD with the following: [[Page 171]] (1) A certificate of occupancy and/or other official approvals necessary for occupancy as required by the locality. (2) A certification by the owner that: (i) The project unit(s) has been completed in accordance with the requirements of the Agreement; (ii) The project unit(s) is/are decent, safe, and sanitary; (iii) The project unit(s) has/have been rehabilitated in accordance with the applicable zoning, building, housing and other codes, ordinances or regulations, as modified by any waivers obtained from the appropriate officials; (iv) The project was in compliance with applicable HUD lead-based paint regulations at part 35, subparts A, B, H, and R of this title. (v) If applicable, the owner has complied with the provisions of the Agreement relating to the payment of not less than prevailing wage rates and that to the best of the owner's knowledge and belief there are no claims of underpayment in alleged violation of said provisions of the Agreement. In the event there are any such pending claims to the knowledge of the owner of HUD, the owner shall be required to place a sufficient amount in escrow, as determined by HUD, to assure such payments; (vi) There are no defects or deficiencies in the project except for ordinary punchlist items, or incomplete work awaiting seasonal opportunity such as landscaping and heating system test (such excepted items to be specified); and (vii) There has been no change in the evidence of management capability or in the proposed management program (if one was required) specified in the approved purchase proposal other than changes approved in writing by HUD in accordance with the Agreement. (c) Actual cost and interest rate certifications. The Owner must provide HUD with statements of the actual costs, including the interest rate incurred for the rehabilitation, Contract Rent shortfalls, and any relocation approved by HUD. The owner shall certify that these are the actual costs. HUD shall review and approve these costs subject to post audit. (d) Review and inspections. (1) Within fifteen working days of the receipt of the evidence of completion, and the owner's certification of costs, HUD shall review the evidence of completion for compliance with paragraphs (b) and (c) of this section. (2) Within the same time period, a HUD representative shall inspect the units, to determine whether the units meet the Housing Quality Standards, the Agreement to Enter into the HAP, and any applicable work write-up. (e) If the inspection discloses defects or deficiencies, the inspector shall report these with sufficient detail and information for purposes of paragraphs (g) (1) and (2) of this section. (f) Acceptance. If HUD determines from the review and inspection that the project has been completed in accordance with the Agreement, the project shall be accepted. (g) Acceptance where defects or deficiencies reported. If the projects unit(s) are not acceptable under paragraph (f) of this section, the following shall apply: (1) If the only defects or deficiencies are punchlist items or incomplete items awaiting seasonal opportunity, the project may be accepted and the contract executed. If the owner fails to complete the items within a reasonable time to the satisfaction of HUD, HUD may, upon 30 days notice to the owner terminate the contract and/or exercise its other rights thereunder, including rescission of the sale. (2) If the defects or deficiencies are other than punchlist items or incomplete work awaiting seasonal opportunity, HUD shall determine whether and to what extent the defects or deficiencies can be corrected, what corrections are essential to permit HUD to accept the project, whether and to what extent a reduction of Contract Rents will be required as a condition to acceptance of the project, and the extension of time required for the remaining work to be done. The owner shall be notified of HUD's determinations and, if the owner agrees to comply with the conditions, an addendum to the Agreement shall be entered into, specifying the remaining work, pursuant to which the defects or deficiencies will be corrected and the unit(s) then accepted. If the owner is unwilling to enter into such an addendum or fails to [[Page 172]] perform under the addendum, the units will not be accepted and appropriate remedies will be sought by HUD. Paragraphs (a) through (g) will apply when the remaining work is completed satisfactorily. (h) Notification of non-acceptance. If HUD determines that, based on the review of the evidence of completion and inspection, the unit(s) cannot be accepted, the Owner must be promptly notified of this decision and the reasons and steps shall be taken immediately to rescind the sale, or such other action deemed appropriate by HUD. [44 FR 70365, Dec. 6, 1979, as amended at 52 FR 1896, Jan. 15, 1987; 58 FR 43723, Aug. 17, 1993; 64 FR 50227, Sept. 15, 1999] Sec. 886.334 Execution of housing assistance payments contract. (a) Time of execution. Upon acceptance of the unit(s) by HUD pursuant to Sec. 886.333(f), the contract will be executed first by the Owner and then by HUD. The effective date must be no earlier than the HUD inspection which provides the basis for unconditional acceptance. (b) Changes in initial contract rents during rehabilitation. (1) The Contract Rents established pursuant to Sec. 886.310 and 24 CFR part 290 will be the Contract Rents on the effective date of the Contract except under the following circumstances: (i) When, during rehabilitation, work items are discovered which could not reasonably have been anticipated by HUD or are necessitated by an unforeseen change in local codes or ordinances; were not listed in the work write-up prepared by HUD but are deemed by HUD, in writing, to be necessary work; and will require additional expenditures which would make the rehabilitations infeasible at the Contract Rents established in the Agreement. Under these circumstances, HUD will: (A) Approve a change order to the rehabilitation contract, or amend the work write-up if there is no rehabilitation contract, specifying the additional work to be accomplished and the additional cost for this work, (B) Recompute the Contract Rents, within the limits specified in paragraph (b)(4) of this section, based upon the revised cost estimate, and (C) Prepare and execute an amendment to the Agreement stating the additional work required and the revised Contract Rents. (ii) When the actual cost of the rehabilitation performed is less than that estimated in the calculation of Contract Rents for the Agreement. (iii) When, due to unforeseen factors, the actual certified relocation payments made by the Owner to temporarily relocated Families varies from the cost estimated by HUD. (2) Should changes occur as specified in paragraph (b)(1) (ii) or (iii) (either an increase or decrease), HUD may recalculate the Contract Rents and amend the Contract or Agreement, as appropriate, to reflect the revised rents. The rents shall not be recalculated based on increased costs to maintain rents at the Section 8 level during the rehabilitation period. (3) HUD must review and approve the Owner's certification that the rehabilitation costs and relocation costs are the actual costs incurred. (4) In establishing the revised Contract Rents, HUD must determine that the resulting Contract Rents plus an applicable Utility Allowances do not exceed the Fair Market Rent or the exception rent provided in Sec. 886.310 in effect at the time of execution of the Agreement. (c) Unleased unit(s). At the time the contract is executed, HUD will provide a list of dwelling unit(s) leased as of the effective date of the Contract and a list of the unit(s) not so leased, if any, and shall determine whether or not the owner has met the obligations with respect to any unleased unit(s) and for which of those unit(s) vacancy payments will be made by HUD. The owner must indicate in writing either concurrence with this determination or disagreement reserving all rights to claim vacancy payments for the unleased unit(s) pursuant to the contract, without prejudice by reason of the owner's signing the contract. [44 FR 70365, Dec. 6, 1979, as amended at 48 FR 12711, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 65 FR 16427, Mar. 29, 2000] [[Page 173]] Sec. 886.335 Management and occupancy reviews. (a) The contract administrator will conduct management and occupancy reviews to determine whether the owner is in compliance with the Contract. Such reviews will be conducted in accordance with a schedule set out by the Secretary and published in the Federal Register, following notice and the opportunity to comment. Where a change in ownership or management occurs, a management and occupancy review must be conducted within six months. (b) HUD or the Contract Administrator may inspect project operations and units at any time. (c) Equal Opportunity reviews may be conducted by HUD at any time. [87 FR 37997, June 27, 2022] Sec. 886.336 Audit. Where a non-Federal entity (as defined in 2 CFR 200.69) is the eligible owner of a project receiving financial assistance under this part, the audit requirements in 2 CFR part 200, subpart F, shall apply. [80 FR 75941, Dec. 7, 2015] Sec. 886.337 Selection preferences. Sections 5.410 through 5.430 govern the use of preferences in the selection of tenants under this subpart. [59 FR 36647, July 18, 1994, as amended at 61 FR 9047, Mar. 6, 1996] Sec. 886.338 Displacement, relocation, and acquisition. (a) Minimizing displacement. Consistent with the other goals and objectives of this part, owners shall assure that they have taken all reasonable steps to minimize the displacement of persons (families, individuals, businesses, nonprofit organizations, and farms) as a result of a project assisted under this part. (b) Temporary relocation. The following policies cover residential tenants who will not be required to move permanently but who must relocate temporarily for the project. Such tenants must be provided: (1) Reimbursement for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, including the cost of moving to and from the temporary housing and any increase in monthly rent/utility costs; and (2) Appropriate advisory services, including reasonable advance written notice of: (i) The date and approximate duration of the temporary relocation; (ii) The location of the suitable, decent, safe, and sanitary dwelling to be made available for the temporary period; (iii) The terms and conditions under which the tenant may lease and occupy a suitable, decent, safe, and sanitary dwelling in the building/ complex following completion of the rehabilitation; and (iv) The provisions of paragraph (b)(1) of this section. (c) Relocation assistance for displaced persons. A ``displaced person'' (defined in paragraph (g) of this section) must be provided relocation assistance at the levels described in, and in accordance with the requirements of, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and implementing regulations at 49 CFR part 24. A ``displaced person'' shall be advised of his or her rights under the Fair Housing Act (42 U.S.C. 3601-19), and, if the representative comparable replacement dwelling used to establish the amount of the replacement housing payment to be provided to a minority person is located in an area of minority concentration, such person also shall be given, if possible, referrals to comparable and suitable, decent, safe, and sanitary replacement dwellings not located in such areas. (d) Real property acquisition requirements. The acquisition of real property for a project is subject to the URA and the requirements described in 49 CFR part 24, subpart B. (e) Appeals. A person who disagrees with the owner's determination concerning whether the person qualifies as a ``displaced person,'' or the amount of relocation assistance for which the person is found to be eligible, may file a written appeal of that determination with the owner. A low-income person [[Page 174]] who is dissatisfied with the owner's determination on such appeal may submit a written request for review of that determination to the HUD Field Office. (f) Responsibility of owner. (1) The owner shall certify (i.e., provide assurance of compliance, as required by 49 CFR part 24) that he or she will comply with the URA, the regulations at 49 CFR part 24, and the requirements of this section. The owner is responsible for such compliance notwithstanding any third party's contractual obligation to the owner to comply with these provisions. (2) The cost of providing required relocation assistance is an eligible project cost to the same extent and in the same manner as other project costs. Such costs may also be paid for with funds available from other sources. (3) The owner shall maintain records in sufficient detail to demonstrate compliance with the provisions of this section. The owner shall maintain data on the race, ethnic, gender, and handicap status of displaced persons. (g) Definition of displaced person. (1) For purposes of this section, the term displaced person means a person (family, individual, business, nonprofit organization, or farm) that moves from real property, or moves personal property from real property, permanently, as a direct result of acquisition, rehabilitation, or demolition for a project assisted under this part. This includes any permanent, involuntary move for an assisted project, including any permanent move from the real property that is made: (i) After notice by the owner to move permanently from the property, if the move occurs on or after the date of the submission of the application to HUD; (ii) Before submission of the application to HUD, if HUD determines that the displacement resulted directly from acquisition, rehabilitation, or demolition for the assisted project; or (iii) By a tenant-occupant of a dwelling unit, if any one of the following three situations occurs: (A) The tenant moves after the execution of the contract to provide Housing Assistance Payments, and the move occurs before the tenant is provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe, and sanitary dwelling in the same building/complex, under reasonable terms and conditions, upon completion of the project. Such reasonable terms and conditions include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: (1) The tenant's monthly rent before execution of the Housing Assistance Payments Contract and estimated average monthly utility costs; or (2) The total tenant payment, as determined under part 5 of this title, if the tenant is low-income, or 30 percent of gross household income, if the tenant is not low-income; or (B) The tenant is required to relocate temporarily, does not return to the building/complex, and either: (1) The tenant is not offered payment for all reasonable out-of- pocket expenses incurred in connection with the temporary relocation, or (2) Other conditions of the temporary relocation are not reasonable; or (C) The tenant is required to move to another dwelling unit in the same building/complex but is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move, or other conditions of the move are not reasonable. (2) Notwithstanding the provisions of paragraph (g)(1) of this section, a person does not qualify as a ``displaced person'' (and is not eligible for relocation assistance under the URA or this section), if: (i) The person has been evicted for serious or repeated violation of the terms and conditions of the lease or occupancy agreement, violation of applicable Federal, State or local law, or other good cause, and HUD determines that the eviction was not undertaken for the purpose of evading the obligation to provide relocation assistance; (ii) The person moved into the property after the submission of the application and, before signing a lease and commencing occupancy, received written notice of the project, its possible impact on the person (e.g., the person may be displaced, temporarily relocated, or suffer a rent increase) and the fact that he or she would not qualify as a ``displaced person'' (or for assistance [[Page 175]] under this section) as a result of the project; (iii) The person is ineligible under 49 CFR 24.2(g)(2); or (iv) HUD determines that the person was not displaced as a direct result of acquisition, rehabilitation, or demolition for the project. (3) The owner may ask HUD, at any time, to determine whether a displacement is or would be covered by this section. (h) Definition of initiation of negotiations. For purposes of determining the formula for computing the replacement housing assistance to be provided to a residential tenant displaced as a direct result of privately undertaken rehabilitation, demolition, or acquisition of the real property, the term ``initiation of negotiations'' means the owner's execution of the Housing Assistance Payments Contract. (Approved by the Office of Management and Budget under OMB Control Number 2506-0121) [58 FR 43723, Aug. 17, 1993, amended at 65 FR 16724, Mar. 29, 2000] Sec. 886.339 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. (a) Covered housing providers must develop and implement an emergency transfer plan that meets the requirements in 24 CFR 5.2005(e). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking, covered housing providers have discretion to adopt new, and modify any existing, admission preferences or transfer waitlist priorities. (c) In addition to following requirements in 24 CFR 5.2005(e), when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, or stalking who qualifies for an emergency transfer, covered housing providers must: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, covered housing providers must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), including data on the outcomes of such requests. [81 FR 80814, Nov. 16, 2016] Sec. 886.340 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and that is subject to a Housing Assistance Payments contract executed or renewed after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92638, Dec. 20, 2016] PART 887_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAMS_FAMILY SELF-SUFFICIENCY PROGRAM--Table of Contents Sec. 887.101 Purpose, scope, and applicability. 887.103 Definitions. 887.105 Basic requirements of FSS programs. 887.107 Cooperative Agreements. 887.109 Housing assistance and total tenant payments and increases in family income. 887.111 FSS award funds formula. 887.113 FSS funds. Authority: 42 U.S.C. 1437u, and 3535(d). Source: 87 FR 30046, May 17, 2022, unless otherwise noted. [[Page 176]] Sec. 887.101 Purpose, scope, and applicability. (a) Purpose. (1) The purpose of the Family Self-Sufficiency (FSS) program is to promote the development of local strategies to coordinate the use of Department of Housing and Urban Development (HUD) assistance with public and private resources, to enable families eligible to receive HUD assistance to achieve economic independence and self- sufficiency. (2) The purpose of this part is to implement the policies and procedures applicable to operation of an FSS program under HUD's Section 8 Housing assistance payments programs, as established under section 23 of the 1937 Act (42 U.S.C. 1437u). (b) Scope. Each owner may implement an FSS program independently or by way of a Cooperative Agreement with a Public Housing Agency (PHA) or another owner. Each owner that administers an FSS program must do so in accordance with the requirements of this part. (c) Applicability. This part applies to owners of multifamily rental housing properties assisted by Section 8 Housing assistance payments programs. See part 984 of this title for program regulations applicable to PHAs. (d) Non-participation. Tenant participation in an FSS program is voluntary. Assistance under Section 8 Housing assistance payments programs for a family that elects not to participate in an FSS program shall not be refused, delayed or terminated by reason of such election. Sec. 887.103 Definitions. The definitions in Sec. 984.103 of this title apply to this part, except that eligible families means tenant families living in multifamily assisted housing. Sec. 887.105 Basic requirements of FSS programs. (a) An FSS program that is voluntarily established under this part by an owner must comply with the following requirements: (1) Shall be operated in conformity with the regulations of this part and other Section 8 regulations, codified in 24 CFR parts 5, 402, 880, 881, 883, and 884, respectively, and with FSS program objectives, as described in Sec. 984.102 of this title; (2) Shall coordinate supportive services as defined in Sec. 984.103 of this title; (3) Shall have an Action Plan approved by HUD, as described in Sec. 984.201 of this title, before operating an FSS program; (4) When a Program Coordinating Committee (PCC), as described in Sec. 984.202 of this title, is available, owners shall work with that PCC or shall create their own PCC, either by themselves, or in conjunction with other owners; (5) Shall comply with the family selection procedures in Sec. 984.203 of this title; (6) May make available and utilize onsite facilities, as described in Sec. 984.204 of this title; (7) Shall comply with the FSS funds provision, as described in Sec. 984.302(c) of this title; (8) Shall enter into Contracts of Participation with eligible families, as described in Sec. 984.303 of this title; (9) Shall establish and manage FSS escrow accounts as described in Sec. 984.305 of this title; (10) Shall report information to HUD as described in Sec. 984.401 of this title; and (11) Shall be operated in compliance with applicable nondiscrimination and equal opportunity requirements including, but not limited to, those set forth in 24 CFR part 5. (b) An owner may employ appropriate staff, including an FSS Program Coordinator, to administer its FSS program, and may contract with an appropriate organization to establish and administer parts of the FSS program. Sec. 887.107 Cooperative Agreements. (a) An owner may enter into a Cooperative Agreement with: (1) A local PHA that operates an FSS program, pursuant to Sec. 984.106 of this title; or (2) Another owner that operates an FSS program, pursuant to this section. (b) Owners that enter into a Cooperative Agreement pursuant to this part, must: [[Page 177]] (1) Open any FSS waiting lists to all eligible families residing in the properties covered by the Cooperative Agreement. (2) Provide periodic escrow amounts to the FSS Program Coordinator for FSS families covered by the Cooperative Agreement under this part. The Cooperative Agreement must provide that each owner is responsible for managing the escrow accounts of their participating families, including calculating and tracking of escrow in accordance with Sec. 984.305 of this title, and set forth the procedures for the sharing of escrow information between the PHA and the owner. (3) The Cooperative Agreement must clearly specify the terms and conditions of such agreement, including the requirements of this section, and it must include a process for PHAs and owners to communicate with each other about changes in their Action Plan. Sec. 887.109 Housing assistance and total tenant payments and increases in family income. (a) Housing assistance payment. The housing assistance payment for an eligible family participating in the FSS program under this part is determined in accordance with the regulations set forth in Sec. 5.661(e) of this title. (b) Total tenant payment. The total tenant payment for an FSS family participating in the FSS program is determined in accordance with Sec. 5.628 of this title. (c) Increases in FSS family income. Any increase in the earned income of an FSS family during its participation in an FSS program may not be considered as income or an asset for purposes of eligibility of the FSS family for other benefits, or amount of benefits payable to the FSS family, under any other program administered by HUD. Sec. 887.111 FSS award funds formula. The Secretary may establish a formula by which funds for administration of the FSS program are awarded consistent with 42 U.S.C. 1437u(i). Sec. 887.113 FSS funds. Owners may access funding from any residual receipt accounts for the property to cover reasonable costs associated with operation of an FSS program, including hiring an FSS Program Coordinator or coordinators for their FSS program. PART 888_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM_FAIR MARKET RENTS AND CONTRACT RENT ANNUAL ADJUSTMENT FACTORS-- Table of Contents Subpart A_Fair Market Rents Sec. 888.111 Fair market rents for existing housing: Applicability. 888.113 Fair market rents for existing housing: Methodology. 888.115 Fair market rents for existing housing: Manner of publication. Subpart B_Contract Rent Annual Adjustment Factors 888.201 Purpose. 888.202 Manner of publication. 888.203 Use of contract rent automatic annual adjustment factors. 888.204 Revision to the automatic annual adjustment factors. Subpart C_Retroactive Housing Assistance Payments for New Construction, Substantial Rehabilitation, State Finance Agencies, Section 515 Farmers Home Administration, Section 202 Elderly or Handicapped, and Special Allocations Projects 888.301 Purpose and scope. 888.305 Amount of the retroactive Housing Assistance Payments. 888.310 Notice of eligibility requirements for retroactive payments. 888.315 Restrictions on retroactive payments. 888.320 One-time Contract Rent determination. Subpart D_Retroactive Housing Assistance Payments for Moderate Rehabilitation Projects 888.401 Purpose and scope. 888.405 Amount of the retroactive Housing Assistance Payments. 888.410 Notice of eligibility requirements for retroactive payments. 888.415 Restrictions on retroactive payments. 888.420 One-time Contract Rent determination. Authority: 42 U.S.C. 1437f and 3535d. [[Page 178]] Source: 50 FR 38796, Sept. 25, 1985, unless otherwise noted. Editorial Note: For revisions and amendments affecting Schedules A, B, C, and D, issued under part 888, but not carried in the Code of Federal Regulations, see the List of CFR Sections Affected, in the Finding Aids section of the printed volume and at www.govinfo.gov. Subpart A_Fair Market Rents Sec. 888.111 Fair market rents for existing housing: Applicability. (a) The fair market rents (FMRs) for existing housing are determined by HUD and are used in the Section 8 Housing Choice Voucher program (HCV program) (part 982 of this title), Section 8 project-based assistance programs and other programs requiring their use. In the HCV program, the FMRs are used to determine payment standard schedules. In the Section 8 project-based assistance programs, the FMRs are used to determine the maximum initial rent (at the beginning of the term of a housing assistance payments contract). (b) Fair market rent means the rent, including the cost of utilities (except telephone), as established by HUD, pursuant to this subpart, for units of varying sizes (by number of bedrooms), that must be paid in the market area to rent privately owned, existing, decent, safe and sanitary rental housing of modest (non-luxury) nature with suitable amenities. [64 FR 56911, Oct. 21, 1999, as amended at 81 FR 80580, Nov. 16, 2017] Sec. 888.113 Fair market rents for existing housing: Methodology. (a) Basis for setting fair market rents. Fair Market Rents (FMRs) are estimates of rent plus the cost of utilities, except telephone. FMRs are housing market-wide estimates of rents that provide opportunities to rent standard quality housing throughout the geographic area in which rental housing units are in competition. The level at which FMRs are set is expressed as a percentile point within the rent distribution of standard quality rental housing units in the FMR area. FMRs are set at the 40th percentile rent, the dollar amount below which the rent for 40 percent of standard quality rental housing units fall within the FMR area. The 40th percentile rent is drawn from the distribution of rents of all units within the FMR area that are occupied by recent movers. Adjustments are made to exclude public housing units, newly built units and substandard units. (b) Setting FMRs at the 40th percentile rent. Generally, HUD will set the FMRs at the 40th percentile rent, but no lower than 90 percent of the previous year's FMR for the FMR area. (c) Setting Small Area FMRs. (1) HUD will set Small Area FMRs for certain metropolitan FMR areas for use in the administration of tenant- based assistance under the HCV program. HUD will establish the selection values used to determine those metropolitan areas through a Federal Register notice on November 16, 2016 and may update the selection values through a Federal Register notice, subject to public comment. The selection criteria used to determine those metropolitan areas are: (i) The number of vouchers under lease in the metropolitan FMR area; (ii) The percentage of the standard quality rental stock, within the metropolitan FMR area is in small areas (ZIP codes) where the Small Area FMR is more than 110 percent of the metropolitan FMR area; (iii) The percentage of voucher families living in concentrated low income areas; (iv) The percentage of voucher families living in concentrated low income areas relative to the percentage of all renters within these areas over the entire metropolitan area; and (v) The vacancy rate for the metropolitan area. (2) For purposes of determining applicability of Small Area FMRs to a metropolitan area, the term ``concentrated low-income areas'' means: (i) Those census tracts in the metropolitan FMR area with a poverty rate of 25 percent or more; or (ii) Any tract in the metropolitan FMR area where at least 50 percent of the households earn less than 60 percent of the area median income and are designated by HUD as Qualified Census Tracts in accordance with section 42 of [[Page 179]] the Internal Revenue Code (26 U.S.C. 42). (3) If a metropolitan area meets the criteria of paragraph (c)(1) of this section, Small Area FMRs will apply to the metropolitan area and all PHAs administering HCV programs in that area will be required to use Small Area FMRs. A PHA administering an HCV program in a metropolitan area not subject to the application of Small Area FMRs may opt to use Small Area FMRs by seeking approval from HUD's Office of Public and Indian Housing (PIH) through written request to PIH. (4) HUD will designate Small Area FMR areas at the beginning of a Federal fiscal year, such designations will be permanent, and will make new area designations every 5 years thereafter as new data becomes available. HUD may suspend a Small Area FMR designation from a metropolitan area, or may temporarily exempt a PHA in a Small Area FMR metropolitan area from use of the Small Area FMRs, when HUD by notice makes a documented determination that such action is warranted. Actions that may serve as the basis of a suspension of Small Area FMRs are: (i) A Presidentially declared disaster area that results in the loss of a substantial number of housing units; (ii) A sudden influx of displaced households needing permanent housing; or (iii) Other events as determined by the Secretary. (5) Small Area FMRs only apply to tenant-based assistance under the HCV program. However, a PHA may elect to apply Small Area FMRs to project-based voucher (PBV) units at 24 CFR part 983 as provided in paragraph (h) of this section. (d) FMR areas. FMR areas comprise metropolitan areas and nonmetropolitan counties and Small Area FMR areas as follows: (1) Generally, FMR areas are metropolitan areas and nonmetropolitan counties. With several exceptions, the most current Office of Management and Budget (OMB) metropolitan area definitions of Metropolitan Statistical Areas (MSAs) are used because of their generally close correspondence with housing market area definitions. HUD may make exceptions to OMB definitions if the MSAs encompass areas that are larger than housing market areas. The counties deleted from the HUD- defined FMR areas in those cases are established as separate metropolitan county FMR areas. FMRs are established for all areas in the United States, the District of Columbia, and the Insular Areas of the United States. (2) Small Area FMR areas are the U.S. Postal Service ZIP code areas within a designated metropolitan area. (e) Data sources. (1) HUD uses the most accurate and current data available to develop the FMR estimates and may add other data sources as they are discovered and determined to be statistically valid. The following sources of survey data are used to develop the base-year FMR estimates: (i) The most recent American Community Survey conducted by the U.S. Census Bureau, which provides statistically reliable rent data. (ii) Locally collected survey data acquired through Address-Based Mail surveys or Random Digit Dialing (RDD) telephone survey data, based on a sampling procedure that uses computers to select statistically random samples of rental housing. (iii) Statistically valid information, as determined by HUD, presented to HUD during the public comment and review period. (2) Base-year recent mover adjusted FMRs are updated and trended to the midpoint of the program year they are to be effective using Consumer Price Index (CPI) data for rents and for utilities. (f) Unit size adjustments. (1) For most areas the ratios developed incorporating the most recent American Community Survey data are applied to the two-bedroom FMR estimates to derive FMRs for other bedroom sizes. Exceptions to this procedure may be made for areas with local bedroom intervals below an acceptable range. To help the largest most difficult- to-house families find units, higher ratios than the actual market ratios may be used for three-bedroom and larger-size units. (2) The FMR for single room occupancy housing is 75 percent of the FMR for a zero bedroom unit. [[Page 180]] (g) Manufactured home space rental. The FMR for a manufactured home space rental (for the HCV program under 24 CFR part 982) is 40 percent of the FMR for a two-bedroom unit for the metropolitan area or non- metropolitan county, as applicable. Small Area FMRs under paragraph (c) of this section do not apply to manufactured home space rentals. (h) Small Area FMRs and Project-based vouchers. Small Area FMRs do not apply to Project-based vouchers regardless of whether HUD designates the metropolitan area or approves the PHA for Small Area FMRs under paragraph (c)(3) of this section. The following exceptions apply: (1) Where the PHA notice of owner selection under 24 CFR 983.51(d) was made on or before the effective dates of both the Small Area FMR designation and the PHA administrative policy, the PHA and owner may mutually agree to apply the Small Area FMR. The application of the Small Area FMRs must be prospective and consistent with the PHA administrative plan. The owner and PHA may not subsequently choose to revert back to the use of the metropolitan-wide FMRs for the PBV project. If the rent to owner will increase as a result of the mutual agreement to apply the Small Area FMRs to the PBV project, the rent increase shall not be effective until the first annual anniversary of the HAP contract in accordance with 24 CFR 983.302(b). (2) Where the PHA notice of owner selection under 24 CFR 983.51(d) was made after the effective dates of both the Small Area FMR designation and the PHA administrative policy, the Small Area FMRs shall apply to the PBV project if the PHA administrative plan provides that Small Area FMRs are used for all future PBV projects. If the PHA chooses to implement this administrative policy, the policy must apply to all future PBV projects and the PHA's entire jurisdiction. An owner and the PHA may not subsequently choose to apply the metropolitan area FMR to the project, regardless of whether the PHA subsequently changes its administrative plan to revert to the use of metropolitan-wide FMR for future PBV projects. (3) For purposes of this section, the term ``effective date of the Small Area FMR designation'' means: (i) The date that HUD designated a metropolitan area as a Small Area FMR area; or (ii) The date that HUD approved a PHA request to voluntarily opt to use Small Area FMRs for its HCV program, as applicable. (4) For purposes of this section, the term ``effective date of the PHA administrative policy'' means the date the administrative policy was formally adopted as part of the PHA administrative plan by the PHA Board of Commissioners or other authorized PHA officials in accordance with Sec. 982.54(a). (i) Transition of metropolitan areas previously subject to 50th percentile FMRs. (1) A metropolitan area designated as 50th percentile FMR areas for which the 3-year period has not expired prior to January 17, 2017 shall transition out of 50th percentile FMRs as follows: (i) A 50th percentile FMR area that is designated for Small Area FMRs in accordance with paragraph (c) of this section will transition to the Small Area FMRs upon the effective date of the Small Area FMR designation; (ii) A 50th percentile metropolitan FMR area not designated as a Small Area FMRs in accordance with paragraph (c) of this section, will remain a 50th percentile FMR until the expiration of the three-year period, at which time the metropolitan area will revert to the standard FMR based on the 40th percentile rent for the metropolitan area. (2) A PHA with jurisdiction in a 50th percentile FMR area that reverts to the standard 40th percentile FMR may request HUD approval of payment standard amounts based on the 50th percentile rent in accordance with 24 CFR 982.503(f). (3) HUD will calculate the 50th percentile rents for certain metropolitan areas for purposes of this transition and to approve success rate payment standard amounts in accordance with 24 CFR 982.503(e). As is the case for determining 40th percentile rent, the 50th percentile rent is drawn from the distribution of rents of all units that are [[Page 181]] occupied by recent movers and adjustments are made to exclude public housing units, newly built units and substandard units. [81 FR 80580, Nov. 16, 2016] Sec. 888.115 Fair market rents for existing housing: Manner of publication. (a) Publication of FMRs. FMRs will be published at least annually by HUD on the World Wide Web, or in any other manner specified by the Secretary. HUD will publish a notice announcing the publication of the FMRs in the Federal Register, to be effective October 1 of each year, and provide for a minimum of 30 days of public comments and requested for reevaluation of the FMRs in a jurisdiction. The FMRs will become effective no earlier than 30 days after the date the notice publishes in the Federal Register (e.g., if HUD fails to publish FMRs 30 days before October 1, the effective date will be 30 days after publication), except for areas where HUD receives comments during the minimum 30-day comment period requesting reevaluation of the FMRs in a jurisdiction. After HUD reviews a request for reevaluation, HUD will post on the World Wide Web the final FMRs for the areas that have been reevaluated and publish a notice in the Federal Register announcing the publication and the effective date. (b) Changes in methodology. HUD will publish for comment in the Federal Register a document proposing material changes in the method for estimating FMRs and shall respond to public comment on the proposed material changes in the subsequent Federal Register document announcing the availability of new FMRs based on the revised method for estimating FMRs. [81 FR 80581, Nov. 16, 2016] Subpart B_Contract Rent Annual Adjustment Factors Sec. 888.201 Purpose. Automatic Annual Adjustment Factors are used to adjust rents under the Section 8 Housing Assistance Payments Program. [44 FR 75383, Dec. 20, 1979] Sec. 888.202 Manner of publication. Adjustment Factors will be published in the Federal Register at least annually by Notice. Interim revisions may be published as market conditions indicate. In the case of revised factors applicable only to specific areas, the HUD Field Office will publish a notice appropriate to the limited scope of the revised factors (see Sec. 888.204). [42 FR 60508, Nov. 25, 1977, as amended at 44 FR 75383, Dec. 20, 1979; 47 FR 4252, Jan. 29, 1982] Sec. 888.203 Use of contract rent automatic annual adjustment factors. (a) To compute an adjustment to a Contract Rent, find the schedule of Automatic Annual Adjustment Factors for the appropriate Census Region or Standard Metropolitan Statistical Area-- (1) If the Contract Rent includes all utilities, use the factor shown on the basic schedule for the rent bracket within which the particular Contract Rent falls and for the applicable size of unit (by number of bedrooms). (2) If the Contract Rent does not include all utilities but does include the highest cost utility, use the appropriate factor shown on the basic schedule. (3) If the Contract Rent does not include any utilities or includes some utilities but not the highest cost utility, use the Annual Adjustment Factor for Contract Rent (Excluding Utilities). (b) The adjusted monthly amount of the Contract Rent of a dwelling unit shall be determined by multiplying the Contract Rent in effect on the anniversary date of the contract by the applicable Automatic Annual Adjustment Factor (see paragraph (a) of this section) and rounding the result as follows: (1) If the result contains a fractional dollar amount ranging from $0.01 to $0.49, round to the next lower whole dollar amount; (2) If the result contains a fractional dollar amount ranging from $0.50 to $0.99, round to the next higher whole dollar amount. [42 FR 60508, Nov. 25, 1977, as amended at 44 FR 21769, Apr. 12, 1979; 47 FR 4252, Jan. 29, 1982; 59 FR 38564, July 29, 1994] [[Page 182]] Sec. 888.204 Revision to the automatic annual adjustment factors. If the application of the Annual Adjustment Factors results in rents that are substantially lower than rents charged for comparable units not receiving assistance under the U.S. Housing Act of 1937, in the area for which the factor was published or a portion thereof, and it is shown to HUD that the costs of operating comparable rental housing have increased at a substantially greater rate than the Adjustment Factors, the HUD Field Office will consider establishing separate or revised Automatic Annual Adjustment Factors for that particular area. Any request for revision of the factors must be accompanied by an identification of the area, its boundaries and evidence that the area constitutes the largest contiguous area in which substantially the same rent levels prevail. The HUD Field Office will publish appropriate notice of the establishment of any such revised Automatic Annual Adjustment Factors. These factors will remain in effect until superseded by the subsequent publication of Automatic Annual Adjustment Factors pursuant to Sec. 888.202. [44 FR 21769, Apr. 12, 1979] Subpart C_Retroactive Housing Assistance Payments for New Construction, Substantial Rehabilitation, State Finance Agencies, Section 515 Farmers Home Administration, Section 202 Elderly or Handicapped, and Special Allocations Projects Source: 56 FR 20084, May 1, 1991, unless otherwise noted. Sec. 888.301 Purpose and scope. (a) Purpose. This subpart describes the basic policies and procedures for the retroactive payment of Housing Assistance Payments to eligible project owners for the period from October 1, 1979 to May 31, 1991 and for one-time Contract Rent determinations for such eligible project owners. (b) Applicability. This subpart applies to all project-based Section 8 Housing Assistance Payments Contracts under New Construction (Part 880); Substantial Rehabilitation (Part 881); State Finance Agencies (Part 883); and Section 515 Farmers Home Administration (Part 884). It also applies to those projects under Section 202 Elderly or Handicapped (Part 885) and Special Allocations (Part 886, Subparts A and C) whose Contract Rents are adjusted by use of the Annual Adjustment Factors (AAFs), as described in subpart B of this part. (c) Eligible project owners. Project owners may be eligible for retroactive payments if, during the period from October 1, 1979 to May 31, 1991: (1) The use of a comparability study by HUD (or the Contract Administrator), which was conducted as an independent limitation on the amount of rent adjustment that would have resulted from use of the applicable AAF, resulted in the reduction of the maximum monthly Contract Rents for units covered by a Housing Assistance Payments (HAP) contract or resulted in less than the maximum increase for those units than would otherwise be permitted by the AAF; or (2) The HAP contract required a project owner to request annual rent adjustments, and the project owner certifies that a request was not made because of an anticipated reduction of the maximum monthly Contract Rents resulting from a comparability study. Sec. 888.305 Amount of the retroactive Housing Assistance Payments. (a) Recalculating the total rent adjustment. To establish the amount of the retroactive HAP payment for which a project owner meeting the criteria in Sec. 888.301(c) is eligible, the total rent adjustment will be recalculated for the period from October 1, 1979 to May 31, 1991. For purposes of establishing the amount of the retroactive payment only, the total rent adjustment will be an amount equal to the Contract Rent, minus the amount of the Contract Rent attributable to debt service, multiplied by the applicable AAF, for each year. (b) Calculating the retroactive payment. HUD (or the Contract Administrator) will pay, as a retroactive Housing Assistance Payment, the amount, if any, [[Page 183]] by which the total rent adjustment, calculated under paragraph (a) of this section, exceeds the rent adjustments actually approved for the same time period, except that in no event will any payment be an amount less than 30 percent of the aggregate of the full Contract Rent multiplied by the applicable AAF, minus the sum of the rent adjustments actually approved for the same time period, adjusted by the average occupancy rate. (c) Occupancy rates. (1) Retroactive payments will be made only for units that were occupied, based on average occupancy rate, including units qualifying for vacancy payments under 24 CFR 880.611, 881.611, 883.712, 884.106, 885.985, 886.109, or 886.309, during the time period from October 1, 1979 to May 31, 1991. (2) When requesting retroactive payment, a project owner must, if the information is available, submit documentation of occupancy rates, on either an annual or monthly basis, for the same time period. The average occupancy rate will be based on these records. If records are unavailable for the full time period, HUD (or the Contract Administrator) will establish an average occupancy rate, to be used for the entire period, from the occupancy rate for the three years immediately preceding May 31, 1991. (d) Revised AAFs. For any year during the period from October 1, 1979 to May 31, 1991, where a HUD field office published a revised Annual Adjustment Factor that replaced the applicable AAF for a specific locality under 24 CFR 888.204, the revised Annual Adjustment Factor, which applied to all projects in that area, will be used to recalculate the total rent adjustment under paragraph (a) of this section, and to establish the amount of the retroactive payments. (e) Special adjustments. When calculating the total rent adjustments and establishing the amount of the retroactive payments under paragraphs (a) and (b) of this section, any special adjustments granted under 24 CFR 880.609(b), 881,609(b), 883.710(b), 884.109(c), 886.112(c), or 886.312(c) during the time period from October 1, 1979 to May 31, 1991, to reflect substantial general increases in real property taxes, assessments, utility rates, utilities not covered by regulated rates, or for special adjustments for any other purpose authorized by a waiver of the regulations, will be deducted from the Contract Rent before applying the AAF. (f) AAFs less than 1.0. For any area where an AAF of less than 1.0 was published, a factor of 1.0 will be used to recalculate the total rent adjustments and to establish the amount of the retroactive payments under paragraphs (a) and (b) of this section. (g) Debt service. (1) For purposes of this section, debt service includes principal, interest, and the mortgage insurance premium, if any. (2) The monthly debt service set forth in the original mortgage documents for a project will be used to compute the debt service portion of the contract rent. The debt service will be compared to the spread of unit sizes included in the original HAP contract, and the amount used in the calculation will be based on the percentage of total rent potential of the various unit types. (3) If, in some cases, HUD or the Contract Administrator cannot determine the debt service for a project, the project owner will be asked to provide documentation of the debt service. The project owner will be notified by the HUD Field Office or the Contract Administrator of the need for documentation of the debt service, and allowed 30 days to respond, or for such longer period as approved by HUD or the Contract Administrator on a case-by-case basis. Where the debt service is not available to HUD or the Contract Administrator and the owner is unable to provide the necessary information, retroactive payments cannot be made. (h) Applicable AAF. The applicable AAF is the factor in effect on the anniversary date of the contract and appropriate for the area, for the size of the unit, and for the treatment of utilities; except where, for any year when AAFs were published after November 8 and made retroactive to November 8, a project owner was given the option to choose the factor in effect on the anniversary date or the retroactive factor, [[Page 184]] the applicable AAF is the factor chosen by the project owner in that year. (Approved by the Office of Management and Budget under control number 2502-0042) Sec. 888.310 Notice of eligibility requirements for retroactive payments. (a) Notice of eligibility requirements. HUD (or the Contract Administrator) will give written notice to all current owners of projects of the eligibility requirements for retroactive payments. Eligible project owners must make a request for payment and a request for a one-time contract determination within 60 days from the date of the notice. (b) Request for payment. (1) Owners eligible for retroactive payments under Sec. 888.301(c) must submit a request for a calculation of the total rent adjustments and the establishment of the amount of the retroactive payment, as described in Sec. 888.301 (a) and (b), and documentation of the occupancy rate for the period from October 1, 1979, to May 31, 1991, if available. (2) Owners whose HAP contract requires a request to be made for annual rent adjustments must certify that a request was not made because of an anticipated reduction in the Contract Rents as a result of a comparability study. The certification must contain the year or years upon which the request for payment is based and a statement of the basis for the belief that rents would have been reduced. (3) Retroactive payments will be made to owners over a three-year period as funds are appropriated for that purpose. When funds are available for payment, HUD will publish a Federal Register notice containing procedures for claiming payments. (c) Request for one-time contract rent determination. When making a request for payment, eligible owners may also request a one-time contract rent determination, as described in Sec. 888.320. Eligible owners may request a one-time contract rent determination even if they choose not to request retroactive payments, provided they are eligible for retroactive payments. (d) Transfer of ownership since October 1, 1979. Eligible owners who request retroactive payments must certify that they are entitled to the entire amount of the payment. Any owner who is unable to certify must present documentation of an agreement between the current and former owners of the proportionate share of the payment for which each is eligible. (Approved by the Office of Management and Budget under control number 2502-0042) Sec. 888.315 Restrictions on retroactive payments. (a) Restrictions on distribution of surplus cash. Retroactive payments for HUD-insured projects and other projects subject to limitations on the distribution of surplus cash will be deposited, in the manner of Housing Assistance Payments, into the appropriate project account. The payments will be subject to HUD rules and procedures (or rules and procedures of other agencies, as appropriate), described in the applicable regulations and the HAP contracts, for distribution of surplus cash to project owners. (b) Replacement reserve. Projects required by HUD regulations to maintain a reserve for replacement account and to adjust the annual payment to the account each year by the amount of the annual rent adjustment must deposit into the account the proportionate share of any retroactive payment received, in accordance with HUD regulations and the HAP contract. (c) Physical condition of HUD-insured or State-financed projects. If the most recent physical inspection report of a HUD-insured project, completed by the mortgagee, or by HUD or the Contract Administrator if a mortgagee inspection is not present, shows significant deficiencies that have not been addressed to the satisfaction of HUD by the date the retroactive payment is deposited into the project account, the payment will not be made available for surplus cash distribution until the deficiencies are resolved or a plan for their resolution has been approved by HUD. Sec. 888.320 One-time Contract Rent determination. (a) Determining the amount of the new Contract Rent. Project owners eligible for retroactive payments, as described in Sec. 888.301(c), may request a one-time Contract Rent determination, to be effective as described in paragraph (c) of this section. The request for a one-time [[Page 185]] rent determination must be made when submitting a request for retroactive payments, as described in Sec. 888.315. If no claim for retroactive payments is made, an owner may submit only the request for a one-time rent determination, provided the owner is eligible for retroactive payments. The new Contract Rent under this provision will be the greater of: (1) The Contract Rent currently approved by HUD (or the Contract Administrator); or (2) An amount equal to the applicable AAF multipled by the Contract Rent minus debt service, calculated for each year from October 1, 1979, to May 31, 1991. (b) Currently approved rent. The Contract Rent currently approved by HUD (or the Contract Administrator) is the Contract Rent stated in the most recent amendment to the HAP Contract signed by both HUD (or the Contract Administrator) and the owner, or as shown on HUD Form 92458 (Rental Schedule) if the most recent amendment to the HAP Contract cannot be located. (c) Effective date of new Contract Rent. The new Contract Rent, determined under paragraph (a) of this section, will be effective on May 31, 1991. (Approved by the Office of Management and Budget under control number 2505-0042) Subpart D_Retroactive Housing Assistance Payments for Moderate Rehabilitation Projects Source: 56 FR 20085, May 1, 1991, unless otherwise noted. Sec. 888.401 Purpose and scope. (a) Purpose. This subpart describes the basic policies and procedures for the retroactive payment of Housing Assistance Payments to eligible project owners for the period from October 1, 1979 to May 31, 1991 and a one-time Contract Rent determination for such eligible project owners. (b) Applicability. This subpart applies to all Moderate Rehabilitation projects under 24 CFR part 882, subparts D, E, and H. (c) Eligible project owners. Project owners may be eligible for retroactive payments if, during the period from October 1, 1979 to May 31, 1991: (1) The use of a comparability study by the Public Housing Agency (PHA) as contract administrator, which was conducted as an independent limitation on the amount of rent adjustment that would have resulted from use of the applicable AAF, resulted in the reduction of the maximum monthly Contract Rents for units covered by a Housing Assistance Payments (HAP) contract or resulted in less than the maximum increase for those units than would otherwise be permitted by the AAF; or (2) The project owner certifies that a request for an annual rent adjustment was not made because of an anticipated reduction of the maximum monthly Contract Rents resulting from a comparability study. Sec. 888.405 Amount of the retroactive Housing Assistance Payments. (a) Recalculating the total rent adjustment. To establish the amount of the retroactive HAP payment for which a project owner meeting the criteria in Sec. 888.401(c) is eligible, the total rent adjustment will be recalculated for the period from October 1, 1979 to May 31, 1991. Rents for that period will be recalculated, under the procedures set out in 24 CFR 882.410(a)(1), by applying the AAF for any affected year, and recalculating the rents for the remainder of the period as necessary. For each year thereafter, all rent adjustments made at the request of the owner at the time will be recalculated, under the procedures in 24 CFR 882.410(a)(1), to account for the new adjustments. (b) Calculating the retroactive payment. HUD will pay, through the PHA, as a retroactive Housing Assistance Payment the amount, if any, by which the total rent adjustment, calculated under paragraph (a) of this section exceeds the rent adjustments actually approved for the same time period. (c) Occupancy rate. (1) Retroactive payments will be made only for units that were occupied, based on average occupancy rate, including units qualifying for vacancy payments under 24 CFR 882.411, during the time period from October 1, 1979 to May 31, 1991. (2) When requesting a retroactive payment, a project owner must, if the [[Page 186]] information is available, submit documentation of occupancy rates, on either an annual or monthly basis, for the same time period. The average occupancy rate will be based on these records. If records are unavailable for the full time period, the PHA will establish an average occupancy rate, to be used for the entire period, from the occupancy rate for the three years immediately preceding May 31, 1991. (d) Revised AAFs. For any year during the period from October 1, 1979 to May 31, 1991, where a HUD field office published a revised Annual Adjustment Factor that replaced the applicable AAF for a specific locality under 24 CFR 888.204, the revised Annual Adjustment Factor, which applied to all projects in that area, will be used to recalculate the total rent adjustment under paragraph (a) of this section, and to establish the amount of the retroactive payments. (e) Special adjustments. When calculating the total rent adjustments and establishing the amount of the retroactive payments under paragraphs (a) and (b) of this section, any special adjustments granted under 24 CFR 882.410(a)(2) during the period from October 1, 1979 to May 31, 1991, to reflect substantial general increases in real property taxes, assessments, utility rates, utilities not covered by regulated rates, or for special adjustments for any other purpose authorized by a waiver of the regulations, will be deducted from the base rent before applying the AAF. (f) AAFs less than 1.0. For any area where an AAF of less than 1.0 was published, a factor of 1.0 will be used to recalculate the total rent adjustments and to establish the amount of the retroactive payments under paragraphs (a) and (b) of this section. (Approved by the Office of Management and Budget under control number 2502-0042) Sec. 888.410 Notice of eligibility requirements for retroactive payments. (a) Notice of eligibility requirements. PHAs will give written notice to all current owners of projects, for which they are the Contract Administrators, of the eligibility requirements for retroactive payments. Eligible project owners must make a request for payment or a request for a one-time contract determination within 60 days from the date of the notice. (b) Request for payment. (1) Owners eligible for retroactive payments under Sec. 888.401(c) must submit a request for a calculation of the total rent adjustments and the establishment of the amount of the retroactive payment, as described in Sec. 888.401 (a) and (b), and documentation of the occupancy rate for the period from October 1, 1979 to May 31, 1991, if available. (2) Owners claiming eligibility under Sec. 888.401(c)(2) must certify that a request was not made because of an anticipated reduction in the Contract Rents as a result of a comparability study. The certification must contain the year or years upon which the request for payment is based and a statement of the basis for the belief that rents would have been reduced. (3) Retroactive payments will be made to owners over a three-year period as funds are appropriated for that purpose. When funds are available for payment, HUD will publish a Federal Register Notice containing procedures for claiming payments. (c) Request for one-time contract rent determination. When making a request for payment, eligible owners may also request a one-time contract rent determination, as described in Sec. 888.420. Eligible owners may request a one-time contract rent determination even if they choose to forgo receiving retroactive payments, provided they are eligible for retroactive payments. (d) Transfer of ownership since October 1, 1979. Eligible owners requesting retroactive payments must certify that they are entitled to the entire amount of the payment. Any owner who is unable to certify must present documentation of an agreement between the current and former owners of the proportionate share of the payment for which each is eligible. (Approved by the Office of Management and Budget under control number 2502-0042) Sec. 888.415 Restrictions on retroactive payments. (a) Restrictions. Retroactive payments are subject to all regulations, procedures, or restrictions that apply to Housing Assistance Payments. [[Page 187]] (b) Review of initial rents. Before calculating the amount of any retroactive payment, the PHA, if directed by HUD, will review whether rents were excessive when initially set. (c) Physical condition of projects. If the most recent physical inspection report by the PHA shows significant deficiencies that have not been addressed to the satisfaction of the PHA by the date the retroactive payment is deposited into the project account, the payment will not be made available until the deficiencies are resolved or a plan for their resolution has been approved by the PHA. Sec. 888.420 One-time Contract Rent determination. (a) Determining the amount of the new Contract Rent. Project owners eligible for retroactive payments, as described in Sec. 888.401(c), may request a one-time Contract Rent determination, to be effective as described in paragraph (c) of this section. The request for a one-time rent determination must be made when submitting a request for retroactive payments, as described in Sec. 888.415. If no claim for retroactive payments is made, an owner may submit only the request for a one-time rent determination, provided the owner is eligible for retroactive payments. The new Contract Rent under this provision will be the greater of: (1) The Contract Rent currently approved by the PHA; or (2) An amount equal to the Contract Rent as adjusted to May 31, 1991 under Sec. 888.405(a). (b) Currently approved rent. The Contract Rent currently approved by the PHA is the Contract Rent stated in the most recent amendment to the HAP Contract signed by both the PHA and the owner. (c) Effective date of new Contract Rent. The new Contract Rent, determined under paragraph (a) of this section, will be effective on May 31, 1991. (Approved by the Office of Management and Budget under control number 2502-0042) PART 891_SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH DISABILITIES--Table of Contents Subpart A_General Program Requirements Sec. 891.100 Purpose and policy. 891.105 Definitions. 891.110 Allocation of authority. 891.115 Notice of funding availability. 891.120 Project design and cost standards. 891.125 Site and neighborhood standards. 891.130 Prohibited relationships. 891.135 Amount and terms of capital advances. 891.140 Development cost limits. 891.145 Owner deposit (Minimum Capital Investment). 891.150 Operating cost standards. 891.155 Other Federal requirements. 891.160 Audit requirements. 891.165 Duration of capital advance. 891.170 Repayment of capital advance. 891.175 Technical assistance. 891.180 Physical condition standards; physical inspection requirements. 891.185 Preemption of rent control laws. 891.190 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. Subpart B_Section 202 Supportive Housing for the Elderly 891.200 Applicability. 891.205 Definitions. 891.210 Special project standards. 891.215 Limits on number of units. 891.220 Prohibited facilities. 891.225 Provision of services. Subpart C_Section 811 Supportive Housing for Persons With Disabilities 891.300 Applicability. 891.305 Definitions. 891.310 Special project standards. 891.315 Prohibited facilities. 891.320 Site and neighborhood standards. 891.325 Lead-based paint requirements. Subpart D_Project Management 891.400 Responsibilities of owner. 891.405 Replacement reserve. 891.410 Selection and admission of tenants. 891.415 Obligations of the household or family. 891.420 Overcrowded and underoccupied units. 891.425 Lease requirements. 891.430 Denial of admission, termination of tenancy, and modification of lease. 891.435 Security deposits. [[Page 188]] 891.440 Adjustment of utility allowances. 891.445 Conditions for receipt of vacancy payments for assisted units. 891.450 HUD review. Subpart E_Loans for Housing for the Elderly and Persons with Disabilities 891.500 Purpose and policy. 891.505 Definitions 891.510 Displacement, relocation, and real property acquisition. 891.515 Audit requirements. Section 202 Projects for the Elderly or Handicapped--Section 8 Assistance 891.520 Definitions applicable to 202/8 projects. 891.525 Amount and terms of financing. 891.530 Prepayment privileges. 891.535 Requirements for awarding construction contracts. 891.540 Loan disbursement procedures. 891.545 Completion of project, cost certification, and HUD approvals. 891.550 Broadband infrastructure. 891.555 Smoke detectors. 891.560 HAP contract. 891.565 Term of HAP contract. 891.570 Maximum annual commitment and project account. 891.575 Leasing to eligible families. 891.580 HAP contract administration. 891.582 Management and occupancy reviews. 891.585 Default by Borrower. 891.590 Notice upon HAP contract expiration. 891.595 HAP contract extension or renewal. 891.600 Responsibilities of Borrower. 891.605 Replacement reserve. 891.610 Selection and admission of tenants. 891.615 Obligations of the family. 891.620 Overcrowded and underoccupied units. 891.625 Lease requirements. 891.630 Denial of admission, termination of tenancy, and modification of lease. 891.635 Security deposits. 891.640 Adjustment of rents. 891.645 Adjustment of utility allowances. 891.650 Conditions for receipt of vacancy payments for assisted units. Section 202 Projects for the Nonelderly Handicapped Families and Individuals--Section 162 Assistance 891.655 Definitions applicable to 202/162 projects. 891.660 Project standards. 891.665 Project size limitations. 891.670 Cost containment and modest design standards. 891.675 Prohibited facilities. 891.680 Site and neighborhood standards. 891.685 Prohibited relationships. 891.690 Other Federal requirements. 891.695 Operating cost standards. 891.700 Prepayment of loans. 891.705 Project assistance contract. 891.710 Term of PAC. 891.715 Maximum annual commitment and project account. 891.720 Leasing to eligible families. 891.725 PAC administration. 891.730 Default by Borrower. 891.735 Notice upon PAC expiration. 891.740 Responsibilities of Borrower. 891.745 Replacement reserve. 891.750 Selection and admission of tenants. 891.755 Obligations of the family. 891.760 Overcrowded and underoccupied units. 891.765 Lease requirements. 891.770 Denial of admission, termination of tenancy, and modification of lease. 891.775 Security deposits. 891.780 Adjustment of rents. 891.785 Adjustment of utility allowances. 891.790 Conditions for receipt of vacancy payments for assisted units. Subpart F_For-Profit Limited Partnerships and Mixed-Finance Development for Supportive Housing for the Elderly or Persons with Disabilities 891.800 Purpose. 891.802 Applicability of other provisions. 891.805 Definitions. 891.808 Capital advance funds. 891.809 Limitations on capital advance funds. 891.810 Project rental assistance. 891.813 Eligible uses for assistance provided under this subpart. 891.815 Mixed-finance developer's fee. 891.818 Firm commitment application. 891.820 Civil rights requirements. 891.823 HUD review and approval. 891.825 Mixed-finance closing documents. 891.830 Drawdown. 891.832 Prohibited relationships. 891.833 Monitoring and review. 891.835 Eligible uses of project rental assistance. 891.840 Site and neighborhood standards. 891.848 Project design and cost standards. 891.853 Development cost limits. 891.855 Replacement reserves. 891.860 Operating reserves. 891.863 Maintenance as supportive housing units for elderly persons and persons with disabilities. 891.865 Sanctions. Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013. Source: 61 FR 11956, Mar. 22, 1996, unless otherwise noted. [[Page 189]] Subpart A_General Program Requirements Sec. 891.100 Purpose and policy. (a) Purpose. The Section 202 Program of Supportive Housing for the Elderly and the Section 811 Program of Supportive Housing for Persons with Disabilities provide Federal capital advances and project rental assistance under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q) (section 202) and section 811 of the National Affordable Housing Act (42 U.S.C. 8013) (section 811), respectively, for housing projects serving elderly households and persons with disabilities. Section 202 projects shall provide a range of services that are tailored to the needs of the residents. Owners of Section 811 projects shall ensure that the residents are provided with any necessary supportive services that address their individual needs. (b) General policy--(1) Supportive Housing for the Elderly. A capital advance and contract for project rental assistance provided under this program shall be used for the purposes described in Section 202 (12 U.S.C. 1701q(b)). (2) Supportive Housing for Persons with Disabilities. A capital advance and contract for project rental assistance provided under this program shall be used for the purposes described in Section 811 (42 U.S.C. 8013(b)). (c) Use of capital advance funds. No part of the funds reserved may be transferred by the Sponsor, except to the Owner caused to be formed by the Sponsor. This action must be accomplished prior to issuance of a commitment for capital advance funding. (d) Amendments. Subject to the availability of funds, HUD may amend the amount of an approved capital advance only after initial closing has occurred. Sec. 891.105 Definitions. The following definitions apply, as appropriate, throughout this part. Other terms with definitions unique to the particular program are defined in Sec. Sec. 891.205, 891.305, 891.505, and 891.805, as applicable. Acquisition with or without repair means the purchase of existing housing and related facilities. Adjusted income as defined in part 5, subpart F of subtitle A of this title. Affiliated entities means entities that the field office determines to be related to each other in such a manner that it is appropriate to treat them as a single entity. Such relationship shall include any identity of interest among such entities or their principals and the use by any otherwise unaffiliated entities of a single Sponsor or of Sponsors (or of a single Borrower or of Borrowers, as applicable) that have any identity of interest themselves or their principals. Annual income as defined in part 5, subpart F of subtitle A of this title. In the case of an individual residing in an intermediate care facility for the developmentally disabled that is assisted under title XIX of the Social Security Act and this part, the annual income of the individual shall exclude protected personal income as provided under that Act. For purposes of determining the total tenant payment, the income of such individuals shall be imputed to be the amount that the household would receive if assisted under title XVI of the Social Security Act. Covered housing provider. For the Supportive Housing for the Elderly and Persons with Disabilities Program, ``covered housing provider,'' as such term is used in HUD's regulations at 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers to the owner (as defined in Sec. Sec. 891.205 and 891.305). Family is defined in 24 CFR 5.403. Gross rent means contract rent plus any utility allowance. Household (eligible household) means an elderly or disabled household (as defined in Sec. Sec. 891.205 or 891.305, respectively), as applicable, that meets the project occupancy requirements approved by HUD and, if the household occupies an assisted unit, meets the very low- income requirements described in Sec. 813.102 of this chapter, as modified by the definition of annual income in this section. Housing and related facilities means rental housing structures constructed, rehabilitated, or acquired as permanent residences for use by elderly or disabled households, as applicable. The term includes necessary community [[Page 190]] space. Except for intermediate care facilities for individuals with developmental disabilities, this term does not include nursing homes, hospitals, intermediate care facilities, or transitional care facilities. For the Loans for the Elderly and Persons with Disabilities Program, see Sec. 891.505. Low-income families shall have the same meaning provided in section 3(b)(2) of the United States Housing Act of 1937 (42 U.S.C. 1437a). National Sponsor means a Sponsor that has one or more Section 202 or one or more Section 811 project(s) under reservation, construction, or management in two or more different HUD geographical regions. Net family assets is defined in Sec. 5.603 of this title. Operating costs means HUD-approved expenses related to the provision of housing and includes: (1) Administrative expenses, including salary and management expenses related to the provision of shelter and, in the case of the Section 202 Program, the coordination of services; (2) Maintenance expenses, including routine and minor repairs and groundskeeping; (3) Security expenses; (4) Utilities expenses, including gas, oil, electricity, water, sewer, trash removal, and extermination services. The term ``operating costs'' excludes telephone services for households; (5) Taxes and insurance; (6) Allowances for reserves; and (7) Allowances for services (in the Section 202 Program only). Project rental assistance contract (PRAC) means the contract entered into by the Owner and HUD setting forth the rights and duties of the parties with respect to the project and the payments under the PRAC. Project rental assistance payment means the payment made by HUD to the Owner for assisted units as provided in the PRAC. The payment is the difference between the total tenant payment and the HUD-approved per unit operating expenses except for expenses related to items not eligible under design and cost provisions. An additional payment is made to a household occupying an assisted unit when the utility allowance is greater than the total tenant payment. A project rental assistance payment, known as a ``vacancy payment,'' may be made to the Owner when an assisted unit is vacant, in accordance with the terms of the PRAC. Rehabilitation means the improvement of the condition of a property from deteriorated or substandard to good condition. Rehabilitation may vary in degree from the gutting and extensive reconstruction to the cure of substantial accumulation of deferred maintenance. Cosmetic improvements alone do not qualify as rehabilitation under this definition. Rehabilitation may also include renovation, alteration, or remodeling for the conversion or adaptation of structurally sound property to the design and condition required for use under this part, or the repair or replacement of major building systems or components in danger of failure. Improvement of an existing structure requires 15 percent or more of the estimated development cost to rehabilitate the project for a useful life of 40 years. The useful life period commences upon execution of a capital advance agreement. Replacement reserve account means a project account into which funds are deposited, which may be used only with the approval of the Secretary for repairs, replacement, capital improvements to the section 202 or section 811 units, and retrofitting to reduce the number of units as provided by 24 CFR 891.405(d). Section 202 means section 202 of the Housing Act of 1959 (12 U.S.C. 1701q), as amended, or the Supportive Housing for the Elderly Program authorized by that section. Section 811 means section 811 of the National Affordable Housing Act (42 U.S.C. 8013), as amended, or the Supportive Housing for Persons with Disabilities Program authorized by that section. Single-asset entity, for the purpose of this subpart, means an entity in which the mortgaged property is the only asset of the owner, and the entity is the only owner of the property. Start-up expenses mean necessary costs (to plan a Section 202 or Section 811 project, as applicable) incurred by [[Page 191]] the Sponsor or Owner prior to initial closing. Tenant rent equals total tenant payment less utility allowance, if any. Total tenant payment means the monthly amount defined in, and determined in accordance with part 5, subpart F of subtitle A of this title. Utility allowance is defined in part 5, subpart F of this subtitle A of this title and is determined or approved by HUD. Very low-income families shall have the same meaning provided in section 3(b)(2) of the United States Housing Act of 1937 (42 U.S.C. 1437a). [61 FR 11956, Mar. 22, 1996, as amended at 66 FR 6225, Jan. 19, 2001; 66 FR 8175, Jan. 30, 2001; 68 FR 67320, Dec. 1, 2003; 70 FR 54209, Sept. 13, 2005; 77 FR 5675, Feb. 3, 2012; 78 FR 37112, June 20, 2013; 81 FR 80814, Nov. 16, 2016; 88 FR 9668, Feb. 14, 2023] Sec. 891.110 Allocation of authority. In accordance with 24 CFR part 791, the Assistant Secretary will separately allocate the amounts available for capital advances for the development of housing for elderly households and for disabled households, less amounts set aside by Congress for specific types of projects, and for amendments of fund reservations made in prior years, for technical assistance, and for other contracted services. Sec. 891.115 Notice of funding availability. Following an allocation of authority under Sec. 891.110, HUD shall publish a separate Notice of Funding Availability (NOFA) for the Section 202 Program of Supportive Housing for the Elderly and for the Section 811 Program of Supportive Housing for Persons with Disabilities in the Federal Register. The NOFAs will contain specific information on how and when to apply for the available capital advance authority, the contents of the application, and the selection process. Sec. 891.120 Project design and cost standards. In addition to the special project standards described in Sec. Sec. 891.210 and 891.310, as applicable, the following standards apply: (a) Property standards. Projects under this part must comply with HUD Minimum Property Standards as set forth in 24 CFR part 200, subpart S. (b) Accessibility requirements. Projects under this part must comply with the Uniform Federal Accessibility Standards (See 24 CFR 40.7 for availability), section 504 of the Rehabilitation Act of 1973 and HUD's implementing regulations (24 CFR part 8), and for new construction multifamily housing projects, the design and construction requirements of the Fair Housing Act and HUD's implementing regulations at 24 CFR part 100. For the Section 811 Program of Supportive Housing for Persons with Disabilities, see additional accessibility requirements in Sec. 891.310(b). (c) Restrictions on amenities. Projects must be modest in design. Amenities not eligible for HUD funding include atriums, bowling alleys, swimming pools, saunas, and jacuzzis. Sponsors may include certain excess amenities, but they must pay for them from sources other than the Section 202 or 811 capital advance. They must also pay for the continuing operating costs associated with any excess amenities from sources other than the Section 202 or 811 project rental assistance contract. (d) Smoke detectors. Smoke detectors and alarm devices must be installed in accordance with standards and criteria acceptable to HUD for the protection of occupants in any dwelling or facility bedroom or other primary sleeping area. (e) Projects under this part may have on their sites commercial facilities for the benefit of residents of the project and of the community in which the project is located, so long as the commercial facilities are not subsidized with funding under the supportive housing programs for the elderly or persons with disabilities. Such commercial facilities are considered public accommodations under Title III of the Americans with Disabilities Act and must be accessible under the requirements of that Act. (f) Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and funded by a grant awarded after January 19, [[Page 192]] 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (1) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (2) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (3) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67320, Dec. 1, 2003; 73 FR 29985, May 23, 2008; 78 FR 37112, June 20, 2013; 81 FR 92638, Dec. 20, 2016; 82 FR 3623, Jan. 12, 2017] Sec. 891.125 Site and neighborhood standards. All sites must meet the following site and neighborhood requirements: (a) The site must be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities (water, sewer, gas, and electricity) and streets must be available to service the site. (b) The site and neighborhood must be suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of Title VI of the Civil Rights Act of 1964, the Fair Housing Act, Executive Order 11063 (27 FR 11527, 3 CFR, 1958-1963 Comp., p. 652); as amended by Executive Order 12259, (46 FR 1253, 3 CFR, 1980 Comp., p. 307)); section 504 of the Rehabilitation Act of 1973, and implementing HUD regulations. (c) New construction sites must meet the following site and neighborhood requirements: (1) The site must not be located in an area of minority concentration (or minority elderly concentration under the Section 202 Program) except as permitted under paragraph (c)(2) of this section, and must not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to nonminority residents (or minority elderly to nonminority elderly residents, under the Section 202 Program) in the area. (2) A project may be located in an area of minority concentration (or minority elderly concentration, under the Section 202 Program) only if: (i) Sufficient, comparable opportunities exist for housing for minority elderly households or minority disabled households, as applicable (or minority families, for projects funded under Sec. Sec. 891.655 through 891.790), in the income range to be served by the proposed project, outside areas of minority concentration (see paragraph (c)(3) of this section for further guidance on this criterion); or (ii) The project is necessary to meet overriding housing needs that cannot be met in that housing market area (see paragraph (c)(4) of this section for further guidance on this criterion). (3)(i) Sufficient does not require that in every locality there be an equal number of assisted units within and outside of areas of minority concentration. Rather, application of this standard should produce a reasonable distribution of assisted units each year which over a period of several years will approach an appropriate balance of housing opportunities within and outside areas of minority concentration. An appropriate balance in any jurisdiction must be determined in light of local conditions affecting the range of housing choices available for very low-income minority elderly or disabled households, as applicable (or low-income minority families, for projects funded under Sec. Sec. 891.655 through 891.790), and in relation to the racial mix of the locality's population. (ii) Units may be considered to be comparable opportunities if they have the same household type (elderly or disabled, as applicable) and tenure type (owner/renter); require approximately the same total tenant payment; serve the same income group; are located in the same housing market; and are in standard condition. (iii) Application of this sufficient, comparable opportunities standard involves assessing the overall impact of HUD-assisted housing on the availability of housing choices for very low-income minority elderly or disabled [[Page 193]] households, as applicable (or low-income minority families, for projects funded under Sec. Sec. 891.655 through 891.790), in and outside areas of minority concentration, and must take into account the extent to which the following factors are present, along with any other factor relevant to housing choice: (A) A significant number of assisted housing units are available outside areas of minority concentration. (B) There is significant integration of assisted housing projects constructed or rehabilitated in the past ten years, relative to the racial mix of the eligible population. (C) There are racially integrated neighborhoods in the locality. (D) Programs are operated by the locality to assist minority elderly or disabled households, as applicable (or minority families, for projects funded under Sec. Sec. 891.655 through 891.790), that wish to find housing outside areas of minority concentration. (E) Minority elderly or disabled households, as applicable (or minority families, for projects funded under Sec. Sec. 891.655 through 891.790), have benefitted from local activities (e.g., acquisition and write-down of sites, tax relief programs for homeowners, acquisitions of units for use as assisted housing units) undertaken to expand choice for minority households (or families) outside of areas of minority concentration. (F) A significant proportion of minority elderly or disabled households, as applicable (or minority households, for projects funded under Sec. Sec. 891.655 through 891.790), have been successful in finding units in nonminority areas under the Section 8 Certificate and Housing Voucher programs. (G) Comparable housing opportunities have been made available outside areas of minority concentration through other programs. (4) Application of the overriding housing needs criterion, for example, permits approval of sites that are an integral part of an overall local strategy for the preservation or restoration of the immediate neighborhood and of sites in a neighborhood experiencing significant private investment that is demonstrably changing the economic character of the area (a ``revitalizing area''). An overriding housing need, however, may not serve as the basis for determining that a site is acceptable if the only reason the need cannot otherwise be feasibly met is that discrimination on the basis of race, color, creed, sex, or national origin renders sites outside areas of minority concentration unavailable, or if the use of this standard in recent years has had the effect of circumventing the obligation to provide housing choice. (d) The neighborhood must not be one that is seriously detrimental to family life or in which substandard dwellings or other undesirable conditions predominate, unless there is actively in progress a concerted program to remedy the undesirable conditions. (e) The housing must be accessible to social, recreational, educational, commercial, and health facilities and services, and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents. (f) For the Section 811 Program of Supportive Housing for Persons with Disabilities, the additional site and neighborhood requirements in Sec. 891.320 apply. Sec. 891.130 Prohibited relationships. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as to loans financed under Sec. Sec. 891.655 through 891.790. (a) Conflicts of interest. (1) Officers and Board members of either the Sponsor or the Owner (or Borrower, as applicable) may not have any financial interest in any contract with the Owner or in any firm which has a contract with the Owner. This restriction applies so long as the individual is serving on the Board and for a period of three years following resignation or final closing, whichever occurs later. (2) The following contracts between the Owner (or Borrower, as applicable) and the Sponsor or the Sponsor's nonprofit affiliate will not constitute a conflict of interest if no more than two persons salaried by the Sponsor or management affiliate serve as nonvoting directors on the Owner's board of directors: [[Page 194]] (i) Management contracts (including associated management fees); (ii) Supportive services contracts (including service fees) under the Supportive Housing for the Elderly Program; (iii) Developer (consultant) contracts; and (iv) Contracts for the sale of land. (b) Identity of interest. An identity of interest between the Sponsor or Owner (or Borrower, as applicable) and any development team member or between development team members is prohibited until two years after final closing. [61 FR 11956, Mar. 22, 1996, as amended at 70 FR 54209, Sept. 13, 2005; 78 FR 37112, June 20, 2013] Sec. 891.135 Amount and terms of capital advances. (a) Amount of capital advances. The amount of capital advances approved shall be the amount stated in the notification of fund reservation, including any adjustment required by HUD before the final closing. The amount of the capital advance may not exceed the appropriate development cost limit. (b) Estimated development cost. The amount of the capital advance may not exceed the total estimated development cost of the project (as determined by HUD), less the incremental development cost associated with excess amenities and design features to be paid for by the Sponsor under Sec. 891.120. Sec. 891.140 Development cost limits. (a) HUD shall use the development cost limits, established by Notice in the Federal Register and adjusted by locality, to calculate the fund reservation amount of the capital advance to be made available to individual Owners. Owners that incur actual development costs that are less than the amount of the initial fund reservation shall be entitled to retain 50 percent of the savings in a Replacement Reserve Account. Such percentage shall be increased to 75 percent for Owners that add energy efficiency features. (b) The Replacement Reserve Account established under paragraph (a) of this section may only be used for repairs, replacements, and capital improvements to the project. Sec. 891.145 Owner deposit (Minimum Capital Investment). As a Minimum Capital Investment, the Owner must deposit in a special escrow account one-half of one percent (0.5%) of the HUD-approved capital advance, not to exceed $10,000, to assure the Owner's commitment to the housing. Under the Section 202 Program, if an Owner has a National Sponsor or a National Co-Sponsor, the Minimum Capital Investment shall be one-half of one percent (0.5%) of the HUD-approved capital advance, not to exceed $25,000. Sec. 891.150 Operating cost standards. HUD shall establish operating cost standards based on the average annual operating cost of comparable housing for the elderly or for persons with disabilities in each field office, and shall adjust the standard annually based on appropriate indices of increases in housing costs such as the Consumer Price Index. The operating cost standards shall be developed based on the number of units. However, under the Section 811 Program and for projects funded under Sec. Sec. 891.655 through 891.790, the operating cost standard for group homes shall be based on the number of residents. HUD may adjust the operating cost standard applicable to an approved project to reflect such factors as differences in costs based on location within the field office jurisdiction. The operating cost standard will be used to determine the amount of the project assistance initially reserved for a project. Sec. 891.155 Other Federal requirements. In addition to the requirements set forth in 24 CFR part 5, the following requirements in this Sec. 891.155 apply to the Section 202 and Section 811 Programs, as well as projects funded under Sec. Sec. 891.655 through 891.790. Other requirements unique to a particular program are described in subparts B and C of this part, as applicable. (a) Affirmative fair housing marketing. (1) The affirmative fair housing marketing requirements of 24 CFR part 200, subpart M and the implementing regulations at 24 CFR part 108; and (2) The fair housing advertising and poster guidelines at 24 CFR parts 109 and 110. [[Page 195]] (b) Environmental. The National Environmental Policy Act of 1969, HUD's implementing regulations at 24 CFR part 50, including the related authorities described in 24 CFR 50.4. For the purposes of Executive Order No. 11988, Floodplain Management (42 FR 26951, 3 CFR, 1977 Comp., p. 117); as amended by Executive Order 12148 (44 FR 43239, 3 CFR, 1979 Comp., p. 412)), and implementing regulations in 24 CFR part 55, all applications for intermediate care facilities for persons with developmental disabilities shall be treated as critical actions requiring consideration of the 500-year floodplain. (c) Flood insurance. The Flood Disaster Protection Act of 1973 (42 U.S.C. 4001). (d) Labor standards. (1) All laborers and mechanics (other than volunteers under the conditions set out in 24 CFR part 70) employed by contractors and subcontractors in the construction (including rehabilitation) of housing with 12 or more units assisted under this part shall be paid wages at rates not less than those prevailing in the locality, as determined by the Secretary of Labor in accordance with the Davis-Bacon Act (40 U.S.C. 276a-276a-5). A group home for persons with disabilities is not covered by the labor standards. (2) Contracts involving employment of laborers and mechanics shall be subject to the provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333). (3) Sponsors, Owners, contractors, and subcontractors must comply with all related rules, regulations, and requirements. (e) Displacement, relocation, and real property acquisition--(1) Minimizing displacement. Consistent with the other goals and objectives of this part, Sponsors and Owners (or Borrowers, if applicable) shall assure that they have taken all reasonable steps to minimize the displacement of persons (families, individuals, businesses, nonprofit organizations, and farms) as a result of a project assisted under this part. (2) Relocation assistance for displaced persons. A displaced person must be provided relocation assistance at the levels described in, and in accordance with the requirements of, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4201-4655), as implemented by 49 CFR part 24. (3) Real property acquisition requirements. The acquisition of real property for a project is subject to the URA and the requirements described in 49 CFR part 24, subpart B. (f) Intergovernmental review. The requirements for intergovernmental review in Executive Order No. 12372 (47 FR 30959, 3 CFR, 1982 Comp., p. 197; as amended by Executive Order No. 12416 (48 FR 15587, 3 CFR, 1983 Comp., p. 186)) and the implementing regulations at 24 CFR part 52 are applicable to this program. (g) Lead-based paint. The requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead- Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, H, J, and R of this title apply to these programs. [61 FR 11956, Mar. 22, 1996, as amended at 64 FR 50227, Sept. 15, 1999; 69 FR 34275, June 21, 2004] Sec. 891.160 Audit requirements. Nonprofit organizations receiving assistance under this part are subject to the audit requirements of 2 CFR part 200, subpart F. [78 FR 37112, June 20, 2013, as amended at 80 FR 75941, Dec. 7, 2015] Sec. 891.165 Duration of capital advance. (a) The duration of the fund reservation for a capital advance with construction advances is 24 months from the date of issuance of the award letter to the date of initial closing. This duration can be up to 36 months, as approved by HUD on a case-by-case basis. (b) The duration of the fund reservation for projects that elect not to receive any capital advance before construction completion is 24 months from the date of issuance of the award letter to the start of construction. This duration can be up to 36 months, as approved by HUD on a case-by-case basis. [78 FR 37112, June 20, 2013, as amended at 78 FR 49681, Aug. 15, 2013] [[Page 196]] Sec. 891.170 Repayment of capital advance. (a) Interest prohibition and repayment. A capital advance provided under this part shall bear no interest and its repayment shall not be required so long as the housing project remains available for very low- income elderly families or persons with disabilities, as applicable, in accordance with this part. The capital advance may not be repaid to extinguish the requirements of this part. To ensure its interest in the capital advance, HUD shall require a note and mortgage, use agreement, capital advance agreement and regulatory agreement from the Owner in a form to be prescribed by HUD. (b) Transfer of assets. The transfer of physical and financial assets of any project under this part is prohibited, unless HUD gives prior written approval. Approval for transfer will not be granted unless HUD determines that the transfer to a private nonprofit corporation, consumer cooperative (under the Section 202 Program), a private nonprofit organization (under the Section 811 Program), or an organization meeting the definition of ``mixed-finance owner'' in Sec. 891.805, is part of a transaction that will ensure the continued operation of the capital advance units for not less than 40 years (from the date of original closing) in a manner that will provide rental housing for very low-income elderly persons or persons with disabilities, as applicable, on terms at least as advantageous to existing and future tenants as the terms required by the original capital advance. [61 FR 11956, Mar. 22, 1996, as amended at 70 FR 54209, Sept. 13, 2005; 78 FR 37113, June 20, 2013] Sec. 891.175 Technical assistance. For purposes of the Section 202 Program and the Section 811 Program, the Secretary shall make available appropriate technical assistance to assure that applicants having limited resources, particularly minority applicants, are able to participate more fully in the programs. Sec. 891.180 Physical condition standards; physical inspection requirements. Housing assisted under this part must be maintained and inspected in accordance with the requirements in 24 CFR part 5, subpart G. [63 FR 46580, Sept. 1, 1998] Sec. 891.185 Preemption of rent control laws. The Department finds that it is necessary and desirable to assist project owners to preserve the continued viability of each project assisted under this part (except subpart E) as a housing resource for very low-income elderly persons or persons with disabilities. The Department also finds that it is necessary to protect the substantial economic interest of the Federal Government in those projects. Therefore, the Department concludes that it is in the national interest to preempt, and it does hereby preempt, the entire field of rent regulation by local rent control boards or other authority acting pursuant to state or local law as it affects those projects. Part 246 of this title applies to projects covered by subpart E of this part. [63 FR 64803, Nov. 23, 1998] Sec. 891.190 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. (a) Covered housing providers must develop and implement an emergency transfer plan that meets the requirements in 24 CFR 5.2005(e). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking, covered housing providers have discretion to adopt new, and modify any existing, admission preferences or transfer waitlist priorities. (c) In addition to following requirements in 24 CFR 5.2005(e), when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, or stalking who qualifies for an emergency transfer, covered housing providers must: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and [[Page 197]] (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, covered housing providers must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), including data on the outcomes of such requests. [81 FR 80814, Nov. 16, 2016] Subpart B_Section 202 Supportive Housing for the Elderly Sec. 891.200 Applicability. The requirements set forth in this subpart B apply to the Section 202 Program of Supportive Housing for the Elderly only, and to applicants, Sponsors, and Owners under that program. Sec. 891.205 Definitions. As used in this part in reference to the Section 202 Program, and in addition to the applicable definitions in Sec. 891.105: Acquisition means the purchase of (or otherwise obtaining title to) existing housing and related facilities to be used as supportive housing for the elderly. Activities of daily living (ADL) means eating, dressing, bathing, grooming, and household management activities, as further described below: (1) Eating--May need assistance with cooking, preparing, or serving food, but must be able to feed self; (2) Bathing--May need assistance in getting in and out of the shower or tub, but must be able to wash self; (3) Grooming--May need assistance in washing hair, but must be able to take care of personal appearance; (4) Dressing--Must be able to dress self, but may need occasional assistance; and (5) Home management activities--May need assistance in doing housework, grocery shopping, laundry, or getting to and from activities such as going to the doctor and shopping, but must be mobile. The mobility requirement does not exclude persons in wheelchairs or those requiring mobility devices. Congregate space (hereinafter referred to as community space) shall have the meaning provided in section 202 (12 U.S.C. 1701q(h)(1)). The term ``community spaces'' excludes offices, halls, mechanical rooms, laundry rooms, parking areas, dwelling units, and lobbies. Community space does not include commercial areas. Elderly person means a household composed of one or more persons at least one of whom is 62 years of age or more at the time of initial occupancy. Frail elderly means an elderly person who is unable to perform at least three activities of daily living as defined in this section. Owners may establish additional eligibility requirements acceptable to HUD based on the standards in local supportive services programs. Owner means a single-asset private nonprofit organization that may be established by the Sponsor that will receive a capital advance and project rental assistance payments to develop and operate supportive housing for the elderly as its legal owner. Owner includes an instrumentality of a public body. The purposes of the Owner must include the promotion of the welfare of the elderly. The Owner may not be controlled by or be under the direction of persons or firms seeking to derive profit or gain therefrom. Private nonprofit organization means any incorporated private institution or foundation: (1) No part of the net earnings of which inures to the benefit of any member, founder, contributor, or individual; (2) That has a governing board: (i) The membership of which is selected in a manner to assure that there is significant representation of the views of the community in which such housing is located; and (ii) Which is responsible for the operation of the housing assisted under this section, except that, in the case of a nonprofit organization that is the sponsoring organization of multiple housing projects assisted under this [[Page 198]] section, HUD may determine the criteria or conditions under which financial, compliance, and other administrative responsibilities exercised by a single-entity private nonprofit organization that is the owner corporation of an individual housing project may be shared or transferred to the governing board of such sponsoring organization; and (3) Which is approved by HUD as to financial responsibility. Services expenses means those costs needed to provide the necessary services for the elderly tenants, which may include, but are not limited to: health related activities, continuing education, welfare, informational, recreational, homemaking, meal and nutritional services, counseling, and referral services as well as transportation as necessary to facilitate access to these services. Sponsor means any private nonprofit entity, including a consumer cooperative: (1) No part of the net earnings of which inures to the benefit of any private shareholder, member, founder, contributor, or individual; (2) That is not controlled by, or under the direction of, persons or firms seeking to derive profit or gain therefrom; and (3) That is approved by the Secretary as to administrative and financial capacity and responsibility. The term Sponsor includes an instrumentality of a public body. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003; 70 FR 54209, Sept. 13, 2005; 78 FR 37113, June 20, 2013] Sec. 891.210 Special project standards. (a) In general. In addition to the applicable project standards in Sec. 891.120, resident units in Section 202 projects are limited to efficiencies or one-bedroom units, except as specified under paragraph (b) of this section. If a resident manager is proposed for a project, up to two bedrooms could be provided for the resident manager unit. (b) Exception. Resident units in Section 202 projects may be two- bedroom units if a portion of the units are financed by other sources. Resident units may be two-bedroom units provided that the square footage in excess of the one-bedroom size limits are treated as excess amenities as specified in Sec. 891.120. [78 FR 37113, June 20, 2013] Sec. 891.215 Limits on number of units. (a) HUD may establish, through publication of a notice in the Federal Register, limits on the number of units that can be applied for by a Sponsor or Co-sponsor in a single geographical region and/or nationwide. (b) Affiliated entities that submit separate applications shall be deemed to be a single entity for purposes of these limits. (c) HUD may also establish, through publication of a notice in the Federal Register, the minimum size of a single project. Sec. 891.220 Prohibited facilities. Projects may not include facilities for infirmaries, nursing stations, or spaces for overnight care. Sec. 891.225 Provision of services. (a) In carrying out the provisions of this part, HUD shall ensure that housing assisted under this part provides services as described in section 202 (12 U.S.C. 1701q(g)(1)). (b)(1) HUD shall ensure that Owners have the managerial capacity to perform the coordination of services described in 12 U.S.C. 1701q(g)(2). (2) Any cost associated with this paragraph shall be an eligible cost under the contract for project rental assistance. Any cost associated with the employment of a service coordinator shall also be an eligible cost, except if the project is receiving congregate housing services assistance under section 802 of the National Affordable Housing Act. The HUD-approved service costs will be an eligible expense to be paid from project rental assistance, not to exceed $15 per unit per month. The balance of service costs shall be provided from other sources, which may include co-payment by the tenant receiving the service. Such co-payment shall not be included in the Total Tenant Payment. [[Page 199]] Subpart C_Section 811 Supportive Housing for Persons With Disabilities Sec. 891.300 Applicability. The requirements set forth in this subpart C apply to the Section 811 Program of Supportive Housing for Persons with Disabilities only, and to applicants, Sponsors, and Owners under that program. Sec. 891.305 Definitions. As used in this part in reference to the Section 811 Program, and in addition to the applicable definitions in Sec. 891.105: Acquisition means the purchase of (or otherwise obtaining title to) existing housing and related facilities to be used as supportive housing for persons with disabilities. Congregate space (hereinafter referred to as community space) means space for multipurpose rooms, common areas, and other space necessary for the provision of supportive services. Community space does not include commercial areas. Disabled household means a household composed of: (1) One or more persons at least one of whom is an adult (18 years or older) who has a disability; (2) Two or more persons with disabilities living together, or one or more such persons living with another person who is determined by HUD, based upon a certification from an appropriate professional (e.g., a rehabilitation counselor, social worker, or licensed physician) to be important to their care or well being; or (3) The surviving member or members of any household described in paragraph (1) of this definition who were living in a unit assisted under this part, with the deceased member of the household at the time of his or her death. Owner means a single-asset private nonprofit organization established by the Sponsor that will receive a capital advance and project rental assistance payments to develop and operate, as its legal owner, supportive housing for persons with disabilities under this part. The purposes of the Owner must include the promotion of the welfare of persons with disabilities. The Owner may not be controlled by or under the direction of persons or firms seeking to derive profit or gain therefrom. Person with disabilities shall have the meaning provided in Section 811 (42 U.S.C. 8013(k)(2)). The term ``person with disabilities'' shall also include the following: (1) A person who has a developmental disability, as defined in section 102(7) of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6001(5)), i.e., if he or she has a severe chronic disability which: (i) Is attributable to a mental or physical impairment or combination of mental and physical impairments; (ii) Is manifested before the person attains age twenty-two; (iii) Is likely to continue indefinitely; (iv) Results in substantial functional limitation in three or more of the following areas of major life activity: (A) Self-care; (B) Receptive and expressive language; (C) Learning; (D) Mobility; (E) Self-direction; (F) Capacity for independent living; (G) Economic self-sufficiency; and (v) Reflects the person's need for a combination and sequence of special, interdisciplinary, or generic care, treatment, or other services which are of lifelong or extended duration and are individually planned and coordinated. (2) A person with a chronic mental illness, i.e., a severe and persistent mental or emotional impairment that seriously limits his or her ability to live independently, and which impairment could be improved by more suitable housing conditions. (3) A person infected with the human acquired immunodeficiency virus (HIV) and a person who suffers from alcoholism or drug addiction, provided they meet the definition of ``person with disabilities'' in Section 811 (42 U.S.C. 8013(k)(2)). A person whose sole impairment is a diagnosis of HIV positive or alcoholism or drug addiction (i.e., does not meet the qualifying criteria in section 811 (42 U.S.C. 8013(k)(2)) will not be eligible for occupancy in a section 811 project. [[Page 200]] Private nonprofit organization means any institution or foundation: (1) That has tax-exempt status under section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.); (2) No part of the net earnings of which inures to the benefit of any Board member, founder, contributor, or individual; (3) That has a governing board; (i) The membership of which is selected in a manner to assure that there is significant representation of the views of the community in which such housing is located (including persons with disabilities); and (ii) That is responsible for the operation of the housing assisted under this part; and (4) That is approved by HUD as to financial responsibility. Sponsor means any nonprofit entity: (1) That has tax-exempt status under section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.); (2) No part of the net earnings of which inures to the benefit of any private shareholder, member, founder, contributor or individual; (3) That is not controlled by or under the direction of persons or firms seeking to derive profit or gain therefrom; (4) That has a governing board the membership of which is selected in a manner to assure that there is significant representation of the views of persons with disabilities; and (5) That is approved by HUD as to administrative and financial capacity and responsibility. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003; 70 FR 54210, Sept. 13, 2005; 78 FR 37113, June 20, 2013] Sec. 891.310 Special project standards. In addition to the applicable project standards in Sec. 891.120, the following special standards apply to the Section 811 Program and to projects funded under Sec. Sec. 891.655 through 891.790: (a) Minimum group home standards. Each group home must provide a minimum of 290 square feet of prorated space for each resident, including a minimum area of 80 square feet for each resident in a shared bedroom (with no more than two residents occupying a shared bedroom) and a minimum area of 100 square feet for a single occupant bedroom; at least one full bathroom for every four residents; space for recreation at indoor and outdoor locations on the project site; and sufficient storage for each resident in the bedroom and other storage space necessary for the operation of the home. If the project involves acquisition (with or without rehabilitation), the structure must at least be in compliance with applicable State requirements. In the absence of such requirements, the above standards shall apply. (b) Additional accessibility requirements. In addition to the accessibility requirements in Sec. 891.120(b), the following requirements apply to the Section 811 Program and to projects funded under Sec. Sec. 891.655 through 891.790: (1) All entrances, common areas, units to be occupied by resident staff, and amenities must be readily accessible to and usable by persons with disabilities. (2) In projects for chronically mentally ill individuals, a minimum of 10 percent of all dwelling units in an independent living facility (or 10 percent of all bedrooms and bathrooms in a group home, but at least one of each such space), must be designed to be accessible or adaptable for persons with disabilities. (3) In projects for developmentally disabled or physically disabled persons, all dwelling units in an independent living facility (or all bedrooms and bathrooms in a group home) must be designed to be accessible or adaptable for persons with physical disabilities. A project involving acquisition and/or rehabilitation may provide a lesser number if: (i) The cost of providing full accessibility makes the project financially infeasible; (ii) Fewer than one-half of the intended occupants have mobility impairments; and (iii) The project complies with the requirements of 24 CFR 8.23. (4) For the purposes of paragraph (b) of this section, the following definitions apply: (i) Accessible describes a site, building, facility, or portion thereof that complies with the Uniform Federal Accessibility Standards and that can be [[Page 201]] approached, entered, and used by physically disabled people; (ii) Adaptability means the ability of certain building spaces and elements, such as kitchen counters, sinks, and grab bars, to be added or altered so as to accommodate the needs of either disabled or nondisabled persons, or to accommodate the needs of either disabled or nondisabled persons, or to accommodate the needs of persons with different types or degrees of disability. Sec. 891.315 Prohibited facilities. This section shall apply to capital advances under the Section 811 Program, as well as loans financed under subpart E of this part. Project facilities may not include infirmaries, nursing stations, spaces dedicated to the delivery of medical treatment or physical therapy, padded rooms, or space for respite care or sheltered workshops, even if paid for from sources other than the HUD capital advance or loan. Except for office space used by the Owner (or Borrower, if applicable) exclusively for the administration of the project, project facilities may not include office space. Sec. 891.320 Site and neighborhood standards. In addition to the requirements in Sec. 891.125 and Sec. 891.680, if applicable, the following site and neighborhood requirements apply to the Section 811 Program: (a) Travel time and cost via public transportation or private automobile, from the neighborhood to places of employment providing a range of jobs for very low-income workers (or low-income workers, as applicable), must not be excessive. (b) Projects should be located in neighborhoods where other family housing is located. Projects should not be located adjacent to the following facilities, or in areas where such facilities are concentrated: schools or day-care centers for persons with disabilities, workshops, medical facilities, or other housing primarily serving persons with disabilities. Not more than one group home may be located on any one site and no such home may be located on a site contiguous to another site containing such a home. Sec. 891.325 Lead-based paint requirements. The requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, H, J, and R of this title apply to the section 811 program and to projects funded under Sec. Sec. 891.655 through 891.790. [69 FR 34276, June 21, 2004] Subpart D_Project Management Sec. 891.400 Responsibilities of owner. (a) Marketing. (1) The Owner must commence and continue diligent marketing activities not later than 90 days before the anticipated date of availability of the first unit or occupancy of the group home. Market activities shall include the provision of notices of the availability of housing under the program to operators of temporary housing for the homeless in the same housing market. (2) Marketing must be done in accordance with a HUD-approved affirmative fair housing marketing plan and all Federal, State or local fair housing and equal opportunity requirements. The purpose of the plan and requirements is to achieve a condition in which eligible households of similar income levels in the same housing market area have a like range of housing choices available to them regardless of discriminatory considerations such as their race, color, creed, religion, familial status, disability, sex or national origin. (3) At the time of PRAC execution, the Owner must submit to HUD a list of leased and unleased assisted units (or in the case of a group home, leased and unleased residential spaces) with a justification for the unleased units or residential spaces, in order to qualify for vacancy payments for the unleased units or residential spaces. [[Page 202]] (b) Management and maintenance. The Owner is responsible for all management functions. These functions include selection and admission of tenants, required reexaminations of incomes for households occupying assisted units or residential spaces, collection of tenant payments, termination of tenancy and eviction, and all repair and maintenance functions (including ordinary and extraordinary maintenance and replacement of capital items). All functions must be performed in compliance with equal opportunity requirements. (c) Contracting for services. (1) With HUD approval, the Owner may contract with a private or public entity for performance of the services or duties required in paragraphs (a) and (b) of this section. However, such an arrangement does not relieve the Owner of responsibility for these services and duties. All such contracts are subject to the restrictions governing prohibited contractual relationships described in Sec. 891.130. (These prohibitions do not extend to management contracts entered into by the Owner with the Sponsor or its nonprofit affiliate.) (2) Consistent with the objectives of Executive Order No. 11625 (36 FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139)); Executive Order No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 198); and Executive Order No. 12138 (44 FR 29637, 3 CFR, 1979 Comp., p. 393; as amended by Executive Order No. 12608 (52 FR 34617, 3 CFR, 1987 Comp., p. 245)), the Owner will promote awareness and participation of minority and women's business enterprises in contracting and procurement activities. (d) Submission of financial and operating statements. The Owner must submit to HUD: (1) Within 60 days after the end of each fiscal year of project operations, financial statements for the project audited by an independent public accountant and in the form required by HUD; and (2) Other statements regarding project operation, financial conditions and occupancy as HUD may require to administer the PRAC and to monitor project operations. (e) Use of project funds. The Owner shall maintain a separate interest bearing project fund account in a depository or depositories which are members of the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund and shall deposit all tenant payments, charges, income and revenues arising from project operation or ownership to this account. All project funds are to be deposited in Federally insured accounts. All balances shall be fully insured at all times, to the maximum extent possible. Project funds must be used for the operation of the project (including required insurance coverage), and to make required deposits to the replacement reserve under Sec. 891.405, in accordance with HUD-approved budget. Any remaining project funds in the project funds account (including earned interest) following the expiration of the fiscal year shall be deposited in a Federally- insured residual receipts account within 60 days following the end of the fiscal year. Withdrawals from this account may be made only for project purposes and with the approval of HUD. If there are funds remaining in the residual receipts account when the mortgage is satisfied, such funds shall be returned to HUD. (f) Reports. The Owner shall submit such reports as HUD may prescribe to demonstrate compliance with applicable civil rights and equal opportunity requirements. See Sec. 891.410(a). (Approved by the Office of Management and Budget under control number 2502-0470) Sec. 891.405 Replacement reserve. (a) Establishment of reserve. The Owner shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. (b) Deposits to reserve. The Owner shall make monthly deposits to the replacement reserve in an amount determined by HUD. (c) Level of reserve. The reserve must be built up to and maintained at a level determined by HUD to be sufficient to meet projected requirements. Should the reserve reach that level, the amount of the deposit to the reserve may be reduced with the approval of HUD. [[Page 203]] (d) Administration of reserve. Replacement reserve funds must be deposited with HUD or in a Federally-insured depository in an interest- bearing account(s) whose balances(s) are fully insured at all times. All earnings including interest on the reserve must be added to the reserve. Funds may be drawn from the reserve and used only in accordance with HUD guidelines and with the approval of, or as directed by, HUD. With HUD approval, reserves may be used to reduce the number of dwelling units, provided that the purpose for the reduction is the retrofitting of obsolete or unmarketable units. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003] Sec. 891.410 Selection and admission of tenants. (a) Written procedures. The Owner shall adopt written tenant selection procedures that ensure nondiscrimination in the selection of tenants and that are consistent with the purpose of improving housing opportunities for very low-income elderly persons and persons with disabilities (as applicable); and reasonably related to program eligibility and an applicant's ability to perform the obligations of the lease. Owners shall promptly inform in writing any rejected applicant of the grounds for any rejection. Additionally, Owners shall maintain a written, chronological waiting list showing the name, race, gender, ethnicity, and date of each person applying for the program. (b) Application for admission. The Owner must accept applications for admission to the project in the form prescribed by HUD, and (under the Section 202 Program only) is obligated to confirm all information provided by applicant families on the application. Applicant households applying for assisted units (or residential spaces in a group home) must complete a certification of eligibility as part of the application for admission. Applicant households must meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, subpart B. Applicant families must sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B. Both the Owner and the applicant household must complete and sign the application for admission. On request, the Owner must furnish copies of all applications for admission to HUD. (c) Determination of eligibility and selection of tenants. (1) The Owner is responsible for determining whether applicants are eligible for admission and for the selection of households. To be eligible for admission, an applicant must be an elderly person or a person with disabilities, as applicable (as defined in Sec. Sec. 891.205 and 891.305, respectively); must meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, subpart B; must sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B; and must be a very low-income family, as defined in Sec. 891.105. (2) Under the Section 811 Program: (i) In order to be eligible for admission, the applicant must also meet any project occupancy requirements approved by HUD. (ii) Owners shall make selections in a nondiscriminatory manner without regard to considerations such as race, religion, color, sex, national origin, familial status, or disability. An Owner may, with the approval of the Secretary, limit occupancy within housing developed under this part 891 to persons with disabilities who have similar disabilities and require a similar set of supportive services in a supportive housing environment. However, the Owner must permit occupancy by any qualified person with a disability who could benefit from the housing and/or services provided regardless of the person's disability. (d) Unit assignment. If the Owner determines that the household is eligible and is otherwise acceptable and units (or residential spaces in a group home) are available, the Owner will assign the household a unit or residential space in a group home. If the household will occupy an assisted unit, the Owner will assign the household a unit of the appropriate size in accordance with [[Page 204]] HUD's general occupancy guidelines. If no suitable unit (or residential space in a group home) is available, the Owner will place the household on a waiting list for the project and notify the household when a suitable unit or residential space may become available. If the waiting list is so long that the applicant would not be likely to be admitted for the next 12 months, the Owner may advise the applicant that no additional applications for admission are being considered for that reason. (e) Ineligibility determination. If the Owner determines that an applicant is ineligible for admission or the Owner is not selecting the applicant for other reasons, the Owner will promptly notify the applicant in writing of the determination, the reasons for the determination, and the applicant's right to request a meeting to review the rejection, in accordance with HUD requirements. The review, if requested, may not be conducted by a member of the Owner's staff who made the initial decision to reject the applicant. The applicant may also exercise other rights (e.g., rights granted under Federal, State or local civil rights laws) if the applicant believes he or she is being discriminated against on a prohibited basis. (f) Records. Records on applicants and approved eligible households, which provide racial, ethnic, gender and place of previous residency data required by HUD, must be retained for three years. See Sec. 891.410(a). (g) Reexamination of household family income and composition--(1) Regular reexaminations. The Owner must reexamine the income and composition of the household at least every 12 months. Upon verification of the information, the Owner must make appropriate adjustments in the total tenant payment in accordance with Sec. 5.657 of this title and must adjust the tenant rent. The Owner must also request an appropriate adjustment to the project rental assistance payment. Further, the Owner must determine whether the household's unit size is still appropriate and must carry out any unit transfer in accordance with HUD standards. At the time of reexamination, the Owner must require the household to meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, subpart B. For requirements regarding the signing and submitting of consent forms by families for obtaining wage and claim information from State Wage Information Collection Agencies, see 24 CFR part 5, subpart B. (2) Interim reexaminations. The household must comply with the provisions in Sec. 5.657 of this title regarding interim reporting of changes in income. If the Owner receives information concerning a change in the household's income or other circumstances between regularly scheduled reexaminations, the Owner must consult with the household and make any adjustments determined to be appropriate. See 24 CFR part 5, subpart B, for the requirements for the disclosure and verification of Social Security Number at interim reexaminations involving new household members. For requirements regarding the signing and submitting of consent forms by families for obtaining wage and claim information from State Wage Information Collection Agencies, see 24 CFR part 5, subpart B. Any change in the household's income or other circumstances that result in an adjustment in the total tenant payment, tenant rent, or project rental assistance payment must be verified. (3) Continuation of project rental assistance payment. (i) A household shall remain eligible for subsidy until the total tenant payment equals or exceeds the gross rent (or a pro rata share of the gross rent in a group home). The termination of subsidy eligibility will not affect the household's other rights under its lease, nor will the unit or residential space be removed from the PRAC. Project rental assistance payments may be resumed if, as a result of changes in income, rent, or other relevant circumstances during the term of the PRAC, the household meets the income eligibility requirements of Sec. 5.657 of this title (as modified in Sec. 891.105) and project rental assistance is available for the unit or residential space under the terms of the PRAC. The household will not be required to establish its eligibility for admission to the [[Page 205]] project under the remaining requirements of paragraph (c) of this section. (ii) A household's eligibility for project rental assistance payment may be terminated in accordance with HUD requirements for such reasons as failure to submit requested verification information, including information related to disclosure and verification of Social Security Numbers, as provided by 24 CFR part 5, subpart B or failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies (as provided by 24 CFR part 5, subpart B). (4) Streamlined income determination. An owner may elect to follow the provisions of 24 CFR 5.657(d). [61 FR 11956, Mar. 22, 1996, as amended at 65 FR 16724, Mar. 29, 2000; 81 FR 12371, Mar. 8, 2016; 88 FR 9668, Feb. 14, 2023] Sec. 891.415 Obligations of the household or family. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as loans financed under subpart E of this part. (a) Requirements. The household (or family, as applicable) shall: (1) Pay amounts due under the lease directly to the Owner (or Borrower, as applicable); (2) Supply such certification, release of information, consent, completed forms or documentation as the Owner (or Borrower, as applicable) or HUD determines necessary, including information and documentation relating to the disclosure and verification of Social Security Numbers, as provided by 24 CFR part 5, subpart B; the signing and submission of consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B; and any certification of family net assets, as provided by 24 CFR 5.659(e); (3) Allow the Owner (or Borrower, as applicable) to inspect the dwelling unit or residential space at reasonable times and after reasonable notice; (4) Notify the Owner (or Borrower, as applicable) before vacating the dwelling unit or residential space; and (5) Use the dwelling unit or residential space solely for residence by the household (or family, as applicable) and as the household's (or family's) principal place of residence. (b) Prohibitions. The household (or family, as applicable) shall not: (1) Assign the lease or transfer the unit or residential space; or (2) Occupy, or receive assistance for the occupancy of, a unit or residential space governed under this part 891 while occupying, or receiving assistance for the occupancy of, another unit assisted under any Federal housing assistance program, including any section 8 program. (Approved by the Office of Management and Budget under control number 2502-0470) [61 FR 11956, Mar. 22, 1996, as amended at 82 FR 58340, Dec. 12, 2017] Sec. 891.420 Overcrowded and underoccupied units. If the Owner determines that because of change in household size, an assisted unit is smaller than appropriate for the eligible household to which it is leased, or that the assisted unit is larger than appropriate, project rental assistance payment with respect to the unit will not be reduced or terminated until the eligible household has been relocated to an appropriate alternate unit. If possible, the Owner will, as promptly as possible, offer the household an appropriate alternate unit. The Owner may receive vacancy payments for the vacated unit if the Owner complies with the requirements of Sec. 891.445. Sec. 891.425 Lease requirements. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as loans financed under subpart E of this part. (a) Term of lease. The term of the lease may not be less than one year. Unless the lease has been terminated by appropriate action, upon expiration of the lease term, the household and Owner (or family and Borrower, as applicable) may execute a new lease for a term not less than one year, or may take no action. If no action is taken, the lease will automatically be renewed for successive terms of one month. [[Page 206]] (b) Termination by the household (or family, as applicable). All leases may contain a provision that permits the household (or family) to terminate the lease upon 30 days advance notice. A lease for a term that exceeds one year must contain such provision. (c) Form. The Owner (or Borrower, as applicable) shall use the lease form prescribed by HUD. In addition to required provisions of the lease form, the Owner (or Borrower) may include a provision in the lease permitting the Owner (or Borrower) to enter the leased premises at any time without advance notice when there is reasonable cause to believe that an emergency exists or that health or safety of a family member is endangered. Sec. 891.430 Denial of admission, termination of tenancy, and modification of lease. (a) The provisions of part 5, subpart I, of this title apply to Section 202 and Section 811 capital advance projects. (b) The provisions of part 247 of this title apply to all decisions by an owner to terminate the tenancy or modify the lease of a household residing in a unit (or residential space in a group home). [66 FR 28798, May 24, 2001] Sec. 891.435 Security deposits. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as loans financed under subpart E of this part. For loans financed under subpart E of this part, the requirements in Sec. 891.635 also apply. (a) Collection of security deposits. At the time of the initial execution of the lease, the Owner (or Borrower, as applicable) will require each household (or family, as applicable) occupying an assisted unit or residential space in a group home to pay a security deposit in an amount equal to one month's tenant rent or $50, whichever is greater. The household (or family) is expected to pay the security deposit from its own resources or other available public or private resources. The Owner (or Borrower) may collect the security deposit on an installment basis. (b) Security deposit provisions applicable to units--(1) Administration of security deposit. The Owner (or Borrower, as applicable) must place the security deposits in a segregated interest- bearing account. The amount of the segregated, interest-bearing account maintained by the Owner (or Borrower) must at all times equal the total amount collected from the households (or families, as applicable) then in occupancy plus any accrued interest and less allowable administrative cost adjustments. The Owner (or Borrower) must comply with any applicable State and local laws concerning interest payments on security deposits. (2) Household (or family, as applicable) notification requirement. In order to be considered for the refund of the security deposit, a household (or family) must provide the Owner (or Borrower, as applicable) with a forwarding address or arrange to pick up the refund. (3) Use of security deposit. The Owner (or Borrower, as applicable), subject to State and local law and the requirements of paragraphs (b)(1) and (b)(3) of this section, may use the household's (or family's, as applicable) security deposit balance as reimbursement for any unpaid amounts that the household (or family) owes under the lease. Within 30 days (or shorter time if required by State or local law) after receiving notification under paragraph (b)(2) of this section, the Owner (or Borrower) must: (i) Refund to a household (or family) that does not owe any amount under the lease the full amount of the household's (or family's) security deposit balance; (ii) Provide to a household (or family) owing amounts under the lease a list itemizing each amount, along with a statement of the household's (or family's) rights under State and local law. If the amount that the Owner (or Borrower) claims is owed by the household (or family) is less than the amount of the household's (or family's) security deposit balance, the Owner (or Borrower) must refund the excess balance to the household (or family). If the Owner (or Borrower) fails to provide the list, the household (or family) will be entitled to the refund of the full amount of the household's (or family's) security deposit balance. (4) Disagreements. If a disagreement arises concerning reimbursement of the security deposit, the household (or [[Page 207]] family, if applicable) will have the right to present objections to the Owner (or Borrower, if applicable) in an informal meeting. The Owner (or Borrower) must keep a record of any disagreements and meetings in a tenant file for inspection by HUD. The procedures of this paragraph do not preclude the household (or family) from exercising its rights under State or local law. (5) Decedent's interest in security deposit. Upon the death of a member of a household (or family, as applicable), the decedent's interest, if any, in the security deposit will be governed by State or local law. (c) Reimbursement by HUD for assisted units. If the household's (or family's, if applicable) security deposit balance is insufficient to reimburse the Owner (or Borrower, if applicable) for any amount that the household (or family) owes under the lease for an assisted unit or residential space, and the Owner (or Borrower) has provided the household (or family) with the list required by paragraph (b)(3)(ii) of this section, the Owner (or Borrower) may claim reimbursement from HUD for an amount not to exceed the lesser of: (1) The amount owed the Owner (or Borrower); or (2) One month's per unit operating cost (or contract rent, if applicable), minus the amount of the household's (or family's) security deposit balance. Any reimbursement under this section will be applied first toward any unpaid tenant rent due under the lease. No reimbursement may be claimed for any unpaid tenant rent for the period after termination of the tenancy. The Owner (or Borrower) may be eligible for vacancy payments following a vacancy in accordance with the requirements of Sec. 891.445 (or Sec. Sec. 891.650 or 891.790, as applicable). [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023] Sec. 891.440 Adjustment of utility allowances. This section shall apply to projects funded under the Section 202 Program, to independent living complexes funded under Section 811 Program, and to projects financed with loans under subpart E of this part. The Owner (or Borrower, as applicable) must submit an analysis of any utility allowances applicable. Such data as changes in utility rates and other facts affecting utility consumption must be provided as part of this analysis to permit appropriate adjustments in the utility allowances for assisted units. In addition, when utility rate changes would result in a cumulative increase of 10 percent or more in the most recently approved utility allowances, the Owner (or Borrower) must advise HUD and request approval of new utility allowances. Whenever a utility allowance for an assisted unit is adjusted, the Owner (or Borrower) will promptly notify affected households (or families, as applicable) and make a corresponding adjustment of the tenant rent and the amount of the project rental assistance payment (or housing or project assistance payment, as applicable). (Approved by the Office of Management and Budget under control number 2502-0470) [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023] Sec. 891.445 Conditions for receipt of vacancy payments for assisted units. (a) General. Vacancy payments under the PRAC will not be made unless the conditions for receipt of these project rental assistance payments set forth in this section are fulfilled. (b) Vacancies during rent-up. For each unit (or residential space in a group home) that is not leased as of the effective date of the PRAC, the Owner is entitled to vacancy payments in the amount of 50 percent of the per unit operating cost (or pro rata share of the group home operating cost) for the first 60 days of vacancy, if the Owner: (1) Conducted marketing in accordance with Sec. 891.400(a) and otherwise complied with Sec. 891.400; (2) Has taken and continues to take all feasible actions to fill the vacancy; and (3) Has not rejected any eligible applicant except for good cause acceptable to HUD. (c) Vacancies after rent-up. If an eligible household vacates an assisted unit (or residential space in a group home) the Owner is entitled to vacancy payments in the amount of 50 percent of the approved per unit operating cost [[Page 208]] (or pro rata share of the group home operating cost) for the first 60 days of vacancy if the Owner: (1) Certifies that it did not cause the vacancy by violating the lease, the PRAC, or any applicable law; (2) Notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy upon learning of the vacancy or prospective vacancy; (3) Has fulfilled and continues to fulfill the requirements specified in Sec. 891.400(a) (2) and (3) and Sec. 891.445(b) (2) and (3); and (4) For any vacancy resulting from the Owner's eviction of an eligible household, certifies that it has complied with Sec. 891.430. (d) Prohibition of double compensation for vacancies. If the Owner collects payments for vacancies from other sources (tenant rent, security deposits, payments under Sec. 891.435(c), or governmental payments under other programs), the Owner shall not be entitled to collect vacancy payments to the extent these collections from other sources plus the vacancy payment exceed the approved per unit operating cost. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023] Sec. 891.450 HUD review. HUD shall conduct periodic on-site management reviews of the Owner's compliance with the requirements of this part. Subpart E_Loans for Housing for the Elderly and Persons with Disabilities Sec. 891.500 Purpose and policy. (a) Purpose. The program under subpart E of this part provides direct Federal loans under section 202 of the Housing Act of 1959 (42 U.S.C. 1701q) for housing projects serving elderly or handicapped families and individuals. The housing projects shall provide the necessary services for the occupants which may include, but are not limited to: Health, continuing education, welfare, informational, recreational, homemaking, meal and nutritional services, counseling, and referral services, as well as transportation where necessary to facilitate access to these services. (b) General policy. A loan made under subpart E of this part shall be used to finance the construction or the substantial rehabilitation of projects for elderly or handicapped families, or for the acquisition with or without moderate rehabilitation of existing housing and related facilities for group homes for nonelderly handicapped individuals. (c) Applicability. Subpart E of this part applies to all fund reservations made before October 1, 1990, except for loans not initially closed that were converted to capital advances. Specifically, Sec. 891.520 through 891.650 of subpart E apply to projects for elderly or handicapped families that received reservations under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q) and housing assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437 et seq). Sections 891.655 through 891.790 of subpart E apply to projects for nonelderly handicapped families receiving reservations under section 202 and project assistance payments under section 202(h) of the Housing Act of 1959. Sec. 891.505 Definitions. For the purposes of this subpart E: Act means section 202 of the Housing Act of 1959, as amended (12 U.S.C. 1701q). Borrower means a private nonprofit corporation or a nonprofit consumer cooperative that may be established by the Sponsor, which will obtain a Section 202 loan and execute a mortgage in connection therewith as the legal owner of the project. ``Borrower'' does not mean a public body or the instrumentality of any public body. The purposes of the Borrower must include the promotion of the welfare of elderly and/or handicapped families. No part of the net earnings of the Borrower may inure to the benefit of any private shareholder, contributor, or individual, and the Borrower may not be controlled by or under the direction of persons or firms seeking to derive profit or gain therefrom. Because of the nonprofit nature of the Section 202 program, no officer or director, or trustee, member, stockholder or authorized [[Page 209]] representative of the Borrower is permitted to have any financial interest in any contract in connection with the rendition of services, the provision of goods or supplies, project management, procurement of furnishings and equipment, construction of the project, procurement of the site or other matters whatsoever. Elderly family means: (1) Families of two or more persons the head of which (or his or her spouse) is 62 years of age or older; (2) The surviving member or members of any family described in paragraph (1) of this definition living in a unit assisted under subpart E of this part with the deceased member of the family at the time of his or her death; (3) A single person who is 62 years of age or older; or (4) Two or more elderly persons living together, or one or more such persons living with another person who is determined by HUD, based upon a licensed physician's certificate provided by the family, to be essential to their care or well being. Handicapped family means: (1) Families of two or more persons the head of which (or his or her spouse) is handicapped; (2) The surviving member or members of any family described in paragraph (1) of this definition living in a unit assisted under subpart E of this part with the deceased member of the family at the time of his or her death; (3) A single handicapped person over the age of 18; or (4) Two or more handicapped persons living together, or one or more such persons living with another person who is determined by HUD, based upon a licensed physician's certificate provided by the family, to be essential to their care or well being. Handicapped person or individual means: (1) Any adult having a physical, mental, or emotional impairment that is expected to be of long-continued and indefinite duration, substantially impedes his or her ability to live independently, and is of a nature that such ability could be improved by more suitable housing conditions. (2) A person with a developmental disability, as defined in section 102(7) of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6001(5), i.e., a person with a severe chronic disability that: (i) Is attributable to a mental or physical impairment or combination of mental and physical impairments; (ii) Is manifested before the person attains age twenty-two; (iii) Is likely to continue indefinitely; (iv) Results in substantial functional limitation in three or more of the following areas of major life activity: (A) Self-care; (B) Receptive and expressive language; (C) Learning; (D) Mobility; (E) Self-direction; (F) Capacity for independent living; (G) Economic self-sufficiency; and (v) Reflects the person's need for a combination and sequence of special, interdisciplinary, or generic care, treatment, or other services that are of lifelong or extended duration and are individually planned and coordinated. (3) A person with a chronic mental illness, i.e., if he or she has a severe and persistent mental or emotional impairment that seriously limits his or her ability to live independently, and whose impairment could be improved by more suitable housing conditions. (4) Persons infected with the human acquired immunodeficiency virus (HIV) who are disabled as a result of infection with the HIV are eligible for occupancy in section 202 projects designed for the physically disabled, developmentally disabled, or chronically mentally ill depending upon the nature of the person's disability. A person whose sole impairment is alcoholism or drug addition (i.e., who does not have a developmental disability, chronic mental illness, or physical disability that is the disabling condition required for eligibility in a particular project) will not be considered to be disabled for the purposes of the section 202 program. Housing and related facilities means rental or cooperative housing structures constructed or substantially rehabilitated as permanent residences for use by elderly or handicapped families, or acquired with or without moderate rehabilitation for use by nonelderly [[Page 210]] handicapped families as group homes. The term includes structures suitable for use by families residing in the project or in the area, such as cafeterias or dining halls, community rooms, or buildings, or other essential service facilities. In the case of acquisition with or without moderate rehabilitation, at least three years must have elapsed from the later of the date of completion of the project or the beginning of occupancy to the date of the application for a Section 202 fund reservation. Except for intermediate care facilities for the mentally retarded and individuals with related conditions, this term does not include nursing homes, hospitals, intermediate care facilities, or transitional care facilities. Nonelderly handicapped family means a handicapped family in which the head of the family (and spouse, if any) is less than 62 years of age at the time of the family's initial occupancy of a project. Section 8 Program means the housing assistance payments program that implements section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f note). Sec. 891.510 Displacement, relocation, and real property acquisition. (a) Minimizing displacement. Consistent with the other goals and objectives of subpart E of this part, Sponsors and Borrowers shall assure that they have taken all reasonable steps to minimize the displacement of persons (families, individuals, businesses, nonprofit organizations, and farms) as a result of a project assisted under subpart E of this part. (b) Relocation assistance for displaced persons. A displaced person (defined in paragraph (f) of this section) must be provided relocation assistance at the levels described in, and in accordance with the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4201- 4655), as implemented by 49 CFR part 24. A displaced person shall be advised of his or her rights under the Fair Housing Act (42 U.S.C. 3601- 3619). If the comparable replacement dwellings are located in areas of minority concentration, minority persons also must be given, if possible, referrals to suitable, decent, safe, and sanitary replacement dwellings not located in such areas. (c) Real property acquisition requirements. The acquisition of real property for a project is subject to the URA and the requirements described in 49 CFR part 24, subpart B. (d) Appeals. A person who disagrees with the Sponsor's/Borrower's determination concerning whether the person qualifies as a ``displaced person,'' or with the amount of relocation assistance for which the person is eligible, may file a written appeal of that determination with the Sponsor/Borrower. A low-income person who is dissatisfied with the Sponsor's/Borrower's determination on his or her appeal may submit a written request for review of that determination to the HUD field office. (e) Responsibility of Sponsor/Borrower. The Sponsor/Borrower shall certify that it will comply (i.e., provide assurance of compliance, as required by 49 CFR part 24) with the URA, the regulations at 49 CFR part 24, and the requirements of this section, and shall ensure such compliance notwithstanding any third party's contractual obligation to comply with these provisions. The Sponsor/Borrower shall maintain records in sufficient detail to demonstrate compliance with the provisions of this section. The Sponsor/Borrower shall maintain data on the race, ethnic, gender, and handicap status of displaced persons. (f) Definition of a displaced person. (1) For purposes of this section, the term displaced person means a person (family, individual, business, nonprofit organization, or farm) that moves from real property, or moves personal property from real property, permanently, as a direct result of acquisition, rehabilitation, or demolition for a project assisted under this part. This includes any permanent, involuntary move for an assisted project including any permanent move from the real property that is made: (i) After notice by the Sponsor/Borrower to move permanently from the property if the move occurs on or after: (A) The date of the submission of an application to HUD that is later approved, if the Sponsor has control of an appropriate site; or [[Page 211]] (B) The date that the Sponsor obtains control of an approvable site, if such control is obtained after the submission of an application to HUD: (ii) Before the date described in paragraph (f)(1)(i) of this section, if the Sponsor, Borrower or HUD determines that the displacement resulted directly from acquisition, rehabilitation, or demolition for the project; (iii) By a tenant-occupant of a dwelling unit, if any one of the following three situations occurs; (A) The tenant moves after execution of the Agreement between the Sponsor/Borrower and HUD, and the move occurs before the tenant is provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe, and sanitary dwelling in the same building/complex upon completion of the project under reasonable terms and conditions. Such reasonable terms and conditions include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: (1) The tenant's monthly rent and estimated average monthly utility costs before the Agreement; or (2) The total tenant payment, as determined under 24 CFR 5.628, if the tenant is low-income, or 30 percent of gross household income, if the tenant is not low-income; or (B) The tenant is required to relocate temporarily, does not return to the building/complex, and either: (1) The tenant is not offered payment for all reasonable out-of- pocket expenses incurred in connection with the temporary relocation; or (2) Other conditions of the temporary relocation are not reasonable; or (C) The tenant is required to move to another dwelling in the same building/complex but is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move, or other conditions of the move are not reasonable. (2) Notwithstanding the provisions of paragraph (f)(1) of this section, however, a person does not qualify as a ``displaced person'' (and is not eligible for relocation assistance at URA levels), if: (i) The person has been evicted for cause based upon a serious or repeated violation of the terms and conditions of the lease or occupancy agreement, violation of applicable Federal, State, or local law, or other good cause, and HUD determines that the eviction was not undertaken for the purpose of evading the obligation to provide relocation assistance. (ii) The person moved into the property after the submission of the application and, before signing a lease and commencing occupancy, was provided written notice of the project, its possible impact on the person (e.g., displacement, temporary relocation or a rent increase) and the fact that he or she will not qualify as a displaced person as a result of the project; (iii) The person is ineligible under 49 CFR 24.2(g)(2); or (iv) HUD determines that the person was not displaced as a direct result of acquisition, rehabilitation, or demolition for the project; (3) The Sponsor/Borrower may request, at any time, a HUD determination of whether a displacement is or would be covered by this section. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023] Sec. 891.515 Audit requirements. Nonprofits receiving assistance under this part are subject to the audit requirements in 2 CFR part 200, subpart F. [61 FR 11956, Mar. 22, 1996, as amended at 80 FR 75941, Dec. 7, 2015] Section 202 Projects for the Elderly or Handicapped--Section 8 Assistance Sec. 891.520 Definitions applicable to 202/8 projects. The following definitions apply to projects for eligible families receiving assistance under section 8 of the United States Housing Act of 1937 in addition to reservations under section 202 of the Housing Act of 1959 (202/8 projects): Adjusted income as defined in part 5, subpart F of subtitle A of this title. Assisted unit means a dwelling unit eligible for assistance under a HAP contract. Contract rent means the total amount of rent specified in the HAP contract [[Page 212]] as payable by HUD and the tenant to the Borrower for an assisted unit. Family (eligible family) means an elderly or handicapped family that meets the project occupancy requirements approved by HUD and, if the family occupies an assisted unit, meets the requirements described in 24 CFR 5.403. HAP contract (housing assistance payments contract) means the contract entered into by the Borrower and HUD setting forth the rights and duties of the parties with respect to the project and the payments under the HAP contract. Housing assistance payment means the payment made by HUD to the Borrower for assisted units as provided in the HAP contract. The payment is the difference between the contract rent and the tenant rent. An additional payment is made to a family occupying an assisted unit when the utility allowance is greater than the total tenant payment. A housing assistance payment, known as a ``vacancy payment,'' may be made to the Borrower when an assisted unit is vacant, in accordance with the terms of the HAP contract. Project account means a specifically identified and segregated account for each project that is established in accordance with Sec. 891.570(b) out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the HAP contract each year. Project occupancy requirements means that eligible populations to be served under the Section 202 program are qualified individuals or families whose head of household or spouse is elderly, physically handicapped, developmentally disabled, or chronically mentally ill. Projects are designed to meet the special needs of the particular tenant population that the Borrower was selected to serve. Individuals from one eligible group may not be accepted for occupancy in a project designed for a different tenant group. However, a Sponsor can propose to house eligible tenant groups other than the one it was selected to serve, but must apply to the HUD field office for permission to do so, based on a plan that demonstrates that it can adequately serve the proposed tenant group. Upon review and recommendation by the field office, HUD Headquarters will approve or disapprove the request. Rent, in the case of a unit in a cooperative project, means the carrying charges payable to the cooperative with respect to occupancy of the unit. Tenant rent means the monthly amount defined in, and determined in accordance with part 5, subpart F of subtitle A of this title. Total tenant payment means the monthly amount defined in, and determined in accordance with part 5, subpart F of subtitle A of this title. Utility allowance is defined in part 5, subpart F of subtitle A of this title and is determined or approved by HUD. Utility reimbursement is defined in part 5, subpart F of subtitle A of this title. Vacancy payment means the housing assistance payment made to the Borrower by HUD for a vacant assisted unit if certain conditions are fulfilled, as provided in the HAP contract. The amount of the vacancy payment varies with the length of the vacancy period and is less after the first 60 days of any vacancy. [61 FR 11956, Mar. 22, 1996, as amended at 66 FR 6225, Jan. 19, 2001; 66 FR 8174, Jan. 30, 2001; 88 FR 9669, Feb. 14, 2023; 88 FR 75233, Nov. 2, 2023] Sec. 891.525 Amount and terms of financing. (a) The amount of financing approved shall be the amount stated in the Notice of Section 202 Fund Reservation, including any increase approved by the field office prior to the final closing of a loan; provided, however, that the amount of financing provided shall not exceed the lesser of: (1) The dollar amounts stated in paragraphs (b) through (f) of this section; or (2) The total development cost of the project as determined by the field office. (b) For such part of the property or project attributable to dwelling use (excluding exterior land improvements, as defined by the Assistant Secretary) the maximum loan amount, depending on the number of bedrooms, may not exceed: (1) $28,032 per family unit without a bedroom. [[Page 213]] (2) $32,321 per family unit with one bedroom. (3) $38,979 per family unit with two bedrooms. (c) In order to compensate for the higher costs incident to construction of elevator type structures of sound standards of construction and design, the field office may increase the dollar limitations per family unit, as provided in paragraph (b) of this section, to not to exceed: (1) $29,500 per family unit without a bedroom. (2) $33,816 per family unit with one bedroom. (3) $41,120 per family unit with two bedrooms. (d) Reduced loan amount--leaseholds. In the event the loan is secured by a leasehold estate rather than a fee simple estate, the allowable cost of the property upon which the loan amount is based shall be reduced by the value of the leased fee. (e) Adjusted loan amount--rehabilitation projects. A loan amount that involves a project to be rehabilitated shall be subject to the following additional limitations: (1) Property held in fee. If the Borrower is the fee simple owner of the project not encumbered by a mortgage, the maximum loan amount shall not exceed 100 percent of the cost of the proposed rehabilitation. (2) Property subject to existing mortgage. If the Borrower owns the project subject to an outstanding indebtedness, which is to be refinanced with part of the Section 202 loan, the maximum loan amount shall not exceed the cost of rehabilitation plus such portion of the outstanding indebtedness as does not exceed the fair market value of such land and improvements prior to the rehabilitation, as determined by the field office. (3) Property to be acquired. If the project is to be acquired by the Borrower and the purchase price is to be financed with a part of the Section 202 loan, the maximum loan amount shall not exceed the cost of the rehabilitation plus such portion of the purchase price as does not exceed the fair market value of such land and improvements prior to the rehabilitation, as determined by the field office. (f) Increased Mortgage Limits--High Cost Areas. (1)(i) The Assistant Secretary may increase the dollar amount limitations in paragraphs (b) and (c) of this section: (A) By not to exceed 110 percent in any geographical area in which the Assistant Secretary finds that cost levels so require; and (B) By not to exceed 140 percent where the Assistant Secretary determines it necessary on a project-by-project basis. (ii) In no case, however, may any such increase exceed 90 percent, where the Assistant Secretary determines that there is involved a mortgage purchased or to be purchased by the Government National Mortgage Association (GNMA) in implementing its Special Assistance Functions under section 305 of the National Housing Act (as section 305 existed immediately before its repeal on November 30, 1983). (2) If the Assistant Secretary finds that because of high costs in Alaska, Guam, or Hawaii it is not feasible to construct dwellings without the sacrifice of sound standards of construction, design, and livability within the limitations of maximum loan amounts provided in this section, the principal amount of mortgages may be increased by such amounts as may be necessary to compensate for such costs, but not to exceed in any event the maximum, including high cost area increases, if any, otherwise applicable by more than one-half thereof. (g) Loan interest rate. Loans shall bear interest at a rate determined by HUD in accordance with this section. (1) Annual interest rate. Except as provided under paragraph (g)(2), loans shall bear interest at the rate in effect at the time the loan is made. The loan interest rate shall not exceed: (i) The average yield on the most recently issued 30-year marketable obligations of the United States during the 3-month period immediately preceding the fiscal year in which the loan is made (adjusted to the nearest one-eighth of one percent), plus an allowance to cover administrative costs and probable losses under the program; and (ii) Any applicable statutory ceiling on the loan interest rate including the [[Page 214]] allowance to cover administrative costs and probable losses. (2) Optional interest rate. The Borrower may elect an optional loan interest rate. To elect the optional rate, the Borrower must request that HUD determine the loan interest rate at the time of the Borrower's request for conditional or firm commitment for direct loan financing. (i) If the Borrower elects the optional loan interest rate, the loan interest rate shall not exceed: (A) The average yield on the most recently issued 30-year marketable obligations of the United States during the 3-month period immediately preceding the fiscal year in which the request for commitment is submitted (adjusted to the nearest one-eighth of one percent), plus an allowance to cover administrative costs and probable losses under the program; (B) The average yield on the most recently issued 30-year marketable obligations of the United States during the 1-month period immediately preceding the month in which the request for commitment is submitted (adjusted to the nearest one-eighth of one percent), plus an allowance to cover the administrative costs and probable losses under the program; and (C) Any applicable statutory ceiling on the loan interest rate including an allowance to cover administrative costs and probable losses under the program. (ii) The date of submission of a request for conditional or firm commitment is the date that the Borrower submits the complete and acceptable request to HUD. The date of the submission of a request for commitment will not be affected by any subsequent resubmission of the request by the Borrower or by any reprocessing of the request by HUD. (iii) The Borrower may withdraw its election of the optional interest rate at any time before initial loan closing. If the Borrower elected the optional interest rate with its request for conditional commitment and withdraws its election, the loan will bear interest at the rate determined under paragraph (g)(1) of this section, unless the Borrower elects an optional interest rate with its request for firm commitment. If the Borrower withdraws its election after the date of submission of its request for firm commitment, the loan will bear interest at the rate determined under paragraph (g)(1) of this section. (iv) If initial loan closing has not occurred within 18 months after the Notice of Section 202 Fund Reservation is issued, the Borrower's election of the optional rate will be cancelled and the loan will bear interest at the rate determined under paragraph (g)(1) of this section. (3) Allowance for administrative costs and probable losses. For the purpose of computing the loan interest rate under paragraphs (g) (1) and (2) of this section, the allowance to cover administrative costs and probable losses under the program is one-fourth of one percent (.25%) per annum for both the construction and permanent loan periods. (h) Announcement of interest rates. (1) HUD will annually announce the loan interest rate determination under paragraph (g)(1) of this section by publishing notice of the rate in the Federal Register. The Federal Register notice will include a statement explaining the basis for the interest rate determination. (2) Upon the Borrower's request, HUD will provide available current information concerning the determination of the interest rate under paragraph (g)(2) of this section. (i) The loan shall be secured by a first mortgage on real estate in fee simple or long term leasehold. The mortgage shall be repayable during a term not to exceed 40 years and shall be subject to such terms and conditions as shall be determined by the Assistant Secretary. (j) In order to assure HUD of the Borrower's continued commitment to the development, management, and operation of the project, a minimum capital investment is required of Section 202 Borrowers of one-half of one percent (0.5%) of the mortgage amount committed to be disbursed, not to exceed the amount of $10,000. Section 106(b) loans made pursuant to section 106 of the Housing Act of 1968 may not be utilized to meet the minimum capital investment requirement. Such minimum capital investment shall be placed in escrow at the initial closing [[Page 215]] of the Section 202 loan and shall be held by HUD or other escrow agent acceptable to the field office for not less than a 3-year period from the date of initial occupancy and may be used for operating expenses or deficits as may be directed by the field office. Any unexpended balance remaining in the minimum capital investment account at the end of the escrow period shall be returned to the Borrower. Sec. 891.530 Prepayment privileges. (a) The prepayment (whether in whole or in part) or the assignment or transfer of physical and financial assets of any Section 202 project is prohibited, unless the Secretary gives prior written approval. (b) The Secretary may not grant approval unless he or she has determined that the prepayment or transfer of the loan is part of a transaction that will ensure the continued operation of the project, until the original maturity date of the loan, in a manner that will provide rental housing for the elderly and handicapped on terms at least as advantageous to existing and future tenants as the terms required by the original Section 202 loan agreement and any other loan agreements entered into under other provisions of law. Sec. 891.535 Requirements for awarding construction contracts. (a) Awards shall be made only to responsible contractors that possess the potential ability to perform successfully under the terms and conditions of a proposed construction contract. Consideration shall be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. (b) Each Borrower is permitted to use either competitive bidding (formal advertising) in selecting a construction contractor or the negotiated noncompetitive method of contract award under paragraph (c) of this section. In competitive bidding, sealed bids are publicly solicited and a firm, fixed-price contract is awarded (in accordance with the requirements of this paragraph (b)) to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is lowest in price. Regardless of which method a Borrower uses, there should be an opportunity for minority owned and women owned businesses to be awarded a contract. (1) Bids shall be solicited from an adequate number of known contractors a reasonable time prior to the date set forth for opening of bids. In addition, the invitation shall be publicly advertised. (2) The invitation for bids shall specify: (i) The name of the Borrower; (ii) A brief description of the proposed project and the proposed construction contract; (iii) A preliminary estimate of cost; (iv) That bids will be received at a specified place until a specified time at which time and place all bids will be publicly opened; (v) The location where the proposed forms of contract and bid documents, including plans and specifications, are on file and may be obtained on payment of a specified returnable deposit; (vi) That a certified check or bank draft or satisfactory bid bond in the amount of 5 percent of the bid shall be submitted with the bid; (vii) That the successful bidder will be required to provide assurance of completion in the form of a performance and payment bond or cash escrow; and (viii) That the Borrower reserves the right to reject any or all bids and to waive any informality. (3) The bid form, which must be submitted by all bidders, must specify: (i) The name of the project; (ii) The name and address of the bidder; (iii) That the bidder proposes to furnish all labor, materials, equipment and services required to construct and complete the project, as described in the invitation for bids (including the contents of all documents on file), for a specified lump-sum price; (iv) That the security specified in paragraph (b)(2)(vi) of this section accompanies the bid; (v) The period after the bid opening during which the bid shall not be withdrawn without the consent of the Borrower; [[Page 216]] (vi) That the bidder will, if notified of acceptance of such bid within a specified period after the opening, execute and deliver a contract in the prescribed form and furnish the required bond within ten days thereafter; (vii) That the bidder acknowledges any amendments to the invitation for bids; and (viii) That the bidder certifies that the bid is in strict accordance with all terms of the invitation for bids (including the contents of all documents on file) and that the bid is signed by a person authorized to bind the bidder. (4) Bidding shall be open to all general contractors who furnish the security guaranteeing their bid, as described in paragraph (b)(2)(vi) of this section. (5) All bids shall be opened publicly at the time and place stated in the invitation for bids, in the presence of the HUD Regional Administrator or his designee. (6) A firm, fixed-price contract award shall be made by written notice to the responsible bidder whose bid, conforming to the invitation for bids, is lowest. The contract may provide for an incentive payment to the contractor for an early completion. (c) A Sponsor or Borrower may award a negotiated, noncompetitive construction contract. Sec. 891.540 Loan disbursement procedures. (a) Disbursements of loan proceeds shall be made directly by HUD to or for the account of the Borrower and may be made through an approved lender, mortgage servicer, title insurance company, or other agent satisfactory to the Borrower and HUD. (b) All disbursements to the Borrower shall be made on a periodic basis in an amount not to exceed the HUD-approved cost of portions of construction or rehabilitation work completed and in place (except as modified in paragraph (d) of this section), minus the appropriate holdback, as determined by the field office. (c) Requisitions for loan disbursements shall be submitted by the Borrower on forms to be prescribed by the Assistant Secretary and shall be accompanied by such additional information as the field office may require in order to approve loan disbursements under subpart E of this part, including but not limited to evidence of compliance with the Davis-Bacon Act, Department of Labor regulations, all applicable zoning, building, and other governmental requirements, and such evidence of continued priority of the mortgage of the Borrower as the Assistant Secretary may prescribe. (d) In loan disbursements for building components stored off-site, the term building component shall mean any manufactured or preassembled part of a structure as defined by HUD and that the Assistant Secretary has designated for off-site storage because it is of such size or weight that storage of the components required for timely construction progress at the construction site is impractical, or weather damage or other adverse conditions prevailing at the construction site would make storage at the site impractical or unduly costly. Each building component must be specifically identified for incorporation into the property as provided under paragraph (d)(1)(ii) of this section. (1) Storage. (i) A loan disbursement may be made for up to 90 percent of the invoice value (to exclude costs of transportation and storage) of the building components stored off-site if the components are stored at a location approved by HUD. (ii) Each building component shall be adequately marked so as to be readily identifiable in the inventory of the off-site location. It shall be kept together with all other building components of the same manufacturer intended for use in the same project for which loan disbursements have been made and separate and apart from similar units not for use in the project. (iii) Storage costs, if any, shall be borne the general contractor. (2) Responsibility for transportation, storage and insurance of off- site building components. The general contractor of the project shall have the responsibility for: (i) Insuring the components in the name of the Borrower while in transit and storage; and [[Page 217]] (ii) Delivering or contracting for the delivery of the components to the storage area and to the construction site, including payment of freight. (3) Loan disbursements. (i) Before a loan disbursement for a building component stored off-site is made, the Borrower shall: (A) Obtain a bill of sale for the component; (B) Provide HUD with a security agreement pledged by a first lien on the building components with the exception of such other liens or encumbrances as may be approved by HUD; and (C) File a financing statement in accordance with the Uniform Commercial Code. (ii) Before each loan disbursement for building components stored off-site is made the manufacturer and the general contractor shall certify to HUD that the components, in their intended use, comply with HUD-approved contract plan and specifications. (iii) Loan disbursements may be made only for components stored off- site in a quantity required to permit uninterrupted installation at the site. (iv) At no time shall the invoice value of building components being stored off-site, for which advances have been insured, represent more than 25 percent of the total estimated construction costs for the insured mortgaged project as specified in the construction contract. Notwithstanding the preceding sentence and other regulatory requirements that set bonding requirements, the percentage of total estimated construction costs insured by advances under this section may exceed 25 percent but not 50 percent if the mortgagor furnishes assurance of completion in the form of a corporate surety bond for the payment and performance each in the amount of 100 percent of the amount of the construction contract. In no event will insurance of components stored off-site be made in the absence of a payment and performance bond. (v) No single loan disbursement which is to be made shall be in an amount less than ten thousand ($10,000) dollars. Sec. 891.545 Completion of project, cost certification, and HUD approvals. (a) The Borrower must satisfy the requirements for completion of construction and substantial rehabilitation and approvals by HUD before submission of a final requisition for disbursement of loan proceeds. (b) The Borrower shall submit to the field office all documentation required for final disbursement of the loan, including: (1) A Borrower's/Mortgagor's Certificate of Actual Cost, showing the actual cost to the mortgagor of the construction contract, architectural, legal, organizational, offsite costs, and all other items of eligible expense. The certificate shall not include as actual cost any kickbacks, rebates, trade discounts, or other similar payments to the mortgagor or to any of its officers, directors, or members. (2) A verification of the Certificate of Actual Cost by an independent Certified Public Accountant or independent public accountant acceptable to the field office. (3) In the case of projects not subject to competitive bidding, a certification of the general contractor (and of such subcontractors, material suppliers, and equipment lessors as the Assistant Secretary or field office may require), on a form prescribed by the Assistant Secretary, as to all actual costs paid for labor, materials, and subcontract work under the general contract exclusive of the builder's fee and kickbacks, rebates, trade discounts, or other similar payments to the general contractor, the mortgagor, or any of its officers, directors, stockholders, partners, or members. (c) In lieu of the requirements set forth in paragraphs (c)(1) and (3) of this section, a simplified form of cost certification prescribed by the Secretary may be completed and submitted by the Borrower for projects with mortgages of $500,000 or less. The simplified cost certification shall be verified by an independent Certified Public Accountant or an independent public accountant in a manner acceptable to the Secretary. (d) If the Borrower's certified costs provided in accordance with paragraph [[Page 218]] (c) or (d) of this section and as approved by HUD are less than the loan amount, the contract rents will be reduced accordingly. (e) If the contract rents are reduced pursuant to paragraph (e) of this section, the maximum annual HAP Contract commitment will be reduced. If contract rents are reduced based on cost certification after HAP Contract execution, any overpayment after the effective date of the Contract will be recovered from the Borrower by HUD. (Approved by the Office of Management and Budget under control number 2502-0044) Sec. 891.550 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and funded by a grant awarded after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92638, Dec. 20, 2016] Sec. 891.560 HAP contract. (a) HAP contract. The housing assistance payments contract sets forth rights and duties of the Borrower and HUD with respect to the project and the housing assistance payments. (b) HAP contract execution. (1) Upon satisfactory completion of the project, the Borrower and HUD shall execute the HAP contract on the form prescribed by HUD. (2) The effective date of the HAP contract may be earlier than the date of execution, but no earlier than the date of HUD's issuance of the permission to occupy. (3) If the project is completed in stages, the procedures of paragraph (b) of this section shall apply to each stage. (c) Housing assistance payments to owners under the HAP contract. The housing assistance payments made under the HAP contract are: (1) Payments to the Borrower to assist eligible families leasing assisted units. The amount of the housing assistance payment made to the Borrower for an assisted unit leased to an eligible family is equal to the difference between the contract rent for the unit and the tenant rent payable by the family. (2) Payments to the Borrower for vacant assisted units (vacancy payments). The amount of and conditions for vacancy payments are described in Sec. 891.650. The housing assistance payments are made monthly by HUD upon proper requisition by the Borrower, except payments for vacancies of more than 60 days, which are made semiannually by HUD upon requisition by the Borrower. (d) Payment of utility reimbursement. As applicable, a utility reimbursement will be paid to a family occupying an assisted unit as an additional housing assistance payment. The HAP contract will provide that the Borrower will make this payment on behalf of HUD. Funds will be paid to the Borrower in trust solely for the purpose of making the additional payment. The Borrower may pay the utility reimbursement jointly to the family and the utility company, or, if the family and utility company consent, directly to the utility company. Sec. 891.565 Term of HAP contract. The term of the HAP contract for assisted units shall be 20 years. If the project is completed in stages, the term of the HAP contract for assisted units in each stage shall be 20 years. The term of the HAP contract for all assisted units in all stages of a project shall not exceed 22 years. Sec. 891.570 Maximum annual commitment and project account. (a) Maximum annual commitment. The maximum annual amount that may be committed under the HAP contract is [[Page 219]] the total of the contract rents and utility allowances for all assisted units in the project. (b) Project account. (1) HUD will establish and maintain a specifically identified and segregated project account for each project. The project account will be established out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the HAP contract each year. HUD will make payments from this account for housing assistance payments as needed to cover increases in contract rents or decreases in tenant income and other payments for costs specifically approved by the Secretary. (2) If the HUD-approved estimate of required annual payments under the HAP contract for a fiscal year exceeds the maximum annual commitment for that fiscal year plus the current balance in the project account, HUD will, within a reasonable time, take such steps authorized by section 8(c)(6) of the United States Housing Act of 1937 (42 U.S.C. 1437f note), as may be necessary, to assure that payments under the HAP contract will be adequate to cover increases in contract rents and decreases in tenant income. Sec. 891.575 Leasing to eligible families. (a) Availability of assisted units for occupancy by eligible families. (1) During the term of the HAP contract, a Borrower shall make available for occupancy by eligible families the total number of units for which assistance is committed under the HAP contract. For purposes of this section, making units available for occupancy by eligible families means that the Borrower: (i) Is conducting marketing in accordance with Sec. 891.600(a); (ii) Has leased or is making good faith efforts to lease the units to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; (iii) Has not rejected any such applicant family except for reasons acceptable to HUD. (2) If the Borrower is temporarily unable to lease all units for which assistance is committed under the HAP contract to eligible families, one or more units may, with the prior approval of HUD, be leased to otherwise eligible families that do not meet the income eligibility requirements of 24 CFR 5.653. Failure on the part of the Borrower to comply with these requirements is a violation of the HAP contract and grounds for all available legal remedies, including an action for specific performance of the HAP contract, suspension or debarment from HUD programs, and reduction of the number of units under the HAP contract as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by the HAP contract. HUD may reduce the number of units covered by the HAP contract to the number of units available for occupancy by eligible families if: (1) The Borrower fails to comply with the requirements of paragraph (a) of this section; or (2) Notwithstanding any prior approval by HUD, HUD determines that the inability to lease units to eligible families is not a temporary problem. (c) Restoration. HUD will agree to an amendment of the HAP contract to provide for subsequent restoration of any reduction made under paragraph (b) of this section if: (1) HUD determines that the restoration is justified by demand; (2) The Borrower otherwise has a record of compliance with the Borrower's obligations under the HAP contract; and (3) Contract and budget authority is available. (d) Applicability. In accordance with section 555 of the Cranston- Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and (b) of this section apply to all contracts. An owner who had leased an assisted unit to an ineligible family consistent with the regulations in effect at the time will continue to lease the unit to that family. However, the owner must make the unit available for occupancy by an eligible family when the ineligible family vacates the unit. (e) Occupancy by families that are not elderly or handicapped. HUD may permit units in the project to be leased to other than elderly or handicapped families if: [[Page 220]] (1) The Borrower has made reasonable efforts to lease assisted and unassisted units to eligible families; (2) The Borrower has been granted HUD approval under paragraph (a) of this section; and (3) The Borrower is temporarily unable to achieve or maintain a level of occupancy sufficient to prevent financial default and foreclosure under the Section 202 loan documents. HUD approval under paragraph (e)(3) of this section will be of limited duration. HUD may impose terms and conditions to this approval that are consistent with program objectives and necessary to protect its interest in the Section 202 loan. (f) The regulations of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to this section. [61 FR 11956, Mar. 22, 1996, as amended at 73 FR 72343, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016; 88 FR 75233, Nov. 2, 2023] Sec. 891.580 HAP contract administration. HUD is responsible for the administration of the HAP contract. Sec. 891.582 Management and occupancy reviews. (a) The contract administrator will conduct management and occupancy reviews to determine whether the owner is in compliance with the HAP Contract. Such reviews will be conducted in accordance with a schedule set out by the Secretary and published in the Federal Register, following notice and the opportunity to comment. Where a change in ownership or management occurs, a management and occupancy review must be conducted within six months. (b) HUD or the Contract Administrator may inspect project operations and units at any time. (c) Equal Opportunity reviews may be conducted by HUD at any time. [87 FR 37997, June 27, 2022] Sec. 891.585 Default by Borrower. (a) HAP contract provisions. The HAP contract will provide: (1) That if HUD determines that the Borrower is in default under the HAP contract, HUD will notify the Borrower of the actions required to be taken to cure the default and of the remedies to be applied by HUD including an action for specific performance under the HAP contract, reduction or suspension of housing assistance payments and recovery of overpayments, where appropriate; and (2) That if the Borrower fails to cure the default, HUD has the right to terminate the HAP contract or to take other corrective action. (b) Loan provisions. Additional provisions governing default under the section 202 loan are included in the regulatory agreement and other loan documents. Sec. 891.590 Notice upon HAP contract expiration. (a) Notice required. The HAP contract will provide that the Borrower will, at least one year before the end of the HAP contract term, notify each family leasing an assisted unit of any increase in the amount the family will be required to pay as rent as a result of the expiration. (b) Service requirements. The notice under paragraph (a) of this section shall be accomplished by sending a letter by first class mail, properly stamped and addressed, to the family at its address at the project, with a proper return address; and serving a copy of the notice on any adult person answering the door at the leased dwelling unit, or if no adult responds, by placing the notice under or through the door, if possible, or else by affixing the notice to the door. Service shall not be considered to be effective until both required notices have been accomplished. The date on which the notice shall be considered to be received by the family shall be the date on which the Borrower mails the first class letter provided for in paragraph (b) of this section, or the date on which the notice provided for in paragraph (b) of this section is properly given, whichever is later. (c) Contents of notice. The notice shall advise each affected family that, after the expiration date of the HAP contract, the family will be required to [[Page 221]] bear the entire cost of the rent and that the Borrower may, subject to requirements and restrictions contained in the regulatory agreement, the lease, and State or local law, change the rent. The notice also shall state: (1) The actual (if known) or the estimated rent that will be charged following the expiration of the HAP contract; (2) The difference between the new rent and the total tenant payment toward rent under the HAP contract; and (3) The date the HAP contract will expire. (d) Certification to HUD. The Borrower shall give HUD a certification that families have been notified in accordance with this section and shall attach to the certification an example of the text of the notice. (e) Applicability. This section applies to all HAP contracts entered into under an agreement to enter into a housing assistance payments contract executed on or after October 1, 1981, or entered into under such an agreement executed before October 1, 1981 but renewed or amended after February 9, 1995. (Approved by the Office of Management and Budget under control number 2502-0371) Sec. 891.595 HAP contract extension or renewal. Upon expiration of the term of the HAP contract, HUD and the Borrower may agree (subject to available funds) to extend the term of the HAP contract or to renew the HAP contract. The number of assisted units under the extended or renewed HAP contract shall equal the number of assisted units under the original HAP contract, except that: (a) HUD and the Borrower may agree to reduce the number of assisted units by the number of assisted units that are not occupied by eligible families at the time of the extension or renewal; and (b) HUD and the Borrower may agree to permit reductions in the number of assisted units during the term of the extended or renewed HAP contract as assisted units are vacated by eligible families. Nothing in this section shall prohibit HUD from reducing the number of units covered under the extended or renewed HAP contract in accordance with Sec. 891.575(b). Sec. 891.600 Responsibilities of Borrower. (a) Marketing. (1) The Borrower must commence and continue diligent marketing activities not later than 90 days before the anticipated date of availability for occupancy of the first unit of the project. Market activities shall include the provision of notices of availability of housing under the program to operators of temporary housing for the homeless in the same housing market. (2) Marketing must be done in accordance with the HUD-approved affirmative fair housing marketing plan and all Federal, State, or local fair housing and equal opportunity requirements. The purpose of the plan and requirements is to achieve a condition in which eligible families of similar income levels in the same housing market have a like range of housing choices available to them regardless of discriminatory considerations, such as their race, color, creed, religion, familial status, disability, sex or national origin. Marketing must also be done in accordance with the communication and notice requirements of Section 504 at 24 CFR 8.6 and 24 CFR 8.54. (3) At the time of HAP contract execution, the Borrower must submit to HUD a list of leased and unleased assisted units, with a justification for the unleased units, in order to qualify for vacancy payments for the unleased units. (b) Management and maintenance. The Borrower is responsible for all management functions. These functions include selection and admission of tenants, required reexaminations of incomes for families occupying assisted units (or residential spaces, as applicable), collection of rents, termination of tenancy and eviction, and all repair and maintenance functions (including ordinary and extraordinary maintenance and replacement of capital items). All functions must be performed in compliance with equal opportunity requirements. (c) Contracting for services. (1) With HUD approval, the Borrower may contract with a private or public entity for performance of the services or duties [[Page 222]] required in paragraphs (a) and (b) of this section. However, such an arrangement does not relieve the Borrower of responsibility for these services and duties. All such contracts are subject to the restrictions governing prohibited contractual relationships described in Sec. Sec. 891.130 and 891.505, if applicable. (These prohibitions do not extend to management contracts entered into by the Borrower with the Sponsor or its nonprofit affiliate). (2) Consistent with the objectives of Executive Order No. 11625 (36 FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139; unless otherwise noted); Executive Order No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 198; unless otherwise noted); and Executive Order No. 12138 (44 FR 29637, 3 CFR, 1979 Comp., p. 393; unless otherwise noted), the Borrower will promote awareness and participation of minority and women's business enterprises in contracting and procurement activities. (d) Submission of financial and operating statements. The Borrower must submit to HUD: (1) Within 60 days after the end of each fiscal year of project operations, financial statements for the project audited by an independent public accountant and in the form required by HUD; and (2) Other statements regarding project operation, financial conditions and occupancy as HUD may require to administer the housing assistance payments contract (HAP contract) or the project assistance contract (PAC), as applicable, and to monitor project operations. (e) Use of project funds. The Borrower shall maintain a separate project fund account in a depository or depositories that are members of the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund and shall deposit all rents, charges, income and revenues arising from project operation or ownership to this account. All project funds are to be deposited in Federally-insured accounts. All balances shall be fully insured at all times, to the maximum extent possible. Project funds must be used for the operation of the project (including required insurance coverage), to make required principal and interest payments on the Section 202 loan, and to make required deposits to the replacement reserve under Sec. Sec. 891.605 and 891.745 (as applicable), in accordance with a HUD-approved budget. Any project funds in the project funds account (including earned interest) following the expiration of the fiscal year shall be deposited in a Federally-insured residual receipts account within 60 days following the end of the fiscal year. Withdrawals from this account may be made only for project purposes and with the approval of HUD. If there are funds remaining in the residual receipts account when the mortgage is satisfied, such funds shall be returned to HUD. (f) Reports. The Borrower shall submit such reports as HUD may prescribe to demonstrate compliance with applicable civil rights and equal opportunity requirements. (Approved by the Office of Management and Budget under control number 2502-0371) Sec. 891.605 Replacement reserve. (a) Establishment of reserve. The Borrower shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance, and repair and replacement of capital items. (b) Deposits to reserve. The Borrower shall make monthly deposits to the replacement reserve in an amount determined by HUD. Further requirements regarding the amount of the deposits for projects funded under Sec. Sec. 891.655 through 891.790 are provided in Sec. 891.745. (c) Level of reserve. The reserve must be built up to and maintained at a level determined by HUD to be sufficient to meet projected requirements. Should the reserve reach that level, the amount of the deposit to the reserve may be reduced with the approval of HUD. (d) Administration of reserve. Replacement reserve funds must be deposited with HUD or in a Federally-insured depository in an interest- bearing account(s) whose balances are fully insured at all times. All earnings including interest on the reserve must be added to the reserve. Funds may be drawn from the reserve and used only in accordance with HUD guidelines and [[Page 223]] with the approval of, or as directed by, HUD. Sec. 891.610 Selection and admission of tenants. (a) Written procedures. The Owner shall adopt written tenant selection procedures that ensure nondiscrimination in the selection of tenants and that are consistent with the purpose of improving housing opportunities for very low-income elderly or handicapped persons; and reasonably related to program eligibility and an applicant's ability to perform the obligations of the lease. Owners shall promptly notify in writing any rejected applicant of the grounds for any rejection. Additionally, owners shall maintain a written, chronological waiting list showing the name, race, gender, ethnicity and date of each person applying for the program. (b) Application for admission. The Borrower must accept applications for admission to the project in the form prescribed by HUD and is obligated to confirm all information provided by the applicant families on the application. Applicant families must be requested to complete a release of information consent for verification of information. Applicants applying for assisted units must complete a certification of eligibility as part of the application for admission. Applicant families must meet the disclosure and verification requirements for Social Security Numbers, and sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B. Both the Borrower and the applicant must complete and sign the application for admission. On request, the Borrower must furnish copies of all applications for admission to HUD. (c) Determination of eligibility and selection of tenants. The borrower is responsible for determining whether applicants are eligible for admission and for selection of families. To be eligible for admission, an applicant must be an elderly or handicapped family as defined in Sec. 891.505; meet any project occupancy requirements approved by HUD; meet the disclosure and verification requirement for Social Security numbers and sign and submit consent forms for obtaining wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B; and, if applying for an assisted unit, be eligible for admission under subpart F of 24 CFR part 5, which governs selection of tenants and occupancy requirements. The provisions of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to this section. (d) Unit assignment. If the Borrower determines that the family is eligible and is otherwise acceptable and units are available, the Borrower will assign the family a unit. The Borrower will assign the family a unit of the appropriate size in accordance with HUD's general occupancy guidelines. If no suitable unit is available, the Borrower will place the family on a waiting list for the project and notify the family of when a suitable unit may become available. If the waiting list is so long that the applicant would not be likely to be admitted within the next 12 months, the Borrower may advise the applicant that no additional applications for admission are being considered for that reason, except that the Borrower may not refuse to place an applicant on the waiting list if the applicant is otherwise eligible for assistance and claims that he or she qualifies for a Federal preference as provided in 24 CFR part 5, subpart D. (e) Ineligibility determination. If the Borrower determines that an applicant is ineligible for admission or the Borrower is not selecting the applicant for other reasons, the Borrower will promptly notify the applicant in writing of the determination, the reasons for the determination, and that the applicant has a right to request a meeting with the Borrower or managing agent to review the rejection, in accordance with HUD requirements. The review, if requested, may not be conducted by a member of the Borrower's staff who made the initial decision to reject the applicant. The applicant may also exercise other rights (e.g., rights granted under Federal, State, or local civil rights laws) if the applicant [[Page 224]] believes he or she is being discriminated against on a prohibited basis. (f) Records. Records on applicants and approved eligible families, which provide racial, ethnic, gender, handicap status, and place of previous residency data required by HUD, must be retained for three years. (g) Reexamination of family income and composition--(1) Regular reexaminations. The Borrower must reexamine the income and composition of the family at least every 12 months. Upon verification of the information, the Borrower shall make appropriate adjustments in the total tenant payment in accordance with Sec. 5.657 of this title and determine whether the family's unit size is still appropriate. The Borrower must adjust tenant rent and the housing assistance payment and must carry out any unit transfer in accordance with the administrative instructions issued by HUD. At the time of reexamination, the Borrower must require the family to meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, subpart B. (2) Interim reexaminations. The family must comply with the provisions in Sec. 5.657 of this title regarding interim reporting of changes in income. If the Borrower receives information concerning a change in the family's income or other circumstances between regularly scheduled reexaminations, the Borrower must consult with the family and make any adjustments determined to be appropriate. Any change in the family's income or other circumstances that results in an adjustment in the total tenant payment, tenant rent, or housing assistance payment must be verified. (3) Continuation of housing assistance payments. (i) A family shall remain eligible for housing assistance payments until the total tenant payment equals or exceeds the gross rent. The termination of subsidy eligibility will not affect the family's other rights under its lease. Housing assistance payments may be resumed if, as a result of changes in income, rent, or other relevant circumstances during the term of the HAP contract, the family meets the income eligibility requirements of Sec. 5.657 of this title and housing assistance is available for the unit under the terms of the HAP contract. The family will not be required to establish its eligibility for admission to the project under the remaining requirements of paragraph (c) of this section. (ii) A family's eligibility for housing assistance payments may be terminated in accordance with HUD requirements for such reasons as failure to submit requested verification information, including information related to disclosure and verification of Social Security Numbers, or failure to sign and submit consent forms for the obtaining of wage and claim information from State wage information collection agencies, as provided by 24 CFR part 5, subpart B. (4) Streamlined income determination. An owner may elect to follow the provisions of 24 CFR 5.657(d). (Approved by the Office of Management and Budget under control number 2502-0371) [61 FR 11956, Mar. 22, 1996, as amended at 70 FR 77744, Dec. 30, 2005; 73 FR 72343, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 12371, Mar. 8, 2016; 81 FR 80815, Nov. 16, 2016; 88 FR 9669, Feb. 14, 2023] Sec. 891.615 Obligations of the family. The obligations of the family are provided in Sec. 891.415. Sec. 891.620 Overcrowded and underoccupied units. If the Borrower determines that because of change in family size, an assisted unit is smaller than appropriate for the eligible family to which it is leased, or that the assisted unit is larger than appropriate, housing assistance payments or project assistance payments (as applicable) with respect to the unit will not be reduced or terminated until the eligible family has been relocated to an appropriate alternate unit. If possible, the Borrower will, as promptly as possible, offer the family an appropriate alternate unit. The Borrower may receive vacancy payments for the vacated unit if the Borrower complies with the requirements of Sec. 891.650. Sec. 891.625 Lease requirements. The lease requirements are provided in Sec. 891.425. [[Page 225]] Sec. 891.630 Denial of admission, termination of tenancy, and modification of lease. (a) The provisions of part 5, subpart I, of this title apply to Section 202 direct loan projects. (b) The provisions of part 247 of this title apply to all decisions by a Borrower to terminate the tenancy or modify the lease of a family residing in a unit. (c) In actions or potential actions to terminate tenancy, the owner shall follow 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). [66 FR 28798, May 24, 2001, as amended at 73 FR 72343, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016] Sec. 891.635 Security deposits. The general requirements for security deposits on assisted units are provided in Sec. 891.435. For purposes of subpart E of this part, the additional requirements apply: (a) The Borrower may require each family occupying an unassisted unit (or residential space in a group home) to pay a security deposit equal to one month's rent payable by the family. (b) The Borrower shall maintain a record of the amount in the segregated interest-bearing account that is attributable to each family in residence in the project. Annually for all families, and when computing the amount available for disbursement under Sec. 891.435(b)(3), the Borrower shall allocate to the family's balance the interest accrued on the balance during the year. Unless prohibited by State or local law, the Borrower may deduct for the family, from the accrued interest for the year, the administrative cost of computing the allocation to the family's balance. The amount of the administrative cost adjustment shall not exceed the accrued interest allocated to the family's balance for the year. Sec. 891.640 Adjustment of rents. (a) Contract rents--(1) Adjustment based on approved budget. If the HAP contract provides, or has been amended to provide, that contract rents will be adjusted based upon a HUD-approved budget, HUD will calculate contract rent adjustments based on the sum of the project's operating costs and debt service (as calculated by HUD), with adjustments for vacancies, the project's nonrental income, and other factors that HUD deems appropriate. The calculation will be made on the basis of information provided by the Borrower on a form acceptable to the Secretary. The automatic adjustment factor described in part 888 of this chapter is not used to adjust contract rents under paragraph (a)(1) of this section, except to the extent that the amount of the replacement reserve deposit is adjusted under Sec. 880.602 of this chapter. (2) Annual and special adjustments. If the HAP contract provides that contract rents will be adjusted based on the application of an automatic adjustment factor and by special additional adjustments: (i) Consistent with the HAP contract, contract rents may be adjusted in accordance with part 888 of this chapter; (ii) Special additional adjustments will be granted, to the extent determined necessary by HUD, to reflect increases in the actual and necessary expenses of owning and maintaining the assisted units that have resulted from substantial general increases in real property taxes, assessments, utility rates or similar costs (i.e., assessments and utilities not covered by regulated rates), and that are not adequately compensated for by an annual adjustment. The Borrower must submit to HUD required supporting data, financial statements, and certifications for the special additional adjustment. (b) Rent for unassisted units. The rent payable by families occupying units that are not assisted under the HAP contract shall be equal to the contract rent computed under paragraph (a) of this section. (Approved by the Office of Management and Budget under control number 2502-0371) Sec. 891.645 Adjustment of utility allowances. In connection with adjustments of contract rents as provided in Sec. 891.640(a), the requirements for the adjustment of utility allowances provided in Sec. 891.440 apply. [[Page 226]] Sec. 891.650 Conditions for receipt of vacancy payments for assisted units. (a) General. Vacancy payments under the HAP contract will not be made unless the conditions for receipt of these housing assistance payments set forth in this section are fulfilled. (b) Vacancies during rent-up. For each unit that is not leased as of the effective date of the HAP contract, the Borrower is entitled to vacancy payments in the amount of 80 percent of the contract rent for the first 60 days of vacancy, if the Borrower: (1) Complied with Sec. 891.600; (2) Has taken and continues to take all feasible actions to fill the vacancy; and (3) Has not rejected any eligible applicant except for good cause acceptable to HUD. (c) Vacancies after rent-up. If an eligible family vacates a unit, the Borrower is entitled to vacancy payments in the amount of 80 percent of the contract rent for the first 60 days of vacancy if the Borrower: (1) Certifies that it did not cause the vacancy by violating the lease, the HAP contract, or any applicable law; (2) Notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy immediately upon learning of the vacancy or prospective vacancy; (3) Has fulfilled and continues to fulfill the requirements specified in Sec. 891.600(a)(2) and (3), and in paragraphs (b)(2) and (3) of this section; and (4) For any vacancy resulting from the Borrower's eviction of an eligible family, certifies that it has complied with Sec. 891.630. (d) Vacancies for longer than 60 days. If a unit continues to be vacant after the 60-day period specified in paragraph (b) or (c) of this section, the Borrower may apply to receive additional vacancy payments in an amount equal to the principal and interest payments required to amortize that portion of the debt service attributable to the vacant unit for up to 12 additional months for the unit if: (1) The unit was in decent, safe, and sanitary condition during the vacancy period for which payment is claimed; (2) The Borrower has fulfilled and continues to fulfill the requirements specified in paragraph (b) or (c) of this section, as appropriate; and (3) The Borrower has demonstrated to the satisfaction of HUD that: (i) For the period of vacancy, the project is not providing the Borrower with revenues at least equal to project expenses (exclusive of depreciation) and the amount of payments requested is not more than the portion of the deficiency attributable to the vacant unit; and (ii) The project can achieve financial soundness within a reasonable time. (e) Prohibition of double compensation for vacancies. If the Borrower collects payments for vacancies from other sources (tenant rent, security deposits, payments under Sec. 891.435(c), or governmental payments under other programs), the Borrower shall not be entitled to collect vacancy payments to the extent these collections from other sources plus the vacancy payment exceed contract rent. (Approved by the Office of Management and Budget under control number 2502-0371) Section 202 Projects for the Nonelderly Handicapped Families and Individuals--Section 162 Assistance Sec. 891.655 Definitions applicable to 202/162 projects. The following definitions apply to projects for eligible families receiving project assistance payments under section 202(h) of the Housing Act of 1959 in addition to reservations under section 202 (202/ 162 projects): Annual income is defined in part 5, subpart F of this title. In the case of an individual residing in an intermediate care facility for individuals with a developmental disability that is assisted under Title XIX of the Social Security Act and subpart E of this part, the annual income of the individual shall exclude protected personal income as provided under that Act. For purposes of determining the total tenant payment, the income of such individuals shall be imputed to be the amount that the family would receive if assisted under Title XVI of the Social Security Act. [[Page 227]] Assisted unit means a dwelling unit that is eligible for assistance under a project assistance contract (PAC). Contract rent means the total amount of rent specified in the PAC as payable by HUD and the family to the Borrower for an assisted unit or residential space. Family (eligible family) means a family that includes a person with a disability (that meets the definition of a handicapped family in Sec. 891.505) that meets the project occupancy requirements approved by HUD and, if the family occupies an assisted unit, meets the low-income requirements described in 24 CFR 5.603, as modified by the definition of ``annual income'' in this section. Group home means a single family residential structure designed or adapted for occupancy by nonelderly handicapped individuals. Housing for handicapped families means housing and related facilities occupied by handicapped families that are primarily nonelderly handicapped families. Independent living complex means a project designed for occupancy by nonelderly handicapped families in separate dwelling units where each dwelling unit includes a kitchen and a bath. Operating costs means expenses related to the provision of housing and excludes expenses related to administering, or managing the provision of, supportive services. Operating costs include: (1) Administrative expenses, including salary and management expenses related to the provision of shelter; (2) Maintenance expenses, including routine and minor repairs and groundskeeping; (3) Security expenses; (4) Utilities expenses, including gas, oil, electricity, water, sewer, trash removal, and extermination services. Operating costs exclude telephone services for families; (5) Taxes and insurance; and (6) Allowances for reserves. PAC (project assistance contract) means the contract entered into by the Borrower and HUD setting forth the rights and duties of the parties with respect to the project and the payments under the PAC. Project account means a specifically identified and segregated account for each project which is established in accordance with Sec. 891.715(b) out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the PAC each year. Project assistance payment means the payment made by HUD to the Borrower for assisted units as provided in the PAC. The payment is the difference between the contract rent and the tenant rent. An additional payment is made to a family occupying an assisted unit in an independent living complex when the utility allowance is greater than the total tenant payment. A project assistance payment, known as a ``vacancy payment,'' may be made to the Borrower when an assisted unit (or residential space in a group home) is vacant, in accordance with the terms of the PAC. Tenant rent equals total tenant payment less utility allowance, if any. Total tenant payment means the monthly amount defined in, and determined in accordance with part 5, subpart F of this title. Utility allowance is defined in part 5, subpart F of this title and is determined or approved by HUD. Utility reimbursement is defined in part 5, subpart F of this title. Vacancy payment means the project assistance payment made to the Borrower by HUD for a vacant assisted unit (or residential space in a group home) if certain conditions are fulfilled, as provided in the PAC. The amount of the vacancy payment varies with the length of the vacancy period and is less after the first 60 days of any vacancy. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023; 88 FR 75233, Nov. 2, 2023] Sec. 891.660 Project standards. (a) Property standards. The property standards for 202/162 projects are provided in Sec. 891.120(a). (b) Minimum group home standards. The minimum group home standards for 202/162 projects are provided in Sec. 891.310(a). (c) Accessibility requirements. The accessibility requirements for 202/162 [[Page 228]] projects are provided in Sec. Sec. 891.120(b) and 891.310(b). (d) Smoke detectors. The requirements for smoke detectors for 202/ 162 projects are provided in Sec. 891.120(d). Sec. 891.665 Project size limitations. (a) Maximum project size. Projects funded under Sec. Sec. 891.655 through 891.790 are subject to the following project size limitations: (1) Group homes may not be designed to serve more than 15 persons on one site; (2) Independent living complexes for chronically mentally ill individuals may not be designed to serve more than 20 persons on one site; and (3) Independent living complexes for handicapped families in the developmental disability or physically handicapped occupancy categories may not have more than 24 units nor more than 24 households on one site. For the purposes of this section, household has the same meaning as handicapped family, except that unrelated handicapped individuals sharing a unit (other than a handicapped person living with another person who is essential to the handicapped person's well-being) are counted as separate households. For independent living complexes for handicapped families in the developmental disability or physically handicapped occupancy categories, units with three or more bedrooms may only be developed to serve handicapped families of one or two parents with children. (b) Additional limitations. Based on the amount of loan authority appropriated for a fiscal year, HUD may have imposed additional limitations on the number of units or residents that may be proposed under an application for Section 202 loan fund reservation, as published in the annual notice of funding availability or the invitation for Section 202 fund reservation. (c) Exemptions. On a case-by-case basis, HUD may approve independent living complexes that do not comply with the project size limitations prescribed in paragraphs (a)(2), (a)(3), or (b) of this section. HUD may approve such projects if the Sponsor demonstrates: (1) The increased number of units is necessary for the economic feasibility of the project; (2) A project of the size proposed is compatible with other residential development and the population density of the area in which the project is to be located; (3) A project of the size proposed can be successfully integrated into the community; and (4) A project of the size proposed is marketable in the community. Sec. 891.670 Cost containment and modest design standards. (a) Restrictions on amenities. Projects must be modest in design. Except as provided in paragraph (d) of this section, amenities must be limited to those amenities, as determined by HUD, that are generally provided in unassisted decent, safe, and sanitary housing for low-income families in the market area. Amenities not eligible for HUD funding include balconies, atriums, decks, bowling alleys, swimming pools, saunas, and jacuzzis. Dishwashers, trash compactors, and washers and dryers in individual units will not be funded in independent living complexes. The use of durable materials to control or reduce maintenance, repair, and replacement costs is not an excess amenity. (b) Unit sizes. For independent living complexes, HUD will establish limitations on the size of units and number of bathrooms, based on the number of bedrooms that are in the unit. (c) Special spaces and accommodations. (1) The costs of construction of special spaces and accommodations may not exceed 10 percent of the total cost of construction, except as provided in paragraph (d) of this section. Special spaces and accommodations include multipurpose rooms, game rooms, libraries, lounges, and, in independent living complexes, central kitchens and dining rooms. (2) Special spaces and accommodations exclude offices, halls, mechanical rooms, laundry rooms, and parking areas; dwelling units and lobbies in [[Page 229]] independent living complexes; and bedrooms, living rooms, dining and kitchen areas, shared bathrooms, and resident staff dwelling units in group homes. (d) Exceptions. HUD may approve a project that does not comply with the cost containment and modest design standards of paragraphs (a) through (c) of this section if: (1) The Sponsor demonstrates a willingness and ability to contribute the incremental development cost and continuing operating costs associated with the additional amenities or design features; or (2) The proposed project involves substantial rehabilitation or acquisition with or without moderate rehabilitation, the additional amenities or design features were incorporated into the existing structure before the submission of the application, and the total development cost of the project with the additional amenities or design features does not exceed the cost limits. Sec. 891.675 Prohibited facilities. The requirements for prohibited facilities for 202/162 projects are provided in Sec. 891.315, except that Section 202/162 projects may not include commercial spaces. Sec. 891.680 Site and neighborhood standards. The general requirements for site and neighborhood standards for 202/162 projects are provided in Sec. Sec. 891.125 and 891.320. In addition to the requirements in Sec. Sec. 891.125 and 891.320, the following requirements apply to 202/162 projects: (a) The site must promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons. (b) Projects must be located in neighborhoods where other family housing is located. Except as provided below, projects may not be located adjacent to the following facilities, or in areas where such facilities are concentrated: schools or day care centers for handicapped persons, workshops, medical facilities, or other housing primarily serving handicapped persons. Projects may be located adjacent to other housing primarily serving handicapped persons if the projects together do not exceed the project size limitations under Sec. 891.665(a). Sec. 891.685 Prohibited relationships. The requirements for prohibited relationships for 202/162 projects are provided in Sec. 891.130. Sec. 891.690 Other Federal requirements. In addition to the Federal requirements set forth in 24 CFR part 5, other Federal requirements for the 202/162 projects are provided in Sec. Sec. 891.155 and 891.325. Sec. 891.695 Operating cost standards. The requirements for the operating cost standards are provided in Sec. 891.150. Sec. 891.700 Prepayment of loans. (a) Prepayment prohibition. The prepayment (whether in whole or in part) or the assignment or transfer of physical and financial assets of any Section 202 project is prohibited, unless the Assistant Secretary gives prior written approval. (b) HUD-approved prepayment. Approval for prepayment or transfer will not be granted unless HUD determines that the prepayment or transfer of the loan is a part of a transaction that will ensure the continued operation of the project until the original maturity date of the loan in a manner that will provide rental housing for the handicapped families on terms at least as advantageous to existing and future tenants as the terms required by the original Section 202 loan agreement and any other loan agreements entered into under other provisions of law. Sec. 891.705 Project assistance contract. (a) Project assistance contract (PAC). The PAC sets forth rights and duties of the Borrower and HUD with respect to the project and the project assistance payments. (b) PAC execution. (1) Upon satisfactory completion of the project, the Borrower and HUD shall execute the PAC on the form prescribed by HUD. (2) The effective date of the PAC may be earlier than the date of execution, but no earlier than the date of HUD's issuance of the permission to occupy. [[Page 230]] (3) If the project is completed in stages, the procedures of paragraph (b) of this section shall apply to each stage. (c) Project assistance payments to owners under the PAC. The project assistance payments made under the PAC are: (1) Payments to the Borrower to assist eligible families leasing assisted units. The amount of the project assistance payment made to the Borrower for an assisted unit (or residential space in a group home) that is leased to an eligible family is equal to the difference between the contract rent for the unit (or pro rata share of the contract rent in a group home) and the tenant rent payable by the family. (2) Payments to the Borrower for vacant assisted units (``vacancy payments''). The amount of and conditions for vacancy payments are described in Sec. 891.790. HUD makes the project assistance payments monthly upon proper requisition by the Borrower, except payments for vacancies of more than 60 days, which HUD makes semiannually upon requisition by the Borrower. (d) Payment of utility reimbursement. If applicable, a utility reimbursement will be paid to a family occupying an assisted unit in an independent living complex as an additional project assistance payment. The PAC will provide that the Borrower will make this payment on behalf of HUD. Funds will be paid to the Borrower in trust solely for the purpose of making the additional payment. The Borrower may pay the utility reimbursement jointly to the family and the utility company, or, if the family and utility company consent, directly to the utility company. Sec. 891.710 Term of PAC. The term of the PAC shall be 20 years. If the project is completed in stages, the term of the PAC for each stage shall be 20 years. The term of the PAC for stages of a project shall not exceed 22 years. Sec. 891.715 Maximum annual commitment and project account. (a) Maximum annual commitment. The maximum annual amount that may be committed under the PAC is the total of the initial contract rents and utility allowances for all assisted units in the project. (b) Project account. (1) HUD will establish and maintain a specifically identified and segregated project account for each project. The project account will be established out of the amounts by which the maximum annual commitment exceeds the amount actually paid out under the PAC each year. HUD will make payments from this account for project assistance payments as needed to cover increases in contract rents or decreases in tenant income and other payments for costs specifically approved by the Secretary. (2) If the HUD-approved estimate of required annual payments under the PAC for a fiscal year exceeds the maximum annual commitment for that fiscal year plus the current balance in the project account, HUD will, within a reasonable time, take such steps authorized by section 202(h)(4)(A) of the Housing Act of 1959, as may be necessary, to assure that payments under the PAC will be adequate to cover increases in contract rents and decreases in tenant income. Sec. 891.720 Leasing to eligible families. (a) Availability of assisted units for occupancy by eligible families. During the term of the PAC, a Borrower shall make all units (or residential spaces in a group home) available for eligible families. For purposes of this section, making units or residential spaces available for occupancy by eligible families means that the Borrower: (1) Is conducting marketing in accordance with Sec. 891.740(a); (2) Has leased or is making good faith efforts to lease the units or residential spaces to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; and (3) Has not rejected any such applicant family except for reasons acceptable to HUD. If the Borrower is temporarily unable to lease all units or residential spaces to eligible families, one or more units or residential spaces may, with the prior approval of HUD, be leased to otherwise eligible families that do not meet the income requirements of part 813 of this chapter, as modified by Sec. 891.505. Failure on the part of the Borrower to [[Page 231]] comply with these requirements is a violation of the PAC and grounds for all available legal remedies, including an action for specific performance of the PAC, suspension or debarment from HUD programs, and reduction of the number of units (or in the case of group homes, reduction of the number of residential spaces) under the PAC as set forth in paragraph (b) of this section. (3) Has not rejected any such applicant family except for reasons acceptable to HUD. If the Borrower is temporarily unable to lease all units or residential spaces to eligible families, one or more units or residential spaces may, with the prior approval of HUD, be leased to otherwise eligible families that do not meet the income requirements of part 5, subpart F of this title. Failure on the part of the Borrower to comply with these requirements is a violation of the PAC and grounds for all available legal remedies, including an action for specific performance of the PAC, suspension or debarment from HUD programs, and reduction of the number of units (or in the case of group homes, reduction of the number of residential spaces) under the PAC as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by the PAC. HUD may reduce the number of units (or in the case of group homes, the number of residential spaces) covered by the PAC to the number of units or residential spaces available for occupancy by eligible families if: (1) The Borrower fails to comply with the requirements of paragraph (a) of this section; or (2) Notwithstanding any prior approval by HUD, HUD determines that the inability to lease units or residential spaces to eligible families is not a temporary problem. (c) Restoration. HUD will agree to an amendment of the PAC to provide for subsequent restoration of any reduction made under paragraph (b) of this section if: (1) HUD determines that the restoration is justified by demand; (2) The Borrower otherwise has a record of compliance with the Borrower's obligations under the PAC; and (3) Contract and budget authority is available. (d) Occupancy by families that are not handicapped. HUD may relieve the Borrower of the requirement that all units in the project (or residential spaces in a group home) must be leased to handicapped families if: (1) The Borrower has made reasonable efforts to lease to eligible families; (2) The Borrower has been granted HUD approval under paragraph (a) of this section; and (3) The Borrower is temporarily unable to achieve or maintain a level of occupancy sufficient to prevent financial default and foreclosure under the Section 202 loan documents. HUD approval under this paragraph will be of limited duration. HUD may impose terms and conditions to this approval that are consistent with program objectives and necessary to protect its interest in the Section 202 loan. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023] Sec. 891.725 PAC administration. HUD is responsible for the administration of the PAC. Sec. 891.730 Default by Borrower. (a) PAC provisions. The PAC will provide: (1) That if HUD determines that the Borrower is in default under the PAC, HUD will notify the Borrower of the actions required to be taken to cure the default and of the remedies to be applied by HUD, including an action for specific performance under the PAC, reduction or suspension of project assistance payment and recovery of overpayments, as appropriate; and (2) That if the Borrower fails to cure the default, HUD has the right to terminate the PAC or to take other corrective action. (b) Loan provisions. Additional provisions governing default under the Section 202 loan are included in the regulatory agreement and other loan documents. Sec. 891.735 Notice upon PAC expiration. The PAC will provide that the Borrower will, at least 90 days before the end of the PAC contract term, notify [[Page 232]] each family occupying an assisted unit (or residential space in a group home) of any increase in the amount the family will be required to pay as rent as a result of the expiration. The notice of expiration will contain such information and will be served in such manner as HUD may prescribe. Sec. 891.740 Responsibilities of Borrower. (a) Marketing. (1) The Borrower must commence and continue diligent marketing activities not later than 90 days before the anticipated date of availability for occupancy of the group home or the anticipated date of availability of the first unit in an independent living complex. Market activities shall include the provision of notices of the availability of housing under the program to operators of temporary housing for the homeless in the same housing market. (2) Marketing must be done in accordance with the HUD-approved affirmative fair housing marketing plan and all fair housing and equal opportunity requirements. The purpose of the plan and requirements is to achieve a condition in which eligible families of similar income levels in the same housing market have a like range of housing choices available to them regardless of their race, color, religion, sex (including actual or perceived sexual orientation and gender identity), disability, familial status, or national origin. (3) At the time of PAC execution, the Borrower must submit to HUD a list of leased and unleased assisted units (or in the case of a group home, leased and unleased residential spaces) with a justification for the unleased units or residential spaces, in order to qualify for vacancy payments for the unleased units or residential spaces. (b) Management and maintenance. The responsibilities of the Borrower with regard to management and maintenance are provided in Sec. 891.600(b). (c) Contracting for services. The responsibilities of the Borrower with regard to contracting for services are provided in Sec. 891.600(c). (d) Submission of financial and operating statements. The responsibilities of the Borrower with regard to the submission of financial and operating statements are provided in Sec. 891.600(d). (e) Use of project funds. The responsibilities of the Borrower with regard to the use of project funds are provided in Sec. 891.600(e). (f) Reports. The responsibilities of the Borrower with regard to reports are provided in Sec. 891.600(f). [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023] Sec. 891.745 Replacement reserve. The general requirements for the replacement reserve are provided in Sec. 891.605. For projects funded under Sec. Sec. 891.655 through 891.790, the amount of the deposits for the initial year of operation shall be an amount equal to 0.6 percent of the cost of the total structures (for new construction projects), 0.4 percent of the cost of the initial mortgage amount (for all other projects), or such higher rate as required by HUD. For the purposes of this section, total structures include main buildings, accessory buildings, garages, and other buildings. The amount of the deposits will be adjusted each year by the amount of the annual adjustment factor as described in part 888 of this chapter. Sec. 891.750 Selection and admission of tenants. (a) Application for admission. The Borrower must accept applications for admission to the project in the form prescribed by HUD. Applicant families applying for assisted units (or residential spaces in a group home) must complete a certification of eligibility as part of the application for admission. Applicant families must meet the disclosure and verification requirements for Social Security Numbers, and sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B. Both the Borrower and the applicant family must complete and sign the application for admission. On request, the Borrower must furnish copies of all applications for admission to HUD. [[Page 233]] (b) Determination of eligibility and selection of tenants. The Borrower is responsible for determining whether applicants are eligible for admission and for the selection of families. To be eligible for admission, an applicant family must be a family that includes a person with a disability (that meets the definition of ``handicapped family'' in 24 CFR 891.505); meet any project occupancy requirements approved by HUD; meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, subpart B; and be a low- income family, as defined in part 5, subpart F of this title, as modified by 24 CFR 891.505. Under certain circumstances, HUD may permit the leasing of units (or residential space in a group home) to ineligible families under Sec. 891.720. (1) Local residency requirements are prohibited. Local residency preferences may be applied in selecting tenants only to the extent that they are not inconsistent with affirmative fair housing marketing objectives and the Borrower's HUD-approved affirmative fair housing marketing plan. Preferences may not be based on the length of time the applicant has resided in the jurisdiction. With respect to any residency preference, persons expected to reside in the community as a result of current or planned employment will be treated as residents. (2) If the Borrower determines that the family is eligible and is otherwise acceptable and units (or residential spaces in a group home) are available, the Borrower will assign the family a unit or residential space in a group home. If the family will occupy an assisted unit the Borrower will assign the family a unit of the appropriate size in accordance with HUD standards. If no suitable unit (or residential space in a group home) is available, the Borrower will place the family on a waiting list for the project and notify the family when a suitable unit or residential space may become available. If the waiting list is so long that the applicant would not be likely to be admitted within the next 12 months, the Borrower may advise the applicant that no additional applications for admission are being considered for that reason. (3) If the Borrower determines that an applicant is ineligible for admission or the Borrower is not selecting the applicant for other reasons, the Borrower will promptly notify the applicant in writing of the determination, the reasons for the determination, and that the applicant has a right to request a meeting to review the rejection, in accordance with HUD requirements. The review, if requested, may not be conducted by the member of the Borrower's staff who made the initial decision to reject the applicant. The applicant may also exercise other rights, including filing a complaint with HUD's Office of Fair Housing and Equal Opportunity, if the applicant believes the applicant is being discriminated against on the basis of race, color, religion, sex (including actual or perceived sexual orientation and gender identity), disability, familial status, or national origin. (4) Records on applicants and approved eligible families, which provide racial, ethnic, gender and place of previous residency data required by HUD, must be maintained and retained for three years. (c) Reexamination of family income and composition--(1) Regular reexaminations. If the family occupies an assisted unit (or residential space in a group home), the Borrower must reexamine the income and composition of the family at least every 12 months. Upon verification of the information, the Borrower shall make appropriate adjustments in the total tenant payment in accordance with Sec. 5.657 of this title and must adjust the rent. The Borrower must also request an appropriate adjustment to the project assistance payment. Further, the Borrower must determine whether the family's unit size is still appropriate and must carry out any unit transfer in accordance with HUD standards. At the time of reexamination, the Borrower must require the family to meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5, subpart B. For requirements regarding the signing and submitting of consent forms by families [[Page 234]] for obtaining wage and claim information from State Wage Information Collection Agencies, see 24 CFR part 5, subpart B. (2) Interim reexamination. If the family occupies an assisted unit (or residential space in a group home) the family must comply with the provisions in Sec. 5.657 of this title regarding interim reporting of changes in income. If the Borrower receives information concerning a change in the family's income or other circumstances between regularly scheduled reexaminations, the Borrower must consult with the family and make any adjustments determined to be appropriate. See 24 CFR part 5, subpart B, for the requirements for the disclosure and verification of Social Security Number at interim reexaminations involving new household members. For requirements regarding the signing and submitting of consent forms by families for obtaining wage and claim information from State Wage Information Collection agencies, see 24 CFR part 5, subpart B. Any change in the family's income or other circumstances that result in an adjustment in the total tenant payment, tenant rent, or project assistance payment must be verified. (3) Continuation of project assistance payment. (i) A family occupying an assisted unit (or residential space in a group home) shall remain eligible for project assistance payments until the total tenant payment equals or exceeds the gross rent (or a pro rata share of the gross rent in a group home). The termination of subsidy eligibility will not affect the family's other rights under its lease. Project assistance payments may be resumed if, as a result of changes in income, rent, or other relevant circumstances during the term of the PAC, the family meets the income eligibility requirements of Sec. 5.657 of this title (as modified in Sec. 891.105) and project assistance is available for the unit or residential space under the terms of the PAC. The family will not be required to establish its eligibility for admission to the project under the remaining requirements of paragraph (b) of this section. (ii) A family's eligibility for project assistance payment may also be terminated in accordance with HUD requirements for such reasons as failure to submit requested verification information, including failure to meet the disclosure and verification requirements for Social Security Numbers, or failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B. (4) Streamlined income determination. An owner may elect to follow the provisions of 24 CFR 5.657(d). (Approved by the Office of Management and Budget under control number 2502-0204 and 2505-0267) [61 FR 11956, Mar. 22, 1996, as amended at 81 FR 12371, Mar. 8, 2016; 88 FR 75234, Nov. 2, 2023] Sec. 891.755 Obligations of the family. The obligations of the family are provided in Sec. 891.415. Sec. 891.760 Overcrowded and underoccupied units. The requirements for overcrowded and underoccupied units are provided in Sec. 891.620. Sec. 891.765 Lease requirements. The lease requirements are provided in Sec. 891.425. Sec. 891.770 Denial of admission, termination of tenancy, and modification of lease. (a) The provisions of part 5, subpart I, of this title apply to Section 202 direct loan projects with Section 162 assistance for disabled families. (b) The provisions of part 247 of this title apply to all decisions by a Borrower to terminate the tenancy or modify the lease of a family residing in a unit (or residential space in a group home). [66 FR 28798, May 24, 2001] Sec. 891.775 Security deposits. The general requirements for security deposits on assisted units are provided in Sec. 891.435. For purposes of subpart E of this part, the additional requirements in Sec. 891.635 apply. [[Page 235]] Sec. 891.780 Adjustment of rents. (a) Contract rents. HUD will calculate contract rent adjustments based on the sum of the project's operating costs and debt service (as calculated by HUD), with adjustments for vacancies, the project's nonrental income, and other factors that HUD deems appropriate. The calculation will be made on the basis of information provided by the Borrower on a form prescribed by HUD. (b) Rent for unassisted units. The rent payable by families occupying units or residential spaces that are not assisted under the PAC shall be equal to the contract rent computed under paragraph (a) of this section. Sec. 891.785 Adjustment of utility allowances. In connection with adjustments of contract rents as provided in Sec. 891.780(a), the requirements for the adjustment of utility allowances provided in Sec. 891.440 apply. Sec. 891.790 Conditions for receipt of vacancy payments for assisted units. (a) General. Vacancy payments under the PAC will not be made unless the conditions for receipt of these project assistance payments set forth in this section are fulfilled. (b) Vacancies during rent-up. For each unit (or residential space in a group home) that is not leased as of the effective date of the PAC, the Borrower is entitled to vacancy payments in the amount of 80 percent of the contract rent (or pro rata share of the contract rent for a group home) for the first 60 days of vacancy, if the Borrower: (1) Complied with Sec. 891.740; (2) Has taken and continues to take all feasible actions to fill the vacancy; and (3) Has not rejected any eligible applicant except for good cause acceptable to HUD. (c) Vacancies after rent-up. If an eligible family vacates an assisted unit (or residential space in a group home) the Borrower is entitled to vacancy payments in the amount of 80 percent of the contract rent (or pro rata share of the contract rent in a group home) for the first 60 days of vacancy if the Borrower: (1) Certifies that it did not cause the vacancy by violating the lease, the PAC, or any applicable law; (2) Notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy immediately upon learning of the vacancy or prospective vacancy; (3) Has fulfilled and continues to fulfill the requirements specified in Sec. 891.740(a)(2) and (3), and in paragraphs (b)(2) and (3) of this section; and (4) For any vacancy resulting from the Borrower's eviction of an eligible family, certifies that it has complied with Sec. 891.770. (d) Vacancies for longer than 60 days. If an assisted unit (or residential space in a group home) continues to be vacant after the 60- day period specified in paragraph (b) or (c) of this section, HUD may approve additional vacancy payments for 60-day periods up to a total of 12 months in an amount equal to the principal and interest payments required to amortize that portion of the debt service attributable to the vacant unit (or, in the case of group homes, the residential space). Such payments may be approved if: (1) The unit was in decent, safe, and sanitary condition during the vacancy period for which payment is claimed; (2) The Borrower has fulfilled and continues to fulfill the requirements specified in paragraph (b) or (c) of this section, as appropriate; and (3) The Borrower has demonstrated to the satisfaction of HUD that: (i) For the period of vacancy, the project is not providing the Borrower with revenues at least equal to project expenses (exclusive of depreciation) and the amount of payments requested is not more than the portion of the deficiency attributable to the vacant unit (or residential space in a group home); and (ii) The project can achieve financial soundness within a reasonable time. (e) Prohibition of double compensation for vacancies. If the Borrower collects payments for vacancies from other sources (tenant rent, security deposits, payments under Sec. 891.435(c), or governmental payments under other programs), the Borrower shall not be entitled to collect vacancy payments to the extent these collections from other [[Page 236]] sources plus the vacancy payment exceed contract rent. Subpart F_For-Profit Limited Partnerships and Mixed-Finance Development for Supportive Housing for the Elderly or Persons with Disabilities Source: 70 FR 54210, Sept. 13, 2005, unless otherwise noted. Sec. 891.800 Purpose. The purpose of this subpart is to establish rules allowing for, and regulating the participation of, for-profit limited partnerships, of which the sole general partner is a Nonprofit Organization meeting the requirements of 12 U.S.C. 1701q(k)(4) or 42 U.S.C. 8032(k)(6), in the development of housing for the elderly and persons with disabilities using mixed-finance development methods. These rules are intended to develop more supportive housing for the elderly and persons with disabilities by allowing the use of federal assistance, private capital and expertise, and low-income housing tax credits. Sec. 891.802 Applicability of other provisions. The provisions of 24 CFR part 891, subparts A through D, apply to this subpart F unless otherwise stated. Sec. 891.805 Definitions. In addition to the definitions at Sec. Sec. 891.105, 891.205, and 891.305, the following definitions apply to this subpart: Mixed-finance owner, for the purpose of the mixed-finance development of housing under this part, means a single-asset, for-profit limited partnership of which a private nonprofit organization is the sole general partner. The purpose of the mixed-finance owner must include the promotion of the welfare of the elderly or persons with disabilities, as appropriate. Private nonprofit organization, for the purpose of this subpart, means: (1) In the case of supportive housing for the elderly: (i) An organization that meets the requirements of the definition of ``private nonprofit organization'' in Sec. 891.205; and (ii) A for-profit limited partnership, the sole general partner of which owns at least one-hundredth of one percent of the partnership assets, whereby the sole general partner is either: an organization meeting the requirements of Sec. 891.205 or a for-profit corporation wholly owned and controlled by one or more organizations meeting the requirements of Sec. 891.205 or a limited liability company wholly owned and controlled by one or more organizations meeting the requirements of Sec. 891.205. If the project will include units financed with the use of federal Low-Income Housing Tax Credits and the organization is a limited partnership, the requirements of section 42 of the IRS code, including the requirements of section 42(h)(5), apply. The general partner may also be the sponsor, so long as it meets the requirements of this part for sponsors and general partners. (2) In the case of supportive housing for persons with disabilities: (i) An organization that meets the requirements of the definition of ``private nonprofit organization'' in Sec. 891.305; and (ii) A for-profit limited partnership, the sole general partner of which owns at least one-hundredth of one percent of the partnership assets, whereby the sole general partner is either: an organization meeting the requirements of Sec. 891.305 or a corporation owned and controlled by an organization meeting the requirements of Sec. 891.305. If the project will include units financed with the use of federal Low- Income Housing Tax Credits and the organization is a limited partnership, the requirements of section 42 of the IRS code, including the requirements of section 42(h)(5), apply. The general partner may also be the sponsor, so long as it meets the requirements of this part for sponsors and general partners. [78 FR 37113, June 20, 2013] Sec. 891.808 Capital advance funds. (a) HUD is authorized to provide capital advance funds to expand the supply of supportive housing for the elderly and persons with disabilities in accordance with the rules and regulations of [[Page 237]] the Section 202 and Section 811 supportive housing programs. For mixed- finance projects, HUD provides a capital advance funds reservation to the sponsor, which transfers the fund reservation to the mixed-finance owner meeting the requirements of this subpart. The sponsor may transfer the fund reservation directly to the owner or to the general partner of the owner, or the sponsor may be the general partner of the mixed- finance owner if the sponsor meets the applicable statutory and regulatory requirements. (b) Developments built with mixed-finance funds may combine Section 202 or Section 811 units with other units, which may or may not benefit from federal assistance. The number of Section 202 or Section 811 supportive housing units must not be less than the number specified in the agreement letter for a capital advance. In the case of a Section 811 mixed-finance project, the additional units cannot cause the project to exceed the applicable Section 811 project size limit if they will also house persons with disabilities. Sec. 891.809 Limitations on capital advance funds. Capital advances are not available in connection with: (a) Acquisition of facilities currently owned and operated by the sponsor as housing for the elderly, except with rehabilitation as defined in 24 CFR 891.105; (b) The financing or refinancing of federally assisted or insured projects; (c) Facilities currently owned and operated by the sponsor as housing for persons with disabilities, except with rehabilitation as defined in 24 CFR 891.105; or (d) Units in Section 202 direct loan projects previously refinanced under the provisions of section 811 of the American Homeownership and Economic Opportunity Act of 2000, 12 U.S.C. 1701q note. Sec. 891.810 Project rental assistance. Project Rental Assistance is defined in Sec. 891.105. Project Rental Assistance is provided for operating costs, not covered by tenant contributions, attributable to the number of units funded by capital advances under the Section 202 and Section 811 supportive housing programs, subject to the provisions of 24 CFR 891.445. The sponsor of a mixed-finance development must obtain the necessary funds from a source other than project rental assistance funds for operating costs related to non-202 or -811 units. Sec. 891.813 Eligible uses for assistance provided under this subpart. (a) Assistance under this subpart may be used to finance the construction, reconstruction, or rehabilitation of a structure or a portion of a structure; or the acquisition of a structure to be used as supportive housing for the elderly; or the acquisition of housing to be used as supportive housing for persons with disabilities. Such assistance may also cover the cost of real property acquisition, site improvement, conversion, demolition, relocation, and other expenses that the Secretary determines are necessary to expand the supply of supportive housing for the elderly and persons with disabilities. (b) Assistance under this subpart may not be used for excess amenities, as stated in Sec. 891.120(c), or for Section 202 ``prohibited facilities,'' as stated in Sec. 891.220. Such amenities or Section 202 prohibited facilities may be included in a mixed-finance development only if: (1) The amenities or prohibited facilities are not financed, maintained, or operated with funds provided under the Section 202 or Section 811 program; (2) The amenities or prohibited facilities are designed with appropriate safeguards for the residents' health and safety; and (3) The assisted residents are not required to use, participate in, or pay a fee for the use or maintenance of the amenities or prohibited facilities, although they are permitted to do so voluntarily. Any fee charged for the use, maintenance, or access to amenities or prohibited facilities by residents must be reasonable and affordable for all residents of the development. (c) Notwithstanding any other provision of this section, Sec. 891.315 on ``prohibited facilities'' shall apply to mixed- [[Page 238]] finance developments containing units assisted under Section 811. [70 FR 54210, Sept. 13, 2005, as amended at 78 FR 37114, June 20, 2013] Sec. 891.815 Mixed-finance developer's fee. (a) Mixed-finance developer's fee. A mixed-finance developer may include, on an up-front or deferral basis, or a combination of both, a fee to cover reasonable profit and overhead costs. (b) Mixed-finance developer's fee cap. No mixed-finance developer's fee may be a greater percentage of the total project replacement costs than the percentage allowed by the state housing finance agency or other tax credit allocating agency in the state in which the mixed-finance development is sited. In no event may the mixed-finance developer's fee exceed 15 percent of the total project replacement cost. (c) Sources of mixed-finance developer's fee. The mixed-finance developer's fee may be paid from project income or project sources of funding other than Section 202 or 811 capital advances, project rental assistance, or tenant rents. Sec. 891.818 Firm commitment application. The sponsor will submit the firm commitment application including the mixed-finance proposal in a form described by HUD. Sec. 891.820 Civil rights requirements. The mixed-finance development must comply with the following: all fair housing and accessibility requirements, including the design and construction requirements of the Fair Housing Act; the requirements of section 504 of the Rehabilitation Act of 1973; accessibility requirements, project standards, and site and neighborhood standards under 24 CFR 891.120, 891.125, 891.210, 891.310, and 891.320, as applicable; and 24 CFR 8.4(b)(5), which prohibits the selection of a site or location which has the purpose or effect of excluding persons with disabilities from federally assisted programs or activities. Sec. 891.823 HUD review and approval. HUD will review and may approve or disapprove the firm commitment application and mixed finance proposal. Sec. 891.825 Mixed-finance closing documents. The mixed-finance owner must submit the mixed-finance closing documents in the form prescribed by HUD. The materials shall be submitted after the firm commitment has been issued and prior to capital advance closing. Sec. 891.830 Drawdown. (a) Upon its approval of the executed mixed-finance closing documents and other documents submitted and upon determining that such documents are satisfactory, and after the capital advance closing, HUD may approve the drawdown of capital advance funds in accordance with the HUD-approved drawdown schedule. (b) Non-capital advance funds may be disbursed before capital advance proceeds or the capital advance funds may be drawn down in an approved ratio to other funds, in accordance with a drawdown schedule approved by HUD. (c) Each drawdown of funds constitutes a certification by the mixed- finance owner that: (1) All the representations and warranties submitted in accordance with this subpart continue to be valid, true, and in full force and effect; (2) All parties are in compliance with their obligations pursuant to this subpart, which, by their terms, are applicable at the time of the drawdown of funds; (3) All conditions precedent to the drawdown of the funds by the mixed-finance owner have been satisfied; (4) The capital advance funds drawn down will be used only for eligible costs actually incurred in accordance with the provisions of this subpart and the approved mixed-finance project, which include costs stated in 12 U.S.C. 1701q(h) and 42 U.S.C. 8013(h). Capital advance funds may be used for paying off bridge or construction financing, or repaying or collateralizing bonds, but only for the portion of such financing or bonds that was used for capital advance units; and [[Page 239]] (5) The amount of the drawdown is consistent with the ratio of 202 or 811 supportive housing units to other units. [70 FR 54210, Sept. 13, 2005, as amended at 78 FR 37114, June 20, 2013] Sec. 891.832 Prohibited relationships. (a) Paragraph (a) of Sec. 891.130, describing conflicts of interest, applies to mixed finance developments. (b) Paragraph (b) of Sec. 891.130, describing identity of interest, does not apply to mixed-finance developments. [78 FR 37114, June 20, 2013] Sec. 891.833 Monitoring and review. HUD shall monitor and review the development during the construction and operational phases in accordance with the requirements that HUD prescribes. In order for units assisted under the 202 and 811 programs to continue to receive project rental assistance, they must be operated in accordance with all contractual agreements among the parties and other HUD regulations and requirements. It is the responsibility of the mixed-finance owner and Nonprofit Organization to ensure compliance with the preceding sentence. Sec. 891.835 Eligible uses of project rental assistance. (a) Section 202 or 811 project rental assistance may be used to pay the necessary and reasonable operating costs, as defined in 24 CFR 891.105 and approved by HUD, not met from project income and attributed to Section 202 or 811 supportive housing units. Operating cost standards under 24 CFR 891.150 apply to developments under this part. (b) Section 202 or 811 project rental assistance may not be used to pay for: (1) Debt service on construction or permanent financing, or any refinancing thereof, for any units in the development, including the 202 or 811 supportive housing units; (2) Cash flow distributions to owners; or (3) Creation of reserves for non-202 or -811 units. (c) HUD-approved operating costs attributable to common areas or to the development as a whole, such as groundskeeping costs and general administrative costs, may be paid from project rental assistance on a pro-rata basis according to the percentage of 202 or 811 supportive housing units as compared to the total number of units. Sec. 891.840 Site and neighborhood standards. For section 202 or 811 mixed-finance developments, the site and neighborhood standards described at Sec. 891.125 and Sec. 891.320 apply to the entire mixed-finance development. Sec. 891.848 Project design and cost standards. (a) The project design and cost standards at Sec. 891.120 apply to mixed-finance developments under this subpart, with the exception of Sec. 891.120(c), subject to the provisions of Sec. 891.813(b). (b) For Section 202 mixed-finance developments, the prohibited facilities requirements described at Sec. 891.220 shall apply to only the capital advance-funded portion of the Section 202 mixed-finance developments under this subpart, subject to the provisions of Sec. 891.813(b). (c) For Section 811 mixed-finance developments, the prohibited facilities requirements described at Sec. 891.315 shall apply to the entire mixed-finance development. [78 FR 37114, June 20, 2013] Sec. 891.853 Development cost limits. The Development Cost Limits for development activities, as established at Sec. 891.140, apply to Section 202 or 811 supportive housing units in mixed-finance developments under this subpart. Sec. 891.855 Replacement reserves. (a) The mixed-finance owner shall establish and maintain a replacement reserve account for Section 202 or 811 supportive housing units. This account must meet all the requirements of 24 CFR 891.405. (b) The mixed-finance owner may obtain a disbursement from the reserve only if the funds will be used to pay for capital replacement costs for the Section 202 or 811 supportive housing units in the mixed- finance development and in accordance with the terms of the regulatory and operating agreement. In [[Page 240]] the case of repairs to common elements, the Section 202/811 replacement reserve can be used on a pro rata basis based on the percentage of Section 202 or 811 units in the building whose common elements are being repaired. In the event of a disposition of the mixed-finance development, or the dissolution of the owner, any Section 202 or 811 funds remaining in the replacement reserve account must remain dedicated to the Section 202 or 811 supportive housing units to ensure their long- term viability, or as otherwise agreed by HUD. (c) Subject to HUD's approval, reserves may be used to reduce the number of Section 202 or 811 dwelling units in the development for the purpose of retrofitting units that are obsolete or unmarketable. Sec. 891.860 Operating reserves. (a) The mixed-finance owner shall maintain an operating reserve account in an amount sufficient to cover the operating expenses of the development for at least a three-month period. (b) Project income, project rental assistance, tenant rents, and tax credit equity may be used to fund the operating reserve account. (c) Amounts derived from Section 202 or 811 (e.g., project income, project rental assistance, and tenant rents) in operating reserve accounts may only be used for the operating expenses of the 202 or 811 units. Sec. 891.863 Maintenance as supportive housing units for elderly persons and persons with disabilities. (a) The mixed-finance owner must develop and continue to operate the same number of supportive housing units for elderly persons or persons with disabilities, as stated in the use agreement or other document establishing the number of assisted units, for a 40-year period. (b) If a mixed-finance development proposal provides that the Section 202 or 811 supportive housing units will be floating units, the mixed-finance owner must operate the HUD-approved percentage of Section 202 or 811 supportive housing units, and maintain the percentage distribution of bedroom sizes of Section 202 or 811 supportive housing units for the entire term of the very low-income use restrictions on the development. Any foreclosure, sale, or other transfer of the development must be subject to a covenant running with the land requiring the continued adherence to the very low-income use restrictions for the Section 202 or 811 supportive housing units. (c) The owner must ensure that Section 202 or 811 supportive housing units in the development are and continue to be comparable to unassisted units in terms of location, size, appearance, and amenities. If due to a change in the partnership structure it becomes necessary to establish a new owner partnership or to transfer the supportive housing project, the new or revised owner must be a single-purpose entity and the use restrictions must remain in effect as provided above. Sec. 891.865 Sanctions. In the event that Section 202 or 811 supportive housing units are not developed and operated in accordance with all applicable federal requirements, HUD may impose sanctions on the participating parties and seek legal or equitable relief in enforcing all requirements under Section 202, the Housing Act of 1959, or Section 811 of the National Affordable Housing Act, all implementing regulations and requirements and contractual obligations under the mixed-finance documents. PARTS 892 899 [RESERVED] [[Page 241]] CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT -------------------------------------------------------------------- Editorial Note: Nomenclature changes to chapter IX appear at 59 FR 14090, Mar. 25, 1994. Part Page 900-901 [Reserved] 902 Public Housing Assessment System............ 243 903 Public housing agency plans................. 263 904 Low rent housing homeownership opportunities 278 905 The Public Housing Capital Fund Program..... 323 906 Public housing homeownership programs....... 371 907 Substantial default by a public housing agency.................................. 382 908 Electronic transmission of required family data for public housing, Indian housing, and the Section 8 rental certificate, rental voucher, and moderate rehabilitation programs................. 384 943 Public housing agency consortia and joint ventures................................ 386 945 Designated housing--Public housing designated for occupancy by disabled, elderly, or disabled and elderly families................................ 390 960 Admission to, and occupancy of, public housing................................. 399 963 Public Housing--Contracting with resident- owned businesses........................ 426 964 Tenant participation and tenant opportunities in public housing......... 429 965 PHA-owned or leased projects--General provisions.............................. 446 966 Public housing lease and grievance procedure 458 970 Public housing program--Demolition or disposition of public housing projects.. 470 971 Assessment of the reasonable revitalization potential of certain public housing required by law......................... 483 972 Conversion of public housing to tenant-based assistance.............................. 489 [[Page 242]] 982 Section 8 tenant-based assistance: housing choice voucher program.................. 506 983 Project-based voucher (PBV) program......... 591 984 Section 8 and public housing family self- sufficiency program..................... 626 985 Section 8 management assessment program (SEMAP) and small rural PHA assessments. 643 990 The public housing operating fund program... 657 1000 Native American housing activities.......... 678 1001-1002 [Reserved] 1003 Community development block grants for Indian tribes and Alaska native villages 737 1004 [Reserved] 1005 Loan guarantees for Indian housing (Eff. until June 18, 2024).................... 773 1005 Loan guarantees for Indian housing (Eff. June 18, 2024).......................... 777 1006 Native Hawaiian Housing Block Grant Program. 825 1007 Section 184A loan guarantees for Native Hawaiian housing........................ 845 1008-1699 [Reserved] [[Page 243]] PARTS 900 901 [RESERVED] PART 902_PUBLIC HOUSING ASSESSMENT SYSTEM--Table of Contents Subpart A_General Provisions Sec. 902.1 Purpose, scope, and general matters. 902.3 Definitions. 902.5 Applicability. 902.9 PHAS scoring. 902.11 PHAS performance designation. 902.13 Frequency of PHAS assessments. Subpart B_Physical Condition Indicator 902.20 [Reserved] 902.21 Physical condition standards for public housing. 902.22 Inspection of PHA projects. 902.24 [Reserved] 902.25 Physical condition scoring and thresholds. 902.26 [Reserved] Subpart C_Financial Condition Indicator 902.30 Financial condition assessment. 902.33 Financial reporting requirements. 902.35 Financial condition scoring and thresholds. Subpart D_Management Operations Indicator 902.40 Management operations assessment. 902.43 Management operations performance standards. 902.44 Adjustment for physical condition and neighborhood environment. 902.45 Management operations scoring and thresholds. Subpart E_Capital Fund Program Indicator 902.50 Capital Fund program assessment. 902.53 Capital Fund program scoring and thresholds. Subpart F_PHAS Scoring 902.60 Data collection. 902.62 Failure to submit data. 902.64 PHAS scoring and audit reviews. 902.66 Withholding, denying, and rescinding designation. 902.68 [Reserved] 902.69 PHA right of petition and appeal. Subpart G_PHAS Incentives and Remedies 902.71 Incentives for high performers. 902.73 PHAs with deficiencies. 902.75 Troubled performers. 902.79 Verification and records. 902.81 Resident petitions for remedial action. 902.83 Sanctions for troubled performer PHAs. Subpart H_Assessment of Small Rural Public Housing Agencies Sec. 902.101 Definitions of small rural PHAs. 902.103 Public housing assessment of small rural PHAs 902.105 Troubled small rural PHAs 902.107 Withholding, denying, and rescinding troubled designation. 902.109 Right to petition and appeal troubled designation. 902.111 Sanctions for troubled small rural PHAs. 902.113 Incentives for small rural PHAs high-performers. Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d), 1437z-10. Source: 76 FR 10149, Feb. 23, 2011, unless otherwise noted. Subpart A_General Provisions Sec. 902.1 Purpose, scope, and general matters. (a) Purpose. The purpose of the Public Housing Assessment System (PHAS) is to improve the delivery of services in public housing and enhance trust in the public housing system among public housing agencies (PHAs), public housing residents, and the general public, by providing a management tool for effectively and fairly measuring the performance of a PHA in essential housing operations of projects, on a program-wide basis and individual project basis, and providing rewards for high performers and remedial requirements for poor performers. (b) Scope. PHAS is a strategic measure of the essential housing operations of projects and PHAs. PHAS does not evaluate the compliance of a project or PHA with every HUD-wide or program-specific requirement or objective. Although not specifically evaluated through PHAS, PHAs are responsible for complying with nondiscrimination and equal opportunity requirements, including but not limited to those specified in 24 CFR 5.105, for affirmatively furthering fair housing, requirements under section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and requirements of other federal programs under [[Page 244]] which the PHA is receiving assistance. A PHA's adherence to these requirements will be monitored in accordance with the applicable program regulations and the PHA's Annual Contributions Contract (ACC). (c) PHAS indicators. HUD will assess and score the performance of projects and PHAs based on the indicators, which are more fully addressed in Sec. 902.9: Physical condition, financial condition, management operations, and the Capital Fund program. (d) Assessment tools. HUD will make use of uniform and objective criteria for the physical inspection of projects and PHAs and the financial assessment of projects and PHAs, and will use data from appropriate agency data systems to assess management operations. For the Capital Fund program indicator, HUD will use information provided in the electronic Line of Credit Control System (eLOCCS), the Public Housing Information Center (PIC), or their successor systems. On the basis of this data, HUD will assess and score the results, advise PHAs of their scores, and identify low-scoring and poor-performing projects and PHAs so that these projects and PHAs will receive the appropriate attention and assistance. (e) Small PHAs. A PHA with fewer than 250 units that does not convert to asset management will be considered as one project by HUD. (f) HUD's scoring procedures will be published from time to time in the Federal Register for public comment. Sec. 902.3 Definitions. As used in this part: Act means the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.) Alternative management entity (AME) is a receiver, private contractor, private manager, or any other entity that is under contract with a PHA, under a management agreement with a PHA, or that is otherwise duly appointed or contracted (for example, by court order or agency action), to manage all or part of a PHA's operations. Assessed fiscal year is the PHA fiscal year that has been/is being assessed under PHAS. Assistant Secretary means the Assistant Secretary for Public and Indian Housing. Capital Fund-troubled refers to a PHA that does not meet the minimum passing score of 5 points or 50 percent under the Capital Fund indicator. Corrective Action Plan means a plan, as provided in Sec. 902.73(a), that is developed by a PHA that specifies the actions to be taken, including timetables, that shall be required to correct deficiencies identified under any of the PHAS indicators and subindicators, and identified as a result of a PHAS assessment, when a memorandum of agreement (MOA) is not required. Days mean calendar days, unless otherwise specified. Decent, safe, sanitary housing and in good repair (DSS/GR) is HUD's standard for acceptable basic housing conditions and the level to which a PHA is required to maintain its public housing. Deficiency means any finding or determination that requires corrective action, or any score below 60 percent of the available points for the physical condition, financial condition, or management operations indicators, and any score below 50 percent for the Capital Fund indicator. In the context of physical condition and physical inspection in subpart B of this part, ``deficiency'' means a specific problem, as described in the Dictionary of Deficiency Definitions, such as a hole in a wall or a damaged refrigerator in the kitchen that can be recorded for inspectable items. Dictionary of Deficiency Definitions means the documents published in the Federal Register that contain the inspection standards and scoring values pursuant to 24 CFR part 5, subpart G. Direct Funded RMC (DF-RMC) means a Resident Management Corporation to which HUD directly provides operating and capital assistance under the provisions of 24 CFR 964.225(h). Inspectable areas (or area) mean any of the three major components of public housing that are inspected, which are: inside, outside, and unit. Inspectable item means the individual parts, such as walls, kitchens, bathrooms, and other things, to be inspected in an inspectable area. Memorandum of Agreement (MOA) is defined in Sec. 902.75(b). [[Page 245]] Resident Management Corporation (RMC) is defined in 24 CFR 964.7. Unit-weighted average means the average of the PHA's individual indicator scores, weighted by the number of units in each project, divided by the total number of units in all of the projects of the PHA. In order to compute a unit-weighted average, an individual project score for a particular indicator is multiplied by the number of units in each project to determine a ``weighted value.'' For example, for a PHA with two projects, one with 200 units and a score of 90, and the other with 100 units and a score of 60, the unit-weighted average score for the indicator would be (200 x 90 + 100 x 60)/300 = 80. [76 FR 10149, Feb. 23, 2011, as amended at 88 FR 30500, May 11, 2023] Sec. 902.5 Applicability. (a) PHAs, RMCs, AMEs. This part applies to PHAs, Resident Management Corporations (RMCs), and AMEs. This part is also applicable to RMCs that receive direct funding from HUD in accordance with section 20 of the 1937 Act (DF-RMCs). (1) Scoring of RMCs and AMEs. (i) RMCs and DF-RMCs will be assessed and issued their own numeric scores under PHAS based on the public housing or portions of public housing that they manage and the responsibilities they assume that can be scored under PHAS. References in this part to PHAs include RMCs, unless stated otherwise. References in this part to RMCs include DF-RMCs, unless stated otherwise. (ii) AMEs are not issued PHAS scores. The performance of the AME contributes to the PHAS score of the project(s)/PHA(s) for which they assumed management responsibilities. (2) ACC. The ACC makes a PHA legally responsible for all public housing operations, except where DF-RMC assumes management operations. (i) Because the PHA and not the RMC or AME is ultimately responsible to HUD under the ACC, the PHAS score of a PHA will be based on all of the projects covered by the ACC, including those with management operations assumed by an RMC or AME (including a court-ordered or administrative receivership agreement, if applicable). (ii) A PHA's PHAS score will not be based on projects managed by a DF-RMC. (3) This part does not apply to Moving-to-Work (MTW) agencies that are specifically exempted in their grant agreement. (b) Implementation of PHAS. The regulations in this part are applicable to PHAs beginning with the first fiscal year end date after the effective date of this rule, and thereafter. Sec. 902.9 PHAS scoring. (a) Indicators and subindicators. Each PHA will receive an overall PHAS score, rounded to the nearest whole number, based on the four indicators: Physical condition, financial condition, management operations, and the Capital Fund program. Each of these indicators contains subindicators, and the scores for the subindicators are used to determine a single score for each of these PHAS indicators. Individual project scores are used to determine a single score for the physical condition, financial condition, and management operations indicators. The Capital Fund program indicator score is entity-wide. (b) Overall PHAS score and indicators. The overall PHAS score is derived from a weighted average of score values for the four indicators, as follows: (1) The physical condition indicator is weighted 40 percent (40 points) of the overall PHAS score. The score for this indicator is obtained as indicated in subpart B of this part. (2) The financial condition indicator is weighted 25 percent (25 points) of the overall PHAS score. The score for this indicator is obtained as indicated in subpart C of this part. (3) The management operations indicator is weighted 25 percent (25 points) of the overall PHAS score. The score for this indicator is obtained as indicated in subpart D of this part. (4) The Capital Fund program indicator is weighted 10 percent (10 points) of the overall PHAS score for all Capital Fund program grants for which [[Page 246]] fund balances remain during the assessed fiscal year. The score for this indicator is obtained as indicated in subpart E of this part. Sec. 902.11 PHAS performance designation. All PHAs that receive a PHAS assessment shall receive a performance designation. The performance designation is based on the overall PHAS score and the four indicator scores, as set forth below. (a) High performer. (1) A PHA that achieves a score of at least 60 percent of the points available under the financial condition, physical condition, and management operations indicators and at least 50 percent of the points available under the Capital Fund indicator, and achieves an overall PHAS score of 90 percent or greater of the total available points under PHAS shall be designated a high performer. A PHA shall not be designated a high performer if it scores below the threshold established for any indicator. (2) High performers will be afforded incentives that include relief from reporting and other requirements, as described in Sec. 902.71. (b) Standard performer. (1) A PHA that is not a high performer shall be designated a standard performer if the PHA achieves an overall PHAS score of at least 60 percent, and at least 60 percent of the available points for the physical condition, financial condition, and management operations indicators, and at least 50 percent of the available points for the Capital Fund indicator. (2) At HUD's discretion, a standard performer may be required by the field office to submit and operate under a Corrective Action Plan. (c) Substandard performer. A PHA shall be designated a substandard performer if the PHA achieves a total PHAS score of at least 60 percent and achieves a score of less than 60 percent under one or more of the physical condition, financial condition, or management operations indicators. The PHA shall be designated as substandard physical, substandard financial, or substandard management, respectively. The HUD office with jurisdiction over the PHA shall require a Corrective Action Plan if the deficiencies have not already been addressed in a current Corrective Action Plan. (d) Troubled performer. (1) A PHA that achieves an overall PHAS score of less than 60 percent shall be designated as a troubled performer. (2) In accordance with section 6(j)(2)(A)(i) of the Act (42 U.S.C. 1437d(j)(2)(A)(i)), a PHA that receives less than 50 percent under the Capital Fund program indicator under subpart E of this part will be designated as a troubled performer and subject to the sanctions provided in section 6(j)(4) of the Act (42 U.S.C. 1437(d)(j)(4)). Sec. 902.13 Frequency of PHAS assessments. The frequency of a PHA's PHAS assessments is determined by the size of the PHA's Low-Rent program and its PHAS designation. HUD may, due to unforeseen circumstances or other cause as determined by HUD, extend the time between assessments by direct notice to the PHA and relevant resident organization or resident management entity, and any other general notice that HUD deems appropriate. (a) Small PHAs. HUD will assess and score the performance of a PHA with fewer than 250 public housing units, as follows: (1) A small PHA that is a high performer may receive a PHAS assessment every 3 years; (2) A small PHA that is a standard or substandard performer may receive a PHAS assessment every other year; and (3) All other small PHAs may receive a PHAS assessment every year, including a PHA that is designated as troubled or Capital Fund-troubled in accordance with Sec. 902.75. (b) Frequency of scoring for PHAs with 250 units or more. (1) All PHAs, other than stated in paragraph (a) of this section, may be assessed on an annual basis. (2) The physical condition score for each project will determine the frequency of inspections of each project in accordance with the inspection cycle laid out in 24 CFR 5.705(c). The PHAS physical condition indicator score for an assessment period shall be calculated by taking the unit-weighted average of the most recent physical [[Page 247]] condition score for each project, except that, starting July 1, 2023, no new physical condition indicator will be issued for a PHA until every project under the PHA has been inspected on or after July 1, 2023. (3) If a PHA is designated as a troubled performer, all projects will receive a physical condition inspection regardless of the individual project physical condition score. (4) In the baseline year, every PHA will receive an overall PHAS score and in all four of the PHAS indicators: Physical condition; financial condition; management operations; and Capital Fund program. This will allow a baseline for the physical condition inspections and the 3-2-1 inspection schedule, as well as a baseline year for the small deregulated PHAs. (c) Financial submissions. HUD shall not issue a PHAS score for the unaudited and audited financial information in the years that a PHA is not being assessed under PHAS. Although HUD shall not issue a PHAS score under such circumstances, a PHA shall comply with the requirements for submission of annual unaudited and audited financial statements in accordance with subpart C of this part and 24 CFR 5.801. [76 FR 10149, Feb. 23, 2011, as amended at 88 FR 30500, May 11, 2023] Subpart B_Physical Condition Indicator Sec. 902.20 [Reserved] Sec. 902.21 Physical condition standards for public housing. Public housing must be maintained in a manner that meets the physical condition standards set forth in 24 CFR part 5, subpart G. [88 FR 30500, May 11, 2023] Sec. 902.22 Inspection of PHA projects. The PHA's score for the physical condition indicator is based on an independent inspection of a PHA's project(s) provided by HUD and using the requirements and timelines laid out in 24 CFR part 5, subpart G, to ensure projects meet acceptable basic housing conditions. Mixed-finance projects will be subject to the physical condition inspections. [88 FR 30501, May 11, 2023] Sec. 902.24 [Reserved] Sec. 902.25 Physical condition scoring and thresholds. (a) Scoring. Under the physical condition indicator, a score will be calculated for individual projects, as well as for the overall condition of a PHA's public housing portfolio. (b) Overall PHA physical condition indicator score. The overall physical condition indicator score is a unit-weighted average of project scores. The sum of the unit-weighted values is divided by the total number of units in the PHA's portfolio to derive the overall physical condition indicator score. (c) Thresholds. (1) The project or projects' 100-point physical condition score is converted to a 40-point basis for the overall physical condition indicator score. The project scores on the 100-point basis are multiplied by .40 in order to derive a 40-point equivalent score to compute the overall physical condition score and overall PHAS score. (2) In order to receive a passing score under the physical condition indicator, the PHA must achieve a score of at least 24 points, or 60 percent. (3) A PHA that receives fewer than 24 points will be categorized as a substandard physical condition agency. Sec. 902.26 [Reserved] Subpart C_Financial Condition Indicator Sec. 902.30 Financial condition assessment. (a) Objective. The objective of the financial condition indicator is to measure the financial condition of each public housing project within a PHA's public housing portfolio for the purpose of evaluating whether there are sufficient financial resources to support the provision of housing that is DSS/GR. Individual project scores for financial condition, as well as overall financial condition scores, will be issued. [[Page 248]] (b) Financial reporting standards. A PHA's financial condition will be assessed under this indicator by measuring the combined performance of all public housing projects in each of the subindicators listed in Sec. 902.35, on the basis of the annual financial report provided in accordance with Sec. 902.33. (c) Exclusions. Mixed-finance projects are excluded from the financial condition indicator. Sec. 902.33 Financial reporting requirements. (a) Annual financial report. All PHAs must submit their unaudited and audited financial data to HUD on an annual basis. The financial information must be: (1) Prepared in accordance with Generally Accepted Accounting Principles (GAAP), as further defined by HUD in supplementary guidance; and (2) Submitted electronically in the format prescribed by HUD using the Financial Data Schedule (FDS). (b) Annual unaudited financial information report filing dates. The unaudited financial information to be submitted to HUD in accordance with paragraph (a) of this section must be submitted to HUD annually, no later than 2 months after the PHA's fiscal year end, with no penalty applying until the 16th day of the 3rd month after the PHA's fiscal year end, in accordance with Sec. 902.62. (c) Annual audited financial information compliance dates. Audited financial statements will be required no later than 9 months after the PHA's fiscal year end, in accordance with the Single Audit Act and 2 CFR part 200, subpart F. (d) Year-end audited financial information. All PHAs that meet the federal assistance threshold stated in the Single Audit Act and 2 CFR part 200, subpart F, must also submit year-end audited financial information. (e) Submission of information. In addition to the submission of information required by paragraph (a) of this section, a PHA shall provide one copy of the completed audit report package and the Management Letter issued by the Independent Auditor to the local HUD field office having jurisdiction over the PHA. [76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75941, Dec. 7, 2015] Sec. 902.35 Financial condition scoring and thresholds. (a) Scoring. (1) Under the financial condition indicator, a score will be calculated for each project based on the values of financial condition subindicators and an overall financial condition score, as well as audit and internal control flags. Each financial condition subindicator has several levels of performance, with different point values for each level. (2) The financial condition score for projects will be based on the annual financial condition information submitted to HUD for each project under 24 CFR 990.280 and 990.285. The financial condition score for PHAs will be based on a unit-weighted average of project scores. (b) Subindicators of the financial condition indicator. The subindicators of financial condition indicator are: (1) Quick Ratio (QR). The QR compares quick assets to current liabilities. Quick assets are cash and assets that are easily convertible to cash and do not include inventory. Current liabilities are those liabilities that are due within the next 12 months. A QR of less than one indicates that the project's ability to make payments on a timely basis may be at risk. (2) Months Expendable Net Assets Ratio (MENAR). The MENAR measures a project's ability to operate using its net available, unrestricted resources without relying on additional funding. This ratio compares the adjusted net available unrestricted resources to the average monthly operating expenses. The result of this calculation shows how many months of operating expenses can be covered with currently available, unrestricted resources. (3) Debt Service Coverage Ratio (DSCR). The DSCR is the ratio of net operating income available to make debt payments, to the amount of the debt payments. This subindicator is used if the PHA has taken on long- term obligations. A DSCR of less than one would indicate that the project would have difficulty generating sufficient cash [[Page 249]] flow to cover both its expenses and its debt obligations. (c) Overall PHA financial condition indicator score. The overall financial condition indicator score is a unit-weighted average of project scores. The sum of the weighted values is then divided by the total number of units in the PHA's portfolio to derive the overall financial condition indicator score. (d) Thresholds. (1) The PHA's financial condition score is based on a maximum of 25 points. (2) In order for a PHA to receive a passing score under the financial condition indicator, the PHA must achieve a score of at least 15 points, or 60 percent of the available points under this indicator. (3) A PHA that receives fewer than 15 points available under this indicator will be categorized as a substandard financial condition agency. Subpart D_Management Operations Indicator Sec. 902.40 Management operations assessment. (a) Objective. The objective of the management operations indicator is to measure the PHA's performance of management operations through the management performance of each project. (b) Exclusions. Mixed-finance projects are excluded from the management operations indicator. Sec. 902.43 Management operations performance standards. (a) Management operations subindicators. The following subindicators listed in this section will be used to assess the management operations of projects and PHAs, consistent with section 6(j)(1) of the Act (42 U.S.C. 1437d(j)(1)). Individual project scores for management operations, as well as overall PHA management operations scores, will be issued. (1) Occupancy. This subindicator measures the occupancy for the project's fiscal year, adjusted for allowable vacancies. (2) Tenant accounts receivable. This subindicator measures the tenant accounts receivable of a project against the tenant charges for the project's fiscal year. (3) Accounts payable. This subindicator measures the money that a project owes to vendors at the end of the project's fiscal year for products and services purchased on credit against total operating expenses. (b) Assessment under the Management Operations Indicator. Projects will be assessed under this indicator through information that is electronically submitted to HUD through the FDS. Sec. 902.44 Adjustment for physical condition and neighborhood environment. (a) General. In accordance with section 6(j)(1)(I)(2) of the Act (42 U.S.C. 1437d(j)(1)(I)(2)), the overall management operations score for a project will be adjusted upward to the extent that negative conditions are caused by situations outside the control of the project. These situations are related to the poor physical condition of the project or the overall depressed condition of the major census tract in which a project is located. The intent of this adjustment is to avoid penalizing such projects, through appropriate application of the adjustment. (b) Definitions. Definitions and application of physical condition and neighborhood environment factors are: (1) Physical condition adjustment applies to projects at least 28 years old, based on the unit-weighted average Date of Full Availability (DOFA) date. (2) Neighborhood environment adjustment applies to projects located in census tracts where at least 40 percent of the families have an income below the poverty rate, as documented by the most recent census data. If a project is located in more than one census tract, the census data for the census tract where the majority of the project's units are located shall be used. (c) Adjustment for physical condition and neighborhood environment. HUD will adjust the management operations score of a project, subject to one or both of the physical condition and neighborhood environment conditions. The adjustments will be made to the overall management operations score for each project so as to reflect the difficulty in managing the projects. In [[Page 250]] each instance where the actual management operations score is rated below the maximum score of 25 points, one point each will be added for physical condition and neighborhood environment, but not to exceed the maximum number of 25 points available for the management operations indicator. (d) Application of adjustment. The adjustment for physical condition and neighborhood environment will be calculated by HUD and applied to all eligible projects. Sec. 902.45 Management operations scoring and thresholds. (a) Scoring. Under the management operations indicator, HUD will calculate a score for each project, as well as for the overall management operations of a PHA, that reflects weights based on the relative importance of the individual management subindicators. (b) Overall PHA management operations indicator score. The overall management operations indicator score is a unit-weighted average of project scores. The sum of the weighted values is divided by the total number of units in the PHA's portfolio to derive the overall management operations indicator score. (c) Thresholds. (1) The PHA's management operations score is based on a maximum of 25 points. (2) In order to receive a passing score under the management operations indicator, a PHA must achieve a score of at least 15 points or 60 percent. (3) A PHA that receives fewer than 15 points will be categorized as a substandard management operations agency. Subpart E_Capital Fund Program Indicator Sec. 902.50 Capital Fund program assessment. (a) Objective. The Capital Fund program indicator examines the period of time taken by a PHA to obligate funds and occupy units in relation to statutory deadlines for obligation for all Capital Fund program grants for which fund balances remain during the assessed fiscal year. Funds from the Capital Fund program under section 9(d) of the Act (42 U.S.C. 1437g(d)) do not include HOPE VI program funds. (b) Applicability. This indicator is applicable on a PHA-wide basis, and not to individual projects. This indicator is not applicable to PHAs that choose not to participate in the Capital Fund program under section 9(d) of the Act. (c) Capital Fund subindicators. The subindicators pursuant to section 9(d) of the Act are: (1) Timeliness of fund obligation. This subindicator examines the period of time it takes for a PHA to obligate funds from the Capital Fund program under section 9(j)(1) of the 1937 Act (42 U.S.C. 1437g(9)(j)). (2) Occupancy rate. This subindicator measures the PHA's occupancy rate as of the end of the PHA's fiscal year. (d) Method of assessment. The assessment required under the Capital Fund program indicator will be performed through analysis of obligated amounts in HUD's eLOCCS (or its successor) for all Capital Fund program grants that were open during the assessed fiscal year. This subindicator measures a statutory requirement for the Capital Fund program. Other aspects of the Capital Fund program will be monitored by HUD through other types of reviews, and in this indicator through considering occupancy rates. (1) PHAs are responsible to ensure that their Capital Fund program information is submitted to eLOCCS by the submission due date. (2) A PHA may not appeal its PHAS score, Capital Fund program score, or both, based on the fact that it did not submit its Capital Fund program information to eLOCCS and/or the PIC systems by the submission due date. Sec. 902.53 Capital Fund program scoring and thresholds. (a) Scoring. The Capital Fund program indicator score provides an assessment of a PHA's ability to obligate Capital Fund program grants in a timely manner on capital and modernization needs. (b) Thresholds. (1) The PHA's Capital Fund program score is based on a maximum of 10 points. [[Page 251]] (2) In order to receive a passing score under the Capital Fund program indicator, a PHA must achieve a score of at least 5 points, or 50 percent. Subpart F_PHAS Scoring Sec. 902.60 Data collection. (a) Fiscal year reporting period--limitation on changes after PHAS effective date. To allow for a period of consistent assessments to refine and make necessary adjustments to PHAS, a PHA is not permitted to change its fiscal year for the first 3 full fiscal years following the effective date of this regulation, unless such change is approved by HUD for good cause. (b) Request for extension of time to submit unaudited financial information. In the event of extenuating circumstances, a PHA may request extensions of time to submit its unaudited financial information. To receive an extension, a PHA must ensure that HUD receives the extension request electronically 15 days before the submission due date. The PHA's electronic extension request must include an objectively verifiable justification as to why the PHA cannot submit the information by the submission due date. PHAs shall submit their requests for extensions of time for the submission of unaudited financial information through the FASS-PH Secure Systems Web site. HUD shall forward its determination electronically to the requesting PHA. (c) Request for waiver of due date for PHA submission of audited financial information. (1) HUD, for good cause, may grant PHAs a waiver of the due date of the submission of audited financial information to HUD. HUD shall consider written requests from PHAs for a waiver of the report submission due date (established by the Single Audit Act and 2 CFR part 200, subpart F, as no later than 9 months after the end of the fiscal year). The PHA's written request for a waiver of the due date of the submission of audited financial information must include an objectively verifiable justification as to why the PHA cannot submit the information by the submission due date. A PHA shall submit its written request for such a waiver, 30 days prior to the submission due date, to its local field office. HUD shall forward its written determination of the waiver request to the PHA and, if appropriate, establish a new submission due date for the audited financial information. (2) A waiver of the due date for the submission of audited financial information to HUD does not relieve a PHA of its responsibility to submit its audited information to OMB's Federal Audit Clearinghouse no later than 9 months after the end of its fiscal year. (d) Rejected unaudited financial submissions. When HUD rejects a PHA's year-end unaudited financial information after the due date, a PHA shall have 15 days from the date of the rejection to resubmit the information without a penalty being applied, in accordance with Sec. 902.62. (e) Late points and late presumptive failure. Late points and late presumptive failure will only be applied to the financial condition indicator since the management operations information is derived from the financial condition submission. (f) Score change. A management operations score can change as a result of the audited submission since the management operations information is derived from the financial condition submission. [76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75941, Dec. 7, 2015] Sec. 902.62 Failure to submit data. (a) Failure to submit data by due date. (1) If a PHA without a finding of good cause by HUD does not submit its year-end financial information, required by this part, or submits its unaudited year-end financial information more than 15 days past the due date, appropriate sanctions may be imposed, including a reduction of one point in the total PHAS score for each 15-day period past the due date. (2) If the unaudited year-end financial information is not received within 3 months past the due date, or extended due date, the PHA will receive a presumptive rating of failure for its unaudited information and shall receive zero points for its unaudited financial information and the final financial condition indicator score. The [[Page 252]] subsequent timely submission of audited information does not negate the score of zero received for the unaudited year-end financial information submission. (3) The PHA's audited financial statement must be received no later than 9 months after the PHA's fiscal year-end, in accordance with the Single Audit Act and 2 CFR part 200, subpart F. If the audited financial statement is not received by that date, the PHA will receive a presumptive rating of failure for the financial condition indicator. (b) Verification of information submitted. (1) A PHA's year-end financial information and any supporting documentation are subject to review by an independent auditor, as authorized by section 6(j)(6) of the Act (42 U.S.C. 1437(d)(j)(6)). Appropriate sanctions for intentional false certification will be imposed, including civil penalties, suspension or debarment of the signatories, the loss of high performer designation, a lower score under the financial condition indicator, and a lower overall PHAS score. (2) A PHA that cannot provide justifying documentation to HUD for the assessment under any indicator(s) or subindicator(s) shall receive a score of zero for the relevant indicator(s) or subindicator(s) and its overall PHAS score shall be lowered accordingly. (c) Failure to submit. If a PHA does not submit its unaudited or audited information, it will receive a zero for management operations. [76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75941, Dec. 7, 2015] Sec. 902.64 PHAS scoring and audit reviews. (a) Adjustments to PHAS score. (1) Adjustments to the score may be made after a PHA's audit report for the fiscal year being assessed is transmitted to HUD. If significant differences are noted between unaudited and audited results, a PHA's PHAS score will be adjusted in accordance with the audited results. (2) A PHA's PHAS score under individual indicators or subindicators, or its overall PHAS score, may be changed by HUD in accordance with data included in the audit report or obtained through such sources as HUD project management and other reviews, investigations by HUD's Office of Fair Housing and Equal Opportunity, investigations or audits by HUD's Office of Inspector General, or reinspection by HUD, as applicable. (b) Issuance of a score by HUD. (1) An overall PHAS score will be issued for each PHA after the later of one month after the submission due date for financial data or one month after submission by the PHA of its financial data. The overall PHAS score becomes the PHA's final PHAS score after any adjustments requested by the PHA and determined necessary under the processes provided in Sec. Sec. 902.25(d), 902.35(a), and 902.68; any adjustments resulting from the appeal process provided in Sec. 902.69; and any adjustments determined necessary as a result of the independent public accountant (IPA) audit. (2) Each PHA (or RMC) shall post a notice of its final PHAS score and designation in appropriate conspicuous and accessible locations in its offices within 2 weeks of receipt of its final PHAS score and designation. In addition, HUD will post every PHA's PHAS score and designation on HUD's Internet site. (c) Review of audit. (1) Quality control review. HUD may undertake a quality control review of the audit work papers or as part of the Department's ongoing quality assurance process. (2) Determination of deficiency. If HUD determines that the PHA's financial statements, electronic financial submission, or audit are deficient, it shall notify the PHA of such determination in writing. The PHA will have 30 days in which to respond to the notice of deficiency and to establish that the determination is erroneous. Following consideration of any PHA response, HUD will issue a final determination in writing to the PHA. (i) Deficient financial statements. Deficient financial statements are statements that are not presented, in some material respect, in accordance with accounting principles generally accepted in the United States, as set forth by the Government Accounting Standards Board, or if applicable, the Financial Accounting Standards Board. [[Page 253]] (ii) Deficient electronic submission. A deficient electronic financial submission is a filing that was not made, in some material respect, in accordance with HUD requirements or attested to in accordance with the Standards for Attestation Engagements issued by the American Institute of Certified Public Accountants or Generally Accepted Government Auditing Standards. (iii) Deficient audit. A deficient audit is one that was not performed, in some material respect, in compliance with Generally Accepted Government Auditing Standards; Generally Accepted Auditing Standards; the Single Audit Act and 2 CFR part 200, subpart F, when applicable; or HUD requirements. (3) HUD actions. If HUD determines that the financial statements, electronic financial submission, or audit are deficient, HUD may adjust the financial indicator score to zero and/or reduce the overall PHAS score in accordance with the provisions of this section. Additionally, if HUD determines that the audit is deficient, HUD may, at its discretion, elect to serve as the audit committee for the PHA for the next fiscal year and select the audit firm that will perform the audit in question. [76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 902.66 Withholding, denying, and rescinding designation. (a) Withholding designation. In exceptional circumstances, even though a PHA has satisfied all of the PHAS indicators for high performer or standard performer designation, HUD may conduct any review as it may determine necessary, and may deny or rescind incentives or high performer designation or standard performer designation, in the case of a PHA that: (1) Is operating under a special agreement with HUD (e.g., a civil rights compliance agreement); (2) Is involved in litigation that bears directly upon the physical, financial, or management performance of a PHA; (3) Is operating under a court order; (4) Demonstrates substantial evidence of fraud or misconduct, including evidence that the PHA's certifications, submitted in accordance with this part, are not supported by the facts, as evidenced by such sources as a HUD review, routine reports, an Office of Inspector General investigation/audit, an independent auditor's audit, or an investigation by any appropriate legal authority; or (5) Demonstrates substantial noncompliance in one or more areas of a PHA's required compliance with applicable laws and regulations, including areas not assessed under PHAS. Areas of substantial noncompliance include, but are not limited to, noncompliance with civil rights, nondiscrimination and fair housing laws and regulations, or the ACC. Substantial noncompliance casts doubt on the capacity of a PHA to preserve and protect its public housing projects and operate them consistent with federal laws and regulations. (b) High performer and standard designations. If a high performer designation is denied or rescinded, the PHA shall be designated either a standard performer, substandard performer, or troubled performer, depending on the nature and seriousness of the matter or matters constituting the basis for HUD's action. If a standard performer designation is denied or rescinded, the PHA shall be designated as a substandard performer or troubled performer. (c) Effect on score. The denial or rescission of a designation of high performer or standard performer shall not affect the PHA's numerical PHAS score, except where the denial or rescission is under paragraph (a)(4) of this section. Sec. 902.68 [Reserved] Sec. 902.69 PHA right of petition and appeal. (a) Appeal of troubled performer designation and petition for removal of troubled performer designation. A PHA may take any of the following actions: (1) Appeal its troubled performer designation (including Capital Fund program troubled performer designation); (2) Appeal its final overall PHAS score; (3) Petition for removal of troubled performer designation; [[Page 254]] (4) Appeal any refusal of a petition to remove troubled performer designation; and (5) Appeal actions under Sec. 902.66. (b) Appeal of PHAS score. (1) If a PHA believes that an objectively verifiable and material error(s) exists in any of the scores for its PHAS indicators, which, if corrected, will result in a significant change in the PHA's PHAS score and its designation (i.e., as troubled performer, substandard performer, standard performer, or high performer), the PHA may appeal its PHAS score in accordance with the procedures of paragraphs (c), (d), and (e) of this section. A significant change in a PHAS score is a change that would cause the PHA's PHAS score to increase, resulting in a higher PHAS designation for the PHA (i.e., from troubled performer to substandard performer or standard performer, or from standard performer to high performer). (2) A PHA may not appeal its PHAS score, physical condition score, or both, based on the subsequent correction of deficiencies identified as a result of a project's physical inspection or the denial of a technical review request. (3) A PHA may not appeal its PHAS score, Capital Fund program score, or both, based on the fact that it did not submit its Capital Fund program information to eLOCCS by the submission due date. (c) Appeal and petition procedures. (1) To appeal a troubled performer designation or a final overall PHAS score, a PHA must submit a request in writing to the Deputy Assistant Secretary of the Real Estate Assessment Center, which must be received by HUD no later than 30 days following the issuance of the overall PHAS score to the PHA. To petition the removal of a troubled performer designation, a PHA must submit its request in writing to the Deputy Assistant Secretary of the Real Estate Assessment Center. (2) To appeal the denial of a petition to remove a troubled performer designation, a PHA must submit a written request to the Deputy Assistant Secretary of the Real Estate Assessment Center, which must be received by HUD no later than 30 days after HUD's decision to refuse to remove the PHA's troubled performer designation. (3) To appeal the petition for the removal of a troubled performer designation, or appeal the denial of a petition to remove a troubled performer designation, a PHA shall submit its request in writing to the Deputy Assistant Secretary of the Real Estate Assessment Center. (4) An appeal of a troubled performer designation, the petition for removal of a troubled performer designation, or the appeal of a refusal of a petition to remove a troubled performer designation must include the PHA's supporting documentation and reasons for the appeal or petition. An appeal of a PHAS score must be accompanied by the PHA's evidence that a material error occurred. An appeal or petition submitted to HUD without supporting documentation will not be considered and will be returned to the PHA. (d) Denial, withholding, or rescission. A PHA that disagrees with the basis for denial, withholding, or rescission of its designation under Sec. 902.66 may make a written request for reinstatement within 30 days of notification by HUD of the denial or rescission of the designation to the Assistant Secretary, and the request shall include reasons for the reinstatement. (e) Consideration of petitions and appeals. (1) Consideration of a petition or the appeal of a final overall PHAS score, of a troubled performer designation, or of a petition to remove troubled performer designation. Upon receipt of such an appeal or a petition from a PHA, HUD will evaluate the appeal and its merits for purposes of determining whether a reassessment of the PHA is warranted. HUD will review the PHA's file and the evidence submitted by the PHA to determine whether an error occurred. (2) Consideration of an appeal of refusal to remove a troubled performer designation. Upon receipt of an appeal of refusal to remove a troubled performer designation, HUD will evaluate the appeal and its merits for the purposes of determining whether a reassessment of the PHA is warranted. The HUD staff initially evaluating an appeal of refusal to remove a troubled performer designation will not be the [[Page 255]] same HUD staff who evaluated the PHA's petition to remove the troubled performer designation. The Assistant Secretary will render the final determination of such an appeal. (f) Notice and finality of decisions. (1) If HUD determines that one or more objectively verifiable and material error has occurred, HUD will undertake a new inspection of the project, arrange for audit services, adjust the PHA's score, or perform other reexamination of the financial, management, or Capital Fund program information, as appropriate in light of the nature of the error that occurred. A new score will be issued and an appropriate performance designation made by HUD. HUD's decision on appeal of a PHAS score, issuance of a troubled performer designation, or refusal to remove a troubled performer designation will be final agency action. No reconsideration will be given by HUD of such decisions. (2) HUD will issue a written decision on all appeals and petitions made under this section. Subpart G_PHAS Incentives and Remedies Sec. 902.71 Incentives for high performers. (a) Incentives for high performer PHAs. A PHA that is designated a high performer will be eligible for the following incentives, and such other incentives that HUD may determine appropriate and permissible under program statutes or regulations. (1) Relief from specific HUD requirements. A PHA that is designated a high performer will be relieved of specific HUD requirements (e.g., will receive fewer reviews and less monitoring), effective upon notification of a high performer designation. (2) Public recognition. High performer PHAs and RMCs that receive a score of at least 60 percent of the points available for the physical condition, financial condition, and management operations indicators, and at least 50 percent of the points available for the Capital Fund indicator, and achieve an overall PHAS score of 90 percent or greater of the total available points under PHAS shall be designated a high performer and will receive a Certificate of Commendation from HUD, as well as special public recognition, as provided by the field office. (3) Bonus points in funding competitions. A high performer PHA may be eligible for bonus points in HUD's funding competitions, where such bonus points are not restricted by statute or regulation governing the funding program and are provided in the relevant notice of funding availability. (b) Compliance with applicable federal laws and regulations. Relief from any standard procedural requirement that may be provided under this section does not mean that a PHA is relieved from compliance with the provisions of federal law and regulations or other handbook requirements. For example, although a high performer or standard performer may be relieved of requirements for prior HUD approval for certain types of contracts for services, the PHA must still comply with all other federal and state requirements that remain in effect, such as those for competitive bidding or competitive negotiation (see 2 CFR 200.319, as applicable). (c) Audits and reviews not relieved by designation. A PHA designated as a high performer or standard performer remains subject to: (1) Regular independent auditor audits; (2) Office of Inspector General audits or investigations as circumstances may warrant; and (3) Reviews identified by the regional or field office in its current Risk Assessment of PHAs and projects. [76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 902.73 PHAs with deficiencies. (a) Oversight and action. Standard and substandard performers will be referred to the field office for appropriate oversight and action. (1) A standard performer that receives a total score of at least 60 percent shall be required to correct the deficiencies in performance within the time period for correction, as stated in Sec. 902.73(c). If the PHA fails to correct the deficiencies, HUD may either require the PHA to enter into a Corrective Action Plan, or HUD may take other action, as appropriate. [[Page 256]] (2) A substandard performer, i.e., a PHA that achieves a PHAS score of at least 60 percent and achieves a score of less than 60 percent of the total points available under one or more of the physical condition, management operations, or financial condition PHAS indicators, shall be required to correct the deficiencies in performance within the time period for correction. If the PHA fails to correct the deficiencies, HUD may require the PHA to enter into a Corrective Action Plan, or take other action, as appropriate. (3) A PHA with a project(s) that receives less than 60 percent of the points available for the physical condition, management operations, or financial condition PHAS indicators, or less than 50 percent of the points available for the capital fund indicator, shall be required to correct the deficiencies in performance within the time period for correction, as stated in Sec. 902.73(b). If the PHA fails to correct the deficiencies within the time period allowed, HUD may either require the PHA to enter into a Corrective Action Plan, or take other action, as appropriate. (b) Correction of deficiencies. (1) Time period for correction. After a PHA's (or DF-RMC's) receipt of its final overall PHAS score and designation as: A standard performer, within the range described in Sec. 902.73(a)(1); or substandard performer, within the range described in Sec. 902.73(a)(2), or, in the case of an RMC, after notification of its score from a PHA, a PHA or RMC shall correct any deficiency indicated in its assessment within 90 days, or within such period as provided in the HUD-executed Corrective Action Plan, if required. (2) Notification and report to regional or field office. A PHA shall notify the regional or field office of its action to correct a deficiency. A PHA shall also forward to the regional or field office an RMC's report of its action to correct a deficiency. A DF-RMC shall forward directly to the regional or field office its report of its action to correct a deficiency. (c) Failure to correct deficiencies. (1) If a PHA (or DF-RMC or RMC) fails to correct deficiencies within the time period noted in paragraph (b) of this section, or to correct deficiencies within the time specified in a Corrective Action Plan, or within such extensions as may be granted by HUD, the field office will notify the PHA of its noncompliance. (2) The PHA (or DF-RMC or RMC) will provide the field office with its reasons for lack of progress in negotiating, executing, or carrying out the Corrective Action Plan, within 30 days of the PHA's receipt of the noncompliance notification. HUD will advise the PHA as to the acceptability of its reasons for lack of progress. (3) If HUD finds the PHA's (or DF-RMC or RMC's) reasons for lack of progress unacceptable, HUD will notify the PHA (or DF-RMC or RMC) that it will take such actions as it may determine appropriate in accordance with the provisions of the 1937 Act and other statutes, the ACC, this part, and other HUD regulations, including, but not limited to, the remedies available for substantial default. Sec. 902.75 Troubled performers. (a) General. Upon a PHA's designation as a troubled performer, in accordance with the requirements of section 6(j)(2)(B) of the Act (42 U.S.C. 1437d(j)(2)(B)) and in accordance with this part, HUD must notify the PHA and shall refer each troubled performer PHA to the PHA's field office, or other designated office(s) at HUD, for remedial action, oversight, and monitoring. The actions to be taken by HUD and the PHA will include statutorily required actions, and such other actions as may be determined appropriate by HUD. (b) Memorandum of agreement (MOA). Within 30 days of notification of a PHA's designation as a troubled performer, HUD will initiate activities to negotiate and develop an MOA. An MOA is required for a troubled performer. The final MOA is a binding contractual agreement between HUD and a PHA. The scope of the MOA may vary depending upon the extent of the problems present in the PHA. It shall include, but not be limited to: (1) Baseline data, which should be data without adjustments or weighting but may be the PHA's score in each of [[Page 257]] the PHAS indicators or subindicators identified as a deficiency; (2) Performance targets for such periods specified by HUD (e.g., annual, semiannual, quarterly, monthly), which may be the attainment of a higher score within an indicator or subindicator that is a problem, or the description of a goal to be achieved; (3) Strategies to be used by the PHA in achieving the performance targets within the time period of the MOA, including the identification of the party responsible for the completion of each task and for reporting progress; (4) Technical assistance to the PHA provided or facilitated by HUD; for example, the training of PHA employees in specific management areas or assistance in the resolution of outstanding HUD monitoring findings; (5) The PHA's commitment to take all actions within its control to achieve the targets; (6) Incentives for meeting such targets, such as the removal of a troubled performer designation or troubled with respect to the program for assistance from the Capital Fund program under section 9(d) of the Act (42 U.S.C. 1437g(d)) and HUD recognition for the most-improved PHAs; (7) The consequences of failing to meet the targets, which include, but are not limited to, the interventions stated in 24 CFR part 907 and in section 6(j)(3) of the Act (42 U.S.C. 1437d(j)(3)); and (8) A description of the involvement of local public and private entities, including PHA resident leaders, in carrying out the agreement and rectifying the PHA's problems. A PHA shall have primary responsibility for obtaining active local public and private entity participation, including the involvement of public housing resident leaders, in assisting PHA improvement efforts. Local public and private entity participation should be premised upon the participant's knowledge of the PHA, ability to contribute technical expertise with regard to the PHA's specific problem areas, and authority to make preliminary commitments of support, financial or otherwise. (c) PHA review of MOA. The PHA will have 10 days to review the MOA. During this 10-day period, the PHA shall resolve any claimed discrepancies in the MOA with HUD, and discuss any recommended changes and target dates for improvement to be incorporated in the final MOA. Unless the time period is extended by HUD, the MOA is to be executed 15 days following issuance of the draft MOA. (d) Maximum recovery period. (1) Expiration of the first-year improvement period. Upon the expiration of the one-year period that started on the date on which the PHA receives initial notice of a troubled performer designation, the PHA shall, by the next PHAS assessment that is at least 12 months after the initial notice of the troubled performer designation, improve its performance by at least 50 percent of the difference between the initial PHAS assessment score that led to the troubled performer status and the score necessary to remove the PHA's designation as a troubled performer. (2) Expiration of 2-year recovery period. Upon the expiration of the 2-year period that started on the date on which the PHA received the initial notice of a troubled performer designation, the PHA shall, by the next PHAS assessment that is at least 24 months after the initial notice of the troubled performer designation, improve its performance and achieve an overall PHAS score of at least 60 percent of the total points available. (e) Parties to the MOA. An MOA shall be executed by: (1) The PHA Board Chairperson (supported by a Board resolution), or a receiver (pursuant to a court-ordered receivership agreement, if applicable) or other AME acting in lieu of the PHA Board; (2) The PHA Executive Director, or a designated receiver (pursuant to a court-ordered receivership agreement, if applicable), or other AME- designated Chief Executive Officer; and (3) The field office (f) Involvement of resident leadership in the MOA. HUD encourages the inclusion of the resident leadership in the execution of the MOA. (g) Failure to execute MOA or make substantial improvement under MOA. (1) If a troubled performer PHA fails or refuses to execute an MOA within the period provided in paragraph (c) of this [[Page 258]] section, or a troubled performer PHA operating under an executed MOA does not show a substantial improvement, as provided in paragraph (d) of this section, toward a passing PHAS score following the issuance of the failing PHAS score by HUD, the field office shall refer the PHA to the Assistant Secretary to determine such remedial actions, consistent with the provisions of the ACC and other HUD regulations, including, but not limited to, remedies available for substantial default. (2) For purposes of paragraph (g) of this section, substantial improvement is defined as the improvement required by paragraph (d) of this section. The maximum period of time for remaining in troubled performer status before being referred to the Assistant Secretary is 2 years after the initial notification of the troubled performer designation. Therefore, the PHA must make substantial improvement in each year of this 2-year period. (3) The following example illustrates the provisions of paragraph (g)(1) of this section: Example: A PHA receives a score of 50 points on the physical condition, management operations, or financial condition PHAS indicators; 60 points is a passing score. Upon the expiration of the one-year period that started on the date on which the PHA received the initial notification of the troubled performer designation, the PHA must achieve at least 55 points (50 percent of the 10 points necessary to achieve a passing score of 60 points) to continue recovery efforts. In the second year, the PHA must achieve a minimum score of 60 points (a passing score). If, in the first year that started on the date on which the PHA received the initial notification of the troubled designation, the PHA fails to achieve the 5-point increase, or if the PHA achieves the 5 point increase within the first year that started on the date on which the PHA received the initial notification of the troubled designation, but fails to achieve the minimum passing score of 60 points after the second year after the initial notification, HUD will notify the PHA that it will take such actions as it may determine appropriate in accordance with the provisions of the ACC and other HUD regulations, including, but not limited to, the remedies available for substantial default. (h) Audit review. For a PHA designated as a troubled performer, HUD may perform an audit review and may, at its discretion, select the audit firm that will perform the audit of the PHA; and HUD may, at its discretion, serve as the audit committee for the audit in question. (i) Continuation of services to residents. To the extent feasible, while a PHA is in a troubled performer status, all services to residents will continue uninterrupted. Sec. 902.79 Verification and records. All project and PHA certifications, year-end financial information, and supporting documentation are subject to HUD verification at any time, including review by an independent auditor. All PHAs must retain supporting documents for any certifications and for asset management reviews for at least 3 years. Failure to maintain and provide supporting documentation for a period of 3 years for any indicator(s), subindicator(s), or other methods used to assess performance shall result in a score of zero for the indicator(s) or subindicator(s), and a lower overall PHAS score for the applicable assessment period. Sec. 902.81 Resident petitions for remedial action. Residents of a PHA designated as troubled pursuant to section 6(j)(2)(A) of the Act (42 U.S.C. 1437d(j)(2)(A)) may petition HUD in writing to take one or more of the actions referred to in section 6(j)(3)(A) of the Act (42 U.S.C. 1437d(j)(3)(A)). HUD will consider any petition from a group of residents totaling at least 20 percent of the PHA's residents, or from an organization or organizations of residents whose membership equals at least 20 percent of the PHA's residents. HUD shall respond to such petitions in a timely manner with a written description of the actions, if any, HUD plans to take and, where applicable, the reasons why such actions differ from the course proposed by the residents. Nothing in this section shall limit HUD's discretion to determine whether a substantial default has occurred or to select the appropriate intervention upon such determination. [[Page 259]] Sec. 902.83 Sanctions for troubled performer PHAs. (a) If a troubled performer PHA fails to make substantial improvement, as set forth in Sec. 902.75(d), HUD shall: (1) In the case of a troubled performer PHA with 1,250 or more units, declare substantial default in accordance with Sec. 907.3(b)(3) of this chapter and petition for the appointment of a receiver pursuant to section 6(j)(3)(A)(ii) of the Act (42 U.S.C. 1437d(j)(3)(A)(ii)); or (2) In the case of a troubled performer PHA with fewer than 1,250 units, declare substantial default in accordance with Sec. 907.3(b)(3) of this chapter and either petition for the appointment of a receiver pursuant to section 6(j)(3)(A)(ii) of the Act (42 U.S.C. 1437d(j)(3)(A)(ii)), or take possession of the PHA (including all or part of any project or program of the PHA) pursuant to section 6(j)(3)(A)(iv) of the Act (42 U.S.C. 1437d(j)(3)(A)(iv)), and appoint, on a competitive or noncompetitive basis, an individual or entity as an administrative receiver to assume the responsibilities of HUD for the administration of all or part of the PHA (including all or part of any project or program of the PHA). (3) In the case of substantial default by a troubled performer PHA, nothing in this section shall be construed to limit the courses of action available to HUD under this part, 24 CFR part 907, or section 6(j)(3)(A) of the Act (42 U.S.C. 1437d(j)(3)(A)) for any other substantial default by a PHA. (b) If a troubled performer PHA fails to execute or meet the requirements of an MOA in accordance with Sec. 902.75, other than as specified in paragraph (a) of this section, the PHA may be deemed to be in substantial default by HUD and any remedy available therefore may be invoked in the discretion of HUD. Subpart H_Assessment of Small Rural Public Housing Agencies Source: 88 FR 30501, May 11, 2023, unless otherwise noted. Sec. 902.101 Definition of small rural PHAs. (a) Definition. A PHA is a small rural PHA if it administers 550 or fewer combined public housing units and vouchers under section 8(o), and either: (1) Has a primary administrative building as determined with a physical address in a rural area as described in 12 CFR 1026.35(b)(2)(iv)(A); or (2) More than 50 percent of its combined public housing units and voucher units under section 8(o) are in rural areas as described in 12 CFR 1026.35(b)(2)(iv)(A). (b) Determination. (1) HUD will make the initial determination of PHAs that qualify as small rural as defined in this section no later than October 30, 2023. (2) HUD will determine if a PHA qualifies as a small rural PHA under paragraph (a) of this section every 3 years. (c) Appeals. A PHA may challenge HUD's determination concerning whether the PHA qualifies as small rural PHA by presenting an objectively verifiable material error which resulted in the incorrect determination, or by presenting information showing that the status of the PHA has changed to justify a redetermination. Sec. 902.103 Public housing assessment of small rural PHAs. (a) Small rural public housing assessment. The public housing program of small rural PHAs as defined in Sec. 902.101 shall be assessed and scored based only on the physical condition of their public housing properties in accordance with 24 CFR part 5, subpart G, except that properties that meet the definition specified in Sec. 902.44(b) of physical condition and neighborhood environment shall receive one additional point for physical condition and neighborhood environment. Such agencies shall not be subject to PHAS except as noted below. (b) Triennial assessment. Public housing programs operated by small rural PHAs will be assessed no more than once every three years, except that a small rural PHA shall be subject to annual inspection if it is designated by the Secretary as troubled as defined in Sec. 902.105. [[Page 260]] (c) Initial public housing assessment. (1) For PHAs subject to small PHA deregulation, the first assessment and inspections will be determined based on the PHA's next scheduled PHAS assessment (e.g., a higher performing PHA would receive the first inspection 3 years after the most recent PHAS assessment). (2) For PHAs not subject to small PHA deregulation, the first inspection is based on the PHA's overall weighted project physical condition indicator score (e.g., a PHA with a physical condition indicator score of 90 or greater would receive the first inspection three years after most recent PHAS assessment). Sec. 902.105 Troubled small rural PHAs. (a) Definition of troubled small rural PHA. A small rural PHA will be determined to be troubled under the public housing program if the weighted average score of all property inspections is below 70 percent of the total available points, or if a small rural PHA has a weighted average score of between 70 and 80 percent of the total available points and has at least one property that receives fewer than 70 percent of the total available points. (b) Referral to the local field office. Upon a PHA's designation as a troubled performer HUD must notify the PHA and shall refer the troubled performer PHA to the PHA's field office, or other designated office(s) at HUD, for remedial action, oversight, and monitoring. The actions to be taken by HUD and the PHA will include statutorily required actions, and such other actions as may be determined appropriate by HUD. (c) Corrective Action Agreement (CAA). Within 30 days of notification of a PHA's designation as a troubled performer, HUD will initiate activities to negotiate and develop a CAA. A CAA is required for a troubled performer. The final CAA is a binding contractual agreement between HUD and a PHA. The scope of the CAA may vary depending upon the extent of the problems present in the PHA. The term of the CAA will not exceed one year and is subject to renewal at the discretion of HUD if HUD determines that the circumstances requiring the CAA still exist at the expiration of the term of the CAA based on the annual assessment frequency as included in Sec. 902.103. It shall include, but not be limited to: (1) Baseline data, which should be data without adjustments or weighting but may be the PHA's score identified as a deficiency; (2) Performance targets for such periods specified by HUD (e.g., annual, semiannual, quarterly, monthly), which may be the attainment of a higher score or the description of a goal to be achieved; however, safety, health, and environmental performance targets and deadlines otherwise specified by regulation, including the lead safety regulations at 24 CFR part 35, are not superseded by the CAA performance targets; (3) Strategies to be used by the PHA in achieving the performance targets within the time period of the CAA, including the identification of the party responsible for the completion of each task and for reporting progress; (4) Technical assistance to the PHA provided or facilitated by HUD; (5) The PHA's commitment to take all actions within its control to achieve the targets; (6) The consequences of failing to meet the targets; and (7) A description of the involvement of local public and private entities, including PHA resident leaders, in carrying out the agreement and rectifying the PHA's problems. A PHA shall have primary responsibility for obtaining active local public and private entity participation, including the involvement of public housing resident leaders, in assisting PHA improvement efforts. Local public and private entity participation should be premised upon the participant's knowledge of the PHA, ability to contribute technical expertise with regard to the PHA's specific problem areas, and authority to make preliminary commitments of support, financial or otherwise. (d) PHA review of the CAA. The PHA will have 10 days to review the CAA. During this 10-day period, the PHA shall resolve any claimed discrepancies in the CAA with HUD and discuss any recommended changes and target dates for improvement to be incorporated in the final CAA. Unless the time period [[Page 261]] is extended by HUD, the CAA is to be executed 30 days following issuance of the draft CAA. (e) Maximum recovery period. Upon the expiration of the one-year period that started on the date on which the PHA receives initial notice of a troubled performer designation, the PHA shall improve its performance in order to no longer be considered troubled under the assessment. (f) Parties to the CAA. A CAA shall be executed by: (1) The PHA Board Chairperson (supported by a Board resolution), or a receiver (pursuant to a court-ordered receivership agreement, if applicable) or other AME acting in lieu of the PHA Board; (2) The PHA Executive Director, or a designated receiver (pursuant to a court-ordered receivership agreement, if applicable), or other AME- designated Chief Executive Officer; and (3) The field office. (g) Involvement of resident leadership in the CAA. HUD encourages the inclusion of the resident leadership in the execution of the CAA. (h) Failure to execute CAA or make substantial improvement under CAA. If a troubled performer PHA fails or refuses to execute an CAA within the period provided in paragraph (d) of this section, or a troubled performer PHA operating under an executed CAA does not achieve a passing physical inspection score, as provided in paragraph (e) of this section, the field office shall refer the PHA to the Assistant Secretary to determine such remedial actions, consistent with the provisions of the ACC and other HUD regulations, including, but not limited to, remedies available for substantial default. (i) Continuation of services to residents. To the extent feasible, while a PHA is in a troubled performer status, all services to residents will continue uninterrupted. Sec. 902.107 Withholding, denying, and rescinding troubled designation. (a) Withholding designation. In exceptional circumstances, even though a PHA has satisfied the requirements for high performer or non- troubled designations, HUD may conduct any review as it may determine necessary, and may deny or rescind incentives or high performer designation or non-troubled performer designation, in the case of a PHA that: (1) Is operating under a special agreement with HUD (e.g., a civil rights Conciliation or Voluntary Compliance Agreement); (2) Is involved in litigation that bears directly upon the physical performance of a PHA; (3) Is operating under a court order; (4) Demonstrates substantial evidence of fraud or misconduct, including evidence that the PHA's certifications, submitted in accordance with this part, are not supported by the facts, as evidenced by such sources as a HUD review, routine reports, an Office of Inspector General investigation/audit, an independent auditor's audit, or an investigation by any appropriate legal authority; or (5) Demonstrates substantial noncompliance in one or more areas of a PHA's required compliance with applicable laws and regulations, including areas not assessed under the small rural assessment. Areas of substantial noncompliance include, but are not limited to, noncompliance with civil rights, nondiscrimination and fair housing laws and regulations, or the ACC. Substantial noncompliance casts doubt on the capacity of a PHA to preserve and protect its public housing projects and operate them consistent with Federal laws and regulations. (b) High performer and standard designations. If a high performer designation is denied or rescinded, the PHA shall be designated either a non-troubled performer, or troubled performer, depending on the nature and seriousness of the matter or matters constituting the basis for HUD's action. If a non-troubled performer designation is denied or rescinded, the PHA shall be designated as a troubled performer. (c) Effect on score. The denial or rescission of a designation of high performer or non-troubled performer shall not affect the PHA's numerical small rural assessment score, except where the denial or rescission is under paragraph (a)(4) of this section. [[Page 262]] Sec. 902.109 Right to petition and appeal troubled designation. (a) Appeal of troubled performer designation and petition for removal of troubled performer designation. A PHA may take any of the following actions: (1) Appeal its troubled performer designation; (2) Petition for removal of troubled performer designation; and (3) Appeal any refusal of a petition to remove troubled performer designation. (b) Appeal of small rural Assessment score. (1) If a PHA believes that an objectively verifiable and material error(s) exists in its small rural assessment score, which, if corrected, will result in a significant change in the PHA's score and its designation, the PHA may appeal its score in accordance with the procedures of paragraphs (c) through (e) of this section. A significant change in a score is a change that would cause the PHA's score to increase, resulting in a higher designation for the PHA (i.e., from troubled performer to non-troubled performer, or from non-troubled to high performer). (2) A PHA may not appeal its score or designation based on the subsequent correction of deficiencies identified as a result of a project's physical inspection. (c) Appeal and petition procedures. (1) To appeal a troubled performer designation or petition for the removal of a troubled performer designation, a PHA must submit a request in writing to the Deputy Assistant Secretary of the Real Estate Assessment Center, which must be received by HUD no later than 30 days following the issuance of the score to the PHA. (2) To appeal the denial of a petition to remove a troubled performer designation, a PHA must submit a written request to the Deputy Assistant Secretary of the Real Estate Assessment Center, which must be received by HUD no later than 30 days after HUD's decision to refuse to remove the PHA's troubled performer designation. (3) An appeal of a troubled performer designation or an appeal of the denial of a petition for removal of a troubled performer designation must include the PHA's supporting documentation and reasons for the appeal or petition. An appeal of an assessment score must be accompanied by the PHA's evidence that a material error occurred. An appeal or petition submitted to HUD without supporting documentation will not be considered and will be returned to the PHA. (d) Denial, withholding, or rescission. A PHA that disagrees with the basis for denial, withholding, or rescission of its designation under Sec. 902.66 may make a written request for reinstatement within 30 days of notification by HUD of the denial or rescission of the designation to the Assistant Secretary, and the request shall include reasons for the reinstatement. (e) Consideration of petitions and appeals. (1) Consideration of a petition or the appeal of a final overall assessment score, of a troubled performer designation, or of a petition to remove troubled performer designation. Upon receipt of such an appeal or a petition from a PHA, HUD will evaluate the appeal and its merits for purposes of determining whether a reassessment of the PHA is warranted. HUD will review the PHA's file and the evidence submitted by the PHA to determine whether an error occurred. (2) Consideration of an appeal of refusal to remove a troubled performer designation. Upon receipt of an appeal of refusal to remove a troubled performer designation, HUD will evaluate the appeal and its merits for the purposes of determining whether a reassessment of the PHA is warranted. The HUD staff initially evaluating an appeal of refusal to remove a troubled performer designation will not be the same HUD staff who evaluated the PHA's petition to remove the troubled performer designation. The Assistant Secretary will render the final determination of such an appeal. (f) Notice and finality of decisions. (1) If HUD determines that one or more objectively verifiable and material error has occurred, HUD will undertake a new inspection of the project, adjust the PHA's score, or perform another reexamination of information, as appropriate in light of the nature of the error that occurred. A new score will be issued and an appropriate performance designation made by HUD. HUD's [[Page 263]] decision on appeal of an assessment score, issuance of a troubled performer designation, or refusal to remove a troubled performer designation will be final agency action. No reconsideration will be given by HUD of such decisions. (2) HUD will issue a written decision on all appeals and petitions made under this section. Sec. 902.111 Sanctions for troubled small rural PHAs. The sanctions for small rural PHAs with troubled public housing programs that remain troubled as required by Sec. 902.108 will be the same as those sanctions for PHAs assessed under PHAS as described in Sec. 902.83. Sec. 902.113 Incentives for small rural PHAs high-performers. (a) High performer. PHAs with a weighted average score for all inspections of at least 90 percent of all available points will be considered high performers and will be eligible for benefits as described in Sec. 902.113(b) and Sec. 905.400(l) of this chapter. (b) Incentives. High performer small rural PHAs under the public housing program will be eligible for the same incentives as high performer PHAs under PHAS as described in Sec. 902.71. PART 903_PUBLIC HOUSING AGENCY PLANS--Table of Contents Sec. Subpart A_Deconcentration of Poverty 903.1 What is the purpose of this subpart? 903.2 With respect to admissions, what must a PHA do to deconcentrate poverty in its developments? Subpart B_PHA Plans and Fair Housing Requirements 903.3 What is the purpose of this subpart? 903.4 What are the public housing agency plans? 903.5 When must a PHA submit the plans to HUD? 903.6 What information must a PHA provide in the 5-Year Plan? 903.7 What information must a PHA provide in the Annual Plan? 903.9 May HUD request additional information in the Annual Plan of a troubled PHA? 903.11 Are certain PHAs eligible to submit a streamlined Annual Plan? 903.12 What are the streamlined Annual Plan requirements for small PHAs? 903.13 What is a Resident Advisory Board and what is its role in development of the Annual Plan? 903.15 What is the relationship of the public housing agency plans to the Consolidated Plan and a PHA's Fair Housing Requirements? 903.17 What is the process for obtaining public comment on the plans? 903.19 When is the 5-Year Plan or Annual Plan ready for submission to HUD? 903.21 May the PHA amend or modify a plan? 903.23 What is the process by which HUD reviews, approves, or disapproves an Annual Plan? 903.25 How does HUD ensure PHA compliance with its plans? Authority: 42 U.S.C. 1437c; 42 U.S.C. 1437c-1; Pub. L. 110-289; 42 U.S.C. 3535d. Source: 65 FR 81222, Dec. 22, 2000, unless otherwise noted. Subpart A_Deconcentration of Poverty Sec. 903.1 What is the purpose of this subpart? The purpose of this subpart is to specify the process which a Public Housing Agency, as part of its annual planning process and development of an admissions policy, must follow in order to develop and apply a policy that provides for deconcentration of poverty and income mixing in certain public housing developments. [80 FR 42368, July 16, 2015] Sec. 903.2 With respect to admissions, what must a PHA do to deconcentrate poverty in its developments? (a) General. The PHA's admission policy includes the PHA's policy designed to promote deconcentration of poverty and income mixing in accordance with section 16(a)(3)(B) of the 1937 Act (42 U.S.C. 1437n), which is submitted to HUD as part of the PHA Annual Plan process. Deconcentration of poverty and income mixing is promoted by a policy that provides for bringing higher income tenants into lower income developments and lower income tenants into higher income developments. [[Page 264]] (1) The provisions of this section apply to applicants to and residents seeking voluntary transfers within covered public housing developments (``covered developments'' as specified in paragraph (b) of this section). (2) The statutory requirement to design a policy to provide for deconcentration and income mixing is not to be construed to impose or require any specific income or racial quotas for any development or developments. (b) Applicability of deconcentration of poverty and income mixing requirements--(1) Developments subject to deconcentration of poverty and income mixing requirements. The deconcentration requirements of this subpart apply to general occupancy, family public housing developments, excluding those developments listed in paragraph (b)(2) of this section. Developments to which this subpart is applicable are referred to as ``covered developments''. (2) Developments not subject to deconcentration of poverty and income mixing requirements. This subpart does not apply to the following public housing developments: (i) Public housing developments operated by a PHA with fewer than 100 public housing units; (ii) Public housing developments operated by a PHA which house only elderly persons or persons with disabilities, or both; (iii) Public housing developments operated by a PHA which consist of only one general occupancy, family public housing development; (iv) Public housing developments approved for demolition or for conversion to tenant-based assistance; and (v) Public housing developments which include public housing units operated in accordance with a HUD-approved mixed-finance plan using HOPE VI or public housing funds awarded before the effective date of this rule, provided that the PHA certifies (and includes reasons for the certification) as part of its PHA Plan (which may be accomplished either in the annual Plan submission or as a significant amendment to its PHA Plan) that exemption from the regulation is necessary to honor an existing contractual agreement or be consistent with a mixed finance plan, including provisions regarding the incomes of public housing residents to be admitted to that development, which has been developed in consultation with residents with rights to live at the affected development and other interested persons. (c) Deconcentration of poverty and income mixing--(1) Steps for implementation. To implement the statutory requirement to deconcentrate poverty and provide for income mixing in covered public housing developments, a PHA must comply with the following steps: (i) Step 1. A PHA shall determine the average income of all families residing in all the PHA's covered developments. A PHA may use median income, instead of average income, provided that the PHA includes a written explanation in its PHA Annual Plan justifying use of median income in the PHA's Annual Plan. (ii) Step 2. A PHA shall determine the average income of all families residing in each covered development. In determining average income for each development, a PHA has the option of adjusting its income analysis for unit size in accordance with procedures prescribed by HUD. (iii) Step 3. A PHA shall determine whether each of its covered developments falls above, within or below the Established Income Range. The Established Income Range is from 85 to 115 percent (inclusive) of the average family income (the PHA-wide average income for covered developments as defined in Step 1), except that the upper limit shall never be less than the income at which a family would be defined as an extremely low income family under 24 CFR 5.603(b). (iv) Step 4. A PHA with covered developments having average incomes outside the Established Income Range may explain or justify the income profile for these developments as being consistent with and furthering two sets of goals: the goals of deconcentration of poverty and income mixing as specified by the statute (bringing higher income tenants into lower income developments and vice versa); and the local goals and strategies contained in the [[Page 265]] PHA Annual Plan. Elements of explanations or justifications that may satisfy these requirements may include, but shall not be limited to the following: (A) The covered development or developments are subject to consent decrees or other resident selection and admission plans mandated by court action; (B) The covered development or developments are part of PHA's programs, strategies or activities specifically authorized by statute, such as mixed-income or mixed-finance developments, homeownership programs, self-sufficiency strategies, or other strategies designed to deconcentrate poverty, promote income mixing in public housing, increase the incomes of public housing residents, or the income mix is otherwise subject to individual review and approval by HUD; (C) The covered development's or developments' size, location, and/ or configuration promote income deconcentration, such as scattered site or small developments; (D) The income characteristics of the covered development or developments are sufficiently explained by other circumstances. (v) Step 5. Where the income profile for a covered development is not explained or justified in the PHA Annual Plan submission, the PHA shall include in its admission policy its specific policy to provide for deconcentration of poverty and income mixing in applicable covered developments. Depending on local circumstances, a PHA's deconcentration policy (which may be undertaken in conjunction with other efforts such as efforts to increase self-sufficiency or current residents) may include but is not limited to providing for one or more of the following actions: (A) Providing incentives designed to encourage families with incomes below the Established Income Range to accept units in developments with incomes above the Established Income Range, or vice versa, including rent incentives, affirmative marketing plans, or added amenities; (B) Targeting investment and capital improvements toward developments with an average income below the Established Income Range to encourage applicant families whose income is above the Established Income Range to accept units in those developments; (C) Establishing a preference for admission of working families in developments below the Established Income Range; (D) Skipping a family on the waiting list to reach another family in an effort to further the goals of the PHA's deconcentration policy; (E) Providing such other strategies as permitted by statute and determined by the PHA in consultation with the residents and the community, through the PHA Annual Plan process, to be responsive to the local context and the PHA's strategic objectives. (2) Determination of compliance with deconcentration requirement. HUD shall consider a PHA to be in compliance with this subpart if: (i) The PHA's income analysis shows that the PHA has no general occupancy family developments to which the deconcentration requirements apply; that is, the average incomes of all covered developments are within the Established Income Range; (ii) The PHA has covered developments with average incomes above or below the Established Income Range and the PHA provides a sufficient explanation in its Annual Plan that supports that the income mix of such development or developments is consistent with and furthers the goal of deconcentration of poverty and income mixing and also the locally determined goals of the PHA's Annual and Five Year Plans, and the PHA therefore need not take further action to deconcentrate poverty and mix incomes; or (iii) The PHA's deconcentration policy provides specific strategies the PHA will take that can be expected to promote deconcentration of poverty and income mixing in developments with average incomes outside of the Established Income Range. (3) Right of return. If a PHA has provided that a family that resided in a covered public housing development has a right to admission to a public housing unit in that development after revitalization, the requirements of [[Page 266]] paragraph (c) of this section do not preclude fulfilling that commitment or a PHA's commitment to return a family to another development after revitalization. (4) Family's discretion to refuse a unit. A family has the sole discretion whether to accept an offer of a unit made under a PHA's deconcentration policy. The PHA may not take any adverse action toward any eligible family for choosing not to accept an offer of a unit under the PHA's deconcentration policy. In accordance with the PHA's established policies, the PHA may uniformly limit the number of offers received by applicants. (5) Relationship to income targeting requirement. Nothing in this section relieves a PHA of the obligation to meet the requirement to admit annually at least 40 percent families whose incomes are below 30 percent of area median income as provided by section 16(a)(2) of the 1937 Act, 42 U.S.C. 1437n(a)(2). (d) Relationship between poverty deconcentration and fair housing. The requirements for poverty deconcentration in paragraph (c) of this section and for fair housing in 24 CFR 903.15(d) arise under separate statutory authorities. [65 FR 81222, Dec. 22, 2000, as amended at 67 FR 51033, Aug. 6, 2002; 80 FR 42368, July 16, 2015] Subpart B_PHA Plans and Fair Housing Requirements Sec. 903.3 What is the purpose of this subpart? (a) This subpart specifies the requirements for PHA plans, required by section 5A of the United States Housing Act of 1937 (42 U.S.C. 1437c- 1) (the Act), as amended. (b) The purpose of the plans is to provide a strategic planning framework for PHA management operations and capital planning: (1) Local accountability; and (2) An easily identifiable source by which public housing residents, participants in the tenant-based assistance program, and other members of the public may locate basic PHA policies, rules and requirements concerning the PHA's operations, programs and services. (c) Title VII of the Housing and Economic Reform Act, Public Law 110-289, section 2702, amends 42 U.S.C. 1437c-1(b) to provide qualified PHAs an exemption from the requirement of section 5A of the Act to submit an annual PHA Plan. The term ``qualified PHA'' means a public housing agency that meets the following requirements: (1) The sum of the number of public housing dwelling units administered by the agency, and the number of vouchers under section 8(o) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)) administered by the agency, is 550 or fewer; and (2) The agency is not designated under section 42 U.S.C. 1437d(j)(2) as a troubled public housing agency, and does not have a failing score under SEMAP during the prior 12 months. [78 FR 63770, Oct. 24, 2013] Sec. 903.4 What are the public housing agency plans? (a) Types of plans. There are two public housing agency plans. They are: (1) The 5-Year Plan (the 5-Year Plan) that a public housing agency (PHA) must submit to HUD once every five PHA fiscal years. The 5-Year Plan covers the five PHA fiscal years immediately following the date on which the 5-Year Plan is due to HUD; and (2) The Annual Plan (Annual Plan) that the PHA must submit to HUD for each fiscal year immediately following the date on which the Annual Plan is due to HUD and for which the PHA receives: (i) Section 8 tenant-based assistance (under section 8(o) of the U.S. Housing Act of 1937, 42 U.S.C. 1437f(o)) (tenant-based assistance); or (ii) Amounts from the public housing operating fund or capital fund (under section 9 of the U.S. Housing Act of 1937 (42 U.S.C. 1437g) (public housing)). (b) Format. HUD may prescribe the format of submission (including electronic format submission) of the plans. HUD also may prescribe the format of attachments to the plans and documents related to the plan that the PHA does not submit but may be required to make available locally. PHAs will receive appropriate notice of any prescribed format. [[Page 267]] (c) Applicability. The requirements of this subpart only apply to a PHA that receives the type of assistance described in paragraph (a) of this section. (d) Authority for waivers. In addition to the waiver authority provided in Sec. 5.110 of this title, the Secretary may, subject to statutory limitations, waive any provision of this title on a program- wide basis, and delegate this authority in accordance with section 106 of the Department of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3535(q)) where the Secretary determines that such waiver is necessary for the effective implementation of this part. Sec. 903.5 When must a PHA submit the plans to HUD? (a) 5-Year Plan. (1) The first PHA fiscal year that is covered by the requirements of this part as amended on December 22, 2000, is the PHA fiscal year that begins October 2001. This 5-Year Plan submitted by a PHA must be submitted for the 5-year period beginning October 1, 2001. (2) For all PHAs, the first 5-Year Plans are due 75 days before the commencement of their fiscal year. (3) For all PHAs, after submission of their first 5-Year Plan, all subsequent 5-Year Plans must be submitted once every 5 PHA fiscal years, no later than 75 days before the commencement of the PHA's fiscal year. However, HUD may require that half of all PHAs with less than 250 public housing units submit their 5-Year Plan one fiscal year in advance (in the fourth PHA fiscal year rather than the fifth PHA fiscal year). (4) PHAs may choose to update their 5-Year Plans every year as good management practice and must update their 5-Year Plans that were submitted for PHA fiscal years beginning before October 1, 2001, to comply with the requirements of this part as amended on December 22, 2000, at the time they submit their next Annual Plan for fiscal years beginning on or after October 1, 2001. PHAs must explain any substantial deviation from their 5-Year Plans in their Annual Plans. (Substantial deviation is determined by the PHA in accordance with criteria provided by the PHA in its Annual Plan in accordance with Sec. 903.7(r).) (b) The Annual Plan. (1) The first PHA fiscal year that is covered by the requirements of this part as amended on December 22, 2000 is the PHA fiscal year that begins October 1, 2001. (2) For all PHAs, the first Annual Plans are due 75 days before the commencement of their fiscal year. (3) For all PHAs, after submission of the first Annual Plan, all subsequent Annual Plans will be due no later than 75 days before the commencement of their fiscal year. [64 FR 56862, Oct. 21, 1999, as amended at 66 FR 8898, Mar. 7, 2001; 68 FR 37671, June 24, 2003] Sec. 903.6 What information must a PHA provide in the 5-Year Plan? (a) A PHA must include in its 5-Year Plan a statement of: (1) The PHA's mission for serving the needs of low-income, very low- income and extremely low-income families in the PHA's jurisdiction; and (2) The PHA's goals and objectives that enable the PHA to serve the needs of the families identified in the PHA's Annual Plan. For HUD, the PHA and the public to better measure the success of the PHA in meeting its goals and objectives, the PHA must adopt quantifiable goals and objectives for serving those needs wherever possible. (3) A statement about goals, activities, objectives, policies, or programs that will enable a PHA to serve the needs of child and adult victims of domestic violence, dating violence, sexual assault, or stalking. (b) After submitting its first 5-Year Plan, a PHA in its succeeding 5-Year Plans, must address: (1) The PHA's mission, goals and objectives for the next 5 years; and (2) The progress the PHA has made in meeting the goals and objectives described in the PHA's previous 5-Year Plan. [65 FR 81222, Dec. 22, 2000, as amended at 73 FR 72344, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010] Sec. 903.7 What information must a PHA provide in the Annual Plan? With the exception of the first Annual Plan submitted by a PHA, the Annual Plan must include the information provided in this section. HUD will [[Page 268]] advise PHAs by separate notice, sufficiently in advance of the first Annual Plan due date, of the information, described in this section that must be part of the first Annual Plan submission, and any additional instructions or directions that may be necessary to prepare and submit the first Annual Plan. The information described in this section applies to both public housing and tenant-based assistance, except where specifically stated otherwise. The information that the PHA must submit for HUD approval under the Annual Plan includes the discretionary policies of the various plan components or elements (for example, rent policies) and not the statutory or regulatory requirements that govern these plan components and that provide no discretion on the part of the PHA in implementation of the requirements. The PHA's Annual Plan must be consistent with the goals and objectives of the PHA's 5-Year Plan. (a) A statement of housing needs. (1) This statement must address the housing needs of the low-income and very low-income families who reside in the jurisdiction served by the PHA, and other families who are on the public housing and Section 8 tenant-based assistance waiting lists, including: (i) Families meeting the definition of extremely low-income families in 24 CFR 5.603. (ii) Elderly families; (iii) Households with individuals with disabilities and households of various races and ethnic groups residing in the jurisdiction or on the waiting list. (2) A PHA must make reasonable efforts to identify the housing needs of each of the groups listed in paragraph (a)(1) of this section based on information provided by the applicable consolidated plan, information provided by HUD, and other generally available data. (i) The identification of housing needs must address issues of affordability, supply, quality, accessibility, size of units, and location. (ii) The statement of housing needs also must describe the ways in which the PHA intends, to the maximum extent practicable, to address those needs and the PHA's reasons for choosing its strategy. (b) A statement of the PHA's deconcentration and other policies that govern eligibility, selection, and admissions. This statement must describe the PHA's policies that govern resident or tenant eligibility, selection and admission. This statement also must describe any PHA admission preferences, and any occupancy policies that pertain to public housing units and housing units assisted under section 8(o) of the 1937 Act, as well as any unit assignment policies for public housing. This statement must include the following information: (1) Deconcentration Policy. The PHA's deconcentration policy applicable to public housing, as described in Sec. 903.2(a). (2) Waiting List Procedures. The PHA's procedures for maintaining waiting lists for admission to the PHA's public housing developments. The statement must address any site-based waiting lists, as authorized by section 6(s) of the 1937 Act (42 U.S.C. 1437d(s)), for public housing. Section 6(s) of the 1937 Act permits PHAs to establish a system of site-based waiting lists for public housing that is consistent with all applicable civil rights and fair housing laws and regulations. Notwithstanding any other regulations, a PHA may adopt site-based waiting lists where: (i) The PHA regularly submits required occupancy data to HUD's Multifamily Tenant Characteristics Systems (MTCS) in an accurate, complete and timely manner; (ii) The system of site-based waiting lists provides for full disclosure to each applicant of any option available to the applicant in the selection of the development in which to reside, including basic information about available sites (location, occupancy, number and size of accessible units, amenities such as day care, security, transportation and training programs) and an estimate of the period of time the applicant would likely have to wait to be admitted to units of different sizes and types (e.g., regular or accessible) at each site; (iii) Adoption of site-based waiting lists would not violate any court order or settlement agreement, or be inconsistent with a pending complaint brought by HUD; [[Page 269]] (iv) The PHA includes reasonable measures to assure that adoption of site-based waiting lists is consistent with affirmatively furthering fair housing, such as reasonable marketing activities to attract applicants regardless of race or ethnicity; (v) The PHA provides for review of its site-based waiting list policy to determine if the policy is consistent with civil rights laws and certifications through the following steps: (A) As part of the submission of the Annual Plan, the PHA shall assess changes in racial, ethnic or disability-related tenant composition at each PHA site that may have occurred during the implementation of the site-based waiting list, based upon MTCS occupancy data that has been confirmed to be complete and accurate by an independent audit (which may be the annual independent audit) or is otherwise satisfactory to HUD; (B) At least every three years the PHA uses independent testers or other means satisfactory to HUD, to assure that the site-based waiting list is not being implemented in a discriminatory manner, and that no patterns or practices of discrimination exist, and providing the results to HUD; (C) Taking any steps necessary to remedy the problems surfaced during the review; and (D) Taking the steps necessary to affirmatively further fair housing. (3) Other admissions policies. The PHA's admission policies that include any other PHA policies that govern eligibility, selection and admissions for the public housing (see part 960 of this title) and tenant-based assistance programs (see part 982, subpart E of this title). (The information requested on site-based waiting lists and deconcentration is applicable only to public housing.) (c) A statement of financial resources. This statement must address the financial resources that are available to the PHA for the support of Federal public housing and tenant-based assistance programs administered by the PHA during the plan year. The statement must include a listing, by general categories, of the PHA's anticipated resources, such as PHA operating, capital and other anticipated Federal resources available to the PHA, as well as tenant rents and other income available to support public housing or tenant-based assistance. The statement also should include the non-Federal sources of funds supporting each Federal program, and state the planned uses for the resources. (d) A statement of the PHA's rent determination policies. This statement must describe the PHA's basic discretionary policies that govern rents charged for public housing units, applicable flat rents, and the rental contributions of families receiving tenant-based assistance. For tenant-based assistance, this statement also shall cover any discretionary minimum tenant rents and payment standard policies. (e) A statement of the PHA's operation and management. (1) This statement must list the PHA's rules, standards, and policies that govern maintenance and management of housing owned, assisted, or operated by the PHA. (2) The policies listed in this statement must include a description of any measures necessary for the prevention or eradication of pest infestation. Pest infestation includes cockroach infestation. (3) This statement must include a description of PHA management organization, and a listing of the programs administered by the PHA. (4) The information requested on a PHA's rules, standards and policies regarding management and maintenance of housing applies only to public housing. The information requested on PHA program management and listing of administered programs applies to public housing and tenant- based assistance. (f) A statement of the PHA grievance procedures. This statement describes the grievance and informal hearing and review procedures that the PHA makes available to its residents and applicants. These procedures include public housing grievance procedures and tenant-based assistance informal review procedures for applicants and hearing procedures for participants. (g) A statement of capital improvements needed. With respect to public housing only, this statement describes the capital improvements necessary to ensure long-term physical and social viability [[Page 270]] of the PHA's public housing developments, including the capital improvements to be undertaken in the year in question and their estimated costs, and any other information required for participation in the Capital Fund. PHAs also are required to include 5-Year Plans covering large capital items. (h) A statement of any demolition and/or disposition--(1) Plan for Demolition/Disposition. With respect to public housing only, a description of any public housing development, or portion of a public housing development, owned by the PHA for which the PHA has applied or will apply for demolition and/or disposition approval under section 18 of the 1937 Act (42 U.S.C. 1437p), and the timetable for demolition and/ or disposition. The application and approval process for demolition and/ or disposition is a separate process. Approval of the PHA Plan does not constitute approval of these activities. (2) Interim Plan for Demolition/Disposition. (i) Before submission of the first Annual Plan, a PHA may submit an interim PHA Annual Plan solely for demolition/disposition. The interim plan must provide: (A) The required description of the action to be taken; (B) A certification of consistency with the Consolidated Plan; (C) A description of how the plan is consistent with the Consolidated Plan; (D) A relocation plan that includes the availability of units in the area and adequate funding; and (E) Confirmation that a public hearing was held on the proposed action and that the resident advisory board was consulted. (ii) Interim plans for demolition/disposition are subject to PHA Plan procedural requirements in this part (see Sec. Sec. 903.13, 903.15, 903.17, 903.19, 903.21, 903.23, 903.25), with the following exception. If a resident advisory board has not yet been formed, the PHA may seek a waiver of the requirement to consult with the resident advisory board on the grounds that organizations that adequately represent residents for this purpose were consulted. (iii) The actual application for demolition or disposition may be submitted at the same time as submission of the interim plan or at a later date. (i) A statement of the public housing developments designated as housing for elderly families or families with disabilities or elderly families and families with disabilities. (1) With respect to public housing only, this statement identifies any public housing developments owned, assisted, or operated by the PHA, or any portion of these developments, that: (i) The PHA has designated for occupancy by: (A) Only elderly families; (B) Only families with disabilities; or (C) Elderly families and families with disabilities; and (ii) The PHA will apply for designation for occupancy by: (A) Only elderly families; (B) Only families with disabilities; or (C) Elderly families and families with disabilities as provided by section 7 of the 1937 Act (42 U.S.C. 1437e). (2) The designated housing application and approval process is a separate process. Approval of the PHA Plan does not constitute approval of these activities. (j) A statement of the conversion of public housing to tenant-based assistance. (1) This statement describes: (i) Any building or buildings that the PHA is required to convert to tenant-based assistance under section 33 of the 1937 Act (42 U.S.C. 1437z-5); (ii) The status of any building or buildings that the PHA may be required to convert to tenant-based assistance under section 202 of the Fiscal Year 1996 HUD Appropriations Act (42 U.S.C. 14371 note); or (iii) The PHA's plans to voluntarily convert under section 22 of the 1937 Act (42 U.S.C. 1437t). (2) The statement also must include an analysis of the developments or buildings required to be converted under section 33. (3) For both voluntary and required conversions, the statement must include the amount of assistance received commencing in Federal Fiscal Year 1999 to be used for rental assistance or other housing assistance in connection with such conversion. (4) The application and approval processes for required or voluntary conversions are separate approval processes. Approval of the PHA Plan does [[Page 271]] not constitute approval of these activities. (5) The information required under this paragraph (j) of this section is applicable to public housing and only that tenant-based assistance which is to be included in the conversion plan. (k) A statement of homeownership programs administered by the PHA. (1) This statement describes: (i) Any homeownership programs administered by the PHA under section 8(y) of the 1937 Act (42 U.S.C. 1437f(y)); (ii) Any homeownership programs administered by the PHA under an approved section 5(h) homeownership program (42 U.S.C. 1437c(h)); (iii) An approved HOPE I program (42 U.S.C. 1437aaa); or (iv) Any homeownership programs for which the PHA has applied to administer or will apply to administer under section 5(h), the HOPE I program, or section 32 of the 1937 Act (42 U.S.C. 1437z-4). (2) The application and approval process for homeownership under the programs described in paragraph (k) of this section, with the exception of the section 8(y) homeownership program, are separate processes. Approval of the PHA Plan does not constitute approval of these activities. (l) A statement of the PHA's community service and self-sufficiency programs. (1) This statement describes: (i) Any PHA programs relating to services and amenities coordinated, promoted or provided by the PHA for assisted families, including programs provided or offered as a result of the PHA's partnership with other entities; (ii) Any PHA programs coordinated, promoted or provided by the PHA for the enhancement of the economic and social self-sufficiency of assisted families, including programs provided or offered as a result of the PHA's partnerships with other entities, and activities under section 3 of the Housing and Community Development Act of 1968 and under requirements for the Family Self-Sufficiency Program and others. The description of programs offered shall include the program's size (including required and actual size of the Family Self-Sufficiency program) and means of allocating assistance to households. (iii) How the PHA will comply with the requirements of section 12(c) and (d) of the 1937 Act (42 U.S.C. 1437j(c) and (d)). These statutory provisions relate to community service by public housing residents and treatment of income changes in public housing and tenant-based assistance recipients resulting from welfare program requirements. PHAs must address any cooperation agreements, as described in section 12(d)(7) of the 1937 Act (42 U.S.C. 1437j(d)(7)), that the PHA has entered into or plans to enter into. (2) The information required by paragraph (l) of this section is applicable to both public housing and tenant-based assistance, except that the information regarding the PHA's compliance with the community service requirement applies only to public housing. (m) A statement of the PHA's safety and crime prevention measures. (1) With respect to public housing only, this statement describes the PHA's plan for safety and crime prevention to ensure the safety of the public housing residents that it serves. The plan for safety and crime prevention must be established in consultation with the police officer or officers in command of the appropriate precinct or police departments. The plan also must provide, on a development-by-development or jurisdiction wide-basis, the measures necessary to ensure the safety of public housing residents. (2) The statement regarding the PHA's safety and crime prevention plan must include the following information: (i) A description of the need for measures to ensure the safety of public housing residents; (ii) A description of any crime prevention activities conducted or to be conducted by the PHA; and (iii) A description of the coordination between the PHA and the appropriate police precincts for carrying out crime prevention measures and activities. (3) If the PHA expects to receive drug elimination program grant funds, the PHA must submit, in addition to the information required by paragraph (m)(1) of this section, the plan required by HUD's Public Housing Drug Elimination Program regulations (see part 761 of this title). [[Page 272]] (4) If HUD determines at any time that the security needs of a public housing development are not being adequately addressed by the PHA's plan, or that the local police precinct is not assisting the PHA with compliance with its crime prevention measures as described in the Annual Plan, HUD may mediate between the PHA and the local precinct to resolve any issues of conflict. (5) A statement of any domestic violence, dating violence, sexual assault, and stalking prevention programs: (i) A description of any activities, services, or programs provided or offered by an agency, either directly or in partnership with other service providers, to child or adult victims of domestic violence, dating violence, sexual assault, or stalking; (ii) Any activities, services, or programs provided or offered by a PHA that help child and adult victims of domestic violence, dating violence, sexual assault, or stalking to obtain or maintain housing; and (iii) Any activities, services, or programs provided or offered by a PHA to prevent domestic violence, dating violence, sexual assault, or stalking, or to enhance victim safety in assisted families. (n) A statement of the PHA's policies and rules regarding ownership of pets in public housing. This statement describes the PHA's policies and requirements pertaining to the ownership of pets in public housing. The policies must be in accordance with section 31 of the 1937 Act (42 U.S.C. 1437a-3). (o) Civil rights certification. (1) The PHA must certify that it will carry out its plan in conformity with title VI of the Civil Rights Act of 1964 (42 U.S.C. 20000d-2000d-4), the Fair Housing Act (42 U.S.C. 3601-19), section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and title II of the Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et seq.), and other applicable Federal civil rights laws. The PHA must also certify that it will affirmatively further fair housing pursuant to Sec. Sec. 5.151 and 5.152 of this title. (2) The certification is applicable to the 5-Year Plan and the Annual Plan. (p) Recent results of PHA's fiscal year audit. This statement provides the results of the most recent fiscal year audit of the PHA conducted under section 5(h)(2) of the 1937 Act (42 U.S.C. 1437c(h)). (q) A statement of asset management. To the extent not covered by other components of the PHA Annual Plan, this statement describes how the PHA will carry out its asset management functions with respect to the PHA's public housing inventory, including how the PHA will plan for long-term operating, capital investment, rehabilitation, modernization, disposition, and other needs for such inventory. (r) Additional information to be provided. (1) For all Annual Plans following submission of the first Annual Plan, a PHA must include a brief statement of the PHA's progress in meeting the mission and goals described in the 5-Year Plan; (2) A PHA must identify the basic criteria the PHA will use for determining: (i) A substantial deviation from its 5-Year Plan; and (ii) A significant amendment or modification to its 5-Year Plan and Annual Plan. (3) A PHA must include such other information as HUD may request of PHAs, either on an individual or across-the-board basis. HUD will advise the PHA or PHAs of this additional information through advance notice. [65 FR 81222, Dec. 22, 2000, as amended at 73 FR 72344, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 80 FR 42368, July 16, 2015; 81 FR 12372, Mar. 8, 2016; 85 FR 47911, Aug. 7, 2020; 86 FR 30792, June 10, 2021] Sec. 903.9 May HUD request additional information in the Annual Plan of a troubled PHA? HUD may request that a PHA that is at risk of being designated as troubled or is designated as troubled in accordance with section 6(j)(2) of the 1937 Act (42 U.S.C. 1437d(j)(2)), the Public Housing Management Assessment Program (part 901 of this title) or the Public Housing Assessment System (part 902 of this chapter) include its operating budget. The PHA also must include or reference any applicable memorandum of agreement with HUD or any plan to improve performance, and such other material as HUD may prescribe. [[Page 273]] Sec. 903.11 Are certain PHAs eligible to submit a streamlined Annual Plan? (a) Yes, the following PHAs may submit a streamlined Annual Plan, as described in paragraph (b) of this section: (1) PHAs that are determined to be high performing PHAs as of the last annual or interim assessment of the PHA before the submission of the 5-Year or Annual Plan; (2) PHAs with less than 250 public housing units (small PHAs) and that have not been designated as troubled in accordance with section 6(j)(2) of the 1937 Act; and (3) PHAs that only administer tenant-based assistance and do not own or operate public housing. (b) All streamlined plans must provide information on how the public may reasonably obtain additional information on the PHA policies contained in the standard Annual Plan, but excluded from their streamlined submissions. (c) A streamlined plan must include the information provided in this paragraph (c). The Secretary may reduce the information requirements of streamlined Plans further, with adequate notice. (1) For high performing PHAs, the streamlined Annual Plan must include the information required by Sec. 903.7(a), (b), (c), (d), (g), (h), (k), (m), (n), (o), (p) and (r). The information required by Sec. 903.7(m) must be included only to the extent this information is required for PHA's participation in the public housing drug elimination program and the PHA anticipates participating in this program in the upcoming year. The information required by Sec. 903.7(k) must be included only to the extent that the PHA participates in homeownership programs under section 8(y). (2) For small PHAs that are not designated as troubled (see Sec. 902.67(c)) or that are not at risk of being designated as troubled (see Sec. 902.67(b)(4) of this chapter) under section 6(j)(2) of the 1937 Act, the requirements for streamlined Annual Plans are described in Sec. 903.12. (3) For PHAs that administer only tenant-based assistance, the streamlined Annual Plan must include the information required by Sec. 903.7(a), (b), (c), (d), (e), (f), (k), (l), (o), (p) and (r). [65 FR 49484, Aug. 14, 2000, as amended at 65 FR 55161, Sept. 12, 2000; 68 FR 37671, June 24, 2003] Sec. 903.12 What are the streamlined Annual Plan requirements for small PHAs? (a) General. PHAs with less than 250 public housing units (small PHAs) and that have not been designated as troubled (see Sec. 902.67(c) of this chapter) or that are not at risk of being designated as troubled (see Sec. 902.67(b)(4)) under section 6(j) of the 1937 Act may submit streamlined Annual Plans in accordance with this section. (b) Streamlined Annual Plan requirements for fiscal years in which its 5-Year Plan is also due. For the fiscal year in which its 5-Year Plan is also due, the streamlined Annual Plan of the small PHA shall consist of the information required by Sec. 903.7(a), (b), (c), (d), (g), (h), (k), (o) and (r). If the PHA wishes to use the project-based voucher program, the streamlined Annual Plan of the small PHA must also include a statement of the projected number of project-based units and general locations and how project basing would be consistent with its PHA Plan. The information required by Sec. 903.7(a) must be included only to the extent it pertains to the housing needs of families that are on the PHA's public housing and Section 8 tenant-based assistance waiting lists. The information required by Sec. 903.7(k) must be included only to the extent that the PHA participates in homeownership programs under section 8(y) of the 1937 Act. (c) Streamlined Annual Plan requirements for all other fiscal years. For all other fiscal years, the streamlined Annual Plan must include: (1) The information required by Sec. 903.7(g) and (o) and, if applicable, Sec. 903.7(b)(2) with respect to site-based waiting lists and Sec. 903.7(k)(1)(i) with respect to homeownership programs under section 8(y) of the 1937 Act; (2) If the PHA wishes to use the project-based voucher program, a statement of the projected number of project-based units and general locations and how project basing would be consistent with its PHA Plan; and [[Page 274]] (3) A certification from the PHA that lists the policies and programs covered by Sec. 903.7(a), (b), (c), (d), (h), (k), and (r) that the PHA has revised since submission of its last Annual Plan and provides assurance by the PHA that: (i) The Resident Advisory Board had an opportunity to review and comment on the changes to the policies and programs before implementation by the PHA; (ii) The changes were duly approved by the PHA board of directors (or similar governing body); and (iii) The revised policies and programs are available for review and inspection at the principal office of the PHA during normal business hours. [68 FR 37671, June 24, 2003] Sec. 903.13 What is a Resident Advisory Board and what is its role in development of the Annual Plan? (a) A Resident Advisory Board refers to a board or boards, as provided in paragraph (b) of this section, whose membership consists of individuals who adequately reflect and represent the residents assisted by the PHA. (1) The role of the Resident Advisory Board (or Resident Advisory Boards) is to assist and make recommendations regarding the development of the PHA plan, and any significant amendment or modification to the PHA plan. (2) The PHA shall allocate reasonable resources to assure the effective functioning of Resident Advisory Boards. Reasonable resources for the Resident Advisory Boards must provide reasonable means for them to become informed on programs covered by the PHA Plan, to communicate in writing and by telephone with assisted families and hold meetings with those families, and to access information regarding covered programs on the internet, taking into account the size and resources of the PHA. (b) Each PHA must establish one or more Resident Advisory Boards, as provided in paragraph (b) of this section. (1) If a jurisdiction-wide resident council exists that complies with the tenant participation regulations in part 964 of this title, the PHA shall appoint the jurisdiction-wide resident council or the council's representatives as the Resident Advisory Board. If the PHA makes such appointment, the members of the jurisdiction-wide resident council or the council's representatives shall be added or another Resident Advisory Board formed to provide for reasonable representation of families receiving tenant-based assistance where such representation is required under paragraph (b)(2) of this section. (2) If a jurisdiction-wide resident council does not exist but resident councils exist that comply with the tenant participation regulations, the PHA shall appoint such resident councils or their representatives to serve on one or more Resident Advisory Boards. If the PHA makes such appointment, the PHA may require that the resident councils choose a limited number of representatives. (3) Where the PHA has a tenant-based assistance program of significant size (where tenant-based assistance is 20% or more of assisted households), the PHA shall assure that the Resident Advisory Board (or Boards) has reasonable representation of families receiving tenant-based assistance and that a reasonable process is undertaken to choose this representation. (4) Where or to the extent that resident councils that comply with the tenant participation regulations do not exist, the PHA shall appoint Resident Advisory Boards or Board members as needed to adequately reflect and represent the interests of residents of such developments; provided that the PHA shall provide reasonable notice to such residents and urge that they form resident councils with the tenant participation regulations. (c) The PHA must consider the recommendations of the Resident Advisory Board or Boards in preparing the final Annual Plan, and any significant amendment or modification to the Annual Plan, as provided in Sec. 903.21 of this title. (1) In submitting the final plan to HUD for approval, or any significant amendment or modification to the plan to HUD for approval, the PHA must include a copy of the recommendations made by the Resident Advisory Board or Boards and a description of the manner in which the PHA addressed these recommendations. [[Page 275]] (2) Notwithstanding the 75-day limitation on HUD review, in response to a written request from a Resident Advisory Board claiming that the PHA failed to provide adequate notice and opportunity for comment, HUD may make a finding of good cause during the required time period and require the PHA to remedy the failure before final approval of the plan. Sec. 903.15 What is the relationship of the public housing agency plans to the Consolidated Plan and a PHA's Fair Housing Requirements? (a) The PHA must ensure that the Annual Plan is consistent with any applicable Consolidated Plan for the jurisdiction in which the PHA is located. (1) The PHA must submit a certification by the appropriate State or local officials that the Annual Plan is consistent with the Consolidated Plan and include a description of the manner in which the applicable plan contents are consistent with the Consolidated Plans. (2) For State agencies that are PHAs, the applicable Consolidated Plan is the State Consolidated Plan. (b) A PHA may request to change its fiscal year to better coordinate its planning with the planning done under the Consolidated Plan process, by the State or local officials, as applicable. (c) Fair housing requirements. A PHA is obligated to affirmatively further fair housing in its operating policies, procedures, and capital activities. All admission and occupancy policies for public housing and Section 8 tenant-based housing programs must comply with Fair Housing Act requirements and other civil rights laws and regulations and with a PHA's plans to affirmatively further fair housing. The PHA may not impose any specific income or racial quotas for any development or developments. (1) Nondiscrimination. A PHA must carry out its PHA Plan in conformity with the nondiscrimination requirements in Federal civil rights laws, including title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act, and the Fair Housing Act. A PHA may not assign housing to persons in a particular section of a community or to a development or building based on race, color, religion, sex, disability, familial status, or national origin for purposes of segregating populations. (2) Affirmatively furthering fair housing. A PHA's policies should be designed to reduce the concentration of tenants and other assisted persons by race, national origin, and disability. Any affirmative steps or incentives a PHA plans to take must be stated in the admission policy. (i) HUD regulations provide that PHAs must take steps to affirmatively further fair housing. PHA policies should include affirmative steps to overcome the effects of discrimination and the effects of conditions that resulted in limiting participation of persons because of their race, national origin, disability, or other protected class. (ii) Such affirmative steps may include, but are not limited to, marketing efforts, use of nondiscriminatory tenant selection and assignment policies that lead to desegregation, additional applicant consultation and information, provision of additional supportive services and amenities to a development (such as supportive services that enable an individual with a disability to transfer from an institutional setting into the community), and engagement in ongoing coordination with state and local disability agencies to provide additional community-based housing opportunities for individuals with disabilities and to connect such individuals with supportive services to enable an individual with a disability to transfer from an institutional setting into the community. (3) Validity of certification. (i) A PHA's certification under Sec. 903.7(o) will be subject to challenge by HUD where it appears that a PHA: (A) Fails to meet the affirmatively furthering fair housing requirements at 24 CFR 5.150 through 5.152 (B) Takes action that is materially inconsistent with its obligation to affirmatively further fair housing; or (C) Fails to meet the fair housing, civil rights, and affirmatively furthering fair housing requirements in 24 CFR 903.7(o). [[Page 276]] (ii) If HUD challenges the validity of a PHA's certification, HUD will do so in writing specifying the deficiencies, and will give the PHA an opportunity to respond to the particular challenge in writing. In responding to the specified deficiencies, a PHA must establish, as applicable, that it has complied with fair housing and civil rights laws and regulations, or has remedied violations of fair housing and civil rights laws and regulations, and has adopted policies and undertaken actions to affirmatively further fair housing, including, but not limited to, providing a full range of housing opportunities to applicants and tenants in a nondiscriminatory manner. In responding to the PHA, HUD may accept the PHA's explanation and withdraw the challenge, undertake further investigation, or pursue other remedies available under law. HUD will seek to obtain voluntary corrective action consistent with the specified deficiencies. In determining whether a PHA has complied with its certification, HUD will review the PHA's circumstances relevant to the specified deficiencies, including characteristics of the population served by the PHA; characteristics of the PHA's existing housing stock; and decisions, plans, goals, priorities, strategies, and actions of the PHA, including those designed to affirmatively further fair housing. [85 FR 47911, Aug. 7, 2020, as amended at 86 FR 30793, June 10, 2021] Sec. 903.17 What is the process for obtaining public comment on the plans? (a) The PHA's board of directors or similar governing body must conduct a public hearing to discuss the PHA plan (either the 5-Year Plan and/or Annual Plan, as applicable) and invite public comment on the plan(s). The hearing must be conducted at a location that is convenient to the residents served by the PHA. (b) Not later than 45 days before the public hearing is to take place, the PHA must: (1) Make the proposed PHA plan(s), the required attachments and documents related to the plans, and all information relevant to the public hearing to be conducted, available for inspection by the public at the principal office of the PHA during normal business hours; and (2) Publish a notice informing the public that the information is available for review and inspection, and that a public hearing will take place on the plan, and the date, time and location of the hearing. (c) PHAs shall conduct reasonable outreach activities to encourage broad public participation in the PHA plans. Sec. 903.19 When is the 5-Year Plan or Annual Plan ready for submission to HUD? A PHA may adopt its 5-Year Plan or its Annual Plan and submit the plan to HUD for approval only after: (a) The PHA has conducted the public hearing; (b) The PHA has considered all public comments received on the plan; (c) The PHA has made any changes to the plan, based on comments, after consultation with the Resident Advisory Board or other resident organization. Sec. 903.21 May the PHA amend or modify a plan? (a) A PHA, after submitting its 5-Year Plan or Annual Plan to HUD, may amend or modify any PHA policy, rule, regulation or other aspect of the plan. If the amendment or modification is a significant amendment or modification, as defined in Sec. 903.7(r)(2), the PHA: (1) May not adopt the amendment or modification until the PHA has duly called a meeting of its board of directors (or similar governing body) and the meeting, at which the amendment or modification is adopted, is open to the public; and (2) May not implement the amendment or modification, until notification of the amendment or modification is provided to HUD and approved by HUD in accordance with HUD's plan review procedures, as provided in Sec. 903.23. (b) Each significant amendment or modification to a plan submitted to HUD is subject to the requirements of Sec. Sec. 903.13, 903.15, and 903.17. [[Page 277]] Sec. 903.23 What is the process by which HUD reviews, approves, or disapproves an Annual Plan? (a) Review of the plan. When the PHA submits its Annual Plan to HUD, including any significant amendment or modification to the plan, HUD reviews the plan to determine whether: (1) The plan provides all the information that is required to be included in the plan; (2) The plan is consistent with the information and data available to HUD; (3) The plan is consistent with any applicable Consolidated Plan for the jurisdiction in which the PHA is located; and (4) The plan is not prohibited or inconsistent with the 1937 Act or any other applicable Federal law. (b) Scope of HUD review. HUD's review of the Annual Plan (and any significant amendments or modifications to the plan) will be limited to the information required by Sec. 903.7(b), (g), (h), and (o), and any other element of the PHA's Annual Plan that is challenged. (c) Disapproval of the plan. (1) HUD may disapprove a PHA plan, in its entirety or with respect to any part, or disapprove any significant amendment or modification to the plan, only if HUD determines that the plan, or one of its components or elements, or any significant amendment or modification to the plan: (i) Does not provide all the information that is required to be included in the plan; (ii) Is not consistent with the information and data available to HUD; (iii) Is not consistent with any applicable Consolidated Plan for the jurisdiction in which the PHA is located; or (iv) Is not consistent with applicable Federal laws and regulations. (2) Not later than 75 days after the date on which the PHA submits its plan or significant amendment or modification to the plan, HUD will issue written notice to the PHA if the plan or a significant amendment or modification has been disapproved. The notice that HUD issues to the PHA must state with specificity the reasons for the disapproval. HUD may not state as a reason for disapproval the lack of time to review the plan. (3) If HUD fails to issue the notice of disapproval on or before the 75th day after the date on which the PHA submits its plan or significant amendment or modification to the plan, HUD shall be considered to have determined that all elements or components of the plan required to be submitted and that were submitted, and to be reviewed by HUD were in compliance with applicable requirements and the plan has been approved. (4) The provisions of paragraph (b)(3) of this section do not apply to troubled PHAs. The plan of a troubled PHA must be approved or disapproved by HUD through written notice. (d) Designation of due date as submission date for first plan submissions. For purposes of the 75-day period described in paragraph (b) of this section, the first 5-year and Annual Plans submitted by a PHA will be considered to have been submitted no earlier than the due date as provided in Sec. 903.5. (e) Public availability of the approved plan. Once a PHA's plan has been approved, a PHA must make the approved plan and the required attachments and documents related to the plan, available for review and inspection, at the principal office of the PHA during normal business hours. (f) Recordkeeping. PHAs must maintain records reflecting actions to affirmatively further fair housing pursuant to Sec. Sec. 5.151, 5.152, and 903.7(o) of this title. [65 FR 81222, Dec. 22, 2000, as amended at 68 FR 37671, June 24, 2003; 80 FR 42371, July 16, 2015; 85 FR 47911, Aug. 7, 2020; 86 FR 30793, June 10, 2021] Sec. 903.25 How does HUD ensure PHA compliance with its plan? A PHA must comply with the rules, standards and policies established in the plans. To ensure that a PHA is in compliance with all policies, rules, and standards adopted in the plan approved by HUD, HUD shall, as it deems appropriate, respond to any complaint concerning PHA noncompliance with its plan. If HUD should determine that a PHA is not in compliance with its plan, HUD will take whatever action it deems necessary and appropriate. [[Page 278]] PART 904_LOW RENT HOUSING HOMEOWNERSHIP OPPORTUNITIES--Table of Contents Subpart A--Introduction to Low-Rent Housing Homeownership Opportunity Program [Reserved] Subpart B_Turnkey III Program Description Sec. 904.101 Introduction. 904.102 Definitions. 904.103 Development. 904.104 Eligibility and selection of homebuyers. 904.105 Counseling of homebuyers. 904.106 Homebuyers Association (HBA). 904.107 Responsibilities of homebuyer. 904.108 Break-even amount. 904.109 Monthly operating expense. 904.110 Earned Home Payments Account. (EHPA) 904.111 Nonroutine Maintenance Reserve (NRMR). 904.112 Operating reserve. 904.113 Achievement of ownership by initial homebuyer. 904.114 Payment upon resale at profit. 904.115 Achievement of ownership by subsequent homebuyers. 904.116 Transfer of title to homebuyer. 904.117 Responsibilities of homebuyer after acquisition of ownership. 904.118 Homeowners association-planned unit development (PUD). 904.119 Homeowners association-condominium. 904.120 Relationship of homeowners association to HBA. 904.121 Use of appendices. 904.122 Statutory preferences. Appendix I to Subpart B of Part 904--Annual Contributions Contract Appendix II to Subpart B of Part 904--Homebuyers Ownership Opportunity Agreement (Turnkey III) Appendix III to Subpart B of Part 904--Certification of Homebuyer Status Appendix IV to Subpart B of Part 904--Promissory Note for Payment Upon Resale by Homebuyer at Profit Subpart C_Homeownership Counseling and Training 904.201 Purpose. 904.202 Objectives. 904.203 Planning. 904.204 General requirements and information. 904.205 Training methodology. 904.206 Funding. 904.207 Use of appendix. Appendix I to Subpart C of Part 904--Content Guide for Counseling and Training Program Subpart D_Homebuyers Association (HBA) 904.301 Purpose. 904.302 Membership. 904.303 Organizing the HBA. 904.304 Functions of the HBA. 904.305 Funding of HBA. 904.306 Performing management services. 904.307 Alternative to HBA. 904.308 Relationship with homeowners association. 904.309 Use of appendices. Appendix I to Subpart D of Part 904--Articles of Incorporation and By- Laws of Homebuyers Association Appendix II to Subpart D of Part 904--Recognition Agreement Between Local Housing Authority and Homebuyers Association Authority: 42 U.S.C. 1437-1437ee and 3535(d). Source: 39 FR 10966, Mar. 22, 1974, unless otherwise noted. Redesignated at 40 FR 15580, Apr. 7, 1975, and further redesignated at 49 FR 6714, Feb. 23, 1984. Subpart A--Introduction to Low-Rent Housing Homeownership Opportunity Program [Reserved] Subpart B_Turnkey III Program Description Sec. 904.101 Introduction. (a) Purpose. This subpart sets forth the essential elements of the HUD Homeownership Opportunities Program for Low-Income Families (Turnkey III). (b) Applicability. This subpart is applicable to Turnkey III developments operated by LHA. For Turnkey III developments operated by an Indian Housing Authority, applicable provisions are found at 24 CFR part 905, subpart G. (1) With respect to any development to be operated as Turnkey III, the Annual Contributions Contract (ACC) shall contain the ``Special Provisions for Turnkey III Homeownership Opportunity Project'' as set forth in Appendix I. A Turnkey III development may include only units which are to be operated as such under Homebuyers Ownership Opportunity Agreements. If for any reason it is determined that certain units should be operated as conventional rental units, such units must [[Page 279]] comprise or be made part of a conventional rental project. (2) With respect to Turnkey III developments pursuant to an executed ACC where no Agreements with Homebuyers have been signed, the ACC shall be amended (i) to include the ``Special Provisions'' set forth in Appendix I, (ii) to extend its term to 30 years, and (iii) to reduce its Maximum Contribution Percentage to a rate that will amortize the debt in 30 years at the minimum Loan Interest Rate specified in the ACC for the specific Turnkey III project involved. Further development and operation shall be in accordance with this subpart including use of the form of Homebuyers Ownership Opportunity Agreement set forth in Appendix II. (3) With respect to developments where Agreements with homebuyers have been signed, the following steps shall be taken: (i) The ACC shall be amended to include the Special Provisions'' set forth in Appendix I; further development and operation of the Project shall be in accordance with this subpart. (ii) The LHA shall offer all qualified homebuyers in the development a new Homebuyers Ownership Opportunity Agreement as set forth in Appendix II with an amendment to section 16a to refer to ``the latest approved Development Cost Budget, or Actual Development Cost Certificate if issued,'' in lieu of ``the Development Cost Budget in effect upon award of the Main Construction Contract or execution of the Contract of Sale,'' and, if the ACC for the Project has a term of 25 years, an amendment to section 16(b) to refer to a term of 25 years, instead of 30, for the Purchase Price Schedule. Each Purchase Price Schedule shall commence with the first day of the month following the effective date of the initial Agreement. No other modification in the new Agreement may be made. In the event the homebuyer refuses to accept the new Agreement, no modifications may be made in the old Agreement and the matter shall be referred to HUD. (4) With respect to Projects which were under ACC on the effective date of this subpart, the Total Development Cost Budget shall be revised, if financially feasible, to include the cost of the appraisals which are necessary for computation of the initial purchase prices pursuant to Sec. 904.113. In the event this is not financially feasible, the matter shall be referred to HUD, which may, if necessary, authorize a different method for computation of such initial purchase prices on an equitable basis. (5) With respect to all developments which were completed by the effective date of this subpart, the appraisals which are necessary for computation of the initial purchase prices pursuant to Sec. 904.113 shall be made as of the date of completion of the development. [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 922, Jan. 9, 1991] Sec. 904.102 Definitions. (a) The term common property means the nondwelling structures and equipment, common areas, community facilities, and in some cases certain component parts of dwelling structures, which are contained in the development: Provided, however, That in the case of a development that is organized as a condominium or a planned unit development (PUD), the term common property shall have the meaning established by the condominium or PUD documents and the State law pursuant to which the condominium or PUD is organized, under the terms common areas, common facilities, common elements, common estate, or other similar terms. (b) The term development means the entire undertaking including all real and personal property, funds and reserves, rights, interests and obligations, and activities related thereto. (c) The term EHPA means the Earned Home Payments Account established and maintained pursuant to Sec. 904.110. (d) The term homebuyer means the member or members of a low-income family who have executed a Homebuyers Ownership Opportunity Agreement with the LHA. (e) The term homebuyers association (HBA) means an organization as defined in Sec. 904.106. (f) The term homeowner means a homebuyer who has acquired title to his home. [[Page 280]] (g) The term homeowners association means an association comprised of homeowners, including condominium associations, having responsibilities with respect to common property. (h) The term LHA means the local housing authority which acquires or develops a low-rent housing development with financial assistance from HUD, owns the homes until title is transferred to the homebuyers, and is responsible for the management of the homeownership opportunity program. (i) The term NRMR means the Nonroutine Maintenance Reserve established and maintained pursuant to Sec. 904.111. (j) The term Project is used to refer to the development in relation to matters specifically related to the Annual Contributions Contract. [39 FR 10966, Mar. 22, 1974, as amended at 61 FR 5214, Feb. 9, 1996] Sec. 904.103 Development. (a) Financial framework. The LHA shall finance development or acquisition by sale of its notes (bond financing shall not be used) in the amount of the Minimum Development Cost. Payment of the debt service on the notes is assured by the HUD commitment to provide annual contributions. (b) Maximum total development cost. The maximum total development cost stated in the ACC is the maximum amount authorized for development of a project and shall not exceed the amount approved in accordance with Sec. 941.406(a) of this chapter. (c) Contractual framework. There are three basic contracts: (1) An Annual Contributions Contract containing ``Special Provisions For Turnkey III Homeownership Opportunity Project,'' Form HUD-53010C (see Appendix I); (2) A Homebuyers Ownership Opportunity Agreement (see Appendix II) which sets forth the respective rights and obligations of the low-income occupants and the LHA, including conditions for achieving homeownership; and (3) A Recognition Agreement (see Appendix II of Subpart D of this part) between the LHA and the HBA under which the LHA agrees to recognize the HBA as the established representative of the homebuyers. (d) Community Participation Committee (CPC). In the necessary development of citizens' participation in and understanding of the Turnkey III program, the LHA should consider formation and use of a CPC to assist the community and the LHA in the development and support of the Turnkey III program. The CPC shall be a voluntary group comprised of representatives of the low-income population primarily and may also include representatives of community service organizations. [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and amended at 47 FR 39482, Sept. 8, 1982. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 53 FR 41598, Oct. 24, 1988] Sec. 904.104 Eligibility and selection of homebuyers. (a) Announcement of availability of housing; fair housing marketing. (1) The availability of housing under Turnkey III shall be announced to the community at large. Families on the waiting list for LHA conventional rental housing who wish to be considered for Turnkey III must apply specifically for that program (see paragraph (d) of this section). (2) The LHA shall submit to HUD an Affirmative Fair Housing Marketing Plan and shall otherwise comply with the provisions of the Affirmative Fair Housing Marketing Regulations, 24 CFR part 200, subpart M, as if the LHA were an applicant for participation in an FHA housing program. This Plan shall be submitted with the development program, and no development program may be approved without prior approval of the Plan pursuant to HUD procedures under said Affirmative Fair Housing Marketing Regulations. If the development program has been approved, but the Annual Contributions Contract has not been executed, prior to the effective date of this subpart, an Affirmative Fair Housing Marketing Plan must be approved prior to execution of said contract. (b) Eligibility and standards for admission. (1) Homebuyers shall be lower income families that are determined to be eligible for admission in accordance with the provisions of 24 CFR parts 5 [[Page 281]] and 913, which prescribe income definitions, income limits, and restrictions concerning citizenship or eligible immigration status. The HUD-approved standards for admission to low-rent housing, including the LHA's established priorities and preferences and the requirements for administration of low-rent housing under Title VI of the Civil Rights Act of 1964 (Pub. L. 88-352, 78 Stat. 241, 42 U.S.C. 2000d), shall be applicable except that the procedures used for homebuyer selection under Turnkey III shall be those set forth in this section. In carrying out these procedures the aim shall be to provide for equal housing opportunity in such a way as to prevent segregation or other discrimination on the basis of race, creed, color or national origin in accordance with the Civil Rights Act of 1964 (Pub. L. 88-352, 78 Stat. 241, 42 U.S.C. 2000d) and 1968 (Pub. L. 90-284, 82 Stat. 73, 42 U.S.C. 3601). (2) An LHA may establish income limits for Turnkey III which are different from those for its conventional rental program: Provided That those limits are in accord with all applicable statutory and administrative requirements and are approved by HUD. (c) Determination of eligibility and preparation of list. The LHA, without participation of a recommending committee (see paragraph (e)(1) of this section), must determine the eligibility of each applicant family in respect to the income limits for the development (including the requirement that the applicant family disclose and verify Social Security Numbers, as provided by 24 CFR part 750, and sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 760), and must then assign each eligible applicant its appropriate place on a waiting list for the development, in sequence based upon the date of the application, suitable type or size of unit, qualification for a Federal preference in accordance with Sec. 904.122, and factors affecting preference or priority established by the LHA's regulations. Notwithstanding the fact that the LHA may not be accepting additional applications because of the length of the waiting list, the LHA may not refuse to place an applicant on the waiting list if the applicant is otherwise eligible for participation and claims that he or she qualifies for a Federal preference as provided in Sec. 904.122(c)(2), unless the LHA determines, on the basis of the number of applicants who are already on the waiting list and who claim a Federal preference, and the anticipated number of admissions to housing under Turnkey III, that-- (1) There is an adequate pool of applicants who are likely to qualify for a Federal preference, and (2) It is unlikely that, on the basis of the LHA's system for applying the Federal preferences, the preference or preferences that the applicant claims, and the preferences claimed by applicants on the waiting list, the applicant would qualify for admission before other applicants on the waiting list. (d) List of applicants. A separate list of applicants for Turnkey III shall be maintained, consisting of families who specifically apply and are eligible for admission to such housing. (1) Dating of applications. All applications for Turnkey III shall be dated as received. (2) Effect on applicant status. The filing of an application for Turnkey III by a family which is an applicant for LHA conventional rental housing or is an occupant of such housing shall in no way affect its status with regard to such rental housing. Such an applicant shall not lose his place on the rental housing waiting list until his application is accepted for Turnkey III and shall not receive any different treatment or consideration with respect to conventional rental housing because of having applied for Turnkey III. (e) Determination of potential for homeownership--(1) Recommending committee. The LHA should consider use of a recommending committee to assist in the establishment of objective criteria for the determination of potential for homeownership and in the selection of homebuyers from the families determined to have such potential. If a recommending committee is used, it should be composed of representatives of the CPC (if any), the LHA and the HBA. The LHA shall submit to the committee prompt written justification of any rejection of a committee [[Page 282]] recommendation, stating grounds, the reasonableness of which shall be in accord with applicable LHA and HUD regulations. Each member of such a committee, at the time of appointment, shall be required to furnish the LHA with a signed statement that the member will (i) follow selection procedures and policies that do not automatically deny admission to a particular class, that insure selection on a nondiscriminatory and nonsegregated basis, and that facilitate achievement of the anticipated results for occupancy stated in the approved Affirmative Fair Housing Marketing Plan, and (ii) maintain strict confidentiality by not divulging any information concerning applicants or the deliberations of the committee to any person except to the LHA as necessary for purposes of the official business of the committee. (2) Potential for homeownership. In order to be considered for selection, a family must be determined to meet at least all of the following standards of potential for homeownership: (i) Income sufficient to result in a required monthly payment which is not less than the sum of the amounts necessary to pay the EHPA, the NRMR, and the estimated average monthly cost of utilities attributable to the home; (ii) Ability to meet all the obligations of a homebuyer under the Homebuyers Ownership Opportunity Agreement; (iii) At least one member gainfully employed, or having an established source of continuing income. (f) Selection of homebuyers. Homebuyers shall be selected from those families determined to have potential for homeownership. Such selection shall be made in sequence from the waiting list established in accordance with this section, provided that the following shall be assured: (1) Selection procedures that do not automatically deny admission to a particular class; that ensure selection on a nondiscriminatory and nonsegregated basis; that give a Federal preference in accordance with Sec. 904.122; and that facilitate achievement of the anticipated results for occupancy stated in the approved Affirmative Fair Housing Marketing Plan. (2) Achievement of an average monthly payment for the Project, including consideration of the availability of the Special Family Subsidy, which is at least 10 percent more than the breakeven amount for the Project (see Sec. 904.108). This standard shall be complied with both in the initial selection of homebuyers and in the subsequent filling of vacancies at all times during the life of the Project. If there is an applicant who has potential for homeownership but whose required monthly payment under the LHA's Rent Schedule would be less than the break-even amount for the suitable size and type of unit, such applicant may be selected as a homebuyer, provided that the incomes of all selected homebuyers shall result in the required average monthly payment of at least 10 percent more than the break-even amount for the Project. Such an average monthly payment for the Project may be achieved by selecting other low-income families who can afford to make required monthly payments substantially above the break-even amounts for their suitable sizes and types of units. (g) Notification to applicants. (1) Once a sufficient number of applicants have been selected to assure that the provisions of paragraph (f)(2) of this section are met, the selected applicant shall be notified of the approximate date of occupancy insofar as such date can reasonably be determined. (2) Applicants who are not selected for a specific Turnkey III development shall be notified in accordance with HUD-approved procedure. The notice shall state: (i) The reason for the applicant's rejection (including a nonrecommendation by the recommending committee unless the applicant has previously been so notified by the committee); (ii) That the applicant will be given an information hearing on such determination, regardless of the reason for the rejection, if the applicant makes a request for such a hearing within a reasonable time (to be specified in the notice) from the date of the notice; and (iii) For denial of assistance for failure to establish citizenship or eligible immigration status, the applicant may request, in addition to the informal [[Page 283]] hearing, an appeal to the INS, in accordance with 24 CFR part 5. (h) Eligibility for continued occupancy. (1) A homebuyer shall cease to be eligible for continued occupancy with the aid of HUD annual contributions when the LHA determines that the homebuyer's adjusted monthly income has reached, and is likely to continue at, a level at which the current amount of the homebuyer's Total Tenant Payment, determined in accordance with part 913 of this chapter, equals or exceeds the monthly housing cost (see paragraph (h)(2) of this section). In such event, if the LHA determines, with HUD approval, that suitable financing is available, the LHA shall notify the homebuyer that he or she must either: (1) Purchase the home or (ii) move from the development. If, however, the LHA determines that, because of special circumstances, the family is unable to find decent, safe, and sanitary housing within the family's financial reach although making every reasonable effort to do so, the family may be permitted to remain for the duration of such a situation if it pays as rent an amount equal to Tenant Rent, as determined in accordance with part 913 of this chapter. Such a monthly payment shall also be payable by the family if it continues in occupancy without purchasing the home because suitable financing is not available. (2) The term ``monthly housing cost,'' as used in this paragraph, means the sum of: (i) The monthly debt service amount shown on the Purchase Price Schedule (except where the homebuyer can purchase the home by the method described in Sec. 904.113(c)(1) of this part); (ii) One-twelfth of the annual real property taxes which the homebuyer will be required to pay as a homeowner; (iii) One-twelfth of the annual premium attributable to fire and extended coverage insurance carried by the LHA with respect to the home; (iv) The current monthly per unit amount budgeted for routine maintenance (EHPA), and for routine maintenance-common property; and (v) The current LHA and HUD approved monthly allowance for utilities paid for directly by the homebuyer plus the monthly cost of utilities supplied by the LHA. (Approved by the Office of Management and Budget under control number 2577-0083) [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and at 49 FR 6714, Feb. 23, 1984, as amended at 49 FR 21490, May 21, 1984; 53 FR 1172, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39710, Sept. 27, 1989; 56 FR 7544, Feb. 22, 1991; 60 FR 14848, Mar. 20, 1995; 61 FR 13626, Mar. 27, 1996] Sec. 904.105 Counseling of homebuyers. The LHA shall provide counseling and training as provided in subpart C of this part, with funding as provided in Sec. 904.206 of this part. Applicants for admission shall be advised of the nature of the counseling and training program available to them and the application for admission shall include a statement that the family agrees to participate and cooperate fully in all official pre-occupancy and post- occupancy training and counseling activities. Failure to participate as agreed may result in the family not being selected or retained as a homebuyer. Sec. 904.106 Homebuyers Association (HBA). An HBA is an incorporated organization composed of all the families who are entitled to occupancy pursuant to a Homebuyers Ownership Opportunity Agreement or who are homeowners. It is formed and organized for the purposes set forth in Sec. 904.304 of this part. The HBA shall be funded as provided in Sec. 904.305 of this part. In the absence of a duly organized HBA, the LHA shall be free to act without the HBA action required by this subpart. Sec. 904.107 Responsibilities of homebuyer. (a) Repair, maintenance and use of home. The homebuyer shall be responsible for the routine maintenance of the home to the satisfaction of the HBA and the LHA. This routine maintenance includes the work (labor and materials) of keeping the dwelling structure, grounds and equipment in good repair, condition and appearance so that they may be utilized continually at their designed capacities and at the satisfactory level of efficiency [[Page 284]] for their intended purposes, and in conformity with the requirements of local housing code and applicable regulations and guidelines of HUD. It includes repairs (labor and materials) to the dwelling structure, plumbing fixtures, dwelling equipment (such as range and refrigerator), shades and screens, water heater, heating equipment and other component parts of the dwelling. It also includes all interior painting and the maintenance of grounds (lot) on which the dwelling is located. It does not include maintenance and replacements provided for by the NRMR described in Sec. 904.111. (b) Repair of damage. In addition to the obligation for routine maintenance, the homebuyer shall be responsible for repair of any damage caused by him, members of his family, or visitors. (c) Care of home. A homebuyer shall keep the home in a sanitary condition; cooperate with the LHA and the HBA in keeping and maintaining the common areas and property, including fixtures and equipment, in good condition and appearance; and follow all rules of the LHA and of the HBA concerning the use and care of the dwellings and the common areas and property. (d) Inspections. A homebuyer shall agree to permit officials, employees, or agents of the LHA and of the HBA to inspect the home at reasonable hours and intervals in accordance with rules established by the LHA and the HBA. (e) Use of home. A homebuyer shall not (1) sublet the home without the prior written approval of the LHA and HUD, (2) use or occupy the home for any unlawful purpose nor for any purpose deemed hazardous by insurance companies on account of fire or other risks, or (3) provide accommodations (unless approved by the HBA and the LHA) to boarders or lodgers. The homebuyer shall agree to use the home only as a place to live for the family (as identified in the initial application or by subsequent amendment with the approval of the LHA), for children thereafter born to or adopted by members of such family, and for aged or widowed parents of the homebuyer or spouse who may join the household. (f) Obligations with respect to other persons and property. Neither the homebuyer nor any member of his family shall interfere with rights of other occupants of the development, or damage the common property or the property of others, or create physical hazards. (g) Structural changes. A homebuyer shall not make any structural changes in or additions to the home unless the LHA has first determined in writing that such change would not (1) impair the value of the unit, the surrounding units, or the development as a whole, or (2) affect the use of the home for residential purposes, or (3) violate HUD requirements as to construction and design. (h) Statements of condition and repair. When each homebuyer moves in, the LHA shall inspect the home and shall give the homebuyer a written statement, to be signed by the LHA and the homebuyer, of the condition of the home and the equipment in it. Should the homebuyer vacate the home, the LHA shall inspect it and give the homebuyer a written statement of the repairs and other work, if any, required to put the home in good condition for the next occupant (see Sec. 904.110(j)(1)). The homebuyer, his representative, and a representative of the HBA may join in any such inspections by the LHA. (i) Maintenance of common property. The homebuyer may participate in nonroutine maintenance of his home and in maintenance of common property as discussed in Sec. 904.110(d) and Sec. 904.111(c). (j) Homebuyer's required monthly payment. (1) The term ``required monthly payment'' as used herein means the monthly payment the homebuyer is required to pay the LHA on or before the first day of each month. The homebuyer's required monthly payment, which is based upon family income, shall be an amount equal to the Tenant Rent as determined in accordance with part 913 of this chapter. If the Utility Allowance, as defined in part 913 of this chapter, exceeds the Homebuyer's Total Tenant Payment, as determined in accordance with part 913, the LHA will pay a utility reimbursement equal to that excess to the Homebuyer, or as provided in Sec. 913.108 of this chapter. (2) For purposes of determining eligibility of an applicant (see 24 CFR parts 5 and 913, as well as this part) and the [[Page 285]] amount of Homebuyer payments under paragraph (j)(1) of this section, the LHA shall examine the family's income and composition and follow the procedures required by 24 CFR part 5 for determining citizenship or eligible immigration status before initial occupancy. Thereafter, for the purposes stated in this paragraph and to determine whether a Homebuyer is required to purchase the home under Sec. 904.104(h)(1), the LHA shall reexamine the Homebuyer's income and composition regularly, at least once every 12 months, and shall undertake such further determination and verification of citizenship or eligible immigration status as required by 24 CFR part 5. The Homebuyer shall comply with the LHA's policy regarding required interim reporting of changes in the family's income and composition. If the LHA receives information from the family or other source concerning a change in the family income or other circumstances between regularly scheduled reexaminations, the LHA, upon consultation with the family and verification of the information (in accordance with 24 CFR parts 5 and 913 of this chapter) shall promptly make any adjustments determined to be appropriate in the Homebuyer payment amount or take appropriate action concerning the addition of a family member who is not a citizen with eligible immigration status. Any change in the family's income or other circumstances that results in an adjustment in the Total Tenant Payment and Tenant Rent must be verified. (3) The LHA shall not refuse to accept monthly payments because of any other charges (other than overdue monthly payments) owed by the homebuyer to the LHA; however, by accepting monthly payments under such circumstances the LHA shall not be deemed to have waived any of its rights and remedies with respect to such other charges. (k) Application of monthly payment. The LHA shall apply the homebuyer's monthly payment as follows: (1) To the credit of the homebuyer's EHPA (see Sec. 904.110); (2) To the credit of the homebuyer's NRMR (see Sec. 904.111); and (3) For payment of monthly operating expense including contribution to operating reserve (see Sec. 904.109). (l) Assignment and survivorship. Until such time as the homebuyer obtains title to the home, it shall be used only to house a family of low income. Therefore: (1) A homebuyer shall not assign any right or interest in the home or under the Homebuyers Ownership Opportunity Agreement without the prior written approval of the LHA and HUD; (2) In the event of death, mental incapacity or abandonment of the family by the homebuyer, the person designated as the successor in the Homebuyers Ownership Opportunity Agreement shall succeed to the rights and responsibilities under the Agreement if that person is an occupant of the home at the time of the event and is determined by the LHA to meet all of the standards of potential for homeownership as set forth in Sec. 904.104(e)(2). Such person shall be designated by the homebuyer at the time the Homebuyers Ownership Opportunity Agreement is executed. This designation may be changed by the homebuyer at any time. If there is no such designation or the designee is no longer an occupant of the home or does not meet the standards of potential for homeownership, the LHA may consider as the homebuyer any family member who was an occupant at the time of the event and who meets the standards of potential for homeownership. (3) If there is no qualified successor in accordance with paragraph (l) (2) of this section, the LHA shall terminate the Agreement and another family shall be selected except under the following circumstances: where a minor child or children of the homebuyer family are in occupancy, then in order to protect their continued occupancy and opportunity for acquisition of ownership of the home, the LHA may approve as occupants of the unit, an appropriate adult(s) who has been appointed legal guardian of the children with a duty to perform the obligations of the Homebuyers Ownership Opportunity Agreement in their interest and behalf. (m) Termination by LHA. (1) In the event the homebuyer breaches the [[Page 286]] Homebuyers Ownership Opportunity Agreement by failure to make the required monthly payment within ten days after its due date, by misrepresenting or withholding of information in applying for admission or in connection with any subsequent reexamination of income and family composition (including the failure to submit any required evidence of citizenship or eligible immigration status, as provided by 24 CFR part 5; the failure to meet the disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR part 5; or the failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5), or by failure to comply with any of the other homebuyer obligations under the Agreement, the LHA may terminate the Agreement. No termination under this paragraph may occur less than 30 days after the LHA gives the homebuyer notice of its intention to do so, in accordance with paragraph (m)(3) of this section. For termination of assistance for failure to establish citizenship or eligible immigration status under 24 CFR part 5, the requirements of 24 CFR parts 5 and 966 shall apply. (2) Notice of termination by the LHA shall be in writing. Such notice shall state (i) The reason for termination, (ii) That the homebuyer may respond to the LHA, in writing or in person, within a specified reasonable period of time regarding the reason for termination, (iii) That in such response he may be represented or accompanied by a person of his choice, including a representative of the HBA, (iv) That the LHA will consult the HBA concerning this termination, and (v) That unless the LHA rescinds or modifies the notice, the termination shall be effective at the end of the 30-day notice period. (n) Termination by the homebuyer. The homebuyer may terminate the Homebuyers Ownership Opportunity Agreement by giving the LHA 30 days notice in writing of this intention to terminate and vacate the home. In the event that the homebuyer vacates the home without notice to the LHA, the Agreement shall be terminated automatically and the LHA may dispose of, in any manner deemed suitable by it, any items of personal property left by the homebuyer in the home. (o) Transfer to rental unit. (1) Inasmuch as the homebuyer was found eligible for admission to the Project on the basis of having the necessary elements of potential for homeownership, continuation of eligibility requires continuation of this potential, subject only to temporary unforeseen changes in circumstances. Accordingly, in the event it should develop that the homebuyer no longer meets one or more of these elements of homeownership potential, the LHA shall investigate the circumstances and provide such counseling and assistance as may be feasible in order to help the family overcome the deficiency as promptly as possible. After a reasonable time, not to exceed 30 days from the date of evaluation of the results of the investigation, the LHA shall make a re-evaluation as to whether the family has regained the potential for homeownership or is likely to do so within a further reasonable time, not to exceed 30 days from the date of the reevaluation. Further extension of time may be granted in exceptional cases, but in any event, a final determination shall be made no later than 90 days from the date of evaluation of the results of the initial investigation. The LHA shall invite the HBA to participate in all investigations and evaluations. (2) If the final determination of the LHA, after considering the views of the HBA, is that the homebuyer should be transferred to a suitable dwelling unit in an LHA rental project, the LHA shall give the homebuyer written notice of the LHA determination of the loss of homeownership potential and of the offer of transfer to a rental unit. The notice shall state that the transfer shall occur as soon as a suitable rental unit is available for occupancy, but no earlier than 30 days from the date of the notice, provided that an eligible successor for the homebuyer unit has been selected by the LHA. The notice shall also state that if the homebuyer [[Page 287]] should refuse to move under such circumstances, the family may be required to vacate the homebuyer unit, without further notice. The notice shall include a statement (i) that the homebuyer may respond to the LHA in writing or in person, within a specified reasonable time, regarding the reason for the determination and offer of transfer, (ii) that in such response he may be represented or accompanied by a person of his choice including a representative of the HBA, and (iii) that the LHA has consulted the HBA concerning this determination and offer of transfer. (3) When a Homebuyers Ownership Opportunity Agreement is terminated pursuant to this paragraph (o), the amount in the homebuyer's EHPA shall be paid in accordance with the provisions of Sec. 904.110(j). (Approved by the Office of Management and Budget under control number 2577-0083) [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and at 49 FR 6714, Feb. 23, 1984, as amended at 49 FR 21490, May 21, 1984; 49 FR 26719, June 29, 1984; 54 FR 39710, Sept. 27, 1989; 56 FR 7544, Feb. 22, 1991; 60 FR 14848, Mar. 20, 1995; 60 FR 13626, Mar. 27, 1996] Sec. 904.108 Break-even amount. (a) Definition. The term ``break-even amount'' as used herein means the minimum average monthly amount required to provide funds for the items listed in the illustration below. A separate break-even amount shall be established for each size and type of dwelling unit, as well as for the Project as a whole. The break-even amount for EHPA and NRMR will vary by size and type of dwelling unit; similar variations as to other line items may be made if the LHA deems this equitable. Illustration. The following is an illustration of the computation of the break-even amount based upon hypothetical amounts. (1) Operating Expense (see Sec. 904.109): Administration....................................... $8.50 Homebuyer services................................... 2.00 Project supplied utilities........................... 3.00 Routine maintenance--common property................. 3.00 Protective services.................................. 2.00 General expense...................................... 6.50 Nonroutine maintenance--common property (Contribution 2.00 $27.00 to operating reserve)............................... (2) Earned Home Payments Account (see Sec. 904.110).. ...... 12.00 (3) Nonroutine Maintenance Reserve (see Sec. 904.111) ...... 7.50 Break-Even Amount...................................... ...... 46.50 The break-even amount does not include the monthly allowance for utilities which the homebuyer pays for directly, nor does it include any amount for debt service on the Project notes. (b) Excess over break-even. When the homebuyer's required monthly payment (see Sec. 904.107(j)) exceeds the applicable break-even amount, the excess shall constitute additional Project income and shall be deposited and used in the same manner as other Project income. (c) Deficit in monthly payment. When the homebuyer's required monthly payment is less than the applicable break-even amount, the deficit shall be applied as a reduction of that portion of the monthly payment designated for operating expense (i. e., as a reduction of Project income). In all such cases, the EHPA and the NRMR shall be credited with the amount included in the break-even amount for these accounts. Sec. 904.109 Monthly operating expense. (a) Definition and categories of monthly operating expense. The term ``monthly operating expense'' means the monthly amount needed for the following purposes: (1) Administration. Administrative salaries, travel, legal expenses, office supplies, postage, telephone and telegraph, etc.; (2) Homebuyer services. LHA expenses in the achievement of social goals, including costs such as salaries, publications, payments to the HBA to assist its operation, contract and other costs; (3) Utilities. Those utilities (such as water), if any, to be furnished by the LHA as part of operating expense; (4) Routine maintenance--common property. For community building, grounds, and other common areas, if any. The amount required for routine maintenance of common property depends upon the type of common property included in the development and the extent of the LHA's responsibility for maintenance (see also Sec. 904.109(c)); (5) Protective services. The cost of supplemental protective services paid by the LHA for the protection of persons and property; [[Page 288]] (6) General expense. Premiums for fire and other insurance, payments in lieu of taxes to the local taxing body, collection losses, payroll taxes, etc.; (7) Nonroutine maintenance--common property (Contribution to operating reserve). Extraordinary maintenance of equipment applicable to the community building and grounds, and unanticipated items for non- dwelling structures (see Sec. 904.112). (b) Monthly operating expense rate. The monthly operating expense rate for each fiscal year shall be established on the basis of the LHA's HUD-approved operating budget for that fiscal year. The operating budget may be revised during the course of the fiscal year in accordance with HUD requirements. If it is subsequently determined that the actual operating expense for a fiscal year was more or less than the amount provided by the monthly operating expense established for that fiscal year, the rate of monthly operating expenses to be established for the next fiscal year may be adjusted to account for the difference (see Sec. 904.112(b)). Such adjustment may result in a change in the required monthly payment, see Sec. 904.107(j)(3). (c) Provision for common property maintenance. During the period the LHA is responsible for the maintenance of common property, the annual operating budget and the monthly operating expense rate shall include the amount required for routine maintenance of all common property in the development, even though a number of the homes may have been acquired by homebuyers. During such period, this amount shall be computed on the basis of the total number of homes in the development (i. e., the annual amount budgeted for routine maintenance of common property shall be divided by the number of homes in the development, resulting in the annual amount for each home; this figure shall in turn be divided by 12 to determine the monthly amount to be included in the monthly operating expense (and in the break-even amount) for routine maintenance of common property). After the home owners association assumes responsibility for maintenance of common property, the monthly operating expense (and break-even amount) shall include an amount equal to the monthly assessment by the homeowners association for the remaining homes owned by the LHA (see Sec. 904.112(b) for nonroutine maintenance of common property). (d) Posting of monthly operating expense statement. A statement showing the budgeted monthly amount allocated in the current operating budget to each operating expense category shall be provided to the HBA and copies shall be provided to homebuyers upon request. Sec. 904.110 Earned Home Payments Account (EHPA) (a) Credits to the account. The LHA shall establish and maintain a separate EHPA for each homebuyer. Since the homebuyer is responsible for maintaining the home, a portion of his required monthly payment equal to the LHA's estimate, approved by HUD, of the monthly cost for such routine maintenance, taking into consideration the relative type and size of the homebuyer's home, shall be set aside in his EHPA. In addition, this account shall be credited with (1) Any voluntary payments made pursuant to paragraph (f) of this section, and (2) Any amount earned through the performance of maintenance as provided in paragraph (d) of this section and Sec. 904.111(c). (b) Charges to the account. (1) If for any reason the homebuyer is unable or fails to perform any item of required maintenance as described in Sec. 904.107(a), the LHA shall arrange to have the work done in accordance with the procedures established by the LHA and the HBA and the cost thereof shall be charged to the homebuyer's EHPA. Inspections of the home shall be made jointly by the LHA and the HBA. (2) To the extent NRMR expense is attributable to the negligence of the homebuyer as determined by the HBA and approved by the LHA (see Sec. 904.111), the cost thereof shall be charged to the EHPA. (c) Exercise of option; required amount in EHPA. The homebuyer may exercise his option to buy the home, by paying the applicable purchase price pursuant [[Page 289]] to Sec. 904.113 or Sec. 904.115, only after satisfying the following conditions precedent: (1) Within the first two years of his occupancy, he has achieved a balance in his EHPA equal to 20 times the amount of the monthly EHPA credit as initially determined in accordance with paragraph (a) of this section; (2) He has met, and is continuing to meet, the requirements of the Homebuyers Ownership Opportunity Agreement; (3) He has rendered, and is continuing to render, satisfactory performance of his responsibilities to the HBA. When the homebuyer has met these conditions precedent, the LHA shall give the homebuyer a certificate to that effect. After achieving the required minimum EHPA balance within the first two years of his occupancy, the homebuyer shall continue to provide the required maintenance, thereby continuing to add to his EHPA. If the homebuyer fails to meet either his obligation to achieve the minimum EHPA balance, as specified, or his obligation thereafter to continue adding to the EHPA, the LHA and the HBA shall investigate and take appropriate corrective action, including termination of the Agreement by the LHA in accordance with Sec. 904.107(m). (d) Additional equity through maintenance of common property. Homebuyers may earn additional EHPA credits by providing in whole or in part any of the maintenance necessary to the common property of the development. When such maintenance is to be provided by the homebuyer, this may be done and credit earned therefor only pursuant to a prior written agreement between the homebuyer and the LHA (or the home owners association, depending on who has responsibility for maintenance of the property involved), covering the nature and scope of the work and the amount of credit the homebuyer is to receive. In such cases, the agreed amount shall be charged to the appropriate maintenance account and credited to the homebuyer's EHPA upon completion of the work. (e) Investment of excess. (1) When the aggregate amount of all EHPA balances exceeds the estimated reserve requirements for 90 days, the LHA shall notify the HBA and shall invest the excess in federally insured savings accounts, federally insured credit unions, and/or securities approved by HUD and in accordance with any recommendations made by the HBA. If the HBA wishes to participate in the investment program, it should submit periodically to the LHA a list of HUD-approved securities, bonds, or obligations which the association recommends for investment by the LHA of the funds in the EHPAs. Interest earned on the investment of such funds shall be prorated and credited to each homebuyer's EHPA in proportion to the amount in each such reserve account. (2) Periodically, but not less often than semi-annually, the LHA shall prepare a statement showing (i) the aggregate amount of all EHPA balances; (ii) the aggregate amount of investments (savings accounts and/or securities) held for the account of all the homebuyers' EHPAs, and (iii) the aggregate uninvested balance of all the homebuyers' EHPAs. This statement shall be made available to any authorized representative of the HBA. (f) Voluntary payments. To enable the homebuyer to acquire title to his home within a shorter period, he may, either periodically or in a lump sum, voluntarily make payments over and above his required monthly payments. Such voluntary payments shall be deposited to his credit in his EHPA. (g) Delinquent monthly payments. Under exceptional circumstances as determined by the HBA and the LHA, a homebuyer's EHPA may be used to pay his delinquent required monthly payments, provided the amount used for this purpose does not seriously deplete the account and provided that the homebuyer agrees to cooperate in such counseling as may be made available by the LHA or the HBA. (h) Annual statement to homebuyer. The LHA shall provide an annual statement to each homebuyer specifying at least (1) the amount in his EHPA, and (2) the amount in his NRMR. During the year, any maintenance or repair done on the dwelling by the LHA which is chargeable to the EHPA or to the NRMR shall be accounted for through a work order. A homebuyer shall receive [[Page 290]] a copy of all such work orders for his home. (i) Withdrawal and assignment. The homebuyer shall have no right to assign, withdraw, or in any way dispose of the funds in its EHPA except as provided in this section or in Sec. 904.113 and Sec. 904.115. (j) Application of EHPA upon vacating of dwelling. (1) In the event a Homebuyers Ownership Opportunity Agreement with the LHA is terminated or if the homebuyer vacates the home (see Sec. 904.107 (m), (n) and (o)), the LHA shall charge against the homebuyer's EHPA the amounts required to pay (i) The amount due the LHA, including the monthly payments the homebuyer is obligated to pay up to the date he vacates; (ii) The monthly payment for the period the home is vacant, not to exceed 30 days from the date of notice of intention to vacate, or, if the homebuyer fails to give notice of intention to vacate, 30 days from the date the home is put in good condition for the next occupant in conformity with Sec. 904.107; and (iii) The cost of any routine maintenance, and of any nonroutine maintenance attributable to the negligence of the homebuyer, required to put the home in good condition for the next occupant in conformity with Sec. 904.107. (2) If the EHPA balance is not sufficient to cover all of these charges, the LHA shall require the homebuyer to pay the additional amount due. If the amount in the account exceeds these charges, the excess shall be paid to the homebuyer. (3) Settlement with the homebuyer shall be made promptly after the actual cost of repairs to the dwelling has been determined (see paragraph (j)(1)(iii) of this section), provided that the LHA shall make every effort to make such settlement within 30 days from the date the homebuyer vacates. The homebuyer may obtain a settlement within 7 days of the date he vacates, even though the actual cost of such repair has not yet been determined, if he has given the LHA notice of intention to vacate at least 30 days prior to the date he vacates and if the amount to be charged against his EHPA for such repairs is based on the LHA's estimate of the cost thereof (determined after consultation with the appropriate representative of the HBA). Sec. 904.111 Nonroutine Maintenance Reserve (NRMR). (a) Purpose of reserve. The LHA shall establish and maintain a separate NRMR for each home, using a portion of the homebuyer's monthly payment. The purpose of the NRMR is to provide funds for the nonroutine maintenance of the home, which consists of the infrequent and costly items of maintenance and replacement shown on the Nonroutine Maintenance Schedule for the home (see paragraph (b) of this section). Such maintenance may include the replacement of dwelling equipment (such as range and refrigerator), replacement of roof, exterior painting, major repairs to heating and plumbing systems, etc. The NRMR shall not be used for nonroutine maintenance of common property, or for nonroutine maintenance relating to the home to the extent such maintenance is attributable to the Homebuyer's negligence or to defective materials or workmanship. (b) Amount of reserve. The amount of the monthly payments to be set aside for NRMR shall be determined by the LHA, with the approval of HUD, on the basis of the Nonroutine Maintenance Schedule showing the amount likely to be needed for nonroutine maintenance of the home during the term of the Homebuyers Ownership Opportunity Agreement, taking into consideration the type of construction and dwelling equipment. This Schedule shall (1) list each item of nonroutine maintenance (e.g., range, refrigerator, plumbing, heating system, roofing, tile flooring, exterior painting, etc.), (2) show for each listed item the estimated frequency of maintenance or useful life before replacement, the estimated cost of maintenance or replacement (including installation) for each occasion, and the annual reserve requirement, and (3) show the total reserve requirements for all the listed items, on an annual and a monthly basis. This Schedule shall be prepared by the LHA and approved by HUD as part of the submission required to determine the financial feasibility of the Project. The Schedule shall be [[Page 291]] revised after approval of the working drawings and specifications, and shall thereafter be reexamined annually in the light of changing economic conditions and experience. (c) Charges to NRMR. (1) The LHA shall provide the nonroutine maintenance necessary for the home and the cost thereof shall be funded as provided in paragraph (c)(2) of this section. Such maintenance may be provided by the homebuyer but only pursuant to a prior written agreement with the LHA covering the nature and scope of the work and the amount of credit the homebuyer is to receive. The amount of any credit shall, upon completion of the work, be credited to the homebuyer's EHPA and charged as provided in paragraph (c)(2) of this section. (2) The cost of nonroutine maintenance shall be charged to the NRMR for the home except that (i) to the extent such maintenance is attributable to the fault or negligence of the homebuyer, the cost shall be charged to the homebuyer's EHPA after consultation with the HBA if the hombuyer disagrees, and (ii) to the extent such maintenance is attributable to defective materials or workmanship not covered by warranty, or even though covered by warranty if not paid for thereunder through no fault or negligence of the homebuyer, the cost shall be charged to the appropriate operating expense account of the Project. (3) In the event the amount charged against the NRMR exceeds the balance therein, the difference (deficit) shall be made up from continuing monthly credits to the NRMR based upon the homebuyer's monthly payments. If there is still a deficit when the homebuyer acquires title, the homebuyer shall pay such deficit at settlement (see paragraph (d)(2) of this section). (d) Transfer of NRMR. (1) In the event the Homebuyer's Ownership Opportunity Agreement is terminated, the homebuyer shall not receive any balance or be required to pay any deficit in the NRMR. When a subsequent homebuyer moves in, the NRMR shall continue to be applicable to the home in the same amount as if the preceding homebuyer had continued in occupancy. (2) In the event the homebuyer purchases the home, and there remains a balance in the NRMR, the LHA shall pay such balance to the homebuyer at settlement. In the event the homebuyer purchases and there is a deficit in the NRMR, the homebuyer shall pay such deficit to the LHA at settlement. (e) Investment of excess. (1) When the aggregate amount of the NRMR balances for all the homes exceeds the estimated reserve requirements for 90 days the LHA shall invest the excess in federally insured savings accounts, federally insured credit unions, and/or securities approved by HUD. Income earned on the investment of such funds shall be prorated and credited to each homebuyer's NRMR in proportion to the amount in each reserve account. (2) Periodically, but not less often than semi-annually, the LHA shall prepare a statement showing (i) the aggregate amount of all NRMR balances, (ii) the aggregate amount of investments (savings accounts and/or securities) held for the account of the NRMRs, and (iii) the aggregate uninvested balance of the NRMRs. A copy of this statement shall be made available to any authorized representative of the HBA. Sec. 904.112 Operating reserve. (a) Purpose of reserve. To the extent that total operating receipts (including subsidies for operations) exceed total operating expenditures of the Project, the LHA shall establish an operating reserve up to the maximum approved by HUD in connection with its approval of the annual operating budgets for the Project. The purpose of this reserve is to provide funds for (1) The infrequent but costly items of nonroutine maintenance and replacements of common property, taking into consideration the types of items which constitute common property, such as nondwelling structures and equipment, and in certain cases, common elements of dwelling structures, (2) Nonroutine maintenance for the homes to the extent such maintenance is attributable to defective materials or workmanship not covered by warranty, (3) Working capital for payment of a deficit in a homebuyer's NRMR, until such deficit is offset by future monthly [[Page 292]] payments by the homebuyer or at settlement in the event the homebuyer should purchase, and (4) A deficit in the operation of the Project for a fiscal year, including a deficit resulting from monthly payments totaling less than the break-even amount for the Project. (b) Nonroutine maintenance--common property (Contribution to operating reserve). The amount under this heading to be included in operating expense (and in the break-even amount) established for the fiscal year (see Sec. 904.108 and Sec. 904.109) shall be determined by the LHA, with the approval of HUD, on the basis of estimates of the monthly amount needed to accumulate an adequate reserve for the items described in paragraph (a)(1) of this section. This amount shall be subject to revision in the light of experience. This contribution to the operating reserve shall be made only during the period the LHA is responsible for the maintenance of any common property; and during such period, the amount shall be determined on the basis of the requirements of all common property in the development in a manner similar to that explained in Sec. 904.109(c). When the operating reserve reaches the maximum authorized in paragraph (c) of this section, the break-even (monthly operating expense) computations (see Sec. Sec. 904.108 and 904.109) for the next and succeeding fiscal years need not include a provision for this contribution to the operating reserve unless the balance of the reserve is reduced below the maximum during any such succeeding fiscal year. (c) Maximum operating reserve. The maximum operating reserve that may be retained by the LHA at the end of any fiscal year shall be the sum of (1) one-half of total routine expense included in the operating budget approved for the next fiscal year and (2) one-third of total break-even amounts included in the operating budget approved for the next fiscal year; provided that such maximum may be increased if necessary as determined or approved by HUD. Total routine expense means the sum of the amounts budgeted for administration, homebuyers services, LHA-supplied utilities, routine maintenance of common property, protective services, and general expense or other category of day-to-day routine expense (see Sec. 904.109 above for explanation of various categories of expense). (d) Transfer to homeowners association. The LHA shall be responsible for and shall retain custody of the operating reserve until the homeowners acquire voting control of the homeowners association (see Sec. Sec. 904.118(c) and 904.119(f). When the homeowners acquire voting control, the homeowners association shall then assume full responsibility for management and maintenance of common property under a plan approved by HUD, and there shall be transferred to the homeowners association a portion of the operating reserve then held by the LHA. The amount of the reserve to be transferred shall be based upon the proportion that one-half of budgeted routine expense (used as a basis for determining the current maximum operating reserve--see paragraph (c) of this section) bears to the approved maximum operating reserve. Specifically, the portion of operating reserve to be transferred shall be computed as follows: Obtain a percentage by dividing one-half of budgeted routine expense by the approved maximum operating reserve; and multiply the actual operating reserve balance by this percentage. (e) Disposition of reserve. If, at the end of a fiscal year, there is an excess over the maximum operating reserve this excess shall be applied to the operating deficit of the Project, if any, and any remainder shall be paid to HUD. Following the end of the fiscal year in which the last home has been conveyed by the LHA, the balance of the operating reserve held by the LHA shall be paid to HUD, provided that the aggregate amount of payments by the LHA under this paragraph shall not exceed the aggregate amount of annual contributions paid by HUD with respect to the Project. Sec. 904.113 Achievement of ownership by initial homebuyer. (a) Determination of initial purchase price. The LHA shall determine the initial purchase price of the home by two basic steps, as follows: Step 1: The LHA shall take the Estimated Total Development Cost (including the full [[Page 293]] amount for contingencies as authorized by HUD) of the development as shown in the Development Cost Budget in effect upon award of the Main Construction Contract or execution of the Contract of Sale, and shall deduct therefrom the amounts, if any, attributed to (1) relocation costs, (2) counseling and training costs, and (3) the cost of any community, administration or management facilities including the land, equipment, and furnishings attributable to such facilities as set forth in the development program for the development. The resulting amount is herein called Estimated Total Development Cost for Homebuyers. Step 2: The LHA shall apportion the Estimated Total Development Cost for Homebuyers among all the homes in the development. This apportionment shall be made by obtaining an FHA appraisal of each home and adjusting such appraised values (upward or downward) by the percentage difference between the total of the appraisal for all the Homes and the Estimated Total Development Cost for Homebuyers. The adjusted amount for each home shall be the initial purchase price for that home. (b) Purchase price schedule. Each homebuyer shall be provided with a Purchase Price Schedule showing (1) the monthly declining purchase price over a 30-year period, \1\ commencing with the initial purchase price on the first day of the month following the effective date of the Homebuyers Ownership Opportunity Agreement and (2) the monthly debt service amount upon which the Schedule is based. The Schedule and debt service amount shall be computed on the basis of the initial purchase price, a 30-year period, \2\ and a rate of interest equal to the minimum loan interest rate as specified in the Annual Contributions Contract for the Project on the date of HUD approval of the Development Cost Budget, described in paragraph (a) of this section, rounded up, if necessary, to the next multiple of one-fourth of one percent (\1/4\ percent). --------------------------------------------------------------------------- \1\ Change to 25-year period where appropriate pursuant to Sec. 904.101(b)(3). \2\ Under section 234(c) of the National Housing Act, as of the date of publication of this subpart, mortgage insurance for a condominium unit in a multi-family project is generally authorized only if the project is currently or has been covered by a mortgage insured under another section of the National Housing Act. There is, however, a proviso which authorizes mortgage insurance for a condominium unit in a multi-family project even though the project is not or has not been covered by such a project mortgage, if the project involves eleven or less units. --------------------------------------------------------------------------- (c) Methods of purchase. (1) The homebuyer may achieve ownership when the amount in his EHPA, plus such portion of the NRMR as he wishes to use for the purchase, is equal to the purchase price as shown at that time on his Purchase Price Schedule plus all Incidental Costs (Incidental Costs mean the costs incidental to acquiring ownership, including, but not limited to, the costs for a credit report, field survey, title examination, title insurance, and inspections, the fees for attorneys other than the LHA's attorney, mortgage application and organization, closing and recording, and the transfer taxes and loan discount payment, if any). If for any reason title to the home is not conveyed to the homebuyer during the month in which such circumstances occur, the purchase price shall be fixed at the amount specified for such month and the homebuyer shall be refunded (i) the net additions, if any, credited to his EHPA subsequent to such month, and (ii) such part of the monthly payments made by the homebuyer after the purchase price has been fixed which exceeds the sum of the break-even amount attributable to the unit and the interest portion of the debt service shown in the Purchase Price Schedule. (2) Where the sum of the purchase price and Incidental Costs is greater than the amounts in the homebuyer's EHPA and NRMR as described in paragraph (c)(1) of this section, the homebuyer may achieve ownership by obtaining financing for or otherwise paying the excess amount. The purchase price shall be the amount shown on his Purchase Price Schedule for the month in which the settlement date for the purchase occurs. (d) The maximum period for achieving ownership shall be 30 years, but depending upon increases in the homebuyers income and the amount of credit which the homebuyer can accumulate through maintenance and voluntary payments, the period may be shortened accordingly. [[Page 294]] Sec. 904.114 Payment upon resale at profit. (a) Promissory note. (1) When a homebuyer achieves ownership (regardless of whether ownership is achieved under Sec. 904.113 or Sec. 904.115), he shall sign a note obligating him to make a payment to the LHA, subject to the provisions of paragraph (a)(2) or this section, in the event he resells his home at a profit within 5 years of actual residence in the home after he becomes a homeowner. If, however, the homeowner should purchase and occupy another home within one year (18 months in case of a newly constructed home) of the resale of the Turnkey III home, the LHA shall refund to the homeowner the amount previously paid by him under the note, less the amount, if any, by which the resale price of the Turnkey III home exceeds the acquisition price of the new home, provided that application for such refund shall be made no later than 30 days after the date of acquisition of the new home. (2) The note to be signed by the homebuyer pursuant to paragraph (a)(1) of this section shall be a non interest-bearing promissory note (see Appendix IV) to the LHA. The note shall be executed at the time the homebuyer becomes a homeowner and shall be secured by a second mortgage. The initial amount of the note shall be computed by taking the appraised value of the home at the time the homebuyer becomes a homeowner and subtracting (i) the homebuyer's purchase price plus the Incidental Costs and (ii) the increase in value of the home, determined by appraisal, caused by improvements paid for by the homebuyer with funds from sources other than the EHPA or NRMR. The note shall provide that this initial amount shall be automatically reduced by 20 percent thereof at the end of each year of residency as a homeowner, with the note terminating at the end of the five-year period of residency, as determined by the LHA. To protect the homeowner, the note shall provide that the amount payable under it shall in no event be more than the net profit on the resale, that is, the amount by which the resale price exceeds the sum of (A) the homebuyer's purchase price plus the Incidental Costs, (B) the costs of the resale, including commissions and mortgage prepayment penalties, if any, and (C) the increase in value of the home, determined by appraisal, due to improvements paid for by him as a homebuyer (with funds from sources other than the EHPA or NRMR) or as a homeowner. (3) Amounts collected by the LHA under such notes shall be retained by the LHA for use in making refunds pursuant to paragraph (a)(1) of this section. After expiration of the period for the filing of claims for such refunds, any remaining amounts shall be applied (i) to reduce the LHA's capital indebtedness on the Project and (ii) after such indebtedness has been paid, for such purposes as may be authorized or approved by HUD under such Annual Contributions Contract as the LHA may then have with HUD. Illustration. If the homeowner's purchase price is $10,000, the Incidental Costs are $500, the value added by improvements is $1,000, and the FHA appraised value at the time he acquires ownership is $17,000, the note computation would be as follows: FHA appraised value................................. ........ $17,000 Homeowner's purchase price.......................... $10,000 ........ Incidental costs.................................... 500 ........ Improvements........................................ 1,000 11,500 ------------------- Initial note amount................................. ........ 5,500 ------------------------------------------------------------------------ In this example, the amount of the note during the first year of residence is $5,500. In the second year, the amount of the note is $4,400, and in the third year, it is $3,300, etc. The note shall terminate at the end of the fifth year. If the homeowner in this example resells his home during the first year for a sales price of $17,500, has resale costs of $1,600 (including a sales commission), and has added $1,500 value by further improvements, he would be required to pay the LHA $2,900 rather than the $5,500, as indicated in the following computations: Resale price........................................ ........ $17,500 Resale costs........................................ $1,600 ........ Purchase price and Incidental costs................. 10,500 ........ All improvements.................................... 2,500 14,600 ------------------- Payable to LHA...................................... ........ 2,900 ------------------------------------------------------------------------ (b) Residency requirements. The five-year note period does not end if the homeowner rents or otherwise does not use the home as his principal place of residence for any period within the first five years after he achieves ownership. Only the actual amount of time [[Page 295]] he is in residence is counted and the note shall be in effect until a total of five years time of residence has elapsed, at which time the homeowner may request the LHA to release him from the note, and the LHA shall do so. Sec. 904.115 Achievement of ownership by subsequent homebuyers. (a) Definition. In the event the initial homebuyer and his family vacate the home before having acquired ownership, a subsequent occupant who enters into a Homebuyer's Ownership Opportunity Agreement and who is not a successor pursuant to Sec. 904.107(l)(2) is herein called a ``subsequent homebuyer.'' (b) Determination of initial purchase price. The initial purchase price for a subsequent homebuyer shall be an amount equal to (1) the purchase price shown in the initial homebuyer's Purchase Price Schedule as of the date of this Agreement with the subsequent homebuyer plus (2) the amount, if any, by which the appraised fair market value of the home, determined or approved by HUD as of the same date, exceeds the purchase price specified in paragraph (b)(1) of this section. (c) Purchase price schedule. The subsequent homebuyer's Purchase Price Schedule shall be the same as the unexpired portion of the initial homebuyer's Purchase Price Schedule except that where his purchase price includes an additional amount as specified in paragraph (b)(2) of this section, the initial homebuyer's Purchase Price Schedule shall be followed by an Additional Purchase Price Schedule for such additional amount based upon the same monthly debt service and the same interest rate as applied to the initial homebuyer's Purchase Price Schedule. (d) Residual receipts. After payment in full of the LHA's debt, if there are any subsequent homebuyers who have not acquired ownership of their homes, the LHA shall continue to pay to HUD all residual receipts from the operation of the Project, including payments received on account of any Additional Purchase Price Schedules applicable to the homes, provided the aggregate amount of such payments of residual receipts does not exceed the aggregate amount of annual contributions paid by HUD with respect to the Project. Sec. 904.116 Transfer of title to homebuyer. When the homebuyer is to obtain ownership as described in Sec. 904.113 or Sec. 904.115, a closing date shall be mutually agreed upon by the parties. On the closing date the homebuyer shall pay the required amount of money to the LHA, sign the promissory note pursuant to Sec. 904.114, and receive a deed for the home. Sec. 904.117 Responsibilities of homebuyer after acquisition of ownership. After acquisition of ownership, each homeowner shall be required to pay to the LHA or to the homeowners association, as appropriate, a monthly fee for (a) the maintenance and operation of community facilities including utility facilities, if any, (b) the maintenance of grounds and other common areas and, (c) such other purposes as determined by the LHA or the homeowners association, as appropriate, including taxes and a provision for a reserve. This requirement shall be set out in the planned unit development or condominium documents which shall be recorded prior to the date of full availability, or in an LHA- homeowner contract in this regard. Sec. 904.118 Homeowners association--planned unit development (PUD). If the development is organized as a planned unit development: (a) Ownership and maintenance of common property. The common areas, sidewalks, parking lots, and other common property in the development shall be owned and maintained as provided for in the approved planned unit development (PUD) program except that the LHA shall be responsible for maintenance until such time as the homeowners association assumes such responsibility (see Sec. 904.112(d)). (b) Title restrictions. The title ultimately conveyed to each homebuyer shall be subject to restrictions and encumbrances to protect the rights and property of all other owners. The homeowners association shall have the [[Page 296]] right and obligation to enforce such restrictions and encumbrances and to assess owners for the costs incurred in connection with common areas and property and other responsibilities. (c) Votes in association. There shall be as many votes in the association as there are homes in the development, and, at the outset, all the voting rights shall be held by the LHA. As each home is conveyed to the homebuyer, one vote shall automatically go to the homeowner so that, when all the homes have been conveyed, the LHA shall no longer have any interest in the homeowners association. (d) Voting control. The LHA shall not lose its majority voting interest in the association as soon as a majority of the homes have been conveyed, unless the law of the state requires control to be transferred at a particular time, or the LHA so desires. If permitted by state law, provision shall be made for each home owned by the LHA to carry three votes, while each home owned by a homeowner shall carry one vote. Under this weighted voting plan, the LHA shall continue to have voting control until 75 percent of the homes have been acquired by homeowners. However, at its discretion, the LHA may transfer voting control to the homeowners when at least 50 percent of the homes have been acquired by the homeowners. Sec. 904.119 Homeowners association--condominium. If the development is organized as a condominium: (a) The LHA at the outset shall own each condominium unit and its undivided interest in the common areas; (b) All the land, including that land under the housing units, shall be a part of the common areas; (c) The homeowners association shall own no property but shall maintain and operate the common areas for the individual owners of the condominium units except that the LHA shall be responsible for maintenance until such time as the homeowners association assumes such responsibility (see Sec. 904.112(d)); (d) The percentage of undivided interest attached to each condominium unit shall be based on the ratio of the value of the units to the value of all units and shall be fixed when the development is completed. This percentage shall determine the homeowner's liability for the maintenance of the common areas and facilities; (e) Each homeowner's vote in the homeowners association shall be identical with the percentage of undivided interest attached to his unit; and (f) The LHA shall not lose its majority voting interest in the association as soon as units representing 50 percent of the value of all units have been conveyed, unless the law of the state requires control to be transferred at a particular time or the LHA so desires. For voting purposes, until units representing 75 percent of the value of all units have been acquired by homeowners, the total undivided interest attributable to the homes owned by the LHA shall be multiplied by three, if such weighted voting plan is permitted by state law. Under this plan, the LHA shall continue to maintain voting control until 75 percent of the homes have been acquired by homeowners. However, at its discretion, the LHA may transfer voting control to the homeowners when units representing at least 50 percent of the value of all units have been acquired by the homeowners. Sec. 904.120 Relationship of homeowners association to HBA. The HBA and the LHA may make arrangements to permit homebuyers to participate in homeowners association matters which affect the homebuyers. Such arrangements may include rights to attend meetings and to participate in homeowners association deliberations and decisions. Sec. 904.121 Use of appendices. Use of the following Appendices is mandatory for Projects developed under this subpart: Sec. 904.122 Statutory preferences. In selecting applicants for assistance under this part, the LHA must give preference, in accordance with the authorized preference requirements described in 24 CFR 5.410 through 5.430. Notwithstanding those preferences, the [[Page 297]] LHA can limit homeownership admission to eligible homeownership candidates. [59 FR 36651, July 18, 1994, as amended at 61 FR 9048, Mar. 6, 1996] Sec. Appendixes I-IV to Subpart B of Part 904 Appendix I--Annual Contributions Contract ``Special Provisions for Turnkey III Homeownership Opportunity Project'' Appendix II--Homebuyers Ownership Opportunity Agreement (Turnkey III) Appendix III--Certificate of Achievement of Homebuyer Status Appendix IV--Promissory Note for Payment Upon Resale by Homebuyer at Profit No modification may be made in format, content or text of these Appendices except (1) as required under state or local law as determined by HUD or (2) with approval of HUD. Sec. Appendix I to Subpart B of Part 904--Annual Contributions Contract (Subpart B) ( ) Special Provisions for Turnkey III Homeownership Opportunity Project No. __________. (1) The Local Authority agrees to operate the Project in accordance with requirements for the Homeownership Opportunity Program for Low- Income Families (Turnkey III) as prescribed by the Government. The Local Authority shall enter into an agreement with the occupant of each dwelling unit in the Project which agreement shall be in the form of the Homebuyers Ownership Opportunity Agreement approved by the Government, which form provides an opportunity for the acquisition of ownership of the dwelling unit by each occupant who has performed all of the obligations and conditions precedent imposed upon him by such agreement. Upon conveyance of any such dwelling unit, the Local Authority's outstanding obligations in respect to the Project shall be reduced by the amount received for such conveyance, and the Government's obligation for payment of annual contributions in respect to the Project shall be reduced by the amount allocable to the initial purchase price of the dwelling unit. The term ``initial purchase price'' as used in these Special Provisions shall have the same meaning as in the Homebuyers Ownership Opportunity Agreement, and the term ``dwelling unit'' shall have the same meaning as the term ``Home'' used in the Homebuyers Ownership Opportunity Agreement. (2) Failure of the Local Authority to enter into such Homebuyers Ownership Opportunity Agreements at the time and in the form as required by the Government, failure to perform any such agreement, and failure to meet any of its obligations under these Special Provisions shall constitute a Substantial Default under this Contract. (3) The books of account and records of the Local Authority shall be maintained to meet the requirements of the Homebuyers Ownership Opportunity Agreement as well as the other provisions of this Contract and in such manner as will at all times show the operating receipts, operating expenditures, reserves, residual receipts, and other required accounts for the Project separate and distinct from all other Projects under this Contract. (4) As of the Date of Full Availability, or at such earlier date as the Government may require, the Local Authority shall determine and submit to the Government for its approval the amount below which the Development Cost of the Project will in no event fall. Upon approval thereof by the Government, such amount shall constitute and be known as the ``Minimum Development Cost'' of the Project. The Local Authority shall issue its Project Loan Notes, Permanent Notes or Project Notes as the Government may require to finance the Minimum Development Cost. On each Annual Contribution Date the Government shall pay an annual contribution for the Project in an amount equal to the Maximum Contribution Percentage of the latest approved Minimum Development Cost. The first annual contribution shall be paid or made available as of the next Annual Contribution Date following the approval of the Minimum Development Cost of the Project. (5) Notwithstanding section 403(A)(4), the term ``Development Cost'' shall include interest on that portion of borrowed monies allocable to the Project for the period ending with the Date of Full Availability or such earlier date as may be specifically approved by the Government. (6) (a) During the __ \1\ year Maximum Contribution Period established for the Project, the Local Authority shall, within 60 days after the end of each Fiscal Year, pay to the Government all Residual Receipts of the Project for such Fiscal Year for application to the reduction of Annual Contributions payable by the Government with respect to the Project. --------------------------------------------------------------------------- \1\ 25 or 30, as applicable. --------------------------------------------------------------------------- (b) During the period of years immediately following and equal to the Maximum Contribution Period established for the Project, the Local Authority shall, within 60 days after the end of each Fiscal Year, pay to the Government all Residual Receipts of the Project for such Fiscal Year. [[Page 298]] (c) Following the end of the Fiscal Year in which the last dwelling unit has been conveyed by the Local Authority, the balance of the operating reserve held by the Local Authority shall be paid to the Government, provided that the aggregate amount of payments under (b) and (c) of this paragraph shall not exceed the aggregate amount of annual contributions paid by the Government with respect to the Project. (7) No part of the Funds on deposit in the Debt Service Fund or the Advance Amortization Fund with respect to any other Project under this Contract or the funds available for deposit in such Funds for such other Projects, shall be applied to the retirement of Notes issued for this Project, nor shall any such funds on deposit for this Project be used with respect to any other Project or Projects under this Contract. (8) To the extent that the provisions of this section conflict with other provisions of this Contract, the provisions of this section shall be controlling with respect to the Project. Sec. Appendix II to Subpart B of Part 904--Homebuyers Ownership Opportunity Agreement (Turnkey III) (Subpart B) part i This Agreement, made and entered into __________________, 19____, by and between __________ (herein called the ``Authority''), and __________ (herein called the ``Homebuyer''); witnesseth: In consideration of the agreements and covenants contained in this Agreement and in Homebuyers Ownership Opportunity Agreement Part II, which is hereby incorporated into this Agreement by reference, the Authority leases to the Homebuyer the following described land and improvements thereon together with an undivided interest in all common areas and property (herein called the ``Home'') located in the ________ Development (Project No. ____), which Home is identified and located as follows: [Insert address and legal description of location of Home, including rights with respect to common areas and property, and making reference to Book and Page No. in Recorder of Deeds Recorded]. A. Term of Agreement. The term of this Agreement shall commence on __________________, 19____, and shall expire at midnight on the last day of this same calendar month. Said term shall be extended automatically for successive periods of one calendar month for a total term of ____ \1\ years from the first day of the next calendar month unless the Homebuyer acquires title to the home pursuant to section 16 or 17 of Part II, as applicable, or unless this Agreement is terminated pursuant to section 24 of Part II. --------------------------------------------------------------------------- \1\ Fill in term of years equal to term of Purchase Price Schedule (and Additional Purchase Price Schedule, if applicable) (see Section 16 or 17 of Part II as applicable). --------------------------------------------------------------------------- B. Monthly Payment. 1. Until changed in accordance with this Agreement, the Homebuyer's Monthly Payment shall be $____ per month, due and payable on or before the first day of each month. If liability for the Monthly Payment shall start on a day other than the first day of a calendar month, or if for any reason the effective date of termination occurs on other than the last day of the month, the Monthly Payment for such month shall be proportionate to the period of occupancy during that month. 2. The amount of the Monthly Payment may be increased or decreased only by reason of changes in the Rent Schedule (see section 7c of Part II) or changes in the Homebuyer's family income or other circumstances (see section 7b of Part II). Any change in Monthly Payment shall become effective by written notice from the Authority to the Homebuyer as of the date specified in such notice, and such notice shall be deemed to constitute an Amendment to this Agreement. C. Option to Purchase. In consideration of the covenants contained herein, the Authority grants the Homebuyer an option to purchase the Home for the applicable purchase price, to be exercised in accordance with section 10d of Part II. D. Purchase Price. The Initial Purchase Price of this Home is $______ (this price has been determined in accordance with section 16 or 17 of Part II as applicable); this amount shall be reduced periodically in accordance with the schedule (hereinafter called Purchase Price Schedule) for that amount, which Schedule is hereby furnished the Homebuyer. E. Amount of NRMR. The balance (or deficit) in the NRMR on the date of this Agreement is $______. F. Homebuyers Association. Upon the signing of this Agreement, the Homebuyer's family automatically becomes a member of the Homebuyers Association, as provided in section 5 of Part II. G. Designation of Successor. For the purpose of section 25 of Part II, the designee and his address are:_______________________________________ ________________________________________________________________________ First Name Initial Last Name ________________________________________________________________________ Relationship [[Page 299]] H. Entire Agreement. THIS AGREEMENT (COMPRISING PARTS I AND II, THE PURCHASE PRICE SCHEDULE, THE NONROUTINE MAINTENANCE SCHEDULE, AND THE PROMISSORY NOTE) IS THE ENTIRE AGREEMENT BETWEEN THE AUTHORITY AND THE HOMEBUYER, AND, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, NO CHANGES SHALL BE MADE OTHER THAN IN WRITING SIGNED BY THE AUTHORITY AND THE HOMEBUYER. THIS AGREEMENT is signed in duplicate, original for all purposes. The Homebuyer hereby acknowledges receipt of one of these signed copies. WITNESSES: ________________________________________________________________________ ________________________________________________________________________ The Authority: By______________________________________________________________________ (Official Title) The Homebuyer(s): Initial Subsequent ________________________________________________________________________ ________________________________________________________________________ part ii terms and conditions 1. Introduction--a. The Home. The Home described in Part I of this Agreement is part of a Development, which the Authority has acquired or caused to be constructed. This Development contains a number of dwelling units including related land, and may also include common areas and property as described in Part I for occupancy by low-income families under lease-purchase agreements, each in the form of this Homebuyers Ownership Opportunity Agreement. This Development is financed by sale of the Authority's notes which will be amortized over the period of years specified in the Annual Contributions Contract relating to this Development. b. Annual Contributions Contract. The Authority has entered into an Annual Contributions Contract (``ACC'') with the Department of Housing and Urban Development (``HUD'') under which the Authority will receive Annual Contributions provided by HUD, and will perform certain operational functions, to provide housing for the Homebuyers and assist the Homebuyers in achieving homeownership. c. Management. The Authority may enter into a contract or contracts for management of the Development or for performance of management functions, by the Homebuyers Association (see section 5) or others. d. Definitions. (1) The term ``Authority'' means the local housing authority which acquires or develops a low-rent housing development with financial assistance from HUD, owns the Homes until title is transferred to the Homebuyers, and is responsible for the management of the homeownership opportunity program. (2) The term ``common property'' means the nondwelling structures and equipment, common areas, community facilities, and in some cases certain component parts of dwelling structures, which are contained in the Development: Provided, however, That in the case of a Development that is organized as a condominium or a planned unit development (PUD), the term ``common property'' shall have the meaning established by the condominium or PUD documents and the State law pursuant to which the condominium or PUD is organized, under the terms, ``common areas,'' ``common facilities,'' ``common elements,'' ``common estate,'' or other similar terms. (3) The term ``Development'' means the entire undertaking including all real and personal property, funds and reserves, rights, interests and obligations, and activities related thereto. (4) The term ``EHPA'' means the Earned Home Payments Account established and maintained pursuant to section 10 of the Agreement. (5) The term ``Homebuyer'' means the member or members of a low- income family who have executed a Homebuyers Ownership Opportunity Agreement with the Authority. (6) The term ``Homebuyers Association'' (HBA) means an organization as defined in section 5 of this Agreement. (7) The term ``Homeowner'' means a Homebuyer who has acquired title to his Home. (8) The term ``Homeowners Association'' means an association comprised of Homeowners, including condominium associations, having responsibilities with respect to common property. (9) The term ``HUD'' means the Department of Housing and Urban Development which provides the Authority with financial assistance through loans and annual contributions and technical assistance in development and operation. (10) The term ``NRMR'' means the Nonroutine Maintenance Reserve established and maintained pursuant to section 11 of this Agreement. (11) The term ``Project'' is used to refer to the Development in relation to matters specifically related to the Annual Contributions Contract. 2. The Homebuyers Ownership Opportunity Agreement. Under this Homebuyers Ownership Opportunity Agreement, the Homebuyer may achieve ownership of the home described in Part I by making the required monthly payments and providing maintenance and repairs to build up a credit in his Earned Home Payments Account (hereinafter called ``EHPA''). While the Homebuyer [[Page 300]] is performing his obligations, the purchase price will be reduced in accordance with the Purchase Price Schedule, so that, while this purchase price is being reduced, the Homebuyer is increasing the amount of his EHPA. The Homebuyer may also make voluntary payments to his EHPA which will enable him to acquire ownership more quickly. The Homebuyer may take title to his Home when he is able to finance or pay in full the balance of the purchase price as shown on the Purchase Price Schedule plus the costs incidental to acquiring ownership, as provided in section 16 or 17, as applicable. 3. Status of Homebuyer. Until the Homebuyer satisfies the conditions set forth in section 10d precedent to the exercise of his option to purchase the Home for the applicable purchase price, the Homebuyer shall have the status of a lessee of the Authority from month to month with an obligation to build up such balance in his EHPA within the first two years of his occupancy and to continue adding to his EHPA thereafter. For convenience the term ``Homebuyer'' also refers to the occupant during his status as a lessee. 4. Counseling of Homebuyers. The Authority shall provide training and counseling, as required and approved by HUD. The Authority's own staff and resources, existing community resources, a private agency under contract with the Authority, or any combination of the three, shall be utilized to prepare Homebuyers for the rights, responsibilities, and obligations of homeownership including participation in the Homebuyers Association. The Homebuyer agrees to participate in and cooperate fully in all official training and counseling activities. 5. Homebuyers Association.\2\ Upon the signing of this Agreement, the Homebuyer's family automatically becomes a member of the Homebuyers Association having membership and purposes as set forth in the Articles of Incorporation of said Association. In the absence of a duly organized Homebuyers Association, the Authority shall be free to act without the HBA action required by this Agreement. --------------------------------------------------------------------------- \2\ There may be cases, such as where the homes are on scattered sites, where there is no Homebuyers Association but an alternative method for homebuyer representation and counseling is provided (see 24 CFR 904.307). In such cases, section 5 and other portions of this Agreement referring to the Homebuyers Association should be modified to reflect the alternative method provided for homebuyer representation and counseling. --------------------------------------------------------------------------- 6. Routine maintenance, repair and use of premises. a. Routine maintenance. The Homebuyer shall be responsible for the routine maintenance of his dwelling and grounds, to the satisfaction of the Homebuyers Association and the Authority. This routine maintenance includes the work (labor and materials) of keeping the dwelling structure, grounds and equipment in good repair, condition and appearance so that they may be utilized continually at their designed capacities and at the satisfactory level of efficiency for their intended purposes, and in conformity with the requirements of local housing codes and applicable regulations and guidelines of HUD. It includes repairs (labor and materials) to the dwelling structure, plumbing fixtures, dwelling equipment (such as range and refrigerator), shades and screens, water heaters, heating equipment and other component parts of the dwelling. It also includes all interior painting and maintenance of the grounds (lot) on which the dwelling is located. It does not include maintenance and replacements provided for by the Nonroutine Maintenance Reserve described in Section 11. b. Repair of damage. In addition to his obligation for routine maintenance, the Homebuyer shall be responsible for repair of any damage caused by the Homebuyer, members of his family, or visitors. c. Care of Home. The Homebuyer agrees to keep his dwelling in a sanitary condition; to cooperate with the Authority and the Homebuyers Association in keeping and maintaining the common area and property, including fixtures and equipment, in good condition and appearance; and to follow all rules of the Authority and of the Homebuyers Association concerning the use and care of the dwellings and the common areas and property. d. Inspections. The Homebuyer agrees to permit officials, employees, or agents of the Authority, and of the Homebuyers Association to inspect his Home at reasonable hours and intervals in accordance with rules established by the Authority and the Homebuyers Association. e. Use of Home. The Homebuyer shall not (1) sublet his Home without the prior written approval of the Authority and HUD, (2) use or occupy his home for any unlawful purpose nor for any purpose deemed hazardous by insurance companies on account of fire and other risks, or (3) provide accommodations (unless approved by the Homebuyers Association and the Authority) to boarders or lodgers. The Homebuyer agrees to use the Home only as a place to live for himself and his family (as identified in his initial application or by subsequent amendment with the approval of the Authority), for children thereafter born to or adopted by members of such family, and for aged or widowed parents of the Homebuyer or spouse who may join the household. f. Obligations with respect to other persons and property. Neither the Homebuyer nor any member of his family shall interfere with rights of other occupants of the Development, or damage the common property or [[Page 301]] the property of others, or create physical hazards. g. Structural changes. A Homebuyer shall not make any structural changes in or additions to his Home unless the Authority has first determined in writing that such change would not (1) impair the value of the unit, the surrounding units, or the Development as a whole, or (2) affect the use of the Home for residential purposes, or (3) violate HUD requirements as to construction and design. Any changes made in accordance with this paragraph shall be at the Homebuyer's expense, and in the event of termination of this Agreement before the Homebuyer acquires title to the Home, whether by reason of the Homebuyer's default or otherwise, the Homebuyer shall not be entitled to any compensation on account of his having made such changes. h. Statement of condition and repair. When the Homebuyer moves in, the Authority shall inspect the Home and shall give the Homebuyer a written statement, to be signed by the Authority and the Homebuyer, of the condition of the Home and the equipment in it. Should the Homebuyer vacate, the Authority shall inspect the Home and give the Homebuyer a written statement of the repairs and other work, if any, required to put the Home in good condition for the next occupant (see section 10k). The Homebuyer or his representative, or both, may join in any such inspections with the Authority and the Homebuyer Association. 7. Monthly payments by Homebuyer--a. Determination of amount. Except as otherwise provided hereinafter, the Homebuyer agrees to pay to the Authority, so long as this Agreement is in effect, a required Monthly Payment as lease rental in an amount determined in accordance with a schedule adopted by the Authority and approved by HUD. Although the total monthly housing cost consists of the sum of the break-even amount (see section 8) and the debt service (payment of principal and interest) on the applicable share of the capital cost of the Development, the Homebuyer, so long as he qualifies as low income, is not required to pay the full amount, but is assisted by HUD annual contributions. The schedule shall provide for payments to be based upon a percentage of the family's adjusted monthly income and shall indicate allowances for those utilities which the Homebuyer will pay for directly. b. Changes in monthly payment due to changes in family income or other circumstances. The required Monthly Payment may be adjusted as a result of the Authority's regularly or specially scheduled reexamination of the Homebuyer's family income and family composition. Interim changes may be made in accordance with the Authority's policy on reexaminations, or under unusual circumstances, at the request of the Homebuyer, if both the Authority and the Homebuyers Association agree that such action is warranted. c. Changes in monthly payment due to changes in rent schedules. The required Monthly Payment may also be adjusted by changes in the required percentage of income to reflect (1) changes in operating expense as described in section 9b and (2) changes in utility allowances. d. Acceptance of monthly payment. The Authority shall not refuse to accept monthly payments because of any other charges (i.e., other than overdue monthly payments) owed by the Homebuyer to the Authority; however, by accepting monthly payments under such circumstances the Authority shall not be deemed to have waived any of its rights and remedies with respect to such other charges. e. Application of monthly payment. The Homebuyer's Monthly Payment shall be applied by the Authority as follows: First, to the credit of the Homebuyer's EHPA pursuant to section 10 below; second, to the credit of the Nonroutine Maintenance Reserve for the Home pursuant to Section 11 below; and third, for payment of Monthly Operating Expense, including contribution to Operating Reserve, as provided in section 9 below. 8. Break-even amount--a. Definition. The term ``Break-even Amount'' means the minimum monthly amount needed to provide funds for: (1) Monthly Operating Expense, including provision for a contribution to Operating Reserve, pursuant to section 9a below; (2) The monthly amount to be credited to the Homebuyer's EHPA pursuant to Section 10 below; and (3) The monthly amount to be credited to the Nonroutine Maintenance Reserve for the Home pursuant to section 11 below. b. Monthly payment in excess of break-even amount. When the Homebuyer's required Monthly Payment exceeds the applicable Break-even Amount, the excess shall constitute additional Project income and shall be deposited and used in the same manner as other Project income. c. Monthly payment below break-even amount. When the Homebuyer's required Monthly Payment is less than the applicable Break-even Amount, the deficit shall be applied as a reduction of that portion of the Monthly Payment designated for Operating Expense (i.e., as a reduction of project income). In all such cases, the EHPA and the NRMR shall be credited with the amount included in the Break-even Amount for these accounts. 9. Monthly operating expense--a. Definition and categories of monthly operating expense. The term ``monthly operating expense'' means the monthly amount needed for the following purposes: [[Page 302]] (1) Administration. Administrative salaries, travel, legal expenses, office supplies, postage, telephone and telegraph, etc.; (2) Homebuyer services. Authority expenses in the achievement of social goals, including costs such as salaries, publications, payments to the HBA to assist its operation, contract and other costs; (3) Utilities. Those utilities (such as water), if any to be furnished by the Authority as part of operating expense; (4) Routine maintenance--Common property. For community building, grounds, and other common areas, if any. The amount required for routine maintenance of common property depends upon the type of common property included in the Development and the extent of the Authority's responsibility for maintenance (see also section 9c); (5) Protective services. The cost of supplemental protective services paid by the Authority for the protection of persons and property; (6) General expense. Premiums for fire and other insurance, payments in lieu of taxes to the local taxing body, collection losses, payroll taxes, etc.; (7) Nonroutine maintenance--Common property (contribution to operating reserve). Extraordinary maintenance of equipment applicable to the community building and grounds, and unanticipated items for non- dwelling structures (see section 12). b. Monthly operating expense rate. The monthly operating expense rate for each fiscal year shall be established on the basis of the Authority's HUD-approved operating budget for that fiscal year. The operating budget may be revised during the course of the fiscal year in accordance with HUD requirements. If it is subsequently determined that the actual operating expense for a fiscal year was more or less than the amount provided by the monthly operating expense established for that fiscal year, the rate of monthly operating expense to be established for the next fiscal year may be adjusted to account for the difference (see section 12). Such adjustment may result in a change in the required monthly payment (see section 7c). c. Provision for common property maintenance. During the period the Authority is responsible for the maintenance of common property, the annual operating budget and the monthly operating expense rate shall include the amount required for routine maintenance of all common property in the Development, even though a number of the homes may have been acquired by homebuyers. During such period, this amount shall be computed on the basis of the total number of homes in the Development (i.e., the annual amount budgeted for routine maintenance of common property shall be divided by the number of Homes in the Development, resulting in the annual amount for each Home; this figure shall in turn be divided by 12 to determine the monthly amount to be included in the monthly operating expense (and in the break-even amount) for routine maintenance of common property). After the Homeowners Association assumes responsibility for maintenance of common property, the monthly operating expense (and break-even amount) shall include an amount equal to the monthly assessment by the homeowners association for the remaining homes owned by the Authority (see section 11 for nonroutine maintenance of common property). d. Posting of monthly operating expense statement. A statement showing the budgeted monthly amount allocated in the current operating budget to each operating expense category shall be provided to the HBA and a copy shall be provided to the Homebuyer upon request. 10. Earned Home Payments Account (EHPA)--a. Credits to the account. The Authority shall establish and maintain a separate EHPA for each Homebuyer. Since the Homebuyer is responsible for maintaining his Home as provided in section 6, a portion of his required Monthly Payment equal to the Authority's estimate, approved by HUD, of the monthly cost for such routine maintenance, taking into consideration the relative type and size of the Home, shall be set aside in his EHPA. In addition, this account shall also be credited with (1) any voluntary payments made pursuant to section 10g and (2) any amount earned through the performance of maintenance pursuant to paragraph e of this section. All amounts received by the Authority for credit to the Homebuyer's account, including credits for performance of maintenance pursuant to paragraph e of this section, shall be held by the Authority for the account of the Homebuyer. b. Use of EHPA funds. The unused balance in the Homebuyer's EHPA may be used toward purchase of the Home as provided in section 16 or 17 as applicable, or shall be payable to the Homebuyer if he leaves the Project as provided in paragraph k of this section. c. Charges to the account. (1) If for any reason the Homebuyer is unable or fails to perform any item of required maintenance as described in section 6, the Authority shall arrange to have the work done in accordance with the procedures established by the Authority and the HBA and the cost thereof shall be charged to the Homebuyer's EHPA. Inspections of the Home shall be made jointly by the Authority and the HBA. (2) To the extent nonroutine maintenance expense is made necessary by the negligence of the Homebuyer as determined by the HBA and the Authority (see section 11), the cost thereof shall be charged to the EHPA. [[Page 303]] d. Exercise of option; required amount in EHPA. The Homebuyer may exercise his option to buy the Home, by paying the applicable purchase price pursuant to section 16 or 17, only after satisfying the following conditions precedent: (1) Within the first two years of his occupancy, he has achieved a balance in his EHPA equal to 20 times the amount of the monthly EHPA credit as initially determined in accordance with paragraph a of this section; (2) He has met, and is continuing to meet, the requirements of this Agreement; (3) He has rendered, and is continuing to render, satisfactory performance of his responsibilities to the HBA. When the Homebuyer has met these conditions precedent, the Authority shall give the Homebuyer a certificate to that effect. After achieving the required minimum EHPA balance within the first two years of his occupancy, the Homebuyer shall continue to be obligated to provide the required maintenance, thereby continuing to add to his EHPA. If the Homebuyer fails to meet either his obligation to achieve the minimum EHPA balance as specified or his obligation thereafter to continue adding to the EHPA, the Authority and the HBA shall investigate and take appropriate corrective action, including termination of this Agreement by the Authority in accordance with section 24. e. Additional equity through other maintenance. Besides the maintenance which the Homebuyer must provide pursuant to section 6, the Homebuyer may earn additional EHPA credits by providing in whole or in part any of the maintenance necessary to the common property of the Development or maintenance for which the Nonroutine Maintenance Reserve is established (see section 11). Such maintenance may be provided by the Homebuyer and credit earned therefor only pursuant to a prior written agreement between the Homebuyer and the Authority (or the Homeowners Association, depending on who has responsibility for maintenance of the property involved), covering the nature and scope of the work and the amount of credit the Homebuyer is to receive. Upon completion of such work, the agreed amount shall be charged to the appropriate maintenance account and credited to the Homebuyer's EHPA. f. Investment of excess. When the aggregate amount of all EHPA balances exceeds the estimated reserve requirements for 90 days, the Authority shall notify the HBA and shall invest the excess in federally- insured savings accounts, federally insured credit unions, and/or securities approved by HUD and in accordance with any recommendations made by the HBA. If the HBA wishes to participate in the investment program it should submit periodically to the Authority a list of HUD approved securities, bonds, or obligations which the HBA reecommends for investment by the Authority of the funds in the EHPAs. Interest earned on the investment of such funds shall be prorated and credited to each Homebuyer's EHPA in proportion to the amount in each such reserve account. Periodically, but not less often than semi-annually, the Authority shall prepare a statement showing: (1) the aggregate amount of all EHPA balances; (2) the aggregate amount of investments (savings accounts and/ or securities) held for the account of all the Homebuyers' EHPAs, and (3) the aggregate uninvested balance of all the Homebuyers' EHPAs. This statement shall be made available to any authorized representative of the HBA. g. Voluntary payments. To enable the Homebuyer to acquire title to the Home within a shorter period, he may either periodically or in a lump sum voluntarily make payments over and above his required monthly payments. Such voluntary payments shall be deposited to his credit in his EHPA. h. Delinquent monthly payments. Under exceptional circumstances as determined by the HBA and the Authority, the Homebuyer's EHPA may be used to pay his delinquent required monthly payments, provided the amount used for this purpose does not seriously deplete the account and provided that the Homebuyer agrees to cooperate in such counseling as may be made available by the Authority or the HBA. i. Annual statement to homebuyer. The Authority shall provide an annual statement to the Homebuyer specifying at least (1) the amount in his EHPA, and (2) the amount in his Nonroutine Maintenance Reserve. During the year, any maintenance or repair done on the dwelling by the Authority which is chargeable to the EHPA or to the Nonroutine Maintenance Reserve, shall be accounted for through a work order. The Homebuyer shall receive a copy of all such work orders for his Home. j. Withdrawal and assignment. The Homebuyer shall have no right to assign, withdraw, or in any way dispose of the funds in his EHPA except as provided in this section or in sections 16 and 17. k. Application of EHPA upon vacating of dwelling. (1) In the event this Agreement is terminated or if the Homebuyer vacates the Home, the Authority shall charge against the Homebuyer's EHPA the amounts required to pay; (i) The amount due the Authority, including the monthly payments the Homebuyer is obligated to pay up to the date he vacates; (ii) the monthly payment for the period the Home is vacant, not to exceed 30 days from the date of notice of intention to vacate, or if the Homebuyer failed to give notice of intention to vacate, 30 days from the date the Home is put in good condition for the next occupant in conformity with section 6; and (iii) the cost of any routine [[Page 304]] maintenance, and of any nonroutine maintenance attributable to the negligence of the Homebuyer, required to put the Home in good condition for the next occupant in conformity with section 6. (2) If the Homebuyer's EHPA balance is not sufficient to cover all of these charges, the Authority shall require the Homebuyer to pay the additional amount due. If the amount in the EHPA exceeds these charges, the excess shall be paid the Homebuyer. (3) Settlement with the Homebuyer shall be made promptly after the actual cost of repairs to the dwelling has been determined (see paragraph k(1)(iii) of this section), provided that the Authority shall make every effort to make such settlement within 30 days from the date the Homebuyer vacates. The Homebuyer may obtain a settlement within 7 days of the date he vacates, even though the actual cost of such repairs has not yet been determined, if he has given the Authority notice of intention to vacate 30 days prior to the date he vacates and if the amount to be charged against his EHPA for such repairs is based on the Authority's estimate of the cost thereof (determined after consultation with the appropriate representative of the HBA). 11. Nonroutine maintenance reserve (NRMR)--a. Purpose of reserve. The Authority shall establish and maintain a separate nonroutine maintenance reserve (NRMR) for the Home, using a portion of the Homebuyer's monthly payment. The purpose of the NRMR is to provide funds for the nonroutine maintenance of the Home, which consists of the infrequent and costly items of maintenance and replacement shown on the Nonroutine Maintenance Schedule for the Home (see paragraph b of this section). Such maintenance may include the replacement of dwelling equipment (such as range and refrigerator), replacement of roof, exterior painting, major repairs to heating and plumbing systems, etc. The NRMR shall not be used for nonroutine maintenance of common property, or for nonroutine maintenance relating to the Home to the extent such maintenance is attributable to the Homebuyer's negligence or to defective materials or workmanship. b. Amount of reserve. The amount of the monthly payments to be set aside for NRMR shall be determined by the Authority, with the approval of HUD, on the basis of the Nonroutine Maintenance Schedule showing the amount estimated to be needed for nonroutine maintenance of the Home during the term of this Agreement, taking into consideration the type of construction and dwelling equipment. This Schedule shall (1) list each item of nonroutine maintenance (e.g., range, refrigerator, plumbing, heating system, roofing, tile flooring, exterior painting, etc.), (2) show for each listed item the estimated frequency of maintenance or useful life before replacement, the estimated cost of maintenance or replacement (including installation) for each occasion, and the annual reserve requirement, and (3) show the total reserve requirements for all the listed items, on an annual and a monthly basis. This Schedule shall be prepared by the Authority and approved by HUD as part of the Submission required to determine the financial feasibility of the Project. The Schedule shall be revised after approval of the working drawings and specifications, and shall thereafter be reexamined annually in the light of changing economic conditions and experience. c. Charges to reserve. (1) The Authority shall provide the nonroutine maintenance necessary for the Home and the cost thereof shall be funded as provided in paragraph c(2) and c(3) of this section. Such maintenance may be provided by the Homebuyer but only pursuant to a prior written agreement with the Authority covering the nature and scope of the work and the amount of credit the Homebuyer is to receive. The amount of any credit shall, upon completion of the work, be credited to the Homebuyer's EHPA and charged as provided in paragraph c(2) of this section. (2) The cost of nonroutine maintenance shall be charged to the NRMR for the Home except that (i) to the extent such maintenance is attributable to the fault or negligence of the Homebuyer, the cost shall be charged to the Homebuyer's EHPA after consultation with the HBA if the Homebuyer disagrees, and (ii) to the extent such maintenance is attributable to defective materials or workmanship not covered by warranty, or even though covered by warranty if not paid for through no fault or negligence of the Homebuyer, the cost shall be charged to the appropriate operating expense account of the Project. (3) In the event the amount charged against the NRMR exceeds the balance therein, the difference (deficit) shall be made up from continuing monthly credits to the NRMR based upon the Homebuyer's monthly payments. If there is still a deficit when the Homebuyer acquires title, the Homebuyer shall pay such deficit at settlement. d. Transfer of NRMR. (1) In the event this Agreement is terminated, the Homebuyer shall not receive any balance or be required to pay any deficit in the NRMR. When a subsequent Homebuyer moves in, the NRMR shall continue to be applicable to the Home in the same amount as if the preceding Homebuyer had continued in occupancy. (2) In the event the Homebuyer purchases the Home, and there remains a balance in the NRMR, the Authority shall pay such balance to the Homebuyer at settlement. In the event the Homebuyer purchases the Home and there is a deficit in the NRMR, the [[Page 305]] Homebuyer shall pay such deficit to the Authority at settlement. e. Investment of excess. (1) When the aggregate amount of the NRMR balances for all the Homes exceeds the estimated reserve requirements for 90 days, the Authority shall invest the excess in federally insured savings accounts, federally insured credit unions, and/or securities approved by HUD. Income earned on the investment of such funds shall be prorated and credited to each Homebuyer's NRMR in proportion to the amount in each reserve account. (2) Periodically, but not less often that semi-annually, the Authority shall prepare a statement showing (i) the aggregate amount of all NRMR balances, (ii) the aggregate amount of investments (savings accounts and/or securities) held for the account of the NRMR and (iii) the aggregate uninvested balance of the NRMRs. A copy of this statement shall be made available to any authorized representative of the HBA. 12. Operating reserve--a. Purpose of reserve. To the extent that total operating receipts (including subsidies for operations) exceeds total operating expenditures of the Project, the LHA shall establish an operating reserve up to the maximum approved by HUD in connection with its approval of the annual operating budgets for the Project. The purpose of this reserve is to provide funds for (1) the infrequent but costly items of nonroutine maintenance and replacements of common property, taking into consideration the types of items which constitute common property, such as nondwelling structures and equipment, and, in certain cases, common elements of dwelling structures, (2) nonroutine maintenance for the Homes to the extent such maintenance is attributable to defective materials or workmanship not covered by warranty, (3) working capital for payment of a deficit in a Homebuyer's NRMR, until such deficit is offset by future monthly payments by the Homebuyer or at settlement in the event the Homebuyer should purchase, and (4) a deficit in the operation of the Project for a fiscal year, including a deficit resulting from monthly payments totaling less than the break-even amount for the Project. b. Nonroutine maintenance--__________ common property (contribution to operating reserve). The amount under this heading to be included in operating expense (and in the break-even amount) established for the fiscal year (see sections 8 and 9) shall be determined by the Authority, with the approval of HUD, on the basis of estimates of the monthly amount needed to accumulate an adequate reserve for the items described in paragraph a(1) of this section. This amount shall be subject to revision in the light of experience. This contribution to the Operating Reserve shall be made only during the period the Authority is responsible for the maintenance of any common property; and during such period, the amount shall be determined on the basis of the requirements of all common property in the Development in a manner similar to that explained in Section 9. When the Operating Reserve reaches the maximum authorized in paragraph c of this Section, the break-even (monthly operating expense) computations (see Sections 8 and 9) for the next and succeeding fiscal years need not include a provision for this contribution to the Operating Reserve unless the balance of the Reserve is reduced below the maximum during any such succeeding fiscal year. c. Maximum operating reserve. The maximum operating reserve that may be retained by the Authority at the end of any fiscal year shall be the sum of (1) one-half of total routine expense included in the operating budget approved for the next fiscal year and (2) one-third of total break-even amounts included in the operating budget approved for the next fiscal year; provided that such maximum may be increased if necessary as determined or approved by HUD. Total routine expense means the sum of the amounts budgeted for administration, homebuyer services. Authority-supplied utilities, routine maintenance of common property, protective services, and general expense or other category of day-to-day routine expense (see section 9 above for explanation of various categories of expense). d. Transfer to Homeowners Association. The Authority shall be responsible for and shall retain custody of the Operating Reserve until the Homeowners acquire voting control of the Homeowners Association (see sections 21c and 22f). When the Homeowners acquire voting control, the Homeowners Association shall then assume full responsibility for management and maintenance of common property under a plan approved by HUD, and there shall be transferred to the Homeowners Association a portion of the Operating Reserve then held by the Authority, as determined by the Authority with the approval of HUD. e. Disposition of reserve. If, at the end of a fiscal year, there is an excess over the maximum Operating Reserve, this excess shall be applied to the operating deficit of the Project, if any, and any remainder shall be paid to HUD. Following the end of the fiscal year in which the last Home has been conveyed by the Authority, the balance of the Operating Reserve held by the Authority shall be paid to HUD, provided that the aggregate amount of payments by the Authority under this paragraph shall not exceed the aggregate amount of annual contributions paid by HUD with respect to the Project. 13. Annual statement and copies of work orders to homebuyer. a. The Authority shall maintain books of accounts and provide a statement at least annually to each Homebuyer which will show (i) the amount in his [[Page 306]] EHPA, and (2) the amount in the NRMR for his Home. b. During the year, any maintenance or repair done on the dwelling by the Authority, which is chargeable to the EHPA or to the NRMR shall be accounted for through a work order. The Homebuyer shall receive a copy of all such work orders for his Home. 14. Insurance. a. Until transfer of title to the Homebuyer, the Authority shall carry all insurance prescribed by HUD including fire and extended coverage insurance upon the Home in such form and amount and with such company or companies as it determines. The Authority shall not carry any insurance on the Homebuyer's furniture, clothing, automobile, or any other personal property, or personal liability insurance covering the Homebuyer. b. In the event the Home is damaged or destroyed by fire or other casualty, the Authority shall consult with the Homebuyer as to whether the Home shall be repaired or rebuilt. If the Authority determines that the Home should not be repaired or rebuilt but the Homebuyer disagrees, the matter shall be submitted to HUD for final determination. If the final determination is that the Home should not be repaired or rebuilt, the Authority shall terminate this Agreement upon reasonable notice to the Homebuyer. In such case, the Homebuyer shall be paid the balance in his EHPA and (to assist him in connection with relocation expenses) the balance in his NRMR, less amounts, if any, due from him to the Authority, including Monthly Payments he may be obligated to pay. c. In the event of termination or if the Home must be vacated during the repair period, the Authority will use its best efforts to assist in relocating the Homebuyer. If the Home must be vacated during the repair period, Monthly Payments shall be suspended during the vacancy period. 15. Eligibility for continued occupancy. a. The Homebuyer shall cease to be eligible for continued occupancy with the aid of HUD annual contributions when the Authority determines the Homebuyer's adjusted monthly income has reached, and is likely to continue at, a level at which the Homebuyer's total payment equals or exceeds the monthly housing cost (see paragraph b of this section). In such an event, if the Authority determines, with HUD approval, that suitable financing is available, the Authority shall notify the Homebuyer that he or she must either: (1) Purchase the Home; or (2) move from the Development. If, however, the Authority determines that, because of special circumstances, the family is unable to find decent, safe and sanitary housing within the family's financial reach although making every reasonable effort to do so, the family may be permitted to remain for the duration of such a situation if it pays as rent a monthly payment consistent with its adjusted monthly income, in accordance with applicable HUD regulations prescribing rental payments for families in housing assisted under the United States Housing Act of 1937. Such a monthly payment shall also be payable by the family if it continues in occupancy without purchasing the home because suitable financing is not available. b. The term ``monthly housing cost,'' as used in this section means the sum of: (1) The monthly debt service amount shown on the Purchase Price Schedule (except where the Homebuyer can purchase the Home by the method described in section 16 below); (2) one-twelfth of the annual real property taxes which the Homebuyer will be required to pay as a Homeowner; (3) one-twelfth of the annual premium attributable to fire and extended coverage insurance carried by the Authority with respect to the Home; (4) the current monthly per unit amount budgeted for routine maintenance (EHPA) and routine maintenance-common property; and (5) the current Authority and HUD approved monthly allowance for utilities paid for directly by the Homebuyer plus the monthly cost of utilities supplied by the Authority. 16. Achievement of ownership by initial homebuyer--a. Determination of initial purchase price. The Authority shall determine the initial purchase prices of the Homes by two basic steps, as follows: Step 1. The Authority shall take the Estimated Total Development Cost (including the full amount for contingencies as authorized by HUD) of the Development as shown in the Development Cost Budget in effect upon award of the Main Construction Contract or execution of the Contract of Sale, and shall deduct therefrom the amounts, if any, attributed to (1) relocation costs, (2) counseling and training costs, and (3) the cost of any community, administration or management facilities including the land, equipment and furnishings attributable to such facilities as set forth in the development program for the Development. The resulting amount is herein called Estimated Total Development Cost for Homebuyers. Step 2. The Authority shall apportion the Estimated Total Development Cost for Homebuyers among all the Homes in the Development. This apportionment shall be made by obtaining an FHA appraisal of each Home, and adjusting such appraised values (upward or downward) by the percentage difference between the total of the appraisal for all the Homes and the Estimated Total Development Cost for Homebuyers. The adjusted amount for each Home shall be the Initial Purchase Price for that Home. b. Purchase Price Schedule. The Homebuyer shall be provided with a Purchase Price Schedule showing (1) the monthly declining [[Page 307]] purchase price over a 30-year period, \3\ commencing with the initial purchase price on the first day of the month following the effective date of this Agreement and (2) the monthly debt service amount upon which the Schedule is based. This Schedule and debt service amount shall be computed on the basis of the initial purchase price, a 30-year period, \3\ and a rate of interest equal to the minimum loan interest rate as specified in the Annual Contributions Contract for the Project on the date of HUD approval of the Development Cost Budget, described in paragraph a of this section, rounded up, if necessary, to the next multiple of one-fourth of one percent (\1/4\ percent). --------------------------------------------------------------------------- \3\ Change to 25-year period where appropriate pursuant to Sec. 904.101(b)(3) of this subpart. --------------------------------------------------------------------------- c. Methods of Purchase. (1) The Homebuyer may achieve ownership when the amount in his EHPA, plus such portion of the NRMR as he wishes to use for the purchase, is equal to the purchase price as shown at that time on his Purchase Price Schedule plus all Incidental Costs (``Incidental Costs'' means the costs incidental to acquiring ownership, including, but not limited to, the costs for a credit report, field survey title examination, title insurance, and inspections, the fees for attorneys other than the LHA's attorney, mortgage application and organization, closing and recording, and the transfer taxes and loan discount payment if any). If for any reason title to the Home is not conveyed to the Homebuyer during the month in which such circumstances occur, the purchase price shall be fixed at the amount specified for such month and the Homebuyer shall be refunded (i) the net additions, if any, credited to his EHPA subsequent to such month, and (ii) such part of the monthly payments made by the Homebuyer after the purchase price has been fixed which exceeds the sum of the break-even amount attributable to the Home and the interest portion of the debt service shown in the Purchase Price Schedule. (2) Where the sum of the purchase price and Incidental Costs is greater than the amounts in the Homebuyer's EHPA and NRMR, the Homebuyer may achieve ownership by obtaining financing for or otherwise paying the excess amount. The purchase price shall be the amount shown on his Purchase Price Schedule for the month in which the settlement date for the purchase occurs. d. The maximum period for achieving ownership shall be 30 years, but depending upon increases in the Homebuyer's income and the amount of credit which the Homebuyer can accumulate through maintenance and voluntary payments, the period may be shortened accordingly. 17. Achievement of Ownership by Subsequent Homebuyer--a. Definition. In the event the initial Homebuyer and his family vacate the Home before having acquired ownership, a subsequent occupant who enters into a Homebuyer's Ownership Opportunity Agreement and who is not a successor pursuant to section 25 is herein called ``Subsequent Homebuyer.'' b. Determination of Initial Purchase Price. The initial purchase price for a subsequent Homebuyer shall be an amount equal to (1) the purchase price shown in the initial Homebuyer's Purchase Price Schedule as of the date of this Agreement with the subsequent Homebuyer plus (2) the amount, if any, by which the appraised fair market value of the Home determined or approved by HUD as of the same date, exceeds the purchase price specified in (1). In the event such appraised value has not been determined by the date of execution of this Agreement, the amount of the Initial Purchase Price shall be inserted in part I, section D after this determination has been made, with appropriate initialling or signing by the parties. c. Purchase Price Schedule. The Subsequent Homebuyer's Purchase Price Schedule shall be the same as the unexpired portion of the initial Homebuyer's Purchase Price Schedule except that where his purchase price includes an additional amount as specified in paragraph b(2) of this section, the initial Homebuyer's Purchase Price Schedule shall be followed by an Additional Purchase Price Schedule for such additional amount based upon the same monthly debt service and the same interest rate as applied to the initial Homebuyer's Purchase Price Schedule. 18. Transfer of Title to Homebuyer. When the Homebuyer is to obtain ownership, a closing date shall be mutually agreed upon by the parties. On the closing date, the Homebuyer shall pay the required amount of money to the Authority, sign the promissory note pursuant to section 19, and receive a deed for the Home. 19. Payment Upon Resale at Profit--a. Promissory Note. (1) When a Homebuyer (whether Initial or Subsequent Homebuyer) achieves ownership, he shall sign a note obligating him to make a payment to the Authority, subject to the provisions of paragraph (a)(2) of this section, in the event he resells his Home at a profit within 5 years of actual residence in the Home after he becomes a Homeowner. If, however, the Homeowner should purchase and occupy another Home within one year (18 months in case of a newly constructed home) of the resale of the Turnkey III Home, the Authority shall refund to the Homeowner the amount previously paid by him under the note, less the amount, if any, by which the resale price of the Turnkey III Home exceeds the acquisition price of the new home, provided that application for such refund shall be made no later than 30 days after the date of acquisition of the new home. [[Page 308]] (2) The note to be signed by the Homebuyer pursuant to paragraph (a)(1) of this section shall be secured by a second mortgage. The initial amount of the note shall be computed by taking the appraised value of the Home at the time the Homebuyer becomes a Homeowner and subtracting (i) the Homebuyer's purchase price plus the Incidental Costs and (ii) the increase in value of the Home, determined by appraisal, caused by improvements paid for by the Homebuyer with funds from sources other than the EHPA or NRMR. The note shall provide that this initial amount shall be automatically reduced by 20 percent thereof at the end of each year of residency as Homeowner, with the note terminating at the end of the five-year period of residency, as determined by the Authority. To protect the Homeowner, the note shall provide that the amount payable under it shall in no event be more than the net profit on the resale, that is, the amount by which the resale price exceeds the sum of (i) the Homebuyer's purchase price plus the Incidental Costs, (ii) the costs of the resale, including commissions and mortgage prepayment penalties, if any, and (iii) the increase in value of the Home, determined by appraisal, resulting from improvements paid for by him as a Homebuyer (with funds other than from the EHPA or NRMR) or as a Homeowner. (b) Residency requirements. The five-year note periods does not end if the Homeowner rents or otherwise does not use the Home as his principal place of residence for any period within the first five years after he achieves ownership. Only the actual amount of time he is in residence is counted and the note shall be in effect until a total of five years time of residence has elapsed, at which time the Homeowner may request the Authority to release him from the note, and the Authority shall do so. 20. Responsibilities of Homeowner. After acquisition of ownership, the Homeowner shall pay to the Authority or to the Homeowners Association, as appropriate, a monthly fee for (a) the maintenance and operation of community facilities including utility facilities, if any, (b) the maintenance of grounds and other common areas, and (c) such other purpose as determined by the Authority or the Homeowners Association, as appropriate, including taxes and a provision for a reserve. 21. Homeowners Association--Planned Unit Development (PUD) \4\ --------------------------------------------------------------------------- \4\ If this Home is a Development of scattered sites, delete both sections 21 and 22. If this Home is in a Planned Unit Development, delete section 22. If this Home is in a Condominium, delete section 21. --------------------------------------------------------------------------- If the Development is organized as a planned unit development: a. The common areas, sidewalks, parking lots and other common property in the Development shall be owned and maintained as provided for in the approved planned unit development (PUD) program, except that the Authority shall be responsible for maintenance until such time as the Homeowners Association assumes such responsibility (see section 12 above). b. The title ultimately conveyed to the Homebuyer shall be subject to restrictions and encumbrances to protect the rights and property of all other Homeowners. The Homeowners Association shall have the right and obligation to enforce such restrictions and encumbrances and to assess Homeowners for the costs incurred in connection with common areas and property and other responsibilities. c. There shall be as many votes in the Association as there are Homes in the Development, and at the outset all the voting rights will be held by the Authority. As each Home is conveyed to a Homebuyer, one vote shall automatically go to that Homebuyer so that when all the Homes have been conveyed, the Authority shall no longer have any interest in the Homeowners Association. d. The Authority shall not lose its majority voting interest in the Association as soon as a majority of the Homes have been conveyed, unless the law of the state requires control to be transferred at a particular time or the Authority so desires. If permitted by state law, provisions shall be made for each Home owned by the Authority to carry three votes while each Home owned by a Homeowner shall carry one vote. Under this weighted voting plan, the Authority will continue to have voting control until 75 percent of the Homes have been acquired by Homeowners. However, at its discretion, the Authority may transfer voting control to the Homeowners when at least 50 percent of the Homes have been acquired by the Homeowners. 22. Homeowners Association--Condominium.\5\ If the Development is organized as a condominium: --------------------------------------------------------------------------- \5\ If this Home is a Development of scattered sites, delete both sections 21 and 22. If this Home is in a Planned Unit Development, delete section 22. If this Home is in Condominium, delete section 21. --------------------------------------------------------------------------- a. The Authority at the outset shall own each condominium unit and the undivided interest of such unit in the common areas. b. All the land, including that land under the housing units, shall be a part of the common areas. c. The Homeowners Association shall own no property and shall merely maintain and operate the common areas for the individual owners of the condominium units, except that the Authority shall be responsible for [[Page 309]] maintenance until such time as the Homeowners Association assumes such responsibility (see section 12 above). d. The percentage of undivided interest attached to each condominium unit shall be based on the ratio of the value of the unit to the value of all units and shall be fixed when the Development is completed. This percentage shall determine the Homeowner's liability for the maintenance of the common areas and facilities. e. Each Homeowner vote in the Homeowners Association will be identical with the percentage of undivided interest attached to his unit. f. The Authority shall not lose its majority voting interest in the Association as soon as units representing more than 50 percent of the value of all units have been conveyed, unless the law of the state requires control to be transferred at a particular time or the Authority so desires. For voting purposes, until units representing 75 percent of the value of all units have been acquired by Homeowners, the total undivided interest attributable to the Homes owned by the Authority shall be multiplied by three, if such weighted voting plan is permitted by state law. Under this plan, the Authority will continue to have voting control until units representing 75 percent of the value of all units have been acquired by Homeowners. However, at its discretion the Authority may transfer voting control to the Homeowners when units representing at least 50 percent of the value of all units have been acquired by the Homeowners. 23. Relationship of Homeowners Association to Homebuyers Association. The Homebuyers Association and the Authority may make arrangements with the Homeowners Association to permit Homebuyers to participate in Homeowners Association matters which affect the Homebuyers. Such arrangements may include rights to attend meetings and to participate in Homeowners Association deliberations and decisions. 24. Termination of Agreement--a. Termination by the Authority--(1) In the event the Homebuyer should breach this Agreement by failure to make a required Monthly Payment within 10 days after its due date, by misrepresentation or withholding of information in applying for admission or in connection with any subsequent reexamination of income and family composition, or by failure to comply with any other Homebuyer obligation under this Agreement, the Authority may terminate this Agreement 30 days after giving the Homebuyer notice of its intention to do so in accordance with paragraph (2) of this section. (2) Notice of termination by the Authority shall be in writing. Such notice shall state (i) the reason for termination, (ii) that the Homebuyer may respond to the Authority, in writing or in person, within a specified reasonable period of time regarding the reason for termination, (iii) that in such response he may be represented or accompanied by a person of his choice, including a representative of the HBA, (iv) that the Authority will consult the HBA concerning the termination, and (v) that, unless the Authority rescinds or modifies the notice, the termination will be effective at the end of the 30-day notice period. b. Termination by the Homebuyer. The Homebuyer may terminate this Agreement by giving the Authority 30 days notice in writing of his intention to terminate and to vacate the Home. In the event that the Homebuyer vacates the Home without notice to the Authority, this Agreement shall be terminated automatically and the Authority may dispose of, in any manner deemed suitable by it, any items of personal property left by the Homebuyer in the Home. c. Transfer to rental unit. (1) Inasmuch as the Homebuyer was found eligible for admission to the Project on the basis of having the necessary elements, of potential for Homeownership, continuation of eligibility requires continuation of this potential, subject only to temporary unforeseen changes in circumstances. The standards of potential for Homeownership are the following: (i) Income sufficient to result in a required monthly payment which is not less than the sum of the amounts necessary to pay the EHPA, the NRMR, and the estimated average monthly cost of utilities attributable to the Home; (ii) Ability to meet all the obligations of a Homebuyer under the Homebuyers Ownership Opportunity Agreement; (iii) At least one member gainfully employed, or having an established source of continuing income. (2) Accordingly, in the event it should develop that the Homebuyer no longer meets one or more of these elements of Homeownership potential, the Authority shall investigate the circumstances and provide such counseling and assistance as may be feasible in order to help the family overcome the deficiency as promptly as possible. After a reasonable time, not to exceed 30 days from the date of evaluation of the results of the investigation, the Authority shall make a re- evaluation as to whether the family has regained the potential for Homeownership or is likely to do so within a further reasonable time, not to exceed 30 days from the date of the re-evaluation. Further extension of time may be granted in exceptional cases, but in any event a final determination shall be made no later than 90 days from the date of evaluation of the results of the initial investigation. The Authority shall invite the HBA to participate in all investigations and evaluations. (3) If the final determination of the Authority, after considering the views of the [[Page 310]] HBA, is that the Homebuyer should be transferred to a suitable dwelling unit in an Authority rental project, the Authority shall give the Homebuyer written notice of the Authority determination of the loss of Homeownership potential and of the offer of transfer to a rental unit. The notice shall state that the transfer shall occur as soon as a suitable rental unit is available for occupancy but no earlier than 30 days from the date of the notice, provided that an eligible successor for the Homebuyer unit has been selected by the Authority. The notice shall also state that if the Homebuyer should refuse to move under such circumstances, the family may be required to vacate the Homebuyer unit, without further notice. The notice shall include a statement (i) that the Homebuyer may respond to the Authority in writing or in person, within a specified reasonable time, regarding the reason for the determination and offer of transfer, (ii) that in such response he may be represented or accompanied by a person of his choice including a representative of the HBA, and (iii) that the Authority has consulted the HBA concerning this determination and offer of transfer. (4) When a Homebuyers Ownership Opportunity Agreement is terminated pursuant to this paragraph 24c, the amount in the Homebuyer's EHPA shall be paid in accordance with the provisions of paragraph 10k of this Agreement. 25. Survivorship. (1) In the event of death, mental incapacity or abandonment of the family by the Homebuyer, the person designated as the successor in part I of this Agreement shall succeed to the rights and responsibilities under the Agreement if that person is an occupant of the Home at the time of the event and is determined by the Authority to meet all of the standards of potential for homeownership as set forth in section 24a. This designation may be changed by the Homebuyer at any time. If there is no such designation or the designee is no longer an occupant of the Home or does not meet the standards of potential for homeownership, the Authority may consider as the Homebuyer any family member who was in occupancy at the time of the event and who meets the standards of potential for homeownership. (2) If there is no qualified successor in accordance with the above, the Authority shall terminate the Agreement and another family shall be selected, except under the following circumstances: where a minor child or children of the Homebuyer family are in occupancy, then in order to protect their continued occupancy and opportunity for acquisition of ownership of the Home, the Authority may approve as occupants of the unit, an appropriate adult(s) who has been appointed legal guardian of the children with a duty to perform the obligations of the Homebuyers Ownership Opportunity Agreement in their interest and behalf. 26. Nonassignability and Use of Reserves and Accounts--a. Nonassignability. The Homebuyer shall not assign this Agreement, or assign, mortgage or pledge any right or interest in the Home or in this Agreement including any right or interest in any reserve or account, except with the prior written approval of the Authority and HUD. b. Use of Reserves and Accounts. It is understood and agreed that the Homebuyer shall have no right to receive or use the money in any reserve or account created pursuant to this Agreement except for the limited purposes and under the special circumstances set forth by the terms of this Agreement. It is further understood and agreed that both the Authority and HUD have a financial and a governmental interest in the Earned Home Payments Account and other reserves as security for the financial integrity of the Development, as a means of savings in cost to the Government by minimizing the amount and period over which HUD annual contributions must be paid, and as a means of advancing the public interest and welfare by assisting low-income families to achieve homeownership. 27. Notices. Any notice required hereunder or by law shall be sufficient if delivered in writing to the Homebuyer personally or to an adult member of his family residing in the dwelling unit or if sent by certified mail, return receipt requested, properly addressed to the Homebuyer, postage prepaid. Notice to the Authority shall be in writing, and either delivered to any Authority employee at the office of the Authority or sent to the Authority by certified mail, properly addressed, postage prepaid. 28. Grievance Procedure. All grievances or appeals arising under this Agreement shall be processed and resolved pursuant to the grievance procedure of the Authority, which procedure shall provide for participation of the HBA in the grievance process. This grievance procedure shall be posted in the Authority's Office. [39 FR 10966, Mar. 22, 1974. Redesignated at 49 FR 15580, Apr. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 49 FR 21490, May 21, 1984] Sec. Appendix III to Subpart B of Part 904--Certification of Homebuyer Status (Subpart B) State of __________ County of __________ This is to certify that_________________________________________________ (Homebuyer) of the Home located at ______________: (1) Has achieved, within the first two years of his occupancy a balance in his Earned [[Page 311]] Home Payments Account (EHPA) of at least __________ dollars (representing 20 times the amount of the monthly EHPA credit applicable to said Home); (2) Has met and is continuing to meet the requirements of his Homebuyers Ownership Opportunity Agreement; and (3) Has rendered and is continuing to render satisfactory performance of his responsibilities to the Homebuyers Association. Accordingly, said Homebuyer may, upon payment of the purchase price, exercise the option to purchase the Home in accordance with and subject to the provisions of his Homebuyers Ownership Opportunity Agreement.Housing Authority By______________________________________________________________________ (Signature and official title) (Date) ____________________ Homebuyers Association__________________________________________________ By______________________________________________________________________ (Signature and official title) (Date) ____________________ Sec. Appendix IV to Subpart B of Part 904--Promissory Note for Payment upon Resale by Homebuyer at Profit (Subpart B) FOR VALUE RECEIVED,_____________________________________________________ (Homeowner) promises to pay to__________________________________________ (Authority) or order, the principal sum of ____________________ \1\ Dollars ($________), without interest, on the date of resale by the Homeowner of the property conveyed by the Authority to the Homeowner. --------------------------------------------------------------------------- \1\ Amount determined in accordance with section 19 of the Homebuyers Ownership Opportunity Agreement. --------------------------------------------------------------------------- Such principal sum shall be reduced automatically by 20 percent of the initial amount at the end of each year of such residency, as a Homeowner, and this note shall terminate at the end of five years of such residency, as determined by the Authority; Provided, however, that the amount payable under this note shall in no event be more than the net profit on the resale, that is, the amount by which the resale price exceeds the sum of (1) the Homeowner's purchase price, (2) the costs incidental to his acquisition of ownership, (3) the costs of the resale, including commissions and mortgage prepayment penalties, if any, and (4) the increase in value of the Home, determined by appraisal, due to improvements paid for by the Homeowner whether as a Homebuyer (with funds from sources other than his Earned Home Payments Account or his Nonroutine Maintenance Reserve) or as a Homeowner. If the Homeowner shall pay this note at the time and in the manner set forth above, or if, by its provisions, the amount of this note shall be zero, then the note shall terminate and the Authority shall, within thirty (30) days after written demand therefor by the Homeowner, execute a release and satisfaction of this note. The Homeowner hereby waives the benefits of all statutes or laws which require the earlier execution or delivery of such release and satisfaction by the Authority. Presentment, protest, and notice are hereby waived. Dated ________________________, 19____ Local Housing Authority_________________________________________________ By: ____________________(Homeowner) ____________________ (Homeowner's Spouse) Subpart C_Homeownership Counseling and Training Sec. 904.201 Purpose. The purpose of the counseling and training program shall be to assure that the homebuyers, individually and collectively through their homebuyers association (HBA), will be more capable of dealing with situations with which they may be confronted, making decisions related to these situations, and understanding and accepting the responsibility and consequences that accompany those decisions. Sec. 904.202 Objectives. The counseling and training program should seek to achieve the following objectives: (a) Enable the potential homebuyer to have a full understanding of the responsibilities that accompany his participation in the Homeownership Opportunity Program; (b) Enable the potential homebuyer to have an understanding of homeownership tasks with specific training given to individuals as the need and readiness for counseling or training indicates; (c) Assure that the role of the HBA is understood and plans for its organization are initiated at the earliest practical time; (d) Develop an understanding of the role of the LHA and of the need for a cooperative relationship between the homebuyer and the LHA; (e) Encourage the development of self-help by the homebuyer through reducing dependency and increasing independent action; [[Page 312]] (f) Develop an understanding of mutual assistance and cooperation that will develop a feeling of self-respect, pride and community responsibility; (g) Develop local resources that can be of assistance to the individual and the community on an on-going basis. Sec. 904.203 Planning. (a) The counseling and training program shall be flexible and responsive to the needs of each prospective homebuyer. While many subjects lend themselves to group sessions, consideration shall be given to individual counseling. Individuals should not be required to attend training classes on subject matter they are familiar with unless they can actively participate in the instruction process. (b) The program may be provided by contract with an outside organization, or by the LHA staff, in either case with voluntary involvement and assistance of groups and individuals within the community. It is essential that the training entity be completely knowledgeable and supportive of the entire Homeownership Opportunity Program. It may be recognized that most of the objectives stated require specialized instructional skill and content knowledge. There shall be recognition of the differences in communication and in value systems, and an understanding and respect for past experience of the individual. Maximum possible use shall be made of indigenous trainers to insure good communication and rapport. Special attention shall be directed to the needs of working members of the family for counseling and training sessions to be held where and during the time they can attend. Where the services of outside contractors are utilized, there shall be a close working relationship with the LHA and a program for phasing in LHA staff who will have the on-going responsibility for the program. The value of local agencies, educational institutions, etc., for implementing the program rather than an outside firm shall be carefully considered since the continuing presence of such agencies and institutions in the community can often develop into an on-going resource beyond the contract period. (c) In planning a homeownership counseling and training program, whether self-administered or contracted, the LHA shall consult with HUD for advice and information on programs, qualified contractors, local resources, reasonable costs, and other similar matters. (d) Where the program is to be contracted to an outside group, proposals shall be secured either by public advertising or by sending requests for proposals to a number of competent public or private organizations. (e) In areas where there are large concentrations of homebuyers who do not read, write, or understand English fluently, the native language of the people shall be used. If feasible all instructional materials shall be in both languages. Sec. 904.204 General requirements and information. (a) The counseling and training program shall be designed to meet the needs of the homebuyers and be sufficiently flexible to meet new needs as they arise. The nature of the program suggests four phases of counseling: (1) Pre-occupancy; (2) move-in; (3) post-occupancy; (4) assistance to the HBA. While some elements of the program lend themselves more to one phase than another, the program areas shall be coordinated and interrelated. It is recommended that the entity providing these services work closely with the participants and ensure that policies established are agreeable to both the LHA and the homebuyer. (b) The following is a description of major elements of the program which experience thus far has shown to be relevant. More detailed information is set forth in Appendix I, ``Content Guide for Counseling and Training Program.'' (1) Pre-occupancy phase. The purpose of this phase is to prepare the selected families to assume the responsibilities of homeownership, and to provide an opportunity for the LHA and each family to reassess the family's potential for successful participation in the homeownership development. (i) An overload of information should be avoided in this phase since many of [[Page 313]] the subjects will be dealt with in greater depth after the family is in occupancy, and experience has shown that much of the information will be more relevant at that time. (ii) This phase should be completed for each family before the beginning of its occupancy. (2) Move-in phase. During this phase, the counseling and training staff should be available to the homebuyers on an individual basis. Services may include (i) inspecting the units, interior and exterior, with the homebuyers and a representative of the LHA, (ii) testing appliances and equipment, (iii) providing information on the moving process (packing, trucks, etc.), and (iv) assisting homebuyers in making adjustments occasioned by the move, serving as liaison among homebuyers, LHA, builder and other agencies, and assisting homebuyers in meeting new neighbors. (3) Post-occupancy phase. Before this phase begins, a period (possibly one month) should elapse to allow homebuyers an opportunity to adjust to their new surroundings. This is a time when new questions and problems come to light that can be dealt with in further counseling and training. This phase should be designed to cover many of the same basic subjects as the pre-occupancy phase, both by review and refresher where necessary but in much greater depth. (4) Assistance to the HBA. The parties responsible for the counseling and training program shall be responsible for the formation, incorporation, and development of the HBA, including the execution of the Recognition Agreement between the LHA and HBA, as provided in subpart D of this part. Sec. 904.205 Training methodology. Equal in importance to the content of the pre- and post-occupancy training is the training methodology. Because groups vary, there should be adaptability in the communication and learning experience. Methods to be utilized may include group presentations, small discussion groups, special classes, and workshops. Especially important to a successful program are individual family home visits for discussion and instruction on unique problems and operation of equipment. Sec. 904.206 Funding. (a) Source of funds. For purpose of funding counseling and training pursuant to this subpart and for establishing the HBA, the LHA shall include an amount equal to $500 per dwelling unit in the development cost budget. If additional funds should be needed for any of these purposes, the LHA with the assistance of the CPC, if any, shall explore all other possible sources of services and funds. (b) Planned use of $500-per-unit funds. These funds are to be used to pay for: (1) Pre- and post-occupancy counseling and training; (2) Establishment and initial operation of the HBA (for operation in the management phase, see Sec. 904.305). In planning the use of these funds, the LHA shall recognize that for a number of years after the initial counseling and training there is likely to be some turnover and follow-up counseling and training needs. Therefore, the LHA shall limit the amounts for the counseling and training of the initial homebuyers and shall reserve a reasonable amount for future counseling and training needs during the management phase of the development. (c) Period of availability of $500-per-unit funds. These funds shall be available during the development phase, and a specific amount shall be set aside, in accordance with paragraph (b) of this section, to be used for ongoing needs after the close of the development period. (d) Budgeting of $500-per-unit funds. (1) The Development Cost Budget submitted with the Development Program shall include an estimated amount for counseling and training program costs. However, such costs shall not be incurred until after HUD approval of the counseling and training program. (2) Upon HUD approval of the counseling and training program, the LHA shall include the approved amount in its Contract Award Development Cost Budget. This amount shall constitute the maximum amount that may be included for such purposes in the project development cost; provided that, if the approved amount is less than $500 per [[Page 314]] dwelling unit, it may, if necessary, be amended with HUD approval, but not later than the Final Development Cost Budget and subject to the $500-per-unit limitation. (e) Application for approval of counseling and training program. (1) The LHA shall submit an application for approval of a counseling and training program and for approval of funds therefor. This application shall be submitted to HUD at the time of the submission of the development program or as soon thereafter as possible but no later than the submission of the working drawings and specifications. (2) The application shall include a narrative statement outlining the counseling and training program, including any services and funds to be obtained from other sources, together with copies of any proposed contract and other pertinent documents. This statement shall include the following: (i) Indication that the training entity is completely knowledgeable of the Homeownership Opportunity Program and is aware of the needs and problems of prospective homebuyers; (ii) The method and/or instruments to be used to determine individual training and counseling needs; (iii) The scope of the proposed program, including a detailed breakdown of tasks to be performed, products to be produced, and a time schedule, including provision for progress payments for specific tasks; (iv) An outline of the proposed content of the counseling and training to be provided, and the local community resources to be utilized; (v) The methods of counseling and training to be utilized; (vi) The experience and qualifications of the organization and of personnel who will directly provide the counseling and training; (vii) The estimated cost, source of funds, and methods of payment for the tasks and products to be performed or produced, including estimates of costs for each of the following categories: (a) Counseling and training during development phase: Salaries Materials, supplies and expendable equipment Contract costs Other costs (b) Establishment and initial operation of HBA (c) Counseling and training during management phase Sec. 904.207 Use of appendix. A Content Guide for Counseling and Training Program (Appendix I) is provided as further detailed information for consideration in designing the counseling and training program. The items set forth therein are not to be considered mandatory. Sec. Appendix I to Subpart C of Part 904--Content Guide for Counseling and Training Program (Subpart C) Inclusion of the following items in the Counseling and Training Program should be considered, keeping in mind that the extent to which they are covered will depend on specific needs of homebuyers in the given development. preoccupancy phase 1. Explanation of program. Includes the background and a full description of the program with special emphasis on the financial and legal responsibilities of the homebuyers, the HBA, and the LHA; and a review for homebuyers of the computation of the monthly payment and of the accumulation and purpose of EHPA and reserves. 2. Property care and maintenance. Includes making homebuyers generally familiar with the overall operation of the home, including fixtures, equipment, interior designing, and building and equipment warranties, and the appropriate procedures for obtaining services and repairs to which the homebuyers may be entitled. (This aspect will probably have to be covered in more detail during the Post-Occupancy Phase.) 3. Money management. Includes budgeting, consumer education, credit counseling, insurance, utility costs, etc. 4. Developing community. Includes a view of the surrounding community, and especially how the homebuyer relates to it as an individual and as a member of the HBA. 5. Referrals. Includes information as to community resources and services where assistance can be obtained in relation to individual or family problems beyond the scope of the contract agency. This may include referrals to community services that can upgrade employment skills, provide legal services, offer educational opportunities, care for health and dental needs, care for children of [[Page 315]] working mothers, provide guidance in marital problems and general family matters, including drugs and alcohol. post-occupancy phase 1. Home maintenance. This should include builder responsibility, identification of minor and major repairs, instructions on do-it- yourself repairs and methods of having major repairs completed. 2. Money management. This should involve an in-depth study of the legal and financial aspects of consumer credit, savings and investments, and budget counseling. 3. Developing community. This will consist primarily of creating an awareness on the part of the homebuyer of the nature and function of the HBA and the value of his participation in, and working through, the HBA as a responsible member of his community. By this means much will be learned about relationships with neighbors, community cooperation, and the ways in which individual and group problems are solved. other items In addition to the above, there are other needs and concerns, especially those expressed by the homebuyers, that may be dealt with in special classes or workshops. These may include such topics as child care, selection of furnishings, decorating and furnishing, refinishing of furniture, upholstery, sewing, food and nutrition, care of clothing, etc. Subpart D_Homebuyers Association (HBA) Sec. 904.301 Purpose. (a) It is essential that the homebuyers have an organized vehicle for pursuing their common interests, for effectively representing the needs of residents in dealing with the LHA, and for undertaking eventual management responsibility for the development. Although this organization, called the homebuyers association (HBA), shall be representative of the homebuyers and independent of the LHA, it shall be the responsibility of the LHA and the training and counseling staff to assist the homebuyers in their initial efforts at organization. (b) Except as noted in Sec. 904.307, each Turnkey III development shall have an HBA. There shall be a separate HBA for each development or developments where there is a physical and financial community of interest. Sec. 904.302 Membership. Every family entitled to occupancy pursuant to a Homebuyers Ownership Opportunity Agreement and every family which is a homeowner shall automatically be a member of the HBA. Sec. 904.303 Organizing the HBA. (a) The HBA should be organized and incorporated as early in the life of the development as is feasible, in order to allow selected homebuyers an opportunity to meet each other and begin forging a sense of community, but in any case the HBA shall be organized and incorporated no later than the date on which 50 percent of the homebuyers have been selected. Interim officers and directors shall be designated as part of the initial organization of the HBA to serve until full-term officers and directors are elected. Such full-term officers and directors shall be elected when 60 percent of the homebuyers are in occupancy, but, in any event, not later than one year from the date the first home is occupied. (b) The LHA, in cooperation with the CPC, if any, shall be responsible for assuring that competent counseling and training assistance pursuant to Subpart C of this part will be provided in organizing the HBA. These services shall be continued until the HBA is fully operational. (c) The provision of such services shall include at least the following functions: (1) Assembling homebuyers for initial orientation and planning; (2) Explaining to homebuyers the structure and functions of an HBA and the rights and responsibilities of the HBA and the LHA; (3) Aiding in the preparation of charters, by-laws, contracts with the LHA and other appropriate documents; (4) Assisting in the formation of the organization, including such things as the initial designation of interim officers and directors and subsequent election of full-term HBA officers and directors, and the establishment of necessary committees, if any. (d) The LHA and the HBA shall execute an agreement recognizing the HBA as the official representative of the homebuyers, and establishing the functions, rights, and responsibilities [[Page 316]] of both parties (see Appendix II). This agreement shall be executed as soon as possible after incorporation of the HBA. Sec. 904.304 Functions of the HBA. (a) Subject to possible variations agreed to by the HBA and approved by HUD, the functions of the HBA shall include the following: (1) Representing its members, individually and collectively, with respect to any deficiencies in the development or in the homes and with respect to fulfillment of the construction contract and related warranties; (2) Representing its members, individually and collectively, in their relationships with the LHA and others in regard to financial matters such as monthly payments, credits to and charges against reserves, settlement upon vacating the home, acquisition of ownership, and other matters pertaining to operation and management of the development; (3) Recommending policies and rules to the LHA for operation and management including rules concerning use of the common areas and community facilities; (4) Participating in the operation of official grievance mechanisms; (5) Advising and assisting its members regarding procedures and practices relative to the Earned Home Payments Account and the acquisition of homeownership; (6) Participating with the LHA in periodic maintenance inspections of homes after occupancy, and making recommendations in case of disagreements arising out of maintenance inspections; (7) Participating with the LHA in the selection of subsequent homebuyers; (8) Coordinating, supervising, or managing the operation of credit union, child care, or other supportive services established for the development; (9) Participating with the LHA in the establishment and implementation of policies related to collection of monthly payments, termination of occupancy, and resolution of hardship situations; and (10) Performing management services as specified under contract with the Authority or with the Homeowners Association and participating in other activities pursuant to agreement with the LHA or with the Homeowners Association. (b) In addition, the HBA may offer such special services as the following: (1) The development of self-help such as consumer clubs, furniture and other co-ops, credit unions, transportation pools, and skill pools; (2) Assisting homebuyers in acquiring group insurance; (3) Developing programs and contracting for services such as child care centers to be located in the community facility where such a facility exists; (4) Assisting homebuyers in their employment, especially by participating in skill development and apprenticeship programs in cooperation with local educational organizations; (5) Assisting homebuyers in planning the management role of the HBA and in negotiating any contract for management services with the LHA. Sec. 904.305 Funding of HBA. (a) In addition to providing the HBA with noncash contributions such as office space and duplicating services, the LHA shall make cash contributions for operating expenses of the HBA, in the amount provided for in paragraph (b) of this section. Until the project goes into management, these contributions shall be made from the development funds budgeted for the counseling and training program (see Sec. 904.206). Thereafter, these contributions shall be provided for in the annual operating budgets of the LHA. (b) The cash contributions pursuant to paragraph (a) of this section shall be in the amount provided for in the LHA budget (development cost budget or annual operating budget, as the case may be) and approved by HUD. Such contributions shall be subject to whatever restrictions are applied by HUD to the funding of tenant councils generally, but they shall not exceed $3 per year per dwelling unit; provided that as an incentive to the HBA to provide additional funds from other sources such as homebuyer's dues, contributions, revenues from special projects or activities, etc., the LHA shall, to the extent approved by HUD in the LHA budget, [[Page 317]] match such additional funds beyond the $3 up to a maximum of $4.50, for a total LHA share of $7.50 where the total funding for the HBA is $12 or more. The HBA shall not be precluded from seeking to achieve total funding in excess of $12 per unit where this can be done with additional funds from sources other than the LHA. Furthermore, funding by the LHA for the normal expenses of the HBA is not to be confused with fees paid pursuant to management services contracts as described in Sec. 904.306. Sec. 904.306 Performing management services. The LHA may also contract with the HBA to perform some or all of the functions of project management for which the HBA may be better suited or located than the LHA. Such functions may include security, maintenance of common property, or collection of monthly payments. For this purpose, the HBA may form a management corporation and the officers of the HBA shall be the directors of such corporation. This corporation and the LHA shall then negotiate a management services contract. Such arrangements are consistent with the objective of providing for maximum participation by residents in the management of their developments. As an alternative, the HBA and the LHA may elect to undertake any other arrangement approved by HUD. Sec. 904.307 Alternative to HBA. Where the homes are on scattered sites (noncontiguous lots throughout a multi-block area, with no common property), or where the number of homes may be too few to support an HBA, and where an alternative method for homebuyer representation and continuing counseling is provided, an HBA shall not be required. For such cases, a modified form of homebuyers association may be called for or a less formal organization may be desirable. This decision shall be made jointly by the LHA and the homebuyers, acting on the recommendation of HUD. Sec. 904.308 Relationship with homeowners association. The HBA and the homeowners association are, in legal terms, separate and distinct organizations with different functions. The homeowners association may hold title to and be responsible for maintenance of common property (see Sec. Sec. 904.119 and 904.120), while the HBA has more general service and representative functions. While all residents are members of the HBA, only those who have acquired title to their homes are members of the homeowners association. Sec. 904.309 Use of appendices. Use of the Articles of Incorporation (Part I of Appendix I) and the Recognition Agreement between the Local Housing Authority and Homebuyers Association (Appendix II) is mandatory for projects developed under subpart B of this part which have homebuyers associations. No modification may be made in format, content or text of these Appendices except (1) as required under state or local law as determined by HUD or (2) with approval of HUD. The By-Laws of the Homebuyers Association is provided as a guide for such projects and it may be used or modified to the extent required by the HBA and LHA respectively to meet local needs and desires. Sec. Appendix I to Subpart D of Part 904--Articles of Incorporation and By-Laws of ______________ Homebuyers Association (Subpart D) Part I--Articles of Incorporation In compliance with the requirements of__________________________________ ________________________________________________________________________ (reference to statute under which incorporation is sought) the undesigned, all of whom are natural persons, residents of ____________________, of full age, have this day voluntarily associated themselves together for the purpose of forming a Corporation, not-for- profit, and do hereby certify: Article I--Name The name of the corporation is__________________________________________ ______________ Homebuyers Association (hereinafter referred to as the ``Association''). Article II--Office The principal office of the Association is [[Page 318]] located at______________________________________________________________ Article III--Agent ________________________, whose address is ________________________, is hereby appointed the initial registered agent of the Association. Article IV--Duration The period of duration of the Association is perpetual. Article V--Membership Membership in the Association shall be limited to families who are entitled to occupancy of a Home in the Development pursuant to a Homebuyers Ownership Opportunity Agreement and families who are Homeowners in the Development, and all such families shall automatically be members so long as they are in occupancy of a Home. For purposes of these Articles, the term ``Development'' includes the following described Development or Developments in the Homeownership Opportunity Program of ____________________ (hereinafter referred to as the Authority): ________________________________________________________________________ ________________________________________________________________________ Article VI--Purposes The purposes for which this Association is formed shall not result in pecuniary gain or profit to the members thereof. These purposes are to provide organization and representation for its members in their relationships with the Authority in all matters regarding the homeownership opportunity program and, if appropriate, to perform management responsibilities for the Development under contract with the Authority. 1. In order to carry out these purposes, the Association shall perform the following functions: a. Represent its members, individually and collectively, with respect to any deficiencies in the Development or in the Homes and with respect to fulfillment of the construction contract and related warranties; b. Represent its members, individually and collectively, in their relationships with the Authority and others in regard to financial matters such as monthly payments, credits to and charges against reserves, settlement upon vacating a Home, and acquisition of ownership, and other matters pertaining to operation and management of the development; c. Recommend policies and rules to the Authority for operation and management including rules concerning use of the common areas and community facilities; d. Participate in the operation of official grievance mechanisms; e. Advise and assist its members regarding procedures and practices relative to their Earned Home Payments Accounts and to their acquisition of homeownership; f. Participate with the Authority in periodic maintenance inspections of the Homes after occupancy and make recommendations in case of disagreement arising out of maintenance inspections; g. Participate with the Authority in the selection of subsequent homebuyers; h. Coordinate, supervise, or manage the operation of credit union, child care, or other supportive services established for the Development; i. Participate with the Authority in the establishment and implementation of policies related to collection of monthly payments, termination of occupancy, and resolution of hardship situations; j. Perform management services as specified under contract with the Authority or with the Homeowners Association and participate in other activities pursuant to agreement with the Authority or with the Homeowners Association. 2. The Association may also offer special services such as: a. The development of self-help such as consumer clubs, furniture and other co-ops, credit unions, transportation pools, and skill pools; b. Assisting Homebuyers in acquiring group insurance; c. Developing programs and contracting for services such as child care centers to be located in the community facility, where such a facility exists; d. Assisting Homebuyers in their employment, especially by participating in skill development and apprenticeship programs in cooperation with local educational organizations; and e. Assisting Homebuyers in planning the management role of the Association and in negotiating any contract for management services with the Authority. Article VII--Powers This Association shall have all the powers, privileges, rights and immunities which are necessary or convenient for carrying out its purposes and which are conferred by the provisions of all applicable laws of the State of __________________ pertaining to non-profit corporations. Article VIII--Voting There shall be only one vote per Home regardless of the number of persons in the family that occupies the Home. Article IX--Board of Directors and By-laws The affairs of the Association shall be managed by a Board of Directors, all of whom shall be members of the Association. The number of Directors shall be as provided [[Page 319]] in the By-Laws of the Association. The following persons shall serve as the first Board of Directors and as the first officers: ------------------------------------------------------------------------ Office Address ------------------------------------------------------------------------ ................... ................... ................... ------------------------------------------------------------------------ This Board shall manage the affairs of the Association until election of their successors by the membership. Promptly after 60 percent of the Homes are occupied, or one year from the date the first Home is occupied, whichever occurs sooner, the Board shall call the first annual meeting of the Association at which the members shall adopt By-Laws and elect one-third of the Board for a term of one year, one-third for a term of two years, and one-third for a term of three years. At each annual meeting thereafter the members shall elect one-third of the Board for a term of three years. Article X--Dissolution After all members have acquired ownership of their Homes, the Association shall be dissolved with the assent given in writing and signed by not less than two-thirds of the members. The dissolution shall be effective when all of the assets of the Association remaining after payment of its liabilities have been granted, conveyed and assigned in such manner as the Association and Authority may mutually agree. Article XI--Amendment Amendment of these Articles shall require the assent of 75 percent of the entire membership. In witness whereof, for the purposes of incorporating this Association under the laws of the State of ______________, we, the undersigned constituting the incorporators of this Association, have executed these Articles of Incorporation this ____________ day of ______________, 19____. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ [Witness, Notary, or Acknowledgment as required by state law] Note: The following is a suggested form of By-Laws. Different format and content to meet local needs may be used. For example, it may be considered desirable to combine HBA offices, eliminate or change functions of various committees, provide for other committees, etc. Part II--By-Laws The members of the __________________ Homebuyers Association (hereinafter referred to as the ``Association'') do hereby adopt in accordance with Article IX of the Articles of Incorporation the following By-Laws: Section 1. Organization--The affairs of the Association shall be managed by a Board of Directors elected by and from the members of the Association. The Board shall elect officers of the Association, including a President, Vice President, Secretary, and Treasurer, who shall carry out such functions and duties as are prescribed by these By- Laws and the Board. Sec. 2. Association meetings--A. Annual meetings. The Association shall have an annual meeting at ______________ (time) on the __________________ (day of week and month) each year for the purpose of transacting such business as may be necessary or appropriate. If the date of the annual meeting is a legal holiday, the meeting shall be held at the same hour on the first day following which is not a legal holiday. B. Quarterly and special meetings. Between annual meetings, quarterly meetings shall be called by the President and be held for the purpose of advising the membership of activities of the Board and enabling the members to bring up matters of common concern. Special meetings may be called at any time (1) by the President with the written concurrence of at least two of the other officers or (2) by a petition filed with the Secretary stating the purpose of the meeting and signed by at least one-fifth of the total number of members in the Association. C. Notice of meetings. Written notice of each annual, quarterly or special meeting of the members shall be given by, or at the direction of, the Secretary by mailing a copy of such notice at least fifteen days before an annual or quarterly meeting or at least seven days before a special meeting, addressed to each member at the member's address shown on the records of the Association. Such notice shall specify the place, date, and hour of the meeting and, in the case of a special meeting, the purpose of such meeting. No business shall be transacted at any special meeting other than that stated in the notice unless by consent of at least one-half of the total number of votes of the Association. D. Quorum. A quorum at any meeting shall consist of members entitled to cast votes which represent at least one-tenth of the votes of the Association. If such a quorum is not present, those present shall have the power to reschedule the meeting from time to time without notice other than an announcement at the meeting until there is a quorum. At any rescheduled meeting at which a quorum is present, the only business which may be transacted is that which might have been transacted at the original meeting. E. Voting. Each family shall designate in writing to the Secretary the family member who is to cast the family vote. That designee [[Page 320]] may appoint as a proxy for a specific meeting any other member of the Association. A proxy must be in writing and filed with the Secretary not later than the time that meeting is called to order. Every proxy shall be revocable and shall be automatically revoked when the person who appointed the proxy attends the meeting or ceases to have voting privileges in the Association. Votes represented by proxy shall be counted in determining the presence or absence of a quorum at any meeting. F. Agenda. An agenda shall be prepared for every meeting. Sec. 3. Board of Directors--A. Number of directors. The affairs of the Association shall be managed by a Board of ______ Directors, all of whom shall be members of the Association. The number of Directors may be changed by amendment of the By-Laws of the Association. B. Term of Office. The Board of Directors shall be elected at the annual meeting of the Association. At the first annual meeting, the members shall elect ______ \1\ Directors for a term of one year, ______ \1\ Directors for a term of two years, and ______ \1\ Directors for a term of three years. At each annual meeting thereafter the members shall elect ______ \1\ Directors for a term of three years. --------------------------------------------------------------------------- \1\ Each group shall be one-third of the total number of Directors. --------------------------------------------------------------------------- C. Removal and other vacancies of Directors. Any Director may be removed from the Board, for cause, by a majority of the votes of the Association at any annual or quarterly meeting or any special meeting called for such purpose, provided that the Director has been given an opportunity to be heard at such meeting. In the event of death, resignation or removal of a Director, his successor shall be elected by the remaining members of the Board and shall serve for the unexpired term of his predecessor. D. Chairman of the Board. At the first regular Board meeting after each annual meeting, the Board of Directors shall elect a Chairman from among their number. E. Compensation. No compensation shall be paid to the Board for its services. However, any Director may be reimbursed for his actual expense incurred in the performance of his duties, as long as such expense receives approval of the Board and is within the approved Association budget. Sec. 4. Nomination and election of the board--A. Nomination. Nomination for election to the Board of Directors (other than for filling of vacancies under section 3. C.) shall be made by the Nomination Committee; provided, however, that nominations may also be made from the floor at the annual meeting by motion properly made and seconded, or by a petition which states the name of the person nominated, is signed by members representing at least ten votes, and is filed with the Secretary not later than the day prior to the annual meeting. Persons nominated must be members of the Association. B. Election. Election of the Board of Directors shall be in accordance with Section 2.E., and by secret written ballot. The ballots shall be prepared by the Secretary. Cumulative voting is not permitted (that is, a voter who refrains from voting with respect to one or more vacancies may not on that account cast any extra vote or votes with respect to another vacancy). The persons receiving the largest number of votes shall be elected. Sec. 5. Meetings of Directors--A. Regular meetings. Regular meetings of the Board of Directors shall be held monthly at such time and hours as may be fixed from time to time by resolution of the Board. Notice of time and place of the meetings shall be mailed to each Director no later than seven days before the meeting. B. Special meetings. Special meetings of the Board of Directors shall be held when called by the President of the Association, the Chairman of the Board or by any two Directors, after not less than three days notice to each Director. C. Quorum. A simple majority of the Board shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the Board present at a duly held meeting shall be regarded as an act of the Board. D. Action taken without a meeting. Any action which could be otherwise taken at a Board meeting may be taken in the absence of a meeting, by obtaining the written approval of all Directors. Any action so approved shall have the same effect as though taken at a meeting of the Board. Sec. 6. Power and duties of the Board of Directors--A. Power and duties generally. The Board of Directors shall have and exercise all the powers, duties, and authority necessary for the administration of the affairs and to carry out the purposes of the Association, excepting only those acts and things as are required by law, by the Articles of Incorporation, or by these By-Laws to be exercised and done by the members or their officers. B. Powers. The Board shall have the power to: (1) Adopt and publish such rules and regulations as are appropriate in the exercise of its powers and duties, including but not limited to rules and regulations governing the amount and payment of dues, use of common areas and facilities and the conduct of the members and their guests thereon, and the establishment of penalties for violation of such rules and regulations; (2) appoint or designate officers, agents, and employees, and make such delegations of authority as in its judgment are in the best interest of the Association; (3) declare the office of a member of the Board of Directors to be vacant in [[Page 321]] the event such member shall be absent from at least three consecutive regular meetings of the Board of Directors. C. Duties. It shall be the duty of the Board of Directors to: (1) Cause to be kept a complete record of all its acts and Association affairs, and to present a statement thereof to the members at the annual meeting, or at any special meeting when such statement is requested in writing by members representing at least one-fifth of the votes of the Association; (2) cause to be prepared an annual audit of the Association books to be made at the completion of each fiscal year; (3) cause to be supervised all officers, agents, and employees of the Association, and see that their duties are properly performed; (4) procure and maintain adequate liability and hazard insurance on any property owned by the Association; (5) cause such officers or employees having fiscal responsibilities to be bonded as the Board may deem appropriate; (6) cause to be performed the functions listed in Article V of the Articles of Incorporation. Sec. 7. Association officers and their duties--A. Election. The Board of Directors shall elect the following officers of the Association: a President, a Vice President, a Secretary, a Treasurer, and such other special officers as, in the opinion of the Board, the Association may require. The President and Vice President shall be elected from members of the Board. The election of officers shall take place biennially at the first meeting of the Board of Directors following the annual meeting of the members. B. Term. The officers shall hold office for two years unless they shall resign sooner, be removed, or otherwise be disqualified to serve; provided, however, that special officers shall hold office for such period as the Board may determine, but not to exceed one year. C. Removal and resignation. Any officer may be removed from office, for cause, by the Board. Any officer may resign at any time by giving written notice to the Board, the President or the Secretary. Such resignation shall take effect on the date of receipt of such notice or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. D. Vacancies. A vacancy in any office may be filled by appointment by the Board. The officer appointed to such vacancy shall serve for the remainder of the term of the officer he replaces. E. Multiple Officers. No person shall simultaneously hold more than one of the offices required by these By-Laws. F. Duties. The duties of the officers are as follows: (1) President. The President shall preside at all Association meetings; shall execute the orders and resolutions of the Board; shall sign all leases, mortgage, deeds, and other written instruments; and shall cosign with the Treasurer all checks and promissory notes. (2) Vice President. The Vice President shall act in place and stead of the President in the event of his absence or disability and shall exercise and discharge such other duties as may be required of him by the Board. (3) Secretary. The Secretary shall record the votes and keep the minutes of all meetings and proceedings of the Board and of the Association; shall keep the corporate seal of the Association and affix it on all papers requiring said seal; shall serve notice of the meetings of the Board and of the Association; shall keep appropriate current records showing the names and addresses of the members of the Association; and shall perform such duties as may be required by the Board. (4) Treasurer. The Treasurer shall receive and deposit in appropriate bank accounts all funds of the Association and shall disburse such funds as directed by resolution of the Board of Directors; shall cosign with the President all checks and promissory notes of the Association; shall keep proper books of account; and shall prepare an annual budget and statement of income and expenditures which shall be approved by the Board before presentation to the Association at its regular annual meeting, and furnish a copy to each of the members. (5) Special officers. Special officers shall have such authority and perform such duties as the Board may determine. (6) Compensation. Officers may not be compensated except as may be determined by the Board, in accordance with the approved Association budget. Sec. 8. Committees. A. Committees to be established. The Board of Directors shall establish the following committees: (1) Representation Committee which shall represent members, individually and collectively, with respect to: any deficiencies in the Development or the individual Homes therein; fulfillment of the construction contract and related warranties; relationships with the Authority and others in regard to financial matters such as monthly payments, credits to and charges against reserves, settlement upon vacating the home, and acquisition of ownership; matters pertaining to project management; and matters in the Authority's official grievance mechanisms. (2) Rules Committee which shall present to the Board for recommendation to the Authority policies for operation and management and, where appropriate, assist the Board in establishing Association rules in that respect. (3) Homeownership Committee which shall advise and assist members in regard to maintenance and acquisition of ownership of their homes, financial matters and other matters [[Page 322]] related to homeownership and home management. (4) Selection Committee which shall recommend proposed homebuyers from a list of eligible applicants. (5) Nominating Committee which shall consist of a chairman, who shall be a member of the Board of Directors, and two or more members of the Association, none of whom are Directors. The Nominating Committee shall be appointed by the Board of Directors prior to each annual meeting, to serve from the close of such annual meeting until the close of the next annual meeting and such appointment shall be announced at each annual meeting. The Nominating Committee shall make as many nominations for election to the Board of Directors as it shall in its discretion determine, but not less than the number of vacancies to be filled. B. Other committees. The Board may establish other committees, permanent or temporary, which it deems necessary or desirable to carry out the purposes of the Association. C. Committee Chairman and Members. The chairmen of all committees, except the Nominating Committee, shall be appointed by and serve at the pleasure of the President. Committee members shall be appointed by the chairman of the committee on which they are to serve and shall serve until a new chairman is appointed. D. Committee Reports. The chairman of each committee shall make a report to the President in writing of committee meetings and activities prior to each regular monthly meeting of the Board of Directors. E. Authority. Unless specifically authorized in writing by the Board of Directors or the President, a committee chairman or a committee shall have no authority to legally obligate the Association or incur any expenditure on behalf of the Association. Sec. 9. Suspension of rights. The Board may suspend, by a majority vote of the Board, the voting rights and rights to use the recreational facilities, of a member, and his family and guests, during any period in which the member shall be in default in the payment of any dues or assessment imposed by the Association. Such rights may also be suspended, after notice and hearing, for a period not to exceed sixty days, for violation of the Association's rules and regulations. Sec. 10. Books and records. The books, records and papers of the Association shall at all times, during reasonable business hours, be subject to inspection by any member. Sec. 11. Amendments. Amendments to these By-Laws may be introduced and discussed at any annual or special meeting of the Association, provided that copies of any proposed amendment shall be mailed to all the members with the notice of the meeting at which such amendment will be introduced. A vote on adopting such amendment shall be taken at the first Association meeting held at least two weeks subsequent to the meeting at which the amendment was introduced. Amendments shall be adopted by a vote of a majority of the members of the Association. Sec. 12. Corporate seal. The Association shall have a seal which shall appear as follows: [seal] Sec. 13. Fiscal year. The first fiscal year of the Association shall begin on the date of incorporation and shall end on the last day of __________ (month, year). Each successive fiscal year shall begin on the first day of __________ (month) and end on the last day of __________ (month). The foregoing By-Laws were adopted at the first annual meeting of the Association held __________ by the undersigned members of the Association. Sec. Appendix II to Subpart D of Part 904--Recognition Agreement Between Local Housing Authority and Homebuyers Association (Subpart D) WHEREAS, the ____________________ (``Authority''), a public body corporate and politic, has developed or acquired with the aid of loans and annual contributions from the Department of Housing and Urban Development (``HUD''), the following Development or Developments in its homeownership opportunity program (hereinafter referred to as the ``Development''): \1\ --------------------------------------------------------------------------- \1\ List here the specific Development or Developments whose Homebuyers are represented by the Homebuyers Association with which this Agreement is entered into. --------------------------------------------------------------------------- ________________________________________________________________________ ________________________________________________________________________ WHEREAS, an organization of residents (``Homebuyers'') is an essential element in such Development for purposes of effective participation of the Homebuyers in the management of the Development and representation of the Homebuyers in their relationships with the Authority, and for other purposes; and WHEREAS, the ____________________ Homebuyers Association (``Association'') fully represents the Homebuyers of the Development; NOW, THEREFORE, this agreement is entered into by and between the Authority and the Association and they do hereby agree as follows: 1. The Association, whose Articles of Incorporation are attached hereto and made a part hereof, is hereby recognized as the established representative of the Homebuyers of the Development and is the sole group entitled to represent them as tenants or Homebuyers before the Authority; [[Page 323]] 2. For each fiscal year, the Authority shall make available funds to the Association for its normal expenses, in such amounts as may be available to the Authority for such purposes and subject to whatever applicable HUD regulations; 3. The Association shall be entitled to the use of office space in __________ at the Development without charge by the Authority for such use; 4. The Authority and the officers of the Association shall meet at a location convenient to both parties on the __________ (day) of each month to discuss matters of interest to either party; 5. In the event the parties later agree that the Association should assume management responsibilities now held by the Authority, a contract for such purpose will be negotiated by ____________________ the Association; ____________________ terminate upon dissolution of the Association. IN WITNESS HEREOF, the parties have executed this Agreement on ____________________, 19____. Local Housing Authority By (Official Title)_____________________________________________________ Homebuyers Association By (Official Title)_____________________________________________________ WITNESSES:______________________________________________________________ ________________________ PART 905_THE PUBLIC HOUSING CAPITAL FUND PROGRAM--Table of Contents Subpart A_General Sec. 905.100 Purpose, general description, and other requirements. 905.102 Applicability. 905.104 HUD approvals. 905.106 Compliance. 905.108 Definitions. 905.110 Incorporation by reference. Subpart B_Eligible Activities 905.200 Eligible activities. 905.202 Ineligible activities and costs. 905.204 Emergencies and natural disasters. Subpart C_General Program Requirements 905.300 Capital fund submission requirements. 905.302 Timely submission of the CF ACC amendment by the PHA. 905.304 CF ACC term and covenant to operate. 905.306 Obligation and expenditure of Capital Fund grants. 905.308 Federal requirements applicable to all Capital Fund activities. 905.310 Disbursements from HUD. 905.312 Design and construction. 905.314 Cost and other limitations. 905.316 Procurement and contract requirements. 905.318 Title and deed. 905.320 Contract administration and acceptance of work. 905.322 Fiscal closeout. 905.324 Data reporting requirements. 905.326 Records. Subpart D_Capital Fund Formula 905.400 Capital Fund formula (CF formula). Subpart E_Use of Capital Funds for Financing 905.500 Purpose and description. 905.505 Program requirements. 905.507 Streamlined application requirements for standard and high- performing PHAs. 905.510 Submission requirements. 905.515 HUD review and approval. Subpart F_Development Requirements 905.600 General. 905.602 Program requirements. 905.604 Mixed-finance development. 905.606 Development proposal. 905.608 Site acquisition proposal. 905.610 Technical processing. 905.612 Disbursement of Capital Funds--predevelopment costs. Subpart G_Other Security Interests 905.700 Other security interests. Subpart H_Compliance, HUD Review, Penalties, and Sanctions 905.800 Compliance. 905.802 HUD review of PHA performance. 905.804 Sanctions. Authority: 42 U.S.C. 1437g, 42 U.S.C. 1437z-2, 42 U.S.C. 1437z-7, and 3535(d). Source: 65 FR 14426, Mar. 16, 2000, unless otherwise noted. Subpart A_General Source: 78 FR 63770, Oct. 24, 2013, unless otherwise noted. Sec. 905.100 Purpose, general description, and other requirements. (a) Purpose. The Public Housing Capital Fund Program (Capital Fund Program or CFP) provides financial assistance to public housing agencies (PHAs) and resident management corporations (RMC) (pursuant to 24 CFR 964.225) to [[Page 324]] make improvements to existing public housing. The CFP also provides financial assistance to develop public housing, including mixed-finance developments that contain public housing units. (b) General description. Congress appropriates amounts for the Capital Fund in HUD's annual appropriations. In order to receive a Capital Fund grant, the PHA must: (1) Validate project-level information in HUD's data systems, as prescribed by HUD; (2) Have an approved CFP 5-Year Action Plan; (3) Enter into a Capital Fund Annual Contributions Contract (CF ACC) Amendment to the PHA's Annual Contributions Contract (as defined in 24 CFR 5.403) with HUD; and (4) Provide a written certification and counsel's opinion that all property receiving Capital Fund assistance is under a currently effective Declaration of Trust (DOT) and is in compliance with the CF ACC and the Act. (c) Informational requirements. Section 905.300 of this part describes the information to be submitted to HUD for the CFP. HUD uses the CF formula set forth in Sec. 905.400 of this part, along with data provided by the PHA and other information, including, but not limited to, the high-performance information from the Real Estate Assessment Center (REAC) and location cost indices, to determine each PHA's annual grant amount. HUD notifies each PHA of the amount of the grant and provides a CF ACC Amendment that must be signed by the PHA and executed by HUD in order for the PHA to access the grant. After HUD executes the CF ACC Amendment, the PHA may draw down funds for eligible costs that have been described in its CFP Annual Statement/Performance and Evaluation Report or CFP 5-Year Action Plan. (d) Eligible activities. Eligible Capital Fund costs and activities as further described in subpart B of this part include, but are not limited to, making physical improvements to the public housing stock and developing public housing units to be added to the existing inventory. With HUD approval, a PHA may also leverage its public housing inventory by borrowing additional capital on the private market and pledging a portion of its annual Capital Funds for debt service, in accordance with Sec. 905.500 of this part. (e) Obligation and expenditure requirements. A PHA must obligate and expend its Capital Funds in accordance with Sec. 905.306 of this part. The PHA will directly employ labor, either temporarily or permanently, to perform work (force account) or contract for the required work in accordance with 2 CFR part 200''. Upon completion of the work, the PHA must submit an Actual Modernization Cost Certificate (AMCC) or Actual Development Cost Certificate (ADCC) and a final Performance and Evaluation Report (in accordance with Sec. 905.322 of this part) to HUD to close out each Capital Fund grant. (f) Financing and development. Section 905.500 of this part regulates financing activities using Capital Funds and Operating Funds. Section 905.600 of this part contains the development requirements, including those related to mixed-finance development, formerly found in 24 CFR part 941. Section 905.700 of this part describes the criteria for the use of Capital Funds for other security interests. Section 905.800 of this part addresses PHA compliance with Capital Fund requirements and HUD capability for review and sanction for noncompliance. (g) Protections for Victims of Domestic Violence, Dating Violence, Sexual Assault and Stalking. Public housing agencies must apply the Violence Against Women Act (VAWA) requirements set forth in 24 CFR part 5, subpart L, to mixed finance developments covered under Sec. 905.604. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015; 81 FR 80815, Nov. 16, 2016] Sec. 905.102 Applicability. All PHAs that have public housing units under an Annual Contributions Contract (ACC), as described in 24 CFR 5.403, are eligible to receive Capital Funds. Sec. 905.104 HUD approvals. All HUD approvals required in this part must be in writing and from an official designated to grant such approval. [[Page 325]] Sec. 905.106 Compliance. PHAs or owner/management entities or their partners are required to comply with all applicable provisions of this part. Execution of the CF ACC Amendment, submissions required by this part, and disbursement of Capital Fund grants from HUD are individually and collectively deemed to be the PHA's certification that it is in compliance with the provisions of this part and all other Public Housing Program Requirements. Noncompliance with any provision of this part or other applicable requirements may subject the PHA and/or its partners to sanctions contained in Sec. 905.804 of this part. Sec. 905.108 Definitions. The following definitions apply to this part: 1937 Act. The term ``1937 Act'' is defined in 24 CFR 5.100. Accessible. As defined in 24 CFR 8.3. ACC. The Annual Contributions Contract between HUD and a PHA covering a public housing project or multiple public housing projects. ACC Amendment. An Amendment to the ACC to reflect specific changes made to a PHA's public housing inventory or funding. An ACC Amendment may be a Capital Fund ACC Amendment, a Mixed-Finance ACC Amendment, a Capital Fund Financing ACC Amendment, or other form of amendment specified by HUD. Additional Project Costs. The sum of the following HUD-approved costs related to the development of a public housing project, which are not included in the calculation of the Total Development Cost (TDC) limit, but are included in the maximum project cost as stated in Sec. 905.314(b). Additional project costs include the following: (1) Costs for the demolition or remediation of environmental hazards associated with public housing units that will not be rebuilt on the original site; and (2) Extraordinary site costs that have been verified by an independent state-registered, licensed engineer (e.g., removal of underground utility systems; replacement of off-site underground utility systems; extensive rock and/or soil removal and replacement; and amelioration of unusual site conditions, such as unusual slopes, terraces, water catchments, lakes, etc.); and (3) Cost effective energy-efficiency measures in excess of standard building codes. Capital Fund (CF). The fund established under section 9(d) of the 1937 Act (42 U.S.C.) 1437g(d). Capital Fund Annual Contributions Contract Amendment (CF ACC). An amendment to the Annual Contributions Contract (ACC) under the 1937 Act between HUD and the PHA containing the terms and conditions under which the Department assists the PHA in providing decent, safe, and sanitary housing for low-income families. The CF ACC must be in a form prescribed by HUD, under which HUD agrees to provide assistance in the development, modernization, and/or operation of a low-income housing project under the 1937 Act and the PHA agrees to modernize and operate the project in compliance with all Public Housing Requirements. Capital Fund Program Fee. A fee that may be charged to a Capital Fund grant by the PHA to cover costs associated with oversight and management of the CFP by the PHA Central Office Cost Center (COCC). These costs include duties related to general capital planning, preparation of the Annual Plan, processing of the Line of Credit Control System (LOCCS), preparation of reports, drawing of funds, budgeting, accounting, and procurement of construction and other miscellaneous contracts. The CFP fee is the administrative cost for managing a Capital Fund grant for a PHA subject to asset management. Community Renewal Costs. Community Renewal Costs consist of the sum of the following HUD-approved costs related to the development of a public housing project: planning (including proposal preparation); administration; site acquisition; relocation; demolition of--and site remediation of environmental hazards associated with--public housing units that will be replaced on the project site; interest and carrying charges; off-site facilities; community buildings and nondwelling facilities; contingency allowance; insurance premiums; any initial operating deficit; on-site streets; on site utilities; and [[Page 326]] other costs necessary to develop the project that are not covered under the Housing Construction Cost (HCC). Public housing capital assistance may be used to pay for Community Renewal Costs in an amount equivalent to the difference between the HCC paid for with public housing capital assistance and the TDC limit. Cooperation agreement. An agreement, in a form prescribed by HUD, between a PHA and the applicable local governing body or bodies that assures exemption from real and personal property taxes, provides for local support and services for the development and operation of public housing, and provides for PHA payments in lieu of taxes (PILOT). Date of Full Availability (DOFA). The last day of the month in which substantially all (95 percent or more) of the units in a public housing project are available for occupancy. Declaration of Restrictive Covenant. The Declaration of Restrictive Covenant is a legal instrument that binds the PHA and the Owner Entity to develop mixed-finance projects in compliance with Public Housing Requirements and restricts disposition of the property, including transferring, conveying, assigning, leasing, mortgaging, pledging or otherwise encumbering the property. Declaration of Trust (DOT). A legal instrument that grants HUD an interest in public housing property. It provides public notice that the property must be operated in accordance with all public housing federal requirements, including the requirement not to convey or otherwise encumber the property unless expressly authorized by federal law and/or HUD. Development. Any or all undertakings necessary for planning, land acquisition, demolition, construction, or equipment in connection with a public housing project. Emergency work. Capital Fund related physical work items that if not done pose an immediate threat to the health or safety of residents, and which must be completed within one year of funding. Management Improvements are not eligible as emergency work and therefore must be covered by the CFP 5-Year Action Plan before the PHA may carry them out. Energy audit. A systematic review of the energy requirements and consumption for property with the intent to identify potential opportunities for energy and water savings through improved operational efficiency or more efficient components. Expenditure. Capital Funds disbursed by the PHA to pay for obligations incurred in connection with work included in a CFP 5-Year Action Plan that has been approved by the PHA Board of Commissioners and HUD. Total funds expended means cash actually disbursed and does not include retainage. Federal Fiscal Year (FFY). The Federal Fiscal Year begins each year on October 1 and ends on September 30 of the following year. Force account labor. Labor employed directly by the PHA on either a permanent or a temporary basis. Fungibility. As it relates to the Capital Fund Program, fungibility allows the PHA to substitute work items between any of the years within the latest approved CFP 5-Year Action Plan, without prior HUD approval. HCC. The sum of the following HUD-approved costs related to the development of a public housing project: dwelling unit hard costs (including construction and equipment), builder's overhead and profit, the cost of extending utilities from the street to the public housing project, finish landscaping, and the payment of Davis-Bacon wage rates. Line of Credit Control System (LOCCS). LOCCS is a HUD grant disbursement system. LOCCS currently provides disbursement controls for over 100 HUD grant programs. LOCCS-Web is an intranet version of LOCCS for HUD personnel. eLOCCS is the Internet link to LOCCS data for HUD business partners. Mixed-finance modernization. Use of the mixed-finance method of development to modernize public housing projects described in Sec. 905.604. Modernization. Modernization means the activities and items listed in Sec. 905.200(b)(4-18). Natural disaster. An extraordinary event, such as an earthquake, flood, or [[Page 327]] hurricane, affecting only one or few PHAs, but excluding presidentially declared emergencies and major disasters under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq). Obligation. A binding agreement for work or financing that will result in outlays, immediately or in the future. All obligations must be incorporated within the CFP 5-Year Action Plan that has been approved by the PHA Board of Commissioners and HUD. This includes funds obligated by the PHA for work to be performed by contract labor (i.e., contract award), or by force account labor (i.e., work actually started by PHA employees). Capital Funds identified in the PHA's CFP 5-Year Action Plan to be transferred to operations are obligated by the PHA once the funds have been budgeted and drawn down by the PHA. Once these funds are drawn down they are subject to the requirements of 24 CFR part 990. Open grant. Any grant for which a cost certificate has not been submitted and which has not reached fiscal closeout as described in Sec. 905.322 of this part. Operating fund. Assistance provided under 24 CFR part 990 pursuant to section 9(e) of the 1937 Act (42 U.S.C. 1437g(e)) for the purpose of operation and management of public housing. Owner entity. An entity that owns public housing units. In mixed- finance development, the Owner Entity may be the PHA, or may be an entity in which the PHA owns a partial interest, or may be an entity in which the PHA has no ownership interest. The Owner Entity is subject to the applicable requirements of this subpart. Partner. A third-party entity with which the PHA has entered into a partnership or other contractual arrangement to provide for the mixed- finance development of public housing units pursuant to this subpart. The partner has primary responsibility with the PHA for the development and/or operation of the public housing units and is subject to the applicable requirements of subpart F of this part. Physical Needs Assessment (PNA). A systematic review of all the major physical components of property to result in a long-term schedule for replacement of each component and estimated capital costs required to meet the replacement need. PIH Information Center (PIC). PIH's current system for recording data concerning: the public housing inventory, the characteristics of public housing and Housing Choice Voucher --assisted families, the characteristics of PHAs, and performance measurement of PHAs receiving Housing Choice Voucher funding. Public Housing Agency (PHA). Any state, county, municipality, or other governmental entity or public body or agency or instrumentality of these entities that is authorized to engage or assist in the development or operation of public housing under this part. Public Housing Assessment System (PHAS). The assessment system under 24 CFR part 902 for measuring the properties and PHA management performance in essential housing operations, including rewards for high performers and consequences for poor performers. Public housing capital assistance. Assistance provided by HUD under the Act in connection with the development of public housing under this part, including Capital Fund assistance provided under section 9(d) of the Act, public housing development assistance provided under section 5 of the Act, Operating Fund assistance used for capital purposes under section 9(g)(2) or 9(e)(1)(I) (with HUD's approval of such financing of rehabilitation and development of public housing units) of the Act, and HOPE VI grant assistance. Public housing funds. Any funds provided through the Capital Fund or Other Public Housing Development Sources, such as HOPE VI, Choice Neighborhoods, Development Funds, disposition proceeds that a PHA may realize under section 18 of the 1937 Act (42 U.S.C. 1437p), or any other funds appropriated by Congress for public housing. Public housing project. The term ``public housing'' means low-income housing, and all necessary appurtenances thereto, assisted under the 1937 Act, other than assistance under 42 U.S.C. 1437f of the 1937 Act (section 8). The term ``public housing'' includes dwelling units in a mixed-finance project that are assisted by a public housing agency with public housing [[Page 328]] capital assistance or Operating Fund assistance. When used in reference to public housing, the term ``project'' means housing developed, acquired, or assisted by a PHA under the 1937 Act, and the improvement of any such housing. Public housing requirements. All requirements applicable to public housing including, but not limited to, the 1937 Act; HUD regulations; the Consolidated Annual Contributions Contract, including amendments; HUD notices; and all applicable federal statutes, executive orders, and regulatory requirements, as these requirements may be amended from time to time. Reasonable cost. An amount to rehabilitate or modernize an existing structure that is not greater than 90 percent of the TDC for a new development of the same structure type, number, and size of units in the same market area. Reasonable costs are also determined with consideration of HUD regulations including 2 CFR part 200. Reconfiguration. The altering of the interior space of buildings (e.g., moving or removing interior walls to change the design, sizes, or number of units). Uniform Federal Accessibility Standards (UFAS). As defined in 24 CFR 8.32; see also 24 CFR part 40. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 905.110 Incorporation by reference. (a) Certain material is incorporated by reference into this part, with the approval of the Director of the Federal Register, under 5 U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that specified in this section, HUD must publish notice of change in the Federal Register and the material must be available to the public. Incorporated material is available from the sources listed below and is available for inspection at HUD's Office of Policy Development and Research, Affordable Housing Research and Technology Division, Department of Housing and Urban Development, telephone number 202-408- 4370 (this is not a toll-free number). This material is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030 (this is not a toll-free number) or go to http:// www.archives.gov/federal_register/code_of_federal_regulations/ ibr_locations.html. (b) American Society of Heating, Refrigerating, and Air-Conditioning Engineers, Inc., 1791 Tulle Circle NE., Atlanta, GA 30329 (http:// www.ashrae.org/standards-research-technology/standards-guidelines). (1) ASHRAE 90.1-2010, ``Energy Standard for Buildings Except Low- Rise Residential Buildings,'' copyright 2010, IBR approved for Sec. Sec. 905.200(b) and 905.312(b) of this part. (2) [Reserved] (c) International Code Council, 500 New Jersey Avenue NW., 6th Floor, Washington, DC 20001. (1) International Energy Conservation Code (IECC), January 2009, IBR approved for Sec. Sec. 905.200(b) and 905.312(b). (2) [Reserved] Subpart B_Eligible Activities Source: 78 FR 63773, Oct. 24, 2013, unless otherwise noted. Sec. 905.200 Eligible activities. (a) General. Activities that are eligible to be funded with Capital Funds as identified in this section include only items specified in an approved CFP 5-Year Action Plan as identified in Sec. 905.300, or approved by HUD for emergency and natural disaster assistance, other than presidentially declared natural disasters and emergencies. (b) Eligible activities. Eligible activities include the development, financing, and modernization of public housing projects, including the redesign, reconstruction, and reconfiguration of public housing sites and buildings (including compliance with the accessible design and construction requirements contained in 24 CFR 8.32, 24 CFR part 40, 24 CFR part 100, 28 CFR 35.151, and 28 CFR part 36, as applicable) and the development of mixed-finance projects, including the following: (1) Modernization. Modernization is defined in Sec. 905.108 of this part; (2) Development. Development refers to activities and related costs to add [[Page 329]] units to a PHA's public housing inventory under Sec. 905.600 of this part, including: construction and acquisition with or without rehabilitation; any and all undertakings necessary for planning, design, financing, land acquisition, demolition, construction, or equipment, including development of public housing units, and buildings, facilities, and/or related appurtenances (i.e., nondwelling facilities/ spaces). Development of mixed-finance projects include the provision of public housing through a regulatory and operating agreement, master contract, individual lease, condominium or cooperative agreement, or equity interest. (3) Financing. Debt and financing costs (e.g., origination fees, interest) incurred by PHAs for development or modernization of PHA projects that involves the use of Capital Funds, including, but not limited to: (i) Mixed finance as described in Sec. 905.604 of this part; (ii) The Capital Fund Financing Program (CFFP) as described in Sec. 905.500 of this part; and (iii) Any other use authorized by the Secretary under section 30 of the 1937 Act (42 U.S.C. 1437). (4) Vacancy reduction. Physical improvements to reduce the number of units that are vacant. Not included are costs for routine vacant unit turnaround, such as painting, cleaning, and minor repairs. Vacancy reduction activities must be remedies to a defined vacancy problem detailed in a vacancy reduction program included in the PHA's CFP 5-Year Action Plan. (5) Nonroutine maintenance. Work items that ordinarily would be performed on a regular basis in the course of maintenance of property, but have become substantial in scope because they have been postponed and involve expenditures that would otherwise materially distort the level trend of maintenance expenses. These activities also include the replacement of obsolete utility systems and dwelling equipment. (6) Planned code compliance. Building code compliance includes design and physical improvement costs associated with: (i) Correcting violations of local building code or the Uniform Physical Condition Standards (UPCS) under the Public Housing Assessment System (PHAS), and (ii) A national building code, such as those developed by the International Code Council or the National Fire Protection Association; and the IECC or ASHRAE 90.1-2010 (both incorporated by reference, see, Sec. 905.110 of this part), for multifamily high-rises (four stories or higher), or a successor energy code or standard that has been adopted by HUD for new construction pursuant to section 109 of the Cranston- Gonzales National Affordable Housing Act, Public Law 101-625, codified at 42 U.S.C. 12709, or other relevant authority. (7) Management improvements. Noncapital activities that are project- specific or PHA-wide improvements needed to upgrade or improve the operation or maintenance of the PHA's projects, to promote energy conservation, to sustain physical improvements at those projects, or correct management deficiencies. PHAs must be able to demonstrate the linkage between the management improvement and the correction of an identified management deficiency, including sustaining the physical improvements. HUD encourages PHAs, to the greatest extent feasible, to hire residents as trainees, apprentices, or employees to carry out activities under this part, and to contract with resident owned businesses as required by section 3 of the Housing and Community Development Act of 1968, 12 U.S.C. 1701u. Management improvement costs shall be fundable only for the implementation period of the physical improvements, unless a longer period, up to a maximum of 4 years, is clearly necessary to achieve performance targets. Eligible activities include the following costs: (i) Training for PHA personnel in operations and procedures, including resident selection, rent collection and eviction; (ii) Improvements to management, financial, and accounting control systems of the PHA; (iii) Improvement of resident and project security; (iv) Activities that assure or foster equal opportunity; and (v) Activities needed in conjunction with capital expenditures to facilitate [[Page 330]] programs to improve the empowerment and economic self-sufficiency of public housing residents, including the costs for resident job training and resident business development activities to enable residents and their businesses to carry out Capital Fund-assisted activities. (vi) Resident management costs not covered by the Operating Fund include: (A) The cost of technical assistance to a resident council or RMC to assess feasibility of carrying out management functions for a specific development or developments; (B) The cost to train residents in skills directly related to the operation and management of the development(s) for potential employment by the RMC; (C) The cost to train RMC board members in community organization, board development, and leadership; (D) The cost of the formation of an RMC; and (E) Resident participation costs that promote more effective resident participation in the operation of the PHA in its Capital Fund activities, including costs for staff support, outreach, training, meeting and office space, childcare, transportation, and access to computers that are modest and reasonable. (8) Economic self-sufficiency. Capital expenditures to facilitate programs to improve the empowerment and economic self-sufficiency of public housing residents. (9) Demolition and reconfiguration. (i) The costs to demolish dwelling units or nondwelling facilities subject to prior approval by HUD, where required, and other related costs for activities such as relocation, clearing, and grading the site after demolition, and subsequent site improvements to benefit the remaining portion of the existing public housing property, as applicable. (ii) The costs to develop dwelling units or nondwelling facilities approved by HUD, where required, and other related costs for activities such as relocation, clearing and grading the site prior to development. (iii) The costs to reconfigure existing dwelling units to units with different bedroom sizes or to a nondwelling use. (10) Resident relocation and mobility counseling. Relocation and other assistance (e.g., reimbursement to affected residents of reasonable out-of-pocket expenses incurred in connection with temporary relocation, including the cost of moving to and from temporary housing and any increase in monthly rent/utility costs) as may be required or permitted by applicable Public Housing Requirements for permanent or temporary relocation, as a direct result of modernization, development, rehabilitation, demolition, disposition, reconfiguration, acquisition, or an emergency or disaster. (11) Security and safety. Capital expenditures designed to improve the security and safety of residents. (12) Homeownership. Activities associated with public housing homeownership, as approved by HUD, such as: (i) The cost of a study to assess the feasibility of converting rental units to homeownership units and the preparation of an application for the conversion to homeownership or for the sale of units; (ii) Construction or acquisition of units; (iii) Downpayment assistance; (iv) Closing cost assistance; (v) Subordinate mortgage loans; (vi) Construction or permanent financing such as write downs for new construction, or acquisition with or without rehabilitation; and (vii) Other activities in support of the primary homeownership activities above, including but not limited to: (A) Demolition to make way for new construction; (B) Abatement of environmentally hazardous materials; (C) Relocation assistance and mobility counseling; (D) Homeownership counseling; (E) Site improvements; and (F) Administrative and marketing costs. (13) Capital Fund-related legal costs (e.g., legal costs related to preparing property descriptions for the DOT, zoning, permitting, environmental review, procurement, and contracting). (14) Energy efficiency. Allowed costs include: (i) Energy audit or updated energy audits to the extent Operating Funds are not available and the energy audit [[Page 331]] is included within a modernization program. (ii) Integrated utility management and capital planning to promote energy conservation and efficiency measures. (iii) Energy and water conservation measures identified in a PHA's most recently updated energy audit. (iv) Improvement of energy and water-use efficiency by installing fixtures and fittings that conform to the American Society of Mechanical Engineers/American National Standards Institute standards A112.19.2-1998 and A112.18.1-2000, or any revision thereto, applicable at the time of installation, and by increasing energy efficiency and water conservation by such other means as the Secretary determines are appropriate. (v) The installation and use of Energy Star appliances whenever energy systems, devices, and appliances are replaced, unless it is not cost-effective to do so, in accordance with Section 152 of the Energy Policy Act of 2005, 42 U.S.C. 15841. (vi) Utility and energy management system automation, and metering activities, including changing mastermeter systems to individually metered systems if installed as a part of a modernization activity to upgrade utility systems; for example, electric, water, or gas systems of the PHA consistent with the requirements of 24 CFR part 965. (15) Administrative costs. Any administrative costs, including salaries and employee benefit contributions, other than the Capital Fund Program Fee, must be related to a specific public housing development or modernization project and detailed in the CFP 5-Year Action Plan. (16) Audit. Costs of the annual audit attributable to the portion of the audit covering the CFP in accordance with Sec. 905.322(c) of this part. (17) Capital Fund Program Fee. This fee covers costs associated with oversight and management of the CFP attributable to the HUD-accepted COCC as described in 24 CFR part 990 subpart H. These costs include duties related to capital planning, preparing the CFP Annual Statement/ Performance and Evaluation Report, preparing the CFP 5-Year Action Plan, the monitoring of LOCCS, preparing reports, drawing funds, budgeting, accounting, and procuring construction and other miscellaneous contracts. This fee is not intended to cover costs associated with construction supervisory and inspection functions that are considered a front-line cost of the project. (18) Emergency activities. Capital Fund related activities identified as emergency work, as defined in Sec. 905.108 of this part, whether or not the need is indicated in the CFP 5-Year Action Plan. Sec. 905.202 Ineligible activities and costs. The following are ineligible activities and costs for the CFP: (a) Costs not associated with a public housing project or development, as defined in Sec. 905.604(b)(1); (b) Activities and costs not included in the PHA's CFP 5-Year Action Plan, with the exception that expenditures for emergencies and disasters, as defined in Sec. 905.204 of this subpart, that are not identified in the 5-year Action Plan because of their emergent nature are eligible costs; (c) Improvements or purchases that are not modest in design and cost because they include amenities, materials, and design in excess of what is customary for the locality. Air conditioning is an eligible modest amenity; (d) Any costs not authorized as outlined in 2 CFR part 200, subpart E, including, but not limited to, indirect administrative costs and indemnification; (e) Public housing operating assistance, except as provided in Sec. 905.314(l) of this part; (f) Direct provision of social services through either force account or contract labor. Examples of ineligible direct social services include, but are not limited to, salaries for social workers or GED teachers; (g) Eligible costs that are in excess of the amount directly attributable to the public housing units when the physical or management improvements, including salaries and employee benefits and contributions, will benefit programs other than public housing, such as section 8 Housing Choice Voucher or local revitalization programs; [[Page 332]] (h) Ineligible management improvements include: (1) Costs for security guards or ongoing security services (Capital Funds may only be used for the initial capital (e.g., fencing, lights, and cameras) or noncapital (e.g., training of in-house security staff) management improvements but may not be used for the ongoing costs, such as security guards after the end of the implementation period of the physical improvements); (2) General remedial education; and (3) Job counseling, job development and placement, supportive services during training, and the hiring of a resident coordinator. No continued Capital Funds will be provided after the end of the implementation period of the management improvements. The PHA shall be responsible for finding other funding sources, reducing its ongoing management costs, or terminating the management activities; (i) Eligible cost that is funded by another source and would result in duplicate funding; and (j) Any other activities and costs that HUD may determine on a case- by-case basis. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 905.204 Emergencies and natural disasters. (a) General. PHAs are required by the CF ACC to carry various types of insurance to protect it from loss. In most cases, insurance coverage will be the primary source of funding to pay repair or replacement costs associated with emergencies and natural disasters. Where the Department's Annual Appropriations Act establishes a set-aside from the Capital Fund appropriation for emergencies and natural disasters, the procedures in this section apply. (b) Emergencies and natural disasters. An emergency is an unforeseen or unpreventable event or occurrence that poses an immediate threat to the health and safety of the residents that must be corrected within one year of funding. A natural disaster for purposes of the Capital Fund reserve, is a non-presidentially declared disaster. In the event an emergency or natural disaster arises, HUD may require a PHA to use any other source that may legally be available, including unobligated Capital Funds, prior to providing emergency or natural disaster funds from the set-aside. The Department will review, on a case-by-case basis, requests for emergency and natural disaster funding from PHAs. (c) Procedure to request emergency or natural disaster funds. To obtain emergency or natural disaster funds, a PHA shall submit a written request in the form and manner prescribed by HUD. In a natural disaster where the PHA requires immediate relief to preserve the property and safety of the residents, the PHA may submit a preliminary request outlined in paragraph (d) of this section. Subsequently, the PHA is required to complete and submit the remaining information outlined in paragraph (e) of this section, at a time prescribed by HUD. For emergency requests, PHAs are to follow the procedures outlined in paragraph (e) of this section. (d) Procedure to request preliminary natural disaster grant for immediate preservation. A PHA may request a preliminary grant only for costs necessary for immediate preservation of the property and safety of the residents. The application should include the reasonable identification of damage and preservation costs as determined by the PHA. An independent assessment will be required when the PHA submits the final request or when the PHA reconciles the preliminary application grant with the actual amounts received from the Federal Emergency Management Agency (FEMA), insurance carriers, and other natural disaster relief sources. Regardless of whether further funding from the set-aside is requested, at a time specified by HUD, the PHA will be expected to provide a reconciliation of all funds received, to ensure that the PHA does not receive duplicate funding. (e) Procedure for an emergency or a final request for natural disaster funds. In the request the PHA shall: (1) Identify the public housing project(s) with the emergency or natural disaster condition(s). (2) Identify and provide the date of the conditions that present an unforeseen or unpreventable threat to the health, life, or safety of residents, in [[Page 333]] the case of emergency; or Natural disaster (e.g., hurricane, tornado, etc.). (3) Describe the activities that will be undertaken to correct the emergency or the conditions caused by the natural disaster and the estimated cost. (4) Provide an independent assessment of the extent of and the cost to correct the condition. The assessment must be specific as to the damage and costs associated with the emergency or natural disaster. An independent estimate of damage and repair cost is required as a part of the final natural disaster application. For natural disasters, the assessment must identify damage specifically caused by the natural disaster. The set-aside can be used only to pay costs to repair or replace a public housing project damaged as a result of the natural disaster, not for nonroutine maintenance or other improvements. (5) Provide a copy of a currently effective DOT covering the property and an opinion of counsel that there are no preexisting liens or other encumbrances on the property. (6) Demonstrate that without the requested funds from the set-aside, the PHA does not have adequate funds available to correct the emergency condition(s). (7) Identify all other sources of available funds (e.g., insurance proceeds, FEMA). (8) Any other material required by HUD. (f) HUD Action. HUD shall review all requests for emergency or natural disaster funds. If HUD determines that a PHA's request meets the requirements of this section, HUD shall approve the request subject to the availability of funds in the set-aside, in the order in which requests are received and are determined approvable. (g) Submission of the CF ACC. Upon being provided with a CF ACC Amendment from HUD, the PHA must sign and date the CF ACC Amendment and return it to HUD by the date established by HUD. HUD will execute the signed and dated CF ACC Amendment submitted by the PHA. Subpart C_General Program Requirements Source: 78 FR 63773, Oct. 24, 2013, unless otherwise noted. Sec. 905.300 Capital fund submission requirements. (a) General. Unless otherwise stated, the requirements in this section apply to both qualified PHAs (as described in Sec. 903.3(c) of this chapter) and nonqualified PHAs. Each PHA must complete a comprehensive physical needs assessment (PNA). (1) Applicability. Small PHAs (PHAs that own or operate fewer than 250 public housing units) must comply with the requirements of this section beginning 30 days after the end of the federal fiscal year quarter following HUD's publication of a notice in the Federal Register. (2) [Reserved] (b) Capital Fund program submission requirements. At the time that the PHA submits the ACC Amendment(s) for its Capital Fund Grants(s) to HUD, the PHA must also submit the following items: (1) CFP 5-Year Action Plan. (i) Content. The CFP 5-Year Action Plan must describe the capital improvements necessary to ensure long-term physical and social viability of the PHA's public housing developments, including the capital improvements to be undertaken within the 5-year period, their estimated costs, status of environmental review, and any other information required for participation in the CFP, as prescribed by HUD. In order to be entitled to fungibility, PHA's must have an approved 5-year Action Plan. Except in the case of emergency/disaster work, the PHA shall not spend Capital Funds on any work that is not included in an approved CFP 5-Year Action Plan and its amendments. (ii) Budget. The Capital Fund Budget for each of the 5 years shall be prepared by a PHA using the form(s) prescribed by HUD. Work items listed in the budget must include, but are not limited to, the following: (A) Where a PHA has an approved Capital Fund Financing Program (CFFP) loan, debt service payments for [[Page 334]] the grants from which the payments are scheduled; (B) Where a PHA has an approved CFFP loan, the PHA shall also include all work and costs, including debt service payments, in the CFP 5-Year Action Plan. Work associated with the use of financing proceeds will be reported separately in a form and manner prescribed by HUD; or (C) Work affecting health and safety and compliance with regulatory requirements such as section 504 of the Rehabilitation Act of 1973 and HUD's implementing regulations at 24 CFR part 8, and the lead-based paint poisoning prevention standards at 24 CFR part 35, before major systems (e.g., heating, roof, etc.) and other costs of lower priority. (iii) PHA Criteria for Significant Amendment or Modification. The PHA must include in the basic criteria that the PHA will use for determining a significant amendment or modification to the CFP 5-Year Action Plan. In addition to the criteria established by the PHA, for the purpose of the CFP, a proposed demolition, disposition, homeownership, Capital Fund financing, development, or mixed-finance proposal are considered significant amendments to the CFP 5-Year Action Plan. (iv) Submission. The PHA must submit a Board-approved CFP 5-Year Action Plan at least once every 5 years. The PHA may choose to update its CFP 5-Year Action Plan every year. The PHA shall indicate whether its CFP 5-Year Action Plan is fixed or rolling. Prior to submission to HUD, the 5-Year Action Plan must have been approved by the PHA's Board of Commissioners. In any given year that a PHA does not have a CFP 5- Year Action Plan that is approved by the PHA Board of Commissioners and HUD, the Capital Fund grant(s) for these PHAs will be reserved and obligated; however, the PHA will not have access to those funds until its CFP 5-Year Action Plan is approved by the PHA Board of Commissioners and HUD. (v) Significant amendments or modification to the CFP 5 Year Action Plan. PHAs making significant amendments or modifications to the CFP 5- Year Action Plan, as defined in paragraph (b)(1)(iii) of this section, must follow the requirements of this section. (A) A PHA after submitting its 5-Year Action Plan may amend or modify the plan. If the amendment or modification is a significant amendment or modification, as defined in paragraph (b)(1)(iii) of this section, the PHA: (1) May not adopt the amendment or modification until the PHA has duly called a meeting of its Board of Commissioners (or similar governing body) and the meeting at which the amendment or modification is adopted, is open to the public; and (2) May not implement the amendment or modification until notification of the amendment or modifications are provided to HUD and approved by HUD in accordance with HUD's plan review procedures, as provided in paragraph (b)(6) of this section. (B) Each significant amendment or modification to a plan submitted to HUD is subject to the requirement of paragraph (b)(3) of this section. (2) Certifications required for receipt of Capital Fund grants. The PHA is also required to submit various certifications to HUD, in a form prescribed by HUD, including, but not limited to: (i) Certification of PIC Data; (ii) Standard Form--Disclosure of Lobbying Activities; (iii) Civil Rights Compliance, in a form prescribed by HUD; and (iv) Certification of Compliance with Public Hearing Requirements. (3) Conduct of public hearing and Resident Advisory Board Consultation. A PHA must annually conduct a public hearing and consult with the Resident Advisory Board (RAB) of the PHA to discuss the Capital Fund submission. The PHA may elect to conduct a separate annual public hearing in order to solicit public comments or to hold the annual public hearing at the same time as the hearing for the Annual PHA Plan, the 5- Year Plan, or the required annual hearing for qualified public housing authorities. The hearing must be conducted at a location that is convenient to the residents served by the PHA. (i) Not later than 45 days before the public hearing is to take place, the PHA must: [[Page 335]] (A) Make the Capital Fund submission along with the material required under this paragraph (b) available to the residents and the RAB; and (B) Publish a notice informing the public that the information is available for review and inspection; that a public hearing will take place on the plan; and of the date, time, and location of the hearing. (C) PHAs shall conduct reasonable outreach activities to encourage broad public participation in the review of the Capital Fund submission. (4) Public and RAB comments. The PHA must consider the comments from the residents, the public, and the RAB on the Capital Fund submission, or any significant modification thereto. In submitting the final CFP 5- Year Action Plan to HUD for approval, or any significant amendment or modification to the 5-Year Action Plan to HUD for approval, the PHA must include a copy of the recommendations made by the RAB(s) and a description of the manner in which the PHA addressed these recommendations. (5) Consistency with Consolidated Plan. The Capital Fund submission must be consistent with any applicable Consolidated Plan. (6) HUD review and approval. The CFP submission requirements must meet the requirements of this part as well as the Public Housing Program Requirements as defined in Sec. 905.108 of this part. A PHA is required to revise or correct information that is not in compliance, and HUD has the authority to impose administrative sanctions until the appropriate revisions are made. HUD will review the CFP submission requirements to determine whether: (i) All of the information that is required to be submitted is included; (ii) The information is consistent with the needs identified in the PNA and data available to HUD; and (iii) There are any issues of compliance with applicable laws, regulations, or contract requirements that have not been addressed with the proposed use of the Capital Fund. (7) Time frame for submission of CFP requirements. The requirements identified in this paragraph (b) must be submitted to HUD, in a format prescribed by HUD, at the time that the PHA submits its signed CF ACC Amendment. (8) Performance and Evaluation Report. (i) All PHAs must prepare a CFP Annual Statement/Performance and Evaluation Report at a time and in a format prescribed by HUD. These reports shall be retained on file for all grants for which a final Actual Modernization Cost Certificate (AMCC) or an Actual Development Cost Certificate (ADCC) has not been submitted. A final Performance and Evaluation Report must be submitted in accordance with 24 CFR 905.322, at the time the PHA submits its AMCC or ADCC. (ii) PHAs that are designated as troubled performers under PHAS (24 CFR part 902) or as troubled under the Section 8 Management Assessment Program (SEMAP) (24 CFR part 985), and/or were identified as noncompliant with section 9(j) obligation and expenditure requirements during the fiscal year, shall submit their CFP Annual Statement/ Performance and Evaluation Reports to HUD for review and approval. (iii) All other PHAs, that are not designated as troubled performers under PHAS and are not designated as troubled under SEMAP, and that were in compliance with section 9(j) obligation and expenditure requirements during the fiscal year, shall prepare a CFP Annual Statement/Performance and Evaluation report for all open grants and shall retain the report(s) on file at the PHA, to be available to HUD upon request. (9) Moving to Work (MTW) PHAs. MTW PHAs are to submit the Capital Fund submissions as part of the MTW Plan annually, as required by the MTW Agreement. (c)-(d) [Reserved] Sec. 905.302 Timely submission of the CF ACC amendment by the PHA. Upon being provided with a CF ACC Amendment from HUD, the PHA must sign and date the CF ACC Amendment and return it to HUD by the date established. HUD will execute the signed and dated CF ACC Amendment submitted by the PHA. If HUD does not receive the signed and dated Amendment by the submission deadline, the PHA will receive the Capital Fund grant for that [[Page 336]] year; however, it will have less than 24 months to obligate 90 percent of the Capital Fund grant and less than 48 months to expend these funds because the PHA's obligation start date and disbursement end date for these grants will remain as previously established by HUD. Sec. 905.304 CF ACC term and covenant to operate. (a) Period of obligation to operate as public housing. The PHA shall operate all public housing projects in accordance with the CF ACC, as amended, and applicable HUD regulations, for the statutorily prescribed period. These periods shall be evidenced by a recorded DOT on all public housing property. If the PHA uses Capital Funds to develop public housing or to modernize existing public housing, the CF ACC term and the covenant to operate those projects are as follows: (1) Development activities. Each public housing project developed using Capital Funds shall establish a restricted use covenant, either in the DOT or as a Declaration of Restrictive Covenants, to operate under the terms and conditions applicable to public housing for a 40-year period that begins on the date on which the project becomes available for occupancy, as determined by HUD. (2) Modernization activities. For PHAs that receive Capital Fund assistance, the execution of each new CF ACC Amendment establishes an additional 20-year period that begins on the latest date on which modernization is completed, except that the additional 20-year period does not apply to a project that receives Capital Fund assistance only for management improvements. (3) Operating Fund. Any public housing project developed that receives Operating Fund assistance shall have a covenant to operate under requirements applicable to public housing for a 10-year period beginning upon the conclusion of the fiscal year for which such amounts were provided, except for such shorter period as permitted by HUD by an exception. (b) Mortgage or security interests. The PHA shall not allow any mortgage or security interest in public housing assets, including under section 30 of the 1937 Act (42 U.S.C. 1437z-2), without prior written approval from HUD. PHAs that undertake financing unsecured by public housing assets shall include the following nonrecourse language in all financing documents as follows: ``This financing is non-recourse to any public housing property (real or personal property including all public housing assets or income), or disposition proceeds approved pursuant to Section 18 of the United States Housing Act of 1937 (unless explicitly permitted by HUD in the Section 18 approval letter).'' (c) Applicability of latest expiration date. All public housing subject to this part or required by law shall be maintained and operated as public housing, as prescribed, until the latest expiration date provided in section 9(d)(3) of the 1937 Act (42 U.S.C. 1437g(d)(3)) or any other provision of law or regulation mandating the operation of the housing as public housing, or under terms and conditions applicable to public housing, for a specified period of time. Sec. 905.306 Obligation and expenditure of Capital Fund grants. (a) Obligation. A PHA shall obligate each Capital Fund grant, including formula grants, Replacement Housing Factor (RHF) grants, Demolition and Disposition Transitional Funding (DDTF) grants, and natural disaster grants, no later than 24 months after, and emergency grants no later than 12 months after, the date on which the funds become available to the PHA for obligation, except as provided in paragraphs (c) and (d) of this section. However, a PHA with unobligated funds from a grant shall disregard this requirement for up to not more than 10 percent of the originally allocated funds from that grant. The funds become available to the PHA when HUD executes the CF ACC Amendment. With HUD approval, and subject to the availability of appropriations, the PHA can accumulate RHF grants for up to 5 years or until it has adequate funds to undertake replacement housing. The PHA shall obligate 90 percent of the RHF grant within 24 months from the date that the PHA accumulates adequate funds, except as provided in paragraph (c) of this section. [[Page 337]] (b) Items and costs. For funds to be considered obligated, all items and costs must meet the definition of ``obligation'' in Sec. 905.108 of this part. (c) Extension to obligation requirement. The PHA may request an extension of the obligation deadline, and HUD may grant an extension for a period of up to 12 months, based on: (1) The size of the PHA; (2) The complexity of the CFP of the PHA; (3) Any limitation on the ability of the PHA to obligate the amounts allocated for the PHA from the Capital Fund in a timely manner as a result of state or local law; or (4) Any other factors that HUD determines to be relevant. (d) HUD extension for other reasons. HUD may extend the obligation deadline for a PHA for such a period as HUD determines to be necessary, if HUD determines that the failure of the PHA to obligate assistance in a timely manner is attributable to: (1) Litigation; (2) Delay in obtaining approvals from the Federal Government or a state or local government that is not the fault of the PHA; (3) Compliance with environmental assessment and abatement requirements; (4) Relocating residents; (5) An event beyond the control of the PHA; or (6) Any other reason established by HUD by notice in the Federal Register. (e) Failure to obligate. (1) For any month during the fiscal year, HUD shall withhold all new Capital Fund grants from any PHA that has unobligated funds in violation of paragraph (a) of this section. The penalty will be imposed once the violations of paragraph (a) are known. The PHA may cure the noncompliance by: (i) Requesting in writing that HUD recapture the unobligated balance of the grant; or (ii) Continuing to obligate funds for the grant in noncompliance until the noncompliance is cured. (2) After the PHA has cured the noncompliance, HUD will release the withheld Capital Fund grant(s) minus a penalty of one-twelfth of the grant for each month of noncompliance. (f) Expenditure. The PHA shall expend all grant funds within 48 months after the date on which funds become available, as described in paragraph (a) of this section. The deadline to expend funds may be extended only by the period of time of a HUD-approved extension of the obligation deadline. No other extensions of the expenditure deadline will be granted. All funds not expended will be recaptured. Sec. 905.308 Federal requirements applicable to all Capital Fund activities. (a) The PHA shall comply with the requirements of 24 CFR part 5 (General HUD Program Requirements; Waivers), 2 CFR part 200, and this part. (b) The PHA shall also comply with the following program requirements. (1) Nondiscrimination and equal opportunity. The PHA shall comply with all applicable nondiscrimination and equal opportunity requirements, including, but not limited to, the Department's generally applicable nondiscrimination and equal opportunity requirements at 24 CFR 5.105(a) and the Architectural Barriers Act of 1968 (42 U.S.C. 4151 et seq.), and its implementing regulations at 24 CFR parts 40 and 41. The PHA shall affirmatively further fair housing in its use of funds under this part, which includes, but is not limited to, addressing modernization and development in the completion of requirements at 24 CFR 903.7(o). (2) Environmental requirements. All activities under this part are subject to an environmental review by a responsible entity under HUD's environmental regulations at 24 CFR part 58 and must comply with the requirements of the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321 et seq.) and the related laws and authorities listed at 24 CFR 58.5. HUD may make a finding in accordance with 24 CFR 58.11 and may perform the environmental review itself under the provisions of 24 CFR part 50. In those cases where HUD performs the environmental review under 24 CFR part 50, it will do so before approving a proposed project, and will comply with the requirements of NEPA and the related requirements at 24 CFR 50.4. [[Page 338]] (3) Wage rates. (i) Davis-Bacon wage rates. For all work or contracts exceeding $2,000 in connection with development activities or modernization activities (except for nonroutine maintenance work, as defined in Sec. 905.200(b)(5) of this part), all laborers and mechanics employed on the construction, alteration, or repair shall be paid not less than the wages prevailing in the locality, as determined by the Secretary of Labor pursuant to the Davis-Bacon Act (40 U.S.C. 3142). (ii) HUD-determined wage rates. For all operations work and contracts, including routine and nonroutine maintenance work (as defined in Sec. 905.200(b)(5) of this part), all laborers and mechanics employed shall be paid not less than the wages prevailing in the locality, as determined or adopted by HUD pursuant to section 12(a) of the 1937 Act, 42 U.S.C. 1437j(a). (iii) State wage rates. Preemption of state prevailing wage rates as provided at 24 CFR 965.101. (iv) Volunteers. The prevailing wage requirements of this section do not apply to volunteers performing development, modernization, or nonroutine maintenance work under the conditions set out in 24 CFR part 70. (4) Technical wage rates. All architects, technical engineers, draftsmen, and technicians (other than volunteers under the conditions set out in 24 CFR part 70) employed in a development or modernization project shall be paid not less than the wages prevailing in the locality, as determined or adopted (subsequent to a determination under applicable state or local law) by HUD. (5) Lead-based paint poisoning prevention. The PHA shall comply with the Lead-Based Paint Poisoning Prevention Act (LPPPA) (42 U.S.C. 4821 et seq.), the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. 4851 et seq.), and the Lead Safe Housing Rule and the Lead Disclosure Rule at 24 CFR part 35. (6) Fire safety. A PHA shall comply with the requirements of section 31 of the Federal Fire Prevention and Control Act of 1974 (15 U.S.C. 2227). (7) Flood insurance and floodplain requirements. The PHA will not engage in the acquisition, construction, or improvement of a public housing project located in an area that has been identified by the FEMA as having special flood hazards, unless: (i) The requirements of 24 CFR part 55, Floodplain Management, have been met, including a determination by a responsible entity under 24 CFR part 58 or by HUD under 24 CFR part 50 that there is no practicable alternative to locating in an area of special flood hazards and the minimization of unavoidable adverse impacts; (ii) Flood insurance on the building is obtained in compliance with the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001 et seq.); and (iii) The community in which the area is situated is participating in the National Flood Insurance Program in accordance with 44 CFR parts 59 through 79, or less than one year has passed since FEMA notification regarding flood hazards. (8) Coastal barriers. In accordance with the Coastal Barriers Resources Act (16 U.S.C. 3501 et seq.), no financial assistance under this part may be made available within the Coastal Barrier Resources System. (9) Displacement, relocation, and real property acquisition. All acquisition or rehabilitation activities carried out under the Capital Fund, including acquisition of any property for development, shall comply with the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and with implementing regulations at 49 CFR part 24. Demolition or disposition under section 18 of the 1937 Act, 42 U.S.C. 1437p, is covered by the relocation provisions at 24 CFR 970.21. (10) Procurement and contract requirement. PHAs and their contractors shall comply with section 3 of the Housing and Community Development Act of 1968 (12 U.S.C. 1701u) and HUD's implementing rules at 24 CFR part 75. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015; 85 FR 61568, Sept. 29, 2020] Sec. 905.310 Disbursements from HUD. (a) The PHA shall initiate a fund requisition from HUD only when funds are due and payable, unless HUD approves another payment schedule as authorized by 2 CFR 200.305. [[Page 339]] (b) The PHA shall maintain detailed disbursement records to document eligible expenditures (e.g., contracts or other applicable documents), in a form and manner prescribed by HUD. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 905.312 Design and construction. The PHA shall meet the following design and construction standards, as applicable, for all development and modernization. (a) Physical structures shall be designed, constructed, and equipped to be consistent with the neighborhoods they occupy; meet contemporary standards of modest design, comfort, and livability (see also Sec. 905.202(c) of this part); promote security; promote energy conservation; and be attractive so as to harmonize with the community. (b) All development projects shall be designed and constructed in compliance with: (1) A national building code, such as those developed by the International Code Council or the National Fire Protection Association; and the IECC or ASHRAE 90.1-2010 (both incorporated by reference, see Sec. 905.110 of this part), for multifamily high-rises (four stories or higher), or a successor energy code or standard that has been adopted by HUD pursuant to 42 U.S.C. 12709 or other relevant authority; (2) Applicable state and local laws, codes, ordinances, and regulations; (3) Other federal requirements, including fire protection and safety standards implemented under section 31 of the Fire Administration Authorization Act of 1992, 15 U.S.C. 2227 and HUD minimum property standards (e.g., 24 CFR part 200, subpart S); (4) Accessibility Requirements as required by section 504 of the Rehabilitation Act (29 U.S.C. 794) and implementing regulations at 24 CFR part 8; title II of the Americans with Disabilities Act (42 U.S.C. 12101 et seq.) and implementing regulations at 28 CFR part 35; and, if applicable, the Fair Housing Act (42 U.S.C. 3601-3619) and implementing regulations at 24 CFR part 100; and (5) Occupancy of high-rise elevator structures by families with children. Pursuant to 42 U.S.C. 1437d(a), a high-rise elevator structure shall not be provided for families with children regardless of density, unless the PHA demonstrates and HUD determines that there is no practical alternative. (c) All modernization projects shall be designed and constructed in compliance with: (1) The modernization standards as prescribed by HUD; (2) Accessibility requirements as required by section 504 of the Rehabilitation Act (29 U.S.C. 794) and implementing regulations at 24 CFR part 8; title II of the Americans with Disabilities Act (42 U.S.C. 12101 et seq.) and implementing regulations at 28 CFR part 35; and, if applicable, the Fair Housing Act (42 U.S.C. 3601-3619) and implementing regulations at 24 CFR part 100; and (3) Cost-effective energy conservation measures, identified in the PHA's most recently updated energy audit. (d) Pursuant to the Energy Policy Act of 2005, in purchasing appliances, PHAs shall purchase appliances that are Energy Star products or Federal Energy Management Program designed products, unless the PHA determines that the purchase of these appliances is not cost effective. (e) Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined in 24 CFR 5.100, of a building with more than 4 rental units and funded by a grant awarded or Capital Funds allocated after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the PHA determines and, in accordance with Sec. 905.326, documents the determination that: (1) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (2) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (3) The structure of the housing to be rehabilitated makes installation of broadband infrastructure infeasible. [78 FR 63773, Oct. 24, 2013, as amended at 81 FR 92639, Dec. 20, 2016] [[Page 340]] Sec. 905.314 Cost and other limitations. (a) Eligible administrative costs. Where the physical or management improvement costs will benefit programs other than Public Housing, such as the Housing Choice Voucher program or local revitalization programs, eligible administrative costs are limited to the amount directly attributable to the public housing program. (b) Maximum project cost. The maximum project cost represents the total amount of public housing capital assistance used in connection with the development of a public housing project, and includes: (1) Project costs that are subject to the TDC limit (i.e., HCC and Community Renewal Costs); and (2) Project costs that are not subject to the TDC limit (i.e., Additional Project Costs). The total project cost to be funded with public housing capital assistance, as set forth in the proposal and as approved by HUD, becomes the maximum project cost stated in the ACC Amendment. Upon completion of the project, the actual project cost is determined based upon the amount of public housing capital assistance expended for the project, and this becomes the maximum project cost for purposes of the ACC Amendment. (c) TDC limit. (1) Public housing funds, including Capital Funds, may not be used to pay for HCC and Community Renewal Costs in excess of the TDC limit, as determined under paragraph (b)(2) of this section. However, HOPE VI grantees will be eligible to request a TDC exception for public housing and HOPE VI funds awarded in FFY 1996 and prior years. PHAs may also request a TDC exception for integrated utility management, capital planning, and other capital and management activities that promote energy conservation and efficiency. HUD will examine the request for TDC exceptions to ensure that they would be cost-effective, so as to ensure that up-front expenditures subject to the exceptions would be justified by future cost savings. (2) Determination of TDC limit. HUD will determine the TDC limit for a public housing project as follows: (i) Step 1: Unit construction cost guideline. HUD will first determine the applicable ``construction cost guideline'' by averaging the current construction costs as listed in two nationally recognized residential construction cost indices for publicly bid construction of a good and sound quality for specific bedroom sizes and structure types. The two indices HUD will use for this purpose are the R.S. Means cost index for construction of ``average'' quality and the Marshall & Swift cost index for construction of ``good'' quality. HUD has the discretion to change the cost indices to other such indices that reflect comparable housing construction quality through a notice published in the Federal Register. (ii) Step 2: Bedroom size and structure types. The construction cost guideline is then multiplied by the number of units for each bedroom size and structure type. (iii) Step 3: Elevator and nonelevator type structures. HUD will then multiply the resulting amounts from step 2 by 1.6 for elevator type structures and by 1.75 for nonelevator type structures. (iv) Step 4: TDC limit. The TDC limit for a project is calculated by adding the resulting amounts from step 3 for all the public housing units in the project. (3) Costs not subject to the TDC limit. Additional project costs are not subject to the TDC limit. (4) Funds not subject to the TDC limit. A PHA may use funding sources not subject to the TDC limit (e.g., Community Development Block Grant (CDBG) funds, low-income housing tax credits, private donations, private financing, etc.) to cover project costs that exceed the TDC limit or the HCC limit described in this paragraph (c). Such funds, however, may not be used for items that would result in substantially increased operating, maintenance, or replacement costs, and must meet the requirements of section 102 of the Department of Housing and Urban Development Reform Act of 1989 (Pub. L. 101-235, approved December 15, 1989) (42 U.S.C. 3545). These funds must be included in the project development cost budget. (d) Housing Construction Costs (HCC). (1) General. A PHA may not use Capital Funds to pay for HCC in excess of the [[Page 341]] amount determined under paragraph (d)(2) of this section. (2) Determination of HCC limit. HUD will determine the HCC limit as listed in at least two nationally recognized residential construction cost indices for publicly bid construction of a good and sound quality for specific bedroom sizes and structure types. The two indices HUD will use for this purpose are the R.S. Means cost index for construction of ``average'' quality and the Marshal & Swift cost index for construction of ``good'' quality. HUD has the discretion to change the cost indices to other such indices that reflect comparable housing construction quality through a notice published in the Federal Register. The resulting construction cost guideline is then multiplied by the number of public housing units in the project, based upon bedroom size and structure type. The HCC limit for a project is calculated by adding the resulting amounts for all public housing units in the project. (3) The HCC limit is not applicable to the acquisition of existing housing, whether or not such housing will be rehabilitated. The TDC limit is applicable to such acquisition. (e) Community Renewal Costs. Capital Funds may be used to pay for Community Renewal Costs in an amount equivalent to the difference between the HCC paid for with public housing capital assistance and the TDC limit. (f) Rehabilitation of existing public housing projects. The HCC limit is not applicable to the rehabilitation of existing public housing projects. The TDC limit for modernization of existing public housing is 90 percent of the TDC limit as determined under paragraph (c) of this section. This limitation does not apply to the rehabilitation of any property acquired pursuant to Sec. 905.600 of this part. (g) Modernization cost limits. If the modernization costs are more than 90 percent of the TDC, then the project shall not be modernized. Capital Funds shall not be expended to modernize an existing public housing development that fails to meet the HUD definition of reasonable cost found in Sec. 905.108 of this part, except for: (1) Emergency work; (2) Essential maintenance necessary to keep a public housing project habitable until the demolition or disposition application is approved; or (3) The costs of maintaining the safety and security of a site that is undergoing demolition. (h) Administrative cost limits and Capital Fund Program Fee. (1) Administrative cost limits (for non-asset-management PHAs). The PHA shall not budget or expend more than 10 percent of its annual Capital Fund grant on administrative costs, in accordance with the CFP 5-Year Action Plan. (2) Capital Fund Program Fee (for asset-management PHAs). For a PHA that is under asset management, the Capital Fund Program Fee and administrative cost limits are the same. For the Capital Fund Program Fee, a PHA may charge a management fee of up to 10 percent of the annual CFP formula grant(s) amount, excluding emergency and disaster grants and also excluding any costs related to lead-based paint or asbestos testing, in-house architectural and engineering work, or other special administrative costs required by state or local law. (i) Modernization. The PHA shall not budget or expend more than 10 percent of its annual Capital Fund grant on administrative costs, in accordance with its CFP 5-Year Action Plan. The 10 percent limit excludes any costs related to lead-based paint or asbestos testing, in- house Architectural and Engineering work, or other special administrative costs required by state or local law. (ii) Development. For development work with Capital Fund and RHF grants, the administrative cost limit is 3 percent of the total project budget, or, with HUD's approval, up to 6 percent of the total project budget. (i) Management improvement cost limits. In Fiscal Year (FY) 2014, a PHA shall not use more than 18 percent of its annual Capital Fund grant for eligible management improvement costs identified in its CFP 5-Year Action Plan. In FY 2015, a PHA shall not use more than 16 percent of its annual Capital Fund grant for eligible management improvement costs identified in its CFP 5-Year Action Plan. In FY 2016, a PHA shall not use more than 14 percent of its annual Capital Fund grant [[Page 342]] for eligible management improvement costs identified in its CFP 5-Year Action Plan. In FY 2017, a PHA shall not use more than 12 percent of its annual Capital Fund grant for eligible management improvement costs identified in its CFP 5-Year Action Plan. In FY 2018 and thereafter, a PHA shall not use more than 10 percent of its annual Capital Fund grant for eligible management improvement costs identified in its CFP 5-Year Action Plan. Management improvements are an eligible expense for PHAs participating in asset management. (j) Types of labor. A PHA may use force account labor for development and modernization activities if included in a CFP 5-Year Action Plan that is approved by the PHA Board of Commissioners and HUD. HUD approval to use force account labor is not required when the PHA is designated as a high performer under PHAS. (k) RMC activities. When the entire development, financing, or modernization activity, including the planning and architectural design, is administered by an RMC, the PHA shall not retain any portion of the Capital Funds for any administrative or other reason, unless the PHA and the RMC provide otherwise by contract. (l) Capital Funds for operating costs. A PHA may use Capital Funds for operating costs only if it is included in the CFP 5-Year Action Plan that is approved by the PHA Board of Commissioners and HUD, and limited as described in paragraphs (l)(1) and (2) of this section. Capital Funds identified in the CFP 5-Year Action Plan to be transferred to operations are obligated once the funds have been budgeted and drawn down by the PHA. Once such transfer of funds occurs, the PHA must follow the requirements of 24 CFR part 990 with respect to those funds. (1) Large PHAs. A PHA with 250 or more units may use no more than 20 percent of its annual Capital Fund grant for activities that are eligible under the Operating Fund at 24 CFR part 990. (2) Small PHAs. A PHA with less than 250 units, that is not designated as troubled under PHAS, may use up to 100 percent of its annual Capital Fund grant for activities that are eligible under the Operating Fund at 24 CFR part 990, except that the PHA must have determined that there are no debt service payments, significant Capital Fund needs, or emergency needs that must be met prior to transferring 100 percent of its funds to operating expenses. Sec. 905.316 Procurement and contract requirements. (a) General. PHAs shall comply with 2 CFR part 200, and HUD implementing instructions, for all capital activities including modernization and development, except as provided in paragraph (c) in this section. (b) Contracts. The PHA shall use all contract forms prescribed by HUD. If a form is not prescribed, the PHA may use any Office of Management and Budget (OMB) approved form that contains all applicable federal requirements and contract clauses. (c) Mixed-finance development projects. Mixed-finance development partners may be selected in accordance with 24 CFR 905.604(h). Contracts and other agreements with mixed-finance development partners must specify that they comply with the requirements of Sec. Sec. 905.602 and 905.604 of this part. (d) Assurances of completion. Notwithstanding 24 CFR 85.36 (as revised April 1, 2013), for each construction contract over $100,000, the contractor shall furnish the PHA with the following: (1) A bid guarantee from each bidder, equivalent to 5 percent of the bid price; and (2) One of the following: (i) A performance bond and payment bond for 100 percent of the contract price; (ii) A performance bond and a payment bond, each for 50 percent or more of the contract price; (iii) A 20 percent cash escrow; (iv) A 10 percent irrevocable letter of credit with terms acceptable to HUD, or (v) Any other payment method acceptable to HUD. (e) Procurement of recovered materials. PHAs that are state agencies and agencies of a political subdivision of a state that are using assistance under this part for procurement, and any person [[Page 343]] contracting with such PHAs with respect to work performed under an assisted contract, must comply with the requirements of section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act. In accordance with section 6002, these agencies and persons must procure items designated in guidelines of the Environmental Protection Agency (EPA) at 40 CFR part 247 that contain the highest percentage of recovered material practicable, consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds $10,000 or the value of the quantity acquired in the preceding fiscal year exceeded $10,000; must procure solid waste management services in a manner that promotes energy and resource recovery; and must have established an affirmative procurement program for procurement of recovered materials identified in the EPA guidelines. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 905.318 Title and deed. The PHA, or, in the case of mixed-finance, the Owner Entity, shall obtain title insurance that guarantees the title is good and marketable before taking title to any and all sites and properties acquired with public housing funds. Immediately upon taking title to a property, the PHA or Owner Entity shall record the deed and a Declaration of Trust or, in the case of mixed finance, a Declaration of Restrictive Covenants, in the form and in the manner and order prescribed by HUD. The PHA shall at all times maintain a recorded Declaration of Trust or Declaration of Restrictive Covenants in the form and in the manner and order prescribed by HUD on all public housing projects covering the term required by this part. Sec. 905.320 Contract administration and acceptance of work. (a) Contract administration. The PHA is responsible, in accordance with 2 CFR part 200, subpart D, for all contractual and administrative issues arising out of their procurements. The PHA shall maintain full and complete records on the history of each procurement transaction. (b) Inspection and acceptance. The PHA, or, in the case of mixed finance, the Owner Entity shall carry out inspections of work in progress and goods delivered, as necessary, to ensure compliance with existing contracts. If, upon inspection, the PHA determines that the work and/or goods are complete, satisfactory and, as applicable, otherwise undamaged, except for any work that is appropriate for delayed completion, the PHA shall accept the work. The PHA shall determine any holdback for items of delayed completion and the amount due and payable for the work that has been accepted, including any conditions precedent to payment that are stated in the construction contract or contract of sale. The contractor shall be paid for items only after the PHA inspects and accepts that work. (c) Guarantees and warranties. The PHA or, in the case of mixed finance, the Owner Entity, shall specify the guaranty period and amounts to be withheld, as applicable, and shall provide that all contractor, manufacturer, and supplier warranties required by the construction and modernization documents shall be assigned to the PHA. The PHA shall inspect each dwelling unit and the overall project approximately 3 months after the beginning of the project guaranty period, 3 months before its expiration, and at other times as may be necessary to exercise its rights before expiration of any warranties. The PHA shall require repair or replacement of all defective items prior to the expiration of the guaranty or warranty periods. (d) Notification of completion. The PHA, or in the case of mixed finance, the Owner Entity, shall require that all contractors and developers notify the PHA in writing when the contract work, including any approved off-site work, will be completed and ready for inspection. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 905.322 Fiscal closeout. (a) General. Each Capital Fund grant and/or development project is subject [[Page 344]] to fiscal closeout. Fiscal closeout includes the submission of a cost certificate; an audit, if applicable; a final Performance and Evaluation Report; and HUD approval of the cost certificate. (b) Submission of cost certificate. (1) When an approved development or modernization activity is completed or when HUD terminates the activity, the PHA must submit to HUD the: (i) Actual Development Cost Certificate (ADCC) within 12 months. For purposes of the CF ACC, costs incurred between the completion of the development and the date of full availability (DOFA) becomes the actual development cost; and (ii) Actual Modernization Cost Certificate (AMCC) for each grant, no later than 12 months after the expenditure deadline but no earlier than the obligation end date. A PHA with under 250 units with an approved CFP 5-Year Action Plan for use of 100 percent of the Capital Fund grant in operations may submit the cost certificate any time after the funds have been budgeted to operations and withdrawn, as described in Sec. 905.314(l) of this part. (2) If the PHA does not submit the cost certificate and the final CFP Annual Statement/Performance and Evaluation Report within the period prescribed in this section, HUD may impose restrictions on open Capital Fund grants; e.g., establish review thresholds, set the grant to ``auto review'' (HUD automatically reviews it on a periodic basis), or suspend grants, until the cost certificate for the affected grant is submitted. These restrictions may be imposed by HUD after notification of the PHA. (c) Audit. The cost certificate is a financial statement subject to audit pursuant to 2 CFR part 200, subpart F. After submission of the cost certificate to HUD, the PHA shall provide the cost certificate to its independent public auditor (IPA) as part of its annual audit. After audit, the PHA will notify HUD of the grants included in the audit, any exceptions noted by the PHA auditor, and the schedule to complete corrective actions recommended by the auditor. (d) Review and approval. For PHAs exempt from the audit requirements, HUD will review and approve the cost certificate based on available information regarding the Capital Fund grant. For PHAs subject to an audit, HUD will review the information from the annual audit provided by the PHA and approve the certificate after all exceptions, if any, have been resolved. (e) Recapture. All Capital Funds in excess of the actual cost incurred for the grant are subject to recapture. Any funds awarded to the PHA that are returned or any funds taken back from the PHA in a fiscal year after the grant was awarded are subject to recapture. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 905.324 Data reporting requirements. The PHA shall provide, at minimum, the following data reports, at a time and in a form prescribed by HUD: (a) The Performance and Evaluation Report as described in Sec. 905.300(b)(8) of this part; (b) Updates on the PHA's building and unit data as required by HUD; (c) Reports of obligation and expenditure; and (d) Any other information required for participation in the Capital Fund Program. Sec. 905.326 Records. (a) The PHA will maintain full and complete records of the history of each Capital Fund grant, including, but not limited to, CFP 5-Year Action Plans, procurement, contracts, obligations, and expenditures. (b) The PHA shall retain for 5 years after HUD approves either the actual development or modernization cost certificate all documents related to the activities for which the Capital Fund grant was received, unless a longer period is required by applicable law. (c) HUD and its duly authorized representatives shall have full and free access to all PHA offices, facilities, books, documents, and records, including the right to audit and make copies. Subpart D_Capital Fund Formula Source: 78 FR 63773, Oct. 24, 2013, unless otherwise noted. [[Page 345]] Sec. 905.400 Capital Fund formula (CF formula). (a) General. This section describes the formula for allocating Capital Funds to PHAs. (b) Formula allocation based on relative needs. HUD shall allocate Capital Funds to the PHAs in accordance with the CF formula. The CF formula measures the existing modernization needs and accrual needs of PHAs. (c) Allocation for existing modernization needs under the CF formula. HUD shall allocate one-half of the available Capital Fund amount based on the relative existing modernization needs of PHAs, determined in accordance with paragraph (d) of this section. (d) PHAs with 250 or more units in FFY 1999, except the New York City and Chicago Housing Authorities. The estimates of the existing modernization needs for these PHAs shall be based on the following: (1) Objective measurable data concerning the following PHA, community, and project characteristics applied to each project: (i) The average number of bedrooms in the units in a project (Equation coefficient 4604.7); (ii) The total number of units in a project (Equation coefficient: 10.17); (iii) The proportion of units in a project in buildings completed in 1978 or earlier. In the case of acquired projects, HUD will use the DOFA unless the PHA provides HUD with the actual date of construction completion. When the PHA provides the actual date of construction completion, HUD will use that date (or, for scattered sites, the average dates of construction of all the buildings), subject to a 50-year cap. (Equation coefficient: 4965.4); (iv) The cost index of rehabilitating property in the area (Equation coefficient: -10608); (v) The extent to which the units of a project were in a nonmetropolitan area as defined by the United States Bureau of the Census (Census Bureau) during FFY 1996 (Equation coefficient: 2703.9); (vi) The PHA is located in the Southern census region, as defined by the Census Bureau (Equation coefficient: -269.4); (vii) The PHA is located in the Western census region, as defined by the Census Bureau (Equation coefficient: -1709.5); (viii) The PHA is located in the Midwest census region as defined by the Census Bureau (Equation coefficient: 246.2); and (2) An equation constant of 13851. (i) Newly constructed units. Units with a DOFA date of October 1, 1991, or after, shall be considered to have a zero existing modernization need. (ii) Acquired projects. Projects acquired by a PHA with a DOFA date of October 1, 1991, or after, shall be considered to have a zero existing modernization need. (3) For New York City and Chicago Housing Authorities, based on a large sample of direct inspections. Prior to the cost calibration in paragraph (d)(5) of this section, the number used for the existing modernization need of family projects shall be $16,680 in New York City and $24,286 in Chicago, and the number for elderly projects shall be $14,622 in New York City and $16,912 in Chicago. (i) Newly constructed units. Units with a DOFA date of October 1, 1991, or after, shall be considered to have a zero existing modernization need. (ii) Acquired projects. Projects acquired by a PHA with a DOFA date of October 1, 1991, or after, shall be considered to have a zero existing modernization need. (4) PHAs with fewer than 250 units in FFY 1999. The estimates of the existing modernization need shall be based on the following: (i) Objective measurable data concerning the PHA, community, and project characteristics applied to each project: (A) The average number of bedrooms in the units in a project. (Equation coefficient: 1427.1); (B) The total number of units in a project. (Equation coefficient: 24.3); (C) The proportion of units in a project in buildings completed in 1978 or earlier. In the case of acquired projects, HUD shall use the DOFA date unless the PHA provides HUD with the actual date of construction completion, in which case HUD shall use the actual date of construction completion [[Page 346]] (or, for scattered sites, the average dates of construction of all the buildings), subject to a 50-year cap. (Equation coefficient: -1389.7); (D) The cost index of rehabilitating property in the area, as of FFY 1999. (Equation coefficient: -20163); (E) The extent to which the units of a project were in a nonmetropolitan area as defined by the Census Bureau during FFY 1996. (Equation coefficient: 6157.7); (F) The PHA is located in the Southern census region, as defined by the Census Bureau. (Equation coefficient: 4379.2); (G) The PHA is located in the Western census region, as defined by the Census Bureau. (Equation coefficient: 3747.7); (H) The PHA is located in the Midwest census region as defined by the Census Bureau. (Equation coefficient: -2073.5); and (ii) An equation constant of 24762. (A) Newly constructed units. Units with a DOFA date of October 1, 1991, or after, shall be considered to have a zero existing modernization need. (B) Acquired projects. Projects acquired by a PHA with a DOFA date of October 1, 1991, or after, shall be considered by HUD to have a zero existing modernization need. (5) Calibration of existing modernization need for cost index of rehabilitating property in the area. The estimated existing modernization need determined under paragraphs (d)(1), (2), or (3) of this section shall be adjusted by the values of the cost index of rehabilitating property in the area. (6) Freezing of the determination of existing modernization need. FFY 2008 is the last fiscal year that HUD will calculate the existing modernization need. The existing modernization need will be frozen for all developments at the calculation as of FFY 2008 and will be adjusted for changes in the inventory and paragraph (d)(4) of this section. (e) Allocation for accrual needs under the CF formula. HUD shall allocate the other half of the remaining Capital Fund amount based on the relative accrual needs of PHAs, determined in accordance with this paragraph of this section. (1) PHAs with 250 or more units, except the New York City and Chicago Housing Authorities. The estimates of the accrual need shall be based on the following: (i) Objective measurable data concerning the following PHA, community, and project characteristics applied to each project: (A) The average number of bedrooms in the units in a project. (Equation coefficient: 324.0); (B) The extent to which the buildings in a project average fewer than 5 units. (Equation coefficient: 93.3); (C) The age of a project, as determined by the DOFA date. In the case of acquired projects, HUD shall use the DOFA date unless the PHA provides HUD with the actual date of construction completion, in which case HUD shall use the actual date of construction (or, for scattered sites, the average dates of construction of all the buildings), subject to a 50-year cap. (Equation coefficient: -7.8); (D) Whether the development is a family project. (Equation coefficient: 184.5); (E) The cost index of rehabilitating property in the area. (Equation coefficient: -252.8); (F) The extent to which the units of a project were in a nonmetropolitan area as defined by the Census Bureau during FFY 1996. (Equation coefficient: -121.3); (G) PHA size of 6,600 or more units in FFY 1999. (Equation coefficient: -150.7); (H) The PHA is located in the Southern census region, as defined by the Census Bureau. (Equation coefficient: 28.4); (I) The PHA is located in the Western census region, as defined by the Census Bureau. (Equation coefficient: -116.9); (J) The PHA is located in the Midwest census region as defined by the Census Bureau. (Equation coefficient: 60.7); and (ii) An equation constant of 1371.9. (2) For the New York City and Chicago Housing Authorities, based on a large sample of direct inspections. Prior to the cost calibration in paragraph (e)(4) of this section the number used for the accrual need of family developments is $1,395 in New York City, [[Page 347]] and $1,251 in Chicago, and the number for elderly developments is $734 in New York City and $864 in Chicago. (3) PHAs with fewer than 250 units. The estimates of the accrual need shall be based on the following: (i) Objective measurable data concerning the following PHA, community, and project characteristics applied to each project: (A) The average number of bedrooms in the units in a project. (Equation coefficient: 325.5); (B) The extent to which the buildings in a project average fewer than 5 units. (Equation coefficient: 179.8); (C) The age of a project, as determined by the DOFA date. In the case of acquired projects, HUD shall use the DOFA date unless the PHA provides HUD with the actual date of construction completion. When provided with the actual date of construction completion, HUD shall use this date (or, for scattered sites, the average dates of construction of all the buildings), subject to a 50-year cap. (Equation coefficient: - 9.0); (D) Whether the project is a family development. (Equation coefficient: 59.3); (E) The cost index of rehabilitating property in the area. (Equation coefficient: -1570.5); (F) The extent to which the units of a project were in a nonmetropolitan area as defined by the Census Bureau during FFY 1996. (Equation coefficient: -122.9); (G) The PHA is located in the Southern census region, as defined by the Census Bureau. (Equation coefficient: -564.0); (H) The PHA is located in the Western census region, as defined by the Census Bureau. (Equation coefficient: -29.6); (I) The PHA is located in the Midwest census region as defined by the Census Bureau. (Equation coefficient: -418.3); and (ii) An equation constant of 3193.6. (4) Calibration of accrual need for the cost index of rehabilitating property in the area. The estimated accrual need determined under either paragraph (e)(2) or (3) of this section shall be adjusted by the values of the cost index of rehabilitation. (f) Calculation of number of units. (1) General. For purposes of determining the number of a PHA's public housing units and the relative modernization needs of PHAs: (i) HUD shall count as one unit: (A) Each public housing and section 23 bond-financed CF unit, except that each existing unit under the Turnkey III program shall count as one-fourth of a unit. Units receiving operating subsidy only shall not be counted. (B) Each existing unit under the Mutual Help program. (ii) HUD shall add to the overall unit count any units that the PHA adds to its inventory when the units are under CF ACC amendment and have reached DOFA by the date that HUD establishes for the FFY in which the CF formula is being run (hereafter called the ``reporting date''). New CF units and those reaching DOFA after the reporting date shall be counted for CF formula purposes in the following FFY. (2) Replacement units. Replacement units newly constructed on or after October 1, 1998, that replace units in a project funded in FFY 1999 by the Comprehensive Grant formula system or the Comprehensive Improvement Assistance Program (CIAP) formula system shall be given a new CF ACC number as a separate project and shall be treated as a newly constructed development as outlined in Sec. 905.600 of this part. (3) Reconfiguration of units. Reconfiguration of units may cause the need to be calculated by the new configuration based on the formula characteristics in the building and unit's PIC module (refer to the formula sections here). The unit counts will be determined by the CF units existing after the reconfiguration. (4) Reduction of units. For a project losing units as a result of demolition and disposition, the number of units on which the CF formula is based shall be the number of units reported as eligible for Capital Funds as of the reporting date. Units are eligible for funding until they are removed due to demolition and disposition in accordance with a schedule approved by HUD. (g) Computation of formula shares under the CF formula. (1) Total estimated existing modernization need. The total [[Page 348]] estimated existing modernization need of a PHA under the CF formula is the result of multiplying for each project the PHA's total number of formula units by its estimated existing modernization need per unit, as determined by paragraph (d) of this section, and calculating the sum of these estimated project needs. (2) Total accrual need. The total accrual need of a PHA under the CF formula is the result of multiplying for each project the PHA's total number of formula units by its estimated accrual need per unit, as determined by paragraph (e) of this section, and calculating the sum of these estimated accrual needs. (3) PHA's formula share of existing modernization need. A PHA's formula share of existing modernization need under the CF formula is the PHA's total estimated existing modernization need divided by the total existing modernization need of all PHAs. (4) PHA's formula share of accrual need. A PHA's formula share of accrual need under the CF formula is the PHA's total estimated accrual need divided by the total existing accrual need of all PHAs. (5) PHA's formula share of capital need. A PHA's formula share of capital need under the CF formula is the average of the PHA's share of existing modernization need and its share of accrual need (by which method each share is weighted 50 percent). (h) CF formula capping. (1) For units that are eligible for funding under the CF formula (including replacement housing units discussed below), a PHA's CF formula share shall be its share of capital need, as determined under the CF formula, subject to the condition that no PHA's CF formula share for units funded under the CF formula can be less than 94 percent of its formula share had the FFY 1999 formula system been applied to these CF formula-eligible units. The FFY 1999 formula system is based upon the FFY 1999 Comprehensive Grant formula system for PHAs with 250 or more units in FFY 1999 and upon the FFY 1999 Comprehensive Improvement Assistance Program (CIAP) formula system for PHAs with fewer than 250 units in FFY 1999. (2) For a Moving to Work (MTW) PHA whose MTW agreement provides that its CF formula share is to be calculated in accordance with the previously existing formula, the PHA's CF formula share, during the term of the MTW agreement, may be approximately the formula share that the PHA would have received had the FFY 1999 formula funding system been applied to the CF formula eligible units. (i) Replacement Housing Factor to reflect formula need for developments with demolition or disposition occurring on or after October 1, 1998, and prior to September 30, 2013. (1) RHF generally. PHAs that have a reduction in the number of units attributable to demolition or disposition of units during the period (reflected in data maintained by HUD) that lowers the formula unit count for the CFF calculation qualify for application of an RHF, subject to satisfaction of criteria stated in paragraph (i)(5) of this section (2) When applied. The RHF will be added, where applicable: (i) For the first 5 years after the reduction of units described in paragraph (i)(1) of this section; and (ii) For an additional 5 years if the planning, leveraging, obligation, and expenditure requirements are met. As a prior condition of a PHA's receipt of additional funds for replacement housing provided for the second 5-year period or any portion thereof, a PHA must obtain a firm commitment of substantial additional funds, other than public housing funds, for replacement housing, as determined by HUD. (3) Computation of RHF. The RHF consists of the difference between the CFF share without the CFF share reduction of units attributable to demolition or disposition and the CFF share that resulted after the reduction of units attributable to demolition or disposition. (4) Replacement housing funding in FFYs 1998 and 1999. Units that received replacement housing funding in FFY 1998 will be treated as if they had received 2 years of replacement housing funding by FFY 2000. Units that received replacement housing funding in FFY 1999 will be treated as if they had received one year of replacement housing funding as of FFY 2000. [[Page 349]] (5) PHA Eligibility for the RHF. A PHA is eligible for this factor only if the PHA satisfies the following criteria: (i) The PHA will use the funding in question only for replacement housing; (ii) The PHA will use the restored funding that results from the use of the replacement factor to provide replacement housing in accordance with the PHA's 5-Year Action Plan, as approved by HUD under part 903 of this chapter as well as the PHA's Board of Commissioners; (iii) The PHA has not received funding for public housing units that will replace the lost units under Public Housing Development, Major Reconstruction of Obsolete Public Housing, HOPE VI, Choice Neighborhoods, Rental Assistance Payment (RAP), or programs that otherwise provide for replacement with public housing units; (iv) The PHA, if designated as a troubled PHA by HUD, and not already under the direction of HUD or an appointed receiver, in accordance with part 902 of this chapter, uses an Alternative Management Entity, as defined in part 902 of this chapter, for development of replacement housing and complies with any applicable provisions of its Memorandum of Agreement executed with HUD under that part; and (v) The PHA undertakes any development of replacement housing in accordance with applicable HUD requirements and regulations. (6) Failure to provide replacement housing in a timely fashion. (i) A PHA will be subject to the actions described in paragraph (i)(7)(ii) of this section if the PHA does not: (A) Use the restored funding that results from the use of the RHF to provide replacement housing in a timely fashion, as provided in paragraph (i)(7)(i) of this section and in accordance with applicable HUD requirements and regulations, and (B) Make reasonable progress on such use of the funding, in accordance with applicable HUD requirements and regulations. (ii) If a PHA fails to act as described in paragraph (i)(6)(i) of this section, HUD will require appropriate corrective action under these regulations, may recapture and reallocate the funds, or may take other appropriate action. (7) Requirement to obligate and expend RHF funds within the specified period. (i) In addition to the requirements otherwise applicable to obligation and expenditure of funds, PHAs are required to obligate assistance received as a result of the RHF within: (A) 24 months from the date that funds become available to the PHA; or (B) With specific HUD approval, 24 months from the date that the PHA accumulates adequate funds to undertake replacement housing. (ii) To the extent the PHA has not obligated any funds provided as a result of the RHF within the time frames required by this paragraph, or has not expended such funds within a reasonable time, HUD shall recapture the unobligated amount of the grant. (j) Demolition and Disposition Transitional Funding (DDTF) to reflect formula need for developments with demolition or disposition on or after October 1, 2013. (1) DDTF generally. In FFY 2014 and thereafter, PHAs that have a reduction in the number of units occurring in FFY 2013 and attributable to demolition or disposition are automatically eligible to receive Demolition and Disposition Transitional Funding. The DDTF will be included in their annual Capital Fund grant for a 5-year period to offset the reduction in funding a PHA would receive from removing units from inventory. DDTF is subject to the criteria stated in paragraph (j)(4) of this section. (2) When applied. DDTF will be added to a PHA's annual CFP grant, where applicable, for 5 years after the reduction of units described in paragraph (j)(1) of this section. (3) Computation of DDTF. The DDTF consists of the difference between the CFF share without the CFF share reduction of units attributable to demolition or disposition and the CFF share that resulted after the reduction of units attributable to demolition or disposition. (4) PHA eligibility for the DDTF. A PHA is eligible for this factor only if the PHA satisfies the following criteria: (i) The PHA will automatically receive the DDTF for reduction of units [[Page 350]] in accordance with paragraph (j)(1) of this section, unless the PHA rejects the DDTF funding for that fiscal year in writing; (ii) The PHA will use the funding in question for eligible activities under the Capital Fund Program, found at 905.200--such as modernization and development--that are included in the PHA's HUD approved CFP 5-Year Action Plan. (iii) The PHA has not received funding for public housing units that will replace the lost units from disposition proceeds, or under Public Housing Development, Major Reconstruction of Obsolete Public Housing, HOPE VI, Choice Neighborhoods, RAP, or programs that otherwise provide for replacement with public housing units; (iv) The PHA, if designated as a troubled PHA by HUD, and not already under the direction of HUD or an appointed receiver, in accordance with part 902 of this chapter, uses an Alternative Management Entity, as defined in part 902 of this chapter, and complies with any applicable provisions of its Memorandum of Agreement executed with HUD under that part; and (v) The PHA undertakes any eligible activities in accordance with applicable HUD requirements and regulations. (5) Requirement to obligate and expend DDTF funds within the specified period. (i) In addition to the requirements otherwise applicable to obligation and expenditure of Capital Funds, including 42 U.S.C. 1437g(j) and the terms of the appropriation from Congress, PHAs are required to obligate funds received as a result of the DDTF within 24 months from the date that funds become available to the PHA; or (ii) To the extent the PHA has not obligated any funds provided as a result of the DDTF within the time frames required by this paragraph, or expended such funds within a reasonable time frame, HUD shall reduce the amount of DDTF to be provided to the PHA. (k) RHF Transition. (1) PHAs that would be newly eligible for RHF in FFY 2014 will receive 5 years of DDTF. (2) PHAs that received a portion of a first increment RHF grant in FY 2013, for units removed from inventory prior to the reporting date of June 30, 2012, will receive up to 10 years of funding consisting of the remainder of first-increment RHF, subject to the requirements of Sec. 905.400(i) of this part, and, if eligible, 5 years of DDTF, subject to the requirements of Sec. 905.400(j) of this part. (3) PHAs that received a portion of a second increment RHF grant in FY 2013, for units removed from inventory prior to the reporting date of June 30, 2012, will continue to receive the remaining portion of the 5- year increment as a separate second increment RHF grant, as described in Sec. 905.400(i) of this part. (l) Performance reward factor. (1) High performer. A PHA that is designated a high performer under the PHA's most recent final PHAS score may receive a performance bonus that is: (i) Three (3) percent above its base formula amount in the first 5 years these awards are given (for any year in this 5-year period in which the performance reward is earned); or (ii) Five (5) percent above its base formula amount in future years (for any year in which the performance reward is earned); (2) Condition. The performance bonus is subject only to the condition that no PHA will lose more than 5 percent of its base formula amount as a result of the redistribution of funding from nonhigh performers to high performers. (3) Redistribution. The total amount of Capital Funds that HUD has recaptured or not allocated to PHAs as a sanction for violation of expenditure and obligation requirements shall be allocated to the PHAs that are designated high performers under PHAS. Subpart E_Use of Capital Funds for Financing Source: 75 FR 65208, Oct. 21, 2010, unless otherwise noted. Sec. 905.500 Purpose and description. (a) This subpart provides the requirements necessary for a PHA to participate in the Capital Fund Financing Program (CFFP), under which the PHA may obtain HUD approval to borrow private capital and pledge a portion of its annual Capital Fund grant or public [[Page 351]] housing assets and other public housing property of the public housing agency as security. (b) Under the CFFP, PHAs are permitted to borrow private capital to finance public housing development or modernization activities. A PHA may use a portion of its Capital Fund for debt service payments and usual and customary financing costs associated with public housing development or modernization (including public housing in mixed-finance developments). A PHA that undertakes such financing activities may, subject to HUD's written approval, grant a security interest in its future annual Capital Fund grants, which shall be subject to the appropriation of those funds by Congress. The PHA's financing activities are not obligations or liabilities of the Federal Government. The Federal Government does not assume any liability with respect to any such pledge of future appropriations, and the Federal Government neither guarantees nor provides any full faith and credit for these financing transactions. Sec. 905.505 Program requirements. (a) Written approval. A PHA shall obtain written HUD approval for all Capital Fund financing transactions that pledge, encumber, or otherwise provide a security interest in public housing assets or other property, including Capital Funds, and use Capital Funds for the payment of debt service or other financing costs. HUD approval shall be based on: (1) The ability of the PHA to complete the financing transaction along with the associated improvements; (2) The reasonableness of the provisions in the Capital Fund Financing Proposal considering the other pledges or commitments of public housing assets, the PHA's capital needs, and the pledge being proposed; and (3) Whether the PHA meets the requirements of this subpart. (b) Antideficiency. Any pledge of future year Capital Fund grants under this section is subject to the availability of appropriations by Congress for that year. All financing documents related to future year Capital Fund amounts must include a statement that the pledging of funds is subject to the availability of appropriations. (c) Conditions on use--(1) Development. Any public housing that is developed using amounts under this part (including proceeds from financing authorized under this part) shall be operated under the terms and conditions applicable to public housing during the 40-year period that begins on the date on which the project becomes available for occupancy, except as otherwise provided in the 1937 Act. (2) Modernization. Any public housing or portion of public housing that is modernized using amounts under this part (including proceeds from financing authorized under this part) shall be maintained and operated during the 20-year period that begins on the latest date on which the modernization is completed, except as otherwise provided in the 1937 Act. (3) Applicability of latest expiration date. Public housing subject to the use conditions described in paragraph (c) of this section, or to any other provision of law mandating the operation of housing as public housing for a specific length of time, shall be maintained and operated as required until the latest such expiration date. (4) Declaration of Trust. All public housing rental projects must show evidence satisfactory to HUD of an effective Declaration of Trust being recorded in first position, meeting the requirements of paragraph (c) of this section and covering the term of the financing. If part of a mixed-finance project, this evidence will be with the mixed-finance evidentiary documents. (d) Public Housing Assessment System (PHAS) designation. Generally, a PHA shall be designated a standard performer or high performer under PHAS (24 CFR part 902), and must be a standard performer or higher on the management and financial condition indicators. HUD will consider requests from a PHA designated as troubled under PHAS when the PHA is able to show that it has developed appropriate management and financial capability and controls that demonstrate its ability to successfully undertake the Capital Fund Financing Proposal. The PHA must comply with all applicable fair housing and civil rights requirements [[Page 352]] in 24 CFR 5.105(a). If a PHA has received a letter of findings, charge, or lawsuit involving ongoing systemic noncompliance under Title VI of the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, the Fair Housing Act, or Section 109 of the Housing and Community Development Act of 1974, and the letter of findings, charge, or lawsuit has not been resolved to HUD's satisfaction, then unless the Capital Fund Financing Proposal is part of a plan to address such findings, charge, or lawsuit, the PHA will not be eligible for financing pursuant to the CFFP. HUD will determine if actions to resolve the charge, lawsuit, or letter of findings taken are sufficient to resolve the matter. (e) Management capacity. A PHA shall have the capacity to undertake and administer private financing and construction or modernization of the size and type contemplated. In order to determine capacity, HUD may require the PHA to submit a management assessment conducted by an independent third party, in a form and manner prescribed by HUD. (f) Existing financing. A PHA shall identify the nature and extent of any existing encumbrances, pledges, or other financing commitments of public housing funds undertaken by the PHA. (g) Need for financing. (1) A PHA must complete a physical needs assessment at the project level, in the form and manner prescribed by HUD that covers the PHA's entire public housing portfolio for the term of the financing and that takes into consideration existing needs and the lifecycle repair and replacement of major building components. The activity to be financed must be identified as a need in the physical needs assessment. (2) Based on the assessment under paragraph (g)(1) of this section, the PHA must demonstrate that the financing will not negatively impact the ability of the PHA to meet the ongoing needs of its public housing portfolio over the term of the financing. In making this demonstration, PHAs must reduce any projected future Capital Fund grants to account for planned or anticipated activities that would have the effect of reducing or otherwise limiting the availability of future Capital Fund grants. PHA projections must be detailed on the portfolio schedule form prescribed by HUD, and shall project a stabilized number of units (Stabilized Base Unit Count) to be reached in no more than 5 years after all planned or anticipated activities have been completed that would reduce future Capital Fund grants. PHAs must also take into consideration projected use of Capital Funds for other eligible activities under part 905, and may take into consideration alternative sources of financing that are available to help meet its needs. (3) For PHAs that are proposing to borrow more than $2 million on a cumulative basis, to the extent that: (i) Capital and other eligible Capital Fund needs exceed projected Capital Fund program funding amounts, and the PHA is not leveraging non- public housing funds as part of its Capital Fund Financing Proposal transaction, then (ii) The PHA must demonstrate that it has considered leveraging non- public housing funds, and state why the proposed financing is appropriate in light of alternative sources available. (iii) Notwithstanding paragraphs (g)(3)(i) and (ii) of this section, PHAs that size their financing by utilizing only replacement housing factor (RHF) funds, or PHAs that propose to use their Capital Fund Financing Proposal proceeds as part of a mixed-finance modernization transaction, are not required to comply with Sec. 905.505(g). (h) CFP Plan. (1) The use of the CFFP proceeds shall be included in a form and manner as required by HUD for CFP planning and budgeting and in a same manner as a Capital Fund grant. The CFFP proceeds shall be included as a separate Capital Fund grant to the same extent that PHAs are required to plan and budget Capital Fund grants. The use of Capital Funds for the payment of debt service and related costs shall be planned and budgeted as would other eligible uses of Capital Funds. (2) As part of its Capital Fund Financing Proposal, the PHA shall submit a Capital Fund financing budget, in the form and manner required by HUD, detailing the proposed use of the Capital Fund Financing Proposal proceeds. There shall be no requirement [[Page 353]] for PHAs to submit a Capital Fund financing budget as part of their Capital Fund financing proceeds where the sizing of the financing is based upon the use of RHF funds for debt service, or where the Capital Fund Financing Proposal proceeds are being used as part of a mixed- finance transaction. Approval letters for mixed-finance and RHF-related Capital Fund financing transactions shall be conditioned upon the approval of the mixed-finance proposal, or, in the case of conventional development, upon the approval of the development proposal and the execution of an associated construction contract with which the Capital Fund financing proceeds would be used. (3) The work financed with Capital Funds and described in the Capital Fund financing budget will be based on the physical needs assessment. The Capital Fund financing budget shall list the work items (e.g., roof replacement, window replacement, accessibility modifications) by development. These work items will constitute performance measures upon which the PHA's performance will be evaluated. A general representation of the work (e.g., ``rehabilitation of the development'') is not sufficient. (4) The CFP Plan (submission (as described in paragraph (h) of this section) shall include a copy of the physical needs assessment described in Sec. 905.505(g). (5) Financing proceeds under this part may be used only for the modernization or development of public housing and related costs including the modernization or development of non-dwelling space. Financing proceeds may not be used for administration or central office cost center costs (except for mixed-finance projects), management improvements, or upon non-viable projects, such as those subject to required conversion. Financing proceeds may be used to reimburse predevelopment costs, but only to the extent they were incurred in conformance with applicable regulatory requirements. (i) Debt Coverage Percentage. (1) Except as stated in Sec. 905.505(i)(2), a PHA shall not pledge more than 33 percent of its annual future Capital Fund grants for debt service payments, assuming level Capital Fund appropriations over the term of the debt obligation and any reduction attributable to activities projected by the PHA to occur during the term of the financing such as demolition, disposition, or conversion of public housing units or other occurrences that could limit the availability of Capital Funds, including a voluntary compliance agreement. This percentage of Capital Funds dedicated for debt service, taking into account adjustments for activities that would reduce the receipt of Capital Funds, is called the ``Debt Coverage Percentage.'' (2) A PHA may pledge up to 100 percent of any projected replacement housing factor (RHF) grants for debt service payments, provided that the pledge extends to the formula fund portion of its Capital Fund grants also, but that not more than 50 percent of its overall projected Capital Fund grants (including formula funds and RHF funds) are pledged. RHF projections shall account for any projected reductions in RHF over the term of the financing. Unless otherwise approved by HUD, PHAs shall be limited to sizing their loans based upon increments of RHF currently being received by the PHA. CFFP transactions pledging RHF funds shall include accelerated amortization provisions, requiring all RHF funds received by the PHA to pay debt service as those RHF funds are received. A RHF grant shall be used only to develop or pay financing costs for the development of replacement public housing units in accordance with Sec. 905.10. (3) Subject to the reasonableness test in Sec. 905.505(a)(2), PHAs may exceed 33 percent when pledging existing Capital Fund grants and RHF grants for the payment of debt service. Existing grants are grants that have been received by the PHA at the time of HUD's approval of the Capital Fund Financing Proposal. (j) Terms and conditions of financing. The terms and conditions of all financing shall be reasonable based on current market conditions. The financing documents shall include the following, as applicable: (1) Term. The term of the Capital Fund financing transaction shall not [[Page 354]] be more than 20 years. All Capital Fund financing transactions shall be fully amortizing. Bridge loans and other short-term loans are permitted; however, unless otherwise approved by HUD, the CFFP Financing transaction may not be structured in a manner that generates program income. (2) Acceleration. Unless otherwise approved by HUD, the financing documents shall provide that HUD approval is required before a lender may accelerate a PHA's debt obligation, for default or otherwise. (3) Public housing assets. A PHA may not pledge any public housing assets unless specifically approved in writing by HUD. PHAs seeking approval of a pledge of public housing assets must submit documentation to HUD that details the nature and priority of the pledge. (4) Variable interest rate. All variable-rate transactions shall include an interest-rate cap. The financing documents must specify that the PHA shall not be liable to pay debt service with public housing funds, and that there shall be no recourse to public housing assets, beyond the interest-rate cap. The limitation on the pledge of Capital Funds specified in Sec. 905.505(i) shall be calculated based on the interest-rate cap. (5) Other pledges or commitments. PHAs seeking approval of a pledge of public housing assets must describe the nature and extent of existing commitments or pledges of public housing assets, providing documentation of such other commitments or pledges to the extent required by HUD. (6) Terms and conditions. Financing documents must include any other terms and conditions as required by HUD. (k) Fairness opinion. The PHA shall provide an opinion, in a form and manner prescribed by HUD, from a qualified, independent, third-party financial advisor attesting that the terms and conditions of the proposed financing transaction are reasonable given current market conditions with respect to such matters as interest rate, fees, costs of issuance, call provisions, and reserve fund requirements. (l) Financial controls and construction management. (1) The PHA shall have a financial control and construction management plan describing how the PHA will ensure that: (i) Adequate controls are in place regarding the use of the Capital Fund financing proceeds; and (ii) The improvements will be developed and completed in a timely manner consistent with the contract documents. (2) This plan shall contain protocols and financial control mechanisms that address the design of the improvements, construction inspections, construction draws, and requisition approval checks and balances. A PHA that is designated troubled under PHAS, or other PHAs as determined by HUD, may be required to institute risk mitigation measures to ensure that the funds are used properly and for the purposes intended. (m) Work items. To the extent that any changes in work items financed by Capital Fund financing proceeds meet or exceed the following threshold requirements determined by HUD, PHAs must obtain written approval of amendments to their Capital Fund financing budget from HUD: (1) A change in the type of activity being financed (for example, if the approved Capital Fund financing budget contemplated the proceeds being used for modernization, but after the proposal is approved, the PHA decides instead to pursue development); (2) A change in the project being modernized or developed with the proceeds; (3) A reduction in 20 percent or more in the number of public housing units being modernized; or (4) An increase of 20 percent or more of the cost of non-dwelling space. (n) Applicability of other Federal requirements. The proceeds of the Capital Fund financing are subject to all laws, regulations, and other requirements applicable to the use of Capital Fund grants made under 24 CFR part 905, unless otherwise approved by HUD in writing. PHAs undertaking CFFP transactions shall be subject to the following requirements, which shall be further enumerated in a Capital Fund Financing Amendment to the Annual Contributions Contract (CFF ACC Amendment): [[Page 355]] (1) Amounts payable to the PHA by HUD pursuant to the CFFP and pledged to the payment of debt service by the PHA shall be used exclusively for debt service in accordance with the debt service schedule approved by HUD and shall not be available for any other purpose; (2) The financing does not constitute a debt or liability of HUD or the United States, the full faith and credit of the United States are not pledged to the payment of debt service, and debt service is not guaranteed by HUD or the United States; (3) Nothing in this CFF ACC Amendment or 24 CFR part 905 is intended to diminish HUD's authority to administer, monitor, and regulate the public housing program, including HUD's authority to exercise any administrative sanction or remedy provided by law; provided, however, that except as required by law, HUD will not assert any claim or right under the ACC, including the exercise of administrative sanctions and remedies, if and to the extent that the effect of such claim or right would be to reduce the payment of Capital Fund moneys to the PHA below the level necessary to pay debt service or delay the time for payment of such moneys such that required amounts would not be available to pay debt service when due; (4) The financing is subject to mandatory prepayment prior to the obligation end date and expenditure end date of the Capital Fund financing proceeds to the extent necessary for the Capital Fund Financing Proposal proceeds to comply with section 9(j) of the 1937 Act (42 U.S.C. 1437g(j)). Bond and loan documents shall include appropriate provisions such that prepayment shall be made by the lender, trustee, or appropriate third-party servicer approved by HUD, without any action by HUD post-approval; (5) HUD agrees, subject to the availability of appropriations, to approve immediately upon receipt from the PHA (subject to any legal requirements or constraints applicable at the time), a CFP Plan document (as described in 24 CFR 905.505(h)) and/or an annual CFF ACC Amendment, to the extent and in an amount sufficient to make the applicable debt service payment; (6) Prior to cumulatively reducing its inventory of public housing units by more than 5 percent of the Stabilized Base Unit Count, if, after the removal of units from inventory, the Debt Coverage Percentage under Sec. 905.505(i)(1) would constitute more than 33 percent of future Capital Funds, the PHA shall prepay the financing such that the reduction in inventory shall not cause the Debt Coverage Percentage to increase. If the reduction in inventory is required by law or public housing requirements, the prepayment is not required to be made prior to the reduction in inventory, but instead shall be made as soon as possible after the PHA becomes aware of the requirement of law or public housing requirements, but only to the extent that Capital Funds are not otherwise needed by the PHA to address the health and safety issues or other requirements of law in the PHA's public housing portfolio, all as determined by HUD. For PHAs that size their loans based upon the projected receipt of RHF funds, prior to undertaking an activity that will reduce its RHF units below the number of units projected in the Capital Fund Financing Proposal as required by Sec. 905.505(i)(3), the PHA shall prepay its loan such that debt service does not exceed 100 percent of projected RHF after accounting for the reduction in RHF units, all as determined by HUD. (o) Performance measures. Pursuant to 24 CFR 905.505(h) a PHA is required to identify in its CFP Plan documents specific items of work that will be accomplished using the proceeds of the proposed financing. The identified items, which shall be quantifiable, shall be the basis on which HUD evaluates a PHA's performance. HUD may also utilize the Capital Fund financing budget, and Capital Fund Financing Proposal approval documents as the basis to evaluate a PHA's performance. Failure to meet performance measures may result in: (1) Failure to receive HUD approval for future financing transactions; (2) Failure to be considered for future competitive grant programs; and (3) Other sanctions HUD deems appropriate and authorized by law or regulation. [[Page 356]] (p) Reporting requirements. (1) The use of the CFFP proceeds shall be reported in the same manner as a Capital Fund grant. The PHA shall submit a performance and evaluation report on a quarterly basis. PHAs that utilize their Capital Fund financing proceeds as part of a mixed- finance transaction, and PHAs that size their financing based upon RHF in their Capital Fund financing transactions, are not required to submit quarterly reports. (2) Each CFFP transaction and/or development project is subject to fiscal closeout in the same manner of a Capital Fund grant. Fiscal closeout includes the submission of an Actual Modernization Cost Certificate (AMCC) or Actual Development Cost Certificate (ADCC), an audit, if applicable, a final quarterly report, and a final Performance and Evaluation report. Sec. 905.507 Streamlined application requirements for standard and high-performing PHAs. (a) PHAs with cumulative CFFP borrowings of less than $2 million and that are standard or high performers under PHAS; PHAs that are high performers under PHAS with cumulative CFFP borrowings of less than $20 million; PHAs that propose to use their CFFP proceeds in a mixed-finance transaction, or proposals where the sizing of the financing is based only upon the use of RHF funds for debt service, shall not be required to submit: (1) A third-party management assessment under Sec. 905.505(e); (2) A third-party fairness opinion under Sec. 905.505(k); (3) An assurance of financial controls and construction management under Sec. 905.505(l). (b) Notwithstanding Sec. 905.507(a), if HUD determines that interest or other costs do not appear to meet industry norms, or other aspects of the proposal present atypical risks, HUD retains the discretion to require assessments, opinions, or controls, or to return the proposal. Sec. 905.510 Submission requirements. (a) All requests for HUD approval of CFFP transactions shall be submitted to the Office of Public and Indian Housing (PIH), Attention: Office of Capital Improvements, in such form and in such number of copies as designated by PIH through direct notice. (b) Each Capital Fund Financing Proposal shall be tabbed and presented with the following information in the order listed: (1) PHA transmittal letter. The PHA must submit a letter signed by the PHA Executive Director (or Chief Executive Officer, if applicable) briefly describing the proposed financing and use of proceeds, the percentage of Capital Funds being dedicated to debt service, the percent of the PHA's public housing units benefiting from the financing, and the impact of the financing upon the public housing portfolio, and transmit to HUD a request for approval of the CFFP transaction. The transmittal letter shall provide any additional information required pursuant to this subpart including, but not limited to: (i) Describing the transaction being proposed; (ii) Describing in detail any existing financing or similar commitments of public housing funds; (iii) Describing and providing justification for significant financial or legal provisions, such as variable interest or acceleration provisions; (iv) Describing construction management and financial controls. (2) Term sheet, table of contents, and contact information. The PHA must submit the HUD-prescribed term sheet that describes the basic terms of the transaction and financing structure, including the proposed amount of the financing, the term, interest rates, security, and reserve requirements. A table of contents must identify the materials submitted, as well as list the materials the PHA is not required to submit pursuant to this rule. Contact information for all of the participating parties is also required. (3) Financing schedules. The PHA must submit financing schedules that include a debt service schedule, sources and uses schedule, and a portfolio schedule (including projections for RHF, as appropriate), and an adequacy-of-Capital Funds schedule, all in a format prescribed by HUD. [[Page 357]] (4) Other required submissions. The following submissions must be incorporated in the proposal to the extent required to be submitted by this part: Capital fund financing budget, management assessment, fairness opinion, and physical needs assessment. (5) Financing documents. The PHA must submit a complete set of the legal documents that the PHA will execute in connection with the CFFP transaction. The legal documents must identify the nature and extent of any security being provided, as well as the position of any security interest (e.g., first lien position, second lien position). The legal documents are to be submitted to HUD only after they have been negotiated and agreed upon by the parties to the transaction. HUD will not review preliminary documents that are still under negotiation. (6) Declaration of Trust requirements. The PHA must submit evidence that the PHA has conformed to the Declaration of Trust requirements in accordance with this subpart. (7) Board resolution and counsel's opinion. The PHA must submit evidence of a PHA Board resolution that authorizes the PHA to: Undertake the loan up to a specified amount, provide all security interests required by the loan, and repay the loan with Capital Funds (including RHF funds, when applicable) as required by the financing documents. The Board resolution must also provide authorization for the Executive Director or other executive staff to negotiate and enter into all legal documents required as part of the transaction. The PHA must submit PHA counsel's opinion, which opines that the PHA has the authority to enter into the transaction, and affirms that the transaction complies with the requirements of the 1937 Act, as amended; Federal regulations; and the ACC, as amended. (8) Depository Agreement and ACC. The PHA must submit a Depository Agreement (form HUD-51999) and a CFF ACC Amendment. (9) Other documents as required by HUD. Sec. 905.515 HUD review and approval. (a) After receipt of a Capital Fund Financing Proposal, HUD shall review the proposal for completeness. HUD will return to the PHA all incomplete or unapprovable proposals, identifying the deficiencies, and will not take any further action. HUD will also return proposals submitted by entities other than the PHA (e.g., the PHA's consultants). HUD shall review all complete proposals for compliance with the requirements under this subpart. HUD may require the PHA to make modifications to any of the CFFP documents submitted and may require the PHA to resubmit all or any portion of the proposal. After HUD determines that a proposal complies with all applicable requirements, HUD shall notify the PHA in writing of its approval and any condition(s) of the approval. (b) (1) A copy or copies of the CFF ACC Amendment shall accompany the approval letter. (2) Within 60 days of the date of HUD's approval of the transaction or, if HUD sets conditions on its approval, within 60 days of the date that the PHA satisfies such conditions (as evidenced by documentation retained in the PHA's file and available to HUD upon request), but in no event longer than 120 days after the HUD approval, unless the time has otherwise been extended by HUD in writing, the PHA must submit: (i) Closing documents as directed by HUD; and (ii) All documents required by HUD to take certain actions such as initiating debt service payments through HUD's automated systems. (3) Failure to provide the required documents to HUD within the time frame required under Sec. 905.515(b)(2) may result in HUD rescinding its approval. Subpart F_Development Requirements Source: 78 FR 63786, Oct. 24, 2013, unless otherwise noted. Sec. 905.600 General. (a) Applicability. This subpart F applies to the development of public housing units to be included under an ACC and which will receive funding from public housing funds. PHAs must comply, or cause the Owner Entity and [[Page 358]] its contractors to comply, as applicable, with all of the applicable requirements in this subpart. Pursuant to Sec. 905.106 of this part, when a PHA, a PHA partner, and/or an Owner Entity submits a development proposal and, if applicable, a site acquisition proposal, and executes an ACC covering the public housing units being developed, it is deemed to have certified by those executed submissions its compliance with this subpart. Noncompliance with any provision of this subpart or other applicable statutes or regulations, or the ACC Amendment, and any amendment thereto may subject the PHA, the PHA's partner and/or the Owner Entity to sanctions contained in Sec. 905.804 of this part. (b) Description. A PHA may develop public housing through the construction of new units or the acquisition, with or without rehabilitation, of existing units. A PHA may use any generally accepted method of development including, but not limited to: (1) Conventional. The PHA designs a project on a property it owns. The PHA then competitively selects an entity to build or rehabilitate the project. (2) Turnkey. The PHA advertises for and competitively selects a developer who will develop public housing units on a site owned or to be owned by the developer. Following HUD approval of the development proposal, the PHA and the developer execute a contract of sale and the developer builds the project. Once the project is complete, the developer sells it to the PHA. (3) Acquisition with or without rehabilitation. The PHA acquires an existing property that requires substantial, moderate, or no repair. Any repair work is done by PHA staff or contracted out by the PHA. The PHA must certify that the property was not constructed with the intent of selling it to the PHA or, alternatively, the PHA must certify that HUD requirements were followed in the development of the property. (4) PHA use of force account labor. The PHA uses staff to carry out new construction or rehabilitation, as provided in Sec. 905.314(j) of this part. (5) Mixed finance. Development or modernization of public housing units where the public housing units are owned in whole or in part by an entity other than a PHA, pursuant to Section 905.604. (c) Development process. The general development process for public housing development, using any method and with any financing, is as follows: (1) The PHA will identify a site to be acquired or a public housing project to be developed or redeveloped. The PHA or its Partner and/or the Owner Entity will prepare a site acquisition proposal pursuant to Sec. 905.608 of this part and/or a development proposal pursuant to Sec. 905.606 of this part for submission to HUD or as otherwise directed by HUD. The PHA may request predevelopment funding necessary for preparation of the acquisition proposal and/or development proposal, as stated in Sec. 905.612(a) of this part. (2) The PHA must consult with affected residents prior to submission of an acquisition proposal, development proposal, or both to HUD to solicit resident input into development of the public housing project. (3) After HUD approval of the site acquisition proposal and/or development proposal, HUD and the PHA shall execute the applicable ACC Amendment for the public housing units and record a Declaration of Trust or Declaration of Restrictive Covenants on all property acquired and/or to be developed. The PHA may then commence development of the units. (4) Upon completion of the public housing project, the PHA will establish the DOFA. After the DOFA, the PHA will submit a cost certificate to HUD attesting to the actual cost of the project that will be subject to audit. (d) Funding sources. A PHA may engage in development activities using any one or a combination of the following sources of funding: (1) Capital Funds; (2) HOPE VI funds; (3) Choice Neighborhoods funds; (4) Proceeds from the sale of units under a homeownership program in accordance with 24 CFR part 906; (5) Proceeds resulting from the disposition of PHA-owned land or improvements; (6) Private financing used in accordance with Sec. 905.604 of this part, Mixed-finance development; [[Page 359]] (7) Capital Fund Financing Program (CFFP) proceeds under Sec. 905.500 of this part; (8) Proceeds resulting from an Operating Fund Financing Program (OFFP) approved by HUD pursuant to 24 CFR part 990; and (9) Funds available from any other eligible sources. Sec. 905.602 Program requirements. (a) Local cooperation. Except as provided under Sec. 905.604(i) of this part for mixed-finance projects, the PHA must enter into a Cooperation Agreement with the applicable local governing body that includes sufficient authority to cover the public housing being developed under this subpart, or provide an opinion of counsel that the existing, amended, or supplementary Cooperation Agreement between the jurisdiction and the PHA includes the project or development. (b) New construction limitation. These requirements apply to the development (including new construction and acquisition) of public housing. All proposed new development projects must meet both of the following requirements: (1) Limitation on the number of units. A PHA may not use Capital Funds to pay for the development cost of public housing units if such development would result in a net increase in the number of public housing units that the PHA owned, assisted, or operated on October 1, 1999. Subject to approval by the Secretary, a PHA may develop public housing units in excess of the limitation if: (i) The units are available and affordable to eligible low-income families and the CF formula does not provide additional funding for the specific purpose of constructing, modernizing, and operating such excess units; or (ii) The units are part of a mixed-finance project or otherwise leverage significant additional investment, and the cost of the useful life of the projects is less than the estimated cost of providing tenant-based assistance under section 8(o) of the 1937 Act. (2) Limitations on cost. A PHA may not construct public housing unless the cost of construction is less than the cost of acquisition or acquisition and rehabilitation of existing units, including the amount required to establish, as necessary, an upfront reserve for replacement accounts for major repairs. A PHA shall provide evidence of compliance with this subpart either by: (i) Demonstrating through a cost comparison that the cost of new construction in the neighborhood where the PHA proposes to construct the housing is less than the cost of acquisition of existing housing, with or without rehabilitation, in the same neighborhood; or (ii) Documenting that there is insufficient existing housing in the neighborhood to acquire. (c) Existing PHA-owned nonpublic housing properties. Nonpublic housing properties may be used in the development of public housing units provided all requirements of the 1937 Act and the development requirements of this part are met. (d) Site and neighborhood standards. Each proposed site to be newly acquired for a public housing project or for construction or rehabilitation of public housing must be reviewed and approved by the field office as meeting the following standards, as applicable: (1) The site must be adequate in size, exposure, and contour to accommodate the number and type of units proposed. Adequate utilities (e.g., water, sewer, gas, and electricity) and streets shall be available to service the site. (2) The site and neighborhood shall be suitable to facilitating and furthering full compliance with the applicable provisions of title VI of the Civil Rights Act of 1964, title VIII of the Civil Rights Act of 1968, Executive Order 11063, and HUD regulations issued under these statutes. (3) The site for new construction shall not be located in an area of minority concentration unless: (i) There are already sufficient, comparable opportunities outside areas of minority concentration for housing minority families in the income range that is to be served by the proposed project; or (ii) The project is necessary to meet overriding housing needs that cannot feasibly be met otherwise in that housing market area. ``Overriding housing needs'' shall not serve as the basis for determining that a site is acceptable if [[Page 360]] the only reason that these needs cannot otherwise feasibly be met is that, due to discrimination because of race, color, religion, creed, sex, disability, familial status, or national origin, sites outside areas of minority concentration are unavailable. (4) The site for new construction shall not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to nonminority residents in the area. (5) Notwithstanding the foregoing, after demolition of public housing units a PHA may construct public housing units on the original public housing site or in the same neighborhood if the number of replacement public housing units is significantly fewer than the number of public housing units demolished. One of the following criteria must be satisfied: (i) The number of public housing units being constructed is not more than 50 percent of the number of public housing units in the original development; or (ii) In the case of replacing an occupied development, the number of public housing units being constructed is the number needed to house current residents who want to remain at the site, so long as the number of public housing units being constructed is significantly fewer than the number being demolished; or (iii) The public housing units being constructed constitute no more than 25 units. (6) The site shall promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons. (7) The site shall be free from adverse environmental conditions, natural or manmade, such as: Toxic or contaminated soils and substances; mudslide or other unstable soil conditions; flooding; septic tank backups or other sewage hazards; harmful air pollution or excessive smoke or dust; excessive noise or vibrations from vehicular traffic; insect, rodent, or vermin infestation; or fire hazards. The neighborhood shall not be seriously detrimental to family life. It shall not be filled with substandard dwellings nor shall other undesirable elements predominate, unless there is a concerted program in progress to remedy the undesirable conditions. (8) The site shall be accessible to social, recreational, educational, commercial, and health facilities; health services; and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of similar unassisted standard housing. The availability of public transportation must be considered. (9) The site shall be accessible to a range of jobs for low-income workers and for other needs. The availability of public transportation must be considered, and travel time and cost via public transportation and private automobile must not be excessive. This requirement may be given less consideration for elderly housing. (10) The project may not be built on a site that has occupants unless the relocation requirements at Sec. 905.308(b)(9) of this part are met. (11) The site shall not be in an area that HUD has identified as having special flood hazards and in which the sale of flood insurance has been made available under the National Flood Insurance Act of 1968, unless the development is covered by flood insurance required by the Flood Disaster Protection Act of 1973 and meets all applicable HUD standards and local requirements. (e) Relocation. All acquisition or rehabilitation activities carried out with public housing funds must comply with the provisions of Sec. 905.308(b)(9). (f) Environmental requirements. All activities under this part are subject to an environmental review by a responsible entity under HUD's environmental regulations at 24 CFR Part 58 and must comply with the requirements of the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.) and the related laws and authorities listed at 24 CFR 58.5. HUD may make a finding in accordance with 24 CFR 58.11 and may perform the environmental review itself under the provisions of 24 CFR Part 50. In those cases where HUD performs the environmental review under 24 CFR Part 50, it will do so before approving a proposed [[Page 361]] project, and will comply with the requirements of NEPA and the related requirements at 24 CFR 50.4. Sec. 905.604 Mixed-finance development. (a) General. Mixed-finance development refers to the development (through new construction or acquisition, with or without rehabilitation) or modernization of public housing, where the public housing units are owned in whole or in part by an entity other than a PHA. If the public housing units being developed are 100 percent owned by the PHA, the project is not a mixed-finance project and will be not be subject to mixed-finance development requirements. However, all other development requirements of part 905 are applicable, and, if the project includes both public housing funds and private funding for development, the project may be subject to other applicable program requirements; e.g., the Capital Fund Financing Program, Operating Fund Financing Program, Public Housing Mortgage Program, etc. (1) Ownership. There are various potential scenarios for the ownership structure of a mixed-finance project, such as: public housing units may be owned entirely by a private entity; a PHA may co-own with a private entity; or a PHA affiliate or instrumentality may own or co-own the units. (2) Partnerships. PHAs may choose to enter into a partnership or other contractual arrangement with a third party entity for the mixed- finance development and/or ownership of public housing units. (3) Funding. Funding for mixed-finance developments may include one or a combination of funding sources, pursuant to Sec. 905.600(d) of this part. (4) Modernization. A mixed-finance project that involves modernization, rather than new construction, shall maintain the DOFA date that existed prior to modernization and shall be subject to the provisions of Sec. 905.304(a)(2) of this part regarding the applicable period of obligation to operate the public housing units. (b) Definitions applicable to this subpart. (1) Mixed-finance. The development (through new construction or acquisition, with or without rehabilitation) or modernization of public housing, using public housing, nonpublic housing, or a combination of public housing and nonpublic housing funds, where the public housing units are owned in whole or in part by an entity other than the PHA. A mixed-finance development may include 100 percent public housing (if there is an Owner Entity other than the PHA) or a mixture of public housing and nonpublic housing units. (2) Owner Entity. As defined in Sec. 905.108 of this part. (3) PHA instrumentality. An instrumentality is an entity related to the PHA whose assets, operations, and management are legally and effectively controlled by the PHA, and through which PHA functions or policies are implemented, and which utilizes public housing funds or public housing assets for the purpose of carrying out public housing development functions of the PHA. An instrumentality assumes the role of the PHA, and is the PHA under the Public Housing Requirements, for purposes of implementing public housing development activities and programs, and must abide by the Public Housing Requirements. Instrumentalities must be authorized to act for and to assume such responsibilities. For purposes of development, ownership of public housing units by an instrumentality would be considered mixed-finance development. (4) PHA affiliate. An affiliate is an entity, other than an instrumentality, formed by a PHA and in which a PHA has a financial or ownership interest or participates in its governance. The PHA has some measure of control over the assets, operations, or management of the affiliate, but such control does not rise to the level of control to qualify the entity as an instrumentality. For the purposes of development, ownership of public housing units by an affiliate would be considered mixed-finance development. (5) Public housing funds. As defined in Sec. 905.108 of this part. (c) Structure of projects. Each mixed-finance project must be structured to: (1) Ensure the continued operation of the public housing units in accordance with all Public Housing Requirements; (2) Ensure that public housing funds committed to a mixed-finance project [[Page 362]] are used only to pay for costs associated with the public housing units, including such costs as demolition, site work, infrastructure, and common area improvements. (3) To ensure that the amount of public housing funds committed to a project is proportionate to the number of public housing units contained in the project. To meet this ``pro rata test,'' the proportion of public housing funds compared to total project funds committed to a project must not exceed the proportion of public housing units compared to total number of units contained in the project. For example, if there are a total of 120 units in the project and 50 are public housing units, the public housing units are 42 percent of the total number of units in the project. Therefore the amount of public housing funds committed to the project cannot exceed 42 percent of the total project budget, unless otherwise approved by the Secretary. However, if public housing funds are to be used to pay for more than the pro rata cost of common area improvements, HUD will evaluate the proposal to ensure that common area improvements will benefit the residents in the development in a mixed- income project; and (4) Ensure that the project is within the Total Development Cost (TDC) and Housing Construction Cost (HCC) limits pursuant to Sec. 905.314(c) and (d) of this part. (d) Process. Except as provided in this section, development of a mixed-finance project under this subpart is subject to the same requirements as development of public housing by a PHA entirely with public housing funds, as stated in Sec. 905.600 of this part. PHAs must submit an acquisition proposal under Sec. 905.608 and/or a development proposal under Sec. 905.606 or as otherwise specified by HUD. (e) Conflicts. In the event of a conflict between the requirements for a mixed-finance project and other requirements of this subpart, the mixed-finance Public Housing Requirements shall apply, unless HUD determines otherwise. (f) HUD approval. For purposes of this section only, any action or approval that is required by HUD pursuant to the requirements set forth in this section shall be construed to mean HUD Headquarters, unless the field office is authorized in writing by Headquarters to carry out a specific function in this section. (g) Comparability. Public housing units built in a mixed-financed development must be comparable in size, location, external appearance, and distribution to nonpublic housing units within the development. (h) Mixed-finance procurement. The requirements of 2 CFR part 200 and 24 CFR 905.316 are applicable to this subpart with the following exceptions: (1) PHAs may select a development partner using competitive proposals procedures for qualifications-based procurement, subject to negotiation of fair and reasonable compensation and compliance with TDC and other applicable cost limitations; (2) An Owner Entity (which, as a private entity, would normally not be subject to 2 CFR part 200) shall be required to comply with 2 CFR part 200 if HUD determines that the PHA or PHA instrumentality, or either of their members or employees, exercises significant decision making functions within the Owner Entity with respect to managing the development of the proposed units. HUD may, on a case-by-case basis, exempt such an Owner Entity from the need to comply with 2 CFR part 200 if it determines that the Owner Entity has developed an acceptable alternative procurement plan. (i) Identity of interest. If the Owner Entity or partner (or any other entity with an identity of interest with the Owner Entity or partner) of a mixed-finance project wants to serve as the general contractor for the mixed-finance project, it may award itself the construction contract only if: (1) The identity of interest general contractor's bid is the lowest bid submitted in response to a request for bids; or (2) The PHA submits a written justification to HUD that includes an independent third-party cost estimate that demonstrates that the identity of interest general contractor's costs are less than or equal to the independent third-party cost estimate; and [[Page 363]] (3) HUD approves the identity of interest general contractor in conjunction with HUD's approval of the development proposal for the mixed-finance project. (j) Operating Subsidy-Only and Capital Fund-Only Assistance. (1) General. This section refers to the mixed-finance development of public housing units that will be developed without public housing funds but will receive operating subsidy, or will be developed with public housing funds but will not receive operating subsidy. (2) Operating Subsidy-Only Development. Operating Subsidy-Only Development refers to mixed-finance projects where public housing units are developed without the use of public housing funds, but for which HUD agrees to provide operating subsidies under Section 9(e) of the 1937 Act. These types of project are subject to the following provisions: (i) The newly developed public housing units will be included in the calculation of the Capital Fund formula in Sec. 905.400 of this part. (ii) An ACC Amendment will be executed to include the new public housing units. The term of the ACC Amendment will be determined based on the assistance as provided in Sec. 905.304, unless reduced by the Secretary. (iii) There shall be no disposition of the public housing units without the prior written approval of HUD, during, and for 10 years after the end of, the period in which the public housing units receive operating subsidy from the PHA, as required by 42 U.S.C. 1437g(3), as those requirements may be amended from time to time. However, if the PHA is no longer able to provide operating subsidies to the Owner Entity pursuant to Section 9(e) of the 1937 Act, the PHA may (on behalf of the Owner Entity) request that HUD terminate the Declaration of Trust or Declaration of Restrictive Covenants, as applicable. Termination under this section does not require disposition approval from HUD pursuant to Section 18 of the 1937 Act, 42 U.S.C. 1437p. However, the PHA must provide public housing residents with a decent, safe, sanitary, and affordable unit to which they can relocate, which may include a public housing unit in another development or a Housing Choice Voucher, and pay for the tenant's reasonable moving costs. The URA is not applicable in this situation. (iv) Where the PHA elects in the future to use public housing funds for modernization of these units, the PHA must execute an ACC Amendment with a 20-year use restriction and record a Declaration of Trust or Declaration of Restrictive Covenants, in accordance with Sec. 905.304. There may be no disposition of the public housing units without the prior written approval of HUD during the 20-year period, and the public housing units shall be maintained and operated in accordance with all applicable Public Housing Requirements (including the ACC), as those requirements may be amended from time to time. (3) Capital Fund-Only Development. Capital Fund-Only projects refers to mixed-finance projects where a PHA and its partners may develop public housing units using public housing funds for development of new units, but for which HUD will not be providing operating subsidy under Section 9(e) of the Act, 42 U.S.C. 1437g(e). These types of projects are subject to the following provisions: (i) The newly developed public housing units will not be included in the calculation of the Operating Fund formula. (ii) The PHA must sign an ACC Amendment, with a 40-year use restriction, for development of new units and record a Declaration of Trust or Declaration of Restrictive Covenants in accordance with Sec. 905.304 of this part, unless the time period is reduced by the Secretary. (iii) There shall be no disposition of the public housing units, without the prior written approval of HUD, during a 40-year period, and the public housing units shall be maintained and operated in accordance with all applicable Public Housing Requirements (including the ACC), as required by section 9(d)(3) of the 1937 Act, 42 U.S.C. 1437g(d)(3), as those requirements may be amended from time to time. (4) Procedures. PHAs must follow the development approval process identified in Sec. 905.600. [[Page 364]] (k) Mixed-finance operations: Deviation from HUD requirements pursuant to section 35(h) of the 1937 Act, 42 U.S.C. 1437z-7(h). (1) Deviation. If a PHA enters into a contract with an entity that owns or operates a mixed-finance project, and the terms of the contract obligate the entity to operate and maintain a specified number of units in the project as public housing units, the contract may include terms that allow the Owner Entity to deviate from otherwise applicable Public Housing Requirements regarding rents, income eligibility, and other areas of public housing management with respect to all or a portion of the public housing units, subject to the following conditions: (i) There are a significant number of units in the mixed-finance project that are not public housing units; (ii) There is a reduction in appropriations under Section 9(e) of the 1937 Act (see 42 U.S.C. 1437g(e)) or a change in applicable law that results in the PHA being unable to fulfill its contractual obligation to the Owner Entity with respect to the public housing units; (iii) Prior to implementation of the contractual terms related to deviation from the Public Housing Requirements, HUD approves an Alternative Management Plan for the mixed-finance project; and (iv) The deviation shall be to the extent necessary to preserve the viability of those units while maintaining the low-income character of the units to the maximum extent practicable. (2) Preparation of an Alternative Management Plan. Should the PHA and the Owner Entity determine a need to deviate from the Public Housing Requirements, the PHA, on behalf of the Owner Entity, must submit an Alternative Management Plan to HUD for review and approval prior to implementation of any changes. The Plan must include the following: (i) A statement describing the Owner Entity's reasons for deviating from the Public Housing Requirements; (ii) An explanation of the Owner Entity's proposed remedies, including, but not limited to: (A) How the Owner Entity will select the residents (including the number and income levels of the families proposed to be admitted to the public housing units) and units to be affected by the proposed change; (B) The Owner Entity's timetable for implementing the Alternative Management Plan; (C) The impact on existing residents. Note that for any resident who is unable to remain in the unit as a result of implementation of the Alternative Management Plan, the resident must be relocated to a public housing unit or given a Housing Choice Voucher by the PHA or by another entity as provided for in the contractual agreement between the PHA and the Owner Entity; (iii) An amendment to the existing contractual agreement between the PHA and the Owner Entity that includes provisions which ensure that: (A) An update on the Alternative Management Plan is submitted annually to HUD to ensure that implementation of the provisions of the Alternative Management Plan continue to be appropriate; (B) The Owner Entity complies with the requirements of this subpart in its management and operation of the public housing units in accordance with the Alternative Management Plan; (C) The Owner Entity provides the PHA any income that is generated by the public housing units in excess of the Owner Entity's expenses on behalf of those units, as a result of implementation of provisions in the Alternative Management Plan; (D) The Owner Entity reinstates all Public Housing Requirements (including rent and income eligibility requirements) with respect to the original number of public housing units and number of bedrooms in the mixed-finance development, following the PHA's reinstatement of operating subsidies at the level originally agreed to in its contract with the Owner Entity; and (iv) Additional evidence. The PHA must provide documentation that: (A) The Owner Entity has provided copies of the Alternative Management Plan to residents of the project and provided the opportunity for review and comment prior to submission to HUD. The Owner Entity must have provided written notice to each of the public housing residents in the mixed-finance development of its intention to [[Page 365]] implement the Alternative Management Plan. Such notice must comply with all relevant federal, state, and local substantive and procedural requirements and, at a minimum, provide public housing residents 90 days advance notice of any proposal to increase rents or to relocate public housing residents to alternative housing; (B) The revenues being generated by the public housing units (in combination with the reduced allocation of Operating Subsidy resulting primarily from a reduction in appropriations or changes in applicable law such that the PHA is unable to comply with its contractual obligations to the Owner Entity) are inadequate to cover the reasonable and necessary operating expenses of the public housing units. Documentation should include a financial statement showing actual operating expenses and revenues over the past 5 years and the projected expenses and revenues over the next 10 years; (C) A demonstration that the PHA cannot meet its contractual obligation, and; (D) The Owner Entity has attempted to offset with regard to the project, the impact of reduced operating subsidies or changes in applicable law by all available means; including the use of other public and private development resources, the use of cash flow from any nonpublic housing units, and funds from other operating deficient reserves. (3) HUD review. HUD will review the Alternative Management Plan to ensure that the plan meets the requirements of this subpart and that any proposed deviation from the Public Housing Requirements will be implemented only to the extent necessary to preserve the viability of the public housing units. Upon completion of HUD's review, HUD will either approve or disapprove the Alternative Management Plan. Reasons for HUD disapproval may include, but are not limited to, the following: (i) The justification for deviation from the Public Housing Requirements does not qualify in accordance with section 35(h) of the Act (42 U.S.C. 1437z-7(h)). (ii) The proposed deviation(s) from the Public Housing Requirements are not limited to preserving the viability of the public housing units. (iii) The information that HUD requires to be included in the Alternative Management Plan has not been included, is not accurate, or does not support the need for deviation from the Public Housing Requirements. (iv) HUD has evidence that the proposed Alternative Management Plan is not in compliance with other federal requirements, including civil rights laws. (4) HUD reevaluation and reapproval. The PHA, on behalf of the Owner Entity, must provide to HUD, for HUD approval, an annual update on the implementation of the Alternative Management Plan. The update must provide the status of the project and whether the circumstances originally triggering the need for the conditions contained in the Alternative Management Plan remain valid and appropriate. Any proposed changes in the Alternative Management Plan should also be identified. Once the annual update of the Alternative Management Plan is properly submitted, the existing Alternative Management Plan shall remain in effect until such time as HUD takes additional action to approve or disapprove the annual update. [78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 905.606 Development proposal. (a) Development proposal. Prior to developing public housing, either through new construction or through acquisition, with or without rehabilitation, a PHA must submit a development proposal to HUD in the form prescribed by HUD, which will allow HUD to assess the viability and financial feasibility of the proposed development. A development proposal must be submitted for all types of public housing development, including mixed-finance. Failure to submit and obtain HUD approval of a development proposal may result in the public housing funds used in conjunction with the project being deemed ineligible expenses. In determining the amount of information to be submitted by the PHA, HUD shall consider whether the documentation is required for [[Page 366]] HUD to carry out mandatory statutory, regulatory, or Executive order reviews; the quality of the PHA's past performance in implementing development projects under this subpart; the PHA's demonstrated administrative capability; and other program requirements. The development proposal shall include some or all of the following documentation, as deemed necessary by HUD. (1) Project description. A description of the proposed project, including: (i) Proposed development method (e.g., mixed-finance, new construction, acquisition with or without rehabilitation, turnkey, etc.), including the extent to which the PHA will use force account labor and use procured contractors. For new construction projects, the PHA must meet the program requirements contained in Sec. 905.602. For projects involving acquisition of existing properties less than 2 years old, the PHA must include an attestation from the PHA and the owner of the property that the property was not constructed with the intent that it would be sold to the PHA or, if it was constructed with the intent that it be sold to the PHA, that it was constructed in compliance with all applicable requirements (e.g., Davis Bacon wage rates, accessibility, etc.); (ii) Type of residents to occupy the units (e.g., family, elderly, persons with disabilities, or families that include persons with disabilities); (iii) Number and type of unit (detached, semidetached, row house, walkup, elevator), with bedroom count, broken out by public housing vs. nonpublic housing, if applicable; (iv) The type and size of nondwelling space, if applicable; and (v) Schematic drawings of the proposed buildings, unit plans, and additional information regarding plans and specifications, as needed by HUD to review the project. (2) Site information. An identification and description of the proposed site and neighborhood, a site plan, and a map of the neighborhood. (3) Participant description. Identification of participating parties and a description of the activities to be undertaken by each of the participating parties and the PHA; and the legal and business relationships between the PHA and each of the participating parties, as applicable. (4) Development project schedule. A schedule for the development project that includes each major stage of development, through and including the submission of an Actual Development Cost Certificate to HUD. (5) Accessibility. A PHA must provide sufficient information for HUD to determine that dwelling units and other public housing facilities meet accessibility requirements specified at Sec. 905.312 of this part, including, but not limited to, the number, location, and bedroom size distribution of accessible dwelling units (see 24 CFR 8.32 and 24 CFR part 40). (6) Project costs. (i) Budgets. To allow HUD to assess sources of funding and projected uses of funds, the PHA shall submit a project budget, in the form prescribed by HUD, reflecting the total permanent development budget for the project, including all sources and uses of funds, including hard and soft costs. The PHA shall also submit a budget for the construction period and a construction draw schedule showing the timing of construction financing contributions and disbursements. In addition, the PHA shall submit an independent construction cost estimate or actual construction contract that supports the permanent and construction budgets. (ii) TDC calculation. The PHA must submit a calculation of the TDC and HCC, subject to Sec. 905.314 of this part. (iii) Financing. A PHA must submit a detailed description of all financing necessary for the implementation of the project, specifying the sources and uses. In addition, HUD may require documents related to the financing (e.g., loan documents, partnership or operating agreement, regulatory and operating agreement, etc.) to be submitted in final draft form as part of the development proposal. Upon financial closing, HUD may also require final, executed copies of these documents to be submitted to HUD for final approval, per Sec. 905.612(b)(2) of this part. (A) Commitment of funds. Documents submitted pursuant to this section must irrevocably commit funds to the project. Irrevocability of funds means that binding legal documents--such as [[Page 367]] loan agreements, mortgages, deeds of trust, partnership agreements or operating agreements, or similar documents committing funds--have been executed by the applicable parties; though disbursement of such funds may be subject to meeting progress milestones, the absence of default, and/or other conditions generally consistent with similar non-public housing transactions. For projects involving revolving loan funds, the irrevocability of funds means that funds in an amount identified to HUD as the maximum revolving loan have been committed pursuant to legally binding documents; though disbursement of such funds may be subject to meeting progress milestones, the absence of default, and/or other conditions generally consistent with similar affordable housing transactions. The PHA must confirm the availability of each party's financing, the amount and source of financing committed to the proposal by the parties, and the irrevocability of those funds. (B) Irrevocability of funds. To ensure the irrevocable nature of the committed funds, the PHA shall review the legal documents committing such funds to ensure that the progress milestones and conditions precedent contained in such contracts are generally consistent with similar affordable housing transactions; that the PHA and/or its Owner Entity know of no impediments that would prevent the project from moving forward consistent with the project milestones and conditions precedent; and, after conducting sufficient due diligence, that such documents are properly executed by persons or entities legally authorized to bind the entity committing such funds. (C) Third-party documents. The PHA is not required to ensure the availability of funds by enforcing documents to which it is not a party. (D) Opinion of counsel. As part of the proposal, the PHA may certify as to the irrevocability of funds through the submission of an opinion of the PHA's counsel attesting that counsel has examined the availability of the participating parties' financing, and the amount and source of financing committed to the project by the participating parties, and has determined that such financing has been irrevocably committed, as defined in paragraph (a)(6)(iii)(A) of this section, and that such commitments are consistent with the project budget submitted under paragraph (a)(6)(i) of this section. (7) Operating pro-forma/Operating Fund methodology. To allow HUD to assess the financial feasibility of projects, PHAs shall submit a 10- year operating pro-forma, including all assumptions, to assure that operating expenses do not exceed operating income. For mixed-finance development, the PHA must describe its methodology for providing and distributing operating subsidy to the Owner Entity for the public housing units. (8) Local Cooperation Agreement. A PHA may elect to exempt all public housing units in a mixed-finance project from the payment in lieu of taxes provisions under section 6(d) of the Act, 42 U.S.C. 1437d(d), and from the finding of need and cooperative agreement provisions under sections 5(e)(1)(ii) and (e)(2) of the Act, 42 U.S.C. 1437c(e)(1)(ii) and (e)(2), and instead subject units to local real estate taxes, but only if the PHA provides documentation from an authorized official of the local jurisdiction that development of the units is consistent with the jurisdiction's comprehensive housing affordability strategy. If the PHA does not elect this exemption, the Cooperation Agreement as provided in Sec. 905.602(a) is required and must be submitted. (9) Environmental requirements. The PHA must provide an approved Request for Release of Funds and environmental certification, submitted in accordance with 24 CFR part 58, or approval in accordance with 24 CFR part 50. HUD will not approve a development proposal without the appropriate environmental approval. (10) Market analysis. For a mixed-finance development that includes nonpublic housing units, the PHA must include an analysis of the projected market for the proposed project. (11) Program income and fees. The PHA must provide information identifying fees to be paid to the PHA, the PHA's partner(s), the Owner Entity, and/or [[Page 368]] other participating parties identified by HUD and on the receipt and use of program income. (b) Additional HUD-requested information. PHAs are required to provide any additional information that HUD may need to assess the development proposal. Sec. 905.608 Site acquisition proposal. (a) Submission. When a PHA determines that it is necessary to acquire vacant land for development of public housing through new construction, using public housing funds, prior to submission and approval of a development proposal under Sec. 905.606 of this part, the PHA must submit an acquisition proposal to HUD for review and approval prior to acquisition. The acquisition proposal shall include the following: (b) Justification. A justification for acquiring property prior to development proposal submission and approval. (c) Description. A description of the property (i.e., the proposed site and/or project) to be acquired. (d) Project description; site and neighborhood standards. An identification and description of the proposed project, site plan, and neighborhood, together with information sufficient to enable HUD to determine that the proposed site meets the site and neighborhood standards at Sec. 905.602(d) of this part. (e) Zoning. Documentation that the proposed project is permitted by current zoning ordinances or regulations, or evidence to indicate that needed rezoning is likely and will not delay the project. (f) Appraisal. Documentation attesting that an appraisal of the proposed property by an independent, state certified appraiser has been conducted and that the acquisition is in compliance with Sec. 905.308(b)(9) of this part. The purchase price of the site/property may not exceed the appraised value without HUD approval. (g) Schedule. A schedule of the activities to be carried out by the PHA. (h) Environmental assessment. An environmental review or request for HUD to perform the environmental review pursuant to Sec. 905.308(b)(2) of this part. Sec. 905.610 Technical processing. (a) Review. HUD shall review all development proposals and site acquisition proposals for compliance with the statutory, Executive order, and regulatory requirements applicable to the development of public housing and the project. HUD's review will evaluate whether the proposed sources and uses of funds are eligible and reasonable, and whether the financing and other documentation establish to HUD's satisfaction that the development is financially viable and structured so as to adequately protect the federal investment of funds in the development. For this purpose, HUD will consider the PHA's proposed methodology for allocating operating subsidies on behalf of the public housing units, the projected revenue to be generated by any nonpublic housing units in a mixed-finance development, and the 10-year operating pro forma and other information contained in the development proposal. (b) Subsidy layering analysis. After the PHA submits the documentation required under paragraph (a) of this section, HUD or its designee (e.g., the State Housing Finance Agency) shall carry out a subsidy layering analysis, pursuant to section 102(d) of the Department of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3545) (see 24 CFR part 4), to determine that the amount of assistance being provided for the development is not more than necessary to make the assisted activity feasible after taking into account the other governmental assistance. (c) Safe harbor standards. For mixed-finance projects, in order to expedite the mixed-finance review process and control costs, HUD may make available safe harbor and maximum fee ranges for a number of costs. If a project is at or below a safe harbor standard, no further review will be required by HUD. If a project is above a safe harbor standard, additional review by HUD will be necessary. In order to approve terms above the safe harbor, the PHA must demonstrate to HUD in writing that the negotiated terms are appropriate for the level of risk involved in the project, the scope of work, any specific circumstances of the [[Page 369]] development, and the local or national market for the services provided. (d) Approval. If HUD determines that a site acquisition proposal or a development proposal is approvable, HUD shall notify the PHA in writing of its approval. The HUD approval of a development proposal will include the appropriate form of ACC for signature. The PHA must execute the ACC and return it to HUD for execution. Until HUD approves a development proposal, a PHA may only expend public housing funds for predevelopment costs, as provided in Sec. 905.612 of this part. (e) Amendments to approved development proposals. HUD must approve any material change to an approved development proposal. HUD defines material change as: (1) A change in the number of public housing units; (2) A change in the number of bedrooms by an increase/decrease of more than 10 percent; (3) A change in cost or financing by an increase/decrease of more than 10 percent; or (4) A change in the site. Sec. 905.612 Disbursement of Capital Funds--predevelopment costs. (a) Predevelopment costs. After a new development project has been included in the CFP 5-Year Action Plan that has been approved by the PHA Board of Commissioners and HUD, a PHA may use funding for predevelopment expenses. Predevelopment funds may be expended in accordance with the following requirements: (1) Predevelopment assistance may be used to pay for materials and services related to proposal development and project soft costs. It may also be used to pay for costs related to the demolition of units on a proposed site. Absent HUD approval, predevelopment assistance may not be used to pay for site work, installation of infrastructure, construction, or other hard costs related to a development. (2) For non-mixed-finance projects, predevelopment funding up to 5 percent of the total amount of the public housing funds committed to a project does not require HUD approval. HUD shall determine on a case-by- case basis that an amount greater than 5 percent may be drawn down by a PHA to pay for necessary and reasonable predevelopment costs, based upon a consideration of the nature and scope of activities proposed to be carried out by the PHA. Before a request for predevelopment assistance in excess of 5 percent may be approved, the PHA must provide to HUD information and documentation specified in Sec. Sec. 905.606 and 905.608 of this part, as HUD deems appropriate. (3) For mixed-finance projects, all funding for predevelopment costs must be reviewed and approved by HUD prior to expenditure. (4) The requirements in paragraph (b) of this section to disburse funds for mixed-financed projects in an approved ratio to other public and private funding do not apply to disbursement of predevelopment funds. (b) Standard drawdown requirements. (1) General. If HUD determines that the proposed development is approvable, it may execute with the PHA the applicable ACC Amendment to provide funds for the purposes and in the amounts approved by HUD. Upon approval of the development proposal and all necessary documentation evidencing and implementing the development plan, the PHA may disburse amounts as are necessary and consistent with the approved development proposal without further HUD approval, unless HUD determines that such approval is necessary. Once HUD approves the site acquisition proposal, the PHA may request funds for acquisition activities. Each Capital Fund disbursement from HUD is deemed to be an attestation of compliance by the PHA with the requirements of this part, as prescribed in Sec. 905.106 of this part. If HUD determines that the PHA is in noncompliance with any provision of this part, the PHA may be subject to the sanctions in Sec. 905.800, subpart H, of this part. (2) Mixed-finance projects. For mixed-finance projects, prior to PHA disbursement of public housing funds, except predevelopment funds identified in paragraph (a) of this section, HUD may require a PHA to submit to HUD, for review and approval, copies of final, fully executed, and, where appropriate, recorded documents, submitted as part [[Page 370]] of the development proposal process. Upon completion of the project, the ratio of public housing funds to non-public housing funds for the overall project must remain as reflected in the executed documents. The ratio does not apply during the construction period. Subpart G_Other Security Interests Source: 78 FR 63786, Oct. 24, 2013, unless otherwise noted. Sec. 905.700 Other security interests. (a) The PHA may not pledge, mortgage, enter into a transaction that provides recourse to public housing assets, or otherwise grant a security interest in any public housing project, portion thereof, or other property of the PHA without the written approval of HUD. (b) The PHA shall submit the request in the form and manner prescribed by HUD. (c) HUD shall consider: (1) The ability of the PHA to complete the financing, the improvements, and repay the financing; (2) The reasonableness of the provisions in the proposal; or (3) Any other factors HUD deems appropriate. Subpart H_Compliance, HUD Review, Penalties, and Sanctions Source: 78 FR 63786, Oct. 24, 2013, unless otherwise noted. Sec. 905.800 Compliance. As provided in Sec. 905.106 of this part, PHAs or other owner/ management entities and their partners are required to comply with all applicable provisions of this part. Execution of the CF ACC Amendment received from the PHA, submissions required by this part, and disbursement of Capital Fund grants from HUD are individually and collectively deemed to be the PHA's certification that it is in compliance with the provisions of this part and all other Public Housing Program Requirements. Noncompliance with any provision of this part or other applicable requirements may subject the PHA and/or its partners to sanctions contained in Sec. 905.804 of this part. Sec. 905.802 HUD review of PHA performance. (a) HUD determination. HUD shall review the PHA's performance in completing work in accordance with this part. HUD may make such other reviews when and as it determines necessary. When conducting such a review, HUD shall, at minimum, make the following determinations: (1) HUD shall determine whether the PHA has carried out its activities under this part in a timely manner and in accordance with its CFP 5-Year Action Plan and other applicable requirements. (2) HUD shall determine whether the PHA has a continuing capacity to carry out its Capital Fund activities in a timely manner. (3) HUD shall determine whether the PHA has accurately reported its obligation and expenditures in a timely manner. (4) HUD shall determine whether the PHA has accurately reported required building and unit data for the calculation of the formula. (5) HUD shall determine whether the PHA has obtained approval for any CFFP or OFFP proposal and any PHA development proposal. (b) [Reserved] Sec. 905.804 Sanctions. (a) If at any time, HUD finds that a PHA has failed to comply substantially with any provision this part, HUD may impose one or a combination of sanctions, as it determines is necessary. Sanctions associated with failure to obligate or expend in a timely manner are specified at Sec. 905.306 of this part. Other possible sanctions that HUD may impose for noncompliance by the PHA include, but are not limited to, the following: (1) Issue a corrective action order, at any time, by notifying the PHA of the specific program requirements that the PHA has violated, and specifying that any of the corrective actions listed in this section must be taken. Any corrective action ordered by HUD shall become a condition of the CF ACC Amendment. [[Page 371]] (2) Require reimbursement from non-HUD sources. (3) Limit, withhold, reduce, or terminate Capital Fund or Operating Fund assistance. (4) Issue a Limited Denial of Participation or Debar responsible PHA officials, pursuant to 2 CFR parts 180 and 2424. (5) Withhold assistance to the PHA under section 8 of the Act, 42 U.S.C. 1437f. (6) Declare a breach of the CF ACC with respect to some or all of the PHA's functions. (7) Take any other available corrective action or sanction as HUD deems necessary. (b) Right to appeal. Before taking any action described in paragraph (a) of this section, HUD shall notify the PHA of its finding and proposed action and provide to the PHA an opportunity, within a prescribed period of time, to present any arguments or additional facts and data concerning the finding and proposed action to HUD's Assistant Secretary for Public and Indian Housing. PART 906_PUBLIC HOUSING HOMEOWNERSHIP PROGRAMS--Table of Contents Subpart A_General Sec. 906.1 Purpose. 906.2 Definitions. 906.3 Requirements applicable to homeownership programs previously approved by HUD. Subpart B_Basic Program Requirements 906.5 Dwelling units and types of assistance that a PHA may make available under a homeownership program under this part. 906.7 Physical requirements that a property offered for sale under this part must meet. 906.9 Title restrictions and encumbrances on properties sold under a homeownership program. Subpart C_Purchaser Requirements 906.11 Eligible purchasers. 906.13 Right of first refusal. 906.15 Requirements applicable to a family purchasing a property under a homeownership program. 906.17 PHA handling of homeownership applications. 906.19 Requirements applicable to a purchase and resale entity (PRE). Subpart D_Program Administration 906.23 Protections available to non-purchasing public housing residents. 906.24 Protections available to non-purchasing residents of housing other than public housing. 906.25 Ownership interests that may be conveyed to a purchaser. 906.27 Limitations applicable to net proceeds on the sale of a property acquired through a homeownership program. 906.29 Below-Market sales and financing. 906.31 Requirements applicable to net proceeds resulting from sale. 906.33 Reporting and recordkeeping requirements. 906.35 Inapplicability of section 18 of the United States Housing Act of 1937. 906.37 Davis-Bacon and HUD wage rate requirements. Subpart E_Program Submission and Approval 906.38 Requirement of HUD approval to implement a homeownership program under this part. 906.39 Contents of a homeownership program. 906.40 Supporting documentation. 906.41 Additional supporting documentation for acquisition of non-public housing for homeownership. 906.43 Where a PHA is to submit a homeownership program for HUD approval. 906.45 HUD criteria for reviewing a proposed homeownership program. 906.47 Environmental requirements. 906.49 HUD approval; implementing agreements. Authority: 42 U.S.C. 1437z-4 and 3535(d). Source: 68 FR 1172, Mar. 11, 2003, unless otherwise noted. Subpart A_General Sec. 906.1 Purpose. (a) This part states the requirements and procedures governing public housing homeownership programs involving sales of individual dwelling units to families or to purchase and resale entities (PREs) for resale to families carried out by public housing agencies (PHAs), as authorized by section 32 of the United States Housing Act of 1937 (42 U.S.C. 1437z-4) (1937 Act). A PHA may only transfer public housing units for homeownership under a homeownership program approved by HUD under [[Page 372]] this part, except as provided under Sec. 906.3. This section does not govern new construction or substantial rehabilitation of units sold under this part. Such construction or rehabilitation is governed by the public housing development and modernization regulations. (b) Under a public housing homeownership program, a PHA makes available for purchase by low-income families for use as their principal residences public housing dwelling units, public housing developments, and other housing units or developments owned, assisted, or operated, or otherwise acquired by the PHA for sale under a homeownership program in connection with the use of assistance provided under the 1937 Act (1937 Act funds). A PHA may sell all or a portion of a property for purposes of homeownership in accordance with a HUD-approved homeownership program, and in accordance with the PHA's annual plan under part 903 of this title. Sec. 906.2 Definitions. Annual Contributions Contract (ACC) is defined in 24 CFR 5.403. Low-income family is defined in the 1937 Act, 42 U.S.C. 1437a(b)(2). Non-public housing unit means a housing unit that does not receive assistance under the 1937 Act (other than Section 8 assistance). PHA Plan means the 5-year or annual plan required under section 5A of the 1937 Act, 42 U.S.C. 1437c-1, and its implementing regulations at 24 CFR part 903. Purchase and Resale Entity (PRE) means an entity that acquires units for resale to low-income families in accordance with this part. Sec. 906.3 Requirements applicable to homeownership programs previously approved by HUD. (a) Any existing section 5(h) or Turnkey III homeownership program continues to be governed by the requirements of part 906 or part 904 of this title, respectively, contained in the April 1, 2002, edition of 24 CFR, parts 700 to 1699. The use of other program income for homeownership activities continues to be governed by agreements executed with HUD. (b) A PHA may convert an existing homeownership program, or a specific number of the units in such a program, to a homeownership program under this part with HUD approval. Subpart B_Basic Program Requirements Sec. 906.5 Dwelling units and types of assistance that a PHA may make available under a homeownership program under this part. (a) A homeownership program under this part may provide for sale of: (1) Units that are public housing units; and (2) Other units owned, operated, assisted, or acquired for homeownership sale and that have received the benefit of 1937 Act funds or are to be sold with the benefit of 1937 Act funds (non-public housing units). In selecting such units to be sold in a homeownership program under this part, the PHA shall not select units such that it could not comply with Sec. 906.7(a). (b) A homeownership program under this part may provide for financing to eligible families (see Sec. 905.15 of this title) purchasing dwelling units eligible under paragraph (a) of this section under the program, or for acquisition of housing units or developments by the PHA for sale under the program. (1) Under this part, a PHA may use assistance from amounts it receives under the Capital Fund under section 9(d) of the 1937 Act or from other income earned from its 1937 Act programs to provide assistance to public housing residents only to facilitate the purchase of homes (e.g., counseling, closing costs, that portion of the down payment not required to be supplied from the purchaser's funds under the provisions of Sec. 906.15(c), financing, and moving assistance). Public housing residents may use such assistance to purchase the unit in which they reside, another public housing unit, or a residence not located in a public housing development. (2) A PHA may provide financing assistance for other eligible purchasers from other income, i.e., funds not from 1937 Act programs, such as proceeds from selling public housing units, loan repayments, and public housing debt [[Page 373]] forgiveness funding not already committed to another purpose. (3) In accordance with the rules and regulations governing the Section 8(y) Homeownership Option, found in 24 CFR part 982 subpart M, a PHA may make its housing choice voucher funds available to provide assistance to a family purchasing a unit under this part. A family receiving assistance under the Section 8(y) program and participating in a homeownership program under this part must meet the requirements of both programs. (c) A PHA must not use 1937 Act funds to rehabilitate units that are not public housing units. Sec. 906.7 Physical requirements that a property offered for sale under this part must meet. (a) Property standards. A property offered for sale under a homeownership program must meet local code requirements (or, if no local code exists, the housing quality standards established by HUD for the Section 8 Housing Choice Voucher Program, 24 CFR part 982) and the relevant requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and the implementing regulations at 24 CFR part 35, subparts A, B, L, and R of this title. When a prospective purchaser who has known disabilities, or who has a family member with known disabilities requires accessible features, the features must be added as a reasonable accommodation to the disability, in accordance with the requirements of Sec. 8.29 of this title. Further, the property must be in good repair, with the major components having a remaining useful life that is sufficient to justify a reasonable expectation that homeownership will be affordable by the purchasers. These standards must be met as a condition for conveyance of a dwelling to an individual purchaser. (b) A unit in this program for which the purchasing family is receiving assistance under Section 8(y) must be an eligible unit for purposes of the Homeownership Option under 24 CFR part 982, subpart M. Sec. 906.9 Title restrictions and encumbrances on properties sold under a homeownership program. (a) If the property is subject to indebtedness under the Annual Contributions Contract (ACC), HUD will continue to make any debt service contributions for which it is obligated under the ACC, and the property sold will not be subject to the encumbrance of that indebtedness. (b) Upon sale of a public housing unit to a public housing tenant or eligible family, or to a PRE operating the units as non-public housing, in accordance with the HUD-approved homeownership program, HUD will execute a release of the title restrictions prescribed by the ACC. Because the property will no longer be subject to the ACC after sale, it will cease to be eligible for public housing Operating Fund or Capital Fund payments. Subpart C_Purchaser Requirements Sec. 906.11 Eligible purchasers. Entities that purchase units from the PHA for resale to low-income families (purchase and resale entities or PREs) and low-income families are eligible to purchase properties made available for sale under a PHA homeownership program. Sec. 906.13 Right of first refusal. (a) In selling a public housing unit under a homeownership program, the PHA or PRE must initially offer the unit to the resident occupying the unit, if any, notwithstanding the requirements of Sec. Sec. 906.15(a) and 906.15(c). (b) This program does not require the PHA, when selling a unit that is a non-public housing unit, to offer the unit for sale first to the current resident of the unit. Sec. 906.15 Requirements applicable to a family purchasing a property under a homeownership program. (a) Low-income requirement. Except in the case of a PHA's offer of first refusal to a resident occupying the unit under Sec. 906.13, a family purchasing a property under a PHA homeownership program must be a low-income family, as defined in section 3 of the 1937 Act (42 [[Page 374]] U.S.C. 1437a), at the time the contract to purchase the property is executed. (b) Principal residence requirement. The dwelling unit sold to an eligible family must be used as the principal residence of the family. (c) Financial capacity requirement. Eligibility must be limited to families who are capable of assuming the financial obligations of homeownership, under minimum income standards for affordability, taking into account the unavailability of public housing operating subsidies and modernization funds after conveyance of the property by the PHA. A homeownership program may, however, take account of any available subsidy from other sources. Under this affordability standard, an applicant must meet the following requirements: (1) Cost/income ratio. On an average monthly estimate, the amount of the applicant's payments for mortgage principal and interest, plus insurance, real estate taxes, utilities, maintenance, and other regularly recurring homeownership costs (such as condominium, cooperative, or other homeownership association fees) will not exceed the sum of: (i) 35 percent of the applicant's adjusted income as defined in 24 CFR part 913; and (ii) Any subsidy that will be available for such payments; (2) Down payment requirement. Each family purchasing housing under a homeownership program must provide a down payment in connection with any loan for acquisition of the housing, in an amount determined by the PHA or PRE, in accordance with an approved homeownership program. Except as provided in paragraph (c)(3) of this section, the PHA or PRE must permit the family to use grant amounts, gifts from relatives, contributions from private sources, and other similar amounts in making the down payment; (3) The family must use its own resources other than grants, gifts, contributions, or similar amounts, to contribute an amount of the down payment that is not less than one percent of the purchase price of the housing. The PHA or PRE must maintain records that are verifiable by HUD through audits regarding the source of this one percent contribution. (d) Other requirements established by the PHA. A PHA may establish requirements or limitations for families to purchase housing under a homeownership program, including but not limited to requirements or limitations regarding: (1) Employment or participation in employment counseling or training activities; (2) Criminal activity; (3) Participation in homeownership counseling programs; and (4) Evidence of regular income. Sec. 906.17 PHA handling of homeownership applications. Families who are interested in purchasing a unit must submit applications to the PHA or PRE for that specific purpose, and those applications must be handled separately from applications for other PHA programs. Application for homeownership must not affect an applicant's place on any other PHA waiting list for rental units. Sec. 906.19 Requirements applicable to a purchase and resale entity (PRE). (a) In general. In the case of a purchase of units for resale to low-income families by a PRE, the PHA must have an approved homeownership program that describes the use of a PRE to sell the units to low-income families within 5 years from the date of the PRE's acquisition of the units. (b) PRE requirements. The PHA must demonstrate in its homeownership program that the PRE has the necessary legal capacity and administrative capability to carry out its responsibilities under the program. The PHA's homeownership program also must contain a written agreement (not required to be submitted as part of the homeownership plan) that specifies the respective rights and obligations of the PHA and the PRE, and which includes: (1) Assurances that the PRE will comply with all provisions of the HUD-approved homeownership program; (2) Assurances that the PRE will be subject to a title restriction providing that the property must be resold or otherwise transferred only by conveyance of individual dwellings to eligible [[Page 375]] families, in accordance with the HUD-approved homeownership program, or by reconveyance to the PHA, and that the property will not be encumbered by the PRE without the written consent of the PHA; (3) Protection against fraud or misuse of funds or other property on the part of the PRE, its employees, and agents; (4) Assurances that the resale proceeds will be used only for the purposes specified by the HUD-approved homeownership program; (5) Limitation of the PRE's administrative and overhead costs, and of any compensation or profit that may be realized by the PRE, to amounts that are reasonable in relation to its responsibilities and risks; (6) Accountability to the PHA and residents for the recordkeeping, reporting, and audit requirements of Sec. 906.33; (7) Assurances that the PRE will administer its responsibilities under the plan on a nondiscriminatory basis, in accordance with the Fair Housing Act, its implementing regulations, and other applicable civil rights statutes and authorities, including the authorities cited in Sec. 5.105(a) of this title; and (8) Adequate legal remedies for the PHA and residents, in the event of the PRE's failure to perform in accordance with the agreement. (c) Sale to low-income families. The requirement for a PRE to sell units under a homeownership program only to low-income families must be recorded as a deed restriction at the time of purchase by the PRE. (d) Resale within five years. A PRE must agree that, with respect to any units it acquires under a homeownership program under this part, it will transfer ownership to the PHA if the PRE fails to resell the unit to a low-income family within 5 years of the PRE's acquisition of the unit. Subpart D_Program Administration Sec. 906.23 Protections available to non-purchasing public housing residents. (a) If a public housing resident does not exercise the right of first refusal under Sec. 906.13, and the PHA determines to move the tenant for the purpose of transferring possession of the unit, the PHA must provide the notice stated in this section 90 days before the date the resident is displaced, and may not displace the resident, except as stated in paragraph (a)(1) of this section, for the full 90-day period. The PHA: (1) Must notify the resident residing in the unit 90 days prior to the displacement date, except in cases of imminent threat to health or safety, that: (i) The public housing unit will be sold; (ii) The transfer of possession of the unit will not occur until the resident is relocated; and (iii) Each resident displaced by such action will be offered comparable housing (as defined in paragraph (b) of this section); (2) Must provide for the payment of the actual costs and reasonable relocation expenses of the resident to be displaced; (3) Must ensure that the resident is offered comparable housing under paragraph (a)(1)(iii) of this section; (4) Must provide counseling for displaced residents regarding their rights to comparable housing, including their rights under the Fair Housing Act to choice of a unit on a nondiscriminatory basis, without regard to race, color, religion, national origin, disability, age, sex, or familial status; and (5) Must not transfer possession of the unit until the resident is relocated. (b) For purposes of this section, the term ``comparable housing'' means housing: (1) That meets housing quality standards; (2) That is located in an area that is generally not less desirable than the displaced resident's original development; and (3) Which may include: (i) Tenant-based assistance (tenant-based assistance must only be provided upon the relocation of the resident to the comparable housing); (ii) Project-based assistance; or (iii) Occupancy in a unit owned, operated, or assisted by the PHA at a rental rate paid by the resident that is comparable to the rental rate applicable to the unit from which the resident is vacating. [[Page 376]] Sec. 906.24 Protections available to non-purchasing residents of housing other than public housing. Residents of non-public housing that would be displaced by a homeownership program are eligible for assistance under the Uniform Relocation Act and part 42 of this title. For purposes of this part, a family that was over-income (i.e., an individual or family that is not a low-income family) at the time of initial occupancy of public housing and was admitted in accordance with section 3(a)(5) of the 1937 Act, is treated as a non-purchasing resident of non-public housing. Sec. 906.25 Ownership interests that may be conveyed to a purchaser. A homeownership program may provide for sale to the purchasing family of any ownership interest that the PHA considers appropriate under the homeownership program, including but not limited to: (a) Ownership in fee simple; (b) A condominium interest; (c) An interest in a limited dividend cooperative; (d) A shared appreciation interest with a PHA providing financing; or (e) A leasehold under a bona fide lease-purchase arrangement. Sec. 906.27 Limitations applicable to net proceeds on the sale of a property acquired through a homeownership program. (a) Where the family has owned a unit under this part, the following rules apply: (1) In this section, the term gain from appreciation means the financial gain on resale attributable solely to the home's appreciation in value over time, and not attributable to government-provided assistance or any below-market financing provided under Sec. 906.29. (2) In this section, the term net proceeds means the financial gain on resale received by the seller after satisfying all amounts owing under mortgages, paying closing costs, and receiving an amount equal to the down payment (made from the seller's own funds) and principal payments on the mortgage(s). (3) A PHA must have a policy that provides for the recapture of net proceeds in an amount that the PHA considers appropriate under the guidelines in this section. (4) A PHA must have a policy that provides the recapture of the following amounts, if a family resells a homeownership unit it purchased under this part during the 5-year period beginning upon purchase of the dwelling unit: (i) All or a portion of the gain from appreciation; and (ii) All or a portion of the assistance provided (which includes below-market financing, but which does not include Section 8(y) assistance used for mortgage payments under this part) under the homeownership program to the family to the extent there are net proceeds, considering the factors the PHA establishes under paragraphs (b)(1)-(7) of this section. (b) The PHA's program under this part may provide for consideration of any factors the PHA considers appropriate in determining how much of the gain from appreciation and assistance to recapture, including but not limited to the following: (1) The aggregate amount of assistance provided under the homeownership program to the family; (2) The contribution of equity by the purchasing family; (3) The period of time elapsed between purchase by the homebuyer under the homeownership program and resale by the homebuyer; (4) The reason for resale; (5) Any improvements made by the family purchasing under the homeownership program; (6) Any appreciation in the value of the property; and (7) Any other factors that the PHA considers appropriate in making the recapture determination under this section. (c) After the expiration of the 5-year period in paragraph (a)(4) of this section, the PHA must recapture all or a portion of the assistance provided under the homeownership program to the family to the extent there are net proceeds. (d) The PHA must enforce its recapture policy through an appropriate form of title restriction. [[Page 377]] Sec. 906.29 Below-Market sales and financing. A homeownership plan may provide for below-market purchase prices or below-market financing to enable below-market purchases, or a combination of the two. Discounted purchase prices may be determined on a unit-by-unit basis, based on the particular purchaser's ability to pay, or may be determined by any other fair and reasonable method (e.g., uniform prices for a group of comparable dwellings, within a range of affordability by potential purchases). Below-market financing may include any lawful type of public or private financing, including but not limited to purchase-money mortgages, non-cash second mortgages, promissory notes, guarantees of mortgage loans from other lenders, shared equity, or lease-purchase arrangements. Sec. 906.31 Requirements applicable to net proceeds resulting from sale. (a) PHA use of net proceeds. The PHA must use any net proceeds of any sales under a homeownership program remaining after payment of all costs of the sale for purposes relating to low-income housing and in accordance with its PHA plan. (b) PRE use of resale net proceeds. The PHA may require the PRE to return the net proceeds from the resale of the units to the PHA. If the PHA permits the PRE to retain the net proceeds, the PRE must use these proceeds for low-income housing purposes. (c) Transfer of unsold unit to PHA. In a situation where the PRE fails to sell a unit to an eligible family within 5 years, and the provision of Sec. 906.19(d) requiring that the unit be transferred to the PHA applies: (1) If the unit has not been operated by the PRE as a public housing unit at any time during the 5-year period, the PHA may resell the unit in accordance with this part or any successor homeownership program of the department, or apply to have the unit included in its public housing program, if it meets all statutory and regulatory requirements of the public housing program; or (2) If the unit has been operated by the PRE as a public housing unit within such a 5-year period, the PHA must return the unit to operation in its regular public housing program. (d) Transfer of unsold unit operated as public housing to PHA. Where the PRE operates the unit as public housing during the 5-year interim period under Sec. 960.40, and fails to sell the unit to an eligible family within such 5-year period and the provision of Sec. 906.19(d) applies, the PHA must return the unit to operation in its regular public housing program. Sec. 906.33 Reporting and recordkeeping requirements. The PHA is responsible for the maintenance of records (including sale and financial records) for all activities incident to implementation of the HUD-approved homeownership program. Where a PRE is responsible for the sale of units, the PHA must ensure that the PRE's responsibilities include proper recordkeeping and accountability to the PHA, sufficient to enable the PHA to monitor compliance with the approved homeownership program and to meet its audit responsibilities. All books and records must be subject to inspection and audit by HUD and the General Accounting Office (GAO). The PHA must report annually to HUD on the progress of each program approved under this part. The PHA must report as part of the Annual Plan process under Sec. 903.7(k) of this title, except for those PHAs under Sec. Sec. 903.11(c)(1) and (2) of this title who are not required to include information on their public housing homeownership programs in their Annual Plan. Those PHAs must report by providing a description of the homeownership program to HUD, including the cumulative number of units sold. Sec. 906.35 Inapplicability of section 18 of the United States Housing Act of 1937. The provisions of section 18 of the 1937 Act (42 U.S.C. 1437p) do not apply to disposition of public housing dwelling units under a homeownership program approved by HUD under this part, or to the sale of a unit to a PRE to operate as public housing and sell to a low-income family within 5 years, under the requirements of Sec. 906.19. [[Page 378]] Sec. 906.37 Davis-Bacon and HUD wage rate requirements. (a) Wage rates applicable to laborers and mechanics. Wage rate requirements in accordance with Sec. 968.110(e) of this title apply to the following activities: (1) Rehabilitation, repairs, and accessibility modifications performed under an agreement or contract with the PHA or by the PHA, pursuant to Sec. 906.7. Davis-Bacon or HUD-determined wage rates apply as follows: (i) Existing public housing units that will be sold under a homeownership program: Davis-Bacon rates apply, except that HUD rates apply to nonroutine maintenance as defined in Sec. 968.105 of this title; (ii) Non-public housing units acquired by a PHA using Capital Funds that will be sold under a homeownership program: Davis-Bacon rates apply; and (iii) Non-public housing units owned or acquired by a PHA with the intent to use 1937 Act funds to finance the sale of the units, or otherwise provide assistance to purchasers of the units: Davis-Bacon rates apply; (2) New construction of non-public housing units pursuant to a contract for acquisition by a PHA for the purpose of sale under a homeownership program: Davis-Bacon rates apply; (3) Operation, rehabilitation, and repair of units operated as public housing units by a PRE: HUD rates apply to nonroutine maintenance, as defined in Sec. 968.105 of this title, and routine maintenance. Davis-Bacon rates apply to rehabilitation and repair that does not qualify as nonroutine maintenance. (b) Technical wage rates. All architects, technical engineers, draftsmen, and technicians employed in the development of units under a homeownership program shall be paid not less than the HUD-determined wage rates in accordance with Sec. 968.100(f) of this title. Subpart E_Program Submission and Approval Sec. 906.38 Requirement of HUD approval to implement a homeownership program under this part. A PHA must obtain HUD approval before implementing a homeownership program under this part. A homeownership program under this part must be carried out in accordance with the requirements of this part and the PHA Plan submitted under part 903 of this title. Sec. 906.39 Contents of a homeownership program. A homeownership program must include the following matters, as applicable to the particular factual situation: (a) Method of Sale: The PHA should indicate how units will be sold, including a description of the exact method of sale, such as, for example, fee simple conveyance, lease-purchase, or sale of a cooperative share. PHAs may sell units directly to a tenant or eligible family directly or via a bona fide lease-purchase arrangement. The PHA must indicate whether it, or a PRE will sell units to families directly or via such lease-purchase method. If the PHA or PRE will use a lease- purchase method the proposal should indicate the terms of the lease- purchase arrangement. The terms of the lease-purchase arrangement shall include, but are not limited to the periodic documentation to be provided to the family regarding the amount they have accrued toward the down payment, and the length of the lease period (with regard to PREs the sales must be completed within the statutory 5-year period.); (b) Property description. (1) If the program involves only financing assistance to the family purchasing the unit, the PHA need not specify property addresses, but it must describe the area(s) in which the assistance is to be used; (2) If the PHA is selling existing public housing, it must describe the property, including identification of the property by project number, or street address if there is no project number, and the specific dwellings to be sold, with bedroom distribution by size and type broken down by development; (3) If the PHA is acquiring units with 1937 Act funds to sell under the program, it must comply with the provisions of Sec. 906.40 concerning this element of the program; (c) Repair or rehabilitation. If applicable, a plan for any repair or rehabilitation needed to meet the requirements [[Page 379]] of Sec. 906.7, based on the assessment of the physical condition of the property that is included in the supporting documentation. The restriction in 906.5(c) of this part applies to such repair or rehabilitation; (d) Purchaser eligibility and selection. The standards and procedures to be used for homeownership applications and the eligibility and selection of purchasers, consistent with the requirements of Sec. 906.15. If the homeownership program allows application for purchase of units by families who are not presently public housing or Section 8 residents and not already on the PHA's waiting lists for those programs, the program must include an affirmative fair housing marketing strategy for such families, including specific steps to inform them of their eligibility to apply, and to solicit applications from those in the housing market who are least likely to apply for the program without special outreach, including persons with disabilities; (e) Sale and financing. Terms and conditions of sale and financing, including any below-market financing under Sec. 906.29; (f) Consultation with residents and purchasers. A description of resident input obtained during the resident consultation process required by the PHA Plan under part 903 of this title. If the PHA is one whose Plan does not require information regarding homeownership under Sec. 903.11(b)(1) of this title, the PHA must consult with the Resident Advisory Board or Boards regarding the homeownership plan, and provide the information required in this paragraph; (g) Counseling. Counseling, training, and technical assistance to be provided to purchasers; (h) Sale via PRE. If the program contemplates sale to residents by an entity other than the PHA, a description of that entity's responsibilities and information demonstrating that the requirements of Sec. 906.19 have been met or will be met in a timely fashion; (i) Non-purchasing residents. If applicable, a plan for non- purchasing residents, in accordance with Sec. 906.23; (j) Sale proceeds. An estimate of the sale proceeds and an explanation of how they will be used, in accordance with Sec. 906.31; (k) Records, accounts, and reports. A description of the recordkeeping, accounting, and reporting procedures to be used, including those required by Sec. 906.33; (l) Budget. A budget estimate, showing any rehabilitation or repair cost, any financing assistance, and the costs of implementing the program, and the sources of the funds that will be used; (m) Timetable. An estimated timetable for the major steps required to carry out the program; (n) Deed restrictions. A deed restriction or covenant running with the land that will assure to HUD's satisfaction that the requirements of Sec. Sec. 906.27 and 906.15(b) are met. Sec. 906.40 Supporting documentation. The following supporting documentation must be submitted to HUD with the proposed homeownership program, as appropriate for the particular program: (a) Supporting documentation--PREs. In approving homeownership programs in which the PHA contemplates selling public housing units to a PRE for operation as public housing during the 5 year interim period the department will require evidentiary materials including but not limited to: (1) Organizational documents of the PRE; (2) Regulatory and operating agreement between the PHA and PRE regarding the provision of operating subsidy and the operation of the public housing units in accordance with all applicable public housing requirements; (3) Management agreement and plan; (4) Financing documents, if any; (5) A description of the use of operating subsidy during the PRE's period of ownership, in the form of an operating pro forma; (6) A mixed-finance ACC amendment governing these units; (7) A deed restriction or covenant running with the land that will assure to HUD's satisfaction that the PRE will operate the units in accordance with public housing laws and regulations, including Sec. 906.19. [[Page 380]] (8) A bond for repairs or proof of insurance to cover any damage to the property during the period of PRE ownership and operation; (9) Such other materials as may be required by HUD. (b) Physical assessment. An assessment of the physical condition of the properties, based on the standards specified in Sec. 906.7; (c) Feasibility. A statement demonstrating the practical feasibility of the program, based on analysis of data on such elements as purchase prices, costs of repair or rehabilitation, accessibility costs, if applicable, homeownership costs, family incomes, availability of financing, and the extent to which there are eligible residents who are expected to be interested in purchase (See Sec. 906.45(a)); (d) PHA performance in homeownership. A statement of the commitment and capability of the PHA (and any other entity with substantial responsibility for implementing the homeownership program) to successfully carry out the homeownership program. The statement must describe the PHA's (and other entity's) past experience in carrying out homeownership programs for low-income families, and (if applicable) its reasons for considering such programs to have been successful. A PHA that has not previously implemented a homeownership program for low- income families instead must submit a statement describing its experience in carrying out public housing modernization and development projects under part 905 of this title, respectively; (e) Nondiscrimination certification. The PHA's or PRE's certification that it will administer the plan on a nondiscriminatory basis, in accordance with the Fair Housing Act, Title VI of the Civil Rights Act of 1964, Executive Order 11063, other authorities cited in Sec. 5.105(a) of this title, and the implementing regulations, and will assure compliance with those requirements by any other entity that may assume substantial responsibilities for implementing the program; (f) Legal opinion. An opinion by legal counsel to the PHA, stating that counsel has reviewed the program and finds it consistent with all applicable requirements of federal, state, and local law, including regulations as well as statutes. At a minimum, the attorney must certify that the documents to be used will ensure sales only to eligible families under Sec. 906.15, compliance with the 5-year PRE sale guarantee in Sec. 906.19(d), and compliance with the restriction of use of resale proceeds of Sec. 906.27; (g) Board resolution. A resolution by the PHA's Board of Commissioners, evidencing its approval of the program; (h) Section 8(y). In any case where the PHA plans to provide families with assistance under the Section 8(y) homeownership option in connection with homeownership under this part, a certification that the PHA will comply with the requirements of the Section 8(y) statute and implementing regulations; (i) Other information. Any other information that may reasonably be required for HUD review of the program. Except for the PHA-HUD implementing agreement under Sec. 906.49 and the deed restriction required by Sec. 906.39(n), HUD approval is not required for documents to be prepared and used by the PHA in implementing the program (such as contracts, applications, deeds, mortgages, promissory notes, and cooperative or condominium documents), if their essential terms and conditions are described in the program. Consequently, those documents need not be submitted as part of the program or the supporting documentation. Sec. 906.41 Additional supporting documentation for acquisition of non-public housing for homeownership. (a) Proposal contents. The PHA must submit an acquisition proposal to the HUD field office for review and approval before its homeownership plan containing acquisition of non-public housing can be approved. This proposal must contain the following: (1) Property description. A description of the properties, including the number of housing units, unit types, and number of bedrooms, and any non-dwelling facilities on the properties to be acquired; (2) Certification. If the housing units were constructed under a contract or an agreement that they be sold to the [[Page 381]] PHA, a certification that the developer/owner complied with all Davis- Bacon wage rate requirements under Sec. 906.37, including all required contractual provisions and compliance measures, and that the PHA received all applicable HUD environmental approvals and all applicable HUD releases of funds before executing the contract or agreement, in accordance with Sec. 906.47(d). (3) Site information. A description of the proposed general location of the properties to be acquired, or where specific properties have been identified, street addresses of the properties; (4) Property costs. The detailed budget of costs for acquiring the properties, including relocation and closing costs, and an identification of the sources of funding; (5) Appraisal. An appraisal of the proposed properties by an independent, state-certified appraiser (when the sites have been identified); (6) Property acquisition schedule. A copy of the PHA acquisition schedule; (7) Environmental information. (i) The environmental information required by Sec. 906.47(f), where HUD will perform the environmental review under 24 CFR part 50, or a statement identifying the responsible entity that has performed or will perform the review under 24 CFR part 58. This paragraph (a)(7)(i) does not apply to a property where a contract or agreement for sale to the PHA has already been executed and HUD has already given prior approval of the property following environmental review under 24 CFR part 50. (ii) Where the PHA's homeownership program is submitted for approval to HUD and contemplates acquisition of properties not identified at the time of submission or approval, the procedures at Sec. 906.47(e) apply. (8) Market analysis. An analysis of the potential market of eligible purchasers for the homeownership units. (9) Additional HUD-requested information. Any additional information that may be needed for HUD to determine whether it can approve the proposal. (b) Cost limit. The acquisition cost of each property is limited by the housing cost cap limit, as determined by HUD. Sec. 906.43 Where a PHA is to submit a homeownership program for HUD approval. A PHA must submit its proposed homeownership program together with supporting documentation, in a format prescribed by HUD, to the Special Applications Center with a copy to the appropriate HUD field office. Sec. 906.45 HUD criteria for reviewing a proposed homeownership program. HUD will use the following criteria in reviewing a homeownership program: (a) Feasibility. The program must be practically feasible, with sound potential for long-term success. Financial viability, including the capability of purchasers to meet the financial obligations of homeownership, is a critical requirement. (b) Legality. Counsel for the PHA shall certify that the homeownership program is consistent with applicable law, including the requirements of this part and any other applicable federal, state, and local statutes and regulations, including existing contracts, and HUD shall accept such certification unless HUD has information indicating that the certification is incorrect. (c) Documentation. The program must be clear and complete enough to serve as a working document for implementation, as well as a basis for HUD review. (d) PHA performance in homeownership. The PHA (and any other entity with substantial responsibility for implementing the homeownership program) must have demonstrated the commitment and capability to successfully implement the homeownership program based upon the criteria stated in Sec. 906.41(d). Sec. 906.47 Environmental requirements. (a) General. HUD environmental regulations at 24 CFR part 58 apply to this part, unless, under Sec. 58.11 of this title, HUD itself performs the environmental review under 24 CFR part 50. The PHA conducting a homeownership program under this part must comply with this section and part 50 or 58, as applicable. [[Page 382]] (b) Assistance to facilitate the purchase of homes. Where the PHA's homeownership program involves assistance provided under the 1937 Act solely to assist homebuyers to purchase existing dwelling units or dwelling units under construction, an environmental review is not required under part 58 or part 50 of this title. However, the requirements of Sec. 58.6 or Sec. 50.19(b)(15) of this title are still applicable. (c) Public housing units in the PHA's inventory. Before the PHA rehabilitates or repairs units in its inventory for use for homeownership, or expends or commits HUD or local funds for such activities, the responsible entity must comply with part 58 and the PHA, where required, must submit and receive HUD approval of its request for release of funds, or HUD must have completed any part 50 environmental review and notified the PHA of its approval of the property. HUD may not release funds under this part before the appropriate approval is obtained. (d) Units to be acquired with federal funds and used for public housing homeownership. A PHA may not enter into any contract for acquisition of real property to be used in a homeownership program unless the required environmental reviews have been performed and approvals have been obtained. (e) Specific units unidentified. Where the PHA's homeownership program contemplates acquisition of properties not identified at the time of submission, the PHA must certify that it will comply with this section, including paragraph (f) of this section, prior to such acquisition or construction. HUD may conditionally approve such a homeownership program; however, HUD will not give final approval of any site or unit until the required environmental review has been completed. (f) Information. The PHA shall supply all relevant information necessary for the responsible entity, or HUD, if applicable, to perform the environmental review for each property included in the homeownership program, and, if necessary, shall carry out mitigating measures or select alternate eligible properties. Where HUD performs the environmental review, the PHA shall comply with 24 CFR 50.3(h). (g) Non-exclusivity. Nothing in this section relieves the participating PHA, and its partners and contractors, from complying with all requirements of 24 CFR part 50 or part 58, as applicable. Sec. 906.49 HUD approval; implementing agreement. HUD may approve a homeownership program as submitted, conditionally approve it under Sec. 906.47(e), or return it to the PHA for revision and resubmission. Where such conditional approval is given, the PHA, partners, and contractors remain subject to the restrictions in Sec. 906.47. Upon HUD notification to the PHA that the homeownership program is approvable (in final form that satisfies all applicable requirements of this part), the PHA and HUD will execute a written implementing agreement, in a form prescribed by HUD, to evidence HUD approval and authorization for implementation. The program itself, as approved by HUD, must be incorporated in the implementing agreement. Any of the items of supporting documentation may also be incorporated, if agreeable to the PHA and HUD. The PHA is obligated to carry out the approved homeownership program and other provisions of the implementing agreement without modification, except with written approval by HUD. PART 907_SUBSTANTIAL DEFAULT BY A PUBLIC HOUSING AGENCY--Table of Contents Sec. 907.1 Purpose and scope. 907.3 Bases for substantial default. 907.5 Procedures for declaring substantial default. 907.7 Remedies for substantial default. Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d). Source: 76 FR 10162, Feb. 23, 2011, unless otherwise noted. Sec. 907.1 Purpose and scope. This part provides the criteria and procedures for determining and declaring substantial default by a public housing agency (PHA) and the actions available to HUD to address and remedy substantial default by a PHA. Nothing in this part shall limit the discretion of HUD to take any action [[Page 383]] available under the provisions of section 6(j)(3)(A) of the 1937 Act (42 U.S.C. 1437d(j)(3)(A)), any applicable annual contributions contract (ACC), or any other law or regulation that may authorize HUD to take actions against a PHA that is in substantial default. Sec. 907.3 Bases for substantial default. (a) Violations of laws and agreements. A PHA may be declared in substantial default when the PHA: (1) Violates a federal statute; (2) Violates a federal regulation; or (3) Violates one or more terms of an ACC, or other covenants or conditions to which the PHA is subject. (b) Failure to act. In addition to the violations listed in paragraph (a) of this section, in the case where a PHA is designated as a troubled performer under PHAS, the PHA shall be in substantial default if the PHA: (1) Fails to execute an MOA; (2) Fails to comply with the terms of an MOA; or (3) Fails to show substantial improvement, as provided in Sec. 902.75(d) of this chapter. Sec. 907.5 Procedures for declaring substantial default. (a) Notification of finding of substantial default. If the PHA is found in substantial default, the PHA shall be notified of such determination in writing. Except in situations as described in paragraph (d) of this section, the PHA shall have an opportunity to respond to the written determination, and an opportunity to cure the default, if a cure of the default is determined appropriate by HUD. The determination of substantial default shall be transmitted to the Executive Director of the PHA, the Chairperson of the Board of the PHA, and the appointing authority(ies) of the PHA's Board of Commissioners, and shall: (1) Identify the specific statute, regulation, covenants, conditions, or agreements of which the PHA is determined to be in violation; (2) Identify the specific events, occurrences, or conditions that constitute the violation; (3) Specify the time period, which shall be a period of 10 but not more than 30 days, during which the PHA shall have an opportunity to demonstrate that the determination or finding is not substantively accurate, if required; (4) If determined by HUD to be appropriate, provide for an opportunity to cure and specify the time period for the cure; and (5) Notify the PHA that, absent a satisfactory response in accordance with paragraph (b) of this section, action shall be taken as determined by HUD to be appropriate. (b) Receipt of notification and response. Upon receipt of the notification described in paragraph (a) of this section, the PHA may submit a response, in writing and within the specified time period, demonstrating: (1) The description of events, occurrences, or conditions described in the written determination of substantial default is in error, or establish that the events, occurrences, or conditions described in the written determination of substantial default do not constitute noncompliance with the statute, regulation, covenants, conditions, or agreements that are cited in the notification under paragraph (a) of this section; or (2) If any opportunity to cure is provided, that the violations have been cured or will be cured in the time period specified by HUD. (c) Waiver of notification and the opportunity to respond. A PHA may waive, in writing, receipt of written notification from HUD of a finding of substantial default and the opportunity to respond to such finding. HUD may then immediately proceed with the remedies as provided in Sec. 907.7. (d) Emergency situations. A PHA shall not be afforded the opportunity to respond to a written determination or to cure a substantial default in any case where: (1) HUD determines that conditions exist that pose an imminent threat to the life, health, or safety of public housing residents or residents of the surrounding neighborhood; or (2) The events or conditions precipitating the default are determined to be the result of criminal or fraudulent activity. [[Page 384]] Sec. 907.7 Remedies for substantial default. (a) Except as provided in Sec. 907.7(c), upon determining that events have occurred or conditions exist that constitute a substantial default, HUD may: (1) Take any action provided for in section 6(j)(3) of the Act (42 U.S.C. 1437d(j)(3)); (2) Provide technical assistance for existing PHA management staff; or (3) Provide assistance deemed necessary, in the discretion of HUD, to remedy emergency conditions. (b) HUD may take any of the actions described in paragraph (a) of this section sequentially or simultaneously in any combination. (c) In the case of a substantial default by a troubled PHA pursuant to Sec. 902.83(b): (1) For a PHA with 1,250 or more units, HUD shall petition for the appointment of a receiver pursuant to section 6(j)(3)(A)(ii) of the 1937 Act (42 U.S.C. 1437d(j)(3)(A)(ii)); or (2) For a PHA with fewer than 1,250 units, HUD shall either petition for the appointment of a receiver pursuant to section 6(j)(3)(A)(ii) of the Act (42 U.S.C. 1437d(j)(3)(A)(ii)), or take possession of the PHA (including all or part of any project or program of the PHA) pursuant to section 6(j)(3)(A)(iv) of the 1937 Act (42 U.S.C. 1437d(j)(3)(A)(iv)), and appoint, on a competitive or noncompetitive basis, an individual or entity as an administrative receiver to assume the responsibilities of HUD for the administration of all or part of the PHA (including all or part of any project or program of the PHA). (d) To the extent feasible, while a PHA is operating under any of the actions that may have been taken by HUD, all services to residents will continue uninterrupted. (e) HUD may limit remedies under this part to one or more of a PHA's specific operational areas (e.g., maintenance, capital improvement, occupancy, or financial management), to a single program or group of programs, or to a single project or a group of projects. For example, HUD may select, or participate in the selection of, an AME to assume management responsibility for a specific project, a group of projects in a geographical area, or a specific operational area, while permitting the PHA to retain responsibility for all programs, operational areas, and projects not so designated. PART 908_ELECTRONIC TRANSMISSION OF REQUIRED FAMILY DATA FOR PUBLIC HOUSING, INDIAN HOUSING, AND THE SECTION 8 RENTAL CERTIFICATE , RENTAL VOUCHER, AND MODERATE REHABILITATION PROGRAMS--Table of Contents Sec. 908.101 Purpose. 908.104 Requirements. 908.108 Cost. 908.112 Extension of time. Authority: 42 U.S.C. 1437f, 3535(d), 3543, 3544, and 3608a. Source: 60 FR 11628, Mar. 2, 1995, unless otherwise noted. Sec. 908.101 Purpose. The purpose of this part is to require Public Housing Agencies (PHAs), including Moving-to-Work (MTW) PHAs, that operate Public Housing, Indian Housing, or Section 8 Rental Certificate, Housing Choice Voucher (HCV), Rental Voucher, and Moderate Rehabilitation programs to electronically submit certain data to HUD for those programs. These electronically submitted data are required for HUD forms: HUD-50058, including the Family Self-Sufficiency (FSS) Addendum. Applicable program entities must retain at a minimum, the last three years of the form HUD- 50058, and supporting documentation, during the term of each assisted lease, and for a period of at least 3 years from the end of participation (EOP) date, to support billings to HUD and to permit an effective audit. Electronic retention of form HUD-50058 and HUD-50058- FSS and supporting documentation fulfills the record retention requirement under this section. [74 FR 68934, Dec. 29, 2009] Sec. 908.104 Requirements. (a) Automated HAs. Housing agencies that currently use automated software [[Page 385]] packages to transmit Forms HUD-50058 and HUD-50058-FSS information by tape or diskette to the Department's data processing contractor must convert to telephonic electronic transmission of that data in a HUD specified format by June 30, 1995. (b) Nonautomated HAs. Housing agencies that currently prepare and transmit the HUD-50058 and HUD-50058-FSS information to HUD paper must: (1) Complete a vendor search and obtain either: (i) The necessary hardware and software required to develop and maintain an in-house automated data processing system (ADP) used to generate electronic submission of the data for these forms via telephonic network; or (ii) A service contract for the operation of an automated system to generate electronic submission of the data for these forms via telephonic network; (2) Complete their data loading; and (3) Begin electronic transmission by March 2, 1996. (c) Electronic transmission of data. Electronic transmission of data consists of submission of all required data fields (correctly formatted) from the forms HUD-050058 and HUD-50058-FSS telephonically, in accordance with HUD instructions. Regardless of whether an HA obtains the ADP system itself or contracts with a service bureau to provide the system, the software must be periodically updated to incorporate changes or revisions in legislation, regulations, handbooks, notices, or HUD electronic transmission data format requirements. (d) Service contract. HAs that determine that the purchase of hardware and/or software is not cost effective may contract out the electronic data transmission function to organizations that provide such services, including, but not limited to the following organizations: local management associations and management agents with centralized facilities. HAs that contract out the electronic transmission function must retain the ability to monitor the day-to-day operations of the project at the HA site and be able to demonstrate the ability to the relevant HUD Field Office. (e) Notwithstanding the provisions of paragraphs (a) and (b) of this section, the Department may approve transmission of the data by tape or diskette if it determines that the cost of telephonic transmission would be excessive. (Approved by the Office of Management and Budget under control number 2577-0083) Sec. 908.108 Cost. (a) General. The costs of the electronic transmission of the correctly formatted data, including either the purchase and maintenance of computer hardware or software, or both, the cost of contracting for those services, or the cost of centralizing the electronic transmission function, shall be considered Section 8 Administrative expenses, or eligible public and Indian housing operating expenses that can be included in the public and Indian housing operating budget. At the HA's option, the cost of the computer software may include service contracts to provide maintenance or training, or both. (b) Sources of funding. For public and Indian housing, costs may be covered from operating subsidy for which the HA is already eligible, or the initial cost may be covered by funds received by the HA under HUD's Comprehensive Improvement Assistance Program (CIAP) or Comprehensive Grant Program (CGP). For Section 8 programs, the costs may be covered from ongoing administrative fees or the Section 8 operating reserve. Sec. 908.112 Extension of time. The HUD Field Office may grant an HA an extension of time, of a reasonable period, for implementation of the requirements of Sec. 908.104, if it determines that such electronic submission is infeasible because of one of the following: (a) Lack of staff resources; (b) Insufficient financial resources to purchase the required hardware, software or contractual services; or (c) Lack of adequate infrastructure, including, but not limited to, the inability to obtain telephone service to transmit the required data. [[Page 386]] PART 943_PUBLIC HOUSING AGENCY CONSORTIA AND JOINT VENTURES--Table of Contents Subpart A_General Sec. 943.100 What is the purpose of this part? Subpart B_Consortia 943.115 What programs are covered under this subpart? 943.118 What is a consortium? 943.120 What programs of a PHA are included in a consortium's functions? 943.122 How is a consortium organized? 943.124 What elements must a consortium agreement contain? 943.126 What is the relationship between HUD and a consortium? 943.128 How does a consortium carry out planning and reporting functions? 943.130 What are the responsibilities of participating PHAs? Subpart C_Subsidiaries, Affiliates, Joint Ventures in Public Housing 943.140 What programs and activities are covered by this subpart? 943.142 In what types of operating organizations may a PHA participate? 943.144 What financial impact do operations of a subsidiary, affiliate, or joint venture have on a PHA? 943.146 What impact does the use of a subsidiary, affiliate, or joint venture have on financial accountability to HUD and the Federal government? 943.148 What procurement standards apply to PHAs selecting partners for a joint venture? 943.150 What procurement standards apply to a PHA's joint venture partner? 943.151 What procurement standards apply to a joint venture itself? Authority: 42 U.S.C. 1437k and 3535(d). Source: 65 FR 71207, Nov. 29, 2000, unless otherwise noted. Subpart A_General Sec. 943.100 What is the purpose of this part? This part authorizes public housing agencies (PHAs) to form consortia, joint ventures, affiliates, subsidiaries, partnerships, and other business arrangements under section 13 of the United States Housing Act of 1937 (42 U.S.C. 1437k). Under this authority, PHAs participating in a consortium enter into a consortium agreement, submit joint PHA Plans to HUD, and may combine all or part of their funding and program administration. This part does not preclude a PHA from entering cooperative arrangements to operate its programs under other authority, as long as they are consistent with other program regulations and requirements. Subpart B_Consortia Sec. 943.115 What programs are covered under this subpart? (a) Except as provided in paragraph (b) of this section, this subpart applies to the following: (1) PHA administration of public housing or Section 8 programs under an Annual Contributions Contract (ACC) with HUD; and (2) PHA administration of grants to the PHA in connection with its public housing or Section 8 programs. (b) This subpart does not apply to the following: (1) PHA administration of Section 8 projects assigned to a PHA for contract administration pursuant to an ACC entered under the Request for Proposals (RFP) published May 19, 1999 (64 FR 27358); (2) Section 8 contract administration of a restructured subsidized multifamily project by a Participating Administrative Entity in accordance with part 401 of this title; or (3) A PHA in its capacity as owner of a Section 8 project. Sec. 943.118 What is a consortium? A consortium consists of two or more PHAs that join together to perform planning, reporting, and other administrative or management functions for participating PHAs, as specified in a consortium agreement. A consortium also submits a joint PHA Plan. The lead agency collects the assistance funds from HUD that would be paid to the participating PHAs for the elements of their operations that are administered by the consortium and allocates them according to the consortium agreement. The participating PHAs must adopt the same fiscal year so that the applicable periods for submission and review of the joint PHA [[Page 387]] Plan are the same. Notwithstanding any other regulation, PHAs proposing to form consortia may request and HUD may approve changes in PHA fiscal years to make this possible. Sec. 943.120 What programs of a PHA are included in a consortium's functions? (a) A PHA may enter a consortium under this subpart for administration of any of the following program categories: (1) The PHA's public housing program (which may include either the operating fund or the capital fund, or both); (2) The PHA's Section 8 voucher and certificate program (including the project-based certificate and voucher programs and special housing types); (3) The PHA's Section 8 Moderate Rehabilitation program, including Single Room Occupancy program; (4) All other project-based Section 8 programs administered by the PHA under an ACC with HUD; and (5) Any grant programs of the PHA in connection with its Section 8 or public housing programs, such as the Drug Elimination program or the Resident Opportunities and Self-Sufficiency program, to the extent not inconsistent with the terms of the governing documents for the grant program's funding source. (b) If a PHA elects to enter a consortium with respect to a category specified in paragraph (a) of this section, the consortium must cover the PHA's whole program under the ACC with HUD for that category, including all dwelling units and all funding for that program under the ACC with HUD. Sec. 943.122 How is a consortium organized? (a) PHAs that elect to form a consortium enter into a consortium agreement among the participating PHAs, specifying a lead agency (see Sec. 943.124), and submit a joint PHA Plan (Sec. 943.118). HUD enters into any necessary payment agreements with the lead agency and the other participating PHAs (see Sec. 943.126) to provide that HUD funding to the participating PHAs for program categories covered by the consortium will be paid to the lead agency. (b) The lead agency must not be a PHA that is designated as a ``troubled PHA'' by HUD, that has been determined by HUD to fail the civil rights compliance threshold for new funding, or that has had a PHAS designation withheld for civil rights or other reasons. The lead agency is designated to receive HUD program payments on behalf of participating PHAs, to administer HUD requirements for administration of the funds, and to apply the funds in accordance with the consortium agreement and HUD regulations and requirements. Sec. 943.124 What elements must a consortium agreement contain? (a) The consortium agreement among the participating PHAs governs the formation and operation of the consortium. The consortium agreement must be consistent with any payment agreements between the participating PHAs and HUD and must specify the following: (1) The names of the participating PHAs and the program categories each PHA is including under the consortium agreement; (2) The name of the lead agency; (3) The functions to be performed by the lead agency and the other participating PHAs during the term of the consortium; (4) The allocation of funds among participating PHAs and responsibility for administration of funds paid to the consortium; and (5) The period of existence of the consortium and the terms under which a PHA may join or withdraw from the consortium before the end of that period. To provide for orderly transition, addition or withdrawal of a PHA and termination of the consortium must take effect on the anniversary of the consortium's fiscal year. (b) The agreement must acknowledge that the participating PHAs are subject to the joint PHA Plan submitted by the lead agency. (c) The agreement must be signed by an authorized representative of each participating PHA. [[Page 388]] Sec. 943.126 What is the relationship between HUD and a consortium? HUD has a direct relationship with the consortium through the PHA Plan process and through one or more payment agreements, executed in a form prescribed by HUD, under which HUD and the participating PHAs agree that program funds will be paid to the lead agency on behalf of the participating PHAs. Such funds must be used in accordance with the consortium agreement, the joint PHA Plan and HUD regulations and requirements. Sec. 943.128 How does a consortium carry out planning and reporting functions? (a) During the term of the consortium agreement, the consortium must submit joint five-year Plans and joint Annual Plans for all participating PHAs, in accordance with part 903 of this chapter. HUD may prescribe methods of submission for consortia generally and where the consortium does not cover all program categories. (b) The consortium must maintain records and submit reports to HUD, in accordance with HUD regulations and requirements, for all of the participating PHAs. All PHAs will be bound by Plans and reports submitted to HUD by the consortium for programs covered by the consortium. (c) Each PHA must keep a copy of the consortium agreement on file for inspection. The consortium agreement must also be a supporting document to the joint PHA Plan. Sec. 943.130 What are the responsibilities of participating PHAs? (a) Responsibilities, generally. Despite participation in a consortium, each participating PHA remains responsible for its own obligations under its ACC with HUD. This means that the PHA has an obligation to assure that all program funds, including funds paid to the lead agency for administration by the consortium, are used in accordance with HUD regulations and requirements, and that the PHA program is administered in accordance with HUD regulations and requirements. Any breach of program requirements with respect to a program covered by the consortium agreement is a breach of the ACC with each of the participating PHAs, so each PHA is responsible for the performance of the consortium. (b) Applicability of independent audit and performance assessment system requirements to consortia. Where the lead agency will manage substantially all program and activities of the consortium, HUD interprets financial accountability to rest with the consortium and thus HUD will apply independent audit and performance assessment requirements on a consortium-wide basis. Where the lead agency will not manage substantially all programs and activities of a consortium, the consortium shall indicate in its PHA Plan submission which PHAs have financial accountability for the programs. The determination of financial accountability shall be made in accordance with generally accepted accounting principles, as determined in consultation with an independent public accountant. In such situations, HUD will apply independent audit and performance assessment requirements consistent with that determination. With respect to any consortium, however, HUD may determine (based on a request from the consortium or other circumstances) to apply independent audit and performance requirements on a different basis where this would promote sound management. Subpart C_Subsidiaries, Affiliates, Joint Ventures in Public Housing Sec. 943.140 What programs and activities are covered by this subpart? (a) This subpart applies to the provision of a PHA's public housing administrative and management functions, and to the provision (or arranging for the provision) of supportive and social services in connection with public housing. This subpart does not apply to activities of a PHA that are subject to the requirements of part 941, subpart F, of this title. (b) For purposes of this subpart, the term ``joint venture partner'' means a participant (other than a PHA) in a joint venture, partnership, or other business arrangement or contract for services with a PHA. (c) This part does not affect a PHA's authority to use joint ventures, as may [[Page 389]] be permitted under State law, when using non-1937 Act funds. Sec. 943.142 In what types of operating organizations may a PHA participate? (a) A PHA may create and operate a wholly owned or controlled subsidiary or other affiliate; may enter into joint ventures, partnerships, or other business arrangements with individuals, organizations, entities, or governmental units. A subsidiary or affiliate may be a nonprofit corporation. A subsidiary or affiliate may be an organization controlled by the same persons who serve on the governing board of the PHA or who are employees of the PHA. (b) The purpose of any of these operating organizations would be to administer programs of the PHA. Sec. 943.144 What financial impact do operations of a subsidiary, affiliate, or joint venture have on a PHA? Income generated by subsidiaries, affiliates, or joint ventures formed under the authority of this subpart is to be used for low-income housing or to benefit the residents assisted by the PHA. This income will not cause a decrease in funding provided under the public housing program, except as otherwise provided under the Operating Fund and Capital Fund formulas. Sec. 943.146 What impact does the use of a subsidiary, affiliate, or joint venture have on financial accountability to HUD and the Federal government? None; the subsidiary, affiliate, or joint venture is subject to the same authority of HUD, HUD's Inspector General, and the Comptroller General to audit its conduct. Sec. 943.148 What procurement standards apply to PHAs selecting partners for a joint venture? (a) The requirements of part 85 of this title are applicable to this part, subject to paragraph (b) of this section, in connection with the PHA's public housing program. (b) A PHA may use competitive proposal procedures for qualifications-based procurement (request for qualifications or ``RFQ''), or may solicit a proposal from only one source (``sole source'') to select a joint venture partner to perform an administrative or management function of its public housing program or to provide or arrange to provide supportive or social services covered under this part, under the following circumstances: (1) The proposed joint venture partner has under its control and will make available to the partnership substantial, unique and tangible resources or other benefits that would not otherwise be available to the PHA on the open market (e.g., planning expertise, program experience, or financial or other resources). In this case, the PHA must maintain documentation to substantiate both the cost reasonableness of its selection of the proposed partner and the unique qualifications of the partner: or (2) A resident group or a PHA subsidiary is willing and able to act as the PHA's partner in performing administrative and management functions or to provide supportive or social services. This entity must comply with the requirements of 2 CFR part 200 (if the entity is a nonprofit or a State or local government) with respect to its selection of the members of the team and the members must be paid on a cost- reimbursement basis only. The PHA must maintain documentation that indicates both the cost reasonableness of its selection of a resident group or PHA subsidiary and the ability of that group or subsidiary to act as the PHA's partner under this provision. [65 FR 71207, Nov. 29, 2000, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 943.150 What procurement standards apply to a PHA's joint venture partner? (a) General. A joint venture partner is not a grantee or subgrantee and, accordingly, is not required to comply with 2 CFR part 200 in its procurement of goods and services under this part. The partner must comply with all applicable State and local procurement and conflict of interest requirements with respect to its selection of entities to assist in PHA program administration. (b) Exception. If the joint venture partner is a subsidiary, affiliate, or identity of interest party of the PHA, [[Page 390]] it is subject to the requirements of 2 CFR part 200 of this title. HUD may, on a case-by-case basis, exempt such a joint venture partner from the need to comply with requirements under 2 CFR part 200 of this title if HUD determines that the joint venture has developed an acceptable alternative procurement plan. (c) Contracting with identity-of-interest parties. A joint venture partner may contract with an identity-of-interest party for goods or services, or a party specified in the selected bidder's response to a RFP or RFQ (as applicable), without the need for further procurement if: (1) The PHA can demonstrate that its original competitive selection of the partner clearly anticipated the later provision of such goods or services; (2) Compensation of all identity-of-interest parties is structured to ensure there is no duplication of profit or expenses; and (3) The PHA can demonstrate that its selection is reasonable based upon prevailing market costs and standards, and that the quality and timeliness of the goods or services is comparable to that available in the open market. For purposes of this paragraph (c), an ``identity-of- interest party'' means a party that is wholly owned or controlled by, or that is otherwise affiliated with, the partner or the PHA. The PHA may use an independent organization experienced in cost valuation to determine the cost reasonableness of the proposed contracts. [65 FR 71207, Nov. 29, 2000, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 943.151 What procurement standards apply to a joint venture itself? (a) When the joint venture as a whole is controlled by the PHA or an identity of interest party of the PHA, the joint venture is subject to the requirements of 2 CFR part 200 of this title. (b) If a joint venture is not controlled by the PHA or an identity of interest party of the PHA, then the rules that apply to the other partners apply. See Sec. 943.150. [65 FR 71207, Nov. 29, 2000, as amended at 80 FR 75942, Dec. 7, 2015] PART 945_DESIGNATED HOUSING_PUBLIC HOUSING DESIGNATED FOR OCCUPANCY BY DISABLED, ELDERLY, OR DISABLED AND ELDERLY FAMILIES --Table of Contents Subpart A_General Sec. 945.101 Purpose. 945.103 General policies. 945.105 Definitions. Subpart B_Application and Approval Procedures 945.201 Approval to designate housing. 945.203 Allocation plan. 945.205 Designated housing for disabled families. Subpart C_Operating Designated Housing 945.301 General requirements. 945.303 Requirements governing occupancy in designated housing. Authority: 42 U.S.C. 1473e and 3535(d). Source: 59 FR 17662, Apr. 13, 1994, unless otherwise noted. Subpart A_General Sec. 945.101 Purpose. The purpose of this part is to provide for designated housing as authorized by section 7 of the U.S. Housing Act of 1937 (42 U.S.C. 1437e). Section 7 provides public housing agencies with the option, subject to the requirements and procedures of this part, to designate public housing projects, or portions of public housing projects, for occupancy by disabled families, elderly families, or mixed populations of disabled families and elderly families. Sec. 945.103 General policies. (a) Agency participation. Participation in this program is limited to public housing agencies (PHAs) (as this term is defined in 24 CFR 913.102) that elect to designate public housing projects for occupancy by disabled families, elderly families, or disabled families and elderly families, as provided by this part. (b) Eligible housing--(1) Designation of public housing. Projects eligible for designation under this part are public housing projects as described in the definition of ``project'' in Sec. 945.105. [[Page 391]] (2) Additional housing resources. To meet the housing and supportive service needs of elderly families, and disabled families, including non- elderly disabled families, who will not be housed in a designated project, PHAs shall utilize housing resources that they own, control, or have received preliminary notification that they will obtain (e.g., section 8 certificates and vouchers). They also may utilize housing resources for which they plan to apply during the period covered by the allocation plan, and that they have a reasonable expectation of obtaining. PHAs also may utilize, to the extent practicable, any housing facilities that they own or control in which supportive services are already provided, facilitated or coordinated, such as mixed housing, shared housing, family housing, group homes, and congregate housing. (3) Exemption of mixed population projects. A PHA with a public housing project with a mixed population of elderly families and disabled families that plans to house them in such project in accordance with the requirements of 24 CFR part 960, subpart D, is not required to meet the designation requirements of this part. (c) Family Participation in designated housing--(1) Voluntary participation. The election to reside in designated housing is voluntary on the part of a family. No disabled family or elderly family may be required to reside in designated housing, nor shall a decision not to reside in designated housing adversely affect the family with respect to occupancy of another appropriate project. (2) Meeting stated eligibility requirements. Nothing in this part shall be construed to require or permit a PHA to accept for admission to a designated project a disabled family or elderly family who does not meet the stated eligibility requirements for occupancy in the project (for example, income), as set forth in HUD's regulations in 24 CFR parts 912 and 913, and in the PHA's admission policies. Sec. 945.105 Definitions. The terms Department, Elderly person, HUD, NAHA, Public Housing Agency (PHA), and Secretary are defined in 24 CFR part 5. Act means the United States Housing Act of 1937 (42 U.S.C. 1437- 1440). Accessible units means units that meet the requirement of accessibility with respect to dwellings as set forth in the second definition of ``accessible'' in 24 CFR 8.3. Allocation plan. See Sec. 945.201. CHAS means the comprehensive housing affordability strategy required by section 105 of the National Affordable Housing Act (42 U.S.C. 12705) or any successor plan prescribed by HUD. Designated family means the category of family for whom the project is designated (e. g., elderly family in a project designated for elderly families). Designated housing or designated project means a project (or projects), or a portion of a project (or projects) (as these terms are defined in this section), that has been designated in accordance with the requirements of this part. Disabled family means a family whose head or spouse or sole member is a person with disabilities. The term ``disabled family'' may include two or more persons with disabilities living together, and one or more persons with disabilities living with one or more persons who are determined to be essential to the care or well-being of the person or persons with disabilities. A disabled family may include persons with disabilities who are elderly. Elderly family means a family whose head, spouse, or sole member is an elderly person. The term ``elderly family'' includes an elderly person, two or more elderly persons living together, and one or more elderly persons living with one or more persons who are determined to be essential to the care or well-being of the elderly person or persons. An elderly family may include elderly persons with disabilities and other family members who are not elderly. Family includes but is not limited to a single person as defined in this part, a displaced person (as defined in 24 CFR part 912), a remaining member of a tenant family, a disabled family, an elderly family, a near-elderly family, and a family with children. It also includes an elderly family or a disabled family [[Page 392]] composed of one or more elderly persons living with one or more disabled persons. Housing has the same meaning as ``project,'' which is defined in this section. Mixed population project means a public housing project reserved for elderly families and disabled families. This is the project type referred to in NAHA as being designated for elderly and disabled families. A PHA that has a mixed population project or intends to develop one need not submit an allocation plan or request a designation. However, the project must meet the requirements of 24 CFR part 960 subpart D. Near-elderly family means a family whose head, spouse, or sole member is a near-elderly person. The term ``near-elderly family'' includes two or more near-elderly persons living together, and one or more near-elderly persons living with one or more persons who are determined to be essential to the care or well-being of the near-elderly person or persons. A near-elderly family may include other family members who are not near-elderly. Near-elderly person means a person who is at least 50 years of age but below the age of 62, who may be a person with a disability. Non-elderly disabled person means a person with a disability who is less than 62 years of age. Person with disabilities means a person who-- (a) Has disability as defined in section 223 of the Social Security Act (42 U.S.C. 423), or (b) Is determined to have a physical, mental, or emotional impairment that-- (1) Is expected to be of long-continued and indefinite duration, (2) Substantially impedes his or her ability to live independently, and (3) Is of such a nature that such ability could be improved by more suitable housing conditions, or (c) Has a developmental disability as defined in section 102 of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6001(5)). The term ``person with disabilities'' does not exclude persons who have the disease of acquired immunodeficiency syndrome or any conditions arising from the etiologic agent for acquired immunodeficiency syndrome. Portion of project includes: One or more buildings in a multi- building project; one or more floors of a project or projects; a certain number of dwelling units in a project or projects. (Designation of a portion of a project does not require that the buildings, floors or units be contiguous.) Project means low-income housing developed, acquired, or assisted by a PHA under the U.S. Housing Act of 1937 (other than section 8) for which there is an Annual Contributions Contract (ACC) between HUD and the PHA. For purposes of this part, the terms housing and public housing mean the same as project. Additionally, as used in this part, and unless the context indicates otherwise, the term project when used in the singular includes the plural, and when used in the plural, includes the singular, and also includes a ``portion of a project,'' as defined in this section. Public housing or public housing project. See definition of ``project'' in this section. Service provider means a person or organization qualified and experienced in the provision of supportive services, and that is in compliance with any licensing requirements imposed by State or local law for the type of service or services to be provided. The service provider may provide the service on either a for-profit or not-for-profit basis. Single person means a person who lives alone or intends to live alone, who is not an elderly person, a person with disabilities, a displaced person, or the remaining member of a tenant family. Supportive service plan. See Sec. 945.205. Supportive services means services available to persons residing in a development, requested by disabled families and for which there is a need, and may include, but are not limited to, meal services, health- related services, mental health services, services for nonmedical counseling, meals, transportation, personal care, bathing, toileting, housekeeping, chore assistance, safety, group and socialization activities, assistance with medications (in accordance with any applicable [[Page 393]] State laws), case management, personal emergency response, and other appropriate services. [59 FR 17662, Apr. 13, 1994, as amended at 61 FR 5214, Feb. 9, 1996] Subpart B_Application and Approval Procedures Sec. 945.201 Approval to designate housing. (a) Designated housing for elderly families. To designate a project for occupancy by elderly families, a PHA must have a HUD-approved allocation plan that meets the requirements of Sec. 945.203. (b) Designated housing for disabled families. To designate a project for occupancy by disabled families, a PHA must have a HUD-approved allocation plan that meets the requirements of Sec. 945.203, and a HUD- approved supportive service plan that meets the requirements of Sec. 945.205. (c) Designated housing for elderly families and disabled families. (1) A PHA that provides or intends to provide a mixed population project (a project for both elderly families and disabled families) is not required to meet the requirements of this part. The PHA is required to meet the requirements of 24 CFR part 960, subpart D. (2) A PHA that intends to provide designated housing for elderly families or for disabled families must identify any existing or planned mixed population projects, reserved under 24 CFR part 960, subpart B, as additional housing resources, in its allocation plan, in accordance with Sec. 945.203(c)(6). Sec. 945.203 Allocation plan. (a) Applicable terminology. (1) As used in this section, the terms ``initial allocation plan'' refers to the PHA's first submission of an allocation plan, and ``updated allocation plan'' refers to the biennial update (once every two years) of this plan, which is described in paragraph (f) of this section. (2) As provided in Sec. 945.105, the term ``project'' includes the plural (``projects'') and includes a portion of a project. (b) Consultation in plan development. These consultation requirements apply to the development of an initial allocation plan as provided in paragraph (c) of this section, or any update of the allocation plan as provided in paragraph (f) of this section. (1) In preparing the draft plan, the PHA shall consult with: (i) The State or unit of general local government where the project is located; (ii) Public and private service providers; (iii) Representative advocacy groups for each of these family types: disabled families, elderly families, and families with children, where such advocacy groups exist; (iv) Representatives of the residents of the PHA's projects proposed for designation, including representatives from resident councils or resident management corporations where they exist; and (v) Other parties that the PHA determines would be interested in the plan, or other parties that have contacted the PHA and expressed an interest in the plan. (2) Following the completion of the draft plan, the PHA shall: (i) Issue public notices regarding its intention to designate housing and the availability of the draft plan for review; (ii) Contact directly those individuals, agencies and other interested parties specified in paragraph (b)(1) of this section, and advise of the availability of the draft plan for review; (iii) Allow not less than 30 days for public comment on the draft allocation plan; (iv) Make free copies of the draft plan available upon request, and in accessible format, when appropriate; (v) Conduct at least one public meeting on the draft allocation plan; (vi) Give fair consideration to all comments received; and (vii) Retain any records of public meetings held on the allocation plan (or updated plan) and any written comments received on the plan for a period of five years commencing from the date of submission of the allocation plan to HUD. These records must be available for review by HUD. [[Page 394]] (c) Contents of initial plan. The initial allocation plan shall contain, at a minimum, the information set forth in this paragraph (c). (1) Identification of the project to be designated and type of designation to be made. The PHA must: (i) Identify the type of designation to be made (i.e., housing for disabled families or housing for elderly families); (ii) Identify the building(s), floor(s), or unit(s) to be designated and their location, or if specific units are not designated, the number to be designated; and (iii) State the reasons the building(s), floor(s), or unit(s) were selected for designation. (2) Identification of groups and persons consulted and comments submitted. The PHA must: (i) Identify the groups and persons with whom the PHA has consulted in the development of the allocation plan; (ii) Include a summary of comments received on the plan from the groups and persons consulted; and (iii) Describe how the plan addresses these comments. (3) Profile of proposed designated project in pre-designation state. This component of the plan must include, for the projects, buildings, or portions of buildings to be designated: (i) The total number of families currently occupying the project, and (A) The number of families who are members of the group for whom the project is to be designated, and (B) The number of families who are not members of the group for whom the project is to be designated; (ii) An estimate of the total number of elderly families and disabled families who are potential tenants of the project (i.e., as the project now exists), based on information provided by: (A) The waiting list from which vacancies in the project are filled; and (B) A local housing needs survey, if available, such as the CHAS, for the jurisdiction within which the area served by the PHA is located; (iii) An estimate of the number of potential tenants who will need accessible units based on information provided by: (A) The needs assessment prepared in accordance with 24 CFR 8.25, and (B) A housing needs survey, if available, such as the CHAS or HUD- prescribed successor survey; (iv) The number of units in the project that became vacant and available for occupancy during the year preceding the date of submission of the allocation plan to HUD; (v) The average length of vacancy for dwelling units in the project for the year preceding the date of submission of the allocation plan to HUD; (vi) An estimate of the number of units in the project that the PHA expects to become vacant and available for occupancy during the two-year period following the date of submission of the allocation plan to HUD (i.e., if the project were not to be designated); (vii) An estimate of the average length of time elderly families and non-elderly persons with disabilities currently have to wait for a dwelling unit. (4) Projected profile of project in designated state. This component of the plan must: (i) Identify the source of the families for the designated project (e.g., current residents of the project, families currently on the waiting list, residents of other projects, and potential tenants based on information from the local housing needs survey); (ii) For projects proposed to be designated for occupancy by elderly families an estimate of the number of: (A) Units in the project that are anticipated to become vacant and available for occupancy during the two-year period following the date of submission of the allocation plan to HUD; (B) Near-elderly families who may be needed to fill units in the designated project for elderly families, as provided in Sec. 945.303(c); (iii) Describe any impact the designation may have on the average length of time applicants in the group for which the project is designated and other applicants will have to wait for a dwelling unit. (5) PHA occupancy policies and procedures. This component of the plan must describe any changes the PHA intends to make in its admission policies to accommodate the designation, including: (i) How the waiting list will be maintained; [[Page 395]] (ii) How dwelling units will be assigned; and (iii) How records will be maintained to document the effect on all families who would have resided in the designated project if it had not been designated. (6) Strategy for addressing the current and future housing needs of the families in the PHA's jurisdiction. The PHA must: (i) Identify the housing resources currently owned or controlled by the PHA, including any mixed population projects, in existence, as provided in 24 CFR part 960, subpart D, that will be available to these families; (ii) Describe the steps to be taken by the PHA to respond to any need for accessible units that will no longer be available for applicants who need them. The PHA has a continuing obligation under section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) to provide accessible dwellings even if the project designation removes accessible dwellings from the inventory of possible dwellings for non-elderly persons with disabilities; (iii) If a project is being designated for elderly families, describe the steps the PHA will take to facilitate access to supportive services by non-elderly disabled families. The services should be equivalent to those available in the designated project and requested by non-elderly disabled families. If the PHA funds supportive services for the designated project for elderly families, the PHA must provide the same level of services, upon the request of non-elderly disabled families. (iv) If a project is being designated for elderly families, identify the additional housing resources that the PHA determines will be sufficient to provide assistance to not less than the number of non- elderly disabled families that would have been housed by the PHA if occupancy in units in the designated project were not restricted to elderly families (one-for-one replacement is not required). Among these resources may be: (A) Normal turnover in existing projects; (B) Existing housing stock that previously was not available to or considered for non-elderly disabled families. Examples are dwellings in general occupancy (family) projects that are reconfigured to meet the dwelling size needs of the non-elderly disabled families, or were previously occupied by elderly families who will relocate to the designated project for elderly families, or were previously vacant because there had not been a demand for dwellings of that size in that location; (C) Housing for which the PHA has received preliminary notification that it will obtain; and (D) Housing for which the PHA plans to apply during the period covered by the allocation plan, and which it has a reasonable expectation of obtaining. (v) Where a project is being designated for elderly families, explain how the PHA plans to secure the required additional housing resources. In the case of housing for which the PHA plans to apply, the PHA must provide sufficient information about the housing resource and its application to establish that the PHA can reasonably expect to obtain the housing. (vi) Describe incentives, if any, that the PHA intends to offer to: (A) Families who are members of the group for whom a project was designated to achieve voluntary transfers to the designated project; and (B) Families who are not members of the group for whom a project was designated to achieve voluntary transfers from the project proposed to be designated; (d) Criteria for allocation plan approval. HUD shall approve an initial allocation plan, or updated allocation plan, if HUD determines that: (1) The information contained in the plan is complete and accurate (a plan that is incomplete, i.e., missing required statements or items, will be disapproved), and the projections are reasonable; (2) Implementation of the plan will not result in a substantial increase in the vacancy rates in the designated project; (3) Implementation of the plan will not result in a substantial increase in delaying or denying housing assistance to families on the PHA's waiting list because of designating projects; (4) The plan for securing sufficient additional housing resources for non- [[Page 396]] elderly disabled persons can reasonably be achieved; and (5) The plan conforms to the requirements of this part. (e) Allocation plan approval or disapproval--(1) Written notification. HUD shall notify each PHA, in writing, of approval or disapproval of the initial or updated allocation plan. (2) Timing of notification. An allocation plan shall be considered to be approved by HUD if HUD fails to provide the PHA with notification of approval or disapproval of the plan, as required by paragraph (e)(1) of this section, within: (i) 90 days after the date of submission of an allocation plan that contains comments, as provided in paragraph (c)(2) of this section; or (ii) 45 days after the date of submission of all other plans, including (A) Initial plans for which no comments were received; (B) Updated plans, as provided in paragraph (f) of this section; and (C) Revised initial plans or revised updated plans, as provided in paragraph (e)(4) of this section. (3) Approval limited solely to approval of designated housing. HUD's approval of an initial plan or updated allocation plan under this section may not be construed to constitute approval of any request for assistance for major reconstruction of obsolete projects, assistance for development or acquisition of public housing, or assistance under 24 CFR part 890 (supportive housing for persons with disabilities). (4) Resubmission following disapproval. If HUD disapproves an initial allocation plan, a PHA shall have a period of not less than 45 days or more than 90 days following notification of disapproval as provided in paragraph (e)(2) of this section, to submit amendments to the plan, or to submit a revised plan. (f) Biennial update of plan--(1) General. Each PHA that owns or operates a public housing project that is designated for occupancy under this part shall update its allocation plan not less than once every two years, from the date of HUD approval of the initial allocation plan. A PHA that wishes to amend or revise its plan later than 90 days after HUD disapproval must begin the hearing and consultation process again. (2) Failure to submit updated plan. If the PHA fails to submit the updated plan as required by this paragraph (f), the Secretary may revoke the designation in accordance with the provisions of paragraph (f)(4)(ii) of this section. (3) Contents of updated plan. The updated allocation plan shall contain, at a minimum, the following information: (i) The most recent update of the allocation plan data, and projections for the next two years; (ii) An assessment of the accuracy of the projections contained in previous plans and in the updated allocation plan; (iii) The number of times a vacancy was filled in accordance with Sec. 945.303(c); (iv) A discussion of the impact of the designation on the designated project and the other public housing projects operated by the PHA, using the data obtained from the system developed in Sec. 945.203(c), including (A) The number of times there was a substantial increase in delaying housing assistance to families on the PHA's waiting list because projects were designated; and (B) The number of times there was a substantial increase in denying housing assistance to families on the PHA's waiting list because projects were designated; (v) A plan for adjusting the allocation of designated units, if necessary. (4) Criteria for approval of updated plan. (i) HUD shall approve an updated allocation plan based on HUD's review and assessment of the updated plan, using the criteria in (d) of this section. If HUD considers it appropriate, the review and assessment shall include any on-site review and monitoring of PHA performance in the administration of its designated housing and in the allocation of the PHA's housing resources. Notification of approval or disapproval of the updated allocation plan shall be provided in accordance with paragraph (e) of this section; (ii) If a PHA's updated plan is not approved, HUD may require PHAs to change the designation of existing or planned projects to other categories, [[Page 397]] such as general occupancy or mixed population projects. (5) Notification of approval or disapproval of updated plan. HUD shall notify each PHA submitting an updated plan of approval or disapproval of the updated plan, in accordance with the form of notification and within the time periods required by paragraph (e) of this section. (Approved by the Office of Management and Budget under control number 2577-0192) Sec. 945.205 Designated housing for disabled families. (a) General. (1) In general, HUD will approve designated projects for disabled families only if there is a clear demonstration that there is both a need and a demand by disabled families for such designation. In the absence of such demonstrated need and demand, PHAs should provide for the housing needs of disabled families in the most integrated setting possible. (2) To designate a project for disabled families, a PHA must submit the allocation plan required by Sec. 945.203 and the supportive service plan described in paragraph (b) of this section. (3) In its allocation plan, (i) The PHA may not designate a project for persons with a specific disability; (ii) The designated project does not have to be made up of contiguous units. PHAs are encouraged to place the units in the project, whether contiguous or not, in the most integrated setting possible. (4) The consultation process for the allocation plan provided in Sec. 945.203(b) and consultation process for the supportive service plan provided in this section may occur concurrently. (5) If the PHA conducts surveys to determine the need or demand for a designated project for disabled families or for supportive services in such project, the PHA must protect the confidentiality of the survey responses. (b) Supportive Service Plan. The plan shall describe how the PHA will provide or arrange for the provision of the appropriate supportive services requested by the disabled families who will occupy the designated housing and who have expressed a need for these services. (1) Contents of plan. The supportive service plan, at a minimum, must: (i) Identify the number of disabled families who need the supportive services and who have expressed an interest in receiving them; (ii) Describe the types of supportive services that will be provided, and, if known, the length of time the supportive services will be available; (iii) Identify each service provider to be utilized, and describe the experience of the service provider in delivering supportive services; (iv) Describe how the supportive services will be provided to the disabled families that the designated housing is expected to serve (how the services will be provided depends upon the type of service offered; e.g., if the package includes transportation assistance, how transportation assistance will be provided to disabled families); (v) Identify all sources of funding upon which the PHA is relying to deliver supportive services to residents of the designated housing for disabled families, or the supportive service resources to be provided in lieu of funding; (vi) Submit evidence of a specific contractual commitment or commitments provided to the PHA by the sources identified in paragraph (b)(1)(v) of this section to make funds available for supportive services, or the delivery of supportive services available to the PHA for at least two calendar years; (vii) Identify any public and private service providers, advocates for the interests of designated housing families, and other interested parties with whom the PHA consulted in the development of this supportive service plan, and summarize the comments and recommendations made by these parties. (These comments must be maintained for a period of five years, and be available for review by HUD as provided in paragraph (b)(2)(vii) of this section.); (viii) If applicable, address the need for residential supervision of disabled families (on-site supervision within the designated housing) and how this supervision is to be provided; (ix) Include any other information that the PHA determines would assist HUD in assessing the suitability of the PHA's supportive service plan; and [[Page 398]] (x) Include any additional information that HUD may request, and which is appropriate to a determination of the suitability of the supportive service plan. (2) Public review and comment on the supportive service plan. In preparing the initial supportive service plan, or any update of the supportive service plan, the PHA shall: (i) Issue public notices regarding its intention to provide supportive services to designated housing for disabled families and the availability of the draft supportive service plan; (ii) Send notices directly to interested individuals and agencies that have contacted the PHA and have expressed an interest in the supportive service plan, and to parties specified in paragraph (b)(1)(vii) of this section; (iii) Allow not less than 30 days for public comment on the supportive service plan; (iv) Make free copies of the draft plan available upon request, and in accessible format, when appropriate; (v) Conduct at least one public meeting regarding the supportive service plan; (vi) Give fair consideration to all comments received; and (vii) Retain any records of the public meetings held on the supportive service plan, and any written comments received on the supportive service plan for a period of five years, from the date of submission of the supportive service plan. These records must be available for review by HUD. (c) Approval. HUD shall approve designated housing for disabled families if the allocation plan meets the requirements of Sec. 945.203, including demonstrating both a need and a demand for designated housing for disabled families, and if HUD determines on the basis of the information provided in the supportive service plan that: (1) There is a sufficient number of persons with disabilities who have expressed an interest in occupying a designated project for disabled families, and who have expressed a need and demand for the supportive services that will be provided; (2) The supportive services are adequately designed to meet the needs of the disabled families who have indicated a desire for them; (3) The service provider has current or past experience administering an effective supportive service delivery program for persons with disabilities; (4) If residential supervision is required, a written commitment to provide this supervision in the designated housing. (Approved by the Office of Management and Budget under control number 2577-0192) Subpart C_Operating Designated Housing Sec. 945.301 General requirements. The application procedures and operation of designated projects shall be in conformity with the regulations of this part, and the regulations applicable to PHAs in 24 CFR Chapter IX, including 24 CFR parts 913, 960 and 966, and, in particular, the nondiscrimination requirements of 24 CFR 960.211(b)(3), that include but are not limited to section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), Fair Housing Act (42 U.S.C. 3601-3619), title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d), section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u), the Age Discrimination Act (42 U.S.C. 6101-6107), Executive Order 11246 (3 CFR 1964-1965 Comp., p. 339), Executive Order 11063, as amended by Executive Order 12259 (3 CFR 1958- 1963 Comp., p. 652 and 3 CFR 1980 Comp., p. 307), the Americans with Disabilities Act (42 U.S.C. 12101-12213) (to the extent the Americans with Disabilities Act is applicable) and the implementing regulations of these statutes and authorities; and other applicable Federal, State, and local laws prohibiting discrimination and promoting equal opportunity. Sec. 945.303 Requirements governing occupancy in designated housing. (a) Priority for occupancy. Except as provided in paragraph (c) of this section, in determining priority for admission to designated housing, the PHA shall make units in the designated housing available only to designated families. (b) Compliance with preference regulations. Among the designated families, [[Page 399]] the PHA shall give preference in accordance with the preferences in 24 CFR part 960, subpart B. (c) Eligibility of other families for housing designated for elderly families--(1) Insufficient elderly families. If there are an insufficient number of elderly families for the units in a project designated for elderly families, the PHA may make dwelling units available to near-elderly families, who qualify for preferences under 24 CFR part 960, subpart B. The election to make dwelling units available to near-elderly families if there are an insufficient number of elderly families should be explained in the PHA's allocation plan. (2) Insufficient elderly families and near-elderly families. If there are an insufficient number of elderly families and near-elderly families for the units in a project designated for elderly families, the PHA shall make available to all other families any dwelling unit that is: (i) Ready for re-rental and for a new lease to take effect; and (ii) Vacant for more than 60 consecutive days. (d) Tenant choice of housing. (1) Subject to paragraph (d)(2) of this section, the decision of any disabled family or elderly family not to occupy or accept occupancy in designated housing shall not have an adverse affect on: (i) The family's admission to or continued occupancy in public housing; or (ii) The family's position on or placement on a public housing waiting list. (2) The protection provided by paragraph (d)(1) of this section shall not apply to any family who refuses to occupy or accept occupancy in designated housing because of the race, color, religion, sex, disability, familial status, or national origin of the occupants of the designated housing or the surrounding area. (3) The protection provided by paragraph (d)(1) of this section shall apply to an elderly family or disabled family that declines to accept occupancy, respectively, in a designated project for elderly families or for disabled families, and requests occupancy in a general occupancy project or in a mixed population project. (e) Appropriateness of dwelling unit to family size. This part may not be construed to require a PHA to offer a dwelling in a designated project to any family who is not of appropriate family size for the dwelling unit. The temporary absence of a child from the home due to placement in foster care is not considered in determining family composition and family size. (f) Prohibition of evictions. Any tenant who is lawfully residing in a dwelling unit in a public housing project may not be evicted or otherwise required to vacate the unit because of the designation of the project, or because of any action taken by HUD or the PHA in accordance with this part. (g) Prohibition of coercion to accept supportive services. As with other HUD-assisted housing, no disabled family or elderly family residing in designated housing may be required to accept supportive services made available by the PHA under this part. (h) Availability of grievance procedures in 24 CFR part 966. The grievance procedures in 24 CFR part 966, subpart B, which applies to public housing tenants, is applicable to this part. PART 960_ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING--Table of Contents Subpart A_Applicability, Definitions, Equal Opportunity Requirements Sec. 960.101 Applicability. 960.102 Definitions. 960.103 Equal opportunity requirements and protection for victims of domestic violence, dating violence, sexual assault, or stalking. Subpart B_Admission 960.200 Purpose. 960.201 Eligibility. 960.202 Tenant selection policies. 960.203 Standards for PHA tenant selection criteria. 960.204 Denial of admission for criminal activity or drug abuse by household members. 960.205 Drug use by applicants: Obtaining information from drug treatment facility. 960.206 Waiting list: Local preferences in admission to public housing program. 960.208 Notification to applicants. [[Page 400]] Subpart C_Rent and Reexamination 960.253 Choice of rent. 960.255 Self-sufficiency incentives--Disallowance of increase in annual income. 960.257 Family income and composition: Annual and interim reexaminations. 960.259 Family information and verification. Subpart D_Preference for Elderly Families and Disabled Families in Mixed Population Projects 960.401 Purpose. 960.403 Applicability. 960.407 Selection preference for mixed population developments. Subpart E_Occupancy by Over-Income Families or Police Officers 960.503 Occupancy by over-income families. 960.505 Occupancy by police officers to provide security for public housing residents. 960.507 Families exceeding the income limit. 960.509 Lease requirements for non-public housing over-income families. Subpart F_When Resident Must Perform Community Service Activities or Self-Sufficiency Work Activities 960.600 Implementation. 960.601 Definitions. 960.603 General requirements. 960.605 How PHA administers service requirements. 960.607 Assuring resident compliance. 960.609 Prohibition against replacement of PHA employees. Subpart G_Pet Ownership in Public Housing 960.701 Purpose. 960.703 Applicability. 960.705 Animals that assist, support, or provide service to persons with disabilities. 960.707 Pet ownership. Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and 3535(d). Source: 40 FR 33446, Aug. 8, 1975, unless otherwise noted. Redesignated at 49 FR 6714, Feb. 23, 1984. Subpart A_Applicability, Definitions, Equal Opportunity Requirements Source: 65 FR 16724, Mar. 29, 2000, unless otherwise noted. Sec. 960.101 Applicability. This part is applicable to public housing. Sec. 960.102 Definitions. (a) Definitions found elsewhere: (1) General definitions. The following terms are defined in 24 CFR part 5, subpart A: 1937 Act, drug, drug-related criminal activity, elderly person, federally assisted housing, guest, household, HUD, MSA, premises, public housing, public housing agency (PHA), Section 8, violent criminal activity. (2) Definitions under the 1937 Act. The following terms are defined in 24 CFR part 5, subpart D: annual contributions contract (ACC), applicant, elderly family, family, person with disabilities. (3) Definitions and explanations concerning income and rent. The following terms are defined or explained in 24 CFR part 5, subpart F (Sec. 5.603): Annual income, economic self-sufficiency program, extremely low-income family, low-income family, tenant rent, total tenant payment, utility allowance. (b) Additional definitions. In addition to the definitions in paragraph (a), the following definitions and cross-references apply: Alternative non-public housing rent. A monthly rent equal to the greater of-- (i) The applicable fair market rent, as defined in 24 CFR part 888, subpart A, for the unit; or (ii) The amount of the monthly subsidy provided for the unit, which will be determined by adding the per unit assistance provided to a public housing property as calculated through the applicable formulas for the Public Housing Capital Fund and Public Housing Operating Fund. (A) For the Public Housing Capital Fund, the amount of Capital Funds provided to the unit will be calculated as the per unit Capital Fund assistance provided to a PHA for the development in which the family resides for the most recent funding year for which Capital Funds have been allocated; (B) For the Public Housing Operating Fund, the amount of Operating Funds provided to the unit will be calculated as the per unit amount provided to the public housing project where the unit is located for the most recent funding [[Page 401]] year for which a final funding obligation determination has been made; (C) HUD will publish such funding amounts no later than December 31 each year. Ceiling rent. See Sec. 960.253(d). Covered housing provider. For HUD's public housing program, ``covered housing provider,'' as such term is in used HUD's regulations at 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), is the PHA. Covered person. For purposes of this part, covered person means a tenant, any member of the tenant's household, a guest or another person under the tenant's control. Designated housing. See part 945 of this chapter. Disabled families. See Sec. 5.403 of this title. Eligible families. Low income families who are eligible for admission to the public housing program. Flat rent. See Sec. 960.253(b). Income-based rent. See Sec. 960.253(c). Mixed population development. A public housing development, or portion of a development, that was reserved for elderly and disabled families at its inception (and has retained that character). If the development was not so reserved at its inception, the PHA has obtained HUD approval to give preference in tenant selection for all units in the development (or portion of development) to elderly families and disabled families. These developments were formerly known as elderly projects. Non-public housing over-income family. A family whose income exceeds the over-income limit for 24 consecutive months and is paying the alternative non-public housing rent. See subpart E of this part. Over-income family. A family whose income exceeds the over-income limit. See subpart E of this part. Over-income limit. The over-income limit is determined by multiplying the applicable income limit for a very low-income family, as defined in Sec. 5.603(b) of this title, by a factor of 2.4. See Sec. 960.507(b). PHA plan. See part 903 of this chapter. Residency preference. A preference for admission of persons who reside in a specified geographic area. Tenant-based. See Sec. 982.1(b) of this chapter. [65 FR 16724, Mar. 29, 2000, as amended at 66 FR 28799, May 24, 2001; 81 FR 12372, Mar. 8, 2016; 81 FR 80815, Nov. 16, 2016; 88 FR 9669, Feb. 14, 2023] Sec. 960.103 Equal opportunity requirements and protection for victims of domestic violence, dating violence, sexual assault, or stalking. (a) Applicable requirements. The PHA must administer its public housing program in accordance with all applicable equal opportunity requirements imposed by contract or federal law, including the authorities cited in Sec. 5.105(a) of this title. (b) PHA duty to affirmatively further fair housing. The PHA must affirmatively further fair housing in the administration of its public housing program. (c) Equal opportunity certification. The PHA must submit signed equal opportunity certifications to HUD in accordance with Sec. 903.7(o) of this title, including certification that the PHA will affirmatively further fair housing. (d) Protection for victims of domestic violence, dating violence, sexual assault, or stalking. The PHA must apply the requirements in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). [65 FR 16724, Mar. 29, 2000, as amended at 73 FR 72344, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016] Subpart B_Admission Source: 66 FR 28799, May 24, 2001, unless otherwise noted. Sec. 960.200 Purpose. (a) This subpart states HUD eligibility and selection requirements for admission to public housing. (b) See also related HUD regulations in this title concerning these subjects: (1) 1937 Act definitions: part 5, subpart D; (2) Restrictions on assistance to noncitizens: part 5, subpart E; [[Page 402]] (3) Family income and family payment: part 5, subpart F; (4) Public housing agency plans: part 903; (5) Rent and reexamination: part 960, subpart C; (6) Mixed population developments: part 960, subpart D; (7) Occupancy by over-income families or police officers: part 960, subpart E. (8) Protection for victims of domestic violence, dating violence, sexual assault, or stalking, 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). [66 FR 28799, May 24, 2001, as amended at 73 FR 72344, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016] Sec. 960.201 Eligibility. (a) Who is eligible? (1) Basic eligibility. An applicant must meet all eligibility requirements in order to receive housing assistance. At a minimum, the applicant must be a family, as defined in Sec. 5.403 of this title, must be income-eligible, as described in this section, and must meet the net asset and property ownership restriction requirements in Sec. 5.618 of this title. Such eligible applicants include single persons. (2) Low income limit. No family other than a low income family is eligible for admission to a PHA's public housing program. (b) Income used for eligibility and targeting. Family annual income (see Sec. 5.609) is used both for determination of income eligibility under paragraph (a) and for PHA income targeting under Sec. 960.202 (c) Reporting. The PHA must comply with HUD-prescribed reporting requirements that will permit HUD to maintain the data, as determined by HUD, necessary to monitor compliance with income eligibility and targeting requirement. [66 FR 28799, May 24, 2001, as amended at 88 FR 9670, Feb. 14, 2023] Sec. 960.202 Tenant selection policies. (a) Selection policies, generally. (1) The PHA shall establish and adopt written policies for admission of tenants. (2) These policies shall provide for and include the following: (i) Targeting admissions to extremely low income families as provided in paragraph (b) of this section. (ii) Deconcentration of poverty and income-mixing in accordance with the PHA Plan regulations (see 24 CFR part 903). (iii) Precluding admission of applicants whose habits and practices reasonably may be expected to have a detrimental effect on the residents or the project environment; (iv) Objective and reasonable policies for selection by the PHA among otherwise eligible applicants, including requirements for applications and waiting lists (see 24 CFR 1.4), and for verification and documentation of information relevant to acceptance or rejection of an applicant, including documentation and verification of citizenship and eligible immigration status under 24 CFR part 5; and (v) Policies of participant transfer between units, developments, and programs. For example, a PHA could adopt a criterion for voluntary transfer that the tenant had met all obligations under the current program, including payment of charges to the PHA. (b) Targeting admissions to extremely low income families--(1) Targeting requirement. (i) Not less than 40 percent of the families admitted to a PHA's public housing program during the PHA fiscal year from the PHA waiting list shall be extremely low income families. This is called the ``basic targeting requirement.'' (ii) To the extent provided in paragraph (b)(2) of this section, admission of extremely low income families to the PHA's Section 8 voucher program during the same PHA fiscal year is credited against the basic targeting requirement. (iii) A PHA must comply with both the targeting requirement found in this part and the deconcentration requirements found in part 903 of this chapter. (2) Credit for admissions to PHA voucher program. (i) If admissions of extremely low income families to the PHA's voucher program during a PHA fiscal year exceeds the 75 percent minimum targeting requirement for the PHA's voucher program (see 24 CFR [[Page 403]] 982.201(b)(2)), such excess shall be credited (subject to the limitations in paragraph (b)(2)(ii) of this section) against the PHA's basic targeting requirement for the same fiscal year. (ii) The fiscal year credit for voucher program admissions that exceed the minimum voucher program targeting requirement shall not exceed the lower of: (A) Ten percent of public housing waiting list admissions during the PHA fiscal year; (B) Ten percent of waiting list admission to the PHA's Section 8 tenant-based assistance program during the PHA fiscal year; or (C) The number of qualifying low income families who commence occupancy during the fiscal year of PHA public housing units located in census tracts with a poverty rate of 30 percent or more. For this purpose, qualifying low income family means a low income family other than an extremely low income family. (c) Adoption and availability of tenant selection policies. These selection policies shall: (1) Be duly adopted and implemented; (2) Be publicized by posting copies thereof in each office where applications are received and by furnishing copies to applicants or tenants upon request, free or at their expense, at the discretion of the PHA; and (3) Be consistent with the fair housing and equal opportunity provisions of Sec. 5.105 of this title; and (4) Be submitted to the HUD field office upon request from that office. Sec. 960.203 Standards for PHA tenant selection criteria. (a) The tenant selection criteria to be established and information to be considered shall be reasonably related to individual attributes and behavior of an applicant and shall not be related to those which may be imputed to a particular group or category of persons of which an applicant may be a member. The PHA may use local preferences, as provided in Sec. 960.206. (b) Under the Public Housing Assessment System (PHAS), PHAs that have adopted policies, implemented procedures and can document that they successfully screen out and deny admission to certain applicants with unfavorable criminal histories receive points. (See 24 CFR 902.43(a)(5).) This policy takes into account the importance of screening to public housing communities and program integrity, and the demand for assisted housing by families who will adhere to lease responsibilities. (c) In selection of families for admission to its public housing program, or to occupy a public housing development or unit, the PHA is responsible for screening family behavior and suitability for tenancy. The PHA may consider all relevant information, which may include, but is not limited to: (1) An applicant's past performance in meeting financial obligations, especially rent; (2) A record of disturbance of neighbors, destruction of property, or living or housekeeping habits at prior residences which may adversely affect the health, safety or welfare of other tenants; and (3) A history of criminal activity involving crimes of physical violence to persons or property and other criminal acts which would adversely affect the health, safety or welfare of other tenants. (See Sec. 960.204.) With respect to criminal activity described in Sec. 960.204: (i) The PHA may require an applicant to exclude a household member in order to be admitted to the housing program where that household member has participated in or been culpable for actions described in Sec. 960.204 that warrants denial. (ii) The PHA may, where a statute requires that the PHA prohibit admission for a prescribed period of time after some disqualifying behavior or event, choose to continue that prohibition for a longer period of time. (4) PHA tenant selection criteria are subject to 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). In cases of requests for emergency transfers under VAWA, with the written consent of the victim of domestic violence, dating violence, sexual assault, or stalking, the receiving PHA may accept and use the prior covered housing provider's determination of eligibility and tenant screening [[Page 404]] and all related verification information, including form HUD 50058 (Family Report). (d) In the event of the receipt of unfavorable information with respect to an applicant, consideration shall be given to the time, nature, and extent of the applicant's conduct (including the seriousness of the offense). (1) In a manner consistent with the PHA's policies, procedures and practices referenced in paragraph (b) of this section, consideration may be given to factors which might indicate a reasonable probability of favorable future conduct. For example: (i) Evidence of rehabilitation; and (ii) Evidence of the applicant family's participation in or willingness to participate in social service or other appropriate counseling service programs and the availability of such programs; (2) Consideration of rehabilitation. (i) In determining whether to deny admission for illegal drug use or a pattern of illegal drug use by a household member who is no longer engaging in such use, or for abuse or a pattern of abuse of alcohol by a household member who is no longer engaging in such abuse, the PHA may consider whether such household member is participating in or has successfully completed a supervised drug or alcohol rehabilitation program, or has otherwise been rehabilitated successfully (42 U.S.C. 13661). For this purpose, the PHA may require the applicant to submit evidence of the household member's current participation in, or successful completion of, a supervised drug or alcohol rehabilitation program or evidence of otherwise having been rehabilitated successfully. (ii) If rehabilitation is not an element of the eligibility determination (see Sec. 960.204(a)(1)), the PHA may choose not to consider whether the person has been rehabilitated. [66 FR 28799, May 24, 2001, as amended at 73 FR 72344, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016] Sec. 960.204 Denial of admission for criminal activity or drug abuse by household members. (a) Required denial of admission--(1) Persons evicted for drug- related criminal activity. The PHA standards must prohibit admission of an applicant to the PHA's public housing program for three years from the date of the eviction if any household member has been evicted from federally assisted housing for drug-related criminal activity. However, the PHA may admit the household if the PHA determines: (i) The evicted household member who engaged in drug-related criminal activity has successfully completed a supervised drug rehabilitation program approved by the PHA; or (ii) The circumstances leading to the eviction no longer exist (for example, the criminal household member has died or is imprisoned). (2) Persons engaging in illegal use of a drug. The PHA must establish standards that prohibit admission of a household to the PHA's public housing program if: (i) The PHA determines that any household member is currently engaging in illegal use of a drug (For purposes of this section, a household member is ``currently engaged in'' the criminal activity if the person has engaged in the behavior recently enough to justify a reasonable belief that the behavior is current); or (ii) The PHA determines that it has reasonable cause to believe that a household member's illegal use or pattern of illegal use of a drug may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents. (3) Persons convicted of methamphetamine production. The PHA must establish standards that permanently prohibit admission to the PHA's public housing program if any household member has ever been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of federally assisted housing. (4) Persons subject to sex offender registration requirement. The PHA must establish standards that prohibit admission to the PHA's public housing program if any member of the household is subject to a lifetime registration requirement under a State sex offender registration program. In the screening of applicants, the PHA must perform necessary criminal history background checks in the State where the housing [[Page 405]] is located and in other States where household members are known to have resided. (See part 5, subpart J of this title for provisions concerning access to sex offender registration records.) (b) Persons that abuse or show a pattern of abuse of alcohol. The PHA must establish standards that prohibit admission to the PHA's public housing program if the PHA determines that it has reasonable cause to believe that a household member's abuse or pattern of abuse of alcohol may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents. (c) Use of criminal records. Before a PHA denies admission to the PHAs public housing program on the basis of a criminal record, the PHA must notify the household of the proposed action to be based on the information and must provide the subject of the record and the applicant with a copy of the criminal record and an opportunity to dispute the accuracy and relevance of that record. (See part 5, subpart J of this title for provisions concerning access to criminal records.) (d) Cost of obtaining criminal record. The PHA may not pass along to the applicant the costs of a criminal records check. Sec. 960.205 Drug use by applicants: Obtaining information from drug treatment facility. (a) Purpose. This section addresses a PHA's authority to request and obtain information from drug abuse treatment facilities concerning applicants. This section does not apply to information requested or obtained from drug abuse treatment facilities other than under the authority of section 6(t). (b) Additional terms used in this section are as follows: (1) Currently engaging in illegal use of a drug. Illegal use of a drug occurred recently enough to justify a reasonable belief that there is continuing illegal drug use by a household member. (2) Drug abuse treatment facility. An entity: (i) That holds itself out as providing, and provides, diagnosis, treatment, or referral for treatment with respect to the illegal drug use; and (ii) That is either an identified unit within a general care facility; or an entity other than a general medical care facility. (c) Authorization by household member for PHA to receive information from a drug abuse treatment facility. (1) The PHA may require each applicant to submit for all household members who are at least 18 years of age, and for each family head or spouse regardless of age, one or more consent forms signed by such household member that: (i) Requests any drug abuse treatment facility to inform the PHA only whether the drug abuse treatment facility has reasonable cause to believe that the household member is currently engaging in illegal drug use; (ii) Complies with the form of written consent required by 42 CFR 2.31; and (iii) Authorizes the PHA to receive such information from the drug abuse treatment facility, and to utilize such information in determining whether to prohibit admission of the household member to the PHA's public housing program in accordance with Sec. 960.203. (See the Public Health Service Act, 42 U.S.C. 290dd-2, and implementing regulations at 42 CFR part 2, with respect to responsibilities of the drug abuse treatment facility.) (2) The consent form submitted for a proposed household member must expire automatically after the PHA has made a final decision to either approve or deny the admission of such person. (d) PHA request for information from drug use treatment facility. (1) The PHA may request that a drug abuse treatment facility disclose whether the drug abuse treatment facility has reasonable cause to believe that the proposed household member is currently engaging in the illegal use of a drug (as defined in Sec. 5.100 of this title). (2) The PHA's request to the drug abuse treatment facility must include a copy of the consent form signed by the proposed household member. (3) A drug abuse treatment facility is not liable for damages based on any information required to be disclosed under this section if such disclosure is consistent with section 543 of the Public Health Service Act (42 U.S.C. 290dd-2). [[Page 406]] (4) The PHA is not obligated to request information from a drug treatment facility under this section, and is not liable for damages for failing to request or receive such information. (5) A drug abuse treatment facility may charge the PHA a reasonable fee for information provided under this section. The PHA may not pass along to the applicant or tenant the costs of obtaining this information. (e) Prohibition of discriminatory treatment of applicants. (1) A PHA may request information from a drug abuse treatment facility under paragraph (d) of this section only if the PHA has adopted and has consistently implemented either of the following policies, obtaining a signed consent form from the proposed household members: (i) Policy A--Request for all families. Under Policy A, the PHA must submit a request for information to a drug abuse treatment facility in accordance with paragraph (d) of this section before admitting any family to the PHA's public housing program. For each such family, the request must be submitted for each proposed household member described in paragraph (c)(1) of this section. (ii) Policy B--Request for certain household members. Under Policy B, the PHA must submit a request to a drug abuse treatment facility only with respect to each proposed household member: (A) Whose criminal record indicates prior arrest or conviction for any criminal activity that may be a basis for denial of admission under Sec. 960.205; or (B) Whose prior tenancy records indicate that the proposed household member: (1) Engaged in the destruction of property; (2) Engaged in violent activity against another person; or (3) Interfered with the right of peaceful enjoyment of the premises of other residents. (4) The policy adopted by the PHA must be included in the PHA administrative plan and the PHA plan. (f) Records management and confidentiality. Each PHA that receives information from a drug abuse treatment facility under this section must establish and implement a system of records management that ensures that any information which the PHA receives from the drug abuse treatment facility about a person: (1) Is maintained confidentially in accordance with section 543 of the Public Health Service Act (12 U.S.C. 290dd-2); (2) Is not misused or improperly disseminated; and (3) Is destroyed, as applicable: (i) Not later than 5 business days after the PHA makes a final decision to admit the person as a household member under the PHA's public housing program; or (ii) If the PHA denies the admission of such person as a household member, in a timely manner after the date on which the statute of limitations for the commencement of a civil action based upon that denial of admissions has expired without the filing of a civil action or until final disposition of any such litigation. Sec. 960.206 Waiting list: Local preferences in admission to public housing program. (a) Establishment of PHA local preferences. (1) The PHA may adopt a system of local preferences for selection of families admitted to the PHA's public housing program. The PHA system of selection preferences must be based on local housing needs and priorities as determined by the PHA. In determining such needs and priorities, the PHA shall use generally accepted data sources. Such sources include public comment on the PHA plan (as received pursuant to Sec. 903.17 of this chapter), and on the consolidated plan for the relevant jurisdiction (as received pursuant to part 91 of this title). (2) The PHA may limit the number of applicants that qualify for any local preference. (3) PHA adoption and implementation of local preferences is subject to HUD requirements concerning income-targeting (Sec. 960.202(b)), deconcentration and income-mixing (Sec. 903.7), and selection preferences for developments designated exclusively for elderly or disabled families or for mixed population developments (Sec. 960.407). [[Page 407]] (4) The PHA must inform all applicants about available preferences and must give applicants an opportunity to show that they qualify for available preferences. (b) Particular local preferences--(1) Residency requirements or preferences. (i) Residency requirements are prohibited. Although a PHA is not prohibited from adopting a residency preference, the PHA may only adopt or implement residency preferences in accordance with non- discrimination and equal opportunity requirements listed at Sec. 5.105(a) of this title. (ii) A residency preference is a preference for admission of persons who reside in a specified geographic area (``residency preference area''). A county or municipality may be used as a residency preference area. An area smaller than a county or municipality may not be used as a residency preference area. (iii) Any PHA residency preferences must be included in the statement of PHA policies that govern eligibility, selection and admission to the program, which is included in the PHA annual plan (or supporting documents) pursuant to part 903 of this chapter. Such policies must specify that use of a residency preference will not have the purpose or effect of delaying or otherwise denying admission to the program based on the race, color, ethnic origin, gender, religion, disability, or age of any member of an applicant family. (iv) A residency preference must not be based on how long an applicant has resided or worked in a residency preference area. (v) Applicants who are working or who have been notified that they are hired to work in a residency preference area must be treated as residents of the residency preference area. The PHA may treat graduates of, or active participants in, education and training programs in a residency preference area as residents of the residency preference area if the education or training program is designed to prepare individuals for the job market. (2) Preference for working families. The PHA may adopt a preference for admission of working families (families where the head, spouse, or sole member, is employed). However, an applicant must be given the benefit of the working family preference if the head and spouse, or sole member is age 62 or older, or is a person with disabilities. (3) Preference for person with disabilities. The PHA may adopt a preference for admission of families that include a person with disabilities. However, the PHA may not adopt a preference for persons with a specific disability. (4) Preference for victims of domestic violence, dating violence, sexual assault, or stalking. The PHA should consider whether to adopt a local preference for admission of families that include victims of domestic violence, dating violence, sexual assault, or stalking. (5) Preference for single persons who are elderly, displaced, homeless or a person with disabilities. The PHA may adopt a preference for admission of single persons who are age 62 or older, displaced, homeless, or persons with disabilities over other single persons. (6) Preference for non-public housing over-income families. The PHA may adopt a preference for admission of non-public housing over-income families paying the alternative non-public housing rent and are on a NPHOI lease who become an income-eligible low-income family as defined in Sec. 5.603(b) of this title and are eligible for admission to the public housing program. (c) Selection for particular unit. In selecting a family to occupy a particular unit, the PHA may match characteristics of the family with the type of unit available, for example, number of bedrooms. In selection of families to occupy units with special accessibility features for persons with disabilities, the PHA must first offer such units to families which include persons with disabilities who require such accessibility features (see Sec. Sec. 8.27 and 100.202 of this title). (d) Housing assistance limitation for single persons. A single person who is not an elderly or displaced person, or a person with disabilities, or the remaining member of a resident family may not be provided a housing unit with two or more bedrooms. (e) Selection method. (1) The PHA must use the following to select among applicants on the waiting list with the same priority for admission: [[Page 408]] (i) Date and time of application; or (ii) A drawing or other random choice technique. (2) The method for selecting applicants must leave a clear audit trail that can be used to verify that each applicant has been selected in accordance with the method specified in the PHA plan. [66 FR 28799, May 24, 2001, as amended at 81 FR 80815, Nov. 16, 2016; 88 FR 9670, Feb. 14, 2023] Sec. 960.208 Notification to applicants. (a) The PHA must promptly notify any applicant determined to be ineligible for admission to a project of the basis for such determination, and must provide the applicant upon request, within a reasonable time after the determination is made, with an opportunity for an informal hearing on such determination. (b) When a determination has been made that an applicant is eligible and satisfies all requirements for admission, including the tenant selection criteria, the applicant must be notified of the approximate date of occupancy insofar as that date can be reasonably determined. Subpart C_Rent and Reexamination Source: 65 FR 16726, Mar. 29, 2000, unless otherwise noted. Sec. 960.253 Choice of rent. (a) Rent options--(1) Annual choice by family. Once a year, the PHA must give each family the opportunity to choose between the two methods for determining the amount of tenant rent payable monthly by the family. The family may choose to pay as tenant rent either a flat rent as determined in accordance with paragraph (b) of this section, or an income-based rent as determined in accordance with paragraph (c) of this section. Except for financial hardship cases as provided in paragraph (d) of this section, the family may not be offered this choice more than once a year. (2) Relation to minimum rent. Regardless of whether the family chooses to pay a flat rent or income-based rent, the family must pay at least the minimum rent as determined in accordance with Sec. 5.630 of this title. (3) Relation to non-public housing over-income families. Non-public housing over-income families must pay the alternative non-public housing rent, as applicable, as determined in accordance with Sec. 960.102. (b) Flat rent. The flat rent is determined annually, based on the market rental value of the unit as determined by this paragraph (b). (1) The PHA must establish a flat rent for each public housing unit that is no less than 80 percent of the applicable Fair Market Rent (FMR) as determined under 24 CFR part 888, subpart A; or (2) HUD may permit a flat rent of no less than 80 percent of an applicable small area FMR (SAFMR) or unadjusted rent, if applicable, as determined by HUD, or any successor determination, that more accurately reflects local market conditions and is based on an applicable market area that is geographically smaller than the applicable market area used in paragraph (b)(1) of this section. If HUD has not determined an applicable SAFMR or unadjusted rent, the PHA must rely on the applicable FMR under paragraph (b)(1) or may apply for an exception flat rent under paragraph (b)(3). (3) The PHA may request, and HUD may approve, on a case-by-case basis, a flat rent that is lower than the amounts in paragraphs (b)(1) and (2) of this section, subject to the following requirements: (i) The PHA must submit a market analysis of the applicable market. (ii) The PHA must demonstrate, based on the market analysis, that the proposed flat rent is a reasonable rent in comparison to rent for other comparable unassisted units, based on the location, quality, size, unit type, and age of the public housing unit and any amenities, housing services, maintenance, and utilities to be provided by the PHA in accordance with the lease. (iii) All requests for exception flat rents under this paragraph (b)(3) must be submitted to HUD. (4) For units where utilities are tenant-paid, the PHA must adjust the flat [[Page 409]] rent downward by the amount of a utility allowance for which the family might otherwise be eligible under 24 CFR part 965, subpart E. (5) The PHA must revise, if necessary, the flat rent amount for a unit no later than 90 days after HUD issues new FMRs. (6) If a new flat rent would cause a family's rent to increase by more than 35 percent, the family's rent increase must be phased in at 35 percent annually until such time that the family chooses to pay the income-based rent or the family is paying the flat rent established pursuant to this paragraph. (c) Income-based rent. (1) An income-based rent is a tenant rent that is based on the family's income and the PHA's policies for determination of such rents. (2) The PHA rent policies may specify that the PHA will use percentage of family income or some other reasonable system to determine income-based rents. The PHA rent policies may provide for depositing a portion of tenant rent in an escrow or savings account, for imposing a ceiling on tenant rents, for adoption of permissive income deductions (see Sec. 5.611(b) of this title), or for another reasonable system to determining the amount of income-based tenant rent. (3) The income-based tenant rent must not exceed the total tenant payment (Sec. 5.628 of this title) for the family minus any applicable utility allowance for tenant-paid utilities. If the utility allowance exceeds the total tenant payment, the PHA shall pay such excess amount (the utility reimbursement) either to the family or directly to the utility supplier to pay the utility bill on behalf of the family. (4) The PHA may elect to establish policies regarding the frequency of utility reimbursement payments for payments made to the family. (i) The PHA will have the option of making utility reimbursement payments not less than once per calendar-year quarter, for reimbursements totaling $45 or less per quarter. In the event a family leaves the program in advance of its next quarterly reimbursement, the PHA must reimburse the family for a prorated share of the applicable reimbursement. PHAs exercising this option must have a hardship policy in place for tenants. (ii) If the PHA elects to pay the utility supplier, the PHA must notify the family of the amount of utility reimbursement paid to the utility supplier. (d) Ceiling rent. A PHA using ceiling rents authorized and established before October 1, 1999, may continue to use ceiling rents, provided such ceiling rents are set at the level required for flat rents under this section. PHAs must follow the requirements for calculating and adjusting flat rents in paragraph (b) of this section when calculating and adjusting ceiling rents. (e) Information for families. For the family to make an informed choice about its rent options, the PHA must provide sufficient information for an informed choice. Such information must include at least the following written information: (1) The PHA's policies on switching type of rent in circumstances of financial hardship, and (2) The dollar amounts of tenant rent for the family under each option, following the procedures in paragraph (f) of this section. (f) Choice between flat and income-based rents. Families must be offered the choice between a flat rental amount and a previously calculated income-based rent according to the following: (1) For a family that chooses the flat rent option, the PHA must conduct a reexamination of family income and composition at least once every three years, except for families a PHA determines exceed the over- income limit described in Sec. 960.507(b). Once a PHA determines that a family has an income exceeding the over-income limit, the PHA must follow the income examination and notification requirements under Sec. 960.507(c). (2) At initial occupancy, or in any year in which a participating family is paying the income-based rent, the PHA must: (i) Conduct a full examination of family income and composition, following the provisions in Sec. 960.257; (ii) Inform the family of the flat rental amount and the income- based [[Page 410]] rental amount determined by the examination of family income and composition; (iii) Inform the family of the PHA's policies on switching rent types in circumstances of financial hardship; and (iv) Apply the family's rent decision at the next lease renewal. (3) In any year in which a family chooses the flat rent option but the PHA chooses not to conduct a full examination of family income and composition for the annual rent option under the authority of paragraph (f)(1) of this section, the PHA must: (i) Use income information from the examination of family income and composition from the first annual rent option; (ii) Inform the family of the updated flat rental amount and the rental amount determined by the most recent examination of family income and composition; (iii) Inform the family of the PHA's policies on switching rent types in circumstances of financial hardship; and (iv) Apply the family's rent decision at the next lease renewal. (g) Switch from flat rent to income-based rent because of hardship. (1) A family that is paying a flat rent may at any time request a switch to payment of income-based rent (before the next annual option to select the type of rent) if the family is unable to pay flat rent because of financial hardship. The PHA must adopt written policies for determining when payment of flat rent is a financial hardship for the family. (2) If the PHA determines that the family is unable to pay the flat rent because of financial hardship, the PHA must immediately allow the requested switch to income-based rent. The PHA shall make the determination within a reasonable time after the family request. (3) The PHA policies for determining when payment of flat rent is a financial hardship must provide that financial hardship include the following situations: (i) The family has experienced a decrease in income because of changed circumstances, including loss or reduction of employment, death in the family, or reduction in or loss of earnings or other assistance; (ii) The family has experienced an increase in expenses, because of changed circumstances, for medical costs, child care, transportation, education, or similar items; and (iii) Such other situations determined by the PHA to be appropriate. [65 FR 16726, Mar. 29, 2000, as amended at 80 FR 53712, Sept. 8, 2015; 81 FR 12372, Mar. 8, 2016; 88 FR 9670, Feb. 14, 2023] Sec. 960.255 Self-sufficiency incentives--Disallowance of increase in annual income. (a) Definitions. The following definitions apply for purposes of this section. Baseline income. The annual income immediately prior to implementation of the disallowance described in paragraph (c)(1) of this section of a person who is a member of a qualified family. Disallowance. Exclusion from annual income. Previously unemployed includes a person who has earned, in the twelve months previous to employment, no more than would be received for 10 hours of work per week for 50 weeks at the established minimum wage. Qualified family. A family residing in public housing: (i) Whose annual income increases as a result of employment of a family member who was unemployed for one or more years previous to employment; (ii) Whose annual income increases as a result of increased earnings by a family member during participation in any economic self-sufficiency or other job training program; or (iii) Whose annual income increases, as a result of new employment or increased earnings of a family member, during or within six months after receiving assistance, benefits or services under any state program for temporary assistance for needy families funded under Part A of Title IV of the Social Security Act, as determined by the PHA in consultation with the local agencies administering temporary assistance for needy families (TANF) and Welfare-to-Work (WTW) programs. The TANF program is not limited to monthly income maintenance, but also includes such benefits and services as one-time payments, wage subsidies and transportation assistance--provided [[Page 411]] that the total amount over a six-month period is at least $500. (b) Disallowance of earned income--(1) Initial 12-month exclusion. During the 12-month period beginning on the date on which a member of a qualified family is first employed or the family first experiences an increase in annual income attributable to employment, the PHA must exclude from the annual income (as defined in Sec. 5.609 of this title) of a qualified family any increase in the income of the family member as a result of employment over the baseline income of that family member. (2) Phase-in of rent increase. Upon the expiration of the 12-month period defined in paragraph (b)(1) of this section and for the subsequent 12-month period, the PHA must exclude from the annual income of a qualified family at least 50 percent of any increase in income of such family member as a result of employment over the family member's baseline income. (3) Maximum 2-year disallowance. The disallowance of increased income of an individual family member as provided in paragraph (b)(1) or (b)(2) of this section is limited to a lifetime 24-month period. It applies for a maximum of 12 months for disallowance under paragraph (b)(1) of this section and a maximum of 12 months for disallowance under paragraph (b)(2) of this section, during the 24-month period starting from the initial exclusion under paragraph (b)(1) of this section. (4) Effect of changes on currently participating families. Families eligible for and participating in the disallowance of earned income under this section prior to May 9, 2016 will continue to be governed by this section in effect as it existed immediately prior to that date. (c) Inapplicability to admission. The disallowance of increases in income as a result of employment under this section does not apply for purposes of admission to the program (including the determination of income eligibility and income targeting). (d) Individual Savings Accounts. As an alternative to the disallowance of increases in income as a result of employment described in paragraph (b) of this section, a PHA may choose to provide for individual savings accounts for public housing residents who pay an income-based rent, in accordance with a written policy, which must include the following provisions: (1) The PHA must advise the family that the savings account option is available; (2) At the option of the family, the PHA must deposit in the savings account the total amount that would have been included in tenant rent payable to the PHA as a result of increased income that is disallowed in accordance with paragraph (b) of this section; (3) Amounts deposited in a savings account may be withdrawn only for the purpose of: (i) Purchasing a home; (ii) Paying education costs of family members; (iii) Moving out of public or assisted housing; or (iv) Paying any other expense authorized by the PHA for the purpose of promoting the economic self-sufficiency of residents of public housing; (4) The PHA must maintain the account in an interest bearing investment and must credit the family with the net interest income, and the PHA may not charge a fee for maintaining the account; (5) At least annually the PHA must provide the family with a report on the status of the account; and (6) If the family moves out of public housing, the PHA shall pay the tenant any balance in the account, minus any amounts owed to the PHA. (e) Limitation. This section applies to a family that is: (1) Receiving the disallowance of earned income under this section on December 31, 2023 or (2) Eligible to receive the Jobs Plus program rent incentive pursuant to the Jobs Plus FY2023 notice of funding opportunity (NOFO) or earlier appropriations and distributed through prior Jobs Plus NOFOs. (f) Sunset. This section will lapse on January 1, 2030. [65 FR 16726, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016; 88 FR 9670, Feb. 14, 2023] [[Page 412]] Sec. 960.257 Family income and composition: Annual and interim reexaminations. (a) When PHA is required to conduct reexamination. (1) For families who pay an income-based rent, the PHA must conduct a reexamination of family income and composition at least annually and must make appropriate adjustments in the rent after consultation with the family and upon verification of the information. (2) For families who choose flat rents, the PHA must conduct a reexamination of family composition at least annually, and must conduct a reexamination of family income at least once every three years in accordance with the procedures in Sec. 960.253(f). (3) For all families who include nonexempt individuals, as defined in Sec. 960.601, the PHA must determine compliance once each twelve months with community service and self-sufficiency requirements in subpart F of this part. (4) The PHA may use the results of these reexaminations to require the family to move to an appropriate size unit. (5) For all non-public housing over-income families, the PHA may not conduct an annual reexamination of family income. (b) Interim reexaminations. (1) A family may request an interim reexamination of family income or composition because of any changes since the last determination. The PHA must conduct any interim reexamination within a reasonable period of time after the family request or when the PHA becomes aware of an increase in family adjusted income under paragraph (3) of this section. What qualifies as a ``reasonable time'' may vary based on the amount of time it takes to verify information, but generally should not be longer than 30 days after changes in income are reported. (2) The PHA may decline to conduct an interim reexamination of family income if the PHA estimates the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD by notice), or a lower threshold established by the PHA. (3) The PHA must conduct an interim reexamination of family income when the PHA becomes aware that the family's adjusted income (as defined in Sec. 5.611 of this title) has changed by an amount that the PHA estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except: (i) The PHA may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, except that, based on the PHA's established written policy, the PHA may consider increases in earned income if the PHA has processed an interim reexamination for a decrease in the family's income under paragraph (b)(1) of this section within the same annual or biennial reexamination cycle; and (ii) The PHA may choose not to conduct an interim reexamination in the last three months of a family's certification period, in accordance with the PHA's established written policy. (4) For over-income families in the period of up to six months before their tenancy termination pursuant to Sec. 960.507(d)(2), the PHA must conduct an interim reexamination of family income as otherwise required under this paragraph. However, the resulting income determination will not make the family eligible to remain in the public housing program beyond the period before termination as defined by PHA policy. (5) The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition. (6) Effective date of rent changes. (i) If the family has reported a change in family income or composition in a timely manner according to the PHA's policies, the PHA must provide the family with 30 days advance notice of any rent increases, and such rent increases will be effective the first day of the month beginning after the end of that 30-day period. Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income. [[Page 413]] (ii) If the family has failed to report a change in family income or composition in a timely manner according to the PHA's policies, PHAs must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, a PHA may apply rent decreases retroactively at the discretion of the PHA, in accordance with the conditions established by the PHA in written policy and subject to paragraph (b)(6)(iii) of this section. (iii) A retroactive rent decrease may not be applied by the PHA prior to the later of the first of the month following: (A) The date of the change leading to the interim reexamination of family income; or (B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination). (c) Streamlined income determination--(1) General. A PHA may elect to apply a streamlined income determination to families receiving fixed income, as described in paragraph (c)(3) of this section. (2) Definition of ``fixed income''. For purposes of this section, ``fixed income'' means periodic payments at reasonably predictable levels from one or more of the following sources: (i) Social Security, Supplemental Security Income, Supplemental Disability Insurance. (ii) Federal, state, local, or private pension plans. (iii) Annuities or other retirement benefit programs, insurance policies, disability or death benefits, or other similar types of periodic receipts. (iv) Any other source of income subject to adjustment by a verifiable COLA or current rate of interest. (3) Method of streamlined income determination. A PHA using the streamlined income determination must adjust a family's income according to the percentage of a family's unadjusted income that is from fixed income. (i) When 90 percent or more of a family's unadjusted income consists of fixed income, PHAs using streamlined income determinations must apply a COLA or COLAs to the family's sources of fixed income, provided that the family certifies both that 90 percent or more of their unadjusted income is fixed income and that their sources of fixed income have not changed from the previous year. For non-fixed income, the PHA is not required to make adjustments pursuant to paragraph (a) of this section. (ii) When less than 90 percent of a family's unadjusted income consists of fixed income, PHAs using streamlined income determinations must apply a COLA to each of the family's sources of fixed income individually. The PHA must determine all other income pursuant to paragraph (a) of this section. (4) COLA rate applied by PHAs. PHAs using streamlined income determinations must adjust a family's fixed income using a COLA or current interest rate that applies to each specific source of fixed income and is available from a public source or through tenant-provided, third-party-generated documentation. If no public verification or tenant-provided documentation is available, then the owner must obtain third-party verification of the income amounts in order to calculate the change in income for the source. (5) Triennial verification. For any income determined pursuant to a streamlined income determination, a PHA must obtain third-party verification of all income amounts every 3 years. (d) PHA reexamination policies. The PHA must adopt admission and continued occupancy policies concerning conduct of annual and interim reexaminations in accordance with this section, and shall conduct reexaminations in accordance with such policies. The PHA reexamination policies must be in accordance with the PHA plan. (e) Reviews of family income under this section are subject to the provisions in section 904 of the Stewart B. McKinney Homeless Assistance Amendments Act of 1988, as amended (42 U.S.C. 3544). (f) De minimis errors. The PHA will not be considered out of compliance [[Page 414]] with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income varies from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income). (i) The PHA must take any corrective action necessary to credit or repay a family if the family has been overcharged for their rent as a result of an error (including a de minimis error) in the income determination. Families will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in a family being undercharged for rent or family share. (ii) HUD may revise the amount of de minimis error in this paragraph (f) through a rulemaking published in the Federal Register for public comment. [65 FR 16726, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016; 82 FR 58340, Dec. 12, 2017; 85 FR 27139, May 7, 2020; 88 FR 9670, Feb. 14, 2023; 88 FR 9670, Feb. 14, 2023] Sec. 960.259 Family information and verification. (a) Family obligation to supply information. (1) The family must supply any information that the PHA or HUD determines is necessary in administration of the public housing program, including submission of required evidence of citizenship or eligible immigration status (as provided by part 5, subpart E of this title). ``Information'' includes any requested certification, release or other documentation. (2) The family must supply any information requested by the PHA or HUD for use in a regularly scheduled reexamination or an interim reexamination of family income and composition in accordance with HUD requirements. (3) For requirements concerning the following, see part 5, subpart B of this title: (i) Family verification and disclosure of social security numbers; (ii) Family execution and submission of consent forms for obtaining wage and claim information from State Wage Information Collection Agencies (SWICAs). (4) Any information supplied by the family must be true and complete. (b) Family release and consent. (1) As a condition of admission to or continued assistance under the program, the PHA shall require the family head, and such other family members as the PHA designates, to execute a consent form (including any release and consent as required under Sec. 5.230 of this title) authorizing any depository or private source of income, or any Federal, State or local agency, to furnish or release to the PHA or HUD such information as the PHA or HUD determines to be necessary. (2) The use or disclosure of information obtained from a family or from another source pursuant to this release and consent shall be limited to purposes directly connected with administration of the program. (c) PHA responsibility for reexamination and verification. (1) Except as provided in paragraph (c)(2) of this section, the PHA must obtain and document in the family file third-party verification of the following factors, or must document in the file why third-party verification was not available: (i) Reported family annual income; (ii) The value of assets; (iii) Expenses related to deductions from annual income; and (iv) Other factors that affect the determination of adjusted income or income-based rent. (2) For a family with net family assets (as the term is defined in Sec. 5.603 of this title) equal to or less than $50,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes of recertification of income, a family's declaration under Sec. 5.618(b) of this title, except that the PHA must obtain third- party verification of all family assets every 3 years. [65 FR 16726, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016; 88 FR 9671, Feb. 14, 2023] [[Page 415]] Subpart D_Preference for Elderly Families and Disabled Families in Mixed Population Projects Source: 59 FR 17667, Apr. 13, 1994, unless otherwise noted. Sec. 960.401 Purpose. This subpart establishes a preference for elderly families and disabled families for admission to mixed population public housing projects, as defined in Sec. 960.405. Sec. 960.403 Applicability. (a) This subpart applies to all dwelling units in mixed population projects (as defined in Sec. 960.405), or portions of mixed population projects, assisted under the U.S. Housing Act of 1937. These projects formerly were known as elderly projects. (b) This subpart does not apply to section 23 and section 10(c) leased housing projects or the section 23 Housing Assistance Payments Program where the owners enter into leases directly with the tenants, or to the Section 8 Housing Assistance Payments Program, the Low-Rent Housing Homeownership Opportunities Program (Turnkey III), the Mutual Help Homeownership Opportunities Program, or to Indian Housing Authorities. (For applicability to Indian Housing Authorities, see part 905 of this chapter.) Additionally, this subpart is not applicable to projects designated for elderly families or designated for disabled families in accordance with 24 CFR part 945. Sec. 960.407 Selection preference for mixed population developments. (a) The PHA must give preference to elderly families and disabled families equally in determining priority for admission to mixed population developments. The PHA may not establish a limit on the number of elderly families or disabled families who may be accepted for occupancy in a mixed population development. (b) In selecting elderly families and disabled families to occupy units in mixed population developments, the PHA must first offer units that have special accessibility features for persons with disabilities to families who include persons with disabilities who require the accessibility features of such units (see Sec. Sec. 8.27 and 100.202 of this title). [65 FR 16729, Mar. 29, 2000] Subpart E_Occupancy by Over-Income Families or Police Officers Source: 65 FR 16729, Mar. 29, 2000, unless otherwise noted. Sec. 960.503 Occupancy by over-income families. A PHA that owns or operates fewer than two hundred fifty (250) public housing units, may lease a unit in a public housing development to an over-income family (a family whose annual income exceeds the limit for a low income family at the time of initial occupancy), in accordance with its PHA annual plan (or supporting documents), if all the following conditions are satisfied: (a) There are no eligible low income families on the PHA waiting list or applying for public housing assistance when the unit is leased to an over-income family; (b) The PHA has publicized availability of the unit for rental to eligible low income families, including publishing public notice of such availability in a newspaper of general circulation in the jurisdiction at least thirty days before offering the unit to an over-income family; (c) The over-income family rents the unit on a month-to-month basis for a rent that is not less than the PHA's cost to operate the unit; (d) The lease to the over-income family provides that the family agrees to vacate the unit when needed for rental to an eligible family; and (e) The PHA gives the over-income family at least thirty days notice to vacate the unit when the unit is needed for rental to an eligible family. Sec. 960.505 Occupancy by police officers to provide security for public housing residents. (a) Police officer. For purpose of this subpart E, ``police officer'' means a person determined by the PHA to be, [[Page 416]] during the period of residence of that person in public housing, employed on a full-time basis as a duly licensed professional police officer by a Federal, State or local government or by any agency of these governments. An officer of an accredited police force of a housing agency may qualify. (b) Occupancy in public housing. For the purpose of increasing security for residents of a public housing development, the PHA may allow police officers who would not otherwise be eligible for occupancy in public housing, to reside in a public housing dwelling unit. The PHA must include in the PHA annual plan or supporting documents the number and location of the units to be occupied by police officers, and the terms and conditions of their tenancies; and a statement that such occupancy is needed to increase security for public housing residents. Sec. 960.507 Families exceeding the income limit. (a) In general. Families participating in the public housing program must not have incomes that exceed the over-income limit, as determined by paragraph (b) of this section, for more than 24 consecutive months. (1) This provision applies to all families in the public housing program, including FSS families and all families receiving EID. (i) Mixed families (as defined in Sec. 5.504 of this title) who are non-public housing over-income families pay the alternative non-public housing rent (as defined in Sec. 960.102), as applicable. (ii) All non-public housing over-income families are precluded from participating in a public housing resident council. (iii) Furthermore, non-public housing over-income families cannot participate in programs that are only for public housing or low-income families. (iv) PHAs cannot provide any Federal assistance, including a utility allowance, to non-public housing over-income families. (2) PHAs must implement the requirements of this section by amending all applicable admission and continued occupancy policies according to the provisions in 24 CFR part 903. All PHAs must have effective over- income policies, consistent with the requirements of this section, no later than June 14, 2023. (b) Determination of over-income limit. The over-income limit is determined by multiplying the applicable income limit for a very low- income family as defined in Sec. 5.603(b) of this title, by a factor of 2.4. (c) Notifying over-income families. (1) If the PHA determines the family has exceeded the over-income limit pursuant to an income examination, the PHA must provide written notice to the family of the over-income determination no later than 30 days after the income examination. The notice must state that the family has exceeded the over-income limit and continuing to exceed the over-income limit for a total of 24 consecutive months will result in the PHA following its continued occupancy policy for over-income families in accordance with paragraph (d) of this section. Pursuant to 24 CFR part 966, subpart B, the PHA must afford the family an opportunity for a hearing if the family disputes within a reasonable time the PHA's determination that the family has exceeded the over-income limit. (2) The PHA must conduct an income examination 12 months after the initial over-income determination described in paragraph (c)(1) of this section, unless the PHA determined the family's income fell below the over-income limit since the initial over-income determination. If the PHA determines the family has exceeded the over-income limit for 12 consecutive months, the PHA must provide written notification of this 12-month over-income determination no later than 30 days after the income examination that led to the 12-month over-income determination. The notice must state that the family has exceeded the over-income limit for 12 consecutive months and continuing to exceed the over-income limit for a total of 24 consecutive months will result in the PHA following its continued occupancy policy for over-income families in accordance with paragraph (d) of this section. Additionally, if applicable under PHA policy, the notice must include an estimate (based on current data) of the alternative non-public [[Page 417]] housing rent for the family's unit. Pursuant to 24 CFR part 966, subpart B, the PHA must afford the family an opportunity for a hearing if the family disputes within a reasonable time the PHA's determination that the family has exceeded the over-income limit. (3) The PHA must conduct an income examination 24 months after the initial over-income determination described in paragraph (c)(1) of this section, unless the PHA determined the family's income fell below the over-income limit since the second over-income determination. If the PHA determines the family has exceeded the over-income limit for 24 consecutive months, then the PHA must provide written notification of this 24-month over-income determination no later than 30 days after the income examination that led to the 24-month over-income determination. The notice must state: (i) That the family has exceeded the over-income limit for 24 consecutive months. (ii) That the PHA must either terminate the family's tenancy or charge the family the alternative non-public housing rent, in accordance with it continued occupancy policy for over-income families in accordance with paragraph (d) of this section. (A) If the PHA determines that under its policy the family's tenancy must be terminated in accordance with paragraph (d)(2) of this section, then the notice must inform the family of this determination and state the period of time before tenancy termination. (B) If the PHA determines that under its policy the family must be charged the alternative non-public housing rent in accordance with paragraph (d)(1) of this section, then the notice must inform the family of this determination and state that the family be charged the alternative non-public housing rent in accordance with paragraph (d)(1) of this section. The PHA must also present the family with a new lease, in accordance with the requirements at Sec. 960.509, and inform the family that the lease must be executed no later than 60 days of the date of the notice or at the next lease renewal, whichever is sooner. (iii) Pursuant to 24 CFR part 966, subpart B, the PHA must afford the family an opportunity for a hearing if the family disputes within a reasonable time the PHA's determination that the family has exceeded the over-income limit. (4) If, at any time during the consecutive 24-month period following the initial over-income determination described in paragraph (c)(1) of this section, a PHA determines that the family's income is below the over-income limit, the family is entitled to a new 24 consecutive month period of being over-income and new notices under paragraphs (c)(1), (c)(2), and (c)(3) of this section if the PHA later determines that the family income exceeds the over-income limit. (d) End of the 24 consecutive month grace period. Once a family has exceeded the over-income limit for 24 consecutive months, the PHA must, as detailed in its admissions and continued occupancy policies-- (1) Require the family to execute a new lease consistent with Sec. 960.509 and charge the family the alternative non-public housing rent, as defined in Sec. 960.102, no later than 60-days after the notice is provided pursuant to paragraph (c)(3) of this section or at the next lease renewal, whichever is sooner; or (2) Terminate the tenancy of the family no more than 6 months after the notification under paragraph (c)(3) of this section as determined by the PHA's continued occupancy policy. PHAs must continue to charge these families the family's choice of income-based, flat rent, or prorated rent for mixed families during the period before termination. The PHA must give appropriate notice of lease tenancy termination (notice to vacate) in accordance with State and local laws. (e) Status of families. An over-income family will continue to be a public housing program participant until their tenancy is terminated by the PHA in accordance with paragraph (d)(2) of this section or the family executes a new non-public housing lease in accordance with paragraph (d)(1) of this section. [[Page 418]] (f) Reporting. Each PHA must submit a report annually to HUD that specifies, as of the end of the year, the number of families residing in public housing with incomes exceeding the over-income limit and the number of families on the waiting lists for admission to public housing projects and provide any other information regarding over-income families requested by HUD. These reports must also be publicly available. [88 FR 9671, Feb. 14, 2023] Sec. 960.509 Lease requirements for non-public housing over-income families. (a) In general. If a family, when permitted by written PHA's continued occupancy policy, elects to remain in a public housing unit paying the alternative non-public housing rent, the PHA and each non- public housing over-income (NPHOI) family (referred to as the ``tenant'' in this section) must enter into a lease. The tenant and the PHA must execute the lease, as presented by the PHA pursuant to Sec. 960.507(c)(3)(ii)(B) no later than 60 days after the notice provided pursuant to Sec. 960.507(c)(3) or at the next lease renewal, whichever is sooner. If the tenant does not execute the lease within this time period, the PHA must terminate the tenancy of the tenant no more than 6 months after the notification under Sec. 960.507(c)(3) in accordance with 960.507(d)(2). Notwithstanding, a PHA may permit, in accordance with its policies, an over-income family to execute the lease beyond this time period, but before termination of the tenancy, if the over- income family pays the PHA the total difference between the alternative non-public housing rent and their public housing rent dating back to the point in time that the over-income family was required to execute the lease. (b) Lease provisions. The non-public housing over-income lease must contain at a minimum the following provisions. (1) Parties, dwelling unit, and term. The lease must state: (i) The name of the PHA and names of the tenants. (ii) The unit rented (address, apartment number, and any other information needed to identify the dwelling unit). (iii) The term of the lease (lease term and renewal in accordance with paragraph (b)(2) of this section). (iv) A statement of the utilities, services, and equipment to be supplied by the PHA without additional cost, and the utilities and appliances to be paid for by the tenant. (v) The composition of the household as approved by the PHA (family members, foster children and adults, and any PHA-approved live-in aides). The family must promptly inform the PHA of the birth, adoption, or court-awarded custody of a child. The family must request PHA approval to add any other family member as an occupant of the unit. (2) Lease term and renewal. (i) The lease must have a term as determined by the PHA and included in PHA policy. (ii) At any time, the PHA may terminate the tenancy in accordance with paragraph (b)(11) of this section. (3) Payments due under the lease. (i) Tenant rent. (A) The tenant must pay the amount of the monthly tenant rent determined by the PHA in accordance with Sec. 960.507(e)(1). (B) The lease must specify the initial amount of the tenant rent at the beginning of the initial lease term. The PHA must comply with State or local law in giving the tenant written notice stating any change in the amount of tenant rent. (ii) PHA charges. The lease must provide for charges to the tenant for repair beyond normal wear and tear and for consumption of excess utilities. The lease must state the basis for the determination of such charges (e.g., by a posted schedule of charges for repair, amounts charged for excess utility consumption, etc.). The imposition of charges for consumption of excess utilities is permissible only if such charges are determined by an individual check meter servicing the leased unit or result from the use of major tenant-supplied appliances. (iii) Late payment penalties. The lease may provide for penalties for late payment of rent. (iv) When charges are due. The lease must provide that charges assessed [[Page 419]] under paragraphs (b)(3)(ii) and (b)(3)(iii) of this section are due in accordance with PHA policy. (v) Security deposits. The lease must provide that any previously paid security deposit will be applied to the tenancy upon signing a new lease. The lease must also inform the tenant of the circumstances under which a security deposit will be returned to the tenant or when the tenant will be charged for damage to the unit, consistent with State and local security deposit laws. (4) Tenant's right to use and occupancy. The lease must provide that the tenant has the right to exclusive use and occupancy of the leased unit by the members of the household authorized to reside in the unit in accordance with the lease, as well as their guests. The term guest is defined in Sec. 5.100 of this title. (5) The PHA's obligations. The PHA's obligations under the lease must include the following: (i) To maintain the dwelling unit and the project in decent, safe, and sanitary condition. (ii) To comply with requirements of applicable State and local building codes, housing codes, and HUD regulations materially affecting health and safety. (iii) To make necessary repairs to the dwelling unit. (iv) To keep project buildings, facilities, and common areas, not otherwise assigned to the tenant for maintenance and upkeep, in a clean and safe condition. (v) To maintain in good and safe working order and condition electrical, plumbing, sanitary, heating, ventilating, and other facilities, and appliances, including elevators, supplied, or required to be supplied by the PHA. (vi) To provide and maintain appropriate receptacles and facilities (except containers for the exclusive use of an individual tenant family) for the deposit of ashes, garbage, rubbish, and other waste removed from the dwelling unit by the tenant in accordance with paragraph (b)(6)(vii) of this section. (vii) To supply running water, including an adequate source of potable water, and reasonable amounts of hot water and reasonable amounts of heat at appropriate times of the year (according to local custom and usage), except where the building that includes the dwelling unit is not required by law to be equipped for that purpose, or where heat or hot water is generated by an installation within the exclusive control of the tenant and supplied by a direct utility connection. (viii) To notify the tenant of the specific grounds for any proposed adverse action by the PHA as required by State and local law. (ix) To comply with Federal, State, and local nondiscrimination and fair housing requirements, including Federal accessibility requirements and providing reasonable accommodations for persons with disabilities. (x) To establish necessary and reasonable policies for the benefit and well-being of the housing project and the tenants, post the policies in the project office, and incorporate the regulations by reference in the lease. (6) Tenant's obligations. The lease must, at a minimum and consistent with State and local law, provide that the tenant must: (i) Not assign the lease or sublease the dwelling unit. (ii) Not provide accommodations for boarders or lodgers. (iii) Use the dwelling unit solely as a private dwelling for the tenant and the tenant's household as identified in the lease, and not use or permit its use for any other purpose. (iv) Abide by necessary and reasonable policies established by the PHA for the benefit and well-being of the housing project and the tenants, which must be posted in the project office and incorporated by reference in the lease. (v) Comply with all applicable State and local building and housing codes materially affecting health and safety. (vi) Keep the dwelling unit and such other areas as may be assigned to the tenant for the tenant's exclusive use in a clean and safe condition. (vii) Dispose of all waste from the dwelling unit in a sanitary and safe manner. (viii) Use in a reasonable manner all electrical, plumbing, sanitary, heating, ventilating, air-conditioning and other facilities, including elevators. (ix) Refrain from, and cause members of the household and guests to refrain [[Page 420]] from destroying, defacing, damaging, or removing any part of the dwelling unit or housing project. (x) Pay reasonable charges (other than for wear and tear) for the repair of damages to the dwelling unit, or to the housing project (including damages to buildings, facilities, or common areas) caused by the tenant, a member of the household or a guest. (xi) Act, and cause household members and guests to act, in a manner which will not disturb other residents' peaceful enjoyment of their accommodations and will be conducive to maintaining the project in a decent, safe, and sanitary condition. (xii) Assure that no tenant, member of the tenant's household, guest, or any other person under the tenant's control engages in: (A) Criminal activity. (1) Any criminal activity that threatens the health, safety or right to peaceful enjoyment of the premises by other residents. (2) Any drug-related criminal activity on or off the premises; or (B) Civil activity. For non-public housing over-income units that are not within mixed-finance projects, any smoking of prohibited tobacco products in the tenant's unit as well as restricted areas, as defined by Sec. 965.653(a) of this chapter, or in other outdoor areas that the PHA has designated as smoke-free. (xiii) To assure that no member of the household engages in an abuse or pattern of abuse of alcohol that affects the health, safety, or right to peaceful enjoyment of the premises by other residents. (7) Tenant maintenance. The lease may provide that the tenant must perform seasonal maintenance or other maintenance tasks, where performance of such tasks by tenants of dwellings units of a similar design and construction is customary, as long as such provisions are not for the purpose of evading the obligations of the PHA. In cases where a PHA adopts such lease provisions, the PHA must exempt tenants who are unable to perform such tasks because of age or disability. (8) Defects hazardous to life, health, or safety. The lease must set forth the rights and obligations of the tenant and the PHA if to the dwelling unit is damaged to the extent that conditions are created which are hazardous to life, health, or safety of the occupants. The lease must provide that: (i) The tenant must immediately notify project management of the damage. (ii) The PHA must repair the unit within a reasonable time. The PHA must charge the tenant the reasonable cost of the repairs if the damage was caused by the tenant, the tenant's household, or the tenant's guests. (iii) The PHA must offer standard alternative accommodations, if available, where necessary repairs cannot be made within a reasonable time, subject to paragraph (b)(5)(ix) of this section; and (iv) The lease must allow for abatement of rent in proportion to the seriousness of the damage and loss in value as a dwelling if repairs are not made in accordance with paragraph (b)(8)(ii) of this section or alternative accommodations not provided in accordance with paragraph (b)(8)(iii) of this section, except that no abatement of rent may occur if the tenant rejects the alternative accommodation or if the damage was caused by the tenant, tenant's household or guests. (9) Entry of dwelling unit during tenancy. The lease must set forth the circumstances under which the PHA may enter the dwelling unit during the tenant's possession and must include the following requirements: (i) The PHA is, upon reasonable advance notification to the tenant, permitted to enter the dwelling unit during reasonable hours for the purpose of performing routine inspections and maintenance, for making improvement or repairs, or to show the dwelling unit for re-leasing. A written statement specifying the purpose of the PHA entry delivered to the dwelling unit at least two days before such entry is reasonable advance notification. (ii) The PHA may enter the dwelling unit at any time without advance notification when there is reasonable cause to believe that an emergency exists; and (iii) If the tenant and all adult members of the household are absent from the dwelling unit at the time of entry, the PHA must leave in the dwelling [[Page 421]] unit a written statement specifying the date, time, and purpose of entry prior to leaving the dwelling unit. (10) Notice procedures. The lease must provide procedures, in accordance with State and local laws, the PHA and tenant must follow when giving notices, which must include: (i) Except as provided in paragraph (b)(9) of this section, notice to a tenant must be provided in a form to allow meaningful access for persons who are limited English proficient and, in a form, to ensure effective communication with individuals with disabilities; and (ii) Notice to the PHA can be in writing, hand delivered, or sent by prepaid first-class mail to PHA address provided in the lease, orally, or submitted electronically through a communications system established by the PHA for that purpose. (11) Termination of tenancy and eviction. (i) Procedures. The lease must state the procedures to be followed by the PHA and the tenant to terminate the tenancy. (ii) Grounds for termination of tenancy. The PHA must terminate the tenancy for good cause, which includes, but is not limited to, the following: (A) Criminal activity or alcohol abuse as provided in paragraph (b)(11)(iv) of this section. (B) Failure to accept the PHA's offer of a lease revision to an existing lease: with written notice of the offer of the revision at least 60 calendar days before the lease revision is scheduled to take effect; and with the offer specifying a reasonable time limit within that period for acceptance by the family. (iii) Lease termination notice. The PHA must give notice of lease termination in accordance with State and local laws. (iv) PHA termination of tenancy for criminal activity or alcohol abuse. (A) Evicting drug criminals. (1) Methamphetamine conviction. The PHA must immediately terminate the tenancy if the PHA determines that any member of the household has been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of Federally assisted housing. (2) Drug crime on or off the premises. The lease must provide that drug-related criminal activity engaged in on or off the premises by any tenant, member of the tenant's household or guest, and any such activity engaged in on the premises by any other person under the tenant's control, is grounds for the PHA to terminate tenancy. In addition, the lease must provide that a PHA may evict a family when the PHA determines that a household member is illegally using a drug or when the PHA determines that a pattern of illegal use of a drug interferes with the health, safety, or right to peaceful enjoyment of the premises by other residents. (B) Evicting other criminals. (1) Threat to other residents. The lease must provide that any criminal activity by a covered person that threatens the health, safety, or right to peaceful enjoyment of the premises by other residents (including PHA management staff residing on the premises) or threatens the health, safety, or right to peaceful enjoyment of their residences by persons residing in the immediate vicinity of the premises is grounds for termination of tenancy. (2) Fugitive felon or parole violator. The PHA may terminate the tenancy if a tenant is fleeing to avoid prosecution, or custody or confinement after conviction, for a crime, or attempt to commit a crime, that is a felony under the laws of the place from which the individual flees, or that, in the case of the State of New Jersey, is a high misdemeanor; or violating a condition of probation or parole imposed under Federal or State law. (C) Eviction for criminal activity. (1) Evidence. The PHA may evict the tenant by judicial action for criminal activity in accordance with this section if the PHA determines that the covered person has engaged in the criminal activity, regardless of whether the covered person has been arrested or convicted for such activity and without satisfying the standard of proof used for a criminal conviction. (2) Notice to Post Office. When a PHA evicts an individual or family for criminal activity, the PHA must notify the local post office serving the dwelling unit that the individual or family is no longer residing in the unit. [[Page 422]] (D) Use of criminal record. If the PHA seeks to terminate the tenancy for criminal activity as shown by a criminal record, the PHA must notify the household of the proposed action to be based on the information and must provide the subject of the record and the tenant with a copy of the criminal record before a PHA grievance hearing, as applicable, or court trial concerning the termination of tenancy or eviction. The tenant must be given an opportunity to dispute the accuracy and relevance of that record in the grievance hearing or court trial. (E) Cost of obtaining criminal record. The PHA may not pass along to the tenant the costs of a criminal records check. (F) Evicting alcohol abusers. The PHA must establish standards that allow termination of tenancy if the PHA determines that a household member has: (1) Engaged in abuse or pattern of abuse of alcohol that threatens the health, safety, or right to peaceful enjoyment of the premises by other residents; or (2) Furnished false or misleading information concerning illegal drug use, alcohol abuse, or rehabilitation of illegal drug users or alcohol abusers. (G) PHA action, generally. (1) Consideration of circumstances. In a manner consistent with policies, procedures and practices, the PHA may consider all circumstances relevant to a particular case such as the nature and severity of the offending action, the extent of participation by the leaseholder in the offending action, the effects that the eviction would have on family members not involved in the offending activity, the extent to which the leaseholder has taken steps to prevent or mitigate the offending action, the amount of time that has passed since the criminal conduct occurred, whether the crime or conviction was related to a disability, and whether the individual has engaged in rehabilitative or community services. (2) Exclusion of culpable household member. The PHA may require a tenant to exclude a household member to continue to reside in the dwelling unit, where that household member has participated in or been culpable for action or failure to act that warrants termination. (3) Consideration of rehabilitation. In determining whether to terminate tenancy for illegal drug use or a pattern of illegal drug use by a household member who is no longer engaging in such use, or for abuse or a pattern of abuse of alcohol by a household member who is no longer engaging in such abuse, the PHA may consider whether such household member is participating in or has successfully completed a supervised drug or alcohol rehabilitation program or has otherwise been rehabilitated successfully (42 U.S.C. 13662). For this purpose, the PHA may require the tenant to submit evidence of the household member's current participation in, or successful completion of, a supervised drug or alcohol rehabilitation program or evidence of otherwise having been rehabilitated successfully. (4) Nondiscrimination limitation. The PHA's eviction actions must be consistent with fair housing and equal opportunity provisions of Sec. 5.105 of this title. (12) No automatic lease renewal. Upon expiration of the lease term, the lease shall not automatically renew. (13) Grievance procedures. The lease may include hearing or grievance procedures and may explain when the procedures are available to the family. (14) Provision for modifications. The lease may be modified at any time by written agreement of the tenant and the PHA. The lease must provide that modification of the lease must be evidenced by a written rider or amendment to the lease, executed by both parties, except as permitted under Sec. 966.5 of this chapter, which allows modifications of the lease by posting of policies, rules and regulations. (15) Signature clause. The lease must provide a signature clause attesting that the lease has been executed by the parties. [88 FR 9671, Feb. 14, 2023; 88 FR 12560, Feb. 28, 2023] [[Page 423]] Subpart F_When Resident Must Perform Community Service Activities or Self-Sufficiency Work Activities Source: 65 FR 16729, Mar. 29, 2000, unless otherwise noted. Sec. 960.600 Implementation. PHAs and residents must comply with the requirements of this subpart beginning with PHA fiscal years that commence on or after October 1, 2000. Unless otherwise provided by Sec. 903.11 of this chapter, Annual Plans submitted for those fiscal years are required to contain information regarding the PHA's compliance with the community service requirement, as described in Sec. 903.7 of this chapter. Non-public housing over-income families are not required to comply with the requirements of this subpart. [88 FR 9675, Feb. 14, 2023] Sec. 960.601 Definitions. (a) Definitions found elsewhere--(1) General definitions. The following terms are defined in part 5, subpart A of this title: public housing, public housing agency (PHA). (2) Definitions concerning income and rent. The following terms are defined in part 5, subpart F of this title: economic self-sufficiency program, work activities. (b) Other definitions. In addition to the definitions in paragraph (a) of this section, the following definitions apply: Community service. The performance of voluntary work or duties that are a public benefit, and that serve to improve the quality of life, enhance resident self-sufficiency, or increase resident self- responsibility in the community. Community service is not employment and may not include political activities. Exempt individual. An adult who: (1) Is 62 years or older; (2)(i) Is a blind or disabled individual, as defined under Section 216(i)(1) or Section 1614 of the Social Security Act (42 U.S.C. 416(i)(1); 1382c), and who certifies that because of this disability she or he is unable to comply with the service provisions of this subpart, or (ii) Is a primary caretaker of such individual; (3) Is engaged in work activities; (4) Meets the requirements for being exempted from having to engage in a work activity under the State program funded under part A of title IV of the Social Security Act (42 U.S.C. 601 et seq.) or under any other welfare program of the State in which the PHA is located, including a State-administered welfare-to-work program; (5) Is a member of a family receiving assistance, benefits or services under a State program funded under part A of title IV of the Social Security Act (42 U.S.C. 601 et seq.) or under any other welfare program of the State in which the PHA is located, including a State- administered welfare-to-work program, and has not been found by the State or other administering entity to be in noncompliance with such a program; or (6) is a member of a non-public housing over-income family. Service requirement. The obligation of each adult resident, other than an exempt individual, to perform community service or participate in an economic-self sufficiency program required in accordance with Sec. 960.603. [65 FR 16729, Mar. 29, 2000, as amended at 88 FR 9675, Feb. 14, 2023] Sec. 960.603 General requirements. (a) Service requirement. Except for any family member who is an exempt individual, each adult resident of public housing must: (1) Contribute 8 hours per month of community service (not including political activities); or (2) Participate in an economic self-sufficiency program for 8 hours per month; or (3) Perform 8 hours per month of combined activities as described in paragraphs (a)(1) and (a)(2) of this section. (b) Family violation of service requirement. The lease shall specify that it shall be renewed automatically for all purposes, unless the family fails to comply with the service requirement. Violation of the service requirement is grounds for nonrenewal of the lease at the end of the twelve month lease term, but not for termination of tenancy during the course of the twelve [[Page 424]] month lease term (see Sec. 966.4(l)(2)(i) of this chapter). Sec. 960.605 How PHA administers service requirements. (a) PHA policy. Each PHA must develop a local policy for administration of the community service and economic self-sufficiency requirements for public housing residents. (b) Administration of qualifying community service or self- sufficiency activities for residents. The PHA may administer qualifying community service or economic self-sufficiency activities directly, or may make such activities available through a contractor, or through partnerships with qualified organizations, including resident organizations, and community agencies or institutions. (c) PHA responsibilities. (1) The PHA policy must describe how the PHA determines which family members are subject to or exempt from the service requirement, and the process for determining any changes to exempt or non-exempt status of family members. (2) The PHA must give the family a written description of the service requirement, and of the process for claiming status as an exempt person and for PHA verification of such status. The PHA must also notify the family of its determination identifying the family members who are subject to the service requirement, and the family members who are exempt persons. The PHA must also notify the family that it will be validating a sample of self-certifications of completion of the service requirement accepted by the PHA under Sec. 960.607(a)(1)(ii). (3) The PHA must review family compliance with service requirements and must verify such compliance annually at least 30 days before the end of the 12-month lease term. If qualifying activities are administered by an organization other than the PHA, the PHA may obtain verification of family compliance from such third parties or may accept a signed certification from the family member that he or she has performed such qualifying activities. (4) The PHA must retain reasonable documentation of service requirement performance or exemption in a participant family's files. (5) The PHA must comply with non-discrimination and equal opportunity requirements listed at Sec. 5.105(a) of this title and affirmatively further fair housing in all their activities in accordance with the AFFH Certification as described in Sec. 903.7(o) of this chapter. [65 FR 16729, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016] Sec. 960.607 Assuring resident compliance. (a) Acceptable documentation demonstrating compliance. (1) If qualifying activities are administered by an organization other than the PHA, a family member who is required to fulfill a service requirement must provide one of the following: (i) A signed certification to the PHA by such other organization that the family member has performed such qualifying activities; or (ii) A signed self-certification to the PHA by the family member that he or she has performed such qualifying activities. (2) The signed self-certification must include the following: (i) A statement that the tenant contributed at least 8 hours per month of community service not including political activities within the community in which the adult resides; or participated in an economic self-sufficiency program (as that term is defined in 24 CFR 5.603(b)) for at least 8 hours per month; (ii) The name, address, and a contact person at the community service provider; or the name, address, and contact person for the economic self-sufficiency program; (iii) The date(s) during which the tenant completed the community service activity, or participated in the economic self-sufficiency program; (iv) A description of the activity completed; and (v) A certification that the tenant's statement is true. (3) If a PHA accepts self-certifications under paragraph (a)(1)(ii) of this section, the PHA must validate a sample of such self- certifications using third-party certification described in paragraph (a)(1)(i) of this section. (b) PHA notice of noncompliance. (1) If the PHA determines that there is a [[Page 425]] family member who is required to fulfill a service requirement, but who has violated this family obligation (noncompliant resident), the PHA must notify the tenant of this determination. (2) The PHA notice to the tenant must: (i) Briefly describe the noncompliance; (ii) State that the PHA will not renew the lease at the end of the twelve month lease term unless: (A) The tenant, and any other noncompliant resident, enter into a written agreement with the PHA, in the form and manner required by the PHA, to cure such noncompliance, and in fact cure such noncompliance in accordance with such agreement; or (B) The family provides written assurance satisfactory to the PHA that the tenant or other noncompliant resident no longer resides in the unit. (iii) State that the tenant may request a grievance hearing on the PHA determination, in accordance with part 966, subpart B of this chapter, and that the tenant may exercise any available judicial remedy to seek timely redress for the PHA's nonrenewal of the lease because of such determination. (c) Tenant agreement to comply with service requirement. If the tenant or another family member has violated the service requirement, the PHA may not renew the lease upon expiration of the term unless: (1) The tenant, and any other noncompliant resident, enter into a written agreement with the PHA, in the form and manner required by the PHA, to cure such noncompliance by completing the additional hours of community service or economic self-sufficiency activity needed to make up the total number of hours required over the twelve-month term of the new lease, and (2) All other members of the family who are subject to the service requirement are currently complying with the service requirement or are no longer residing in the unit. [65 FR 16729, Mar. 29, 2000, as amended at 81 FR 12374, Mar. 8, 2016] Sec. 960.609 Prohibition against replacement of PHA employees. In implementing the service requirement under this subpart, the PHA may not substitute community service or self-sufficiency activities performed by residents for work ordinarily performed by PHA employees, or replace a job at any location where residents perform activities to satisfy the service requirement. Subpart G_Pet Ownership in Public Housing Source: 65 FR 42522, July 10, 2000, unless otherwise noted. Sec. 960.701 Purpose. The purpose of this subpart is, in accordance with section 31 of the United States Housing Act of 1937 (42 U.S.C. 1437z-3), to permit pet ownership by residents of public housing, subject to compliance with reasonable requirements established by the public housing agency (PHA) for pet ownership. Sec. 960.703 Applicability. This subpart applies to public housing as that term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)), except that such term does not include public housing developments for the elderly or persons with disabilities. Regulations that apply to pet ownership in such developments are located in part 5, subpart C, of this title. Sec. 960.705 Animals that assist, support, or provide service to persons with disabilities. (a) This subpart G does not apply to animals that assist, support or provide service to persons with disabilities. PHAs may not apply or enforce any policies established under this subpart against animals that are necessary as a reasonable accommodation to assist, support or provide service to persons with disabilities. This exclusion applies to such animals that reside in public housing, as that term is used in Sec. 960.703, and such animals that visit these developments. (b) Nothing in this subpart G: [[Page 426]] (1) Limits or impairs the rights of persons with disabilities; (2) Authorizes PHAs to limit or impair the rights of persons with disabilities; or (3) Affects any authority that PHAs may have to regulate service animals that assist, support or provide service to persons with disabilities, under Federal, State, or local law. Sec. 960.707 Pet ownership. (a) Ownership Conditions. A resident of a dwelling unit in public housing, as that term is used in Sec. 960.703, may own one or more common household pets or have one or more common household pets present in the dwelling unit of such resident, subject to the reasonable requirements of the PHA, if the resident maintains each pet: (1) Responsibly; (2) In accordance with applicable State and local public health, animal control, and animal anti-cruelty laws and regulations; and (3) In accordance with the policies established in the PHA Annual Plan for the agency as provided in part 903 of this chapter. (b) Reasonable requirements. Reasonable requirements may include but are not limited to: (1) Requiring payment of a non-refundable nominal fee to cover the reasonable operating costs to the development relating to the presence of pets, a refundable pet deposit to cover additional costs attributable to the pet and not otherwise covered, or both; (2) Limitations on the number of animals in a unit, based on unit size; (3) Prohibitions on types of animals that the PHA classifies as dangerous, provided that such classifications are consistent with applicable State and local law, and prohibitions on individual animals, based on certain factors, including the size and weight of animals; (4) Restrictions or prohibitions based on size and type of building or project, or other relevant conditions; (5) Registration of the pet with the PHA; and (6) Requiring pet owners to have their pets spayed or neutered. (c) Restriction. A PHA may not require pet owners to have any pet's vocal chords removed. (d) Pet deposit. A PHA that requires a resident to pay a pet deposit must place the deposit in an account of the type required under applicable State or local law for pet deposits or, if State or local law has no requirements regarding pet deposits, for rental security deposits, if applicable. The PHA shall comply with such applicable law as to retention of the deposit, interest, and return of the deposit or portion thereof to the resident, and any other applicable requirements. (e) PHA Plan. Unless otherwise provided by Sec. 903.11 of this chapter, Annual Plans are required to contain information regarding the PHA's pet policies, as described in Sec. 903.7(n) of this chapter, beginning with PHA fiscal years that commence on or after January 1, 2001. PART 963_PUBLIC HOUSING_CONTRACTING WITH RESIDENT-OWNED BUSINESSES--Table of Contents Subpart A_General Sec. 963.1 Purpose. 963.3 Applicability. 963.5 Definitions. Subpart B_Contracting with Resident-Owned Businesses 963.10 Eligible resident-owned businesses. 963.12 Alternative procurement process. Authority: 42 U.S.C. 1437 and 3535(d). Source: 57 FR 20189, May 11, 1992, unless otherwise noted. Subpart A_General Sec. 963.1 Purpose. The purpose of this part is to enhance the economic opportunities of public housing residents by providing public housing agencies with a method of soliciting and contracting with eligible and qualifed resident-owned businesses (as defined in this part) for public housing services, supplies, or construction. The contract award method provided by this part is based on the established procurement procedures set forth in 24 CFR 85.36 (as revised April 1, [[Page 427]] 2013), with solicitation as provided by these procedures limited to resident-owned businesses. The contract award method provided by this part is not a requirement. It is an alternative procurement method available to public housing agencies, subject to the conditions set forth in this part, and subject to permissibility under State and local laws. [57 FR 20189, May 11, 1992, as amended at 80 FR 75942, Dec. 7, 2015] Sec. 963.3 Applicability. The policies and procedures contained in this part apply to public housing developments that are owned by public housing agencies (PHAs) and that are covered by Annual Contributions Contracts (ACC) with the Department. Public housing contracts eligible to be awarded under the alternative procurement process provided by this part are limited to individual contracts that do not exceed $1,000,000. Resident-owned businesses eligible to participate in the alternative procurement process are limited to those that meet the eligibility requirements of Sec. 963.10. The policies and procedures contained in this part are consistent with the objectives of section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u), and similar Federal requirements imposed on public housing programs. (See 24 CFR 941.208(a) and 24 CFR 968.110(a)). [57 FR 20189, May 11, 1992, as amended at 59 FR 33895, June 30, 1994] Sec. 963.5 Definitions. The terms HUD and Public housing agency (PHA) are defined in 24 CFR part 5. Act. The U.S. Housing Act of 1937 (42 U.S.C. 1437). Alternative procurement process. The alternative method of public housing contract award available to public housing agencies and eligible resident-owned businesses under the conditions set forth in this part. Annual Contributions Contract (ACC). See definition in 24 CFR 968.105. Certification. A written assertion based on supporting evidence, which shall be kept available for inspection by the Secretary, the Inspector General, and the public, which assertion shall be deemed to be accurate for purposes of this part, unless the Secretary determines otherwise after inspecting the evidence and providing due notice and opportunity for comment. Contract or public housing contract. Any contract awarded by a PHA for services, supplies, or construction necessary for the development, operation, modernization, or maintenance of public housing. Management officials. The individuals who possess the power to make the day-to-day, as well as major, decisions on matters of management, policy, and operations of the resident-owned business. Principal. An owner, partner, director, or management official of the resident-owned business with the power and authority to represent the business and to execute contract, leases, agreements, and other documents on behalf of the business. Public housing or public housing development. Any public housing development which is owned by a Public Housing Agency (PHA) and is receiving funds under an Annual Contribution Contract (ACC). Public housing resident. Any individual who resides in public housing as a signatory on a public housing lease, or as a member of the family of the individual(s) who is the signatory on the public housing lease. Resident-owned business. Any business concern which is owned and controlled by public housing residents. (The term ``resident-owned business'' includes sole proprietorships.) For purposes of this part, ``owned and controlled'' means a business: (1) Which is at least 51 percent owned by one or more public housing residents; and (2) Whose management and daily business operations are controlled by one or more such individuals. All securities which constitute ownership or control of a corporation for purposes of establishing the business as a resident-owned business shall be held directly by the public housing residents. No securities held in trust, or by any guardian for a minor, shall be considered as held by the public housing [[Page 428]] resident in determining the ownership or control of a corporation. [57 FR 20189, May 11, 1992, as amended at 61 FR 5215, Feb. 9, 1996] Subpart B_Contracting With Resident-Owned Businesses Sec. 963.10 Eligible resident-owned businesses. To be eligible for the alternative procurement process provided by this part, a business must meet the following requirements, and must submit evidence to the PHA, in the form described below, or as the PHA may require, that shows how each requirement has been met. (a) Legally formed business. The business shall submit certified copies of any State, county, or municipal licenses that may be required of the business to engage in the type of business activity for which it was formed. Where applicable (as for example, in the case of corporations), the business also shall submit a certified copy of its corporate charter or other organizational document that verifies that the business was properly formed in accordance with State law. (b) Resident-owned business. The business shall submit a certification that it is a resident-owned business as defined by this part. The business shall disclose to the PHA all owners of the business, and each owner's percentage of ownership interest in the business. The business also shall disclose all individuals who possess the power to make the day-to-day, as well as major, decisions on matters of management, policy, and operations (management officials). The business shall identify all owners and management officials who are not public housing residents, and shall disclose any relationship that these owners and officials may have to a business (resident- or non-resident-owned) engaged in the type of business activity with which the resident-owned business is engaged. For purposes of this part, ``relationship'' means employment by, or having an ownership interest in, a business. The business also shall submit such evidence as the PHA may require to verify that the owner or owners identified as public housing residents reside within public housing of the PHA. (c) Responsibility to complete contract. The business shall submit evidence sufficient to demonstrate to the satisfaction of the PHA that the business has the ability to perform successfully under the terms and conditions of the proposed contract. Consideration will be given to various factors, including but not limited to those identified in 24 CFR 85.36(b)(8) (as revised April 1, 2013) and also to such matters as proof of completion of courses in business administration or financial management, and proof of job training or apprenticeship in the particular trade, business, profession, or occupation. (d) Limitation on alternative procurement contract awards. The business shall submit a certification as to the number of contracts awarded, and the dollar amount of each contract award received, under the alternative procurement process provided by this part. A resident- owned business is not eligible to participate in the alternative procurement process provided by this part if the resident-owned business has received under this process one or more contracts with a total combined dollar value of $1,000,000. [57 FR 20189, May 11, 1992, as amended at 59 FR 33895, June 30, 1994; 80 FR 75942, Dec. 7, 2015] Sec. 963.12 Alternative procurement process. (a) Method of procurement. In contracting with resident-owned businesses, the PHA shall follow the applicable method of procurement as set forth in 24 CFR 85.36(d) (as revised April 1, 2013), with solicitation limited to resident-owned businesses. Additionally, the PHA shall ensure that the method of procurement conforms to the procurement standards set forth in 24 CFR 85.36(b) (as revised April 1, 2013). (b) Contract awards. Contracts awarded under this part shall be made only to resident-owned businesses that meet the requirements of Sec. 963.10, and that comply with such other requirements as may be required of a contractor under the particular procurement and the Department's regulations. An award shall not be made to the resident-owned business if the contract [[Page 429]] award exceeds the independent cost estimate required by 24 CFR 85.36(f) (as revised April 1, 2013), and the price normally paid for comparable supplies, services, or construction in the project area. (c) Contract requirements. Any contract entered into between a PHA and a resident-owned business under this part shall comply with: the contract provisions of 24 CFR 85.36(i) (as revised April 1, 2013); the provisions of 24 CFR 85.36(h) (as revised April 1, 2013) or 24 CFR 905.316(d) governing bonding requirements, where applicable; and such other contract terms that may be applicable to the particular procurement under the Department's regulations. In addition to the recordkeeping requirements imposed by 24 CFR 85.36(i) (as revised April 1, 2013), the PHA also shall maintain records sufficient to detail the significant history of the procurement made under this part. These records will include, but are not necessarily limited to the following: The independent cost estimate and comparable price analysis as required by paragraph (b) of this section; the basis for contractor selection, including documentation concerning the eligibility of the selected resident-owned business under Sec. 963.10; and the basis for determining the reasonableness of the proposed contract price. [57 FR 20189, May 11, 1992, as amended at 80 FR 75942, Dec. 7, 2015] PART 964_TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC HOUSING--Table of Contents Subpart A_General Provisions Sec. 964.1 Purpose. 964.3 Applicability and scope. 964.7 Definitions. 964.11 HUD policy on tenant participation. 964.12 HUD policy on the Tenant Opportunities Program (TOP). 964.14 HUD policy on partnerships. 964.15 HUD policy on resident management. 964.16 HUD role in activities under this part. 964.18 HA role in activities under subparts B & C. 964.24 HUD policy on FIC Program. 964.30 Other Program requirements. Subpart B_Tenant Participation 964.100 Role of resident council. 964.105 Role of the jurisdiction-wide resident council. 964.115 Resident council requirements. 964.117 Resident council partnerships. 964.120 Resident management corporation requirements. 964.125 Eligibility for resident council membership. 964.130 Election procedures and standards. 964.135 Resident involvement in HA management operations. 964.140 Resident training. 964.145 Conflict of interest. 964.150 Funding tenant participation. Subpart C_Tenant Opportunities Program 964.200 General. 964.205 Eligibility. 964.210 Notice of funding availability. 964.215 Grant agreement. 964.220 Technical assistance. 964.225 Resident management requirements. 964.230 Audit and administrative requirements. Subpart D_Family Investment Centers (FIC) Program 964.300 General. 964.305 Eligibility. 964.308 Supportive services requirements. 964.310 Audit/compliance requirements. 964.315 HAs role in activities under this part. 964.320 HUD Policy on training, employment, contracting and subcontracting of public housing residents. 964.325 Notice of funding availability. 964.330 Grant set-aside assistance. 964.335 Grant agreement. 964.340 Resident compensation. 964.345 Treatment of income. 964.350 Administrative requirements. Subpart E_Resident Board Members 964.400 Purpose. 964.405 Applicability. 964.410 Additional definitions. 964.415 Resident board members. 964.420 Resident board member may be elected. 964.425 Small public housing agencies. 964.430 Nondiscrimination. Authority: 42 U.S.C. 1437d, 1437g, 1437r, 3535(d). Source: 59 FR 43636, Aug. 24, 1994, unless otherwise noted. [[Page 430]] Subpart A_General Provisions Sec. 964.1 Purpose. The purpose of this part is to recognize the importance of resident involvement in creating a positive living environment and in actively participating in the overall mission of public housing. Sec. 964.3 Applicability and scope. (a) The policies and procedures contained in this part apply to any PHA that has a Public Housing Annual Contributions Contract (ACC) with HUD. This part, except for subpart E, does not apply to PHAs with housing assistance payments contracts with HUD under section 8 of the U.S. Housing Act of 1937. (b) Subpart B of this part contains HUD policies, procedures, and requirements for the participation of residents in public housing operations. These policies, procedures, and requirements apply to all residents participating under this part. (c)(1) Subpart C of this part contains HUD policies, procedures, and requirements for residents participating in the Tenant Opportunities Program (TOP) (replaces the Resident Management Program under Section 20 of the United States Housing Act of 1937). Resident management in public housing is viable and remains an option under TOP. (2) Subpart C of this part is not intended to negate any pre- existing arrangements for resident management in public housing between a PHA and a resident management corporation. On or after September 23, 1994, any new, renewed or renegotiated contracts must meet the requirements of this part, the ACC and all applicable laws and regulations. (d) Subpart D of this part includes requirements for the Family Investment Centers (FIC) Program which was established by Section 22 of the United States Housing Act of 1937 (42 U.S.C. 1437t) to provide families living in public housing and Indian housing with better access to educational and employment opportunities. (e) Subpart E of this part implements section 2(b) of the United States Housing Act of 1937 (42 U.S.C. 1437), which provides for resident membership on the board of directors or similar governing body of a PHA. Subpart E applies to any public housing agency that has a public housing annual contributions contract with HUD or administers tenant-based rental under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). (f) The term ``resident,'' as used throughout this part, is interchangeable with the term ``tenant,'' to reflect the fact that local resident organizations have differing preferences for the terms. Terms such as ``resident council'' and ``tenant council'' and ``resident management'' and ``tenant management'' are interchangeable. Hereafter, for ease of discussion, the rule will use the terms resident, resident council and resident management corporation, as appropriate. [57 FR 43636, Aug. 24, 1994, as amended at 64 FR 56879, Oct. 21, 1999] Sec. 964.7 Definitions. Annual Contributions Contract (ACC). A contract (in the form prescribed by HUD) under which HUD agrees to provide financial assistance, and the HA agrees to comply with HUD requirements for the development and operation of the public housing project. Eligible residents for FIC. A participating resident of a participating HA. If the HA is combining FIC with the Family Self- Sufficiency (FSS) program, the term also means Public Housing FSS and Section 8 families participating in the FSS program. Although Section 8 FSS families are eligible residents for FIC, they do not qualify for income exclusions that are provided for public housing residents participating in employment and supportive service programs. Family Investment Centers (FIC). A facility on or near public housing which provides families living in public housing with better access to educational and employment opportunities to achieve self- sufficiency and independence. FIC service coordinator. Any person who is responsible for: (1) Determining the eligibility and assessing needs of families to be served by the FIC; (2) Assessing training and service needs of eligible residents; [[Page 431]] (3) Working with service providers to coordinate the provision of services on a HA-wide or less than HA-wide basis, and to tailor the services to the needs and characteristics of eligible residents; (4) Mobilizing public and private resources to ensure that the supportive services identified can be funded over the five-year period, at least, following the initial receipt of funding. (5) Monitoring and evaluating the delivery, impact, and effectiveness of any supportive service funded with capital or operating assistance under the FIC program; (6) Coordinating the development and implementation of the FIC program with other self-sufficiency programs, and other education and employment programs; and (7) Performing other duties and functions that are appropriate for providing eligible residents with better access to educational and employment opportunities. HA means the same as Public Housing Agency (PHA). Management. All activities for which the HA is responsible to HUD under the ACC, within the definition of ``operation'' under the Act and the ACC, including the development of resident programs and services. Management contract. A written agreement between a resident management corporation and a HA, as provided by subpart C. Public Housing Agency (PHA) is defined in 24 CFR part 5. Public housing development (Development). The term ``development'' has the same meaning as that provided for ``low-income housing project'' as that term is defined Section 3(b)(1) of the Act. Resident management. The performance of one or more management activities for one or more projects by a resident management corporation under a management contract with the HA. Resident management corporation. An entity that proposes to enter into, or enters into, a contract to manage one or more management activities of a HA. Resident-owned business. Any business concern which is owned and controlled by public housing residents. (The term ``resident-owned business'' includes sole proprietorships.) For purposes of this part, ``owned and controlled'' means a business: (1) Which is at least 51 percent owned by one or more public housing residents; and (2) Whose management and daily business operations are controlled by one or more such individuals. Supportive services for FIC. New or significantly expanded services that are essential to providing families living with children in public housing with better access to educational and employment opportunities to achieve self-sufficiency and independence. Tenant Opportunities Program (TOP). The TOP program is designed to prepare residents to experience the dignity of meaningful work, to own and operate resident businesses, to move toward financial independence, and to enable them to choose where they want to live and engage in meaningful participation in the management of housing developments in which they live. Financial assistance in the form of technical assistance grants is available to RCs/RMCs to prepare to manage activities in their public housing developments. Vacant unit under FIC. A dwelling unit that is not under an effective lease to an eligible family. An effective lease is a lease under which an eligible family has a right to possession of the unit and is being charged rent, even if the amount of any utility allowance equals or exceeds the amount of a total resident payment that is based on income and, as a result, the amount paid by the family to the HA is zero. [59 FR 43636, Aug. 24, 1994, as amended at 61 FR 5215, Feb. 9, 1996] Sec. 964.11 HUD policy on tenant participation. HUD promotes resident participation and the active involvement of residents in all aspects of a HA's overall mission and operation. Residents have a right to organize and elect a resident council to represent their interests. As long as proper procedures are followed, the HA shall recognize the duly elected resident council to participate fully through a working relationship with [[Page 432]] the HA. HUD encourages HAs and residents to work together to determine the most appropriate ways to foster constructive relationships, particularly through duly-elected resident councils. Sec. 964.12 HUD policy on the Tenant Opportunities Program (TOP). HUD promotes TOP programs to support activities that enable residents to improve the quality of life and resident satisfaction, and obtain other social and economic benefits for residents and their families. Tenant opportunity programs are proven to be effective in facilitating economic uplift, as well as in improving the overall conditions of the public housing communities. Sec. 964.14 HUD policy on partnerships. HUD promotes partnerships between residents and HAs which are an essential component to building, strengthening and improving public housing. Strong partnerships are critical for creating positive changes in lifestyles thus improving the quality of life for public housing residents, and the surrounding community. Sec. 964.15 HUD policy on resident management. It is HUD's policy to encourage resident management. HUD encourages HAs, resident councils and resident management corporations to explore the various functions involved in management to identify appropriate opportunities for contracting with a resident management corporation. Potential benefits of resident-managed entities include improved quality of life, experiencing the dignity of meaningful work, enabling residents to choose where they want to live, and meaningful participation in the management of the housing development. Sec. 964.16 HUD role in activities under this part. (a) General. Subject to the requirements of this part and other requirements imposed on HAs by the ACC, statute or regulation, the form and extent of resident participation including resident management are local decisions to be made jointly by resident councils/resident management corporations and their HAs. HUD will promote tenant participation and tenant opportunities programs, and will provide additional guidance, as necessary and appropriate. In addition, HUD will endeavor to provide technical assistance in connection with these initiatives. (b) Monitoring. HUD shall ensure that the requirements under this part are operating efficiently and effectively. Sec. 964.18 HA role in activities under subparts B & C. (a) HAs with 250 units or more. (1) A HA shall officially recognize a duly elected resident council as the sole representative of the residents it purports to represent, and support its tenant participation activities. (2) When requested by residents, a HA shall provide appropriate guidance to residents to assist them in establishing and maintaining a resident council. (3) A HA may consult with residents, or resident councils (if they exist), to determine the extent to which residents desire to participate in activities involving their community, including the management of specific functions of a public housing development that may be mutually agreeable to the HA and the resident council/resident management corporation. (4) A HA shall provide the residents or any resident council with current information concerning the HA's policies on tenant participation in management. (5) If requested, a HA should provide a duly recognized resident council office space and meeting facilities, free of charge, preferably within the development it represents. If there is no community or rental space available, a request to approve a vacant unit for this non- dwelling use will be considered on a case-by-case basis. (6) If requested, a HA shall negotiate with the duly elected resident council on all uses of community space for meetings, recreation and social services and other resident participation activities pursuant to HUD guidelines. Such agreements shall be put into a written document to be signed by the HA and the resident council. If a HA fails to negotiate with a resident council in good faith or, after negotiations, refuses to permit such usage of community space, the resident council may [[Page 433]] file an informal appeal with HUD, setting out the circumstances and providing copies of relevant materials evidencing the resident council's efforts to negotiate a written agreement. HUD shall require the HA to respond with a report stating the HA's reasons for rejecting the request or for refusing to negotiate. HUD shall require the parties (with or without direct HUD participation) to undertake or to resume negotiations on an agreement. If no resolution is achieved within 90 days from the date HUD required the parties to undertake or resume such negotiations, HUD shall serve notice on both parties that administrative remedies have been exhausted (except that, pursuant to mutual agreement of the parties, the time for negotiations may be extended by no more than an additional 30 days). (7) In no event shall HUD or a HA recognize a competing resident council once a duly elected resident council has been established. Any funding of resident activities and resident input into decisions concerning public housing operations shall be made only through the officially recognized resident council. (8) The HA shall ensure open communication and frequent meetings between HA management and resident councils and shall encourage the formation of joint HA management-resident committees to work on issues and planning. (9) The resident council shall hold frequent meetings with the residents to ensure that residents have input, and are aware and actively involved in HA management-resident council decisions and activities. (10) The HA and resident council shall put in writing in the form of a Memorandum of Understanding the elements of their partnership agreement and it shall be updated at least once every three (3) years. (11) The HA, in collaboration with the resident councils, shall assume the lead role for assuring maximum opportunities for skills training for public housing residents. To the extent possible, the training resources should be local to ensure maximum benefit and on- going access. (b) HAs with fewer than 250 units. (1) HAs with fewer than 250 units of public housing have the option of participating in programs under this part. (2) HAs shall not deny residents the opportunity to organize. If the residents decide to organize and form a resident council, the HA shall comply with the following: (i) A HA shall officially recognize a duly elected resident council as the sole representative of the residents it purports to represent, and support its tenant participation activities. (ii) When requested by residents, a HA shall provide appropriate guidance to residents to assist them in establishing and maintaining a resident council. (iii) A HA shall provide the residents or any resident council with current information concerning the HA's policies on tenant participation in management. (iv) In no event shall HUD or a HA officially recognize a competing resident council once a duly elected resident council has been established. If a duly elected resident council has been formed, any input into changes concerning public housing operations shall be made only through the officially recognized resident council. Sec. 964.24 HUD policy on FIC Program. HUD promotes Family Investment Centers which provide better access to educational and employment opportunities for residents living in public housing. HUD encourages resident involvement in the FIC Program and promotes resident-HA partnerships to achieve mutual goals. Sec. 964.30 Other Program requirements. In addition to the requirements set forth in 24 CFR part 5, the following Federal requirements apply to this program: (a) Affirmative Outreach. (1) The Affirmative Fair Housing Marketing Program requirements of 24 CFR part 200, subpart M and the implementing regulations at 24 CFR part 108; and (2) The fair housing advertising and poster guidelines at 24 CFR parts 109 and 110. (b) Title II of the Americans with Disabilities Act of 1990 (42 U.S.C. 12131) [[Page 434]] and implementing regulations at 28 CFR part 35. [61 FR 5216, Feb. 9, 1996] Subpart B_Tenant Participation Sec. 964.100 Role of resident council. The role of a resident council is to improve the quality of life and resident satisfaction and participate in self-help initiatives to enable residents to create a positive living environment for families living in public housing. Resident councils may actively participate through a working partnership with the HA to advise and assist in all aspects of public housing operations. Sec. 964.105 Role of the jurisdiction-wide resident council. (a) Jurisdiction-wide resident council. Resident councils may come together to form an organization which can represent the interest of residents residing in units under a HA's jurisdiction. This can be accomplished by the presidents of duly elected resident councils forming an organization, by resident councils electing a representative to the organization, or through jurisdiction-wide elections. If duly elected resident councils form such an organization, the HA shall recognize it as the voice of authority-wide residents for input into housing authority policy making. (b) Function. The jurisdiction-wide council may advise the Board of Commissioners and executive director in all areas of HA operations, including but not limited to occupancy, general management, maintenance, security, resident training, resident employment, social services and modernization priorities. (c) Cooperation with other groups. There shall be regularly scheduled meetings between the HA and the local duly elected resident council, and the jurisdiction-wide resident council to discuss problems, plan activities and review progress. Sec. 964.115 Resident council requirements. A resident council shall consist of persons residing in public housing and must meet each of the following requirements in order to receive official recognition from the HA/HUD, and be eligible to receive funds for resident council activities, and stipends for officers for their related costs for volunteer work in public housing: (a) It may represent residents residing: (1) In scattered site buildings; (2) In areas of contiguous row houses; or (3) In one or more contiguous buildings; (4) In a development; or (5) In a combination of these buildings or developments; (b) It must adopt written procedures such as by-laws, or a constitution which provides for the election of residents to the governing board by the voting membership of the residents residing in public housing, described in paragraph (b) of this section, on a regular basis but at least once every three (3) years. The written procedures must provide for the recall of the resident board by the voting membership. These provisions shall allow for a petition or other expression of the voting membership's desire for a recall election, and set the number of percentage of voting membership (``threshold'') who must be in agreement in order to hold a recall election. This threshold shall not be less than 10 percent of the voting membership. (c) It must have a democratically elected governing board that is elected by the voting membership. At a minimum, the governing board should consist of five (5) elected board members. The voting membership must consist of heads of households (any age) and other residents at least 18 years of age or older and whose name appears on a lease for the unit in the public housing that the resident council represents. Sec. 964.117 Resident council partnerships. A resident council may form partnerships with outside organizations, provided that such relationships are complementary to the resident council in its duty to represent the residents, and provided that such outside organizations do not become the governing entity of the resident council. [[Page 435]] Sec. 964.120 Resident management corporation requirements. A resident management corporation must consist of residents residing in public housing and have each of the following characteristics in order to receive official recognition by the HA and HUD: (a) It shall be a non-profit organization that is validly incorporated under the laws of the State in which it is located; (b) It may be established by more than one resident council, so long as each such council: (1) Approves the establishment of the corporation; and (2) Has representation on the Board of Directors of the corporation; (c) It shall have an elected Board of Directors, and elections must be held at least once every three (3) years; (d) Its by-laws shall require the Board of Directors to include resident representatives of each resident council involved in establishing the corporation; include qualifications to run for office, frequency of elections, procedures for recall, and term limits if desired. (e) Its voting members shall be heads of households (any age) and other residents at least 18 years of age and whose name appears on the lease of a unit in the public housing represented by the resident management corporation; (f) Where a resident council already exists for the development, or a portion of the development, the resident management corporation shall be approved by the resident council board and a majority of the residents. If there is no resident council, a majority of the residents of the public housing development it will represent must approve the establishment of such a corporation for the purposes of managing the project; and (g) It may serve as both the resident management corporation and the resident council, so long as the corporation meets the requirements of this part for a resident council. Sec. 964.125 Eligibility for resident council membership. (a) Any member of a public housing household, not including members of a non-public housing over-income family as defined in Sec. 960.102 of this chapter, whose name is on the lease of a unit in the public housing development and meets the requirements of the by-laws is eligible to be a member of a resident council. The resident council may establish additional criteria that are non-discriminatory and do not infringe on rights of other residents in the development. Such criteria must be stated in the by-laws or constitution as appropriate. (b) The right to vote for resident council board shall be limited to designated heads of households (any age) and other members of the household who are 18 years or older whose name appears on the lease of a unit in the public housing development represented by the resident council. (c) Any qualified voting member of a resident council who meets the requirements described in the by-laws and is in compliance with the lease may seek office and serve on the resident council governing board. [59 FR 43636, Aug. 24, 1994, as amended at 88 FR 9675, Feb. 14, 2023] Sec. 964.130 Election procedures and standards. At a minimum, a resident council may use local election boards/ commissions. The resident council shall use an independent third-party to oversee elections and recall procedures. (a) Resident councils shall adhere to the following minimum standards regarding election procedures: (1) All procedures must assure fair and frequent elections of resident council members--at least once every three years for each member. (2) Staggered terms for resident council governing board members and term limits shall be discretionary with the resident council. (3) Each resident council shall adopt and issue election and recall procedures in their by-laws. (4) The election procedures shall include qualifications to run for office, frequency of elections, procedures for recall, and term limits if desired. (5) All voting members of the resident community must be given sufficient notice (at least 30 days) for nomination and election. The notice should [[Page 436]] include a description of election procedures, eligibility requirements, and dates of nominations and elections. (b) If a resident council fails to satisfy HUD minimum standards for fair and frequent elections, or fails to follow its own election procedures as adopted, HUD shall require the HA to withdraw recognition of the resident council and to withhold resident services funds as well as funds provided in conjunction with services rendered for resident participation in public housing. (c) HAs shall monitor the resident council election process and shall establish a procedure to appeal any adverse decision relating to failure to satisfy HUD minimum standards. Such appeal shall be submitted to a jointly selected third-party arbitrator at the local level. If costs are incurred by using a third-party arbitrator, then such costs should be paid from the HAs resident services funds pursuant to Sec. 964.150. Sec. 964.135 Resident involvement in HA management operations. Residents shall be involved and participate in the overall policy development and direction of Public Housing operations. (a) Resident management corporations (RMCs) may contract with HAs to perform one or more management functions provided the resident entity has received sufficient training and/or has staff with the necessary expertise to perform the management functions and provided the RMC meets bonding and licensing requirements. (b) Residents shall be actively involved in a HA's decision-making process and give advice on matters such as modernization, security, maintenance, resident screening and selection, and recreation. (c) While a HA has responsibility for management operations, it shall ensure strong resident participation in all issues and facets of its operations through the duly elected resident councils at public housing developments, and with jurisdiction-wide resident councils. (d) A HA shall work in partnership with the duly elected resident councils. (e) HAs, upon request from the duly elected resident council, shall ensure that the duly elected resident council officers as defined in subpart B of this part, and other residents in the development are fully trained and involved in developing and implementing Federal programs including but not limited to Comprehensive Improvement Assistance Program (CIAP), Comprehensive Grant Program, Urban Revitalization Demonstration, Drug Elimination, and FIC. (f) HAs shall involve resident council officers and other interested residents at the development through education and direct participation in all phases of the budgetary process. (g) Resident council officers shall be encouraged to become involved in the resident screening and selection process for prospective residents at the development. Those selected to perform resident screening and selection functions must be trained by the HA in resident screening and selection and must sign a legal document committing to confidentiality. Sec. 964.140 Resident training. (a) Resident training opportunities. HUD encourages a partnership between the residents, the HA and HUD, as well as with the public and non-profit sectors to provide training opportunities for public housing residents. The categories in which training could occur include, but are not limited to: (1) Community organization and leadership training; (2) Organizational development training for Resident Management Corporations and duly elected Resident Councils; (3) Public housing policies, programs, rights and responsibilities training; and (4) Business entrepreneurial training, planning and job skills. (b) Local training resources. HUD encourages the use of local training resources to ensure the ongoing accessibility and availability of persons to provide training and technical assistance. Possible training resources may include: (1) Resident organizations; (2) Housing authorities; [[Page 437]] (3) Local community colleges, vocational schools; and (4) HUD and other Federal agencies and other local public, private and non-profit organizations. Sec. 964.145 Conflict of interest. Resident council officers can not serve as contractors or employees if they are in policy making or supervisory positions at the HA. Sec. 964.150 Funding tenant participation. (a) Funding duly elected resident councils and jurisdiction wide resident councils. (1) The HA shall provide funds it receives for this purpose to the duly elected resident council at each development and/or those jurisdiction-wide councils eligible to receive the resident portion of the tenant services account to use for resident participation activities. This shall be an addition to the Performance Funding System (PFS), as provided by 24 CFR part 990, to permit HAs to fund $25 per unit per year for units represented by duly elected resident councils for resident services, subject to the availability of appropriations. Of this amount, $15 per unit per year would be provided to fund tenant participation activities under subpart B of this part for duly elected resident councils and/or jurisdiction-wide councils and $10 per unit per year would be used by the HA to pay for costs incurred in carrying out tenant participation activities under subpart B of this part, including the expenses for conducting elections, recalls or arbitration required under Sec. 964.130 in subpart B. This will guarantee the resources necessary to create a bona fide partnership among the duly elected resident councils, the HA and HUD. Where both local and jurisdiction- wide councils exist, the distribution will be agreed upon by the HA and the respective councils. (2) If funds are available through appropriations, the HA must provide tenant services funding to the duly elected resident councils regardless of the HA's financial status. The resident council funds shall not be impacted or restricted by the HA financial status and all said funds must be used for the purpose set forth in subparts B and C of this part. (3) The HA and the duly elected resident council at each development and/or those jurisdiction-wide councils shall collaborate on how the funds will be distributed for tenant participation activities. If disputes regarding funding decisions arise between the parties, the matter shall be referred to the Field Office for intervention. HUD Field Office shall require the parties to undertake further negotiations to resolve the dispute. If no resolution is achieved within 90 days from the date of the Field Office intervention, the Field Office shall refer the matter to HUD Headquarters for final resolution. (b) Stipends. (1) HUD encourages HAs to provide stipends to resident council officers who serve as volunteers in their public housing developments. The amount of the stipend, up to $200 per month/per officer, shall be decided locally by the resident council and the HA. Subject to appropriations, the stipends will be funded from the resident council's portion of the operating subsidy funding for resident council expenses ($15.00 per unit per year). (2) Pursuant to Sec. 913.106, stipends are not to be construed as salaries and should not be included as income for calculation of rents, and are not subject to conflict of interest requirements. (3) Funding provided by a HA to a duly elected resident council may be made only under a written agreement between the HA and a resident council, which includes a resident council budget and assurance that all resident council expenditures will not contravene provisions of law and will promote serviceability, efficiency, economy and stability in the operation of the local development. The agreement must require the local resident council to account to the HA for the use of the funds and permit the HA to inspect and audit the resident council's financial records related to the agreement. [[Page 438]] Subpart C_Tenant Opportunities Program Sec. 964.200 General. (a) The Tenant Opportunities Program (TOP) provides technical assistance for various activities, including but not limited to resident management, for resident councils/resident management corporations as authorized by Section 20 of the U.S. Housing Act of 1937. The TOP provides opportunities for resident organizations to improve living conditions and resident satisfaction in public housing communities. (b) This subpart establishes the policies, procedures and requirements for participating in the TOP with respect to applications for funding for programs identified in this subpart. (c) This subpart contains the policies, procedures and requirements for the resident management program as authorized by section 20 of the U.S. Housing Act of 1937. Sec. 964.205 Eligibility. (a) Resident councils/resident management corporations. Any eligible resident council/resident management corporation as defined in subpart B of this part is eligible to participate in a program administered under this subpart. (b) Activities. Activities to be funded and carried out by an eligible resident council or resident management corporation, as defined in subpart B of this part, must improve the living conditions and public housing operations and may include any combination of, but are not limited to, the following: (1) Resident capacity building. (i) Training Board members in community organizing, Board development, and leadership training; (ii) Determining the feasibility of resident management enablement for a specific project or projects; and (iii) Assisting in the actual creation of an RMC, such as consulting and legal assistance to incorporate, preparing by-laws and drafting a corporate charter. (2) Resident management. (i) Training residents, as potential employees of an RMC, in skills directly related to the operation, management, maintenance and financial systems of a project; (ii) Training of residents with respect to fair housing requirements; and (iii) Gaining assistance in negotiating management contracts, and designing a long-range planning system. (3) Resident management business development. (i) Training related to resident-owned business development and technical assistance for job training and placement in RMC developments; (ii) Technical assistance and training in resident managed business development through: (A) Feasibility and market studies; (B) Development of business plans; (C) Outreach activities; and (D) Innovative financing methods including revolving loan funds; and (iii) Legal advice in establishing a resident managed business entity. (4) Social support needs (such as self-sufficiency and youth initiatives). (i) Feasibility studies to determine training and social services needs; (ii) Training in management-related trade skills, computer skills, etc; (iii) Management-related employment training and counseling; (iv) Coordination of support services; (v) Training for programs such as child care, early childhood development, parent involvement, volunteer services, parenting skills, before and after school programs; (vi) Training programs on health, nutrition and safety; (vii) Workshops for youth services, child abuse and neglect prevention, tutorial services, in partnership with community-based organizations such as local Boys and Girls Clubs, YMCA/YWCA, Boy/Girl Scouts, Campfire and Big Brother/Big Sisters, etc. Other HUD programs such as the Youth Sports Program and the Public Housing Drug Elimination Programs also provide funding in these areas; (viii) Training in the development of strategies to successfully implement a youth program. For example, assessing the needs and problems of the youth, improving youth initiatives that are currently active, and training youth, housing authority staff, resident management corporations and resident councils on youth initiatives and program activities; and (5) Homeownership Opportunity. Determining feasibility for homeownership [[Page 439]] by residents, including assessing the feasibility of other housing (including HUD owned or held single or multi-family) affordable for purchase by residents. (6) General. (i) Required training on HUD regulations and policies governing the operation of low-income public housing including contracting/procurement regulations, financial management, capacity building to develop the necessary skills to assume management responsibilities at the project and property management; (ii) Purchasing hardware, i.e., computers and software, office furnishings and supplies, in connection with business development. Every effort must be made to acquire donated or discounted hardware; (iii) Training in accessing other funding sources; and (iv) Hiring trainers or other experts (RCs/RMCs must ensure that this training is provided by a qualified housing management specialist, a community organizer, the HA, or other sources knowledgeable about the program). Sec. 964.210 Notice of funding availability. A Notice of Funding Availability shall be published periodically in the Federal Register containing the amounts of funds available, funding criteria, where to obtain and submit applications, and the deadline for submissions. Sec. 964.215 Grant agreement. (a) General. HUD shall enter into a grant agreement with the recipient of a technical assistance grant which defines the legal framework for the relationship between HUD and a resident council or resident management corporation for the proposed funding. (b) Term of grant agreement. A grant shall be for a term of three to five years (3-5 years), and renewable at the expiration of the term. Sec. 964.220 Technical assistance. (a) Financial assistance. HUD will provide financial assistance, to the extent available, to resident councils or resident management corporations for technical assistance and training to further the activities under this subpart. (b) Requirements for a management specialist. If a resident council or resident management corporation seeks to manage a development, it must select, in consultation with the HA, a qualified housing management specialist to assist in determining the feasibility of, and to help establish, a resident management corporation and to provide training and other duties in connection with the daily operations of the project. Sec. 964.225 Resident management requirements. The following requirements apply when a HA and its residents are interested in providing for resident performance of several management functions in one or more projects. (a) Resident management corporation responsibilities. Resident councils interested in contracting with a HA must establish a resident management corporation that meets the requirements for such a corporation, as specified in subpart B. The RMC and its employees must demonstrate their ability and skill to perform in the particular areas of management pursuant to the management contract. (b) HA responsibilities. HAs shall give full and serious consideration to resident management corporations seeking to enter into a management contract with the HA. A HA shall enter into good-faith negotiations with a corporation seeking to contract to provide management services. (c) Duty to bargain in good faith. If a HA refuses to negotiate with a resident management corporation in good faith or, after negotiations, refuses to enter into a contract, the corporation may file an informal appeal with HUD, setting out the circumstances and providing copies of relevant materials evidencing the corporation's efforts to negotiate a contract. HUD shall require the HA to respond with a report stating the HA's reasons for rejecting the corporation's contract offer or for refusing to negotiate. Thereafter, HUD shall require the parties (with or without direct HUD participation) to undertake [[Page 440]] or to resume negotiations on a contract providing for resident management, and shall take such other actions as are necessary to resolve the conflicts between the parties. If no resolution is achieved within 90 days from the date HUD required the parties to undertake or resume such negotiations, HUD shall serve notice on both parties that administrative remedies have been exhausted (except that, pursuant to mutual agreement of the parties, the time for negotiations may be extended by no more than an additional 30 days). (d) Management contract. A management contract between the HA and a resident management corporation is required for property management. The HA and the resident management corporation may agree to the performance by the corporation of any or all management functions for which the HA is responsible to HUD under the ACC and any other functions not inconsistent with the ACC and applicable state and local laws, regulations and licensing requirements. (e) Procurement requirements. The management contract shall be treated as a contracting out of services, and must be subject to any provision of a collective bargaining agreement regarding the contracting out of services to which the HA is subject. Provisions on competitive bidding and requirements of prior written HUD approval of contracts contained in the ACC do not apply to the decision of a HA to contract with a RMC. (f) Rights of families; operation of project. If a resident management corporation is approved by the tenant organization representing one or more buildings or an area of row houses that are part of a public housing project for purposes of part 941 of this chapter, the resident management program may not, as determined by the HA, interfere with the rights of other residents of such project or harm the efficient operation of such project. (g) Comprehensive improvement assistance with RMCs. (1) The HA may enter into a contract with the RMC to provide comprehensive improvement assistance under part 968 of this chapter to modernize a project managed by the RMC. (2) The HA shall not retain, for any administrative or other reason, any portion of the comprehensive improvement assistance provided, unless the PHA and the RMC provide otherwise by contract. (3) In assessing the modernization needs of its projects under 24 CFR part 968, or other grant mechanisms established by the Housing and Community Development Act of 1987, the HAs must consult with the tenant management corporation regarding any project managed by the corporation, in order to determine the modernization needs and preferences of resident-managed projects. Evidence of this required consultation must be included with a HA's initial submission to HUD. (h) Direct provision of operating and capital assistance to RMC--(1) Direct provision of assistance to RMC. The ACC shall provide for the direct provision of operating and capital assistance by HUD to an RMC if: (i) The RMC petitions HUD for the release of funds; (ii) The contract provides for the RMC to assume the primary management responsibilities of the PHA; (iii) The RMC has been designated as at least a ``standard performer'' under the Public Housing Assessment System (PHAS) (see 24 CFR part 902); and (iv) The RMC is not in violation of any financial, accounting, procurement, civil rights, fair housing or other program requirements that HUD determines call into question the capability of the RMC to effectively discharge its responsibilities under the contract. (2) Use of assistance. Any direct capital or operating assistance provided to the RMC must be used for purposes of performing eligible activities with respect to public housing as may be provided under the contract. (3) Responsibilities of PHA. If HUD provides direct funding to a RMC under paragraph (h)(1) of this section, the PHA is not responsible for the actions of the RMC. (i) Prohibited activities. A HA may not contract for assumption by the resident management corporation of the HA's underlying responsibilities to HUD under the ACC. [[Page 441]] (j) Bonding, insurance, and licensing--(1) Bonding and insurance. Before assuming any management responsibility under its contract, the RMC must provide fidelity bonding and insurance, or equivalent protection that is adequate (as determined by HUD and the PHA) to protect HUD and the PHA against loss, theft, embezzlement, or fraudulent acts on the part of the RMC or its employees. (2) Licensing and other local requirements. An RMC must be in compliance with any local licensing, or other local requirement, governing the qualifications or operations of a property manager. (k) Waiver of HUD requirements. Upon the joint request of a resident management corporation and the HA, HUD may waive any requirement that HUD has established and that is not required by law, if HUD determines, after consultation with the resident management corporation and the HA, that the requirement unnecessarily increases the costs to the project or restricts the income of the project; and that the waiver would be consistent with the management contract and any applicable collective bargaining agreement. Any waiver granted to a resident management corporation under this section will apply as well to the HA to the extent the waiver affects the HA's remaining responsibilities relating to the resident management corporation's project. (l) Monitoring of RMC performance. The HA must review periodically (but not less than annually) the management corporation's performance to ensure that it complies with all applicable requirements and meets agreed-upon standards of performance. (The method of review and criteria used to judge performance should be specified in the management contract.) [59 FR 43636, Aug. 24, 1994, as amended at 65 FR 42515, July 10, 2000] Sec. 964.230 Audit and administrative requirements. (a) TOP grant recipients. The HUD Inspector General, the Comptroller General of the United States, or any duly authorized representative shall have access to all records required to be retained by this subpart or by any agreement with HUD for the purpose of audit or other examinations. (1) Grant recipients must comply with the requirements of 2 CFR part 200, as applicable. (2) A final audit shall be required of the financial statements made pursuant to this subpart by a Certified Public Accountant (CPA), in accordance with generally accepted government audit standards. A written report of the audit must be forwarded to HUD within 60 days of issuance. (b) Resident management corporations. Resident management corporations who have entered into a contract with a HA with respect to management of a development(s) must comply with the requirements of 2 CFR part 200, as applicable. Resident management corporations managing a development(s) must be audited annually by a licensed certified public accountant, designated by the corporation, in accordance with generally accepted government audit standards. A written report of each audit must be forwarded to HUD and the HA within 30 days of issuance. These requirements are in addition to any other Federal law or other requirement that would apply to the availability and audit of books and records of resident management corporations under this part. [59 FR 43636, Aug. 24, 1994, as amended at 80 FR 75942, Dec. 7, 2015] Subpart D_Family Investment Centers (FIC) Program Sec. 964.300 General. The Family Investment Centers Program provides families living in public housing with better access to educational and employment opportunities by: (a) Developing facilities in or near public housing for training and support services; (b) Mobilizing public and private resources to expand and improve the delivery of such services; (c) Providing funding for such essential training and support services that cannot otherwise be funded; and (d) Improving the capacity of management to assess the training and service needs of families, coordinate [[Page 442]] the provision of training and services that meet such needs, and ensure the long-term provision of such training and services. FIC provides funding to HAs to access educational, housing, or other social service programs to assist public housing residents toward self-sufficiency. Sec. 964.305 Eligibility. (a) Public Housing Authorities. HAs may apply to establish one or more FICs for more than one public housing development. (b) FIC Activities. Activities that may be funded and carried out by eligible HAs, as defined in Sec. 964.305(a) and Sec. 964.310(a) may include: (1) The renovation, conversion, or combination of vacant dwelling units in a HA development to create common areas to accommodate the provision of supportive services; (2) The renovation of existing common areas in a HA development to accommodate the provision of supportive services; (3) The acquisition, construction or renovation of facilities located near the premises of one or more HA developments to accommodate the provision of supportive services; (4) The provision of not more than 15 percent of the total cost of supportive services (which may be provided directly to eligible residents by the HA or by contract or lease through other appropriate agencies or providers), but only if the HA demonstrates that: (i) The supportive services are appropriate to improve the access of eligible residents to employment and educational opportunities; and (ii) The HA has made diligent efforts to use or obtain other available resources to fund or provide such services; and (5) The employment of service coordinators. (c) Follow up. A HA must demonstrate a firm commitment of assistance from one or more sources ensuring that supportive services will be provided for not less than one year following the completion of activities. (d) Environmental Review. Any environmental impact regarding eligible activities will be addressed through an environmental review of that activity as required by 24 CFR part 50, including the applicable related laws and authorities under Sec. 50.4, to be completed by HUD, to ensure that any environmental impact will be addressed before assistance is provided to the HA. Grantees will be expected to adhere to all assurances applicable to environmental concerns. Sec. 964.308 Supportive services requirements. HAs shall provide new or significantly expanded services essential to providing families in public housing with better access to educational and employment opportunities to achieve self-sufficiency and independence. HAs applying for funds to provide supportive services must demonstrate that the services will be provided at a higher level than currently provided. Supportive services may include: (a) Child care, of a type that provides sufficient hours of operation and serves appropriate ages as needed to facilitate parental access to education and job opportunities; (b) Employment training and counseling (e.g., job training, preparation and counseling, job development and placement, and follow-up assistance after job placement); (c) Computer skills training; (d) Education (e.g., remedial education, literacy training, completion of secondary or post-secondary education, and assistance in the attainment of certificates of high school equivalency); (e) Business entrepreneurial training and counseling; (f) Transportation, as necessary to enable any participating family member to receive available services or to commute to his or her place of employment; (g) Personal welfare (e.g., substance/alcohol abuse treatment and counseling, self-development counseling, etc.); (h) Supportive Health Care Services (e.g., outreach and referral services); and (i) Any other services and resources, including case management, that are determined to be appropriate in assisting eligible residents. [[Page 443]] Sec. 964.310 Audit/compliance requirements. HAs cannot have serious unaddressed, outstanding Inspector General audit findings or fair housing and equal opportunity monitoring review findings or Field Office management review findings. In addition, the HA must be in compliance with civil rights laws and equal opportunity requirements. A HA will be considered to be in compliance if: (a) As a result of formal administrative proceedings, there are no outstanding findings of noncompliance with civil rights laws unless the HA is operating in compliance with a HUD-approved compliance agreement designed to correct the area(s) of noncompliance; (b) There is no adjudication of a civil rights violation in a civil action brought against it by a private individual, unless the HA demonstrates that it is operating in compliance with a court order, or implementing a HUD-approved resident selection and assignment plan or compliance agreement, designed to correct the area(s) of noncompliance; (c) There is no deferral of Federal funding based upon civil rights violations; (d) HUD has not deferred application processing by HUD under Title VI of the Civil Rights Act of 1964, the Attorney General's Guidelines (28 CFR 50.3) and HUD's Title VI regulations (24 CFR 1.8) and procedures (HUD Handbook 8040.1) [HAs only] or under Section 504 of the Rehabilitation Act of 1973 and HUD regulations (24 CFR 8.57) [HAs and IHAs]; (e) There is no pending civil rights suit brought against the HA by the Department of Justice; and (f) There is no unresolved charge of discrimination against the HA issued by the Secretary under Section 810(g) of the Fair Housing Act, as implemented by 24 CFR 103.400. Sec. 964.315 HAs role in activities under this part. The HAs shall develop a process that assures that RC/RMC representatives and residents are fully briefed and have an opportunity to comment on the proposed content of the HA's application for funding. The HA shall give full and fair consideration to the comments and concerns of the residents. The process shall include: (a) Informing residents of the selected developments regarding the preparation of the application, and providing for residents to assist in the development of the application. (b) Once a draft application has been prepared, the HA shall make a copy available for reading in the management office; provide copies of the draft to any resident organization representing the residents of the development(s) involved; and provide adequate opportunity for comment by the residents of the development and their representative organizations prior to making the application final. (c) After HUD approval of a grant, notify the duly elected resident organization and if none exists, notify the residents of the development of the approval of the grant; provide notification of the availability of the HUD-approved implementation schedule in the management office for reading; and develop a system to facilitate a regular resident role in all aspects of program implementation. Sec. 964.320 HUD Policy on training, employment, contracting and subcontracting of public housing residents. In accordance with Section 3 of the Housing and Urban Development Act of 1968 and the implementing regulations at 24 CFR part 75, PHAs, their contractors and subcontractors shall make best efforts, consistent with existing Federal, State, and local laws and regulations, to give low and very low-income persons the training and employment opportunities generated by Section 3 covered assistance (as this term is defined in 24 CFR 75.3) and to give Section 3 business concerns the contracting opportunities generated by Section 3 covered assistance. [85 FR 61568, Sept. 29, 2020] Sec. 964.325 Notice of funding availability. A Notice of Funding Availability will be published periodically in the Federal Register containing the amounts of funds available, funding criteria, [[Page 444]] where to obtain and submit applications, the deadline for the submissions, and further explanation of the selection criteria. Sec. 964.330 Grant set-aside assistance. The Department may make available five percent (5%) of any amounts available in each fiscal year (subsequent to the first funding cycle) available to eligible HAs to supplement grants previously awarded under this program. These supplemental grants would be awarded if the HA demonstrates that the funds cannot otherwise be obtained and are needed to maintain adequate levels of services to residents. Sec. 964.335 Grant agreement. (a) General. HUD will enter into a grant agreement with the recipients of a Family Investment Centers grant which defines the legal framework for the relationship between HUD and a HA. (b) Term of grant agreement. A grant will be for a term of three to five years depending upon the tasks undertaken, as defined under this subpart. Sec. 964.340 Resident compensation. Residents employed to provide services or renovation or conversion work funded under this program shall be paid at a rate not less than the highest of: (a) The minimum wage that would be applicable to the employees under the Fair Labor Standards Act of 1938 (FLSA), if section 6(a)(1) of the FLSA applied to the resident and if the resident were not exempt under section 13 of the FLSA; (b) The State or local minimum wage for the most nearly comparable covered employment; or (c) The prevailing rate of pay for persons employed in similar public occupations by the same employer. Sec. 964.345 Treatment of income. Program participation shall begin on the first day the resident enters training or begins to receive services. Furthermore, the earnings of and benefits to any HA resident resulting from participation in the FIC program shall not be considered as income in computing the resident's total annual income that is used to determine the resident rental payment during: (a) The period that the resident participates in the program; and (b) The period that begins with the commencement of employment of the resident in the first job acquired by the resident after completion of the program that is not funded by assistance under the 1937 Act, and ends on the earlier of: (1) The date the resident ceases to continue employment without good cause; or (2) The expiration of the 18-month period beginning on the date of commencement of employment in the first job not funded by assistance under this program. (See Sec. 913.106, Annual Income.) This provision does not apply to residents participating in the Family Self-Sufficiency Program who are utilizing the escrow account. Sec. 964.350 Administrative requirements. The HUD Inspector General, the Comptroller General of the United States, or any duly authorized representative shall have access to all records required to be retained by this subpart or by any agreements with HUD for the purpose of audit or other examinations. (a) Each HA receiving a grant shall submit to HUD an annual progress report, participant evaluation and assessment data and other information, as needed, regarding the effectiveness of FIC in achieving self-sufficiency. (b) The policies, guidelines, and requirements of 2 CFR part 200 are applicable with respect to the acceptance and use of assistance by private nonprofit organizations. [59 FR 43636, Aug. 24, 1994, as amended at 80 FR 75942, Dec. 7, 2015] Subpart E_Resident Board Members Source: 64 FR 56879, Oct. 21, 1999, unless otherwise noted. Sec. 964.400 Purpose. The purpose of this subpart is to implement section 2(b) of the United States Housing Act of 1937 (42 U.S.C. 1437). [[Page 445]] Sec. 964.405 Applicability. (a) General. Except as described in paragraph (b) of this section, this subpart applies to any public housing agency that has a public housing annual contributions contract with HUD or administers tenant- based rental assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). (b) Exceptions. The requirements of this subpart do not apply to a public housing agency that is: (1) Located in a State that requires the members of a governing board to be salaried and to serve on a full-time basis; or (2) Not governed by a governing board. Sec. 964.410 Additional definitions. The following additional definitions apply to this subpart only: Directly assisted. Directly assisted means a public housing resident or a recipient of housing assistance in the tenant-based section 8 program. Direct assistance does not include any State financed housing assistance or Section 8 project-based assistance. Eligible resident. An eligible resident is a person: (1) Who is directly assisted by a public housing agency; (2) Whose name appears on the lease; and (3) Is eighteen years of age or older. Governing board. Governing board means the board of directors or similar governing body of a public housing agency. Resident board member. A resident board member is a member of the governing board who is directly assisted by that public housing agency. Sec. 964.415 Resident board members. (a) General. Except as provided in Sec. Sec. 964.405(b) and 964.425, the membership of the governing board of each public housing agency must contain not less than one eligible resident board member. (b) Resident board member no longer directly assisted. (1) A resident board member who ceases to be directly assisted by the public housing agency is no longer an ``eligible resident'' as defined in Sec. 964.410. (2) Such a board member may be removed from the PHA board for that cause, where such action is permitted under State or local law. (3) Alternatively, the board member may be allowed to complete his/ her current term as a member of the governing board. However, the board member may not be re-appointed (or re-elected) to the governing board for purposes of serving as the statutorily required resident board member. (c) Minimum qualifications for board membership. Any generally applicable qualifications for board membership also apply to residents, unless the application of the requirements would result in the governing board not containing at least one eligible resident as a member. Further, PHAs and localities may not establish eligibility requirements for board membership that are solely applicable to residents. Sec. 964.420 Resident board member may be elected. (a) General. Residents directly assisted by a public housing agency may elect a resident board member if provided for in the public housing agency plan, adopted in accordance with 24 CFR part 903. (b) Notice to residents. The public housing agency must provide residents with at least 30 days advance notice for nominations and elections. The notice should include a description of the election procedures, eligibility requirements, and dates of nominations and elections. Any election procedures devised by the public housing agency must facilitate fair elections. Sec. 964.425 Small public housing agencies. (a) General. The requirements of this subpart do not apply to any public housing agency that: (1) Has less than 300 public housing units (or has no public housing units): (2) Has provided reasonable notice to the resident advisory board of the opportunity for residents to serve on the governing board; (3) Has not been notified of the intention of any resident to participate on the governing board within a reasonable time (which shall not be less than 30 days) of the resident advisory board [[Page 446]] receiving the notice described in paragraph (a)(3) of this section; and (4) Repeats the requirements of paragraphs (a)(2) and (a)(3) of this section at least once every year. (b) Public housing agencies that only administer Section 8 assistance. A public housing agency that has no public housing units, but administers Section 8 tenant-based assistance, is eligible for the exception described in paragraph (a) of this section, regardless of the number of Section 8 vouchers it administers. (c) Failure to meet requirements for exception. A public housing agency that is otherwise eligible for the exception described in paragraphs (a) and (b) of this section, but does not meet the three conditions described in paragraphs (a)(2) through (a)(4) of this section, must comply with the requirements of this subpart. Sec. 964.430 Nondiscrimination. (a) Membership status--(1) General. A resident board member is a full member of the governing board. (2) Resident participation must include matters regarding Federal public housing and Section 8 tenant-based assistance. A resident board member must be allowed to take part in decisions related to the administration, operation, and management of Federal public housing programs and Section 8 tenant-based rental assistance programs. This rule does not extend to matters that: (i) Exclusively relate to other types of housing assistance (such as State financed housing assistance); or (ii) Do not involve housing assistance (as may occur where the city or county governing body also serves as the PHA board). (3) Public housing agency may expand scope of resident participation. A public housing agency may choose to expand the scope of resident member involvement to matters not required under paragraph (a)(2) of this section. (b) Residence status. A governing board may not prohibit any person from serving on the governing board because that person is a resident of a public housing project or is assisted under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). (c) Conflict of interest. A governing board may not exclude any resident board member from participating in any matter before the governing board on the grounds that the resident board member's lease with the public housing agency, or the resident board member's status as a public housing resident or recipient of Section 8 tenant-based assistance, either results or may result in a conflict of interest, unless the matter is clearly applicable to the resident board member only in a personal capacity and applies uniquely to that member and not generally to residents or to a subcategory of residents. PART 965_PHA-OWNED OR LEASED PROJECTS_GENERAL PROVISIONS--Table of Contents Subpart A_Preemption of State Prevailing Wage Requirements Sec. 965.101 Preemption of State prevailing wage requirements. Subpart B_Required Insurance Coverage 965.201 Purpose and applicability. 965.205 Qualified PHA-owned insurance entity. 965.215 Lead-based paint liability insurance coverage. Subpart C_Energy Audits and Energy Conservation Measures 965.301 Purpose and applicability. 965.302 Requirements for energy audits. 965.303 [Reserved] 965.304 Order of funding. 965.305 Funding. 965.306 Energy conservation equipment and practices. 965.307 Compliance schedule. 965.308 Energy performance contracts. Subpart D_Individual Metering of Utilities for Existing PHA-Owned Projects 965.401 Individually metered utilities. 965.402 Benefit/cost analysis. 965.403 Funding. 965.404 Order of conversion. 965.405 Actions affecting residents. 965.406 Benefit/cost analysis for similar projects. 965.407 Reevaluations of mastermeter systems. [[Page 447]] Subpart E_Resident Allowances for Utilities 965.501 Applicability. 965.502 Establishment of utility allowances by PHAs. 965.503 Categories for establishment of allowances. 965.504 Period for which allowances are established. 965.505 Standards for allowances for utilities. 965.506 Surcharges for excess consumption of PHA-furnished utilities. 965.507 Review and revision of allowances. 965.508 Individual relief. Subpart F_Physical Condition Standards and Physical Inspection Requirements 965.601 Physical condition standards; physical inspection requirements. Subpart G_Smoke-Free Public Housing 965.651 Applicability. 965.653 Smoke-free public housing. 965.655 Implementation. Subpart H_Lead-Based Paint Poisoning Prevention 965.701 Lead-based paint poisoning prevention. Subpart I [Reserved] Authority: 42 U.S.C. 1437, 1437a, 1437d, 1437g, and 3535(d). Subpart H is also issued under 42 U.S.C. 4821-4846. Source: 41 FR 20276, May 17, 1976, unless otherwise noted. Redesignated at 49 FR 6714, Feb. 23, 1984. Subpart A_Preemption of State Prevailing Wage Requirements Sec. 965.101 Preemption of State prevailing wage requirements. (a) A prevailing wage rate including basic hourly rate and any fringe benefits) determined under State law shall be inapplicable to a contract or PHA-performed work item for the development, maintenance, and modernization of a project whenever: (1) The contract or work item: (i) Is otherwise subject to State law requiring the payment of wage rates determined by a State or local government or agency to be prevailing and (ii) is assisted with funds for low-income public housing under the U.S. Housing Act of 1937, as amended; and (2) The wage rate determined under State law to be prevailing with respect to an employee in any trade or position employed in the development, maintenance, and modernization of a project exceeds whichever of the following Federal wage rates is applicable: (i) The wage rate determined by the Secretary of Labor pursuant to the Davis-Bacon Act (40 U.S.C. 276a et seq.) to be prevailing in the locality with respect to such trade; (ii) An applicable apprentice wage rate based thereon specified in an apprenticeship program registered with the Department of Labor or a DOL-recognized State Apprenticeship Agency; (iii) An applicable trainee wage rate based thereon specified in a DOL-certified trainee program; or (iv) The wage rate determined by the Secretary of HUD to be prevailing in the locality with respect to such trade or position. (v) For the purpose of ascertaining whether a wage rate determined under State law for a trade or position exceeds the Federal wage rate: (A) Where a rate determined by the Secretary of Labor or an apprentice or trainee wage rate based thereon is applicable, the total wage rate determined under State law, including fringe benefits (if any) and basic hourly rate, shall be compared to the total wage rate determined by the Secretary of Labor or apprentice or trainee wage rate; and (B) where a rate determined by the Secretary of HUD is applicable, any fringe benefits determined under State law shall be excluded from the comparison with the rate determined by the Secretary of HUD. (b) Whenever paragraph (a)(1) of this section is applicable: (1) Any solicitation of bids or proposals issued by the PHA and any contract executed by the PHA for development, maintenance, and modernization of the project shall include a statement that any prevailing wage rate (including basic hourly rate and any fringe benefits) determined under State law to be prevailing with respect to an employee in any trade or position employed under the contract is inapplicable to the contract and shall not be enforced against the contractor or any [[Page 448]] subcontractor with respect to employees engaged under the contract whenever either of the following occurs: (i) Such nonfederal prevailing wage rate exceeds: (A) The applicable wage rate determined by the Secretary of Labor pursuant to the Davis- Bacon Act (40 U.S.C. 276a et seq.) to be prevailing in the locality with respect to such trade; (B) an applicable apprentice wage rate based thereon specified in an apprenticeship program registered with the Department of Labor or a DOL-recognized State Apprenticeship Agency or (C) an applicable trainee wage rate based thereon specified in a DOL- certified trainee program; or (ii) Such nonfederal prevailing wage rate, exclusive of any fringe benefits, exceeds the applicable wage rate determined by the Secretary of HUD to be prevailing in the locality with respect to such trade or position. Failure to include this statement may constitute grounds for requiring resolicitation of the bid or proposal; (2) The PHA itself shall not be required to pay the basic hourly rate or any fringe benefits comprising a prevailing wage rate determined under State law and described in paragraph (a)(2) of this section to any of its own employees who may be engaged in the work item for development, maintenance, and modernization of the project; and (3) Neither the basic hourly rate nor any fringe benefits comprising a prevailing wage rate determined under State law and described in paragraph (a)(2) shall be enforced against the PHA or any of its contractors or subcontractors with respect to employees engaged in the contract or PHA-performed work item for development, maintenance, and modernization of the project. (c) Nothing in this section shall affect the applicability of any wage rate established in a collective bargaining agreement with a PHA or its contractors or subcontractors where such wage rate equals or exceeds the applicable Federal wage rate referred to in paragraph (a)(2) of this section, nor does this section impose a ceiling on wage rates a PHA or its contractors or subcontractors may choose to pay independent of State law. (d) The provisions of this section shall be applicable to work performed under any prime contract entered into as a result of a solicitation of bids or proposals issued on or after October 6, 1988 and to any work performed by employees of a PHA on or after October 6, 1988, but not to work or contracts administered by Indian Housing Authorities (for which, see part 905 of this chapter). [53 FR 30217, Aug. 10, 1988, as amended at 57 FR 28358, June 24, 1992; 61 FR 8736, Mar. 5, 1996] Subpart B_Required Insurance Coverage Source: 58 FR 51957, Oct. 5, 1993, unless otherwise noted. Sec. 965.201 Purpose and applicability. (a) Purpose. The purpose of this subpart is to implement policies concerning insurance coverage required under the Annual Contributions Contract (ACC) between the U.S. Department of Housing and Urban Development (HUD) and a Public Housing Agency (PHA). (b) Applicability. The provisions of this subpart apply to all housing owned by PHAs, including Turnkey III housing. However, these provisions do not apply to Section 23 and Section 10(c) PHA-leased projects or to Section 8 Housing Assistance Payments Program projects. Sec. 965.205 Qualified PHA-owned insurance entity. (a) Contractual requirements for insurance coverage. The Annual Contributions Contract (ACC) between PHAs and the U.S. Department of Housing and Urban Development requires that PHAs maintain specified insurance coverage for property and casualty losses that would jeopardize the financial stability of the PHAs. The insurance coverage is required to be obtained under procedures that provide ``for open and competitive bidding.'' The HUD Appropriations Act for Fiscal Year 1992 provided that a PHA could purchase insurance coverage without [[Page 449]] regard to competitive selection procedures when it purchases it from a nonprofit insurance entity owned and controlled by PHAs approved by HUD in accordance with standards established by regulation. This section specifies the standards. (b) Method of selecting insurance coverage. While 2 CFR 200.319 requires that grantees solicit full and open competition for their procurements, the HUD Appropriations Act for Fiscal Year 1992 provides an exception to this requirement. PHAs are authorized to obtain any line of insurance from a nonprofit insurance entity that is owned and controlled by PHAs and approved by HUD in accordance with this section, without regard to competitive selection procedures. Procurement of insurance from other entities is subject to competitive selection procedures. (c) Approval of a nonprofit insurance entity. Under the following conditions, HUD will approve a nonprofit self-funded insurance entity created by PHAs that limits participation to PHAs (and to nonprofit entities associated with PHAs that engage in activities or perform functions only for housing authorities or housing authority residents): (1) An insurance company (including a risk retention group). (i) The insurance company is licensed or authorized to do business in the State by the State Insurance Commissioner and has submitted documentation of this approval to HUD; and (ii) The insurance company has not been suspended from providing insurance coverage in the State or been suspended or debarred from doing business with the federal government. The insurance company is obligated to send to HUD a copy of any action taken by the authorizing official to withdraw the license or authorization. (2) An entity not organized as an insurance company. (i) The entity has competent underwriting staff (hired directly or engaged by contract with a third party), as evidenced by professionals with an average of at least five years of experience in large risk (exceeding $100,000 in annual premiums) commercial underwriting or at least five years of experience in the underwriting of risks for public entity risk pools. This standard may be satisfied by submission of evidence of competent underwriting staff, including copies of resumes of underwriting staff for the entity; (ii) The entity has efficient and qualified management (hired directly or engaged by contract with a third party), as evidenced by the report submitted to HUD in accordance with paragraph (d)(3) of this section and by having at least one senior staff person who has a minimum of five years of experience: (A) At the management level of Vice President of a property/casualty insurance entity; (B) As a senior branch manager of a branch office with annual property/casualty premiums exceeding $5 million; or (C) As a senior manager of a public entity risk pool. Documentation for this standard must include copies of resumes of key management personnel responsible for oversight and for the day-to-day operation of the entity; (iii) The entity maintains internal controls and cost containment measures, as evidenced by an annual budget; (iv) The entity maintains sound investments consistent with the State insurance commissioner's requirements for licensed insurance companies, or other State statutory requirements controlling investments of public entities, in the State in which the entity is organized, investing only in assets that qualify as ``admitted assets''; (v) The entity maintains adequate surplus and reserves for undischarged liabilities of all types, as evidenced by a current audited financial statement and an actuarial review conducted in accordance with paragraph (d) of this section; and (vi) Upon application for initial approval, the entity has proper organizational documentation, as evidenced by copies of the articles of incorporation, by-laws, business plans, copies of contracts with third party administrators, and an opinion from legal counsel that establishment of the entity conforms with all legal requirements under Federal and State law. Any material changes made to these documents after initial approval must be submitted for [[Page 450]] review and approval before becoming effective. (d) Professional evaluations of performance. Audits and actuarial reviews are required to be prepared and submitted annually to the HUD Office of Public and Indian Housing, for review and appropriate action, by nonprofit insurance entities that are not insurance companies approved under paragraph (c)(1) of this section. In addition, an evaluation of other management factors is required to be performed by an insurance professional every three years. For fiscal years ending on or after December 31, 1993, the initial audit, actuarial review, and insurance management review required for a nonprofit insurance entity must be submitted to HUD within 90 days after the entity's fiscal year. (1) The annual financial statement prepared in accordance with generally accepted accounting principles (including any supplementary data required under GASB 10) is to be audited by an independent auditor (see 2 CFR part 200, subpart F), in accordance with generally accepted auditing standards. The independent auditor shall express an opinion on whether the entity's financial statement is presented fairly in accordance with generally accepted accounting principles. A copy of this audit must be submitted to HUD. (2) The actuarial review must be done consistent with requirements established by the National Association of Insurance Commissioners and must be conducted by an independent property/casualty actuary who is an Associate or Fellow of a recognized professional actuarial organization, such as the Casualty Actuary Society. The report issued, a copy of which must be submitted to HUD, must include an opinion on any over or under reserving and the adequacy of the reserves maintained for the open claims and for incurred but unreported claims. (3) A review must be conducted, a copy of which must be submitted to HUD, by an independent insurance consulting firm that has at least one person on staff who has received the professional designation of chartered property/casualty underwriter (CPCU), associate in risk management (ARM), or associate in claims (AIC), of the following: (i) Efficiency of any Third Party Administrator; (ii) Timeliness of the claim payments and reserving practices; and (iii) The adequacy of reinsurance coverage. (e) Revocation of approval of a nonprofit insurance entity. HUD may revoke its approval of a nonprofit insurance entity under this section when it no longer meets the requirements of this section. The nonprofit insurance entity will be notified in writing of: the proposed revocation of its approval, the reasons for the action, and the manner and time in which to request a hearing to challenge the determination. The procedure to be followed is specified in 24 CFR part 26, subpart A. [41 FR 20276, May 17, 1976, as amended at 61 FR 7969, Feb. 29, 1996; 61 FR 50219, Sept. 24, 1996; 80 FR 75942, Dec. 7, 2015] Sec. 965.215 Lead-based paint liability insurance coverage. (a) General. The purpose of this section is to specify what HUD deems reasonable insurance coverage with respect to the hazards associated with lead-based paint activities that the PHA undertakes, in accordance with the PHA's ACC with HUD. The insurance coverage does not relieve the PHA of its responsibility for assuring that lead-based paint activities are conducted in a responsible manner. (b) Insurance coverage requirements. When the PHA undertakes lead- based paint activities, it must assure that it has reasonable insurance coverage for itself for potential personal injury liability associated with those activities. If the work is being done by PHA employees, the PHA must obtain a liability insurance policy directly to protect the PHA. If the work is being done by a contractor, the PHA must obtain, from the insurer of the contractor performing this type of work in accordance with a contract, a certificate of insurance providing evidence of such insurance and naming the PHA as an additional insured; or obtain such insurance directly. Insurance must remain in effect during the entire period of lead-based paint activity and must [[Page 451]] comply with the following requirements: (1) Named insured. If purchased by the PHA, the policy shall name the PHA as insured. If purchased by an independent contractor, the policy shall name the contractor as insured and the PHA as an additional insured, in connection with performing work under the PHA's contract pertaining to lead-based paint activities. If the PHA has executed a contract with a Resident Management Corporation (RMC) to manage a building/project on behalf of the PHA, the RMC shall be an additional insured under the policy in connection with the PHA's contract related to lead-based paint activities. (The duties of the RMC are similar to those of a real estate management firm.) (2) Coverage limits. The minimum limit of liability shall be $500,000 per occurrence written, with a combined single limit for bodily injury and property damage. (3) Deductible. A deductible, if any, may not exceed $5,000 per occurrence. (4) Supplementary payments. Payments for such supplementary costs as the costs of defending against a claim must be in addition to, and not as a reduction of, the limit of liability. However, it will be permissible for the policy to have a limit on the amount payable for defense costs. If a limit is applicable, it must not be less than $250,000 per claim prior to such costs being deducted from the limit of liability. (5) Occurrence form policy. The form used must be an ``occurrence'' form, or a ``claims made'' form that contains an extended reporting period of at least five years. (Under an occurrence form, coverage applies to any loss regardless of when the claim is made.) (6) Aggregate limit. If the policy contains an aggregate limit, the minimum acceptable limit is $1,000,000. (7) Cancellation. In the event of cancellation, at least 30 days' advance notice is to be given to the insured and any additional insured. (c) Exception to requirements. Insurance already purchased by the PHA or contractor and enforced on the day this section is effective which provides coverage for lead-based paint activities shall be considered as meeting the requirements of this section until the expiration of the policy. This section is not applicable to architects, engineers or consultants who do not physically perform lead-based paint activities. (d) Insurance for the existence of lead-based paint hazards. A PHA may also purchase special liability insurance against the existence of lead-based paint hazards, although it is not a required coverage. A PHA may purchase this coverage if, in the opinion of the PHA, the policy meets the PHA's requirements, the premium is reasonable and the policy is obtained in accordance with applicable procurement standards. (See 2 CFR part 200 and Sec. 965.205 of this title.) If this coverage is purchased, the premium must be paid from funds available under the Performance Funding System or from reserves. [59 FR 31930, June 21, 1994, as amended at 64 FR 50228, Sept. 15, 1999; 80 FR 75943, Dec. 7, 2015] Subpart C_Energy Audits and Energy Conservation Measures Source: 61 FR 7969, Feb. 29, 1996, unless otherwise noted. Sec. 965.301 Purpose and applicability. (a) Purpose. The purpose of this subpart C is to implement HUD policies in support of national energy conservation goals by requiring PHAs to conduct energy audits and undertake certain cost-effective energy conservation measures. (b) Applicability. The provisions of this subpart apply to all PHAs with PHA-owned housing, but they do not apply to Indian Housing Authorities. (For similar provisions applicable to Indian housing, see part 950 of this chapter.) No PHA-leased project or Section 8 Housing Assistance Payments Program project, including a PHA-owned Section 8 project, is covered by this subpart. Sec. 965.302 Requirements for energy audits. All PHAs shall complete an energy audit for each PHA-owned project under management, not less than once [[Page 452]] every five years. Standards for energy audits shall be equivalent to State standards for energy audits. Energy audits shall analyze all of the energy conservation measures, and the payback period for these measures, that are pertinent to the type of buildings and equipment operated by the PHA. Sec. 965.303 [Reserved] Sec. 965.304 Order of funding. Within the funds available to a PHA, energy conservation measures should be accomplished with the shortest pay-back periods funded first. A PHA may make adjustments to this funding order because of insufficient funds to accomplish high-cost energy conservation measures (ECM) or where an ECM with a longer pay-back period can be more efficiently installed in conjunction with other planned modernization. A PHA may not install individual utility meters that measure the energy or fuel used for space heating in dwelling units that need substantial weatherization, when installation of meters would result in economic hardship for residents. In these cases, the ECMs related to weatherization shall be accomplished before the installation of individual utility meters. Sec. 965.305 Funding. (a) The cost of accomplishing cost-effective energy conservation measures, including the cost of performing energy audits, shall be funded from operating funds of the PHA to the extent feasible. When sufficient operating funds are not available for this purpose, such costs are eligible for inclusion in a modernization program, for funding from any available development funds in the case of projects still in development, or for other available funds that HUD may designate to be used for energy conservation. (b) If a PHA finances energy conservation measures from sources other than modernization or operating reserves, such as a loan from a utility entity or a guaranteed savings agreement with a private energy service company, HUD may agree to provide adjustments in its calculation of the PHA's operating subsidy eligibility under the PFS for the project and utility involved based on a determination that payments can be funded from the reasonably anticipated energy cost savings (See Sec. 990.107(g) of this chapter). Sec. 965.306 Energy conservation equipment and practices. In purchasing original or, when needed, replacement equipment, PHAs shall acquire only equipment that meets or exceeds the minimum efficiency requirements established by the U.S. Department of Energy. In the operation of their facilities, PHAs shall follow operating practices directed to maximum energy conservation. Sec. 965.307 Compliance schedule. All energy conservation measures determined by energy audits to be cost effective shall be accomplished as funds are available. Sec. 965.308 Energy performance contracts. (a) Method of procurement. Energy performance contracting shall be conducted using one of the following methods of procurement: (1) Competitive proposals (see 2 CFR 200.320(d)). In identifying the evaluation factors and their relative importance, as required by Sec. 2 CFR 200.320(d) of this title, the solicitation shall state that technical factors are significantly more important than price (of the energy audit); or (2) If the services are available only from a single source, noncompetitive proposals (see 2 CFR 200.320(f)). (b) HUD Review. Solicitations for energy performance contracting shall be submitted to the HUD Field Office for review and approval prior to issuance. Energy performance contracts shall be submitted to the HUD Field Office for review and approval before award. [61 FR 7969, Feb. 29, 1996, as amended at 80 FR 75943, Dec. 7, 2015] Subpart D_Individual Metering of Utilities for Existing PHA-Owned Projects Source: 61 FR 7970, Feb. 29, 1996, unless otherwise noted. [[Page 453]] Sec. 965.401 Individually metered utilities. (a) All utility service shall be individually metered to residents, either through provision of retail service to the residents by the utility supplier or through the use of checkmeters, unless: (1) Individual metering is impractical, such as in the case of a central heating system in an apartment building; (2) Change from a mastermetering system to individual meters would not be financially justified based upon a benefit/cost analysis; or (3) Checkmetering is not permissible under State or local law, or under the policies of the particular utility supplier or public service commission. (b) If checkmetering is not permissible, retail service shall be considered. Where checkmetering is permissible, the type of individual metering offering the most savings to the PHA shall be selected. Sec. 965.402 Benefit/cost analysis. (a) A benefit/cost analysis shall be made to determine whether a change from a mastermetering system to individual meters will be cost effective, except as otherwise provided in Sec. 965.405. (b) Proposed installation of checkmeters shall be justified on the basis that the cost of debt service (interest and amortization) of the estimated installation costs plus the operating costs of the checkmeters will be more than offset by reduction in future utilities expenditures to the PHA under the mastermeter system. (c) Proposed conversion to retail service shall be justified on the basis of net savings to the PHA. This determination involves making a comparison between the reduction in utility expense obtained through eliminating the expense to the PHA for PHA-supplied utilities and the resultant allowance for resident-supplied utilities, based on the cost of utility service to the residents after conversion. Sec. 965.403 Funding. The cost to change mastermeter systems to individual metering of resident consumption, including the costs of benefit/cost analysis and complete installation of checkmeters, shall be funded from operating funds of the PHA to the extent feasible. When sufficient operating funds are not available for this purpose, such costs are eligible for inclusion in a modernization project or for funding from any available development funds. Sec. 965.404 Order of conversion. Conversions to individually metered utility service shall be accomplished in the following order when a PHA has projects of two or more of the designated categories, unless the PHA has a justifiable reason to do otherwise, which shall be documented in its files. (a) In projects for which retail service is provided by the utility supplier and the PHA is paying all the individual utility bills, no benefit/cost analysis is necessary, and residents shall be billed directly after the PHA adopts revised payment schedules providing appropriate allowances for resident-supplied utilities. (b) In projects for which checkmeters have been installed but are not being utilized as the basis for determining utility charges to the residents, no benefit/cost analysis is necessary. The checkmeters shall be used as the basis for utility charges, and residents shall be surcharged for excess utility use. (c) Projects for which meter loops have been installed for utilization of checkmeters shall be analyzed both for the installation of checkmeters and for conversion to retail service. (d) Low- or medium-rise family units with a mastermeter system should be analyzed for both checkmetering and conversion to retail service, because of their large potential for energy savings. (e) Low- or medium-rise housing for the elderly should next be analyzed for both checkmetering and conversion to retail service, since the potential for energy saving is less than for family units. (f) Electric service under mastermeters for high-rise buildings, including projects for the elderly, should be analyzed for both use of retail service and of checkmeters. [[Page 454]] Sec. 965.405 Actions affecting residents. (a) Before making any conversion to retail service, the PHA shall adopt revised payment schedules, providing appropriate allowances for the resident-supplied utilities resulting from the conversion. (b) Before implementing any modifications to utility services arrangements with the residents or charges with respect thereto, the PHA shall make the requisite changes in resident dwelling leases in accordance with 24 CFR part 966. (c) PHAs must work closely with resident organizations, to the extent practicable, in making plans for conversion of utility service to individual metering, explaining the national policy objectives of energy conservation, the changes in charges and rent structure that will result, and the goals of achieving an equitable structure that will be advantageous to residents who conserve energy. (d) A transition period of at least six months shall be provided in the case of initiation of checkmeters, during which residents will be advised of the charges but during which no surcharge will be made based on the readings. This trial period will afford residents ample notice of the effects the checkmetering system will have on their individual utility charges and also afford a test period for the adequacy of the utility allowances established. (e) During and after the transition period, PHAs shall advise and assist residents with high utility consumption on methods for reducing their usage. This advice and assistance may include counseling, installation of new energy conserving equipment or appliances, and corrective maintenance. Sec. 965.406 Benefit/cost analysis for similar projects. PHAs with more than one project of similar design and utilities service may prepare a benefit/cost analysis for a representative project. A finding that a change in metering is not cost effective for the representative project is sufficient reason for the PHA not to perform a benefit/cost analysis on the remaining similar projects. Sec. 965.407 Reevaluations of mastermeter systems. Because of changes in the cost of utility services and the periodic changes in utility regulations, PHAs with mastermeter systems are required to reevaluate mastermeter systems without checkmeters by making benefit/cost analyses at least every 5 years. These analyses may be omitted under the conditions specified in Sec. 965.406. Subpart E_Resident Allowances for Utilities Source: 61 FR 7971, Feb. 29, 1996, unless otherwise noted. Sec. 965.501 Applicability. (a) This subpart E applies to public housing, including the Turnkey III Homeownership Opportunities program. This subpart E also applies to units assisted under sections 10(c) and 23 of the U. S. Housing Act of 1937 (42 U.S.C. 1437 et seq.) as in effect before amendment by the Housing and Community Development Act of 1974 (12 U.S.C. 1706e) and to which 24 CFR part 900 is not applicable. This subpart E does not apply to Indian housing projects (see 24 CFR part 950). (b) In rental units for which utilities are furnished by the PHA but there are no checkmeters to measure the actual utilities consumption of the individual units, residents shall be subject to charges for consumption by resident-owned major appliances, or for optional functions of PHA-furnished equipment, in accordance with Sec. 965.502(e) and 965.506(b), but no utility allowance will be established. Sec. 965.502 Establishment of utility allowances by PHAs. (a) PHAs shall establish allowances for PHA-furnished utilities for all checkmetered utilities and allowances for resident-purchased utilities for all utilities purchased directly by residents from the utilities suppliers. (b) The PHA shall maintain a record that documents the basis on which allowances and scheduled surcharges, and revisions thereof, are established [[Page 455]] and revised. Such record shall be available for inspection by residents. (c) The PHA shall give notice to all residents of proposed allowances, scheduled surcharges, and revisions thereof. Such notice shall be given, in the manner provided in the lease or homebuyer agreement, not less than 60 days before the proposed effective date of the allowances or scheduled surcharges or revisions; shall describe with reasonable particularity the basis for determination of the allowances, scheduled surcharges, or revisions, including a statement of the specific items of equipment and function whose utility consumption requirements were included in determining the amounts of the allowances or scheduled surcharges; shall notify residents of the place where the PHA's record maintained in accordance with paragraph (b) of this section is available for inspection; and shall provide all residents an opportunity to submit written comments during a period expiring not less than 30 days before the proposed effective date of the allowances or scheduled surcharges or revisions. Such written comments shall be retained by the PHA and shall be available for inspection by residents. (d) Schedules of allowances and scheduled surcharges shall not be subject to approval by HUD before becoming effective, but will be reviewed in the course of audits or reviews of PHA operations. (e) The PHA's determinations of allowances, scheduled surcharges, and revisions thereof shall be final and valid unless found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Sec. 965.503 Categories for establishment of allowances. Separate allowances shall be established for each utility and for each category of dwelling units determined by the PHA to be reasonably comparable as to factors affecting utility usage. Sec. 965.504 Period for which allowances are established. (a) PHA-furnished utilities. Allowances will normally be established on a quarterly basis; however, residents may be surcharged on a monthly basis. The allowances established may provide for seasonal variations. (b) Resident-purchased utilities. Monthly allowances shall be established. The allowances established may provide for seasonal variations. Sec. 965.505 Standards for allowances for utilities. (a) The objective of a PHA in designing methods of establishing utility allowances for each dwelling unit category and unit size shall be to approximate a reasonable consumption of utilities by an energy- conservative household of modest circumstances consistent with the requirements of a safe, sanitary, and healthful living environment. (b) Allowances for both PHA-furnished and resident-purchased utilities shall be designed to include such reasonable consumption for major equipment or for utility functions furnished by the PHA for all residents (e.g., heating furnace, hot water heater), for essential equipment whether or not furnished by the PHA (e.g., range and refrigerator), and for minor items of equipment (such as toasters and radios) furnished by residents. (c) The complexity and elaborateness of the methods chosen by the PHA, in its discretion, to achieve the foregoing objective will depend upon the nature of the housing stock, data available to the PHA and the extent of the administrative resources reasonably available to the PHA to be devoted to the collection of such data, the formulation of methods of calculation, and actual calculation and monitoring of the allowances. (d) In establishing allowances, the PHA shall take into account relevant factors affecting consumption requirements, including: (1) The equipment and functions intended to be covered by the allowance for which the utility will be used. For instance, natural gas may be used for cooking, heating domestic water, or space heating, or any combination of the three; (2) The climatic location of the housing projects; (3) The size of the dwelling units and the number of occupants per dwelling unit; [[Page 456]] (4) Type of construction and design of the housing project; (5) The energy efficiency of PHA-supplied appliances and equipment; (6) The utility consumption requirements of appliances and equipment whose reasonable consumption is intended to be covered by the total resident payment; (7) The physical condition, including insulation and weatherization, of the housing project; (8) Temperature levels intended to be maintained in the unit during the day and at night, and in cold and warm weather; and (9) Temperature of domestic hot water. (e) If a PHA installs air conditioning, it shall provide, to the maximum extent economically feasible, systems that give residents the option of choosing to use air conditioning in their units. The design of systems that offer each resident the option to choose air conditioning shall include retail meters or checkmeters, and residents shall pay for the energy used in its operation. For systems that offer residents the option to choose air conditioning, the PHA shall not include air conditioning in the utility allowances. For systems that offer residents the option to choose air conditioning but cannot be checkmetered, residents are to be surcharged in accordance with Sec. 965.506. If an air conditioning system does not provide for resident option, residents are not to be charged, and these systems should be avoided whenever possible. Sec. 965.506 Surcharges for excess consumption of PHA-furnished utilities. (a) For dwelling units subject to allowances for PHA-furnished utilities where checkmeters have been installed, the PHA shall establish surcharges for utility consumption in excess of the allowances. Surcharges may be computed on a straight per unit of purchase basis (e.g., cents per kilowatt hour of electricity) or for stated blocks of excess consumption, and shall be based on the PHA's average utility rate. The basis for calculating such surcharges shall be described in the PHA's schedule of allowances. Changes in the dollar amounts of surcharges based directly on changes in the PHA's average utility rate shall not be subject to the advance notice requirements of this section. (b) For dwelling units served by PHA-furnished utilities where checkmeters have not been installed, the PHA shall establish schedules of surcharges indicating additional dollar amounts residents will be required to pay by reason of estimated utility consumption attributable to resident-owned major appliances or to optional functions of PHA- furnished equipment. Such surcharge schedules shall state the resident- owned equipment (or functions of PHA-furnished equipment) for which surcharges shall be made and the amounts of such charges, which shall be based on the cost to the PHA of the utility consumption estimated to be attributable to reasonable usage of such equipment. Sec. 965.507 Review and revision of allowances. (a) Annual review. The PHA shall review at least annually the basis on which utility allowances have been established and, if reasonably required in order to continue adherence to the standards stated in Sec. 965.505, shall establish revised allowances. The review shall include all changes in circumstances (including completion of modernization and/ or other energy conservation measures implemented by the PHA) indicating probability of a significant change in reasonable consumption requirements and changes in utility rates. (b) Revision as a result of rate changes. The PHA may revise its allowances for resident-purchased utilities between annual reviews if there is a rate change (including fuel adjustments) and shall be required to do so if such change, by itself or together with prior rate changes not adjusted for, results in a change of 10 percent or more from the rates on which such allowances were based. Adjustments to resident payments as a result of such changes shall be retroactive to the first day of the month following the month in which the last rate change taken into account in such revision became effective. Such rate changes shall not be [[Page 457]] subject to the 60 day notice requirement of Sec. 965.502(c). Sec. 965.508 Individual relief. Requests for relief from surcharges for excess consumption of PHA- purchased utilities, or from payment of utility supplier billings in excess of the allowances for resident-purchased utilities, may be granted by the PHA on reasonable grounds, such as special needs of elderly, ill or disabled residents, or special factors affecting utility usage not within the control of the resident, as the PHA shall deem appropriate. The PHA's criteria for granting such relief, and procedures for requesting such relief, shall be adopted at the time the PHA adopts the methods and procedures for determining utility allowances. Notice of the availability of such procedures (including identification of the PHA representative with whom initial contact may be made by residents), and the PHA's criteria for granting such relief, shall be included in each notice to residents given in accordance with Sec. 965.502(c) and in the information given to new residents upon admission. Subpart F_Physical Condition Standards and Physical Inspection Requirements Sec. 965.601 Physical condition standards; physical inspection requirements. Housing owned or leased by a PHA, and public housing owned by another entity approved by HUD, must be maintained in accordance with the physical condition standards in 24 CFR part 5, subpart G. For each PHA, HUD will perform an independent physical inspection of a statistically valid sample of such housing based upon the physical condition standards in 24 CFR part 5, subpart G. [63 FR 46580, Sept. 1, 1998] Subpart G_Smoke-Free Public Housing Source: 81 FR 87444, Dec. 5, 2016, unless otherwise noted. Sec. 965.651 Applicability. This subpart applies to public housing units, except for dwelling units in a mixed-finance project. Public housing is defined as low- income housing, and all necessary appurtenances (e.g., community facilities, public housing offices, day care centers, and laundry rooms) thereto, assisted under the U.S. Housing Act of 1937 (the 1937 Act), other than assistance under section 8 of the 1937 Act. Sec. 965.653 Smoke-free public housing. (a) In general. PHAs must design and implement a policy prohibiting the use of prohibited tobacco products in all public housing living units and interior areas (including but not limited to hallways, rental and administrative offices, community centers, day care centers, laundry centers, and similar structures), as well as in outdoor areas within 25 feet from public housing and administrative office buildings (collectively, ``restricted areas'') in which public housing is located. (b) Designated smoking areas. PHAs may limit smoking to designated smoking areas on the grounds of the public housing or administrative office buildings in order to accommodate residents who smoke. These areas must be outside of any restricted areas, as defined in paragraph (a) of this section, and may include partially enclosed structures. Alternatively, PHAs may choose to create additional smoke-free areas outside the restricted areas or to make their entire grounds smoke-free. (c) Prohibited tobacco products. A PHA's smoke-free policy must, at a minimum, ban the use of all prohibited tobacco products. Prohibited tobacco products are defined as: (1) Items that involve the ignition and burning of tobacco leaves, such as (but not limited to) cigarettes, cigars, and pipes. (2) To the extent not covered by paragraph (c)(1) of this section, waterpipes (hookahs). Sec. 965.655 Implementation. (a) Amendments. PHAs are required to implement the requirements of this subpart by amending each of the following: [[Page 458]] (1) All applicable PHA plans, according to the provisions in 24 CFR part 903. (2) Tenant leases, according to the provisions of 24 CFR 966.4. (b) Deadline. All PHAs must be in full compliance, with effective policy amendments, by July 30, 2018. Subpart H_Lead-Based Paint Poisoning Prevention Sec. 965.701 Lead-based paint poisoning prevention. The requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, L, and R of this title apply to this program. [64 FR 50229, Sept. 15, 1999] Subpart I [Reserved] PART 966_PUBLIC HOUSING LEASE AND GRIEVANCE PROCEDURE--Table of Contents Subpart A_Dwelling Leases, Procedures and Requirements Sec. 966.1 Purpose and applicability. 966.2 Definitions. 966.3 Tenants' opportunity for comment. 966.4 Lease requirements. 966.5 Posting of policies, rules and regulations. 966.6 Prohibited lease provisions. 966.7 Accommodation of persons with disabilities. 966.8 Providing opportunity to receive emergency rent relief. Subpart B_Grievance Procedures and Requirements 966.50 Purpose and scope. 966.51 Applicability. 966.52 Requirements. 966.53 Definitions. 966.54 Informal settlement of grievance. 966.56 Procedures governing the hearing. 966.57 Decision of the hearing officer. Authority: 42 U.S.C. 1437d and 3535(d). Subpart A_Dwelling Leases, Procedures and Requirements Source: 40 FR 33402, Aug. 7, 1975, unless otherwise noted. Redesignated at 49 FR 6714, Feb. 23, 1984. Sec. 966.1 Purpose and applicability. (a) This part is applicable to public housing. (b) Subpart A of this part prescribes the provisions that must be incorporated in leases for public housing dwelling units. (c) Subpart B of this part prescribes public housing grievance hearing requirements. [66 FR 28802, May 24, 2001] Sec. 966.2 Definitions. The following terms are defined in part 5, subpart A of this title: 1937 Act, covered person, drug, drug-related criminal activity, federally assisted housing, guest, household, HUD, other person under the tenant's control, public housing, premises, public housing agency, Section 8, violent criminal activity. [66 FR 28802, May 24, 2001] Sec. 966.3 Tenants' opportunity for comment. Each PHA shall provide at least 30 days notice to tenants and resident organizations setting forth proposed changes in the lease form used by the PHA, and providing an opportunity to present written comments. Subject to requirements of this rule, comments submitted shall be considered by the PHA before formal adoption of any new lease form. [56 FR 51576, Oct. 11, 1991] Sec. 966.4 Lease requirements. A lease shall be entered into between the PHA and each tenant of a dwelling unit which shall contain the provisions described hereinafter. (a) Parties, dwelling unit and term. (1) The lease shall state: (i) The names of the PHA and the tenant; (ii) The unit rented (address, apartment number, and any other information needed to identify the dwelling unit); [[Page 459]] (iii) The term of the lease (lease term and renewal in accordance with paragraph (a)(2) of this section); (iv) A statement of what utilities, services, and equipment are to be supplied by the PHA without additional cost, and what utilities and appliances are to be paid for by the tenant; (v) The composition of the household as approved by the PHA (family members and any PHA-approved live-in aide). The family must promptly inform the PHA of the birth, adoption, or court-awarded custody of a child. The family must request PHA approval to add any other family member as an occupant of the unit; (vi) HUD's regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply. (2) Lease term and renewal. (i) The lease shall have a twelve month term. Except as provided in paragraph (a)(2)(ii) of this section, the lease term must be automatically renewed for the same period. (ii) The PHA may not renew the lease if the family has violated the requirement for resident performance of community service or participation in an economic self-sufficiency program in accordance with part 960, subpart F of this chapter. (iii) The lease shall convert to a month-to-month term for families determined to be over-income whose tenancy will be terminated in accordance with Sec. 960.507(d)(2) of this chapter as of the date of the notice provided under Sec. 960.507(c)(3) of this chapter. PHAs must charge these families, who continue to be public housing program participants, the family's choice of income-based, flat rent, or prorated rent for mixed families during the period before termination. (iv) At any time, the PHA may terminate the tenancy in accordance with paragraph (l) of this section. (3) Execution and modification. The lease must be executed by the tenant and the PHA, except for automatic renewals of a lease. The lease may modified at any time by written agreement of the tenant and the PHA. (b) Payments due under the lease--(1) Tenant rent. (i) The tenant shall pay the amount of the monthly tenant rent determined by the PHA in accordance with HUD regulations and other requirements. The amount of the tenant rent is subject to change in accordance with HUD requirements. (ii) The lease shall specify the initial amount of the tenant rent at the beginning of the initial lease term. The PHA shall give the tenant written notice stating any change in the amount of tenant rent, and when the change is effective. (2) PHA charges. The lease shall provide for charges to the tenant for maintenance and repair beyond normal wear and tear and for consumption of excess utilities. The lease shall state the basis for the determination of such charges (e.g., by a posted schedule of charges for repair, amounts charged for utility consumption in excess of the allowance stated in the lease, etc.). The imposition of charges for consumption of excess utilities is permissible only if such charges are determined by an individual check meter servicing the leased unit or result from the use of major tenant-supplied appliances. (3) Late payment penalties. At the option of the PHA, the lease may provide for payment of penalties for late payment. (4) When charges are due. The lease shall provide that charges assessed under paragraph (b) (2) and (3) of this section shall not be due and collectible until two weeks after the PHA gives written notice of the charges. Such notice constitutes a notice of adverse action, and must meet the requirements governing a notice of adverse action (see Sec. 966.4(e)(8)). (5) Security deposits. At the option of the PHA, the lease may provide for security deposits which shall not exceed one month's rent or such reasonable fixed amount as may be required by the PHA. Provision may be made for gradual accumulation of the security deposit by the tenant. Subject to applicable laws, interest earned on security deposits may be refunded to the tenant on vacation of the dwelling unit or used for tenant services or activities. (c) Redetermination of rent and family composition. The lease shall provide for redetermination of rent and family composition which shall include: [[Page 460]] (1) The frequency of regular rental redetermination and the basis for interim redetermination. (2) An agreement by the tenant to furnish such information and certifications regarding family composition and income as may be necessary for the PHA to make determinations with respect to rent, eligibility, and the appropriateness of dwelling size. (3) An agreement by the tenant to transfer to an appropriate size dwelling unit based on family composition, upon appropriate notice by the PHA that such a dwelling unit is available. (4) When the PHA redetermines the amount of rent (Total Tenant Payment or Tenant Rent) payable by the tenant, not including determination of the PHA's schedule of Utility Allowances for families in the PHA's Public Housing Program, or determines that the tenant must transfer to another unit based on family composition, the PHA shall notify the tenant that the tenant may ask for an explanation stating the specific grounds of the PHA determination, and that if the tenant does not agree with the determination, the tenant shall have the right to request a hearing under the PHA grievance procedure. (d) Tenant's right to use and occupancy. (1) The lease shall provide that the tenant shall have the right to exclusive use and occupancy of the leased unit by the members of the household authorized to reside in the unit in accordance with the lease, including reasonable accommodation of their guests. The term guest is defined in 24 CFR 5.100. (2) With the consent of the PHA, members of the household may engage in legal profitmaking activities in the dwelling unit, where the PHA determines that such activities are incidental to primary use of the leased unit for residence by members of the household. (3)(i) With the consent of the PHA, a foster child or a live-in aide may reside in the unit. The PHA may adopt reasonable policies concerning residence by a foster child or a live-in-aide, and defining the circumstances in which PHA consent will be given or denied. Under such policies, the factors considered by the PHA may include: (A) Whether the addition of a new occupant may necessitate a transfer of the family to another unit, and whether such units are available. (B) The PHA's obligation to make reasonable accommodation for handicapped persons. (ii) Live-in aide means a person who resides with an elderly, disabled or handicapped person and who: (A) Is determined to be essential to the care and well-being of the person; (B) Is not obligated for the support of the person; and (C) Would not be living in the unit except to provide the necessary supportive services. (e) The PHA's obligations. The lease shall set forth the PHA's obligations under the lease, which shall include the following: (1) To maintain the dwelling unit and the project in decent, safe, and sanitary condition; (2) To comply with requirements of applicable building codes, housing codes, and HUD regulations materially affecting health and safety; (3) To make necessary repairs to the dwelling unit; (4) To keep project buildings, facilities, and common areas, not otherwise assigned to the tenant for maintenance and upkeep, in a clean and safe condition; (5) To maintain in good and safe working order and condition electrical, plumbing, sanitary, heating, ventilating, and other facilities and appliances, including elevators, supplied or required to be supplied by the PHA; (6) To provide and maintain appropriate receptacles and facilities (except containers for the exclusive use of an individual tenant family) for the deposit of ashes, garbage, rubbish, and other waste removed from the dwelling unit by the tenant in accordance with paragraph (f)(7) of this section; (7) To supply running water and reasonable amounts of hot water and reasonable amounts of heat at appropriate times of the year (according to local custom and usage), except where the building that includes the dwelling unit is not required by law to be equipped for that purpose, or where heat or hot water is generated by an [[Page 461]] installation within the exclusive control of the tenant and supplied by a direct utility connection; and (8)(i) To notify the tenant of the specific grounds for any proposed adverse action by the PHA. (Such adverse action includes, but is not limited to, a proposed lease termination, transfer of the tenant to another unit, or imposition of charges for maintenance and repair, or for excess consumption of utilities.) (ii) When the PHA is required to afford the tenant the opportunity for a hearing under the PHA grievance procedure for a grievance concerning a proposed adverse action: (A) The notice of proposed adverse action shall inform the tenant of the right to request such hearing. In the case of a lease termination, a notice of lease termination, in accordance with paragraph (l)(3) of this section, shall constitute adequate notice of proposed adverse action. (B) In the case of a proposed adverse action other than a proposed lease termination, the PHA shall not take the proposed action until the time for the tenant to request a grievance hearing has expired, and (if a hearing was timely requested by the tenant) the grievance process has been completed. (9) To consider lease bifurcation, as provided in 24 CFR 5.2009, in circumstances involving domestic violence, dating violence, sexual assault, or stalking addressed in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), provided that, if a PHA chooses to bifurcate a lease, no assistance will be given for an individual who does not meet public housing eligibility and 24 CFR 5.508(h)(2) applies to submission of evidence of citizenship or eligible immigration status. (f) Tenant's obligations. The lease shall provide that the tenant shall be obligated: (1) Not to assign the lease or to sublease the dwelling unit; (2) Not to provide accommodations for boarders or lodgers; (3) To use the dwelling unit solely as a private dwelling for the tenant and the tenant's household as identified in the lease, and not to use or permit its use for any other purpose; (4) To abide by necessary and reasonable regulations promulgated by the PHA for the benefit and well-being of the housing project and the tenants which shall be posted in the project office and incorporated by reference in the lease; (5) To comply with all obligations imposed upon tenants by applicable provisions of building and housing codes materially affecting health and safety; (6) To keep the dwelling unit and such other areas as may be assigned to the tenant for the tenant's exclusive use in a clean and safe condition; (7) To dispose of all ashes, garbage, rubbish, and other waste from the dwelling unit in a sanitary and safe manner; (8) To use only in a reasonable manner all electrical, plumbing, sanitary, heating, ventilating, air-conditioning and other facilities and appurtenances including elevators; (9) To refrain from, and to cause the household and guests to refrain from destroying, defacing, damaging, or removing any part of the dwelling unit or project; (10) To pay reasonable charges (other than for wear and tear) for the repair of damages to the dwelling unit, or to the project (including damages to project buildings, facilities or common areas) caused by the tenant, a member of the household or a guest. (11) To act, and cause household members or guests to act, in a manner which will not disturb other residents' peaceful enjoyment of their accommodations and will be conducive to maintaining the project in a decent, safe and sanitary condition; (12)(i) To assure that no tenant, member of the tenant's household, or guest engages in: (A) Criminal activity. (1) Any criminal activity that threatens the health, safety or right to peaceful enjoyment of the premises by other residents; (2) Any drug-related criminal activity on or off the premises; or (B) Civil activity. For any units covered by 24 CFR part 965, subpart G, any smoking of prohibited tobacco products in restricted areas, as defined by 24 [[Page 462]] CFR 965.653(a), or in other outdoor areas that the PHA has designated as smoke-free. (ii) To assure that no other person under the tenant's control engages in: (A) Criminal activity. (1) Any criminal activity that threatens the health, safety or right to peaceful enjoyment of the premises by other residents; (2) Any drug-related criminal activity on the premises; or (B) Civil activity. For any units covered by 24 CFR part 965, subpart G, any smoking of prohibited tobacco products in restricted areas, as defined by 24 CFR 965.653(a), or in other outdoor areas that the PHA has designated as smoke-free. (iii) To assure that no member of the household engages in an abuse or pattern of abuse of alcohol that affects the health, safety, or right to peaceful enjoyment of the premises by other residents. (g) Tenant maintenance. The lease may provide that the tenant shall perform seasonal maintenance or other maintenance tasks, as specified in the lease, where performance of such tasks by tenants of dwellings units of a similar design and construction is customary: Provided, That such provision is included in the lease in good faith and not for the purpose of evading the obligations of the PHA. The PHA shall exempt tenants who are unable to perform such tasks because of age or disability. (h) Defects hazardous to life, health, or safety. The lease shall set forth the rights and obligations of the tenant and the PHA if the dwelling unit is damaged to the extent that conditions are created which are hazardous to life, health, or safety of the occupants and shall provide that: (1) The tenant shall immediately notify project management of the damage; (2) The PHA shall be responsible for repair of the unit within a reasonable time: Provided, That if the damage was caused by the tenant, tenant's household or guests, the reasonable cost of the repairs shall be charged to the tenant; (3) The PHA shall offer standard alternative accommodations, if available, where necessary repairs cannot be made within a reasonable time; and (4) Provisions shall be made for abatement of rent in proportion to the seriousness of the damage and loss in value as a dwelling if repairs are not made in accordance with paragraph (h)(2) of this section or alternative accommodations not provided in accordance with paragraph (h)(3) of this section, except that no abatement of rent shall occur if the tenant rejects the alternative accommodation or if the damage was caused by the tenant, tenant's household or guests. (i) Pre-occupancy and pre-termination inspections. The lease shall provide that the PHA and the tenant or representative shall be obligated to inspect the dwelling unit prior to commencement of occupancy by the tenant. The PHA will furnish the tenant with a written statement of the condition of the dwelling unit, and the equipment provided with the unit. The statement shall be signed by the PHA and the tenant, and a copy of the statement shall be retained by the PHA in the tenant's folder. The PHA shall be further obligated to inspect the unit at the time the tenant vacates the unit and to furnish the tenant a statement of any charges to be made in accordance with paragraph (b)(2) of this section. Provision shall be made for the tenant's participation in the latter inspection, unless the tenant vacates without notice to the PHA. (j) Entry of dwelling unit during tenancy. The lease shall set forth the circumstances under which the PHA may enter the dwelling unit during the tenant's possession thereof, which shall include provision that: (1) The PHA shall, upon reasonable advance notification to the tenant, be permitted to enter the dwelling unit during reasonable hours for the purpose of performing routine inspections and maintenance, for making improvement or repairs, or to show the dwelling unit for re- leasing. A written statement specifying the purpose of the PHA entry delivered to the dwelling unit at least two days before such entry shall be considered reasonable advance notification; [[Page 463]] (2) The PHA may enter the dwelling unit at any time without advance notification when there is reasonable cause to believe that an emergency exists; and (3) If the tenant and all adult members of the household are absent from the dwelling unit at the time of entry, the PHA shall leave in the dwelling unit a written statement specifying the date, time and purpose of entry prior to leaving the dwelling unit. (k) Notice procedures. (1) The lease shall provide procedures to be followed by the PHA and the tenant in giving notice one to the other which shall require that: (i) Except as provided in paragraph (j) of this section, notice to a tenant shall be in writing and delivered to the tenant or to an adult member of the tenant's household residing in the dwelling or sent by prepaid first-class mail properly addressed to the tenant; and (ii) Notice to the PHA shall be in writing, delivered to the project office or the PHA central office or sent by prepaid first-class mail properly addressed. (2) If the tenant is visually impaired, all notices must be in an accessible format. (l) Termination of tenancy and eviction--(1) Procedures. The lease shall state the procedures to be followed by the PHA and by the tenant to terminate the tenancy. (2) Grounds for termination of tenancy. The PHA may terminate the tenancy only for: (i) Serious or repeated violation of material terms of the lease, such as the following: (A) Failure to make payments due under the lease; (B) Failure to fulfill household obligations, as described in paragraph (f) of this section; (ii) Being over the income limit for the program, as provided in 24 CFR 960.507. (iii) No longer meeting the restrictions on net assets and property ownership as provided in Sec. 5.618 of this title. (iv) Other good cause. Other good cause includes, but is not limited to, the following: (A) Criminal activity or alcohol abuse as provided in paragraph (1)(5) of this section; (B) Discovery after admission of facts that made the tenant ineligible; (C) Discovery of material false statements or fraud by the tenant in connection with an application for assistance or with reexamination of income; (D) Failure of a family member to comply with service requirement provisions of part 960, subpart F, of this chapter--as grounds only for non-renewal of the lease and termination of tenancy at the end of the twelve-month lease term; and (E) Failure to accept the PHA's offer of a lease revision to an existing lease: that is on a form adopted by the PHA in accordance with Sec. 966.3; with written notice of the offer of the revision at least 60 calendar days before the lease revision is scheduled to take effect; and with the offer specifying a reasonable time limit within that period for acceptance by the family. (3) Lease termination notice. (i) The PHA must give written notice of lease termination of: (A) 14 days in the case of failure to pay rent; (B) A reasonable period of time considering the seriousness of the situation (but not to exceed 30 days): (1) If the health or safety of other residents, PHA employees, or persons residing in the immediate vicinity of the premises is threatened; or (2) If any member of the household has engaged in any drug-related criminal activity or violent criminal activity; or (3) If any member of the household has been convicted of a felony; (C) 30 days in any other case, except that if a State or local law allows a shorter notice period, such shorter period shall apply. (ii) The notice of lease termination to the tenant shall state specific grounds for termination, and shall inform the tenant of the tenant's right to make such reply as the tenant may wish. The notice shall also inform the tenant of the right (pursuant to Sec. 966.4(m)) to examine PHA documents directly relevant to the termination or eviction. When the PHA is required to afford the tenant the opportunity for a [[Page 464]] grievance hearing, the notice shall also inform the tenant of the tenant's right to request a hearing in accordance with the PHA's grievance procedure. (iii) A notice to vacate which is required by State or local law may be combined with, or run concurrently with, a notice of lease termination under paragraph (l)(3)(i) of this section. (iv) When the PHA is required to afford the tenant the opportunity for a hearing under the PHA grievance procedure for a grievance concerning the lease termination (see Sec. 966.51(a)(1)), the tenancy shall not terminate (even if any notice to vacate under State or local law has expired) until the time for the tenant to request a grievance hearing has expired, and (if a hearing was timely requested by the tenant) the grievance process has been completed. (v) When the PHA is not required to afford the tenant the opportunity for a hearing under the PHA administrative grievance procedure for a grievance concerning the lease termination (see Sec. 966.51(a)(2)), and the PHA has decided to exclude such grievance from the PHA grievance procedure, the notice of lease termination under paragraph (l)(3)(i) of this section shall: (A) State that the tenant is not entitled to a grievance hearing on the termination. (B) Specify the judicial eviction procedure to be used by the PHA for eviction of the tenant, and state that HUD has determined that this eviction procedure provides the opportunity for a hearing in court that contains the basic elements of due process as defined in HUD regulations. (C) State whether the eviction is for a criminal activity as described in Sec. 966.51(a)(2)(i)(A) or for a drug-related criminal activity as described in Sec. 966.51(a)(2)(i)(B). (4) How tenant is evicted. The PHA may evict the tenant from the unit either: (i) By bringing a court action or; (ii) By bringing an administrative action if law of the jurisdiction permits eviction by administrative action, after a due process administrative hearing, and without a court determination of the rights and liabilities of the parties. In order to evict without bringing a court action, the PHA must afford the tenant the opportunity for a pre- eviction hearing in accordance with the PHA grievance procedure. (5) PHA termination of tenancy for criminal activity or alcohol abuse--(i) Evicting drug criminals. (A) Methamphetamine conviction. The PHA must immediately terminate the tenancy if the PHA determines that any member of the household has ever been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of federally assisted housing. (B) Drug crime on or off the premises. The lease must provide that drug-related criminal activity engaged in on or off the premises by any tenant, member of the tenant's household or guest, and any such activity engaged in on the premises by any other person under the tenant's control, is grounds for the PHA to terminate tenancy. In addition, the lease must provide that a PHA may evict a family when the PHA determines that a household member is illegally using a drug or when the PHA determines that a pattern of illegal use of a drug interferes with the health, safety, or right to peaceful enjoyment of the premises by other residents. (ii) Evicting other criminals. (A) Threat to other residents. The lease must provide that any criminal activity by a covered person that threatens the health, safety, or right to peaceful enjoyment of the premises by other residents (including PHA management staff residing on the premises) or threatens the health, safety, or right to peaceful enjoyment of their residences by persons residing in the immediate vicinity of the premises is grounds for termination of tenancy. (B) Fugitive felon or parole violator. The PHA may terminate the tenancy if a tenant is fleeing to avoid prosecution, or custody or confinement after conviction, for a crime, or attempt to commit a crime, that is a felony under the laws of the place from which the individual flees, or that, in the case of the State of New Jersey, is a high misdemeanor; or violating a condition of probation or parole imposed under Federal or State law. [[Page 465]] (iii) Eviction for criminal activity. (A) Evidence. The PHA may evict the tenant by judicial action for criminal activity in accordance with this section if the PHA determines that the covered person has engaged in the criminal activity, regardless of whether the covered person has been arrested or convicted for such activity and without satisfying the standard of proof used for a criminal conviction. (B) Notice to Post Office. When a PHA evicts an individual or family for criminal activity, the PHA must notify the local post office serving the dwelling unit that the individual or family is no longer residing in the unit. (iv) Use of criminal record. If the PHA seeks to terminate the tenancy for criminal activity as shown by a criminal record, the PHA must notify the household of the proposed action to be based on the information and must provide the subject of the record and the tenant with a copy of the criminal record before a PHA grievance hearing or court trial concerning the termination of tenancy or eviction. The tenant must be given an opportunity to dispute the accuracy and relevance of that record in the grievance hearing or court trial. (v) Cost of obtaining criminal record. The PHA may not pass along to the tenant the costs of a criminal records check. (vi) Evicting alcohol abusers. The PHA must establish standards that allow termination of tenancy if the PHA determines that a household member has: (A) Engaged in abuse or pattern of abuse of alcohol that threatens the health, safety, or right to peaceful enjoyment of the premises by other residents; or (B) Furnished false or misleading information concerning illegal drug use, alcohol abuse, or rehabilitation of illegal drug users or alcohol abusers. (vii) PHA action, generally. (A) Assessment under PHAS. Under the Public Housing Assessment System (PHAS), PHAs that have adopted policies, implemented procedures and can document that they appropriately evict any public housing residents who engage in certain activity detrimental to the public housing community receive points. (See 24 CFR 902.43(a)(5).) This policy takes into account the importance of eviction of such residents to public housing communities and program integrity, and the demand for assisted housing by families who will adhere to lease responsibilities. (B) Consideration of circumstances. In a manner consistent with such policies, procedures and practices, the PHA may consider all circumstances relevant to a particular case such as the seriousness of the offending action, the extent of participation by the leaseholder in the offending action, the effects that the eviction would have on family members not involved in the offending activity and the extent to which the leaseholder has shown personal responsibility and has taken all reasonable steps to prevent or mitigate the offending action. (C) Exclusion of culpable household member. The PHA may require a tenant to exclude a household member in order to continue to reside in the assisted unit, where that household member has participated in or been culpable for action or failure to act that warrants termination. (D) Consideration of rehabilitation. In determining whether to terminate tenancy for illegal drug use or a pattern of illegal drug use by a household member who is no longer engaging in such use, or for abuse or a pattern of abuse of alcohol by a household member who is no longer engaging in such abuse, the PHA may consider whether such household member is participating in or has successfully completed a supervised drug or alcohol rehabilitation program, or has otherwise been rehabilitated successfully (42 U.S.C. 13662). For this purpose, the PHA may require the tenant to submit evidence of the household member's current participation in, or successful completion of, a supervised drug or alcohol rehabilitation program or evidence of otherwise having been rehabilitated successfully. (E) Length of period of mandatory prohibition on admission. If a statute requires that the PHA prohibit admission of persons for a prescribed period of time after some disqualifying behavior or event, the PHA may apply that prohibition for a longer period of time. [[Page 466]] (F) Nondiscrimination limitation. The PHA's eviction actions must be consistent with fair housing and equal opportunity provisions of Sec. 5.105 of this title. (m) Eviction: Right to examine PHA documents before hearing or trial. The PHA shall provide the tenant a reasonable opportunity to examine, at the tenant's request, before a PHA grievance hearing or court trial concerning a termination of tenancy or eviction, any documents, including records and regulations, which are in the possession of the PHA, and which are directly relevant to the termination of tenancy or eviction. The tenant shall be allowed to copy any such document at the tenant's expense. A notice of lease termination pursuant to Sec. 966.4(l) (3) shall inform the tenant of the tenant's right to examine PHA documents concerning the termination of tenancy or eviction. If the PHA does not make documents available for examination upon request by the tenant (in accordance with this Sec. 966.4(m)), the PHA may not proceed with the eviction. (n) Grievance procedures. (1) The lease must provide that all disputes concerning the obligations of the tenant or the PHA must (except as provided in Sec. 966.51(a)(2)) be resolved in accordance with the PHA grievance procedures. The grievance procedures must comply with subpart B of this part. (2) The lease must include a description of the PHA's policies for selecting a hearing officer. (o) Provision for modifications. The lease shall provide that modification of the lease must be accomplished by a written rider to the lease executed by both parties, except for paragraph (c) of this section and Sec. 966.5. (p) Signature clause. The lease shall provide a signature clause attesting that the lease has been executed by the parties. [56 FR 51576, Oct. 11, 1991, as amended at 61 FR 13273, Mar. 26, 1996; 65 FR 16730, Mar. 29, 2000; 66 FR 28802, May 24, 2001; 66 FR 32875, June 18, 2001; 66 FR 33134, June 20, 2001; 69 FR 68791, Nov. 26, 2004; 75 FR 66262, Oct. 27, 2010; 81 FR 12374, Mar. 8, 2016; 81 FR 80815, Nov. 16, 2016; 81 FR 87444, Dec. 5, 2016; 88 FR 9675, Feb. 14, 2023] Sec. 966.5 Posting of policies, rules and regulations. Schedules of special charges for services, repairs and utilities and rules and regulations which are required to be incorporated in the lease by reference shall be publicly posted in a conspicuous manner in the Project Office and shall be furnished to applicants and tenants on request. Such schedules, rules and regulations may be modified from time to time by the PHA provided that the PHA shall give at least 30-day written notice to each affected tenant setting forth the proposed modification, the reasons therefor, and providing the tenant an opportunity to present written comments which shall be taken into consideration by the PHA prior to the proposed modification becoming effective. A copy of such notice shall be: (a) Delivered directly or mailed to each tenant; or (b) Posted in at least three (3) conspicuous places within each structure or building in which the affected dwelling units are located, as well as in a conspicuous place at the project office, if any, of if none, a similar central business location within the project. Sec. 966.6 Prohibited lease provisions. Lease clauses of the nature described below shall not be included in new leases between a PHA and a tenant and shall be deleted from existing leases either by amendment thereof or execution of a new lease: (a) Confession of judgment. Prior consent by the tenant to any lawsuit the landlord may bring against him in connection with the lease and to a judgment in favor of the landlord. (b) Distraint for rent or other charges. Agreement by the tenant that landlord is authorized to take property of the tenant and hold it as a pledge until the tenant performs the obligation which the landlord has determined the tenant has failed to perform. (c) Exculpatory clauses. Agreement by the tenant not to hold the landlord or landlord's agent liable for any acts or omissions whether intentional or negligent on the part of the landlord or the landlord's authorized representatives or agents. [[Page 467]] (d) Waiver of legal notice by tenant prior to actions for eviction or money judgments. Agreements by the tenant that the landlord may institute suit without any notice to the tenant that the suit has been filed, thus preventing the tenant from defending against the lawsuit. (e) Waiver of legal proceedings. Authorization to the landlord to evict the tenant or hold or sell the tenant's possessions whenever the landlord determines that a breach or default has occurred without notice to the tenant or any determination by a court of the rights and liabilities of the parties. (f) Waiver of jury trial. Authorization of the landlord's lawyer to appear in court for the tenant and waive the right to a trial by jury. (g) Waiver of right to appeal judicial error in legal proceeding. Authorization to the landlord's lawyer to waive the right to appeal for judicial error in any suit or to waive the right to file a suit in equity to prevent the execution of a judgment. (h) Tenant chargeable with cost of legal actions regardless of outcome. Provision that the tenant agrees to pay attorney's fees or other legal costs whenever the landlord decides to take action against the tenant even though the court determines that the tenant prevails in the action. Prohibition of this type of provision does not mean that the tenant as a party to the lawsuit may not be obligated to pay attorney's fees or other costs if he loses the suit. Sec. 966.7 Accommodation of persons with disabilities. (a) For all aspects of the lease and grievance procedures, a handicapped person shall be provided reasonable accommodation to the extent necessary to provide the handicapped person with an opportunity to use and occupy the dwelling unit equal to a non-handicapped person. (b) The PHA shall provide a notice to each tenant that the tenant may, at any time during the tenancy, request reasonable accommodation of a handicap of a household member, including reasonable accommodation so that the tenant can meet lease requirements or other requirements of tenancy. [56 FR 51579, Oct. 11, 1991] Sec. 966.8 Providing opportunity to receive emergency rent relief. (a) If the Secretary determines that tenants must be provided with adequate notice to secure Federal funding that is available due to a Presidential declaration of a national emergency: (1) The notice of lease termination required in Sec. 966.4(l)(3) for failure to pay rent must provide such information as required by the Secretary; and (2) Notwithstanding Sec. 966.4(l)(3)(i)(A), the notice of lease termination for failure to pay rent must provide for at least 30 days from the date the tenant receives the notice. (b) Upon the Secretary's determination in paragraph (a) of this section, the PHA must provide notice to all tenants of the requirements in paragraph (a) taking effect. [86 FR 55701, Oct. 7, 2021] Subpart B_Grievance Procedures and Requirements Source: 40 FR 33406, Aug. 7, 1975, unless otherwise noted. Redesignated at 49 FR 6714, Feb. 23, 1984. Sec. 966.50 Purpose and scope. The purpose of this subpart is to set forth the requirements, standards and criteria for a grievance procedure to be established and implemented by public housing agencies (PHAs) to assure that a PHA tenant is afforded an opportunity for a hearing if the tenant disputes within a reasonable time any PHA action or failure to act involving the tenant's lease with the PHA or PHA regulations which adversely affect the individual tenant's rights, duties, welfare or status. [56 FR 51579, Oct. 11, 1991] Sec. 966.51 Applicability. (a)(1) The PHA grievance procedure shall be applicable (except as provided in paragraph (a)(2) of this section) to all individual grievances as defined in Sec. 966.53 of this subpart between the tenant and the PHA. (2)(i) The term due process determination means a determination by HUD that law of the jurisdiction requires [[Page 468]] that the tenant must be given the opportunity for a hearing in court which provides the basic elements of due process (as defined in Sec. 966.53(c)) before eviction from the dwelling unit. If HUD has issued a due process determination, a PHA may exclude from the PHA administrative grievance procedure under this subpart any grievance concerning a termination of tenancy or eviction that involves: (A) Any criminal activity that threatens the health, safety or right to peaceful enjoyment of the premises of other residents or employees of the PHA; (B) Any violent or drug-related criminal activity on or off such premises; or (C) Any criminal activity that resulted in felony conviction of a household member. (iii) For guidance of the public, HUD will publish in the Federal Register a notice listing the judicial eviction procedures for which HUD has issued a due process determination. HUD will make available for public inspection and copying a copy of the legal analysis on which the determinations are based. (iv) If HUD has issued a due process determination, the PHA may evict the occupants of the dwelling unit through the judicial eviction procedures which are the subject of the determination. In this case, the PHA is not required to provide the opportunity for a hearing under the PHA's administrative grievance procedure. (b) The PHA grievance procedure shall not be applicable to disputes between tenants not involving the PHA or to class grievances. The grievance procedure is not intended as a forum for initiating or negotiating policy changes between a group or groups of tenants and the PHA's Board of Commissioners. [40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 51579, Oct. 11, 1991; 61 FR 13273, Mar. 26, 1996; 66 FR 28804, May 24, 2001] Sec. 966.52 Requirements. (a) Each PHA shall adopt a grievance procedure affording each tenant an opportunity for a hearing on a grievance as defined in Sec. 966.53 in accordance with the requirements, standards, and criteria contained in this subpart. A PHA may establish an expedited grievance procedure as defined in Sec. 966.53. (b) The PHA grievance procedure shall be included in, or incorporated by reference in, all tenant dwelling leases pursuant to subpart A of this part. (c) The PHA shall provide at least 30 days notice to tenants and resident organizations setting forth proposed changes in the PHA grievance procedure, and providing an opportunity to present written comments. Subject to requirements of this subpart, comments submitted shall be considered by the PHA before adoption of any grievance procedure changes by the PHA. (d) The PHA shall furnish a copy of the grievance procedure to each tenant and to resident organizations. (e) The PHA must not only meet the minimal procedural due process requirements contained in this subpart but also satisfy any additional requirements required by local, state, or federal law. [56 FR 51579, Oct. 11, 1991, as amended at 81 FR 12374, Mar. 8, 2016] Sec. 966.53 Definitions. For the purpose of this subpart, the following definitions are applicable: (a) Grievance shall mean any dispute which a tenant may have with respect to PHA action or failure to act in accordance with the individual tenant's lease or PHA regulations which adversely affect the individual tenant's rights, duties, welfare or status. (b) Complainant shall mean any tenant whose grievance is presented to the PHA or at the project management office. (c) Elements of due process shall mean an eviction action or a termination of tenancy in a State or local court in which the following procedural safeguards are required: (1) Adequate notice to the tenant of the grounds for terminating the tenancy and for eviction; (2) Right of the tenant to be represented by counsel; (3) Opportunity for the tenant to refute the evidence presented by the PHA including the right to confront and cross-examine witnesses and to present any affirmative legal or equitable defense which the tenant may have; [[Page 469]] (4) A decision on the merits. (d) Expedited grievance means a procedure established by the PHA for any grievance concerning a termination of tenancy or eviction that involves: (1) Any criminal activity that threatens the health, safety, or right to peaceful enjoyment of the PHA's public housing premises by other residents or employees of the PHA; or (2) Any drug-related or violent criminal activity on or off such premises. (e) Hearing officer means an impartial person or persons selected by the PHA, other than the person who made or approved the decision under review, or a subordinate of that person. Such individual or individuals do not need legal training. PHAs must describe their policies for selection of a hearing officer in their lease forms as required by Sec. 966.4, changes to which are subject to a 30-day comment period as described in Sec. 966.3. (f) Tenant shall mean the adult person (or persons) (other than a live-in aide): (1) Who resides in the unit, and who executed the lease with the PHA as lessee of the dwelling unit, or, if no such person now resides in the unit, (2) Who resides in the unit, and who is the remaining head of household of the tenant family residing in the dwelling unit. (g) Resident organization includes a resident management corporation. [40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 51579, Oct. 11, 1991; 81 FR 12374, Mar. 8, 2016] Sec. 966.54 Informal settlement of grievance. Any grievance shall be personally presented, either orally or in writing, to the PHA office or to the office of the project in which the complainant resides so that the grievance may be discussed informally and settled without a hearing. A summary of such discussion shall be prepared within a reasonable time and one copy shall be given to the tenant and one retained in the PHA's tenant file. The summary shall specify the names of the participants, dates of meeting, the nature of the proposed disposition of the complaint and the specific reasons therefor, and shall specify the procedures by which a hearing may be obtained if the complainant is not satisfied. [40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, as amended at 81 FR 12374, Mar. 8, 2016] Sec. 966.56 Procedures governing the hearing. (a) The hearing must be scheduled promptly for a time and place reasonably convenient to both the complainant and the PHA and held before a hearing officer. A written notification specifying the time, place, and the procedures governing the hearing must be delivered to the complainant and the appropriate official. (b) The complainant shall be afforded a fair hearing, which shall include: (1) The opportunity to examine before the grievance hearing any PHA documents, including records and regulations, that are directly relevant to the hearing. (For a grievance hearing concerning a termination of tenancy or eviction, see also Sec. 966.4(m).) The tenant shall be allowed to copy any such document at the tenant's expense. If the PHA does not make the document available for examination upon request by the complainant, the PHA may not rely on such document at the grievance hearing. (2) The right to be represented by counsel or other person chosen as the tenant's representative and to have such person make statements on the tenant's behalf; (3) The right to a private hearing unless the complainant requests a public hearing; (4) The right to present evidence and arguments in support of the tenant's complaint, to controvert evidence relied on by the PHA or project management, and to confront and cross-examine all witnesses upon whose testimony or information the PHA or project management relies; and (5) A decision based solely and exclusively upon the facts presented at the hearing. (c) If the complainant or the PHA fails to appear at a scheduled hearing, the hearing officer may make a determination to postpone the hearing for no more than 5 business days or may make a determination that the party has waived his right to a hearing. Both [[Page 470]] the complainant and the PHA must be notified of the determination by the hearing officer. A determination that the complainant has waived the complainant's right to a hearing will not constitute a waiver of any right the complainant may have to contest the PHA's disposition of the grievance in an appropriate judicial proceeding. (d) At the hearing, the complainant must first make a showing of an entitlement to the relief sought and thereafter the PHA must sustain the burden of justifying the PHA action or failure to act against which the complaint is directed. (e) The complainant or the PHA may arrange, in advance and at the expense of the party making the arrangement, for a transcript of the hearing. Any interested party may purchase a copy of such transcript. (f) Accommodation of persons with disabilities. (1) The PHA must provide reasonable accommodation for persons with disabilities to participate in the hearing. Reasonable accommodation may include qualified sign language interpreters, readers, accessible locations, or attendants. (2) If the tenant is visually impaired, any notice to the tenant which is required under this subpart must be in an accessible format. (g) Limited English Proficiency. PHAs must comply with HUD's ``Final Guidance to Federal Financial Assistance Recipients Regarding Title VI Prohibition Against National Origin Discrimination Affecting Limited English Proficient Persons'' issued on January 22, 2007 and available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/ fair_housing_equal_opp/promotingfh/lep-faq. [40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 51580, Oct. 11, 1991; 81 FR 12374, Mar. 8, 2016] Sec. 966.57 Decision of the hearing officer. (a) The hearing officer must prepare a written decision, including the reasons for the PHA's decision within a reasonable time after the hearing. A copy of the decision must be sent to the complainant and the PHA. The PHA must retain a copy of the decision in the tenant's folder. The PHA must maintain a log of all hearing officer decisions and make that log available upon request of the hearing officer, a prospective complainant, or a prospective complainant's representative. (b) The decision of the hearing officer will be binding on the PHA unless the PHA Board of Commissioners determines that: (1) The grievance does not concern PHA action or failure to act in accordance with or involving the complainant's lease on PHA regulations, which adversely affects the complainant's rights, duties, welfare or status; or (2) The decision of the hearing officer is contrary to applicable Federal, State or local law, HUD regulations or requirements of the annual contributions contract between HUD and the PHA. (c) A decision by the hearing officer or Board of Commissioners in favor of the PHA or which denies the relief requested by the complainant in whole or in part will not constitute a waiver of, nor affect in any manner whatever, any rights the complainant may have to a trial de novo or judicial review in any judicial proceedings, which may thereafter be brought in the matter. [81 FR 12375, Mar. 8, 2016] PART 970_PUBLIC HOUSING PROGRAM_DEMOLITION OR DISPOSITION OF PUBLIC HOUSING PROJECTS--Table of Contents Sec. 970.1 Purpose. 970.3 Applicability. 970.5 Definitions. 970.7 General requirements for HUD approval of a PHA demolition/ disposition application. 970.9 Resident participation--consultation and opportunity to purchase. 970.11 Procedures for the offer of sale to established eligible organizations. 970.13 Environmental review requirements. 970.15 Specific criteria for HUD approval of demolition requests. 970.17 Specific criteria for HUD approval of disposition requests. 970.19 Disposition of property; use of proceeds. 970.21 Relocation of residents. 970.23 Costs of demolition and relocation of displaced tenants. 970.25 Required and permitted actions prior to approval. [[Page 471]] 970.27 De minimis exception to demolition requirements. 970.29 Criteria for disapproval of demolition or disposition applications. 970.31 Replacement units. 970.33 Effect on Operating Fund Program and Capital Fund Program. 970.35 Reports and records. Authority: 42 U.S.C. 1437p and 3535(d). Source: 71 FR 62362, Oct. 24, 2006, unless otherwise noted. Sec. 970.1 Purpose. This part states requirements for HUD approval of a public housing agency's application for demolition or disposition (in whole or in part) of public housing developments assisted under Title I of the U.S. Housing Act of 1937 (Act). The regulations in 2 CFR part 200 are not applicable to this part. Sec. 970.3 Applicability. (a) This part applies to public housing developments that are owned by public housing agencies (PHAs) and that are subject to annual contributions contracts (ACCs) under the Act. (b) This part does not apply to the following: (1) PHA-owned section 8 housing, or housing leased under former sections 10(c) or 23 of the Act; (2) Demolition or disposition before the date of full availability (DOFA) of property acquired incident to the development of a public housing project (however, this exception shall not apply to dwelling units under ACC); (3) The conveyance of public housing for the purpose of providing homeownership opportunities for lower-income families under sections 21 and 32 of the Act (42 U.S.C. 1437s and 42 U.S.C. 1437z-4, respectively), the homeownership program under former section 5(h) of the Act (42 U.S.C. 1437c(h)), or other predecessor homeownership programs; (4) The leasing of dwelling or non-dwelling space incidental to the normal operation of the project for public housing purposes, as permitted by the ACC; (5) Making available common areas and unoccupied dwelling units in public housing projects to provide HUD-approved economic self- sufficiency services and activities to promote employment of public housing residents; (6) The reconfiguration of the interior space of buildings (e.g., moving or removing interior walls to change the design, sizes, or number of units) without ``demolition,'' as defined in Sec. 970.5. (This includes the conversion of bedroom size, occupancy type, changing the status of unit from dwelling to non-dwelling.); (7) Easements, rights-of-way, and transfers of utility systems incident to the normal operation of the development for public housing purposes, as permitted by the ACC; (8) A whole or partial taking by a public or quasi-public entity (taking agency) authorized to take real property by its use of police power or exercise of its power of eminent domain under state law. A taking does not qualify for the exception under this paragraph unless: (i) The taking agency has been authorized to acquire real property by use of its police power or power of eminent domain under its state law; (ii) The taking agency has taken at least the first step in formal proceedings under its state law; and (iii) If the taking is for a federally assisted project, the Uniform Relocation Act (URA) (42 U.S.C. 4601 et seq.) applies to any resulting displacement of residents and it is the responsibility of the taking agency to comply with applicable URA requirements. (9) Demolition after conveyance of a public housing project to a non-PHA entity in accordance with an approved homeownership program under Title III of the Cranston-Gonzalez National Affordable Housing Act (HOPE I) (42 U.S.C. 1437aaa note); (10) Units or land leased for non-dwelling purposes for one year or less; (11) A public housing property that is conveyed by a PHA prior to DOFA to enable an owner entity to develop the property using the mixed- finance development method; (12) Disposition of public housing property for development pursuant to the mixed-finance development method at 24 CFR part 941, subpart F; (13) Demolition under the de minimis exception in Sec. 970.27, except that the environmental review provisions apply, including the provisions at Sec. Sec. 970.7(a)(15) and (b)(13) of this part. [[Page 472]] (14) Demolition (but not disposition) of severely distressed units as part of a revitalization plan under section 24 of the Act (42 U.S.C. 1437v) (HOPE VI) approved after October 21, 1998; (15) Demolition (but not disposition) of public housing developments removed from a PHA's inventory under section 33 of the Act, 42 U.S.C. 1437z-5. [71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008] Sec. 970.5 Definitions. ACC, or annual contributions contract, is defined in 24 CFR 5.403. Act means the United States Housing Act of 1937, 42 U.S.C. 1437 et seq. Appropriate government officials mean the Chief Executive Officer or officers of a unit of general local government. Assistant Secretary means the Assistant Secretary for Public and Indian Housing at HUD. Chief Executive Officer of a unit of general local government means the elected official or the legally designated official, who has the primary responsibility for the conduct of that entity's governmental affairs. Examples of the chief executive officer of a unit of general local government are: the elected mayor of a municipality; the elected county executive of a county; the chairperson of a county commission or board in a county that has no elected county executive; and the official designated pursuant to law by the governing body of a unit of general local government. Demolition means the removal by razing or other means, in whole or in part, of one or more permanent buildings of a public housing development. A demolition involves any four or more of the following: (1) Envelope removal (roof, windows, exterior walls); (2) Kitchen removal; (3) Bathroom removal; (4) Electrical system removal (unit service panels and distribution circuits); or (5) Plumbing system removal (e.g., either the hot water heater or distribution piping in the unit, or both). Disposition means the conveyance or other transfer by the PHA, by sale or other transaction, of any interest in the real estate of a public housing development, subject to the exceptions stated in Sec. 970.3. DOFA, or date of full availability, means the last day of the month in which substantially all (95 percent or more) of the units in a housing development are available for occupancy. Firm financial commitment means a commitment that obligates a creditable source, lender, or equity provider, to the lending or equity investment of a specific sum of funds to be made on or before a specific date(s) and may contain contingencies or conditions that must be satisfied by the borrower (or entity receiving equity investments) before the closing of the transaction. The condition of a firm commitment must be that it is enforceable by the borrower (or entity receiving the equity investment) upon the satisfaction of all contingencies or conditions. PHA Plan--Means the PHA's initial, annual, and 5-year submissions under section 5A of the U.S. Housing Act of 1937, 42 U.S.C. 1437c-1. Resident Advisory Board (RAB) has the same meaning as in Sec. 903.13(a) of this title. Resident Council means a resident organization, the role and requirements of which are as described in 24 CFR part 964. Total development cost has the same meaning as in 24 CFR 941.103. Sec. 970.7 General requirements for HUD approval of a PHA demolition /disposition application. (a) Application for HUD Approval. A PHA must obtain written approval from HUD before undertaking any transaction involving demolition or disposition of PHA-owned property under the ACC. Where a PHA demolishes or disposes of public housing property without HUD approval, no HUD funds may be used to fund the costs of demolition or disposition or reimburse the PHA for those costs. HUD will approve an application for demolition or disposition upon the PHA's submission of an application with the required certifications and the supporting information required by this section and Sec. Sec. 970.15 or 970.17. Section 970.29 specifies criteria for disapproval [[Page 473]] of an application. Approval of the application under this part does not imply approval of a request for additional funding, which the PHA must make separately under a program that makes available funding for this purpose. The PHA shall submit the application for demolition or disposition and the timetable in a time and manner and in a form prescribed by HUD. The supporting information shall include: (1) A certification that the PHA has described the demolition or disposition in the PHA Annual Plan and timetable under 24 CFR part 903 (except in the case of small or high-performing PHAs eligible for streamlined annual plan treatment), and that the description in the PHA Annual Plan is identical to the application submitted pursuant to this part and otherwise complies with section 18 of the Act (42 U.S.C. 1437p) and this part; (2) A description of all identifiable property, by development, including land, dwelling units, and other improvements, involved in the proposed demolition or disposition; (3) A description of the specific action proposed, such as: (i) Demolition, disposition, or demolition with disposition; (ii) If disposition is involved, the method of sale; (4) A general timetable for the proposed action(s), including the initial contract for demolition, the actual demolition, and, if applicable, the closing of sale or other form of disposition; (5) A statement justifying the proposed demolition or disposition under the applicable criteria of Sec. Sec. 970.15 or 970.17; (6) If applicable, a plan for the relocation of tenants who would be displaced by the proposed demolition or disposition (including persons with disabilities requiring reasonable accommodations and a relocation timetable as prescribed in Sec. 970.21); (7) A description with supporting evidence of the PHA's consultations with residents, any resident organizations, and the Resident Advisory Board, as required under Sec. 903.9 of this title; (8) In the case of disposition only, evidence of compliance with the offering to resident organizations, as required under Sec. 970.9; (9) In the case of disposition, an estimate of the fair market value of the property, established on the basis of one independent appraisal, unless otherwise determined by HUD, as described in Sec. 970.19(c); (10) In the case of disposition, estimates of the gross and net proceeds to be realized, with an itemization of estimated costs to be paid out of gross proceeds and the proposed use of any net proceeds in accordance with Sec. 970.19; (11) An estimate of costs for any required relocation housing, moving costs, and counseling. (12) Where the PHA is requesting a waiver of the requirement for the application of proceeds for repayment of outstanding debt, the PHA must request such a waiver in its application, along with a description of the proposed use of the proceeds; (13) A copy of a resolution by the PHA's Board of Commissioners approving the specific demolition or disposition application (or, in the case of the report required under Sec. 970.27(e) for ``de minimis'' demolitions, the Board of Commissioner's resolution approving the ``de minimis'' action) for that development or developments or portions thereof. The resolution must be signed and dated after all resident and local government consultation has been completed; (14) Evidence that the application was developed in consultation with appropriate government officials as defined in Sec. 970.5, including: (i) A description of the process of consultation with local government officials, which summarizes dates, meetings, and issues raised by the local government officials and the PHA's responses to those issues; (ii) A signed and dated letter in support of the application from the chief executive officer of the unit of local government that demonstrates that the PHA has consulted with the appropriate local government officials on the proposed demolition or disposition; (iii) Where the local government consistently fails to respond to the PHA's attempts at consultation, including letters, requests for meetings, public [[Page 474]] notices, and other reasonable efforts, documentation of those attempts; (iv) Where the PHA covers multiple jurisdictions (such as a regional housing authority), the PHA must meet these requirements for each of the jurisdictions where the PHA is proposing demolition or disposition of PHA property; (15) An approved environmental review of the proposed demolition or disposition in accordance with 24 CFR parts 50 or 58 for any demolition or disposition of public housing property covered under this part, as required under 24 CFR 970.13; (16) A certification that the demolition or disposition application does not violate any remedial civil rights order or agreement, voluntary compliance agreement, final judgment, consent decree, settlement agreement, or other court order or agreement; (17) Any additional information necessary to support the application and assist HUD in making determinations under this part. (b) Completion of demolition/disposition or rescissions of approval. (1) HUD will consider a PHA's request to rescind an earlier approval to demolish or dispose of public housing property, where a PHA submits a resolution from the Board of Commissioners and submits documentation that the conditions that originally led to the request for demolition or disposition have significantly changed or been removed. (2) The Assistant Secretary will not approve any request by the PHA to either substitute units or add units to those originally included in the approved demolition or disposition application, unless the PHA submits a new application for those units that meet the requirements of this part. Sec. 970.9 Resident participation--consultation and opportunity to purchase. (a) Resident consultation. PHAs must consult with residents who will be affected by the proposed action with respect to all demolition or disposition applications. The PHA must provide with its application evidence that the application was developed in consultation with residents who will be affected by the proposed action, any resident organizations for the development, PHA-wide resident organizations that will be affected by the demolition or disposition, and the Resident Advisory Board (RAB). The PHA must also submit copies of any written comments submitted to the PHA and any evaluation that the PHA has made of the comments. (b) Resident organization offer to sell--applicability. In the situation where the PHA applies to dispose of a development or portion of a development: (1) The PHA shall, in appropriate circumstances as determined by the Assistant Secretary, initially offer the property proposed for disposition to any eligible resident organization, eligible resident management corporation as defined in 24 CFR part 964, or to a nonprofit organization acting on behalf of the residents at any development proposed for disposition, if the resident entity has expressed an interest in purchasing the property for continued use as low-income housing. The entity must make the request in writing to the PHA, no later than 30 days after the resident entity has received the notification of sale from the PHA; (2) If the resident entity has expressed an interest in purchasing the property for continued use as low-income housing, the entity, in order for its purchase offer to be considered, must: (i) In the case of a nonprofit organization, be acting on behalf of the residents of the development; and (ii) Demonstrate that it has obtained a firm commitment for the necessary financing within 60 days of serving its written notice of interest under paragraph (b)(1) of this section. (3) The requirements of this section do not apply to the following cases, which have been determined not to present an appropriate opportunity for purchase by a resident organization: (i) A unit of state or local government requests to acquire vacant land that is less than two acres in order to build or expand its public services (a local government wishes to use the land to build or establish a police substation); or (ii) A PHA seeks disposition outside the public housing program to privately finance or otherwise develop a [[Page 475]] facility to benefit low-income families (e.g., day care center, administrative building, mixed-finance housing under 24 CFR part 941 subpart F, or other types of low-income housing); (iii) Units that have been legally vacated in accordance with the HOPE VI program, the regulations at 24 CFR part 971, or the mandatory conversion regulations at 24 CFR part 972, excluding developments where the PHA has consolidated vacancies; (iv) Distressed units required to be converted to tenant-based assistance under section 33 of the 1937 Act (42 U.S.C. 1437z-5); or (v) Disposition of non-dwelling properties, including administration and community buildings, and maintenance facilities. (4) If the requirements of this section are not applicable, as provided in paragraph (b)(3) of this section, the PHA may proceed to submit to HUD its application under this part to dispose of the property, or a portion of the property, without affording an opportunity for purchase by a resident organization. However, PHAs must consult with their residents in accordance with paragraph (a) of this section. The PHA must submit documentation with date and signatures to support the applicability of one of the exceptions in paragraph (b)(3) of this section. Examples of appropriate documentation include, but are not limited to: a letter from the public body that wants to acquire the land, copies of memoranda or letters approving the PHA's previous application under part 970 or mandatory conversion plan, and the HUD transmittal document approving the proposed revitalization plan. (c) Established eligible organizations. Where there are eligible resident organizations, eligible resident management corporations as defined in 24 CFR part 964, or nonprofit organizations acting on behalf of the residents as defined in 24 CFR part 964 (collectively, ``established eligible organizations''), that have expressed an interest, in writing, to the PHA within 30 days of the date of notification of the proposed sale, in purchasing the property for continued use as low-income housing at the affected development, the PHA shall follow the procedures for making the offer described in Sec. 970.11. [71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008] Sec. 970.11 Procedures for the offer of sale to established eligible organizations. In making an offer of sale to established eligible organizations as defined in Sec. 970.9(c) in the case of proposed disposition, the PHA shall proceed as follows: (a) Initial written notification of sale of property. The PHA shall send an initial written notification to each established eligible organization (for purposes of this section, an established eligible organization that has been so notified is a ``notified eligible organization'') of the proposed sale of the property. The notice of sale must include, at a minimum, the information listed in paragraph (d) of this section; (b) Initial expression of interest. All notified eligible organizations shall have 30 days to initially express an interest, in writing, in the offer (``initial expression of interest''). The initial expression of interest need not contain details regarding financing, acceptance of an offer of sale, or any other terms of sale. (c) Opportunity to obtain firm financial commitment by interested entity. If a notified eligible organization expresses interest in writing during the 30-day period referred to in paragraph (b) of this section, no disposition of the property shall occur during the 60-day period beginning on the date of the receipt of the written notice of interest. During this period, the PHA must give the entity expressing interest an opportunity to obtain a firm financial commitment as defined in Sec. 970.5 for the financing necessary to purchase the property; (d) Contents of initial written notification. The initial written notification to established eligible organizations under paragraph (a) of this section must include at a minimum the following: (1) An identification of the development, or portion of the development, involved in the proposed disposition, including the development number and [[Page 476]] location, the number of units and bedroom configuration, the amount and use of non-dwelling space, the current physical condition (fire damaged, friable asbestos, lead-based paint test results), and percent of occupancy; (2) A copy of the appraisal of the property and any terms of sale; (3) Disclosure and description of the PHA's plans for reuse of land, if any, after the proposed disposition; (4) An identification of available resources (including its own and HUD's) to provide technical assistance to the organization to help it to better understand its opportunity to purchase the development, the development's value, and potential use; (5) A statement that public housing developments sold to resident organizations will not continue to receive capital and operating subsidy after the completion of the sale; (6) Any and all terms of sale that the PHA will require, including a statement that the purchaser must use the property for low-income housing. If the PHA does not know all the terms of the offer of sale at the time of the notice of sale, the PHA shall include all the terms of sale of which it is aware. The PHA must supply the totality of all the terms of sale and all necessary material to the residents no later than 3 business days from the day it receives the residents' initial expression of interest; (7) A date by which an established eligible organization must express its interest, in writing, in response to the PHA's offer to sell the property proposed for demolition or disposition, which shall be up to 30 days from the date of the official written offer of sale from the PHA; (8) A statement that the established eligible organization will be given 60 days from the date of the PHA's receipt of its letter expressing interest to develop and submit a proposal to the PHA to purchase the property and to obtain a firm financial commitment, as defined in Sec. 970.5. The statement shall explain that the PHA shall approve the proposal from an organization if the proposal meets the terms of sale and is supported by a firm commitment for financing. The statement shall also provide that the PHA can consider accepting an offer from the organization that differs from the terms of sale. The statement shall explain that if the PHA receives proposals from more than one organization, the PHA shall select the proposal that meets the terms of sale, if any. In the event that two proposals from the development to be sold meet the terms of sale, the PHA shall choose the best proposal. If no proposal meets the terms of sale, the PHA in its discretion may or may not select the best proposal. (e) Response to the notice of sale. The established eligible organization or organizations have up to 30 days to respond to the notice of sale from the PHA. The established eligible organization shall respond to the PHA's notice of sale by means of an initial expression of interest under paragraph (b) of this section. (f) Resident proposal. The established eligible organization has up to 60 days from the date the PHA receives its initial expression of interest and provides all necessary terms and information to prepare and submit a proposal to the PHA for the purchase of the property of which the PHA plans to dispose, and to obtain a firm commitment for financing. The resident's proposal shall provide all the information requested in paragraph (i) of this section. (g) PHA Review of Proposals. The PHA has up to 60 days from the date of receipt of the proposal or proposals to review the proposals and determine whether they meet the terms of sale described in the PHA's offer or offers. If the PHA determines that the proposal meets the terms of sale, within 14 days of the date of this determination, the PHA shall notify the organization of that fact and that the proposal has been accepted. If the PHA determines that the proposal differs from the terms of sale, the PHA may accept or reject the proposal at its discretion; (h) Appeals. The established eligible organization has the right to appeal the PHA's decision to the Assistant Secretary for Public and Indian Housing, or his designee, by sending a letter of appeal within 30 days of the date of the PHA's decision to the field office director. The letter of appeal must include copies of the proposal and any related correspondence, along with a [[Page 477]] statement of reasons why the organization believes the PHA should have decided differently. HUD shall render a decision within 30 days, and notify the organization and the PHA by letter within 14 days of such decision. If HUD cannot render a decision within 30 days, HUD will so notify the PHA and the established eligible organization in writing, in which case HUD will have an additional 30 days in which to render a decision. HUD may continue to extend its time for decision in 30-day increments for a total of 120 days. Once HUD renders its decision, there is no further administrative appeal or remedy available. (i) Contents of the organization's proposal. The established eligible organization's proposal shall at a minimum include the following: (1) The length of time the organization has been in existence; (2) A description of current or past activities that demonstrate the organization's organizational and management capability, or the planned acquisition of such capability through a partner or other outside entities (in which case the proposal should state how the partner or outside entity meets this requirement); (3) To the extent not included in paragraph (i)(2) of this section, the organization's experience in the development of low-income housing, or planned arrangements with partners or outside entities with such experience (in which case the proposal should state how the partner or outside entity meets this requirement); (4) A statement of financial capability; (5) A description of involvement of any non-resident organization (such as non-profit, for-profit, governmental, or other entities), if any, the proposed division of responsibilities between the non-resident organization and the established eligible organization, and the non- resident organization's financial capabilities; (6) A plan for financing the purchase of the property and a firm financial commitment as stated in paragraph (c) of this section for funding resources necessary to purchase the property and pay for any necessary repairs; (7) A plan for using the property for low-income housing; (8) The proposed purchase price in relation to the appraised value; (9) Justification for purchase at less than the fair market value in accordance with Sec. 970.19(a) of this part, if appropriate; (10) Estimated time schedule for completing the transaction; (11) Any additional items necessary to respond fully to the PHA's terms of sale; (12) A resolution from the resident organization approving the proposal; and (13) A proposed date of settlement, generally not to exceed 6 months from the date of PHA approval of the proposal, or such period as the PHA may determine to be reasonable. (j) PHA obligations. The PHA must: (1) Prepare and distribute the initial notice of sale pursuant to 24 CFR 970.11(a), and, if any established eligible organization expresses an interest, any further documents necessary to enable the organization or organizations to make an offer to purchase; (2) Evaluate proposals received, make the selection based on the considerations set forth in paragraph (b) of this section, and issue letters of acceptance or rejection; (3) Prepare certifications, where appropriate, as provided in paragraph (k) of this section; (4) Comply with its obligations under Sec. 970.7(a) regarding tenant consultation and provide evidence to HUD that the PHA has met those obligations. The PHA shall not act in an arbitrary manner and shall give full and fair consideration to any offer from a qualified resident management corporation, resident council of the affected development, or a nonprofit organization acting on behalf of the residents, and shall accept the proposal if the proposal meets the terms of sale. (k) PHA post-offer requirements. After the resident offer, if any, is made, the PHA shall: (1) Submit its disposition application to HUD in accordance with section 18 of the Act and this part. The disposition application must include complete documentation that the resident offer [[Page 478]] provisions of this part have been met. This documentation shall include: (i) A copy of the signed and dated PHA notification letter(s) to each established eligible organization informing them of the PHA's intention to submit an application for disposition, the organization's right to purchase the property to be disposed of; and (ii) The responses from each organization. (2)(i) If the PHA accepts the proposal of an established eligible organization, the PHA shall submit revisions to its disposition application to HUD in accordance with section 18 of the Act and this part reflecting the arrangement with the resident organization, with appropriate justification for a negotiated sale and for sale at less than fair market value, if applicable. (ii) If the PHA rejects the proposal of the resident organization, the resident organization may appeal as provided in paragraph (h) of this section. Once the appeal is resolved, or, if there is no appeal, and the 30 days allowed for appeal has passed, HUD shall proceed to approve or disapprove the application. (3) HUD will not process an application for disposition unless the PHA provides HUD with one of the following: (i) An official board resolution or its equivalent from each established eligible organization stating that such organization has received the PHA offer, and that it understands the offer and waives its opportunity to purchase the project, or portion of the project, covered by the disposition application; (ii) A certification from the executive director or board of commissioners of the PHA that the 30-day time frame to express interest has expired and no response was received to its offer; or (iii) A certification from the executive director or board of commissioners of the PHA with supporting documentation that the offer was otherwise rejected. Sec. 970.13 Environmental review requirements. (a) Activities under this part (including de minimis demolition pursuant to Sec. 970.27) are subject to HUD environmental regulations in 24 CFR part 58. However, HUD may make a finding in accordance with 24 CFR 58.11(d) of this title and may itself perform the environmental review under the provisions of 24 CFR part 50 if a PHA objects in writing to the responsible entity performing the review under 24 CFR part 58. (b) The environmental review is limited to the demolition or disposition action and any known re-use, and is not required for any unknown future re-use. Factors that indicate that the future site reuse can reasonably be considered to be known include the following: (1) Private, Federal, state, or local funding for the site reuse has been committed; (2) A grant application involving the site has been filed with the Federal government or a state or local unit of government; (3) The Federal government or a state or unit of local government has made a commitment to take an action, including a physical action, that will facilitate a particular reuse of the site; and (4) Architectural, engineering, or design plans for the reuse exist that go beyond preliminary stages. (c) In the case of a demolition or disposition made necessary by a disaster that the President has declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq., or a disaster that has been declared under state law by the officer or entity with legal authority to make such declaration, pursuant to 24 CFR 50.43 and 24 CFR 58.33, the provisions of 40 CFR 1506.11 will apply. Sec. 970.15 Specific criteria for HUD approval of demolition requests. (a) In addition to other applicable requirements of this part, HUD will approve an application for demolition upon the PHA's certification that it meets the following statutory criteria, unless the application meets the criteria for disapproval under 24 CFR 970.29. An application for the demolition of all or a portion of a public housing project must certify that the project: (1) Is obsolete as to physical condition, location, or other factors, making it unsuitable for housing purposes, and [[Page 479]] no reasonable program of modifications is cost-effective to return the public housing project or portion of the project to useful life; and (2) In the case of an application for demolition of a portion of a project, the demolition will help to ensure the viability of the remaining portion of the project. (b) As to paragraph (a)(1) of this section: (1) Major problems indicative of obsolescence are: (i) As to physical condition: Structural deficiencies that cannot be corrected in a cost-effective manner (settlement of earth below the building caused by inadequate structural fills, faulty structural design, or settlement of floors), or other design or site problems (severe erosion or flooding); (ii) As to location: physical deterioration of the neighborhood; change from residential to industrial or commercial development; or environmental conditions as determined by HUD environmental review in accord with 24 CFR part 50, which jeopardize the suitability of the site or a portion of the site and its housing structures for residential use; or (iii) There are other factors that have seriously affected the marketability, usefulness, or management of the property. (2) HUD generally shall not consider a program of modifications to be cost-effective if the costs of such program exceed 62.5 percent of total development cost (TDC) for elevator structures and 57.14 percent of TDC for all other types of structures in effect at the time the application is submitted to HUD. (c) As to paragraph (a)(2) of this section, a partial demolition will be considered to ensure the viability of the remaining portion if the application certifies that the demolition will reduce development density to permit better access by emergency, fire, or rescue services, or improve marketability by reducing the density to that of the neighborhood or other developments in the PHA's inventory. [71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008] Sec. 970.17 Specific criteria for HUD approval of disposition requests. In addition to other applicable requirements of this part, HUD will approve a request for disposition by sale or other transfer of a public housing project or other real property if the PHA certifies that the retention of the property is not in the best interests of the residents or the PHA for at least one of the following reasons, unless information available to HUD is inconsistent with the certification: (a) Conditions in the area surrounding the project (density, or industrial or commercial development) adversely affect the health or safety of the tenants or the feasible operation of the project by the PHA; (b) Disposition allows the acquisition, development, or rehabilitation of other properties that will be more efficiently or effectively operated as low-income housing developments; (c) The PHA has otherwise determined the disposition to be appropriate for reasons that are consistent with the goals of the PHA and the PHA Plan and that are otherwise consistent with the Act; (d) In the case of disposition of property other than dwelling units (community facilities or vacant land), the PHA certifies that: (1) The non-dwelling facilities or land exceeds the needs of the development (after DOFA); or (2) The disposition of the property is incidental to, or does not interfere with, continued operation of the remaining portion of the development. Sec. 970.19 Disposition of property; use of proceeds. (a) Where HUD approves the disposition of real property of a development, in whole or in part, the PHA shall dispose of the property promptly for not less than fair market value (in which case there is no showing of commensurate public benefit required), unless HUD authorizes negotiated sale for reasons found to be in the best interests of the PHA or the federal government; or dispose of the property for sale for less [[Page 480]] than fair market value (where permitted by state law), based on commensurate public benefits to the community, the PHA, or the federal government justifying such an exception. General public improvements, such as streets and bridges, do not qualify as commensurate public benefits. (b) A PHA may pay the reasonable costs of disposition, and of relocation of displaced tenants allowable under Sec. 970.21, out of the gross proceeds, as approved by HUD. (c) To obtain an estimate of the fair market value before the property is advertised for bid, the PHA shall have one independent appraisal performed on the property proposed for disposition, unless HUD determines that: (1) More than one appraisal is warranted; or (2) Another method of valuation is clearly sufficient and the expense of an independent appraisal is unjustified because of the limited nature of the property interest involved or other available data. (d) To obtain an estimate of the fair market value when a property is not publicly advertised for bid, HUD may accept a reasonable valuation of the property. (e) A PHA shall use net proceeds, including any interest earned on the proceeds (after payment of HUD-approved costs of disposition and relocation under paragraph (a) of this section), subject to HUD approval, as follows: (1) Unless waived by HUD, for the retirement of outstanding obligations, if any, issued to finance original development or modernization of the project; and (2) To the extent that any net proceeds remain, after the application of proceeds in accordance with paragraph (e)(1) of this section, for: (i) The provision of low-income housing or to benefit the residents of the PHA, through such measures as modernization of lower-income housing or the acquisition, development, or rehabilitation of other properties to operate as lower-income housing; or (ii) Leveraging amounts for securing commercial enterprises, on-site in public housing developments of the PHA, appropriate to serve the needs of the residents. (f) For dispositions for the purpose stated in Sec. 970.17(b), a PHA must demonstrate to the satisfaction of HUD that the replacement units are being provided in connection with the disposition of the property. A PHA may use sale proceeds in accordance with paragraph (e) to fund the replacement units. Sec. 970.21 Relocation of residents. (a) Relocation of residents on a nondiscriminatory basis and relocation resources. A PHA must offer each family displaced by demolition or disposition comparable housing that meets housing quality standards (HQS) and is located in an area that is generally not less desirable than the location of the displaced persons. The housing must be offered on a nondiscriminatory basis, without regard to race, color, religion, creed, national origin, handicap, age, familial status, or gender, in compliance with applicable Federal and state laws. For persons with disabilities displaced from a unit with reasonable accommodations, comparable housing should include similar accommodations. Such housing may include: (1) Tenant-based assistance, such as assistance under the Housing Choice Voucher Program, 24 CFR part 982, except that such assistance will not be considered ``comparable housing'' until the family is actually relocated into such housing; (2) Project-based assistance; or (3) Occupancy in a unit operated or assisted by the PHA at a rental rate paid by the family that is comparable to the rental rate applicable to the unit from which the family is vacated. (b) In-place tenants. A PHA may not complete disposition of a building until all tenants residing in the building are relocated. (c) Financial resources. (1) Sources of funding for relocation costs related to demolition or disposition may include, but are not limited to, capital funds or other federal funds currently available for this purpose; (2) If Federal financial assistance under the Community Development Block Grant (CDBG) program, 42 U.S.C. 5301 et seq. (including loan guarantees under section 108 of the Housing and Community Development Act of 1974, [[Page 481]] 42 U.S.C. 5308 et seq.); the Urban Development Action Grant (UDAG) program, 42 U.S.C. 5318 et seq.; or HOME program, 42 U.S.C. 12701 et seq. is used in connection with the demolition or disposition of public housing, the project is subject to section 104(d) of the Housing and Community Development Act of 1974, 42 U.S.C. 5304(d) (as amended)), including the relocation payment provisions and the anti-displacement provisions, which require that comparable replacement dwellings be provided within the community for the same number of occupants as could have been housed in the occupied and vacant, occupiable low- and moderate-income units demolished or converted to another use. (d) Relocation timetable. For the purpose of determining operating subsidy eligibility under 24 CFR part 990, a PHA must provide the following information in the application or immediately following application submission: (1) The number of occupied units at the time of demolition/ disposition application approval; (2) A schedule for the relocation of those residents on a month-by- month basis. (e) The PHA is responsible for the following: (1) Notifying each family residing in the development of the proposed demolition or disposition 90 days prior to the displacement date, except in cases of imminent threat to health and safety. The notification must include a statement that: (i) The development or portion of the development will be demolished or disposed of; (ii) The demolition of the building in which the family resides will not commence until each resident of the building has been relocated; (iii) Each family displaced by such action will be provided comparable housing, which may include housing with reasonable accommodations for disability, if required under section 504 of the Rehabilitation Act of 1973 and HUD's regulations in 24 CFR part 8, as described in paragraph (a) of this section; (2) Providing for the payment of the actual and reasonable relocation expenses of each resident to be displaced, including residents requiring reasonable accommodations because of disabilities; (3) Ensuring that each displaced resident is offered comparable replacement housing as described in paragraph (b) of this section; and (4) Providing any necessary counseling for residents that are displaced. (f) In addition, the PHA's plan for the relocation of residents who would be displaced by the proposed demolition or disposition must indicate: (1) The number of individual residents to be displaced; (2) The type of counseling and advisory services the PHA plans to provide; (3) What housing resources are expected to be available to provide housing for displaced residents; and (4) An estimate of the costs for counseling and advisory services and resident moving expenses, and the expected source for payment of these costs. (g) The Uniform Relocation Act does not apply to demolitions and dispositions under this part. Sec. 970.23 Costs of demolition and relocation of displaced tenants. Where HUD has approved demolition of a project, or a portion of a project, and the proposed action is part of a program under the Capital Fund Program (24 CFR part 905), the costs of demolition and of relocation of displaced residents may be included in the budget funded with capital funds pursuant to section 9(d) of the Act (42 U.S.C. 1437g(d)) or awarded HOPE VI or other eligible HUD funds. Sec. 970.25 Required and permitted actions prior to approval. (a) A PHA may not take any action to demolish or dispose of a public housing development or a portion of a public housing development without obtaining HUD approval under this part. HUD funds may not be used to pay for the cost to demolish or dispose of a public housing development or a portion of a public housing development, unless HUD approval has been obtained under this part. Until the PHA receives HUD approval, the PHA shall continue [[Page 482]] to meet its ACC obligations to maintain and operate the property as housing for low-income families. However, the PHA may engage in planning activities, analysis, or consultations without seeking HUD approval. Planning activities may include project viability studies, capital planning, or comprehensive occupancy planning. The PHA must continue to provide full housing services to all residents that remain in the development. A PHA should not re-rent these units at turnover while HUD is considering its application for demolition or disposition. However, the PHA's operating subsidy eligibility will continue to be calculated as stated in 24 CFR part 990. (b) A PHA may consolidate occupancy within or among buildings of a development, or among developments, or with other housing for the purposes of improving living conditions of, or providing more efficient services to residents, without submitting a demolition or disposition application. Sec. 970.27 De minimis exception to demolition requirements. (a) A PHA may demolish units without submitting an application if the PHA is proposing to demolish not more than the lesser of: (1) five dwelling units; or (2) 5 percent of the total dwelling units owned by the PHA over any 5-year period. (b) The 5-year period referred to in paragraph (a)(2) of this section is the 5 years counting backward from the date of the proposed de minimis demolition, except that any demolition performed prior to October 21, 1998, will not be counted against the five units or 5 percent of the total, as applicable. For example, if a PHA that owns 1,000 housing units wishes to demolish units under this de minimis provision on July 1, 2004, and previously demolished two units under this provision on September 1, 2000, and two more units on July 1, 2001, the PHA would be able to demolish one additional unit for a total of five in the preceding 5 years. As another example, if a PHA that owns 60 housing units as of July 1, 2004, had demolished two units on September 1, 2000, and one unit on July 1, 2001, that PHA would not be able to demolish any further units under this ``de minimis'' provision until after September 1, 2005, because it would have already demolished 5 percent of its total. (c)(1) In order to qualify for this exemption, the space occupied by the demolished unit must be used for meeting the service or other needs of public housing residents (use of space to construct a laundry facility, community center, child care facility, office space for a general provider; or for use as open space or garden); or (2) The unit being demolished must be beyond repair. (d) PHAs utilizing this section will comply with environmental review requirements at 24 CFR 970.13 and, if applicable, the requirements of 24 CFR 8.23. (e) For recordkeeping purposes, PHAs that wish to demolish units under this section shall submit the information required in Sec. 970.7(a)(1), (2), (12), (13), and (14). HUD will accept a certification from the PHA that one of the two conditions in paragraph (c) of this section apply unless HUD has independent information that requirements for ``de minimis'' demolition have not been met. [71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008] Sec. 970.29 Criteria for disapproval of demolition or disposition applications. HUD will disapprove an application if HUD determines that: (a) Any certification made by the PHA under this part is clearly inconsistent with: (1) The PHA Plan; (2) Any information and data available to HUD related to the requirements of this part, such as failure to meet the requirements for the justification for demolition or disposition as found in Sec. Sec. 970.15 or 970.17; or (3) Information or data requested by HUD; or (b) The application was not developed in consultation with: (1) Residents who will be affected by the proposed demolition or disposition as required in Sec. 970.9; and (2) Each resident advisory board and resident council, if any, of the project [[Page 483]] (or portion thereof) that will be affected by the proposed demolition or disposition as required in Sec. 970.9, and appropriate government officials as required in Sec. 970.7. Sec. 970.31 Replacement units. Notwithstanding any other provision of law, replacement public housing units may be built on the original public housing location or in the same neighborhood as the original public housing location if the number of the replacement public housing units is significantly fewer than the number of units demolished. Such development must comply with 24 CFR part 905, Public Housing Capital Fund Program, as well as 24 CFR part 941. Sec. 970.33 Effect on the Operating Fund Program and Capital Fund Program. The provisions of 24 CFR part 990, the Public Housing Operating Fund Program, and 24 CFR part 905, the Public Housing Capital Fund Program, apply. Sec. 970.35 Reports and records. (a) After HUD approval of demolition or disposition of all or part of a project, the PHA shall provide information on the following: (1) Actual completion of each demolition contract by entering the appropriate information into HUD's applicable data system, or providing the information by another method HUD may require, within a week of making the final payment to the demolition contractor, or expending the last remaining funds if funded by force account; (2) Execution of sales or lease contracts by entering the appropriate information into HUD's applicable data system, or providing the information by another method HUD may require, within a week of execution; (3) The PHA's use of the proceeds of sale by providing a financial statement showing how the funds were expended by item and dollar amount; (4) Amounts expended for closing costs and relocation expenses, by providing a financial statement showing this information for each property sold; and (5) Such other information as HUD may from time to time require. (b) [Reserved] PART 971_ASSESSMENT OF THE REASONABLE REVITALIZATION POTENTIAL OF CERTAIN PUBLIC HOUSING REQUIRED BY LAW--Table of Contents Sec. 971.1 Purpose. 971.3 Standards for identifying developments. 971.5 Long-term viability. 971.7 Plan for removal of units from public housing inventories. 971.9 Tenant and local government consultation. 971.11 Hope VI developments. 971.13 HUD enforcement authority. Appendix to Part 971--Methodology of Comparing Cost of Public Housing With Cost of Tenant-Based Assistance Authority: Pub. L. 104-134; 42 U.S.C. 3535(d). Source: 62 FR 49576, Sept. 22, 1997, unless otherwise noted. Sec. 971.1 Purpose. Section 202 of the Omnibus Consolidated Rescissions and Appropriations Act of 1996 (Pub.L. 104-134, approved April 26, 1996) (``OCRA'') requires PHAs to identify certain distressed public housing developments that cost more than Section 8 rental assistance and cannot be reasonably revitalized. Households in occupancy that will be affected by the activities will be offered tenant-based or project-based assistance (that can include other public housing units) and will be relocated, to other decent, safe, sanitary, and affordable housing which is, to the maximum extent practicable, housing of their choice. After residents are relocated, the distressed developments (or affected buildings) for which no reasonable means of revitalization exists will be removed from the public housing inventory. Sec. 971.3 Standards for identifying developments. (a) PHAs shall use the following standards for identifying developments or portions thereof which are subject to section 202's requirement that PHAs develop and carry out plans for the removal over time from the public housing inventory. These standards track [[Page 484]] section 202(a) of OCRA. The development, or portions thereof, must: (1) Be on the same or contiguous sites. (OCRA Sec. 202(a)(1)). This standard and the standard set forth in paragraph (a)(2) of this section refer to the actual number and location of units, irrespective of HUD development project numbers. (2) Total more than 300 dwelling units. (OCRA Sec. 202(a)(2)). (3) Have a vacancy rate of at least ten percent for dwelling units not in funded, on-schedule modernization. (OCRA Sec. 202(a)(3)). For this determination, PHAs and HUD shall use the data the PHA relied upon for its last Public Housing Management Assessment Program (PHMAP) certification, as reported on the Form HUD-51234 (Report on Occupancy), or more recent data which demonstrates improvement in occupancy rates. Units in the following categories shall not be included in this calculation: (i) Vacant units in an approved demolition or disposition program; (ii) Vacant units in which resident property has been abandoned, but only if State law requires the property to be left in the unit for some period of time, and only for the period stated in the law; (iii) Vacant units that have sustained casualty damage, but only until the insurance claim is adjusted; and (iv) Units that are occupied by employees of the PHA and units that are utilized for resident services. (4) Have an estimated cost of continued operation and modernization of the developments as public housing in excess of the cost of providing tenant-based assistance under section 8 of the United States Housing Act of 1937 for all families in occupancy, based on appropriate indicators of cost (such as the percentage of total development cost required for modernization). (OCRA Sec. 202(a)(5)). (i) For purposes of this determination, the costs used for public housing shall be those necessary to produce a revitalized development as described in the paragraph (a)(5) of this section. (ii) These costs, including estimated operating costs, modernization costs and accrual needs must be used to develop a per unit monthly cost of continuing the development as public housing. (iii) That per unit monthly cost of public housing must be compared to the per unit monthly Section 8 cost. (iv) Both the method to be used and an example are included in the Appendix to this part. (5) Be identified as distressed housing that the PHA cannot assure the long-term viability as public housing through reasonable revitalization, density reduction, or achievement of a broader range of household income. (OCRA Sec. 202(a)(4)). [See Sec. 971.5.] (b) Properties meeting the standards set forth in paragraphs (a)(1) through (3) of this section will be assumed to be ``distressed'' unless the PHA can show that the property fails the standard set forth in paragraph (a)(3) of this section for reasons that are temporary in duration and are unlikely to recur. (c) Where the PHA will demolish all of the units in a development, or the portion thereof, that is subject to section 202, section 202 requirements will be satisfied once the demolition occurs and its standards will not be applied further to the use of the site. (d) PHAs will meet the test for assuring long-term viability of identified housing only if it is probable that, after reasonable investment, for at least twenty years (or at least 30 years for rehabilitation equivalent to new construction) the development can sustain structural/system soundness and full occupancy; will not be excessively densely configured relative to standards for similar (typically family) housing in the community; will not constitute an excessive concentration of very low-income families; and has no other site impairments which clearly should disqualify the site from continuation as public housing. Sec. 971.5 Long-term viability. (a) Reasonable investment. (1) Proposed revitalization costs for viability must be reasonable. Such costs must not exceed, and ordinarily would be substantially less than, 90 percent of HUD's total development cost limit for the units proposed to be revitalized (100 percent of the total development cost limit for any ``infill'' new construction [[Page 485]] subject to this regulation). The revitalization cost estimate used in the PHA's most recent comprehensive plan for modernization is to be used for this purpose, unless a PHA demonstrates or HUD determines that another cost estimate is clearly more realistic to ensure viability and to sustain the operating costs that are described in paragraph (a)(2) of this section. (2) The overall projected cost of the revitalized development must not exceed the Section 8 cost under the method contained in the Appendix to this part, even if the cost of revitalization is a lower percentage of the TDC than the limits stated in paragraph (a)(1) of this section. (3) The source of funding for such a revitalization program must be identified and already available. In addition to other resources already available to the PHA, a PHA may assume that future formula funds provided through the Comprehensive Grant Program are available for this purpose, provided that they are sufficient to permit completion of the revitalization within the statutory five year time frame. (Comprehensive plans must be amended accordingly.) (b) Density. Density reduction measures would have to result in a public housing community with a density approaching that which prevails in the community for similar types of housing (typically family), or a lower density. If the development's density already meets this description, further reduction in density is not a requirement. (c) Income mix. (1) Measures generally will be required to broaden the range of resident incomes to include over time a significant mix of households with at least one full-time worker (for example, at least 20 percent with an income at least 30 percent of median area income). Measures to achieve a broader range of household incomes must be realistic in view of the site's location. Evidence of such realism typically would include some mix of incomes of other households located in the same census tract or neighborhood, or unique advantages of the public housing site. (2) For purposes of judging appropriateness of density reduction and broader range of income measures, overall size of the public housing site and its number of dwelling units will be considered. The concerns these measures would address generally are greater as the site's size and number of dwelling units increase. Sec. 971.7 Plan for removal of units from public housing inventories. (a) Time frames. Section 202 is a continuing requirement, and the Secretary will establish time frames for submission of necessary information annually through publication of a Federal Register notice. (b) Plan for removal. With respect to any development that meets all of the standards listed, the PHA shall develop a plan for removal of the affected public housing units from the inventory. The plan should consider relocation alternatives for households in occupancy, including other public housing and Section 8 tenant-based assistance, and shall provide for relocation from the units as soon as possible. For planning purposes, PHAs shall assume that HUD will be able to provide in a timely fashion any necessary Section 8 rental assistance. The plan shall include: (1) A listing of the public housing units to be removed from the inventory; (2) The number of households to be relocated, by bedroom size; (3) Identification and obligation status of any previously approved CIAP, modernization, or major reconstruction funds for the distressed development and PHA recommendations concerning transfer of these funds to Section 8 or alternative public housing uses; (4) The relocation resources that will be necessary, including a request for any necessary Section 8 and a description of actual or potential public or other assisted housing vacancies that can be used as relocation housing; (5) A schedule for relocation and removal of units from the public housing inventory; (6) Provision for notifying families residing in the development, in a timely fashion, that the development shall be removed from the public housing inventory; informing such families that they will receive tenant-based or [[Page 486]] project-based assistance; providing any necessary counselling with respect to the relocation, including a request for any necessary counseling funds; and assuring that such families are relocated as necessary to other decent, safe, sanitary and affordable housing which is, to the maximum extent possible, housing of their choice; (7) The displacement and relocation provisions set forth in 24 CFR 970.5. (8) A record indicating compliance with the statute's requirements for consultation with applicable public housing tenants of the affected development and the unit of local government where the public housing is located, as set forth in Sec. 971.9. (c) Section 18 of the United States Housing Act of 1937 shall not apply to demolition of developments removed from PHA inventories under this section, but shall apply to any proposed dispositions of such developments or their sites. HUD's review of any such disposition application will take into account that the development has been required to be removed from the PHA's inventory. (d) For purposes of determining operating subsidy eligibility under the Performance Funding System (PFS), the submitted plan will be considered the equivalent of a formal request to remove dwelling units from the PHA's inventory and ACC and approval (or acceptance). The PHA will receive written notification that the plan has been approved (or accepted). Units that are vacant or vacated on or after the written notification date will be treated as approved for deprogramming under Sec. 990.108(b)(1) of this chapter and also will be provided the phase- down of subsidy pursuant to Sec. 990.114 of this chapter. (Approved by the Office of Management and Budget under control number 2577-0210) Sec. 971.9 Tenant and local government consultation. (a) PHAs are required to proceed in consultation with affected public housing residents. PHAs must provide copies of their submissions complying with Sec. Sec. 971.3(a) (1) through (3) to the appropriate tenant councils and resident groups before or immediately after these submissions are provided to HUD. (b) PHAs must: (1) Hold a meeting with the residents of the affected sites and explain the requirements of section 202 of OCRA; (2) Provide an outline of the submission(s) complying with Sec. 971.3(a) (4) and (5) to affected residents; and (3) Provide a reasonable comment period for residents and must provide a summary of the resident comments to HUD. (c) PHAs must prepare conversion plans in consultation with affected tenants and must: (1) Hold a meeting with affected residents and provide draft copies of the plan; and (2) Provide a reasonable comment period for residents and must provide a summary of the resident comments to HUD. (d) The conversion plan must be approved by the local officials as not inconsistent with the Consolidated Plan. Sec. 971.11 HOPE VI developments. Developments with HOPE VI implementation grants that have approved HOPE VI revitalization plans will be treated as having shown the ability to achieve long-term viability with reasonable revitalization plans. Future HUD actions to approve or deny proposed HOPE VI implementation grant revitalization plans will be taken with consideration of the standards for section 202. Developments with HOPE VI planning or implementation grants, but without approved HOPE VI revitalization plans, are fully subject to section 202 standards and requirements. Sec. 971.13 HUD enforcement authority. Section 202 provides HUD authority to ensure that certain distressed developments are properly identified and removed from PHA inventories. Specifically, HUD may: (a) Direct a PHA to cease additional spending in connection with a development which meets or is likely to meet the statutory criteria, except as necessary to ensure decent, safe and sanitary housing until an appropriate course of action is approved; (b) Identify developments which fall within the statutory criteria where a PHA has failed to do so properly; [[Page 487]] (c) Take appropriate actions to ensure the removal of developments from the inventory where the PHA has failed to adequately develop or implement a plan to do so; and (d) Authorize or direct the transfer of capital funds committed to or on behalf of the development (including comprehensive improvement assistance, comprehensive grant amounts attributable to the development's share of funds under the formula, and major reconstruction of obsolete projects funds) to tenant-based assistance or appropriate site revitalization for the agency. Sec. Appendix to Part 971--Methodology of Comparing Cost of Public Housing With Cost of Tenant-Based Assistance I. Public Housing The costs used for public housing shall be those necessary to produce a revitalized development as described in the next paragraph. These costs, including estimated operating costs, modernization costs and costs to address accrual needs must be used to develop a per unit monthly cost of continuing the development as public housing. That per unit monthly cost of public housing must be compared to the per unit monthly Section 8 cost. The estimated cost of the continued operation and modernization as public housing shall be calculated as the sum of total operating, modernization, and accrual costs, expressed on a monthly per occupied unit basis. The costs shall be expressed in current dollar terms for the period for which the most recent Section 8 costs are available. A. Operating Costs 1. The proposed revitalization plan must indicate how unusually high current operating expenses (e.g, security, supportive services, maintenance, utilities) will be reduced as a result of post- revitalization changes in occupancy, density and building configuration, income mix and management. The plan must make a realistic projection of overall operating costs per occupied unit in the revitalized development, by relating those operating costs to the expected occupancy rate, tenant composition, physical configuration and management structure of the revitalized development. The projected costs should also address the comparable costs of buildings or developments whose siting, configuration, and tenant mix is similar to that of the revitalized public housing development. 2. The development's operating cost (including all overhead costs pro-rated to the development--including a Payment in Lieu of Taxes (PILOT) or some other comparable payment, and including utilities and utility allowances) shall be expressed as total operating costs per month, divided by the number of units occupied by households. For example, if a development will have 1,000 units occupied by households and will have $300,000 monthly in non-utility costs (including pro-rated overhead costs and appropriate P.I.L.O.T.) and $100,000 monthly in utility costs paid by the authority and $50,000 monthly in utility allowances that are deducted from tenant rental payments to the authority because tenants paid some utility bills directly to the utility company, then the development's monthly operating cost per occupied unit is $450--the sum of $300 per unit in non-utility costs, $100 per unit in direct utility costs, and $50 per unit in utility allowance costs. 3. In justifying the operating cost estimates as realistic, the plan should link the cost estimates to its assumptions about the level and rate of occupancy, the per-unit funding of modernization, any physical reconfiguration that will result from modernization, any planned changes in the surrounding neighborhood and security costs. The plan should also show whether developments or buildings in viable condition in similar neighborhoods have achieved the income mix and occupancy rate projected for the revitalized development. The plan should also show how the operating costs of the similar developments or buildings compare to the operating costs projected for the development. 4. In addition to presenting evidence that the operating costs of the revitalized development are plausible, when the per-unit operating cost of the renovated development is more than ten percent lower than the current per-unit operating cost of the development, then the plan should detail how the revitalized development will achieve its reduction in costs. To determine the extent to which projected operating costs are lower than current operating costs, the current per-unit operating costs of the development will be estimated as follows: a. If the development has reliable operating costs and if the overall vacancy rate is less than twenty percent, then these costs will be divided by the sum of all occupied units and vacant units fully funded under PFS plus fifty percent of all units not fully funded under PFS. For instance, if the total monthly operating costs of the current development are $6.6 million and it has 1,000 occupied units and 200 vacant units not fully funded under PFS (or a 17 percent overall vacancy rate), then the $6.6 million is divided by 1100--1000 plus 50 percent of 200--to give a per unit figure of $600 per unit month. By this example, the current costs of $600 per occupied unit are at least ten percent higher [[Page 488]] than the projected costs per occupied unit of $450 for the revitalized development, and the reduction in costs would have to be detailed. b. If the development currently lacks reliable cost data or has a vacancy rate of twenty percent or higher, then its current per unit costs will be estimated as follows. First, the per unit cost of the entire authority will be computed, with total costs divided by the sum of all occupied units and vacant units fully funded under PFS plus fifty percent of all vacant units not fully funded under PFS. Second, this amount will be multiplied by the ratio of the bedroom adjustment factor of the development to the bedroom adjustment factor of the Housing Authority. The bedroom adjustment factor, which is based on national rent averages for units grouped by the number of bedrooms and which has been used by HUD to adjust for costs of units when the number of bedrooms vary, assigns to each unit the following factors: .70 for 0- bedroom units, .85 for 1-bedroom units, 1.0 for 2-bedroom units, 1.25 for 3-bedroom units, 1.40 for 4-bedroom units, 1.61 for 5-bedroom units, and 1.82 for 6 or more bedroom units. The bedroom adjustment factor is the unit-weighted average of the distribution. For instance, if the development with one thousand occupied units had in occupancy 500 two- bedroom units and 500 three-bedroom units, then its bedroom adjustment factor would be 1.125--500 times 1.0 plus 500 times 1.25, the sum divided by 1,000. Where necessary, HUD field offices will arrange for assistance in the calculation of the bedroom adjustment factors of the Housing Authority and its affected developments. c. As an example of estimating development operating costs from PHA operating costs, suppose that the Housing Authority had a total monthly operating cost per unit of $500 and a bedroom adjustment factor of .90, and suppose that the development had a bedroom adjustment factor of 1.125. Then, the development's estimated current monthly operating cost per occupied unit would be $625--or $500 times 1.25 (the ratio of 1.125 to .90). B. Modernization The cost of modernization is the initial revitalization cost to meet viability standards, that cost amortized over twenty years (which is equivalent to fifteen years at a three percent annual real capital cost for the initial outlay). Expressed in monthly terms, the modernization cost is divided by 180 (or 15 years times 12 months). Thus, if the initial modernization outlay to meet viability standards is $60 million for 1,000 units, then the per-unit outlay is $60,000 and the amortized modernization cost is $333 per unit per month (or $60,000 divided by 180). However, when revitalization would be equivalent to new construction and the PHA thus is permitted to amortize the proposed cost over thirty years (which is equivalent to twenty-two and one-half years at a three percent annual real capital cost to the initial outlay), the modernization cost will be divided by 270, the product of 22.5 and 12, to give a cost per unit month of $222. C. Accrual The monthly per occupied unit cost of accrual (i.e., replacement needs) will be estimated by using the latest published HUD unit total development cost limits for the area and applying them to the development's structure type and bedroom distribution after modernization, then subtracting from that figure half the per-unit cost of modernization, then multiplying that figure by .02 (representing a fifty year replacement cycle), and dividing this product by 12 to get a monthly cost. For example, if the development will remain a walkup structure containing five hundred two-bedroom occupied and five hundred three-bedroom occupied units, if HUD's Total Development Cost limit for the area is $70,000 for two-bedroom walkup structures and $92,000 for three-bedroom walkup structures, and if the per unit cost of modernization is $60,000, then the estimated monthly cost of accrual per occupied unit is $85. This is the result of multiplying the value of $51,000--the cost guideline value of $81,000 minus half the modernization value of $60,000--by .02 and then dividing by 12. D. Overall Cost The overall current cost for continuing the development as public housing is the sum of its monthly post-revitalization operating cost estimates, its monthly modernization cost per occupied unit, and its estimated monthly accrual cost per occupied unit. For example, if the operating cost per occupied unit month is $450 and the amortized modernization cost is $333 and the accrual cost is $85, the overall monthly cost per occupied unit is $868. II. Tenant-Based Assistance The estimated cost of providing tenant-based assistance under Section 8 for all households in occupancy shall be calculated as the unit-weighted averaging of the monthly Fair Market Rents for units of the applicable bedroom size; plus the administrative fee applicable to newly funded Section 8 rental assistance during the year used for calculating public housing operating costs (e.g., the administrative fee for units funded from 10/1/95 through 9/30/96 is based on column C of the January 24, 1995 Federal Register, at 60 FR 4764, and the administrative fee for units funded from 10/1/96 through 9/30/97 is based on column B of the March 12, 1997 Federal Register, at 62 FR 11526); plus the [[Page 489]] amortized cost of demolishing the occupied public housing units, where the cost per unit is not to exceed ten percent of the TDC prior to amortization. For example, if the development has five hundred occupied two-bedroom units and five hundred occupied three-bedroom units and if the Fair Market Rent in the area is $600 for two bedroom units and is $800 for three bedroom units and if the administrative fee comes to $46 per unit, and if the cost of demolishing 1000 occupied units is $5 million, then the per unit monthly cost of tenant based assistance is $774 ($700 for the unit-weighted average of Fair Market Rents, or 500 times $600 plus 500 times $800 with the sum divided by 1,000; plus $46 for the administrative fee; plus $28 for the amortized cost of demolition and tenant relocation (including any necessary counseling), or $5000 per unit divided by 180 in this example). This Section 8 cost would then be compared to the cost of revitalized public housing development--in the example of this section, the revitalized public housing cost of $868 monthly per occupied unit would exceed the Section 8 cost of $774 monthly per occupied unit by 12 percent. The PHA would have to prepare a conversion plan for the property. III. Detailing the Section-8 Cost Comparison: A Summary Table The Section 8 cost comparison methods are summarized, using the example provided in this section III. A. Key Data, Development: The revitalized development has 1000 occupied units. All of the units are in walkup buildings. The 1000 occupied units will consist of 500 two-bedroom units and 500 three- bedroom units. The total current operating costs attributable to the development are $300,000 per month in non-utility costs, $100,000 in utility costs paid by the PHA, and $50,000 in utility allowance expenses for utilities paid directly by the tenants to the utility company. Also, the modernization cost for revitalization is $60,000,000, or $60,000 per occupied unit. This will provide standards for viability but not standards for new construction. The cost of demolition and relocation of the 1000 occupied units is $5 million, or $5000 per unit, based on recent experience. B. Key Data, Area: The unit total development cost limit is $70,000 for two-bedroom walkups and $92,000 for three-bedroom walkups. The two- bedroom Fair Market Rent is $600 and the three-bedroom Fair Market Rent is $800. The applicable monthly administrative fee amount, in column B of the March 12, 1997 Federal Register Notice, at 62 FR 11526, is $46. C. Preliminary Computation of the Per-Unit Average Total Development Cost of the Development: This results from applying the location's unit total development cost by structure type and number of bedrooms to the occupied units of the development. In this example, five hundred units are valued at $70,000 and five hundred units are valued at $92,000 and the unit-weighted average is $81,000. D. Current Per Unit Monthly Occupied Costs of Public Housing: 1. Operating Cost--$450 (total monthly costs divided by occupied units: in this example, the sum of $300,000 and $100,000 and $50,000-- divided by 1,000 units). 2. Amortized Modernization Cost--$333 ($60,000 per unit divided by 180 for standards less than those of new construction). 3. Estimated Accrual Cost--$85 (the per-unit average total development cost minus half of the modernization cost per unit, times .02 divided by 12 months: in this example, $51,000 times .02 and then divided by 12). 4. Total per unit public housing costs--$868. E. Current per unit monthly occupied costs of section 8: 1. Unit-weighted Fair Market Rents--$700 (the unit-weighted average of the Fair Market Rents of occupied bedrooms: in this example, 500 times $600 plus 500 times $800, divided by 1000). 2. Administrative Fee--$46. 3. Amortized Demolition and Relocation Cost--$28 ($5000 per unit divided by 180). 4. Total per unit section 8 costs--$774. F. Result: In this example, because revitalized public housing costs exceed current Section 8 costs, a conversion plan for the property would be required. PART 972_CONVERSION OF PUBLIC HOUSING TO TENANT-BASED ASSISTANCE--Table of Contents Subpart A_Required Conversion of Public Housing Developments Purpose; Definition of ``Conversion'' Sec. 972.100 Purpose. 972.103 Definition of ``conversion.'' Required Conversion Process 972.106 Procedure for required conversion of public housing developments to tenant-based assistance. 972.109 Conversion of developments. 972.112 Relationship between required conversion and demolition/ disposition requirements. 972.115 Relationship between required conversions and HOPE VI developments. 972.118 Applicability of Uniform Relocation Act. Identifying Developments Subject to Required Conversion 972.121 Developments subject to this subpart. [[Page 490]] 972.124 Standards for identifying public housing developments subject to required conversion. 972.127 Standards for determining whether a property is viable in the long term. Conversion Plans 972.130 Conversion plan components. 972.133 Public and resident consultation process for developing a conversion plan. 972.136 Timing of submission of conversion plans to HUD. HUD Actions With Respect to Required Conversions 972.139 HUD actions with respect to required conversions. Subpart B_Voluntary Conversion of Public Housing Developments Purpose; Definition of Conversion 972.200 Purpose. 972.203 Definition of ``conversion.'' Required Initial Assessments 972.206 Required initial assessments. Voluntary Conversion Procedure 972.209 Procedure for voluntary conversion of public housing developments to tenant-based assistance. 972.212 Timing of voluntary conversion. 972.215 Applicability of Uniform Relocation Act. Conversion Assessments 972.218 Conversion assessment components. 972.221 Timing of submission of conversion assessments to HUD. 972.224 Necessary conditions for HUD approval of conversion. Conversion Plans 972.227 Public and resident consultation process for developing a conversion plan. 972.230 Conversion plan components. 972.233 Timing of submission of conversion plans to HUD. 972.236 HUD process for approving a conversion plan. 972.239 HUD actions with respect to a conversion plan. Appendix to Part 972--Methodology of Comparing Cost of Public Housing with the Cost of Tenant-Based Assistance Authority: 42 U.S.C. 1437t, 1437z-5, and 3535(d). Source: 66 FR 33618, June 22, 2001, unless otherwise noted. Subpart A_Required Conversion of Public Housing Developments Source: 68 FR 54608, Sept. 17, 2003, unless otherwise noted. Purpose; Definition of Conversion Sec. 972.100 Purpose. The purpose of this subpart is to implement section 33 of the United States Housing Act of 1937 (42 U.S.C. 1437z-5), which requires PHAs to annually review their public housing inventory and identify developments, or parts of developments, which must be removed from its stock of public housing operated under an Annual Contributions Contract (ACC) with HUD. This subpart provides the procedures a PHA must follow to develop and carry out a conversion plan to remove the units from the public housing inventory, including how to provide for the transition for residents of these developments to other affordable housing. Sec. 972.103 Definition of ``conversion.'' For purposes of this subpart, the term ``conversion'' means the removal of public housing units from the inventory of a PHA, and the provision of tenant-based or project-based assistance for the residents of the public housing units that are being removed. The term ``conversion,'' as used in this subpart, does not necessarily mean the physical removal of the public housing development. Required Conversion Process Sec. 972.106 Procedure for required conversion of public housing developments to tenant-based assistance. (a) A PHA must annually review its public housing inventory and identify developments, or parts of developments, which must be converted to tenant-based assistance, in accordance with Sec. Sec. 972.121- 972.127. (b) With respect to any public housing development that is identified under paragraph (a) of this section, the PHA generally must develop a 5-year plan for removal of the affected public housing units from the inventory, in accordance with Sec. Sec. 972.130-972.136. [[Page 491]] (c) The PHA may proceed to convert the development if HUD approves the conversion plan. Sec. 972.109 Conversion of developments. (a)(1) The PHA may proceed to convert the development covered by a conversion plan after receiving written approval from HUD. This approval will be separate from the approval that the PHA receives for its Annual Plan. (2) HUD anticipates that its review of a conversion plan will ordinarily occur within 90 days following submission of a complete plan by the PHA. A longer process may be required where HUD's initial review of the plan raises questions that require further discussion with the PHA. In any event, HUD will provide all PHAs with a preliminary response within 90 days following submission of a conversion plan. (b) The PHA may not demolish or dispose of units or property until completion of the required environmental review under part 58 of this title (if a responsible entity has assumed environmental responsibility for the project) or part 50 of this title (if HUD is performing the environmental review). Further, HUD will not approve a conversion plan until completion of the required environmental review. However, before completion of the environmental review, HUD may approve the targeted units for removal from the PHA's inventory and may authorize the PHA to undertake other activities proposed in its conversion plan that do not require environmental review (such as certain activities related to the relocation of residents), as long as the buildings in question are adequately secured and maintained. (c) For purposes of determining operating subsidy eligibility, HUD will consider the conversion plan the PHA submits to be the equivalent of a formal request to remove dwelling units from the PHA's inventory and ACC. HUD will notify the PHA in writing whether it has approved the conversion plan. Units that are vacant or vacated on or after the written notification date will be treated as approved for deprogramming under Sec. 990.108(b)(1) of this title and also will be provided any phase-down of subsidy to which the PHA is entitled pursuant to Sec. 990.114 of this title. (d) The PHA may apply for tenant-based assistance in accordance with Section 8 program requirements, and HUD will give the PHA a priority for receiving tenant-based assistance to replace the public housing units. It is HUD's policy to provide funds for one-for-one replacement housing with either public housing or tenant-based assistance, if funds are available. HUD may require that funding for the initial year be provided from the public housing Capital Fund, Operating Fund, or both. Sec. 972.112 Relationship between required conversion and demolition/disposition requirements. (a) Section 18 of the United States Housing Act of 1937 does not apply to demolition of developments removed from the inventory of the PHA under this subpart. Demolition of these developments is therefore not subject to section 18(g), which provides an exclusion from the applicability of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601) (URA). Accordingly, the URA will apply to the displacement of tenants as the direct result of the demolition of a development carried out pursuant to this subpart, in accordance with Sec. 972.118. With respect to any such demolition, the PHA must comply with the requirements for environmental review found at part 58 of this title. (b) Section 18 of the United States Housing Act of 1937 does apply to any disposition of developments removed from the inventory of the PHA under this subpart. Therefore, to dispose of property, the PHA must submit a disposition application under section 18. HUD's review of any such disposition application will take into account that the development has been required to be converted. Sec. 972.115 Relationship between required conversions and HOPE VI developments. HUD actions to approve or deny proposed HOPE VI revitalization plans must be consistent with the requirements of this subpart. Developments with HOPE VI revitalization grants, [[Page 492]] but without approved HOPE VI revitalization plans, are fully subject to required conversion standards under this subpart. Sec. 972.118 Applicability of Uniform Relocation Act. To the extent that tenants are displaced as a direct result of the demolition, acquisition, or rehabilitation of federally-assisted property converted pursuant to this subpart, the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601) (URA), and the implementing regulations issued by the Department of Transportation at 49 CFR part 24, apply. Identifying Developments Subject to Required Conversion Sec. 972.121 Developments subject to this subpart. (a) This subpart is applicable to any development not identified before October 21, 1998, for conversion, or for assessment of whether such conversion is required, in accordance with section 202 of the Omnibus Consolidated Rescissions and Appropriations Act of 1996 (Pub. L. 104-134, approved April 26, 1996, 110 Stat. 1321-279--1321-281). Developments identified before October 21, 1998, continue to be subject to the requirements of section 202 and part 971 of this chapter until these requirements are satisfied. Thereafter, the provisions of this subpart apply to any remaining public housing on the sites of those developments. (b) The developments to which this subpart is applicable are subject to the requirements of section 33 of the United States Housing Act of 1937 (42 U.S.C. 1437z-5). (c) The provisions of this subpart cease to apply when the units in a development that are subject to the requirements of this subpart have been demolished. Sec. 972.124 Standards for identifying public housing developments subject to required conversion. The development, or portions thereof, must be converted if it is a general occupancy development of 250 or more dwelling units and it meets the following criteria: (a) The development is on the same or contiguous sites. This refers to the actual number and location of units, irrespective of HUD development project numbers. (b) The development has a vacancy rate of at least a specified percent for dwelling units not in funded, on-schedule modernization, for each of the last three years, and the vacancy rate has not significantly decreased in those three years. (1) For a conversion analysis performed on or before March 16, 2009, the specified vacancy rate is 15 percent. For a conversion analysis performed after that date, the specified vacancy rate is 12 percent. (2) For the determination of vacancy rates, the PHA must use the data it relied upon for the PHA's latest Public Housing Assessment System (PHAS) certification, as reported on the Form HUD-51234 (report on Occupancy). Units in the following categories must not be included in this calculation: (i) Vacant units in an approved demolition or disposition program; (ii) Vacant units in which resident property has been abandoned, but only if state law requires the property to be left in the unit for some period of time, and only for the period of time stated in the law; (iii) Vacant units that have sustained casualty damage, but only until the insurance claim is adjusted; (iv) Units that are occupied by employees of the PHA and units that are used for resident services; and (v) Units that HUD determines, in its sole discretion, are intentionally vacant and do not indicate continued distress. (c) The development either is distressed housing for which the PHA cannot assure the long-term viability as public housing, or more expensive for the PHA to operate as public housing than providing tenant-based assistance. (1) The development is distressed housing for which the PHA cannot assure the long-term viability as public housing through reasonable revitalization, density reduction, or achievement of a broader range of household income. (See Sec. 972.127) (i) Properties meeting the standards set forth in paragraphs (a) and (b) of [[Page 493]] this section will be assumed to be ``distressed,'' unless HUD determines that the reasons a property meets such standards are temporary in duration and are unlikely to recur. (ii) A development satisfies the long-term viability test only if it is probable that, after reasonable investment, for at least 20 years (or at least 30 years for rehabilitation equivalent to new construction) the development can sustain structural/system soundness and full occupancy; will not be excessively densely configured relative to other similar rental (typically family) housing in the community; can achieve a broader range of family income; and has no other site impairments that clearly should disqualify the site from continuation as public housing. (2) The development is more expensive for the PHA to operate as public housing than to provide tenant-based assistance if it has an estimated cost, during the remaining useful life of the project, of continued operation and modernization of the development as public housing in excess of the cost of providing tenant-based assistance under section 8 of the United States Housing Act of 1937 for all families in occupancy, based on appropriate indicators of cost (such as the percentage of total development cost required for modernization). (i) For purposes of this determination, the costs used for public housing must be those necessary to produce a revitalized development as described in paragraph (c)(1) of this section. (ii) These costs, including estimated operating costs, modernization costs, and accrual needs must be used to develop a per unit monthly cost of continuing the development as public housing. (iii) That per unit monthly cost of public housing must be compared to the per unit monthly Section 8 cost. (iv) The cost methodology necessary to conduct the cost comparisons for required conversions has not yet been finalized. PHAs are not required to undertake conversions under this subpart until six months after the effective date of the cost methodology, which will be announced in the Federal Register. Once effective, the cost methodology will be codified as an appendix to this part. Sec. 972.127 Standards for determining whether a property is viable in the long term. In order for a property to meet the standard of long-term viability, as discussed in Sec. 972.124, the following criteria must be met: (a) The investment to be made in the development is reasonable. (1) Proposed revitalization costs for viability must be reasonable. Such costs must not exceed, and ordinarily would be substantially less than, 90 percent of HUD's total development cost (TDC) limit for the units proposed to be revitalized (100 percent of the total development cost limit for any ``infill'' new construction subject to this regulation). The revitalization cost estimate used in the PHA's most recent Annual Plan or 5-Year Plan is to be used for this purpose, unless the PHA demonstrates, or HUD determines, that another cost estimate is clearly more realistic to ensure viability and to sustain the operating costs that are described in paragraph (a)(2) of this section. (2) The overall projected cost of the revitalized development must not exceed the Section 8 cost under the method contained in the Appendix to this part, even if the cost of revitalization is a lower percentage of the TDC than the limits stated in paragraph (a)(1) of this section. (3) The source of funding for such a revitalization program must be identified and available. In addition to other resources already available to the PHA, it may assume that future formula funds provided through the Capital Fund over five years are available for this purpose. (b) Appropriate density is achieved. The resulting public housing development must have a density which is comparable to that which prevails in or is appropriate for assisted rental housing or for other similar types of housing in the community (typically family). (c) A greater income mix can be achieved. (1) Measures generally will be required to broaden the range of resident incomes over time to include a significant mix of households with at least one full-time worker. Measures to [[Page 494]] achieve a broader range of household incomes must be realistic in view of the site's location. Appropriate evidence typically would include census or other recent statistical evidence demonstrating some mix of incomes of other households located in the same census tract or neighborhood, or unique advantages of the public housing site. (2) For purposes of judging appropriateness of density reduction and broader range of income measures, overall size of the public housing site and its number of dwelling units will be considered. The concerns these measures would address generally are greater as the site's size and number of dwelling units increase. Conversion Plans Sec. 972.130 Conversion plan components. (a) With respect to any development that is identified under Sec. Sec. 972.121 through 972.127, the PHA generally must develop a 5- year plan for removal of the affected public housing units from the inventory. The plan must consider relocation alternatives for households in occupancy, including other public housing and Section 8 tenant-based assistance, and must provide for relocation from the units as soon as possible. For planning purposes, the PHA must assume that HUD will be able to provide in a timely fashion any necessary Section 8 rental assistance. The plan must include: (1) A listing of the public housing units to be removed from the inventory; (2) Identification and obligation status of any previously approved modernization, reconstruction, or other capital funds for the distressed development and the PHA's recommendations concerning transfer of these funds to Section 8 or alternative public housing uses; (3) A record indicating compliance with the statute's requirements for consultation with applicable public housing tenants of the affected development and the unit of local government where the public housing is located, as set forth in Sec. 972.133; (4) A description of the plans for demolition or disposition of the public housing units; and (5) A relocation plan, in accordance with paragraph (b) of this section. (b) Relocation plan. The relocation plan must incorporate all of the information identified in paragraphs (b)(1) through (b)(4) of this section. In addition, if the required conversion is subject to the URA, the relocation plan must also contain the information identified in paragraph (b)(5) of this section. The relocation plan must incorporate the following: (1) The number of households to be relocated, by bedroom size, and by the number of accessible units. (2) The relocation resources that will be necessary, including a request for any necessary Section 8 funding and a description of actual or potential public or other assisted housing vacancies that can be used as relocation housing and budget for carrying out relocation activities. (3) A schedule for relocation and removal of units from the public housing inventory (including the schedule for providing actual and reasonable relocation expenses, as determined by the PHA, for families displaced by the conversion). (4) Provide for issuance of a written notice to families residing in the development in accordance with the following requirements: (i) Timing of notice. If the required conversion is not subject to the URA, the notice shall be provided to families at least 90 days before displacement. If the required conversion is subject to the URA the written notice shall be provided to families no later than the date the conversion plan is submitted to HUD. For purposes of a required conversion subject to the URA, this written notice shall constitute the General Information Notice (GIN) required by the URA. (ii) Contents of notice. The written notice shall include all of the following: (A) The development must be removed from the public housing inventory and that the family may be displaced as a result of the conversion; (B) The family will be offered comparable housing, which may include [[Page 495]] tenant-based or project-based assistance, or occupancy in a unit operated or assisted by the PHA (if tenant-based assistance is used, the comparable housing requirement is fulfilled only upon the relocation of the family into such housing); (C) Any necessary counseling with respect to the relocation will be provided, including any appropriate mobility counseling (the PHA may finance the mobility counseling using Operating Fund, Capital Fund, or Section 8 administrative fee funding); (D) Such families will be relocated to other decent, safe, sanitary, and affordable housing that is, to the maximum extent possible, housing of their choice; (E) If the development is used as housing after conversion, the PHA must ensure that each resident may choose to remain in the housing, using tenant-based assistance towards rent; and (F) Where section 8 voucher assistance is being used for relocation, the family will be provided with the vouchers at least 90 days before displacement. (5) If the required conversion is subject to the URA, the written notice described in paragraph (b)(4) must also provide that: (i) The family will not be required to move without at least 90-days advance written notice of the earliest date by which the family may be required to move, and that the family will not be required to move permanently until the family is offered comparable housing, as provided in paragraph (b)(4)(ii)(B) of this section; (ii) Any person who is an alien not lawfully present in the United States is ineligible for relocation payments or assistance under the URA, unless such ineligibility would result in exceptional and extremely unusual hardship to a qualifying spouse, parent, or child, as provided in the URA regulations at 49 CFR 24.208; (iii) The family has a right to appeal the PHA's determination as to the family's application for relocation assistance for which the family may be eligible under this subpart and URA; (iv) Families residing in the development will be provided with the URA Notice of Relocation Eligibility or Notice of Non-displacement (as applicable) as of the date HUD approves the conversion plan (for purposes of this subpart, the date of HUD's approval of the conversion plan shall be the ``date of initiation of negotiations'' as that term is used in URA and the implementing regulations at 49 CFR part 24); and (v) Any family that moves into the development after submission of the conversion plan to HUD will also be eligible for relocation assistance, unless the PHA issues a written move-in notice to the family prior to leasing and occupancy of the unit advising the family of the development's possible conversion, the impact of the conversion on the family, and that the family will not be eligible for relocation assistance. (c) The conversion plan may not be more than a 5-year plan, unless the PHA applies for and receives approval from HUD for a longer period of time. HUD may allow the PHA up to 10 years to remove the units from the inventory, in exceptional circumstances where HUD determines that this is clearly the most cost effective and beneficial means of providing housing assistance over that same period. For example, HUD may allow a longer period of time to remove the units from the public housing inventory, where more than one development is being converted, and a larger number of families require relocation than can easily be absorbed into the rental market at one time, provided the housing has a remaining useful life of longer than five years and the longer time frame will assist in relocation. Sec. 972.133 Public and resident consultation process for developing a conversion plan. (a) The PHA must consult with appropriate public officials and with the appropriate public housing residents in developing the conversion plan. (b) The PHA may satisfy the requirement for consultation with public officials by obtaining a certification from the appropriate government official that the conversion plan is consistent with the applicable Consolidated Plan. This may be the same certification as [[Page 496]] is required for the PHA Annual Plan that includes the conversion plan, so long as the certification specifically addresses the conversion plan. (c) To satisfy the requirement for consultation with the appropriate public housing residents, in addition to the public participation requirements for the PHA Annual Plan, the PHA must: (1) Hold at least one meeting with the residents of the affected sites (including the duly elected Resident Council, if any, that covers the development in question) at which the PHA must: (i) Explain the requirements of this section, especially as they apply to the residents of the affected developments; and (ii) Provide draft copies of the conversion plan to the residents; (2) Provide a reasonable comment period for residents; and (3) Summarize the resident comments for HUD, in the conversion plan, and consider these comments in developing the final conversion plan. Sec. 972.136 Timing of submission of conversion plans to HUD. The requirements of this section are on-going requirements. If the PHA must submit a plan for conversion, it must submit the conversion plan as part of the PHA's Annual Plan, beginning with PHA fiscal years that commence six months after the effective date of HUD's final rule establishing the cost methodology for required conversions. HUD Actions With Respect to Required Conversions Sec. 972.139 HUD actions with respect to required conversions. (a) HUD will take appropriate steps to ensure that distressed developments subject to this subpart are properly identified and converted. If a PHA fails to properly identify a development for required conversion, or does not submit a conversion plan for a development in the PHA Annual Plan following the Annual Plan in which the development was identified as subject to required conversion, HUD will take the actions described in paragraph (b) of this section, and may also take any or all of the actions described in paragraph (c) of this section. (b) If a PHA fails to take the conversion activities described in paragraph (a) of this section, HUD will: (1) Disqualify the PHA from HUD funding competitions; and (2) Direct the PHA to cease additional spending in connection with a development that meets, or is likely to meet the statutory criteria, except to the extent that failure to expend such amounts would endanger health or safety. (c) If a PHA fails to take the conversion activities described in paragraph (a) of this section, HUD may also take any or all of the following actions: (1) Identify developments that fall within the statutory criteria where the PHA has failed to do so properly; (2) Take appropriate actions to ensure the conversion of developments where the PHA has failed to adequately develop or implement a conversion plan; (3) Require the PHA to revise the conversion plan, or prohibit conversion, where HUD has determined that the PHA has erroneously identified a development as being subject to the requirements of this section; (4) Authorize or direct the transfer of capital or operating funds committed to or on behalf of the development (including comprehensive improvement assistance, comprehensive grant or Capital Fund amounts attributable to the development's share of funds under the formula, and major reconstruction of obsolete projects funds) to tenant-based assistance or appropriate site revitalization for the agency; and (5) Any other action that HUD determines appropriate and has the authority to undertake. Subpart B_Voluntary Conversion of Public Housing Developments Source: 68 FR 54619, Sept. 17, 2003, unless otherwise noted. Purpose; Definition of Conversion Sec. 972.200 Purpose. This subpart implements section 22 of the United States Housing Act of [[Page 497]] 1937 (42 U.S.C. 1437t). The purposes of this subpart are to: (a) Require PHAs to perform an assessment which considers developments for which conversion of public housing may be appropriate; and (b) Provide a basis for a PHA to take action for conversion on a voluntary basis. Sec. 972.203 Definition of ``conversion.'' For purposes of this subpart, the term ``conversion'' means the removal of public housing units from the inventory of a Public Housing Agency (PHA), and the provision of tenant-based, or project-based assistance for the residents of the public housing that is being removed. The term ``conversion,'' as used in this subpart, does not necessarily mean the physical removal of the public housing development from the site. Required Initial Assessments Sec. 972.206 Required initial assessments. (a) General. A PHA must conduct a required initial assessment (which consists of the certification described in paragraph (b) of this section), in accordance with this section, once for each of its developments, unless: (1) The development is subject to required conversion under 24 CFR part 971; (2) The development is the subject of an application for demolition or disposition that has not been disapproved by HUD; (3) A HOPE VI revitalization grant has been awarded for the development; or (4) The development is designated for occupancy by the elderly and/ or persons with disabilities (i.e., is not a general occupancy development). (b) Certification procedure. For each development, the PHA shall certify that it has: (1) Reviewed the development's operation as public housing; (2) Considered the implications of converting the public housing to tenant-based assistance; and (3) Concluded that conversion of the development may be: (i) Appropriate because removal of the development would meet the necessary conditions for voluntary conversion described in Sec. 972.224; or (ii) Inappropriate because removal of the development would not meet the necessary conditions for voluntary conversion described Sec. 972.224. (c) Documentation. A PHA must maintain documentation of the reasoning with respect to each required initial assessment. (d) Timing of submission. Consistent with statutory submission requirements, the results of each required initial assessment (consisting of the certification described in paragraph (b) of this section) must be submitted to HUD as part of the next PHA Annual Plan after its completion. Voluntary Conversion Procedure Sec. 972.209 Procedure for voluntary conversion of public housing developments to tenant-based assistance. A PHA that wishes to convert a public housing development to tenant- based assistance must comply with the following process: (a) The PHA must perform a conversion assessment, in accordance with Sec. Sec. 972.218-972.224 and submit it to HUD as part of the next PHA Annual Plan submission. (b) The PHA must prepare a conversion plan, in accordance with Sec. 972.227-972.233, and submit it to HUD, as part of its PHA Annual Plan, within one year after submitting the conversion assessment. The PHA may submit the conversion plan in the same Annual Plan as the conversion assessment. (c) The PHA may proceed to convert the development if HUD approves the conversion plan. Sec. 972.212 Timing of voluntary conversion. (a) A PHA may proceed to convert a development covered by a conversion plan only after receiving written approval of the conversion plan from HUD. This approval will be separate from the approval that the PHA receives for its PHA Annual Plan. A PHA may apply for tenant-based assistance in accordance with Section 8 program requirements and will be given priority for receiving tenant-based assistance to replace the public housing units. [[Page 498]] (b) A PHA may not demolish or dispose of units or property until completion of the required environmental review under part 58 of this title (if a Responsible Entity has assumed environmental responsibility for the project) or part 50 of this title (if HUD is performing the environmental review). Further, HUD will not approve a conversion plan until completion of the required environmental review. However, before completion of the environmental review, HUD may approve the targeted units for deprogramming and may authorize the PHA to undertake other activities proposed in the conversion plan that do not require environmental review (such as certain activities related to the relocation of residents), as long as the buildings in question are adequately secured and maintained. (c) For purposes of determining operating subsidy eligibility, the submitted conversion plan will be considered the equivalent of a formal request to remove dwelling units from the PHA's inventory and Annual Contributions Contract (ACC). Units that are vacant or are vacated on or after the written notification date will be treated as approved for deprogramming under Sec. 990.108(b)(1) of this title, and will also be provided the phase down of subsidy pursuant to Sec. 990.114 of this title. (d) HUD may require that funding for the initial year of tenant- based assistance be provided from the public housing Capital Fund, Operating Fund, or both. Sec. 972.215 Applicability of the Uniform Relocation Act. To the extent that tenants are displaced as a direct result of the demolition, acquisition, or rehabilitation of federally-assisted property converted under this subpart, the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601) (URA), and the implementing regulations issued by the Department of Transportation at 49 CFR part 24, apply. Conversion Assessments Sec. 972.218 Conversion assessment components. The conversion assessment contains five elements, as described below: (a) Cost analysis. A PHA must conduct a cost analysis comparing the cost of providing Section 8 tenant-based assistance with the cost of continuing to operate the development as public housing for the remainder of its useful life. The cost methodology necessary to conduct the cost comparisons for voluntary conversions has not yet been finalized. PHAs may not undertake conversions under this subpart until the effective date of the cost methodology, which will be announced in the Federal Register. Once effective, the cost methodology will be codified as an appendix to this part. (b) Analysis of the market value. (1) A PHA must have an independent appraisal conducted to compare the market value of the development before and after rehabilitation. In both cases, the market value must be based on the use of the development as public housing. (2) In addition, the appraisal must compare: (i) The market value of the development before rehabilitation, based on the use of the development as public housing, with the market value of the development after conversion; with (ii) The market value of the development after rehabilitation, based on the use of the development as public housing, with the market value of the development after conversion. (3) A copy of the appraisal findings and the analysis of market value of the development in the conversion assessment must be provided in the conversion assessment. (c) Analysis of rental market conditions. (1) A PHA must conduct an analysis of the likely success of using tenant-based assistance for the residents of the public housing development. This analysis must include an assessment of the availability of decent, safe, and sanitary dwelling units rented at or below the applicable Section 8 payment standard established for the jurisdiction or designated part of the FMR [[Page 499]] area in which the development is located. (2) In conducting this assessment, a PHA must take into account: (i) Its overall use of rental certificates or vouchers under lease and the success rates of using Section 8 tenant-based assistance in the community for the appropriate bedroom sizes, including recent success rates for units renting at or below the established payment standard; and (ii) Any particular characteristics of the specific residents of the public housing which may affect their ability to be housed (such as large household size or the presence of an elderly or disabled family member). (d) Impact analysis. A PHA must describe the likely impact of conversion of the public housing development on the neighborhood in which the public housing is located. This must include: (1) The impact on the availability of affordable housing in the neighborhood; (2) The impact on the concentration of poverty in the neighborhood; and (3) Other substantial impacts on the neighborhood. (e) Conversion implementation. If a PHA intends to convert the development (or a portion of it) to tenant-based assistance, the conversion assessment must include a description of any actions the PHA plans to take in converting the development. This must include a general description of the planned future uses of the development, and the means and timetable for accomplishing such uses. Sec. 972.221 Timing of submission of conversion assessments to HUD. (a) Submission with PHA Plan. A PHA that wishes to convert a public housing development to tenant-based assistance must submit a conversion assessment to HUD with its next PHA Annual Plan. (b) Updated conversion assessment. Where a PHA proposes to convert a development to tenant-based assistance, it must submit an updated conversion assessment if the conversion assessment otherwise would be more than one year older than the conversion plan to be submitted to HUD. To update a conversion assessment, a PHA must ensure that the analysis of rental market conditions is based on the most recently available data, and must include any data that have changed since the initial conversion assessment. A PHA may submit the initial cost analysis and comparison of the market value of the public housing before and after rehabilitation and/or conversion if there is no reason to believe that such information has changed significantly. Sec. 972.224 Necessary conditions for HUD approval of conversion. (a) Conditions. In order to convert a public housing development, the PHA must conduct a conversion assessment that demonstrates that the conversion of the development: (1) Will not be more expensive than continuing to operate the development (or portion of it) as public housing; (2) Will principally benefit the residents of the public housing development (or portion thereof) to be converted, the PHA, and the community; and (3) Will not adversely affect the availability of affordable housing in the community. (b) Evidence--(1) Relative expense. The relative expense of continuing operation as public housing or conversion to tenant-based assistance may be demonstrated by the cost analysis and market value analysis. (2) Benefit to residents, PHA, and the community. (i) The benefit to residents, the PHA, and the community may be demonstrated in the rental market analysis, the analysis of the impact on the neighborhood, the market value analysis, and the proposed future use of the development. In determining whether a conversion will principally benefit residents, the PHA, and the community, HUD will consider whether the conversion will conflict with any litigation settlement agreements, voluntary compliance agreements, or other remedial agreements signed by the PHA with HUD. (ii) In making the determination of whether a conversion would principally benefit residents, the PHA, and the community, the PHA must consider [[Page 500]] such factors as the availability of landlords providing tenant-based assistance, as well as access to schools, jobs, and transportation. (iii) To determine the benefit to residents, the PHA must hold at least one public meeting with residents of the affected site (including the duly elected Resident Council, if any, that covers the development in question). At the meeting, the PHA must: (A) Explain the requirements of section 22 of the United States Housing Act of 1937 and these regulations, especially as they apply to residents of affected developments; (B) Provide draft copies of the conversion assessment to the residents; and (C) Provide the residents with a reasonable period of time to submit comments on the draft conversion assessment. (iv) The conversion assessment submitted to HUD must contain a summary of the resident comments, and the PHA responses to any significant issues raised by the commenters. (3) Impact on affordable housing. The impact on affordable housing may be demonstrated in the rental market analysis and the analysis of the impact of conversion on the neighborhood. Conversion Plans Sec. 972.227 Public and resident consultation process for developing a conversion plan. (a) A conversion plan must be developed in consultation with appropriate public officials and with significant participation by residents of the development. (b) The requirement for consultation with public officials may be satisfied by obtaining a certification from the appropriate state or local officials that the conversion plan is consistent with that jurisdiction's Consolidated Plan. This may be the same certification as is required for the PHA Annual Plan that includes the conversion plan, so long as the certification specifically addresses the conversion plan. (c) To satisfy the requirement for significant participation by residents of the development, in addition to the public participation requirements for the PHA Annual Plan, a PHA must: (1) Hold at least one meeting with the residents of the affected sites (including the duly elected Resident Council, if any, that covers the development in question) at which the PHA must: (i) Explain the requirements of section 22 of the United States Housing Act of 1937 and these regulations, especially as they apply to residents of affected developments; and (ii) Provide draft copies of the conversion plan to them. (2) Provide a reasonable comment period for residents; and (3) Summarize the resident comments (as well as the PHA responses to the significant issues raised by the commenters) for HUD, and consider these comments in developing the final conversion plan. Sec. 972.230 Conversion plan components. A conversion plan must: (a) Describe the conversion and future use or disposition of the public housing development. If the future use of the development is demolition or disposition, the PHA is not required to submit a demolition or disposition application, so long as the PHA submits, and HUD approves, a conversion plan that includes a description of the future uses of the development. (b) Include an impact analysis of the conversion on the affected community. This may include the description that is required as part of the conversion assessment. (c) Include a description of how the conversion plan is consistent with the findings of the conversion assessment undertaken in accordance with Sec. 972.218. (d) Include a summary of the resident comments received when developing the conversion plan, and the PHA responses to the significant issues raised by the commenters (including a description of any actions taken by the PHA as a result of the comments). (e) Confirm that any proceeds received from the conversion are subject to the limitations under section 18(a)(5) of the United States Housing Act of 1937 (42 U.S.C. 1437p(a)(5)) applicable to proceeds resulting from demolition or disposition. [[Page 501]] (f) Summarize why the conversion assessment for the public housing project supports the three conditions necessary for conversion described in Sec. 972.224. (g) Include a relocation plan that incorporates all of the information identified in paragraphs (g)(1) through (g)(4) of this section. In addition, if the required conversion is subject to the URA, the relocation plan must also contain the information identified in paragraph (g)(5) of this section. The relocation plan must incorporate the following: (1) The number of households to be relocated, by bedroom size, by the number of accessible units. (2) The relocation resources that will be necessary, including a request for any necessary Section 8 funding and a description of actual or potential public or other assisted housing vacancies that can be used as relocation housing and budget for carrying out relocation activities. (3) A schedule for relocation and removal of units from the public housing inventory (including the schedule for providing actual and reasonable relocation expenses, as determined by the PHA, for families displaced by the conversion). (4) Provide for issuance of a written notice to families residing in the development in accordance with the following requirements: (i) Timing of notice. If the voluntary conversion is not subject to the URA, the notice shall be provided to families at least 90 days before displacement. If the voluntary conversion is subject to the URA the written notice shall be provided to families no later than the date the conversion plan is submitted to HUD. For purposes of a voluntary conversion subject to the URA, this written notice shall constitute the General Information Notice (GIN) required by the URA. (ii) Contents of notice. The written notice shall include all of the following: (A) The development will no longer be used as public housing and that the family may be displaced as a result of the conversion; (B) The family will be offered comparable housing, which may include tenant-based or project-based assistance, or occupancy in a unit operated or assisted by the PHA (if tenant-based assistance is used, the comparable housing requirement is fulfilled only upon relocation of the family into such housing); (C) Any necessary counseling with respect to the relocation will be provided, including any appropriate mobility counseling (the PHA may finance the mobility counseling using Operating Fund, Capital Fund, or Section 8 administrative fee funding); (D) The family will be relocated to other decent, safe, sanitary, and affordable housing that is, to the maximum extent possible, housing of their choice; (E) If the development is used as housing after conversion, the PHA must ensure that each resident may choose to remain in the housing, using tenant-based assistance towards rent; (F) Where Section 8 voucher assistance is being used for relocation, the family will be provided with the vouchers at least 90 days before displacement; (5) Additional information required for conversions subject to the URA. If the voluntary conversion is subject to the URA, the written notice described in paragraph (g)(4) must also provide that: (i) The family will not be required to move without at least 90-days advance written notice of the earliest date by which the family may be required to move, and that the family will not be required to move permanently until the family is offered comparable housing as provided in paragraph (g)(4)(ii)(B) of this section; (ii) Any person who is an alien not lawfully present in the United States is ineligible for relocation payments or assistance under the URA, unless such ineligibility would result in exceptional and extremely unusual hardship to a qualifying spouse, parent, or child, as provided in the URA regulations at 49 CFR 24.208. (iii) The family has a right to appeal the PHA's determination as to the family's application for relocation assistance for which the family may be eligible under this subpart and URA. (iv) Families residing in the development will be provided with the URA [[Page 502]] Notice of Relocation Eligibility or Notice of Non-displacement (as applicable) as of the date HUD approves the conversion plan (for purposes of this subpart, the date of HUD's approval of the conversion plan shall be the ``date of initiation of negotiations'' as that term is used in URA and the implementing regulations at 49 CFR part 24). (v) Any family that moves into the development after submission of the conversion plan to HUD will also be eligible for relocation assistance, unless the PHA issues a written move-in notice to the family prior to leasing and occupancy of the unit advising the family of the development's possible conversion, the impact of the conversion on the family, and that the family will not be eligible for relocation assistance. Sec. 972.233 Timing of submission of conversion plans to HUD. A PHA that wishes to convert a public housing project to tenant- based assistance must submit a conversion plan to HUD. A PHA must prepare a conversion plan, in accordance with Sec. 972.230, and submit it to HUD, as part of the next PHA Annual Plan within one year after submitting the full conversion assessment, or as a significant amendment to that Annual Plan. The PHA may also submit the conversion plan in the same Annual Plan as the conversion assessment. Sec. 972.236 HUD process for approving a conversion plan. Although a PHA will submit its conversion plan to HUD as part of the PHA Annual Plan, the conversion plan will be treated separately for purposes of HUD approval. A PHA needs a separate written approval from HUD in order to proceed with conversion. HUD anticipates that its review of a conversion plan will ordinarily occur within 90 days following submission of a complete plan by the PHA. A longer process may be required where HUD's initial review of the plan raises questions that require further discussion with the PHA. In any event, HUD will provide all PHAs with a preliminary response within 90 days following submission of a conversion plan. A lack of a HUD response within this time frame will constitute automatic HUD approval of the conversion plan. Sec. 972.239 HUD actions with respect to a conversion plan. (a) When a PHA submits a conversion plan to HUD, HUD will review it to determine whether: (1) The conversion plan is complete and includes all of the information required under Sec. 972.230; and (2) The conversion plan is consistent with the conversion assessment the PHA submitted. (b) HUD will disapprove a conversion plan only if HUD determines that: (1) The conversion plan is plainly inconsistent with the conversion assessment; (2) There is reliable information and data available to the Secretary that contradicts the conversion assessment; or (3) The conversion plan is incomplete or otherwise fails to meet the requirements under Sec. 972.230. Sec. Appendix to Part 972--Methodology of Comparing Cost of Public Housing With the Cost of Tenant-Based Assistance I. Public Housing-Net Present Value The costs used for public housing shall be those necessary to produce a viable development for its projected useful life. The estimated cost for the continued operation of the development as public housing shall be calculated as the sum of total operating cost, modernization cost, and costs to address accrual needs. Costs will be calculated at the property level on an annual basis covering a period of 30 years (with options for 20 or 40 years). All costs expected to occur in future years will be discounted, using an OMB-specified real discount rate provided on the OMB Web site at http://www.whitehouse.gov/OMB/ Budget, for each year after the initial year. The sum of the discounted values for each year (net present value) for public housing will then be compared to the net present value of the stream of costs associated with housing vouchers. Applicable information on discount rates may be found in Appendix C of OMB Circular A-94, ``Guidelines and Discount Rates for Benefit Cost Analysis of Federal Programs,'' which is updated annually, and may be found on OMB's Web site at http://www.whitehouse.gov/OMB. All cost adjustments conducted pursuant to this cost methodology must be performed using the real discount rates provided on the OMB Web site [[Page 503]] at http://www.whitehouse.gov/OMB/Budget. HUD will also provide information on current rates, along with guidance and instructions for completing the cost comparisons on the HUD Homepage (http:// www.hud.gov). The Homepage will also include a downloadable spreadsheet calculator that HUD has developed to assist PHAs in completing the assessments. The spreadsheet calculator is designed to walk housing agencies through the calculations and comparisons laid out in the appendix and allows housing agencies to enter relevant data for their PHA and the development being assessed. Results, including net present values, are generated based on these housing agency data. A. Operating Costs 1. Any proposed revitalization or modernization plan must indicate how unusually high current operating expenses (e.g., security, supportive services, maintenance, tenant, and PHA-paid utilities) will be reduced as a result of post-revitalization changes in occupancy, density and building configuration, income mix, and management. The plan must make a realistic projection of overall operating costs per occupied unit in the revitalized or modernized development, by relating those operating costs to the expected occupancy rate, tenant composition, physical configuration, and management structure of the revitalized or modernized development. The projected costs should also address the comparable costs of buildings or developments whose siting, configuration, and tenant mix is similar to that of the revitalized or modernized public housing development. 2. The development's operating cost (including all overhead costs pro-rated to the development--including a Payment in Lieu of Taxes (P.I.L.O.T.) or some other comparable payment, and including utilities and utility allowances) shall be expressed as total operating costs per year. For example, if a development will have 375 units occupied by households and will have $112,500 monthly non-utility costs (including pro-rated overhead costs and appropriate P.I.L.O.T.) and $37,500 monthly utility costs paid by the PHA, and $18,750 in monthly utility allowances that are deducted from tenant rental payments to the PHA because tenants paid some utility bills directly to the utility company, then the development's monthly operating cost is $168,750 (or $450 per unit per month) and its annual operating cost would be $5,400 ($450 times 12). Operating costs are assumed to begin in the initial year of the 30-year (or alternative period) calculation and will be incurred in each year thereafter. 3. In justifying the operating cost estimates as realistic, the plan should link the cost estimates to its assumptions about the level and rate of occupancy, the per-unit funding of modernization, any physical reconfiguration that will result from modernization, any planned changes in the surrounding neighborhood, and security costs. The plan should also show whether developments or buildings in viable condition in similar neighborhoods have achieved the income mix and occupancy rate projected for the revitalized or modernized development. The plan should also show how the operating costs of the similar developments or buildings compare to the operating costs projected for the development. 4. In addition to presenting evidence that the operating costs of the revitalized or modernized development are plausible, when the projected initial year per-unit operating cost of the renovated development is lower than the current per unit cost by more than 10 percent, then the plan should detail how the revitalized development will achieve this reduction in costs. To determine the extent to which projected operating costs are lower than current operating costs, the current per-unit operating costs of the development will be estimated as follows: a. If the development has reliable operating costs and if the overall vacancy rate is less than 20 percent, then the development-based method will be used to determine projected costs. The current costs will be divided by the sum of all occupied units and vacant units fully funded under the Operating Fund Program plus 20 percent of all units not fully funded under the Operating Fund Program. For instance, if the total monthly operating costs of the current development are $168,750 and it has 325 occupied units and 50 vacant units not fully funded under the Operating Fund Program (or a 13 percent overall vacancy rate), then the $2,250,000 is divided by 335--325 plus 20 percent of 50--to give a per unit figure of $504 per unit month. By this example, the current costs per occupied unit are at least 10 percent higher (12 percent in this example) than the projected costs per occupied unit of $450 for the revitalized development, and the reduction in costs would have to be detailed. b. If the development currently lacks reliable cost data or has a vacancy rate of 20 percent or higher, then the PHA-wide method will be used to determine projected costs. First, the current per unit cost of the entire PHA will be computed, with total costs divided by the sum of all occupied units and vacant units fully funded under the Operating Fund Program plus 20 percent of all vacant units not fully funded under the Operating Fund Program. For example, if the PHA's operating cost is $18 million, and the PHA has 4,000 units, of which 3,875 are occupied and 125 are vacant and not fully funded under the Operating Fund Program, then the PHA's vacancy adjusted operating cost is $385 per unit per month--$18,000,000 divided by the 3,825 (the sum of 3,800 occupied units and 20 percent of 125 vacant units) divided by [[Page 504]] 12 months. Second, this amount will be multiplied by the ratio of the bedroom adjustment factor of the development to the bedroom adjustment factor of the PHA. The bedroom adjustment factor, which is based on national rent averages for units grouped by the number of bedrooms and which has been used by HUD to adjust for costs of units when the number of bedrooms vary, assigns to each unit the following factors: .70 for 0- bedroom units, .85 for 1-bedroom units, 1.0 for 2-bedroom units, 1.25 for 3-bedroom units, 1.40 for 4-bedroom units, 1.61 for 5-bedroom units, and 1.82 for 6 or more bedroom units. The bedroom adjustment factor is the unit-weighted average of the distribution. For instance, consider a development with 375 occupied units that had the following under an ACC contract: 200 two-bedroom units, 150 three-bedroom units, and 25 four- bedroom units. In that example, the bedroom adjustment factor would be 1.127--200 times 1.0, plus 150 times 1.25, plus 25 times 1.4 with the sum divided by 375. Where necessary, HUD field offices will arrange for assistance in the calculation of the bedroom adjustment factors of the PHA and its affected developments. c. As an example of estimating development operating costs from PHA- wide operating costs, suppose that the PHA had a total monthly operating cost per unit of $385 and a bedroom adjustment factor of .928, and suppose that the development had a bedroom adjustment factor of 1.127. Then, the development's estimated current monthly operating cost per occupied unit would be $467--or $385 times 1.214 (the ratio of 1.127 to .928). By this example, the development's current operating costs of $467 per unit per month are not more than 10 percent higher (3.8 percent in this example) than the projected costs of $450 per unit per month and no additional justification of the cost reduction would be required. B. Modernization Under both the required and voluntary conversion programs, PHAs prepare modernization or capital repair estimates in accordance with the physical needs of the specific properties proposed for conversion. There are three key assumptions that guide how PHAs prepare modernization estimates that affect remaining useful life and determine whether the 20-, 30-, or discretionary 40-year remaining useful life evaluation period are used for the cost-test. When calculating public housing revitalization costs for a property, PHAs will use a 30-year period if the level of modernization addresses all accumulated backlog needs and the planned redesign ensures long-term viability. For modernization equivalent to new construction or when the renovations restore a property to as-new physical conditions, a 40-year remaining useful life test is used. When light or moderate rehabilitation that does not address all accumulated backlog is undertaken, but it is compliant with the International Existing Building Codes (ICC) or Public Housing Modernization Standards in the absence of a local rehabilitation code, the 20-year remaining useful life evaluation period must be used. Except for some voluntary conversion situations as explained in paragraph E below, the cost of modernization is, at a minimum, the initial revitalization cost to meet viability standards. In the absence of a local code, PHAs may refer to the Public Housing Modernization Standards Handbook (Handbook 7485.2) or the International Existing Building Codes (ICC) 2003 Edition. To justify a 40-year amortization cycle that increases the useful life period and time over which modernization costs are amortized, PHAs must demonstrate that the proposed modernization meets the applicable physical viability standards, but must also cover accumulated backlog and redesign that achieves as-new physical conditions to ensure long-term viability. To be a plausible estimate, modernization costs shall be justified by a newly created property-based needs assessment (a life-cycle physical needs assessments prepared in accordance with a PHA's Capital Fund annual or 5-year action plan and shall be able to be reconciled with standardized measures, such as components of the PHAs physical inspection and chronic vacancy due to physical condition and design. Modernization costs may be assumed to occur during years one through four, consistent with the level of work proposed and the PHA's proposed modernization schedule. For example, if the initial modernization outlay (excluding demolition costs) to meet viability standards is $21,000,000 for 375 units, a PHA might incur costs in three equal increments of $7,000,000 in years two, three, and four (based on the PHA's phased modernization plan). In comparing the net present value of public housing to voucher costs for required conversion, a 30-year amortization period will normally be used, except when revitalization would bring the property to as-new condition and a 40-year amortization would be justified. On the other hand, when the modernization falls short of meeting accumulated backlog and long-term redesign needs, only a 20-year amortization period might be justified. C. Accrual Accrual projections estimate the ongoing replacement repair needs for public housing properties and building structures and systems required to maintain the physical viability of a property throughout its useful life as the lifecycle of building structures and [[Page 505]] systems expire. The cost of accrual (i.e., replacement needs) will be estimated with an algorithm that meets all ongoing capital needs based on systems that have predictable lifecycles. The algorithm starts with the area index of housing construction costs (HCC) that HUD publishes as a component of its TDC index series. Subtracted from this HCC figure is half the estimated modernization per unit, with a coefficient of .025 multiplied by the result to provide an annual accrual figure per unit. For example, suppose that the development after modernization will remain a walkup structure containing 200 two-bedroom, 150 three-bedroom, and 25 four-bedroom occupied units, and if HUD's HCC limit for the area is $66,700 for two-bedroom walkup structures, $93,000 for three-bedroom walkup structures, and $108,400 for four-bedroom walkup structures. Then the unit-weighted HCC cost is $80,000 per unit and .75 of that figure is $60,000 per unit. Then, if the per unit cost of the modernization is $56,000, the estimated annual cost of accrual per occupied unit is $1,300. This is the result of multiplying .025 times $52,000 (the weighted HCC of $80,000) minus $28,000 (half the per-unit modernization cost of $56,000). The first year of total accrual for the development is $487,500 ($1,300 times 375 units) and should be assumed to begin in the year after modernization is complete. Accrual--like operating cost--is an annual expense and will occur in each year over the amortized period. Because the method assumes full physical renewal each year, this accrual method when combined with a modernization that meets past backlog and redesign needs justifies a 30- or 40-year amortization period, because the property is refreshed each year to as-new or almost as-new condition. D. Residual Value (Voluntary Conversion Only) Under the voluntary conversion program, PHAs are required to prepare market appraisals based on the ``as-is'' and post-rehabilitation condition of properties, assuming the buildings are operated as public or assisted, unassisted, or market-rate housing. Section 972.218 requires PHAs to describe the future use for a property proposed for conversion and to describe the means and timetable to complete these activities. HUD will permit a PHA to enter the appraised market value of a property into the cost-test in Years 1 through 5 when a PHA anticipates selling a property or receiving income generated from the sale or lease of a property. As a separate line item to be added to total public costs as a foregone opportunity cost, a PHA shall include in the voluntary cost- test calculations the appraised market or residual value (or net sales proceeds) from the sale or lease of a property that is to be voluntarily converted to tenant-based voucher assistance. The PHA must hire an appraiser to estimate the market value of the property using the comparable sale, tax-assessment, or revenue-based appraisal methods. PHAs are advised to select one or more of these appraisal methods to accurately determine the actual or potential market value of a property, particularly the comparable sales or revenue-based methods. The market or residual value is to be determined by calculating the estimated market value for the property based on the appraisal, minus any costs required for demolition and remediation. The residual value must be incorporated into the cost-test instead of the actual market value only when any demolition, site remediation, and clearance costs that are necessary are covered by the selling PHA. However, if the sum of the estimated per unit cost of demolition and remediation exceeds 10 percent of the average Total Development Cost (TDC) for the units, the lower of the PHA estimate or a figure based on 10 percent of TDC must be used. Suppose the estimated remediation and demolition costs necessary for conversion sale are $7,000 per unit. Also, suppose the TDC limits are $115,000 for a two-bedroom unit, $161,000 for a three-bedroom unit, and $184,000 for a four-bedroom unit. Then the average TDC of a development with 200 two-bedroom units, 150 three-bedroom units, and 25 four-bedroom units is $138,000 (200 times $115,000, plus 150 times $161,000, plus 25 times $184,000, the sum divided by 375) and 10 percent of TDC is $13,800. In this example, the estimated $7,000 per unit costs for demolition and remediation is less than 10 percent of TDC for the development, and the PHA estimate of $7,000 is used. If estimated expenses had exceeded 10 percent of TDC ($13,800 in this example), demolition and remediation expenses must be capped at the lower amount. E. Accumulated Discounted Cost: Public Housing The overall cost for continuing to operate the development as public housing is the sum of the discounted values of the yearly stream of costs up for the amortization period, which can range from 20 to 30 to 40 years, depending on the extent of modernization relative to the current physical and redesign needs of the development. In calculating net present value for required conversion, the sum of all costs in each future year is discounted back to the current year using the OMB- specified real discount rate. For voluntary conversion, the discount rate is applied forward as a direct inflation factor. To assist PHAs in completing the net present value comparison and to ensure consistency in the calculations, HUD has developed a spreadsheet calculator that is available for downloading from the HUD Internet site. Using PHA data and property specific [[Page 506]] inputs (to be entered by the housing agency), the spreadsheet will discount costs as described above and will generate net present values for amortization periods of 20, 30, and 40 years. II. Tenant-Based Assistance The estimated cost of providing tenant-based assistance under Section 8 for all households in occupancy shall be calculated as the unit-weighted average of recent movers in the local area; plus the administrative fee for providing such vouchers; plus $1,000 per unit (or a higher amount allowed by HUD) for relocation assistance costs, including counseling. However, if the sum of the estimated per unit cost of demolition, remediation, and relocation exceeds 10 percent of the average Total Development Cost (TDC) for the units, the lower of the PHA estimate or a figure based on 10 percent of TDC must be used. For example, if the development has 200 occupied two-bedroom units, 150 occupied three-bedroom units, and 25 occupied four-bedroom units, and if the monthly payment standard for voucher units occupied by recent movers is $550 for two-bedroom units, $650 for three-bedroom units, and $750 for four-bedroom units, the unit-weighted monthly payment standard is $603.33. If the administrative fee comes to $46 per unit, then the monthly per unit operating voucher costs are $649.33, which rounds to an annual total of $2,922,000 for 375 occupied units of the same bedroom size as those being demolished in public housing. To these operating voucher costs, a first-year relocation is added on the voucher side. For per-unit relocation costs of $1,000 per unit for relocation, then $375,000 for 375 units is placed on the voucher cost side of the first year. Accumulated Discounted Cost: Vouchers The overall cost for vouchers is the sum of the discounted values of the yearly stream of costs up for the amortization period, which can range from 20 to 30 to 40 years, depending on the extent of modernization relative to the current physical and redesign needs of the development. The amortization period chosen is the one that was appropriate for discounting public housing costs. In calculating net present value for required conversion, the sum of all costs in each future year is discounted back to the current year using the OMB- specified real discount rate. For voluntary conversion, the discount rate is applied forward as a direct inflation factor. To assist PHAs in completing the net present value comparison and to ensure consistency in the calculations, HUD has developed a spreadsheet calculator that will be available for downloading from the HUD Internet site. III. Results of the Example With the hypothetical data used in the examples, under an amortization period of 30 years, the discounted public housing costs under required conversion sums to $69,633,225, and the discounted voucher cost under required conversions totals $60,438,698. The ratio is 1.15, which means that public housing is 15 percent more costly than vouchers. With this amortization and this data, the PHA would be required to convert the development under the requirements of subpart A of this part, except in a situation where a PHA can demonstrate a distressed property that has failed the cost-test can be redeveloped by meeting each of the four factors that compose the long-term physical viability test to avoid removal from the inventory. With the same data, but a 40-year amortization period, public housing is still 11 percent costlier than vouchers, and with a 20-year amortization, public housing is 25 percent costlier than vouchers. In voluntary conversion, with the same hypothetical data, but a slightly different methodology (use of residual value as a public housing cost, inflating forward the discount numbers), the ratio of public housing costs to voucher costs would be 1.16 for the 20-year amortization period, 1.03 for the 30-year amortization period, and .97 for the 20-year amortization period. Thus, in voluntary conversion, the appropriate amortization period would decide whether public housing is more costly or is slightly more costly, or less than vouchers. Under a 20-year amortization assumption and possibly under a 30-year amortization period, the PHA would have the option of preparing a conversion plan for the development under subpart B of this part. Different sets of data would yield different conclusions for required and voluntary conversion determinations. [71 FR 14336, Mar. 21, 2006] PART 982_SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM--Table of Contents Subpart A_General Information Sec. 982.1 Programs: Purpose and structure. 982.2 Applicability. 982.3 HUD. 982.4 Definitions. 982.5 Notices required by this part. Subpart B_HUD Requirements and PHA Plan for Administration of Program 982.51 PHA authority to administer program. 982.52 HUD requirements. [[Page 507]] 982.53 Equal opportunity requirements and protection for victims of domestic violence, dating violence, sexual assault, or stalking. 982.54 Administrative plan. Subpart C_Funding and PHA Application for Funding 982.101 Allocation of funding. 982.102 Allocation of budget authority for renewal of expiring CACC funding increments. 982.103 PHA application for funding. 982.104 HUD review of application. Subpart D_Annual Contributions Contract and PHA Administration of Program 982.151 Annual contributions contract. 982.152 Administrative fee. 982.153 PHA responsibilities. 982.154 ACC reserve account. 982.155 Administrative fee reserve. 982.156 Depositary for program funds. 982.157 Budget and expenditure. 982.158 Program accounts and records. 982.159 Audit requirements. 982.160 HUD determination to administer a local program. 982.161 Conflict of interest. 982.162 Use of HUD-required contracts and other forms. 982.163 Fraud recoveries. Subpart E_Admission to Tenant-Based Program 982.201 Eligibility and targeting. 982.202 How applicants are selected: General requirements. 982.203 Special admission (non-waiting list): Assistance targeted by HUD. 982.204 Waiting list: Administration of waiting list. 982.205 Waiting list: Different programs. 982.206 Waiting list: Opening and closing; public notice. 982.207 Waiting list: Local preferences in admission to program. Subpart F [Reserved] Subpart G_Leasing a Unit 982.301 Information when family is selected. 982.302 Issuance of certificate or voucher; Requesting PHA approval of assisted tenancy. 982.303 Term of voucher. 982.304 Illegal discrimination: PHA assistance to family. 982.305 PHA approval of assisted tenancy. 982.306 PHA disapproval of owner. 982.307 Tenant screening. 982.308 Lease and tenancy. 982.309 Term of assisted tenancy. 982.310 Owner termination of tenancy. 982.311 When assistance is paid. 982.312 Absence from unit. 982.313 Security deposit: Amounts owed by tenant. 982.315 Family break-up. 982.316 Live-in aide. 982.317 Lease-purchase agreements. Subpart H_Where Family Can Live and Move 982.351 Overview. 982.352 Eligible housing. 982.353 Where family can lease a unit with tenant-based assistance. 982.354 Move with continued tenant-based assistance. 982.355 Portability: Administration by initial and receiving PHA. Subpart I_Dwelling Unit: Housing Quality Standards, Subsidy Standards, Inspection and Maintenance 982.401 Housing quality standards. 982.402 Subsidy standards. 982.403 Terminating HAP contract when unit is too small. 982.404 Maintenance: Owner and family responsibility; PHA remedies. 982.405 PHA initial and periodic unit inspection. 982.406 Use of alternative inspections. 982.407 Enforcement of HQS. Subpart J_Housing Assistance Payments Contract and Owner Responsibility 982.451 Housing assistance payments contract. 982.452 Owner responsibilities. 982.453 Owner breach of contract. 982.454 Termination of HAP contract: Insufficient funding. 982.455 Automatic termination of HAP contract. 982.456 Third parties. Subpart K_Rent and Housing Assistance Payment 982.501 Overview. 982.503 Payment standard amount and schedule. 982.504 Payment standard for family in restructured subsidized multifamily project. 982.505 How to calculate housing assistance payment. 982.506 Negotiating rent to owner. 982.507 Rent to owner: Reasonable rent. 982.508 Maximum family share at initial occupancy. 982.509 Rent to owner: Effect of rent control. 982.510 Other fees and charges. [[Page 508]] 982.514 Distribution of housing assistance payment. 982.515 Family share: Family responsibility. 982.516 Family income and composition: Annual and interim examinations. 982.517 Utility allowance schedule. 982.521 Rent to owner in subsidized project. Subpart L_Family Obligations; Denial and Termination of Assistance 982.551 Obligations of participant. 982.552 PHA denial or termination of assistance for family. 982.553 Denial of admission and termination of assistance for criminals and alcohol abusers. 982.554 Informal review for applicant. 982.555 Informal hearing for participant. Subpart M_Special Housing Types 982.601 Overview. Single Room Occupancy (SRO) 982.602 SRO: Who may reside in an SRO? 982.603 SRO: Lease and HAP contract. 982.604 SRO: Voucher housing assistance payment. 982.605 SRO: Housing quality standards. Congregate Housing 982.606 Congregate housing: Who may reside in congregate housing. 982.607 Congregate housing: Lease and HAP contract. 982.608 Congregate housing: Voucher housing assistance payment. 982.609 Congregate housing: Housing quality standards. Group Home 982.610 Group home: Who may reside in a group home. 982.611 Group home: Lease and HAP contract. 982.612 Group home: State approval of group home. 982.613 Group home: Rent and voucher housing assistance payment. 982.614 Group home: Housing quality standards. Shared Housing 982.615 Shared housing: Occupancy. 982.616 Shared housing: Lease and HAP contract. 982.617 Shared housing: Rent and voucher housing assistance payment. 982.618 Shared housing: Housing quality standards. Cooperative 982.619 Cooperative housing. Manufactured Home 982.620 Manufactured home: Applicability of requirements. 982.621 Manufactured home: Housing quality standards. Manufactured Home Space Rental 982.622 Manufactured home space rental: Rent to owner. 982.623 Manufactured home space rental: Housing assistance payment. 982.624 Manufactured home space rental: Utility allowance schedule. Homeownership Option 982.625 Homeownership option: General. 982.626 Homeownership option: Initial requirements. 982.627 Homeownership option: Eligibility requirements for families. 982.628 Homeownership option: Eligible units. 982.629 Homeownership option: Additional PHA requirements for family search and purchase. 982.630 Homeownership option: Homeownership counseling. 982.631 Homeownership option: Home inspections, contract of sale, and PHA disapproval of seller. 982.632 Homeownership option: Financing purchase of home; affordability of purchase. 982.633 Homeownership option: Continued assistance requirements; Family obligations. 982.634 Homeownership option: Maximum term of homeownership assistance. 982.635 Homeownership option: Amount and distribution of monthly homeownership assistance payment. 982.636 Homeownership option: Portability. 982.637 Homeownership option: Move with continued tenant-based assistance. 982.638 Homeownership option: Denial or termination of assistance for family. 982.639 Homeownership option: Administrative fees. 982.641 Homeownership option: Applicability of other requirements. 982.642 Homeownership option: Pilot program for homeownership assistance for disabled families. 982.643 Homeownership option: Downpayment assistance grants. Authority: 42 U.S.C. 1437f and 3535(d). Source: 59 FR 36682, July 18, 1994, unless otherwise noted. Editorial Note: Nomenclature changes to part 982 appear at 64 FR 26640, May 14, 1999. [[Page 509]] Subpart A_General Information Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.1 Programs: purpose and structure. (a) General description. (1) In the HUD Housing Choice Voucher (HCV) program, HUD pays rental subsidies so eligible families can afford decent, safe, and sanitary housing. The HCV program is generally administered by State or local governmental entities called public housing agencies (PHAs). HUD provides housing assistance funds to the PHA. HUD also provides funds for PHA administration of the program. (2) Families select and rent units that meet program housing quality standards. If the PHA approves a family's unit and tenancy, the PHA contracts with the owner to make rent subsidy payments on behalf of the family. A PHA may not approve a tenancy unless the rent is reasonable. (3) Subsidy in the HCV program is based on a local ``payment standard'' that reflects the cost to lease a unit in the local housing market. If the rent is less than the payment standard, the family generally pays 30 percent of adjusted monthly income for rent. If the rent is more than the payment standard, the family pays a larger share of the rent. (b) Tenant-based and project-based assistance. (1) Section 8 assistance may be ``tenant-based'' or ``project-based''. In project- based programs, rental assistance is paid for families who live in specific housing developments or units. With tenant-based assistance, the assisted unit is selected by the family. The family may rent a unit anywhere in the United States in the jurisdiction of a PHA that runs a voucher program. (2) To receive tenant-based assistance, the family selects a suitable unit. After approving the tenancy, the PHA enters into a contract to make rental subsidy payments to the owner to subsidize occupancy by the family. The PHA contract with the owner only covers a single unit and a specific assisted family. If the family moves out of the leased unit, the contract with the owner terminates. The family may move to another unit with continued assistance so long as the family is complying with program requirements. [60 FR 34695, July 3, 1995, as amended at 64 FR 26640, May 14, 1999; 80 FR 8245, Feb. 17, 2015] Sec. 982.2 Applicability. Part 982 contains the program requirements for the tenant-based housing assistance program under Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). The tenant-based program is the HCV program. [80 FR 8245, Feb. 17, 2015] Sec. 982.3 HUD. The HUD field offices have been delegated responsibility for day-to- day administration of the program by HUD. In exercising these functions, the field offices are subject to HUD regulations and other HUD requirements issued by HUD headquarters. Some functions are specifically reserved to HUD headquarters. Sec. 982.4 Definitions. (a) Definitions found elsewhere--(1) General definitions. The following terms are defined in part 5, subpart A of this title: 1937 Act, covered person, drug, drug-related criminal activity, federally assisted housing, guest, household, HUD, MSA, other person under the tenant's control, public housing, Section 8, and violent criminal activity. (2) Definitions concerning family income and rent. The terms ``adjusted income,'' ``annual income,'' ``extremely low income family,'' ``tenant rent,'' ``total tenant payment,'' ``utility allowance,'' ``utility reimbursement,'' and ``welfare assistance'' are defined in part 5, subpart F of this title. The definitions of ``tenant rent'' and ``utility reimbursement'' in part 5, subpart F of this title do not apply to the HCV program under part 982. (b) In addition to the terms listed in paragraph (a) of this section, the following definitions apply: Absorption. For purposes of subpart H, the point at which a receiving PHA starts making assistance payments with funding under its consolidated ACC, rather than billing, the initial PHA. [[Page 510]] Administrative fee. Fee paid by HUD to the PHA for administration of the program. See Sec. 982.152. Administrative fee reserve (formerly ``operating reserve''). Account established by PHA from excess administrative fee income. The administrative fee reserve must be used for housing purposes. See Sec. 982.155. Administrative plan. The plan that describes PHA policies for administration of the HCV program. See Sec. 982.54. Admission. The point when the family becomes a participant in the program. The date used for this purpose is the effective date of the first HAP contract for a family (first day of initial lease term) in the tenant-based program. Applicant (applicant family). A family that has applied for admission to the HCV program but is not yet a program participant. Budget authority. An amount authorized and appropriated by the Congress for payment to PHAs under the HCV program. For each funding increment in the program, budget authority is the maximum amount that may be paid by HUD to the PHA over the ACC term of the funding increment. Common space. In shared housing: Space available for use by the assisted family and other occupants of the unit. Congregate housing. Housing for elderly persons or persons with disabilities that meets the HQS for congregate housing. A special housing type: see Sec. 982.606 to Sec. 982.609. Continuously assisted. An applicant is continuously assisted under the 1937 Act if the family is already receiving assistance under any 1937 Act program when the family is admitted to the HCV program. Cooperative. Housing owned by a corporation or association, and where a member of the corporation or association has the right to reside in a particular unit, and to participate in management of the housing. Cooperative member. A family of which one or more members owns membership shares in a cooperative. Domicile. The legal residence of the household head or spouse as determined in accordance with State and local law. Downpayment assistance grant. A form of homeownership assistance in the homeownership option: A single downpayment assistance grant for the family. If a family receives a downpayment assistance grant, a PHA may not make monthly homeownership assistance payments for the family. A downpayment assistance grant is applied to the downpayment for purchase of the home or reasonable and customary closing costs required in connection with purchase of the home. Fair market rent (FMR). The rent, including the cost of utilities (except telephone), as established by HUD for units of varying sizes (by number of bedrooms), that must be paid in the housing market area to rent privately owned, existing, decent, safe and sanitary rental housing of modest (non-luxury) nature with suitable amenities. See periodic publications in the Federal Register in accordance with 24 CFR part 888. Family. A person or group of persons, as determined by the PHA consistent with 24 CFR 5.403, approved to reside in a unit with assistance under the program. See ``family composition'' at Sec. 982.201(c). Family rent to owner. In the voucher program, the portion of rent to owner paid by the family. For calculation of family rent to owner, see Sec. 982.515(b). Family self-sufficiency program (FSS program). The program established by a PHA in accordance with 24 CFR part 984 to promote self- sufficiency of assisted families, including the coordination of supportive services (42 U.S.C. 1437u). Family share. The portion of rent and utilities paid by the family. For calculation of family share, see Sec. 982.515(a). Family unit size. The appropriate number of bedrooms for a family, as determined by the PHA under the PHA subsidy standards. First-time homeowner. In the homeownership option: A family of which no member owned any present ownership interest in a residence of any family member during the three years before commencement of homeownership assistance for the family. The term ``first-time homeowner'' includes a single parent or displaced homemaker (as those terms are defined in 12 U.S.C. 12713) who, while married, owned a [[Page 511]] home with his or her spouse, or resided in a home owned by his or her spouse. Funding increment. Each commitment of budget authority by HUD to a PHA under the consolidated annual contributions contract for the PHA program. Gross rent. The sum of the rent to owner plus any utility allowance. Group home. A dwelling unit that is licensed by a State as a group home for the exclusive residential use of two to twelve persons who are elderly or persons with disabilities (including any live-in aide). A special housing type: see Sec. 982.610 to Sec. 982.614. HAP contract. Housing assistance payments contract. Home. In the homeownership option: A dwelling unit for which the PHA pays homeownership assistance. Homeowner. In the homeownership option: A family of which one or more members owns title to the home. Homeownership assistance. Assistance for a family under the homeownership option. There are two alternative and mutually exclusive forms of homeownership assistance by a PHA for a family: monthly homeownership assistance payments, or a single downpayment assistance grant. Either form of homeownership assistance may be paid to the family, or to a mortgage lender on behalf of the family. Homeownership expenses. In the homeownership option: A family's allowable monthly expenses for the home, as determined by the PHA in accordance with HUD requirements (see Sec. 982.635). Homeownership option. Assistance for a homeowner or cooperative member under Sec. 982.625 to Sec. 982.641. A special housing type. Housing assistance payment. The monthly assistance payment by a PHA, which includes: (1) A payment to the owner for rent to the owner under the family's lease; and (2) An additional payment to the family if the total assistance payment exceeds the rent to owner. Housing quality standards (HQS). The minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for the HCV program or the HUD approved alternative standard for the PHA under 24 CFR 5.703(g). Initial PHA. In portability, the term refers to both: (1) a PHA that originally selected a family that later decides to move out of the jurisdiction of the selecting PHA; and (2) a PHA that absorbed a family that later decides to move out of the jurisdiction of the absorbing PHA. Initial payment standard. The payment standard at the beginning of the HAP contract term. Initial rent to owner. The rent to owner at the beginning of the HAP contract term. Interest in the home. In the homeownership option: (1) In the case of assistance for a homeowner, ``interest in the home'' includes title to the home, any lease or other right to occupy the home, or any other present interest in the home. (2) In the case of assistance for a cooperative member, ``interest in the home'' includes ownership of membership shares in the cooperative, any lease or other right to occupy the home, or any other present interest in the home. Jurisdiction. The area in which the PHA has authority under State and local law to administer the program. Lease. (1) A written agreement between an owner and a tenant for the leasing of a dwelling unit to the tenant. The lease establishes the conditions for occupancy of the dwelling unit by a family with housing assistance payments under a HAP contract between the owner and the PHA. (2) In cooperative housing, a written agreement between a cooperative and a member of the cooperative. The agreement establishes the conditions for occupancy of the member's cooperative dwelling unit by the member's family with housing assistance payments to the cooperative under a HAP contract between the cooperative and the PHA. For purposes of this part 982, the cooperative is the Section 8 ``owner'' of the unit, and the cooperative member is the Section 8 ``tenant.'' Manufactured home. A manufactured structure that is built on a permanent chassis, is designed for use as a principal place of residence, and meets the HQS. A special housing type: see Sec. 982.620 and Sec. 982.621. [[Page 512]] Manufactured home space. In manufactured home space rental: A space leased by an owner to a family. A manufactured home owned and occupied by the family is located on the space. See Sec. 982.622 to Sec. 982.624. Membership shares. In the homeownership option: shares in a cooperative. By owning such cooperative shares, the share-owner has the right to reside in a particular unit in the cooperative, and the right to participate in management of the housing. Merger date. October 1, 1999, which is the effective date of the merger of the two tenant-based programs (the housing voucher and housing certificate programs) into the Housing Choice Voucher (HCV) program. Notice of Funding Availability (NOFA). For budget authority that HUD distributes by competitive process, the Federal Register document that invites applications for funding. This document explains how to apply for assistance and the criteria for awarding the funding. Owner. Any person or entity with the legal right to lease or sublease a unit to a participant. Participant (participant family). A family that has been admitted to the PHA program and is currently assisted in the program. The family becomes a participant on the effective date of the first HAP contract executed by the PHA for the family (first day of initial lease term). Payment standard. The maximum monthly assistance payment for a family assisted in the voucher program (before deducting the total tenant payment by the family). PHA plan. The annual plan and the 5-year plan as adopted by the PHA and approved by HUD in accordance with part 903 of this chapter. Portability. Renting a dwelling unit with Section 8 tenant-based assistance outside the jurisdiction of the initial PHA. Premises. The building or complex in which the dwelling unit is located, including common areas and grounds. Present homeownership interest. In the homeownership option: ``Present ownership interest'' in a residence includes title, in whole or in part, to a residence, or ownership, in whole or in part, of membership shares in a cooperative. ``Present ownership interest'' in a residence does not include the right to purchase title to the residence under a lease-purchase agreement. Private space. In shared housing: The portion of a contract unit that is for the exclusive use of an assisted family. Program. The Section 8 HCV program under this part. Program receipts. HUD payments to the PHA under the consolidated ACC, and any other amounts received by the PHA in connection with the program. Public housing agency (PHA). PHA includes both: (1) Any State, county, municipality, or other governmental entity or public body which is authorized to administer the program (or an agency or instrumentality of such an entity), and (2) Any of the following: (i) A consortium of housing agencies, each of which meets the qualifications in paragraph (1) of this definition, that HUD determines has the capacity and capability to efficiently administer the program (in which case, HUD may enter into a consolidated ACC with any legal entity authorized to act as the legal representative of the consortium members); (ii) Any other public or private non-profit entity that was administering a Section 8 tenant-based assistance program pursuant to a contract with the contract administrator of such program (HUD or a PHA) on October 21, 1998; or (iii) For any area outside the jurisdiction of a PHA that is administering a tenant-based program, or where HUD determines that such PHA is not administering the program effectively, a private non-profit entity or a governmental entity or public body that would otherwise lack jurisdiction to administer the program in such area. Reasonable rent. A rent to owner that is not more than rent charged: (1) For comparable units in the private unassisted market; and (2) For comparable unassisted units in the premises. Receiving PHA. In portability: A PHA that receives a family selected for participation in the HCV program of another PHA. The receiving PHA issues a [[Page 513]] voucher and provides program assistance to the family. Renewal units. The number of units, as determined by HUD, for which funding is reserved on HUD books for a PHA's program. This number is used is calculating renewal budget authority in accordance with Sec. 982.102. Rent to owner. The total monthly rent payable to the owner under the lease for the unit. Rent to owner covers payment for any housing services, maintenance and utilities that the owner is required to provide and pay for. Residency preference. A PHA preference for admission of families that reside anywhere in a specified area, including families with a member who works or has been hired to work in the area (``residency preference area''). Residency preference area. The specified area where families must reside to qualify for a residency preference. Shared housing. A unit occupied by two or more families. The unit consists of both common space for shared use by the occupants of the unit and separate private space for each assisted family. A special housing type: see Sec. 982.615 to Sec. 982.618. Single room occupancy housing (SRO). A unit that contains no sanitary facilities or food preparation facilities, or contains either, but not both, types of facilities. A special housing type: see Sec. 982.602 to Sec. 982.605. Special admission. Admission of an applicant that is not on the PHA waiting list or without considering the applicant's waiting list position. Special housing types. See subpart M of this part 982. Subpart M of this part states the special regulatory requirements for: SRO housing, congregate housing, group home, shared housing, manufactured home (including manufactured home space rental), cooperative housing (rental assistance for cooperative member) and homeownership option (homeownership assistance for cooperative member or first-time homeowner). Statement of homeowner obligations. In the homeownership option: The family's agreement to comply with program obligations. Subsidy standards. Standards established by a PHA to determine the appropriate number of bedrooms and amount of subsidy for families of different sizes and compositions. Suspension. The term on the family's voucher stops from the date that the family submits a request for PHA approval of the tenancy, until the date the PHA notifies the family in writing whether the request has been approved or denied. Tenant. The person or persons (other than a live-in aide) who executes the lease as lessee of the dwelling unit. Utility reimbursement. The portion of the housing assistance payment which exceeds the amount of the rent to owner. (See Sec. 982.514(b)). Voucher holder. A family holding a voucher with an unexpired term (search time). Voucher (rental voucher). A document issued by a PHA to a family selected for admission to the voucher program. This document describes the program and the procedures for PHA approval of a unit selected by the family. The voucher also states obligations of the family under the program. Waiting list admission. An admission from the PHA waiting list. Welfare-to-work (WTW) families. Families assisted by a PHA with voucher funding awarded to the PHA under the HUD welfare-to-work voucher program (including any renewal of such WTW funding for the same purpose). [63 FR 23857, Apr. 30, 1998; 63 FR 31625, June 10, 1998, as amended at 64 FR 26641, May 14, 1999; 64 FR 49658, Sept. 14, 1999; 64 FR 56887, 56911, Oct. 21, 1999; 65 FR 16821, Mar. 30, 2000; 65 FR 55161, Sept. 12, 2000; 66 FR 28804, May 24, 2001; 66 FR 33613, June 22, 2001; 67 FR 64492, Oct. 18, 2002; 77 FR 5675, Feb. 3, 2012; 80 FR 8245, Feb. 17, 2015; 80 FR 50572, Aug. 20, 2015; 88 FR 30503, May 11, 2023] Sec. 982.5 Notices required by this part. Where part 982 requires any notice to be given by the PHA, the family or the owner, the notice must be in writing. Subpart B_HUD Requirements and PHA Plan for Administration of Program Source: 60 FR 34695, July 3, 1995, unless otherwise noted. [[Page 514]] Sec. 982.51 PHA authority to administer program. (a) The PHA must have authority to administer the program. The PHA must provide evidence, satisfactory to HUD, of its status as a PHA, of its authority to administer the program, and of the PHA jurisdiction. (b) The evidence submitted by the PHA to HUD must include enabling legislation and a supporting legal opinion satisfactory to HUD. The PHA must submit additional evidence when there is a change that affects its status as a PHA, its authority to administer the program, or its jurisdiction. [60 FR 34695, July 3, 1995, as amended at 64 FR 26641, May 14, 1999; 80 FR 8245, Feb. 17, 2015] Sec. 982.52 HUD requirements. (a) The PHA must comply with HUD regulations and other HUD requirements for the program. HUD requirements are issued by HUD headquarters, as regulations, Federal Register notices or other binding program directives. (b) The PHA must comply with the consolidated ACC and the PHA's HUD- approved applications for program funding. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995] Sec. 982.53 Equal opportunity requirements and protection for victims of domestic violence, dating violence, sexual assault, or stalking. (a) The tenant-based program requires compliance with all equal opportunity requirements imposed by contract or federal law, including the authorities cited at 24 CFR 5.105(a) and title II of the Americans with Disabilities Act, 42 U.S.C. 12101 et seq. (b) Civil rights certification. The PHA must submit a signed certification to HUD that: (1) The PHA will administer the program in conformity with the Fair Housing Act, Title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act of 1973, and Title II of the Americans with Disabilities Act. (2) The PHA will affirmatively further fair housing in the administration of the program. (c) Obligation to affirmatively further fair housing. The PHA shall affirmatively further fair housing as required by Sec. 903.7(o) of this title. (d) State and local law. Nothing in part 982 is intended to pre-empt operation of State and local laws that prohibit discrimination against a Section 8 voucher-holder because of status as a Section 8 voucher- holder. However, such State and local laws shall not change or affect any requirement of this part, or any other HUD requirements for administration or operation of the program. (e) Protection for victims of domestic violence, dating violence, sexual assault, or stalking. The PHA must apply the requirements in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). For purposes of compliance with HUD's regulations in 24 CFR part 5, subpart L, the covered housing provider is the PHA or owner, as applicable given the responsibilities of the covered housing provider as set forth in 24 CFR part 5, subpart L. For example, the PHA is the covered housing provider responsible for providing the Notice of occupancy rights under VAWA and certification form described at 24 CFR 5.2005(a). In addition, the owner is the covered housing provider that may choose to bifurcate a lease as described at 24 CFR 5.2009(a), while the PHA is the covered housing provider responsible for complying with emergency transfer plan provisions at 24 CFR 5.2005(e). (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 FR 23859, Apr. 30, 1998; 64 FR 26641, May 14, 1999; 64 FR 56911, Oct. 21, 1999; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 80 FR 8245, Feb. 17, 2015; 81 FR 80816, Nov. 16, 2016] Sec. 982.54 Administrative plan. (a) The PHA must adopt a written administrative plan that establishes local policies for administration of the program in accordance with HUD requirements. The administrative plan and any revisions of the plan must be [[Page 515]] formally adopted by the PHA Board of Commissioners or other authorized PHA officials. The administrative plan states PHA policy on matters for which the PHA has discretion to establish local policies. (b) The administrative plan must be in accordance with HUD regulations and requirements. The administrative plan is a supporting document to the PHA plan (part 903 of this title) and must be available for public review. The PHA must revise the administrative plan if needed to comply with HUD requirements. (c) The PHA must administer the program in accordance with the PHA administrative plan. (d) The PHA administrative plan must cover PHA policies on these subjects: (1) Selection and admission of applicants from the PHA waiting list, including any PHA admission preferences, procedures for removing applicant names from the waiting list, and procedures for closing and reopening the PHA waiting list; (2) Issuing or denying vouchers, including PHA policy governing the voucher term and any extensions of the voucher term. If the PHA decides to allow extensions of the voucher term, the PHA administrative plan must describe how the PHA determines whether to grant extensions, and how the PHA determines the length of any extension. (3) Any special rules for use of available funds when HUD provides funding to the PHA for a special purpose (e.g., desegregation), including funding for specified families or a specified category of families; (4) Occupancy policies, including: (i) Definition of what group of persons may qualify as a ``family''; (ii) Definition of when a family is considered to be ``continuously assisted''; (iii) Standards for denying admission or terminating assistance based on criminal activity or alcohol abuse in accordance with Sec. 982.553; (5) Encouraging participation by owners of suitable units located outside areas of low income or minority concentration; (6) Assisting a family that claims that illegal discrimination has prevented the family from leasing a suitable unit; (7) Providing information about a family to prospective owners; (8) Disapproval of owners; (9) Subsidy standards; (10) Family absence from the dwelling unit; (11) How to determine who remains in the program if a family breaks up; (12) Informal review procedures for applicants; (13) Informal hearing procedures for participants; (14) The process for establishing and revising payment standards, including policies on administering decreases in the payment standard during the HAP contract term (see Sec. 982.505(d)(3)). (15) The method of determining that rent to owner is a reasonable rent (initially and during the term of a HAP contract); (16) Special policies concerning special housing types in the program (e.g., use of shared housing); (17) Policies concerning payment by a family to the PHA of amounts the family owes the PHA; (18) Interim redeterminations of family income and composition; (19) Restrictions, if any, on the number of moves by a participant family (see Sec. 982.354(c)); (20) Approval by the Board of Commissioners or other authorized officials to charge the administrative fee reserve; (21) Procedural guidelines and performance standards for conducting required HQS inspections; and (22) PHA screening of applicants for family behavior or suitability for tenancy. (23) Policies concerning application of Small Area FMRs to project- based voucher units (see Sec. 888.113(h)). (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 27163, May 30, 1996; 63 FR 23859, Apr. 30, 1998; 64 FR 26641, May 14, 1999; 64 FR 49658, Sept. 14, 1999; 64 FR 56911, Oct. 21, 1999; 66 FR 28804, May 24, 2001; 80 FR 8245, Feb. 17, 2015; 80 FR 50572, Aug. 20, 2015; 81 FR 80582, Nov. 16, 2016] [[Page 516]] Subpart C_Funding and PHA Application for Funding Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.101 Allocation of funding. (a) Allocation of funding. HUD allocates available budget authority for the tenant-based assistance program to HUD field offices. (b) Section 213(d) allocation. (1) Section 213(d) of the HCD Act of 1974 (42 U.S.C. 1439) establishes requirements for allocation of assisted housing budget authority. Some budget authority is exempt by law from allocation under section 213(d). Unless exempted by law, budget authority for the tenant-based programs must be allocated in accordance with section 213(d). (2) Budget authority subject to allocation under section 213(d) is allocated in accordance with 24 CFR part 791, subpart D. There are three categories of section 213(d) funding allocations under part 791 of this title: (i) Funding retained in a headquarters reserve for purposes specified by law; (ii) funding incapable of geographic formula allocation (e.g., for renewal of expiring funding increments); or (iii) funding allocated by an objective fair share formula. Funding allocated by fair share formula is distributed by a competitive process. (c) Competitive process. For budget authority that is distributed by competitive process, the Department solicits applications from PHAs by publishing one or more notices of funding availability (NOFAs) in the Federal Register. See 24 CFR part 12, subpart B; and 24 CFR 791.406. The NOFA explains how to apply for assistance, and specifies the criteria for awarding the assistance. The NOFA may identify any special program requirements for use of the funding. [60 FR 34695, July 3, 1995, as amended at 64 FR 26642, May 14, 1999; 80 FR 8246, Feb. 17, 2015] Sec. 982.102 Allocation of budget authority for renewal of expiring consolidated ACC funding increments. (a) Applicability. This section applies to the renewal of consolidated ACC funding increments in the program (as described in Sec. 982.151(a)(2)) that expire after December 31, 1999 (including any assistance that the PHA has attached to units for project-based assistance under 24 CFR part 983). This section implements section 8(dd) of the 1937 Act (42 U.S.C. 1437f(dd)). (b) Renewal Methodology. HUD will use the following methodology to determine the amount of budget authority to be allocated to a PHA for the renewal of expiring consolidated ACC funding increments in the program, subject to the availability of appropriated funds. If the amount of appropriated funds is not sufficient to provide the full amount of renewal funding for PHAs, as calculated in accordance with this section, HUD may establish a procedure to adjust allocations for the shortfall in funding. (c) Determining the amount of budget authority allocated for renewal of an expiring funding increment. Subject to availability of appropriated funds, as determined by HUD, the amount of budget authority allocated by HUD to a PHA for renewal of each program funding increment that expires during a calendar year will be equal to: (1) Number of renewal units. The number of renewal units assigned to the funding increment (as determined by HUD pursuant to paragraph (d) of this section); multiplied by (2) Adjusted annual per unit cost. The adjusted annual per unit cost (as determined by HUD pursuant to paragraph (e) of this section). (d) Determining the number of renewal units--(1) Number of renewal units. HUD will determine the total number of renewal units for a PHA's program as of the last day of the calendar year previous to the calendar year for which renewal funding is calculated. The number of renewal units for a PHA's program will be determined as follows: (i) Step 1: Establishing the initial baseline. HUD will establish a baseline number of units (``baseline'') for each PHA program. The initial baseline equals the number of units reserved by HUD for the PHA program as of December 31, 1999. (ii) Step 2: Establishing the adjusted baseline. The adjusted baseline equals the initial baseline with the following [[Page 517]] adjustments from the initial baseline as of the last day of the calendar year previous to the calendar year for which renewal funding is calculated: (A) Additional units. HUD will add to the initial baseline any additional units reserved for the PHA after December 31, 1999. (B) Units removed. HUD will subtract from the initial baseline any units de-reserved by HUD from the PHA program after December 31, 1999. (iii) Step 3: Determining the number of renewal units. The number of renewal units equals the adjusted baseline minus the number of units supported by contract funding increments that expire after the end of the calendar year. (2) Funding increments. HUD will assign all units reserved for a PHA program to one or more funding increment(s). (3) Correction of errors. HUD may adjust the number of renewal units to correct errors. (e) Determining the adjusted per unit cost. HUD will determine the PHA's adjusted per unit cost when HUD processes the allocation of renewal funding for an expiring contract funding increment. The adjusted per unit cost calculated will be determined as follows: (1) Step 1: Determining monthly program expenditure--(i) Use of most recent HUD-approved year end statement. HUD will determine the PHA's monthly per unit program expenditure for the HCV program (including project-based assistance under such program) under the consolidated ACC with HUD using data from the PHA's most recent HUD-approved year end statement. (ii) Monthly program expenditure. The monthly program expenditure equals: (A) Total program expenditure. The PHA's total program expenditure (the total of housing assistance payments and administrative costs) for the PHA fiscal year covered by the approved year end statement; divided by (B) Total unit months leased. The total of unit months leased for the PHA fiscal year covered by the approved year end statement. (2) Step 2: Determining annual per unit cost. HUD will determine the PHA's annual per unit cost. The annual per unit cost equals the monthly program expenditures (as determined under paragraph (e)(1)(ii) of this section) multiplied by 12. (3) Step 3: Determining adjusted annual per unit cost. (i) HUD will determine the PHA's adjusted annual per unit cost. The adjusted annual per unit cost equals the annual per unit cost (as determined under paragraph (e)(2) of this section) multiplied cumulatively by the applicable published Section 8 housing assistance payments program annual adjustment factors in effect during the period from the end of the PHA fiscal year covered by the approved year end statement to the time when HUD processes the allocation of renewal funding. (ii) Use of annual adjustment factor applicable to PHA jurisdiction. For this purpose, HUD will use the annual adjustment factor from the notice published annually in the Federal Register pursuant to part 888 that is applicable to the jurisdiction of the PHA. For a PHA whose jurisdiction spans multiple annual adjustment factor areas, HUD will use the highest applicable annual adjustment factor. (iii) Use of annual adjustment factors in effect subsequent to most recent Year End Statement. HUD will use the Annual Adjustment Factors in effect during the time period subsequent to the time covered by the most recent HUD approved Year End Statement and the time of the processing of the contract funding increment to be renewed. (iv) Special circumstances. At its discretion, HUD may modify the adjusted annual per unit cost based on receipt of a modification request from a PHA. The modification request must demonstrate that because of special circumstances application of the annual adjustment factor will not provide an accurate adjusted annual per unit cost. (4) Correction of errors. HUD may correct for errors in the adjusted per unit cost. (f) Consolidated ACC amendment to add renewal funding. HUD will reserve allocated renewal funding available to the PHA within a reasonable time prior to the expiration of the funding increment to be renewed and establish a new expiration date one-year from the date of such expiration. [[Page 518]] (g) Modification of allocation of budget authority--(1) HUD authority to conform PHA program costs with PHA program finances through Federal Register notice. In the event that a PHA's costs incurred threaten to exceed budget authority and allowable reserves, HUD reserves the right, through Federal Register notice, to bring PHA program costs and the number of families served, in line with PHA program finances. (2) HUD authority to limit increases of per unit cost through Federal Register notice. HUD may, by Federal Register notice, limit the amount or percentage of increases in the adjusted annual per unit cost to be used in calculating the allocation of budget authority. (3) HUD authority to limit decreases to per unit costs through Federal Register notice. HUD may, by Federal Register notice, limit the amount or percentage of decreases in the adjusted annual per unit cost to be used in calculating the allocation of budget authority. (4) Contents of Federal Register notice. If HUD publishes a Federal Register notice pursuant to paragraphs (g)(1), (g)(2) or (g)(3) of this section, it will describe the rationale, circumstances and procedures under which such modifications are implemented. Such circumstances and procedures shall, be consistent with the objective of enabling PHAs and HUD to meet program goals and requirements including but not limited to: (i) Deconcentration of poverty and expanding housing opportunities; (ii) Reasonable rent burden; (iii) Income targeting; (iv) Consistency with applicable consolidated plan(s); (v) Rent reasonableness; (vi) Program efficiency and economy; (vii) Service to additional households within budgetary limitations; and (viii) Service to the adjusted baseline number of families. (5) Public consultation before issuance of Federal Register notice. HUD will design and undertake informal public consultation prior to issuing Federal Register notices pursuant to paragraphs (g)(1) or (g)(2) of this section. (h) Ability to prorate and synchronize contract funding increments. Notwithstanding paragraphs (c) through (g) of this section, HUD may prorate the amount of budget authority allocated for the renewal of funding increments that expire on different dates throughout the calendar year. HUD may use such proration to synchronize the expiration dates of funding increments under the PHA's consolidated ACC. (i) Reallocation of budget authority. If a PHA has performance deficiencies, such as a failure to adequately lease units, HUD may reallocate some of its budget authority to other PHAs. If HUD determines to reallocate budget authority, it will reduce the number of units reserved by HUD for the PHA program of the PHA whose budget authority is being reallocated and increase the number of units reserved by HUD for the PHAs whose programs are receiving the benefit of the reallocation, so that such PHAs can issue vouchers. HUD will publish a notice in the Federal Register that will describe the circumstances and procedures for reallocating budget authority pursuant to this paragraph. [64 FR 56887, Oct. 21, 1999; 65 FR 16818, Mar. 30, 2000; 80 FR 8246, Feb. 17, 2015] Sec. 982.103 PHA application for funding. (a) A PHA must submit an application for program funding to HUD at the time and place and in the form required by HUD. (b) For competitive funding under a NOFA, the application must be submitted by a PHA in accordance with the requirements of the NOFA. (c) The application must include all information required by HUD. HUD requirements may be stated in the HUD-required form of application, the NOFA, or other HUD instructions. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 FR 23859, Apr. 30, 1998. Redesignated at 64 FR 56887, Oct. 21, 1999; 80 FR 8246, Feb. 17, 2015] Sec. 982.104 HUD review of application. (a) Competitive funding under NOFA. For competitive funding under a NOFA, HUD must evaluate an application on the basis of the selection criteria stated in the NOFA, and must [[Page 519]] consider the PHA's capacity and capability to administer the program. (b) Approval or disapproval of PHA funding application. (1) HUD must notify the PHA of its approval or disapproval of the PHA funding application. (2) When HUD approves an application, HUD must notify the PHA of the amount of approved funding. (3) For budget authority that is distributed to PHAs by competitive process, documentation of the basis for provision or denial of assistance is available for public inspection in accordance with 24 CFR 12.14(b). (c) PHA disqualification. HUD will not approve any PHA funding application (including an application for competitive funding under a NOFA) if HUD determines that the PHA is disbarred or otherwise disqualified from providing assistance under the program. [60 FR 34695, July 3, 1995, as amended at 64 FR 26642, May 14, 1999. Redesignated at 64 FR 56887, Oct. 21, 1999] Subpart D_Annual Contributions Contract and PHA Administration of Program Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.151 Annual contributions contract. (a) Nature of ACC. (1) An annual contributions contract (ACC) is a written contract between HUD and a PHA. Under the ACC, HUD agrees to make payments to the PHA, over a specified term, for housing assistance payments to owners and for the PHA administrative fee. The ACC specifies the maximum payment over the ACC term. The PHA agrees to administer the program in accordance with HUD regulations and requirements. (2) HUD's commitment to make payments for each funding increment in the PHA program constitutes a separate ACC. However, commitments for all the funding increments in a PHA program are listed in one consolidated contractual document called the consolidated annual contributions contract (consolidated ACC). A single consolidated ACC covers funding for the PHA's HCV program. (b) Budget authority. (1) Budget authority is the maximum amount that may be paid by HUD to a PHA over the ACC term of a funding increment. Before adding a funding increment to the consolidated ACC for a PHA program, HUD reserves budget authority from amounts authorized and appropriated by the Congress for the program. (2) For each funding increment, the ACC specifies the term over which HUD will make payments for the PHA program, and the amount of available budget authority for each funding increment. The amount to be paid to the PHA during each PHA fiscal year (including payment from the ACC reserve account described in Sec. 982.154) must be approved by HUD. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 64 FR 26642, May 14, 1999; 80 FR 8246, Feb. 17, 2015] Sec. 982.152 Administrative fee. (a) Purposes of administrative fee. (1) HUD may approve administrative fees to the PHA for any of the following purposes: (i) Ongoing administrative fee; (ii) Costs to help families who experience difficulty finding or renting appropriate housing under the program; (iii) The following types of extraordinary costs approved by HUD: (A) Costs to cover necessary additional expenses incurred by the PHA to provide reasonable accommodation for persons with disabilities in accordance with part 8 of this title (e.g., additional counselling costs), where the PHA is unable to cover such additional expenses from ongoing administrative fee income or the PHA administrative fee reserve; (B) Costs of audit by an independent public accountant; (C) Other extraordinary costs determined necessary by HUD Headquarters; (iv) Preliminary fee (in accordance with paragraph (c) of this section); (v) Costs to coordinate supportive services for families participating in the family self-sufficiency (FSS) program. [[Page 520]] (2) For each PHA fiscal year, administrative fees are specified in the PHA budget. The budget is submitted for HUD approval. Fees are paid in the amounts approved by HUD. Administrative fees may only be approved or paid from amounts appropriated by the Congress. (3) PHA administrative fees may only be used to cover costs incurred to perform PHA administrative responsibilities for the program in accordance with HUD regulations and requirements. (b) Ongoing administrative fee. (1) The PHA ongoing administrative fee is paid for each program unit under HAP contract on the first day of the month. The amount of the ongoing fee is determined by HUD in accordance with Section 8(q)(1) of the 1937 Act (42 U.S.C. 1437f(q)(1)). (2) If appropriations are available, HUD may pay a higher ongoing administrative fee for a small program or a program operating over a large geographic area. This higher fee level will not be approved unless the PHA demonstrates that it is efficiently administering its HCV program, and that the higher ongoing administrative fee is reasonable and necessary for administration of the program in accordance with HUD requirements. (3) HUD may pay a lower ongoing administrative fee for PHA-owned units. (c) Preliminary fee. (1) If the PHA was not administering a program of Section 8 tenant-based assistance prior to the merger date, HUD will pay a one-time fee in the amount of $500 in the first year the PHA administers a program. The fee is paid for each new unit added to the PHA program by the initial funding increment under the consolidated ACC. (2) The preliminary fee is used to cover expenses the PHA incurs to help families who inquire about or apply for the program, and to lease up new program units. (d) Reducing PHA administrative fee. HUD may reduce or offset any administrative fee to the PHA, in the amount determined by HUD, if the PHA fails to perform PHA administrative responsibilities correctly or adequately under the program (for example, PHA failure to enforce HQS requirements; or to reimburse a receiving PHA promptly under portability procedures). [60 FR 23695, July 3, 1995, as amended at 63 FR 23860, Apr. 30, 1998; 64 FR 26642, May 14, 1999; 80 FR 8246, Feb. 17, 2015] Sec. 982.153 PHA responsibilities. The PHA must comply with the consolidated ACC, the application, HUD regulations and other requirements, and the PHA administrative plan. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 13627, Mar. 27, 1996; 63 FR 23860, Apr. 30, 1998] Sec. 982.154 ACC reserve account. (a) HUD may establish and maintain an unfunded reserve account for the PHA program from available budget authority under the consolidated ACC. This reserve is called the ``ACC reserve account'' (formerly ``project reserve''). There is a single ACC reserve account for the PHA program. (b) The amount in the ACC reserve account is determined by HUD. HUD may approve payments for the PHA program, in accordance with the PHA's HUD-approved budget, from available amounts in the ACC reserve account. [64 FR 26642, May 14, 1999] Sec. 982.155 Administrative fee reserve. (a) The PHA must maintain an administrative fee reserve (formerly ``operating reserve'') for the program. There is a single administrative fee reserve for the PHA program. The PHA must credit to the administrative fee reserve the total of: (1) The amount by which program administrative fees paid by HUD for a PHA fiscal year exceed the PHA program administrative expenses for the fiscal year; plus (2) Interest earned on the administrative fee reserve. (b)(1) The PHA must use funds in the administrative fee reserve to pay program administrative expenses in excess of administrative fees paid by HUD for a PHA fiscal year. If funds in the administrative fee reserve are not needed to cover PHA administrative expenses (to the end of the last expiring funding increment under the consolidated [[Page 521]] ACC), the PHA may use these funds for other housing purposes permitted by State and local law. However, HUD may prohibit use of the funds for certain purposes. (2) The PHA Board of Commissioners or other authorized officials must establish the maximum amount that may be charged against the administrative fee reserve without specific approval. (3) If the PHA has not adequately administered any Section 8 program, HUD may prohibit use of funds in the administrative fee reserve, and may direct the PHA to use funds in the reserve to improve administration of the program or to reimburse ineligible expenses. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 64 FR 26642, May 14, 1999] Sec. 982.156 Depositary for program funds. (a) Unless otherwise required or permitted by HUD, all program receipts must be promptly deposited with a financial institution selected as depositary by the PHA in accordance with HUD requirements. (b) The PHA may only withdraw deposited program receipts for use in connection with the program in accordance with HUD requirements. (c) The PHA must enter into an agreement with the depositary in the form required by HUD. (d)(1) If required under a written freeze notice from HUD to the depositary: (i) The depositary may not permit any withdrawal by the PHA of funds held under the depositary agreement unless expressly authorized by written notice from HUD to the depositary; and (ii) The depositary must permit withdrawals of such funds by HUD. (2) HUD must send the PHA a copy of the freeze notice from HUD to the depositary. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995] Sec. 982.157 Budget and expenditure. (a) Budget submission. Each PHA fiscal year, the PHA must submit its proposed budget for the program to HUD for approval at such time and in such form as required by HUD. (b) PHA use of program receipts. (1) Program receipts must be used in accordance with the PHA's HUD-approved budget. Such program receipts may only be used for: (i) Housing assistance payments; and (ii) PHA administrative fees. (2) The PHA must maintain a system to ensure that the PHA will be able to make housing assistance payments for all participants within the amounts contracted under the consolidated ACC. (c) Intellectual property rights. Program receipts may not be used to indemnify contractors or subcontractors of the PHA against costs associated with any judgment of infringement of intellectual property rights. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 64 FR 26642, May 14, 1999] Sec. 982.158 Program accounts and records. (a) The PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. The PHA must comply with the financial reporting requirements in 24 CFR part 5, subpart H. (b) The PHA must furnish to HUD accounts and other records, reports, documents and information, as required by HUD. For provisions on electronic transmission of required family data, see 24 CFR part 908. (c) HUD and the Comptroller General of the United States shall have full and free access to all PHA offices and facilities, and to all accounts and other records of the PHA that are pertinent to administration of the program, including the right to examine or audit [[Page 522]] the records, and to make copies. The PHA must grant such access to computerized or other electronic records, and to any computers, equipment or facilities containing such records, and shall provide any information or assistance needed to access the records. (d) The PHA must prepare a unit inspection report. (e) During the term of each assisted lease, and for at least three years thereafter, the PHA must keep: (1) A copy of the executed lease; (2) The HAP contract; and (3) The application from the family. (f) The PHA must keep the following records for at least three years: (1) Records that provide income, racial, ethnic, gender, and disability status data on program applicants and participants; (2) An application from each ineligible family and notice that the applicant is not eligible; (3) HUD-required reports; (4) Unit inspection reports; (5) Lead-based paint records as required by part 35, subpart B of this title. (6) Accounts and other records supporting PHA budget and financial statements for the program; (7) Records to document the basis for PHA determination that rent to owner is a reasonable rent (initially and during the term of a HAP contract); and (8) Other records specified by HUD. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 27163, May 30, 1996; 63 FR 23860, Apr. 30, 1998; 63 FR 46593, Sept. 1, 1998; 64 FR 50229, Sept. 15, 1999; 80 FR 8246, Feb. 17, 2015] Sec. 982.159 Audit requirements. (a) The PHA must engage and pay an independent public accountant to conduct audits in accordance with HUD requirements. (b) The PHA is subject to the audit requirements in 2 CFR part 200, subpart F. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 80 FR 75943, Dec. 7, 2015] Sec. 982.160 HUD determination to administer a local program. If the Assistant Secretary for Public and Indian Housing determines that there is no PHA organized, or that there is no PHA able and willing to implement the provisions of this part for an area, HUD (or an entity acting on behalf of HUD) may enter into HAP contracts with owners and perform the functions otherwise assigned to PHAs under this part with respect to the area. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995] Sec. 982.161 Conflict of interest. (a) Neither the PHA nor any of its contractors or subcontractors may enter into any contract or arrangement in connection with the HCV program in which any of the following classes of persons has any interest, direct or indirect, during tenure or for one year thereafter: (1) Any present or former member or officer of the PHA (except a participant commissioner); (2) Any employee of the PHA, or any contractor, subcontractor or agent of the PHA, who formulates policy or who influences decisions with respect to the programs; (3) Any public official, member of a governing body, or State or local legislator, who exercises functions or responsibilities with respect to the programs; or (4) Any member of the Congress of the United States. (b) Any member of the classes described in paragraph (a) of this section must disclose their interest or prospective interest to the PHA and HUD. (c) The conflict of interest prohibition under this section may be waived by the HUD field office for good cause. [60 FR 34695, July 3, 1995, as amended at 80 FR 8246, Feb. 17, 2015] Sec. 982.162 Use of HUD-required contracts and other forms. (a) The PHA must use program contracts and other forms required by HUD headquarters, including: [[Page 523]] (1) The consolidated ACC between HUD and the PHA; (2) The HAP contract between the PHA and the owner; and (3) The tenancy addendum required by HUD (which is included both in the HAP contract and in the lease between the owner and the tenant). (b) Required program contracts and other forms must be word-for-word in the form required by HUD headquarters. Any additions to or modifications of required program contracts or other forms must be approved by HUD headquarters. [60 FR 34695, July 3, 1995, as amended at 64 FR 26642, May 14, 1999] Sec. 982.163 Fraud recoveries. Under 24 CFR part 792, the PHA may retain a portion of program fraud losses that the PHA recovers from a family or owner by litigation, court-order or a repayment agreement. [60 FR 34695, July 3, 1995; 60 FR 43840, Aug. 23, 1995] Subpart E_Admission to Tenant-Based Program Sec. 982.201 Eligibility and targeting. (a) When applicant is eligible: General. The PHA may admit only eligible families to the program. To be eligible, an applicant must be a ``family;'' must be income-eligible in accordance with paragraph (b) of this section and 24 CFR part 5, subpart F; and must be a citizen or a noncitizen who has eligible immigration status as determined in accordance with 24 CFR part 5, subpart E. If the applicant is a victim of domestic violence, dating violence, sexual assault, or stalking, 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) applies. (b) Income--(1) Income-eligibility. To be income-eligible, the applicant must be a family in any of the following categories: (i) A ``very low income'' family; (ii) A low-income family that is ``continuously assisted'' under the 1937 Housing Act; (iii) A low-income family that meets additional eligibility criteria specified in the PHA administrative plan. Such additional PHA criteria must be consistent with the PHA plan and with the consolidated plans for local governments in the PHA jurisdiction; (iv) A low-income family that qualifies for voucher assistance as a non-purchasing family residing in a HOPE 1 (HOPE for public housing homeownership) or HOPE 2 (HOPE for homeownership of multifamily units) project. (Section 8(o)(4)(D) of the 1937 Act (42 U.S.C. 1437f(o)(4)(D)); (v) A low-income or moderate-income family that is displaced as a result of the prepayment of the mortgage or voluntary termination of an insurance contract on eligible low-income housing as defined in Sec. 248.101 of this title; (vi) A low-income family that qualifies for voucher assistance as a non-purchasing family residing in a project subject to a resident homeownership program under Sec. 248.173 of this title. (2) Income-targeting. (i) Not less than 75 percent of the families admitted to a PHA's HCV program during the PHA fiscal year from the PHA waiting list shall be extremely low income families. Annual income of such families shall be verified within the period described in paragraph (e) of this section. (ii) A PHA may admit a lower percent of extremely low income families during a PHA fiscal year (than otherwise required under paragraph (b)(2)(i) of this section) if HUD approves the use of such lower percent by the PHA, in accordance with the PHA plan, based on HUD's determination that the following circumstances necessitate use of such lower percent by the PHA: (A) The PHA has opened its waiting list for a reasonable time for admission of extremely low income families residing in the same metropolitan statistical area (MSA) or non-metropolitan county, both inside and outside the PHA jurisdiction; (B) The PHA has provided full public notice of such opening to such families, and has conducted outreach and marketing to such families, including outreach and marketing to extremely low income families on the Section 8 and public housing waiting lists of other PHAs with jurisdiction in the same MSA or non-metropolitan county; [[Page 524]] (C) Notwithstanding such actions by the PHA (in accordance with paragraphs (b)(2)(ii)(A) and (B) of this section), there are not enough extremely low income families on the PHA's waiting list to fill available slots in the program during any fiscal year for which use of a lower percent is approved by HUD; and (D) Admission of the additional very low income families other than extremely low income families to the PHA's tenant-based voucher program will substantially address worst case housing needs as determined by HUD. (iii) If approved by HUD, the admission of a portion of very low income welfare-to-work (WTW) families that are not extremely low income families may be disregarded in determining compliance with the PHA's income-targeting obligations under paragraph (b)(2)(i) of this section. HUD will grant such approval only if and to the extent that the PHA has demonstrated to HUD's satisfaction that compliance with such targeting obligations with respect to such portion of WTW families would interfere with the objectives of the welfare-to-work voucher program. If HUD grants such approval, admission of that portion of WTW families is not counted in the base number of families admitted to a PHA's tenant-based voucher program during the fiscal year for purposes of income targeting. (iv) Admission of families as described in paragraphs (b)(1)(ii) or (b)(1)(v) of this section is not subject to targeting under paragraph (b)(2)(i) of this section. (v) If the jurisdictions of two or more PHAs that administer the HCV program cover an identical geographic area, such PHAs may elect to be treated as a single PHA for purposes of targeting under paragraph (b)(2)(i) of this section. In such a case, the PHAs shall cooperate to assure that aggregate admissions by such PHAs comply with the targeting requirement. If such PHAs do not have a single fiscal year, HUD will determine which PHA's fiscal year is used for this purpose. (vi) If a family initially leases a unit outside the PHA jurisdiction under portability procedures at admission to the HCV program, such admission shall be counted against the targeting obligation of the initial PHA (unless the receiving PHA absorbs the portable family into the receiving PHA's HCV program from the point of admission). (3) The annual income (gross income) of an applicant family is used both for determination of income-eligibility under paragraph (b)(1) of this section and for targeting under paragraph (b)(2)(i) of this section. In determining annual income of an applicant family that includes a person with disabilities, the determination must include the disallowance of increase in annual income as provided in 24 CFR 5.617, if applicable. (4) The applicable income limit for issuance of a voucher when a family is selected for the program is the highest income limit (for the family size) for areas in the PHA jurisdiction. The applicable income limit for admission to the program is the income limit for the area where the family is initially assisted in the program. At admission, the family may only use the voucher to rent a unit in an area where the family is income eligible. (c) Family composition. See definition of ``family'' in 24 CFR 5.403. (d) Continuously assisted. (1) An applicant is continuously assisted under the 1937 Housing Act if the family is already receiving assistance under any 1937 Housing Act program when the family is admitted to the voucher program. (2) The PHA must establish policies concerning whether and to what extent a brief interruption between assistance under one of these programs and admission to the voucher program will be considered to break continuity of assistance under the 1937 Housing Act. (e) When PHA verifies that applicant is eligible. The PHA must receive information verifying that an applicant is eligible within the period of 60 days before the PHA issues a voucher to the applicant. (f) Decision to deny assistance--(1) Notice to applicant. The PHA must give an applicant prompt written notice of a decision denying admission to the program (including a decision that the applicant is not eligible, or denying assistance for other reasons). The notice [[Page 525]] must give a brief statement of the reasons for the decision. The notice must also state that the applicant may request an informal review of the decision, and state how to arrange for the informal review. (2) For description of the grounds for denying assistance because of action or inaction by the applicant, see Sec. 982.552(b) and (c) (requirement and authority to deny admission) and Sec. 982.553(a) (crime by family members). [59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 61 FR 13627, Mar. 27, 1996; 64 FR 26642, May 14, 1999; 64 FR 49658, Sept. 14, 1999; 64 FR 56911, Oct. 21, 1999; 66 FR 6226, Jan. 19, 2001; 66 FR 8174, Jan. 30, 2001; 67 FR 6820, Feb. 13, 2002; 70 FR 77744, Dec. 30, 2005; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 77 FR 5676, Feb. 3, 2012; 80 FR 8246, Feb. 17, 2015; 81 FR 80816, Nov. 16, 2016] Sec. 982.202 How applicants are selected: General requirements. (a) Waiting list admissions and special admissions. The PHA may admit an applicant for participation in the program either: (1) As a special admission (see Sec. 982.203). (2) As a waiting list admission (see Sec. 982.204 through Sec. 982.210). (b) Prohibited admission criteria--(1) Where family lives. Admission to the program may not be based on where the family lives before admission to the program. However, the PHA may target assistance for families who live in public housing or other federally assisted housing, or may adopt a residency preference (see Sec. 982.207). (2) Where family will live. Admission to the program may not be based on where the family will live with assistance under the program. (3) Family characteristics. The PHA preference system may provide a preference for admission of families with certain characteristics from the PHA waiting list. However, admission to the program may not be based on: (i) Discrimination because members of the family are unwed parents, recipients of public assistance, or children born out of wedlock; (ii) Discrimination because a family includes children (familial status discrimination); (iii) Discrimination because of age, race, color, religion, sex, or national origin; (iv) Discrimination because of disability; or (v) Whether a family decides to participate in a family self- sufficiency program. (c) Applicant status. An applicant does not have any right or entitlement to be listed on the PHA waiting list, to any particular position on the waiting list, or to admission to the programs. The preceding sentence does not affect or prejudice any right, independent of this rule, to bring a judicial action challenging an PHA violation of a constitutional or statutory requirement. (d) Admission policy. The PHA must admit applicants for participation in accordance with HUD regulations and other requirements, including, but not limited to, 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), and with PHA policies stated in the PHA administrative plan and the PHA plan. The PHA admission policy must state the system of admission preferences that the PHA uses to select applicants from the waiting list, including any residency preference or other local preference. [59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 61 FR 9048, Mar. 6, 1996; 61 FR 27163, May 30, 1996; 64 FR 26643, May 14, 1999; 65 FR 16821, Mar. 30, 2000; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 81 FR 80816, Nov. 16, 2016] Sec. 982.203 Special admission (non-waiting list): Assistance targeted by HUD. (a) If HUD awards a PHA program funding that is targeted for families living in specified units: (1) The PHA must use the assistance for the families living in these units. (2) The PHA may admit a family that is not on the PHA waiting list, or without considering the family's waiting list position. The PHA must maintain records showing that the family was admitted with HUD-targeted assistance. (b) The following are examples of types of program funding that may be targeted for a family living in a specified unit: [[Page 526]] (1) A family displaced because of demolition or disposition of a public housing project; (2) A family residing in a multifamily rental housing project when HUD sells, forecloses or demolishes the project; (3) For housing covered by the Low Income Housing Preservation and Resident Homeownership Act of 1990 (41 U.S.C. 4101 et seq.): (i) A non-purchasing family residing in a project subject to a homeownership program (under 24 CFR 248.173); or (ii) A family displaced because of mortgage prepayment or voluntary termination of a mortgage insurance contract (as provided in 24 CFR 248.165); (4) A family residing in a project covered by a project-based Section 8 HAP contract at or near the end of the HAP contract term; and (5) A non-purchasing family residing in a HOPE 1 or HOPE 2 project. [59 FR 36682, July 18, 1994, as amended at 64 FR 26643, May 14, 1999] Sec. 982.204 Waiting list: Administration of waiting list. (a) Admission from waiting list. Except for special admissions, participants must be selected from the PHA waiting list. The PHA must select participants from the waiting list in accordance with admission policies in the PHA administrative plan. (b) Organization of waiting list. The PHA must maintain information that permits the PHA to select participants from the waiting list in accordance with the PHA admission policies. The waiting list must contain the following information for each applicant listed: (1) Applicant name; (2) Family unit size (number of bedrooms for which family qualifies under PHA occupancy standards); (3) Date and time of application; (4) Qualification for any local preference; (5) Racial or ethnic designation of the head of household. (c) Removing applicant names from the waiting list. (1) The PHA administrative plan must state PHA policy on when applicant names may be removed from the waiting list. The policy may provide that the PHA will remove names of applicants who do not respond to PHA requests for information or updates. (2) An PHA decision to withdraw from the waiting list the name of an applicant family that includes a person with disabilities is subject to reasonable accommodation in accordance with 24 CFR part 8. If the applicant did not respond to the PHA request for information or updates because of the family member's disability, the PHA must reinstate the applicant in the family's former position on the waiting list. (d) Family size. (1) The order of admission from the waiting list may not be based on family size, or on the family unit size for which the family qualifies under the PHA occupancy policy. (2) If the PHA does not have sufficient funds to subsidize the family unit size of the family at the top of the waiting list, the PHA may not skip the top family to admit an applicant with a smaller family unit size. Instead, the family at the top of the waiting list will be admitted when sufficient funds are available. (e) Funding for specified category of waiting list families. When HUD awards an PHA program funding for a specified category of families on the waiting list, the PHA must select applicant families in the specified category. (f) Number of waiting lists. A PHA must use a single waiting list for admission to its Section 8 tenant-based assistance program. However, the PHA may use a separate single waiting list for such admissions for a county or municipality. (Approved by the Office of Management and Budget under OMB control number 2577-0169) [59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 63 FR 23860, Apr. 30, 1998; 64 FR 26643, May 14, 1999; 65 FR 16821, Mar. 30, 2000] Sec. 982.205 Waiting list: Different programs. (a) Merger and cross-listing--(1) Merged waiting list. A PHA may merge the waiting list for tenant-based assistance with the PHA waiting list for admission to another assisted housing program, including a federal or local program. In admission from the merged waiting list, admission for each federal [[Page 527]] program is subject to federal regulations and requirements for the particular program. (2) Non-merged waiting list: Cross-listing. If the PHA decides not to merge the waiting list for tenant-based assistance with the waiting list for the PHA's public housing program, project-based voucher program or moderate rehabilitation program: (i) If the PHA's waiting list for tenant-based assistance is open when an applicant is placed on the waiting list for the PHA's public housing program, project-based voucher program or moderate rehabilitation program, the PHA must offer to place the applicant on its waiting list for tenant-based assistance. (ii) If the PHA's waiting list for its public housing program, project-based voucher program or moderate rehabilitation program is open when an applicant is placed on the waiting list for its tenant-based program, and if the other program includes units suitable for the applicant, the PHA must offer to place the applicant on its waiting list for the other program. (b) Other housing assistance: Effect of application for, receipt or refusal. (1) For purposes of this section, ``other housing subsidy'' means a housing subsidy other than assistance under the voucher program. Housing subsidy includes subsidy assistance under a federal housing program (including public housing), a State housing program, or a local housing program. (2) The PHA may not take any of the following actions because an applicant has applied for, received, or refused other housing assistance: (i) Refuse to list the applicant on the PHA waiting list for tenant- based assistance; (ii) Deny any admission preference for which the applicant is currently qualified; (iii) Change the applicant's place on the waiting list based on preference, date and time of application, or other factors affecting selection under the PHA selection policy; or (iv) Remove the applicant from the waiting list. [59 FR 36682, July 18, 1994, as amended at 61 FR 27163, May 30, 1996; 63 FR 23860, Apr. 30, 1998; 64 FR 26643, May 14, 1999; 65 FR 16821, Mar. 30, 2000; 80 FR 8246, Feb. 17, 2015] Sec. 982.206 Waiting list: Opening and closing; public notice. (a) Public notice. (1) When the PHA opens a waiting list, the PHA must give public notice that families may apply for tenant-based assistance. The public notice must state where and when to apply. (2) The PHA must give the public notice by publication in a local newspaper of general circulation, and also by minority media and other suitable means. The notice must comply with HUD fair housing requirements. (3) The public notice must state any limitations on who may apply for available slots in the program. (b) Criteria defining what families may apply. (1) The PHA may adopt criteria defining what families may apply for assistance under a public notice. (2) If the waiting list is open, the PHA must accept applications from families for whom the list is open unless there is good cause for not accepting the application (such as denial of assistance because of action or inaction by members of the family) for the grounds stated in Sec. Sec. 982.552 and 982.553. (c) Closing waiting list. If the PHA determines that the existing waiting list contains an adequate pool for use of available program funding, the PHA may stop accepting new applications, or may accept only applications meeting criteria adopted by the PHA. (Approved by the Office of Management and Budget under control number 2577-0169) [59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 60 FR 45661, Sept. 1, 1995; 63 FR 23860, Apr. 30, 1998; 64 FR 26643, May 14, 1999] Sec. 982.207 Waiting list: Local preferences in admission to program. (a) Establishment of PHA local preferences. (1) The PHA may establish a system of local preferences for selection of families admitted to the program. PHA selection preferences must be described in the PHA administrative plan. [[Page 528]] (2) The PHA system of local preferences must be based on local housing needs and priorities, as determined by the PHA. In determining such needs and priorities, the PHA shall use generally accepted data sources. The PHA shall consider public comment on the proposed public housing agency plan (as received pursuant to Sec. 903.17 of this chapter) and on the consolidated plan for the relevant jurisdiction (as received pursuant to part 91 of this title). (3) The PHA may limit the number of applicants that may qualify for any local preference. (4) The PHA shall not deny a local preference, nor otherwise exclude or penalize a family in admission to the program, solely because the family resides in a public housing project. The PHA may establish a preference for families residing in public housing who are victims of a crime of violence (as defined in 18 U.S.C. 16). (b) Particular local preferences--(1) Residency requirements or preferences. (i) Residency requirements are prohibited. Although a PHA is not prohibited from adopting a residency preference, the PHA may only adopt or implement residency preferences in accordance with non- discrimination and equal opportunity requirements listed at Sec. 5.105(a) of this title. (ii) A residency preference is a preference for admission of persons who reside in a specified geographic area (``residency preference area''). A county or municipality may be used as a residency preference area. An area smaller than a county or municipality may not be used as a residency preference area. (iii) Any PHA residency preferences must be included in the statement of PHA policies that govern eligibility, selection and admission to the program, which is included in the PHA annual plan (or supporting documents) pursuant to part 903 of this title. Such policies must specify that use of a residency preference will not have the purpose or effect of delaying or otherwise denying admission to the program based on the race, color, ethnic origin, gender, religion, disability, or age of any member of an applicant family. (iv) A residency preference must not be based on how long an applicant has resided or worked in a residency preference area. (v) Applicants who are working or who have been notified that they are hired to work in a residency preference area must be treated as residents of the residency preference area. The PHA may treat graduates of, or active participants in, education and training programs in a residency preference area as residents of the residency preference area if the education or training program is designed to prepare individuals for the job market. (2) Preference for working families. The PHA may adopt a preference for admission of working families (families where the head, spouse or sole member is employed). However, an applicant shall be given the benefit of the working family preference if the head and spouse, or sole member is age 62 or older, or is a person with disabilities. (3) Preference for person with disabilities. The PHA may adopt a preference for admission of families that include a person with disabilities. However, the PHA may not adopt a preference for admission of persons with a specific disability. (4) Preference for victims of domestic violence, dating violence, sexual assault, or stalking. The PHA should consider whether to adopt a local preference for admission of families that include victims of domestic violence, dating violence, sexual assault, or stalking. (5) Preference for single persons who are elderly, displaced, homeless, or persons with disabilities. The PHA may adopt a preference for admission of single persons who are age 62 or older, displaced, homeless, or persons with disabilities over other single persons. (c) Selection among families with preference. The PHA system of preferences may use either of the following to select among applicants on the waiting list with the same preference status: (1) Date and time of application; or (2) A drawing or other random choice technique. (d) Preference for higher-income families. The PHA must not select families for admission to the program in an order different from the order on the waiting list for the purpose of selecting higher income families for admission to the program. [[Page 529]] (e) Verification of selection method. The method for selecting applicants from a preference category must leave a clear audit trail that can be used to verify that each applicant has been selected in accordance with the method specified in the administrative plan. [64 FR 26643, May 14, 1999, as amended at 64 FR 56912, Oct. 21, 1999; 65 FR 16821, Mar. 30, 2000; 81 FR 80816, Nov. 16, 2016] Subpart F [Reserved] Subpart G_Leasing a Unit Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.301 Information when family is selected. (a) PHA briefing of family. (1) When the PHA selects a family to participate in a tenant-based program, the PHA must give the family an oral briefing. The briefing must include information on the following subjects: (i) A description of how the program works; (ii) Family and owner responsibilities; and (iii) Where the family may lease a unit, including renting a dwelling unit inside or outside the PHA jurisdiction, and any information on selecting a unit that HUD provides. (2) An explanation of how portability works. The PHA may not discourage the family from choosing to live anywhere in the PHA jurisdiction, or outside the PHA jurisdiction under portability procedures, unless otherwise expressly authorized by statute, regulation, PIH Notice, or court order. The family must be informed of how portability may affect the family's assistance through screening, subsidy standards, payment standards, and any other elements of the portability process which may affect the family's assistance. (3) The briefing must also explain the advantages of areas that do not have a high concentration of low-income families. (4) In briefing a family that includes any disabled person, the PHA must take appropriate steps to ensure effective communication in accordance with 24 CFR 8.6. (5) In briefing a welfare-to-work family, the PHA must include specification of any local obligations of a welfare-to-work family and an explanation that failure to meet these obligations is grounds for PHA denial of admission or termination of assistance. (b) Information packet. When a family is selected to participate in the program, the PHA must give the family a packet that includes information on the following subjects: (1) The term of the voucher, voucher suspensions, and PHA policy on any extensions of the term. If the PHA allows extensions, the packet must explain how the family can request an extension; (2) How the PHA determines the amount of the housing assistance payment for a family, including: (i) How the PHA determines the payment standard for a family; and (ii) How the PHA determines the total tenant payment for a family. (3) How the PHA determines the maximum rent for an assisted unit; (4) Where the family may lease a unit and an explanation of how portability works, including information on how portability may affect the family's assistance through screening, subsidy standards, payment standards, and any other elements of the portability process which may affect the family's assistance. (5) The HUD-required ``tenancy addendum'' that must be included in the lease; (6) The form that the family uses to request PHA approval of the assisted tenancy, and an explanation of how to request such approval; (7) A statement of the PHA policy on providing information about a family to prospective owners; (8) PHA subsidy standards, including when the PHA will consider granting exceptions to the standards; (9) Materials (e.g., brochures) on how to select a unit and any additional information on selecting a unit that HUD provides. (10) Information on federal, State and local equal opportunity laws, and a copy of the housing discrimination complaint form; [[Page 530]] (11) A list of landlords known to the PHA who may be willing to lease a unit to the family or other resources (e.g., newspapers, organizations, online search tools) known to the PHA that may assist the family in locating a unit. PHAs must ensure that the list of landlords or other resources covers areas outside of poverty or minority concentration. (12) Notice that if the family includes a disabled person, the family may request a current listing of accessible units known to the PHA that may be available; (13) Family obligations under the program; (14) Family obligations under the program, including any obligations of a welfare-to-work family. (15) The advantages of areas that do not have a high concentration of low-income families. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 27163, May 30, 1996; 64 FR 26644, May 14, 1999; 64 FR 50229, Sept. 15, 1999; 64 FR 56912, Oct. 21, 1999; 80 FR 50572, Aug. 20, 2015; 80 FR 52619, Sept. 1, 2015] Sec. 982.302 Issuance of voucher; Requesting PHA approval of assisted tenancy. (a) When a family is selected, or when a participant family wants to move to another unit, the PHA issues a voucher to the family. The family may search for a unit. (b) If the family finds a unit, and the owner is willing to lease the unit under the program, the family may request PHA approval of the tenancy. The PHA has the discretion whether to permit the family to submit more than one request at a time. (c) The family must submit to the PHA a request for approval of the tenancy and a copy of the lease, including the HUD-prescribed tenancy addendum. The request must be submitted during the term of the voucher. (d) The PHA specifies the procedure for requesting approval of the tenancy. The family must submit the request for approval of the tenancy in the form and manner required by the PHA. [64 FR 26644, May 14, 1999] Sec. 982.303 Term of voucher. (a) Initial term. The initial term of a voucher must be at least 60 calendar days. The initial term must be stated on the voucher. (b) Extensions of term. (1) At its discretion, the PHA may grant a family one or more extensions of the initial voucher term in accordance with PHA policy as described in the PHA administrative plan. Any extension of the term is granted by PHA notice to the family. (2) If the family needs and requests an extension of the initial voucher term as a reasonable accommodation, in accordance with part 8 of this title, to make the program accessible to a family member who is a person with disabilities, the PHA must extend the voucher term up to the term reasonably required for that purpose. (c) Suspension of term. The PHA must provide for suspension of the initial or any extended term of the voucher from the date that the family submits a request for PHA approval of the tenancy until the date the PHA notifies the family in writing whether the request has been approved or denied. (d) Progress report by family to the PHA. During the initial or any extended term of a voucher, the PHA may require the family to report progress in leasing a unit. Such reports may be required at such intervals or times as determined by the PHA. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 FR 23860, Apr. 30, 1998; 64 FR 26644, May 14, 1999; 64 FR 56913, Oct. 21, 1999; 80 FR 50573, Aug. 20, 2015] Sec. 982.304 Illegal discrimination: PHA assistance to family. A family may claim that illegal discrimination because of race, color, religion, sex, national origin, age, familial status or disability prevents the family from finding or leasing a suitable unit with assistance under the program. [[Page 531]] The PHA must give the family information on how to fill out and file a housing discrimination complaint. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995] Sec. 982.305 PHA approval of assisted tenancy. (a) Program requirements. The PHA may not give approval for the family of the assisted tenancy, or execute a HAP contract, until the PHA has determined that all the following meet program requirements: (1) The unit is eligible; (2) The unit has been inspected by the PHA and passes HQS; (3) The lease includes the tenancy addendum; (4) The rent to owner is reasonable; and (5) At the time a family initially receives tenant-based assistance for occupancy of a dwelling unit, and where the gross rent of the unit exceeds the applicable payment standard for the family, the family share does not exceed 40 percent of the family's monthly adjusted income. (b) Actions before lease term. (1) All of the following must always be completed before the beginning of the initial term of the lease for a unit: (i) The PHA has inspected the unit and has determined that the unit satisfies the HQS; (ii) The landlord and the tenant have executed the lease (including the HUD-prescribed tenancy addendum, and the lead-based paint disclosure information as required in Sec. 35.92(b) of this title); and (iii) The PHA has approved leasing of the unit in accordance with program requirements. (2)(i) The PHA must inspect the unit, determine whether the unit satisfies the HQS, and notify the family and owner of the determination: (A) In the case of a PHA with up to 1250 budgeted units in its tenant-based program, within fifteen days after the family and the owner submit a request for approval of the tenancy. (B) In the case of a PHA with more than 1250 budgeted units in its tenant-based program, within a reasonable time after the family submits a request for approval of the tenancy. To the extent practicable, such inspection and determination must be completed within fifteen days after the family and the owner submit a request for approval of the tenancy. (ii) The fifteen day clock (under paragraph (b)(2)(i)(A) or paragraph (b)(2)(i)(B) of this section) is suspended during any period when the unit is not available for inspection. (3) In the case of a unit subject to a lease-purchase agreement, the PHA must provide written notice to the family of the environmental requirements that must be met before commencing homeownership assistance for the family (see Sec. 982.626(c)). (c) When HAP contract is executed. (1) The PHA must use best efforts to execute the HAP contract before the beginning of the lease term. The HAP contract must be executed no later than 60 calendar days from the beginning of the lease term. (2) The PHA may not pay any housing assistance payment to the owner until the HAP contract has been executed. (3) If the HAP contract is executed during the period of 60 calendar days from the beginning of the lease term, the PHA will pay housing assistance payments after execution of the HAP contract (in accordance with the terms of the HAP contract), to cover the portion of the lease term before execution of the HAP contract (a maximum of 60 days). (4) Any HAP contract executed after the 60 day period is void, and the PHA may not pay any housing assistance payment to the owner. (d) Notice to family and owner. After receiving the family's request for approval of the assisted tenancy, the PHA must promptly notify the family and owner whether the assisted tenancy is approved. (e) Procedure after PHA approval. If the PHA has given approval for the family of the assisted tenancy, the [[Page 532]] owner and the PHA execute the HAP contract. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 64 FR 26644, May 14, 1999; 64 FR 56913, Oct. 21, 1999; 64 FR 59622, Nov. 3, 1999; 65 FR 16818, Mar. 30, 2000; 65 FR 55161, Sept. 12, 2000; 69 FR 34276, June 21, 2004; 80 FR 8246, Feb. 17, 2015] Sec. 982.306 PHA disapproval of owner. (a) The PHA must not approve an assisted tenancy if the PHA has been informed (by HUD or otherwise) that the owner is debarred, suspended, or subject to a limited denial of participation under 2 CFR part 2424. (b) When directed by HUD, the PHA must not approve an assisted tenancy if: (1) The federal government has instituted an administrative or judicial action against the owner for violation of the Fair Housing Act or other federal equal opportunity requirements, and such action is pending; or (2) A court or administrative agency has determined that the owner violated the Fair Housing Act or other federal equal opportunity requirements. (c) In its administrative discretion, the PHA may deny approval of an assisted tenancy for any of the following reasons: (1) The owner has violated obligations under a HAP contract under Section 8 of the 1937 Act (42 U.S.C. 1437f); (2) The owner has committed fraud, bribery or any other corrupt or criminal act in connection with any federal housing program; (3) The owner has engaged in any drug-related criminal activity or any violent criminal activity; (4) The owner has a history or practice of non-compliance with the HQS for units leased under the tenant-based programs, or with applicable housing standards for units leased with project-based Section 8 assistance or leased under any other federal housing program; (5) The owner has a history or practice of failing to terminate tenancy of tenants of units assisted under Section 8 or any other federally assisted housing program for activity engaged in by the tenant, any member of the household, a guest or another person under the control of any member of the household that: (i) Threatens the right to peaceful enjoyment of the premises by other residents; (ii) Threatens the health or safety of other residents, of employees of the PHA, or of owner employees or other persons engaged in management of the housing; (iii) Threatens the health or safety of, or the right to peaceful enjoyment of their residences, by persons residing in the immediate vicinity of the premises; or (iv) Is drug-related criminal activity or violent criminal activity; or (6) The owner has a history or practice of renting units that fail to meet State or local housing codes; or (7) The owner has not paid State or local real estate taxes, fines or assessments. (d) The PHA must not approve a unit if the owner is the parent, child, grandparent, grandchild, sister, or brother of any member of the family, unless the PHA determines that approving the unit would provide reasonable accommodation for a family member who is a person with disabilities. This restriction against PHA approval of a unit only applies at the time a family initially receives tenant-based assistance for occupancy of a particular unit, but does not apply to PHA approval of a new tenancy with continued tenant-based assistance in the same unit. (e) Nothing in this rule is intended to give any owner any right to participate in the program. (f) For purposes of this section, ``owner'' includes a principal or other interested party. [60 FR 34695, July 3, 1995, as amended at 63 FR 27437, May 18, 1998; 64 FR 26644, May 14, 1999; 64 FR 56913, Oct. 21, 1999; 65 FR 16821, Mar. 30, 2000; 72 FR 73496, Dec. 27, 2007] Sec. 982.307 Tenant screening. (a) PHA option and owner responsibility. (1) The PHA has no liability or responsibility to the owner or other persons for the family's behavior or suitability for tenancy. However, the PHA may opt to screen applicants for family behavior or suitability for tenancy. The PHA must conduct any such [[Page 533]] screening of applicants in accordance with policies stated in the PHA administrative plan. (2) The owner is responsible for screening and selection of the family to occupy the owner's unit. At or before PHA approval of the tenancy, the PHA must inform the owner that screening and selection for tenancy is the responsibility of the owner. (3) The owner is responsible for screening of families on the basis of their tenancy histories. An owner may consider a family's background with respect to such factors as: (i) Payment of rent and utility bills; (ii) Caring for a unit and premises; (iii) Respecting the rights of other residents to the peaceful enjoyment of their housing; (iv) Drug-related criminal activity or other criminal activity that is a threat to the health, safety or property of others; and (v) Compliance with other essential conditions of tenancy. (b) PHA information about tenant. (1) The PHA must give the owner: (i) The family's current and prior address (as shown in the PHA records); and (ii) The name and address (if known to the PHA) of the landlord at the family's current and prior address. (2) When a family wants to lease a dwelling unit, the PHA may offer the owner other information in the PHA possession, about the family, including information about the tenancy history of family members, or about drug-trafficking by family members. (3) The PHA must give the family a statement of the PHA policy on providing information to owners. The statement must be included in the information packet that is given to a family selected to participate in the program. The PHA policy must provide that the PHA will give the same types of information to all families and to all owners. (4) In cases involving a victim of domestic violence, dating violence, sexual assault, or stalking, 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) applies. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 27163, May 30, 1996; 64 FR 26645, May 14, 1999; 64 FR 49658, Sept. 14, 1999; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 81 FR 80816, Nov. 16, 2016] Sec. 982.308 Lease and tenancy. (a) Tenant's legal capacity. The tenant must have legal capacity to enter a lease under State and local law. ``Legal capacity'' means that the tenant is bound by the terms of the lease and may enforce the terms of the lease against the owner. (b) Form of lease. (1) The tenant and the owner must enter a written lease for the unit. The lease must be executed by the owner and the tenant. (2) If the owner uses a standard lease form for rental to unassisted tenants in the locality or the premises, the lease must be in such standard form (plus the HUD-prescribed tenancy addendum). If the owner does not use a standard lease form for rental to unassisted tenants, the owner may use another form of lease, such as a PHA model lease (including the HUD-prescribed tenancy addendum). The HAP contract prescribed by HUD will contain the owner's certification that if the owner uses a standard lease form for rental to unassisted tenants, the lease is in such standard form. (c) State and local law. The PHA may review the lease to determine if the lease complies with State and local law. The PHA may decline to approve the tenancy if the PHA determines that the lease does not comply with State or local law. (d) Required information. The lease must specify all of the following: (1) The names of the owner and the tenant; (2) The unit rented (address, apartment number, and any other information needed to identify the contract unit); (3) The term of the lease (initial term and any provisions for renewal); (4) The amount of the monthly rent to owner; and (5) A specification of what utilities and appliances are to be supplied by [[Page 534]] the owner, and what utilities and appliances are to be supplied by the family. (e) Reasonable rent. The rent to owner must be reasonable (see Sec. 982.507). (f) Tenancy addendum. (1) The HAP contract form required by HUD shall include an addendum (the ``tenancy addendum''), that sets forth: (i) The tenancy requirements for the program (in accordance with this section and Sec. Sec. 982.309 and 982.310); and (ii) The composition of the household as approved by the PHA (family members and any PHA-approved live-in aide). (2) All provisions in the HUD-required tenancy addendum must be added word-for-word to the owner's standard form lease that is used by the owner for unassisted tenants. The tenant shall have the right to enforce the tenancy addendum against the owner, and the terms of the tenancy addendum shall prevail over any other provisions of the lease. (g) Changes in lease or rent. (1) If the tenant and the owner agree to any changes in the lease, such changes must be in writing, and the owner must immediately give the PHA a copy of such changes. The lease, including any changes, must be in accordance with the requirements of this section. (2) In the following cases, tenant-based assistance shall not be continued unless the PHA has approved a new tenancy in accordance with program requirements and has executed a new HAP contract with the owner: (i) If there are any changes in lease requirements governing tenant or owner responsibilities for utilities or appliances; (ii) If there are any changes in lease provisions governing the term of the lease; (iii) If the family moves to a new unit, even if the unit is in the same building or complex. (3) PHA approval of the tenancy, and execution of a new HAP contract, are not required for changes in the lease other than as specified in paragraph (g)(2) of this section. (4) The owner must notify the PHA of any changes in the amount of the rent to owner at least sixty days before any such changes go into effect, and any such changes shall be subject to rent reasonableness requirements (see Sec. 982.503). [64 FR 26645, May 14, 1999, as amended at 64 FR 56913, Oct. 21, 1999] Sec. 982.309 Term of assisted tenancy. (a) Initial term of lease. (1) Except as provided in paragraph (a)(2) of this section, the initial lease term must be for at least one year. (2) The PHA may approve a shorter initial lease term if the PHA determines that: (i) Such shorter term would improve housing opportunities for the tenant; and (ii) Such shorter term is the prevailing local market practice. (3) During the initial term of the lease, the owner may not raise the rent to owner. (4) The PHA may execute the HAP contract even if there is less than one year remaining from the beginning of the initial lease term to the end of the last expiring funding increment under the consolidated ACC. (b) Term of HAP contract. (1) The term of the HAP contract begins on the first day of the lease term and ends on the last day of the lease term. (2) The HAP contract terminates if any of the following occurs: (i) The lease is terminated by the owner or the tenant; (ii) The PHA terminates the HAP contract; or (iii) The PHA terminates assistance for the family. (c) Family responsibility. (1) If the family terminates the lease on notice to the owner, the family must give the PHA a copy of the notice of termination at the same time. Failure to do this is a breach of family obligations under the program. (2) The family must notify the PHA and the owner before the family moves out of the unit. Failure to do this is a breach of family obligations under the program. [64 FR 26645, May 14, 1999] Sec. 982.310 Owner termination of tenancy. (a) Grounds. During the term of the lease, the owner may not terminate the [[Page 535]] tenancy except on the following grounds: (1) Serious violation (including but not limited to failure to pay rent or other amounts due under the lease) or repeated violation of the terms and conditions of the lease; (2) Violation of federal, State, or local law that imposes obligations on the tenant in connection with the occupancy or use of the premises; or (3) Other good cause. (b) Nonpayment by PHA: Not grounds for termination of tenancy. (1) The family is not responsible for payment of the portion of the rent to owner covered by the housing assistance payment under the HAP contract between the owner and the PHA. (2) The PHA failure to pay the housing assistance payment to the owner is not a violation of the lease between the tenant and the owner. During the term of the lease the owner may not terminate the tenancy of the family for nonpayment of the PHA housing assistance payment. (c) Criminal activity--(1) Evicting drug criminals due to drug crime on or near the premises. The lease must provide that drug-related criminal activity engaged in, on or near the premises by any tenant, household member, or guest, or such activity engaged in on the premises by any other person under the tenant's control, is grounds for the owner to terminate tenancy. In addition, the lease must provide that the owner may evict a family when the owner determines that a household member is illegally using a drug or when the owner determines that a pattern of illegal use of a drug interferes with the health, safety, or right to peaceful enjoyment of the premises by other residents. (2) Evicting other criminals. (i) Threat to other residents. The lease must provide that the owner may terminate tenancy for any of the following types of criminal activity by a covered person: (A) Any criminal activity that threatens the health, safety, or right to peaceful enjoyment of the premises by other residents (including property management staff residing on the premises); (B) Any criminal activity that threatens the health, safety, or right to peaceful enjoyment of their residences by persons residing in the immediate vicinity of the premises; or (C) Any violent criminal activity on or near the premises by a tenant, household member, or guest, or any such activity on the premises by any other person under the tenant's control. (ii) Fugitive felon or parole violator. The lease must provide that the owner may terminate the tenancy if a tenant is: (A) Fleeing to avoid prosecution, or custody or confinement after conviction, for a crime, or attempt to commit a crime, that is a felony under the laws of the place from which the individual flees, or that, in the case of the State of New Jersey, is a high misdemeanor; or (B) Violating a condition of probation or parole imposed under Federal or State law. (3) Evidence of criminal activity. The owner may terminate tenancy and evict by judicial action a family for criminal activity by a covered person in accordance with this section if the owner determines that the covered person has engaged in the criminal activity, regardless of whether the covered person has been arrested or convicted for such activity and without satisfying the standard of proof used for a criminal conviction. (See part 5, subpart J, of this title for provisions concerning access to criminal records.) (d) Other good cause. (1) ``Other good cause'' for termination of tenancy by the owner may include, but is not limited to, any of the following examples: (i) Failure by the family to accept the offer of a new lease or revision; (ii) A family history of disturbance of neighbors or destruction of property, or of living or housekeeping habits resulting in damage to the unit or premises; (iii) The owner's desire to use the unit for personal or family use, or for a purpose other than as a residential rental unit; or (iv) A business or economic reason for termination of the tenancy (such as sale of the property, renovation of the unit, or desire to lease the unit at a higher rental). [[Page 536]] (2) During the initial lease term, the owner may not terminate the tenancy for ``other good cause'', unless the owner is terminating the tenancy because of something the family did or failed to do. For example, during this period, the owner may not terminate the tenancy for ``other good cause'' based on any of the following grounds: failure by the family to accept the offer of a new lease or revision; the owner's desire to use the unit for personal or family use, or for a purpose other than as a residential rental unit; or a business or economic reason for termination of the tenancy (see paragraph (d)(1)(iv) of this section). (e) Owner notice--(1) Notice of grounds. (i) The owner must give the tenant a written notice that specifies the grounds for termination of tenancy during the term of the lease. The tenancy does not terminate before the owner has given this notice, and the notice must be given at or before commencement of the eviction action. (ii) The notice of grounds may be included in, or may be combined with, any owner eviction notice to the tenant. (2) Eviction notice. (i) Owner eviction notice means a notice to vacate, or a complaint or other initial pleading used under State or local law to commence an eviction action. (ii) The owner must give the PHA a copy of any owner eviction notice to the tenant. (f) Eviction by court action. The owner may only evict the tenant from the unit by instituting a court action. (g) Regulations not applicable. 24 CFR part 247 (concerning evictions from certain subsidized and HUD-owned projects) does not apply to a tenancy assisted under this part 982. (h) Termination of tenancy decisions--(1) General. If the law and regulation permit the owner to take an action but do not require action to be taken, the owner may take or not take the action in accordance with the owner's standards for eviction. The owner may consider all of the circumstances relevant to a particular eviction case, such as: (i) The seriousness of the offending action; (ii) The effect on the community of denial or termination or the failure of the owner to take such action; (iii) The extent of participation by the leaseholder in the offending action; (iv) The effect of denial of admission or termination of tenancy on household members not involved in the offending activity; (v) The demand for assisted housing by families who will adhere to lease responsibilities; (vi) The extent to which the leaseholder has shown personal responsibility and taken all reasonable steps to prevent or mitigate the offending action; (vii) The effect of the owner's action on the integrity of the program. (2) Exclusion of culpable household member. The owner may require a tenant to exclude a household member in order to continue to reside in the assisted unit, where that household member has participated in or been culpable for action or failure to act that warrants termination. (3) Consideration of rehabilitation. In determining whether to terminate tenancy for illegal use of drugs or alcohol abuse by a household member who is no longer engaged in such behavior, the owner may consider whether such household member is participating in or has successfully completed a supervised drug or alcohol rehabilitation program, or has otherwise been rehabilitated successfully (42 U.S.C. 13661). For this purpose, the owner may require the tenant to submit evidence of the household member's current participation in, or successful completion of, a supervised drug or alcohol rehabilitation program or evidence of otherwise having been rehabilitated successfully. (4) Nondiscrimination limitation and protection for victims of domestic violence, dating violence, sexual assault, or stalking. The owner's termination of tenancy actions must be consistent with the fair housing and equal opportunity provisions of 24 CFR 5.105, and with the provisions for protection of victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L (Protection for Victims of [[Page 537]] Domestic Violence, Dating Violence, Sexual Assault, or Stalking). (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 64 FR 26645, May 14, 1999; 64 FR 56913, Oct. 21, 1999; 66 FR 28804, May 24, 2001; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 81 FR 80816, Nov. 16, 2016] Sec. 982.311 When assistance is paid. (a) Payments under HAP contract. Housing assistance payments are paid to the owner in accordance with the terms of the HAP contract. Housing assistance payments may only be paid to the owner during the lease term, and while the family is residing in the unit. (b) Termination of payment: When owner terminates the lease. Housing assistance payments terminate when the lease is terminated by the owner in accordance with the lease. However, if the owner has commenced the process to evict the tenant, and if the family continues to reside in the unit, the PHA must continue to make housing assistance payments to the owner in accordance with the HAP contract until the owner has obtained a court judgment or other process allowing the owner to evict the tenant. The PHA may continue such payments until the family moves from or is evicted from the unit. (c) Termination of payment: Other reasons for termination. Housing assistance payments terminate if: (1) The lease terminates; (2) The HAP contract terminates; or (3) The PHA terminates assistance for the family. (d) Family move-out. (1) If the family moves out of the unit, the PHA may not make any housing assistance payment to the owner for any month after the month when the family moves out. The owner may keep the housing assistance payment for the month when the family moves out of the unit. (2) If a participant family moves from an assisted unit with continued tenant-based assistance, the term of the assisted lease for the new assisted unit may begin during the month the family moves out of the first assisted unit. Overlap of the last housing assistance payment (for the month when the family moves out of the old unit) and the first assistance payment for the new unit, is not considered to constitute a duplicative housing subsidy. [60 FR 34695, July 3, 1995, as amended at 80 FR 8246, Feb. 17, 2015] Sec. 982.312 Absence from unit. (a) The family may be absent from the unit for brief periods. For longer absences, the PHA administrative plan establishes the PHA policy on how long the family may be absent from the assisted unit. However, the family may not be absent from the unit for a period of more than 180 consecutive calendar days in any circumstance, or for any reason. At its discretion, the PHA may allow absence for a lesser period in accordance with PHA policy. (b) Housing assistance payments terminate if the family is absent for longer than the maximum period permitted. The term of the HAP contract and assisted lease also terminate. (The owner must reimburse the PHA for any housing assistance payment for the period after the termination.) (c) Absence means that no member of the family is residing in the unit. (d)(1) The family must supply any information or certification requested by the PHA to verify that the family is residing in the unit, or relating to family absence from the unit. The family must cooperate with the PHA for this purpose. The family must promptly notify the PHA of absence from the unit, including any information requested on the purposes of family absences. (2) The PHA may adopt appropriate techniques to verify family occupancy or absence, including letters to the family at the unit, phone calls, visits or questions to the landlord or neighbors. (e) The PHA administrative plan must state the PHA policies on family absence from the dwelling unit. The PHA absence policy includes: (1) How the PHA determines whether or when the family may be absent, and for how long. For example, the PHA may establish policies on absences because of vacation, hospitalization or imprisonment; and (2) Any provision for resumption of assistance after an absence, including readmission or resumption of assistance to the family. [[Page 538]] Sec. 982.313 Security deposit: Amounts owed by tenant. (a) The owner may collect a security deposit from the tenant. (b) The PHA may prohibit security deposits in excess of private market practice, or in excess of amounts charged by the owner to unassisted tenants. (c) When the tenant moves out of the dwelling unit, the owner, subject to State or local law, may use the security deposit, including any interest on the deposit, in accordance with the lease, as reimbursement for any unpaid rent payable by the tenant, damages to the unit or for other amounts the tenant owes under the lease. (d) The owner must give the tenant a written list of all items charged against the security deposit, and the amount of each item. After deducting the amount, if any, used to reimburse the owner, the owner must refund promptly the full amount of the unused balance to the tenant. (e) If the security deposit is not sufficient to cover amounts the tenant owes under the lease, the owner may seek to collect the balance from the tenant. Sec. 982.315 Family break-up. (a)(1) The PHA has discretion to determine which members of an assisted family continue to receive assistance in the program if the family breaks up. The PHA administrative plan must state PHA policies on how to decide who remains in the program if the family breaks up. (2) If the family break-up results from an occurrence of domestic violence, dating violence, sexual assault, or stalking as provided in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), the PHA must ensure that the victim retains assistance. (b) The factors to be considered in making this decision under the PHA policy may include: (1) Whether the assistance should remain with family members remaining in the original assisted unit. (2) The interest of minor children or of ill, elderly, or disabled family members. (3) Whether family members are forced to leave the unit as a result of actual or threatened domestic violence, dating violence, sexual assault, or stalking. (4) Whether any of the family members are receiving protection as victims of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L, and whether the abuser is still in the household. (5) Other factors specified by the PHA. (c) If a court determines the disposition of property between members of the assisted family in a divorce or separation under a settlement or judicial decree, the PHA is bound by the court's determination of which family members continue to receive assistance in the program. [60 FR 34695, July 3, 1995, as amended at 75 FR 66264, Oct. 27, 2010; 80 FR 8246, Feb. 17, 2015; 81 FR 80816, Nov. 16, 2016] Sec. 982.316 Live-in aide. (a) A family that consists of one or more elderly, near-elderly or disabled persons may request that the PHA approve a live-in aide to reside in the unit and provide necessary supportive services for a family member who is a person with disabilities. The PHA must approve a live-in aide if needed as a reasonable accommodation in accordance with 24 CFR part 8 to make the program accessible to and usable by the family member with a disability. (See Sec. 982.402(b)(6) concerning effect of live-in aide on family unit size.) (b) At any time, the PHA may refuse to approve a particular person as a live-in aide, or may withdraw such approval, if: (1) The person commits fraud, bribery or any other corrupt or criminal act in connection with any federal housing program; (2) The person commits drug-related criminal activity or violent criminal activity; or (3) The person currently owes rent or other amounts to the PHA or to another PHA in connection with Section 8 or public housing assistance under the 1937 Act. [63 FR 23860, Apr. 30, 1998; 63 FR 31625, June 10, 1998] [[Page 539]] Sec. 982.317 Lease-purchase agreements. (a) A family leasing a unit with assistance under the program may enter into an agreement with an owner to purchase the unit. So long as the family is receiving such rental assistance, all requirements applicable to families otherwise leasing units under the tenant-based program apply. Any homeownership premium (e.g., increment of value attributable to the value of the lease-purchase right or agreement such as an extra monthly payment to accumulate a downpayment or reduce the purchase price) included in the rent to the owner that would result in a higher subsidy amount than would otherwise be paid by the PHA must be absorbed by the family. (b) In determining whether the rent to owner for a unit subject to a lease-purchase agreement is a reasonable amount in accordance with Sec. 982.503, any homeownership premium paid by the family to the owner must be excluded when the PHA determines rent reasonableness. [65 FR 55162, Sept. 12, 2000] Subpart H_Where Family Can Live and Move Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.351 Overview. This subpart describes what kind of housing is eligible for leasing, and the areas where a family can live with tenant-based assistance. The subpart covers: (a) Assistance for a family that rents a dwelling unit in the jurisdiction of the PHA that originally selected the family for tenant- based assistance. (b) ``Portability'' assistance for a family PHA rents a unit outside the jurisdiction of the initial PHA. Sec. 982.352 Eligible housing. (a) Ineligible housing. The following types of housing may not be assisted by a PHA in the tenant-based programs: (1) A public housing or Indian housing unit; (2) A unit receiving project-based assistance under section 8 of the 1937 Act (42 U.S.C. 1437f); (3) Nursing homes, board and care homes, or facilities providing continual psychiatric, medical, or nursing services; (4) College or other school dormitories; (5) Units on the grounds of penal, reformatory, medical, mental, and similar public or private institutions; (6) A unit occupied by its owner or by a person with any interest in the unit. (7) For provisions on PHA disapproval of an owner, see Sec. 982.306. (b) PHA-owned housing. (1) A unit that is owned by the PHA that administers the assistance under the consolidated ACC (including a unit owned by an entity substantially controlled by the PHA) may only be assisted under the tenant-based program if all the following conditions are satisfied: (i) The PHA must inform the family, both orally and in writing, that the family has the right to select any eligible unit available for lease, and a PHA-owned unit is freely selected by the family, without PHA pressure or steering. (ii) The unit is not ineligible housing. (iii) During assisted occupancy, the family may not benefit from any form of housing subsidy that is prohibited under paragraph (c) of this section. (iv)(A) The PHA must obtain the services of an independent entity to perform the following PHA functions as required under the program rule: (1) To determine rent reasonableness in accordance with Sec. 982.507. The independent agency shall communicate the rent reasonableness determination to the family and the PHA. (2) To assist the family negotiate the rent to owner in accordance with Sec. 982.506. (3) To inspect the unit for compliance with the HQS in accordance with Sec. Sec. 982.305(a) and 982.405. The independent entity shall communicate the results of each such inspection to the family and the PHA. (B) The independent agency used to perform these functions must be approved by HUD. The independent agency may be the unit of general local government for the PHA jurisdiction [[Page 540]] (unless the PHA is itself the unit of general local government or an agency of such government), or may be another HUD-approved independent agency. (C) The PHA may compensate the independent agency from PHA ongoing administrative fee income for the services performed by the independent agency. The PHA may not use other program receipts to compensate the independent agency for such services. The PHA and the independent agency may not charge the family any fee or charge for the services provided by the independent agency. (c) Prohibition against other housing subsidy. A family may not receive the benefit of tenant-based assistance while receiving the benefit of any of the following forms of other housing subsidy, for the same unit or for a different unit: (1) Public or Indian housing assistance; (2) Other Section 8 assistance (including other tenant-based assistance); (3) Assistance under former Section 23 of the United States Housing Act of 1937 (before amendment by the Housing and Community Development Act of 1974); (4) Section 101 rent supplements; (5) Section 236 rental assistance payments; (6) Tenant-based assistance under the HOME Program; (7) Rental assistance payments under Section 521 of the Housing Act of 1949 (a program of the Rural Development Administration); (8) Any local or State rent subsidy; (9) Section 202 supportive housing for the elderly; (10) Section 811 supportive housing for persons with disabilities; (11) Section 202 projects for non-elderly persons with disabilities (Section 162 assistance); or (12) Any other duplicative federal, State, or local housing subsidy, as determined by HUD. For this purpose, ``housing subsidy'' does not include the housing component of a welfare payment, a social security payment received by the family, or a rent reduction because of a tax credit. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 FR 23860, Apr. 30, 1998; 64 FR 13057, Mar. 16, 1999; 64 FR 26645, May 14, 1999; 65 FR 55162, Sept. 12, 2000; 88 FR 30503, May 11, 2023] Sec. 982.353 Where family can lease a unit with tenant-based assistance. (a) Assistance in the initial PHA jurisdiction. The family may receive tenant-based assistance to lease a unit located anywhere in the jurisdiction (as determined by State and local law) of the initial PHA. HUD may nevertheless restrict the family's right to lease such a unit anywhere in such jurisdiction if HUD determines that limitations on a family's opportunity to select among available units in that jurisdiction are appropriate to achieve desegregation goals in accordance with obligations generated by a court order or consent decree. (b) Portability: Assistance outside the initial PHA jurisdiction. Subject to paragraph (c) of this section, and to Sec. 982.552 and Sec. 982.553, a voucher-holder or participant family has the right to receive tenant-based voucher assistance, in accordance with requirements of this part, to lease a unit outside the initial PHA jurisdiction, anywhere in the United States, in the jurisdiction of a PHA with a tenant-based program under this part. The initial PHA must not provide such portable assistance for a participant if the family has moved out of the assisted unit in violation of the lease except as provided for in this subsection. If the family moves out in violation of the lease in order to protect the health or safety of a person who is or has been the victim of domestic violence, dating violence, sexual assault, or stalking and who reasonably believes him- or herself to be threatened with imminent harm from further violence by remaining in the dwelling unit (or any family member has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's move or request to move), and has otherwise complied with all other obligations under the Section 8 program, [[Page 541]] the family may receive a voucher from the initial PHA and move to another jurisdiction under the Housing Choice Voucher Program. (c) Nonresident applicants. (1) This paragraph (c) applies if neither the household head nor spouse of an assisted family already had a ``domicile'' (legal residence) in the jurisdiction of the initial PHA at the time when the family first submitted an application for participation in the program to the initial PHA. (2) The following apply during the 12 month period from the time when a family described in paragraph (c)(1) of this section is admitted to the program: (i) The family may lease a unit anywhere in the jurisdiction of the initial PHA; (ii) The family does not have any right to portability; (iii) The initial PHA may choose to allow portability during this period. (3) If the initial PHA approves, the family may lease a unit outside the PHA jurisdiction under portability procedures. (4) Paragraph (c) of this section does not apply when the family or a member of the family is or has been the victim of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), and the move is needed to protect the health or safety of the family or family member, or any family member who has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's request to move. (d) Income eligibility. (1) For admission to the program, a family must be income eligible in the area where the family initially leases a unit with assistance under the program. (2) If a family is a participant in the initial PHA's voucher program, income eligibility is not redetermined when the family moves to the receiving PHA program under portability procedures. (e) Freedom of choice. The PHA may not directly or indirectly reduce the family's opportunity to select among available units, except as provided in paragraph (a) of this section, or elsewhere in this part 982 (e.g., prohibition on the use of ineligible housing, housing not meeting HQS, or housing for which the rent to owner exceeds a reasonable rent). However, the PHA must provide families the information required in Sec. 982.301 for both the oral briefing and the information packet to ensure that they have the information they need to make an informed decision on their housing choice. [60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996; 61 FR 42131, Aug. 13, 1996; 64 FR 26646, May 14, 1999; 73 FR 72344, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 50573, Aug. 20, 2015; 81 FR 80816, Nov. 16, 2016] Sec. 982.354 Move with continued tenant-based assistance. (a) Applicability. This section states when a participant family may move to a new unit with continued tenant-based assistance: (b) When family may move. A family may move to a new unit if: (1) The assisted lease for the old unit has terminated. This includes a termination because: (i) The PHA has terminated the HAP contract for the owner's breach; or (ii) The lease has terminated by mutual agreement of the owner and the tenant. (2) The owner has given the tenant a notice to vacate, or has commenced an action to evict the tenant, or has obtained a court judgment or other process allowing the owner to evict the tenant. (3) The tenant has given notice of lease termination (if the tenant has a right to terminate the lease on notice to the owner, for owner breach, or otherwise). (4) The family or a member of the family, is or has been the victim of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), and the move is needed to protect the health or safety of the family or family member, or if any family member has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's request to move. A PHA may not terminate assistance if [[Page 542]] the family, with or without prior notification to the PHA, moves out of a unit in violation of the lease, if such move occurs to protect the health or safety of a family member who is or has been the victim of domestic violence, dating violence, sexual assault, or stalking and who reasonably believed he or she was threatened with imminent harm from further violence if he or she remained in the dwelling unit. However, any family member that has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's move or request to move is not required to believe that he or she was threatened with imminent harm from further violence if he or she remained in the dwelling unit. (c) How many moves. (1) A participant family may move with continued assistance under the program, either inside the PHA jurisdiction, or under the portability procedures (See Sec. 982.353) in accordance with the PHA's policies. (2) Consistent with applicable civil rights laws and regulations, the PHA may establish policies that: (i) Prohibit any move by the family during the initial lease term; (ii) Prohibit more than one move by the family during any one-year period; and (iii) The above policies do not apply when the family or a member of the family is or has been the victim of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L, and the move is needed to protect the health or safety of the family or family member, or any family member has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's request to move. (d) Notice that family wants to move. If the family wants to move to a new unit, the family must notify the PHA and the owner before moving from the old unit. If the family wants to move to a new unit that is located outside the initial PHA jurisdiction, the notice to the initial PHA must specify the area where the family wants to move. See portability procedures in subpart H of this part. (e) When the PHA may deny permission to move. (1) The PHA may deny permission to move if the PHA does not have sufficient funding for continued assistance. The PHA must provide written notification to the local HUD Office within 10 business days of determining it is necessary to deny moves to a higher-cost unit based on insufficient funding. (2) At any time, the PHA may deny permission to move in accordance with Sec. 982.552 (grounds for denial or termination of assistance). [60 FR 34695, July 3, 1995, as amended at 64 FR 56913, Oct. 21, 1999; 75 FR 66263, Oct. 27, 2010. Redesignated and amended at 80 FR 50573, Aug. 20, 2015; 81 FR 80817, Nov. 16, 2016] Sec. 982.355 Portability: Administration by initial and receiving PHA. (a) General. When a family moves under portability (in accordance with Sec. 982.353(b)) to an area outside the initial PHA jurisdiction, the receiving PHA must administer assistance for the family if a PHA with a HCV program has jurisdiction in the area where the unit is located. (b) Requirement to administer assistance. A receiving PHA cannot refuse to assist incoming portable families or direct them to another neighboring PHA for assistance. If there is more than one such PHA, the initial PHA provides the family with the contact information for the receiving PHAs that serve the area, and the family selects the receiving PHA. The family must inform the initial PHA which PHA it has selected as the receiving PHA. In cases where the family prefers not to select the receiving PHA, the initial PHA selects the receiving PHA on behalf of the family. HUD may determine in certain instances that a PHA is not required to accept incoming portable families, such as a PHA in a declared disaster area. However, the PHA must have approval in writing from HUD before refusing any incoming portable families. (c) Portability procedures. The following portability procedures must be followed: (1) When the family decides to use the voucher outside of the PHA jurisdiction, the family must notify the initial PHA of its desire to relocate and [[Page 543]] must specify the location where it wants to live. (2) The initial PHA must determine the family's eligibility to move in accordance with Sec. Sec. 982.353 and 982.354. (3) Once the receiving PHA is determined in accordance with paragraph (b) of this section, the initial PHA must contact the receiving PHA, via email or other confirmed delivery method, prior to approving the family's request to move in order to determine whether the voucher will be absorbed or billed by the receiving PHA. The receiving PHA must advise the initial PHA in writing, via email or other confirmed delivery method, of its decision. (4) If the receiving PHA notifies the initial PHA that it will absorb the voucher, the receiving PHA cannot reverse its decision at a later date without consent of the initial PHA. (5) If the receiving PHA will bill the initial PHA for the portability voucher and the cost of the HAP will increase due to the move, the initial PHA may deny the move if it does not have sufficient funding for continued assistance in accordance with Sec. 982.354 (e)(1). (6) If a billing arrangement is approved by the initial PHA or if the voucher is to be absorbed by the receiving PHA, the initial PHA must issue the family a voucher to move, if it has not already done so, and advise the family how to contact and request assistance from the receiving PHA. (7) The initial PHA must promptly notify the receiving PHA to expect the family. The initial PHA must give the receiving PHA the form HUD- 52665, the most recent form HUD 50058 (Family Report) for the family, and all related verification information. (8) The family must promptly contact the receiving PHA in order to be informed of the receiving PHA's procedures for incoming portable families and comply with these procedures. The family's failure to comply may result in denial or termination of the receiving PHA's voucher. (9) The receiving PHA does not redetermine eligibility for a participant family. However, for a family that was not already receiving assistance in the PHA's HCV program, the initial PHA must determine whether the family is eligible for admission to the receiving PHA's HCV program. In determining income eligibility, the receiving PHA's income limits are used by the initial PHA. (10) When a receiving PHA assists a family under portability, administration of the voucher must be in accordance with the receiving PHA's policies. This requirement also applies to policies of Moving to Work agencies. The receiving PHA procedures and preferences for selection among eligible applicants do not apply to the family, and the receiving PHA waiting list is not used. (11) If the receiving PHA opts to conduct a new reexamination for a current participant family, the receiving PHA may not delay issuing the family a voucher or otherwise delay approval of a unit. (12) The receiving PHA must determine the family unit size for the family, and base its determination on the subsidy standards of the receiving PHA. (13) The receiving PHA must issue a voucher to the family. The term of the receiving PHA voucher may not expire before 30 calendar days from the expiration date of the initial PHA voucher. If the voucher expires before the family arrives at the receiving PHA, the receiving PHA must contact the initial PHA to determine if it will extend the voucher. (14) Once the receiving PHA issues the portable family a voucher, the receiving PHA's policies on extensions of the voucher term apply. The receiving PHA must notify the initial PHA of any extensions granted to the term of the voucher. (15) The family must submit a request for tenancy approval to the receiving PHA during the term of the receiving PHA voucher. As required in Sec. 982.303, if the family submits a request for tenancy approval during the term of the voucher, the PHA must suspend the term of that voucher. (16) The receiving PHA must promptly notify the initial PHA if the family has leased an eligible unit under the program, or if the family fails to submit a request for tenancy approval for an eligible unit within the term of the voucher. [[Page 544]] (17) At any time, either the initial PHA or the receiving PHA may make a determination to deny or terminate assistance to the family in accordance with Sec. 982.552 and 982.553. (d) Absorption by the receiving PHA. (1) If funding is available under the consolidated ACC for the receiving PHA's HCV program, the receiving PHA may absorb the family into the receiving PHA's HCV program. After absorption, the family is assisted with funds available under the consolidated ACC for the receiving PHA's HCV program. (2) HUD may require that the receiving PHA absorb all, or a portion of, incoming portable families. Under circumstances described in a notice published in the Federal Register, HUD may determine that receiving PHAs, or categories of receiving PHAs, should absorb all or a portion of incoming portable families. If HUD makes such a determination, HUD will provide an opportunity for public comment, for a period of no less than 60 calendar days, on such policy and procedures. After consideration of public comments, HUD will publish a final notice in the Federal Register advising PHAs and the public of HUD's final determination on the subject of mandatory absorption of incoming portable families. (3) HUD may provide financial or nonfinancial incentives (or both) to PHAs that absorb portability vouchers. (e) Portability billing. (1) To cover assistance for a portable family that was not absorbed in accordance with paragraph (d) of this section, the receiving PHA may bill the initial PHA for housing assistance payments and administrative fees. (2) The initial PHA must promptly reimburse the receiving PHA for the full amount of the housing assistance payments made by the receiving PHA for the portable family. The amount of the housing assistance payment for a portable family in the receiving PHA program is determined in the same manner as for other families in the receiving PHA program. (3) The initial PHA must promptly reimburse the receiving PHA for the lesser of 80 percent of the initial PHA ongoing administrative fee or 100 percent of the receiving PHA's ongoing administrative fee for each program unit under HAP contract on the first day of the month for which the receiving PHA is billing the initial PHA under this section. If administrative fees are prorated for the HCV program, the proration will apply to the amount of the administrative fee for which the receiving PHA may bill under this section (e.g., the receiving PHA may bill for the lesser of 80 percent of the initial PHA's prorated ongoing administrative fee or 100 percent of the receiving PHA's prorated ongoing administrative fee). If both PHAs agree, the PHAs may negotiate a different amount of reimbursement. (4) When a portable family moves out of the HCV program of a receiving PHA that has not absorbed the family, the PHA in the new jurisdiction to which the family moves becomes the receiving PHA, and the first receiving PHA is no longer required to provide assistance for the family. (5) In administration of portability, the initial PHA and the receiving PHA must comply with financial procedures required by HUD, including the use of HUD-required billing forms. The initial and receiving PHA must also comply with billing and payment deadlines under the financial procedures. (6) A PHA must manage the PHA HCV program in a manner that ensures that the PHA has the financial ability to provide assistance for families that move out of the PHA's program under the portability procedures, and that have not been absorbed by the receiving PHA, as well as for families that remain in the PHA's program. (7) HUD may reduce the administrative fee to an initial or receiving PHA if the PHA does not comply with HUD portability requirements. (f) Portability funding. (1) HUD may transfer units and funds for assistance to portable families to the receiving PHA from funds available under the initial PHA ACC. (2) HUD may provide additional funding (e.g., funds for incremental units) to the initial PHA for funds transferred to a receiving PHA for portability purposes. (3) HUD may provide additional funding (e.g., funds for incremental units) to the receiving PHA for absorption of portable families. [[Page 545]] (4) HUD may require the receiving PHA to absorb portable families. (g) Special purpose vouchers. (1) The initial PHA must submit the codes used for special purpose vouchers on the form HUD-50058, Family Report, and the receiving PHA must maintain the codes on the Family Report, as long as the Receiving PHA chooses to bill the initial PHA. (2) Initial and receiving PHAs must administer special purpose vouchers, such as the HUD-Veterans Affairs Supportive Housing vouchers, in accordance with HUD-established policy in cases where HUD has established alternative program requirements of such special purpose vouchers. [80 FR 50573, Aug. 20, 2015] Subpart I_Dwelling Unit: Housing Quality Standards, Subsidy Standards, Inspection and Maintenance Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.401 Housing quality standards. As defined in Sec. 982.4, housing quality standards (HQS) refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program or a HUD approved alternative standard for the PHA under 24 CFR 5.703(g). [88 FR 30503, May 11, 2023] Sec. 982.402 Subsidy standards. (a) Purpose. (1) The PHA must establish subsidy standards that determine the number of bedrooms needed for families of different sizes and compositions. (2) For each family, the PHA determines the appropriate number of bedrooms under the PHA subsidy standards (family unit size). (3) The family unit size number is entered on the voucher issued to the family. The PHA issues the family a voucher for the family unit size when a family is selected for participation in the program. (b) Determining family unit size. The following requirements apply when the PHA determines family unit size under the PHA subsidy standards: (1) The subsidy standards must provide for the smallest number of bedrooms needed to house a family without overcrowding. (2) The subsidy standards must be consistent with space requirements under the housing quality standards (See Sec. 982.401). (3) The subsidy standards must be applied consistently for all families of like size and composition. (4) A child who is temporarily away from the home because of placement in foster care is considered a member of the family in determining the family unit size. (5) A family that consists of a pregnant woman (with no other persons) must be treated as a two-person family. (6) Any live-in aide (approved by the PHA to reside in the unit to care for a family member who is disabled or is at least 50 years of age) must be counted in determining the family unit size; (7) Unless a live-in-aide resides with the family, the family unit size for any family consisting of a single person must be either a zero or one-bedroom unit, as determined under the PHA subsidy standards. (8) In determining family unit size for a particular family, the PHA may grant an exception to its established subsidy standards if the PHA determines that the exception is justified by the age, sex, health, handicap, or relationship of family members or other personal circumstances. (For a single person other than a disabled or elderly person or remaining family member, such PHA exception may not override the limitation in paragraph (b)(7) of this section.) (c) Effect of family unit size-maximum subsidy in voucher program. The family unit size as determined for a family under the PHA subsidy standard is used to determine the maximum rent subsidy for a family assisted in the voucher program. For a voucher tenancy, the PHA establishes payment standards by number of bedrooms. The payment standard for a family shall be the lower of: (1) The payment standard amount for the family unit size; or [[Page 546]] (2) The payment standard amount for the unit size of the unit rented by the family. (3) Voucher program. For a voucher tenancy, the PHA establishes payment standards by number of bedrooms. The payment standards for the family must be the lower of: (i) The payment standards for the family unit size; or (ii) The payment standard for the unit size rented by the family. (d) Size of unit occupied by family. (1) The family may lease an otherwise acceptable dwelling unit with fewer bedrooms than the family unit size. However, the dwelling unit must meet the applicable HQS space requirements. (2) The family may lease an otherwise acceptable dwelling unit with more bedrooms than the family unit size. However, utility allowances must follow Sec. 982.517(d). [60 FR 34695, July 3, 1995, as amended at 63 FR 23861, Apr. 30, 1998; 64 FR 26646, May 14, 1999; 81 FR 12375, Mar. 8, 2016; 88 FR 30503, May 11, 2023] Sec. 982.403 Terminating HAP contract when unit is too small. (a) Violation of HQS space standards. (1) If the PHA determines that a unit does not meet the HQS space standards because of an increase in family size or a change in family composition, the PHA must issue the family a new voucher, and the family and PHA must try to find an acceptable unit as soon as possible. (2) If an acceptable unit is available for rental by the family, the PHA must terminate the HAP contract in accordance with its terms. (b) Termination. When the PHA terminates the HAP contract under paragraph (a) of this section: (1) The PHA must notify the family and the owner of the termination; and (2) The HAP contract terminates at the end of the calendar month that follows the calendar month in which the PHA gives such notice to the owner. (3) The family may move to a new unit in accordance with Sec. 982.354. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 64 FR 26647, May 14, 1999; 80 FR 8246, Feb. 17, 2015; 80 FR 50575, Aug. 20, 2015] Sec. 982.404 Maintenance: Owner and family responsibility; PHA remedies. (a) Owner obligation. (1) The owner must maintain the unit in accordance with HQS. (2) If the owner fails to maintain the dwelling unit in accordance with HQS, the PHA must take prompt and vigorous action to enforce the owner obligations. PHA remedies for such breach of the HQS include termination, suspension or reduction of housing assistance payments and termination of the HAP contract. (3) The PHA must not make any housing assistance payments for a dwelling unit that fails to meet the HQS, unless the owner corrects the defect within the period specified by the PHA and the PHA verifies the correction. If a defect is life threatening, the owner must correct the defect within no more than 24 hours. For other defects, the owner must correct the defect within no more than 30 calendar days (or any PHA- approved extension). (4) The owner is not responsible for a breach of the HQS that is not caused by the owner, and for which the family is responsible (as provided in Sec. 982.404(b) and Sec. 982.551(c)). (However, the PHA may terminate assistance to a family because of HQS breach caused by the family.) (b) Family obligation. (1) The family is responsible for a breach of the HQS that is caused by any of the following: (i) The family fails to pay for any utilities that the owner is not required to pay for, but which are to be paid by the tenant; (ii) The family fails to provide and maintain any appliances that the owner is not required to provide, but which are to be provided by the tenant; or (iii) Any member of the household or guest damages the dwelling unit or [[Page 547]] premises (damages beyond ordinary wear and tear). (2) If an HQS breach caused by the family is life threatening, the family must correct the defect within no more than 24 hours. For other family-caused defects, the family must correct the defect within no more than 30 calendar days (or any PHA-approved extension). (3) If the family has caused a breach of the HQS, the PHA must take prompt and vigorous action to enforce the family obligations. The PHA may terminate assistance for the family in accordance with Sec. 982.552. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995] Sec. 982.405 PHA initial and periodic unit inspection. (a)(1) General requirements. The PHA must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets the HQS. (See Sec. 982.305(b)(2) concerning timing of initial inspection by the PHA.) (2) Small rural PHAs. Instead of biennially, a small rural PHA as defined in Sec. 902.101 of this chapter must inspect a unit during occupancy at least once every three years. (b) The PHA must conduct supervisory quality control HQS inspections. (c) In scheduling inspections, the PHA must consider complaints and any other information brought to the attention of the PHA. (d) The PHA must notify the owner of defects shown by the inspection. (e) The PHA may not charge the family for an initial inspection or reinspection of the unit. (f) The PHA may not charge the owner for the inspection of the unit prior to the initial term of the lease or for a first inspection during assisted occupancy of the unit. The PHA may establish a reasonable fee to owners for a reinspection if an owner notifies the PHA that a repair has been made or the allotted time for repairs has elapsed and a reinspection reveals that any deficiency cited in the previous inspection that the owner is responsible for repairing pursuant to Sec. 982.404(a) was not corrected. The owner may not pass this fee along to the family. Fees collected under this paragraph will be included in a PHA's administrative fee reserve and may be used only for activities related to the provision of Section 8 Tenant-Based Rental Assistance. (g) If a participant family or government official reports a condition that is life-threatening (i.e., the PHA would require the owner to make the repair within no more than 24 hours in accordance with Sec. 982.404(a)(3)), then the PHA must inspect the housing unit within 24 hours of when the PHA received the notification. If the reported condition is not life-threatening (i.e., the PHA would require the owner to make the repair within no more than 30 calendar days in accordance with Sec. 982.404(a)(3)), then the PHA must inspect the unit within 15 days of when the PHA received the notification. In the event of extraordinary circumstances, such as if a unit is within a Presidentially declared disaster area, HUD may waive the 24-hour or the 15-day inspection requirement until such time as an inspection is feasible. [60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999; 64 FR 56914, Oct. 21, 1999; 81 FR 12375, Mar. 8, 2016; 88 FR 30503, May 11, 2023] Sec. 982.406 Use of alternative inspections. (a) In general. (1) A PHA may comply with the inspection requirement in Sec. 982.405(a) by relying on an alternative inspection (i.e., an inspection conducted for another housing assistance program) only if the PHA is able to obtain the results of the alternative inspection. (2) If an alternative inspection method employs sampling, then a PHA may rely on such alternative inspection method to comply with the requirement in Sec. 982.405(a) only if HCV units are included in the population of units forming the basis of the sample. (3) Units in properties that are mixed-finance properties assisted with project-based vouchers may be inspected at least triennially pursuant to 24 CFR 983.103(g). [[Page 548]] (b) Administrative plans. A PHA relying on an alternative inspection to fulfill the requirement in Sec. 982.405(a) must identify the alternative inspection method being used in the PHA's administrative plan. Such a change may be a significant amendment to the plan, in which case the PHA must follow its plan amendment and public notice requirements, in addition to meeting the requirements in Sec. 982.406(c)(2), if applicable, before using the alternative inspection method. (c) Eligible inspection methods. (1) A PHA may rely upon inspections of housing assisted under the HOME Investment Partnerships (HOME) program or housing financed using Low-Income Housing Tax Credits (LIHTCs), or inspections performed by HUD, with no action other than amending its administrative plan. (2) If a PHA wishes to rely on an inspection method other than a method listed in paragraph (c)(1) of this section, then, prior to amending its administrative plan, the PHA must submit to the Real Estate Assessment Center (REAC) a copy of the inspection method it wishes to use, along with its analysis of the inspection method that shows that the method ``provides the same or greater protection to occupants of dwelling units'' as would HQS. (i) A PHA may rely upon such alternative inspection method only upon receiving approval from REAC to do so. (ii) A PHA that uses an alternative inspection method approved under this paragraph must monitor changes to the standards and requirements applicable to such method. If any change is made to the alternative inspection method, then the PHA must submit to REAC a copy of the revised standards and requirements, along with a revised comparison to HQS. If the PHA or REAC determines that the revision would cause the alternative inspection to no longer meet or exceed HQS, then the PHA may no longer rely upon the alternative inspection method to comply with the inspection requirement at Sec. 982.405(a). (d) Results of alternative inspection. (1) In order for a PHA to rely upon the results of an alternative inspection to comply with the requirement at Sec. 982.405(a), a property inspected pursuant to such method must meet the standards or requirements regarding housing quality or safety applicable to properties assisted under the program using the alternative inspection method. To make the determination of whether such standards or requirements are met, the PHA must adhere to the following procedures: (i) If a property is inspected under an alternative inspection method, and the property receives a ``pass'' score, then the PHA may rely on that inspection to demonstrate compliance with the inspection requirement at Sec. 982.405(a). (ii) If a property is inspected under an alternative inspection method, and the property receives a ``fail'' score, then the PHA may not rely on that inspection to demonstrate compliance with the inspection requirement at Sec. 982.405(a). (iii) If a property is inspected under an alternative inspection method that does not employ a pass/fail determination--for example, in the case of a program where deficiencies are simply identified--then the PHA must review the list of deficiencies to determine whether any cited deficiency would have resulted in a ``fail'' score under HQS. If no such deficiency exists, then the PHA may rely on the inspection to demonstrate compliance with the inspection requirement at Sec. 982.405(a); if such a deficiency does exist, then the PHA may not rely on the inspection to demonstrate such compliance. (2) Under any circumstance described above in which a PHA is prohibited from relying on an alternative inspection method for a property, the PHA must, within a reasonable period of time, conduct an HQS inspection of any units in the property occupied by voucher program participants and follow HQS procedures to remedy any identified deficiencies. (e) Records retention. As with all other inspection reports, and as required by Sec. 982.158(f)(4), reports for inspections conducted pursuant to an alternative inspection method must be obtained by the PHA. Such reports must be available for HUD inspection for at least three years from the date of the latest inspection. [81 FR 12375, Mar. 8, 2016] [[Page 549]] Sec. 982.407 Enforcement of HQS. Part 982 does not create any right of the family, or any party other than HUD or the PHA, to require enforcement of the HQS requirements by HUD or the PHA, or to assert any claim against HUD or the PHA, for damages, injunction or other relief, for alleged failure to enforce the HQS. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 80 FR 8246, Feb. 17, 2015. Redesignated at 81 FR 12375, Mar. 8, 2016] Subpart J_Housing Assistance Payments Contract and Owner Responsibility Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.451 Housing assistance payments contract. (a)(1) The HAP contract must be in the form required by HUD. (2) The term of the HAP contract is the same as the term of the lease. (b)(1) The amount of the monthly housing assistance payment by the PHA to the owner is determined by the PHA in accordance with HUD regulations and other requirements. The amount of the housing assistance payment is subject to change during the HAP contract term. (2) The monthly housing assistance payment by the PHA is credited toward the monthly rent to owner under the family's lease. (3) The total of rent paid by the tenant plus the PHA housing assistance payment to the owner may not be more than the rent to owner. The owner must immediately return any excess payment to the PHA. (4)(i) The part of the rent to owner which is paid by the tenant may not be more than: (A) The rent to owner; minus (B) The PHA housing assistance payment to the owner. (ii) The owner may not demand or accept any rent payment from the tenant in excess of this maximum, and must immediately return any excess rent payment to the tenant. (iii) The family is not responsible for payment of the portion of rent to owner covered by the housing assistance payment under the HAP contract between the owner and the PHA. See Sec. 982.310(b). (5)(i) The PHA must pay the housing assistance payment promptly when due to the owner in accordance with the HAP contract. (ii)(A) The HAP contract shall provide for penalties against the PHA for late payment of housing assistance payments due to the owner if all the following circumstances apply: (1) Such penalties are in accordance with generally accepted practices and law, as applicable in the local housing market, governing penalties for late payment of rent by a tenant; (2) It is the owner's practice to charge such penalties for assisted and unassisted tenants; and (3) The owner also charges such penalties against the tenant for late payment of family rent to owner. (B) The PHA is not obligated to pay any late payment penalty if HUD determines that late payment by the PHA is due to factors beyond the PHA's control. The PHA may add HAP contract provisions which define when the housing assistance payment by the PHA is deemed received by the owner (e.g., upon mailing by the PHA or actual receipt by the owner). (iii) The PHA may only use the following sources to pay a late payment penalty from program receipts under the consolidated ACC: administrative fee income for the program; or the administrative fee reserve for the program. The PHA may not use other program receipts for this purpose. [60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996; 63 FR 23861, Apr. 30, 1998; 64 FR 26647, May 14, 1999; 64 FR 56914, Oct. 21, 1999] Sec. 982.452 Owner responsibilities. (a) The owner is responsible for performing all of the owner's obligations under the HAP contract and the lease. (b) The owner is responsible for: (1) Performing all management and rental functions for the assisted unit, including selecting a voucher-holder to lease the unit, and deciding if the family is suitable for tenancy of the unit. [[Page 550]] The fact that an applicant is or has been a victim of domestic violence, dating violence, sexual assault, or stalking is not an appropriate basis for denial of tenancy if the applicant otherwise qualifies for tenancy. (2) Maintaining the unit in accordance with HQS, including performance of ordinary and extraordinary maintenance. For provisions on family maintenance responsibilities, see Sec. 982.404(a)(4). (3) Complying with equal opportunity requirements. (4) Preparing and furnishing to the PHA information required under the HAP contract. (5) Collecting from the family: (i) Any security deposit. (ii) The tenant contribution (the part of rent to owner not covered by the housing assistance payment). (iii) Any charges for unit damage by the family. (6) Enforcing tenant obligations under the lease. (7) Paying for utilities and services (unless paid by the family under the lease). (c) For provisions on modifications to a dwelling unit occupied or to be occupied by a disabled person, see 24 CFR 100.203. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 FR 23861, Apr. 30, 1998; 64 FR 26647, May 14, 1999; 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 8246, Feb. 17, 2015; 81 FR 80817, Nov. 16, 2016] Sec. 982.453 Owner breach of contract. (a) Any of the following actions by the owner (including a principal or other interested party) is a breach of the HAP contract by the owner: (1) If the owner has violated any obligation under the HAP contract for the dwelling unit, including the owner's obligation to maintain the unit in accordance with the HQS. (2) If the owner has violated any obligation under any other HAP contract under Section 8 of the 1937 Act (42 U.S.C. 1437f). (3) If the owner has committed fraud, bribery or any other corrupt or criminal act in connection with any federal housing program. (4) For projects with mortgages insured by HUD or loans made by HUD, if the owner has failed to comply with the regulations for the applicable mortgage insurance or loan program, with the mortgage or mortgage note, or with the regulatory agreement; or if the owner has committed fraud, bribery or any other corrupt or criminal act in connection with the mortgage or loan. (5) If the owner has engaged in drug-related criminal activity. (6) If the owner has committed any violent criminal activity. (b) The PHA rights and remedies against the owner under the HAP contract include recovery of overpayments, abatement or other reduction of housing assistance payments, termination of housing assistance payments, and termination of the HAP contract. [60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999; 64 FR 56914, Oct. 21, 1999; 65 FR 16821, Mar. 30, 2000] Sec. 982.454 Termination of HAP contract: Insufficient funding. The PHA may terminate the HAP contract if the PHA determines, in accordance with HUD requirements, that funding under the consolidated ACC is insufficient to support continued assistance for families in the program. [60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999] Sec. 982.455 Automatic termination of HAP contract. The HAP contract terminates automatically 180 calendar days after the last housing assistance payment to the owner. [64 FR 26647, May 14, 1999] Sec. 982.456 Third parties. (a) Even if the family continues to occupy the unit, the PHA may exercise any rights and remedies against the owner under the HAP contract. (b)(1) The family is not a party to or third party beneficiary of the HAP contract. Except as provided in paragraph (b)(2) of this section, the family may not exercise any right or remedy against the owner under the HAP contract. [[Page 551]] (2) The tenant may exercise any right or remedy against the owner under the lease between the tenant and the owner, including enforcement of the owner's obligations under the tenancy addendum (which is included both in the HAP contract between the PHA and the owner; and in the lease between the tenant and the owner.) (c) The HAP contract shall not be construed as creating any right of the family or other third party (other than HUD) to enforce any provision of the HAP contract, or to assert any claim against HUD, the PHA or the owner under the HAP contract. [60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999] Subpart K_Rent and Housing Assistance Payment Source: 63 FR 23861, Apr. 30, 1998, unless otherwise noted. Sec. 982.501 Overview. This subpart describes program requirements concerning the housing assistance payment and rent to owner under the HCV program. [80 FR 8246, Feb. 17, 2015] Sec. 982.503 Payment standard amount and schedule. (a) Payment standard schedule. (1) HUD publishes the fair market rents for each market area in the United States (see part 888 of this title). The PHA must adopt a payment standard schedule that establishes voucher payment standard amounts for each FMR area in the PHA jurisdiction. For each FMR area, the PHA must establish payment standard amounts for each ``unit size.'' Unit size is measured by number of bedrooms (zero-bedroom, one-bedroom, and so on). (2) The payment standard amounts on the PHA schedule are used to calculate the monthly housing assistance payment for a family (Sec. 982.505). (3) The PHA voucher payment standard schedule shall establish a single payment standard amount for each unit size. For each unit size, the PHA may establish a single payment standard amount for the whole FMR area, or may establish a separate payment standard amount for each designated part of the FMR area. (b) Establishing payment standard amounts. (1)(i) The PHA may establish the payment standard amount for a unit size at any level between 90 percent and 110 percent of the published FMR for that unit size. HUD approval is not required to establish a payment standard amount in that range (``basic range''). The PHA must revise the payment standard amount no later than 3 months following the effective date of the published FMR if a change is necessary to stay within the basic range. (ii) The PHA may establish a separate payment standard amount within the basic range for a designated part of an FMR area. (iii) A PHA that is not in a designated Small Area FMR area or has not opted to voluntarily implement Small Area FMRs under 24 CFR 888.113(c)(3) may establish exception payment standards for a ZIP code area above the basic range for the metropolitan FMR based on the HUD published Small Area FMRs. The PHA may establish an exception payment standard up to 110 percent of the HUD published Small Area FMR for that ZIP code area. The PHA must notify HUD if it establishes an exception payment standard based on the Small Area FMR. The exception payment standard must apply to the entire ZIP code area. (iv) At the request of a PHA administering the HCV program under Small Area FMRs under Sec. 888.113(c)(3), HUD may approve an exception payment standard for a Small Area FMR area above the 110 percent of the published FMR in accordance with conditions set forth by Notice in the Federal Register. The requirements of paragraph (c) of this section do not apply to these exception payment standard requests and approvals. (v) The PHA may establish an exception payment standard of not more than 120 percent of the published FMR if required as a reasonable accommodation in accordance with 24 CFR part 8 for a family that includes a person with a disability. Any unit approved under an exception payment standard must still meet the reasonable rent requirements found at Sec. 982.507. [[Page 552]] (vi) The PHA may establish an exception payment standard of more than 120 percent of the published FMR if required as a reasonable accommodation in accordance with 24 CFR part 8 for a family that includes a person with a disability after approval from HUD. Any unit approved under an exception payment standard must still meet the reasonable rent requirements found at Sec. 982.507. (2) Except as described in paragraphs (b)(1)(iii) through (v) of this section, the PHA must request HUD approval to establish a payment standard amount that is higher or lower than the basic range. HUD has sole discretion to grant or deny approval of a higher or lower payment standard amount. Paragraphs (c) and (e) of this section describe the requirements for approval of a higher payment standard amount (``exception payment standard amount''). (c) HUD approval of exception payment standard amount--(1) HUD discretion. At HUD's sole discretion, HUD may approve a payment standard amount that is higher than the basic range for a designated part of the fair market rent area (called an ``exception area''). HUD may approve an exception payment standard amount in accordance with this paragraph (c) of this section for all units, or for all units of a given unit size, leased by program families in the exception area. Any PHA with jurisdiction in the exception area may use the HUD-approved exception payment standard amount. (2) Above 110 percent of FMR to 120 percent of published FMR. The HUD Field Office may approve an exception payment standard amount from above 110 percent of the published FMR to 120 percent of the published FMR (upper range) if the HUD Field Office determines that approval is justified by the median rent method or the 40th percentile rent or the Small Area FMR method as described in paragraph (c)(2)(ii) of this section (and that such approval is also supported by an appropriate program justification in accordance with paragraph (c)(4) of this section). (i) Median rent method. In the median rent method, HUD determines the exception payment standard amount by multiplying the FMR times a fraction of which the numerator is the median gross rent of the exception area and the denominator is the median gross rent of the entire FMR area. In this method, HUD uses median gross rent data from the most recent decennial United States census, and the exception area may be any geographic entity within the FMR area (or any combination of such entities) for which median gross rent data is provided in decennial census products. (ii) 40th percentile rent or Small Area FMR method. In this method, HUD determines that the area exception payment standard amount equals application of the 40th percentile of rents for standard quality rental housing in the exception area or the Small Area FMR. HUD determines whether the 40th percentile rent or Small Area FMR applies in accordance with the methodology described in 24 CFR 888.113 for determining FMRs. A PHA must present statistically representative rental housing survey data to justify HUD approval. (3) Above 120 percent of FMR. (i) At the request of a PHA, the Assistant Secretary for Public and Indian Housing may approve an exception payment standard amount for the total area of a county, PHA jurisdiction, or place if the Assistant Secretary determines that: (A) Such approval is necessary to prevent financial hardship for families; (B) Such approval is supported by statistically representative rental housing survey data to justify HUD approval in accordance with the methodology described in Sec. 888.113 of this title; and (C) Such approval is also supported by an appropriate program justification in accordance with paragraph (c)(4) of this section. (ii) For purposes of paragraph (c)(3) of this section, the term ``place'' is an incorporated place or a U.S. Census designated place. An incorporated place is established by State law and includes cities, boroughs, towns, and villages. A U.S. Census designated place is the statistical counterpart of an incorporated place. (4) Program justification. (i) HUD will only approve an exception payment [[Page 553]] standard amount (pursuant to paragraph (c)(2) or paragraph (c)(3) of this section) if HUD determines that approval of such higher amount is needed either: (A) To help families find housing outside areas of high poverty, or (B) Because voucher holders have trouble finding housing for lease under the program within the term of the voucher. (ii) HUD will only approve an exception payment standard amount (pursuant to paragraph (c)(3) of this section) after six months from the date of HUD approval of an exception payment standard pursuant to paragraph (c)(2) of this section for the area. (5) Population. The total population of HUD-approved exception areas in an FMR area may not include more than 50 percent of the population of the FMR area, except when applying Small Area FMR exception areas under paragraph (b)(1)(iii) of this section. (6) Withdrawal or modification. At any time, HUD may withdraw or modify approval to use an exception payment standard amount. (d) HUD approval of payment standard amount below the basic range. HUD may consider a PHA request for approval to establish a payment standard amount that is lower than the basic range. At HUD's sole discretion, HUD may approve PHA establishment of a payment standard lower than the basic range. In determining whether to approve the PHA request, HUD will consider appropriate factors, including rent burden of families assisted under the program. HUD will not approve a lower payment standard if the family share for more than 40 percent of participants in the PHA's voucher program exceeds 30 percent of adjusted monthly income. Such determination may be based on the most recent examinations of family income. (e) HUD approval of success rate payment standard amounts. In order to increase the number of voucher holders who become participants, HUD may approve requests from PHAs whose FMRs are computed at the 40th percentile rent to establish higher, success rate payment standard amounts. A success rate payment standard amount is defined as any amount between 90 percent and 110 percent of the 50th percentile rent, calculated in accordance with the methodology described in Sec. 888.113 of this title. (1) A PHA may obtain HUD Field Office approval of success rate payment standard amounts provided the PHA demonstrates to HUD that it meets the following criteria: (i) Fewer than 75 percent of the families to whom the PHA issued rental vouchers during the most recent 6 month period for which there is success rate data available have become participants in the voucher program; (ii) The PHA has established payment standard amounts for all unit sizes in the entire PHA jurisdiction within the FMR area at 110 percent of the published FMR for at least the 6 month period referenced in paragraph (e)(1)(i) of this section and up to the time the request is made to HUD; and (iii) The PHA has a policy of granting automatic extensions of voucher terms to at least 90 days to provide a family who has made sustained efforts to locate suitable housing with additional search time. (2) In determining whether to approve the PHA request to establish success rate payment standard amounts, HUD will consider whether the PHA has a SEMAP overall performance rating of ``troubled''. If a PHA does not yet have a SEMAP rating, HUD will consider the PHA's SEMAP certification. (3) HUD approval of success rate payment standard amounts shall be for all unit sizes in the FMR area. A PHA may opt to establish a success rate payment standard amount for one or more unit sizes in all or a designated part of the PHA jurisdiction within the FMR area. (f) Payment standard protection for PHAs that meet deconcentration objectives. Paragraph (f) of this section applies only to a PHA with jurisdiction in an FMR area where the FMR had previously been set at the 50th percentile rent to provide a broad range of housing opportunities throughout a metropolitan area, pursuant to Sec. 888.113(i)(3), but is now set at the 40th percentile rent. (1) Such a PHA may obtain HUD Field Office approval of a payment [[Page 554]] standard amount based on the 50th percentile rent if the PHA scored the maximum number of points on the deconcentration bonus indicator in Sec. 985.3(h) in the prior year, or in two of the last three years. (2) HUD approval of payment standard amounts based on the 50th percentile rent shall be for all unit sizes in the FMR area that had previously been set at the 50th percentile rent pursuant to Sec. 888.113(i)(3). A PHA may opt to establish a payment standard amount based on the 50th percentile rent for one or more unit sizes in all or a designated part of the PHA jurisdiction within the FMR area. (g) HUD review of PHA payment standard schedules. (1) HUD will monitor rent burdens of families assisted in a PHA's voucher program. HUD will review the PHA's payment standard for a particular unit size if HUD finds that 40 percent or more of such families occupying units of that unit size currently pay more than 30 percent of adjusted monthly income as the family share. Such determination may be based on the most recent examinations of family income. (2) After such review, HUD may, at its discretion, require the PHA to modify payment standard amounts for any unit size on the PHA payment standard schedule. HUD may require the PHA to establish an increased payment standard amount within the basic range. [64 FR 26648, May 14, 1999; 64 FR 49658, Sept. 14, 1999, as amended at 64 FR 56914, Oct. 21, 1999; 65 FR 16822, Mar. 30, 2000; 65 FR 58874, Oct. 2, 2000; 66 FR 30568, June 6, 2001; 67 FR 56688, Sept. 4, 2002; 80 FR 8246, Feb. 17, 2015; 81 FR 12376, Mar. 8, 2016; 81 FR 80582, Nov. 16, 2016] Sec. 982.504 Payment standard for family in restructured subsidized multifamily project. (a) This section applies to HCV assistance if all the following conditions are applicable: (1) Such HCV assistance is provided to a family pursuant to 24 CFR 401.421 when HUD has approved a restructuring plan, and the participating administrative entity has approved the use of tenant-based assistance to provide continued assistance for such families. Such tenant-based voucher assistance is provided for a family previously receiving project-based assistance in an eligible project (as defined in Sec. 401.2 of this title) at the time when the project-based assistance terminates. (2) The family chooses to remain in the restructured project with HCV assistance under the program and leases a unit that does not exceed the family unit size; (3) The lease for such assisted tenancy commences during the first year after the project-based assistance terminates. (b) The initial payment standard for the family under such initial lease is the sum of the reasonable rent to owner for the unit plus the utility allowance for tenant-paid utilities. (Determination of such initial payment standard for the family is not subject to paragraphs (c)(1) and (c)(2) of Sec. 982.505. Except for determination of the initial payment standard as specifically provided in paragraph (b) of this section, the payment standard and housing assistance payment for the family during the HAP contract term shall be determined in accordance with Sec. 982.505.) [64 FR 26649, May 14, 1999, as amended at 80 FR 8247, Feb. 17, 2015] Sec. 982.505 How to calculate housing assistance payment. (a) Use of payment standard. A payment standard is used to calculate the monthly housing assistance payment for a family. The ``payment standard'' is the maximum monthly subsidy payment. (b) Amount of monthly housing assistance payment. The PHA shall pay a monthly housing assistance payment on behalf of the family that is equal to the lower of: (1) The payment standard for the family minus the total tenant payment; or (2) The gross rent minus the total tenant payment. (c) Payment standard for family. (1) The payment standard for the family is the lower of: (i) The payment standard amount for the family unit size; or (ii) The payment standard amount for the size of the dwelling unit rented by the family. [[Page 555]] (2) If the PHA has established a separate payment standard amount for a designated part of an FMR area in accordance with Sec. 982.503 (including an exception payment standard amount as determined in accordance with Sec. 982.503(b)(2) and Sec. 982.503(c)), and the dwelling unit is located in such designated part, the PHA must use the appropriate payment standard amount for such designated part to calculate the payment standard for the family. The payment standard for the family shall be calculated in accordance with this paragraph and paragraph (c)(1) of this section. (3) Decrease in the payment standard amount during the HAP contract term. If the amount on the payment standard schedule is decreased during the term of the HAP contract, the PHA is not required to reduce the payment standard amount used to calculate the subsidy for the families under HAP contract for as long as the HAP contract remains in effect. (i) If the PHA chooses to reduce the payment standard for the families currently under HAP contract during the HAP contract term in accordance with their administrative plan, the initial reduction to the payment standard amount used to calculate the monthly housing assistance payment for the family may not be applied any earlier than the effective date of the family's second regular reexamination following the effective date of the decrease in the payment standard amount. (ii) The PHA may choose to reduce the payment standard amount for families that remain under HAP contract to the current payment standard amount in effect on the PHA voucher payment standard schedule, or may reduce the payment standard amount to an amount that is higher than the normally applicable payment standard amount on the PHA voucher payment standard schedule. The PHA may further reduce the payment standard amount for the families during the term of the HAP contract, provided the subsequent reductions continue to result in a payment standard amount that meets or exceeds the normally applicable payment standard amount on the PHA voucher payment standard schedule. (iii) The PHA must provide the family with at least 12 months' notice that the payment standard is being reduced during the term of the HAP contract before the effective date of the change. (iv) The PHA shall administer decreases in the payment standard amount during the term of the HAP contract in accordance with the PHA policy as described in the PHA administrative plan. The PHA may establish different policies for designated areas within their jurisdiction (e.g., for different zip code areas), but the PHA administrative policy on decreases to payment standards during the term of the HAP contract applies to all families under HAP contract at the time of the effective date of decrease in the payment standard within that designated area. The PHA may not limit or otherwise establish different protections or policies for certain families under HAP contract. (4) Increase in the payment standard amount during the HAP contract term. If the payment standard amount is increased during the term of the HAP contract, the increased payment standard amount shall be used to calculate the monthly housing assistance payment for the family beginning at the effective date of the family's first regular reexamination on or after the effective date of the increase in the payment standard amount. (5) Change in family unit size during the HAP contract term. Irrespective of any increase or decrease in the payment standard amount, if the family unit size increases or decreases during the HAP contract term, the new family unit size must be used to determine the payment standard amount for the family beginning at the family's first regular reexamination following the change in family unit size. (d) PHA approval of higher payment standard for the family as a reasonable accommodation. If the family includes a person with disabilities and requires a payment standard above the basic range, as a reasonable accommodation for such person, in accordance with part 8 of this title, the PHA may establish a payment standard for the family of not more than 120 percent of the [[Page 556]] FMR. A PHA may establish a payment standard greater than 120 percent of the FMR by submitting a request to HUD. [64 FR 26649, May 14, 1999, as amended at 64 FR 56914, Oct. 21, 1999; 65 FR 16822, Mar. 30, 2000; 65 FR 42509, July 10, 2000; 66 FR 30568, June 6, 2001; 67 FR 56689, Sept. 4, 2002; 80 FR 8247, Feb. 17, 2014; 81 FR 12376, Mar. 8, 2016; 81 FR 80582, Nov. 16, 2016] Sec. 982.506 Negotiating rent to owner. The owner and the family negotiate the rent to owner. At the family's request, the PHA must help the family negotiate the rent to owner. [63 FR 23861, Apr. 30, 1998. Redesignated at 64 FR 26648, May 14, 1999] Sec. 982.507 Rent to owner: Reasonable rent. (a) PHA determination. (1) Except as provided in paragraph (c) of this section, the PHA may not approve a lease until the PHA determines that the initial rent to owner is a reasonable rent. (2) The PHA must redetermine the reasonable rent: (i) Before any increase in the rent to owner; (ii) If there is a 10 percent decrease in the published FMR in effect 60 days before the contract anniversary (for the unit size rented by the family) as compared with the FMR in effect 1 year before the contract anniversary. (iii) If directed by HUD. (3) The PHA may also redetermine the reasonable rent at any other time. (4) At all times during the assisted tenancy, the rent to owner may not exceed the reasonable rent as most recently determined or redetermined by the PHA. (b) Comparability. The PHA must determine whether the rent to owner is a reasonable rent in comparison to rent for other comparable unassisted units. To make this determination, the PHA must consider: (1) The location, quality, size, unit type, and age of the contract unit; and (2) Any amenities, housing services, maintenance and utilities to be provided by the owner in accordance with the lease. (c) Units assisted by low-income housing tax credits or assistance under HUD's HOME Investment Partnerships (HOME) program. (1) General. For a unit receiving low-income housing tax credits (LIHTCs) pursuant to section 42 of the Internal Revenue Code of 1986 or receiving assistance under HUD's HOME Program (for which the regulations are found in 24 CFR part 92), a rent comparison with unassisted units is not required if the voucher rent does not exceed the rent for other LIHTC- or HOME-assisted units in the project that are not occupied by families with tenant-based assistance. (2) LIHTC. If the rent requested by the owner exceeds the LIHTC rents for non-voucher families, the PHA must perform a rent comparability study in accordance with program regulations and the rent shall not exceed the lesser of the: (i) Reasonable rent as determined pursuant to a rent comparability study; and (ii) The payment standard established by the PHA for the unit size involved. (3) HOME Program. [Reserved] (d) Owner certification of rents charged for other units. By accepting each monthly housing assistance payment from the PHA, the owner certifies that the rent to owner is not more than rent charged by the owner for comparable unassisted units in the premises. The owner must give the PHA information requested by the PHA on rents charged by the owner for other units in the premises or elsewhere. [63 FR 23861, Apr. 30, 1998. Redesignated at 64 FR 26648, May 14, 1999; 79 FR 36164, June 25, 2014; 81 FR 80583, Nov. 16, 2016] Sec. 982.508 Maximum family share at initial occupancy. At the time the PHA approves a tenancy for initial occupancy of a dwelling unit by a family with tenant-based assistance under the program, and where the gross rent of the unit exceeds the applicable payment standard for the family, the family share must not exceed 40 percent of the family's adjusted monthly income. The determination of adjusted monthly income must be based on verification information received by the PHA no earlier than 60 days before the PHA issues a voucher to the family. [64 FR 59622, Nov. 3, 1999] [[Page 557]] Sec. 982.509 Rent to owner: Effect of rent control. In addition to the rent reasonableness limit under this subpart, the amount of rent to owner also may be subject to rent control limits under State or local law. [63 FR 23861, Apr. 30, 1998. Redesignated and amended at 64 FR 26648, May 14, 1999] Sec. 982.510 Other fees and charges. (a) The cost of meals or supportive services may not be included in the rent to owner, and the value of meals or supportive services may not be included in the calculation of reasonable rent. (b) The lease may not require the tenant or family members to pay charges for meals or supportive services. Non-payment of such charges is not grounds for termination of tenancy. (c) The owner may not charge the tenant extra amounts for items customarily included in rent in the locality, or provided at no additional cost to unsubsidized tenants in the premises. [63 FR 23861, Apr. 30, 1998. Redesignated at 64 FR 26648, May 14, 1999] Sec. 982.514 Distribution of housing assistance payment. The monthly housing assistance payment is distributed as follows: (a) The PHA pays the owner the lesser of the housing assistance payment or the rent to owner. (b) If the housing assistance payment exceeds the rent to owner, the PHA may pay the balance of the housing assistance payment (``utility reimbursement'') either to the family or directly to the utility supplier to pay the utility bill on behalf of the family. If the PHA elects to pay the utility supplier directly, the PHA must notify the family of the amount paid to the utility supplier. (c) The PHA may elect to establish policies regarding the frequency of utility reimbursement payments for payments made to the family. (1) The PHA will have the option of making utility reimbursement payments not less than once per calendar-year quarter, for reimbursements totaling $45 or less per quarter. In the event a family leaves the program in advance of its next quarterly reimbursement, the PHA would be required to reimburse the family for a prorated share of the applicable reimbursement. PHAs exercising this option must have a hardship policy in place for tenants. (2) If the PHA elects to pay the utility supplier directly, the PHA must notify the family of the amount paid to the utility supplier. [63 FR 23861, Apr. 30, 1998, as amended at 64 FR 56914, Oct. 21, 1999; 65 FR 16822, Mar. 30, 2000; 81 FR 12376, Mar. 8, 2016] Sec. 982.515 Family share: Family responsibility. (a) The family share is calculated by subtracting the amount of the housing assistance payment from the gross rent. (b) The family rent to owner is calculated by subtracting the amount of the housing assistance payment to the owner from the rent to owner. (c) The PHA may not use housing assistance payments or other program funds (including any administrative fee reserve) to pay any part of the family share, including the family rent to owner. Payment of the whole family share is the responsibility of the family. [63 FR 23861, Apr. 30, 1998, as amended at 64 FR 56915, Oct. 21, 1999] Sec. 982.516 Family income and composition: Annual and interim examinations. (a) PHA responsibility for reexamination and verification. (1) The PHA must conduct a reexamination of family income and composition at least annually. (2) Except as provided in paragraph (a)(3) of this section, the PHA must obtain and document in the tenant file third-party verification of the following factors, or must document in the tenant file why third- party verification was not available: (i) Reported family annual income; (ii) The value of assets; (iii) Expenses related to deductions from annual income; and (iv) Other factors that affect the determination of adjusted income. (3) For a family with net family assets (as the term is defined in Sec. 5.603 of [[Page 558]] this title) equal to or less than $50,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes of recertification of income, a family's declaration under Sec. 5.618(b) of this title, except that the PHA must obtain third-party verification of all family assets every 3 years. (b) Streamlined income determination--(1) General. A PHA may elect to apply a streamlined income determination to families receiving fixed income as described in paragraph (b)(3) of this section. (2) Definition of ``fixed income''. For purposes of this section, ``fixed income'' means periodic payments at reasonably predictable levels from one or more of the following sources: (i) Social Security, Supplemental Security Income, Supplemental Disability Insurance. (ii) Federal, state, local, or private pension plans. (iii) Annuities or other retirement benefit programs, insurance policies, disability or death benefits, or other similar types of periodic receipts. (iv) Any other source of income subject to adjustment by a verifiable COLA or current rate of interest. (3) Method of streamlined income determination. A PHA using the streamlined income determination must adjust a family's income according to the percentage of a family's unadjusted income that is from fixed income. (i) When 90 percent or more of a family's unadjusted income consists of fixed income, PHAs using streamlined income determinations must apply a COLA or COLAs to the family's fixed-income sources, provided that the family certifies both that 90 percent or more of their unadjusted income is fixed income and that their sources of fixed income have not changed from the previous year. For non-fixed income, the PHA is not required to make adjustments pursuant to paragraph (a) of this section. (ii) When less than 90 percent of a family's unadjusted income consists of fixed income, PHAs using streamlined income determinations must apply a COLA to each of the family's sources of fixed income individually. The PHA must determine all other income pursuant to paragraph (a) of this section. (4) COLA rate applied by PHAs. PHAs using streamlined income determinations must adjust a family's fixed income using a COLA or current interest rate that applies to each specific source of fixed income and is available from a public source or through tenant-provided, third-party-generated documentation. If no public verification or tenant-provided documentation is available, then the owner must obtain third-party verification of the income amounts in order to calculate the change in income for the source. (5) Triennial verification. For any income determined pursuant to a streamlined income determination, a PHA must obtain third-party verification of all income amounts every 3 years. (c) Interim reexaminations. (1) A family may request an interim determination of family income or composition because of any changes since the last determination. The PHA must conduct any interim reexamination within a reasonable period of time after the family request or when the PHA becomes aware of an increase in family adjusted income under paragraph (c)(3) of this section. What qualifies as a ``reasonable time'' may vary based on the amount of time it takes to verify information, but generally should not be longer than 30 days after changes in income are reported. (2) The PHA may decline to conduct an interim reexamination of family income if the PHA estimates the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or a lower threshold established by the PHA. (3) The PHA must conduct an interim reexamination of family income when the PHA becomes aware that the family's adjusted income (as defined in Sec. 5.611 of this title) has changed by an amount that the PHA estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except: [[Page 559]] (i) The PHA may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and (ii) The PHA may choose not to conduct an interim reexamination in the last three months of a certification period. (4) Effective date of rent changes. (i) If the family has reported a change in family income or composition in a timely manner according to the PHA's policies, the PHA must provide the family with 30 days advance notice of any family share and family rent to owner increases, and such increases will be effective the first day of the month beginning after the end of that 30-day period. Family share and family rent to owner decreases will be effective on the first day of the first month after the date of the reported change leading to the interim reexamination of family income. (ii) If the family has failed to report a change in family income or composition in a timely manner according to the PHA's policies, PHAs must implement any resulting family share and family rent to owner increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting family share and family rent to owner decrease must be implemented no later than the first rent period following completion of the reexamination. However, a PHA may apply a family share and family rent to owner decrease retroactively at the discretion of the PHA, in accordance with the conditions established by the PHA in the administrative plan and subject to paragraph (c)(4)(iii) of this section. (iii) A retroactive family share and family rent to owner decrease may not be applied prior to the later of the first of the month following: (A) The date of the change leading to the interim reexamination of family income; or (B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination). (d) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition. (e) Effective date of reexamination. (1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination. (2) At the effective date of a regular or interim reexamination, the PHA must make appropriate adjustments in the housing assistance payment in accordance with Sec. 982.505. (f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income). (i) The PHA must take any corrective action necessary to credit or repay a family if the family has been overcharged for their rent or family share as a result of an error (including a de minimis error) in the income determination. Families will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in a family being undercharged for rent or family share. (ii) HUD may revise the amount of de minimis error in this paragraph (f) through a rulemaking published in the Federal Register for public comment. (g) Execution of release and consent. (1) As a condition of admission to or continued assistance under the program, the PHA shall require the family head, and such other family members as the [[Page 560]] PHA designates, to execute a HUD-approved release and consent form (including any release and consent as required under Sec. 5.230 of this title) authorizing any depository or private source of income, or any Federal, State or local agency, to furnish or release to the PHA or HUD such information as the PHA or HUD determines to be necessary. (2) The PHA and HUD must limit the use or disclosure of information obtained from a family or from another source pursuant to this release and consent to purposes directly in connection with administration of the program. (h) Reviews of family income under this section are subject to the provisions in section 904 of the Stewart B. McKinney Homeless Assistance Amendments Act of 1988, as amended (42 U.S.C. 3544). (Information collection requirements contained in this section have been approved by the Office of Management and Budget under control number 2577-0169.) [63 FR 23861, Apr. 30, 1998, as amended at 64 FR 13057, Mar. 16, 1999; 64 FR 26649, May 14, 1999; 64 FR 56915, Oct. 21, 1999; 65 FR 16822, Mar. 30, 2000; 80 FR 8247, Feb. 17, 2015; 81 FR 12376, Mar. 8, 2016; 82 FR 58341, Dec. 12, 2017; 85 FR 27139, May 7, 2020; 88 FR 9675, Feb. 14, 2023] Editorial Note: At 64 FR 26649, May 14, 1999, Sec. 982.516 was amended in paragraph (e) by removing the reference to ``and family unit size''; however paragraph (e) does not contain this phrase. Sec. 982.517 Utility allowance schedule. (a) Maintaining schedule. (1) The PHA must maintain a utility allowance schedule for all tenant-paid utilities (except telephone), for cost of tenant-supplied refrigerators and ranges, and for other tenant- paid housing services (e.g., trash collection (disposal of waste and refuse)). (2) The PHA must give HUD a copy of the utility allowance schedule. At HUD's request, the PHA also must provide any information or procedures used in preparation of the schedule. (b) How allowances are determined. (1) The utility allowance schedule must be determined based on the typical cost of utilities and services paid by energy-conservative households that occupy housing of similar size and type in the same locality. In developing the schedule, the PHA must use normal patterns of consumption for the community as a whole and current utility rates. (2)(i) A PHA's utility allowance schedule, and the utility allowance for an individual family, must include the utilities and services that are necessary in the locality to provide housing that complies with the housing quality standards. However, the PHA may not provide any allowance for non-essential utility costs, such as costs of cable or satellite television. (ii) In the utility allowance schedule, the PHA must classify utilities and other housing services according to the following general categories: space heating; air conditioning; cooking; water heating; water; sewer; trash collection (disposal of waste and refuse); other electric; refrigerator (cost of tenant-supplied refrigerator); range (cost of tenant-supplied range); and other specified housing services. The PHA must provide a utility allowance for tenant-paid air- conditioning costs if the majority of housing units in the market provide centrally air-conditioned units or there is appropriate wiring for tenant-installed air conditioners. (3) The cost of each utility and housing service category must be stated separately. For each of these categories, the utility allowance schedule must take into consideration unit size (by number of bedrooms), and unit types (e.g., apartment, row-house, town house, single-family detached, and manufactured housing) that are typical in the community. (4) The utility allowance schedule must be prepared and submitted in accordance with HUD requirements on the form prescribed by HUD. (c) Revisions of utility allowance schedule. (1) A PHA must review its schedule of utility allowances each year, and must revise its allowance for a utility category if there has been a change of 10 percent or more in the utility rate since the last time the utility allowance schedule was revised. The PHA must maintain information supporting its annual review of utility allowances and any revisions made in its utility allowance schedule. [[Page 561]] (2) At HUD's direction, the PHA must revise the utility allowance schedule to correct any errors, or as necessary to update the schedule. (d) Use of utility allowance schedule. The PHA must use the appropriate utility allowance for the lesser of the size of dwelling unit actually leased by the family or the family unit size as determined under the PHA subsidy standards. In cases where the unit size leased exceeds the family unit size as determined under the PHA subsidy standards as a result of a reasonable accommodation, the PHA must use the appropriate utility allowance for the size of the dwelling unit actually leased by the family. (e) Higher utility allowance as reasonable accommodation for a person with disabilities. On request from a family that includes a person with disabilities, the PHA must approve a utility allowance which is higher than the applicable amount on the utility allowance schedule if a higher utility allowance is needed as a reasonable accommodation in accordance with 24 CFR part 8 to make the program accessible to and usable by the family member with a disability. (Information collection requirements contained in this section have been approved by the Office of Management and Budget under control number 2577-0169.) [63 FR 23861, Apr. 30, 1998, as amended at 80 FR 8247, Feb. 17, 2015; 81 FR 12377, Mar. 8, 2016] Sec. 982.521 Rent to owner in subsidized project. (a) Applicability to subsidized project. This section applies to a program tenancy in any of the following types of federally subsidized project: (1) An insured or non-insured Section 236 project; (2) A Section 202 project; (3) A Section 221(d)(3) below market interest rate (BMIR) project; or (4) A Section 515 project of the Rural Development Administration. (b) How rent to owner is determined. The rent to owner is the subsidized rent as determined in accordance with requirements for the applicable federal program listed in paragraph (a) of this section. This determination is not subject to the prohibition against increasing the rent to owner during the initial lease term (see Sec. 982.309). [65 FR 16822, Mar. 30, 2000, as amended at 80 FR 8247, Feb. 17, 2015] Subpart L_Family Obligations; Denial and Termination of Assistance Source: 60 FR 34695, July 3, 1995, unless otherwise noted. Sec. 982.551 Obligations of participant. (a) Purpose. This section states the obligations of a participant family under the program. (b) Supplying required information--(1) The family must supply any information that the PHA or HUD determines is necessary in the administration of the program, including submission of required evidence of citizenship or eligible immigration status (as provided by 24 CFR part 5). ``Information'' includes any requested certification, release or other documentation. (2) The family must supply any information requested by the PHA or HUD for use in a regularly scheduled reexamination or interim reexamination of family income and composition in accordance with HUD requirements. (3) The family must disclose and verify social security numbers (as provided by part 5, subpart B, of this title) and must sign and submit consent forms for obtaining information in accordance with part 5, subpart B, of this title. (4) Any information supplied by the family must be true and complete. (c) HQS breach caused by family. The family is responsible for an HQS breach caused by the family as described in Sec. 982.404(b). (d) Allowing PHA inspection. The family must allow the PHA to inspect the unit at reasonable times and after reasonable notice. (e) Violation of lease. The family may not commit any serious or repeated violation of the lease. Under 24 CFR 5.2005(c), an incident or incidents of actual or threatened domestic violence, dating violence, sexual assault, or stalking will not be construed as a serious or repeated lease violation by the [[Page 562]] victim, or threatened victim, of the domestic violence, dating violence, sexual assault, or stalking, or as good cause to terminate the tenancy, occupancy rights, or assistance of the victim. (f) Family notice of move or lease termination. The family must notify the PHA and the owner before the family moves out of the unit, or terminates the lease on notice to the owner. See Sec. 982.354(d). (g) Owner eviction notice. The family must promptly give the PHA a copy of any owner eviction notice. (h) Use and occupancy of unit--(1) The family must use the assisted unit for residence by the family. The unit must be the family's only residence. (2) The composition of the assisted family residing in the unit must be approved by the PHA. The family must promptly inform the PHA of the birth, adoption or court-awarded custody of a child. The family must request PHA approval to add any other family member as an occupant of the unit. No other person [i.e., nobody but members of the assisted family] may reside in the unit (except for a foster child or live-in aide as provided in paragraph (h)(4) of this section). (3) The family must promptly notify the PHA if any family member no longer resides in the unit. (4) If the PHA has given approval, a foster child or a live-in-aide may reside in the unit. The PHA has the discretion to adopt reasonable policies concerning residence by a foster child or a live-in-aide, and defining when PHA consent may be given or denied. (5) Members of the household may engage in legal profitmaking activities in the unit, but only if such activities are incidental to primary use of the unit for residence by members of the family. (6) The family must not sublease or let the unit. (7) The family must not assign the lease or transfer the unit. (i) Absence from unit. The family must supply any information or certification requested by the PHA to verify that the family is living in the unit, or relating to family absence from the unit, including any PHA-requested information or certification on the purposes of family absences. The family must cooperate with the PHA for this purpose. The family must promptly notify the PHA of absence from the unit. (j) Interest in unit. The family must not own or have any interest in the unit. (k) Fraud and other program violation. The members of the family must not commit fraud, bribery or any other corrupt or criminal act in connection with the programs. (l) Crime by household members. The members of the household may not engage in drug-related criminal activity or violent criminal activity or other criminal activity that threatens the health, safety, or right to peaceful enjoyment of other residents and persons residing in the immediate vicinity of the premises (see Sec. 982.553). Under 24 CFR 5.2005(b)(2), criminal activity directly related to domestic violence, dating violence, sexual assault, or stalking, engaged in by a member of a tenant's household, or any guest or other person under the tenant's control, shall not be cause for termination of tenancy, occupancy rights, or assistance of the victim, if the tenant or an affiliated individual of the tenant, as defined in 24 CFR 5.2003, is the victim. (m) Alcohol abuse by household members. The members of the household must not abuse alcohol in a way that threatens the health, safety or right to peaceful enjoyment of other residents and persons residing in the immediate vicinity of the premises. (n) Other housing assistance. An assisted family, or members of the family, may not receive Section 8 tenant-based assistance while receiving another housing subsidy, for the same unit or for a different unit, under any duplicative (as determined by HUD or in accordance with HUD requirements) federal, State or local housing assistance program. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 11119, Mar. 18, 1996; 61 FR 13627, Mar. 27, 1996; 61 FR 27163, May 30, 1996; 64 FR 26650, May 14, 1999; 66 FR 28805, May 24, 2001; 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 50575, Aug. 20, 2015; 81 FR 80817, Nov. 16, 2016] [[Page 563]] Sec. 982.552 PHA denial or termination of assistance for family. (a) Action or inaction by family. (1) A PHA may deny assistance for an applicant or terminate assistance for a participant under the programs because of the family's action or failure to act as described in this section or Sec. 982.553. The provisions of this section do not affect denial or termination of assistance for grounds other than action or failure to act by the family. (2) Denial of assistance for an applicant may include any or all of the following: denying listing on the PHA waiting list, denying or withdrawing a voucher, refusing to enter into a HAP contract or approve a lease, and refusing to process or provide assistance under portability procedures. (3) Termination of assistance for a participant may include any or all of the following: refusing to enter into a HAP contract or approve a lease, terminating housing assistance payments under an outstanding HAP contract, and refusing to process or provide assistance under portability procedures. (4) This section does not limit or affect exercise of the PHA rights and remedies against the owner under the HAP contract, including termination, suspension or reduction of housing assistance payments, or termination of the HAP contract. (b) Requirement to deny admission or terminate assistance. (1) For provisions on denial of admission and termination of assistance for illegal drug use, other criminal activity, and alcohol abuse that would threaten other residents, see Sec. 982.553. (2) The PHA must terminate program assistance for a family evicted from housing assisted under the program for serious violation of the lease. (3) The PHA must deny admission to the program for an applicant, or terminate program assistance for a participant, if any member of the family fails to sign and submit consent forms for obtaining information in accordance with part 5, subparts B and F of this title. (4) The family must submit required evidence of citizenship or eligible immigration status. See part 5 of this title for a statement of circumstances in which the PHA must deny admission or terminate program assistance because a family member does not establish citizenship or eligible immigration status, and the applicable informal hearing procedures. (5) The PHA must deny or terminate assistance if any family member fails to meet the eligibility requirements concerning individuals enrolled at an institution of higher education as specified in 24 CFR 5.612. (6) The PHA must deny or terminate assistance based on the restrictions on net assets and property ownership when required by Sec. 5.618 of this title. (c) Authority to deny admission or terminate assistance--(1) Grounds for denial or termination of assistance. The PHA may at any time deny program assistance for an applicant, or terminate program assistance for a participant, for any of the following grounds: (i) If the family violates any family obligations under the program (see Sec. 982.551). See Sec. 982.553 concerning denial or termination of assistance for crime by family members. (ii) If any member of the family has been evicted from federally assisted housing in the last five years; (iii) If a PHA has ever terminated assistance under the program for any member of the family. (iv) If any member of the family has committed fraud, bribery, or any other corrupt or criminal act in connection with any Federal housing program (see also Sec. 982.553(a)(1)); (v) If the family currently owes rent or other amounts to the PHA or to another PHA in connection with Section 8 or public housing assistance under the 1937 Act. (vi) If the family has not reimbursed any PHA for amounts paid to an owner under a HAP contract for rent, damages to the unit, or other amounts owed by the family under the lease. (vii) If the family breaches an agreement with the PHA to pay amounts owed to a PHA, or amounts paid to an owner by a PHA. (The PHA, at its discretion, may offer a family the opportunity to enter an agreement to pay amounts owed to a PHA or amounts paid to an owner by a PHA. The PHA may prescribe the terms of the agreement.) [[Page 564]] (viii) If a family participating in the FSS program fails to comply, without good cause, with the family's FSS contract of participation. (ix) If the family has engaged in or threatened abusive or violent behavior toward PHA personnel. (x) If a welfare-to-work (WTW) family fails, willfully and persistently, to fulfill its obligations under the welfare-to-work voucher program. (xi) If the family has been engaged in criminal activity or alcohol abuse as described in Sec. 982.553. (2) Consideration of circumstances. In determining whether to deny or terminate assistance because of action or failure to act by members of the family: (i) The PHA may consider all relevant circumstances such as the seriousness of the case, the extent of participation or culpability of individual family members, mitigating circumstances related to the disability of a family member, and the effects of denial or termination of assistance on other family members who were not involved in the action or failure. (ii) The PHA may impose, as a condition of continued assistance for other family members, a requirement that other family members who participated in or were culpable for the action or failure will not reside in the unit. The PHA may permit the other members of a participant family to continue receiving assistance. (iii) In determining whether to deny admission or terminate assistance for illegal use of drugs or alcohol abuse by a household member who is no longer engaged in such behavior, the PHA may consider whether such household member is participating in or has successfully completed a supervised drug or alcohol rehabilitation program, or has otherwise been rehabilitated successfully (42 U.S.C. 13661). For this purpose, the PHA may require the applicant or tenant to submit evidence of the household member's current participation in, or successful completion of, a supervised drug or alcohol rehabilitation program or evidence of otherwise having been rehabilitated successfully. (iv) If the family includes a person with disabilities, the PHA decision concerning such action is subject to consideration of reasonable accommodation in accordance with part 8 of this title. (v) Nondiscrimination limitation and protection for victims of domestic violence, dating violence, sexual assault, or stalking. The PHA's admission and termination actions must be consistent with fair housing and equal opportunity provisions of 24 CFR 5.105, and with the requirements of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). (d) Information for family. The PHA must give the family a written description of: (1) Family obligations under the program. (2) The grounds on which the PHA may deny or terminate assistance because of family action or failure to act. (3) The PHA informal hearing procedures. (e) Applicant screening. The PHA may at any time deny program assistance for an applicant in accordance with the PHA policy, as stated in the PHA administrative plan, on screening of applicants for family behavior or suitability for tenancy. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 13627, Mar. 27, 1996; 63 FR 23865, Apr. 30, 1998; 64 FR 26650, May 14, 1999; 64 FR 49659, Sept. 14, 1999; 64 FR 56915, Oct. 21, 1999; 65 FR 16823, Mar. 30, 2000; 66 FR 28805, May 24, 2001; 70 FR 77744, Dec. 30, 2005; 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 8247, Feb. 17, 2015; 81 FR 80817, Nov. 16, 2016; 88 FR 9676, Feb. 14, 2023] Sec. 982.553 Denial of admission and termination of assistance for criminals and alcohol abusers. (a) Denial of admission--(1) Prohibiting admission of drug criminals. (i) The PHA must prohibit admission to the program of an applicant for three years from the date of eviction if a household member has been evicted from federally assisted housing for drug-related criminal activity. However, the PHA may admit the household if the PHA determines: (A) That the evicted household member who engaged in drug-related criminal activity has successfully completed [[Page 565]] a supervised drug rehabilitation program approved by the PHA; or (B) That the circumstances leading to eviction no longer exist (for example, the criminal household member has died or is imprisoned). (ii) The PHA must establish standards that prohibit admission if: (A) The PHA determines that any household member is currently engaging in illegal use of a drug; (B) The PHA determines that it has reasonable cause to believe that a household member's illegal drug use or a pattern of illegal drug use may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents; or (C) Any household member has ever been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of federally assisted housing. (2) Prohibiting admission of other criminals--(i) Mandatory prohibition. The PHA must establish standards that prohibit admission to the program if any member of the household is subject to a lifetime registration requirement under a State sex offender registration program. In this screening of applicants, the PHA must perform criminal history background checks necessary to determine whether any household member is subject to a lifetime sex offender registration requirement in the State where the housing is located and in other States where the household members are known to have resided. (ii) Permissive prohibitions. (A) The PHA may prohibit admission of a household to the program if the PHA determines that any household member is currently engaged in, or has engaged in during a reasonable time before the admission: (1) Drug-related criminal activity; (2) Violent criminal activity; (3) Other criminal activity which may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents or persons residing in the immediate vicinity; or (4) Other criminal activity which may threaten the health or safety of the owner, property management staff, or persons performing a contract administration function or responsibility on behalf of the PHA (including a PHA employee or a PHA contractor, subcontractor or agent). (B) The PHA may establish a period before the admission decision during which an applicant must not have engaged in the activities specified in paragraph (a)(2)(i) of this section (``reasonable time''). (C) If the PHA previously denied admission to an applicant because a member of the household engaged in criminal activity, the PHA may reconsider the applicant if the PHA has sufficient evidence that the members of the household are not currently engaged in, and have not engaged in, such criminal activity during a reasonable period, as determined by the PHA, before the admission decision. (1) The PHA would have ``sufficient evidence'' if the household member submitted a certification that she or he is not currently engaged in and has not engaged in such criminal activity during the specified period and provided supporting information from such sources as a probation officer, a landlord, neighbors, social service agency workers and criminal records, which the PHA verified. (2) For purposes of this section, a household member is ``currently engaged in'' criminal activity if the person has engaged in the behavior recently enough to justify a reasonable belief that the behavior is current. (3) Prohibiting admission of alcohol abusers. The PHA must establish standards that prohibit admission to the program if the PHA determines that it has reasonable cause to believe that a household member's abuse or pattern of abuse of alcohol may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents. (b) Terminating assistance--(1) Terminating assistance for drug criminals. (i) The PHA must establish standards that allow the PHA to terminate assistance for a family under the program if the PHA determines that: (A) Any household member is currently engaged in any illegal use of a drug; or (B) A pattern of illegal use of a drug by any household member interferes with the health, safety, or right to [[Page 566]] peaceful enjoyment of the premises by other residents. (ii) The PHA must immediately terminate assistance for a family under the program if the PHA determines that any member of the household has ever been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of federally assisted housing. (iii) The PHA must establish standards that allow the PHA to terminate assistance under the program for a family if the PHA determines that any family member has violated the family's obligation under Sec. 982.551 not to engage in any drug-related criminal activity. (2) Terminating assistance for other criminals. The PHA must establish standards that allow the PHA to terminate assistance under the program for a family if the PHA determines that any household member has violated the family's obligation under Sec. 982.551 not to engage in violent criminal activity. (3) Terminating assistance for alcohol abusers. The PHA must establish standards that allow termination of assistance for a family if the PHA determines that a household member's abuse or pattern of abuse of alcohol may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents. (c) Evidence of criminal activity. The PHA may terminate assistance for criminal activity by a household member as authorized in this section if the PHA determines, based on a preponderance of the evidence, that the household member has engaged in the activity, regardless of whether the household member has been arrested or convicted for such activity. (d) Use of criminal record--(1) Denial. If a PHA proposes to deny admission for criminal activity as shown by a criminal record, the PHA must provide the subject of the record and the applicant with a copy of the criminal record. The PHA must give the family an opportunity to dispute the accuracy and relevance of that record, in the informal review process in accordance with Sec. 982.554. (See part 5, subpart J for provision concerning access to criminal records.) (2) Termination of assistance. If a PHA proposes to terminate assistance for criminal activity as shown by a criminal record, the PHA must notify the household of the proposed action to be based on the information and must provide the subject of the record and the tenant with a copy of the criminal record. The PHA must give the family an opportunity to dispute the accuracy and relevance of that record in accordance with Sec. 982.555. (3) Cost of obtaining criminal record. The PHA may not pass along to the tenant the costs of a criminal records check. (e) The requirements in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to this section. [66 FR 28805, May 24, 2001, as amended at 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 8247, Feb. 17, 2015; 81 FR 80817, Nov. 16, 2016] Sec. 982.554 Informal review for applicant. (a) Notice to applicant. The PHA must give an applicant for participation prompt notice of a decision denying assistance to the applicant. The notice must contain a brief statement of the reasons for the PHA decision. The notice must also state that the applicant may request an informal review of the decision and must describe how to obtain the informal review. (b) Informal review process. The PHA must give an applicant an opportunity for an informal review of the PHA decision denying assistance to the applicant. The administrative plan must state the PHA procedures for conducting an informal review. The PHA review procedures must comply with the following: (1) The review may be conducted by any person or persons designated by the PHA, other than a person who made or approved the decision under review or a subordinate of this person. (2) The applicant must be given an opportunity to present written or oral objections to the PHA decision. (3) The PHA must notify the applicant of the PHA final decision after the informal review, including a brief [[Page 567]] statement of the reasons for the final decision. (c) When informal review is not required. The PHA is not required to provide the applicant an opportunity for an informal review for any of the following: (1) Discretionary administrative determinations by the PHA. (2) General policy issues or class grievances. (3) A determination of the family unit size under the PHA subsidy standards. (4) A PHA determination not to approve an extension of the voucher term. (5) A PHA determination not to grant approval of the tenancy. (6) An PHA determination that a unit selected by the applicant is not in compliance with HQS. (7) An PHA determination that the unit is not in accordance with HQS because of the family size or composition. (d) Restrictions on assistance for noncitizens. The informal hearing provisions for the denial of assistance on the basis of ineligible immigration status are contained in 24 CFR part 5. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 13627, Mar. 27, 1996; 64 FR 26650, May 14, 1999; 80 FR 50575, Aug. 20, 2015] Sec. 982.555 Informal hearing for participant. (a) When hearing is required. (1) A PHA must give a participant family an opportunity for an informal hearing to consider whether the following PHA decisions relating to the individual circumstances of a participant family are in accordance with the law, HUD regulations and PHA policies: (i) A determination of the family's annual or adjusted income, and the use of such income to compute the housing assistance payment. (ii) A determination of the appropriate utility allowance (if any) for tenant-paid utilities from the PHA utility allowance schedule. (iii) A determination of the family unit size under the PHA subsidy standards. (iv) A determination to terminate assistance for a participant family because of the family's action or failure to act (see Sec. 982.552). (v) A determination to terminate assistance because the participant family has been absent from the assisted unit for longer than the maximum period permitted under PHA policy and HUD rules. (2) In the cases described in paragraphs (a)(1) (iv), (v) and (vi) of this section, the PHA must give the opportunity for an informal hearing before the PHA terminates housing assistance payments for the family under an outstanding HAP contract. (b) When hearing is not required. The PHA is not required to provide a participant family an opportunity for an informal hearing for any of the following: (1) Discretionary administrative determinations by the PHA. (2) General policy issues or class grievances. (3) Establishment of the PHA schedule of utility allowances for families in the program. (4) A PHA determination not to approve an extension of the voucher term. (5) A PHA determination not to approve a unit or tenancy. (6) A PHA determination that an assisted unit is not in compliance with HQS. (However, the PHA must provide the opportunity for an informal hearing for a decision to terminate assistance for a breach of the HQS caused by the family as described in Sec. 982.551(c).) (7) A PHA determination that the unit is not in accordance with HQS because of the family size. (8) A determination by the PHA to exercise or not to exercise any right or remedy against the owner under a HAP contract. (c) Notice to family. (1) In the cases described in paragraphs (a)(1) (i), (ii) and (iii) of this section, the PHA must notify the family that the family may ask for an explanation of the basis of the PHA determination, and that if the family does not agree with the determination, the family may request an informal hearing on the decision. (2) In the cases described in paragraphs (a)(1) (iv), (v) and (vi) of this [[Page 568]] section, the PHA must give the family prompt written notice that the family may request a hearing. The notice must: (i) Contain a brief statement of reasons for the decision, (ii) State that if the family does not agree with the decision, the family may request an informal hearing on the decision, and (iii) State the deadline for the family to request an informal hearing. (d) Expeditious hearing process. Where a hearing for a participant family is required under this section, the PHA must proceed with the hearing in a reasonably expeditious manner upon the request of the family. (e) Hearing procedures--(1) Administrative plan. The administrative plan must state the PHA procedures for conducting informal hearings for participants. (2) Discovery--(i) By family. The family must be given the opportunity to examine before the PHA hearing any PHA documents that are directly relevant to the hearing. The family must be allowed to copy any such document at the family's expense. If the PHA does not make the document available for examination on request of the family, the PHA may not rely on the document at the hearing. (ii) By PHA. The PHA hearing procedures may provide that the PHA must be given the opportunity to examine at PHA offices before the PHA hearing any family documents that are directly relevant to the hearing. The PHA must be allowed to copy any such document at the PHA's expense. If the family does not make the document available for examination on request of the PHA, the family may not rely on the document at the hearing. (iii) Documents. The term ``documents'' includes records and regulations. (3) Representation of family. At its own expense, the family may be represented by a lawyer or other representative. (4) Hearing officer: Appointment and authority. (i) The hearing may be conducted by any person or persons designated by the PHA, other than a person who made or approved the decision under review or a subordinate of this person. (ii) The person who conducts the hearing may regulate the conduct of the hearing in accordance with the PHA hearing procedures. (5) Evidence. The PHA and the family must be given the opportunity to present evidence, and may question any witnesses. Evidence may be considered without regard to admissibility under the rules of evidence applicable to judicial proceedings. (6) Issuance of decision. The person who conducts the hearing must issue a written decision, stating briefly the reasons for the decision. Factual determinations relating to the individual circumstances of the family shall be based on a preponderance of the evidence presented at the hearing. A copy of the hearing decision shall be furnished promptly to the family. (f) Effect of decision. The PHA is not bound by a hearing decision: (1) Concerning a matter for which the PHA is not required to provide an opportunity for an informal hearing under this section, or that otherwise exceeds the authority of the person conducting the hearing under the PHA hearing procedures. (2) Contrary to HUD regulations or requirements, or otherwise contrary to federal, State, or local law. (3) If the PHA determines that it is not bound by a hearing decision, the PHA must promptly notify the family of the determination, and of the reasons for the determination. (g) Restrictions on assistance to noncitizens. The informal hearing provisions for the denial of assistance on the basis of ineligible immigration status are contained in 24 CFR part 5. (Approved by the Office of Management and Budget under control number 2577-0169) [60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 FR 13627, Mar. 27, 1996; 64 FR 26650, May 14, 1999; 65 FR 16823, Mar. 30, 2000; 80 FR 8247, Feb. 17, 2015; 80 FR 50575, Aug. 20, 2015] Subpart M_Special Housing Types Source: 63 FR 23865, Apr. 30, 1998, unless otherwise noted. [[Page 569]] Sec. 982.601 Overview. (a) Special housing types. This subpart describes program requirements for special housing types. The following are the special housing types: (1) Single room occupancy (SRO) housing; (2) Congregate housing; (3) Group home; (4) Shared housing; (5) Manufactured home; (6) Cooperative housing (excluding families that are not cooperative members); and (7) Homeownership option. (b) PHA choice to offer special housing type. (1) The PHA may permit a family to use any of the following special housing types in accordance with requirements of the program: single room occupancy (SRO) housing, congregate housing, group home, shared housing, manufactured home when the family owns the home and leases the manufactured home space, cooperative housing or homeownership option. (2) In general, the PHA is not required to permit families (including families that move into the PHA program under portability procedures) to use any of these special housing types, and may limit the number of families using special housing types. (3) The PHA must permit use of any special housing type if needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities in accordance with 24 CFR part 8. (4) For occupancy of a manufactured home, see Sec. 982.620(a). (c) Program funding for special housing types. (1) HUD does not provide any additional or designated funding for special housing types, or for a specific special housing type (e.g., the homeownership option). Assistance for special housing types is paid from program funding available for the PHA's tenant-based program under the consolidated annual contributions contract. (2) The PHA may not set aside program funding or program slots for special housing types or for a specific special housing type. (d) Family choice of housing and housing type. The family chooses whether to use housing that qualifies as a special housing type under this subpart, or as any specific special housing type, or to use other eligible housing in accordance with requirements of the program. The PHA may not restrict the family's freedom to choose among available units in accordance with Sec. 982.353. (e) Applicability of requirements. (1) Except as modified by this subpart, the requirements of other subparts of this part apply to the special housing types. (2) Provisions in this subpart only apply to a specific special housing type. The housing type is noted in the title of each section. (3) Housing must meet the requirements of this subpart for a single special housing type specified by the family. Such housing is not subject to requirements for other special housing types. A single unit cannot be designated as more than one special housing type. [63 FR 23865, Apr. 30, 1998, as amended at 65 FR 55162, Sept. 12, 2000; 67 FR 64493, Oct. 18, 2002; 80 FR 8247, Feb. 17, 2015] Single Room Occupancy (SRO) Sec. 982.602 SRO: Who may reside in an SRO? A single person may reside in an SRO housing unit. [64 FR 26650, May 14, 1999] Sec. 982.603 SRO: Lease and HAP contract. For SRO housing, there is a separate lease and HAP contract for each assisted person. Sec. 982.604 SRO: Voucher housing assistance payment. (a) For a person residing in SRO housing, the payment standard is 75 percent of the zero-bedroom payment standard amount on the PHA payment standard schedule. For a person residing in SRO housing in an exception area, the payment standard is 75 percent of the HUD-approved zero- bedroom exception payment standard amount. (b) The utility allowance for an assisted person residing in SRO housing is 75 percent of the zero bedroom utility allowance. [64 FR 26650, May 14, 1999] [[Page 570]] Sec. 982.605 SRO: Housing quality standards. (a) HQS standards for SRO. As defined in Sec. 982.4, housing quality standards (HQS) refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program or a HUD approved alternative standard for the PHA under 24 CFR 5.703(g). However, the standards in this section apply in place of standards related to sanitary facilities, food preparation and refuse disposal, and space and security. Since the SRO units will not house children, the standards at 24 CFR part 35, subparts A, B, H, and R, applying to the PBC program, concerning lead-based paint, do not apply to SRO housing. (b) Performance requirements. (1) SRO housing is subject to the additional performance requirements in this paragraph (b). (2) Sanitary facilities, and space and security characteristics must meet local code standards for SRO housing. In the absence of applicable local code standards for SRO housing, the following standards apply: (i) Sanitary facilities. (A) At least one flush toilet that can be used in privacy, lavatory basin, and bathtub or shower, in proper operating condition, must be supplied for each six persons or fewer residing in the SRO housing. (B) If SRO units are leased only to males, flush urinals may be substituted for not more than one-half the required number of flush toilets. However, there must be at least one flush toilet in the building. (C) Every lavatory basin and bathtub or shower must be supplied at all times with an adequate quantity of hot and cold running water. (D) All of these facilities must be in proper operating condition, and must be adequate for personal cleanliness and the disposal of human waste. The facilities must utilize an approvable public or private disposal system. (E) Sanitary facilities must be reasonably accessible from a common hall or passageway to all persons sharing them. These facilities may not be located more than one floor above or below the SRO unit. Sanitary facilities may not be located below grade unless the SRO units are located on that level. (ii) Space and security. (A) No more than one person may reside in an SRO unit. (B) An SRO unit must contain at least one hundred ten square feet of floor space. (C) An SRO unit must contain at least four square feet of closet space for each resident (with an unobstructed height of at least five feet). If there is less closet space, space equal to the amount of the deficiency must be subtracted from the area of the habitable room space when determining the amount of floor space in the SRO unit. The SRO unit must contain at least one hundred ten square feet of remaining floor space after subtracting the amount of the deficiency in minimum closet space. (D) Exterior doors and windows accessible from outside an SRO unit must be lockable. (3) Access. (i) Access doors to an SRO unit must have locks for privacy in proper operating condition. (ii) An SRO unit must have immediate access to two or more approved means of exit, appropriately marked, leading to safe and open space at ground level, and any means of exit required by State and local law. (iii) The resident must be able to access an SRO unit without passing through any other unit. (4) Sprinkler system. A sprinkler system that protects all major spaces, hard wired smoke detectors, and such other fire and safety improvements as State or local law may require must be installed in each building. The term ``major spaces'' means hallways, large common areas, and other areas specified in local fire, building, or safety codes. [63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30503, May 11, 2023] Congregate Housing Sec. 982.606 Congregate housing: Who may reside in congregate housing. (a) An elderly person or a person with disabilities may reside in a congregate housing unit. (b)(1) If approved by the PHA, a family member or live-in aide may reside [[Page 571]] with the elderly person or person with disabilities. (2) The PHA must approve a live-in aide if needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities in accordance with 24 CFR part 8. See Sec. 982.316 concerning occupancy by a live-in aide. Sec. 982.607 Congregate housing: Lease and HAP contract. For congregate housing, there is a separate lease and HAP contract for each assisted family. Sec. 982.608 Congregate housing: Voucher housing assistance payment. (a) Unless there is a live-in aide: (1) For a family residing in congregate housing, the payment standard is the zero-bedroom payment standard amount on the PHA payment standard schedule. For a family residing in congregate housing in an exception area, the payment standard is the HUD-approved zero-bedroom exception payment standard amount. (2) However, if there are two or more rooms in the unit (not including kitchen or sanitary facilities), the payment standard for a family residing in congregate housing is the one-bedroom payment standard amount. (b) If there is a live-in aide, the live-in aide must be counted in determining the family unit size. [63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26650, May 14, 1999] Sec. 982.609 Congregate housing: Housing quality standards. (a) HQS standards for congregate housing. As defined in Sec. 982.4, housing quality standards (HQS) refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program or a HUD approved alternative standard for the PHA under 24 CFR 5.703(g). However, the standards in this section apply in place of standards related to food preparation and refuse disposal. Congregate housing is not subject to the requirement that the dwelling unit must have a kitchen area. (b) Food preparation and refuse disposal: Additional performance requirements. The following additional performance requirements apply to congregate housing: (1) The unit must contain a refrigerator of appropriate size. (2) There must be central kitchen and dining facilities on the premises. These facilities: (i) Must be located within the premises, and accessible to the residents; (ii) Must contain suitable space and equipment to store, prepare, and serve food in a sanitary manner; (iii) Must be used to provide a food service that is provided for the residents, and that is not provided by the residents; and (iv) Must be for the primary use of residents of the congregate units and be sufficient in size to accommodate the residents. (3) There must be adequate facilities and services for the sanitary disposal of food waste and refuse, including facilities for temporary storage where necessary. [63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023] Group Home Sec. 982.610 Group home: Who may reside in a group home. (a) An elderly person or a person with disabilities may reside in a State-approved group home. (b)(1) If approved by the PHA, a live-in aide may reside with a person with disabilities. (2) The PHA must approve a live-in aide if needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities in accordance with 24 CFR part 8. See Sec. 982.316 concerning occupancy by a live-in aide. (c) Except for a live-in aide, all residents of a group home, whether assisted or unassisted, must be elderly persons or persons with disabilities. (d) Persons residing in a group home must not require continual medical or nursing care. (e) Persons who are not assisted under the tenant-based program may reside in a group home. (f) No more than 12 persons may reside in a group home. This limit covers [[Page 572]] all persons who reside in the unit, including assisted and unassisted residents and any live-in aide. Sec. 982.611 Group home: Lease and HAP contract. For assistance in a group home, there is a separate HAP contract and lease for each assisted person. Sec. 982.612 Group home: State approval of group home. A group home must be licensed, certified, or otherwise approved in writing by the State (e.g., Department of Human Resources, Mental Health, Retardation, or Social Services) as a group home for elderly persons or persons with disabilities. Sec. 982.613 Group home: Rent and voucher housing assistance payment. (a) Meaning of pro-rata portion. For a group home, the term ``pro- rata portion'' means the ratio derived by dividing the number of persons in the assisted household by the total number of residents (assisted and unassisted) residing in the group home. The number of persons in the assisted household equals one assisted person plus any PHA-approved live-in aide. (b) Rent to owner: Reasonable rent limit. (1) The rent to owner for an assisted person may not exceed the pro-rata portion of the reasonable rent for the group home. (2) The reasonable rent for a group home is determined in accordance with Sec. 982.507. In determining reasonable rent for the group home, the PHA must consider whether sanitary facilities, and facilities for food preparation and service, are common facilities or private facilities. (c) Payment standard--(1) Family unit size. (i) Unless there is a live-in aide, the family unit size is zero or one bedroom. (ii) If there is a live-in aide, the live-in aide must be counted in determining the family unit size. (2) The payment standard for a person who resides in a group home is the lower of: (i) The payment standard amount on the PHA payment standard schedule for the family unit size; or (ii) The pro-rata portion of the payment standard amount on the PHA payment standard schedule for the group home size. (iii) If there is a live-in aide, the live-in aide must be counted in determining the family unit size. (d) Utility allowance. The utility allowance for each assisted person residing in a group home is the pro-rata portion of the utility allowance for the group home unit size. [63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26651, May 14, 1999] Sec. 982.614 Group home: Housing quality standards. (a) Compliance with HQS. The PHA may not give approval to reside in a group home unless the unit, including the portion of the unit available for use by the assisted person under the lease, meets the housing quality standards. As defined in Sec. 982.4, housing quality standards (HQS) refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program or a HUD approved alternative standard for the PHA under 24 CFR 5.703(g). (b) Applicable HQS standards. (1) The standards in this section apply in place of standards in 24 CFR 5.703 that relate to sanitary facilities, food preparation and refuse disposal, space and security, structure and materials, and site and neighborhood. (2) The entire unit must comply with the HQS. (c) Additional performance requirements. The following additional performance requirements apply to a group home: (1) Sanitary facilities. (i) There must be a bathroom in the unit. The unit must contain, and an assisted resident must have ready access to: (A) A flush toilet that can be used in privacy; (B) A fixed basin with hot and cold running water; and (C) A shower or bathtub with hot and cold running water. (ii) All of these facilities must be in proper operating condition, and must be adequate for personal cleanliness and the disposal of human waste. The facilities must utilize an approvable public or private disposal system. [[Page 573]] (iii) The unit may contain private or common sanitary facilities. However, the facilities must be sufficient in number so that they need not be shared by more than four residents of the group home. (iv) Sanitary facilities in the group home must be readily accessible to and usable by residents, including persons with disabilities. (2) Food preparation and service. (i) The unit must contain a kitchen and a dining area. There must be adequate space to store, prepare, and serve foods in a sanitary manner. (ii) Food preparation and service equipment must be in proper operating condition. The equipment must be adequate for the number of residents in the group home. The unit must contain the following equipment: (A) A stove or range, and oven; (B) A refrigerator; and (C) A kitchen sink with hot and cold running water. The sink must drain into an approvable public or private disposal system. (iii) There must be adequate facilities and services for the sanitary disposal of food waste and refuse, including facilities for temporary storage where necessary. (iv) The unit may contain private or common facilities for food preparation and service. (3) Space and security. (i) The unit must provide adequate space and security for the assisted person. (ii) The unit must contain a living room, kitchen, dining area, bathroom, and other appropriate social, recreational or community space. The unit must contain at least one bedroom of appropriate size for each two persons. (iii) Doors and windows that are accessible from outside the unit must be lockable. (4) Structure and material. (i) The unit must be structurally sound to avoid any threat to the health and safety of the residents, and to protect the residents from the environment. (ii) Ceilings, walls, and floors must not have any serious defects such as severe bulging or leaning, loose surface materials, severe buckling or noticeable movement under walking stress, missing parts or other significant damage. The roof structure must be firm, and the roof must be weathertight. The exterior or wall structure and exterior wall surface may not have any serious defects such as serious leaning, buckling, sagging, cracks or large holes, loose siding, or other serious damage. The condition and equipment of interior and exterior stairways, halls, porches, walkways, etc., must not present a danger of tripping or falling. Elevators must be maintained in safe operating condition. (iii) The group home must be accessible to and usable by a resident with disabilities. (5) Site and neighborhood. The site and neighborhood must be reasonably free from disturbing noises and reverberations and other hazards to the health, safety, and general welfare of the residents. The site and neighborhood may not be subject to serious adverse environmental conditions, natural or manmade, such as dangerous walks or steps, instability, flooding, poor drainage, septic tank back-ups, sewage hazards or mud slides, abnormal air pollution, smoke or dust, excessive noise, vibrations or vehicular traffic, excessive accumulations of trash, vermin or rodent infestation, or fire hazards. The unit must be located in a residential setting. [63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023] Shared Housing Sec. 982.615 Shared housing: Occupancy. (a) Sharing a unit. An assisted family may reside in shared housing. In shared housing, an assisted family shares a unit with the other resident or residents of the unit. The unit may be a house or an apartment. (b) Who may share a dwelling unit with assisted family? (1) If approved by the PHA, a live-in aide may reside with the family to care for a person with disabilities. The PHA must approve a live-in aide if needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities in accordance with 24 CFR part 8. See Sec. 982.316 concerning occupancy by a live-in aide. (2) Other persons who are assisted under the tenant-based program, or [[Page 574]] other persons who are not assisted under the tenant-based program, may reside in a shared housing unit. (3) The owner of a shared housing unit may reside in the unit. A resident owner may enter into a HAP contract with the PHA. However, housing assistance may not be paid on behalf of an owner. An assisted person may not be related by blood or marriage to a resident owner. [63 FR 23865, Apr. 30, 1998, as amended at 80 FR 8247, Feb. 17, 2015] Sec. 982.616 Shared housing: Lease and HAP contract. For assistance in a shared housing unit, there is a separate HAP contract and lease for each assisted family. Sec. 982.617 Shared housing: Rent and voucher housing assistance payment. (a) Meaning of pro-rata portion. For shared housing, the term ``pro- rata portion'' means the ratio derived by dividing the number of bedrooms in the private space available for occupancy by a family by the total number of bedrooms in the unit. For example, for a family entitled to occupy three bedrooms in a five bedroom unit, the ratio would be 3/5. (b) Rent to owner: Reasonable rent. (1) The rent to owner for the family may not exceed the pro-rata portion of the reasonable rent for the shared housing dwelling unit. (2) The reasonable rent is determined in accordance with Sec. 982.507. (c) Payment standard. The payment standard for a family that resides in a shared housing is the lower of: (1) The payment standard amount on the PHA payment standard schedule for the family unit size; or (2) The pro-rata portion of the payment standard amount on the PHA payment standard schedule for the size of the shared housing unit. (d) Utility allowance. The utility allowance for an assisted family residing in shared housing is the pro-rata portion of the utility allowance for the shared housing unit. [63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26651, May 14, 1999] Sec. 982.618 Shared housing: Housing quality standards. (a) Compliance with HQS. The PHA may not give approval to reside in shared housing unless the entire unit, including the portion of the unit available for use by the assisted family under its lease, meets the housing quality standards. (b) Applicable HQS standards. As defined in Sec. 982.4, housing quality standards (HQS) refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program or a HUD approved alternative standard for the PHA under 24 CFR 5.703(g). However, the HQS standards in this section apply in place of standards related to space and security in 24 CFR 5.703. (c) Facilities available for family. The facilities available for the use of an assisted family in shared housing under the family's lease must include (whether in the family's private space or in the common space) a living room, sanitary facilities in accordance with the standards set in 24 CFR 5.703, and food preparation and refuse disposal facilities in accordance with 24 CFR 5.703. (d) Space and security: Performance requirements. (1) The entire unit must provide adequate space and security for all its residents (whether assisted or unassisted). (2)(i) Each unit must contain private space for each assisted family, plus common space for shared use by the residents of the unit. Common space must be appropriate for shared use by the residents. (ii) The private space for each assisted family must contain at least one bedroom for each two persons in the family. The number of bedrooms in the private space of an assisted family may not be less than the family unit size. (iii) A zero or one bedroom unit may not be used for shared housing. [63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023] Cooperative Sec. 982.619 Cooperative housing. (a) Assistance in cooperative housing. This section applies to rental assistance for a cooperative member residing [[Page 575]] in cooperative housing. However, this section does not apply to: (1) Assistance for a cooperative member under the homeownership option pursuant to Sec. Sec. 982.625 through 982.641; or (2) Rental assistance for a family that leases a cooperative housing unit from a cooperative member (such rental assistance is not a special housing type, and is subject to requirements in other subparts of this part 982). (b) Rent to owner. (1) The reasonable rent for a cooperative unit is determined in accordance with Sec. 982.507. For cooperative housing, the rent to owner is the monthly carrying charge under the occupancy agreement/lease between the member and the cooperative. (2) The carrying charge consists of the amount assessed to the member by the cooperative for occupancy of the housing. The carrying charge includes the member's share of the cooperative debt service, operating expenses, and necessary payments to cooperative reserve funds. However, the carrying charge does not include down-payments or other payments to purchase the cooperative unit, or to amortize a loan to the family for this purpose. (3) Gross rent is the carrying charge plus any utility allowance. (4) Adjustments are applied to the carrying charge as determined in accordance with this section. (5) The occupancy agreement/lease and other appropriate documents must provide that the monthly carrying charge is subject to Section 8 limitations on rent to owner. (c) Housing assistance payment. The amount of the housing assistance payment is determined in accordance with subpart K of this part. (d) Maintenance. (1) During the term of the HAP contract between the PHA and the cooperative, the dwelling unit and premises must be maintained in accordance with the HQS. If the dwelling unit and premises are not maintained in accordance with the HQS, the PHA may exercise all available remedies, regardless of whether the family or the cooperative is responsible for such breach of the HQS. PHA remedies for breach of the HQS include recovery of overpayments, abatement or other reduction of housing assistance payments, termination of housing assistance payments and termination of the HAP contract. (2) The PHA may not make any housing assistance payments if the contract unit does not meet the HQS, unless any defect is corrected within the period specified by the PHA and the PHA verifies the correction. If a defect is life-threatening, the defect must be corrected within no more than 24 hours. For other defects, the defect must be corrected within the period specified by the PHA. (3) The family is responsible for a breach of the HQS that is caused by any of the following: (i) The family fails to perform any maintenance for which the family is responsible in accordance with the terms of the cooperative occupancy agreement between the cooperative member and the cooperative; (ii) The family fails to pay for any utilities that the cooperative is not required to pay for, but which are to be paid by the cooperative member; (iii) The family fails to provide and maintain any appliances that the cooperative is not required to provide, but which are to be provided by the cooperative member; or (iv) Any member of the household or guest damages the dwelling unit or premises (damages beyond ordinary wear and tear). (4) If the family has caused a breach of the HQS for which the family is responsible, the PHA must take prompt and vigorous action to enforce such family obligations. The PHA may terminate assistance for violation of family obligations in accordance with Sec. 982.552. (5) Section 982.404 does not apply to assistance for cooperative housing under this section. (e) Live-in aide. (1) If approved by the PHA, a live-in aide may reside with the family to care for a person with disabilities. The PHA must approve a live-in aide if needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities in accordance with 24 CFR part 8. See Sec. 982.316 concerning occupancy by a live-in aide. [[Page 576]] (2) If there is a live-in aide, the live-in aide must be counted in determining the family unit size. [63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26651, May 14, 1999; 65 FR 55162, Sept. 12, 2000; 80 FR 8247, Feb. 17, 2015] Manufactured Home Sec. 982.620 Manufactured home: Applicability of requirements. (a) Assistance for resident of manufactured home. (1) A family may reside in a manufactured home with assistance under the program. (2) The PHA must permit a family to lease a manufactured home and space with assistance under the program. (3) The PHA may provide assistance for a family that owns the manufactured home and leases only the space. The PHA is not required to provide such assistance under the program. (b) Applicability. (1) The HQS in Sec. 982.621 always apply when assistance is provided to a family occupying a manufactured home (under paragraph (a)(2) or (a)(3) of this section). (2) Sections 982.622 to 982.624 only apply when assistance is provided to a manufactured home owner to lease a manufactured home space. (c) Live-in aide. (1) If approved by the PHA, a live-in aide may reside with the family to care for a person with disabilities. The PHA must approve a live-in aide if needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities in accordance with 24 CFR part 8. See Sec. 982.316 concerning occupancy by a live-in aide. (2) If there is a live-in aide, the live-in aide must be counted in determining the family unit size. Sec. 982.621 Manufactured home: Housing quality standards. As defined in Sec. 982.4, housing quality standards (HQS) refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program or a HUD approved alternative standard for the PHA under 24 CFR 5.703(g). A manufactured home also must meet the following requirements: (a) Performance requirement. A manufactured home must be placed on the site in a stable manner, and must be free from hazards such as sliding or wind damage. (b) Acceptability criteria. A manufactured home must be securely anchored by a tie-down device that distributes and transfers the loads imposed by the unit to appropriate ground anchors to resist wind overturning and sliding. [63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023] Manufactured Home Space Rental Sec. 982.622 Manufactured home space rental: Rent to owner. (a) What is included. (1) Rent to owner for rental of a manufactured home space includes payment for maintenance and services that the owner must provide to the tenant under the lease for the space. (2) Rent to owner does not include the costs of utilities and trash collection for the manufactured home. However, the owner may charge the family a separate fee for the cost of utilities or trash collection provided by the owner. (b) Reasonable rent. (1) During the assisted tenancy, the rent to owner for the manufactured home space may not exceed a reasonable rent as determined in accordance with this section. Section 982.503 is not applicable. (2) The PHA may not approve a lease for a manufactured home space until the PHA determines that the initial rent to owner for the space is a reasonable rent. At least annually during the assisted tenancy, the PHA must redetermine that the current rent to owner is a reasonable rent. (3) The PHA must determine whether the rent to owner for the manufactured home space is a reasonable rent in comparison to rent for other comparable manufactured home spaces. To make this determination, the PHA must consider the location and size of the space, and any services and maintenance to be provided by the owner in accordance with the lease (without a fee in addition to the rent). (4) By accepting each monthly housing assistance payment from the PHA, the owner of the manufactured home space certifies that the rent to owner for the space is not more than rent [[Page 577]] charged by the owner for unassisted rental of comparable spaces in the same manufactured home park or elsewhere. The owner must give the PHA information, as requested by the PHA, on rents charged by the owner for other manufactured home spaces. Sec. 982.623 Manufactured home space rental: Housing assistance payment. (a) There is a separate fair market rent for a manufactured home space. The FMR for a manufactured home space is determined in accordance with Sec. 888.113(e) of this title. The FMR for a manufactured home space is generally 40 percent of the published FMR for a two-bedroom unit. (b) The payment standard shall be determined in accordance with Sec. 982.505. (c) The PHA shall pay a monthly housing assistance payment on behalf of the family that is equal to the lower of: (1) The payment standard minus the total tenant payment; or (2) The rent paid for rental of the real property on which the manufactured home owned by the family is located (``space rent'') minus the total tenant payment. (d) The space rent is the sum of the following as determined by the PHA: (1) Rent to owner for the manufactured home space; (2) Owner maintenance and management charges for the space; (3) The utility allowance for tenant-paid utilities. [64 FR 26651, May 14, 1999; 64 FR 49659, Sept. 14, 1999; 64 FR 56915, Oct. 21, 1999; 80 FR 8247, Feb. 17, 2015] Sec. 982.624 Manufactured home space rental: Utility allowance schedule. The PHA must establish utility allowances for manufactured home space rental. For the first twelve months of the initial lease term only, the allowances must include a reasonable amount for utility hook- up charges payable by the family if the family actually incurs the expenses because of a move. Allowances for utility hook-up charges do not apply to a family that leases a manufactured home space in place. Utility allowances for manufactured home space must not cover costs payable by a family to cover the digging of a well or installation of a septic system. Homeownership Option Source: 65 FR 55163, Sept. 12, 2000, unless otherwise noted. Sec. 982.625 Homeownership option: General. (a) The homeownership option is used to assist a family residing in a home purchased and owned by one or more members of the family. (b) A family assisted under the homeownership option may be a newly admitted or existing participant in the program. (c) Forms of homeownership assistance. (1) A PHA may provide one of two forms of homeownership assistance for a family: (i) Monthly homeownership assistance payments; or (ii) A single downpayment assistance grant. (2) Prohibition against combining forms of homeownership assistance. A family may only receive one form of homeownership assistance. Accordingly, a family that includes a person who was an adult member of a family that previously received either of the two forms of homeownership assistance may not receive the other form of homeownership assistance from any PHA. (d) PHA choice to offer homeownership options. (1) The PHA may choose to offer either or both forms of homeownership assistance under this subpart, or choose not to offer either form of assistance. However, the PHA must offer either form of homeownership assistance if necessary as a reasonable accommodation for a person with disabilities in accordance with Sec. 982.601(b)(3). (2) It is the sole responsibility of the PHA to determine whether it is reasonable to implement a homeownership program as a reasonable accommodation. The PHA will determine what is reasonable based on the specific circumstances and individual needs of the person with a disability. The PHA may determine that it is not reasonable to offer homeownership assistance as a reasonable accommodation in cases where the PHA has otherwise opted not [[Page 578]] to implement a homeownership program. (e) Family choice. (1) The family chooses whether to participate in the homeownership option if offered by the PHA. (2) If the PHA offers both forms of homeownership assistance, the family chooses which form of homeownership assistance to receive. (f) The PHA must approve a live-in aide if needed as a reasonable accommodation so that the program is readily accessible to and useable by persons with disabilities in accordance with part 8 of this title. (See Sec. 982.316 concerning occupancy by a live-in aide.) (g) The PHA must have the capacity to operate a successful Section 8 homeownership program. The PHA has the required capacity if it satisfies either paragraph (g)(1), (g)(2), or (g)(3) of this section. (1) The PHA establishes a minimum homeowner downpayment requirement of at least 3 percent of the purchase price for participation in its Section 8 homeownership program, and requires that at least one percent of the purchase price come from the family's personal resources; (2) The PHA requires that financing for purchase of a home under its Section 8 homeownership program: (i) Be provided, insured, or guaranteed by the state or Federal government; (ii) Comply with secondary mortgage market underwriting requirements; or (iii) Comply with generally accepted private sector underwriting standards; or (3) The PHA otherwise demonstrates in its Annual Plan that it has the capacity, or will acquire the capacity, to successfully operate a Section 8 homeownership program. (h) Recapture of homeownership assistance. A PHA shall not impose or enforce any requirement for the recapture of voucher homeownership assistance on the sale or refinancing of a home purchased with assistance under the homeownership option. (i) Applicable requirements. The following specify what regulatory provisions (under the heading ``homeownership option'') are applicable to either or both forms of homeownership assistance (except as otherwise specifically provided): (1) Common provisions. The following provisions apply to both forms of homeownership assistance: (i) Section 982.625 (General); (ii) Section 982.626 (Initial requirements); (iii) Section 982.627 (Eligibility requirements for families); (iv) Section 982.628 (Eligible units); (v) Section 982.629 (Additional PHA requirements for family search and purchase); (vi) Section 982.630 (Homeownership counseling); (vii) Section 982.631 (Home inspections, contract of sale, and PHA disapproval of seller); (viii) Section 982.632 (Financing purchase of home; affordability of purchase); (ix) Section 982.636 (Portability); (x) Section 982.638 (Denial or termination of assistance for family); and (xi) Section 982.641 (Applicability of other requirements). (2) Monthly homeownership assistance payments. The following provisions only apply to homeownership assistance in the form of monthly homeownership assistance payments: (i) Section 982.633 (Continued assistance requirements; family obligations); (ii) Section 982.634 (Maximum term of homeownership assistance); (iii) Section 982.635 (Amount and distribution of monthly homeownership assistance payment); (iv) Section 982.637 (Move with continued tenant-based assistance); and (v) Section 982.639 (Administrative fees). (3) Downpayment assistance grant. The following provision only applies to homeownership assistance in the form of a downpayment assistance grant: Section 982.643 (Downpayment assistance grants). [65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64493, Oct. 18, 2002; 80 FR 8247, Feb. 17, 2015] Sec. 982.626 Homeownership option: Initial requirements. (a) List of initial requirements. Before commencing homeownership assistance for a family, the PHA must determine [[Page 579]] that all of the following initial requirements have been satisfied: (1) The family is qualified to receive homeownership assistance (see Sec. 982.627); (2) The unit is eligible (see Sec. 982.628); and (3) The family has satisfactorily completed the PHA program of required pre-assistance homeownership counseling (see Sec. 982.630). (b) Additional PHA requirements. Unless otherwise provided in this part, the PHA may limit homeownership assistance to families or purposes defined by the PHA, and may prescribe additional requirements for commencement of homeownership assistance for a family. Any such limits or additional requirements must be described in the PHA administrative plan. (c) Environmental requirements. The PHA is responsible for complying with the authorities listed in Sec. 58.6 of this title requiring the purchaser to obtain and maintain flood insurance for units in special flood hazard areas, prohibiting assistance for acquiring units in the coastal barrier resources system, and requiring notification to the purchaser of units in airport runway clear zones and airfield clear zones. In the case of units not yet under construction at the time the family enters into the contract for sale, the additional environmental review requirements referenced in Sec. 982.628(e) of this part also apply, and the PHA shall submit all relevant environmental information to the responsible entity or to HUD to assist in completion of those requirements. [63 FR 23865, Apr. 30, 1998, as amended at 72 FR 59938, Oct. 22, 2007] Sec. 982.627 Homeownership option: Eligibility requirements for families. (a) Determination whether family is qualified. The PHA may not provide homeownership assistance for a family unless the PHA determines that the family satisfies all of the following initial requirements at commencement of homeownership assistance for the family: (1) The family has been admitted to the Section 8 Housing Choice Voucher program, in accordance with subpart E of this part. (2) The family satisfies any first-time homeowner requirements (described in paragraph (b) of this section). (3) The family satisfies the minimum income requirement (described in paragraph (c) of this section). (4) The family satisfies the employment requirements (described in paragraph (d) of this section). (5) The family has not defaulted on a mortgage securing debt to purchase a home under the homeownership option (see paragraph (e) of this section). (6) Except for cooperative members who have acquired cooperative membership shares prior to commencement of homeownership assistance, no family member has a present ownership interest in a residence at the commencement of homeownership assistance for the purchase of any home. (7) Except for cooperative members who have acquired cooperative membership shares prior to the commencement of homeownership assistance, the family has entered a contract of sale in accordance with Sec. 982.631(c). (8) The family also satisfies any other initial requirements established by the PHA (see Sec. 982.626(b)). Any such additional requirements must be described in the PHA administrative plan. (b) First-time homeowner requirements. At commencement of homeownership assistance for the family, the family must be any of the following: (1) A first-time homeowner (defined at Sec. 982.4); (2) A cooperative member (defined at Sec. 982.4); or (3) A family of which a family member is a person with disabilities, and use of the homeownership option is needed as a reasonable accommodation so that the program is readily accessible to and usable by such person, in accordance with part 8 of this title. (c) Minimum income requirements. (1) At commencement of monthly homeownership assistance payments for the family, or at the time of a downpayment assistance grant for the family, the family must demonstrate that the annual income, as determined by the PHA in accordance with Sec. 5.609 of this title, of the adult family members who will own the home at commencement [[Page 580]] of homeownership assistance is not less than: (i) In the case of a disabled family (as defined in Sec. 5.403(b) of this title), the monthly Federal Supplemental Security Income (SSI) benefit for an individual living alone (or paying his or her share of food and housing costs) multiplied by twelve; or (ii) In the case of other families, the Federal minimum wage multiplied by 2,000 hours. (2)(i) Except in the case of an elderly family or a disabled family (see the definitions of these terms at Sec. 5.403(b) of this title), the PHA shall not count any welfare assistance received by the family in determining annual income under this section. (ii) The disregard of welfare assistance income under paragraph (c)(2)(i) of this section only affects the determination of minimum annual income used to determine if a family initially qualifies for commencement of homeownership assistance in accordance with this section, but does not affect: (A) The determination of income-eligibility for admission to the voucher program; (B) Calculation of the amount of the family's total tenant payment (gross family contribution); or (C) Calculation of the amount of homeownership assistance payments on behalf of the family. (iii) In the case of an elderly or disabled family, the PHA shall include welfare assistance for the adult family members who will own the home in determining if the family meets the minimum income requirement. (3) A PHA may establish a minimum income standard that is higher than those described in paragraph (c)(1) of this section for either or both types of families. However, a family that meets the applicable HUD minimum income requirement described in paragraph (c)(1) of this section, but not the higher standard established by the PHA shall be considered to satisfy the minimum income requirement if: (i) The family demonstrates that it has been pre-qualified or pre- approved for financing; (ii) The pre-qualified or pre-approved financing meets any PHA established requirements under Sec. 982.632 for financing the purchase of the home (including qualifications of lenders and terms of financing); and (iii) The pre-qualified or pre-approved financing amount is sufficient to purchase housing that meets HQS in the PHA's jurisdiction. (d) Employment requirements. (1) Except as provided in paragraph (d)(2) of this section, the family must demonstrate that one or more adult members of the family who will own the home at commencement of homeownership assistance: (i) Is currently employed on a full-time basis (the term ``full-time employment'' means not less than an average of 30 hours per week); and (ii) Has been continuously so employed during the year before commencement of homeownership assistance for the family. (2) The PHA shall have discretion to determine whether and to what extent interruptions are considered to break continuity of employment during the year. The PHA may count successive employment during the year. The PHA may count self-employment in a business. (3) The employment requirement does not apply to an elderly family or a disabled family (see the definitions of these terms at Sec. 5.403(b) of this title). Furthermore, if a family, other than an elderly family or a disabled family, includes a person with disabilities, the PHA shall grant an exemption from the employment requirement if the PHA determines that an exemption is needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities in accordance with part 8 of this title. (4) A PHA may not establish an employment requirement in addition to the employment standard established by this paragraph. (e) Prohibition against assistance to family that has defaulted. The PHA shall not commence homeownership assistance for a family that includes an individual who was an adult member of a family at the time when such family received homeownership assistance and [[Page 581]] defaulted on a mortgage securing debt incurred to purchase the home. [65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64493, Oct. 18, 2002; 80 FR 8247, Feb. 17, 2015] Sec. 982.628 Homeownership option: Eligible units. (a) Initial requirements applicable to the unit. The PHA must determine that the unit satisfies all of the following requirements: (1) The unit is eligible. (See Sec. 982.352. Paragraphs (a)(6), (a)(7) and (b) of Sec. 982.352 do not apply.) (2) The unit is either a one-unit property (including a manufactured home) or a single dwelling unit in a cooperative or condominium. (3) The unit has been inspected by a PHA inspector and by an independent inspector designated by the family (see Sec. 982.631). (4) The unit satisfies the HQS (see 24 CFR 5.703 and Sec. 982.631). (b) Purchase of home where family will not own fee title to the real property. Homeownership assistance may be provided for the purchase of a home where the family will not own fee title to the real property on which the home is located, but only if: (1) The home is located on a permanent foundation; and (2) The family has the right to occupy the home site for at least forty years. (c) PHA disapproval of seller. The PHA may not commence homeownership assistance for occupancy of a home if the PHA has been informed (by HUD or otherwise) that the seller of the home is debarred, suspended, or subject to a limited denial of participation under 2 CFR part 2424. (d) PHA-owned units. Homeownership assistance may be provided for the purchase of a unit that is owned by the PHA that administers the assistance under the consolidated ACC (including a unit owned by an entity substantially controlled by the PHA), only if all of the following conditions are satisfied: (1) The PHA must inform the family, both orally and in writing, that the family has the right to purchase any eligible unit and a PHA-owned unit is freely selected by the family without PHA pressure or steering; (2) The unit is not ineligible housing; (3) The PHA must obtain the services of an independent agency, in accordance with Sec. 982.352(b)(1)(iv)(B) and (C), to perform the following PHA functions: (i) Inspection of the unit for compliance with the HQS, in accordance with Sec. 982.631(a); (ii) Review of the independent inspection report, in accordance with Sec. 982.631(b)(4); (iii) Review of the contract of sale, in accordance with Sec. 982.631(c); and (iv) Determination of the reasonableness of the sales price and any PHA provided financing, in accordance with Sec. 982.632 and other supplementary guidance established by HUD. (e) Units not yet under construction. Families may enter into contracts of sale for units not yet under construction at the time the family enters into the contract for sale. However, the PHA shall not commence homeownership assistance for the family for that unit, unless and until: (1) Either: (i) The responsible entity completed the environmental review procedures required by 24 CFR part 58, and HUD approved the environmental certification and request for release of funds prior to commencement of construction; or (ii) HUD performed an environmental review under 24 CFR part 50 and notified the PHA in writing of environmental approval of the site prior to commencement of construction; (2) Construction of the unit has been completed; and (3) The unit has passed the required Housing Quality Standards (HQS) inspection (see Sec. 982.631(a)) and independent inspection (see Sec. 982.631(b)). [65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002; 67 FR 65865, Oct. 28, 2002; 67 FR 67522, Nov. 6, 2002; 72 FR 59938, Oct. 22, 2007; 72 FR 73496, Dec. 27, 2007; 88 FR 30504, May 11, 2023] [[Page 582]] Sec. 982.629 Homeownership option: Additional PHA requirements for family search and purchase. (a) The PHA may establish the maximum time for a family to locate a home, and to purchase the home. (b) The PHA may require periodic family reports on the family's progress in finding and purchasing a home. (c) If the family is unable to purchase a home within the maximum time established by the PHA, the PHA may issue the family a voucher to lease a unit or place the family's name on the waiting list for a voucher. Sec. 982.630 Homeownership option: Homeownership counseling. (a) Before commencement of homeownership assistance for a family, the family must attend and satisfactorily complete the pre-assistance homeownership and housing counseling program required by the PHA (pre- assistance counseling). (b) Suggested topics for the PHA-required pre-assistance counseling program include: (1) Home maintenance (including care of the grounds); (2) Budgeting and money management; (3) Credit counseling; (4) How to negotiate the purchase price of a home; (5) How to obtain homeownership financing and loan preapprovals, including a description of types of financing that may be available, and the pros and cons of different types of financing; (6) How to find a home, including information about homeownership opportunities, schools, and transportation in the PHA jurisdiction; (7) Advantages of purchasing a home in an area that does not have a high concentration of low-income families and how to locate homes in such areas; (8) Information on fair housing, including fair housing lending and local fair housing enforcement agencies; and (9) Information about the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) (RESPA), state and Federal truth-in-lending laws, and how to identify and avoid loans with oppressive terms and conditions. (c) The PHA may adapt the subjects covered in pre-assistance counseling (as listed in paragraph (b) of this section) to local circumstances and the needs of individual families. (d) The PHA may also offer additional counseling after commencement of homeownership assistance (ongoing counseling). If the PHA offers a program of ongoing counseling for participants in the homeownership option, the PHA shall have discretion to determine whether the family is required to participate in the ongoing counseling. (e) If the PHA is not using a HUD-approved housing counseling agency to provide the counseling for families participating in the homeownership option, the PHA should ensure that its counseling program is consistent with the homeownership counseling provided under HUD's Housing Counseling program. Sec. 982.631 Homeownership option: Home inspections, contract of sale, and PHA disapproval of seller. (a) HQS inspection by PHA. The PHA may not commence monthly homeownership assistance payments or provide a downpayment assistance grant for the family until the PHA has inspected the unit and has determined that the unit passes HQS. (b) Independent inspection. (1) The unit must also be inspected by an independent professional inspector selected by and paid by the family. (2) The independent inspection must cover major building systems and components, including foundation and structure, housing interior and exterior, and the roofing, plumbing, electrical, and heating systems. The independent inspector must be qualified to report on property conditions, including major building systems and components. (3) The PHA may not require the family to use an independent inspector selected by the PHA. The independent inspector may not be a PHA employee or contractor, or other person under control of the PHA. However, the PHA may establish standards for qualification of inspectors selected by families under the homeownership option. (4) The independent inspector must provide a copy of the inspection report both to the family and to the PHA. The PHA may not commence monthly [[Page 583]] homeownership assistance payments, or provide a downpayment assistance grant for the family, until the PHA has reviewed the inspection report of the independent inspector. Even if the unit otherwise complies with the HQS (and may qualify for assistance under the PHA's tenant-based rental voucher program), the PHA shall have discretion to disapprove the unit for assistance under the homeownership option because of information in the inspection report. (c) Contract of sale. (1) Before commencement of monthly homeownership assistance payments or receipt of a downpayment assistance grant, a member or members of the family must enter into a contract of sale with the seller of the unit to be acquired by the family. The family must give the PHA a copy of the contract of sale (see also Sec. 982.627(a)(7)). (2) The contract of sale must: (i) Specify the price and other terms of sale by the seller to the purchaser. (ii) Provide that the purchaser will arrange for a pre-purchase inspection of the dwelling unit by an independent inspector selected by the purchaser. (iii) Provide that the purchaser is not obligated to purchase the unit unless the inspection is satisfactory to the purchaser. (iv) Provide that the purchaser is not obligated to pay for any necessary repairs. (3) In addition to the requirements contained in paragraph (c)(2) of this section, a contract for the sale of units not yet under construction at the time the family is to enter into the contract for sale must also provide that: (i) The purchaser is not obligated to purchase the unit unless an environmental review has been performed and the site has received environmental approval prior to commencement of construction in accordance with 24 CFR 982.628. (ii) The construction will not commence until the environmental review has been completed and the seller has received written notice from the PHA that environmental approval has been obtained. Conduct of the environmental review may not necessarily result in environmental approval, and environmental approval may be conditioned on the contracting parties' agreement to modifications to the unit design or to mitigation actions. (iii) Commencement of construction in violation of paragraph (c)(3)(ii) of this section voids the purchase contract and renders homeownership assistance under 24 CFR part 982 unavailable for purchase of the unit. (d) PHA disapproval of seller. In its administrative discretion, the PHA may deny approval of a seller for any reason provided for disapproval of an owner in Sec. 982.306(c). [65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002; 72 FR 59938, Oct. 22, 2007; 72 FR 73497, Dec. 27, 2007; 80 FR 8247, Feb. 17, 2015] Sec. 982.632 Homeownership option: Financing purchase of home; affordability of purchase. (a) The PHA may establish requirements for financing purchase of a home to be assisted under the homeownership option. Such PHA requirements may include requirements concerning qualification of lenders (for example, prohibition of seller financing or case-by-case approval of seller financing), or concerning terms of financing (for example, a prohibition of balloon payment mortgages, establishment of a minimum homeowner equity requirement from personal resources, or provisions required to protect borrowers against high cost loans or predatory loans). A PHA may not require that families acquire financing from one or more specified lenders, thereby restricting the family's ability to secure favorable financing terms. (b) If the purchase of the home is financed with FHA mortgage insurance, such financing is subject to FHA mortgage insurance requirements. (c) The PHA may establish requirements or other restrictions concerning debt secured by the home. (d) The PHA may review lender qualifications and the loan terms before authorizing homeownership assistance. The PHA may disapprove proposed financing, refinancing or other debt if the PHA determines that the debt is unaffordable, or if the PHA determines that the lender or the loan terms do not meet PHA qualifications. In making this determination, the PHA may [[Page 584]] take into account other family expenses, such as child care, unreimbursed medical expenses, homeownership expenses, and other family expenses as determined by the PHA. (e) All PHA financing or affordability requirements must be described in the PHA administrative plan. [65 FR 55163, Sept. 12, 2000, as amended at 66 FR 33613, June 22, 2001] Sec. 982.633 Homeownership option: Continued assistance requirements; Family obligations. (a) Occupancy of home. Homeownership assistance may only be paid while the family is residing in the home. If the family moves out of the home, the PHA may not continue homeownership assistance after the month when the family moves out. The family or lender is not required to refund to the PHA the homeownership assistance for the month when the family moves out. (b) Family obligations. The family must comply with the following obligations. (1) Ongoing counseling. To the extent required by the PHA, the family must attend and complete ongoing homeownership and housing counseling. (2) Compliance with mortgage. The family must comply with the terms of any mortgage securing debt incurred to purchase the home (or any refinancing of such debt). (3) Prohibition against conveyance or transfer of home. (i) So long as the family is receiving homeownership assistance, use and occupancy of the home is subject to Sec. 982.551(h) and (i). (ii) The family may grant a mortgage on the home for debt incurred to finance purchase of the home or any refinancing of such debt. (iii) Upon death of a family member who holds, in whole or in part, title to the home or ownership of cooperative membership shares for the home, homeownership assistance may continue pending settlement of the decedent's estate, notwithstanding transfer of title by operation of law to the decedent's executor or legal representative, so long as the home is solely occupied by remaining family members in accordance with Sec. 982.551(h). (4) Supplying required information. (i) The family must supply required information to the PHA in accordance with Sec. 982.551(b). (ii) In addition to other required information, the family must supply any information as required by the PHA or HUD concerning: (A) Any mortgage or other debt incurred to purchase the home, and any refinancing of such debt (including information needed to determine whether the family has defaulted on the debt, and the nature of any such default), and information on any satisfaction or payment of the mortgage debt; (B) Any sale or other transfer of any interest in the home; or (C) The family's homeownership expenses. (5) Notice of move-out. The family must notify the PHA before the family moves out of the home. (6) Notice of mortgage default. The family must notify the PHA if the family defaults on a mortgage securing any debt incurred to purchase the home. (7) Prohibition on ownership interest on second residence. During the time the family receives homeownership assistance under this subpart, no family member may have any ownership interest in any other residential property. (8) Additional PHA requirements. The PHA may establish additional requirements for continuation of homeownership assistance for the family (for example, a requirement for post-purchase homeownership counseling or for periodic unit inspections while the family is receiving homeownership assistance). The family must comply with any such requirements. (9) Other family obligations. The family must comply with the obligations of a participant family described in Sec. 982.551. However, the following provisions do not apply to assistance under the homeownership option: Sec. 982.551(c), (d), (e), (f), (g) and (j). (c) Statement of homeowner obligations. Before commencement of homeownership assistance, the family must execute a statement of family obligations in the form prescribed by HUD. In the statement, the family agrees to comply with all family obligations under the homeownership option. [[Page 585]] Sec. 982.634 Homeownership option: Maximum term of homeownership assistance. (a) Maximum term of assistance. Except in the case of a family that qualifies as an elderly or disabled family (see paragraph (c) of this section), the family members described in paragraph (b) of this section shall not receive homeownership assistance for more than: (1) Fifteen years, if the initial mortgage incurred to finance purchase of the home has a term of 20 years or longer; or (2) Ten years, in all other cases. (b) Applicability of maximum term. The maximum term described in paragraph (a) of this section applies to any member of the family who: (1) Has an ownership interest in the unit during the time that homeownership payments are made; or (2) Is the spouse of any member of the household who has an ownership interest in the unit during the time homeownership payments are made. (c) Exception for elderly and disabled families. (1) As noted in paragraph (a) of this section, the maximum term of assistance does not apply to elderly and disabled families. (2) In the case of an elderly family, the exception only applies if the family qualifies as an elderly family at the start of homeownership assistance. In the case of a disabled family, the exception applies if at any time during receipt of homeownership assistance the family qualifies as a disabled family. (3) If, during the course of homeownership assistance, the family ceases to qualify as a disabled or elderly family, the maximum term becomes applicable from the date homeownership assistance commenced. However, such a family must be provided at least 6 months of homeownership assistance after the maximum term becomes applicable (provided the family is otherwise eligible to receive homeownership assistance in accordance with this part). (d) Assistance for different homes or PHAs. If the family has received such assistance for different homes, or from different PHAs, the total of such assistance terms is subject to the maximum term described in paragraph (a) of this section. Sec. 982.635 Homeownership option: Amount and distribution of monthly homeownership assistance payment. (a) Amount of monthly homeownership assistance payment. While the family is residing in the home, the PHA shall pay a monthly homeownership assistance payment on behalf of the family that is equal to the lower of: (1) The payment standard minus the total tenant payment; or (2) The family's monthly homeownership expenses minus the total tenant payment. (b) Payment standard for family. (1) The payment standard for a family is the lower of: (i) The payment standard for the family unit size; or (ii) The payment standard for the size of the home. (2) If the home is located in an exception payment standard area, the PHA must use the appropriate payment standard for the exception payment standard area. (3) The payment standard for a family is the greater of: (i) The payment standard (as determined in accordance with paragraphs (b)(1) and (b)(2) of this section) at the commencement of homeownership assistance for occupancy of the home; or (ii) The payment standard (as determined in accordance with paragraphs (b)(1) and (b)(2) of this section) at the most recent regular reexamination of family income and composition since the commencement of homeownership assistance for occupancy of the home. (4) The PHA must use the same payment standard schedule, payment standard amounts, and subsidy standards pursuant to Sec. Sec. 982.402 and 982.503 for the homeownership option as for the rental voucher program. (c) Determination of homeownership expenses. (1) The PHA shall adopt policies for determining the amount of homeownership expenses to be allowed by the PHA in accordance with HUD requirements. (2) Homeownership expenses for a homeowner (other than a cooperative member) may only include amounts allowed by the PHA to cover: (i) Principal and interest on initial mortgage debt, any refinancing of such [[Page 586]] debt, and any mortgage insurance premium incurred to finance purchase of the home; (ii) Real estate taxes and public assessments on the home; (iii) Home insurance; (iv) The PHA allowance for maintenance expenses; (v) The PHA allowance for costs of major repairs and replacements; (vi) The PHA utility allowance for the home; (vii) Principal and interest on mortgage debt incurred to finance costs for major repairs, replacements or improvements for the home. If a member of the family is a person with disabilities, such debt may include debt incurred by the family to finance costs needed to make the home accessible for such person, if the PHA determines that allowance of such costs as homeownership expenses is needed as a reasonable accommodation so that the homeownership option is readily accessible to and usable by such person, in accordance with part 8 of this title; and (viii) Land lease payments (where a family does not own fee title to the real property on which the home is located; see Sec. 982.628(b)). (3) Homeownership expenses for a cooperative member may only include amounts allowed by the PHA to cover: (i) The cooperative charge under the cooperative occupancy agreement including payment for real estate taxes and public assessments on the home; (ii) Principal and interest on initial debt incurred to finance purchase of cooperative membership shares and any refinancing of such debt; (iii) Home insurance; (iv) The PHA allowance for maintenance expenses; (v) The PHA allowance for costs of major repairs and replacements; (vi) The PHA utility allowance for the home; and (vii) Principal and interest on debt incurred to finance major repairs, replacements or improvements for the home. If a member of the family is a person with disabilities, such debt may include debt incurred by the family to finance costs needed to make the home accessible for such person, if the PHA determines that allowance of such costs as homeownership expenses is needed as a reasonable accommodation so that the homeownership option is readily accessible to and usable by such person, in accordance with part 8 of this title. (4) If the home is a cooperative or condominium unit, homeownership expenses may also include cooperative or condominium operating charges or maintenance fees assessed by the condominium or cooperative homeowner association. (d) Payment to lender or family. The PHA must pay homeownership assistance payments either: (1) Directly to the family or; (2) At the discretion of the PHA, to a lender on behalf of the family. If the assistance payment exceeds the amount due to the lender, the PHA must pay the excess directly to the family. (e) Automatic termination of homeownership assistance. Homeownership assistance for a family terminates automatically 180 calendar days after the last homeownership assistance payment on behalf of the family. However, a PHA has the discretion to grant relief from this requirement in those cases where automatic termination would result in extreme hardship for the family. [65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002] Sec. 982.636 Homeownership option: Portability. (a) General. A family may qualify to move outside the initial PHA jurisdiction with continued homeownership assistance under the voucher program in accordance with this section. (b) Portability of homeownership assistance. Subject to Sec. 982.353(b) and (c), Sec. 982.552, and Sec. 982.553, a family determined eligible for homeownership assistance by the initial PHA may purchase a unit outside of the initial PHA's jurisdiction, if the receiving PHA is administering a voucher homeownership program and is accepting new homeownership families. (c) Applicability of Housing Choice Voucher program portability procedures. In general, the portability procedures described in Sec. Sec. 982.353 and 982.355 apply to the homeownership option and the administrative responsibilities of the [[Page 587]] initial and receiving PHA are not altered except that some administrative functions (e.g., issuance of a voucher or execution of a tenancy addendum) do not apply to the homeownership option. (d) Family and PHA responsibilities. The family must attend the briefing and counseling sessions required by the receiving PHA. The receiving PHA will determine whether the financing for, and the physical condition of the unit, are acceptable. The receiving PHA must promptly notify the initial PHA if the family has purchased an eligible unit under the program, or if the family is unable to purchase a home within the maximum time established by the PHA. (e) Continued assistance under Sec. 982.637. Such continued assistance under portability procedures is subject to Sec. 982.637. [65 FR 55163, Sept. 12, 2000, as amended at 80 FR 8247, Feb. 17, 2015] Sec. 982.637 Homeownership option: Move with continued tenant-based assistance. (a) Move to new unit. (1) A family receiving homeownership assistance may move to a new unit with continued tenant-based assistance in accordance with this section. The family may move either with voucher rental assistance (in accordance with rental assistance program requirements) or with voucher homeownership assistance (in accordance with homeownership option program requirements). (2) The PHA may not commence continued tenant-based assistance for occupancy of the new unit so long as any family member owns any title or other interest in the prior home. However, when the family or a member of the family is or has been the victim of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), and the move is needed to protect the health or safety of the family or family member (or any family member has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's request to move), such family or family member may be assisted with continued tenant-based assistance even if such family or family member owns any title or other interest in the prior home. (3) The PHA may establish policies that prohibit more than one move by the family during any one-year period. However, these policies do not apply when the family or a member of the family is or has been the victim of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L, and the move is needed to protect the health or safety of the family or family member, or any family member has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's request to move. (b) Requirements for continuation of homeownership assistance. The PHA must determine that all initial requirements listed in Sec. 982.626 (including the environmental requirements with respect to a unit not yet under construction) have been satisfied if a family that has received homeownership assistance wants to move to such a unit with continued homeownership assistance. However, the following requirements do not apply: (1) The requirement for pre-assistance counseling (Sec. 982.630) is not applicable. However, the PHA may require that the family complete additional counseling (before or after moving to a new unit with continued assistance under the homeownership option). (2) The requirement that a family must be a first-time homeowner (Sec. 982.627) is not applicable. (c) When PHA may deny permission to move with continued assistance. The PHA may deny permission to move to a new unit with continued voucher assistance as follows: (1) Lack of funding to provide continued assistance. The PHA may deny permission to move with continued rental or homeownership assistance if the PHA determines that it does not have sufficient funding to provide continued assistance. The PHA must provide written notification to the local HUD Office within 10 business days of determining it is necessary to deny moves based on insufficient funding. [[Page 588]] (2) Termination or denial of assistance under Sec. 982.638. At any time, the PHA may deny permission to move with continued rental or homeownership assistance in accordance with Sec. 982.638. [63 FR 23865, Apr. 30, 1998, as amended at 72 FR 59938, Oct. 22, 2007; 80 FR 50575, Aug. 20, 2015; 81 FR 80817, Nov. 16, 2016] Sec. 982.638 Homeownership option: Denial or termination of assistance for family. (a) General. The PHA shall terminate homeownership assistance for the family, and shall deny voucher rental assistance for the family, in accordance with this section. (b) Denial or termination of assistance under basic voucher program. At any time, the PHA may deny or terminate homeownership assistance in accordance with Sec. 982.552 (Grounds for denial or termination of assistance) or Sec. 982.553 (Crime by family members). (c) Failure to comply with family obligations. The PHA may deny or terminate assistance for violation of participant obligations described in Sec. 982.551 or Sec. 982.633. (d) Mortgage default. The PHA must terminate voucher homeownership assistance for any member of family receiving homeownership assistance that is dispossessed from the home pursuant to a judgment or order of foreclosure on any mortgage (whether FHA-insured or non-FHA) securing debt incurred to purchase the home, or any refinancing of such debt. The PHA, in its discretion, may permit the family to move to a new unit with continued voucher rental assistance. However, the PHA must deny such permission, if: (1) The family defaulted on an FHA-insured mortgage; and (2) The family fails to demonstrate that: (i) The family has conveyed, or will convey, title to the home, as required by HUD, to HUD or HUD's designee; and (ii) The family has moved, or will move, from the home within the period established or approved by HUD. [65 FR 55163, Sept. 12, 2000, as amended at 66 FR 33613, June 22, 2001] Sec. 982.639 Homeownership option: Administrative fees. The ongoing administrative fee described in Sec. 982.152(b) is paid to the PHA for each month that homeownership assistance is paid by the PHA on behalf of the family. Sec. 982.641 Homeownership option: Applicability of other requirements. (a) General. The following types of provisions (located in other subparts of this part) do not apply to assistance under the homeownership option: (1) Any provisions concerning the Section 8 owner or the HAP contract between the PHA and owner; (2) Any provisions concerning the assisted tenancy or the lease between the family and the owner; (3) Any provisions concerning PHA approval of the assisted tenancy; (4) Any provisions concerning rent to owner or reasonable rent; and (5) Any provisions concerning the issuance or term of voucher. (b) Subpart G requirements. The following provisions of subpart G of this part do not apply to assistance under the homeownership option: (1) Section 982.302 (Issuance of voucher; Requesting PHA approval of assisted tenancy); (2) Section 982.303 (Term of voucher); (3) Section 982.305 (PHA approval of assisted tenancy); (4) Section 982.306 (PHA disapproval of owner) (except that a PHA may disapprove a seller for any reason described in paragraph (c), see Sec. 982.631(d)). (5) Section 982.307 (Tenant screening); (6) Section 982.308 (Lease and tenancy); (7) Section 982.309 (Term of assisted tenancy); (8) Section 982.310 (Owner termination of tenancy); (9) Section 982.311 (When assistance is paid) (except that Sec. 982.311(c)(3) is applicable to assistance under the homeownership option); (10) Section 982.313 (Security deposit: Amounts owed by tenant); and (11) Section 982.354 (Move with continued tenant-based assistance). (c) Subpart H requirements. The following provisions of subpart H of this [[Page 589]] part do not apply to assistance under the homeownership option: (1) Section 982.352(a)(6) (Prohibition of owner-occupied assisted unit); (2) Section 982.352(b) (PHA-owned housing); and (3) Those provisions of Sec. 982.353 (Where family can lease a unit with tenant-based assistance) and Sec. 982.355 (Portability: Administration by receiving PHA) that are inapplicable per Sec. 982.636; (d) Subpart I requirements. The following provisions of subpart I of this part do not apply to assistance under the homeownership option: (1) Section 982.403 (Terminating HAP contract when unit is too small); (2) Section 982.404 (Maintenance: Owner and family responsibility; PHA remedies); and (3) Section 982.405 (PHA initial and periodic unit inspection). (e) Subpart J requirements. The requirements of subpart J of this part (Housing Assistance Payments Contract and Owner Responsibility) (Sec. Sec. 982.451-456) do not apply to assistance under the homeownership option. (f) Subpart K requirements. Except for those sections listed below, the requirements of subpart K of this part (Rent and Housing Assistance Payment) (Sec. Sec. 982.501-521) do not apply to assistance under the homeownership option: (1) Section 982.503 (Voucher tenancy: Payment standard amount and schedule); (2) Section 982.516 (Family income and composition: Regular and interim reexaminations); and (3) Section 982.517 (Utility allowance schedule). (g) Subpart L requirements. The following provisions of subpart L of this part do not apply to assistance under the homeownership option: (1) Section 982.551(c) (HQS breach caused by family); (2) Section 982.551(d) (Allowing PHA inspection); (3) Section 982.551(e) (Violation of lease); (4) Section 982.551(g) (Owner eviction notice); and (5) Section 982.551(j) (Interest in unit). (h) Subpart M requirements. The following provisions of subpart M of this part do not apply to assistance under the homeownership option: (1) Sections 982.602-982.619; and (2) Sections 982.622-982.624. [65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002; 80 FR 8247, Feb. 17, 2015; 80 FR 50575, Aug. 20, 2015] Sec. 982.642 Homeownership option: Pilot program for homeownership assistance for disabled families. (a) General. This section implements the pilot program authorized by section 302 of the American Homeownership and Economic Opportunity Act of 2000. Under the pilot program, a PHA may provide homeownership assistance to a disabled family residing in a home purchased and owned by one or more members of the family. A PHA that administers tenant- based assistance has the choice whether to offer homeownership assistance under the pilot program (whether or not the PHA has also decided to offer the homeownership option). (b) Applicability of homeownership option requirements. Except as provided in this section, all of the regulations applicable to the homeownership option (as described in Sec. Sec. 982.625 through 982.641) are also applicable to the pilot program. (c) Initial eligibility requirements. Before commencing homeownership assistance under the pilot program for a family, the PHA must determine that all of the following initial requirements have been satisfied: (1) The family is a disabled family (as defined in Sec. 5.403 of this title); (2) The family annual income does not exceed 99 percent of the median income for the area; (3) The family is not a current homeowner; (4) The family must close on the purchase of the home during the period starting on July 23, 2001 and ending on July 23, 2004; and (5) The family meets the initial requirements described in Sec. 982.626; however, the following initial requirements do not apply to a family seeking to participate in the pilot program: (i) The income eligibility requirements of Sec. 982.201(b)(1); [[Page 590]] (ii) The first-time homeowner requirements of Sec. 982.627(b); and (iii) The mortgage default requirements of Sec. 982.627(e), if the PHA determines that the default is due to catastrophic medical reasons or due to the impact of a federally declared major disaster or emergency. (d) Amount and distribution of homeownership assistance payments. (1) While the family is residing in the home, the PHA shall calculate a monthly homeownership assistance payment on behalf of the family in accordance with Sec. 982.635 and this section. (2) A family that is a low income family (as defined at 24 CFR 5.603(b)) as determined by HUD shall receive the full amount of the monthly homeownership assistance payment calculated under Sec. 982.635. (3) A family whose annual income is greater than the low income family ceiling but does not exceed 89 percent of the median income for the area as determined by HUD shall receive a monthly homeownership assistance payment equal to 66 percent of the amount calculated under Sec. 982.635. (4) A family whose annual income is greater than the 89 percent ceiling but does not exceed 99 percent of the median income for the area as determined by HUD shall receive a monthly homeownership assistance payment equal to 33 percent of the amount calculated under Sec. 982.635. (5) A family whose annual income is greater than 99 percent of the median income for the area shall not receive homeownership assistance under the pilot program. (e) Assistance payments to lender. The PHA must make homeownership assistance payments to a lender on behalf of the disabled family. If the assistance payment exceeds the amount due to the lender, the PHA must pay the excess directly to the family. The provisions of Sec. 982.635(d), which permit the PHA to make monthly homeownership assistance payments directly to the family, do not apply to the pilot program. (f) Mortgage defaults. The requirements of Sec. 982.638(d) regarding mortgage defaults are applicable to the pilot program. However, notwithstanding Sec. 982.638(d), the PHA may, in its discretion, permit a family that has defaulted on its mortgage to move to a new unit with continued voucher homeownership assistance if the PHA determines that the default is due to catastrophic medical reasons or due to the impact of a federally declared major disaster or emergency. The requirements of Sec. Sec. 982.627(a)(5) and 982.627(e) do not apply to such a family. [66 FR 33613, June 22, 2001] Sec. 982.643 Homeownership option: Downpayment assistance grants. (a) General. (1) A PHA may provide a single downpayment assistance grant for a participant that has received tenant-based or project-based rental assistance in the Housing Choice Voucher Program. (2) The downpayment assistance grant must be applied toward the downpayment required in connection with the purchase of the home and/or reasonable and customary closing costs in connection with the purchase of the home. (3) If the PHA permits the downpayment grant to be applied to closing costs, the PHA must define what fees and charges constitute reasonable and customary closing costs. However, if the purchase of a home is financed with FHA mortgage insurance, such financing is subject to FHA mortgage insurance requirements, including any requirements concerning closing costs (see Sec. 982.632(b) of this part regarding the applicability of FHA requirements to voucher homeownership assistance and Sec. 203.27 of this title regarding allowable fees, charges and discounts for FHA-insured mortgages). (b) Maximum downpayment grant. A downpayment assistance grant may not exceed twelve times the difference between the payment standard and the total tenant payment. (c) Payment of downpayment grant. The downpayment assistance grant shall be paid at the closing of the family's purchase of the home. (d) Administrative fee. For each downpayment assistance grant made by the PHA, HUD will pay the PHA a one-time administrative fee in accordance with Sec. 982.152(a)(1)(iii). [[Page 591]] (e) Return to tenant-based assistance. A family that has received a downpayment assistance grant may apply for and receive tenant-based rental assistance, in accordance with program requirements and PHA policies. However, the PHA may not commence tenant-based rental assistance for occupancy of the new unit so long as any member of the family owns any title or other interest in the home purchased with homeownership assistance. Further, eighteen months must have passed since the family's receipt of the downpayment assistance grant. (f) Implementation of downpayment assistance grants. A PHA may not offer downpayment assistance under this paragraph until HUD publishes a notice in the Federal Register. [67 FR 64494, Oct. 18, 2002] PART 983_PROJECT-BASED VOUCHER (PBV) PROGRAM--Table of Contents Subpart A_General Sec. 983.1 When the PBV rule (24 CFR part 983) applies. 983.2 When the tenant-based voucher rule (24 CFR part 982) applies. 983.3 PBV definitions. 983.4 Cross-reference to other Federal requirements. 983.5 Description of the PBV program. 983.6 Maximum amount of PBV assistance. 983.7 Uniform Relocation Act. 983.8 Equal opportunity requirements. 983.9 Special housing types. 983.10 Project-based certificate (PBC) program. Subpart B_Selection of PBV Owner Proposals 983.51 Owner proposal selection procedures. 983.52 Housing type. 983.53 Prohibition of assistance for ineligible units. 983.54 Prohibition of assistance for units in subsidized housing. 983.55 Prohibition of excess public assistance. 983.56 Cap on number of PBV units in each project. 983.57 Site selection standards. 983.58 Environmental review. 983.59 PHA-owned units. Subpart C_Dwelling Units 983.101 Housing quality standards. 983.102 Housing accessibility for persons with disabilities. 983.103 Inspecting units. Subpart D_Requirements for Rehabilitated and Newly Constructed Units 983.151 Applicability. 983.152 Purpose and content of the Agreement to enter into HAP contract. 983.153 When Agreement is executed. 983.154 Conduct of development work. 983.155 Completion of housing. 983.156 PHA acceptance of completed units. 983.157 Broadband infrastructure. Subpart E_Housing Assistance Payments Contract 983.201 Applicability. 983.202 Purpose of HAP contract. 983.203 HAP contract information. 983.204 When HAP contract is executed. 983.205 Term of HAP contract. 983.206 Statutory notice requirements: Contract termination or expiration. 983.207 HAP contract amendments (to add or substitute contract units). 983.208 Condition of contract units. 983.209 Owner responsibilities. 983.210 Owner certification. 983.211 Removal of unit from HAP contract. Subpart F_Occupancy 983.251 How participants are selected. 982.252 PHA information for accepted family. 983.253 Leasing of contract units. 983.254 Vacancies. 983.255 Tenant screening. 983.256 Lease. 983.257 Owner termination of tenancy and eviction. 983.258 Continuation of housing assistance payments. 983.259 Security deposit: amounts owed by tenant. 983.260 Overcrowded, under-occupied, and accessible units. 983.261 Family right to move. 983.262 When occupancy may exceed 25 percent cap on the number of PBV units in each project. Subpart G_Rent to owner 983.301 Determining the rent to owner. 983.302 Redetermination of rent to owner. 983.303 Reasonable rent. 983.304 Other subsidy: effect on rent to owner. 983.305 Rent to owner: effect of rent control and other rent limits. [[Page 592]] Subpart H_Payment to Owner 983.351 PHA payment to owner for occupied unit. 983.352 Vacancy payment. 983.353 Tenant rent; payment to owner. 983.354 Other fees and charges. Authority: 42 U.S.C. 1437f and 3535(d). Source: 70 FR 59913, Oct. 13, 2005, unless otherwise noted. Subpart A_General Sec. 983.1 When the PBV rule (24 CFR part 983) applies. Part 983 applies to the project-based voucher (PBV) program. The PBV program is authorized by section 8(o)(13) of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)). Sec. 983.2 When the tenant-based voucher rule (24 CFR part 982) applies. (a) 24 CFR Part 982. Part 982 is the basic regulation for the tenant-based voucher program. Paragraphs (b) and (c) of this section describe the provisions of part 982 that do not apply to the PBV program. The rest of part 982 applies to the PBV program. For use and applicability of voucher program definitions at Sec. 982.4, see Sec. 983.3. (b) Types of 24 CFR part 982 provisions that do not apply to PBV. The following types of provisions in 24 CFR part 982 do not apply to PBV assistance under part 983. (1) Provisions on issuance or use of a voucher; (2) Provisions on portability; (3) Provisions on the following special housing types: Shared housing, manufactured home space rental, and the homeownership option. (c) Specific 24 CFR part 982 provisions that do not apply to PBV assistance. Except as specified in this paragraph, the following specific provisions in 24 CFR part 982 do not apply to PBV assistance under part 983. (1) In subpart E of part 982: paragraph (b)(2) of Sec. 982.202 and paragraph (d) of Sec. 982.204; (2) Subpart G of part 982 does not apply, with the following exceptions: (i) Section 982.310 (owner termination of tenancy) applies to the PBV program, but to the extent that those provisions differ from Sec. 983.257, the provisions of Sec. 983.257 govern; and (ii) Section 982.312 (absence from unit) applies to the PBV Program, but to the extent that those provisions differ from Sec. 983.256(g), the provisions of Sec. 983.256(g) govern; and (iii) Section 982.316 (live-in aide) applies to the PBV Program; (3) Subpart H of part 982; (4) In subpart I of part 982: Sec. 982.401; paragraphs (a)(3), (c), and (d) of Sec. 982.402; Sec. 982.403; Sec. 982.405(a); and Sec. 982.407; (5) In subpart J of part 982: Sec. 982.455; (6) Subpart K of Part 982: subpart K does not apply, except that the following provisions apply to the PBV Program: (i) Section 982.503 (for determination of the payment standard amount and schedule for a Fair Market Rent (FMR) area or for a designated part of an FMR area). However, provisions authorizing approval of a higher payment standard as a reasonable accommodation for a particular family that includes a person with disabilities do not apply (since the payment standard amount does not affect availability of a PBV unit for occupancy by a family or the amount paid by the family); (ii) Section 982.516 (family income and composition; regular and interim examinations); (iii) Section 982.517 (utility allowance schedule); (7) In subpart M of part 982: (i) Sections 982.603, 982.607, 982.611, 982.613(c)(2), 982.619(a), (b)(1), (b)(4), (c); and (ii) Provisions concerning shared housing (Sec. 982.615 through Sec. 982.618), manufactured home space rental (Sec. 982.622 through Sec. 982.624), and the homeownership option (Sec. 982.625 through Sec. 982.641). [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014; 81 FR 12377, Mar. 8, 2016; 88 FR 30504, May 11, 2023] Sec. 983.3 PBV definitions. (a) Use of PBV definitions--(1) PBV terms (defined in this section). This section defines PBV terms that are used in this part 983. For PBV assistance, the definitions in this section apply to use of the defined terms in part 983 and in applicable provisions of 24 CFR part [[Page 593]] 982. (Section 983.2 specifies which provisions in part 982 apply to PBV assistance under part 983.) (2) Other voucher terms (terms defined in 24 CFR 982.4). (i) The definitions in this section apply instead of definitions of the same terms in 24 CFR 982.4. (ii) Other voucher terms are defined in Sec. 982.4, but are not defined in this section. Those Sec. 982.4 definitions apply to use of the defined terms in this part 983 and in provisions of part 982 that apply to part 983. (b) PBV definitions. 1937 Act. The United States Housing Act of 1937 (42 U.S.C. 1437 et seq.). Activities of daily living. Eating, bathing, grooming, dressing, and home management activities. Admission. The point when the family becomes a participant in the PHA's tenant-based or project-based voucher program (initial receipt of tenant-based or project-based assistance). After admission, and so long as the family is continuously assisted with tenant-based or project- based voucher assistance from the PHA, a shift from tenant-based or project-based assistance to the other form of voucher assistance is not a new admission. Agreement to enter into HAP contract (Agreement). The Agreement is a written contract between the PHA and the owner in the form prescribed by HUD. The Agreement defines requirements for development of housing to be assisted under this section. When development is completed by the owner in accordance with the Agreement, the PHA enters into a HAP contract with the owner. The Agreement is not used for existing housing assisted under this section. HUD will keep the public informed about changes to the Agreement and other forms and contracts related to this program through appropriate means. Assisted living facility. A residence facility (including a facility located in a larger multifamily property) that meets all the following criteria: (1) The facility is licensed and regulated as an assisted living facility by the state, municipality, or other political subdivision; (2) The facility makes available supportive services to assist residents in carrying out activities of daily living; and (3) The facility provides separate dwelling units for residents and includes common rooms and other facilities appropriate and actually available to provide supportive services for the residents. Comparable rental assistance. A subsidy or other means to enable a family to obtain decent housing in the PHA jurisdiction renting at a gross rent that is not more than 40 percent of the family's adjusted monthly gross income. Contract units. The housing units covered by a HAP contract. Covered housing provider. For Project-Based Voucher (PBV) program, ``covered housing provider,'' as such term is used in HUD's regulations in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) refers to the PHA or owner (as defined in 24 CFR 982.4), as applicable given the responsibilities of the covered housing provider as set forth in 24 CFR part 5, subpart L. For example, the PHA is the covered housing provider responsible for providing the notice of occupancy rights under VAWA and certification form described at 24 CFR 5.2005(a). In addition, the owner is the covered housing provider that may choose to bifurcate a lease as described at 24 CFR 5.2009(a), while the PHA is the covered housing provider responsible for complying with emergency transfer plan provisions at 24 CFR 5.2005(e). Development. Construction or rehabilitation of PBV housing after the proposal selection date. Excepted units (units in a multifamily project not counted against the 25 percent per- project cap). See Sec. 983.56(b)(2)(i). Existing housing. Housing units that already exist on the proposal selection date and that substantially comply with the HQS on that date. (The units must fully comply with the HQS before execution of the HAP contract.) Household. The family and any PHA-approved live-in aide. Housing assistance payment. The monthly assistance payment for a PBV unit by a PHA, which includes: [[Page 594]] (1) A payment to the owner for rent to owner under the family's lease minus the tenant rent; and (2) An additional payment to or on behalf of the family, if the utility allowance exceeds the total tenant payment, in the amount of such excess. Housing credit agency. For purposes of performing subsidy layering reviews for proposed PBV projects, a housing credit agency includes a State housing finance agency, a State participating jurisdiction under HUD's HOME program (see 24 CFR part 92), or other State housing agencies that meet the definition of ``housing credit agency'' as defined by section 42 of the Internal Revenue Code of 1986. Housing quality standards (HQS). The minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for the PBV program or the HUD approved alternative standard for the PHA under 24 CFR 5.703(g). Lease. A written agreement between an owner and a tenant for the leasing of a PBV dwelling unit by the owner to the tenant. The lease establishes the conditions for occupancy of the dwelling unit by a family with housing assistance payments under a HAP contract between the owner and the PHA. Multifamily building. A building with five or more dwelling units (assisted or unassisted). Newly constructed housing. Housing units that do not exist on the proposal selection date and are developed after the date of selection pursuant to an Agreement between the PHA and owner for use under the PBV program. Partially assisted project. A project in which there are fewer contract units than residential units. PHA-owned unit. A dwelling unit owned by the PHA that administers the voucher program. PHA-owned means that the PHA or its officers, employees, or agents hold a direct or indirect interest in the building in which the unit is located, including an interest as titleholder or lessee, or as a stockholder, member or general or limited partner, or member of a limited liability corporation, or an entity that holds any such direct or indirect interest. Premises. The project in which the contract unit is located, including common areas and grounds. Program. The voucher program under section 8 of the 1937 Act, including tenant-based or project-based assistance. Project. A project is a single building, multiple contiguous buildings, or multiple buildings on contiguous parcels of land. Contiguous in this definition includes ``adjacent to'', as well as touching along a boundary or a point. Project-based certificate (PBC) program. The program in which project-based assistance is attached to units pursuant to an Agreement executed by a PHA and owner before January 16, 2001 (see Sec. 983.10). Proposal selection date. The date the PHA gives written notice of PBV proposal selection to an owner whose proposal is selected in accordance with the criteria established in the PHA's administrative plan. Qualifying families (for purpose of exception to 25 percent per- project cap). See Sec. 983.56(b)(2)(ii). Rehabilitated housing. Housing units that exist on the proposal selection date, but do not substantially comply with the HQS on that date, and are developed, pursuant to an Agreement between the PHA and owner, for use under the PBV program. Release of funds (for purposes of environmental review). Release of funds in the case of the project-based voucher program, under 24 CFR 58.1(b)(6)(iii) and Sec. 983.58, means that HUD approves the local PHA's Request for Release of Funds and Certification by issuing a Letter to Proceed (in lieu of using form HUD-7015.16) that authorizes the PHA to execute an ``agreement to enter into housing assistance payment contract'' (AHAP) or, for existing housing, to directly enter into a HAP with an owner of units selected under the PBV program. Rent to owner. The total monthly rent payable by the family and the PHA to the owner under the lease for a contract unit. Rent to owner includes payment for any housing services, maintenance, and utilities to be provided by the owner in accordance with the lease. (Rent to owner must not include charges for non-housing services including payment for food, furniture, or supportive services provided in accordance with the lease.) [[Page 595]] Responsible entity (RE) (for environmental review). The unit of general local government within which the project is located that exercises land use responsibility or, if HUD determines this infeasible, the county or, if HUD determines that infeasible, the state. Single-family building. A building with no more than four dwelling units (assisted or unassisted). Site. The grounds where the contract units are located, or will be located after development pursuant to the Agreement. Special housing type. Subpart M of 24 CFR part 982 states the special regulatory requirements for single-room occupancy (SRO) housing, congregate housing, group homes, and manufactured homes. Subpart M provisions on shared housing, manufactured home space rental, and the homeownership option do not apply to PBV assistance under this part. Tenant-paid utilities. Utility service that is not included in the tenant rent (as defined in 24 CFR 982.4), and which is the responsibility of the assisted family. Total tenant payment. The amount described in 24 CFR 5.628. Utility allowance. See 24 CFR 5.603. Utility reimbursement. See 24 CFR 5.603. Wrong-size unit. A unit occupied by a family that does not conform to the PHA's subsidy guideline for family size, by being either too large or too small compared to the guideline. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014; 81 FR 80818, Nov. 16, 2016; 88 FR 30504, May 11, 2023] Sec. 983.4 Cross-reference to other Federal requirements. The following provisions apply to assistance under the PBV program. Civil money penalty. Penalty for owner breach of HAP contract. See 24 CFR 30.68. Debarment. Prohibition on use of debarred, suspended, or ineligible contractors. See 24 CFR 5.105(c) and 2 CFR part 2424. Definitions. See 24 CFR part 5, subpart D. Disclosure and verification of income information. See 24 CFR part 5, subpart B. Environmental review. See 24 CFR parts 50 and 58 (see also provisions on PBV environmental review at Sec. 983.58). Fair housing. Nondiscrimination and equal opportunity. See 24 CFR 5.105(a) and section 504 of the Rehabilitation Act. Fair market rents. See 24 CFR part 888, subpart A. Fraud. See 24 CFR part 792. PHA retention of recovered funds. Funds. See 24 CFR part 791. HUD allocation of voucher funds. Income and family payment. See 24 CFR part 5, subpart F (especially Sec. 5.603 (definitions), Sec. 5.609 (annual income), Sec. 5.611 (adjusted income), Sec. 5.628 (total tenant payment), Sec. 5.630 (minimum rent), Sec. 5.603 (utility allowance), Sec. 5.603 (utility reimbursements), and Sec. 5.661 (section 8 project-based assistance programs: approval for police or other security personnel to live in project). Labor standards. Regulations implementing the Davis-Bacon Act, Contract Work Hours and Safety Standards Act (40 U.S.C. 3701-3708), 29 CFR part 5, and other federal laws and regulations pertaining to labor standards applicable to development (including rehabilitation) of a project comprising nine or more assisted units. Lead-based paint. Regulations implementing the Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846) and the Residential Lead- based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856). See 24 CFR part 35, subparts A, B, H, and R. Lobbying restriction. Restrictions on use of funds for lobbying. See 24 CFR 5.105(b). Noncitizens. Restrictions on assistance. See 24 CFR part 5, subpart E. Program accessibility. Regulations implementing Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794). See 24 CFR parts 8 and 9. Protection for victims of domestic violence, dating violence, or stalking. See 24 CFR part 5, subpart L. Protection for victims of domestic violence, dating violence, sexual assault, or stalking. See 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). For purposes of compliance with HUD's regulations in 24 CFR part 5, subpart L, the covered [[Page 596]] housing provider is the PHA or owner, as applicable given the responsibilities of the covered housing provider as set forth in 24 CFR part 5, subpart L. Relocation assistance. Regulations implementing the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4201-4655). See 49 CFR part 24. Uniform financial reporting standards. See 24 CFR part 5, subpart H. Waiver of HUD rules. See 24 CFR 5.110. [70 FR 59913, Oct. 13, 2005, as amended at 72 FR 73497, Dec. 27, 2007; 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 24, 2010; 79 FR 36165, June 25, 2014; 81 FR 80818, Nov. 16, 2016; 85 FR 61568, Sept. 29, 2020] Sec. 983.5 Description of the PBV program. (a) How PBV works. (1) The PBV program is administered by a PHA that already administers the tenant-based voucher program under an annual contributions contract (ACC) with HUD. In the PBV program, the assistance is ``attached to the structure.'' (See description of the difference between ``project-based'' and ``tenant-based'' rental assistance at 24 CFR 982.1(b).) (2) The PHA enters into a HAP contract with an owner for units in existing housing or in newly constructed or rehabilitated housing. (3) In the case of newly constructed or rehabilitated housing, the housing is developed under an Agreement between the owner and the PHA. In the Agreement, the PHA agrees to execute a HAP contract after the owner completes the construction or rehabilitation of the units. (4) During the term of the HAP contract, the PHA makes housing assistance payments to the owner for units leased and occupied by eligible families. (b) How PBV is funded. (1) If a PHA decides to operate a PBV program, the PHA's PBV program is funded with a portion of appropriated funding (budget authority) available under the PHA's voucher ACC. This pool of funding is used to pay housing assistance for both tenant-based and project-based voucher units and to pay PHA administrative fees for administration of tenant-based and project-based voucher assistance. (2) There is no special or additional funding for project-based vouchers. HUD does not reserve additional units for project-based vouchers and does not provide any additional funding for this purpose. (c) PHA discretion to operate PBV program. A PHA has discretion whether to operate a PBV program. HUD approval is not required, except that the PHA must notify HUD of its intent to project-base its vouchers, in accordance with Sec. 983.6(d). [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014] Sec. 983.6 Maximum amount of PBV assistance. (a) The PHA may select owner proposals to provide project-based assistance for up to 20 percent of the amount of budget authority allocated to the PHA by HUD in the PHA voucher program. PHAs are not required to reduce the number of PBV units selected under an Agreement or HAP contract if the amount of budget authority is subsequently reduced. (b) All PBC and project-based voucher units for which the PHA has issued a notice of proposal selection or which are under an Agreement or HAP contract for PBC or project-based voucher assistance count against the 20 percent maximum. (c) The PHA is responsible for determining the amount of budget authority that is available for project-based vouchers and for ensuring that the amount of assistance that is attached to units is within the amounts available under the ACC. (d) Before a PHA issues a Request for Proposals in accordance with Sec. 983.51(b)(1) or makes a selection in accordance with Sec. 983.51(b)(2), the PHA must submit the following information to a HUD field office for review: (1) The total amount of annual budget authority; (2) The percentage of annual budget authority available to be project-based; and (3) The total amount of annual budget authority the PHA is planning to project-base pursuant to the selection [[Page 597]] and the number of units that such budget authority will support. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014] Sec. 983.7 Uniform Relocation Act. (a) Relocation assistance for displaced person. (1) A displaced person must be provided relocation assistance at the levels described in and in accordance with the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4201-4655) and implementing regulations at 49 CFR part 24. (2) The cost of required relocation assistance may be paid with funds provided by the owner, or with local public funds, or with funds available from other sources. Relocation costs may not be paid from voucher program funds; however, provided payment of relocation benefits is consistent with state and local law, PHAs may use their administrative fee reserve to pay for relocation assistance after all other program administrative expenses are satisfied. Use of the administrative fee reserve in this manner must be consistent with legal and regulatory requirements, including the requirements of 24 CFR 982.155 and other official HUD issuances. (b) Real property acquisition requirements. The acquisition of real property for a PBV project is subject to the URA and 49 CFR part 24, subpart B. (c) Responsibility of PHA. The PHA must require the owner to comply with the URA and 49 CFR part 24. (d) Definition of initiation of negotiations. In computing a replacement housing payment to a residential tenant displaced as a direct result of privately undertaken rehabilitation or demolition of the real property, the term ``initiation of negotiations'' means the execution of the Agreement between the owner and the PHA. Sec. 983.8 Equal opportunity requirements. (a) The PBV program requires compliance with all equal opportunity requirements under federal law and regulation, including the authorities cited at 24 CFR 5.105(a). (b) The PHA must comply with the PHA Plan civil rights and affirmatively furthering fair housing certification submitted by the PHA in accordance with 24 CFR 903.7(o). Sec. 983.9 Special housing types. (a) Applicability. (1) For applicability of rules on special housing types at 24 CFR part 982, subpart M, see Sec. 983.2. (2) In the PBV program, the PHA may not provide assistance for shared housing, manufactured home space rental, or the homeownership option. (b) Group homes. A group home may include one or more group home units. A separate lease is executed for each elderly person or person with disabilities who resides in a group home. (c) Cooperative housing. (1) Applicability of part 983. Except as provided in paragraph (c)(3) of this section, assistance under this housing type is subject to the regulations of part 983, except the following sections of part 983, subpart F: Sec. Sec. 983.256(b) and (c), 983.258 and 983.259 do not apply. (2) Applicability of part 982. (i) Cooperative housing under the PBV program is also subject to the requirements of 24 CFR 982.619(b)(2), (b)(3), (b)(5), (d), and (e). (ii) Cooperative housing under the PBV program is not subject to the requirements of 24 CFR 982.619(a), (b)(1), (b)(4), and (c). (3) Assistance in cooperative housing. Rental assistance for PBV cooperative housing where families lease cooperative housing units from cooperative members is not a special housing type and all requirements of 24 CFR 983 apply. (4) Rent to owner. The regulations of 24 CFR part 983, subpart G, apply to PBV housing under paragraph (c) of this section. The reasonable rent for a cooperative unit is determined in accordance with Sec. 983.303. For cooperative housing, the rent to owner is the monthly carrying charge under the occupancy agreement/lease between the member and the cooperative. (5) Other fees and charges. Fees such as application fees, credit report fees, and transfer fees shall not be included in the rent to owner. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014] [[Page 598]] Sec. 983.10 Project-based certificate (PBC) program. (a) What is it? ``PBC program'' means project-based assistance attached to units pursuant to an Agreement executed by a PHA and owner before January 16, 2001, and in accordance with: (1) The regulations for the PBC program at 24 CFR part 983, codified as of May 1, 2001 and contained in 24 CFR part 983 revised as of April 1, 2002; and (2) Section 8(d)(2) of the 1937 Act, as in effect before October 21, 1998 (the date of enactment of Title V of Public Law 105-276, the Quality Housing and Work Responsibility Act of 1998, codified at 42 U.S.C. 1437 et seq.). (b) What rules apply? Units under the PBC program are subject to the provisions of 24 CFR part 983, codified as of May 1, 2001, with the following exceptions: (1) PBC renewals. (i) General. Consistent with the PBC HAP contract, at the sole option of the PHA, HAP contracts may be renewed for terms for an aggregate total (including the initial and any renewal terms) of 15 years, subject to the availability of appropriated funds. (ii) Renewal of PBC as PBV. At the sole discretion of the PHA, upon the request of an owner, PHAs may renew a PBC HAP contract as a PBV HAP contract. All PBV regulations (including 24 CFR part 983, subpart G-- Rent to Owner) apply to a PBC HAP contract renewed as a PBV HAP contract with the exception of Sec. Sec. 983.51, 983.56, and 983.57(b)(1). In addition, the following conditions apply: (A) The term of the HAP contract for PBC contracts renewed as PBV contracts shall be consistent with Sec. 983.205. (B) A PHA must make the determination, within one year before expiration of a PBC HAP contract, that renewal of the contract under the PBV program is appropriate to continue providing affordable housing for low-income families. (C) The renewal of PBC assistance as PBV assistance is effectuated by the execution of a PBV HAP contract addendum as prescribed by HUD and a PBV HAP contract for existing housing. (2) Housing quality standards. The regulations in 24 CFR 982.401 (housing quality standards) (HQS) apply to units assisted under the PBC program. (i) Special housing types. HQS requirements for eligible special housing types, under this program, apply (See 24 CFR 982.605. 982.609 and 982.614). (ii) Lead-based paint requirements. The Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at 24 CFR part 35, subparts A, B, H, and R of this title, apply to the PBC program. (iii) HQS enforcement. The regulations in 24 CFR parts 982 and 983 do not create any right of the family or any party, other than HUD or the PHA, to require enforcement of the HQS requirements or to assert any claim against HUD or the PHA for damages, injunction, or other relief for alleged failure to enforce the HQS. (c) Statutory notice requirements. In addition to provisions of 24 CFR part 983 codified as of May 1, 2001, Sec. 983.206 applies to the PBC program. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014; 88 FR 30504, May 11, 2023] Subpart B_Selection of PBV Owner Proposals Sec. 983.51 Owner proposal selection procedures. (a) Procedures for selecting PBV proposals. The PHA administrative plan must describe the procedures for owner submission of PBV proposals and for PHA selection of PBV proposals. Before selecting a PBV proposal, the PHA must determine that the PBV proposal complies with HUD program regulations and requirements, including a determination that the property is eligible housing (Sec. Sec. 983.53 and 983.54), complies with the cap on the number of PBV units per project (Sec. 983.56), and meets the site selection standards (Sec. 983.57). (b) Selection of PBV proposals. The PHA must select PBV proposals in accordance with the selection procedures in the PHA administrative plan. The PHA must select PBV proposals by either of the following two methods. (1) PHA request for PBV Proposals. The PHA may not limit proposals to a [[Page 599]] single site or impose restrictions that explicitly or practically preclude owner submission of proposals for PBV housing on different sites. (2) Selection based on previous competition. The PHA may select, without competition, a proposal for housing assisted under a federal, State, or local government housing assistance, community development, or supportive services program that required competitive selection of proposals (e.g., HOME, and units for which competitively awarded low- income housing tax credits (LIHTCs) have been provided), where the proposal has been selected in accordance with such program's competitive selection requirements within 3 years of the PBV proposal selection date, and the earlier competitively selected housing assistance proposal did not involve any consideration that the project would receive PBV assistance. (c) Public notice of PHA request for PBV proposals. If the PHA will be selecting proposals under paragraph (b)(1) of this section, PHA procedures for selecting PBV proposals must be designed and actually operated to provide broad public notice of the opportunity to offer PBV proposals for consideration by the PHA. The public notice procedures may include publication of the public notice in a local newspaper of general circulation and other means designed and actually operated to provide broad public notice. The public notice of the PHA request for PBV proposals must specify the submission deadline. Detailed application and selection information must be provided at the request of interested parties. (d) PHA notice of owner selection. The PHA must give prompt written notice to the party that submitted a selected proposal and must also give prompt public notice of such selection. Public notice procedures may include publication of public notice in a local newspaper of general circulation and other means designed and actually operated to provide broad public notice. (e) PHA-owned units. A PHA-owned unit may be assisted under the PBV program only if the HUD field office or HUD-approved independent entity reviews the selection process and determines that the PHA-owned units were appropriately selected based on the selection procedures specified in the PHA administrative plan. Under no circumstances may PBV assistance be used with a public housing unit. (f) Public review of PHA selection decision documentation. The PHA must make documentation available for public inspection regarding the basis for the PHA selection of a PBV proposal. (g) Owner proposal selection does not require submission of form HUD-2530 or other HUD previous participation clearance. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014] Sec. 983.52 Housing type. The PHA may attach PBV assistance for units in existing housing or for newly constructed or rehabilitated housing developed under and in accordance with an Agreement. (a) Existing housing--A housing unit is considered an existing unit for purposes of the PBV program, if at the time of notice of PHA selection the units substantially comply with HQS. (1) Units for which rehabilitation or new construction began after owner's proposal submission but prior to execution of the AHAP do not subsequently qualify as existing housing. (2) Units that were newly constructed or rehabilitated in violation of program requirements also do not qualify as existing housing. (b) Subpart D of this part applies to newly constructed and rehabilitated housing. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014] Sec. 983.53 Prohibition of assistance for ineligible units. (a) Ineligible unit. The PHA may not attach or pay PBV assistance for units in the following types of housing: (1) Shared housing; (2) Units on the grounds of a penal, reformatory, medical, mental, or similar public or private institution; (3) Nursing homes or facilities providing continuous psychiatric, medical, nursing services, board and care, or intermediate care. However, the PHA may attach PBV assistance for a dwelling unit in an assisted living facility [[Page 600]] that provides home health care services such as nursing and therapy for residents of the housing; (4) Units that are owned or controlled by an educational institution or its affiliate and are designated for occupancy by students of the institution; (5) Manufactured homes; and (6) Transitional Housing. (b) Prohibition against assistance for owner-occupied unit. The PHA may not attach or pay PBV assistance for a unit occupied by an owner of the housing. A member of a cooperative who owns shares in the project assisted under the PBV program shall not be considered an owner for purposes of participation in the PBV program. (c) Prohibition against selecting unit occupied by an ineligible family. Before a PHA selects a specific unit to which assistance is to be attached, the PHA must determine whether the unit is occupied and, if occupied, whether the unit's occupants are eligible for assistance. The PHA must not select or enter into an Agreement or HAP contract for a unit occupied by a family ineligible for participation in the PBV program. (d) Prohibition against assistance for units for which commencement of construction or rehabilitation occurred prior to AHAP. The PHA may not attach or pay PBV assistance for units for which construction or rehabilitation has commenced as defined in Sec. 983.152 after proposal submission and prior to execution of an AHAP. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014] Sec. 983.54 Prohibition of assistance for units in subsidized housing. A PHA may not attach or pay PBV assistance to units in any of the following types of subsidized housing: (a) A public housing dwelling unit; (b) A unit subsidized with any other form of Section 8 assistance (tenant-based or project-based); (c) A unit subsidized with any governmental rent subsidy (a subsidy that pays all or any part of the rent); (d) A unit subsidized with any governmental subsidy that covers all or any part of the operating costs of the housing; (e) A unit subsidized with Section 236 rental assistance payments (12 U.S.C. 1715z-1). However, the PHA may attach assistance to a unit subsidized with Section 236 interest reduction payments; (f) A unit subsidized with rental assistance payments under Section 521 of the Housing Act of 1949, 42 U.S.C. 1490a (a Rural Housing Service Program). However, the PHA may attach assistance for a unit subsidized with Section 515 interest reduction payments (42 U.S.C. 1485); (g) A Section 202 project for non-elderly persons with disabilities (assistance under Section 162 of the Housing and Community Development Act of 1987, 12 U.S.C. 1701q note); (h) Section 811 project-based supportive housing for persons with disabilities (42 U.S.C. 8013); (i) Section 202 supportive housing for the elderly (12 U.S.C. 1701q); (j) A Section 101 rent supplement project (12 U.S.C. 1701s); (k) A unit subsidized with any form of tenant-based rental assistance (as defined at 24 CFR 982.1(b)(2)) (e.g., a unit subsidized with tenant-based rental assistance under the HOME program, 42 U.S.C. 12701 et seq.); (l) A unit with any other duplicative federal, state, or local housing subsidy, as determined by HUD or by the PHA in accordance with HUD requirements. For this purpose, ``housing subsidy'' does not include the housing component of a welfare payment; a social security payment; or a federal, state, or local tax concession (such as relief from local real property taxes). Sec. 983.55 Prohibition of excess public assistance. (a) Subsidy layering requirements. The PHA may provide PBV assistance only in accordance with HUD subsidy layering regulations (24 CFR 4.13) and other requirements. The subsidy layering review is intended to prevent excessive public assistance for the housing by combining (layering) housing assistance payment subsidy under the PBV program with other governmental housing assistance from federal, state, or local agencies, including assistance such as tax concessions or tax credits. The subsidy layering requirements are not applicable to existing housing. A further subsidy layering [[Page 601]] review is not required for housing selected as new construction or rehabilitation of housing, if HUD's designee has conducted a review, which included a review of PBV assistance, in accordance with HUD's PBV subsidy layering review guidelines. (b) When subsidy layering review is conducted. The PHA may not enter into an Agreement or HAP contract until HUD or a housing credit agency approved by HUD has conducted any required subsidy layering review and determined that the PBV assistance is in accordance with HUD subsidy layering requirements. (c) Owner certification. The HAP contract must contain the owner's certification that the project has not received and will not receive (before or during the term of the HAP contract) any public assistance for acquisition, development, or operation of the housing other than assistance disclosed in the subsidy layering review in accordance with HUD requirements. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014] Sec. 983.56 Cap on number of PBV units in each project. (a) 25 percent per project cap. Except as provided in paragraph (b) of this section, the PHA may not select a proposal to provide PBV assistance for units in a project or enter into an Agreement or HAP contract to provide PBV assistance for units in a project, if the total number of dwelling units in the project that will receive PBV assistance during the term of the PBV HAP is more than 25 percent of the number of dwelling units (assisted or unassisted) in the project. (b) Exception to 25 percent per building cap--(1) When PBV units are not counted against cap. In the following cases, PBV units are not counted against the 25 percent per project cap: (i) Units in a single-family building; (ii) Excepted units in a multifamily project. (2) Terms (i) ``Excepted units'' means units in a multifamily project that are specifically made available for qualifying families. (ii) ``Qualifying families'' means: (A) Elderly and/or disabled families; and/or (B) Families receiving supportive services. PHAs must include in the PHA administrative plan the type of services offered to families for a project to qualify for the exception and the extent to which such services will be provided. It is not necessary that the services be provided at or by the project, if they are approved services. To qualify, a family must have at least one member receiving at least one qualifying supportive service. A PHA may not require participation in medical or disability-related services other than drug and alcohol treatment in the case of current abusers as a condition of living in an excepted unit, although such services may be offered. If a family at the time of initial tenancy is receiving, and while the resident of an excepted unit has received, FSS supportive services or any other supportive services as defined in the PHA administrative plan, and successfully completes the FSS contract of participation or the supportive services requirement, the unit continues to count as an excepted unit for as long as the family resides in the unit. If a family in an excepted unit fails without good cause to complete its FSS contract of participation or if the family fails to complete the supportive services requirement as outlined in the PHA administrative plan, the PHA will take the actions provided under Sec. 983.262(d), and the owner may terminate the lease in accordance with Sec. 983.257(c). Also, at the time of initial lease execution between the family and the owner, the family and the PHA must sign a statement of family responsibility. The statement of family responsibility must contain all family obligations including the family's participation in a service program under this section. Failure by the family without good cause to fulfill its service obligation will require the PHA to terminate assistance. If the unit at the time of such termination is an excepted unit, the exception continues to apply to the unit as long as the unit is made available to another qualifying family. (C) The PHA must monitor the excepted family's continued receipt of supportive services and take appropriate action regarding those families [[Page 602]] that fail without good cause to complete their supportive services requirement. The PHA administrative plan must state the form and frequency of such monitoring. (3) Combining exception categories. Exception categories in a multifamily housing project may be combined. (4) Set-aside for qualifying families. (i) In leasing units in a multifamily project pursuant to the PBV HAP, the owner must set aside the number of excepted units made available for occupancy by qualifying families. (ii) The PHA may refer only qualifying families for occupancy of excepted units. (c) Additional, local requirements promoting partially assisted projects. A PHA may establish local requirements designed to promote PBV assistance in partially assisted projects. For example, a PHA may: (1) Establish a per-project cap on the number of units that will receive PBV assistance or other project-based assistance in a multifamily project containing excepted units or in a single-family building, (2) Determine not to provide PBV assistance for excepted units, or (3) Establish a per-project cap of less than 25 percent. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014] Sec. 983.57 Site selection standards. (a) Applicability. The site selection requirements in paragraph (d) of this section apply only to site selection for existing housing and rehabilitated PBV housing. The site selection requirements in paragraph (e) of this section apply only to site selection for newly constructed PBV housing. Other provisions of this section apply to selection of a site for any form of PBV housing, including existing housing, newly constructed housing, and rehabilitated housing. (b) Compliance with PBV goals, civil rights requirements, and HQS. The PHA may not select a proposal for existing, newly constructed, or rehabilitated PBV housing on a site or enter into an Agreement or HAP contract for units on the site, unless the PHA has determined that: (1) Project-based assistance for housing at the selected site is consistent with the goal of deconcentrating poverty and expanding housing and economic opportunities. The standard for deconcentrating poverty and expanding housing and economic opportunities must be consistent with the PHA Plan under 24 CFR part 903 and the PHA Administrative Plan. In developing the standards to apply in determining whether a proposed PBV development will be selected, a PHA must consider the following: (i) Whether the census tract in which the proposed PBV development will be located is in a HUD-designated Enterprise Zone, Economic Community, or Renewal Community; (ii) Whether a PBV development will be located in a census tract where the concentration of assisted units will be or has decreased as a result of public housing demolition; (iii) Whether the census tract in which the proposed PBV development will be located is undergoing significant revitalization; (iv) Whether state, local, or federal dollars have been invested in the area that has assisted in the achievement of the statutory requirement; (v) Whether new market rate units are being developed in the same census tract where the proposed PBV development will be located and the likelihood that such market rate units will positively impact the poverty rate in the area; (vi) If the poverty rate in the area where the proposed PBV development will be located is greater than 20 percent, the PHA should consider whether in the past five years there has been an overall decline in the poverty rate; (vii) Whether there are meaningful opportunities for educational and economic advancement in the census tract where the proposed PBV development will be located. (2) The site is suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d(4)) and HUD's implementing regulations at 24 CFR part 1; Title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601-3629); and HUD's implementing [[Page 603]] regulations at 24 CFR parts 100 through 199; Executive Order 11063 (27 FR 11527; 3 CFR, 1959-1963 Comp., p. 652) and HUD's implementing regulations at 24 CFR part 107. The site must meet the section 504 site selection requirements described in 24 CFR 8.4(b)(5). (3) The site meets the HQS site standards at 24 CFR 982.401(l). (c) PHA PBV site selection policy. (1) The PHA administrative plan must establish the PHA's policy for selection of PBV sites in accordance with this section. (2) The site selection policy must explain how the PHA's site selection procedures promote the PBV goals. (3) The PHA must select PBV sites in accordance with the PHA's site selection policy in the PHA administrative plan. (d) Existing and rehabilitated housing site and neighborhood standards. A site for existing or rehabilitated housing must meet the following site and neighborhood standards. The site must: (1) Be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities and streets must be available to service the site. (The existence of a private disposal system and private sanitary water supply for the site, approved in accordance with law, may be considered adequate utilities.) (2) Promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons. (3) Be accessible to social, recreational, educational, commercial, and health facilities and services and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents. (4) Be so located that travel time and cost via public transportation or private automobile from the neighborhood to places of employment providing a range of jobs for lower-income workers is not excessive. While it is important that housing for the elderly not be totally isolated from employment opportunities, this requirement need not be adhered to rigidly for such projects. (e) New construction site and neighborhood standards. A site for newly constructed housing must meet the following site and neighborhood standards: (1) The site must be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities (water, sewer, gas, and electricity) and streets must be available to service the site. (2) The site must not be located in an area of minority concentration, except as permitted under paragraph (e)(3) of this section, and must not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to non- minority residents in the area. (3) A project may be located in an area of minority concentration only if: (i) Sufficient, comparable opportunities exist for housing for minority families in the income range to be served by the proposed project outside areas of minority concentration (see paragraph (e)(3)(iii), (iv), and (v) of this section for further guidance on this criterion); or (ii) The project is necessary to meet overriding housing needs that cannot be met in that housing market area (see paragraph (e) (3)(vi)) of this section for further guidance on this criterion). (iii) As used in paragraph (e)(3)(i) of this section, ``sufficient'' does not require that in every locality there be an equal number of assisted units within and outside of areas of minority concentration. Rather, application of this standard should produce a reasonable distribution of assisted units each year, that, over a period of several years, will approach an appropriate balance of housing choices within and outside areas of minority concentration. An appropriate balance in any jurisdiction must be determined in light of local conditions affecting the range of housing choices available for low-income minority families and in relation to the racial mix of the locality's population. (iv) Units may be considered ``comparable opportunities,'' as used in paragraph (e)(3)(i) of this section, if they [[Page 604]] have the same household type (elderly, disabled, family, large family) and tenure type (owner/renter); require approximately the same tenant contribution towards rent; serve the same income group; are located in the same housing market; and are in standard condition. (v) Application of this sufficient, comparable opportunities standard involves assessing the overall impact of HUD-assisted housing on the availability of housing choices for low-income minority families in and outside areas of minority concentration, and must take into account the extent to which the following factors are present, along with other factors relevant to housing choice: (A) A significant number of assisted housing units are available outside areas of minority concentration. (B) There is significant integration of assisted housing projects constructed or rehabilitated in the past 10 years, relative to the racial mix of the eligible population. (C) There are racially integrated neighborhoods in the locality. (D) Programs are operated by the locality to assist minority families that wish to find housing outside areas of minority concentration. (E) Minority families have benefited from local activities (e.g., acquisition and write-down of sites, tax relief programs for homeowners, acquisitions of units for use as assisted housing units) undertaken to expand choice for minority families outside of areas of minority concentration. (F) A significant proportion of minority households has been successful in finding units in non-minority areas under the tenant-based assistance programs. (G) Comparable housing opportunities have been made available outside areas of minority concentration through other programs. (vi) Application of the ``overriding housing needs'' criterion, for example, permits approval of sites that are an integral part of an overall local strategy for the preservation or restoration of the immediate neighborhood and of sites in a neighborhood experiencing significant private investment that is demonstrably improving the economic character of the area (a ``revitalizing area''). An ``overriding housing need,'' however, may not serve as the basis for determining that a site is acceptable, if the only reason the need cannot otherwise be feasibly met is that discrimination on the basis of race, color, religion, sex, national origin, age, familial status, or disability renders sites outside areas of minority concentration unavailable or if the use of this standard in recent years has had the effect of circumventing the obligation to provide housing choice. (4) The site must promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons. (5) The neighborhood must not be one that is seriously detrimental to family life or in which substandard dwellings or other undesirable conditions predominate, unless there is actively in progress a concerted program to remedy the undesirable conditions. (6) The housing must be accessible to social, recreational, educational, commercial, and health facilities and services and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents. (7) Except for new construction, housing designed for elderly persons, travel time, and cost via public transportation or private automobile from the neighborhood to places of employment providing a range of jobs for lower-income workers, must not be excessive. Sec. 983.58 Environmental review. (a) HUD environmental regulations. Activities under the PBV program are subject to HUD environmental regulations in 24 CFR parts 50 and 58. (b) Who performs the environmental review? (1) Under 24 CFR part 58, a unit of general local government, a county or a state (the ``responsible entity'' or ``RE'') is responsible for the federal environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and related applicable federal laws and authorities in accordance with 24 CFR 58.5 and 58.6. [[Page 605]] (2) If a PHA objects in writing to having the RE perform the federal environmental review, or if the RE declines to perform it, then HUD may perform the review itself (24 CFR 58.11). 24 CFR part 50 governs HUD performance of the review. (c) Existing housing. In the case of existing housing under this part 983, the RE that is responsible for the environmental review under 24 CFR part 58 must determine whether or not PBV assistance is categorically excluded from review under the National Environmental Policy Act and whether or not the assistance is subject to review under the laws and authorities listed in 24 CFR 58.5. (d) Limitations on actions before completion of the environmental review. (1) The PHA may not enter into an Agreement or HAP contract with an owner, and the PHA, the owner, and its contractors may not acquire, rehabilitate, convert, lease, repair, dispose of, demolish, or construct real property or commit or expend program or local funds for PBV activities under this part, until one of the following occurs: (i) The responsible entity has completed the environmental review procedures required by 24 CFR part 58, and HUD has approved the environmental certification and HUD has given a release of funds, as defined in Sec. 983.3(b); (ii) The responsible entity has determined that the project to be assisted is exempt under 24 CFR 58.34 or is categorically excluded and not subject to compliance with environmental laws under 24 CFR 58.35(b); or (iii) HUD has performed an environmental review under 24 CFR part 50 and has notified the PHA in writing of environmental approval of the site. (2) HUD will not approve the release of funds for PBV assistance under this part if the PHA, the owner, or any other party commits funds (i.e., enters an Agreement or HAP contract or otherwise incurs any costs or expenditures to be paid or reimbursed with such funds) before the PHA submits and HUD approves its request for release of funds (where such submission is required). (e) PHA duty to supply information. The PHA must supply all available, relevant information necessary for the RE (or HUD, if applicable) to perform any required environmental review for any site. (f) Mitigating measures. The PHA must require the owner to carry out mitigating measures required by the RE (or HUD, if applicable) as a result of the environmental review. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014] Sec. 983.59 PHA-owned units. (a) Selection of PHA-owned units. The selection of PHA-owned units must be done in accordance with Sec. 983.51(e). (b) Inspection and determination of reasonable rent by independent entity. In the case of PHA-owned units, the following program services may not be performed by the PHA, but must be performed instead by an independent entity approved by HUD. (1) Determination of rent to owner for the PHA-owned units. Rent to owner for PHA-owned units is determined pursuant to Sec. Sec. 983.301 through 983.305 in accordance with the same requirements as for other units, except that the independent entity approved by HUD must establish the initial contract rents based on PBV program requirements; (2) Initial and renewal HAP contract term. The term of the HAP contract and any HAP contract renewal for PHA-owned units must be agreed upon by the PHA and the independent entity approved by HUD. Any costs associated with implementing this requirement must be paid for by the PHA; and (3) Inspection of PHA-owned units as required by Sec. 983.103(f). (c) Nature of independent entity. The independent entity that performs these program services may be the unit of general local government for the PHA jurisdiction (unless the PHA is itself the unit of general local government or an agency of such government) or another HUD-approved public or private independent entity. (d) Payment to independent entity. (1) The PHA may compensate the independent entity from PHA ongoing administrative fee income (including amounts credited to the administrative fee reserve). The PHA may not use other program receipts to compensate the independent entity for its services. [[Page 606]] (2) The PHA, and the independent entity, may not charge the family any fee for the services provided by the independent entity. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014] Subpart C_Dwelling Units Sec. 983.101 Housing quality standards. (a) HQS applicability. As defined in Sec. 983.3, housing quality standards (HQS) refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 of this title for housing assisted under the PBV program or a HUD approved alternative standard for the PHA under 24 CFR 5.703(g). (b) Requirements for special housing types. For special housing types assisted under the PBV program, HQS applies to the PBV program except as specified in 24 CFR part 982, subpart M. Provisions contained within 24 CFR part 982 that are inapplicable to the PBV program pursuant to Sec. 983.2 are also inapplicable to special housing types under the PBV program. (c) Lead-based paint requirements. The Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at 24 CFR part 35, subparts A, B, H, and R, apply to the PBV program. (d) HQS enforcement. Parts 982 and 983 of this chapter do not create any right of the family or any party, other than HUD or the PHA, to require enforcement of the HQS requirements or to assert any claim against HUD or the PHA for damages, injunction, or other relief for alleged failure to enforce the HQS. (e) Additional PHA quality and design requirements. This section establishes the minimum federal housing quality standards for PBV housing. However, the PHA may elect to establish additional requirements for quality, architecture, or design of PBV housing, and any such additional requirements must be specified in the Agreement. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014; 88 FR 30504, May 11, 2023] Sec. 983.102 Housing accessibility for persons with disabilities. (a) Program accessibility. The housing must comply with program accessibility requirements of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8. The PHA shall ensure that the percentage of accessible dwelling units complies with the requirements of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), as implemented by HUD's regulations at 24 CFR part 8, subpart C. (b) Design and construction. Housing first occupied after March 13, 1991, must comply with design and construction requirements of the Fair Housing Amendments Act of 1988 and implementing regulations at 24 CFR 100.205, as applicable. Sec. 983.103 Inspecting units. (a) Pre-selection inspection--(1) Inspection of site. The PHA must examine the proposed site before the proposal selection date. (2) Inspection of existing units. If the units to be assisted already exist, the PHA must inspect all the units before the proposal selection date, and must determine whether the units substantially comply with the HQS. To qualify as existing housing, units must substantially comply with the HQS on the proposal selection date. However, the PHA may not execute the HAP contract until the units fully comply with the HQS. (b) Pre-HAP contract inspections. The PHA must inspect each contract unit before execution of the HAP contract. The PHA may not enter into a HAP contract covering a unit until the unit fully complies with the HQS. (c) Turnover inspections. Before providing assistance to a new family in a contract unit, the PHA must inspect the unit. The PHA may not provide assistance on behalf of the family until the unit fully complies with the HQS. (d) Periodic inspections. (1) At least biennially during the term of the HAP contract, the PHA must inspect a random sample, consisting of at least 20 percent of the contract units in each building, to determine if the contract units and the premises are maintained in accordance with the HQS. Turnover [[Page 607]] inspections pursuant to paragraph (c) of this section are not counted toward meeting this inspection requirement. (2) If more than 20 percent of the sample of inspected contract units in a building fail the initial inspection, then the PHA must reinspect 100 percent of the contract units in the building. (3) A PHA may also use the procedures applicable to HCV units in 24 CFR 982.406. (4) Instead of at least biennially, a small rural PHA as defined in Sec. 902.101 of this chapter must inspect the random sample of units in accordance with paragraph (d)(1) of this section at least once every three years. (e) Other inspections. (1) The PHA must inspect contract units whenever needed to determine that the contract units comply with the HQS and that the owner is providing maintenance, utilities, and other services in accordance with the HAP contract. The PHA must take into account complaints and any other information coming to its attention in scheduling inspections. (2) The PHA must conduct follow-up inspections needed to determine if the owner (or, if applicable, the family) has corrected an HQS violation, and must conduct inspections to determine the basis for exercise of contractual and other remedies for owner or family violation of the HQS. (Family HQS obligations are specified in 24 CFR 982.404(b).) (3) In conducting PHA supervisory quality control HQS inspections, the PHA should include a representative sample of both tenant-based and project-based units. (f) Inspecting PHA-owned units. (1) In the case of PHA-owned units, the inspections required under this section must be performed by an independent agency designated in accordance with Sec. 983.59, rather than by the PHA. (2) The independent entity must furnish a copy of each inspection report to the PHA and to the HUD field office where the project is located. (3) The PHA must take all necessary actions in response to inspection reports from the independent agency, including exercise of contractual remedies for violation of the HAP contract by the PHA owner. (g) Mixed-finance properties. In the case of a property assisted with project-based vouchers (authorized at 42 U.S.C. 1437f(o)(13)) that is subject to an alternative inspection, the PHA may rely upon inspections conducted at least triennially to demonstrate compliance with the inspection requirement of 24 CFR 982.405(a). [70 FR 59913, Oct. 13, 2005, as amended at 81 FR 12377, Mar. 8, 2016; 88 FR 30504, May 11, 2023] Subpart D_Requirements for Rehabilitated and Newly Constructed Units Sec. 983.151 Applicability. This Subpart D applies to PBV assistance for newly constructed or rehabilitated housing. This Subpart D does not apply to PBV assistance for existing housing. Housing selected under this subpart cannot be selected as existing housing, as defined in Sec. 983.52, at a later date. Sec. 983.152 Purpose and content of the Agreement to enter into HAP contract. (a) Purpose of Agreement. In the Agreement the owner agrees to develop the contract units to comply with the HQS, and the PHA agrees that, upon timely completion of such development in accordance with the terms of the Agreement, the PHA will enter into a HAP contract with the owner for the contract units. (b) Requirement. The PHA must enter into an Agreement with the owner at such time as provided in Sec. 983.153. The Agreement must be in the form required by HUD headquarters (see 24 CFR 982.162). (c) Commencement of construction or rehabilitation. The PHA may not enter into an agreement if commencement of construction or rehabilitation has commenced after proposal submission. (1) Construction begins when excavation or site preparation (including clearing of the land) begins for the housing; (2) Rehabilitation begins with the physical commencement of rehabilitation activity on the housing. [[Page 608]] (d) Description of housing. (1) At a minimum, the Agreement must describe the following features of the housing to be developed (newly constructed or rehabilitated) and assisted under the PBV program: (i) Site; (ii) Location of contract units on site; (iii) Number of contract units by area (size) and number of bedrooms and bathrooms; (iv) Services, maintenance, or equipment to be supplied by the owner without charges in addition to the rent to owner; (v) Utilities available to the contract units, including a specification of utility services to be paid by owner (without charges in addition to rent) and utility services to be paid by the tenant; (vi) Indication of whether or not the design and construction requirements of the Fair Housing Act and implementing regulations at 24 CFR 100.205 and the accessibility requirements of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR 8.22 and 8.23 apply to units under the Agreement. If these requirements are applicable, any required work item resulting from these requirements must be included in the description of work to be performed under the Agreement, as specified in paragraph (c)(i)(viii) of this section. (vii) Estimated initial rents to owner for the contract units; (viii) Description of the work to be performed under the Agreement. If the Agreement is for rehabilitation of units, the work description must include the rehabilitation work write up and, where determined necessary by the PHA, specifications, and plans. If the Agreement is for new construction, the work description must include the working drawings and specifications. (2) At a minimum, the housing must comply with the HQS. The PHA may elect to establish additional requirements for quality, architecture, or design of PBV housing, over and above the HQS, and any such additional requirement must be specified in the Agreement. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014] Sec. 983.153 When Agreement is executed. The agreement must be promptly executed, in accordance with the following conditions: (a) Prohibition of excess subsidy. The PHA may not enter the Agreement with the owner until the subsidy layering review is completed (see Sec. 983.55). (b) Environmental approval. The PHA may not enter the Agreement with the owner until the environmental review is completed and the PHA has received the environmental approval (see Sec. 983.58). (c) Prohibition on construction or rehabilitation. The PHA shall not enter into the Agreement with the owner if construction or rehabilitation has commenced after proposal submission. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014] Sec. 983.154 Conduct of development work. (a) Development requirements. The owner must carry out development work in accordance with the Agreement and the requirements of this section. (b) Labor standards. (1) In the case of an Agreement for development of nine or more contract units (whether or not completed in stages), the owner and the owner's contractors and subcontractors must pay Davis- Bacon wages to laborers and mechanics employed in development of the housing. (2) The HUD prescribed form of Agreement shall include the labor standards clauses required by HUD, such as those involving Davis-Bacon wage rates. (3) The owner and the owner's contractors and subcontractors must comply with the Contract Work Hours and Safety Standards Act, Department of Labor regulations in 29 CFR part 5, and other applicable federal labor relations laws and regulations. The PHA must monitor compliance with labor standards. (c) Equal employment opportunity. The owner must comply with federal equal employment opportunity requirements of Executive Orders 11246 as amended (3 CFR, 1964-1965 Comp., p. 339), 11625 (3 CFR, 1971-1975 Comp., p. 616), 12432 (3 [[Page 609]] CFR, 1983 Comp., p. 198) and 12138 (3 CFR, 1977 Comp., p. 393). (d) Eligibility to participate in federal programs and activities. The Agreement and HAP contract shall include a certification by the owner that the owner and other project principals (including the officers and principal members, shareholders, investors, and other parties having a substantial interest in the project) are not on the U.S. General Services Administration list of parties excluded from federal procurement and nonprocurement programs. (e) Disclosure of conflict of interest. The owner must disclose any possible conflict of interest that would be a violation of the Agreement, the HAP contract, or HUD regulations. [70 FR 59913, Oct. 13, 2005, as amended at 85 FR 61568, Sept. 29, 2020] Sec. 983.155 Completion of housing. (a) Completion deadline. The owner must develop and complete the housing in accordance with the Agreement. The Agreement must specify the deadlines for completion of the housing and for submission by the owner of the required evidence of completion. (b) Required evidence of completion--(1) Minimum submission. At a minimum, the owner must submit the following evidence of completion to the PHA in the form and manner required by the PHA: (i) Owner certification that the work has been completed in accordance with the HQS and all requirements of the Agreement; and (ii) Owner certification that the owner has complied with labor standards and equal opportunity requirements in development of the housing. (2) Additional documentation. At the discretion of the PHA, the Agreement may specify additional documentation that must be submitted by the owner as evidence of housing completion. For example, such documentation may include: (i) A certificate of occupancy or other evidence that the units comply with local requirements (such as code and zoning requirements); and (ii) An architect's certification that the housing complies with: (A) HUD housing quality standards; (B) State, local, or other building codes; (C) Zoning; (D) The rehabilitation work write-up (for rehabilitated housing) or the work description (for newly constructed housing); or (E) Any additional design or quality requirements pursuant to the Agreement. Sec. 983.156 PHA acceptance of completed units. (a) PHA determination of completion. When the PHA has received owner notice that the housing is completed: (1) The PHA must inspect to determine if the housing has been completed in accordance with the Agreement, including compliance with the HQS and any additional requirement imposed by the PHA under the Agreement. (2) The PHA must determine if the owner has submitted all required evidence of completion. (3) If the work has not been completed in accordance with the Agreement, the PHA must not enter into the HAP contract. (b) Execution of HAP contract. If the PHA determines that the housing has been completed in accordance with the Agreement and that the owner has submitted all required evidence of completion, the PHA must submit the HAP contract for execution by the owner and must then execute the HAP contract. Sec. 983.157 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and where the date of the notice of owner proposal selection or the start of the rehabilitation while under a HAP contract is after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; [[Page 610]] (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92639, Dec. 20, 2016] Subpart E_Housing Assistance Payments Contract Sec. 983.201 Applicability. Subpart E applies to all PBV assistance under part 983 (including assistance for existing, newly constructed, or rehabilitated housing). Sec. 983.202 Purpose of HAP contract. (a) Requirement. The PHA must enter into a HAP contract with the owner. With the exception of single family scattered site projects, a HAP contract shall cover a single project. If multiple projects exist, each project shall be covered by a separate HAP contract. The HAP contract must be in such form as may be prescribed by HUD. (b) Purpose of HAP contract. (1) The purpose of the HAP contract is to provide housing assistance payments for eligible families. (2) The PHA makes housing assistance payments to the owner in accordance with the HAP contract. Housing assistance is paid for contract units leased and occupied by eligible families during the HAP contract term. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014] Sec. 983.203 HAP contract information. The HAP contract must specify: (a) The total number of contract units by number of bedrooms; (b) Information needed to identify the site and the building or buildings where the contract units are located. The information must include the project's name, street address, city or county, state and zip code, block and lot number (if known), and any other information necessary to clearly identify the site and the building; (c) Information needed to identity the specific contract units in each building. The information must include the number of contract units in the building, the location of each contract unit, the area of each contract unit, and the number of bedrooms and bathrooms in each contract unit; (d) Services, maintenance, and equipment to be supplied by the owner without charges in addition to the rent to owner; (e) Utilities available to the contract units, including a specification of utility services to be paid by the owner (without charges in addition to rent) and utility services to be paid by the tenant; (f) Features provided to comply with program accessibility requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8; (g) The HAP contract term; (h) The number of units in any project that will exceed the 25 percent per-project cap (as described in Sec. 983.56), which will be set-aside for occupancy by qualifying families (elderly and/or disabled families and families receiving supportive services); and (i) The initial rent to owner (for the first 12 months of the HAP contract term). [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014] Sec. 983.204 When HAP contract is executed. (a) PHA inspection of housing. (1) Before execution of the HAP contract, the PHA must inspect each contract unit in accordance with Sec. 983.103(b). (2) The PHA may not enter into a HAP contract for any contract unit until the PHA has determined that the unit complies with the HQS. (b) Existing housing. In the case of existing housing, the HAP contract must be executed promptly after PHA selection of the owner proposal and PHA inspection of the housing. (c) Newly constructed or rehabilitated housing. (1) In the case of newly constructed or rehabilitated housing the HAP contract must be executed after the PHA has inspected the completed units and has determined that the units have been completed in accordance with the Agreement and the [[Page 611]] owner has furnished all required evidence of completion (see Sec. Sec. 983.155 and 983.156). (2) In the HAP contract, the owner certifies that the units have been completed in accordance with the Agreement. Completion of the units by the owner and acceptance of units by the PHA is subject to the provisions of the Agreement. Sec. 983.205 Term of HAP contract. (a) 15-year initial term. The PHA may enter into a HAP contract with an owner for an initial term of up to 15 years for each contract unit. The length of the term of the HAP contract for any contract unit may not be less than one year, nor more than 15 years. In the case of PHA-owned units, the term of the initial HAP contract shall be determined in accordance with Sec. 983.59. (b) Extension of term. A PHA may agree to enter into an extension at the time of the initial HAP contract term or any time before expiration of the contract, for an additional term of up to 15 years if the PHA determines an extension is appropriate to continue providing affordable housing for low-income families. A HAP contract extension may not exceed 15 years. A PHA may provide for multiple extensions; however, in no circumstance may such extensions exceed 15 years, cumulatively. Extensions after the initial extension are allowed at the end of any extension term provided that not more than 24 months prior to the expiration of the previous extension contract, the PHA agrees to extend the term, and that such extension is appropriate to continue providing affordable housing for low-income families or to expand housing opportunities. Extensions after the initial extension term shall not begin prior to the expiration date of the previous extension term. Subsequent extensions are subject to the same limitations described in this paragraph. Any extension of the term must be on the form and subject to the conditions prescribed by HUD at the time of the extension. In the case of PHA-owned units, any extension of the initial term of the HAP contract shall be determined in accordance with Sec. 983.59. (c) Termination by PHA--insufficient funding. (1) The HAP contract must provide that the term of the PHA's contractual commitment is subject to the availability of sufficient appropriated funding (budget authority) as determined by HUD or by the PHA in accordance with HUD instructions. For purposes of this section, ``sufficient funding'' means the availability of appropriations, and of funding under the ACC from such appropriations, to make full payment of housing assistance payments payable to the owner for any contract year in accordance with the terms of the HAP contract. (2) The availability of sufficient funding must be determined by HUD or by the PHA in accordance with HUD instructions. If it is determined that there may not be sufficient funding to continue housing assistance payments for all contract units and for the full term of the HAP contract, the PHA has the right to terminate the HAP contract by notice to the owner for all or any of the contract units. Such action by the PHA shall be implemented in accordance with HUD instructions. (d) Termination by owner--reduction below initial rent. The owner may terminate the HAP contract, upon notice to the PHA, if the amount of the rent to owner for any contract unit, as adjusted in accordance with Sec. 983.302, is reduced below the amount of the initial rent to owner (rent to owner at the beginning of the HAP contract term). In this case, the assisted families residing in the contract units will be offered tenant-based voucher assistance. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36168, June 25, 2014] Sec. 983.206 Statutory notice requirements: Contract termination or expiration. (a) Notices required in accordance with this section must be provided in the form prescribed by HUD. (b) Not less than one year before termination of a PBV or PBC HAP contract, the owner must notify the PHA and assisted tenants of the termination. (c) For purposes of this section, the term ``termination'' means the expiration of the HAP contract or an owner's refusal to renew the HAP contract. [[Page 612]] (d)(1) If an owner does not give timely notice of termination, the owner must permit the tenants in assisted units to remain in their units for the required notice period with no increase in the tenant portion of their rent, and with no eviction as a result of an owner's inability to collect an increased tenant portion of rent. (2) An owner may renew the terminating contract for a period of time sufficient to give tenants one-year advance notice under such terms as HUD may require. [79 FR 36168, June 25, 2014] Sec. 983.207 HAP contract amendments (to add or substitute contract units). (a) Amendment to substitute contract units. At the discretion of the PHA and subject to all PBV requirements, the HAP contract may be amended to substitute a different unit with the same number of bedrooms in the same building for a previously covered contract unit. Prior to such substitution, the PHA must inspect the proposed substitute unit and must determine the reasonable rent for such unit. (b) Amendment to add contract units. At the discretion of the PHA, and provided that the total number of units in a project that will receive PBV assistance will not exceed 25 percent of the total number of dwelling units in the project (assisted and unassisted), (unless units were initially identified in the HAP contract as excepted from the 25 percent limitation in accordance with Sec. 983.56(b)), or the 20 percent of authorized budget authority as provided in Sec. 983.6, a HAP contract may be amended during the three-year period immediately following the execution date of the HAP contract to add additional PBV contract units in the same project. An amendment to the HAP contract is subject to all PBV requirements (e.g., rents are reasonable), except that a new PBV request for proposals is not required. The anniversary and expiration dates of the HAP contract for the additional units must be the same as the anniversary and expiration dates of the HAP contract term for the PBV units originally placed under HAP contract. (c) Staged completion of contract units. Even if contract units are placed under the HAP contract in stages commencing on different dates, there is a single annual anniversary for all contract units under the HAP contract. The annual anniversary for all contract units is the annual anniversary date for the first contract units placed under the HAP contract. The expiration of the HAP contract for all the contract units completed in stages must be concurrent with the end of the HAP contract term for the units originally placed under HAP contract. [70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36168, June 25, 2014] Sec. 983.208 Condition of contract units. (a) Owner maintenance and operation. (1) The owner must maintain and operate the contract units and premises in accordance with the HQS, including performance of ordinary and extraordinary maintenance. (2) The owner must provide all the services, maintenance, equipment, and utilities specified in the HAP contract with the PHA and in the lease with each assisted family. (3) At the discretion of the PHA, the HAP contract may also require continuing owner compliance during the HAP term with additional housing quality requirements specified by the PHA (in addition to, but not in place of, compliance with the HUD-prescribed HQS). Such additional requirements may be designed to assure continued compliance with any design, architecture, or quality requirement specified in the Agreement. (b) Remedies for HQS violation. (1) The PHA must vigorously enforce the owner's obligation to maintain contract units in accordance with the HQS. The PHA may not make any HAP payment to the owner for a contract unit covering any period during which the contract unit does not comply with the HQS. (2) If the PHA determines that a contract unit is not in accordance with the housing quality standards (or other HAP contract requirement), the PHA may exercise any of its remedies under [[Page 613]] the HAP contract for all or any contract units. Such remedies include termination of housing assistance payments, abatement or reduction of housing assistance payments, reduction of contract units, and termination of the HAP contract. (c) Maintenance and replacement--Owner's standard practice. Maintenance and replacement (including redecoration) must be in accordance with the standard practice for the building concerned as established by the owner. [70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36168, June 25, 2014] Sec. 983.209 Owner responsibilities. The owner is responsible for performing all of the owner responsibilities under the Agreement and the HAP contract. 24 CFR 982.452 (Owner responsibilities) applies. [70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36168, June 25, 2014] Sec. 983.210 Owner certification. By execution of the HAP contract, the owner certifies that at such execution and at all times during the term of the HAP contract: (a) All contract units are in good and tenantable condition. The owner is maintaining the premises and all contract units in accordance with the HQS. (b) The owner is providing all the services, maintenance, equipment, and utilities as agreed to under the HAP contract and the leases with assisted families. (c) Each contract unit for which the owner is receiving housing assistance payments is leased to an eligible family referred by the PHA, and the lease is in accordance with the HAP contract and HUD requirements. (d) To the best of the owner's knowledge, the members of the family reside in each contract unit for which the owner is receiving housing assistance payments, and the unit is the family's only residence. (e) The owner (including a principal or other interested party) is not the spouse, parent, child, grandparent, grandchild, sister, or brother of any member of a family residing in a contract unit. (f) The amount of the housing assistance payment is the correct amount due under the HAP contract. (g) The rent to owner for each contract unit does not exceed rents charged by the owner for other comparable unassisted units. (h) Except for the housing assistance payment and the tenant rent as provided under the HAP contract, the owner has not received and will not receive any payment or other consideration (from the family, the PHA, HUD, or any other public or private source) for rental of the contract unit. (i) The family does not own or have any interest in the contract unit. The certification required by this section does not apply in the case of an assisted family's membership in a cooperative. (j) Repair work on a project selected as an existing project that is performed after HAP execution within such post-execution period as specified by HUD may constitute development activity, and if determined to be development activity, the repair work undertaken shall be in compliance with Davis-Bacon wage requirements. [70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36168, June 25, 2014] Sec. 983.211 Removal of unit from HAP contract. (a) Units occupied by families whose income has increased during their tenancy resulting in the tenant rent equaling the rent to the owner, shall be removed from the HAP Contract 180 days following the last housing assistance payment on behalf of the family. (b) If the project is fully assisted, a PHA may reinstate the unit removed under paragraph (a) of this section to the HAP contract after the ineligible family vacates the property. If the project is partially assisted, a PHA may substitute a different unit for the unit removed under paragraph (a) of this section to the HAP contract when the first eligible substitute becomes available. (c) A reinstatement or substitution of units under the HAP contract, in accordance with paragraph (b) of this section, must be permissible under Sec. 983.207. The anniversary and expirations dates of the HAP contract for the [[Page 614]] unit must be the same as it was when it was originally placed under the HAP contract. The PHA must refer eligible families to the owner in accordance with the PHA's selection policies. [79 FR 36168, June 25, 2014] Subpart F_Occupancy Sec. 983.251 How participants are selected. (a) Who may receive PBV assistance? (1) The PHA may select families who are participants in the PHA's tenant-based voucher program and families who have applied for admission to the voucher program. (2) Except for voucher participants (determined eligible at original admission to the voucher program), the PHA may only select families determined eligible for admission at commencement of PBV assistance. (3) The protections for victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L, apply to admission to the project-based program. (4) A PHA may not approve a tenancy if the owner (including a principal or other interested party) of a unit is the parent, child, grandparent, grandchild, sister, or brother of any member of the family, unless the PHA determines that approving the unit would provide reasonable accommodation for a family member who is a person with disabilities. (b) Protection of in-place families. (1) The term ``in-place family'' means an eligible family residing in a proposed contract unit on the proposal selection date. (2) In order to minimize displacement of in-place families, if a unit to be placed under contract that is either an existing unit or one requiring rehabilitation is occupied by an eligible family on the proposal selection date, the in-place family must be placed on the PHA's waiting list (if the family is not already on the list) and, once its continued eligibility is determined, given an absolute selection preference and referred to the project owner for an appropriately sized PBV unit in the project. (However, the PHA may deny assistance for the grounds specified in 24 CFR 982.552 and 982.553.) Admission of such families is not subject to income-targeting under 24 CFR 982.201(b)(2)(i), and such families must be referred to the owner from the PHA's waiting list. A PHA shall give such families priority for admission to the PBV program. This protection does not apply to families that are not eligible to participate in the program on the proposal selection date. (c) Selection from PHA waiting list. (1) Applicants who will occupy PBV units must be selected by the PHA from the PHA waiting list. The PHA must select applicants from the waiting list in accordance with the policies in the PHA administrative plan. (2) The PHA may use a separate waiting list for admission to PBV units or may use the same waiting list for both tenant-based assistance and PBV assistance. If the PHA chooses to use a separate waiting list for admission to PBV units, the PHA must offer to place applicants who are listed on the waiting list for tenant-based assistance on the waiting list for PBV assistance. (3) The PHA may use separate waiting lists for PBV units in individual projects or buildings (or for sets of such units) or may use a single waiting list for the PHA's whole PBV program. In either case, the waiting list may establish criteria or preferences for occupancy of particular units. (4) The PHA may merge the waiting list for PBV assistance with the PHA waiting list for admission to another assisted housing program. (5) The PHA may place families referred by the PBV owner on its PBV waiting list. (6) Not less than 75 percent of the families admitted to a PHA's tenant-based and project-based voucher programs during the PHA fiscal year from the PHA waiting list shall be extremely low-income families. The income-targeting requirements at 24 CFR 982.201(b)(2) apply to the total of admissions to the PHA's project-based voucher program and tenant-based voucher program during the PHA fiscal year from the PHA waiting list for such programs. (7) In selecting families to occupy PBV units with special accessibility features for persons with disabilities, the PHA must first refer families who [[Page 615]] require such accessibility features to the owner (see 24 CFR 8.26 and 100.202). (d) Preference for services offered. In selecting families, PHAs may give preference to disabled families who need services offered at a particular project in accordance with the limits under this paragraph. The prohibition on granting preferences to persons with a specific disability at 24 CFR 982.207(b)(3) continues to apply. (1) Preference limits. (i) The preference is limited to the population of families (including individuals) with disabilities that significantly interfere with their ability to obtain and maintain themselves in housing; (ii) Who, without appropriate supportive services, will not be able to obtain or maintain themselves in housing; and (iii) For whom such services cannot be provided in a nonsegregated setting. (2) Disabled residents shall not be required to accept the particular services offered at the project. (3) In advertising the project, the owner may advertise the project as offering services for a particular type of disability; however, the project must be open to all otherwise eligible persons with disabilities who may benefit from services provided in the project. (e) Offer of PBV assistance. (1) If a family refuses the PHA's offer of PBV assistance, such refusal does not affect the family's position on the PHA waiting list for tenant-based assistance. (2) If a PBV owner rejects a family for admission to the owner's PBV units, such rejection by the owner does not affect the family's position on the PHA waiting list for tenant-based assistance. (3) The PHA may not take any of the following actions against an applicant who has applied for, received, or refused an offer of PBV assistance: (i) Refuse to list the applicant on the PHA waiting list for tenant- based assistance; (ii) Deny any admission preference for which the applicant is currently qualified; (iii) Change the applicant's place on the waiting list based on preference, date, and time of application, or other factors affecting selection under the PHA selection policy; (iv) Remove the applicant from the waiting list for tenant-based voucher assistance. [70 FR 59913, Oct. 13, 2005, as amended at 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 79 FR 36168, June 25, 2014; 81 FR 80818, Nov. 16, 2016] Sec. 983.252 PHA information for accepted family. (a) Oral briefing. When a family accepts an offer of PBV assistance, the PHA must give the family an oral briefing. The briefing must include information on the following subjects: (1) A description of how the program works; and (2) Family and owner responsibilities. (b) Information packet. The PHA must give the family a packet that includes information on the following subjects: (1) How the PHA determines the total tenant payment for a family; (2) Family obligations under the program; and (3) Applicable fair housing information. (c) Providing information for persons with disabilities. (1) If the family head or spouse is a disabled person, the PHA must take appropriate steps to assure effective communication, in accordance with 24 CFR 8.6, in conducting the oral briefing and in providing the written information packet, including in alternative formats. (2) The PHA shall have some mechanism for referring to accessible PBV units a family that includes a person with mobility impairment. (d) Providing information for persons with limited English proficiency. The PHA should take reasonable steps to assure meaningful access by persons with limited English proficiency in accordance with obligations contained in Title VI of the Civil Rights Act of 1964 and Executive Order 13166. Sec. 983.253 Leasing of contract units. (a) Owner selection of tenants. (1) During the term of the HAP contract, the owner must lease contract units only to eligible families selected and referred by the PHA from the PHA waiting list. (2) The owner is responsible for adopting written tenant selection procedures that are consistent with the [[Page 616]] purpose of improving housing opportunities for very low-income families and reasonably related to program eligibility and an applicant's ability to perform the lease obligations. (3) An owner must promptly notify in writing any rejected applicant of the grounds for any rejection. (4) The owner must comply with 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). (b) Size of unit. The contract unit leased to each family must be appropriate for the size of the family under the PHA's subsidy standards. (c) The protections for victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L, apply to tenant screening. [70 FR 59913, Oct. 13, 2005, as amended at 81 FR 80818, Nov. 16, 2016] Sec. 983.254 Vacancies. (a) Filling vacant units. (1) The owner must promptly notify the PHA of any vacancy or expected vacancy in a contract unit. After receiving the owner notice, the PHA must make every reasonable effort to refer promptly a sufficient number of families for the owner to fill such vacancies. (2) The owner must lease vacant contract units only to eligible families on the PHA waiting list referred by the PHA. (3) The PHA and the owner must make reasonable good faith efforts to minimize the likelihood and length of any vacancy. (b) Reducing number of contract units. If any contract units have been vacant for a period of 120 or more days since owner notice of vacancy (and notwithstanding the reasonable good faith efforts of the PHA to fill such vacancies), the PHA may give notice to the owner amending the HAP contract to reduce the number of contract units by subtracting the number of contract units (by number of bedrooms) that have been vacant for such period. Sec. 983.255 Tenant screening. (a) PHA option. (1) The PHA has no responsibility or liability to the owner or any other person for the family's behavior or suitability for tenancy. However, the PHA may opt to screen applicants for family behavior or suitability for tenancy and may deny admission to an applicant based on such screening. (2) The PHA must conduct any such screening of applicants in accordance with policies stated in the PHA administrative plan. (b) Owner responsibility. (1) The owner is responsible for screening and selection of the family to occupy the owner's unit. (2) The owner is responsible for screening of families on the basis of their tenancy histories. An owner may consider a family's background with respect to such factors as: (i) Payment of rent and utility bills; (ii) Caring for a unit and premises; (iii) Respecting the rights of other residents to the peaceful enjoyment of their housing; (iv) Drug-related criminal activity or other criminal activity that is a threat to the health, safety, or property of others; and (v) Compliance with other essential conditions of tenancy; (c) Providing tenant information to owner. (1) The PHA must give the owner: (i) The family's current and prior address (as shown in the PHA records); and (ii) The name and address (if known to the PHA) of the landlord at the family's current and any prior address. (2) When a family wants to lease a dwelling unit, the PHA may offer the owner other information in the PHA possession about the family, including information about the tenancy history of family members or about drug trafficking and criminal activity by family members. (3) The PHA must give the family a description of the PHA policy on providing information to owners. (4) The PHA policy must provide that the PHA will give the same types of information to all owners. (d) The protections for victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L, apply to tenant screening. [70 FR 59913, Oct. 13, 2005, as amended at 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 81 FR 80818, Nov. 16, 2016] [[Page 617]] Sec. 983.256 Lease. (a) Tenant's legal capacity. The tenant must have legal capacity to enter a lease under state and local law. ``Legal capacity'' means that the tenant is bound by the terms of the lease and may enforce the terms of the lease against the owner. (b) Form of lease. (1) The tenant and the owner must enter a written lease for the unit. The lease must be executed by the owner and the tenant. (2) If the owner uses a standard lease form for rental to unassisted tenants in the locality or the premises, the lease must be in such standard form, except as provided in paragraph (b)(4) of this section. If the owner does not use a standard lease form for rental to unassisted tenants, the owner may use another form of lease, such as a PHA model lease. (3) In all cases, the lease must include a HUD-required tenancy addendum. The tenancy addendum must include, word-for-word, all provisions required by HUD. (4) The PHA may review the owner's lease form to determine if the lease complies with state and local law. The PHA may decline to approve the tenancy if the PHA determines that the lease does not comply with state or local law. (c) Required information. The lease must specify all of the following: (1) The names of the owner and the tenant; (2) The unit rented (address, apartment number, if any, and any other information needed to identify the leased contract unit); (3) The term of the lease (initial term and any provision for renewal); (4) The amount of the tenant rent to owner. The tenant rent to owner is subject to change during the term of the lease in accordance with HUD requirements; (5) A specification of what services, maintenance, equipment, and utilities are to be provided by the owner; and (6) The amount of any charges for food, furniture, or supportive services. (d) Tenancy addendum. (1) The tenancy addendum in the lease shall state: (i) The program tenancy requirements (as specified in this part); (ii) The composition of the household as approved by the PHA (names of family members and any PHA-approved live-in aide). (2) All provisions in the HUD-required tenancy addendum must be included in the lease. The terms of the tenancy addendum shall prevail over other provisions of the lease. (e) Changes in lease. (1) If the tenant and the owner agree to any change in the lease, such change must be in writing, and the owner must immediately give the PHA a copy of all such changes. (2) The owner must notify the PHA in advance of any proposed change in lease requirements governing the allocation of tenant and owner responsibilities for utilities. Such changes may be made only if approved by the PHA and in accordance with the terms of the lease relating to its amendment. The PHA must redetermine reasonable rent, in accordance with Sec. 983.303(c), based on any change in the allocation of responsibility for utilities between the owner and the tenant, and the redetermined reasonable rent shall be used in calculation of rent to owner from the effective date of the change. (f) Term of lease. (1) The initial lease term must be for at least one year. (2) The lease must provide for automatic renewal after the initial term of the lease. The lease may provide either: (i) For automatic renewal for successive definite terms (e.g., month-to-month or year-to-year); or (ii) For automatic indefinite extension of the lease term. (3) The term of the lease terminates if any of the following occurs: (i) The owner terminates the lease for good cause; (ii) The tenant terminates the lease; (iii) The owner and the tenant agree to terminate the lease; (iv) The PHA terminates the HAP contract; or (v) The PHA terminates assistance for the family. (g) Lease provisions governing absence from the unit. The lease may specify a maximum period of family absence from the unit that may be shorter than the maximum period permitted by PHA policy. (PHA termination-of-assistance [[Page 618]] actions due to family absence from the unit are subject to 24 CFR 982.312, except that the unit is not terminated from the HAP contract if the family is absent for longer than the maximum period permitted.) [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36168, June 25, 2014] Sec. 983.257 Owner termination of tenancy and eviction. (a) In general. 24 CFR 982.310 applies with the exception that Sec. 982.310(d)(1)(iii) and (iv) do not apply to the PBV program. (In the PBV program, ``good cause'' does not include a business or economic reason or desire to use the unit for an individual, family, or non-residential rental purpose.) 24 CFR 5.858 through 5.861 on eviction for drug and alcohol abuse apply to this part. 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) applies to this part. (b) If a family resides in a project-based unit excepted from the 25 percent per-project cap on project-basing because of participation in an FSS or other supportive services program, and the family fails without good cause to complete its FSS contract of participation or supportive services requirement, such failure is grounds for lease termination by the owner. [70 FR 59913, Oct. 13, 2005, as amended at 73 FR 72345, Nov. 28, 2008; 75 FR 66265, Oct. 27, 2010; 79 FR 36169, June 25, 2014; 81 FR 80818, Nov. 16, 2016] Sec. 983.258 Continuation of housing assistance payments. Housing assistance payments shall continue until the tenant rent equals the rent to owner. The cessation of housing assistance payments at such point will not affect the family's other rights under its lease, nor will such cessation preclude the resumption of payments as a result of later changes in income, rents, or other relevant circumstances if such changes occur within 180 days following the date of the last housing assistance payment by the PHA. After the 180-day period, the unit shall be removed from the HAP contract pursuant to Sec. 983.211. [79 FR 36169, June 25, 2014] Sec. 983.259 Security deposit: amounts owed by tenant. (a) The owner may collect a security deposit from the tenant. (b) The PHA may prohibit security deposits in excess of private market practice, or in excess of amounts charged by the owner to unassisted tenants. (c) When the tenant moves out of the contract unit, the owner, subject to state and local law, may use the security deposit, including any interest on the deposit, in accordance with the lease, as reimbursement for any unpaid tenant rent, damages to the unit, or other amounts which the tenant owes under the lease. (d) The owner must give the tenant a written list of all items charged against the security deposit and the amount of each item. After deducting the amount used to reimburse the owner, the owner must promptly refund the full amount of the balance to the tenant. (e) If the security deposit is not sufficient to cover amounts the tenant owes under the lease, the owner may seek to collect the balance from the tenant. However, the PHA has no liability or responsibility for payment of any amount owed by the family to the owner. [70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36169, June 25, 2014] Sec. 983.260 Overcrowded, under-occupied, and accessible units. (a) Family occupancy of wrong-size or accessible unit. The PHA subsidy standards determine the appropriate unit size for the family size and composition. If the PHA determines that a family is occupying a: (1) Wrong-size unit, or (2) Unit with accessibility features that the family does not require, and the unit is needed by a family that requires the accessibility features, the PHA must promptly notify the family and the owner of this determination, and of the PHA's offer of continued assistance in another unit pursuant to paragraph (b) of this section. (b) PHA offer of continued assistance. (1) If a family is occupying a: (i) Wrong-size unit, or [[Page 619]] (ii) Unit with accessibility features that the family does not require, and the unit is needed by a family that requires the accessibility features, the PHA must offer the family the opportunity to receive continued housing assistance in another unit. (2) The PHA policy on such continued housing assistance must be stated in the administrative plan and may be in the form of: (i) Project-based voucher assistance in an appropriate-size unit (in the same project or in another project); (ii) Other project-based housing assistance (e.g., by occupancy of a public housing unit); (iii) Tenant-based rental assistance under the voucher program; or (iv) Other comparable public or private tenant-based assistance (e.g., under the HOME program). (c) PHA termination of housing assistance payments. (1) If the PHA offers the family the opportunity to receive tenant-based rental assistance under the voucher program, the PHA must terminate the housing assistance payments for a wrong-sized or accessible unit at the earlier of the expiration of the term of the family's voucher (including any extension granted by the PHA) or the date upon which the family vacates the unit. If the family does not move out of the wrong-sized unit or accessible unit by the expiration date of the term of the family's voucher, the PHA must remove the unit from the HAP contract. (2) If the PHA offers the family the opportunity for another form of continued housing assistance in accordance with paragraph (b)(2) of this section (not in the tenant-based voucher program), and the family does not accept the offer, does not move out of the PBV unit within a reasonable time as determined by the PHA, or both, the PHA must terminate the housing assistance payments for the wrong-sized or accessible unit, at the expiration of a reasonable period as determined by the PHA, and remove the unit from the HAP contract. [70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36169, June 25, 2014] Sec. 983.261 Family right to move. (a) The family may terminate the assisted lease at any time after the first year of occupancy. The family must give the owner advance written notice of intent to vacate (with a copy to the PHA) in accordance with the lease. (b) If the family has elected to terminate the lease in this manner, the PHA must offer the family the opportunity for continued tenant-based rental assistance, in the form of either assistance under the voucher program or other comparable tenant-based rental assistance. (c) Before providing notice to terminate the lease under paragraph (a) of this section, a family must contact the PHA to request comparable tenant-based rental assistance if the family wishes to move with continued assistance. If voucher or other comparable tenant-based rental assistance is not immediately available upon termination of the family's lease of a PBV unit, the PHA must give the family priority to receive the next available opportunity for continued tenant-based rental assistance. (1) The above policies do not apply when the family or a member of the family is or has been the victim of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L, and the move is needed to protect the health or safety of the family or family member, or any family member has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's request to move. A PHA may not terminate assistance if the family, with or without prior notification to the PHA, moves out of a unit in violation of the lease, if such move occurs to protect the health or safety of a family member who is or has been the victim of domestic violence, dating violence, sexual assault, or stalking and who reasonably believed he or she was threatened with imminent harm from further violence if he or she remained in the dwelling unit, or any family member has been the victim of a sexual assault that occurred on the premises during the 90-calendar-day period preceding the family's request to move. [[Page 620]] (2) If a family breaks up as a result of an occurrence of domestic violence, dating violence, sexual assault, or stalking, as provided in 24 CFR part 5, subpart L, the PHA may offer the victim the opportunity for continued tenant-based rental assistance. (d) If the family terminates the assisted lease before the end of one year, the family relinquishes the opportunity for continued tenant- based assistance. [70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36169, June 25, 2014; 81 FR 80818, Nov. 16, 2016] Sec. 983.262 When occupancy may exceed 25 percent cap on the number of PBV units in each project. (a) Except as provided in Sec. 983.56(b), the PHA may not pay housing assistance under the HAP contract for contract units in excess of the 25 percent cap pursuant to Sec. 983.56(a). (b) In referring families to the owner for admission to excepted units, the PHA must give preference to elderly and/or disabled families, or to families receiving supportive services. (c) If a family at the time of initial tenancy is receiving and while the resident of an excepted unit has received FSS supportive services or any other service as defined in the PHA administrative plan, and successfully completes the FSS contract of participation or the supportive services requirement, the unit continues to count as an excepted unit for as long as the family resides in the unit. (d) A family (or the remaining members of the family) residing in an excepted unit that no longer meets the criteria for a ``qualifying family'' in connection with the 25 percent per project cap exception (i.e., a family that does not successfully complete its FSS contract of participation or the supportive services requirement as defined in the PHA administrative plan or the remaining members of a family that no longer qualifies for elderly or disabled family status where the PHA does not exercise its discretion under paragraph (e) of this section) must vacate the unit within a reasonable period of time established by the PHA, and the PHA shall cease paying housing assistance payments on behalf of the non-qualifying family. If the family fails to vacate the unit within the established time, the unit must be removed from the HAP contract unless the project is partially assisted, and it is possible for the HAP contract to be amended to substitute a different unit in the project in accordance with Sec. 983.207(a); or the owner terminates the lease and evicts the family. The housing assistance payments for a family residing in an excepted unit that is not in compliance with its family obligations (e.g., a family fails, without good cause, to successfully complete its FSS contract of participation or supportive services requirement) shall be terminated by the PHA. (e) The PHA may allow a family that initially qualified for occupancy of an excepted unit based on elderly or disabled family status to continue to reside in a unit, where through circumstances beyond the control of the family (e.g., death of the elderly or disabled family member or long term or permanent hospitalization or nursing care), the elderly or disabled family member no longer resides in the unit. In this case, the unit may continue to count as an excepted unit for as long as the family resides in that unit. Once the family vacates the unit, in order to continue as an excepted unit under the HAP contact, the unit must be made available to and occupied by a qualifying family. [70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36169, June 25, 2014] Subpart G_Rent to Owner Sec. 983.301 Determining the rent to owner. (a) Initial and redetermined rents. (1) The amount of the initial and redetermined rent to owner is determined in accordance with this section and Sec. 983.302. (2) The amount of the initial rent to owner is established at the beginning of the HAP contract term. For rehabilitated or newly constructed housing, the Agreement states the estimated amount of the initial rent to owner, but the actual amount of the initial rent to owner is established at the beginning of the HAP contract term. [[Page 621]] (3) The rent to owner is also redetermined in accordance with Sec. 983.302. (b) Amount of rent to owner. Except for certain tax credit units as provided in paragraph (c) of this section, the rent to owner must not exceed the lowest of: (1) An amount determined by the PHA, not to exceed 110 percent of the applicable fair market rent (or any exception payment standard approved by the Secretary) for the unit bedroom size minus any utility allowance; (2) The reasonable rent; or (3) The rent requested by the owner. (c) Rent to owner for certain tax credit units. (1) This paragraph (c) applies if: (i) A contract unit receives a low-income housing tax credit under the Internal Revenue Code of 1986 (see 26 U.S.C. 42); (ii) The contract unit is not located in a qualified census tract; (iii) In the same building, there are comparable tax credit units of the same unit bedroom size as the contract unit and the comparable tax credit units do not have any form of rental assistance other than the tax credit; and (iv) The tax credit rent exceeds the applicable fair market rental (or any exception payment standard) as determined in accordance with paragraph (b) of this section. (2) In the case of a contract unit described in paragraph (c)(1) of this section, the rent to owner must not exceed the lowest of: (i) The tax credit rent minus any utility allowance; (ii) The reasonable rent; or (iii) The rent requested by the owner. (3) The ``tax credit rent'' is the rent charged for comparable units of the same bedroom size in the building that also receive the low- income housing tax credit but do not have any additional rental assistance (e.g., additional assistance such as tenant-based voucher assistance). (4) A ``qualified census tract'' is any census tract (or equivalent geographic area defined by the Bureau of the Census) in which: (i) At least 50 percent of households have an income of less than 60 percent of Area Median Gross Income (AMGI); or (ii) Where the poverty rate is at least 25 percent and where the census tract is designated as a qualified census tract by HUD. (d) Rent to owner for other tax credit units. Except in the case of a tax-credit unit described in paragraph (c)(1) of this section, the rent to owner for all other tax credit units may be determined by the PHA pursuant to paragraph (b) of this section. (e) Reasonable rent. The PHA shall determine the reasonable rent in accordance with Sec. 983.303. The rent to the owner for each contract unit may at no time exceed the reasonable rent, except in cases where, the PHA has elected within the HAP contract not to reduce rents below the initial rent to owner and, upon redetermination of the rent to owner, the reasonable rent would result in a rent below the initial rent. If the PHA has not elected within the HAP contract to establish the initial rent to owner as the rent floor, the rent to owner shall not at any time exceed the reasonable rent. (f) Use of FMRs and utility allowance schedule in determining the amount of rent to owner--(1) Amounts used. (i) Determination of initial rent (at beginning of HAP contract term). When determining the initial rent to owner, the PHA shall use the most recently published FMR in effect and the utility allowance schedule in effect at execution of the HAP contract. At its discretion, the PHA may use the amounts in effect at any time during the 30-day period immediately before the beginning date of the HAP contract. (ii) Redetermination of rent to owner. When redetermining the rent to owner, the PHA shall use the most recently published FMR and the PHA utility allowance schedule in effect at the time of redetermination. At its discretion, the PHA may use the amounts in effect at any time during the 30-day period immediately before the redetermination date. (2) Exception payment standard and PHA utility allowance schedule. (i) Any HUD-approved exception payment standard amount under 24 CFR 982.503(c) applies to both the tenant- [[Page 622]] based and project-based voucher programs. HUD will not approve a different exception payment standard amount for use in the PBV program. (ii) The PHA may not establish or apply different utility allowance amounts for the PBV program. The same PHA utility allowance schedule applies to both the tenant-based and PBV programs. (g) PHA-owned units. For PHA-owned PBV units, the initial rent to owner and the annual redetermination of rent at the annual anniversary of the HAP contract are determined by the independent entity approved by HUD in accordance with Sec. 983.59. The PHA must use the rent to owner established by the independent entity. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36169, June 25, 2014; 81 FR 80583, Nov. 16, 2016] Sec. 983.302 Redetermination of rent to owner. (a) The PHA must redetermine the rent to owner: (1) Upon the owner's request; or (2) When there is a 10 percent decrease in the published FMR. (b) Rent increase. (1) The PHA may not make any rent increase other than an increase in the rent to owner as determined pursuant to Sec. 983.301. (Provisions for special adjustments of contract rent pursuant to 42 U.S.C. 1437f(b)(2)(B) do not apply to the voucher program.) (2) The owner must request an increase in the rent to owner at the annual anniversary of the HAP contract by written notice to the PHA. The length of the required notice period of the owner request for a rent increase at the annual anniversary may be established by the PHA. The request must be submitted in the form and manner required by the PHA. (3) The PHA may not approve and the owner may not receive any increase of rent to owner until and unless the owner has complied with all requirements of the HAP contract, including compliance with the HQS. The owner may not receive any retroactive increase of rent for any period of noncompliance. (c) Rent decrease. (1) If there is a decrease in the rent to owner, as established in accordance with Sec. 983.301, the rent to owner must be decreased, regardless of whether the owner requested a rent adjustment. (2) If the PHA has elected within the HAP contract to not reduce rents below the initial rent to owner, the rent to owner shall not be reduced below the initial rent to owner for dwelling units under the initial HAP contract, except: (i) To correct errors in calculations in accordance with HUD requirements; (ii) If additional housing assistance has been combined with PBV assistance after the execution of the initial HAP contract and a rent decrease is required pursuant to Sec. 983.55; or (iii) If a decrease in rent to owner is required based on changes in the allocation of responsibility for utilities between the owner and the tenant. (d) Notice of rent redetermination. Rent to owner is redetermined by written notice by the PHA to the owner specifying the amount of the redetermined rent (as determined in accordance with Sec. Sec. 983.301 and 983.302). The PHA notice of the rent adjustment constitutes an amendment of the rent to owner specified in the HAP contract. (e) Contract year and annual anniversary of the HAP contract. (1) The contract year is the period of 12 calendar months preceding each annual anniversary of the HAP contract during the HAP contract term. The initial contract year is calculated from the first day of the first calendar month of the HAP contract term. (2) The annual anniversary of the HAP contract is the first day of the first calendar month after the end of the preceding contract year. The adjusted rent to owner amount applies for the period of 12 calendar months from the annual anniversary of the HAP contract. (3) See Sec. 983.207(c) for information on the annual anniversary of the HAP contract for contract units completed in stages. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36170, June 25, 2014; 81 FR 80583, Nov. 16, 2016] [[Page 623]] Sec. 983.303 Reasonable rent. (a) Comparability requirement. At all times during the term of the HAP contract, the rent to the owner for a contract unit may not exceed the reasonable rent as determined by the PHA, except that where the PHA has elected in the HAP contract to not reduce rents below the initial rent under the initial HAP contract, the rent to owner shall not be reduced below the initial rent in accordance with Sec. 983.302(e)(2). (b) Redetermination. The PHA must redetermine the reasonable rent: (1) Whenever there is a 10 percent decrease in the published FMR in effect 60 days before the contract anniversary (for the unit sizes specified in the HAP contract) as compared with the FMR in effect 1 year before the contract anniversary. (2) Whenever the PHA approves a change in the allocation of responsibility for utilities between the owner and the tenant; (3) Whenever the HAP contract is amended to substitute a different contract unit in the same building or project; and (4) Whenever there is any other change that may substantially affect the reasonable rent. (c) How to determine reasonable rent. (1) The reasonable rent of a contract unit must be determined by comparison to rent for other comparable unassisted units. (2) In determining the reasonable rent, the PHA must consider factors that affect market rent, such as: (i) The location, quality, size, unit type, and age of the contract unit; and (ii) Amenities, housing services, maintenance, and utilities to be provided by the owner. (d) Comparability analysis. (1) For each unit, the PHA comparability analysis must use at least three comparable units in the private unassisted market, which may include comparable unassisted units in the premises or project. (2) The PHA must retain a comparability analysis that shows how the reasonable rent was determined, including major differences between the contract units and comparable unassisted units. (3) The comparability analysis may be performed by PHA staff or by another qualified person or entity. A person or entity that conducts the comparability analysis and any PHA staff or contractor engaged in determining the housing assistance payment based on the comparability analysis may not have any direct or indirect interest in the property. (e) Owner certification of comparability. By accepting each monthly housing assistance payment from the PHA, the owner certifies that the rent to owner is not more than rent charged by the owner for comparable unassisted units in the premises. The owner must give the PHA information requested by the PHA on rents charged by the owner for other units in the premises or elsewhere. (f) Determining reasonable rent for PHA-owned units. (1) For PHA- owned units, the amount of the reasonable rent must be determined by an independent agency approved by HUD in accordance with Sec. 983.59, rather than by the PHA. The reasonable rent must be determined in accordance with this section. (2) The independent entity must furnish a copy of the independent entity determination of reasonable rent for PHA-owned units to the PHA and to the HUD field office where the project is located. [70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36170, June 25, 2014; 81 FR 80583, Nov. 16, 2016] Sec. 983.304 Other subsidy: effect on rent to owner. (a) General. In addition to the rent limits established in accordance with Sec. 983.301 and 24 CFR 982.302, the following restrictions apply to certain units. (b) HOME. For units assisted under the HOME program, rents may not exceed rent limits as required by the HOME program (24 CFR 92.252). (c) Subsidized projects. (1) This paragraph (c) applies to any contract units in any of the following types of federally subsidized project: (i) An insured or non-insured Section 236 project; (ii) A formerly insured or non-insured Section 236 project that continues to [[Page 624]] receive Interest Reduction Payment following a decoupling action; (iii) A Section 221(d)(3) below market interest rate (BMIR) project; (iv) A Section 515 project of the Rural Housing Service; (v) Any other type of federally subsidized project specified by HUD. (2) The rent to owner may not exceed the subsidized rent (basic rent) as determined in accordance with requirements for the applicable federal program listed in paragraph (c)(1) of this section. (d) Combining subsidy. Rent to owner may not exceed any limitation required to comply with HUD subsidy layering requirements. See Sec. 983.55. (e) Other subsidy: rent reduction. To comply with HUD subsidy layering requirements, at the direction of HUD or its designee, a PHA shall reduce the rent to owner because of other governmental subsidies, including tax credits or tax exemptions, grants, or other subsidized financing. (f) Prohibition of other subsidy. For provisions that prohibit PBV assistance to units in certain types of subsidized housing, see Sec. 983.54. [70 FR 59913, Oct. 13, 2005, as amended at 72 FR 65207, Nov. 19, 2007; 79 FR 36170, June 25, 2014] Sec. 983.305 Rent to owner: effect of rent control and other rent limits. In addition to the limitation to 110 percent of the FMR in Sec. 983.301(b)(1), the rent reasonableness limit under Sec. Sec. 983.301(b)(2) and 983.303, the rental determination provisions of Sec. 983.301(f), the special limitations for tax credit units under Sec. 983.301(c), and other rent limits under this part, the amount of rent to owner also may be subject to rent control or other limits under local, state, or federal law. Subpart H_Payment to Owner Sec. 983.351 PHA payment to owner for occupied unit. (a) When payments are made. (1) During the term of the HAP contract, the PHA shall make housing assistance payments to the owner in accordance with the terms of the HAP contract. The payments shall be made for the months during which a contract unit is leased to and actually occupied by an eligible family. (2) Except for discretionary vacancy payments in accordance with Sec. 983.352, the PHA may not make any housing assistance payment to the owner for any month after the month when the family moves out of the unit (even if household goods or property are left in the unit). (b) Monthly payment. Each month, the PHA shall make a housing assistance payment to the owner for each contract unit that complies with the HQS and is leased to and occupied by an eligible family in accordance with the HAP contract. (c) Calculating amount of payment. The monthly housing assistance payment by the PHA to the owner for a contract unit leased to a family is the rent to owner minus the tenant rent (total tenant payment minus the utility allowance). (d) Prompt payment. The housing assistance payment by the PHA to the owner under the HAP contract must be paid to the owner on or about the first day of the month for which payment is due, unless the owner and the PHA agree on a later date. (e) Owner compliance with contract. To receive housing assistance payments in accordance with the HAP contract, the owner must comply with all the provisions of the HAP contract. Unless the owner complies with all the provisions of the HAP contract, the owner does not have a right to receive housing assistance payments. Sec. 983.352 Vacancy payment. (a) Payment for move-out month. If an assisted family moves out of the unit, the owner may keep the housing assistance payment payable for the calendar month when the family moves out (``move-out month''). However, the owner may not keep the payment if the PHA determines that the vacancy is the owner's fault. (b) Vacancy payment at PHA discretion. (1) At the discretion of the PHA, the HAP contract may provide for vacancy payments to the owner (in the amounts determined in accordance with paragraph (b)(2) of this section) for a PHA-determined period of vacancy extending from the beginning of [[Page 625]] the first calendar month after the move-out month for a period not exceeding two full months following the move-out month. (2) The vacancy payment to the owner for each month of the maximum two-month period will be determined by the PHA, and cannot exceed the monthly rent to owner under the assisted lease, minus any portion of the rental payment received by the owner (including amounts available from the tenant's security deposit). Any vacancy payment may cover only the period the unit remains vacant. (3) The PHA may make vacancy payments to the owner only if: (i) The owner gives the PHA prompt, written notice certifying that the family has vacated the unit and containing the date when the family moved out (to the best of the owner's knowledge and belief); (ii) The owner certifies that the vacancy is not the fault of the owner and that the unit was vacant during the period for which payment is claimed; (iii) The owner certifies that it has taken every reasonable action to minimize the likelihood and length of vacancy; and (iv) The owner provides any additional information required and requested by the PHA to verify that the owner is entitled to the vacancy payment. (4) The owner must submit a request for vacancy payments in the form and manner required by the PHA and must provide any information or substantiation required by the PHA to determine the amount of any vacancy payment. Sec. 983.353 Tenant rent; payment to owner. (a) PHA determination. (1) The tenant rent is the portion of the rent to owner paid by the family. The PHA determines the tenant rent in accordance with HUD requirements. (2) Any changes in the amount of the tenant rent will be effective on the date stated in a notice by the PHA to the family and the owner. (b) Tenant payment to owner. (1) The family is responsible for paying the tenant rent (total tenant payment minus the utility allowance). (2) The amount of the tenant rent as determined by the PHA is the maximum amount the owner may charge the family for rent of a contract unit. The tenant rent is payment for all housing services, maintenance, equipment, and utilities to be provided by the owner without additional charge to the tenant, in accordance with the HAP contract and lease. (3) The owner may not demand or accept any rent payment from the tenant in excess of the tenant rent as determined by the PHA. The owner must immediately return any excess payment to the tenant. (4) The family is not responsible for payment of the portion of the rent to owner covered by the housing assistance payment under the HAP contract. The owner may not terminate the tenancy of an assisted family for nonpayment of the PHA housing assistance payment. (c) Limit of PHA responsibility. (1) The PHA is responsible only for making housing assistance payments to the owner on behalf of a family in accordance with the HAP contract. The PHA is not responsible for paying the tenant rent, or for paying any other claim by the owner. (2) The PHA may not use housing assistance payments or other program funds (including any administrative fee reserve) to pay any part of the tenant rent or to pay any other claim by the owner. The PHA may not make any payment to the owner for any damage to the unit, or for any other amount owed by a family under the family's lease or otherwise. (d) Utility reimbursement. (1) If the amount of the utility allowance exceeds the total tenant payment, the PHA shall pay the amount of such excess as a reimbursement for tenant-paid utilities (``utility reimbursement'') and the tenant rent to the owner shall be zero. (2) The PHA either may pay the utility reimbursement to the family or may pay the utility bill directly to the utility supplier on behalf of the family. (3) If the PHA chooses to pay the utility supplier directly, the PHA must notify the family of the amount paid to the utility supplier. [[Page 626]] Sec. 983.354 Other fees and charges. (a) Meals and supportive services. (1) Except as provided in paragraph (a)(2) of this section, the owner may not require the tenant or family members to pay charges for meals or supportive services. Non- payment of such charges is not grounds for termination of tenancy. (2) In assisted living developments receiving project-based assistance, owners may charge tenants, family members, or both for meals or supportive services. These charges may not be included in the rent to owner, nor may the value of meals and supportive services be included in the calculation of reasonable rent. Non-payment of such charges is grounds for termination of the lease by the owner in an assisted living development. (b) Other charges by owner. The owner may not charge the tenant or family members extra amounts for items customarily included in rent in the locality or provided at no additional cost to unsubsidized tenants in the premises. PART 984_SECTION 8 AND PUBLIC HOUSING FAMILY SELF-SUFFICIENCY PROGRAM --Table of Contents Subpart A_General Sec. 984.101 Purpose, applicability, and scope. 984.102 Program objectives. 984.103 Definitions. 984.104 Basic requirements of the FSS program. 984.105 Minimum program size. 984.106 Cooperative Agreements. 984.107 FSS award funds formula. Subpart B_Program Development and Approval Procedures 984.201 Action Plan. 984.202 Program Coordinating Committee (PCC). 984.203 FSS family selection procedures. 984.204 On-site facilities. Subpart C_Program Operations 984.301 Program implementation. 984.302 FSS funds. 984.303 Contract of Participation (CoP). 984.304 Amount of rent paid by FSS family and increases in family income. 984.305 FSS escrow account. 984.306 HCV portability requirements for FSS participants. Subpart D_Reporting 984.401 Reporting. Authority: 42 U.S.C. 1437f, 1437u, and 3535(d). Source: 87 FR 30047, May 17, 2022, unless otherwise noted. Editorial Note: Nomenclature changes to part 984 appear at 65 FR 16731, Mar. 29, 2000. Subpart A_General Sec. 984.101 Purpose, applicability, and scope. (a) Purpose. (1) The purpose of the Family Self-Sufficiency (FSS) program is to promote the development of local strategies to coordinate the use of Department of Housing and Urban Development (HUD or Department) assistance with public and private resources, to enable families eligible to receive HUD assistance to achieve economic independence and self-sufficiency. (2) The purpose of this part is to implement the policies and procedures applicable to operation of an FSS program, as established under section 23 of the 1937 Act (42 U.S.C. 1437u). (b) Applicability. This part applies to Public Housing Agencies (PHAs) administering a public housing program under section 9, a project-based and/or tenant-based assistance program under section 8(o) of the U.S. Housing Act of 1937 (1937 Act), a Housing Choice Voucher (HCV) homeownership program under section 8(y) of the U.S. Housing Act of 1937, or Section 8 Moderate Rehabilitation for low-income families and Moderate Rehabilitation Single Room Occupancy for homeless individuals under 24 CFR part 882. See part 887 of this title for program regulations applicable to owners of multifamily assisted housing. (c) Scope. Each PHA that administers an FSS program must do so in accordance with the requirements of this part. See Sec. 984.105 for more information concerning PHAs that are required to administer an FSS program. (d) Non-participation. Participation in an FSS program is voluntary. A family's admission to the public housing or [[Page 627]] Section 8 programs cannot be conditioned on participation in FSS. A family's housing assistance cannot be terminated by reason of such election or due to an FSS family's failure to comply with FSS program requirements in this part. Sec. 984.102 Program objectives. The objective of the FSS program is to reduce the dependency of low- income families on welfare assistance and housing subsidies. Under the FSS program, HUD assisted families are provided opportunities for education, job training, counseling, and other forms of social service assistance, while living in assisted housing, so that they may obtain the education, employment, and business and social skills necessary to achieve self-sufficiency, as defined in Sec. 984.103. The Department will evaluate the performance of a PHA's or owner's FSS program using a scoring system that measures criteria, such as graduation from the program, increased earned income, and program participation, as provided by HUD through a Federal Register notice. Sec. 984.103 Definitions. (a) The terms 1937 Act, Fair Market Rent, Head of household, HUD, Low income family, Public housing, Public Housing Agency (PHA), and Secretary, as used in this part, are defined in part 5 of this title. (b) As used in this part: Baseline annual earned income means, for purposes of determining the FSS credit under Sec. 984.305(b), the FSS family's total annual earned income from wages and business income (if any) as of the effective date of the FSS contract. In calculating baseline annual earned income, all applicable exclusions of income must be applied, except for any disregarded earned income or other adjustments associated with self- sufficiency incentives that may be applicable to the determination of annual income. Baseline monthly rent means, for purposes of determining the FSS credit under Sec. 984.305(b): (i) The FSS family's total tenant payment (TTP), as of the effective date of the FSS contract, for families paying an income-based rent as of the effective date of the FSS contract; or (ii) The amount of the flat or ceiling rent (which includes the applicable utility allowance), and including any hardship discounts, as of the effective date of the FSS contract, for families paying a flat or ceiling rent as of the effective date of the FSS contract. Certification means a written assertion based on supporting evidence, provided by the FSS family or the PHA or owner, as may be required under this part, and which: (i) Shall be maintained by the PHA or owner in the case of the family's certification, or by HUD in the case of the PHA's or owner's certification; (ii) Shall be made available for inspection by HUD, the PHA or owner, and the public, as appropriate; and, (iii) Shall be deemed to be accurate for purposes of this part, unless the Secretary or the PHA or owner, as applicable, determines otherwise after inspecting the evidence and providing due notice and opportunity for comment. Chief executive officer (CEO) means the elected official or the legally designated official of a unit of general local government, who has the primary responsibility for the conduct of that entity's governmental affairs. Contract of Participation (CoP) means a contract, in a form with contents prescribed by HUD, entered into between an FSS family and a PHA or owner operating an FSS program that sets forth the terms and conditions governing participation in the FSS program. The CoP includes all Individual Training and Services Plans (ITSPs) entered into between the PHA or owner and all members of the family who will participate in the FSS program, and which plans are attached to the CoP as exhibits. For additional detail, see Sec. 984.303. Current annual earned income means, for purposes of determining the FSS credit under Sec. 984.305(b), the FSS family's total annual earned income from wages and business income (if any) as of the most recent re- examination of income which occurs after the effective date of the FSS contract. In calculating current annual earned income, all applicable exclusions of income will [[Page 628]] apply, including any disregarded earned income and other adjustments associated with self-sufficiency incentives or other alternative rent structures that may be applicable to the determination of annual income. Current monthly rent means, for purposes of determining the FSS credit under Sec. 984.305(b): (i) The FSS family's TTP as of the most recent re-examination of income, which occurs after the effective date of the FSS contract, for families paying an income-based rent as of the most recent re- examination of income; or (ii) The amount of the flat rent (which includes the applicable utility allowance) or ceiling rent, including any hardship discounts, as of the most recent re-examination of income which occurs after the effective date of the FSS contract, for families paying a flat rent or ceiling rent as of the most recent re-examination of income. Earned income means income or earnings from wages, tips, salaries, other employee compensation, and self-employment. Earned income does not include any pension or annuity, transfer payments, any cash or in-kind benefits, or funds deposited in or accrued interest on the FSS escrow account established by a PHA or owner on behalf of a FSS family. Effective date of Contract of Participation (CoP) means the first day of the month following the date in which the FSS family and the PHA or owner entered into the CoP. Eligible families means current residents of public housing (section 9) and current Section 8 program participants, as defined in this section, including those participating in other local self-sufficiency programs. Enrollment means the date that the FSS family entered into the CoP with the PHA or owner. Family Self-Sufficiency (FSS) Program means the program established by a PHA within its jurisdiction or by an owner to promote self- sufficiency among participating families, including the coordination of supportive services to these families, as authorized by section 23 of the 1937 Act. FSS escrow account (or, escrow) means the FSS escrow account authorized by section 23 of the 1937 Act, and as provided by Sec. 984.305. FSS escrow credit means the amount credited by the PHA or owner to the FSS family's FSS escrow account. FSS family means a family that resides in public housing (section 9) or receives Section 8 assistance, as defined in this section, and that elects to participate in the FSS program, and whose designated adult member (head of FSS family), as determined in accordance with Sec. 984.303(a), has signed the CoP. FSS family in good standing means, for purposes of this part, an FSS family that is in compliance with their FSS CoP; has either satisfied or are current on any debts owed the PHA or owner; and is in compliance with the regulations in part 5 and chapters VIII and IX of this title regarding participation in the relevant rental assistance program. FSS related service program means any program, publicly or privately sponsored, that offers the kinds of supportive services described in the definition of ``supportive services'' set forth in this section. FSS slots refers to the total number of families (as determined in the Action Plan for mandatory programs in Sec. 984.105) that the PHA will serve in its FSS program. FSS Program Coordinator means the person(s) who runs the FSS program. This may include (but is not limited to) performing outreach, recruitment, and retention of FSS participants; goal-setting and case management/coaching of FSS participants; working with the community and service partners; and tracking program performance. FY means Federal fiscal year (starting October 1 and ending September 30, and year designated by the calendar year in which it ends). Head of FSS family means the designated adult family member of the FSS family who has signed the CoP. The head of FSS family may, but is not required to be, the head of the household for purposes of determining income eligibility and rent. Individual Training and Services Plan (ITSP) means a written plan that is prepared by the PHA or owner in consultation with a participating FSS [[Page 629]] family member (the person with for and whom the ITSP is being developed), and which sets forth: (i)(A) The final and interim goals for the participating FSS family member; (B) The supportive services to be provided to the participating FSS family member; (C) The activities to be completed by that family member; and, (D) The agreed upon completion dates for the goals, and activities. (ii) Each ITSP must be signed by the PHA or owner and the participating FSS family member and is attached to, and incorporated as part of the CoP. An ITSP must be prepared for each adult family member who elects to participate in the FSS program, including the head of FSS family who has signed the CoP. Multifamily assisted housing (also known as project-based rental assistance (PBRA)) means rental housing assisted by a Section 8 Housing Payments Program, pursuant to 24 CFR parts 880, 881, 883, 884, and 886. Owner means the owner of multifamily assisted housing. Program Coordinating Committee (PCC) means the committee described in Sec. 984.202. Section 8 means assistance provided under section 8 of the 1937 Act (42 U.S.C. 1437f). Specifically, multifamily assisted housing, as defined in this section; tenant-based and project-based rental assistance under section 8(o) of the 1937 Act; the HCV homeownership option under section 8(y) of the 1937 Act; Family Unification Program (FUP) assistance under section 8(x) of the 1937 Act; and the Section 8 Moderate Rehabilitation (Mod Rehab) for low-income families and Moderate Rehabilitation Single Room Occupancy (Mod Rehab SRO) for homeless individuals under 24 CFR part 882. Self-sufficiency means that an FSS family is no longer receiving Section 8, public housing assistance, or any Federal, State, or local rent, homeownership subsidies, or welfare assistance. Achievement of self-sufficiency, although an FSS program objective, is not a condition for receipt of the FSS escrow account funds. Supportive services means those appropriate services that a PHA or owner will coordinate on behalf of an FSS family under a CoP, which may include, but are not limited to: (i) Child care. Child care (on an as-needed or ongoing basis) of a type that provides sufficient hours of operation and serves an appropriate range of ages; (ii) Transportation. Transportation necessary to enable a participating FSS family member to receive available services, or to commute to their place(s) of employment; (iii) Education. Remedial education; education for completion of high school or attainment of a high school equivalency certificate; education in pursuit of a post-secondary degree or certificate; (iv) Employment supports. Job training, preparation, and counseling; job development and placement; and follow-up assistance after job placement and completion of the CoP; (v) Personal welfare. Substance/alcohol abuse treatment and counseling, and health, dental, mental health and health insurance services; (vi) Household management. Training in household management; (vii) Homeownership and housing counseling. Homeownership education and assistance and housing counseling; (viii) Financial empowerment. Training in financial literacy, such as financial coaching, training in financial management, asset building, and money management, including engaging in mainstream banking, reviewing and improving credit scores, etc.; and (ix) Other services. Any other services and resources, including case management, optional services, and specialized services for individuals with disabilities, that are determined to be appropriate in assisting FSS families to achieve economic independence and self- sufficiency. Reasonable accommodations and modifications must be made for individuals with disabilities consistent with applicable Federal civil rights and nondiscrimination laws. Unit size or size of unit refers to the number of bedrooms in a dwelling unit. Very low-income family is defined as set out in Sec. 813.102 of this title. Welfare assistance means (for purposes of the FSS program only) income assistance from Federal (i.e., Temporary [[Page 630]] Assistance for Needy Families (TANF) or subsequent program), State, or local welfare programs and includes only cash maintenance payments designed to meet a family's ongoing basic needs. Welfare assistance does not include: (i) Nonrecurrent, short-term benefits that: (A) Are designed to deal with a specific crisis or episode of need; (B) Are not intended to meet recurrent or ongoing needs; and, (C) Will not extend beyond four months; (ii) Work subsidies (i.e., payments to employers or third parties to help cover the costs of employee wages, benefits, supervision, and training); (iii) Supportive services such as child care and transportation provided to families who are employed; (iv) Refundable earned income tax credits; (v) Contributions to, and distributions from, Individual Development Accounts under TANF; (vi) Services such as counseling, case management, peer support, child care information and referral, financial empowerment, transitional services, job retention, job advancement, and other employment-related services that do not provide basic income support; (vii) Amounts solely directed to meeting housing expenses; (viii) Amounts for health care; (ix) Supplemental Nutrition Assistance Program and emergency rental and utilities assistance; (x) Supplemental Security Income, Social Security Disability Income, or Social Security; and (xi) Child-only or non-needy TANF grants made to or on behalf of a dependent child solely on the basis of the child's need and not on the need of the child's current non-parental caretaker. Sec. 984.104 Basic requirements of the FSS program. (a) An FSS program established under this part shall be operated in conformity with the requirements of this part, including the Action Plan at Sec. 984.201, and: (1) As applicable to voucher program participants: (i) HCV regulations at 24 CFR part 982, for HCV program participants; and (ii) Project-based voucher (PBV) regulations at 24 CFR part 983, for PBV program participants; and (iii) HCV Homeownership regulations at 24 CFR 982.625 through 982.643, for HCV homeownership participants; (2) As applicable to Mod Rehab and Mod Rehab SRO participants, 24 CFR part 882; (3) As applicable to public housing program participants, the applicable public housing regulations, including the regulations in 24 CFR parts 5, subpart F, 960, and 966; and, (4) The applicable nondiscrimination and equal opportunity requirements including, but not limited to, those set forth in 24 CFR part 5. (b) [Reserved] Sec. 984.105 Minimum program size. (a) FSS program size--(1) Minimum program size requirement. A PHA must operate an FSS program of the minimum program size determined in accordance with paragraph (b) of this section. (2) Exceptions to program operation requirement or to operate a smaller mandatory program. Paragraph (c) of this section states when HUD may grant an exception to the program operation requirement, and paragraph (d) of this section states when an exception may be granted to operate a program that is smaller than the minimum program size. (3) Option to operate larger FSS program. A PHA may choose to operate an FSS program larger than the minimum program size. (b) How to determine FSS minimum program size--(1) General requirement. Each PHA that was required to administer an FSS program on May 24, 2018 (enactment date of the Economic Growth, Regulatory Relief, and Consumer Protection Act), shall continue to operate such program for, at a minimum, the total number of families the PHA was required by statute to serve as of May 24, 2018, subject only to the availability of sufficient amounts for housing assistance under appropriations acts and the provisions of paragraph (b)(2) of this section. (2) Reduction of minimum program size. The minimum program size for a PHA's FSS program is reduced by one slot for each family from any rental assistance [[Page 631]] program (public housing or Section 8, including multifamily assisted housing) for which the PHA administers FSS under this section and that graduates from the FSS program by fulfilling its FSS CoP on or after October 21, 1998. If an FSS slot is vacated by a family that has not completed its FSS CoP obligations, the slot must be filled by a replacement family which has been selected in accordance with the FSS family selection procedures set forth in Sec. 984.203. (c) Exception to program operation. (1) Upon approval by HUD, a PHA will not be required to carry out an FSS program if the PHA provides to HUD a certification, as defined in Sec. 984.103, that the operation of such an FSS program is not feasible because of local circumstances, which may include, but are not limited to, the following: (i) Lack of supportive services accessible to eligible families, including insufficient availability of resources for programs under title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 et seq.); (ii) Lack of funding for reasonable administrative costs; (iii) Lack of cooperation by other units of State or local government; or, (iv) Lack of interest in participating in the FSS program on the part of eligible families. (2) A program operation exception will not be granted if HUD determines that local circumstances do not preclude the PHA from effectively operating an FSS program that is smaller than the minimum program size. (d) Exception to operate a smaller mandatory program. Upon approval by HUD in its full discretion, a PHA may be permitted to operate an FSS program that is smaller than the minimum program size if the PHA requests an exception and provides to HUD a certification, as defined in Sec. 984.103, that the operation of an FSS program of the minimum program size is not feasible because of local circumstances, which may include, but are not limited to: (1) Decrease in or lack of supportive services available to eligible families, including insufficient availability of resources for programs under title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 et seq.); (2) Decrease in or lack of funding for reasonable administrative costs; (3) Decrease in or lack of cooperation by other units of State or local government; or (4) Decrease in or lack of interest in participating in the FSS program on the part of eligible families. (e) Expiration of exception. A full or partial exception to the FSS minimum program size requirement (approved by HUD in accordance with paragraph (c) or (d) of this section) expires five (5) years from the date of HUD approval of the exception. If circumstances change and a HUD-approved exception is no longer needed, the PHA is not required to effectuate the exception for the full term of the exception. If a PHA seeks to continue an exception after its expiration, the PHA must submit a new request and certification to HUD for consideration. (f) Review of certification records. HUD reserves the right to examine, during its management review of the PHA, or at any time, the documentation and data that a PHA relied on in certifying to the unfeasibility of its establishing and operating an FSS program, or of operating one of less than minimum program size. Sec. 984.106 Cooperative Agreements. (a) A PHA may enter into a Cooperative Agreement with one or more owners to voluntarily make an FSS program available to the owner's multifamily assisted housing tenants. (b) A PHA and owner that enter into a Cooperative Agreement to make an FSS program available pursuant to paragraph (a) of this section, are subject to this part and the following requirements: (1) The PHA must open its FSS waiting list to any eligible family residing in the multifamily assisted housing covered by the Cooperative Agreement. (2) The owner must provide, at the request of the PHA, information on escrow amounts for participating multifamily assisted housing tenants. The Cooperative Agreement must provide that the owner is responsible for managing the escrow account for participating multifamily assisted housing tenants, including calculating and tracking of escrow in accordance with [[Page 632]] Sec. 984.305. The Cooperative Agreement must set forth the procedures that will be in place for the exchange of escrow information between the PHA and the owner. (3) The PHA may count multifamily assisted housing families served pursuant to a Cooperative Agreement under this subpart as part of the calculation of the FSS award under Sec. Sec. 984.107 and 984.302. (4) The PHA may use FSS appropriated funds to serve multifamily assisted housing tenants subject to a Cooperative Agreement under this section. (5) The Cooperative Agreement must clearly specify the terms and conditions of such agreement, including the requirements of this section, and it must include a process for entities for PHAs and owners to communicate with each other about changes in their Action Plan. Sec. 984.107 FSS award funds formula. The Secretary may establish a formula by which funds for administration of the FSS program are awarded consistent with 42 U.S.C. 1437u(i), which provides the following: (a) Base award. A PHA or owner serving 25 or more participants in the FSS program is eligible to receive an award equal to the costs, as determined by the Secretary, of 1 full-time family self-sufficiency coordinator position. The Secretary may, by notice (including a Notice of Funding Opportunity (NOFO)), determine the policy concerning the award for an eligible entity serving fewer than 25 such participants, including providing prorated awards or allowing such entities to combine their programs under this section for purposes of employing a coordinator. (b) Additional award. A PHA or owner that meets performance standards set by the Secretary is eligible to receive an additional award sufficient to cover the costs of filling an additional FSS coordinator position if such entity has 75 or more participating families, and an additional coordinator for each additional 50 participating families, or such other ratio as may be established by the Secretary based on the award allocation evaluation under section 23(i)(2)(E) of the U.S. Housing Act of 1937. (c) State and regional entities. For purposes of calculating the award under this section, HUD may treat each administratively distinct part of a State or regional entity as a separate entity. (d) Determination of number of coordinators. In determining whether a PHA or owner meets a specific threshold for funding pursuant to this section, the Secretary shall consider the number of participants enrolled by the PHA or owner in its FSS program as well as other criteria determined by the Secretary. (e) Renewals and allocation. FSS awards shall be allocated, as established by the Secretary, in the following order of priority: (1) First priority. Renewal of the full cost of all FSS coordinators in the previous year at each PHA or owner with an existing FSS program that meets applicable performance standards set by the Secretary. If this first priority cannot be fully satisfied, the Secretary may prorate the funding for each PHA or owner, as long as: (i) Each PHA or owner that has received funding for at least 1 part- time coordinator in the prior fiscal year is provided sufficient funding for at least 1 part-time coordinator as part of any such proration; and (ii) Each PHA or owner that has received funding for at least 1 full-time coordinator in the prior fiscal year is provided sufficient funding for at least 1 full-time coordinator as part of any such proration. (2) Second priority. New or incremental coordinator funding. (f) Recapture or offset. Any FSS awards allocated under this section by the Secretary in a fiscal year that have not been spent by the end of the subsequent fiscal year or such other time period as determined by the Secretary may be recaptured by the Secretary and shall be available for providing additional awards pursuant to paragraph (b) of this section, or may be offset as determined by the Secretary. (g) Incentives for innovation and high performance. The Secretary may reserve up to 5 percent of the appropriated FSS funds to provide support to or reward FSS programs based on [[Page 633]] the rate of successful completion, increased earned income, or other factors as may be established by the Secretary. Subpart B_Program Development and Approval Procedures Sec. 984.201 Action Plan. (a) Requirement for Action Plan. A PHA or owner must have a HUD- approved Action Plan that complies with the requirements of this section before the PHA or owner operates an FSS program, whether the FSS program is a mandatory or voluntary program. (b) Development of Action Plan. The Action Plan shall be developed by the PHA or owner in consultation with the chief executive officer of the applicable unit of general local government and the Program Coordinating Committee. Consultation for the Action Plan by the PHA or owner shall also include representatives of current and prospective FSS program participants, any local agencies responsible for programs under title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 et seq.), other appropriate organizations (such as other local welfare and employment or training institutions, child care providers, financial empowerment providers, nonprofit service providers, and private businesses), and any other public and private service providers affected by the operation of the PHA's or owner's program. (c) Plan submission--(1) Voluntary program. The PHA or owner must submit its Action Plan and obtain HUD approval of the plan before the PHA or owner carries out a voluntary FSS program, including a program that exceeds the minimum size for a mandatory program, regardless of whether the voluntary program receives HUD funding. (2) Revision. Following HUD's initial approval of the Action Plan, no further approval of the Action Plan is required unless the PHA or owner proposes to make policy changes to the Action Plan or increase the size of a voluntary program; or HUD requires other changes. In such cases, the PHA or owner must submit such changes to the Action Plan to HUD for approval. (d) Contents of Plan. The Action Plan shall describe the policies and procedures for the operation of a PHA's or owner's FSS program, and shall contain, at a minimum, the following information: (1) Family demographics. A description of the number, size, characteristics, and other demographics (including racial and ethnic data), and the supportive service needs of the families expected to participate in the FSS program; (2) Estimate of participating families. A description of the number of eligible FSS families who can reasonably be expected to receive supportive services under the FSS program, based on available and anticipated Federal, tribal, State, local, and private resources; (3) Eligible families from other self-sufficiency programs. If applicable, the number of families, by program type, who are participating in other local self-sufficiency programs and are expected to agree to execute an FSS CoP; (4) FSS family selection procedures. A statement indicating the procedures to be utilized to select families for participation in the FSS program, subject to the requirements governing the selection of FSS families, set forth in Sec. 984.203. This statement must include a description of how the selection procedures ensure that families will be selected without regard to race, color, religion, sex (including actual or perceived gender identity and sexual orientation), disability, familial status, or national origin; (5) Incentives to encourage participation. A description of the incentives that will be offered to eligible families to encourage their participation in the FSS program (incentives plan). The incentives plan shall provide for the establishment of the FSS escrow account in accordance with the requirements set forth in Sec. 984.305, and other incentives, if any. The incentives plan shall be part of the Action Plan; (6) Outreach efforts. A description of: (i) The efforts, including notification and outreach efforts, to recruit FSS participants from among eligible families; and, (ii) The actions to be taken to assure that both minority and non- minority groups are informed about the FSS [[Page 634]] program, and how this information will be made available; (7) FSS activities and supportive services. A description of the activities and supportive services to be coordinated on behalf of participating FSS families and identification of the public and private resources which are expected to provide the supportive services; (8) Method for identification of family support needs. A description of how the FSS program will identify the needs and coordinate the services and activities according to the needs of the FSS families; (9) Program termination; withholding of services; and available grievance procedures. A description of all policies concerning termination of participation in the FSS program, or withholding of coordination of supportive services, on the basis of a family's failure to comply with the requirements of the CoP; and the grievance and hearing procedures available for FSS families; (10) Assurances of non-interference with rights of non-participating families. An assurance that a family's election not to participate in the FSS program will not affect the family's admission to public housing or to the Section 8 program or the family's right to occupancy in accordance with its lease; (11) Timetable for program implementation. A timetable for implementation of the FSS program, as provided in Sec. 984.301(a)(1), including the schedule for filling FSS slots with eligible FSS families, as provided in Sec. 984.301; (12) Certification of coordination. A certification that development of the services and activities under the FSS program has been coordinated with programs under title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 et seq.), and other relevant employment, child care, transportation, training, education, and financial empowerment programs in the area, and that implementation will continue to be coordinated, in order to avoid duplication of services and activities; and (13) Optional additional information. Such other information that would help HUD determine the soundness of the proposed FSS program. This may include, and is not limited to: (i) Policies related to the modification of goals in the ITSP; (ii) The circumstances in which an extension of the Contract of Participation may be granted; (iii) Policies on the interim disbursement of escrow, including limitations on the use of the funds (if any); (iv) Policies regarding eligible uses of forfeited escrow funds by families in good standing; (v) Policies regarding the re-enrollment of previous FSS participants, including graduates and those who exited the program without graduating; (vi) Policies on requirements for documentation for goal completion; (vii) Policies on documentation of the household's designation of the ``head of FSS family;'' and (viii) Policies for providing an FSS selection preference for porting families (if the PHA elects to offer such a preference). (e) Eligibility of a combined program. A PHA or owner that wishes to operate a joint FSS program with a PHA or owner may combine its resources with one or more PHAs or owners to deliver supportive services under a joint Action Plan that will provide for the coordination of a combined FSS program that meets the requirements of this part. (f) Single Action Plan. A PHA or owner may submit one Action Plan that covers all applicable rental assistance programs (Section 8 vouchers, PBRA, Mod Rehab, and public housing) served by the FSS program. Sec. 984.202 Program Coordinating Committee (PCC). (a) General. Each participating PHA (or joint FSS program) must establish a PCC whose functions will be to assist the PHA in securing commitments of public and private resources for the operation of the FSS program within the PHA's jurisdiction, including assistance in developing the Action Plan and in operating the program. (b) Membership--(1) Required membership. The PCC must include representatives of the PHA, including one or more FSS Program Coordinators, and one or more participants from each HUD rental assistance program served by the PHA's FSS program. The PHA [[Page 635]] may seek assistance from the following groups in identifying potential PCC members: (i) An area-wide or city-wide resident council, if one exists; (ii) If the PHA operates in a specific public housing development, the resident council or resident management corporation, if one exists, of the public housing development where the public housing FSS program is to be carried out; or (iii) Any other resident group, which the PHA believes is interested in the FSS program and would contribute to the development and coordination of the FSS program (such as the Resident Advisory Board or tenant association, as applicable). (2) Recommended membership. Membership on the PCC may include representatives of the unit of general local government served by the PHA, local agencies (if any) responsible for carrying out programs under title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 et seq.), and other organizations, such as other State, local, or tribal welfare and employment agencies, public and private primary, secondary, and post-secondary education or training institutions, child care providers, financial empowerment organizations, nonprofit service providers, private businesses, and any other public and private service providers with resources to assist the FSS program. (c) Alternative committee. The PHA may, in consultation with the chief executive officer of the unit of general local government served by the PHA and one or more residents of each HUD-assisted program served by the FSS program, utilize an existing entity as the PCC if the membership of the existing entity consists, or will consist of, the individuals identified in paragraph (b)(1) of this section, and it may also include individuals from the same or similar organizations identified in paragraph (b)(2) of this section. Sec. 984.203 FSS family selection procedures. (a) Preference in the FSS selection process. A PHA has the option of selecting eligible families for up to fifty (50) percent of its FSS slots in accordance with a written policy, provided in the PHA's FSS Action Plan, who have one or more family members currently enrolled in an FSS related service program or on the waiting list for such a program. The PHA may limit the selection preference given to participants in, and applicants for, FSS related service programs to one or more eligible FSS related service programs. A PHA that chooses to exercise the selection preference option must include the following information in its Action Plan: (1) The percentage of FSS slots, not to exceed fifty (50) percent of the total number of FSS slots, for which it will give a selection preference; (2) The FSS related service programs to which it will give a selection preference to the programs' participants and applicants; and (3) The method of outreach to, and selection of, families with one or more members participating in the identified programs. (b) Selection among families with preference. The PHA may use either of the following to select among applicants on the FSS waiting list with the same preference status: (1) Date and time of application to the FSS program; or, (2) A drawing or other random choice technique. (c) FSS selection without preference. For those FSS slots for which a selection preference is not applicable, the FSS slots must be filled with eligible families in accordance with an objective selection system, such as a lottery, the length of time living in subsidized housing, or the date the family expressed an interest in participating in the FSS program. The objective system to be used by the PHA must be described in the PHA's Action Plan. (d) Motivation as a selection factor--(1) General. A PHA may screen families for interest, and motivation to participate in the FSS program, provided that the factors utilized by the PHA are those which solely measure the family's interest and motivation to participate in the FSS program. (2) Permissible motivational screening factors. Permitted motivational factors include requiring attendance at FSS orientation sessions or preselection [[Page 636]] interviews and assigning certain tasks which indicate the family's willingness to undertake the obligations which may be imposed by the FSS CoP. Any tasks assigned shall be those which may be readily accomplishable by the family, based on the family members' educational level, capabilities, and disabilities, if any. Reasonable accommodations and modifications must be made for individuals with disabilities, including, e.g., mobility, manual, sensory, speech, mental, intellectual, or developmental disabilities, consistent with applicable Federal civil rights and nondiscrimination laws. (3) Prohibited motivational screening factors. Prohibited motivational screening factors include the family's educational level, educational or standardized motivational test results, previous job history or job performance, credit rating, marital status, number of children, or other factors, such as sensory or manual skills, and any factors which may result in the exclusion, application of different eligibility requirements, or other discriminatory treatment or effect on the basis of race, color, national original, sex (including actual or perceived gender identity and sexual orientation), religion, familial status, or disability. Sec. 984.204 On-site facilities. Each PHA or owner may, subject to the approval of HUD, make available and utilize common areas or unoccupied dwelling units in properties owned by the entity to provide or coordinate supportive services under any FSS program. Subpart C_Program Operations Sec. 984.301 Program implementation. (a) Voluntary program implementation. Unless otherwise required under a funding notice, there is no deadline for implementation of a voluntary program. A voluntary program, however, may not be implemented before the requirements of Sec. 984.201 have been satisfied. (b) Program administration. A PHA may employ appropriate staff, including a service coordinator or FSS Program Coordinator to administer its FSS program, and may contract with an appropriate organization to establish and administer all or part of the FSS program, including the FSS escrow account, as provided by Sec. 984.305. Sec. 984.302 FSS funds. (a) Public housing program. Subject to 42 U.S.C. 1437g, 24 CFR part 990, and appropriations by Congress, PHAs may use funds provided under 42 U.S.C. 1437g to cover reasonable and eligible administrative costs incurred by PHAs in carrying out the FSS program. (b) Section 8 program. Subject to 42 U.S.C. 1437f, 24 CFR part 982, and appropriations by Congress, PHAs may use the administrative fees paid to PHAs for costs associated with operation of an FSS program. (c) FSS funds. FSS funds associated with operation of an FSS program are established by the Congress and subject to appropriations. FSS appropriated funds will be awarded to and used by PHAs or owners for costs associated with families who are enrolled in an FSS program under this part, including when an owner operates an FSS program through a Cooperative Agreement or on its own. Sec. 984.303 Contract of Participation (CoP). (a) General. Each eligible family that is selected to participate in an FSS program must enter into a CoP with the PHA or owner that operates the FSS program in which the family will participate. There will be no more than one CoP at any time for each family. There may be an ITSP for as many members of the family as wish to participate. The CoP shall be signed by a representative of the PHA or the owner and the head of FSS family, as designated by the family. This head of FSS family does not have to be the same as the official head of household for rental assistance purposes. (b) Form and content of contract--(1) General. The CoP, which incorporates the ITSP(s), shall set forth the principal terms and conditions governing participation in the FSS program. These include the rights and responsibilities of the FSS family and of the PHA or owner, the services to be provided to, and the activities to be completed by, each adult member of the [[Page 637]] FSS family who elects to participate in the program. (2) FSS family goals. The ITSP, incorporated in the CoP, shall establish specific interim and final goals by which the PHA or owner, and the family, measures the FSS family's progress towards fulfilling its obligations under the CoP and becoming self-sufficient. For any FSS family that is a recipient of welfare assistance at the outset of the CoP or that receives welfare assistance while in the FSS program, the PHA or owner must establish as a final goal for each FSS participant that every member of the family become independent from welfare assistance before the expiration of the term of the CoP, including any extension thereof. Also, see the employment obligation described in paragraph (b)(4) of this section. Aside from the goals specifically required in this section, PHAs or owners must work with each participant to establish realistic and individualized goals and may not include additional mandatory goals or mandatory modifications of the two mandatory goals. (3) Compliance with lease terms. The CoP shall provide that one of the obligations of the FSS family is to comply with the terms and conditions of the respective public housing or Section 8 lease. However, all considerations allowed for other assisted residents for repayment agreements, etc., shall also be allowed for FSS participants. (4) Employment obligation--(i) Minimum requirement. Although all members of the FSS family may seek and maintain suitable employment during the term of the contract, only the head of FSS family shall be required under the CoP to seek and maintain suitable employment during the term of the contract and any extension thereof. (ii) Seek employment. The obligation to seek employment means searching for jobs, applying for employment, attending job interviews, and otherwise following through on employment opportunities. (iii) Determination of suitable employment. A determination of suitable employment shall be made by the PHA or owner, with the agreement of the affected participant, based on the skills, education, job training, and receipt of other benefits of the household member, and based on the available job opportunities within the jurisdiction served by the PHA or in the community where the PBRA property is located. (5) Consequences of noncompliance with the contract. The CoP shall specify the consequences of noncompliance with the CoP as described in paragraph (i) of this section. (c) Contract of Participation term. The CoP shall state that each FSS family will be required to fulfill CoP obligations no later than 5 years after the first re-examination of income after the execution date of the CoP. (d) Contract of Participation extension. The PHA or owner shall, in writing, extend the term of the CoP for a period not to exceed two (2) years for any FSS family that requests, in writing, an extension of the contract, provided that the PHA or owner finds that good cause exists for granting the extension. The family's written request for an extension must include a description of the need for the extension. Extension of the CoP will entitle the FSS family to continue to have amounts credited to the family's FSS escrow account in accordance with Sec. 984.304. As used in this paragraph (d), good cause means: (1) Circumstances beyond the control of the FSS family that impede the family's ability to complete the CoP obligations, as determined by the PHA or owner, such as a serious illness or involuntary loss of employment; (2) Active pursuit of a current or additional goal that will result in furtherance of self-sufficiency during the period of the extension (e.g., completion of a college degree during which the participant is unemployed or under-employed, credit repair towards being homeownership ready, etc.) as determined by the PHA or owner; or (3) Any other circumstance that the PHA or owner determines warrants an extension, as long as the PHA or owner is consistent in its determination as to which circumstances warrant an extension. (e) Unavailability of supportive services--(1) Good-faith effort to replace unavailable services. If a social service agency fails to deliver the supportive services identified in an FSS family [[Page 638]] member's ITSP, the PHA or owner shall make a good faith effort to obtain these services from another agency. (2) Assessment of necessity of services. If the PHA or owner is unable to obtain the services from another agency, the PHA or owner shall reassess the family member's needs and determine whether other available services would achieve the same purpose. If other available services would not achieve the same purpose, the PHA or owner and the family shall determine whether the unavailable services are integral to the FSS family's advancement or progress toward self-sufficiency. If the unavailable services are: (i) Determined not to be integral to the FSS family's advancement toward self-sufficiency, the PHA or owner shall revise the ITSP to delete these services, and modify the CoP to remove any obligation on the part of the FSS family to accept the unavailable services, in accordance with paragraph (f) of this section; or, (ii) Determined to be integral to the FSS family's advancement toward self-sufficiency, the PHA or owner shall terminate the CoP and follow the requirements in paragraph (k) of this section regarding FSS escrow disbursement. (f) Modification. The PHA or owner and the FSS family may mutually agree to modify the CoP with respect to the ITSP and/or the contract term in accordance with paragraph (d) of this section, and/or designation of the head of FSS family. Modifications must be in writing. (g) Completion of the contract. The CoP is considered to be completed, and a family's participation in the FSS program is considered to be concluded when the FSS family has fulfilled all of its obligations under the CoP, including all family members' ITSPs, on or before the expiration of the contract term, including any extension thereof. (h) Termination of the contract. The CoP shall be terminated if the family's housing assistance is terminated in accordance with HUD requirements. The CoP may be terminated before the expiration of the contract term, and any extension thereof, by: (1) Mutual consent of the parties; (2) The failure of the FSS family to meet its obligations under the CoP without good cause. This includes an FSS family who has moved out of multifamily assisted housing and families receiving tenant-based assistance under section 8(o) of the 1937 Act who fail to comply with the contract requirements because the family has moved outside the jurisdiction of the PHA, and the PHA has not determined that there is good cause terminate the CoP with FSS escrow disbursement in accordance with paragraph (k)(1)(iii) of this section; (3) The family's withdrawal from the FSS program; (4) Such other act as is deemed inconsistent with the purpose of the FSS program; or (5) Operation of law. (i) Option to terminate FSS participation or withhold the coordination of supportive service assistance. The PHA or owner may withhold the coordination of supportive services or terminate the FSS family's participation in the FSS program, if the PHA or owner determines, in accordance with the FSS Action Plan hearing procedures, that the FSS family has failed to comply without good cause with the requirements of the CoP in accordance with this section. (j) Transitional supportive service assistance. A PHA or owner may continue to offer to a former FSS family that has completed its CoP, appropriate coordination of those FSS supportive services needed to become self-sufficient if the family still resides in public housing or Section 8 housing. If the family no longer resides in public housing, Section 8, or other assisted housing, then a PHA or owner may continue to coordinate supportive services for a former FSS family that completed its CoP using only funding sources that are not HUD funds or HUD- restricted funds. (k) Termination with FSS escrow disbursement. (1) The CoP is will be terminated with FSS disbursement when: (i) Services that the PHA or owner and the FSS family have agreed are integral to the FSS family's advancement towards self-sufficiency are unavailable, as described in paragraph (e) of this section; [[Page 639]] (ii) The head of the FSS family becomes permanently disabled and unable to work during the period of the contract, unless the PHA or owner and the FSS family determine that it is possible to modify the contract to designate a new head of the FSS family; or (iii) An FSS family in good standing moves outside the jurisdiction of the PHA (in accordance with portability requirements at Sec. 982.353 of this chapter) for good cause, as determined by the PHA, and continuation of the CoP after the move, or completion of the CoP prior to the move, is not possible. PHAs must be consistent in their determinations of whether a family has good cause for a termination with FSS escrow disbursement under this paragraph (k). (2) Upon termination of a CoP pursuant to paragraph (k)(1) of this section, escrow funds must be handled consistent with Sec. 984.305. Sec. 984.304 Amount of rent paid by FSS family and increases in family income. (a) Amount of rent paid by FSS family. The amount of rent paid by an FSS family is determined in accordance with the requirements of the applicable housing assistance program as specified in paragraphs (a)(1) and (2) of this section. (1) Public housing program: Calculation of total tenant payment. Total tenant payment for an FSS family participating in the FSS program is determined in accordance with the regulations set forth in 24 CFR part 5, subpart F. (2) Section 8 programs: Calculation of rent. (i) For the HCV program, rent is determined in accordance with 24 CFR part 982, subpart K; and (ii) For the PBV program, rent is determined in accordance with 24 CFR part 983, subpart G. (b) Increases in FSS family income. Any increase in the earned income of an FSS family during its participation in an FSS program may not be considered as income or an asset for purposes of eligibility of the FSS family under any other program administered by HUD. Sec. 984.305 FSS escrow account. (a) Establishment of FSS escrow account--(1) General. The PHA or owner shall deposit the FSS escrow account funds of all families participating in an FSS program into a single interest-bearing depository account. The PHA or owner must deposit the FSS escrow account funds in one or more of the HUD-approved investments. The depository account may be part of the PHA's or owner's overall accounts or a separate account, as long as it is in compliance with paragraph (a)(2) of this section. During the term of the CoP, the FSS escrow account credit amount shall be determined in accordance with paragraph (b) of this section at each re-examination of income occurring after the effective date of the CoP. Such escrow credit amount must be deposited each month by the PHA or owner to each family's FSS escrow account within the PHA's or owner's depository account. (2) Accounting for FSS escrow account funds--(i) Accounting records. The total of the combined FSS escrow account funds will be supported in the accounting records by a subsidiary ledger showing the balance applicable to each FSS family. (ii) Proration of investment income. The investment income for funds in the FSS escrow account must be prorated and credited to each family's FSS escrow account based on the balance in each family's FSS escrow account at the end of the period for which the investment income is credited. (iii) Reduction of amounts due by FSS family. If the FSS family has not paid the family contribution towards rent, or other amounts, if any, due under the public housing or Section 8-assisted lease, the balance in the family's FSS account shall be reduced by that amount (as determined by the owner or reported by the owner to the PHA in the Section 8(o) programs) at the time of final disbursement of FSS escrow funds in accordance with paragraph (c) of this section. If the FSS family has been found to have under-reported income after the baseline annual earned income was set, the amount credited to the FSS escrow account will be based on the income amounts originally reported by the FSS family. If the FSS [[Page 640]] family is found to have under-reported income in the re-examination used to set the baseline, the escrow for the entire period of the CoP will be re-calculated using the correct income to set the baseline and then calculate subsequent escrow amounts. (3) Reporting on FSS escrow account. Each PHA or owner will be required to make a report, at least once annually, to each FSS family on the status of the family's FSS escrow account. At a minimum, the report will include: (i) The balance at the beginning of the reporting period; (ii) The amount of the family's rent payment that was credited to the FSS escrow account, during the reporting period; (iii) Any deductions made from the account at the time of final disbursement of FSS escrow funds (see paragraphs (a)(2)(iii) and (c) of this section) for amounts due the PHA or owner; (iv) The amount of interest earned on the account during the year; and (v) The total in the account at the end of the reporting period. (b) FSS credit--(1) Determining the family's baseline information. When determining the family's baseline annual earned income and the baseline monthly rent amounts for purposes of computing the FSS escrow credit, the PHA or owner must use the amounts on the family's last income re-examination. (2) Computation of amount. The FSS credit amount shall be the lower of: (i) Thirty (30) percent of one-twelfth (\1/12\) (i.e., two and a half (2.5) percent) of the amount by which the family's current annual earned income exceeds the family's baseline annual earned income; or (ii) The increase in the family's monthly rent. The increase in the family's monthly rent shall be the lower of: (A) The amount by which the family's current monthly rent exceeds the family's baseline monthly rent; (B) For HCV families, the difference between the baseline monthly rent and the current gross rent (i.e., rent to owner plus any utility allowance) or the payment standard, whichever is lower; or (C) For PBV, Mod Rehab, including Mod Rehab SRO, and PBRA families, the difference between the baseline monthly rent and the current gross rent (i.e., rent to owner or contract rent, as applicable, plus any utility allowance). (3) Ineligibility for FSS credit. FSS families who are not low- income families (i.e., whose adjusted annual income exceeds eighty (80) percent of the area median income) shall not be entitled to any FSS credit. (4) Cessation of FSS credit. The PHA or owner shall not make additional credits to the FSS family's FSS escrow account: (i) When the FSS family has completed the CoP, as described in Sec. 984.303(g); (ii) When the CoP is terminated; or (iii) During the time an HCV family is in the process of moving to a new unit, in accordance with HCV program requirements in part 982 of this title, and is not under a lease. (c) Disbursement of FSS escrow account funds--(1) General. The amount in an FSS escrow account in excess of any amount owed to the PHA or owner by the FSS family, as provided in paragraph (a)(2)(iii) of this section, shall be paid to the head of FSS family when the CoP has been completed as provided in Sec. 984.303(g), and if, at the time of contract completion, the head of FSS family submits to the PHA or owner a certification, as defined in Sec. 984.103, that to the best of his or her knowledge and belief, no member of the FSS family is a recipient of welfare assistance. (2) Disbursement before expiration of contract term. (i) If the PHA or owner determines that the FSS family has fulfilled its obligations under the CoP before the expiration of the contract term, and the head of FSS family submits a certification that, to the best of his or her knowledge, no member of the FSS family is a recipient of welfare assistance, the amount in the family's FSS escrow account, in excess of any amount owed to the PHA or owner by the FSS family, as provided in paragraph (a)(2)(iii) of this section, shall be paid to the head of FSS family. (ii) If the PHA or owner determines that the FSS family has fulfilled certain interim goals established in the [[Page 641]] CoP and needs a portion of the FSS escrow account funds for purposes consistent with or in support of the CoP, such as completion of higher education (i.e., college, graduate school), job training, or to meet start-up expenses involved in creation of a small business, the PHA or owner may, at the PHA's or owner's sole discretion, disburse a portion of the funds from the family's FSS escrow account to assist the family in paying those expenses. Unless the interim disbursement was made based on fraudulent information from the family, the family is not required to repay such interim disbursements if the family does not complete the CoP. (3) Disbursement in cases of termination of the CoP with disbursement of escrow. The PHA or owner must disburse to the family its FSS escrow account funds in excess of any amount owed to the PHA or owner by the FSS family, as provided in paragraph (a)(2)(iii) of this section, under circumstances in which HUD has determined good cause is warranted. HUD determines that there is good cause when a CoP is terminated in accordance with Sec. 984.303(k). Therefore, if the CoP is terminated in accordance with Sec. 984.303(k), the PHA or owner must disburse to the family its FSS escrow account funds in excess of any amount owed to the PHA or owner by the FSS family, as provided in paragraph (a)(2)(iii) of this section, as of the effective date of the termination of the contract. (4) Verification of family certification. Before disbursement of the FSS escrow account funds to the family, the PHA or owner may verify that the FSS family is no longer a recipient of welfare assistance by requesting copies of any documents which may indicate whether the family is receiving any welfare assistance and by contacting welfare agencies. (d) Succession of FSS escrow account. If the head of FSS family ceases to reside with other family members in the public housing or the Section 8-assisted unit, the remaining members of the FSS family, after consultation with the PHA or owner, shall have the right to take over the CoP or designate another family member to receive the funds in accordance with paragraph (c) of this section. (e) Use of FSS escrow account funds for homeownership. An FSS family may use disbursed FSS escrow account funds, in accordance with Sec. 984.305(c), after final disbursement for the purchase of a home, including the purchase of a home under one of HUD's homeownership programs, or other Federal, State, or local homeownership programs, unless such use is prohibited by the statute or regulations governing the particular homeownership program. (f) Forfeiture of FSS escrow account funds--(1) Conditions for forfeiture. Amounts in the FSS escrow account shall be forfeited upon the occurrence of the following: (i) The CoP is terminated, as provided in Sec. 984.303(h); or, (ii) The CoP is completed by the family, as provided in Sec. 984.303(g), but the FSS family is receiving welfare assistance at the time the CoP term expires, including any extension thereof. (2) Treatment of forfeited FSS escrow account funds. FSS escrow account funds forfeited by the FSS family must be used by the PHA or owner for the benefit of the FSS participants. (i) Specifically, such funds may be used for the following eligible activities: (A) Support for FSS participants in good standing, including, but not limited to, transportation, child care, training, testing fees, employment preparation costs, and other costs related to achieving obligations outlined in the CoP; (B) Training for FSS Program Coordinator(s); or (C) Other eligible activities as determined by the Secretary. (ii) Such funds may not be used for salary and fringe benefits of FSS Program Coordinators; general administrative costs of the FSS program, for housing assistance payments (HAP) expenses or public housing operating funds; or any other activity determined ineligible by the Secretary. Sec. 984.306 HCV portability requirements for FSS participants. (a) Initial period of CoP--(1) First 12 months. During the first 12 months after the effective date of the FSS CoP, [[Page 642]] an FSS family may not move outside the jurisdiction of the PHA that first enrolled the family in the FSS program. However, the PHA may approve an FSS family's request to move outside of its jurisdiction under portability (in accordance with Sec. 982.353 of this chapter) during this period. This paragraph (a)(1) applies to a former PBV family who received tenant-based rental assistance in accordance with Sec. 983.261 of this chapter and exercised their right to move. (2) After the first 12 months. After the first 12 months of the FSS CoP, the FSS family with a tenant-based voucher may move outside the initial PHA jurisdiction under portability regulations (in accordance with Sec. 982.353 of this chapter). This paragraph (a)(2) applies to former PBV families who received tenant-based rental assistance in accordance with Sec. 983.261 of this chapter and exercised their right to move. (b) An FSS family moves to the jurisdiction of a receiving PHA that administers an FSS program. (1) Whether the receiving PHA bills the initial PHA or absorbs the FSS family into its HCV program, the receiving PHA must enroll an FSS family in good standing in its FSS program; unless (i) The receiving PHA is already serving the number of FSS families identified in its FSS Action Plan and determines that it does not have the resources to manage the FSS contract; or (ii) The receiving PHA and the initial PHA agree to the FSS family's continued participation in the initial PHA's FSS program. Prior to the PHAs agreeing to the continued participation, the initial PHA must determine that the relocating FSS family has demonstrated that, notwithstanding the move, it will be able to fulfill its responsibilities under the initial or a modified CoP at its new place of residence. For example, the FSS family may be able to commute to the supportive services specified in the CoP, or the family may move to obtain employment as specified in the contract. (2) Where continued FSS participation is not possible in accordance with paragraph (b)(1) of this section, the initial PHA must clearly discuss the options that may be available to the family, depending on the family's specific circumstances, which may include, but are not limited to, modification of the FSS contract, termination of the FSS contract and forfeiture of escrow, termination with FSS escrow disbursement in accordance with Sec. 984.303(k)(1)(iii), or locating a receiving PHA that has the capacity to enroll the family into its FSS program. (c) An FSS family moves to the jurisdiction of a receiving PHA that does not administer an FSS program. If the receiving PHA does not administer an FSS program, the FSS family may not continue participation in the FSS program. The initial PHA must clearly discuss the options that may be available to the family, depending on the family's specific circumstances, which may include, but are not limited to, modification of the FSS contract, termination with FSS escrow disbursement in accordance with Sec. 984.303(k)(1)(iii), termination of the FSS contract and forfeiture of escrow, or locating a receiving PHA that administers an FSS program. (d) Single FSS escrow account. Regardless of whether the FSS family remains in the FSS program of the initial PHA or is enrolled in the FSS program of the receiving PHA, the family will have only one FSS escrow account. If the receiving PHA is billing the initial PHA, the account will be maintained by the initial PHA. If an FSS family will be absorbed by the receiving PHA, the initial PHA will transfer the family's FSS escrow account funds to the receiving PHA and the receiving PHA will maintain the funds in its FSS account. (e) FSS program termination; loss of FSS escrow account. (1) If an FSS family relocates to another jurisdiction, as provided under this section, and is unable to fulfill its obligations under the CoP (or any modifications thereto), the PHA, which is a party to the CoP, must terminate the FSS family from the FSS program, and the family's FSS escrow account will be forfeited. Termination of FSS program participation and forfeiture of FSS escrow must be used only as a last resort, after the PHA determines, in consultation with the family, that the family would be [[Page 643]] unable to fulfill its obligations under the CoP after the move, that the current CoP cannot be modified to allow for graduation prior to porting, and that the current CoP cannot be terminated with FSS escrow disbursement in accordance with Sec. 984.303(k)(1)(iii). When termination is the only option, the PHA must clearly notify the family that the move will result in the loss of escrow funds. (2) In the event of forfeiture of the family's FSS escrow account funds, the FSS escrow account funds will revert to the PHA maintaining the FSS escrow account for the family. (f) Contract of Participation (CoP). (1) If the FSS family enrolls in the receiving PHA's FSS program pursuant to this section, the receiving PHA will enter into a new CoP with the FSS family for the term remaining on the contract with the initial PHA. The initial PHA will terminate its CoP with the family. (2) If the FSS family remains in the FSS program of the initial PHA, pursuant to this section, the CoP executed by the initial PHA will remain as the contract in place. (g) New FSS enrollment into the receiving PHA's FSS program--(1) Billing. If the receiving PHA bills the initial PHA, the receiving PHA may, consistent with the receiving PHA's FSS enrollment policies, enroll a family that was not an FSS participant at the initial PHA into its FSS program, provided that the initial PHA manages an FSS program and agrees to such enrollment. If the receiving PHA bills the initial PHA, but the initial PHA does not manage an FSS program, the family may not enroll in the receiving PHA's FSS program. (2) Absorption. If the receiving PHA absorbs the family into its HCV program, the receiving PHA may, consistent with the receiving PHA's FSS enrollment policies, enroll a family that was not an FSS participant at the initial PHA into its FSS program. Subpart D_Reporting Sec. 984.401 Reporting. Each PHA or owner that carries out an FSS program shall submit to HUD, in the form prescribed by HUD, a report regarding its FSS program. The report shall include the following information: (a) A description of the activities carried out under the program; (b) A description of the effectiveness of the program in assisting families to achieve economic independence and self-sufficiency, including the number of families enrolled and graduated and the number of established escrow accounts and positive escrow balances; (c) A description of the effectiveness of the program in coordinating resources of communities to assist families to achieve economic independence and self-sufficiency; and (d) Any recommendations by the PHA or owner or the appropriate local Program Coordinating Committee for legislative or administrative action that would improve the FSS program and ensure the effectiveness of the program. PART 985_SECTION 8 MANAGEMENT ASSESSMENT PROGRAM (SEMAP) AND SMALL RURAL PHA ASSESSMENTS--Table of Contents Subpart A_General Sec. 985.1 Purpose and applicability. 985.2 Definitions. 985.3 Indicators, HUD verification methods and ratings. Subpart B_Program Operation 985.101 SEMAP certification. 985.102 SEMAP profile. 985.103 SEMAP score and overall performance rating. 985.104 PHA right of appeal of overall rating. 985.105 HUD SEMAP responsibilities. 985.106 Required actions for SEMAP deficiencies. 985.107 Required actions for PHA with troubled performance rating. 985.108 SEMAP records. 985.109 Default under the Annual Contributions Contract (ACC). Subpart C--Physical Assessment Component [Reserved] Subpart D_Small Rural PHA Assessment Sec. 985.201 Applicability. [[Page 644]] 985.203 Assessment indicators and HUD verification methods. 985.205 Determination of assessment rating. 985.207 Frequency of assessments. 985.209 Troubled small rural PHAs. 985.211 Small rural PHAs assessment records. Authority: 42 U.S.C. 1437a, 1437c, 1437f, 1437z-10, and 3535(d). Source: 63 FR 48555, Sept. 10, 1998, unless otherwise noted. Editorial Note: Nomenclature changes to part 985 appear at 64 FR 67983, Dec. 3, 1999. Subpart A_General Sec. 985.1 Purpose and applicability. (a) Purpose. The Section 8 Management Assessment Program (SEMAP) is designed to assess whether the Section 8 tenant-based assistance programs operate to help eligible families afford decent rental units at the correct subsidy cost. SEMAP also establishes a system for HUD to measure PHA performance in key Section 8 program areas and to assign performance ratings. SEMAP provides procedures for HUD to identify PHA management capabilities and deficiencies in order to target monitoring and program assistance more effectively. PHAs can use the SEMAP performance analysis to assess and improve their own program operations. (b) Applicability. This rule applies to PHA administration of the tenant-based Section 8 rental program (part 982 of this chapter), the project-based voucher program (part 983 of this chapter) to the extent that PBV family and unit data are reported and measured under the stated HUD verification method, and enrollment levels and contributions to escrow accounts for Section 8 participants under the family self- sufficiency program (FSS) (part 984 of this chapter). (c) Small rural PHA assessments. Subpart D of this part covers the HCV and PBV assessment for a small rural PHA as defined in Sec. 902.101 of this chapter. Section 985.3 and subparts B and C of this part do not apply to small rural PHAs. [63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40497, July 26, 1999; 88 FR 30505, May 11, 2023] Sec. 985.2 Definitions. (a) The terms Department, Fair Market Rent, HUD, Secretary, and Section 8, as used in this part, are defined in 24 CFR 5.100. (b) The definitions in 24 CFR 982.4 apply to this part. As used in this part: Confirmatory review means an on site review performed by HUD to verify the management performance of an PHA. Corrective action plan means a HUD-required written plan that addresses PHA program management deficiencies or findings identified by HUD through remote monitoring or on-site review, and that will bring the PHA to an acceptable level of performance. MTCS means Multifamily Tenant Characteristics System. MTCS is the Department's national database on participants and rental units in the Section 8 rental certificate, rental voucher, and moderate rehabilitation programs and in the Public and Indian Housing programs. PHA means a Housing Agency. PHA's quality control sample means an annual sample of files or records drawn in an unbiased manner and reviewed by an PHA supervisor (or by another qualified person other than the person who performed the original work) to determine if the work documented in the files or records conforms to program requirements. The minimum size of the PHA's quality control sample is as follows: ------------------------------------------------------------------------ Minimum number of files or Universe records to be sampled ------------------------------------------------------------------------ 50 or less............................... 5. 51-600................................... 5 plus 1 for each 50 (or part of 50) over 50. 601-2000................................. 16 plus 1 for each 100 (or part of 100) over 600. Over 2000................................ 30 plus 1 for each 200 (or part of 200) over 2000. ------------------------------------------------------------------------ Where the universe is: the number of admissions in the last year for each of the two quality control samples under the SEMAP indicator at Sec. 985.3(a) Selection from the Waiting List; the number of families assisted for the SEMAP indicators at Sec. 985.3(b) Reasonable Rent, and 985.3(c) Determination of Adjusted Income; the number of units under HAP contract during the last completed PHA fiscal year for the SEMAP indicator at Sec. 985.3(e) HQS Quality Control Inspections; and the number of failed HQS inspections in [[Page 645]] the last year for the SEMAP indicator at Sec. 985.3(f) HQS Enforcement. Performance indicator means a standard set for a key area of Section 8 program management against which the PHA's performance is measured to show whether the PHA administers the program properly and effectively. (See Sec. 985.3.) SEMAP certification means the PHA's annual certification to HUD, on the form prescribed by HUD, concerning its performance in key Section 8 program areas. SEMAP deficiency means any rating of 0 points on a SEMAP performance indicator. SEMAP profile means a summary prepared by HUD of an PHA's ratings on each SEMAP indicator, its overall SEMAP score, and its overall performance rating (high performer, standard, troubled). [63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40497, July 26, 1999] Sec. 985.3 Indicators, HUD verification methods and ratings. This section states the performance indicators that are used to assess PHA Section 8 management. HUD will use the verification method identified for each indicator in reviewing the accuracy of an PHA's annual SEMAP certification. HUD will prepare a SEMAP profile for each PHA and will assign a rating for each indicator as shown. If the HUD verification method for the indicator relies on data in MTCS and HUD determines those data are insufficient to verify the PHA's certification on the indicator due to the PHA's failure to adequately report family data, HUD will assign a zero rating for the indicator. The method for selecting the PHA's quality control sample under paragraphs (a), (b), (c) and (f) of this section must leave a clear audit trail that can be used to verify that the PHA's quality control sample was drawn in an unbiased manner. An PHA that expends less than $300,000 in Federal awards and whose Section 8 programs are not audited by an independent auditor (IA), will not be rated under the SEMAP indicators in paragraphs (a) through (g) of this section for which the annual IA audit report is a HUD verification method. For those PHAs, the SEMAP score and overall performance rating will be determined based only on the remaining indicators in paragraphs (i) through (o) of this section as applicable. Although the SEMAP performance rating will not be determined using the indicators in paragraphs (a) through (g) of this section, PHAs not subject to Federal audit requirements must still complete the SEMAP certification for these indicators and performance under the indicators is subject to HUD confirmatory reviews. (a) Selection from the waiting list. (1) This indicator shows whether the PHA has written policies in its administrative plan for selecting applicants from the waiting list and whether the PHA follows these policies when selecting applicants for admission from the waiting list. (24 CFR 982.54(d)(1) and 982.204(a)) (2) HUD verification method: The independent auditor (IA) annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that: (A) The PHA has written waiting list selection policies in its administrative plan and, (B) Based on the PHA's quality control samples, drawn separately for applicants reaching the top of the waiting list and for admissions, documentation shows that at least 98 percent of the families in both samples of applicants and admissions were selected from the waiting list for admission in accordance with these policies and met the selection criteria that determined their places on the waiting list and their order of selection. 15 points. (ii) The PHA's SEMAP certification does not support the statement in paragraph (a)(3)(i) of this section. 0 points. (b) Reasonable rent. (1) This indicator shows whether the PHA has and implements a reasonable written method to determine and document for each unit leased that the rent to owner is reasonable based on current rents for comparable unassisted units: At the time of initial leasing; if there is any increase in the rent to owner; at the HAP [[Page 646]] contract anniversary if there is a 10 percent decrease in the published fair market rent (FMR) in effect 60 days before the HAP contract anniversary. The PHA's method must take into consideration the location, size, type, quality and age of the units, and the amenities, housing services, and maintenance and utilities provided by the owners in determining comparability and the reasonable rent. (24 CFR 982.4, 24 CFR 982.54(d)(15), 982.158(f)(7) and 982.507) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that: (A) The PHA has a reasonable written method to determine reasonable rent which considers location, size, type, quality and age of the units and the amenities, housing services, and maintenance and utilities provided by the owners; and (B) Based on the PHA's quality control sample of tenant files, the PHA follows its written method to determine reasonable rent and has documented its determination that the rent to owner is reasonable in accordance with Sec. 982.507 of this chapter for at least 98 percent of units sampled at the time of initial leasing, if there is any increase in the rent to owner, and at the HAP contract anniversary if there is a 10 percent decrease in the published FMR in effect 60 days before the HAP contract anniversary. 20 points. (ii) The PHA's SEMAP certification includes the statements in paragraph (b)(3)(i) of this section, except that the PHA documents its determination of reasonable rent for only 80 to 97 percent of units sampled at initial leasing, if there is any increase in the rent to owner, and at the HAP contract anniversary if there is a 10 percent decrease in the published FMR in effect 60 days before the HAP contract anniversary. 15 points. (iii) The PHA's SEMAP certification does not support the statements in either paragraph (b)(3)(i) or (b)(3)(ii) of this section. 0 points. (c) Determination of adjusted income. (1) This indicator shows whether, at the time of admission and annual reexamination, the PHA verifies and correctly determines adjusted annual income for each assisted family and, where the family is responsible for utilities under the lease, the PHA uses the appropriate utility allowances for the unit leased in determining the gross rent. (24 CFR part 5, subpart F and 24 CFR 982.516) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that, based on the PHA's quality control sample of tenant files, for at least 90 percent of families: (A) The PHA obtains third party verification of reported family annual income, the value of assets totalling more than $5,000, expenses related to deductions from annual income, and other factors that affect the determination of adjusted income, and uses the verified information in determining adjusted income, and/or documents tenant files to show why third party verification was not available; (B) The PHA properly attributes and calculates allowances for any medical, child care, and/or disability assistance expenses; and (C) The PHA uses the appropriate utility allowances to determine gross rent for the unit leased. 20 points. (ii) The PHA's SEMAP certification includes the statements in paragraph (c)(3)(i) of this section, except that the PHA obtains and uses independent verification of income, properly attributes allowances, and uses the appropriate utility allowances for only 80 to 89 percent of families. 15 points. (iii) The PHA's SEMAP certification does not support the statements in either paragraph (c)(3)(i) or (c)(3)(ii) of this section. 0 points. (d) Utility Allowance Schedule. (1) This indicator shows whether the PHA maintains an up-to-date utility allowance schedule. (24 CFR 982.517) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. [[Page 647]] (3) Rating: (i) The PHA's SEMAP certification states that the PHA reviewed utility rate data within the last 12 months, and adjusted its utility allowance schedule if there has been a change of 10 percent or more in a utility rate since the last time the utility allowance schedule was revised. 5 points. (ii) The PHA's SEMAP certification does not support the statement in paragraph (d)(3)(i) of this section. 0 points. (e) HQS quality control inspections. (1) This indicator shows whether an PHA supervisor or other qualified person reinspects a sample of units under contract during the PHA fiscal year, which meets the minimum sample size requirements specified at Sec. 985.2 under PHA's quality control sample, for quality control of HQS inspections. The PHA supervisor's reinspected sample is to be drawn from recently completed HQS inspections (i.e., performed during the 3 months preceding reinspection) and is to be drawn to represent a cross section of neighborhoods and the work of a cross section of inspectors. (24 CFR 982.405(b)) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that an PHA supervisor or other qualified person performed quality control HQS reinspections during the PHA fiscal year for a sample of units under contract which meets the minimum sample size requirements specified in Sec. 983.2 under PHA's quality control sample. The PHA's SEMAP certification also states that the reinspected sample was drawn from recently completed HQS inspections (i.e., performed during the 3 months preceding the quality control reinspection) and was drawn to represent a cross section of neighborhoods and the work of a cross section of inspectors. 5 points. (ii) The PHA's SEMAP certification does not support the statements in paragraph (e)(3)(i) of this section. 0 points. (f) HQS enforcement. (1) This indicator shows whether, following each HQS inspection of a unit under contract where the unit fails to meet HQS, any cited life-threatening HQS deficiencies are corrected within 24 hours from the inspection and all other cited HQS deficiencies are corrected within no more than 30 calendar days from the inspection or any PHA-approved extension. In addition, if HQS deficiencies are not corrected timely, the indicator shows whether the PHA stops (abates) housing assistance payments beginning no later than the first of the month following the specified correction period or terminates the HAP contract or, for family-caused defects, takes prompt and vigorous action to enforce the family obligations. (24 CFR 982.404) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that the PHA's quality control sample of case files with failed HQS inspections shows that, for all cases sampled, any cited life-threatening HQS deficiencies were corrected within 24 hours from the inspection and, for at least 98 percent of cases sampled, all other cited HQS deficiencies were corrected within no more than 30 calendar days from the inspection or any PHA-approved extension, or, if any life-threatening HQS deficiencies were not corrected within 24 hours and all other HQS deficiencies were not corrected within 30 calendar days or any PHA-approved extension, the PHA stopped (abated) housing assistance payments beginning no later than the first of the month following the correction period, or took prompt and vigorous action to enforce family obligations. 10 points. (ii) The PHA's SEMAP certification does not support the statement in paragraph (f)(3)(i) of this section. 0 points. (g) Expanding housing opportunities. (1) This indicator applies only to PHAs with jurisdiction in metropolitan FMR areas. The indicator shows whether the PHA has adopted and implemented a written policy to encourage participation by owners of units located outside areas of poverty or minority concentration; informs rental voucher [[Page 648]] holders of the full range of areas where they may lease units both inside and outside the PHA's jurisdiction; and supplies a list of landlords or other parties who are willing to lease units or help families find units, including units outside areas of poverty or minority concentration. (24 CFR 982.54(d)(5), 982.301(a) and 982.301(b)(4) and 982.301(b)(12)) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that: (A) The PHA has a written policy in its administrative plan which includes actions the PHA will take to encourage participation by owners of units located outside areas of poverty or minority concentration, and which clearly delineates areas in its jurisdiction that the PHA considers areas of poverty or minority concentration; (B) PHA documentation shows that the PHA has taken actions indicated in its written policy to encourage participation by owners of units located outside areas of poverty or minority concentration; (C) The PHA has prepared maps that show various areas with housing opportunities outside areas of poverty or minority concentration both within its jurisdiction and neighboring its jurisdiction; has assembled information about the characteristics of those areas which may include information about job opportunities, schools, transportation and other services in these areas; and can demonstrate that it uses the maps and area characteristics information when briefing rental voucher holders about the full range of areas where they may look for housing; (D) The PHA's information packet for rental voucher holders contains either a list of owners who are willing to lease (or properties available for lease) under the rental voucher program; or a current list of other organizations that will help families find units and the PHA can demonstrate that the list(s) includes properties or organizations that operate outside areas of poverty or minority concentration; (E) The PHA's information packet includes an explanation of how portability works and includes a list of portability contact persons for neighboring housing agencies, with the name, address and telephone number of each, for use by families who move under portability; and (F) PHA documentation shows that the PHA has analyzed whether rental voucher holders have experienced difficulties in finding housing outside areas of poverty or minority concentration and, if such difficulties have been found, PHA documentation shows that the PHA has analyzed whether it is appropriate to seek approval of exception payment standard amounts in any part of its jurisdiction and has sought HUD approval of exception payment standard amounts when necessary. 5 points. (ii) The PHA's SEMAP certification does not support the statement in paragraph (g)(3)(i) of this section. 0 points. (h) Deconcentration bonus. (1) Submission of deconcentration data in the HUD-prescribed format for this indicator is mandatory for a PHA using one or more payment standard amount(s) that exceed(s) 100 percent of the published FMR set at the 50th percentile rent to provide access to a broad range of housing opportunities throughout a metropolitan area in accordance with Sec. 888.113(c) of this title, starting with the second full PHA fiscal year following initial use of payment standard amounts based on the FMR set at the 50th percentile rent. Submission of deconcentration data for this indicator is optional for all other PHAs. Additional SEMAP points are available to PHAs that have jurisdiction in metropolitan FMR areas and that choose to submit with their SEMAP certifications certain data, in a HUD-prescribed format, on the percent of their tenant-based Section 8 families with children who live in, and who have moved during the PHA fiscal year to, low poverty census tracts in the PHA's principal operating area. For purposes of this indicator, the PHA's principal operating area is the geographic entity for which the Census tabulates data that most closely [[Page 649]] matches the PHA's geographic jurisdiction under State or local law (e.g., city, county, metropolitan statistical area) as determined by the PHA, subject to HUD review. A low poverty census tract is defined as a census tract where the poverty rate of the tract is at or below 10 percent, or at or below the overall poverty rate for the principal operating area of the PHA, whichever is greater. The PHA determines the overall poverty rate for its principal operating area using the most recent available decennial Census data. Family data used for the PHA's analysis must be the same information as reported to MTCS for the PHA's tenant-based Section 8 families with children. If HUD determines that the quantity of MTCS data is insufficient for adequate analysis, HUD will not award points under this bonus indicator. Bonus points will be awarded if: (i) Half or more of all Section 8 families with children assisted by the PHA in its principal operating area at the end of the last completed PHA fiscal year reside in low poverty census tracts; (ii) The percent of Section 8 mover families with children who moved to low poverty census tracts in the PHA's principal operating area during the last completed PHA fiscal year is at least 2 percentage points higher than the percent of all Section 8 families with children who reside in low poverty census tracts at the end of the last completed PHA fiscal year; or (iii) The percent of Section 8 families with children who moved to low-poverty census tracts in the PHA's principal operating area over the last two completed PHA fiscal years is at least 2 percentage points higher than the percent of all Section 8 families with children who resided in low poverty census tracts at the end of the second to last completed PHA fiscal year. (iv) State and regional PHAs that provide Section 8 rental assistance in more than one metropolitan area within a State or region make these determinations separately for each metropolitan area or portion of a metropolitan area where the PHA has assisted at least 20 Section 8 families with children in the last completed PHA fiscal year. (2) HUD verification methods: PHA data submitted for the deconcentration bonus, the IA annual audit report covering the PHA fiscal year entered on the SEMAP certification, and on-site confirmatory review if performed. (3) Rating: (i) The data submitted by the PHA for the deconcentration bonus shows that the PHA met the requirements for bonus points in paragraph (h)(1)(i), (ii) or (iii) of this section. 5 points. (ii) The data submitted by the PHA for the deconcentration bonus does not show that the PHA met the requirements for bonus points in paragraph (h)(1)(i), (ii) or (iii) of this section. 0 points. (i) Payment standards. (1) This indicator shows whether the PHA has adopted a payment standard schedule that establishes voucher payment standard amounts by unit size for each FMR area in the PHA jurisdiction, and, if applicable, separate payment standard amounts by unit size for a PHA-designated part of an FMR area, which payment standards do not exceed 110 percent of the current applicable published FMRs and which are not less than 90 percent of the current applicable published FMRs (unless a higher or lower payment standard amount is approved by HUD). (Sec. 982.503 of this chapter.) For purposes of this paragraph, payment standards that do not exceed 110 percent of the current applicable published FMRs include exception payment standards established by the PHA in accordance with 982.503(c)(iii). (2) HUD verification method: PHA data submitted on the SEMAP certification form concerning payment standards. (3) Rating: (i) The PHA's voucher program payment standard schedule contains payment standards which do not exceed 110 percent of the current applicable published FMR and which are not less than 90 percent of the current applicable published FMR (unless a higher or lower payment standard amount is approved by HUD). 5 points. (ii) The PHA's voucher program payment standard schedule contains payment standards which exceed 110 percent of the current applicable published FMRs or which are less than 90 [[Page 650]] percent of the current applicable published FMRs (unless a higher or lower payment standard amount is approved by HUD). 0 points. (j) Annual reexaminations. (1) This indicator shows whether the PHA completes a reexamination for each participating family at least every 12 months. (24 CFR 5.617). (2) HUD verification method: MTCS report--Shows percent of reexaminations that are more than 2 months overdue. The 2-month allowance is provided only to accommodate a possible lag in the PHA's electronic reporting of the annual reexamination on Form HUD-50058 and to allow the processing of the data into MTCS. The 2-month allowance provided here for rating purposes does not mean that any delay in completing annual reexaminations is permitted. (3) Rating: (i) Fewer than 5 percent of all PHA reexaminations are more than 2 months overdue. 10 points. (ii) 5 to 10 percent of all PHA reexaminations are more than 2 months overdue. 5 points. (iii) More than 10 percent of all PHA reexaminations are more than 2 months overdue. 0 points. (k) Correct tenant rent calculations. (1) This indicator shows whether the PHA correctly calculates tenant rent in the rental certificate program and the family's share of the rent to owner in the rental voucher program. (24 CFR 982 subpart K). (2) HUD verification method: MTCS report--Shows percent of tenant rent and family's share of the rent to owner calculations that are incorrect based on data sent to HUD by the PHA on Forms HUD-50058. The MTCS data used for verification cover only voucher program and regular certificate program tenancies, and do not include rent calculation discrepancies for manufactured home owner rentals of manufactured home spaces under the certificate program or for proration of assistance under the noncitizen rule. (3) Ratings: (i) 2 percent or fewer of PHA tenant rent and family's share of the rent to owner calculations are incorrect. 5 points. (ii) More than 2 percent of PHA tenant rent and family's share of the rent to owner calculations are incorrect. 0 points. (l) Pre-contract housing quality standards (HQS) inspections. (1) This indicator shows whether newly leased units pass HQS inspection on or before the beginning date of the assisted lease and HAP contract. (24 CFR 982.305). (2) HUD verification method: MTCS report--Shows percent of newly leased units where the beginning date of the assistance contract is before the date the unit passed HQS inspection. (3) Rating: (i) 98 to 100 percent of newly leased units passed HQS inspection before the beginning date of the assisted lease and HAP contract. 5 points. (ii) Fewer than 98 percent of newly leased units passed HQS inspection before the beginning date of the assisted lease and HAP contract. 0 points. (m) Annual HQS inspections. (1) This indicator shows whether the PHA inspects each unit under contract at least annually. (24 CFR 982.405(a)) (2) HUD verification method: MTCS report--Shows percent of HQS inspections that are more than 2 months overdue. The 2-month allowance is provided only to accommodate a possible lag in the PHA's electronic reporting of the annual HQS inspection on Form HUD-50058, and to allow the processing of the data into MTCS. The 2-month allowance provided here for rating purposes does not mean that any delay in completing annual HQS inspections is permitted. (3) Rating: (i) Fewer than 5 percent of annual HQS inspections of units under contract are more than 2 months overdue. 10 points. (ii) 5 to 10 percent of all annual HQS inspections of units under contract are more than 2 months overdue. 5 points. (iii) More than 10 percent of all annual HQS inspections of units under contract are more than 2 months overdue. 0 points. (n) Lease-up. The provisions of this paragraph (n) apply to the first SEMAP certification due after July 2, 2012. (1) The indicator: This indicator shows whether the PHA enters into HAP contracts for the number of the PHA's [[Page 651]] baseline voucher units (units that are contracted under a Consolidated ACC) for the calendar year that ends on or before the PHA's fiscal year or whether the PHA has expended its allocated budget authority for the same calendar year. Allocated budget authority will be based upon the PHA's eligibility, which includes budget authority obligated for the calendar year and any portion of HAP reserves attributable to the budget authority that was offset from reserves during the calendar year. Litigation units and funding will be excluded from this indicator, and new increments will be excluded for 12 months from the effective date of the increment on the Consolidated ACC. Units assisted under the voucher homeownership option and units occupied under a project-based HAP contract are included in the measurement of this indicator. (2) HUD verification method: This method is based on the percent of units leased under a tenant-based or project-based HAP contract or occupied by homeowners under the voucher homeownership option during the calendar year that ends on or before the assessed PHA's fiscal year, or the percent of allocated budget authority expended during the calendar year that ends on or before the assessed PHA's fiscal year. The percent of units leased is determined by taking unit months leased under a HAP contract and unit months occupied by homeowners under the voucher homeownership option, as shown in HUD systems for the calendar year that ends on or before the assessed PHA fiscal year, and dividing that number by the number of unit months available for leasing based on the number of baseline units available at the beginning of the calendar year. (3) Rating: (i) The percent of units leased or occupied by homeowners under the voucher homeownership option, or the percent of allocated budget authority expended during the calendar year that ends on or before the assessed PHA fiscal year was 98 percent or more. (20 points.) (ii) The percent of units leased or occupied by homeowners under the voucher homeownership option, or the percent of allocated budget authority expended during the calendar year that ends on or before the assessed PHA fiscal year was 95 to 97 percent. (15 points.) (iii) The percent of units leased or occupied by homeowners under the voucher homeownership option, or the percent of allocated budget authority expended during the calendar year that ends on or before the assessed PHA fiscal year was less than 95 percent. (0 points.) (o) Family self-sufficiency (FSS) enrollment and escrow accounts. (1) This indicator applies only to PHAs with mandatory FSS programs. The indicator consists of 2 components which show whether the PHA has enrolled families in the FSS program as required, and the extent of the PHA's progress in supporting FSS by measuring the percent of current FSS participants with FSS progress reports entered in MTCS that have had increases in earned income which resulted in escrow account balances. (24 CFR 984.105 and 984.305) (2) HUD verification method: MTCS report--Shows number of families currently enrolled in FSS. This number is divided by the number of mandatory FSS slots, as determined under Sec. 984.105 of this chapter. An MTCS report also shows the percent of FSS families with FSS progress reports who have escrow account balances. HUD also uses information reported on the SEMAP certification by initial PHAs concerning FSS families enrolled in their FSS programs but who have moved under portability to the jurisdiction of another PHA. (3) Rating: (i) The PHA has filled 80 percent or more of its mandatory FSS slots and 30 percent or more of FSS families have escrow account balances. 10 points. (ii) The PHA has filled 60 to 79 percent of its mandatory FSS slots and 30 percent or more of FSS families have escrow account balances. 8 points. (iii) The PHA has filled 80 percent or more of its mandatory FSS slots, but fewer than 30 percent of FSS families have escrow account balances. 5 points. (iv) 30 percent or more of FSS families have escrow account balances, but fewer than 60 percent of the PHA's mandatory FSS slots are filled. 5 points. [[Page 652]] (v) The PHA has filled 60 to 79 percent of its mandatory FSS slots, but fewer than 30 percent of FSS families have escrow account balances. 3 points. (vi) The PHA has filled fewer than 60 percent of its mandatory FSS slots and less than 30 percent of FSS families have escrow account balances. 0 points. (p) Success rate of voucher holders. (1) This indicator shows whether voucher holders were successful in leasing units with voucher assistance. This indicator applies only to PHAs that have received approval to establish success rate payment standard amounts in accordance with Sec. 982.503(e). This indicator becomes initially effective for the second full PHA fiscal year following the date of HUD approval of success rate payment standard amounts. (2) HUD verification method: MTCS Report. (3) Rating (5 points): (i) The proportion of families issued rental vouchers during the last PHA fiscal year that have become participants in the voucher program is more than the higher of: (A) 75 percent; or (B) The proportion of families issued rental vouchers that became participants in the program during the six month period utilized to determine eligibility for success rate payment standards under Sec. 982.503(e)(1) plus 5 percentage points; and (ii) The percent of units leased during the last PHA fiscal year was 95 percent or more, or the percent of allocated budget authority expended during the last PHA fiscal year was 95 percent or more following the methodology of Sec. 985.3(n). [63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40497, July 26, 1999; 64 FR 67983, Dec. 3, 1999; 65 FR 16733, Mar. 29, 2000; 65 FR 16823, Mar. 30, 2000; 65 FR 58875, Oct. 2, 2000; 66 FR 50005, Oct. 1, 2001; 77 FR 32018, May 31, 2012; 81 FR 80583, Nov. 16, 2016] Subpart B_Program Operation Sec. 985.101 SEMAP certification. (a) An PHA must submit the HUD-required SEMAP certification form within 60 calendar days after the end of its fiscal year. (1) The certification must be approved by PHA board resolution and signed by the PHA executive director. If the PHA is a unit of local government or a state, a resolution approving the certification is not required, and the certification must be executed by the Section 8 program director. (2) An PHA that subcontracts administration of its program to one or more subcontractors shall require each subcontractor to submit the subcontractor's own SEMAP certification on the HUD-prescribed form to the PHA in support of the PHA's SEMAP certification to HUD. The PHA shall retain subcontractor certifications for 3 years. (3) An PHA may include with its SEMAP certification any information bearing on the accuracy or completeness of the information used by the PHA in providing its certification. (b) Failure of an PHA to submit its SEMAP certification within 60 calendar days after the end of its fiscal year will result in an overall performance rating of troubled and the PHA will be subject to the requirements at Sec. 985.107. (c) An PHA's SEMAP certification is subject to HUD verification by an on-site confirmatory review at any time. (Information collection requirements in this section have been approved by the Office of Management and Budget under control number 2577-0215) [63 FR 48555, Sept. 10, 1998, as amended at 66 FR 50006, Oct. 1, 2001] Sec. 985.102 SEMAP profile. Upon receipt of the PHA's SEMAP certification, HUD will rate the PHA's performance under each SEMAP indicator in accordance with Sec. 985.3. HUD will then prepare a SEMAP profile for each PHA which shows the rating for each indicator, sums the indicator ratings, and divides by the total possible points to arrive at an PHA's overall SEMAP score. SEMAP scores shall be rounded off to the nearest whole percent. Sec. 985.103 SEMAP score and overall performance rating. (a) High performer rating. PHAs with SEMAP scores of at least 90 percent shall be rated high performers under SEMAP. PHAs that achieve an overall performance rating of high performer [[Page 653]] may receive national recognition by the Department and may be given competitive advantage under notices of fund availability. (b) Standard rating. PHAs with SEMAP scores of 60 to 89 percent shall be rated standard. (c) Troubled rating. PHAs with SEMAP scores of less than 60 percent shall be rated troubled. (d) Modified rating on an indicator. A rating on any of the indicators at Sec. Sec. 985.3(a) through 985.3(h) will be subject to change after HUD receives the PHA's annual audit report or after HUD conducts a confirmatory review if the audit report or the confirmatory review report contains information that the PHA's SEMAP certification concerning an indicator is not accurate. (e) Modified or withheld overall rating. (1) Notwithstanding an PHA's SEMAP score, HUD may modify or withhold an PHA's overall performance rating when warranted by circumstances which have bearing on the SEMAP indicators such as an PHA's appeal of its overall rating, adverse litigation, a conciliation agreement under Title VI of the Civil Rights Act of 1964, fair housing and equal opportunity monitoring and compliance review findings, fraud or misconduct, audit findings or substantial noncompliance with program requirements. (2) Notwithstanding an PHA's SEMAP score, if the latest IA report submitted for the PHA under the Single Audit Act indicates that the auditor is unable to provide an opinion as to whether the PHA's financial statements are presented fairly in all material respects in conformity with generally accepted accounting principals, or an opinion that the schedule of expenditures of Federal awards is presented fairly in all material respects in relation to the financial statements taken as a whole, the PHA will automatically be given an overall performance rating of troubled and the PHA will be subject to the requirements at Sec. 985.107. (3) When HUD modifies or withholds a rating for any reason, it shall explain in writing to the PHA the reasons for the modification or for withholding the rating. [63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40498, July 26, 1999] Sec. 985.104 PHA right of appeal of overall rating. An PHA may appeal its overall performance rating to HUD by providing justification of the reasons for its appeal. An appeal made to a HUD hub or program center or to the HUD Troubled Agency Recovery Center and denied may be further appealed to the Assistant Secretary. Sec. 985.105 HUD SEMAP responsibilities. (a) Frequency of SEMAP assessments--(1) Annual review. Except as provided in paragraph (a)(2) of this section, HUD shall assess each PHA's performance under SEMAP annually and shall assign each PHA a SEMAP score and overall performance rating. (2) Biennial review for small PHAs. HUD shall assess and score the performance of a PHA with less than 250 assisted units once every other PHA fiscal year, unless the PHA: (i) Elects to have its performance assessed on an annual basis; or (ii) Is designated as troubled, in accordance with Sec. 985.103. (b) Notification to PHA. No later than 120 calendar days after the PHA's fiscal year end, HUD shall notify each PHA in writing of its rating on each SEMAP indicator, of its overall SEMAP score and of its overall performance rating (high performer, standard, troubled). The HUD notification letter shall identify and require correction of any SEMAP deficiencies (indicator rating of zero) within 45 calendar days from date of HUD notice. (c) On-site confirmatory review. HUD may conduct an on-site confirmatory review to verify the PHA certification and the HUD rating under any indicator. (d) Changing rating from troubled. HUD must conduct an on-site confirmatory review of an PHA's performance before changing any annual overall performance rating from troubled to standard or high performer. [[Page 654]] (e) Appeals. HUD must review, consider and provide a final written determination to an PHA on its appeal of its overall performance rating. (f) Corrective action plans. HUD must review the adequacy and monitor implementation of PHA corrective action plans submitted under Sec. 985.106(c) or Sec. 985.107(c) and provide technical assistance to help the PHA improve program management. If an PHA is assigned an overall performance rating of troubled, the PHA's corrective action plan must be approved in writing by HUD. [63 FR 48555, Sept. 10, 1998, as amended at 68 FR 37671, June 24, 2003] Sec. 985.106 Required actions for SEMAP deficiencies. (a) When the PHA receives the HUD notification of its SEMAP rating, an PHA must correct any SEMAP deficiency (indicator rating of zero) within 45 calendar days from date of HUD notice. (b) The PHA must send a written report to HUD describing its correction of any identified SEMAP deficiency. (c) If an PHA fails to correct a SEMAP deficiency within 45 calendar days as required, HUD may then require the PHA to prepare and submit a corrective action plan for the deficiency within 30 calendar days from the date of HUD notice. (Information collection requirements in this section have been approved by the Office of Management and Budget under control number 2577-0215) Sec. 985.107 Required actions for PHA with troubled performance rating. (a) On-site reviews--(1) Required reviews for troubled PHAs. Except as provided in paragraph (a)(2) of this section, HUD will conduct an on- site review of PHA program management for any PHA assigned an overall performance rating of troubled to assess the magnitude and seriousness of the PHA's noncompliance with performance requirements. (2) On-site reviews for small PHAs. Notwithstanding paragraph (a)(1) of this section, HUD may elect not to conduct an on-site review of a troubled PHA, if: (i) The PHA has less than 250 assisted units; and (ii) HUD determines that an on-site review is unnecessary to determine the needs of the PHA and the actions required to address the program deficiencies. (b) HUD written report. HUD must provide the PHA a written report of its on-site review containing HUD findings of program management deficiencies, the apparent reasons for the deficiencies, and recommendations for improvement. (c) PHA corrective action plan. Upon receipt of the HUD written report on its on-site review, the PHA must write a corrective action plan and submit it to HUD for approval. The corrective action plan must: (1) Specify goals to be achieved; (2) Identify obstacles to goal achievement and ways to eliminate or avoid them; (3) Identify resources that will be used or sought to achieve goals; (4) Identify an PHA staff person with lead responsibility for completing each goal; (5) Identify key tasks to reach each goal; (6) Specify time frames for achievement of each goal, including intermediate time frames to complete each key task; and (7) Provide for regular evaluation of progress toward improvement. (8) Be signed by the PHA board of commissioners chairperson and by the PHA executive director. If the PHA is a unit of local government or a state, the corrective action plan must be signed by the Section 8 program director and by the chief executive officer of the unit of government or his or her designee. (d) Monitoring. The PHA and HUD must monitor the PHA's implementation of its corrective action plan to ensure performance targets are met. (e) Use of administrative fee reserve prohibited. Any PHA assigned an overall performance rating of troubled may not use any part of the administrative fee reserve for other housing purposes (see 24 CFR 982.155(b)). (f) Upgrading poor performance rating. HUD shall change an PHA's overall performance rating from troubled to standard or high performer if HUD determines that a change in the rating is [[Page 655]] warranted because of improved PHA performance and an improved SEMAP score. (Information collection requirements in this section have been approved by the Office of Management and Budget under control number 2577-0215) [63 FR 48555, Sept. 10, 1998, as amended at 68 FR 37672, June 24, 2003] Sec. 985.108 SEMAP records. HUD shall maintain SEMAP files, including certifications, notifications, appeals, corrective action plans, and related correspondence for at least 3 years. (Information collection requirements in this section have been approved by the Office of Management and Budget under control number 2577-0215) Sec. 985.109 Default under the Annual Contributions Contract (ACC). HUD may determine that an PHA's failure to correct identified SEMAP deficiencies or to prepare and implement a corrective action plan required by HUD constitutes a default under the ACC. Subpart C--Physical Assessment Component [Reserved] Subpart D_Small Rural PHA Assessment Source: 88 FR 30505, May 11, 2023, unless otherwise noted. Sec. 985.201 Applicability. (a) This subpart applies to small rural PHAs as defined in Sec. 902.101 of this chapter. (b) Small rural PHAs shall be assessed and rated on the indicators and methodology of this subpart and shall not be subject to the SEMAP requirements. Sec. 985.203 Assessment indicators and HUD verification methods. (a) This section describes the performance indicators used to assess a PHA's designation as troubled resulting from the small rural PHA assessment. HUD will use the verification method identified for each indicator. The four indicators are determined on a pass or fail basis. (b)(1) Inspection standards. This indicator shows whether the PHA applied the correct inspection standards to HCV and PBV unit inspections. (2) HUD verification method. The PHA's assessment certification and on-site HUD review when applicable. (3) Rating. The PHA passes the indicator if it applied the correct inspection standards for all unit HCV and PBV unit inspections conducted during the assessment period. If the PHA applied the incorrect inspection standards for any HCV or PBV unit inspection during the assessment period, the PHA fails the indicator. (c)(1) Initial unit inspections. This indicator determines if the PHA conducted the initial HQS inspections within the required time period. (2) HUD verification method. HUD systems show percent of newly leased units where the beginning date of the assistance contract is before the date the unit passed the initial unit inspection or, if the PHA employed the PHA initial inspection option for non-life-threatening deficiencies or alternative inspections, the timing requirements for the applicable PHA initial inspection option. (3) Rating. The PHA passes the indicator if at least 98 percent of units placed under HAP contract during the assessment period passed the initial PHA HQS inspection within the required time period. If fewer than 98 percent of units placed under HAP contract during the assessment period passed the HQS inspection within the required time periods, the PHA fails the indicator. (d)(1) Frequency of HQS inspections. This indicator shows, for units that have been under HAP contract for at least three years, whether the PHA re-inspected tenant-based units under HAP contract and the required sample of PBV units at least once during the three-year period from the last PHA inspection. (2) HUD verification method. HUD systems show the percentage of units that have been under HAP contract for at least three years that have been re-inspected within the required three-year period from the last inspection. [[Page 656]] (3) Rating. The PHA passes the indicator if at least 98 percent of the units that have been under HAP contract for at least three years have been re-inspected within the required three-year period from the last inspection. The PHA fails the indicator if fewer than 98 percent of these units have been re-inspected within the required three-year period. (e)(1) Unit condition enforcement. This indicator shows whether, following the inspection of a unit under contract where the unit fails to meet the required standards, any cited life-threatening and non-life- threatening deficiencies are corrected within the required cure period in accordance with Sec. Sec. 982.404 and 983.103 of this chapter. In addition, if HQS deficiencies are not corrected timely, the indicator shows whether the PHA stops (abates) housing assistance payments beginning no later than the first of the month following the specified correction period or terminates the HAP contract or, for family-caused defects, takes prompt and vigorous action to enforce the family obligations. (Sec. 982.404 of this chapter) (2) HUD verification method. The PHA certification and on-site HUD review (if performed), and HUD system data. (3) Rating. In order to pass the indicator, the applicable verification method, which may include sampling, determines that the PHA took corrective action within the required timeframes for at least 98 percent of inspections with identified life-threatening or other HQS deficiencies. (f)(1) PHA submission of certifications. The PHA must submit its certifications for the applicable indicators within the designated timeframe required by HUD, and in the form and manner as required by HUD. HUD will issue instructions on the submission of PHA certifications by Federal Register notification, which will be subject to public comment. (2) Failure to submit. Failure of the PHA to submit any certification in accordance with this paragraph will result in the PHA failing the indicator and being designated as troubled under the small rural PHA assessment. Sec. 985.205 Determination of assessment rating. (a) High performer designation. (1) A PHA is designated a high performer under the small rural PHA assessment if the PHA has passed all four indicators identified in Sec. 985.203 and the PHA: (i) Has utilized at least 98 percent of its HCV budget authority in the two most recent calendar years, or the percent of HCV units leased by renters or occupied by homeowners in the two most recent calendar years was at least 98 percent; (ii) Did not end that calendar year with excess HAP reserves; and (iii) Did not end that calendar year in a funding shortfall or receive shortfall prevention funding from HUD. (2) HUD shall publish the calculation for determining excess HAP reserves in the Federal Register, and such calculation shall provide for public comment before becoming effective. (b) Standard performer designation. A PHA that passed all four indicators but did not meet the funding utilization criteria for a high performer designation in paragraph (a) is designated as a standard performer. (c) Troubled PHA designation. A PHA that failed any of the four indicators under Sec. 985.201 is designated as a troubled PHA under the small rural PHA assessment. Sec. 985.207 Frequency of assessments. (a) Frequency of small rural PHA assessments--(1) Initial assessment. The initial small rural PHA assessment will be effective when the PHA's next SEMAP assessment would have been applied. For PHAs that qualify for SEMAP biennial review as a small PHA (less than 250 assisted units), the transition to the small rural PHA assessment will occur when the PHA's next biennial SEMAP assessment is required. (2) Triennial assessments. HUD shall assess small rural PHAs no more than once every three years, except that a troubled small rural PHA shall be subject to an annual assessment in accordance with Sec. 985.209. (b) [Reserved] [[Page 657]] Sec. 985.209 Troubled small rural PHAs. (a) Appeals--(1) HUD action. HUD must review, consider, and provide a final written determination to a small rural PHA that appeals its designation as a troubled PHA. (2) Deciding HUD official. The HUD decision on the PHA appeal shall be made by a HUD official who has not been involved in and is not subordinate to any person who has been involved in the original determination to designate the PHA as a troubled PHA under the small rural PHA assessment. (b) Corrective action agreement. No later than 60 days after the date on which the PHA is designated a troubled PHA, the PHA and HUD will enter into a corrective action agreement (CAA) under which the PHA shall take actions to correct the deficiencies upon which the troubled PHA designation is based. The PHA must comply with HUD requirements for the submission of the CAA, including but not limited to the date by which the CAA must be submitted to HUD. The CAA must: (1) Have a term of one year, and shall be renewable at the option of HUD; (2) Specify goals to be achieved; (3) Identify obstacles to goal achievement and ways to eliminate or avoid them; (4) Identify resources that will be used or sought to achieve goals; (5) Provide, where feasible, for technical assistance to assist the PHA in curing its deficiencies; (6) Identify a PHA staff person with lead responsibility for completing each goal; (7) Identify key tasks to reach each goal; (8) Specify time frames for achievement of each goal, including intermediate time frames to complete each key task; (9) Provide for regular evaluation of progress toward improvement; (10) Provide for the reconsideration of the PHA's designation as a troubled PHA no less than annually, and provide for the termination of the CAA when HUD determines the PHA is no longer troubled; (11) Provide that in the event of substantial noncompliance by the PHA under the CAA, HUD may (i) contract with another PHA or a private entity to administer the HCV program; and (ii) withhold funds otherwise distributable to the troubled PHA; (12) Be signed by the PHA board of commissioners chairperson and by the PHA executive director. If the PHA is a unit of local government or a State, the CAA must be signed by the Section 8 program director and by the chief executive officer of the unit of government or his or her designee. (c) Monitoring. The PHA and HUD must monitor the PHA's implementation of its CAA to ensure performance targets are met. (d) Annual small rural assessment. A troubled PHA shall be subject to the small rural assessment on an annual basis. (e) Use of administrative fee reserve prohibited. Any PHA designated as troubled may not use any part of the administrative fee reserve for other housing purposes (see Sec. 982.155(b) of this chapter). (f) Upgrading poor performance rating. HUD shall change a PHA's overall performance rating from troubled to standard or high performer if HUD determines that a change in the rating is warranted because of improved PHA performance and a standard or high designation on a subsequent small rural PHA assessment. (g) Default under the Annual Contributions Contract (ACC). HUD may determine that a PHA's failure to correct identified deficiencies resulting from its small rural PHA assessment or to execute and implement a CAA as required by HUD constitutes a default under the ACC. Sec. 985.211 Small rural PHA assessment records. HUD shall maintain small rural PHA assessment files, including designations, notifications, appeals, corrective action agreements, and related correspondence for at least 3 years. PART 990_THE PUBLIC HOUSING OPERATING FUND PROGRAM--Table of Contents Subpart A_Purpose, Applicability, Formula, and Definitions Sec. 990.100 Purpose. 990.105 Applicability. [[Page 658]] 990.110 Operating fund formula. 990.115 Definitions. 990.116 Environmental review requirements. Subpart B_Eligibility for Operating Subsidy; Computation of Eligible Unit Months 990.120 Unit months. 990.125 Eligible units. 990.130 Ineligible units. 990.135 Eligible unit months (EUMs). 990.140 Occupied dwelling units. 990.145 Dwelling units with approved vacancies. 990.150 Limited vacancies. 990.155 Addition and deletion of units. Subpart C_Calculating Formula Expenses 990.160 Overview of calculating formula expenses. 990.165 Computation of project expense level (PEL). 990.170 Computation of utilities expense level (UEL): Overview. 990.175 Utilities expense level: Computation of the current consumption level. 990.180 Utilities expense level: Computation of the rolling base consumption level. 990.185 Utilities expense level: Incentives for energy conservation/rate reduction. 990.190 Other formula expenses (add-ons). Subpart D_Calculating Formula Income 990.195 Calculation of formula income. Subpart E_Determination and Payment of Operating Subsidy 990.200 Determination of formula amount. 990.205 Fungibility of operating subsidy between projects. 990.210 Payment of operating subsidy. 990.215 Payments of operating subsidy conditioned upon reexamination of income of families in occupancy. Subpart F_Transition Policy and Transition Funding 990.220 Purpose. 990.225 Transition determination. 990.230 PHAs that will experience a subsidy reduction. 990.235 PHAs that will experience a subsidy increase. Subpart G_Appeals 990.240 General. 990.245 Types of appeals. 990.250 Requirements for certain appeals. Subpart H_Asset Management 990.255 Overview. 990.260 Applicability. 990.265 Identification of projects. 990.270 Asset management. 990.275 Project-based management (PBM). 990.280 Project-based budgeting and accounting. 990.285 Records and reports. 990.290 Compliance with asset management requirements. Subpart I_Operating Subsidy for Properties Managed by Resident Management Corporations (RMCs) 990.295 Resident Management Corporation operating subsidy. 990.300 Preparation of operating budget. 990.305 Retention of excess revenues. Subpart J_Financial Management Systems, Monitoring, and Reporting 990.310 Purpose--General policy on financial management, monitoring, and reporting. 990.315 Submission and approval of operating budgets. 990.320 Audits. 990.325 Record retention requirements. Authority: 42 U.S.C. 1437g; 42 U.S.C. 3535(d). Source: 70 FR 54997, Sept. 19, 2005, unless otherwise noted. Subpart A_Purpose, Applicability, Formula, and Definitions Sec. 990.100 Purpose. This part implements section 9(f) of the United States Housing Act of 1937 (1937 Act), (42 U.S.C. 1437g). Section 9(f) establishes an Operating Fund for the purposes of making assistance available to public housing agencies (PHAs) for the operation and management of public housing. In the case of unsubsidized housing, the total expenses of operating rental housing should be covered by the operating income, which primarily consists of rental income and, to some degree, investment and non-rental income. In the case of public housing, the Operating Fund provides operating subsidy to assist PHAs to serve low, very low, and extremely low-income families. This part describes the policies and procedures for Operating Fund formula calculations and management under the Operating Fund Program. [[Page 659]] Sec. 990.105 Applicability. (a) Applicability of this part. (1) With the exception of subpart I of this part, this part is applicable to all PHA rental units under an Annual Contributions Contract (ACC). This includes PHAs that have not received operating subsidy previously, but are eligible for operating subsidy under the Operating Fund Formula. (2) This part is applicable to all rental units managed by a resident management corporation (RMC), including a direct-funded RMC. (b) Inapplicability of this part. (1) This part is not applicable to Indian Housing, section 5(h) and section 32 homeownership projects, the Housing Choice Voucher Program, the section 23 Leased Housing Program, or the section 8 Housing Assistance Payments Programs. (2) With the exception of subpart J of this part, this part is not applicable to the Mutual Help Program or the Turnkey III Homeownership Opportunity Program. Sec. 990.110 Operating fund formula. (a) General formula. (1) The amount of annual contributions (operating subsidy) each PHA is eligible to receive under this part shall be determined by a formula. (2) In general, operating subsidy shall be the difference between formula expense and formula income. If a PHA's formula expense is greater than its formula income, then the PHA is eligible for an operating subsidy. (3) Formula expense is an estimate of a PHA's operating expense and is determined by the following three components: Project Expense Level (PEL), Utility Expense Level (UEL), and other formula expenses (add- ons). Formula expense and its three components are further described in subpart C of this part. Formula income is an estimate for a PHA's non- operating subsidy revenue and is further described in subpart D of this part. (4) Certain portions of the operating fund formula (e.g., PEL) are calculated in terms of per unit per month (PUM) amounts and are converted into whole dollars by multiplying the PUM amount by the number of eligible unit months (EUMs). EUMs are further described in subpart B of this part. (b) Specific formula. (1) A PHA's formula amount shall be the sum of the three formula expense components calculated as follows: {[(PEL multiplied by EUM) plus (UEL multiplied by EUM) plus add-ons] minus (formula income multiplied by EUM){time} . (2) A PHA whose formula amount is equal to or less than zero is still eligible to receive operating subsidy equal to its most recent actual audit cost for its Operating Fund Program. (3) Operating subsidy payments will be limited to the availability of funds as described in Sec. 990.210(c). (c) Non-codified formula elements. This part defines the major components of the Operating Fund Formula and describes the relationships of these various components. However, this part does not codify certain secondary elements that will be used in the revised Operating Fund Formula. HUD will more appropriately provide this information in non- codified guidance, such as a Handbook, Federal Register notice, or other non-regulatory means that HUD determines appropriate. Sec. 990.115 Definitions. The following definitions apply to the Operating Fund program: 1937 Act means the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.). Annual contributions contract (ACC) is a contract prescribed by HUD for loans and contributions, which may be in the form of operating subsidy, whereby HUD agrees to provide financial assistance and the PHA agrees to comply with HUD requirements for the development and operation of its public housing projects. Asset management is a management model that emphasizes project-based management, as well as long-term and strategic planning. Current consumption level is the amount of each utility consumed at a project during the 12-month period that ended the June 30th prior to the beginning of the applicable funding period. Eligible unit months (EUM) are the actual number of PHA units in eligible categories expressed in months for a [[Page 660]] specified time frame and for which a PHA receives operating subsidy. Formula amount is the amount of operating subsidy a PHA is eligible to receive, expressed in whole dollars, as determined by the Operating Fund Formula. Formula expense is an estimate of a PHA's operating expense used in the Operating Fund Formula. Formula income is an estimate of a PHA's non-operating subsidy revenue used in the Operating Fund Formula. Funding period is the calendar year for which HUD will distribute operating subsidy according to the Operating Fund Formula. Operating Fund is the account/program authorized by section 9 of the 1937 Act for making operating subsidy available to PHAs for the operation and management of public housing. Operating Fund Formula (or Formula) means the data and calculations used under this part to determine a PHA's amount of operating subsidy for a given period. Operating subsidy is the amount of annual contributions for operations a PHA receives each funding period under section 9 of the 1937 Act as determined by the Operating Fund Formula in this part. Other operating costs (add-ons) means PHA expenses that are recognized as formula expenses but are not included either in the project expense level or in the utility expense level. Payable consumption level is the amount for all utilities consumed at a project that the Formula recognizes in the computation of a PHA's utility expense level at that project. Per unit per month (PUM) describes a dollar amount on a monthly basis per unit, such as Project Expense Level, Utility Expense Level, and formula income. Project means each PHA project under an ACC to which the Operating Fund Formula is applicable. However, for purposes of asset management, as described in subpart H of this part, projects may be as identified under the ACC or may be a reasonable grouping of projects or portions of a project or projects under the ACC. Project-based management is the provision of property management services that is tailored to the unique needs of each property, given the resources available to that property. Project expense level (PEL) is the amount of estimated expenses for each project (excluding utilities and add-ons) expressed as a PUM cost. Project units means all dwelling units in all of a PHA's projects under an ACC. Rolling base consumption level (RBCL) is the average of the yearly consumption levels for the 36-month period ending on the June 30th that is 18 months prior to the beginning of the applicable funding period. Transition funding is the timing and amount by which a PHA will realize increases and reductions in operating subsidy based on the new funding levels of the Operating Fund Formula. Unit months are the total number of project units in a PHA's inventory expressed in months for a specified time frame. Utilities means electricity, gas, heating fuel, water, and sewerage service. Utilities expense level (UEL) is a product of the utility rate multiplied by the payable consumption level multiplied by the utilities inflation factor expressed as a PUM dollar amount. Utility rate (rate) means the actual average rate for any given utility for the most recent 12-month period that ended the June 30th prior to the beginning of the applicable funding period. Yearly consumption level is the actual amount of each utility consumed at a project during a 12-month period ending June 30th. Sec. 990.116 Environmental review requirements. The environmental review procedures of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)) and the implementing regulations at 24 CFR parts 50 and 58 are applicable to the Operating Fund Program. Subpart B_Eligibility for Operating Subsidy; Computation of Eligible Unit Months Sec. 990.120 Unit months. (a) Some of the components of HUD's Operating Fund Formula are based on a measure known as unit months. Unit [[Page 661]] months represent a PHA's public housing inventory during a specified period of time. The unit months eligible for operating subsidy in a 12- month period are equal to the number of months that the units are in an operating subsidy-eligible category, adjusted for changes in inventory (e.g., units added or removed), as described below. (b) A PHA is eligible to receive operating subsidy for a unit on the date it is both placed under the ACC and occupied. The date a unit is eligible for operating subsidy does not change the Date of Full Availability (DOFA) or the date of the End of Initial Operating Period (EIOP), nor does this provision place a project into management status. Sec. 990.125 Eligible units. A PHA is eligible to receive operating subsidy for public housing units under an ACC for: (a) Occupied dwelling units as defined in Sec. 990.140; (b) A dwelling unit with an approved vacancy (as defined in Sec. 990.145); and (c) A limited number of vacancies (as defined in Sec. 990.150). Sec. 990.130 Ineligible units. (a) Vacant units that do not fall within the definition of Sec. 990.145 or Sec. 990.150 are not eligible for operating subsidy under this part. (b) Units that are eligible to receive an asset-repositioning fee, as described in Sec. 990.190(h), are not eligible to receive operating subsidy under this subpart. Sec. 990.135 Eligible unit months (EUMs). (a) A PHA's total number of EUMs will be calculated for the 12-month period from July 1st to June 30th that is prior to the first day of the applicable funding period, and will consist of eligible units as defined in Sec. 990.140, Sec. 990.145, or Sec. 990.150. (b)(1) The determination of whether a public housing unit satisfies the requirements of Sec. 990.140, Sec. 990.145, or Sec. 990.150 for any unit month shall be based on the unit's status as of either the first or last day of the month, as determined by the PHA. (2) HUD reserves the right to determine the status of any and all public housing units based on information in its information systems. (c) The PHA shall maintain and, at HUD's request, shall make available to HUD, specific documentation of the status of all units, including, but not limited to, a listing of the units, street addresses or physical address, and project/management control numbers. (d) Any unit months that do not meet the requirements of this subpart are not eligible for operating subsidy, and will not be subsidized by the Operating Fund. Sec. 990.140 Occupied dwelling units. A PHA is eligible to receive operating subsidy for public housing units for each unit month that those units are under an ACC and occupied by a public housing-eligible family under lease. Sec. 990.145 Dwelling units with approved vacancies. (a) A PHA is eligible to receive operating subsidy for vacant public housing units for each unit month the units are under an ACC and meet one of the following HUD-approved vacancies: (1) Units undergoing modernization. Vacancies resulting from project modernization or unit modernization (such as work necessary to reoccupy vacant units) provided that one of the following conditions is met: (i) The unit is undergoing modernization (i.e., the modernization contract has been awarded or force account work has started) and must be vacant to perform the work, and the construction is on schedule according to a HUD-approved PHA Annual Plan; or (ii) The unit must be vacant to perform the work and the treatment of the vacant unit is included in a HUD-approved PHA Annual Plan, but the time period for placing the vacant unit under construction has not yet expired. The PHA shall place the vacant unit under construction within two federal fiscal years (FFYs) after the FFY in which the capital funds are approved. (2) Special use units. Units approved and used for resident services, resident organization offices, and related activities, such as self-sufficiency and anti-crime initiatives. [[Page 662]] (b) On a project-by-project basis, subject to prior HUD approval and for the time period agreed to by HUD, a PHA shall receive operating subsidy for the units affected by the following events that are outside the control of the PHA: (1) Litigation. Units that are vacant due to litigation, such as a court order or settlement agreement that is legally enforceable; units that are vacant in order to meet regulatory and statutory requirements to avoid potential litigation (as covered in a HUD-approved PHA Annual Plan); and units under voluntary compliance agreements with HUD or other voluntary compliance agreements acceptable to HUD (e.g., units that are being held vacant as part of a court-order, HUD-approved desegregation plan, or voluntary compliance agreement requiring modifications to the units to make them accessible pursuant to 24 CFR part 8). (2) Disasters. Units that are vacant due to a federally declared, state-declared, or other declared disaster. (3) Casualty losses. Damaged units that remain vacant due to delays in settling insurance claims. (c) A PHA may appeal to HUD to receive operating subsidy for units that are vacant due to changing market conditions (see subpart G of this part--Appeals). Sec. 990.150 Limited vacancies. (a) Operating subsidy for a limited number of vacancies. HUD will pay operating subsidy for a limited number of vacant units under an ACC. The limited number of vacant units must be equal to or less than 3 percent of the unit months on a project-by-project basis based on the definition of a project under Sec. 990.265 (provided that the number of eligible unit months does not exceed 100 percent of the unit months for a project). (b) Exception for PHAs with 100 or fewer units. Notwithstanding paragraph (a) of this section, a PHA with 100 or fewer units will be paid operating subsidy for up to five vacant units not to exceed 100 percent of the unit months under an ACC. For example, a PHA with an inventory of 100 units and four vacancies during its fiscal year will be eligible for operating subsidy for all 100 units. A PHA with an inventory of 50 units with seven vacancies during its fiscal year will be eligible for operating subsidy for 48 units. [70 FR 54997, Sept. 19, 2005, as amended at 81 FR 12377, Mar. 8, 2016] Sec. 990.155 Addition and deletion of units. (a) Changes in public housing unit inventory. To generate a change to its formula amount within each one-year funding period, PHAs shall periodically (e.g., quarterly) report the following information to HUD, during the funding period: (1) New units that were added to the ACC, and occupied by a public housing-eligible family during the prior reporting period for the one- year funding period, but have not been included in the previous EUMs' data; and (2) Projects, or entire buildings in a project, that are eligible to receive an asset repositioning fee in accordance with the provisions in Sec. 990.190(h). (b) Revised EUM calculation. (1) For new units, the revised calculation shall assume that all such units will be fully occupied for the balance of that funding period. The actual occupancy/vacancy status of these units will be included to calculate the PHA's operating subsidy in the subsequent funding period after these units have one full year of a reporting cycle. (2) Projects, or entire buildings in a project, that are eligible to receive an asset repositioning fee in accordance with Sec. 990.190(h) are not to be included in the calculation of EUMs. Funding for these units is provided under the conditions described in Sec. 990.190(h). Subpart C_Calculating Formula Expenses Sec. 990.160 Overview of calculating formula expenses. (a) General. Formula expenses represent the costs of services and materials needed by a well-run PHA to sustain the project. These costs include items such as administration, maintenance, and utilities. HUD also determines a PHA's formula expenses at a project level. HUD uses the following three factors to determine the overall formula expense level for each project: [[Page 663]] (1)The project expense level (PEL) (calculated in accordance with Sec. 990.165); (2) The utilities expense level (UEL) (calculated in accordance with Sec. Sec. 990.170, 990.175, 990.180, and 990.185); and (3)Other formula expenses (add-ons) (calculated in accordance with Sec. 990.190). (b) PEL, UEL, and Add-ons. Each project of a PHA has a unique PEL and UEL. The PEL for each project is based on ten characteristics and certain adjustments described in Sec. 990.165. The PEL represents the normal expenses of operating public housing projects, such as maintenance and administration costs. The UEL for each project represents utility expenses. Utility expense levels are based on an incentive system aimed at reducing utility expenses. Both the PEL and UEL are expressed in PUM costs. The expenses not included in these expense levels and which are unique to PHAs are titled ``other formula expenses (add-ons)'' and are expressed in a dollar amount. (c) Calculating project formula expense. The formula expense of any one project is the sum of the project's PEL and the UEL, multiplied by the total EUMs specific to the project, plus the add-ons. Sec. 990.165 Computation of project expense level (PEL). (a) Computation of PEL. The PEL is calculated in terms of PUM cost and represents the costs associated with the project, except for utility and add-on costs. Costs associated with the PEL are administration, management fees, maintenance, protective services, leasing, occupancy, staffing, and other expenses, such as project insurance. HUD will calculate the PEL using regression analysis and benchmarking for the actual costs of Federal Housing Administration (FHA) projects to estimate costs for public housing projects. HUD will use the ten variables described in paragraph (b) of this section and their associated coefficient (i.e., values that are expressed in percentage terms) to produce a PEL. (b) Variables. The ten variables are: (1) Size of project (number of units); (2) Age of property (Date of Full Availability (DOFA)); (3) Bedroom mix; (4) Building type; (5) Occupancy type (family or senior); (6) Location (an indicator of the type of community in which a property is located; location types include rural, city central metropolitan, and non-city central metropolitan (suburban) areas); (7) Neighborhood poverty rate; (8) Percent of households assisted; (9) Ownership type (profit, non-profit, or limited dividend); and (10) Geographic. (c) Cost adjustments. HUD will apply four adjustments to the PEL. The adjustments are: (1) Application of a $200 PUM floor for any senior property and a $215 PUM floor for any family property; (2) Application of a $420 PUM ceiling for any property except for New York City Housing Authority projects, which have a $480 PUM ceiling; (3) Application of a four percent reduction for any PEL calculated over $325 PUM, with the reduction limited so that a PEL will not be reduced to less than $325; and (4) The reduction of audit costs as reported for FFY 2003 in a PUM amount. (d) Annual inflation factor. The PEL for each project shall be adjusted annually, beginning in 2005, by the local inflation factor. The local inflation factor shall be the HUD-determined weighted average percentage increase in local government wages and salaries for the area in which the PHA is located, and non-wage expenses. (e) Calculating a PEL. To calculate a specific PEL for a given property, the sum of the coefficients for nine variables (all variables except ownership type) shall be added to a formula constant. The exponent of that sum shall be multiplied by a percentage to reflect the non-profit ownership type, which will produce an unadjusted PEL. For the calculation of the initial PEL, the cost adjustments described in paragraphs (c)(1), (c)(2), and (c)(3) of this section will be applied. After these initial adjustments are applied, the audit adjustment described in paragraph (c)(4) of this section will be applied to arrive at the PEL in year 2000 dollars. After the PEL in year 2000 dollars is [[Page 664]] created, the annual inflation factor as described in paragraph (d) of this section will be applied cumulatively to this number through 2004 to yield an initial PEL in terms of current dollars. (f) Calculation of the PEL for Moving to Work PHAs. PHAs participating in the Moving to Work (MTW) Demonstration authorized under section 204 of the Omnibus Consolidated Rescissions and Appropriations Act of 1996 (Pub. L. 104-134, approved April 26, 1996) shall receive an operating subsidy as provided in Attachment A of their MTW Agreements executed prior to November 18, 2005. PHAs with an MTW Agreement will continue to have the right to request extensions of or modifications to their MTW Agreements. (g) Calculation of the PELs for mixed-finance developments. If, prior to November 18, 2005, a PHA has either a mixed-finance arrangement that has closed or has filed documents in accordance with 24 CFR 941.606 for a mixed-finance transaction, then the project covered by the mixed- finance transaction will receive funding based on the higher of its former Allowable Expense Level or the new computed PEL. (h) Calculation of PELs when data are inadequate or unavailable. When sufficient data are unavailable for the calculation of a PEL, HUD may calculate a PEL using an alternative methodology. The characteristics may be used from similarly situated properties. (i) Review of PEL methodology by advisory committee. In 2009, HUD will convene a meeting with representation of appropriate stakeholders, to review the methodology to evaluate the PEL based on actual cost data. The meeting shall be convened in accordance with the Federal Advisory Committee Act (5 U.S.C. Appendix) (FACA). HUD may determine appropriate funding levels for each project to be effective in FY 2011 after following appropriate rulemaking procedures. Sec. 990.170 Computation of utilities expense level (UEL): Overview. (a) General. The UEL for each PHA is based on its consumption for each utility, the applicable rates for each utility, and an applicable inflation factor. The UEL for a given funding period is the product of the utility rate multiplied by the payable consumption level multiplied by the inflation factor. The UEL is expressed in terms of PUM costs. (b) Utility rate. The utility rate for each type of utility will be the actual average rate from the most recent 12-month period that ended June 30th prior to the beginning of the applicable funding period. The rate will be calculated by dividing the actual utility cost by the actual utility consumption, with consideration for pass-through costs (e.g., state and local utility taxes, tariffs) for the time period specified in this paragraph. (c) Payable consumption level. The payable consumption level is based on the current consumption level adjusted by a utility consumption incentive. The incentive shall be computed by comparing current consumption levels of each utility to the rolling base consumption level. If the comparison reflects a decrease in the consumption of a utility, the PHA shall retain 75 percent of this decrease. Alternately, if the comparison reflects an increase in the consumption of a utility, the PHA shall absorb 75 percent of this increase. (d) Inflation factor for utilities. The UEL shall be adjusted annually by an inflation/deflation factor based upon the fuels and utilities component of the United States Department of Labor, Bureau of Labor Statistics (BLS) Consumer Price Index for All Urban Consumers (CPI-U). The annual adjustment to the UEL shall reflect the most recently published and localized data available from BLS at the time the annual adjustment is calculated. (e) Increases in tenant utility allowances. Increases in tenant utility allowances, as a component of the formula income, as described in Sec. 990.195, shall result in a commensurate increase of operating subsidy. Decreases in such utility allowances shall result in a commensurate decrease in operating subsidy. (f) Records and reporting. (1) Appropriate utility records, satisfactory to HUD, shall be developed and maintained, so that consumption and rate data can be determined. [[Page 665]] (2) All records shall be kept by utility and by project for each 12- month period ending June 30th. (3) HUD will notify each PHA when HUD has the automated systems capacity to receive such information. Each PHA then will be obligated to provide consumption and cost data to HUD for all utilities for each project. (4) If a PHA has not maintained or cannot recapture utility data from its records for a particular utility, the PHA shall compute the UEL by: (i) Using actual consumption data for the last complete year(s) of available data or data of comparable project(s) that have comparable utility delivery systems and occupancy, in accordance with a method prescribed by HUD; or (ii) Requesting field office approval to use actual PUM utility expenses for its UEL in accordance with a method prescribed by HUD when the PHA cannot obtain necessary data to calculate the UEL in accordance with paragraph (f)(4)(i) of this section. Sec. 990.175 Utilities expense level: Computation of the current consumption level. The current consumption level shall be the actual amount of each utility consumed during the 12-month period ending June 30th that is 6 months prior to the first day of the applicable funding period. Sec. 990.180 Utilities expense level: Computation of the rolling base consumption level. (a) General. (1) The rolling base consumption level (RBCL) shall be equal to the average of yearly consumption levels for the 36-month period ending on the June 30th that is 18 months prior to the first day of the applicable funding period. (2) The yearly consumption level is the actual amount of each utility consumed during a 12-month period ending June 30th. For example, for the funding period January 1, 2006, through December 31, 2006, the RBCL will be the average of the following yearly consumption levels: (i) Year 1 = July 1, 2001, through June 30, 2002. (ii) Year 2 = July 1, 2002, through June 30, 2003. (iii) Year 3 = July 1, 2003, through June 30, 2004. Note to paragraph (a)(2): In this example, the current year's consumption level will be July 1, 2004, through June 30, 2005. (b) Distortions to rolling base consumption level. The PHA shall have its RBCL determined so as not to distort the rolling base period in accordance with a method prescribed by HUD if: (1) A project has not been in operation during at least 12 months of the rolling base period; (2) A project enters or exits management after the rolling base period and prior to the end of the applicable funding period; or (3) A project has experienced a conversion from one energy source to another, switched from PHA-supplied to resident-purchased utilities during or after the rolling base period, or for any other reason that would cause the RBCL not to be comparable to the current year's consumption level. (c) Financial incentives. The three-year rolling base for all relevant utilities will be adjusted to reflect any financial incentives to the PHA to reduce consumption as described in Sec. 990.185. Sec. 990.185 Utilities expense level: Incentives for energy conservation/rate reduction. (a) General/consumption reduction. If a PHA undertakes energy conservation measures that are financed by an entity other than HUD, the PHA may qualify for the incentives available under this section. For a PHA to qualify for these incentives, the PHA must enter into a contract to finance the energy conservation measures, and must obtain HUD approval. Such approval shall be based on a determination that payments under a contract can be funded from reasonably anticipated energy cost savings. The contract period shall not exceed 20 years. The energy conservation measures may include, but are not limited to: Physical improvements financed by a loan from a bank, utility, or governmental entity; management of costs under the performance contract; or a shared savings agreement with a private energy service company. All such contracts shall [[Page 666]] be known as energy performance contracts. PHAs may extend an executed energy performance contract with a term of less than 20 years to a term of not more than 20 years, to permit additional energy conservation improvements without the reprocurement of energy performance contractors. The PHA must obtain HUD approval to extend the term of an executed energy performance contract. (1) Frozen rolling base. (i) If a PHA undertakes energy conservation measures that are approved by HUD, the RBCL for the project and the utilities involved may be frozen during the contract period. Before the RBCL is frozen, it must be adjusted to reflect any energy savings resulting from the use of any HUD funding. The RBCL also may be adjusted to reflect systems repaired to meet applicable building and safety codes as well as to reflect adjustments for occupancy rates increased by rehabilitation. The RBCL shall be frozen at the level calculated for the year during which the conservation measures initially shall be implemented. (ii) The PHA operating subsidy eligibility shall reflect the retention of 100 percent of the savings from decreased consumption until the term of the financing agreement is complete. The PHA must use at least 75 percent of the cost savings to pay off the debt, e.g., pay off the contractor or bank loan. If less than 75 percent of the cost savings is used for debt payment, however, HUD shall retain the difference between the actual percentage of cost savings used to pay off the debt and 75 percent of the cost savings. If at least 75 percent of the cost savings is paid to the contractor or bank, the PHA may use the full amount of the remaining cost savings for any eligible operating expense. (iii) The annual three-year rolling base procedures for computing the RBCL shall be reactivated after the PHA satisfies the conditions of the contract. The three years of consumption data to be used in calculating the RBCL after the end of the contract period shall be the yearly consumption levels for the final three years of the contract. (2) PHAs undertaking energy conservation measures that are financed by an entity other than HUD may include resident-paid utilities under the consumption reduction incentive, using the following methodology: (i) The PHA reviews and updates all utility allowances to ascertain that residents are receiving the proper allowances before energy savings measures are begun; (ii) The PHA makes future calculations of rental income for purposes of the calculation of operating subsidy eligibility based on these baseline allowances. In effect, HUD will freeze the baseline allowances for the duration of the contract; (iii) After implementation of the energy conservation measures, the PHA updates the utility allowances in accordance with provisions in 24 CFR part 965, subpart E. The new allowance should be lower than baseline allowances; (iv) The PHA uses at least 75 percent of the savings for paying the cost of the improvement (the PHA will be permitted to retain 100 percent of the difference between the baseline allowances and revised allowances); (v) After the completion of the contract period, the PHA begins using the revised allowances in calculating its operating subsidy eligibility; and (vi) The PHA may exclude from its calculation of rental income the increased rental income due to the difference between the baseline allowances and the revised allowances of the projects involved, for the duration of the contract period. (3) Subsidy add-on. (i) If a PHA qualifies for this incentive (i.e., the subsidy add-on, in accordance with the provisions of paragraph (a) of this section), then the PHA is eligible for additional operating subsidy each year of the contract to amortize the cost of the loan for the energy conservation measures and other direct costs related to the energy project under the contract during the term of the contract subject to the provisions of this paragraph (a)(3) of this section. The PHA's operating subsidy for the current funding year will continue to be calculated in accordance with paragraphs (a), (b), and (c) of Sec. 990.170 (i.e., the rolling base is [[Page 667]] not frozen). The PHA will be able to retain part of the cost savings in accordance with Sec. 990.170(c). (ii) The actual cost of energy (of the type affected by the energy conservation measure) after implementation of the energy conservation measure will be subtracted from the expected energy cost, to produce the energy cost savings for the year. (iii) If the cost savings for any year during the contract period are less than the amount of operating subsidy to be made available under this paragraph to pay for the energy conservation measure in that year, the deficiency will be offset against the PHA's operating subsidy eligibility for the PHA's next fiscal year. (iv) If energy cost savings are less than the amount necessary to meet amortization payments specified in a contract, the contract term may be extended (up to the 20-year limit) if HUD determines that the shortfall is the result of changed circumstances, rather than a miscalculation or misrepresentation of projected energy savings by the contractor or PHA. The contract term may be extended only to accommodate payment to the contractor and associated direct costs. (b) Rate reduction. If a PHA takes action beyond normal public participation in rate-making proceedings, such as well-head purchase of natural gas, administrative appeals, or legal action to reduce the rate it pays for utilities, then the PHA will be permitted to retain one-half the annual savings realized from these actions. (c) Utility benchmarking. HUD will pursue benchmarking utility consumption at the project level as part of the transition to asset management. HUD intends to establish benchmarks by collecting utility consumption and cost information on a project-by-project basis. In 2009, after conducting a feasibility study, HUD will convene a meeting with representation of appropriate stakeholders to review utility benchmarking options so that HUD may determine whether or how to implement utility benchmarking to be effective in FY 2011. The meeting shall be convened in accordance with the Federal Advisory Committee Act (5 U.S.C. Appendix) (FACA). The HUD study shall take into account typical levels of utilities consumption at public housing developments based upon factors such as building and unit type and size, temperature zones, age and construction of building, and other relevant factors. [70 FR 54997, Sept. 19, 2005, as amended at 73 FR 61352, Oct. 16, 2008] Sec. 990.190 Other formula expenses (add-ons). In addition to calculating operating subsidy based on the PEL and UEL, a PHA's eligible formula expenses shall be increased by add-ons. The allowed add-ons are: (a) Self-sufficiency. A PHA may request operating subsidy for the reasonable cost of program coordinator(s) and associated costs in accordance with HUD's self-sufficiency program regulations and notices. (b) Energy loan amortization. A PHA may qualify for operating subsidy for payments of principal and interest cost for energy conservation measures described in Sec. 990.185(a)(3). (c) Payments in lieu of taxes (PILOT). Each PHA will receive an amount for PILOT in accordance with section 6(d) of the 1937 Act, based on its cooperation agreement or its latest actual PILOT payment. (d) Cost of independent audits. A PHA is eligible to receive operating subsidy equal to its most recent actual audit costs for the Operating Fund Program when an audit is required by the Single Audit Act (31 U.S.C. 7501-7507) (see 2 CFR part 200, subpart F) or when a PHA elects to prepare and submit such an audit to HUD. For the purpose of this rule, the most recent actual audit costs include the associated costs of an audit for the Operating Fund Program only. A PHA whose operating subsidy is determined to be zero based on the formula is still eligible to receive operating subsidy equal to its most recent actual audit costs. The most recent actual audit costs are used as a proxy to cover the cost of the next audit. If a PHA does not have a recent actual audit cost, the PHA working with HUD may establish an audit cost. A PHA that requests funding for an audit shall complete an audit. The results of the [[Page 668]] audit shall be transmitted in a time and manner prescribed by HUD. (e) Funding for resident participation activities. Each PHA's operating subsidy calculation shall include $25 per occupied unit per year for resident participation activities, including, but not limited to, those described in 24 CFR part 964. For purposes of this section, a unit is eligible to receive resident participation funding if it is occupied by a public housing resident or it is occupied by a PHA employee, or a police officer or other security personnel who is not otherwise eligible for public housing. In any fiscal year, if appropriations are not sufficient to meet all funding requirements under this part, then the resident participation component of the formula will be adjusted accordingly. (f) Asset management fee. Each PHA with at least 250 units shall receive a $4 PUM asset management fee. PHAs with fewer than 250 units that elect to transition to asset management shall receive an asset management fee of $2 PUM. PHAs with fewer than 250 units that elect to have their entire portfolio treated and considered as a single project as described in Sec. 990.260(b) or PHAs with only one project will not be eligible for an asset management fee. For all PHAs eligible to receive the asset management fee, the fee will be based on the total number of ACC units. PHAs that are not in compliance with asset management as described in subpart H of this part by FY 2011 will forfeit this fee. (g) Information technology fee. Each PHA's operating subsidy calculation shall include $2 PUM for costs attributable to information technology. For all PHAs, this fee will be based on the total number of ACC units. (h) Asset repositioning fee. (1) A PHA that transitions projects or entire buildings of a project out of its inventory is eligible for an asset-repositioning fee. This fee supplements the costs associated with administration and management of demolition or disposition, tenant relocation, and minimum protection and service associated with such efforts. The asset-repositioning fee is not intended for individual units within a multi-unit building undergoing similar activities. (2) Projects covered by applications approved for demolition or disposition shall be eligible for an asset repositioning fee on the first day of the next quarter six months after the date the first unit becomes vacant after the relocation date included in the approved relocation plan. When this condition is met, the project and all associated units are no longer considered an EUM as described in Sec. 990.155. Each PHA is responsible for accurately applying and maintaining supporting documentation on the start date of this transition period or is subject to forfeiture of this add-on. (3) Units categorized for demolition and which are eligible for an asset repositioning fee are eligible for operating subsidy at the rate of 75 percent PEL per unit for the first twelve months, 50 percent PEL per unit for the next twelve months, and 25 percent PEL per unit for the next twelve months. (4) Units categorized for disposition and which are eligible for an asset repositioning fee are eligible for operating subsidy at the rate of 75 percent PEL per unit for the first twelve months and 50 percent PEL per unit for the next twelve months. (5) The following is an example of how eligibility for an asset- repositioning fee is determined: (i) A PHA has HUD's approval to demolish (or dispose of) a 100-unit project from its 1,000 unit inventory. On January 12th, in conjunction with the PHA's approved Relocation Plan, a unit in that project becomes vacant. Accordingly, the demolition/disposition-approved project is eligible for an asset-repositioning fee on October 1st. (This date is calculated as follows: January 12th + six months = July 12th. The first day of the next quarter is October 1st.) (ii) Although payment of the asset-repositioning fee will not begin until October 1st, the PHA will receive its full operating subsidy based on the 1,000 units through September 30th. On October 1st the PHA will begin to receive the 36-month asset-repositioning fee in accordance with paragraph (h)(3) of this section for the 100 units approved for demolition. (Asset repositioning fee requirements for projects [[Page 669]] approved for disposition are found in paragraph (h)(4) of this section.) On October 1st, the PHA's units will be 900. (i) Costs attributable to changes in Federal law, regulation, or economy. In the event that HUD determines that enactment of a Federal law or revision in HUD or other Federal regulations has caused or will cause a significant change in expenditures of a continuing nature above the PEL and UEL, HUD may, at HUD's sole discretion, decide to prescribe a procedure under which the PHA may apply for or may receive an adjustment in operating subsidy. [70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015] Subpart D_Calculating Formula Income Sec. 990.195 Calculation of formula income. (a) General. For the purpose of the formula, formula income is equal to the amount of rent charged to tenants divided by the respective unit months leased, and is therefore expressed as a PUM. Formula income will be derived from a PHA's year-end financial information. The financial information used in the formula income computation will be the audited information provided by the PHA through HUD's information systems. The information will be calculated using the following PHA fiscal year-end information: (1) April 1, 2003, through March 31, 2004; (2) July 1, 2003, through June 30, 2004; (3) October 1, 2003, through September 30, 2004; and (4) January 1, 2004, through December 31, 2004. (b) Calculation of formula income. To calculate formula income in whole dollars, the PUM amount will be multiplied by the EUMs as described in subpart B of this part. (c) Frozen at 2004 level. After a PHA's formula income is calculated as described in paragraph (a) of this section, it will not be recalculated or inflated for fiscal years 2007 through 2009, unless a PHA can show a severe local economic hardship that is impacting the PHA's ability to maintain some semblance of its formula income (see subpart G of this part--Appeals). A PHA's formula income may be recalculated if the PHA appeals to HUD for an adjustment in its formula. (d) Calculation of formula income when data are inadequate or unavailable. When audited data are unavailable in HUD's information systems for the calculation of formula income, HUD may use an alternative methodology, including, but not limited to, certifications, hard copy reports, and communications with the respective PHAs. (e) Inapplicability of 24 CFR 85.25 (as revised April 1, 2013). Formula income is not subject to the provisions regarding program income in 24 CFR 85.25 (as revised April 1, 2013). [70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005; 80 FR 75943, Dec. 7, 2015] Subpart E_Determination and Payment of Operating Subsidy Sec. 990.200 Determination of formula amount. (a) General. The amount of operating subsidy that a PHA is eligible for is the difference between its formula expenses (as calculated under subpart C of this part) and its formula income (as calculated under subpart D of this part). (b) Use of HUD databases to calculate formula amount. HUD shall utilize its databases to make the formula calculations. HUD's databases are intended to be employed to provide information on all primary factors in determining the operating subsidy amount. Each PHA is responsible for supplying accurate information on the status of each of its units in HUD's databases. (c) PHA responsibility to submit timely data. PHAs shall submit data used in the formula on a regular and timely basis to ensure accurate calculation under the formula. If a PHA fails to provide accurate data, HUD will make a determination as to the PHA's inventory, occupancy, and financial information using available or verified data, which may result in a lower operating subsidy. HUD has the right to adjust any or all formula amounts based on clerical, mathematical, and information system errors that affect any of the data elements used in the calculation of the formula. [[Page 670]] Sec. 990.205 Fungibility of operating subsidy between projects. (a) General. Operating subsidy shall remain fully fungible between ACC projects until operating subsidy is calculated by HUD at a project level. After subsidy is calculated at a project level, operating subsidy can be transferred as the PHA determines during the PHA's fiscal year to another ACC project(s) if a project's financial information, as described more fully in Sec. 990.280, produces excess cash flow, and only in the amount up to those excess cash flows. (b) Notwithstanding the provisions of paragraph (a) of this section and subject to all of the other provisions of this part, the New York City Housing Authority's Development Grant Project Amendment Number 180, dated July 13, 1995, to Consolidated Annual Contributions Contract NY- 333, remains in effect. Sec. 990.210 Payment of operating subsidy. (a) Payments of operating subsidy under the formula. HUD shall make monthly payments equal to \1/12\ of a PHA's total annual operating subsidy under the formula by electronic funds transfers through HUD's automated disbursement system. HUD shall establish thresholds that permit PHAs to request monthly installments. Requests by PHAs that exceed these thresholds will be subject to HUD review. HUD approvals of requests that exceed these thresholds are limited to PHAs that have an unanticipated and immediate need for disbursement. (b) Payments procedure. In the event that the amount of operating subsidy has not been determined by HUD as of the beginning of the funding period, operating subsidy shall be provided monthly, quarterly, or annually based on the amount of the PHA's previous year's formula or another amount that HUD may determine to be appropriate. (c) Availability of funds. In the event that insufficient funds are available, HUD shall have discretion to revise, on a pro rata basis, the amounts of operating subsidy to be paid to PHAs. Sec. 990.215 Payments of operating subsidy conditioned upon reexamination of income of families in occupancy. (a) General. Each PHA is required to reexamine the income of each family in accordance with the provisions of the ACC, the 1937 Act, and HUD regulations. Income reexaminations shall be performed annually, except as provided in the 1937 Act, in HUD regulations, or in the MTW agreements. A PHA must be in compliance with all reexamination requirements in order to be eligible to receive full operating subsidy. A PHA's calculations of rent and utility allowances shall be accurate and timely. (b) A PHA in compliance. A PHA shall submit a certification that states that the PHA is in compliance with the annual income reexamination requirements and its rent and utility allowance calculations have been or will be adjusted in accordance with current HUD requirements and regulations. (c) A PHA not in compliance. Any PHA not in compliance with annual income reexamination requirements at the time of the submission of the calculation of operating subsidy shall furnish to the responsible HUD field office a copy of the procedures it is using to achieve compliance and a statement of the number of families that have undergone reexamination during the 12 months preceding the current funding cycle. If, on the basis of this submission or any other information, HUD determines that the PHA is not substantially in compliance with all of the annual income reexamination requirements, HUD shall withhold payments to which the PHA may be entitled under this part. Payment may be withheld in an amount equal to HUD's estimate of the loss of rental income to the PHA resulting from its failure to comply with the requirements. Subpart F_Transition Policy and Transition Funding Sec. 990.220 Purpose. This policy is aimed at assisting all PHAs in transitioning to the new funding levels as determined by the formula set forth in this rule. PHAs will [[Page 671]] be subject to a transition funding policy that will either increase or reduce their total operating subsidy for a given year. Sec. 990.225 Transition determination. The determination of the amount and period of the transition funding shall be based on the difference in subsidy levels between the formula set forth in this part and the formula in effect prior to implementation of the formula set forth in this part. The difference in subsidy levels will be calculated using FY 2004 data. When actual data are not available for one of the formula components needed to calculate the formula of this part for FY 2004, HUD will use alternate data as a substitute (e.g., unit months available for eligible unit months, etc.) If the difference between these formulas indicates that a PHA shall have its operating subsidy reduced as a result of this formula, the PHA will be subject to a transition policy as indicated in Sec. 990.230. If the difference between these formulas indicates that a PHA will have its operating subsidy increased as a result of this formula, the PHA will be subject to the transition policy as indicated in Sec. 990.235. [70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005] Sec. 990.230 PHAs that will experience a subsidy reduction. (a) For PHAs that will experience a reduction in their operating subsidy, as determined in Sec. 990.225, such reductions will have a limit of: (1) 5 percent of the difference between the two funding levels in the first year of implementation of the formula contained in this part; (2) 24 percent of the difference between the two funding levels in the second year of implementation of the formula contained in this part; (3) 43 percent of the difference between the two levels in the third year of implementation of the formula contained in this part; (4) 62 percent of the difference between the two levels in the fourth year of implementation of the formula contained in this part; and (5) 81 percent of the difference between the two levels in the fifth year of implementation of the formula contained in this part. (b) The full amount of the reduction in the operating subsidy level shall be realized in the sixth year of implementation of the formula contained in this part. (c) For example, a PHA has a subsidy reduction from $1 million, under the formula in effect prior to implementation of the formula contained in this part, to $900,000, under the formula contained in this part using FY 2004 data. The difference would be calculated at $100,000 ($1 million - $900,000 = $100,000). In the first year, the subsidy reduction would be limited to $5,000 (5 percent of the difference). Thus, the PHA would receive an operating subsidy amount pursuant to this rule plus a transition-funding amount of $95,000 (the $100,000 difference between the two subsidy amounts minus the $5,000 reduction limit). (d) If a PHA can demonstrate a successful conversion to the asset management requirements of subpart H of this part, as determined under paragraph (f) of this section, HUD will discontinue the reduction at the PHA's next subsidy calculation following such demonstration, as reflected in the schedule in paragraph (e) of this section, notwithstanding Sec. 990.290(c). (e) The schedule for successful demonstration of conversion to asset management for discontinuation of PHA subsidy reduction is reflected in the table below: Stop-Loss Demonstration Time Line and Effective Dates ---------------------------------------------------------------------------------------------------------------- Reduction stopped Reduction Demonstration date by Applications due at effective for ---------------------------------------------------------------------------------------------------------------- September 30, 2007.................. October 15, 2007.................... 5 percent of the Calendar Year PUM difference. 2007 and thereafter. April 1, 2008....................... April 15, 2008...................... 24 percent of the Calendar Year PUM difference. 2008 and thereafter. October 1, 2008..................... October 15, 2008.................... 43 percent of the Calendar Year PUM difference. 2009 and thereafter. [[Page 672]] October 1, 2009..................... October 15, 2009.................... 62 percent of the Calendar Year PUM difference. 2010 and thereafter. October 1, 2010..................... October 15, 2010.................... 81 percent of the Calendar Year PUM difference. 2011 and thereafter. ---------------------------------------------------------------------------------------------------------------- (f)(1) For purposes of this section, compliance with the asset management requirements of subpart H of this part will be based on an independent assessment conducted by a HUD-approved professional familiar with property management practices in the region or state in which the PHA is located. (2) A PHA must select from a list of HUD-approved professionals to conduct the independent assessment. The professional review and recommendation will then be forwarded to the Assistant Secretary for Public and Indian Housing (or designee) for final determination of compliance with the asset management requirements of subpart H of this part. (3) Upon completion of the independent assessment, the assessor shall conduct an exit conference with the PHA. In response to the exit conference, the PHA may submit a management response and other pertinent information (including, but not limited to, an additional assessment procured at the PHAs' own expense) within ten working days of the exit conference to be included in the report submitted to HUD. (4) In the event that HUD is unable to produce a list of independent assessors on a timely basis, the PHA may submit its own demonstration of a successful conversion to asset management directly to HUD for determination of compliance. (5) The Assistant Secretary for Public and Indian Housing (or designee) shall consider all information submitted and respond with a final determination of compliance within 60 days of the independent assessor's report being submitted to HUD. [70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005, as amended at 72 FR 45874, Aug. 15, 2007] Sec. 990.235 PHAs that will experience a subsidy increase. (a) For PHAs that will experience a gain in their operating subsidy, as determined in Sec. 990.225, such increases will have a limit of 50 percent of the difference between the two funding levels in the first year following implementation of the formula contained in this part. (b) The full amount of the increase in the operating subsidy level shall be realized in the second year following implementation of the formula contained in this part. (c) For example, a PHA's subsidy increased from $900,000 under the formula in effect prior to implementation of the formula contained in this part to $1 million under the formula contained in this part using FY 2004 data. The difference would be calculated at $100,000 ($1 million-$900,000 = $100,000). In the first year, the subsidy increase would be limited to $50,000 (50 percent of the difference). Thus, in this example the PHA will receive the operating subsidy amount of this rule minus a transition-funding amount of $50,000 (the $100,000 difference between the two subsidy amounts minus the $50,000 transition amount). (d) The schedule for a PHA whose subsidy would be increased is reflected in the table below. ------------------------------------------------------------------------ Funding period Increase limited to ------------------------------------------------------------------------ Year 1........................ 50 percent of the difference. Year 2........................ Full increase reached. ------------------------------------------------------------------------ [70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005] Subpart G_Appeals Sec. 990.240 General. (a) PHAs will be provided opportunities for appeals. HUD will provide up to [[Page 673]] a two percent hold-back of the Operating Fund appropriation for FY 2006 and FY 2007. HUD will use the hold-back amount to fund appeals that are filed during each of these fiscal years. Hold-back funds not utilized will be added back to the formula within each of the affected fiscal years. (b) Appeals are voluntary and must cover an entire portfolio, not single projects. However, the Assistant Secretary for Public and Indian Housing (or designee) has the discretion to accept appeals of less than an entire portfolio for PHAs with greater than 5,000 public housing units. Sec. 990.245 Types of appeals. (a) Streamlined appeal. This appeal would demonstrate that the application of a specific Operating Fund formula component has a blatant and objective flaw. (b) Appeal of formula income for economic hardship. After a PHA's formula income has been frozen, the PHA can appeal to have its formula income adjusted to reflect a severe local economic hardship that is impacting the PHA's ability to maintain rental and other revenue. (c) Appeal for specific local conditions. This appeal would be based on demonstrations that the model's predictions are not reliable because of specific local conditions. To be eligible, the affected PHA must demonstrate a variance of ten percent or greater in its PEL. (d) Appeal for changing market conditions. A PHA may appeal to receive operating subsidy for vacant units due to changing market conditions, after a PHA has taken aggressive marketing and outreach measures to rent these units. For example, a PHA could appeal if it is located in an area experiencing population loss or economic dislocations that faces a lack of demand for housing in the foreseeable future. (e) Appeal to substitute actual project cost data. A PHA may appeal its PEL if it can produce actual project cost data derived from actual asset management, as outlined in subpart H of this part, for a period of at least two years. Sec. 990.250 Requirements for certain appeals. (a) Appeals under Sec. 990.245 (a) and (c) must be submitted once annually. Appeals under Sec. 990.245 (a) and (c) must be submitted for new projects entering a PHA's inventory within one year of the applicable Date of Full Availability (DOFA). (b) Appeals under Sec. 990.245 (c) and (e) are subject to the following requirements: (1) The PHA is required to acquire an independent cost assessment of its projects; (2) The cost of services for the independent cost assessment is to be paid by the appellant PHA; (3) The assessment is to be reviewed by a professional familiar with property management practices and costs in the region or state in which the appealing PHA is located. This professional is to be procured by HUD. The professional review and recommendation will then be forwarded to the Assistant Secretary for Public and Indian Housing (or designee) for final determination; and (4) If the appeal is granted, the PHA agrees to be bound to the independent cost assessment regardless of new funding levels. Subpart H_Asset Management Sec. 990.255 Overview. (a) PHAs shall manage their properties according to an asset management model, consistent with the management norms in the broader multi-family management industry. PHAs shall also implement project- based management, project-based budgeting, and project-based accounting, which are essential components of asset management. The goals of asset management are to: (1) Improve the operational efficiency and effectiveness of managing public housing assets; (2) Better preserve and protect each asset; (3) Provide appropriate mechanisms for monitoring performance at the property level; and (4) Facilitate future investment and reinvestment in public housing by public and private sector entities. [[Page 674]] (b) HUD recognizes that appropriate changes in its regulatory and monitoring programs may be needed to support PHAs to undertake the goals identified in paragraph (a) of this section. Sec. 990.260 Applicability. (a) PHAs that own and operate 250 or more dwelling rental units under title I of the 1937 Act, including units managed by a third-party entity (for example, a resident management corporation) but excluding section 8 units, are required to operate using an asset management model consistent with this subpart. (b) PHAs that own and operate fewer than 250 dwelling rental units may treat their entire portfolio as a single project. However, if a PHA selects this option, it will not receive the add-on for the asset management fee described in Sec. 990.190(f). Sec. 990.265 Identification of projects. For purposes of this subpart, project means a public housing building or set of buildings grouped for the purpose of management. A project may be as identified under the ACC or may be a reasonable grouping of projects or portions of a project under the ACC. HUD shall retain the right to disapprove of a PHA's designation of a project. PHAs may group up to 250 scattered-site dwelling rental units into a single project. Sec. 990.270 Asset management. As owners, PHAs have asset management responsibilities that are above and beyond property management activities. These responsibilities include decision-making on topics such as long-term capital planning and allocation, the setting of ceiling or flat rents, review of financial information and physical stock, property management performance, long- term viability of properties, property repositioning and replacement strategies, risk management responsibilities pertaining to regulatory compliance, and those decisions otherwise consistent with the PHA's ACC responsibilities, as appropriate. Sec. 990.275 Project-based management (PBM). PBM is the provision of property-based management services that is tailored to the unique needs of each property, given the resources available to that property. These property management services include, but are not limited to, marketing, leasing, resident services, routine and preventive maintenance, lease enforcement, protective services, and other tasks associated with the day-to-day operation of rental housing at the project level. Under PBM, these property management services are arranged, coordinated, or overseen by management personnel who have been assigned responsibility for the day-to-day operation of that property and who are charged with direct oversight of operations of that property. Property management services may be arranged or provided centrally; however, in those cases in which property management services are arranged or provided centrally, the arrangement or provision of these services must be done in the best interests of the property, considering such factors as cost and responsiveness. Sec. 990.280 Project-based budgeting and accounting. (a) All PHAs covered by this subpart shall develop and maintain a system of budgeting and accounting for each project in a manner that allows for analysis of the actual revenues and expenses associated with each property. Project-based budgeting and accounting will be applied to all programs and revenue sources that support projects under an ACC (e.g., the Operating Fund, the Capital Fund, etc.). (b)(1) Financial information to be budgeted and accounted for at a project level shall include all data needed to complete project-based financial statements in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP), including revenues, expenses, assets, liabilities, and equity data. The PHA shall also maintain all records to support those financial transactions. At the time of conversion to project-based accounting, a PHA shall apportion its [[Page 675]] assets, liabilities, and equity to its respective projects and HUD- accepted central office cost centers. (2) Provided that the PHA complies with GAAP and other associated laws and regulations pertaining to financial management (e.g., 2 CFR part 200it shall have the maximum amount of responsibility and flexibility in implementing project-based accounting. (3) Project-specific operating income shall include, but is not limited to, such items as project-specific operating subsidy, dwelling and non-dwelling rental income, excess utilities income, and other PHA or HUD-identified income that is project-specific for management purposes. (4) Project-specific operating expenses shall include, but are not limited to, direct administrative costs, utilities costs, maintenance costs, tenant services, protective services, general expenses, non- routine or capital expenses, and other PHA or HUD-identified costs which are project-specific for management purposes. Project-specific operating costs also shall include a property management fee charged to each project that is used to fund operations of the central office. Amounts that can be charged to each project for the property management fee must be reasonable. If the PHA contracts with a private management company to manage a project, the PHA may use the difference between the property management fee paid to the private management company and the fee that is reasonable to fund operations of the central office and other eligible purposes. (5) If the project has excess cash flow available after meeting all reasonable operating needs of the property, the PHA may use this excess cash flow for the following purposes: (i) Fungibility between projects as provided for in Sec. 990.205. (ii) Charging each project a reasonable asset management fee that may also be used to fund operations of the central office. However, this asset management fee may be charged only if the PHA performs all asset management activities described in this subpart (including project-based management, budgeting, and accounting). Asset management fees are considered a direct expense. (iii) Other eligible purposes. (c) In addition to project-specific records, PHAs may establish central office cost centers to account for non-project specific costs (e.g., human resources, Executive Director's office, etc.). These costs shall be funded from the property-management fees received from each property, and from the asset management fees to the extent these are available. (d) In the case where a PHA chooses to centralize functions that directly support a project (e.g., central maintenance), it must charge each project using a fee-for-service approach. Each project shall be charged for the actual services received and only to the extent that such amounts are reasonable. [70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015] Sec. 990.285 Records and reports. (a) Each PHA shall maintain project-based budgets and fiscal year- end financial statements prepared in accordance with GAAP and shall make these budgets and financial statements available for review upon request by interested members of the public. (b) Each PHA shall distribute the project-based budgets and year-end financial statements to the Chairman and to each member of the PHA Board of Commissioners, and to such other state and local public officials as HUD may specify. (c) Some or all of the project-based budgets and financial statements and information shall be required to be submitted to HUD in a manner and time prescribed by HUD. Sec. 990.290 Compliance with asset management requirements. (a) A PHA is considered in compliance with asset management requirements if it can demonstrate substantially, as described in paragraph (b) of this section, that it is managing according to this subpart. (b) Demonstration of compliance with asset management will be based on an independent assessment. (1) The assessment is to be conducted by a professional familiar with property management practices and costs [[Page 676]] in the region or state in which the PHA is located. This professional is to be procured by HUD. (2) The professional review and recommendation will then be forwarded to the Assistant Secretary for Public and Indian Housing (or designee) for final determination of compliance to asset management. (c) Upon HUD's determination of successful compliance with asset management, PHAs will then be funded based on this information pursuant to Sec. 990.165(i). (d) PHAs must be in compliance with the project-based accounting and budgeting requirements in this subpart by FY 2007. PHAs must be in compliance with the remainder of the components of asset management by FY 2011. Subpart I_Operating Subsidy for Properties Managed by Resident Management Corporations (RMCs) Sec. 990.295 Resident Management Corporation operating subsidy. (a) General. This part applies to all projects managed by a Resident Management Corporation (RMC), including a direct funded RMC. (b) Operating subsidy. Subject to paragraphs (c) and (d) of this section, the amount of operating subsidy that a PHA or HUD provides a project managed by an RMC shall not be reduced during the three-year period beginning on the date the RMC first assumes management responsibility for the project. (c) Change factors. The operating subsidy for an RMC-managed project shall reflect changes in inflation, utility rates, and consumption, as well as changes in the number of units in the resident managed project. (d) Exclusion of increased income. Any increased income directly generated by activities by the RMC or facilities operated by the RMC shall be excluded from the calculation of the operating subsidy. (e) Exclusion of technical assistance. Any technical assistance the PHA provides to the RMC will not be included for purposes of determining the amount of funds provided to a project under paragraph (b) of this section. (f) The following conditions may not affect the amounts to be provided under this part to a project managed by an RMC: (1) Income reduction. Any reduction in the subsidy or total income of a PHA that occurs as a result of fraud, waste, or mismanagement by the PHA; and (2) Change in total income. Any change in the total income of a PHA that occurs as a result of project-specific characteristics when these characteristics are not shared by the project managed by the RMC. (g) Other project income. In addition to the operating subsidy calculated in accordance with this part and the amount of income derived from the project (from sources such as rents and charges), the management contract between the PHA and the RMC may specify that income be provided to the project from other legally available sources of PHA income. Sec. 990.300 Preparation of operating budget. (a) The RMC and the PHA must submit operating budgets and calculations of operating subsidy to HUD for approval in accordance with Sec. 990.200. The budget will reflect all project expenditures and will identify the expenditures related to the responsibilities of the RMC and the expenditures that are related to the functions that the PHA will continue to perform. (b) For each project or part of a project that is operating in accordance with the ACC amendment relating to this subpart and in accordance with a contract vesting maintenance responsibilities in the RMC, the PHA will transfer into a sub-account of the operating reserve of the PHA an operating reserve for the RMC project. When all maintenance responsibilities for a resident-managed project are the responsibility of the RMC, the amount of the reserve made available to a project under this subpart will be the per-unit cost amount available to the PHA operating reserve, excluding all inventories, prepaids, and receivables at the end of the PHA fiscal year preceding implementation, multiplied by the number of units in the project operated. When some, but not all, maintenance responsibilities are vested in the [[Page 677]] RMC, the management contract between the PHA and RMC may provide for an appropriately reduced portion of the operating reserve to be transferred into the RMC's sub-account. (c) The RMC's use of the operating reserve is subject to all administrative procedures applicable to the conventionally owned public housing program. Any expenditure of funds from the reserve must be for eligible expenditures that are incorporated into an operating budget subject to approval by HUD. (d) Investment of funds held in the reserve will be in accordance with HUD regulations and guidance. Sec. 990.305 Retention of excess revenues. (a) Any income generated by an RMC that exceeds the income estimated for the income categories specified in the RMC's management contract must be excluded in subsequent years in calculating: (1) The operating subsidy provided to a PHA under this part; and (2) The funds the PHA provides to the RMC. (b) The RMC's management contract must specify the amount of income that is expected to be derived from the project (from sources such as rents and charges) and the amount of income to be provided to the project from the other sources of income of the PHA (such as operating subsidy under this part, interest income, administrative fees, and rents). These income estimates must be calculated consistent with HUD's administrative instructions. Income estimates may provide for adjustment of anticipated project income between the RMC and the PHA, based upon the management and other project-associated responsibilities (if any) that are to be retained by the PHA under the management contract. (c) Any revenues retained by an RMC under this section may be used only for purposes of improving the maintenance and operation of the project, establishing business enterprises that employ residents of public housing, or acquiring additional dwelling units for lower income families. Units acquired by the RMC will not be eligible for payment of operating subsidy. Subpart J_Financial Management Systems, Monitoring, and Reporting Sec. 990.310 Purpose--General policy on financial management, monitoring and reporting. All PHA financial management systems, reporting, and monitoring of program performance and financial reporting shall be in compliance with the requirements of 2 CFR part 200. Certain HUD requirements provide exceptions for additional specialized procedures that are determined by HUD to be necessary for the proper management of the program in accordance with the requirements of the 1937 Act and the ACC between each PHA and HUD. [70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015] Sec. 990.315 Submission and approval of operating budgets. (a) Required documentation: (1) Prior to the beginning of its fiscal year, a PHA shall prepare an operating budget in a manner prescribed by HUD. The PHA's Board of Commissioners shall review and approve the budget by resolution. Each fiscal year, the PHA shall submit to HUD, in a time and manner prescribed by HUD, the approved Board resolution. (2) HUD may direct the PHA to submit its complete operating budget with detailed supporting information and the Board resolution if the PHA has breached the ACC contract, or for other reasons, which, in HUD's determination, threaten the PHA's future serviceability, efficiency, economy, or stability. When the PHA no longer is operating in a manner that threatens the future serviceability, efficiency, economy, or stability of the housing it operates, HUD will notify the PHA that it no longer is required to submit a complete operating budget with detailed supporting information to HUD for review and approval. (b) If HUD finds that an operating budget is incomplete, inaccurate, includes illegal or ineligible expenditures, contains mathematical errors or errors in the application of accounting procedures, or is otherwise unacceptable, HUD may, at any time, require [[Page 678]] the PHA to submit additional or revised information regarding the budget or revised budget. Sec. 990.320 Audits. All PHAs that receive financial assistance under this part shall submit an acceptable audit and comply with the audit requirements in 2 CFR part 200, subpart F. [70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015] Sec. 990.325 Record retention requirements. The PHA shall retain all documents related to all financial management and activities funded under the Operating Fund for a period of five fiscal years after the fiscal year in which the funds were received. PART 1000_NATIVE AMERICAN HOUSING ACTIVITIES--Table of Contents Subpart A_General Sec. 1000.1 What is the applicability and scope of these regulations? 1000.2 What are the guiding principles in the implementation of NAHASDA? 1000.4 What are the objectives of NAHASDA? 1000.6 What is the nature of the IHBG program? 1000.8 May provisions of these regulations be waived? 1000.9 How is negotiated rulemaking conducted when promulgating NAHASDA regulations? 1000.10 What definitions apply in these regulations? 1000.12 What nondiscrimination requirements are applicable? 1000.14 What relocation and real property acquisition policies are applicable? 1000.16 What labor standards are applicable? 1000.18 What environmental review requirements apply? 1000.20 Is an Indian tribe required to assume environmental review responsibilities? 1000.21 Under what circumstances are waivers of the environmental review procedures available to tribes? 1000.22 Are the costs of the environmental review an eligible cost? 1000.24 If an Indian tribe assumes environmental review responsibility, how will HUD assist the Indian tribe in performing the environmental review? 1000.26 What are the administrative requirements under NAHASDA? 1000.28 May a self-governance Indian tribe be exempted from the applicability of Sec. 1000.26? 1000.30 What prohibitions regarding conflict of interest are applicable? 1000.32 May exceptions be made to the conflict of interest provisions? 1000.34 What factors must be considered in making an exception to the conflict of interest provisions? 1000.36 How long must a recipient retain records regarding exceptions made to the conflict of interest provisions? 1000.38 What flood insurance requirements are applicable? 1000.40 Do lead-based paint poisoning prevention requirements apply to affordable housing activities under NAHASDA? 1000.42 Are the requirements of Section 3 of the Housing and Urban Development Act of 1968 applicable? 1000.44 What prohibitions on the use of debarred, suspended, or ineligible contractors apply? 1000.46 Do drug-free workplace requirements apply? 1000.48 Are Indian or tribal preference requirements applicable to IHBG activities? 1000.50 What tribal or Indian preference requirements apply to IHBG administration activities? 1000.52 What tribal or Indian preference requirements apply to IHBG procurement? 1000.54 What procedures apply to complaints arising out of any of the methods of providing for Indian preference? 1000.56 How are NAHASDA funds paid by HUD to recipients? 1000.58 Are there limitations on the investment of IHBG funds? 1000.60 Can HUD prevent improper expenditure of funds already disbursed to a recipient? 1000.62 What is considered program income? 1000.64 What are the permissible uses of program income? Subpart B_Affordable Housing Activities 1000.101 What is affordable housing? 1000.102 What are eligible affordable housing activities? 1000.103 How may IHBG funds be used for tenant-based or project-based rental assistance? 1000.104 What families are eligible for affordable housing activities? 1000.106 What families receiving assistance under title II of NAHASDA require HUD approval? 1000.108 How is HUD approval obtained by a recipient for housing for non-low-income families and model activities? 1000.110 Under what conditions may non-low-income Indian families participate in the program? [[Page 679]] 1000.112 How will HUD determine whether to approve model housing activities? 1000.114 How long does HUD have to review and act on a proposal to provide assistance to non-low-income families or a model housing activity? 1000.116 What should HUD do before declining a proposal to provide assistance to non low-income families or a model housing activity? 1000.118 What recourse does a recipient have if HUD disapproves a proposal to provide assistance to non-low-income families or a model housing activity? 1000.120 May a recipient use Indian preference or tribal preference in selecting families for housing assistance? 1000.122 May NAHASDA grant funds be used as matching funds to obtain and leverage funding, including any Federal or state program and still be considered an affordable housing activity? 1000.124 What maximum and minimum rent or homebuyer payment can a recipient charge a low-income rental tenant or homebuyer residing in housing units assisted with NAHASDA grant amounts? 1000.126 May a recipient charge flat or income-adjusted rents? 1000.128 Is income verification required for assistance under NAHASDA? 1000.130 May a recipient charge a non low-income family rents or homebuyer payments which are more than 30 percent of the family's adjusted income? 1000.132 Are utilities considered a part of rent or homebuyer payments? 1000.134 When may a recipient (or entity funded by a recipient) demolish or dispose of current assisted stock? 1000.136 What insurance requirements apply to housing units assisted with NAHASDA grants? 1000.138 What constitutes adequate insurance? 1000.139 What are the standards for insurance entities owned and controlled by recipients? 1000.140 May a recipient use grant funds to purchase insurance for privately owned housing to protect NAHASDA grant amounts spent on that housing? 1000.141 What is ``useful life'' and how is it related to affordability? 1000.142 How does a recipient determine the ``useful life'' during which low-income rental housing and low-income homebuyer housing must remain affordable as required in sections 205(a)(2) and 209 of NAHASDA? 1000.143 How does a recipient implement its useful life requirements? 1000.144 What are binding commitments satisfactory to HUD? 1000.145 Are Mutual Help homes developed under the 1937 Act subject to the useful life provisions of section 205(a)(2)? 1000.146 Are binding commitments for the remaining useful life of property applicable to a family member or household member who subsequently takes ownership of a homeownership unit? 1000.147 When does housing qualify as affordable housing under NAHASDA? 1000.150 How may Indian tribes and TDHEs receive criminal conviction information on applicants for employment and on adult applicants for housing assistance, or tenants? 1000.152 How is the recipient to use criminal conviction information? 1000.154 How is the recipient to keep criminal conviction information confidential? 1000.156 Is affordable housing developed, acquired, or assisted under the IHBG program subject to limitations on cost or design standards? 1000.158 How will a NAHASDA grant recipient know that the housing assisted under the IHBG program meets the requirements of Sec. 1000.156? 1000.160 Are non-dwelling structures developed, acquired or assisted under the IHBG program subject to limitations on cost or design standards? 1000.162 How will a recipient know that non-dwelling structures assisted under the IHBG program meet the requirements of 1000.160? Subpart C_Indian Housing Plan (IHP) 1000.201 How are funds made available under NAHASDA? 1000.202 Who are eligible recipients? 1000.204 How does an Indian tribe designate itself as recipient of the grant? 1000.206 How is a TDHE designated? 1000.208 What happens if an Indian tribe had two IHAs as of September 30, 1996? 1000.210 What happens to existing 1937 Act units in those jurisdictions for which Indian tribes do not or cannot submit an IHP? 1000.212 Is submission of an IHP required? 1000.214 What is the deadline for submission of an IHP? 1000.216 What happens if the recipient does not submit the IHP to the Area ONAP by no later than 75 days before the beginning of the tribal program year? 1000.218 Who prepares and submits an IHP? 1000.220 What are the requirements for the IHP? 1000.222 Are there separate IHP requirements for small Indian tribes and small TDHEs? 1000.224 Can any part of the IHP be waived? 1000.225 When may a waiver of the IHP submission deadline be requested? 1000.226 Can the certification requirements of section 102(c)(5) of NAHASDA be waived by HUD? [[Page 680]] 1000.227 What shall HUD do upon receipt of an IHP submission deadline waiver request? 1000.228 If HUD changes its IHP format will Indian tribes be involved? 1000.230 What is the process for HUD review of IHPs and IHP amendments? 1000.232 Can an Indian tribe or TDHE amend its IHP? 1000.234 Can HUD's determination regarding the non-compliance of an IHP or a modification to an IHP be appealed? 1000.236 What are eligible administrative and planning expenses? 1000.238 What percentage of the IHBG funds can be used for administrative and planning expenses? 1000.239 May a recipient establish and maintain reserve accounts for administration and planning? 1000.240 When is a local cooperation agreement required for affordable housing activities? 1000.242 When does the requirement for exemption from taxation apply to affordable housing activities? 1000.244 If the recipient has made a good-faith effort to negotiate a cooperation agreement and tax-exempt status but has been unsuccessful through no fault of its own, may the Secretary waive the requirement for a cooperation agreement and a tax exemption? 1000.246 How must HUD respond to a request for waiver of the requirement for a cooperation agreement and a tax exemption? Subpart D_Allocation Formula 1000.301 What is the purpose of the IHBG formula? 1000.302 What are the definitions applicable for the IHBG formula? 1000.304 May the IHBG formula be modified? 1000.306 How can the IHBG formula be modified? 1000.308 Who can make modifications to the IHBG formula? 1000.310 What are the components of the IHBG formula? 1000.312 What is current assisted stock? 1000.314 What is formula current assisted stock? 1000.315 Is a recipient required to report changes to the Formula Current Assisted Stock (FCAS) on the Formula Response Form? 1000.316 How is the Formula Current Assisted Stock (FCAS) Component developed? 1000.317 Who is the recipient for funds for current assisted stock which is owned by state-created Regional Native Housing Authorities in Alaska? 1000.318 When do units under Formula Current Assisted Stock cease to be counted or expire from the inventory used for the formula? 1000.319 What would happen if a recipient misreports or fails to correct Formula Current Assisted Stock (FCAS) information on the Formula Response Form? 1000.320 How is Formula Current Assisted Stock adjusted for local area costs? 1000.322 Are IHA financed units included in the determination of Formula Current Assisted Stock? 1000.324 How is the need component developed? 1000.325 How is the need component adjusted for local area costs? 1000.326 What if a formula area is served by more than one Indian tribe? 1000.327 What is the order of preference for allocating the IHBG formula needs data for Indian tribes in Alaska not located on reservations due to the unique circumstances in Alaska? 1000.328 What is the minimum amount that an Indian tribe may receive under the need component of the formula? 1000.329 What is the minimum total grant allocated to a tribe if there is carryover funds available? 1000.330 What are the data sources for the need variables? 1000.331 How will the impacts from adoption of a new data source be minimized as the new data source is implemented? 1000.332 Will data used by HUD to determine an Indian tribe's or TDHE's formula allocation be provided to the Indian tribe or TDHE before the allocation? 1000.334 May Indian tribes, TDHEs, or HUD challenge the data from the U.S. Decennial Census or provide an alternative source of data? 1000.336 How may an Indian tribe, TDHE, or HUD challenge data or appeal HUD formula determinations? 1000.340 What if an Indian tribe is allocated less funding under the IHBG Formula than it received in Fiscal Year (FY) 1996 for operating subsidy and modernization? 1000.342 Are undisbursed IHBG funds a factor in the grant formula? Subpart E_Federal Guarantees for Financing of Tribal Housing Activities 1000.401 What terms are used throughout this subpart? 1000.402 Are State recognized Indian tribes eligible for guarantees under title VI of NAHASDA? 1000.404 What lenders are eligible for participation? 1000.406 What constitutes tribal approval to issue notes or other obligations under title VI of NAHASDA? 1000.410 What conditions shall HUD prescribe when providing a guarantee for [[Page 681]] notes or other obligations issued by an Indian tribe? 1000.412 Can an issuer obtain a guarantee for more than one note or other obligation at a time? 1000.414 How is an issuer's financial capacity demonstrated? 1000.416 What is a repayment contract in a form acceptable to HUD? 1000.418 Can grant funds be used to pay costs incurred when issuing notes or other obligations? 1000.420 May grants made by HUD under section 603 of NAHASDA be used to pay net interest costs incurred when issuing notes or other obligations? 1000.422 What are the procedures for applying for loan guarantees under title VI of NAHASDA? 1000.424 What are the application requirements for guarantee assistance under title VI of NAHASDA? 1000.426 How does HUD review a guarantee application? 1000.428 For what reasons may HUD disapprove an application or approve an application for an amount less than that requested? 1000.430 When will HUD issue notice to the applicant if the application is approved at the requested or reduced amount? 1000.432 Can an amendment to an approved guarantee be made? 1000.434 How will HUD allocate the availability of loan guarantee assistance? 1000.436 How will HUD monitor the use of funds guaranteed under this subpart? Subpart F_Recipient Monitoring, Oversight and Accountability 1000.501 Who is involved in monitoring activities under NAHASDA? 1000.502 What are the monitoring responsibilities of the recipient, the grant beneficiary and HUD under NAHASDA? 1000.503 What is an appropriate extent of HUD monitoring? 1000.506 If the TDHE is the recipient, must it submit its monitoring evaluation/results to the Indian tribe? 1000.508 If the recipient monitoring identifies programmatic concerns, what happens? 1000.510 What happens if tribal monitoring identifies compliance concerns? 1000.512 Are performance reports required? 1000.514 When must the annual performance report be submitted? 1000.516 What reporting period is covered by the annual performance report? 1000.518 When must a recipient obtain public comment on its annual performance report? 1000.520 What are the purposes of HUD's review of the Annual Performance Report? 1000.521 After the receipt of the recipient's performance report, how long does HUD have to make recommendations under section 404(c) of NAHASDA? 1000.522 How will HUD give notice of on-site reviews? 1000.524 What are HUD's performance measures for the review? 1000.526 What information will HUD use for its review? 1000.528 What are the procedures for the recipient to comment on the result of HUD's review when HUD issues a report under section 405(b) of NAHASDA? 1000.530 What corrective and remedial actions will HUD request or recommend to address performance problems prior to taking action under Sec. 1000.532? 1000.532 What are the remedial actions that HUD may take in the event of recipient's substantial noncompliance? 1000.534 What constitutes substantial noncompliance? 1000.536 What happens to NAHASDA grant funds adjusted, reduced, withdrawn, or terminated under Sec. 1000.532? 1000.540 What hearing procedures will be used under NAHASDA? 1000.542 When may HUD require replacement of a recipient? 1000.544 What audits are required? 1000.546 Are audit costs eligible program or administrative expenses? 1000.548 Must a copy of the recipient's audit pursuant to the Single Audit Act relating to NAHASDA activities be submitted to HUD? 1000.550 If the TDHE is the recipient, does it have to submit a copy of its audit to the Indian tribe? 1000.552 How long must the recipient maintain program records? 1000.554 Which agencies have right of access to the recipient's records relating to activities carried out under NAHASDA? 1000.556 Does the Freedom of Information Act (FOIA) apply to recipient records? 1000.558 Does the Federal Privacy Act apply to recipient records? Appendix A to Part 1000--Indian Housing Block Grant Formula Mechanics Appendix B to Part 1000--IHBG Block Grant Formula Mechanisms Authority: 25 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d). Source: 63 FR 12349, Mar. 12, 1998, unless otherwise noted. Subpart A_General Sec. 1000.1 What is the applicability and scope of these regulations? Under the Native American Housing Assistance and Self-Determination Act [[Page 682]] of 1996 (25 U.S.C. 4101 et seq.) (NAHASDA) the Department of Housing and Urban Development (HUD) provides grants, loan guarantees, and technical assistance to Indian tribes and Alaska Native villages for the development and operation of low-income housing in Indian areas. The policies and procedures described in this part apply to grants to eligible recipients under the Indian Housing Block Grant (IHBG) program for Indian tribes and Alaska Native villages. This part also applies to loan guarantee assistance under title VI of NAHASDA. The regulations in this part supplement the statutory requirements set forth in NAHASDA. This part, as much as practicable, does not repeat statutory language. Sec. 1000.2 What are the guiding principles in the implementation of NAHASDA? (a) The Secretary shall use the following Congressional findings set forth in section 2 of NAHASDA as the guiding principles in the implementation of NAHASDA: (1) The Federal government has a responsibility to promote the general welfare of the Nation: (i) By using Federal resources to aid families and individuals seeking affordable homes in safe and healthy environments and, in particular, assisting responsible, deserving citizens who cannot provide fully for themselves because of temporary circumstances or factors beyond their control; (ii) By working to ensure a thriving national economy and a strong private housing market; and (iii) By developing effective partnerships among the Federal government, state, tribal, and local governments, and private entities that allow government to accept responsibility for fostering the development of a healthy marketplace and allow families to prosper without government involvement in their day-to-day activities. (2) There exists a unique relationship between the Government of the United States and the governments of Indian tribes and a unique Federal responsibility to Indian people. (3) The Constitution of the United States invests the Congress with plenary power over the field of Indian affairs, and through treaties, statutes, and historical relations with Indian tribes, the United States has undertaken a unique trust responsibility to protect and support Indian tribes and Indian people. (4) The Congress, through treaties, statutes, and the general course of dealing with Indian tribes, has assumed a trust responsibility for the protection and preservation of Indian tribes and for working with Indian tribes and their members to improve their housing conditions and socioeconomic status so that they are able to take greater responsibility for their own economic condition. (5) Providing affordable homes in safe and healthy environments is an essential element in the special role of the United States in helping Indian tribes and their members to improve their housing conditions and socioeconomic status. (6) The need for affordable homes in safe and healthy environments on Indian reservations, in Indian communities, and in Native Alaskan villages is acute and the federal government shall work not only to provide housing assistance, but also, to the extent practicable, to assist in the development of private housing finance mechanisms on Indian lands to achieve the goals of economic self-sufficiency and self- determination for Indian tribes and their members. (7) Federal assistance to meet these responsibilities shall be provided in a manner that recognizes the right of Indian self- determination and tribal self-governance by making such assistance available directly to the Indian tribes or tribally designated entities under authorities similar to those accorded Indian tribes in Public Law 93-638 (25 U.S.C. 450 et seq.). (b) Nothing in this section shall be construed as releasing the United States government from any responsibility arising under its trust responsibilities towards Indians or any treaty or treaties with an Indian tribe or nation. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71521, Dec. 3, 2012] [[Page 683]] Sec. 1000.4 What are the objectives of NAHASDA? The primary objectives of NAHASDA are: (a) To assist and promote affordable housing activities to develop, maintain and operate affordable housing in safe and healthy environments on Indian reservations and in other Indian areas for occupancy by low- income Indian families; (b) To ensure better access to private mortgage markets for Indian tribes and their members and to promote self-sufficiency of Indian tribes and their members; (c) To coordinate activities to provide housing for Indian tribes and their members and to promote self-sufficiency of Indian tribes and their members; (d) To plan for and integrate infrastructure resources for Indian tribes with housing development for Indian tribes; and (e) To promote the development of private capital markets in Indian country and to allow such markets to operate and grow, thereby benefiting Indian communities. Sec. 1000.6 What is the nature of the IHBG program? The IHBG program is formula driven whereby eligible recipients of funding receive an equitable share of appropriations made by the Congress, based upon formula components specified under subpart D of this part. IHBG recipients must have the administrative capacity to undertake the affordable housing activities proposed, including the systems of internal control necessary to administer these activities effectively without fraud, waste, or mismanagement. Sec. 1000.8 May provisions of these regulations be waived? Yes. Upon determination of good cause, the Secretary may, subject to statutory limitations, waive any provision of this part and delegate this authority in accordance with section 106 of the Department of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3535(q)). Sec. 1000.9 How is negotiated rulemaking conducted when promulgating NAHASDA regulations? The negotiated rulemaking procedures and requirements set out in section 106(b) of NAHASDA shall be conducted as follows: (a) Committee membership. In forming a negotiated rulemaking committee, HUD shall appoint as committee members representatives of the Federal Government and representatives of diverse tribes and program recipients. (b) Initiation of rulemaking. HUD shall initiate a negotiated rulemaking not later than 90 days after the enactment of any act to reauthorize or significantly amend NAHASDA. (c) Work groups. Negotiated rulemaking committees may form workgroups made up of committee members and other interested parties to meet during committee sessions and between sessions to develop specific rulemaking proposals for committee consideration. (d) Further review. Negotiated rulemaking committees shall provide recommended rules to HUD. Once rules are proposed by HUD, they shall be published for comment in the Federal Register. Any comments will be further reviewed by the committee and HUD before HUD determines if the rule or rules will be adopted. [77 FR 71521, Dec. 3, 2012] Sec. 1000.10 What definitions apply in these regulations? Except as noted in a particular subpart, the following definitions apply in this part: (a) The terms ``Adjusted income,'' ``Affordable housing,'' ``Drug- related criminal activity,'' ``Elderly families and near-elderly families,'' ``Elderly person,'' ``Grant beneficiary,'' ``Indian,'' ``Indian housing plan (IHP),'' ``Indian tribe,'' ``Low-income family,'' ``Near-elderly persons,'' ``Nonprofit,'' ``Recipient,'' Secretary,'' ``State,'' and ``Tribally designated housing entity (TDHE)'' are defined in section 4 of NAHASDA. (b) In addition to the definitions set forth in paragraph (a) of this section, the following definitions apply to this part: [[Page 684]] Affordable housing activities are those activities identified in section 202 of NAHASDA. Annual Contributions Contract (ACC) means a contract under the 1937 Act between HUD and an IHA containing the terms and conditions under which HUD assists the IHA in providing decent, safe, and sanitary housing for low-income families. Annual income has one of the following meanings, as determined by the Indian tribe: (1) ``Annual income'' as defined for HUD's Section 8 programs in 24 CFR part 5, subpart F (except when determining the income of a homebuyer for an owner-occupied rehabilitation project, the value of the homeowner's principal residence may be excluded from the calculation of Net Family assets); or (2) Annual income as reported under the Census long-form for the most recent available decennial Census. This definition includes: (i) Wages, salaries, tips, commissions, etc.; (ii) Self-employment income; (iii) Farm self-employment income; (iv) Interest, dividends, net rental income, or income from estates or trusts; (v) Social security or railroad retirement; (vi) Supplemental Security Income, Aid to Families with Dependent Children, or other public assistance or public welfare programs; (vii) Retirement, survivor, or disability pensions; and (viii) Any other sources of income received regularly, including Veterans' (VA) payments, unemployment compensation, and alimony; or (3) Adjusted gross income as defined for purposes of reporting under Internal Revenue Service (IRS) Form 1040 series for individual Federal annual income tax purposes. Assistant Secretary means the Assistant Secretary for Public and Indian Housing. Department or HUD means the Department of Housing and Urban Development. Family includes, but is not limited to, a family with or without children, an elderly family, a near-elderly family, a disabled family, a single person, as determined by the Indian tribe. Homebuyer payment means the payment of a family purchasing a home pursuant to a lease purchase agreement. Homeless family means a family who is without safe, sanitary and affordable housing even though it may have temporary shelter provided by the community, or a family who is homeless as determined by the Indian tribe. Housing related activities, for purposes of program income, means any facility, community building, infrastructure, business, program, or activity, including any community development or economic development activity, that: (1) Is determined by the recipient to be beneficial to the provision of housing in an Indian area; and (2) Would meet at least one of the following conditions: (i) Would help an Indian tribe or its tribally designated housing entity to reduce the cost of construction of Indian housing; (ii) Would make housing more affordable, energy efficient, accessible, or practicable in an Indian area; (iii) Would otherwise advance the purposes of NAHASDA. Housing related community development: (1) Means any facility, community building, business, activity, or infrastructure that: (i) Is owned by an Indian tribe or a tribally designated housing entity; (ii) Is necessary to the provision of housing in an Indian area; and (iii)(A) Would help an Indian tribe or tribally designated housing entity reduce the cost of construction of Indian housing; (B) Would make housing more affordable, energy efficient, accessible, or practicable in an Indian area; or (C) Would otherwise advance the purposes of NAHASDA. (2) Does not include any activity conducted by any Indian tribe under the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.) IHBG means Indian Housing Block Grant. Income means annual income as defined in this subpart. [[Page 685]] Indian area means the area within which an Indian tribe operates affordable housing programs or the area in which a TDHE, as authorized by one or more Indian tribes, operates affordable housing programs. Whenever the term ``jurisdiction'' is used in NAHASDA, it shall mean ``Indian Area,'' except where specific reference is made to the jurisdiction of a court. Indian Housing Authority (IHA) means an entity that: (1) Is authorized to engage or assist in the development or operation of low-income housing for Indians under the 1937 Act; and (2) Is established: (i) By exercise of the power of self government of an Indian tribe independent of state law; or (ii) By operation of state law providing specifically for housing authorities for Indians, including regional housing authorities in the State of Alaska. Median income for an Indian area is the greater of: (1) The median income for the counties, previous counties, or their equivalent in which the Indian area is located; or (2) The median income for the United States. NAHASDA means the Native American Housing Assistance and Self- Determination Act of 1996 (25 U.S.C. 4101 et seq.). 1937 Act means the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.). Office of Native American Programs (ONAP) means the office of HUD which has been delegated authority to administer programs under this part. An ``Area ONAP'' is an ONAP field office. Outcomes are the intended results or consequences important to program beneficiaries, the IHBG recipient, and the tribe generally from carrying out the housing or housing-related activity as determined by the tribe (and/or its TDHE). Person with Disabilities means a person who-- (1) Has a disability as defined in section 223 of the Social Security Act; (2) Has a developmental disability as defined in section 102 of the Developmental Disabilities Assistance and Bill of Rights Act; (3) Has a physical, mental, or emotional impairment which- (i) Is expected to be of long-continued and indefinite duration; (ii) Substantially impedes his or her ability to live independently; and (iii) Is of such a nature that such ability could be improved by more suitable housing conditions. (4) The term ``person with disabilities'' includes persons who have the disease of acquired immunodeficiency syndrome or any condition arising from the etiologic agent for acquired immunodeficiency syndrome. (5) Notwithstanding any other provision of law, no individual shall be considered a person with disabilities, for purposes of eligibility for housing assisted under this part, solely on the basis of any drug or alcohol dependence. The Secretary shall consult with Indian tribes and appropriate Federal agencies to implement this paragraph. (6) For purposes of this definition, the term ``physical, mental or emotional impairment'' includes, but is not limited to: (i) Any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the following body systems: Neurological, musculoskeletal, special sense organs, respiratory, including speech organs; cardiovascular; reproductive; digestive; genito-urinary; hemic and lymphatic; skin; and endocrine; or (ii) Any mental or psychological condition, such as mental retardation, organic brain syndrome, emotional or mental illness, and specific learning disabilities. (iii) The term ``physical, mental, or emotional impairment'' includes, but is not limited to, such diseases and conditions as orthopedic, visual, speech, and hearing impairments, cerebral palsy, autism, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, Human Immunodeficiency Virus infection, mental retardation, and emotional illness. Tribal program year means the fiscal year of the IHBG recipient. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71522, Dec. 3, 2012] [[Page 686]] Sec. 1000.12 What nondiscrimination requirements are applicable? (a) The requirements of the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and HUD's implementing regulations in 24 CFR part 146. (b) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and HUD's regulations at 24 CFR part 8 apply. (c) The Indian Civil Rights Act (Title II of the Civil Rights Act of 1968; 25 U.S.C. 1301-1303), applies to Federally recognized Indian tribes that exercise powers of self-government. (d) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and Title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601 et seq.) apply to Indian tribes that are not covered by the Indian Civil Rights Act. The Title VI and Title VIII requirements do not apply to actions under NAHASDA by federally recognized Indian tribes and their TDHEs. State-recognized Indian tribes and their TDHEs may provide preference for tribal members and other Indian families pursuant to NAHASDA sections 201(b) and 101(k) (relating to tribal preference in employment and contracting). (e) The equal access to HUD-assisted or -insured housing requirements in 24 CFR 5.105(a)(2). [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71522, Dec. 3, 2012; 81 FR 80993, Nov. 17, 2016] Sec. 1000.14 What relocation and real property acquisition policies are applicable? The following relocation and real property acquisition policies are applicable to programs developed or operated under NAHASDA: (a) Real Property acquisition requirements. The acquisition of real property for an assisted activity is subject to 49 CFR part 24, subpart B. Whenever the recipient does not have the authority to acquire the real property through condemnation, it shall: (1) Before discussing the purchase price, inform the owner: (i) Of the amount it believes to be the fair market value of the property. Such amount shall be based upon one or more appraisals prepared by a qualified appraiser. However, this provision does not prevent the recipient from accepting a donation or purchasing the real property at less than its fair market value. (ii) That it will be unable to acquire the property if negotiations fail to result in an amicable agreement. (2) Request HUD approval of the proposed acquisition price before executing a firm commitment to purchase the property if the proposed acquisition payment exceeds the fair market value. The recipient shall include with its request a copy of the appraisal(s) and a justification for the proposed acquisition payment. HUD will promptly review the proposal and inform the recipient of its approval or disapproval. (b) Minimize displacement. Consistent with the other goals and objectives of this part, recipients shall assure that they have taken all reasonable steps to minimize the displacement of persons (households, businesses, nonprofit organizations, and farms) as a result of a project assisted under this part. (c) Temporary relocation. The following policies cover residential tenants and homebuyers who will not be required to move permanently but who must relocate temporarily for the project. Such residential tenants and homebuyers shall be provided: (1) Reimbursement for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, including the cost of moving to and from the temporarily occupied housing and any increase in monthly housing costs (e.g., rent/utility costs). (2) Appropriate advisory services, including reasonable advance written notice of: (i) The date and approximate duration of the temporary relocation; (ii) The location of the suitable, decent, safe and sanitary dwelling to be made available for the temporary period; (iii) The terms and conditions under which the tenant may occupy a suitable, decent, safe, and sanitary dwelling in the building/complex following completion of the repairs; and (iv) The provisions of paragraph (c)(1) of this section. (d) Relocation assistance for displaced persons. A displaced person (defined in paragraph (g) of this section) must be provided relocation assistance at the [[Page 687]] levels described in, and in accordance with the requirements of, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4601-4655) and implementing regulations at 49 CFR part 24. (e) Appeals to the recipient. A person who disagrees with the recipient's determination concerning whether the person qualifies as a ``displaced person,'' or the amount of relocation assistance for which the person is eligible, may file a written appeal of that determination with the recipient. (f) Responsibility of recipient. (1) The recipient shall certify that it will comply with the URA, the regulations at 49 CFR part 24, and the requirements of this section. The recipient shall ensure such compliance notwithstanding any third party's contractual obligation to the recipient to comply with the provisions in this section. (2) The cost of required relocation assistance is an eligible project cost in the same manner and to the same extent as other project costs. However, such assistance may also be paid for with funds available to the recipient from any other source. (3) The recipient shall maintain records in sufficient detail to demonstrate compliance with this section. (g) Definition of displaced person. (1) For purposes of this section, the term ``displaced person'' means any person (household, business, nonprofit organization, or farm) that moves from real property, or moves his or her personal property from real property, permanently, as a direct result of rehabilitation, demolition, or acquisition for a project assisted under this part. The term ``displaced person'' includes, but is not limited to: (i) A tenant-occupant of a dwelling unit who moves from the building/complex permanently after the submission to HUD of an IHP that is later approved. (ii) Any person, including a person who moves before the date described in paragraph (g)(1)(i) of this section, that the recipient determines was displaced as a direct result of acquisition, rehabilitation, or demolition for the assisted project. (iii) A tenant-occupant of a dwelling unit who moves from the building/complex permanently after the execution of the agreement between the recipient and HUD, if the move occurs before the tenant is provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe and sanitary dwelling in the same building/complex, under reasonable terms and conditions, upon completion of the project. Such reasonable terms and conditions include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: (A) The tenant-occupant's monthly rent and estimated average monthly utility costs before the agreement; or (B) 30 percent of gross household income. (iv) A tenant-occupant of a dwelling who is required to relocate temporarily, but does not return to the building/complex, if either: (A) The tenant-occupant is not offered payment for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, including the cost of moving to and from the temporarily occupied unit, any increased housing costs and incidental expenses; or (B) Other conditions of the temporary relocation are not reasonable. (v) A tenant-occupant of a dwelling who moves from the building/ complex after he or she has been required to move to another dwelling unit in the same building/complex in order to carry out the project, if either: (A) The tenant-occupant is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move; or (B) Other conditions of the move are not reasonable. (2) Notwithstanding the provisions of paragraph (g)(1) of this section, a person does not qualify as a ``displaced person'' (and is not eligible for relocation assistance under the URA or this section), if: (i) The person moved into the property after the submission of the IHP to HUD, but, before signing a lease or commencing occupancy, was provided written notice of the project, its possible impact on the person (e.g., the person may be displaced, temporarily [[Page 688]] relocated or suffer a rent increase) and the fact that the person would not qualify as a ``displaced person'' or for any assistance provided under this section as a result of the project. (ii) The person is ineligible under 49 CFR 24.2(g)(2). (iii) The recipient determines the person is not displaced as a direct result of acquisition, rehabilitation, or demolition for an assisted project. To exclude a person on this basis, HUD must concur in that determination. (3) A recipient may at any time ask HUD to determine whether a specific displacement is or would be covered under this section. (h) Definition of initiation of negotiations. For purposes of determining the formula for computing the replacement housing assistance to be provided to a person displaced as a direct result of rehabilitation or demolition of the real property, the term ``initiation of negotiations'' means the execution of the agreement covering the rehabilitation or demolition (See 49 CFR part 24). Sec. 1000.16 What labor standards are applicable? (a) Davis-Bacon wage rates. (1) As described in section 104(b) of NAHASDA, contracts and agreements for assistance, sale, or lease under NAHASDA must require prevailing wage rates determined by the Secretary of Labor under the Davis-Bacon Act (40 U.S.C. 3141-44, 3146, and 3147) to be paid to laborers and mechanics employed in the development of affordable housing. (2) When NAHASDA assistance is only used to assist homebuyers to acquire single family housing, the Davis-Bacon wage rates apply to the construction of the housing if there is a written agreement with the owner or developer of the housing that NAHASDA assistance will be used to assist homebuyers to buy the housing. (3) Prime contracts not in excess of $2000 are exempt from Davis- Bacon wage rates. (b) HUD-determined wage rates. Section 104(b) also mandates that contracts and agreements for assistance, sale or lease under NAHASDA require that prevailing wages determined or adopted (subsequent to a determination under applicable state, tribal or local law) by HUD shall be paid to maintenance laborers and mechanics employed in the operation, and to architects, technical engineers, draftsmen and technicians employed in the development, of affordable housing. (c) Contract Work Hours and Safety Standards Act. Contracts in excess of $100,000 to which Davis-Bacon or HUD-determined wage rates apply are subject by law to the overtime provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. 3701). (d) Volunteers. The requirements in 24 CFR part 70 concerning exemptions for the use of volunteers on projects subject to Davis-Bacon and HUD-determined wage rates are applicable. (e) Paragraphs (a) through (d) of this section shall not apply to any contract or agreement for assistance, sale, or lease pursuant to NAHASDA, or to any contract for construction, development, operations, or maintenance thereunder, if such contract or agreement for assistance, sale, or lease is otherwise covered by one or more laws or regulations adopted by an Indian tribe that requires the payment of not less than prevailing wages, as determined by the Indian tribe. Paragraphs (a) through (d) of this section shall also not apply to work performed directly by tribal or TDHE employees under a contract or agreement for assistance, sale, or lease, that is covered by one or more such laws or regulations adopted by an Indian tribe. (f) Other laws and issuances. Recipients, contractors, subcontractors, and other participants must comply with regulations issued under the labor standards provisions cited in this section, other applicable Federal laws and regulations pertaining to labor standards, and HUD Handbook 1344.1 (Federal Labor Standards Compliance in Housing and Community Development Programs). [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71522, Dec. 3, 2012] Sec. 1000.18 What environmental review requirements apply? The environmental effects of each activity carried out with assistance under this part must be evaluated in accordance with the provisions of the National Environmental Policy Act of [[Page 689]] 1969 (NEPA) (42 U.S.C. 4321) and the related authorities listed in HUD's implementing regulations at 24 CFR parts 50 and 58. An environmental review does not have to be completed prior to HUD approval of an IHP. Sec. 1000.20 Is an Indian tribe required to assume environmental review responsibilities? (a) No. It is an option an Indian tribe may choose. If an Indian tribe declines to assume the environmental review responsibilities, HUD will perform the environmental review in accordance with 24 CFR part 50. The timing of HUD undertaking the environmental review will be subject to the availability of resources. A HUD environmental review must be completed for any NAHASDA assisted activities not excluded from review under 24 CFR 50.19(b) before a recipient may acquire, rehabilitate, convert, lease, repair or construct property, or commit HUD or local funds used in conjunction with such NAHASDA assisted activities with respect to the property. (b) If an Indian tribe assumes environmental review responsibilities: (1) Its certifying officer must certify that he/she is authorized and consents on behalf of the Indian tribe and such officer to accept the jurisdiction of the Federal courts for the purpose of enforcement of the responsibilities of the certifying officer as set forth in section 105(c) of NAHASDA; and (2) The Indian tribe must follow the requirements of 24 CFR part 58. (3) No funds may be committed to a grant activity or project before the completion of the environmental review and approval of the request for release of funds and related certification required by sections 105(b) and 105(c) of NAHASDA, except as authorized by 24 CFR part 58 such as for the costs of environmental reviews and other planning and administrative expenses. (c) Where an environmental assessment (EA) is appropriate under 24 CFR part 50, instead of an Indian tribe assuming environmental review responsibilities under paragraph (b) of this section or HUD preparing the EA itself under paragraph (a) of this section, an Indian tribe or TDHE may prepare an EA for HUD review. In addition to complying with the requirements of 40 CFR 1506.5(a), HUD shall make its own evaluation of the environmental issues and take responsibility for the scope and content of the EA in accordance with 40 CFR 1506.5(b). Sec. 1000.21 Under what circumstances are waivers of the environmental review procedures available to tribes? A tribe or recipient may request that the Secretary waive the requirements under section 105 of NAHASDA. The Secretary may grant the waiver if the Secretary determines that a failure on the part of a recipient to comply with provisions of this section: (a) Will not frustrate the goals of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) or any other provision of law that furthers the goals of that Act; (b) Does not threaten the health or safety of the community involved by posing an immediate or long-term hazard to residents of that community; (c) Is a result of inadvertent error, including an incorrect or incomplete certification provided under section 105(c)(1) of NAHASDA; and (d) May be corrected through the sole action of the recipient. [77 FR 71522, Dec. 3, 2012] Sec. 1000.22 Are the costs of the environmental review an eligible cost? Yes, costs of completing the environmental review are eligible. Sec. 1000.24 If an Indian tribe assumes environmental review responsibility, how will HUD assist the Indian tribe in performing the environmental review? As set forth in section 105(a)(2)(B) of NAHASDA and 24 CFR 58.77, HUD will provide for monitoring of environmental reviews and will also facilitate training for the performance for such reviews by Indian tribes. Sec. 1000.26 What are the administrative requirements under NAHASDA? (a) Except as addressed in Sec. 1000.28, recipients shall comply with the requirements and standards of 2 CFR part 200, ``Uniform Administrative Requirements, Cost Principles, And Audit [[Page 690]] Requirements for Federal Awards'', except for the following sections: (1) Section 200.113 applies, except that, in lieu of the remedies described in Sec. 200.338, HUD shall be authorized to seek remedies under subpart F of this part. (2) Section 200.302(a), ``Financial management.'' (3) Section 200.305, ``Payment,'' applies, except that HUD shall not require a recipient to expend retained program income before drawing down or expending IHBG funds. (4) Section 200.306, ``Cost sharing or matching.'' (5) Section 200.307, ``Program income.'' (6) Section 200.308, ``Revision of budget and program plans.'' (7) Section 200.311, ``Real property,'' except as provided in 24 CFR 5.109. (8) Section 200.313, ``Equipment,'' applies, except that in all cases in which the equipment is sold, the proceeds shall be program income. (9) Section 200.314, ``Supplies,'' applies, except in all cases in which the supplies are sold, the proceeds shall be program income. (10) Section 200.317, ``Procurement by states.'' (11) Sections 200.318 through 200.326 apply, as modified in this paragraph (a)(11): (i) De minimis procurement. A recipient shall not be required to comply with 2 CFR 200.318 through 200.326 with respect to any procurement, using a grant provided under NAHASDA, of goods and services with a value of less than $5,000. (ii) Utilizing Federal supply sources in procurement. In accordance with Section 101(j) of NAHASDA, recipients may use Federal supply sources made available by the General Services Administration pursuant to 40 U.S.C. 501. (12) Section 200.325, ``Bonding requirements,'' applies. There may be circumstances under which the bonding requirements of 2 CFR 200.325 are inconsistent with other responsibilities and obligations of the recipient. In such circumstances, acceptable methods to provide performance and payment assurance may include: (i) Deposit with the recipient of a cash escrow of not less than 20 percent of the total contract price, subject to reduction during the warranty period, commensurate with potential risk; (ii) Letter of credit for 25 percent of the total contract price, unconditionally payable upon demand of the recipient, subject to reduction during any warranty period commensurate with potential risk; or (iii) Letter of credit for 10 percent of the total contract price, unconditionally payable upon demand of the recipient, subject to reduction during any warranty period commensurate with potential risk, and compliance with the procedures for monitoring of disbursements by the contractor. (13) Section 200.328(b) through (d) and (f), ``Monitoring and reporting program performance.'' (14) Section 200.333, ``Retention requirements for records.'' (15) Section 200.338, ``Remedies for noncompliance.'' (16) Section 200.343, ``Closeout.'' (b)(1) With respect to the applicability of cost principles, all items of cost listed in 2 CFR part 200, subpart E, which require prior Federal agency approval are allowable without the prior approval of HUD to the extent that they comply with the general policies and principles stated in 2 CFR part 200, subpart E and are otherwise eligible under this part, except for the following: (i) Depreciation method for fixed assets shall not be changed without the approval of the Federal cognizant agency. (ii) Penalties, damages, fines and other settlements are unallowable costs to the IHBG program. (iii) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and personal living expenses (goods or services for personal use), regardless of whether reported as taxable income to the employees (2 CFR 200.445) requires HUD prior approval. (2) In addition, no person providing consultant services in an employer-employee type of relationship shall receive more than a reasonable rate of compensation for personal services paid with IHBG funds. In no event, however, shall such compensation exceed the equivalent of the daily rate [[Page 691]] paid for Level IV of the Executive Schedule. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71523, Dec. 3, 2012; 80 FR 75943, Dec. 7, 2015] Sec. 1000.28 May a self-governance Indian tribe be exempted from the applicability of Sec. 1000.26? Yes. A self-governance Indian tribe shall certify that its administrative requirements, standards and systems meet or exceed the comparable requirements of Sec. 1000.26. For purposes of this section, a self-governance Indian tribe is an Indian tribe that participates in tribal self-governance as authorized under Public Law 93-638, as amended (25 U.S.C. 450 et seq.). Sec. 1000.30 What prohibitions regarding conflict of interest are applicable? (a) Applicability. In the procurement of supplies, equipment, other property, construction and services by recipients and subrecipients, the conflict of interest provisions of 2 CFR 200.318 shall apply. In all cases not governed by 2 CFR 200.318, the following provisions of this section shall apply. (b) Conflicts prohibited. No person who participates in the decision-making process or who gains inside information with regard to NAHASDA assisted activities may obtain a personal or financial interest or benefit from such activities, except for the use of NAHASDA funds to pay salaries or other related administrative costs. Such persons include anyone with an interest in any contract, subcontract or agreement or proceeds thereunder, either for themselves or others with whom they have business or immediate family ties. Immediate family ties are determined by the Indian tribe or TDHE in its operating policies. (c) The conflict of interest provision does not apply in instances where a person who might otherwise be included under the conflict provision is low-income and is selected for assistance in accordance with the recipient's written policies for eligibility, admission and occupancy of families for housing assistance with IHBG funds, provided that there is no conflict of interest under applicable tribal or state law. The recipient must make a public disclosure of the nature of assistance to be provided and the specific basis for the selection of the person. The recipient shall provide the appropriate Area ONAP with a copy of the disclosure before the assistance is provided to the person. [63 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015] Sec. 1000.32 May exceptions be made to the conflict of interest provisions? (a) Yes. HUD may make exceptions to the conflict of interest provisions set forth in Sec. 1000.30(b) on a case-by-case basis when it determines that such an exception would further the primary objective of NAHASDA and the effective and efficient implementation of the recipient's program, activity, or project. (b) A public disclosure of the conflict must be made and a determination that the exception would not violate tribal laws on conflict of interest (or any applicable state laws) must also be made. Sec. 1000.34 What factors must be considered in making an exception to the conflict of interest provisions? In determining whether or not to make an exception to the conflict of interest provisions, HUD must consider whether undue hardship will result, either to the recipient or to the person affected, when weighed against the public interest served by avoiding the prohibited conflict. Sec. 1000.36 How long must a recipient retain records regarding exceptions made to the conflict of interest provisions? A recipient must maintain all such records for a period of at least 3 years after an exception is made. Sec. 1000.38 What flood insurance requirements are applicable? Under the Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4128), a recipient may not permit the use of Federal financial assistance for acquisition and construction purposes (including rehabilitation) in an area identified by the Federal Emergency Management Agency (FEMA) as having [[Page 692]] special flood hazards, unless the following conditions are met: (a) The community in which the area is situated is participating in the National Flood Insurance Program in accord with section 202(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4106(a)), or less than a year has passed since FEMA notification regarding such flood hazards. For this purpose, the ``community'' is the governmental entity, such as an Indian tribe or authorized tribal organization, an Alaska Native village, or authorized Native organization, or a municipality or county, that has authority to adopt and enforce flood plain management regulations for the area; and (b) Where the community is participating in the National Flood Insurance Program, flood insurance on the building is obtained in compliance with section 102(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012(a)); provided, that if the financial assistance is in the form of a loan or an insurance or guaranty of a loan, the amount of flood insurance required need not exceed the outstanding principal balance of the loan and need not be required beyond the term of the loan. Sec. 1000.40 Do lead-based paint poisoning prevention requirements apply to affordable housing activities under NAHASDA? Yes, lead-based paint requirements apply to housing activities assisted under NAHASDA. The applicable requirements for NAHASDA are HUD's regulations at part 35, subparts A, B, H, J, K, M and R of this title, which implement the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4822-4846) and the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856). [64 FR 50230, Sept. 15, 1999; 65 FR 3387, Jan. 21, 2000] Sec. 1000.42 Are the requirements of Section 3 of the Housing and Urban Development Act of 1968 applicable? No. Recipients shall comply with Indian preference requirements of Section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5307(b)), or employment and contract preference laws adopted by the recipient's tribe in accordance with Section 101(k) of NAHASDA. [85 FR 61568, Sept. 29, 2020] Sec. 1000.44 What prohibitions on the use of debarred, suspended, or ineligible contractors apply? In addition to any tribal requirements, the prohibitions in 2 CFR part 2424 on the use of debarred, suspended, or ineligible contractors apply. [72 FR 73497, Dec. 27, 2007] Sec. 1000.46 Do drug-free workplace requirements apply? Yes. In addition to any tribal requirements, the Drug-Free Workplace Act of 1988 (41 U.S.C. 701, et seq.) and HUD's implementing regulations in 2 CFR part 2429 apply. [76 FR 45168, July 28, 2011] Sec. 1000.48 Are Indian or tribal preference requirements applicable to IHBG activities? Grants under this part are subject to Indian preference under section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e(b)) or, if applicable under section 101(k) of NAHASDA, tribal preference in employment and contracting. (a)(1) Section 7(b) provides that any contract, subcontract, grant, or subgrant pursuant to an act authorizing grants to Indian organizations or for the benefit of Indians shall require that, to the greatest extent feasible: (i) Preference and opportunities for training and employment shall be given to Indians; and (ii) Preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned economic enterprises as defined in section 3 of the Indian Financing Act of 1974 (25 U.S.C. 1452). (2) The following definitions apply: (i) The Indian Self-Determination and Education Assistance Act defines ``Indian'' to mean a person who is a member of an Indian tribe and defines ``Indian tribe'' to mean any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or [[Page 693]] village corporation as defined or established pursuant to the Alaska Native Claims Settlement Act, which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. (ii) In section 3 of the Indian Financing Act of 1974, ``economic enterprise'' is defined as any Indian-owned commercial, industrial, or business activity established or organized for the purpose of profit, except that Indian ownership must constitute not less than 51 percent of the enterprise. This act defines ``Indian organization'' to mean the governing body of any Indian tribe or entity established or recognized by such governing body. (b) If tribal employment and contract preference laws have not been adopted by the Indian tribe, section 7(b) Indian preference provisions shall apply. (c) Exception for de minimis procurements. A recipient shall not be required to apply Indian preference requirements under Section 7(b) of the Indian Self-Determination and Education Assistance Act with respect to any procurement, using a grant provided under NAHASDA, of goods and services with a value less than $5,000. [77 FR 71523, Dec. 3, 2012] Sec. 1000.50 What tribal or Indian preference requirements apply to IHBG administration activities? (a) In accordance with Section 101(k) of NAHASDA, a recipient shall apply the tribal employment and contract preference laws (including regulations and tribal ordinances) adopted by the Indian tribe that receives a benefit from funds granted to the recipient under NAHASDA. (b) In the absence of tribal employment and contract preference laws, a recipient must, to the greatest extent feasible, give preference and opportunities for training and employment in connection with the administration of grants awarded under this part to Indians in accordance with section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e(b)). [77 FR 71523, Dec. 3, 2012] Sec. 1000.52 What tribal or Indian preference requirements apply to IHBG procurement? (a) In accordance with Section 101(k) of NAHASDA, a recipient shall apply the tribal employment and contract preference laws (including regulations and tribal ordinances) adopted by the Indian tribe that receives a benefit from funds granted to the recipient under NAHASDA. (b) In the absence of tribal employment and contract preference laws, a recipient must, to the greatest extent feasible, give preference in the award of contracts for projects funded under this part to Indian organizations and Indian-owned economic enterprises in accordance with Section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e(b)). (c) The following provisions apply to the application of Indian preference under paragraph (b) of this section: (1) In applying Indian preference, each recipient shall: (i) Certify to HUD that the policies and procedures adopted by the recipient will provide preference in procurement activities consistent with the requirements of section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e(b)) (An Indian preference policy that was previously approved by HUD for a recipient will meet the requirements of this section); or (ii) Advertise for bids or proposals limited to qualified Indian organizations and Indian-owned enterprises; or (iii) Use a two-stage preference procedure, as follows: (A) Stage 1. Invite or otherwise solicit Indian-owned economic enterprises to submit a statement of intent to respond to a bid announcement or request for proposals limited to Indian-owned firms. (B) Stage 2. If responses are received from more than one Indian enterprise found to be qualified, advertise for bids or proposals limited to Indian organizations and Indian-owned economic enterprises. (2) If the recipient selects a method of providing preference that results in fewer than two responsible qualified organizations or enterprises submitting a [[Page 694]] statement of intent, a bid, or a proposal to perform the contract at a reasonable cost, then the recipient shall: (i) Readvertise the contract, using any of the methods described in paragraph (c)(1) of this section; or (ii) Readvertise the contract without limiting the advertisement for bids or proposals to Indian organizations and Indian-owned economic enterprises; or (iii) If one approvable bid or proposal is received, request Area ONAP review and approval of the proposed contract and related procurement documents, in accordance with 2 CFR 200.318 through 200.326, in order to award the contract to the single bidder or offeror. (3) Procurements that are within the dollar limitations established for small purchases under 2 CFR 200.320 need not follow the formal bid or proposal procedures of since these procurements are governed by the small purchase procedures of 2 CFR 200.320. However, a recipient's small purchase procurement shall, to the greatest extent feasible, provide Indian preference in the award of contracts. (4) All preferences shall be publicly announced in the advertisement and bidding or proposal solicitation documents and the bidding and proposal documents. (5) A recipient, at its discretion, may require information of prospective contractors seeking to qualify as Indian organizations or Indian-owned economic enterprises. Recipients may require prospective contractors to provide the following information before submitting a bid or proposal, or at the time of submission: (i) Evidence showing fully the extent of Indian ownership and interest; (ii) Evidence of structure, management, and financing affecting the Indian character of the enterprise, including major subcontracts and purchase agreements; materials or equipment supply arrangements; management salary or profit-sharing arrangements; and evidence showing the effect of these on the extent of Indian ownership and interest; and (iii) Evidence sufficient to demonstrate to the satisfaction of the recipient that the prospective contractor has the technical, administrative, and financial capability to perform contract work of the size and type involved. (6) The recipient shall incorporate the following clause (referred to as the section 7(b) clause) in each contract awarded in connection with a project funded under this part: (i) The work to be performed under this contract is on a project subject to section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e(b)) (the Indian Act). Section 7(b) requires that, to the greatest extent feasible: (A) Preferences and opportunities for training and employment shall be given to Indians; and (B) Preferences in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned economic enterprises. (ii) The parties to this contract shall comply with the provisions of section 7(b) of the Indian Act. (iii) In connection with this contract, the contractor shall, to the greatest extent feasible, give preference in the award of any subcontracts to Indian organizations and Indian-owned economic enterprises, and preferences and opportunities for training and employment to Indians. (iv) The contractor shall include this section 7(b) clause in every subcontract in connection with the project; shall require subcontractors at each level to include this section 7(b) clause in every subcontract they execute in connection with the project; and shall, at the direction of the recipient, take appropriate action pursuant to the subcontract upon a finding by the recipient or HUD that the subcontractor has violated the section 7(b) clause of the Indian Act. (d) A recipient shall not be required to apply Indian preference requirements under Section 7(b) of the Indian Self-Determination and Education Assistance Act with respect to any procurement, using a grant provided under NAHASDA, of goods and services with a value less than $5,000. [77 FR 71523, Dec. 3, 2012, as amended at 80 FR 75944, Dec. 7, 2015] [[Page 695]] Sec. 1000.54 What procedures apply to complaints arising out of any of the methods of providing for Indian preference? The following procedures are applicable to complaints arising out of any of the methods of providing for Indian preference contained in this part, including alternate methods. Tribal policies that meet or exceed the requirements of this section shall apply. (a) Each complaint shall be in writing, signed, and filed with the recipient. (b) A complaint must be filed with the recipient no later than 20 calendar days from the date of the action (or omission) upon which the complaint is based. (c) Upon receipt of a complaint, the recipient shall promptly stamp the date and time of receipt upon the complaint, and immediately acknowledge its receipt. (d) Within 20 calendar days of receipt of a complaint, the recipient shall either meet, or communicate by mail or telephone, with the complainant in an effort to resolve the matter. The recipient shall make a determination on a complaint and notify the complainant, in writing, within 30 calendar days of the submittal of the complaint to the recipient. The decision of the recipient shall constitute final administrative action on the complaint. Sec. 1000.56 How are NAHASDA funds paid by HUD to recipients? (a) Each year funds shall be paid directly to a recipient in a manner that recognizes the right of Indian self-determination and tribal self-governance and the trust responsibility of the Federal government to Indian tribes consistent with NAHASDA. (b) Payments shall be made as expeditiously as practicable. Sec. 1000.58 Are there limitations on the investment of IHBG funds? (a) A recipient may invest IHBG funds for the purposes of carrying out affordable housing activities in investment securities and other obligations as provided in this section. (b) The recipient may invest IHBG funds so long as it demonstrates to HUD: (1) That there are no unresolved significant and material audit findings or exceptions in the most recent annual audit completed under the Single Audit Act or in an independent financial audit prepared in accordance with generally accepted auditing principles; and (2) That it is a self-governance Indian tribe or that it has the administrative capacity and controls to responsibly manage the investment. For purposes of this section, a self-governance Indian tribe is an Indian tribe that participates in tribal self-governance as authorized under Public Law 93-638, as amended (25 U.S.C. 450 et seq.). (c) Recipients shall invest IHBG funds only in: (1) Obligations of the United States; obligations issued by Government sponsored agencies; securities that are guaranteed or insured by the United States; mutual (or other) funds registered with the Securities and Exchange Commission and which invest only in obligations of the United States or securities that are guaranteed or insured by the United States; or (2) Accounts that are insured by an agency or instrumentality of the United States or fully collateralized to ensure protection of the funds, even in the event of bank failure. (d) IHBG funds shall be held in one or more accounts separate from other funds of the recipient. Each of these accounts shall be subject to an agreement in a form prescribed by HUD sufficient to implement the regulations in this part and permit HUD to exercise its rights under Sec. 1000.60. (e) Expenditure of funds for affordable housing activities under section 204(a) of NAHASDA shall not be considered investment. (f) A recipient may invest its IHBG annual grant in an amount equal to the annual formula grant amount. (g) Investments under this section may be for a period no longer than 5 years. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71524, Dec. 3, 2012] [[Page 696]] Sec. 1000.60 Can HUD prevent improper expenditure of funds already disbursed to a recipient? Yes. In accordance with the standards and remedies contained in Sec. 1000.532 relating to substantial noncompliance, HUD will use its powers under a depository agreement and take such other actions as may be legally necessary to suspend funds disbursed to the recipient until the substantial noncompliance has been remedied. In taking this action, HUD shall comply with all appropriate procedures, appeals, and hearing rights prescribed elsewhere in this part. [77 FR 71524, Dec. 3, 2012] Sec. 1000.62 What is considered program income? (a) Program income is defined as any income that is realized from the disbursement of grant amounts. Program income does not include any amounts generated from the operation of 1937 Act units unless the units are assisted with grant amounts and the income is attributable to such assistance. Program income includes income from fees for services performed from the use of real or rental of real or personal property acquired with grant funds, from the sale of commodities or items developed, acquired, etc. with grant funds, and from payments of principal and interest earned on grant funds prior to disbursement. (b) If the amount of income received in a single year by a recipient and all its subrecipients, which would otherwise be considered program income, does not exceed $25,000, such funds may be retained but will not be considered to be or treated as program income. (c) If program income is realized from an eligible activity funded with both grant funds as well as other funds (i.e., funds that are not grant funds), then the amount of program income realized will be based on a percentage calculation that represents the proportional share of funds provided for the activity generating the program income. (d) Costs incident to the generation of program income shall be deducted from gross income to determine program income. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71524, Dec. 3, 2012] Sec. 1000.64 What are the permissible uses of program income? Program income may be used for any housing or housing related activity and is not subject to other federal requirements. [77 FR 71524, Dec. 3, 2012] Subpart B_Affordable Housing Activities Sec. 1000.101 What is affordable housing? Eligible affordable housing is defined in section 4(2) of NAHASDA and is described in title II of NAHASDA. Sec. 1000.102 What are eligible affordable housing activities? Eligible affordable housing activities are those described in section 202 of NAHASDA. Sec. 1000.103 How may IHBG funds be used for tenant-based or project-based rental assistance? (a) IHBG funds may be used for project-based or tenant-based rental assistance. (b) IHBG funds may be used for project-based or tenant-based rental assistance that is provided in a manner consistent with section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). (c) IHBG funds used for project-based or tenant-based rental assistance must comply with the requirements of NAHASDA and this part. [72 FR 59004, Oct. 18, 2007] Sec. 1000.104 What families are eligible for affordable housing activities? The following families are eligible for affordable housing activities: (a) Low income Indian families on a reservation or Indian area. (b) A non-low-income family may receive housing assistance in accordance with Sec. 1000.110. (c) A family may receive housing assistance on a reservation or Indian [[Page 697]] area if the family's housing needs cannot be reasonably met without such assistance and the recipient determines that the presence of that family on the reservation or Indian area is essential to the well-being of Indian families. (d) A recipient may provide housing or housing assistance provided through affordable housing activities assisted with grant amounts under NAHASDA for a law enforcement officer on an Indian reservation or other Indian area, if: (1) The officer: (i) Is employed on a full-time basis by the federal government or a state, county, or other unit of local government, or lawfully recognized tribal government; and (ii) In implementing such full-time employment, is sworn to uphold, and make arrests for, violations of federal, state, county, or tribal law; and (2) The recipient determines that the presence of the law enforcement officer on the Indian reservation or other Indian area may deter crime. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71524, Dec. 3, 2012] Sec. 1000.106 What families receiving assistance under title II of NAHASDA require HUD approval? (a) Housing assistance for non-low-income families requires HUD approval only as required in Sec. Sec. 1000.108 and 1000.110. (b) Assistance for essential families under section 201(b)(3) of NAHASDA does not require HUD approval but only requires that the recipient determine that the presence of that family on the reservation or Indian area is essential to the well-being of Indian families and that the family's housing needs cannot be reasonably met without such assistance. [77 FR 71525, Dec. 3, 2012] Sec. 1000.108 How is HUD approval obtained by a recipient for housing for non-low-income families and model activities? Recipients are required to submit proposals to operate model housing activities as defined in section 202(6) of NAHASDA and to provide assistance to non-low-income families in accordance with section 201(b)(2) of NAHASDA. Assistance to non-low-income families must be in accordance with Sec. 1000.110. Proposals may be submitted in the recipient's IHP or at any time by amendment of the IHP, or by special request to HUD at any time. HUD may approve the remainder of an IHP, notwithstanding disapproval of a model activity or assistance to non- low-income families. [77 FR 71525, Dec. 3, 2012] Sec. 1000.110 Under what conditions may non-low-income Indian families participate in the program? (a) A family that was low-income at the times described in Sec. 1000.147 but subsequently becomes a non-low-income family due to an increase in income may continue to participate in the program in accordance with the recipient's admission and occupancy policies. The 10 percent limitation in paragraph (c) of this section shall not apply to such families. Such families may be made subject to the additional requirements in paragraph (d) of this section based on those policies. This includes a family member or household member who takes ownership of a homeownership unit under Sec. 1000.146. (b) A recipient must determine and document that there is a need for housing for each family that cannot reasonably be met without such assistance. (c) A recipient may use up to 10 percent of the amount planned for the tribal program year for families whose income falls within 80 to 100 percent of the median income without HUD approval. HUD approval is required if a recipient plans to use more than 10 percent of the amount planned for the tribal program year for such assistance or to provide housing for families with income over 100 percent of median income. (d) Non-low-income families cannot receive the same benefits provided low-income Indian families. The amount of assistance non-low- income families may receive will be determined as follows: (1) The rent (including homebuyer payments under a lease purchase agreement) to be paid by a non-low-income family cannot be less than: (Income of non-low-income family/Income of family at 80 percent of median income) x [[Page 698]] (Rental payment of family at 80 percent of median income), but need not exceed the fair market rent or value of the unit. (2) Other assistance, including down payment assistance, to non-low- income families, cannot exceed: (Income of family at 80 percent of median income/Income of non-low-income family) x (Present value of the assistance provided to family at 80 percent of median income). (e) The requirements set forth in paragraphs (c) and (d) of this section do not apply to non-low-income families that the recipient has determined to be essential under Sec. 1000.106(b). [77 FR 71525, Dec. 3, 2012] Sec. 1000.112 How will HUD determine whether to approve model housing activities? HUD will review all proposals with the goal of approving the activities and encouraging the flexibility, discretion, and self- determination granted to Indian tribes under NAHASDA to formulate and operate innovative housing programs that meet the intent of NAHASDA. Sec. 1000.114 How long does HUD have to review and act on a proposal to provide assistance to non-low-income families or a model housing activity? Whether submitted in the IHP or at any other time, HUD will have 60 calendar days after receiving the proposal to notify the recipient in writing that the proposal to provide assistance to non-low-income families or for model activities is approved or disapproved. If no decision is made by HUD within 60 calendar days of receiving the proposal, the proposal is deemed to have been approved by HUD. [77 FR 71525, Dec. 3, 2012] Sec. 1000.116 What should HUD do before declining a proposal to provide assistance to non low-income families or a model housing activity? HUD shall consult with a recipient regarding the recipient's proposal to provide assistance to non-low-income families or a model housing activity. To the extent that resources are available, HUD shall provide technical assistance to the recipient in amending and modifying the proposal, if necessary. In case of a denial, HUD shall give the specific reasons for the denial. [77 FR 71525, Dec. 3, 2012] Sec. 1000.118 What recourse does a recipient have if HUD disapproves a proposal to provide assistance to non-low-income families or a model housing activity? (a) Within 30 calendar days of receiving HUD's denial of a proposal to provide assistance to non-low-income families or a model housing activity, the recipient may request reconsideration of the denial in writing. The request shall set forth justification for the reconsideration. (b) Within twenty calendar days of receiving the request, HUD shall reconsider the recipient's request and either affirm or reverse its initial decision in writing, setting forth its reasons for the decision. If the decision was made by the Assistant Secretary, the decision will constitute final agency action. If the decision was made at a lower level, then paragraphs (c) and (d) of this section will apply. (c) The recipient may appeal any denial of reconsideration by filing an appeal with the Assistant Secretary within twenty calendar days of receiving the denial. The appeal shall set forth the reasons why the recipient does not agree with HUD's decision and set forth justification for the reconsideration. (d) Within twenty calendar days of receipt of the appeal, the Assistant Secretary shall review the recipient's appeal and act on the appeal, setting forth the reasons for the decision. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71525, Dec. 3, 2012] Sec. 1000.120 May a recipient use Indian preference or tribal preference in selecting families for housing assistance? Yes. The IHP may set out a preference for the provision of housing assistance to Indian families who are members of the Indian tribe or to other Indian families if the recipient has adopted the preference in its admissions policy. The recipient shall ensure that housing activities funded under [[Page 699]] NAHASDA are subject to the preference. Sec. 1000.122 May NAHASDA grant funds be used as matching funds to obtain and leverage funding, including any Federal or state program and still be considered an affordable housing activity? There is no prohibition in NAHASDA against using grant funds as matching funds. Sec. 1000.124 What maximum and minimum rent or homebuyer payment can a recipient charge a low-income rental tenant or homebuyer residing in housing units assisted with NAHASDA grant amounts? A recipient can charge a low-income rental tenant or homebuyer rent or homebuyer payments not to exceed 30 percent of the adjusted income of the family. The recipient may also decide to compute its rental and homebuyer payments on any lesser percentage of adjusted income of the family. This requirement applies only to units assisted with NAHASDA grant amounts. NAHASDA does not set minimum rents or homebuyer payments; however, a recipient may do so. Sec. 1000.126 May a recipient charge flat or income-adjusted rents? Yes, providing the rental or homebuyer payment of the low-income family does not exceed 30 percent of the family's adjusted income. Sec. 1000.128 Is income verification required for assistance under NAHASDA? (a) Yes, the recipient must verify that the family is income eligible based on anticipated annual income. The family is required to provide documentation to verify this determination. The recipient is required to maintain the documentation on which the determination of eligibility is based. (b) The recipient may require a family to periodically verify its income in order to determine housing payments or continued occupancy consistent with locally adopted policies. When income verification is required, the family must provide documentation which verifies its income, and this documentation must be retained by the recipient. Sec. 1000.130 May a recipient charge a non low-income family rents or homebuyer payments which are more than 30 percent of the family's adjusted income? Yes. A recipient may charge a non low-income family rents or homebuyer payments which are more than 30 percent of the family's adjusted income. Sec. 1000.132 Are utilities considered a part of rent or homebuyer payments? Utilities may be considered a part of rent or homebuyer payments if a recipient decides to define rent or homebuyer payments to include utilities in its written policies on rents and homebuyer payments required by section 203(a)(1) of NAHASDA. A recipient may define rents and homebuyer payments to exclude utilities. Sec. 1000.134 When may a recipient (or entity funded by a recipient) demolish or dispose of current assisted stock? (a) A recipient (or entity funded by a recipient) may undertake a planned demolition or disposal of current assisted stock owned by the recipient or an entity funded by the recipient when: (1) A financial analysis demonstrates that it is more cost-effective or housing program-effective for the recipient to demolish or dispose of the unit than to continue to operate or own it; or (2) The housing unit has been condemned by the government which has authority over the unit; or (3) The housing unit is an imminent threat to the health and safety of housing residents; or (4) Continued habitation of a housing unit is inadvisable due to cultural or historical considerations. (b) No action to demolish or dispose of the property other than performing the analysis cited in paragraph (a) of this section can be taken until HUD has been notified in writing of the recipient's intent to demolish or dispose of the housing units consistent with section 102(c)(4)(H) of NAHASDA. The written notification must set out the analysis used to arrive at the decision to demolish or dispose of the property [[Page 700]] and may be set out in a recipient's IHP or in a separate submission to HUD. (c) In any disposition sale of a housing unit, a sale process designed to maximize the sale price will be used. However, where the sale is to a low-income Indian family, the home may be disposed of without maximizing the sale price so long as such price is consistent with a recipient's IHP. The sale proceeds from the disposition of any housing unit are program income under NAHASDA and must be used in accordance with the requirements of NAHASDA and these regulations. Sec. 1000.136 What insurance requirements apply to housing units assisted with NAHASDA grants? (a) The recipient shall provide adequate insurance either by purchasing insurance or by indemnification against casualty loss by providing insurance in adequate amounts to indemnify the recipient against loss from fire, weather, and liability claims for all housing units owned or operated by the recipient. (b) The recipients shall not require insurance on units assisted by grants to families for privately owned housing if there is no risk of loss or exposure to the recipient or if the assistance is in an amount less than $5000, but will require insurance when repayment of all or part of the assistance is part of the assistance agreement. (c) The recipient shall require contractors and subcontractors to either provide insurance covering their activities or negotiate adequate indemnification coverage to be provided by the recipient in the contract. (d) These requirements are in addition to applicable flood insurance requirements under Sec. 1000.38. Sec. 1000.138 What constitutes adequate insurance? Insurance is adequate if it is a purchased insurance policy from an insurance provider or a plan of self-insurance in an amount that will protect the financial stability of the recipient's IHBG program. Recipients may purchase the required insurance without regard to competitive selection procedures from nonprofit insurance entities which are owned and controlled by recipients and which have been approved by HUD. Sec. 1000.139 What are the standards for insurance entities owned and controlled by recipients? (a) General. A recipient may provide insurance coverage required by section 203(c) of NAHASDA and Sec. Sec. 1000.136 and 1000.138 through a self-insurance plan, approved by HUD in accordance with this section, provided by a nonprofit insurance entity that is wholly owned and controlled by IHBG recipients. (b) Self-insurance plan. An Indian housing self-insurance plan must be shown to meet the requirements of paragraph (c) of this section. (c) Application. For a self-insurance plan to be approved by HUD, an application and supporting materials must be submitted containing the information specified in paragraphs (c)(1) through (c)(9) of this section. Any material changes made to these documents after initial approval must be submitted to HUD. Adverse material changes may cause HUD to revoke its approval of a self-insurance entity. The application submitted to HUD must show that: (1) The plan is organized as an insurance entity, tribal self- insurance plan, tribal risk retention group, or Indian housing self- insurance risk pool; (2) The plan limits participation to IHBG recipients; (3) The plan operates on a nonprofit basis; (4)(i) The plan employs or contracts with a third party to provide competent underwriting and management staff; (A) The underwriting staff must be composed of insurance professionals with an average of at least five years of experience in large risk commercial underwriting exceeding $100,000 in annual premiums or at least five years of experience in underwriting risks for public entity plans of self-insurance; (B) The management staff must have at least one senior manager who has a minimum of five years of insurance experience at the level of vice president of a property or casualty insurance entity; as a senior branch manager of a branch office with annual property or [[Page 701]] casualty premiums exceeding five million dollars; or as a senior manager of a public entity self-insurance risk pool; (ii) Satisfaction of this requirement may be demonstrated by evidence such as r[eacute]sum[eacute]s and employment history of the underwriting staff for the plan and of the key management staff with day-to-day operational oversight of the plan; (5) The plan maintains internal controls and cost containment measures, as shown by the annual budget; (6) The plan maintains sound investments consistent with its articles of incorporation, charter, bylaws, risk pool agreement, or other applicable organizational document or agreement concerning investments; (7) The plan maintains adequate surplus and reserves, as determined by HUD, for undischarged liabilities of all types, as shown by a current audited financial statement and an actuarial review conducted in accordance with paragraph (e) of this section; (8) The plan has proper organizational documentation, as shown by copies of the articles of incorporation, charter, bylaws, subscription agreement, business plan, contracts with third-party administrators, and other organizational documents; and (9) A plan's first successful application for approval under this section must also include an opinion from the plan's legal counsel that the plan is properly chartered, incorporated, or otherwise formed under applicable law. (d) HUD consideration of plan. HUD will consider an application for approval of a self-insurance plan submitted under this section and approve or disapprove that application no later than 90 days from the date of receipt of a complete application. If an application is disapproved, HUD shall notify the applicant of the reasons for disapproval and may offer technical assistance to a recipient to help the recipient correct the deficiencies in the application. The recipient may then resubmit the application under this section. (e) Annual reporting. An approved plan must undergo an audit and actuarial review annually. In addition, an evaluation of the plan's management must be performed by an insurance professional every three years. These audits, actuarial reviews, and management reviews must be submitted to HUD within 90 days after the end of the insuring entity's fiscal year and be prepared in accordance with the following standards: (1) The annual financial statement must be prepared in accordance with generally accepted accounting principles (GAAP) and audited by an independent auditor in accordance with generally accepted government auditing standards. The independent auditor shall state in writing an opinion on whether the plan's financial statement is presented fairly, in accordance with GAAP; (2) The actuarial review of the plan shall be done consistently with requirements established by the Association of Governmental Risk Pools and conducted by an independent property or casualty actuary who is a member of a recognized professional actuarial organization, such as the American Academy of Actuaries. The report issued and submitted to HUD must include the actuary's written opinion on any over- or under- reserving and the adequacy of the reserve maintained for open claims and for incurred but unreported claims; (3) The management review must be prepared by an independent insurance consultant who has received the professional designation of a chartered property/casualty underwriter (CPCU), associate in risk management (ARM), or associate in claims (AIC), and must cover the following: (i) The efficiency of the management or third-party administrator of the plan; (ii) Timeliness of the claim payments and reserving practices; and (iii) The adequacy of reinsurance or excess insurance coverage. (f) Revocation of approval. HUD may revoke its approval of a plan under this section when the plan no longer meets the requirements of this section. The plan's management will be notified in writing of the proposed revocation of its approval and of the manner and time in which to request a hearing to [[Page 702]] challenge the determination, in accordance with the dispute resolution procedures set forth in this part for model housing activities (Sec. 1000.118). (g) Preemption. In order that tribally owned Indian housing insurance entities that provide insurance for IHBG-assisted housing will not be subject to conflicting state laws and widely varying and costly requirements, any self-insurance plan under this section that meets the requirements of this section and that has been approved by HUD shall be governed by the regulations of this subpart in its provision of insurance for IHBG-assisted housing. [72 FR 29740, May 29, 2007] Sec. 1000.140 May a recipient use grant funds to purchase insurance for privately owned housing to protect NAHASDA grant amounts spent on that housing? Yes. All purchases of insurance must be in accordance with Sec. Sec. 1000.136 and 1000.138. Sec. 1000.141 What is ``useful life'' and how is it related to affordability? Useful life is the time period during which an assisted property must remain affordable, as defined in section 205(a) of NAHASDA. [77 FR 71525, Dec. 3, 2012] Sec. 1000.142 How does a recipient determine the ``useful life'' during which low-income rental housing and low-income homebuyer housing must remain affordable as required in sections 205(a)(2) and 209 of NAHASDA? To the extent required in the IHP, each recipient shall describe its determination of the useful life of the assisted housing units in its developments in accordance with the local conditions of the Indian area of the recipient. By approving the plan, HUD determines the useful life in accordance with section 205(a)(2) of NAHASDA and for purposes of section 209. [77 FR 71525, Dec. 3, 2012] Sec. 1000.143 How does a recipient implement its useful life requirements? A recipient implements its useful life requirements by placing a binding commitment, satisfactory to HUD, on the assisted property. [77 FR 71526, Dec. 3, 2012] Sec. 1000.144 What are binding commitments satisfactory to HUD? A binding commitment satisfactory to HUD is a written use restriction agreement, developed by the recipient, and placed on an assisted property for the period of its useful life. [77 FR 71526, Dec. 3, 2012] Sec. 1000.145 Are Mutual Help homes developed under the 1937 Act subject to the useful life provisions of section 205(a)(2)? No. [63 FR 12349, Mar. 12, 1998. Redesignated at 77 FR 71526, Dec. 3, 2012] Sec. 1000.146 Are binding commitments for the remaining useful life of property applicable to a family member or household member who subsequently takes ownership of a homeownership unit? No. The transfer of a homeownership unit to a family member or household member is not subject to a binding commitment for the remaining useful life of the property. Any subsequent transfer by the family member or household member to a third party (not a family member or household member) is subject to any remaining useful life under a binding commitment. [77 FR 71526, Dec. 3, 2012] Sec. 1000.147 When does housing qualify as affordable housing under NAHASDA? (a) Housing qualifies as affordable housing, provided that the family occupying the unit is low-income at the following times: (1) In the case of rental housing, at the time of the family's initial occupancy of such unit; (2) In the case of a contract to purchase existing housing, at the time of purchase; (3) In the case of a lease-purchase agreement for existing housing or for housing to be constructed, at the time the agreement is signed; and [[Page 703]] (4) In the case of a contract to purchase housing to be constructed, at the time the contract is signed. (b) Families that are not low-income as described in this section may be eligible under Sec. 1000.104 or Sec. 1000.110. [63 FR 12349, Mar. 12, 1998. Redesignated at 77 FR 71526, Dec. 3, 2012] Sec. 1000.150 How may Indian tribes and TDHEs receive criminal conviction information on applicants for employment and on adult applicants for housing assistance, or tenants? (a) As required by section 208 of NAHASDA, the National Crime Information Center, police departments, and other law enforcement agencies shall provide criminal conviction information to Indian tribes and TDHEs upon request. Information regarding juveniles shall only be released to the extent such release is authorized by the law of the applicable state, Indian tribe or locality. (b) For purposes of this section, the term ``tenants'' includes homebuyers who are purchasing a home pursuant to a lease purchase agreement. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71526, Dec. 3, 2012] Sec. 1000.152 How is the recipient to use criminal conviction information? (a) With regard to adult tenants and applicants for housing assistance, the recipient shall use the criminal conviction information described in Sec. 1000.150 only for applicant screening, lease enforcement, and eviction actions. (b) With regard to applicants for employment, the recipient shall use the criminal conviction information described in Sec. 1000.150 for the purposes set out in section 208 of NAHASDA. (c) The criminal conviction information described in Sec. 1000.150 may be disclosed only to any person who has a job-related need for the information and who is an authorized officer, employee, or representative of the recipient or the owner of housing assisted under NAHASDA. [77 FR 71526, Dec. 3, 2012] Sec. 1000.154 How is the recipient to keep criminal conviction information confidential? (a) The recipient will keep all the criminal conviction record information it receives from the official law enforcement agencies listed in Sec. 1000.150 in files separate from all other housing records. (b) These criminal conviction records will be kept under lock and key and be under the custody and control of the recipient's housing executive director/lead official and/or his designee for such records. (c) These criminal conviction records may only be accessed with the written permission of the Indian tribe's or TDHE's housing executive director/lead official and/or his designee and are only to be used for the purposes stated in section 208 of NAHASDA and these regulations. Sec. 1000.156 Is affordable housing developed, acquired, or assisted under the IHBG program subject to limitations on cost or design standards? Yes. Affordable housing must be of moderate design. For these purposes, moderate design is defined as housing that is of a size and with amenities consistent with unassisted housing offered for sale in the Indian tribe's general geographic area to buyers who are at or below the area median income. The local determination of moderate design applies to all housing assisted under an affordable housing activity, including development activities (e.g., acquisition, new construction, reconstruction, moderate or substantial rehabilitation of affordable housing and homebuyer assistance) and model activities. Acquisition includes assistance to a family to buy housing. Units with the same number of bedrooms must be comparable with respect to size, cost and amenities. [66 FR 49790, Sept. 28, 2001] Sec. 1000.158 How will a NAHASDA grant recipient know that the housing assisted under the IHBG program meets the requirements of Sec. 1000.156? (a) A recipient must use one of the methods specified in paragraph (b) or [[Page 704]] (c) of this section to determine if an assisted housing project meets the moderate design requirements of Sec. 1000.156. For purposes of this requirement, a project is one or more housing units, of comparable size, cost, amenities and design, developed with assistance provided by the Act. (b) The recipient may adopt written standards for its affordable housing programs that reflect the requirement specified in Sec. 1000.156. The standards must describe the type of housing, explain the basis for the standards, and use similar housing in the Indian tribe's general geographic area. For each affordable housing project, the recipient must maintain documentation substantiating compliance with the adopted housing standards. The standards and documentation substantiating compliance for each activity must be available for review by the general public and, upon request, by HUD. Prior to awarding a contract for the construction of housing or beginning construction using its own workforce, the recipient must complete a comparison of the cost of developing or acquiring/rehabilitating the affordable housing with the limits provided by the TDC discussed in paragraph (c) of this section and may not, without prior HUD approval, exceed by more than 10 percent the TDC maximum cost for the project. In developing standards under this paragraph, the recipient must establish, maintain, and follow policies that determine a local definition of moderate design which considers: (1) Gross area; (2) Total cost to provide the housing; (3) Environmental concerns and mitigations; (4) Climate; (5) Comparable housing in geographical area; (6) Local codes, ordinances and standards; (7) Cultural relevance in design; (8) Design and construction features that are reasonable, and necessary to provide decent, safe, sanitary and affordable housing; and (9) Design and construction features that are accessible to persons with a variety of disabilities. (c) If the recipient has not adopted housing standards specified in paragraph (b) of this section, Total Development Cost (TDC) limits published periodically by HUD establish the maximum amount of funds (from all sources) that the recipient may use to develop or acquire/ rehabilitate affordable housing. The recipient must complete a comparison of the cost of developing or acquiring/rehabilitating the affordable housing with the limits provided by the TDC and may not, without prior HUD approval, exceed the TDC maximum cost for the project. [66 FR 49790, Sept. 28, 2001] Sec. 1000.160 Are non-dwelling structures developed, acquired or assisted under the IHBG program subject to limitations on cost or design standards? Yes. Non-dwelling structures must be of a design, size and with features or amenities that are reasonable and necessary to accomplish the purpose intended by the structures. The purpose of a non-dwelling structure must be to support an affordable housing activity, as defined by the Act. [66 FR 49790, Sept. 28, 2001] Sec. 1000.162 How will a recipient know that non-dwelling structures assisted under the IHBG program meet the requirements of 1000.160? (a) The recipient must use one of the methods described in paragraph (b) or (c) of this section to determine if a non-dwelling structure meets the limitation requirements of Sec. 1000.160. If the recipient develops, acquires, or rehabilitates a non-dwelling structure with funds from NAHASDA and other sources, then the cost limit standard established under these regulations applies to the entire structure. If funds are used from two different sources, the standards of the funding source with the more restrictive rules apply. (b)(1) The recipient may adopt written standards for non-dwelling structures. The standards must describe the type of structures and must clearly describe the criteria to be used to guide the cost, size, design, features, amenities, performance or other factors. The standards for such structures must be able to support the reasonableness and [[Page 705]] necessity for these factors and to clearly identify the affordable housing activity that is being provided. (2) When the recipient applies a standard to particular structures, it must document the following: (i) Identification of targeted population to benefit from the structures; (ii) Identification of need or problem to be solved; (iii) Affordable housing activity provided or supported by the structures; (iv) Alternatives considered; (v) Provision for future growth and change; (vi) Cultural relevance of design; (vii) Size and scope supported by population and need; (viii) Design and construction features that are accessible to persons with a variety of disabilities; (ix) Cost; and (x) Compatibility with community infrastructure and services. (c) If the recipient has not adopted program standards specified in paragraph (b) of this section, then it must demonstrate and document that the non-dwelling structure is of a cost, size, design and with amenities consistent with similarly designed and constructed structures in the recipient's general geographic area. [66 FR 49790, Sept. 28, 2001] Subpart C_Indian Housing Plan (IHP) Sec. 1000.201 How are funds made available under NAHASDA? Every fiscal year HUD will make grants under the IHBG program to recipients who have submitted to HUD for a tribal program year an IHP in accordance with Sec. 1000.220 to carry out affordable housing activities. [77 FR 71526, Dec. 3, 2012] Sec. 1000.202 Who are eligible recipients? Eligible recipients are Indian tribes, or TDHEs when authorized by one or more Indian tribes. Sec. 1000.204 How does an Indian tribe designate itself as recipient of the grant? (a) By resolution of the Indian tribe; or (b) When such authority has been delegated by an Indian tribe's governing body to a tribal committee(s), by resolution or other written form used by such committee(s) to memorialize the decisions of that body, if applicable. Sec. 1000.206 How is a TDHE designated? (a)(1) By resolution of the Indian tribe or Indian tribes to be served; or (2) When such authority has been delegated by an Indian tribe's governing body to a tribal committee(s), by resolution or other written form used by such committee(s) to memorialize the decisions of that body, if applicable. (b) In the absence of a designation by the Indian tribe, the default designation as provided in section 4(21) of NAHASDA shall apply. Sec. 1000.208 What happens if an Indian tribe had two IHAs as of September 30, 1996? Indian tribes which had established and were operating two IHAs as of September 30, 1996, under the 1937 Act shall be allowed to form and operate two TDHEs under NAHASDA. Nothing in this section shall affect the allocation of funds otherwise due to an Indian tribe under the formula. Sec. 1000.210 What happens to existing 1937 Act units in those jurisdictions for which Indian tribes do not or cannot submit an IHP? NAHASDA does not provide the statutory authority for HUD to grant NAHASDA grant funds to an Indian housing authority, Indian tribe or to a default TDHE which cannot obtain a tribal certification, if the requisite IHP is not submitted by an Indian tribe or is determined to be out of compliance by HUD. There may be circumstances where this may happen, and in those cases, other methods of tribal, Federal, or private market support may have to be sought to maintain and operate those 1937 Act units. Sec. 1000.212 Is submission of an IHP required? Yes. An Indian tribe or, with the consent of its Indian tribe(s), the TDHE, must submit an IHP to HUD to receive funding under NAHASDA, except as provided in section 101(b)(2) of [[Page 706]] NAHASDA. If a TDHE has been designated by more than one Indian tribe, the TDHE can submit a separate IHP for each Indian tribe or it may submit a single IHP based on the requirements of Sec. 1000.220 with the approval of the Indian tribes. Sec. 1000.214 What is the deadline for submission of an IHP? IHPs must be initially sent by the recipient to the Area ONAP no later than 75 days before the beginning of a tribal program year. Grant funds cannot be provided until the plan due under this section is determined to be in compliance with section 102 of NAHASDA and funds are available. [77 FR 71526, Dec. 3, 2012] Sec. 1000.216 What happens if the recipient does not submit the IHP to the Area ONAP by no later than 75 days before the beginning of the tribal program year? If the IHP is not initially sent by at least 75 days before the beginning of the tribal program year, the recipient will not be eligible for IHBG funds for that fiscal year. Any funds not obligated because an IHP was not received before this deadline has passed shall be distributed by formula in the following year. [77 FR 71526, Dec. 3, 2012] Sec. 1000.218 Who prepares and submits an IHP? An Indian tribe, or with the authorization of a Indian tribe, in accordance with section 102(d) of NAHASDA a TDHE may prepare and submit a plan to HUD. Sec. 1000.220 What are the requirements for the IHP? The IHP requirements are set forth in section 102(b) of NAHASDA. In addition, Sec. Sec. 1000.56, 1000.108, 1000.120, 1000.134, 1000.142, 1000.238, 1000.302, and 1000.328 require or permit additional items to be set forth in the IHP for HUD determinations required by those sections. Recipients are only required to provide IHPs that contain these elements in a form prescribed by HUD. If a TDHE is submitting a single IHP that covers two or more Indian tribes, the IHP must contain a separate certification in accordance with section 102(d) of NAHASDA and IHP Tables for each Indian tribe when requested by such Indian tribes. However, Indian tribes are encouraged to perform comprehensive housing needs assessments and develop comprehensive IHPs and not limit their planning process to only those housing efforts funded by NAHASDA. An IHP should be locally driven. [77 FR 71526, Dec. 3, 2012] Sec. 1000.222 Are there separate IHP requirements for small Indian tribes and small TDHEs? No. HUD requirements for IHPs are reasonable. Sec. 1000.224 Can any part of the IHP be waived? Yes. HUD has general authority under section 101(b)(2) of NAHASDA to waive any IHP requirements when an Indian tribe cannot comply with IHP requirements due to exigent circumstances beyond its control, for a period of not more than 90 days. The waiver authority under section 101(b)(2) of NAHASDA provides flexibility to address the needs of every Indian tribe, including small Indian tribes. The waiver may be requested by the Indian tribe or its TDHE (if such authority is delegated by the Indian tribe), and such waiver shall not be unreasonably withheld. [77 FR 71526, Dec. 3, 2012] Sec. 1000.225 When may a waiver of the IHP submission deadline be requested? A recipient may request a waiver for a period of not more than 90 days beyond the IHP submission due date. [77 FR 71526, Dec. 3, 2012] Sec. 1000.226 Can the certification requirements of section 102(c)(5) of NAHASDA be waived by HUD? Yes. HUD may waive these certification requirements as provided in section 101(b)(2) of NAHASDA. [[Page 707]] Sec. 1000.227 What shall HUD do upon receipt of an IHP submission deadline waiver request? The waiver shall be decided upon by HUD within 45 days of receipt of the waiver request. HUD shall notify the recipient in writing within 45 days of receipt of the waiver request whether the request is approved or denied. [77 FR 71526, Dec. 3, 2012] Sec. 1000.228 If HUD changes its IHP format will Indian tribes be involved? Yes. HUD will first consult with Indian tribes before making any substantial changes to HUD's IHP format. Sec. 1000.230 What is the process for HUD review of IHPs and IHP amendments? HUD will conduct the IHP review in the following manner: (a) HUD will conduct a limited review of the IHP to ensure that its contents: (1) Comply with the requirements of section 102 of NAHASDA, which outlines the IHP submission requirements; however, the recipient may use either the HUD-estimated IHBG amount or the IHBG amount from their most recent compliant IHP; (2) Are consistent with information and data available to HUD; (3) Are not prohibited by or inconsistent with any provision of NAHASDA or other applicable law; and (4) Include the appropriate certifications. (b) If the IHP complies with the provisions of paragraphs (a)(1), (a)(2), and (a)(3) of this section, HUD will notify the recipient of IHP compliance within 60 days after receiving the IHP. If HUD fails to notify the recipient, the IHP shall be considered to be in compliance with the requirements of section 102 of NAHASDA and the IHP is approved. (c) If the submitted IHP does not comply with the provisions of paragraphs (a)(1), and (a)(3) of this section, HUD will notify the recipient of the determination of non-compliance. HUD will provide this notice no later than 60 days after receiving the IHP. This notice will set forth: (1) The reasons for noncompliance; (2) The modifications necessary for the IHP to meet the submission requirements; and (3) The date by which the revised IHP must be submitted. (d) If the recipient does not submit a revised IHP by the date indicated in the notice provided under paragraph (c) of this section, the IHP will be determined by HUD to be in non-compliance unless a waiver is requested and approved under section 101(b)(2) of NAHASDA. If the IHP is determined by HUD to be in non-compliance and no waiver is granted, the recipient may appeal this determination following the appeal process in Sec. 1000.234. (e)(1) If the IHP does not contain the certifications identified in paragraph (a)(4) of this section, the recipient will be notified within 60 days of submission of the IHP that the plan is incomplete. The notification will include a date by which the certification must be submitted. (2) If the recipient has not complied or cannot comply with the certification requirements due to circumstances beyond the control of the Indian tribe(s), within the timeframe established, the recipient can request a waiver in accordance with section 101(b)(2) of NAHASDA. If the waiver is approved, the recipient is eligible to receive its grant in accordance with any conditions of the waiver. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71527, Dec. 3, 2012] Sec. 1000.232 Can an Indian tribe or TDHE amend its IHP? Yes. Section 103(c) of NAHASDA specifically provides that a recipient may submit modifications or revisions of its IHP to HUD. Unless the initial IHP certification provided by an Indian tribe allowed for the submission of IHP amendments without further tribal certifications, a tribal certification must accompany submission of IHP amendments by a TDHE to HUD. HUD's review of an amendment and determination of compliance will be limited to modifications of an IHP which adds new activities or involve a decrease in the amount of funds provided to protect and maintain the viability of housing assisted under the 1937 Act. HUD will consider these modifications [[Page 708]] to the IHP in accordance with Sec. 1000.230. HUD will act on amended IHPs within 30 days. Sec. 1000.234 Can HUD's determination regarding the non-compliance of an IHP or a modification to an IHP be appealed? (a) Yes. Within 30 days of receiving HUD's disapproval of an IHP or of a modification to an IHP, the recipient may submit a written request for reconsideration of the determination. The request shall include the justification for the reconsideration. (b) Within 21 days of receiving the request, HUD shall reconsider its initial determination and provide the recipient with written notice of its decision to affirm, modify, or reverse its initial determination. This notice will also contain the reasons for HUD's decision. (c) The recipient may appeal any denial of reconsideration by filing an appeal with the Assistant Secretary within 21 days of receiving the denial. The appeal shall set forth the reasons why the recipient does not agree with HUD's decision and include justification for the reconsideration. (d) Within 21 days of receipt of the appeal, the Assistant Secretary shall review the recipient's appeal and act on the appeal. The Assistant Secretary will provide written notice to the recipient setting forth the reasons for the decision. The Assistant Secretary's decision constitutes final agency action. Sec. 1000.236 What are eligible administrative and planning expenses? (a) Eligible administrative and planning expenses of the IHBG program include, but are not limited to: (1) Costs of overall program and/or administrative management; (2) Coordination monitoring and evaluation; (3) Preparation of the IHP including data collection and transition costs; (4) Preparation of the annual performance report; (5) Challenge to and collection of data for purposes of challenging the formula; and (6) Administrative and planning expenses associated with expenditure of non-IHBG funds on affordable housing activities if the source of the non-IHBG funds limits expenditure of its funds on such administrative expenses. (b) Staff and overhead costs directly related to carrying out affordable housing activities or comprehensive and community development planning activities can be determined to be eligible costs of the affordable housing activity or considered as administration or planning at the discretion of the recipient. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71527, Dec. 3, 2012] Sec. 1000.238 What percentage of the IHBG funds can be used for administrative and planning expenses? Recipients receiving in excess of $500,000 may use up to 20 percent of their annual expenditures of grant funds or may use up to 20 percent of their annual grant amount, whichever is greater. Recipients receiving $500,000 or less may use up to 30 percent of their annual expenditures of grant funds or up to 30 percent of their annual grant amount, whichever is greater. When a recipient is receiving grant funds on behalf of one or more grant beneficiaries, the recipient may use up to 30 percent of the annual expenditure of grant funds or up to 30 percent of the annual grant amount, whichever is greater, of each grant beneficiary whose allocation is $500,000 or less, and up to 20 percent of the annual expenditure of grant funds or up to 20 percent of the annual grant amount, whichever is greater, of each grant beneficiary whose allocation is greater than $500,000. HUD approval is required if a higher percentage is requested by the recipient. Recipients combining grant funds with other funding may request HUD approval to use a higher percentage based on its total expenditure of funds from all sources for that year. When HUD approval is required, HUD must take into consideration any cost of preparing the IHP, challenges to and collection of data, the recipient's grant amount, approved cost allocation plans, and any other relevant information with special consideration given to the circumstances of recipients receiving minimal funding. [77 FR 71527, Dec. 3, 2012] [[Page 709]] Sec. 1000.239 May a recipient establish and maintain reserve accounts for administration and planning? Yes. In addition to the amounts established for planning and administrative expenses under Sec. Sec. 1000.236 and 1000.238, a recipient may establish and maintain separate reserve accounts only for the purpose of accumulating amounts for administration and planning relating to affordable housing activities. These amounts may be invested in accordance with Sec. 1000.58(c). Interest earned on reserves is not program income and shall not be included in calculating the maximum amount of reserves. The maximum amount of reserves, whether in one or more accounts, that a recipient may have available at any one time is calculated as follows: (a) Determine the 5-year average of administration and planning amounts, not including reserve amounts, expended in a tribal program year. (b) Establish \1/4\ of that amount for the total eligible reserve. [77 FR 71527, Dec. 3, 2012] Sec. 1000.240 When is a local cooperation agreement required for affordable housing activities? The requirement for a local cooperation agreement applies only to rental and lease-purchase homeownership units assisted with IHBG funds which are owned by the Indian tribe or TDHE. Sec. 1000.242 When does the requirement for exemption from taxation apply to affordable housing activities? The requirement for exemption from taxation applies only to rental and lease-purchase homeownership units assisted with IHBG funds which are owned by the Indian tribe or TDHE. Sec. 1000.244 If the recipient has made a good-faith effort to negotiate a cooperation agreement and tax-exempt status but has been unsuccessful through no fault of its own, may the Secretary waive the requirement for a cooperation agreement and a tax exemption? Yes. Recipients must submit a written request for waiver to the recipient's Area ONAP. The request must detail a good faith effort by the recipient, identify the housing units involved, and include all pertinent background information about the housing units. The recipient must further demonstrate that it has pursued and exhausted all reasonable channels available to it to reach an agreement to obtain tax- exempt status, and that failure to obtain the required agreement and tax-exempt status has been through no fault of its own. The Area ONAP will forward the request, its recommendation, comments, and any additional relevant documentation to the Deputy Assistant Secretary for Native American Programs for processing to the Assistant Secretary. [77 FR 71527, Dec. 3, 2012] Sec. 1000.246 How must HUD respond to a request for waiver of the requirement for a cooperation agreement and a tax exemption? (a) HUD shall make a determination to such request for a waiver within 30 days of receipt or provide a reason to the requestor for the delay, identify all additional documentation necessary, and provide a timeline within which a determination will be made. (b) If the waiver is granted, HUD shall notify the recipient of the waiver in writing and inform the recipient of any special condition or deadlines with which it must comply. Such waiver shall remain effective until revoked by the Secretary. (c) If the waiver is denied, HUD shall notify the recipient of the denial and the reason for the denial in writing. If the request is denied, IHBG funds may not be spent on the housing units. If IHBG funds have been spent on the housing units prior to the denial, the recipient must reimburse the grant for all IHBG funds expended. [77 FR 71527, Dec. 3, 2012] Subpart D_Allocation Formula Sec. 1000.301 What is the purpose of the IHBG formula? The IHBG formula is used to allocate equitably and fairly funds made available through NAHASDA among eligible Indian tribes. A TDHE may be a recipient on behalf of an Indian tribe. [[Page 710]] Sec. 1000.302 What are the definitions applicable for the IHBG formula? Allowable Expense Level (AEL) factor. In rental projects, AEL is the per-unit per-month dollar amount of expenses which was used to compute the amount of operating subsidy used prior to October 1, 1997 for the Low Rent units developed under the 1937 Act. The ``AEL factor'' is the relative difference between a local area AEL and the national weighted average for AEL. Date of Full Availability (DOFA) means the last day of the month in which substantially all the units in a housing development are available for occupancy. Fair Market Rent (FMR) factors are gross rent estimates; they include shelter rent plus the cost of all utilities, except telephones. HUD estimates FMRs on an annual basis for 354 metropolitan FMR areas and 2,355 non-metropolitan county FMR areas. The ``FMR factor'' is the relative difference between a local area FMR and the national weighted average for FMR. Formula Annual Income. For purposes of the IHBG formula, annual income is a household's total income as currently defined by the U.S. Census Bureau. Formula area. (1) Formula areas are: (i) Reservations for federally recognized Indian tribes, as defined by the U.S. Census; (ii) Trust lands; (iii) Department of the Interior Near-Reservation Service Areas; (iv) Former Indian Reservation Areas in Oklahoma Indian Areas, as defined by the U.S. Census as Oklahoma Tribal Statistical Areas (OTSAs); (v) Congressionally Mandated Service Areas; (vi) State Tribal Areas as defined by the U.S. Census as State Designated American Indian Statistical Areas (SDAISAs); (vii) Tribal Designated Statistical Areas (TDSAs); (viii) California Tribal Jurisdictional Areas established or reestablished by federal court judgment; and (ix) Alaska formula areas described in paragraph (4) of this definition. (2)(i) For a geographic area not identified in paragraph (1) of this definition, and for expansion or re-definition of a geographic area from the prior year, including those identified in paragraph (1) of this definition, the Indian tribe must submit, on a form agreed to by HUD, information about the geographic area it wishes to include in its Formula Area, including proof that the Indian tribe, where applicable, has agreed to provide housing services pursuant to a Memorandum of Agreement (MOA) with the tribal and public governing entity or entities of the area, or has attempted to establish such an MOA, and is providing substantial housing services and will continue to expend or obligate funds for substantial housing services, as reflected in its Indian Housing Plan and Annual Performance Report for this purpose. (ii) Upon receiving a request for recognition of a geographic area not identified in paragraph (1) of this definition, HUD shall make a preliminary determination. HUD shall notify all potentially affected Indian tribes of the basis for its preliminary determination by certified mail and provide the Indian tribes with the opportunity to comment for a period of not less than 90 days. After consideration of the comments, HUD shall announce its final determination through Federal Register notice. (iii) No Indian tribe may expand or redefine its Formula Area without complying with the requirements of paragraphs (2)(i) and (ii) of this definition, notwithstanding any changes recognized by the U.S. Census Bureau. (iv) The geographic area into which an Indian tribe may expand under this paragraph (2) shall be the smallest U.S. Census unit or units encompassing the physical location where substantial housing services have been provided by the Indian tribe. (3) Subject to a challenge by an Indian tribe with a Formula Area described under paragraph (1)(iv) of this definition, any federally recognized Indian tribe assigned Formula Area geography in Fiscal Year 2003 not identified in paragraphs (1) and (2) of this definition, shall continue to be assigned such Formula Area in subsequent fiscal years, provided that the Indian tribe continues to provide an appropriate level of housing services within the Formula Area as monitored by HUD using the definition of substantial [[Page 711]] housing services contained in this section as a guideline but not as a requirement. (4) Notwithstanding paragraphs (1), (2), and (3) of this definition, Alaska needs data shall be credited as set forth in Sec. 1000.327 to the Alaska Native Village (ANV), the regional Indian tribe, or to the regional corporation established pursuant to the Alaska Native Claims Settlement Act (33 U.S.C. 1601 et seq.) (ANCSA). For purposes of Sec. 1000.327 and this definition: (i) The formula area of the ANV shall be the geographic area of the village or that area delineated by the TDSA established for the ANV for purposes of the 1990 U.S. Census or the Alaska Native Village Statistical Area (ANVSA) established for the ANV. To the extent that the area encompassed by such designation may substantially exceed the actual geographic area of the village, such designation is subject to challenge pursuant to Sec. 1000.336. If the ANVSA or the TDSA is determined pursuant to such challenge to substantially exceed the actual area of the village, then the geographic formula area of the ANV for purposes of Sec. 1000.327 shall be such U.S. Census designation as most closely approximates the actual geographic area of the village. (ii) The geographic formula area of the regional corporation shall be the area established for the corporation by the ANCSA. (iii) An Indian tribe may seek to expand its Alaska formula area within its ANCSA region pursuant to the procedures set out in paragraph (2) of this definition. Formula Area added in this way shall be treated as overlapping pursuant to Sec. 1000.326, unless the Indian tribe's members in the expanded area are less than 50 percent of the AIAN population. In cases where the Indian tribe is not treated as overlapping, the Indian tribe shall be credited with population and housing data only for its own tribal member residents within the new or added area. All other population and housing data for the area shall remain with the Indian tribe or tribes previously credited with such data. (5) In some cases the population data for an Indian tribe within its Formula Area is greater than its tribal enrollment. In general, to maintain fairness for all Indian tribes, the tribe's population data will not be allowed to exceed twice an Indian tribe's enrolled population. However, an Indian tribe subject to this cap may receive an allocation based on more than twice its total enrollment if it can show that it is providing housing assistance to substantially more non-member Indians and Alaska Natives who are members of another federally recognized Indian tribe than it is to members. For state-recognized Indian tribes, the population data and formula allocation shall be limited to their tribal enrollment figures as determined under enrollment criteria in effect in 1996. (6) In cases where an Indian tribe is seeking to receive an allocation more than twice its total enrollment, the tribal enrollment multiplier will be determined by the total number of Indians and Alaska Natives to whom the Indian tribe is providing housing assistance (on July 30 of the year before funding is sought) divided by the number of members to whom the Indian tribe is providing housing assistance. For example, an Indian tribe that provides housing to 300 Indians and Alaska Natives, of which 100 are members, the Indian tribe would then be able to receive an allocation for up to three times its tribal enrollment if the Indian and Alaska Native population in the area is three or more times the tribal enrollment. Formula Median Income. For purposes of the formula median income is determined in accordance with section 567 of the Housing and Community Development Act of 1987 (42 U.S.C. 1437a note). Formula Response Form is the form recipients use to report changes to their Formula Current Assisted stock, formula area, and other formula related information before each year's formula allocation. Indian Housing Authority (IHA) financed means a homeownership program where title rests with the homebuyer and a security interest rests with the IHA. Mutual Help Occupancy Agreement (MHOA) means a lease with option to purchase contract between an IHA and a homebuyer under the 1937 Act. [[Page 712]] National per unit subsidy is the Fiscal Year 1996 national per unit subsidy (adjusted to full funding level) multiplied by an adjustment factor for inflation. Overcrowded means households with more than 1.01 persons per room as defined by the U.S. Decennial Census. Section 8 means the making of housing assistance payments to eligible families leasing existing housing pursuant to the provisions of the 1937 Act. Section 8 unit means the contract annualized housing assistance payments (certificates, vouchers, and project based) under the Section 8 program. Substantial housing services are: (1) Affordable housing activities funded from any source provided to AIAN households with incomes 80 percent of the median income as defined in NAHASDA (25 U.S.C. 4103 (14)) or lower, equivalent to 100 percent or more of the increase in the IHBG formula allocation that the Indian tribe would receive as a result of adding the proposed geography; or (2) Affordable housing activities funded with IHBG funds provided to AIAN households with incomes 80 percent of the median income as defined in NAHASDA (25 U.S.C. 4104(14)) or lower, equivalent to 51 percent or more of the Indian tribe's current total IHBG grant; and either: (i) Fifty-one percent or more of the Indian tribe's official enrollment resides within the geographic area; or (ii) The Indian tribe's official enrollment constitutes 51 percent or more of the total AIAN persons within the geography. (3) HUD shall require that the Indian tribe annually provide written verification, in its Indian Housing Plan and Annual Performance Report, that the affordable housing activities it is providing meet the definition of substantial housing services. Total Development Cost (TDC) is the sum of all costs for a project including all undertakings necessary for administration, planning, site acquisition, demolition, construction or equipment and financing (including payment of carrying charges) and for otherwise carrying out the development of the project, excluding off site water and sewer. Total Development Cost amounts will be based on a moderately designed house and will be determined by averaging the current construction costs as listed in not less than two nationally recognized residential construction cost indices. Without kitchen or plumbing means, as defined by the U.S. Decennial Census, an occupied house without one or more of the following items: (1) Hot and cold piped water; (2) A flush toilet; (3) A bathtub or shower; (4) A sink with piped water; (5) A range or cookstove; or (6) A refrigerator. [63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20023, Apr. 20, 2007; 77 FR 71527, Dec. 3, 2012; 81 FR 83680, Nov. 22, 2016] Sec. 1000.304 May the IHBG formula be modified? Yes, as long as any modification does not conflict with the requirements of NAHASDA. Sec. 1000.306 How can the IHBG formula be modified? (a) The IHBG formula can be modified upon development of a set of measurable and verifiable data directly related to Indian and Alaska Native housing need. Any data set developed shall be compiled with the consultation and involvement of Indian tribes and examined and/or implemented not later than 5 years from the date of issuance of these regulations and periodically thereafter. (b) The IHBG Formula shall be reviewed not later than May 21, 2012 to determine if a subsidy is needed to operate and maintain NAHASDA units or if any other changes are needed in respect to funding under the Formula Current Assisted Stock component of the formula. [63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20024, Apr. 20, 2007; 81 FR 83680, Nov. 22, 2016] Sec. 1000.308 Who can make modifications to the IHBG formula? HUD can make modifications in accordance with Sec. 1000.304 and Sec. 1000.306 provided that any changes proposed by HUD are published and made available for public comment in accordance with [[Page 713]] applicable law before their implementation. Sec. 1000.310 What are the components of the IHBG formula? The IHBG formula consists of four components: (a) Formula Current Assisted Stock (FCAS) (Sec. 1000.316); (b) Need (Sec. 1000.324); (c) 1996 Minimum (Sec. 1000.340); and (d) Undisbursed IHBG funds factor (Sec. 1000.342). [81 FR 83680, Nov. 22, 2016] Sec. 1000.312 What is current assisted stock? Current assisted stock consists of housing units owned or operated pursuant to an ACC. This includes all low rent, Mutual Help, and Turnkey III housing units under management as of September 30, 1997, as indicated in the Formula Response Form. Sec. 1000.314 What is formula current assisted stock? Formula current assisted stock is current assisted stock as described in Sec. 1000.312 plus 1937 Act units in the development pipeline when they become owned or operated by the recipient and are under management as indicated in the Formula Response Form. Formula current assisted stock also includes Section 8 units when their current contract expires and the Indian tribe continues to manage the assistance in a manner similar to the Section 8 program, as reported on the Formula Response Form. Sec. 1000.315 Is a recipient required to report changes to the Formula Current Assisted Stock (FCAS) on the Formula Response Form? (a) A recipient shall report changes to information related to the IHBG formula on the Formula Response Form, including corrections to the number of Formula Current Assisted Stock (FCAS), during the time period required by HUD. This time period shall be not less than 60 days from the date of the HUD letter transmitting the form to the recipient. (b) The Formula Response Form is the only mechanism that a recipient shall use to report changes to the number of FCAS. [72 FR 20025, Apr. 20, 2007] Sec. 1000.316 How is the Formula Current Assisted Stock (FCAS) Component developed? The Formula Current Assisted Stock component consists of two elements. They are: (a) Operating subsidy. The operating subsidy consists of three variables which are: (1) The number of low-rent FCAS units multiplied by the national per unit subsidy; (2) The number of Section 8 units whose contract has expired but had been under contract on September 30, 1997, multiplied by the FY 1996 national per unit subsidy; and (3) The number of Mutual Help and Turnkey III FCAS units multiplied by the national per unit subsidy. (b) Modernization allocation. (1) For Indian tribes with an Indian Housing Authority that owned or operated 250 or more public housing units on October 1, 1997, the modernization allocation equals the number of Low Rent, Mutual Help, and Turnkey III FCAS units multiplied by the national per-unit amount of allocation for FY 1996 modernization multiplied by an adjustment factor for inflation. (2) For Indian tribes with an Indian Housing Authority that owned or operated fewer than 250 public housing units on October 1, 1997, the modernization allocation equals the average amount of funds received under the assistance program authorized by section 14 of the 1937 Act (not including funds provided as emergency assistance) for FYs 1992 through 1997. (c) Conversion. Conversion of FCAS units from homeownership (Mutual Help or Turnkey III) to low-rent or from low-rent to a home ownership program. (1) If units were converted before October 1, 1997, as evidenced by an amended ACC, then those units will be counted for formula funding and eligibility purposes as the type of unit to which they were converted. (2) If units were converted on or after October 1, 1997, the following applies: [[Page 714]] (i) Funding type. Units that converted after October 1, 1997 will be funded as the type of unit specified on the original ACC in effect on September 30, 1997. (ii) Continued FCAS eligibility. Whether or not it is the first conversion, a unit converted after October 1, 1997, will be considered as the type converted to when determining continuing FCAS eligibility. A unit that is converted to low-rent will be treated as a low-rent unit for purposes of determining continuing FCAS eligibility. A unit that is converted to homeownership will be treated as a homeownership unit for purposes of determining continuing FCAS eligibility. (3) The Indian tribe, TDHE, or IHA shall report conversions on the Formula Response Form. [63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20025, Apr. 20, 2007; 81 FR 83680, Nov. 22, 2016] Sec. 1000.317 Who is the recipient for funds for current assisted stock which is owned by state-created Regional Native Housing Authorities in Alaska? If housing units developed under the 1937 Act are owned by a state- created Regional Native Housing Authority in Alaska, and are not located on an Indian reservation, then the recipient for funds allocated for the current assisted stock portion of NAHASDA funds for the units is the regional Indian tribe. Sec. 1000.318 When do units under Formula Current Assisted Stock cease to be counted or expire from the inventory used for the formula? (a) Mutual Help and Turnkey III units shall no longer be considered Formula Current Assisted Stock when the Indian tribe, TDHE, or IHA no longer has the legal right to own, operate, or maintain the unit, whether such right is lost by conveyance, demolition, or otherwise, provided that: (1) Conveyance of each Mutual Help or Turnkey III unit occurs as soon as practicable after a unit becomes eligible for conveyance by the terms of the MHOA; and (2) The Indian tribe, TDHE, or IHA actively enforce strict compliance by the homebuyer with the terms and conditions of the MHOA, including the requirements for full and timely payment. (b)(1) A Mutual Help or Turnkey III unit not conveyed after the unit becomes eligible for conveyance by the terms of the MHOA may continue to be considered Formula Current Assisted Stock only if a legal impediment prevented conveyance; the legal impediment continues to exist; the tribe, TDHE, or IHA has taken all other steps necessary for conveyance and all that remains for conveyance is a resolution of the legal impediment; and the tribe, TDHE, or IHA made the following reasonable efforts to overcome the impediments: (i) No later than four months after the unit becomes eligible for conveyance, the tribe, TDHE, or IHA creates a written plan of action, which includes a description of specific legal impediments as well as specific, ongoing, and appropriate actions for each applicable unit that have been taken and will be taken to resolve the legal impediments within a 24-month period; and (ii) The tribe, TDHE, or IHA has carried out or is carrying out the written plan of action; and (iii) The tribe, TDHE, or IHA has documented undertaking the plan of action. (2) No Mutual Help or Turnkey III unit will be considered FCAS 24 months after the date the unit became eligible for conveyance, unless the tribe, TDHE, or IHA provides evidence from a third party, such as a court or state or federal government agency, documenting that a legal impediment continues to prevent conveyance. FCAS units that have not been conveyed due to legal impediments on December 22, 2016 shall be treated as having become eligible for conveyance on December 22, 2016. (c) Rental units shall continue to be included for formula purposes as long as they continue to be operated as low income rental units by the Indian tribe, TDHE, or IHA. (d) Expired contract Section 8 units shall continue as rental units and be included in the formula as long as they are operated as low income rental units as included in the Indian tribe's or TDHE's Formula Response Form. [[Page 715]] (e) A unit that is demolished pursuant to a planned demolition may be considered eligible as a FCAS unit if, after demolition is completed, the unit is rebuilt within one year. Demolition is completed when the site of the demolished unit is ready for rebuilding. If the unit cannot be rebuilt within one year because of relative administrative capacities and other challenges faced by the recipient, including, but not limited to geographic distribution within the Indian area and technical capacity, the Indian tribe, TDHE or IHA may request approval for a one- time, one-year extension. Requests must be submitted in writing and include a justification for the request. [63 FR 12349, Mar. 12, 1998, as amended at 81 FR 83680, Nov. 22, 2016] Sec. 1000.319 What would happen if a recipient misreports or fails to correct Formula Current Assisted Stock (FCAS) information on the Formula Response Form? (a) A recipient is responsible for verifying and reporting changes to their Formula Current Assisted Stock (FCAS) on the Formula Response Form to ensure that data used for the IHBG Formula are accurate (see Sec. 1000.315). Reporting shall be completed in accordance with requirements in this Subpart D and the Formula Response Form. (b) If a recipient receives an overpayment of funds because it failed to report such changes on the Formula Response Form in a timely manner, the recipient shall be required to repay the funds within 5 fiscal years. HUD shall subsequently distribute the funds to all Indian tribes in accordance with the next IHBG Formula allocation. (c) A recipient will not be provided back funding for any units that the recipient failed to report on the Formula Response Form in a timely manner. (d) HUD shall have 3 years from the date a Formula Response Form is sent out to take action against any recipient that fails to correct or make appropriate changes on that Formula Response Form. Review of FCAS will be accomplished by HUD as a component of A-133 audits, routine monitoring, FCAS target monitoring, or other reviews. [72 FR 20025, Apr. 20, 2007] Sec. 1000.320 How is Formula Current Assisted Stock adjusted for local area costs? There are two adjustment factors that are used to adjust the allocation of funds for the Current Assisted Stock portion of the formula. They are: (a) Operating Subsidy as adjusted by the greater of the AEL factor or FMR factor (AELFMR); and (b) Modernization as adjusted by TDC. Sec. 1000.322 Are IHA financed units included in the determination of Formula Current Assisted Stock? No. If these units are not owned or operated at the time (September 30, 1997) pursuant to an ACC then they are not included in the determination of Formula Current Assisted Stock. Sec. 1000.324 How is the need component developed? After determining the FCAS allocation, remaining funds are allocated by need component. The need component consists of seven criteria. They are: (a) American Indian and Alaskan Native (AIAN) Households with housing cost burden greater than 50 percent of formula annual income weighted at 22 percent; (b) AIAN Households which are overcrowded or without kitchen or plumbing weighted at 25 percent; (c) Housing Shortage which is the number of AIAN households with an annual income less than or equal to 80 percent of formula median income reduced by the combination of current assisted stock and units developed under NAHASDA weighted at 15 percent; (d) AIAN households with annual income less than or equal to 30 percent of formula median income weighted at 13 percent; (e) AIAN households with annual income between 30 percent and 50 percent of formula median income weighted at 7 percent; (f) AIAN households with annual income between 50 percent and 80 percent [[Page 716]] of formula median income weighted at 7 percent; (g) AIAN persons weighted at 11 percent. Sec. 1000.325 How is the need component adjusted for local area costs? The need component is adjusted by the TDC. Sec. 1000.326 What if a formula area is served by more than one Indian tribe? (a) If an Indian tribe's formula area overlaps with the formula area of one or more other Indian tribes, the funds allocated to that Indian tribe for the geographic area in which the formula areas overlap will be divided based on: (1) The Indian tribe's proportional share of the population in the overlapping geographic area; and (2) The Indian tribe's commitment to serve that proportional share of the population in such geographic area. (3) In cases where a State recognized tribe's formula area overlaps with the formula area of a Federally recognized Indian tribe, the Federally recognized Indian tribe receives the allocation for the formula area up to its population cap, and the State recognized tribe receives the balance of the overlapping area (if any) up to its population cap. (b) Tribal membership in the geographic area (not to include dually enrolled tribal members) will be based on data that all Indian tribes involved agree to use. Suggested data sources include tribal enrollment lists, the U.S. Census, Indian Health Service User Data, and Bureau of Indian Affairs data. (c) Upon receiving a request for expansion or redefinition of a tribe's formula area, if approving the request would create an overlap, HUD shall follow the notice and comment procedures set forth in paragraph (2)(ii) of the definition of ``Formula area'' in Sec. 1000.302. (d) If the Indian tribes involved cannot agree on what data source to use, HUD will make the decision on what data will be used to divide the funds between the Indian tribes by August 1. [63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20025, Apr. 20, 2007; 81 FR 83681, Nov. 22, 2016] Sec. 1000.327 What is the order of preference for allocating the IHBG formula needs data for Indian tribes in Alaska not located on reservations due to the unique circumstances in Alaska? (a) Data in areas without reservations. The data on population and housing within an Alaska Native Village is credited to the Alaska Native Village. Accordingly, the village corporation for the Alaska Native Village has no needs data and no formula allocation. The data on population and housing outside the Alaska Native Village is credited to the regional Indian tribe, and if there is no regional Indian tribe, the data will be credited to the regional corporation. (b) Deadline for notification on whether an IHP will be submitted. By September 15 of each year, each Indian tribe in Alaska not located on a reservation, including each Alaska Native village, regional Indian tribe, and regional corporation, or its TDHE must notify HUD in writing whether it or its TDHE intends to submit an IHP. If an Alaska Native village notifies HUD that it does not intend either to submit an IHP or to designate a TDHE to do so, or if HUD receives no response from the Alaska Native village or its TDHE, the formula data which would have been credited to the Alaska Native village will be credited to the regional Indian tribe, or if there is no regional Indian tribe, to the regional corporation. Sec. 1000.328 What is the minimum amount that an Indian tribe may receive under the need component of the formula? (a) Subject to the eligibility criteria described in paragraph (b) of this section, the minimum allocation in any fiscal year to an Indian tribe under the need component of the IHBG Formula shall equal 0.007826 percent of the available appropriations for that fiscal year after set asides. (b) To be eligible for the minimum allocation described in paragraph (a) of this section, an Indian tribe must: (1) Receive less than $200,000 under the FCAS component of the IHBG Formula for the fiscal year; and [[Page 717]] (2) Certify in its Indian Housing Plan the presence of any households at or below 80 percent of median income. [72 FR 20025, Apr. 20, 2007, as amended at 77 FR 71527, Dec. 3, 2012] Sec. 1000.329 What is the minimum total grant allocated to a tribe if there is carryover funds available? (a) If in any given year there are carryover funds, then HUD will hold the lesser amount of $3 million or available carryover funds for additional allocations to tribes with grant allocations of less than 0.011547 percent of that year's appropriations. All tribes eligible under this section shall receive a grant allocation equal to 0.011547 percent of that year's appropriations. (b)(1) If the set-aside carryover funds are insufficient to fund all eligible tribes at 0.011547 percent of that year's appropriations, the minimum total grant shall be reduced to an amount which can be fully funded with the available set-aside carryover funds. (2) If less than $3 million is necessary to fully fund tribes under paragraph (a) of this section, any remaining carryover amounts of the set aside shall be carried forward to the next year's formula. (c) To be eligible, an Indian tribe must certify in its Indian Housing Plan the presence of any households at or below 80 percent of median income. (d) For purposes of this section, carryover funds means grant funds voluntarily returned to the formula or not accepted by tribes in a fiscal year. [81 FR 83681, Nov. 22, 2016] Sec. 1000.330 What are the data sources for the need variables? (a) The sources of data for the need variables shall be data that are available and collected in a uniform manner that can be confirmed and verified for all AIAN households and persons living in an identified area. Until fiscal year 2018, the data used are 2000 U.S. Decennial Census data and any HUD-accepted Census challenges. The 2000 U.S. Decennial Census data shall be adjusted annually using IHS projections based upon birth and death rate data provided by the National Center for Health Statistics. (b)(1) Beginning fiscal year 2018, the data source used to determine the AIAN persons variable described in Sec. 1000.324(g) shall be the most recent U.S. Decennial Census data adjusted for any statistically significant undercount for AIAN population confirmed by the U.S. Census Bureau and updated annually using the U.S. Census Bureau county level Population Estimates for Native Americans. For Remote Alaska as designated by the U.S. Census Bureau, Alaska Formula Areas in Remote Alaska shall be treated as Reservation and Trust Lands, unless the U.S. Census Bureau includes Remote Alaska in their Census Coverage Measurement or comparable study. The data under this paragraph (b) shall be updated annually using the U.S. Census Bureau county level Population Estimates for Native Americans. (2) Beginning fiscal year 2018, the data source used to determine the variables described in paragraphs (a) through (f) of Sec. 1000.324 shall initially be the American Community Survey (ACS) 5-year Estimates. (c) Indian tribes may challenge the data described in this section pursuant to Sec. 1000.336. [81 FR 83681, Nov. 22, 2016] Sec. 1000.331 How will the impacts from adoption of a new data source be minimized as the new data source is implemented? (a) To minimize the impact of funding changes based on the introduction of a new data source under Sec. 1000.330, in fiscal year 2018 and each year thereafter, if, solely as a direct result of the introduction of a new data source, an Indian tribe's allocation under the need component of the formula is less than 90 percent of the amount it received under the need component in the immediate previous fiscal year, the Indian tribe's need allocation shall be adjusted up to an amount equal to 90 percent of the previous year's need allocation. (b) Nothing in this section shall impact other adjustments under this part, including minimum funding, census challenges, formula area changes, or an increase in the total amount of funds available under the need component. [[Page 718]] (c) In the event of a decrease in the total amount of funds available under the need component, an Indian tribe's adjusted allocation under paragraph (a) of this section shall be reduced by an amount proportionate to the reduced amount available for distribution under the need component of the formula. (d) Adjustments under paragraph (b) or (c) of this section shall be made to a tribe's need allocation after adjusting that allocation under paragraph (a) of this section. [81 FR 83681, Nov. 22, 2016] Sec. 1000.332 Will data used by HUD to determine an Indian tribe's or TDHE's formula allocation be provided to the Indian tribe or TDHE before the allocation? Yes. HUD shall provide the Indian tribe or TDHE notice of the data to be used for the formula and projected allocation amount by June 1. [77 FR 71528, Dec. 3, 2012] Sec. 1000.334 May Indian tribes, TDHEs, or HUD challenge the data from the U.S. Decennial Census or provide an alternative source of data? Yes. Provided that the data are gathered, evaluated, and presented in a manner acceptable to HUD and that the standards for acceptability are consistently applied throughout the Country. Sec. 1000.336 How may an Indian tribe, TDHE, or HUD challenge data or appeal HUD formula determinations? (a) An Indian tribe, TDHE, or HUD may challenge data used in the IHBG Formula and HUD formula determinations regarding: (1) U.S. Census data; (2) Tribal enrollment; (3) Formula area; (4) Formula Current Assisted Stock (FCAS); (5) Total Development Cost (TDC); (6) Fair Market Rents (FMRs); (7) Indian Health Service projections based upon birth and death rate data provided by the National Center for Health Statistics; and (8) The undisbursed funds factor. (b) An Indian tribe or TDHE may not challenge data or HUD formula determinations regarding Allowable Expense Level (AEL) and the inflation factor. (c) The challenge and the collection of data and the appeal of HUD formula determinations is an allowable cost for IHBG funds. (d) An Indian tribe or TDHE that seeks to appeal data or a HUD formula determination, and has data in its possession that are acceptable to HUD, shall submit the challenge or appeal in writing with data and proper documentation to HUD. An Indian tribe or TDHE may appeal the undisbursed funds factor no later than 30 days after the receipt of the formula determination. Data used to challenge data contained in the U.S. Census must meet the requirements described in Sec. 1000.330(a). Further, in order for a census challenge to be considered for the upcoming fiscal year allocation, documentation must be submitted by March 30th. (e) HUD shall respond to all challenges or appeals no later than 45 days after receipt and either approve or deny the appeal in writing, setting forth the reasons for its decision. (1) If HUD challenges the validity of the submitted data HUD and the Indian tribe or TDHE shall attempt in good faith to resolve any discrepancies so that such data may be included in the formula allocation. (2) If HUD denies a challenge or appeal, the Indian tribe or TDHE may request reconsideration of HUD's denial within 30 calendar days of receipt of HUD's denial. The request shall be in writing and set forth justification for reconsideration. (3) HUD shall in writing affirm or deny the Indian tribe's or TDHE's request for reconsideration, setting forth HUD's reasons for the decision, within 20 calendar days of receiving the request. HUD's denial of a request for reconsideration shall constitute final agency action. (4) If HUD approves the Indian tribe or TDHE's appeal, HUD will adjust to the Indian tribe's or TDHE's subsequent fiscal year allocation to include only the disputed fiscal year(s). [[Page 719]] (f) In the event HUD questions whether the data contained in the formula accurately represents the Indian tribe's need, HUD shall request the Indian tribe to submit supporting documentation to justify the data and, if applicable, to provide a commitment to serve the population indicated in the geographic area. [72 FR 20025, Apr. 20, 2007, as amended at 81 FR 83681, Nov. 22, 2016] Sec. 1000.340 What if an Indian tribe is allocated less funding under the IHBG Formula than it received in Fiscal Year (FY) 1996 for operating subsidy and modernization? (a) If an Indian tribe is allocated less funding under the modernization allocation of the formula pursuant to Sec. 1000.316(b)(2) than the calculation of the number of Low Rent, Mutual Help, and Turnkey III FCAS units multiplied by the national per-unit amount of allocation for FY 1996 modernization multiplied by an adjustment factor for inflation, the Indian tribe's modernization allocation is calculated under Sec. 1000.316(b)(1). The remaining grants are adjusted to keep the allocation within available appropriations. (b) If an Indian tribe is allocated less funding under the formula than an IHA received on its behalf in FY 1996 for operating subsidy and modernization, its grant is increased to the amount received in FY 1996 for operating subsidy and modernization. The remaining grants are adjusted to keep the allocation within available appropriations. [72 FR 20026, Apr. 20, 2007] Sec. 1000.342 Are undisbursed IHBG funds a factor in the grant formula? Yes, beginning fiscal year 2018. After calculating the initial allocation calculation for the current fiscal year by calculating FCAS, need, the 1996 Minimum, and repayments or additions for past over- or under-funding for each Indian tribe, the undisbursed funds factor shall be applied as follows: (a) The undisbursed funds factor applies if an Indian tribe's initial allocation calculation is $5 million or more and the Indian tribe has undisbursed IHBG funds in an amount that is greater than the sum of the prior 3 years' initial allocation calculations. (b) If subject to paragraph (a) of this section, the Indian tribe's grant allocation shall be the greater of the initial allocation calculation minus the amount of undisbursed IHBG funds that exceed the sum of the prior 3 years' initial allocation calculations, or its 1996 Minimum. (c) For purposes of this section, ``undisbursed IHBG funds'' means the amount of IHBG funds allocated to an Indian tribe in HUD's line of credit control system on October 1 of the fiscal year for which the allocation is made. For Indian tribes under an umbrella TDHE (a recipient that has been designated to receive grant amounts by more than one Indian tribe), if the Indian tribe's initial allocation calculation is $5 million or more, its undisbursed IHBG funds is the amount calculated by multiplying the umbrella TDHE's total balance in HUD's line of credit control system on October 1 of the fiscal year for which the allocation is made by a percentage based on the Indian tribe's proportional share of the initial allocation calculation of all tribes under the umbrella. (d) Amounts subtracted from an initial allocation calculation under this section shall be redistributed under the need component among all Indian tribes not subject to paragraph (a) of this section (while also retaining the 1996 Minimum). [81 FR 83682, Nov. 22, 2016] Subpart E_Federal Guarantees for Financing of Tribal Housing Activities Sec. 1000.401 What terms are used throughout this subpart? As used throughout title VI of NAHASDA and in this subpart: Applicant means the entity that requests a HUD guarantee under the provisions of this subpart. Borrower means an Indian tribe or TDHE that receives funds in the form of a loan with the obligation to repay in full, with interest, and has executed notes or other obligations that evidence that transaction. Issuer means an Indian tribe or TDHE that issues or executes notes or other [[Page 720]] obligations. An issuer can also be a borrower. Sec. 1000.402 Are State recognized Indian tribes eligible for guarantees under title VI of NAHASDA? Those State recognized Indian tribes that meet the definition set forth in section 4(12)(C) of NAHASDA are eligible for guarantees under title VI of NAHASDA. Sec. 1000.404 What lenders are eligible for participation? Eligible lenders are those approved under and meeting the qualifications established in this subpart, except that loans otherwise insured or guaranteed by an agency of the United States, or made by an organization of Indians from amounts borrowed from the United States, shall not be eligible for guarantee under this part. The following lenders are deemed to be eligible under this subpart: (a) Any mortgagee approved by HUD for participation in the single family mortgage insurance program under title II of the National Housing Act; (b) Any lender whose housing loans under chapter 37 of title 38, United States Code, are automatically guaranteed pursuant to section 1802(d) of such title; (c) Any lender approved by the Department of Agriculture to make guaranteed loans for single family housing under the Housing Act of 1949; (d) Any other lender that is supervised, approved, regulated, or insured by any agency of the United States; and (e) Any other lender approved by the Secretary. Sec. 1000.406 What constitutes tribal approval to issue notes or other obligations under title VI of NAHASDA? Tribal approval is evidenced by a written tribal resolution that authorizes the issuance of notes or obligations by the Indian tribe or a TDHE on behalf of the Indian tribe. Sec. 1000.410 What conditions shall HUD prescribe when providing a guarantee for notes or other obligations issued by an Indian tribe? HUD shall provide that: (a) Any loan, note or other obligation guaranteed under title VI of NAHASDA may be sold or assigned by the lender to any financial institution that is subject to examination and supervision by an agency of the Federal government, any State, or the District of Columbia without destroying or otherwise negatively affecting the guarantee; and (b) Indian tribes and housing entities are encouraged to explore creative financing mechanisms and in so doing shall not be limited in obtaining a guarantee. These creative financing mechanisms include but are not limited to: (1) Borrowing from private or public sources or partnerships; (2) Issuing tax exempt and taxable bonds where permitted; and (3) Establishing consortiums or trusts for borrowing or lending, or for pooling loans. (c) The repayment period may exceed 20 years, and the length of the repayment period cannot be the sole basis for HUD disapproval; (d) Lender and issuer/borrower must certify that they acknowledge and agree to comply with all applicable tribal laws; and (e) A guarantee made under Title VI of NAHASDA shall guarantee repayment of 95 percent of the unpaid principal and interest due on the notes or other obligations guaranteed. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012] Sec. 1000.412 Can an issuer obtain a guarantee for more than one note or other obligation at a time? Yes. To obtain multiple guarantees, the issuer shall demonstrate that: (a) The issuer will not exceed a total for all notes or other obligations in an amount equal to five times its grant amount, excluding any amount no longer owed on existing notes or other obligations; and (b) Issuance of additional notes or other obligations is within the financial capacity of the issuer. Sec. 1000.414 How is an issuer's financial capacity demonstrated? An issuer must demonstrate its financial capacity to: (a) Meet its obligations; and [[Page 721]] (b) Protect and maintain the viability of housing developed or operated pursuant to the 1937 Act. Sec. 1000.416 What is a repayment contract in a form acceptable to HUD? (a) The Secretary's signature on a contract shall signify HUD's acceptance of the form, terms and conditions of the contract. (b) In loans under title VI of NAHASDA, involving a contract between an issuer and a lender other than HUD, HUD's approval of the loan documents and guarantee of the loan shall be deemed to be HUD's acceptance of the sufficiency of the security furnished. No other security can or will be required by HUD at a later date. Sec. 1000.418 Can grant funds be used to pay costs incurred when issuing notes or other obligations? Yes. Other costs that can be paid using grant funds include but are not limited to the costs of servicing and trust administration, and other costs associated with financing of debt obligations. Sec. 1000.420 May grants made by HUD under section 603 of NAHASDA be used to pay net interest costs incurred when issuing notes or other obligations? Yes. Other costs that can be paid using grant funds include but are not limited to the costs of servicing and trust administration, and other costs associated with financing of debt obligations, not to exceed 30 percent of the net interest cost. Sec. 1000.422 What are the procedures for applying for loan guarantees under title VI of NAHASDA? (a) The borrower applies to the lender for a loan using a guarantee application form prescribed by HUD. (b) The lender provides the loan application to HUD to determine if funds are available for the guarantee. HUD will reserve these funds for a period of 90 days if the funds are available and the applicant is otherwise eligible under this subpart. HUD may extend this reservation period for an extra 90 days if additional documentation is necessary. (c) The borrower and lender negotiate the terms and conditions of the loan in consultation with HUD. (d) The borrower and lender execute documents. (e) The lender formally applies for the guarantee. (f) HUD reviews and provides a written decision on the guarantee. Sec. 1000.424 What are the application requirements for guarantee assistance under title VI of NAHASDA? The application for a guarantee must include the following: (a) An identification of each of the activities to be carried out with the guaranteed funds and a description of how each activity qualifies: (1) As an affordable housing activity as defined in section 202 of NAHASDA; or (2) As a housing related community development activity under section 601(a) of NAHASDA. (b) A schedule for the repayment of the notes or other obligations to be guaranteed that identifies the sources of repayment, together with a statement identifying the entity that will act as the borrower. (c) A copy of the executed loan documents, if applicable, including, but not limited to, any contract or agreement between the borrower and the lender. (d) Certifications by the borrower that: (1) The borrower possesses the legal authority to pledge and that it will, if approved, make the pledge of grants required by section 602(a)(2) of NAHASDA. (2) It possesses the legal authority to borrow or issue obligations and to use the guaranteed funds in accordance with the requirements of this subpart. (3) Its governing body has duly adopted or passed as an official act a resolution, motion, or similar official action that: (i) Identifies the official representative of the borrower, and directs and authorizes that person to provide such additional information as may be required; and (ii) Authorizes such official representative to issue the obligation or to execute the loan or other documents, as applicable. [[Page 722]] (4) The borrower has complied with section 602(a) of NAHASDA. (5) The borrower will comply with the requirements described in subpart A of this part and other applicable laws. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012] Sec. 1000.426 How does HUD review a guarantee application? The procedure for review of a guarantee application includes the following steps: (a) HUD will review the application for compliance with title VI of NAHASDA and these implementing regulations. (b) HUD will accept the certifications submitted with the application. HUD may, however, consider relevant information that challenges the certifications and require additional information or assurances from the applicant as warranted by such information. Sec. 1000.428 For what reasons may HUD disapprove an application or approve an application for an amount less than that requested? HUD may disapprove an application or approve a lesser amount for any of the following reasons: (a) HUD determines that the guarantee constitutes an unacceptable risk. Factors that will be considered in assessing financial risk shall include, but not be limited to, the following: (1) The ratio of the expected annual debt service requirements to the expected available annual grant amount, taking into consideration the obligations of the borrower under the provisions of section 203(b) of NAHASDA; (2) Evidence that the borrower will not continue to receive grant assistance under this part during the proposed repayment period; (3) The borrower's inability to furnish adequate security pursuant to section 602(a) of NAHASDA; and (4) The amount of program income the proposed activities are reasonably estimated to contribute toward repayment of the guaranteed loan or other obligations. (b) The loan or other obligation for which the guarantee is requested exceeds any of the limitations specified in sections 601(c) or section 605(d) of NAHASDA. (c) Funds are not available in the amount requested. (d) Evidence that the performance of the borrower under this part has been determined to be unacceptable pursuant to the requirements of subpart F of this part, and that the borrower has failed to take reasonable steps to correct performance. (e) The activities to be undertaken are not eligible under either: (1) Section 202 of NAHASDA; or (2) Section 601(a) of NAHASDA. (f) The loan or other obligation documents for which a guarantee is requested do not meet the requirements of this subpart. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012] Sec. 1000.430 When will HUD issue notice to the applicant if the application is approved at the requested or reduced amount? (a) HUD shall make every effort to approve a guarantee within 30 days of receipt of a completed application including executed documents and, if unable to do so, will notify the applicant within the 30 day timeframe of the need for additional time and/or if additional information is required. (b) HUD shall notify the applicant in writing that the guarantee has either been approved, reduced, or disapproved. If the request is reduced or disapproved, the applicant will be informed of the specific reasons for reduction or disapproval. (c) HUD shall issue a certificate to guarantee the debt obligation of the issuer subject to compliance with NAHASDA including but not limited to sections 105, 601(a), and 602(c) of NAHASDA, and such other reasonable conditions as HUD may specify in the commitment documents in a particular case. Sec. 1000.432 Can an amendment to an approved guarantee be made? (a) Yes. An amendment to an approved guarantee can occur if an applicant wishes to allow a borrower/issuer to carry out an activity not described in the loan or other obligation documents, or substantially to change the [[Page 723]] purpose, scope, location, or beneficiaries of an activity. (b) Any changes to an approved guarantee must be approved by HUD. Sec. 1000.434 How will HUD allocate the availability of loan guarantee assistance? (a) Each fiscal year HUD may allocate a percentage of the total available loan guarantee assistance to each Area ONAP equal to the percentage of the total NAHASDA grant funds allocated to the Indian tribes in the geographic area of operation of that office. (b) These allocated amounts shall remain exclusively available for loan guarantee assistance for Indian tribes or TDHEs in the area of operation of that office until committed by HUD for loan guarantees or until the end of the second quarter of the fiscal year. At the beginning of the third quarter of the fiscal year, any residual loan guarantee commitment amount shall be made available to guarantee loans for Indian tribes or TDHEs regardless of their location. Applications for residual loan guarantee money must be submitted on or after April 1. (c) In approving applications for loan guarantee assistance, HUD shall seek to maximize the availability of such assistance to all interested Indian tribes or TDHEs. HUD may limit the proportional share approved to any one Indian tribe or TDHE to its proportional share of the block grant allocation based upon the annual plan submitted by the Indian tribe or TDHE indicating intent to participate in the loan guarantee allocation process. Sec. 1000.436 How will HUD monitor the use of funds guaranteed under this subpart? HUD will monitor the use of funds guaranteed under this subpart as set forth in section 403 of NAHASDA, and the lender is responsible for monitoring performance with the documents. Subpart F_Recipient Monitoring, Oversight and Accountability Sec. 1000.501 Who is involved in monitoring activities under NAHASDA? The recipient, the grant beneficiary and HUD are involved in monitoring activities under NAHASDA. Sec. 1000.502 What are the monitoring responsibilities of the recipient, the grant beneficiary and HUD under NAHASDA? (a) The recipient is responsible for monitoring grant activities, ensuring compliance with applicable Federal requirements and monitoring performance goals under the IHP. The recipient is responsible for preparing at least annually: a compliance assessment in accordance with section 403(b) of NAHASDA; a performance report covering the assessment of program progress and goal attainment under the IHP; and an audit in accordance with the Single Audit Act, as applicable. The recipient's monitoring should also include an evaluation of the recipient's performance in accordance with performance objectives and measures. At the request of a recipient, other Indian tribes and/or TDHEs may provide assistance to aid the recipient in meeting its performance goals or compliance requirements under NAHASDA. (b) Where the recipient is a TDHE, the grant beneficiary (Indian tribe) is responsible for monitoring programmatic and compliance requirements of the IHP and NAHASDA by requiring the TDHE to prepare periodic progress reports including the annual compliance assessment, performance and audit reports. (c) HUD is responsible for reviewing the recipient as set forth in Sec. 1000.520. (d) HUD monitoring will consist of on-site as well as off-site review of records, reports and audits. To the extent funding is available, HUD or its designee will provide technical assistance and training, or funds to the recipient to obtain technical assistance and training. In the absence of funds, HUD shall make best efforts to provide technical assistance and training. [[Page 724]] Sec. 1000.503 What is an appropriate extent of HUD monitoring? (a) Subject to any conflicting or supplementary requirement of specific legislation, and upon the effective date of this regulation, the frequency of HUD monitoring of a particular recipient will be determined by application of the HUD standard risk assessment factors, provided that when a recipient requests to be monitored, HUD shall conduct such monitoring as soon as practicable. The HUD standard risk assessment factors may be but are not limited to the following: (1) Annual grant amount; (2) Disbursed amounts--all open grants; (3) Months since last on-site monitoring; (4) Delinquent audits under 2 CFR part 200, subpart F; (5) Open 2 CFR part 200, subpart F, or Inspector General audit findings; (6) Conclusions of 2 CFR part 200, subpart F, auditor; (7) Open monitoring findings; (8) Delinquent Annual Performance Reports or Annual Status and Evaluation Reports; (9) Status of Corrective Action Plan (CAP) or Performance Agreement (PA); (10) Recipient Self-Monitoring; (11) Inspection of 1937 Act units; (12) Preservation of 1937 Act units; and (13) Any other additional factors that may be determined by HUD, consistent with HUD's Tribal Consultation Policy, by which HUD will send written notification and provide a comment period. Such additional factors shall be provided by program guidance. (b) If monitoring indicates noncompliance, HUD may undertake additional sampling and review to determine the extent of such noncompliance. The level of HUD monitoring of a recipient once that recipient has been selected for HUD monitoring is as follows: (1) Review recipient program compliance for the current program year and the 2 prior program years; (2) On-site inspection of no more than 10 dwelling units or no more than 10 percent of total dwelling units, whichever is greater; (3) Review of no more than 10 client files or no more than 10 percent of client files, whichever is greater. (c) Notwithstanding paragraph (b) of this section, HUD may at any time undertake additional sampling and review of prior program years, subject to the records retention limitations of Sec. 1000.552, if HUD has credible information suggesting noncompliance. HUD will share this information with the recipient as appropriate. (d) A recipient may request ONAP to enter into Self-Monitoring Mutual Agreements or other self-monitoring arrangements with recipients. ONAP will monitor the recipient only in accordance with such agreement or arrangement, unless ONAP finds reasonable evidence of fraud, a pattern of noncompliance, or the significant unlawful expenditure of IHBG funds. [77 FR 71528, Dec. 3, 2012, as amended at 80 FR 75944, Dec. 7, 2015] Sec. 1000.506 If the TDHE is the recipient, must it submit its monitoring evaluation/results to the Indian tribe? Yes. The Indian tribe as the grant beneficiary must receive a copy of the monitoring evaluation/results so that it can fully carry out its oversight responsibilities under NAHASDA. Sec. 1000.508 If the recipient monitoring identifies programmatic concerns, what happens? If the recipient's monitoring activities identify areas of concerns, the recipient will take corrective actions which may include but are not limited to one or more of the following actions: (a) Depending upon the nature of the concern, the recipient may obtain additional training or technical assistance from HUD, other Indian tribes or TDHEs, or other entities. (b) The recipient may develop and/or revise policies, or ensure that existing policies are better enforced. (c) The recipient may take appropriate administrative action to remedy the situation. (d) The recipient may refer the concern to an auditor or to HUD for additional corrective action. [[Page 725]] Sec. 1000.510 What happens if tribal monitoring identifies compliance concerns? The Indian tribe shall have the responsibility to ensure that appropriate corrective action is taken. Sec. 1000.512 Are performance reports required? Yes. An annual report shall be submitted by the recipient to HUD and the Indian tribe being served in a format acceptable by HUD. Annual performance reports shall contain: (a) The information required by sections 403(b) and 404(b) of NAHASDA; (b) Brief information on the following: (1) A comparison of actual accomplishments to the planned activities established for the period; (2) The reasons for slippage if established planned activities were not met; and (3) Analysis and explanation of cost overruns or high unit costs; (c) Any information regarding the recipient's performance in accordance with HUD's performance measures, as set forth in section Sec. 1000.524; and (d) Annual performance data to reflect the accomplishments of the recipient to include, as specified in the IHP: (1) Permanent and temporary jobs supported with IHBG funds; (2) Outputs by eligible activity, including: (i) Units completed or assisted, and (ii) Families assisted; and (3) Outcomes by eligible activity. (e) As applicable, items required under Sec. Sec. 1000.302 and 1000.544. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012] Sec. 1000.514 When must the annual performance report be submitted? The annual performance report must be submitted within 90 days of the end of the recipient's program year. If a justified request is submitted by the recipient, the Area ONAP may extend the due date for submission of the annual performance report. [72 FR 41213, July 26, 2007] Sec. 1000.516 What reporting period is covered by the annual performance report? For the first annual performance report to be submitted under NAHASDA, the period to be covered is October 1, 1997, through September 30, 1998. This first report must be submitted by January 31, 1999. Subsequent annual performance reports must cover the period that coincides with the recipient's program year. [64 FR 3015, Jan. 20, 1999] Sec. 1000.518 When must a recipient obtain public comment on its annual performance report? The recipient must make its report publicly available to tribal members, non-Indians served under NAHASDA, and other citizens in the Indian area, in sufficient time to permit comment before submission of the report to HUD. The recipient determines the manner and times for making the report available. The recipient shall include a summary of any comments received by the grant beneficiary or recipient from tribal members, non-Indians served under NAHASDA, and other citizens in the Indian area. Sec. 1000.520 What are the purposes of HUD's review of the Annual Performance Report? HUD will review each recipient's Annual Performance Report when submitted to determine whether the recipient: (a) Has carried out its eligible activities in a timely manner, has carried out its eligible activities and certifications in accordance with the requirements and the primary objective of NAHASDA and with other applicable laws and has a continuing capacity to carry out those activities in a timely manner; (b) Has complied with the IHP of the grant beneficiary; and (c) Whether the Annual Performance Report of the recipient is accurate. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012] [[Page 726]] Sec. 1000.521 After the receipt of the recipient's performance report, how long does HUD have to make recommendations under section 404(c) of NAHASDA? 60 days. Sec. 1000.522 How will HUD give notice of on-site reviews? HUD shall generally provide a 30 day written notice of an impending on-site review to the Indian tribe and TDHE. Prior written notice will not be required in emergency situations. All notices shall state the general nature of the review. Sec. 1000.524 What are HUD's performance measures for the review? HUD has the authority to develop performance measures which the recipient must meet as a condition for compliance under NAHASDA. The performance measures are: (a) The recipient has complied with the required certifications in its IHP and all policies and the IHP have been made available to the public. (b) Fiscal audits have been conducted on a timely basis and in accordance with the requirements of the Single Audit Act, as applicable. Any deficiencies identified in audit reports have been addressed within the prescribed time period. (c) Accurate annual performance reports were submitted to HUD in accordance with Sec. 1000.514. (d) The recipient has met the IHP-planned activities in the one-year plan. (e) The recipient has substantially complied with the requirements of 24 CFR part 1000 and all other applicable Federal statutes and regulations. [63 FR 12349, Mar. 12, 1998, as amended at 72 FR 41213, July 26, 2007; 77 FR 71529, Dec. 3, 2012] Sec. 1000.526 What information will HUD use for its review? In reviewing each recipient's performance, HUD may consider the following: (a) The approved IHP and any amendments thereto; (b) Reports prepared by the recipient; (c) Records maintained by the recipient; (d) Results of HUD's monitoring of the recipient's performance, including on-site evaluation of the quality of the work performed; (e) Audit reports; (f) Records of drawdown(s) of grant funds; (g) Records of comments and complaints by citizens and organizations within the Indian area; (h) Litigation; and (i) Any other reliable relevant information which relates to the performance measures under Sec. 1000.524. Sec. 1000.528 What are the procedures for the recipient to comment on the result of HUD's review when HUD issues a report under section 405(b) of NAHASDA? HUD will issue a draft report to the recipient and Indian tribe within 60 days of the completion of HUD's review. The recipient will have at least 60 days to review and comment on the draft report, as well as provide any additional information relating to the draft report. Upon written notification to HUD, the recipient may exercise the right to take an additional 30 days to complete its review and comment to the draft report. Additional extensions of time for the recipient to complete review and comment may be mutually agreed upon in writing by HUD and the recipient. HUD shall consider the comments and any additional information provided by the recipient. HUD may also revise the draft report based on the comments and any additional information provided by the recipient. HUD shall make the recipient's comments and a final report readily available to the recipient, grant beneficiary, and the public not later than 30 days after receipt of the recipient's comments and additional information. [77 FR 71529, Dec. 3, 2012] Sec. 1000.530 What corrective and remedial actions will HUD request or recommend to address performance problems prior to taking action under Sec. 1000.532? (a) The following actions are designed, first, to prevent the continuance of the performance problem(s); second, to mitigate any adverse effects or consequences of the performance [[Page 727]] problem(s); and third, to prevent a recurrence of the same or similar performance problem. The following actions, at least one of which must be taken prior to a sanction under paragraph (b), may be taken by HUD singly or in combination, as appropriate for the circumstances: (1) Issue a letter of warning advising the recipient of the performance problem(s), describing the corrective actions that HUD believes should be taken, establishing a completion date for corrective actions, and notifying the recipient that more serious actions may be taken if the performance problem(s) is not corrected or is repeated; (2) Request the recipient to submit progress schedules for completing activities or complying with the requirements of this part; (3) Recommend that the recipient suspend, discontinue, or not incur costs for the affected activity; (4) Recommend that the recipient redirect funds from affected activities to other eligible activities; (5) Recommend that the recipient reimburse the recipient's program account in the amount improperly expended; and (6) Recommend that the recipient obtain appropriate technical assistance using existing grant funds or other available resources to overcome the performance problem(s). (b) Failure of a recipient to address performance problems specified in paragraph (a) of this section may result in the imposition of sanctions as prescribed in Sec. 1000.532. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71529, Dec. 3, 2012] Sec. 1000.532 What are the remedial actions that HUD may take in the event of recipient's substantial noncompliance? (a) If HUD finds after reasonable notice and opportunity for hearing that a recipient has failed to comply substantially with any provision of NAHASDA or the regulations in this part, HUD shall carry out any of the following actions with respect to the recipient's current or future grants, as appropriate: (1) Terminate payments under NAHASDA to the recipient; (2) Reduce payments under NAHASDA to the recipient by an amount equal to the amount of such payments that were not expended in accordance with NAHASDA or these regulations; (3) Limit the availability of payments under NAHASDA to programs, projects, or activities not affected by the failure to comply; or (4) In the case of noncompliance described in Sec. 1000.542, provide a replacement TDHE for the recipient. (b) Before undertaking any action in accordance with paragraph (a) of this section, HUD will notify the recipient in writing of the action it intends to take and provide the recipient an opportunity for an informal meeting to resolve the deficiency. Before taking any action under paragraph (a) of this section, HUD shall provide the recipient with the opportunity for a hearing no less than 30 days prior to taking the proposed action. The hearing shall be held in accordance with Sec. 1000.540. The amount in question shall not be reallocated under the provisions of Sec. 1000.536, until 15 days after the hearing has been conducted and HUD has rendered a final decision. (c) Notwithstanding paragraphs (a) and (b) of this section, if HUD makes a determination that the failure of a recipient to comply substantially with any material provision of NAHASDA or these regulations is resulting, and would continue to result, in a continuing expenditure of funds provided under NAHASDA in a manner that is not authorized by law, HUD may, in accordance with section 401(a)(4) of NAHASDA, take action under paragraph (a)(3) of this section prior to conducting a hearing under paragraph (b) of this section. HUD shall provide notice to the recipient at the time that HUD takes that action and conducts a hearing, in accordance with section 401(a)(4)(B) of NAHASDA, within 60 days of such notice. (d) Notwithstanding paragraph (a) of this section, if HUD determines that the failure to comply substantially with the provisions of NAHASDA or these regulations is not a pattern or practice of activities constituting willful noncompliance, and is a result of the limited capability or capacity of [[Page 728]] the recipient, if the recipient requests, HUD shall provide technical assistance for the recipient (directly or indirectly) that is designed to increase the capability or capacity of the recipient to administer assistance under NAHASDA in compliance with the requirements under NAHASDA. A recipient's eligibility for technical assistance under this subsection is contingent on the recipient's execution of, and compliance with, a performance agreement pursuant to Section 401(b) of NAHASDA. (e) In lieu of, or in addition to, any action described in this section, if the Secretary has reason to believe that the recipient has failed to comply substantially with any provisions of NAHASDA or these regulations, HUD may refer the matter to the Attorney General of the United States, with a recommendation that appropriate civil action be instituted. [77 FR 71529, Dec. 3, 2012] Sec. 1000.534 What constitutes substantial noncompliance? HUD will review the circumstances of each noncompliance with NAHASDA and the regulations on a case-by-case basis to determine if the noncompliance is substantial. This review is a two step process. First, there must be a noncompliance with NAHASDA or these regulations. Second, the noncompliance must be substantial. A noncompliance is substantial if: (a) The noncompliance has a material effect on the recipient meeting its planned activities as described in its Indian Housing Plan; (b) The noncompliance represents a material pattern or practice of activities constituting willful noncompliance with a particular provision of NAHASDA or the regulations, even if a single instance of noncompliance would not be substantial; (c) The noncompliance involves the obligation or expenditure of a material amount of the NAHASDA funds budgeted by the recipient for a material activity; or (d) The noncompliance places the housing program at substantial risk of fraud, waste or abuse. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71529, Dec. 3, 2012] Sec. 1000.536 What happens to NAHASDA grant funds adjusted, reduced, withdrawn, or terminated under Sec. 1000.532? Such NAHASDA grant funds shall be distributed by HUD in accordance with the next NAHASDA formula allocation. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71529, Dec. 3, 2012] Sec. 1000.540 What hearing procedures will be used under NAHASDA? The hearing procedures in 24 CFR part 26 shall be used. Sec. 1000.542 When may HUD require replacement of a recipient? (a) In accordance with section 402 of NAHASDA, as a condition of HUD making a grant on behalf of an Indian tribe, the Indian tribe shall agree that, notwithstanding any other provisions of law, HUD may, only in the circumstances discussed below, require that a replacement TDHE serve as the recipient for the Indian tribe. (b) HUD may require a replacement TDHE for an Indian tribe only upon a determination by HUD on the record after opportunity for hearing that the recipient for the Indian tribe has engaged in a pattern or practice of activities that constitute substantial or willful noncompliance with the requirements of NAHASDA. Sec. 1000.544 What audits are required? Pursuant to NAHASDA section 405(a), the recipient must comply with the requirements of the Single Audit Act (chapter 75 of title 31, United States Code), implemented by 2 CFR part 200, subpart F, which require annual audits of recipients that expend federal funds equal to or in excess of an amount specified by the Office of Management and Budget (OMB), as set out in 2 CFR 200.501. If applicable, a certification that the recipient has not expended federal funds in excess of the audit threshold that is set by OMB [[Page 729]] shall be included in the recipient's Annual Performance Report. [77 FR 71529, Dec. 3, 2012, as amended at 80 FR 75944, Dec. 7, 2015] Sec. 1000.546 Are audit costs eligible program or administrative expenses? Yes, audit costs are an eligible program or administrative expense. If the Indian tribe is the recipient then program funds can be used to pay a prorated share of the tribal audit or financial review cost that is attributable to NAHASDA funded activities. For a recipient not covered by the Single Audit Act, but which chooses to obtain a periodic financial review, the cost of such a review would be an eligible program expense. Sec. 1000.548 Must a copy of the recipient's audit pursuant to the Single Audit Act relating to NAHASDA activities be submitted to HUD? No. A copy of the recipient audit under the Single Audit Act relating to NAHASDA activities is only required to be submitted to the Federal Audit Clearinghouse pursuant to 2 CFR part 200, subpart F. [80 FR 75944, Dec. 7, 2015] Sec. 1000.550 If the TDHE is the recipient, does it have to submit a copy of its audit to the Indian tribe? Yes. The Indian tribe as the grant beneficiary must receive a copy of the audit report so that it can fully carry out its oversight responsibilities with NAHASDA. Sec. 1000.552 How long must the recipient maintain program records? (a) This section applies to all financial and programmatic records, supporting documents, and statistical records of the recipient which are required to be maintained by the statute, regulation, or grant agreement. (b) Except as otherwise provided herein, records must be retained for 3 years from the end of the tribal program year during which the funds were expended. (c) If any litigation, claim, negotiation, audit or other action involving the records has been started before the expiration of the 3- year period, the records must be retained until completion of the action and resolution of all issues which arise from it, or until the end of the regular 3-year period, whichever is later. [63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71530, Dec. 3, 2012] Sec. 1000.554 Which agencies have right of access to the recipient's records relating to activities carried out under NAHASDA? (a) HUD and the Comptroller General of the United States, and any of their authorized representatives, shall have the right of access to any pertinent books, documents, papers, or other records of recipients which are pertinent to NAHASDA assistance, in order to make audits, examinations, excerpts, and transcripts. (b) The right of access in this section lasts as long as the records are maintained. Sec. 1000.556 Does the Freedom of Information Act (FOIA) apply to recipient records? FOIA does not apply to recipient records. However, there may be other applicable State and tribal access laws or recipient policies which may apply. Sec. 1000.558 Does the Federal Privacy Act apply to recipient records? The Federal Privacy Act does not apply to recipient records. However, there may be other applicable State and tribal access laws or recipient policies which may apply. Sec. Appendix A to Part 1000--Indian Housing Block Grant Formula Mechanics This appendix shows the different components of the Indian Housing Block Grant (IHBG) formula. The following text explains how each component of the IHBG formula is calculated. 1. The first step in running the IHBG formula is to determine the amount available for allocation in the Fiscal Year (FY). It is the sum of: (a) The FY appropriation for the IHBG program less amounts in the Appropriations Act mandated for purposes other than the formula allocation. [[Page 730]] (b) The net amount, if any, made available as a result of corrections for over- or under-allocations in prior FYs. (c) The amount, if any, made available pursuant to Sec. 1000.536. (d) The amounts, if any, made available because tribes voluntarily returned, or did not accept, the amounts allocated to them in prior FYs, defined as ``carryover'' (see Sec. 1000.329). 2. If there is carryover as defined in Sec. 1000.329, the amount of carryover up to $3 million, is then held aside for allocation under the minimum total grant provisions of the formula (see 11 below). 3. The IHBG formula first calculates the amount each tribe is allocated under the Formula Current Assisted Stock (FCAS) component (See Sec. Sec. 1000.310 through 1000.322). The FCAS component is comprised of two parts, Operating Subsidy (Sec. 1000.316(a)) and Modernization (Sec. 1000.316(b)). (a) The Operating Subsidy component is calculated in two steps, as follows: (i) Each tribe's counts of Low Rent, Homeownership (Mutual Help and Turnkey III), and Section 8 units are multiplied by the National Per Unit Subsidy for operations for that category of unit, which is a 1996 index for the type of unit that is adjusted for inflation (see Sec. 1000.302 defining National Per Unit Subsidy). The amounts are summed to create an initial calculation of the operating subsidy component. (ii) The initial operating subsidy component amount is then adjusted for local area costs, using an adjustment factor called the AELFMR. The AELFMR factor is calculated for each tribe in three steps. First, an Allowable Expense Level (AEL) factor is calculated by dividing the tribe's AEL, a historic per-unit measure of operating cost, by the national weighted average AEL (see Sec. 1000.302 defining Allowable Expense Level). Second, a Fair Market Rent (FMR) factor is calculated by dividing the tribe's FMR amount, an area-specific index published annually by HUD (see Sec. 1000.302 Fair Market Rent factor), by the national weighted average FMR. Third, an AELFMR factor is created by assigning each tribe the greater of its AEL or FMR factor, and dividing that figure by the national weighted average AELFMR. In all cases, when the national average figure is calculated, tribes are weighted by the amount of their initial operating subsidy as calculated in 3(a)(i). (See Sec. 1000.320). (b) The Modernization component is determined using two methods depending on the number of public housing units that a tribe's housing authority operated prior to the Native American Housing and Self- Determination Act. (i) For all tribes, the number of Low Rent, Mutual Help, and Turnkey III units are multiplied by the National Per Unit Subsidy for modernization from 1996 adjusted for inflation (see Sec. 1000.302 defining National Per Unit Subsidy). (ii) For Indian tribes with an Indian Housing Authority (IHA) that owned or operated fewer than 250 units on October 1, 1997, an alternative modernization component is calculated from the amount of funds the IHA received under the assistance program authorized by Section 14 of the 1937 Act (not including funds provided as emergency assistance) for FYs 1992 through 1997 (see Sec. 1000.316(b)(2)). If this alternative calculation is greater than the amount calculated in paragraph (a) above, it is used to calculate the tribe's modernization component. (iii) The Modernization component is then multiplied by a local area cost adjustment factor based on the Total Development Cost (TDC) for the tribe (see Sec. 1000.302) divided by the national weighted average of all TDCs weighted by each tribe's pre-adjustment Modernization calculation in paragraph (b)(i) or (ii) above as applicable. 4. The total amounts calculated under the FCAS component for each tribe are then added together to determine the national total amount allocated under the FCAS component. That total is subtracted from the funds available for allocation less the carryover amount held aside for allocation under the minimum total grant provision in Sec. 1000.329. The remainder is the total amount available for allocation under the need component of the IHBG formula. 5. The first step in calculating need component is identifying weighted needs variables and adjusting for local area cost differences. (a) Need is first calculated using seven factors, where each factor is a tribe's share of the national totals for each of seven variables. The data used for the seven variables is described in Sec. 1000.330. The person count variable is adjusted for statistically significant undercounts for reservations, trust lands and remote Alaska and for growth in population since the latest Decennial Census. The Population Cap provision in Sec. 1000.302 Formula Area (5) is then applied. Needs data are capped if the American Indian and Alaska Native (AIAN) population counts exceed twice tribal enrollment unless a tribe can demonstrate that it serves more than twice as many non-tribal members as tribal members, in which case the cap is adjusted upward. The factors are weighted as set forth in Sec. 1000.324, as follows: (i) 22 percent of the amount available for allocation under the needs component are allocated by the share of the total AIAN households paying more than 50 percent of their income for housing and living in each tribe's Formula Area (see Sec. 1000.302); [[Page 731]] (ii) 25 percent are allocated by the share of the total AIAN households living in overcrowded housing and/or without kitchen or plumbing in each tribe's Formula Area; (iii) 15 percent are allocated by the share of the total AIAN households with an annual income less than or equal to 80 percent of Formula Median Income (see Sec. 1000.302) living in each tribe's Formula Area less the tribe's number of FCAS. (iv) 13 percent are allocated by the share of AIAN households with annual income less than or equal to 30 percent of Formula Median Income living in each tribe's Formula Area; (v) 7 percent are allocated by the share of AIAN households with annual income between 30 percent and 50 percent of Formula Median Income living in each tribe's Formula Area; (vi) 7 percent are allocated by the share of AIAN households with annual income between 50 percent and 80 percent of Formula Median Income living in each tribe's Formula Area; (vii) 11 percent are allocated by the share of AIAN persons living in each tribe's Formula Area. (b) The result of these calculations for each tribe is then multiplied by a local area cost adjustment based on the Total Development Cost for the tribe (see Sec. 1000.302) divided by the national weighted average of TDCs weighted by each tribe's pre- adjustment need calculation. (See Sec. 1000.325). 6. Each tribe's initial need allocation amount is then adjusted under the minimum need allocation provision of Sec. 1000.328. Tribes that are allocated less than $200,000 under the FCAS component of the IHBG formula and that certify the presence of any households at or below 80 percent of median income in their Indian Housing Plans will be allocated no less than a specified minimum under the needs component of the formula. The specified minimum amount shall equal 0.007826 percent of the appropriation for that FY after set-asides. The increase in funding for the tribes allocated the minimum need amount is funded by a reallocation from other tribes whose needs allocation exceeds the minimum need amount. This is necessary in order to keep the total allocation within the appropriation level (See Sec. 1000.328). 7. Whenever a new Data Source is first introduced, provision is made to moderate extreme impacts through phase down adjustments. For purposes of these adjustments, new data sources (see Sec. 1000.331) include the initial introduction of the American Community Survey and 2010 Decennial Census in 2018, and the initial introduction of the 2020 Decennial Census when it becomes available. Tribes whose allocation under the need component decrease by more than ten percent in the first year of introduction will have that decrease moderated by subsequent adjustments, as required to prevent a drop of more than ten percent per year in the tribes' needs allocation attributable solely to the introduction of the New Data Source. After allocation adjustments are made under Sec. 1000.331 for a FY, the needs allocation of an Indian tribe whose needs allocation increased as a result of the introduction of a New Data Source under Sec. 1000.331 shall be adjusted downward proportionate to its share of the total increase in funding resulting from the introduction of a New Data Source to keep the overall needs allocation within available appropriations. 8. A tribe's preliminary total allocation for a grant is calculated by summing the amounts calculated under the FCAS and need components. This amount is compared to how much a tribe received in FY 1996 for operating subsidy and modernization under the 1937 Housing Act. If a tribe received more in FY 1996 for operating subsidy and modernization than it does under the IHBG formula allocation, its preliminary total allocation is adjusted up to the FY 1996 amount (See Sec. 1000.340(b)). Indian tribes receiving more under the IHBG formula than in FY 1996 have their grant allocations adjusted downward to offset the upward adjustments for the other tribes. 9. The initial allocation amount for the current FY is calculated by adding any adjustments for over- or under-funding occurring in prior FYs to the allocation calculated in the previous step. These adjustments typically result from late reporting of FCAS changes, or conveyances which occur in a timely manner following the removal of units from eligibility due to conveyance eligibility. 10. The Undisbursed Funds Factor component is calculated based on the initial allocation amounts calculated above. Tribes with an initial allocation of $5 million or more and undisbursed IHBG grant amounts (the amount available to the tribe in HUD's line of credit control on October 1 of the FY for which the allocation is being made) in an amount greater than the sum of the prior 3 years' initial allocation calculations will have their initial allocation amount adjusted down by the difference between the tribe's undisbursed grant amounts and the sum of its prior 3 years' initial allocation calculations. If this adjustment would bring the tribe below its FY 1996 minimum (see Sec. 1000.340(b)), then the tribe will be allocated its FY 1996 minimum. The sum of the adjustments will be reallocated among the other tribes proportionally under the need component. 11. A final adjustment is made under Sec. 1000.329 which allocates available carryover amounts up to $3 million to achieve minimum total allocations. Tribes that certify in their Indian Housing Plans the presence of [[Page 732]] any eligible households at or below 80 percent of median income and whose current FY formula allocation after the Undisbursed Funds Factor adjustment determined in the preceding step is less than 0.011547 percent of the FY appropriation after set-asides, will have their allocation adjusted upwards to 0.011547 percent of the FY appropriation after set-asides, or to a lesser percentage which can be achieved for all eligible tribes with available carryover held for this adjustment (see 2 above). [81 FR 83682, Nov. 22, 2016] Sec. Appendix B to Part 1000--IHBG Block Grant Formula Mechanisms 1. The first step in running the Indian Housing Block Grant (IHBG) formula is to determine the total amount available for allocation in the current Fiscal Year (FY). ALLOCAMT = APPROP + ADJ1 + ADJ2 + CARRYOVER. Where: ALLOCAMT = amount available for allocation under the formula. APPROP = current FY appropriation for the IHBG program less amounts in the Appropriations Act mandated for purposes other than the formula allocation. ADJ1= net amount, if any, made available as a result of corrections for over-or under allocations in prior FYs. ADJ2 = amount, if any, made available under Sec. 1000.536. CARRYOVER = amounts, if any, made available because tribes voluntarily returned, or did not accept, the amounts allocated to them in prior FYs. 2. If there is carryover as defined in Sec. 1000.329, the amount of carryover up to $3 million, is then held aside for allocation under the minimum total grant provisions of the formula (see Step 10), then: MGHOLD = amount set-aside for allocation under minimum total grant provision. If CARRYOVER = 0, MGHOLD = 0. If CARRYOVER 0 and CARRYOVER < = $3 million, MGHOLD = CARRYOVER. If CARRYOVER $3 million, MGHOLD = $3 million. 3. The FCAS component is calculated first. FCAS consists of two parts, Operating Subsidy (OPSUB) and Modernization (MOD), such that: FCAS = OPSUB + MOD. a. OPSUB is calculated in two steps, as follows: (i) First, the number of Low-Rent, Section 8 and homeownership units are multiplied by the applicable national per unit subsidy (Sec. 1000.302 National Per Unit Subsidy). The amounts are summed to create an initial calculation of the Operating Subsidy component. OPSUB1 = [LR * LRSUB] + [(MH + TK) * HOSUB] + [S8 * S8SUB]. Where: OPSUB1 = initial calculation of Operating Subsidy component. LR = number of Low-Rent units. LRSUB = national per unit subsidy for Low-Rent units ($2,440 * INF). INF = adjustment for inflation since 1995, as determined by the Consumer Price Index for housing. MH + TK = number of Mutual Help and Turnkey III units. HOSUB = national per unit subsidy for Homeownership units ($528 * INF). S8 = number of Section 8 units. S8SUB = national per unit subsidy for Section 8 units = ($3,625 * INF). (ii) The initial Operating Subsidy component amount is then adjusted for local area costs, using an adjustment factor called the AELFMR. The AELFMR factor is calculated for each tribe in three steps. First, an AEL factor is calculated by dividing the tribe's Allowable Expense Level (AEL), a historic per-unit measure of operating cost, by the national weighted average AEL (see Sec. 1000.302 defining Allowable Expense Level) AEL FACTOR = AEL/NAEL. Where: AEL = local Allowable Expense Level. NAEL = national weighted average for AEL, where the weight is a tribe's initial calculation of operating subsidy. Second, an FMR factor is calculated by dividing the tribe's Fair Market Rent amount (FMR), an area-specific index published annually by HUD (see Sec. 1000.302 Fair Market Rent factor), by the national weighted average FMR. FMR FACTOR = FMR/NFMR. Where: FMR= local Fair Market Rent. NFMR = national weighted average for FMR, where the weight is a tribe's initial calculation of operating subsidy. Third, an AELFMR factor is created by assigning each tribe the greater of its AEL or FMR factor, and dividing that figure by the national weighted average AELFMR. In all cases, when the national average figure is calculated, tribes are weighted by the amount of their initial operating subsidy as calculated in 3(a)(i) above. (See Sec. 1000.320). AELFMRFACTOR = final local area cost adjustment factor (AELFACTOR or FMRFACTOR)/NAELFMR. Where: NAELFMR = national weighted average for greater of AEL Factor or FMR factor, [[Page 733]] where weight is a tribe's initial calculation of operating subsidy Finally, the AELFMR factor is used to adjust the initial operating subsidy calculation for differences in local area costs. OPSUB = OPSUB1 * AELFMRFACTOR. Where: OPSUB = Operating Subsidy component after adjustment for local cost differences. b. The modernization component, MOD, is calculated by two different methods, depending on whether the tribe had an Indian housing authority (IHA) that owned or operated more than 250 public housing units on October 1, 1997. (i) MOD1 is calculated for all tribes and considers the number of Low-Rent, and Mutual Help and Turnkey III FCAS units. Each of these is adjusted by the national per-unit modernization subsidy MOD1 = [LR + MH + TK] * MODPU. Where: LR = number of Low-Rent units. MH = number of Mutual Help units. TK = number of Turnkey III units. MODPU = national per-unit amount for modernization in 1996 adjusted for inflation ($1,974 * INF). INF = adjustment for inflation since 1995, as determined by the Consumer Price Index for housing. (ii) MODAVG is calculated only for tribes that had an IHA that owned or operated fewer than 250 public housing units on October 1, 1997, as the annual average amount they received for FYs 1992 through 1997 under the assistance program authorized by section 14 of the 1937 Act (not including emergency assistance). If this alternative calculation is greater than the amount calculated in (i), it is used to calculate the tribe's modernization component. MODAVG = Average (FY 1992 to FY 1997) amount received by Section 14 of the 1937 Act. If MODAVG MOD1, MOD1 = MODAVG. c. The modernization calculation is adjusted for local area costs: MOD = MOD1 * (TDC/NTDC). Where: TDC = Local Total Development Costs defined in Sec. 1000.302. NTDC = weighted national average for TDC, where the weight is the initial calculation of modernization amount of tribe with CAS. 4. Now that calculation for FCAS is complete, the amount allocated using the need component of the formula can be determined: NEEDALLOCAMT = ALLOCAMT - MGHOLD - NATCAS. Where: NEEDALLOCAMT = amount allocated using the need component of the formula. ALLOCAMT = amount available for allocation under the formula. MGHOLD = amount held for allocation under minimum total grant provision. NATCAS = national summation of FCAS allocation for all tribes. 5. The first step in calculating needs is identifying weighted needs variables and adjusting for local area cost differences. a. The basic needs calculation uses seven weighted criteria based on population and housing data in a tribe's Formula Area or share of Formula Area if Formula Areas overlap (see Sec. 1000.302 Formula Area and Sec. 1000.326) to allocate the funds available for the needs component. The person count variable is adjusted for statistically significant undercounts for reservations, trust lands and remote Alaska and for changes in population since the latest Decennial Census. PERADJ = PER * UCFACTOR * POPCHGFACTOR. Where: PER = American Indian and Alaskan Native (AIAN) persons as reported in the most recent Decennial Census. UCFACTOR= 1+ the percentage undercount identified by the Census by type of land (in 2010 1.0488 for reservation and trust lands only and assumed also to apply to remote Alaska). POPCHGFACTOR = the ratio of the most recent AIAN Census population estimate for county to the AIAN count for county from the Decennial Census. The Population Cap provision in Sec. 1000.302 Formula Area (5) is then applied. Needs data are capped if AIAN population counts exceed twice tribal enrollment unless a tribe can demonstrate that it serves more than twice as many non-tribal members as tribal members, in which case the cap is adjusted upward. POPCAPTEST=1 if PERADJ TEmultiplier * TE If POPCAPTEST=1, (tribes subject to Population Cap) then: PER = TEmultiplier * TE POPCAPADJF = PER/PERADJ For tribes NOT subject to Population Cap, PER = PERADJ and POPCAPADJF = 1. Where: POPCAPTEST = an indicator showing whether a tribe's needs data must be adjusted downward because its Formula Area population is disproportionally large relative to tribe's enrollment, TEmultiplier = 2, or a larger factor if justified by tribe on annual basis. TE = Tribal enrollment. [[Page 734]] POPCAPADJF = factor used to adjust household needs variables. An initial calculation of the needs component is then calculated by determining each tribe's share of national totals on each variable, and applying weights to the variables as specified in regulation. BASENEED = [(0.11 * (PER)/NPER) + (0.13 * HHLE30/NHHLE30) + (0.07 * HH30T50/NHH30T50) + (0.07 * HH50T80/NHH50T80) + (0.25 * OCRPR/ NOCRPR) + (0.22 * SCBTOT/NSCBTOT) + (0.15 * HOUSHOR/NHOUSHOR)] * NEEDALLOCAMT. Where: PER = count of AIAN persons after adjustments. NPER = national total of PER. HHLE30 = count of AIAN households less than 30% of formula median income multiplied by POPCAPADJF. NHHLE30 = national total of HHLE30. HH30T50 = count of AIAN households 30% to 50% of formula median income multiplied by POPCAPADJF. NHH30T50 = national total of HH30T50. HH50T80 = count of AIAN households 50% to 80% of formula median income multiplied by POPCAPADJF. NHH50T80 = national total of HH50T80. OCRPR = count of AIAN households crowded or without complete kitchen or plumbing multiplied by POPCAPADJF. NOCRPR = national total of OCRPR. SCBTOT = count of AIAN households paying more than 50% of their income for housing multiplied by POPCAPADJF. NSCBTOT = national total SCBTOT. HOUSHOR = a measure of housing shortage calculated as (HHLE30 + HH30T50 + HH50T80)--(LR + MH + TKIII) NHOUSHOR = national total of HOUSHOR. NEEDALLOCAMT = amount allocated using the need component of the formula. b. The basic needs calculation is adjusted to reflect differences in local area costs. NEED = BASENEED * (TDC/NATDC). Where: TDC = Local Total Development Costs defined in Sec. 1000.302. NATDC = average for TDC for all tribes weighted using BASENEED. 6. The need allocation computed above is adjusted to take into account the minimum needs provision. Tribes allocated less than $200,000 under the FCAS component of the IHBG formula and that certify the presence of any households at or below 80 percent of median income in their Indian Housing Plan are allocated an additional amount so their needs allocation equals 0.007826 percent of the available appropriations for that FY after set-asides. MINNEED = APPROP * 0.00007826. Where: APPROP = current FY appropriation for the IHBG program less amounts in the Appropriations Act mandated for purposes other than the formula allocation. If in the first need computation, a qualified tribe is allocated less than the minimum needs funding level, its need allocation will go up. Other tribes whose needs allocations are greater than the minimum needs amount will have their allocations adjusted downward to keep the total allocation within available funds: If NEED < MINNEED and FCAS < $200,000 and income-based need has been identified in a tribe's IHP, then NEED1 = MINNEED. If NEED = MINNEED, then NEED1 = NEED1 - {UNDERMIN$ * [(NEED1 - MINNEED)/OVERMIN$]{time} . Where: MINNEED = minimum needs amount. UNDERMIN$ = for all tribes qualifying for an increase under the minimum needs provision, sum of the differences between MINNEED and NEED1. OVERMIN$ = for all tribes with needs allocations larger than the minimum needs amount, the sum of the difference between NEED1 and MINNEED. 7. Whenever a new data source (see Sec. 1000.331) is first introduced, provision is made to moderate extreme impacts through phase down adjustments. Tribes whose allocation under the need component decrease by more than ten percent in the first year of introduction will have that decrease moderated by subsequent adjustments, as required to prevent a drop of more than ten percent per year in the tribes' needs allocation attributable solely to the introduction of the new data source. A phase down adjustment schedule is calculated, containing adjustment amounts (PDADJn) for the first and all subsequent FYs, based on the amount allocated to a tribe under the need component in the FY prior to the introduction of the new data source using the old data source. That is, If NEED1NewDS < 0.9 * NEED1OldDS, then a tribe qualifies for a phase down adjustment (PDADJ) (see Sec. 1000.331(c)). PDADJn = (((0.9\n\) * NEED1OldDS)--NEED1NewDS), where n = 1 to [infin] provided PDADJn 0 for at least one tribe. Where: NEED1NewDS = the amount the tribe would have received in the FY prior to the introduction of the new data source had the new data source been used to determine their need component in that FY. NEED1OldDS = the amount a tribe actually received in the FY prior to the introduction of the new data source based on the old data source. [[Page 735]] PDADJn = the size of the adjustment that qualifying tribes will receive in each year n, where the n represents the number of years elapsed since the introduction of the new data source and is equal to one in the first year. After allocation adjustments are made under Sec. 1000.331 for a FY, the needs allocation of an Indian tribe whose needs allocation increased as a result of the introduction of a new data source shall be adjusted downward proportionate to its share of the total increase in funding resulting from the introduction of a new data source to keep the overall need component within available appropriations. For each tribe which benefitted from the introduction of the new data source, their share of the total gain is calculated and that share is used to determine the amount of contribution they will make in each year following the introduction of the new data source to allow the phase down adjustments to be made without exceeding the amount available for allocation. If NEED1NewDS NEED1OldDS, then tribe gained from the introduction of the new data source and contributes a portion of their gain to offset the phase down adjustments. GAINSHR = (NEED1NewDS -NEED1OldDS)/TOTGAINYR1. CONTRIBn = GAINSHR * TOTPDADJn, Where: NEEDd1NewDS = the amount the tribe would have received in the FY prior to the of introduction of the new data source had the new data source been used to determine their needs funding in that FY. NEED1OldDS = the amount a tribe actually received in the FY prior to the introduction the new data source based on the old data source. GAINSHR = a tribe's share of the total gains realized by all tribes that benefitted from the introduction of the new data source. TOTGAINYR1 = the sum of the amounts that tribes gain from the introduction of the new data source in year one. CONTRIBn = the size of the contribution that non-qualifying tribes give in each year n, where the n represents the number of years elapsed since the introduction of the new data source and equal to one in the first year. TOTPDADJn = the total amount in each year n required to cover the cost of phase down adjustments in that year, i.e. S PDADJn. The initial needs allocation for each tribe is adjusted based on the phase down adjustments and contribution amounts in the phase down schedule. NEED1PD = NEED1 +__PDADJn - CONTRIBn. Where: NEED1PD = a tribe's allocation under the need component after applying the phase down adjustment schedule. NEED1= the initial calculation of need in the current FY from step 6 above. PDADJn = the size of the adjustment that qualifying tribes will receive in each year n, where the n represents the number of years elapsed since the introduction of the new data source and is equal to one in the first year. CONTRIBn = the size of the contribution that non-qualifying tribes give in each year n, where the n represents the number of years elapsed since the introduction of the new data source and equal to one in the first year. PDADJn and CONTRIBn as calculated in the initial phase down adjustment schedule may have to be adjusted downward in subsequent FYs if the total amount available for allocation under the needs Component (i.e. NEEDALLOCAMT in Step 4) is lower than the amount available for that purpose in the FY prior to the introduction of the new data source. If so, both PDADJn and CONTRIBn will be reduced by a factor which is the ratio of NEEDALLOCAMT in current FY to NEEDALLOCAMT in the year prior to the introduction of the new data source. Furthermore, when the 2020 Decennial Census or other new data source is introduced, a new phase down adjustment schedule will be calculated in a similar manner as that was calculated for FY 2018. 8. A tribe's preliminary total allocation is calculated by summing the amounts calculated under the FCAS and need components that will serve as the basis for further adjustments in accordance with Sec. 1000.340. GRANT1 = FCAS + NEED1PD. Where: GRANT1 = preliminary total allocation before applying 1996 Operating Subsidy and Modernization minimum funding (see Step 8), Undisbursed Funds Factor (see Step 9) and Minimum Grant provision (see Step 10). FCAS = Formula Current Assisted Stock component equal to OPSUB + MOD. NEED1PD = the Tribe's needs allocation after applying the phase down adjustment schedule. GRANT1 is compared to how much a tribe received in FY 1996 for operating subsidy and modernization under the 1937 Housing Act. If a tribe received more in FY 1996 for operating subsidy and modernization than its IHBG formula allocation, its preliminary total allocation is adjusted up to the FY 1996 amount (See Sec. 1000.340(b)). Indian tribes receiving more under the IHBG formula than [[Page 736]] in FY 1996 have their grant allocations adjusted downward to offset the upward adjustment for the other tribes. TEST = GRANT1 - OPMOD96. If TEST is < = than 0, then GRANT2 = OPMOD96. If TEST is greater than 0 and GRANT1 MINNEED, then: GRANT2 = GRANT1 - [UNDER1996 * (TEST/OVER1996)]. Where: TEST = variable to decide whether tribes qualify for adjustments under 1996 minimum funding. GRANT1 = preliminary total allocation before applying 1996 Operating Subsidy and Modernization minimum funding (see Step 8), Undisbursed Funds Factor (see Step 9) and Minimum Grant provision (see Step 10). OPMOD96 = funding received by tribe in FY 1996 for Operating Subsidy and Modernization. MINNEED = minimum needs amount. UNDER1996 = for all tribes with TEST less than 0, sum of the absolute value of TEST. OVER1996 = for all tribes with TEST greater than 0, sum of TEST. GRANT2 = preliminary total allocation after applying 1996 Operating Subsidy and Modernization minimum funding (see Step 8) but before applying the Undisbursed Funds Factor (see Step 9) and Minimum Grant provision (see Step 10). 9. The initial allocation amount for the current FY is calculated by adding any adjustments for over- or under-funding occurring in prior FYs to the allocation calculated in the previous step. These adjustments typically result from late reporting of FCAS changes, or conveyances. REPGRANT = GRANT2 + ADJUST1. Where: REPGRANT = Initial Allocation Amount in current FY (see Sec. 1000.342). GRANT2 = preliminary total allocation after applying 1996 Operating Subsidy and Modernization minimum funding (see Step 8) but before applying the Undisbursed Funds Factor (see Step 9) and Minimum Grant provision (see Step 10). ADJUST1 = adjustments for over- or under-funding occurring in prior FYs. 10. The Undisbursed Funds Factor is determined by subtracting the sum of each tribe's Initial Allocation Amount for the prior three FYs from the IHBG amounts in HUD's Line of Credit Control System (LOCCS) on October 1 of the FY for which the new allocation is being determined. If the undisbursed funds factor is $0 and the tribe's initial allocation for the FY exceeds $5 million, its final allocation will be the initial allocation minus the Undisbursed Funds Factor or its 1996 minimum, whichever is greater. Reductions to the initial allocation amounts due to the Undisbursed Funds Factor are summed and redistributed to other tribes in proportion to their initial needs allocation, NEED1PD, calculated above. If REPGRANT = $5 MILLION and UNDISB$ (REPGRANTYR1 + REPGRANTYR2 + REPGRANTYR3), then UDFFtest = 1. Where: REPGRANT = Initial Allocation Amount in current FY. REPGRANTYR1 = Initial Allocation Amount in one year prior to current FY. REPGRANTYR2 = Initial Allocation Amount in two years prior to current FY. REPGRANTYR3 = Initial Allocation Amount in three years prior to current FY. UDFFTest = is an indicator as to whether the tribe will give up a portion of its needs allocation due to an excessive amount of undisbursed funds. For tribes whose UDFFtest = 1, a reduction will occur as follows: REPGRANTaftUDFF = (GRANT2 - (UNDISB$ - (REPGRANTYR1 + REPGRANTYR2 + REPGRANTYR3)) Except if, OPMOD96 (GRANT2 - (UNDISB$ - (REPGRANTYR + REPGRANTYR2 + REPGRANTYR3)) then, REPGRANTaftUDFF = OPMOD96. Where: REPGRANTaftUDFF = Initial Allocation Amount in current FY adjusted for the Undisbursed Funds Factor. GRANT2 = preliminary total allocation after applying 1996 Operating Subsidy and Modernization minimum funding (see Step 8) but before applying the Undisbursed Funds Factor (see Step 9) and Minimum Grant provision (see Step 10). UNDISB$ = amount in HUD's LOCCS on October 1 of the FY. REPGRANTYR1 = Initial Allocation Amount in one year prior to current FY. REPGRANTYR2 = Initial Allocation Amount in two years prior to current FY. REPGRANTYR3 = Initial Allocation Amount in three years prior to current FY. OPMOD96 = funding received by tribe in FY 1996 for Operating Subsidy and Modernization. So the UDFFadj = REPGRANTaftUDFF - GRANT2 and UDFFadjTOT= Absolute value of the sum of UDFF adjustments for tribes subject to reduction. If UDFFtest is not equal to 1, tribes receive a portion of the funds recovered under the UDFF provision based on their share of [[Page 737]] total needs excluding any tribes with UDFFtest = 1. For these tribes, then: UDFFadj = (NEED1PD/S Need1PD) * UDFFadjTOT). REPGRANTaftUDFF = REPGRANT + UDFFadj. Where: UDFFadj = amount of the Undisbursed Fund Factor adjustments. Negative amount represents excess undisbursed funds. Positive represents amounts being transferred to other tribes without excess undisbursed funds. NEED1PD = the Tribe's needs allocation after applying the phase down adjustment schedule. UDFFadjTOT = absolute value of the sum of Undisbursed Fund Factor adjustments for tribes that meet the criteria for reduction and is equal to the sum available for redistribution among other tribes based on their initial needs allocation. REPGRANTaftUDFF = Initial Allocation Amount in current FY adjusted for the Undisbursed Funds Factor. REPGRANT = Initial Allocation Amount in current FY. 11. A final adjustment is made under Sec. 1000.329 which allocates available carryover amounts up to $3 million to achieve minimum total allocations. Tribes that certify in their Indian Housing Plans the presence of any eligible households at or below 80 percent of median income and whose total allocation determined in the preceding step is less than 0.011547 percent of the FY appropriation after set-asides, will have their allocation adjusted upwards to 0.011547 percent of the FY appropriation after set-asides, or to a lesser percentage which can be achieved for all eligible tribes with available carryover funds set- aside for this purpose. MINGRANT = APPROP * 0.0001547. Where: APPROP = current FY appropriation for the IHBG program less amounts in the Appropriations Act mandated for purposes other than the formula allocation. If (GRANT2 + UDFFADJ) < MINGRANT and income-based need has been identified in a tribe's IHP, then tribe qualifies for MINGRANTADJ. For Tribes that qualify, calculate: MINGRTADJTEST = MINGRANT--(GRANT2 + UDFFADJ). If the Sum for all tribes of MINGRTADJTEST < MGHOLD, then: MINGRANTADJ = MINGRTADJTEST. If the Sum for all tribes of MINGRANTADJTEST MGHOLD, then: MINGRANTADJ = MINGRANTADJTEST * (MGHOLD/S MINGRANTADJ) Where: GRANT2 is the approximate grant allocation in any given year for any given tribe. UDFFADJ = amount of UDFF adjustment. MINGRANT = Minimum total allocation established in Sec. 1000.329. MINGRANTADJTEST = amount required to bring all qualifying tribes' allocations up to the minimum total allocation amount. This amount can then be compared. MGHOLD = amount set-aside for allocation under minimum total grant provision (see Step 2). MINGRANTADJ = actual amount of the minimum grant adjustment that can be accommodated with the amount set aside from carryover for this purpose. 12. A tribe's final allocation consists of the initial current FY formula allocation with three adjustments. FINALALLOCATION = GRANT2 + ADJUST1 + UDFFadj + MINGRANTADJ Where: FINALALLOCATION = total amount a tribe is eligible to receive as a grant in the current FY. GRANT2 = preliminary total allocation after applying 1996 Operating Subsidy and Modernization minimum funding (see Step 8) but before applying the Undisbursed Funds Factor (see Step 9) and Minimum Grant provision (see Step 10). ADJUST1 = adjustments for over- or under-funding occurring in prior FYs. UDFFadj = amount of the Undisbursed Fund Factor adjustments. Negative amount represents excess undisbursed funds. Positive represents amounts being transferred to other tribes without excess undisbursed funds. MINGRANTADJ = actual amount of the minimum grant adjustment that can be accommodated with the amount set aside from carryover for this purpose. [81 FR 83682, Nov. 22, 2016] PARTS 1001 1002 [RESERVED] PART 1003_COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND ALASKA NATIVE VILLAGES--Table of Contents Subpart A_General Provisions Sec. 1003.1 Applicability and scope. 1003.2 Program objective. 1003.3 Nature of program. 1003.4 Definitions. 1003.5 Eligible applicants. 1003.6 Waivers. [[Page 738]] Subpart B_Allocation of Funds 1003.100 General. 1003.101 Area ONAP allocation of funds. 1003.102 Use of recaptured and unawarded funds. Subpart C_Eligible Activities 1003.200 General policies. 1003.201 Basic eligible activities. 1003.202 Eligible rehabilitation and preservation activities. 1003.203 Special economic development activities. 1003.204 Special activities by Community-Based Development Organizations (CBDOs). 1003.205 Eligible planning, urban environmental design and policy- planning-management-capacity building activities. 1003.206 Program administration costs. 1003.207 Ineligible activities. 1003.208 Criteria for compliance with the primary objective. 1003.209 Prohibition on use of assistance for employment relocation activities. Subpart D_Single Purpose Grant Application and Selection Process 1003.300 Application requirements. 1003.301 Selection process. 1003.302 Project specific threshold requirements. 1003.303 Project rating. 1003.304 Funding process. 1003.305 Program amendments. Subpart E_Imminent Threat Grants 1003.400 Criteria for funding. 1003.401 Application process. 1003.402 Availability of funds. Subpart F_Grant Administration 1003.500 Responsibility for grant administration. 1003.501 Applicability of uniform administrative requirements and cost principles. 1003.502 Agreements with subrecipients. 1003.503 Program income. 1003.504 Use of real property. 1003.505 Records to be maintained. 1003.506 Reports. 1003.507 Public access to program records. 1003.508 Grant closeout procedures. 1003.509 Force account construction. 1003.510 Indian preference requirements. 1003.511 Use of escrow accounts for rehabilitation of privately owned residential property. Subpart G_Other Program Requirements 1003.600 Equal participation of faith-based organizations. 1003.601 Nondiscrimination. 1003.602 Relocation and real property acquisition. 1003.603 Labor standards. 1003.604 Citizen participation. 1003.605 Environment. 1003.606 Conflict of interest. 1003.607 Lead-based paint. 1003.608 Debarment and suspension. Subpart H_Program Performance 1003.700 Review of grantee's performance. 1003.701 Corrective and remedial actions. 1003.702 Reduction or withdrawal of grant. 1003.703 Other remedies for noncompliance. Authority: 42 U.S.C. 3535(d) and 5301 et seq. Source: 61 FR 40090, July 31, 1996, unless otherwise noted. Redesignated at 62 FR 12349, Mar. 12, 1998. Subpart A_General Provisions Sec. 1003.1 Applicability and scope. The policies and procedures described in this part apply to grants to eligible applicants under the Community Development Block Grant (CDBG) program for Indian tribes and Alaska native villages. Sec. 1003.2 Program objective. The primary objective of the Indian CDBG (ICDBG) Program and of the community development program of each grantee covered under the Act is the development of viable Indian and Alaska native communities, including decent housing, a suitable living environment, and economic opportunities, principally for persons of low and moderate income. The Federal assistance provided in this part is not to be used to reduce substantially the amount of tribal financial support for community development activities below the level of such support before the availability of this assistance. Sec. 1003.3 Nature of program. The selection of single purpose grantees under subpart B of this part is competitive in nature. Therefore, selection of grantees for funds will reflect consideration of the relative adequacy of applications in addressing tribally determined need. The selection of grantees of imminent threat grants under the provisions of subpart B of this part is not competitive in nature. However, [[Page 739]] applicants for funding under either subpart must have the administrative capacity to undertake the community development activities proposed, including the systems of internal control necessary to administer these activities effectively without fraud, waste, or mismanagement. Sec. 1003.4 Definitions. Act means Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq.) Area ONAPs mean the HUD Offices of Native American Programs having field office responsibility for the ICDBG Program. Assistant Secretary means the Assistant Secretary for Public and Indian Housing. Buildings for the general conduct of government mean office buildings and other facilities in which the legislative, judicial or general administrative affairs of the government are conducted. This term does not include such facilities as neighborhood service centers or special purpose buildings located in low and moderate income areas that house various non-legislative functions or services provided by the government at decentralized locations. Chief executive officer means the elected official or legally designated official who has the prime responsibility for the conduct of the affairs of an Indian tribe or Alaska native village. Eligible Indian population means the most accurate and uniform population data available from data compiled and published by the United States Bureau of the Census available from the latest census referable to the same point or period of time for Indian tribes and Alaska native villages eligible under this part. Extent of overcrowded housing means the number of housing units with 1.01 or more persons per room, based on data compiled and published by the United States Bureau of the Census available from the latest census referable to the same point or period of time. Extent of poverty means the number of persons whose incomes are below the poverty level, based on data compiled and published by the United States Bureau of the Census referable to the same point or period in time and the latest reports from the Office of Management and Budget. HUD means the Department of Housing and Urban Development. ICDBG Program means the Indian Community Development Block Grant Program. Identified service area means: (1) A geographic location within the jurisdiction of a tribe (but not the entire jurisdiction) designated in comprehensive plans, ordinances, or other tribal documents as a service area; (2) The Bureau of Indian Affairs (BIA) service area, including residents of areas outside the geographic jurisdiction of the tribe; or (3) The entire area under the jurisdiction of a tribe which has a population of members of under 10,000. Imminent threat means a problem which if unresolved or not addressed will have an immediate negative impact on public health or safety. Low and moderate income beneficiary means a family, household, or individual whose income does not exceed 80 percent of the median income for the area, as determined by HUD, with adjustments for smaller and larger households or families. However, HUD may establish income ceilings higher or lower than 80 percent of the median for the area on the basis of HUD's findings that such variations are necessary because of unusually high or low household or family incomes. In reporting income levels to HUD, the applicant must include and identify the distributions of tribal or village income to families, households, or individuals. Microenterprise means a business that has five or fewer employees, one or more of whom owns the enterprise. Secretary means the Secretary of HUD. Small business means a business that meets the criteria set forth in section 3(a) of the Small Business Act (15 U.S.C. 631, 636, and 637). Subrecipient means a public or private nonprofit agency, authority or organization, or a for-profit entity described in Sec. 1003.201(l), receiving ICDBG funds from the grantee or another subrecipient to undertake activities eligible for assistance under subpart C of [[Page 740]] this part. The term excludes a CBDO receiving ICDBG funds from the grantee under the authority of Sec. 1003.204, unless the grantee explicitly designates it as a subrecipient. The term does not include contractors providing supplies, equipment, construction or services subject to the procurement requirements in 2 CFR 200.318 through 200.326. Tribal government, Tribal governing body or Tribal council means the governing body of an Indian tribe or Alaska native village as recognized by the Bureau of Indian Affairs. Tribal resolution means the formal manner in which the tribal government expresses its legislative will in accordance with its organic documents. In the absence of such organic documents, a written expression adopted pursuant to tribal practices will be acceptable. URA means the Uniform Relocation and Real Property Acquisition Policies Act of 1970, as amended (42 U.S.C. 4601 et. seq.). [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015] Sec. 1003.5 Eligible applicants. (a) Eligible applicants are any Indian tribe, band, group, or nation, including Alaska Indians, Aleuts, and Eskimos, and any Alaska native village of the United States which is considered an eligible recipient under Title I of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450) or which had been an eligible recipient under the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 1221). Eligible recipients under the Indian Self-Determination and Education Assistance Act will be determined by the Bureau of Indian Affairs and eligible recipients under the State and Local Fiscal Assistance Act of 1972 are those that have been determined eligible by the Department of Treasury, Office of Revenue Sharing. (b) Tribal organizations which are eligible under Title I of the Indian Self-Determination and Education Assistance Act may apply on behalf of any Indian tribe, band, group, nation, or Alaska native village eligible under that act for funds under this part when one or more of these entities have authorized the tribal organization to do so through concurring resolutions. Such resolutions must accompany the application for funding. Eligible tribal organizations under Title I of the Indian Self-Determination and Education Assistance Act will be determined by the Bureau of Indian Affairs or the Indian Health Service, as appropriate. (c) To apply for funding in a given fiscal year, an applicant must be eligible as an Indian tribe or Alaska native village, as provided in paragraph (a) of this section, or as a Tribal organization, as provided in paragraph (b) of this section, by the application submission date. (Approved by the Office of Management and Budget under control number 2577-0191) Sec. 1003.6 Waivers. Upon determination of good cause, HUD may waive any provision of this part not required by statute. Each waiver must be in writing and must be supported by documentation of the pertinent facts and grounds. Subpart B_Allocation of Funds Sec. 1003.100 General. (a) Types of grants. Two types of grants are available under the Indian CDBG Program. (1) Single purpose grants provide funds for one or more single purpose projects consisting of an activity or set of activities designed to meet a specific community development need. This type of grant is awarded through competition with other single purpose projects. (2) Imminent threat grants alleviate an imminent threat to public health or safety that requires immediate resolution. This type of grant is awarded only after an Area ONAP determines that such conditions exist and if funds are available for such grants. (b) Size of grants--(1) Ceilings. Each Area ONAP may recommend grant ceilings for single purpose grant applications. Single purpose grant ceilings for each Area ONAP shall be established in the NOFA (Notice of Funding Availability). (2) Individual grant amounts. An Area ONAP may approve a grant amount less than the amount requested. In doing so, the Area ONAP may take [[Page 741]] into account the size of the applicant, the level of demand, the scale of the activity proposed relative to need and operational capacity, the number of persons to be served, the amount of funds required to achieve project objectives, the reasonableness of the project costs, and the administrative capacity of the applicant to complete the activities in a timely manner. [61 FR 40090, July 31, 1996. Redesignated at 62 FR 12349, Mar. 12, 1998, as amended at 66 FR 4580, Jan. 17, 2001; 66 FR 8176, Jan. 30, 2001] Sec. 1003.101 Area ONAP allocation of funds. (a) Except as provided in paragraph (b) of this section, funds will be allocated to the Area ONAPs responsible for the program on the following basis: (1) Each Area ONAP will be allocated $1,000,000 as a base amount, to which will be added a formula share of the balance of the ICDBG Program funds, as provided in paragraph (a)(2) of this section. (2) The amount remaining after the base amount is allocated and any amount retained by the Headquarters ONAP to fund imminent threat grants pursuant to the provisions of Sec. 1003.402 is subtracted, will be allocated to each Area ONAP based on the most recent data complied and published by the United States Bureau of the Census referable to the same point or period in time, as follows: (i) Forty percent (40%) of the funds will be allocated based upon each Area ONAP's share of the total eligible Indian population; (ii) Forty percent (40%) of the funds will be allocated based upon each Area ONAP's share of the total extent of poverty among the eligible Indian population; and (iii) Twenty percent (20%) of the funds will be allocated based upon each Area ONAP's share of the total extent of overcrowded housing among the eligible Indian population. (b) HUD will use other criteria to determine an allocation formula for distributing funds to the Area ONAPs if funds are set aside by statute for a specific purpose in any fiscal year if it is determined that the formula in paragraph (a) of this section is inappropriate to accomplish the purpose. HUD will use other criteria if it is determined that, based on a limited appropriation of funds, the use of the formula in paragraph (a) of this section is inappropriate to obtain an equitable allocation of funds. (c) Data used for the allocation of funds will be based upon the Indian population of those tribes and villages that are determined to be eligible ninety (90) days before the beginning of each fiscal year. Sec. 1003.102 Use of recaptured and unawarded funds. (a) The Assistant Secretary will determine on a case-by-case basis the use of grant funds which are: (1) Recaptured by HUD under the provisions of Sec. 1003.703 or Sec. 1003.704; (2) Recaptured by HUD at the time of the closeout of a program; or (3) Unawarded after the completion by an Area ONAP of a funding competition. (b) The recaptured or unawarded funds will remain with the Area ONAP to which they were originally allocated unless the Assistant Secretary determines that there is an overriding reason to redistribute these funds outside of the Area ONAP's jurisdiction. The recaptured funds may be used to fund the highest ranking unfunded project from the most recent funding competition, an imminent threat, or other uses. Unawarded funds may be used to fund an imminent threat or other uses. Subpart C_Eligible Activities Sec. 1003.200 General policies. An activity may be assisted in whole or in part with ICDBG funds only if the activity meets the eligibility requirements of section 105 of the Act as further defined in this subpart and if the criteria for compliance with the primary objective of the Act set forth under Sec. 1003.208 have been met. The requirements for compliance with the primary objective of the Act do not apply to imminent threat grants funded under subpart E of this part. Sec. 1003.201 Basic eligible activities. ICDBG funds may be used for the following activities: [[Page 742]] (a) Acquisition. Acquisition in whole or in part by the grantee, or other public or private nonprofit entity, by purchase, long-term lease, donation, or otherwise, of real property (including air rights, water rights, rights-of-way, easements, and other interests therein) for any public purpose, subject to the limitations of Sec. 1003.207. (b) Disposition. Disposition, through sale, lease, donation, or otherwise, of any real property acquired with ICDBG funds or its retention for public purposes, including reasonable costs of temporarily managing such property or property acquired under urban renewal, provided that the proceeds from any such disposition shall be program income subject to the requirements set forth in Sec. 1003.503. (c) Public facilities and improvements. Acquisition, construction, reconstruction, rehabilitation or installation of public facilities and improvements, except as provided in Sec. 1003.207(a), carried out by the grantee or other public or private nonprofit entities. In undertaking such activities, design features and improvements which promote energy efficiency may be included. [However, activities under this paragraph may be directed to the removal of material and architectural barriers that restrict the mobility and accessibility of elderly or severely disabled persons to publicly owned and privately owned buildings, facilities, and improvements including those provided for in Sec. 1003.207(a)(1).] Such activities may also include the execution of architectural design features, and similar treatments intended to enhance the aesthetic quality of facilities and improvements receiving ICDBG assistance. Facilities designed for use in providing shelter for persons having special needs are considered public facilities and not subject to the prohibition of new housing construction described in Sec. 1003.207(b)(3). Such facilities include shelters for the homeless; convalescent homes; hospitals, nursing homes; battered spouse shelters; halfway houses for run-away children, drug offenders or parolees; group homes for mentally retarded persons and temporary housing for disaster victims. In certain cases, nonprofit entities and subrecipients including those specified in Sec. 1003.204 may acquire title to public facilities. When such facilities are owned by nonprofit entities or subrecipients, they shall be operated so as to be open for use by the general public during all normal hours of operation. Public facilities and improvements eligible for assistance under this paragraph (c) are subject to the following policies in paragraphs (c)(1) through (c)(3) of this section: (1) Special policies governing facilities. The following special policies apply to: (i) Facilities containing both eligible and ineligible uses. A public facility otherwise eligible for assistance under the ICDBG program may be provided with ICDBG funds even if it is part of a multiple use building containing ineligible uses, if: (A) The facility which is otherwise eligible and proposed for assistance will occupy a designated and discrete area within the larger facility; and (B) The grantee can determine the costs attributable to the facility proposed for assistance as separate and distinct from the overall costs of the multiple-use building and/or facility. Allowable costs are limited to those attributable to the eligible portion of the building or facility. (ii) Equipment purchase. As stated in Sec. 1003.207(b)(1), the purchase of equipment with ICDBG funds is generally ineligible. However, the purchase of construction equipment for use as part of a solid waste facility is eligible. In addition, the purchase of fire protection equipment is considered to be an integral part of a public facility, and, therefore, the purchase of such equipment is also eligible. (2) Fees for use of facilities. Reasonable fees may be charged for the use of the facilities assisted with ICDBG funds, but charges such as excessive membership fees, which will have the effect of precluding low and moderate income persons from using the facilities, are not permitted. (3) Special assessments under the ICDBG program. The following policies relate to special assessments under the ICDBG program: (i) Definition of special assessment. The term special assessment means the recovery of the capital costs of a public improvement, such as streets, water or [[Page 743]] sewer lines, curbs, and gutters, through a fee or charge levied or filed as a lien against a parcel of real estate as a direct result of benefit derived from the installation of a public improvement, or a one-time charge made as a condition of access to a public improvement. This term does not relate to taxes, or the establishment of the value of real estate for the purpose of levying real estate, property, or ad valorem taxes, and does not include periodic charges based on the use of a public improvement, such as water or sewer user charges, even if such charges include the recovery of all or some portion of the capital costs of the public improvement. (ii) Special assessments to recover capital costs. Where ICDBG funds are used to pay all or part of the cost of a public improvement, special assessments may be imposed as follows: (A) Special assessments to recover the ICDBG funds may be made only against properties owned and occupied by persons not of low and moderate income. Such assessments constitute program income. (B) Special assessments to recover the non-ICDBG portion may be made provided that ICDBG funds are used to pay the special assessment on behalf of all properties owned and occupied by low and moderate income persons; except that ICDBG funds need not be used to pay the special assessments on behalf of properties owned and occupied by moderate income persons if the grantee certifies that it does not have sufficient ICDBG funds to pay the assessments in behalf of all of the low and moderate income owner-occupant persons. Funds collected through such special assessments are not program income. (iii) Public improvements not initially assisted with ICDBG funds. The payment of special assessments with ICDBG funds constitutes ICDBG assistance to the public improvement. Therefore, ICDBG funds may be used to pay special assessments provided: (A) The installation of the public improvements was carried out in compliance with requirements applicable to activities assisted under this part including environmental and citizen participation requirements; and (B) The installation of the public improvement meets a criterion for the primary objective in Sec. 1003.208; and, (C) The requirements of Sec. 1003.201(c)(3)(ii))(B) are met. (d) Clearance activities. Clearance, demolition, and removal of buildings and improvements, including movement of structures to other sites. Demolition of HUD-assisted housing units may be undertaken only with the prior approval of HUD. (e) Public services. Provision of public services (including labor, supplies, materials, and the purchase of personal property and furnishings) which are directed toward improving the community's public services and facilities, including but not limited to those concerned with employment, crime prevention, child care, health, drug abuse, education, fair housing counseling, energy conservation, welfare (but excluding the provision of income payments identified under Sec. 1003.207(b)(4)), homebuyer downpayment assistance or recreational needs. To be eligible for ICDBG assistance, a public service must be either a new service, or a quantifiable increase in the level of an existing service above that which has been provided by or on behalf of the grantee through funds raised by the grantee, or received by the grantee from the Federal government in the twelve calendar months before the submission of the application for ICDBG assistance. (An exception to this requirement may be made if HUD determines that any decrease in the level of a service was the result of events not within the control of the grantee.) The amount of ICDBG funds used for public services shall not exceed 15 percent of the grant. Such projects must therefore be submitted with one or more other projects, which must comprise at least 85 percent of the total requested ICDBG grant amount. (f) Interim assistance. (1) The following activities may be undertaken on an interim basis in areas exhibiting objectively determinable signs of physical deterioration where the grantee has determined that immediate action is necessary to arrest the deterioration and that permanent improvements will be carried out as soon as practicable: [[Page 744]] (i) The repairing of streets, sidewalks, parks, playgrounds, publicly owned utilities, and public buildings; and (ii) The execution of special garbage, trash, and debris removal, including neighborhood cleanup campaigns, but not the regular curbside collection of garbage or trash in an area. (2) In order to alleviate emergency conditions threatening the public health and safety in areas where the chief executive officer of the grantee determines that such an emergency condition exists and requires immediate resolution, ICDBG funds may be used for: (i) The activities specified in paragraph (f)(1) of this section, except for the repair of parks and playgrounds; (ii) The clearance of streets, including snow removal and similar activities; and (iii) The improvement of private properties. (3) All activities authorized under paragraph (f)(2) of this section are limited to the extent necessary to alleviate emergency conditions. (g) Payment of non-Federal share. Payment of the non-Federal share required in connection with a Federal grant-in-aid program undertaken as part of ICDBG activities, provided, that such payment shall be limited to activities otherwise eligible and in compliance with applicable requirements under this subpart. (h) Relocation. Relocation payments and other assistance for permanently and temporarily relocated individuals families, businesses, nonprofit organizations, and farm operations where the assistance is: (1) Required under the provisions of Sec. 1003.602 (b) or (c); or (2) Determined by the grantee to be appropriate under the provisions of Sec. 1003.602(d). (i) Loss of rental income. Payments to housing owners for losses of rental income incurred in holding, for temporary periods, housing units to be used for the relocation of individuals and families displaced by program activities assisted under this part. (j) Housing services. Housing services, as provided in section 105(a)(21) of the Housing and Community Development Act of 1974 [42 U.S.C. 5305(a)(21)]. (k) Privately owned utilities. ICDBG funds may be used to acquire, construct, reconstruct, rehabilitate, or install the distribution lines and facilities of privately owned utilities, including the placing underground of new or existing distribution facilities and lines. (l) The provision of assistance to facilitate economic development. (1) The provision of assistance either through the grantee directly or through public and private organizations, agencies, and other subrecipients (including nonprofit and for-profit subrecipients) to facilitate economic development by: (i) Providing credit, including, but not limited to, grants, loans, loan guarantees, and other forms of financial support, for the establishment, stabilization, and expansion of microenterprises; (ii) Providing technical assistance, advice, and business support services to owners of microenterprises and persons developing microenterprises; and (iii) Providing general support, including, but not limited to, peer support programs, counseling, child care, transportation, and other similar services, to owners of microenterprises and persons developing microenterprises. (2) Services provided under paragraph (l)(1) of this section shall not be subject to the restrictions on public services contained in Sec. 1003.201(e). (3) For purposes of this paragraph (l), persons developing microenterprises means such persons who have expressed interest and who are, or after an initial screening process are expected to be, actively working toward developing businesses, each of which is expected to be a microenterprise at the time it is formed. (m) Technical assistance. Provision of technical assistance to public or nonprofit entities to increase the capacity of such entities to carry out eligible neighborhood revitalization or economic development activities. Capacity building for private or public entities (including grantees) for other purposes may be eligible as a planning cost under Sec. 1003.205. (n) Assistance to institutions of higher education. Provision of assistance by [[Page 745]] the grantee to institutions of higher education where the grantee determines that such an institution has demonstrated a capacity to carry out eligible activities under this subpart. (o) Homeownership assistance. ICDBG funds may be used to provide direct homeownership assistance to low- and moderate-income households to: (1) Subsidize interest rates and mortgage principal amounts for low- and moderate-income homebuyers; (2) Finance the acquisition by low-and moderate-income homebuyers of housing that is occupied by the homebuyers; (3) Acquire guarantees for mortgage financing obtained by low-and moderate-income homebuyers form private lenders (except that ICDBG funds may not be used to guarantee such mortgage financing directly, and grantees may not provide such guarantees directly); (4) Provide up to 50 percent of any downpayment required from a low- and moderate-income homebuyer; or (5) Pay reasonable closing costs (normally associated with the purchase of a home) incurred by a low-or moderate-income homebuyer. Sec. 1003.202 Eligible rehabilitation and preservation activities. (a) Types of buildings and improvements eligible for rehabilitation or reconstruction assistance. ICDBG funds may be used to finance the rehabilitation of: (1) Privately owned buildings and improvements for residential purposes; improvements to a single-family residential property which is also used as a place of business, which are required in order to operate the business, need not be considered to be rehabilitation of a commercial or industrial building, if the improvements also provide general benefit to the residential occupants of the building; (2) Low-income public housing and other publicly owned residential buildings and improvements; (3) Publicly or privately owned commercial or industrial buildings, except that the rehabilitation of such buildings owned by a private for- profit business is limited to improvements to the exterior of the building and the correction of code violations (further improvements to such buildings may be undertaken pursuant to Sec. 1003.203(b)); and (4) Nonprofit-owned nonresidential buildings and improvements not eligible under Sec. 1003.201(c); (5) Manufactured housing when such housing constitutes part of the community's permanent housing stock. (b) Types of assistance. ICDBG funds may be used to finance the following types of rehabilitation or reconstruction activities, and related costs, either singly, or in combination, through the use of grants, loans, loan guarantees, interest supplements, or other means for buildings and improvements described in paragraph (a) of this section, except that rehabilitation of commercial or industrial buildings is limited as described in paragraph (a)(3) of this section. (1) Assistance to private individuals and entities, including profit making and nonprofit organizations, to acquire for the purpose of rehabilitation, and to rehabilitate properties, for use or resale for residential purposes; (2) Labor, materials, and other costs of rehabilitation of properties, including repair directed toward an accumulation of deferred maintenance, replacement of principal fixtures and components of existing structures, installation of security devices, including smoke detectors and dead bolt locks, and renovation through alterations, additions to, or enhancement of existing structures, which may be undertaken singly, or in combination; (3) Loans for refinancing existing indebtedness secured by a property being rehabilitated with ICDBG funds if such financing is determined by the grantee to be necessary or appropriate to achieve the grantee's community development objectives; (4) Improvements to increase the efficient use of energy in structures through such means as installation of storm windows and doors, siding, wall and attic insulation, and conversion, modification, or replacement of heating and cooling equipment, including the use of solar energy equipment; (5) Improvements to increase the efficient use of water through such means [[Page 746]] as water saving faucets and shower heads and repair of water leaks; (6) Connection of residential structures to water distribution lines or local sewer collection lines; (7) For rehabilitation carried out with ICDBG funds, costs of: (i) Initial homeowner warranty premiums; (ii) Hazard insurance premiums, except where assistance is provided in the form of a grant; and (iii) Flood insurance premiums for properties covered by the Flood Disaster Protection Act of 1973, pursuant to 24 CFR 58.6(a). (iv) Lead-based paint activities in part 35 of this title. (8) Costs of acquiring tools to be lent to owners, tenants, and others who will use such tools to carry out rehabilitation; (9) Rehabilitation services, such as rehabilitation counseling, energy auditing, preparation of work specifications, loan processing, inspections, and other services related to assisting owners, tenants, contractors, and other entities, participating or seeking to participate in rehabilitation activities authorized under this section; (10) Improvements designed to remove material and architectural barriers that restrict the mobility and accessibility of elderly or severely disabled persons to buildings and improvements eligible for assistance under paragraph (a) of this section. (c) Code enforcement. Code enforcement in deteriorating or deteriorated areas where such enforcement together with public or private improvements, rehabilitation, or services to be provided, may be expected to arrest the decline of the area. (d) Historic preservation. ICDBG funds may be used for the rehabilitation, preservation or restoration of historic properties, whether publicly or privately owned. Historic properties are those sites or structures that are either listed in or eligible to be listed in the National Register of Historic Places, listed in a State or local inventory of historic places, or designated as a State or local landmark or historic district by appropriate law or ordinance. Historic preservation, however, is not authorized for buildings for the general conduct of government. (e) Renovation of closed buildings. ICDBG funds may be used to renovate closed buildings, such as closed school buildings, for use as an eligible public facility or to rehabilitate such buildings for housing. [61 FR 40090, July 31, 1996, as amended at 64 FR 50230, Sept. 15, 1999] Sec. 1003.203 Special economic development activities. A grantee may use ICDBG funds for special economic development activities in addition to other activities authorized in this subpart which may be carried out as part of an economic development project. Special activities authorized under this section do not include assistance for the construction of new housing. Special economic development activities include: (a) The acquisition, construction, reconstruction, rehabilitation or installation of commercial or industrial buildings, structures, and other real property equipment and improvements, including railroad spurs or similar extensions. Such activities may be carried out by the grantee or public or private nonprofit subrecipients. (b) The provision of assistance to a private for-profit business, including, but not limited to, grants, loans, loan guarantees, interest supplements, technical assistance, and other forms of support, for any activity where the assistance is necessary or appropriate to carry out an economic development project, excluding those described as ineligible in Sec. 1003.207(a). In order to ensure that any such assistance does not unduly enrich the for-profit business, the grantee shall conduct an analysis to determine that the amount of any financial assistance to be provided is not excessive, taking into account the actual needs of the business in making the project financially feasible and the extent of public benefit expected to be derived from the economic development project. The grantee shall document the analysis as well as any factors it considered in making its determination that the assistance is necessary or appropriate to carry out the project. The requirement for making such a determination applies whether [[Page 747]] the business is to receive assistance from the grantee or through a subrecipient. (Approved by the Office of Management and Budget under control number 2577-0191) Sec. 1003.204 Special activities by Community-Based Development Organizations (CBDOs). (a) Eligible activities. The grantee may provide ICDBG funds as grants or loans to any CBDO qualified under this section to carry out a neighborhood revitalization, community economic development, or energy conservation project. The funded project activities may include those listed as eligible under this subpart, and, except as described in paragraph (b) of this section, activities not otherwise listed as eligible under this subpart. For purposes of qualifying as a project under paragraphs (a)(1), (a)(2), and (a)(3) of this section, the funded activity or activities may be considered either alone or in concert with other project activities either being carried out or for which funding has been committed. For purposes of this section: (1) Neighborhood revitalization project includes activities of sufficient size and scope to have an impact on the decline of a geographic location within the jurisdiction of a grantee (but not the entire jurisdiction) designated in comprehensive plans, ordinances, or other local documents as a neighborhood, village, or similar geographical designation; or the entire jurisdiction of a grantee which is under 25,000 population; (2) Community economic development project includes activities that increase economic opportunity, principally for persons of low- and moderate-income, or that stimulate or retain businesses or permanent jobs, including projects that include one or more such activities that are clearly needed to address a lack of affordable housing accessible to existing or planned jobs; (3) Energy conservation project includes activities that address energy conservation, principally for the benefit of the residents of the grantee's jurisdiction; and (4) To carry out a project means that the CBDO undertakes the funded activities directly or through contract with an entity other than the grantee, or through the provision of financial assistance for activities in which it retains a direct and controlling involvement and responsibilities. (b) Ineligible activities. Notwithstanding that CBDOs may carry out activities that are not otherwise eligible under this subpart, this section does not authorize: (1) Carrying out an activity described as ineligible in Sec. 1003.207(a); (2) Carrying out public services that do not meet the requirements of Sec. 1003.201(e), except services carried out under this section that are specifically designed to increase economic opportunities through job training and placement and other employment support services, including, but not limited to, peer support programs, counseling, child care, transportation, and other similar services; (3) Carrying out an activity that would otherwise be eligible under Sec. 1003.205 or Sec. 1003.206, but that would result in the grantee's exceeding the spending limitation in Sec. 1003.206. (c) Eligible CBDOs. (1) A CBDO qualifying under this section is an organization which has the following characteristics: (i) Is an association or corporation organized under State or local law to engage in community development activities (which may include housing and economic development activities) primarily within an identified geographic area of operation within the jurisdiction of the grantee; and (ii) Has as its primary purpose the improvement of the physical, economic or social environment of its geographic area of operation by addressing one or more critical problems of the area, with particular attention to the needs of persons of low and moderate income; and (iii) May be either non-profit or for-profit, provided any monetary profits to its shareholders or members must be only incidental to its operations; and (iv) Maintains at least 51 percent of its governing body's membership for low- and moderate-income residents of [[Page 748]] its geographic area of operation, owners or senior officers of private establishments and other institutions located in and serving its geographic area of operation, or representatives of low- and moderate- income neighborhood organizations located in its geographic area of operation; and (v) Is not an agency or instrumentality of the grantee and does not permit more than one-third of the membership of its governing body to be appointed by, or to consist of, elected or other public officials or employees or officials of an ineligible entity (even though such persons may be otherwise qualified under paragraph (c)(1)(iv) of this section); and (vi) Except as otherwise authorized in paragraph (c)(1)(v) of this section, requires the members of its governing body to be nominated and approved by the general membership of the organization, or by its permanent governing body; and (vii) Is not subject to requirements under which its assets revert to the grantee upon dissolution; and (viii) Is free to contract for goods and services from vendors of its own choosing. (2) A CBDO that does not meet the criteria in paragraph (c)(1) of this section may also qualify as an eligible entity under this section if it meets one of the following requirements: (i) Is an entity organized pursuant to section 301(d) of the Small Business Investment Act of 1958 (15 U.S.C. 681(d)), including those which are profit making; or (ii) Is an SBA-approved Section 501 State Development Company or Section 502 Local Development Company, or an SBA Certified Section 503 Company under the Small Business Investment Act of 1958, as amended; or (iii) Is a Community Housing Development Organization (CHDO) under 24 CFR 92.2, designated as a CHDO by the HOME Investment Partnerships program participating jurisdiction, with a geographic area of operation of no more than one neighborhood, and has received HOME funds under 24 CFR 92.300 or is expected to receive HOME funds as described in and documented in accordance with 24 CFR 92.300(e); or (iv) Is a tribal-based nonprofit organization. Such organizations are associations or corporations duly organized to promote and undertake community development activities on a not-for-profit basis within an identified service area. (3) A CBDO that does not qualify under paragraphs (c)(1) or (2) of this section may also be determined to qualify as an eligible entity under this section if the grantee demonstrates to the satisfaction of HUD, through the provision of information regarding the organization's charter and by-laws, that the organization is sufficiently similar in purpose, function, and scope to those entities qualifying under paragraphs (c)(1) or (2) of this section. Sec. 1003.205 Eligible planning, urban environmental design and policy-planning-management-capacity building activities. (a) Planning activities which consist of all costs of data gathering, studies, analysis, and preparation of plans and the identification of actions that will implement such plans, including, but not limited to comprehensive plans, community development plans and functional plans in areas such as housing and economic development. In addition, other plans and studies such as capital improvements programs, individual project plans, general environmental studies, and strategies and action programs to implement plans, including the development of codes and ordinances are also eligible activities. With respect to the costs of individual project plans, engineering and design costs related to a specific activity are eligible as part of the cost of such activity under Sec. Sec. 1003.201 through 1003.204 and are not considered planning costs. Also, costs necessary to comply with the requirements of 24 CFR part 58, including project specific environmental assessments and clearances for activities eligible under this part are eligible as part of the cost of such activities under Sec. Sec. 1003.201 through 1003.204. (b) Policy--planning--management--capacity building activities including those which will enable the grantee to determine its needs, set long term goals and short term objectives, devise [[Page 749]] programs to meet these goals and objectives, evaluate the progress being made in accomplishing the goals and objectives. In addition, actions necessary to carry out management, coordination and monitoring of activities necessary for effective planning implementation are eligible planning activities, however the costs necessary to implement the plans are not. Sec. 1003.206 Program administration costs. ICDBG funds may be used for the payment of reasonable administrative costs and carrying charges related to the planning and execution of community development activities assisted in whole or in part with funds provided under this part. No more than 20 percent of the sum of any grant plus program income received shall be expended for activities described in this section and in Sec. 1003.205--Eligible planning, urban environmental design and policy-planning-management capacity building activities. This does not include staff and overhead costs directly related to carrying out activities eligible under Sec. Sec. 1003.201 through 1003.204, since those costs are eligible as part of such activities. In addition, technical assistance costs associated with developing the capacity to undertake a specific funded activity are also not considered program administration costs. These costs must not, however, exceed 10% of the total grant award. (a) General management, oversight and coordination. Reasonable costs of overall program management, coordination, monitoring, and evaluation. Such costs include, but are not necessarily limited to, necessary expenditures for the following: (1) Salaries, wages, and related costs of the grantee's staff, the staff of local public agencies, or other staff engaged in program administration. In charging costs to this category the grantee may either include the entire salary, wages, and related costs allocable to the program of each person whose primary responsibilities with regard to the program involve program administration assignments, or the pro rata share of the salary, wages, and related costs of each person whose job includes any program administration assignments. The grantee may use only one of these methods during the grant period. Program administration includes the following types of assignments: (i) Providing tribal officials and citizens with information about the program; (ii) Preparing program budgets and schedules, and amendments thereto; (iii) Developing systems for assuring compliance with program requirements; (iv) Developing interagency agreements and agreements with subrecipients and contractors to carry out program activities; (v) Monitoring program activities for progress and compliance with program requirements; (vi) Preparing reports and other documents related to the program for submission to HUD; (vii) Coordinating the resolution of audit and monitoring findings; (viii) Evaluating program results against stated objectives; and (ix) Managing or supervising persons whose primary responsibilities with regard to the program include such assignments as those described in paragraph (a)(1) (i) through (viii) of this section. (2) Travel costs incurred for official business in carrying out the program; (3) Administrative services performed under third party contracts or agreements, including such services as general legal services, accounting services, and audit services; and (4) Other costs for goods and services required for administration of the program, including such goods and services as rental or purchase of equipment, furnishings, or other personal property (or the payment of depreciation for such items in accordance with 2 CFR part 200, subpart E , insurance, utilities, office supplies, and rental and maintenance (but not purchase) of office space.) (b) Public information. The provisions of information and other resources to residents and citizen organizations participating in the planning, implementation, or assessment of activities being assisted with ICDBG funds. (c) Indirect costs. Indirect costs may be charged to the ICDBG program under a cost allocation plan prepared [[Page 750]] in accordance with 2 CFR part 200, subpart E. (d) Submission of applications for Federal programs. Preparation of documents required for submission to HUD to receive funds under the ICDBG program. In addition, ICDBG funds may be used to prepare applications for other Federal programs where the grantee determines that such activities are necessary or appropriate to achieve its community development objectives. [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015] Sec. 1003.207 Ineligible activities. The general rule is that any activity that is not authorized under the provisions of Sec. Sec. 1003.201 through 1003.206 is ineligible to be assisted with ICDBG funds. This section identifies specific activities that are ineligible and provides guidance in determining the eligibility of other activities frequently associated with housing and community development. (a) The following activities may not be assisted with ICDBG funds: (1) Buildings or portions thereof used for the general conduct of government as defined at Sec. 1003.4 cannot be assisted with ICDBG funds. This does not include, however, the removal of architectural barriers under Sec. 1003.201(c) involving any such building. Also, where acquisition of real property includes an existing improvement which is to be used in the provision of a building for the general conduct of government, the portion of the acquisition cost attributable to the land is eligible, provided such acquisition meets the primary objective described in Sec. 1003.208. (2) General government expenses. Except as otherwise specifically authorized in this subpart or under 2 CFR part 200, subpart E, expenses required to carry out the regular responsibilities of the grantee are not eligible for assistance under this part. (3) Political activities. ICDBG funds shall not be used to finance the use of facilities or equipment for political purposes or to engage in other partisan political activities, such as candidate forums, voter transportation, or voter registration. However, a facility originally assisted with ICDBG funds may be used on an incidental basis to hold political meetings, candidate forums, or voter registration campaigns, provided that all parties and organizations have access to the facility on an equal basis, and are assessed equal rent or use charges, if any. (b) The following activities may not be assisted with ICDBG funds unless authorized under provisions of Sec. 1003.203 or as otherwise specifically noted herein, or when carried out by a CBDO under the provisions of Sec. 1003.204. (1) Purchase of equipment. The purchase of equipment with ICDBG funds is generally ineligible. (i) Construction equipment. The purchase of construction equipment is ineligible, but compensation for the use of such equipment through leasing or depreciation pursuant to 2 CFR part 200, subpart E, for an otherwise eligible activity is an eligible use of ICDBG funds. (ii) Furnishings and personal property. The purchase of equipment, fixtures, motor vehicles, furnishings, or other personal property not an integral structural fixture is generally ineligible. Exceptions to this general prohibition are set forth in Sec. 1003.201(o). (2) Operating and maintenance expenses. The general rule is that any expense associated with repairing, operating or maintaining public facilities, improvements and services is ineligible. Specific exceptions to this general rule are operating and maintenance expenses associated with public service activities, interim assistance, and office space for program staff employed in carrying out the ICDBG program. For example, the use of ICDBG funds to pay the allocable costs of operating and maintaining a facility used in providing a public service would be eligible under Sec. 1003.201(e), even if no other costs of providing such a service are assisted with such funds. Examples of ineligible operating and maintenance expenses are: (i) Maintenance and repair of streets, parks, playgrounds, water and sewer facilities, neighborhood facilities, senior centers, centers for persons with a disability, parking and similar public facilities; and [[Page 751]] (ii) Payment of salaries for staff, utility costs and similar expenses necessary for the operation of public works and facilities. (3) New housing construction. ICDBG funds may not be used for the construction of new permanent residential structures or for any program to subsidize or assist such new construction, except: (i) As provided under the last resort housing provisions set forth in 24 CFR part 42; or (ii) When carried out by a CBDO pursuant to Sec. 1003.204(a); (4) Income payments. The general rule is that ICDBG funds may not be used for income payments. For purposes of the ICDBG program, income payments means a series of subsistence-type grant payments made to an individual or family for items such as food, clothing, housing (rent or mortgage) or utilities, but excludes emergency payments made over a period of up to three months to the provider of such items or services on behalf of an individual or family. [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015] Sec. 1003.208 Criteria for compliance with the primary objective. The Act establishes as its primary objective the development of viable communities by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income. Consistent with this objective, not less than 70 percent of the expenditures of each single purpose grant shall be for activities which meet the criteria set forth in paragraphs (a), (b), (c) and (d) of this section. Activities meeting these criteria as applicable will be considered to benefit low and moderate income persons unless there is substantial evidence to the contrary. In assessing any such evidence, the full range of direct effects of the assisted activity will be considered. (The grantee shall appropriately ensure that activities that meet these criteria do not benefit moderate income persons to the exclusion of low income persons.) (a) Area benefit activities. (1) An activity, the benefits of which are available to all the residents in a particular area, where at least 51 percent of the residents are low and moderate income persons. Such an area need not be coterminous with census tracts or other officially recognized boundaries but must be the entire area served by the activity. An activity that serves an area that is not primarily residential in character shall not qualify under this criterion. (2) For purposes of determining qualification under this criterion, activities of the same type that serve different areas will be considered separately on the basis of their individual service area. (3) In determining whether there is a sufficiently large percentage of low and moderate income persons residing in the area served by an activity to qualify under paragraph (a) (1) or (2) of this section, the most recently available decennial census information shall be used to the fullest extent feasible, together with the Section 8 income limits that would have applied at the time the income information was collected by the Census Bureau. Grantees that believe that the census data does not reflect current relative income levels in an area, or where census boundaries do not coincide sufficiently well with the service area of an activity, may conduct (or have conducted) a current survey of the residents of the area to determine the percent of such persons that are low and moderate income. HUD will accept information obtained through such surveys, to be used in lieu of the decennial census data, where it determines that the survey was conducted in such a manner that the results meet standards of statistical reliability that are comparable to that of the decennial census data for areas of similar size. Where there is substantial evidence that provides a clear basis to believe that the use of the decennial census data would substantially overstate the proportion of persons residing there that are low and moderate income, HUD may require that the grantee rebut such evidence in order to demonstrate compliance with section 105(c)(2) of the Act. (b) Limited clientele activities. (1) An activity which benefits a limited clientele, at least 51 percent of whom are [[Page 752]] low or moderate income persons. (The following kinds of activities may not qualify under paragraph (b) of this section: Activities, the benefits of which are available to all the residents of an area; activities involving the acquisition, construction or rehabilitation of property for housing; or activities where the benefit to low and moderate income persons to be considered is the creation or retention of jobs except as provided in paragraph (b)(4) of this section.) To qualify under paragraph (b) of this section, the activity must meet one of the following tests: (i) Benefit a clientele who are generally presumed to be principally low and moderate income persons. Activities that exclusively serve a group of persons in any one of the following categories may be presumed to benefit persons, 51 percent of whom are low-and moderate-income: abused children, battered spouses, elderly persons, adults meeting the Bureau of the Census' current Population Reports definition of ``severely disabled'', homeless persons, illiterate adults, persons living with AIDS, and migrant workers; or (ii) Require information on family size and income so that it is evident that at least 51 percent of the clientele are persons whose family income does not exceed the low and moderate income limit; or (iii) Have income eligibility requirements which limit the activity exclusively to low and moderate income persons; or (iv) Be of such nature and be in such location that it may be concluded that the activity's clientele will primarily be low and moderate income persons. (2) An activity that serves to remove material or architectural barriers to the mobility or accessibility of elderly persons or adults meeting the Bureau of the Census' Current Population Reports definition of ``severely disabled'' will be presumed to qualify under this criterion if it is restricted, to the extent practicable, to the removal of such barriers by assisting: (i) The reconstruction of a public facility or improvement, or portion thereof, that does not qualify under Sec. 1003.208(a); or (ii) The rehabilitation of a privately-owned nonresidential building or improvement that does not qualify under Sec. 1003.208 (a) or (d); or (iii) The rehabilitation of the common areas of a residential structure that contains more than one dwelling unit. (3) A microenterprise assistance activity carried out in accordance with the provisions of Sec. 1003.201(l) with respect to those owners of microenterprises and persons developing microenterprises assisted under the activity during the grant period who are low and moderate income persons. For purposes of this paragraph, persons determined to be low and moderate income may be presumed to continue to qualify for up to a three year period. (4) An activity designed to provide job training and placement and/ or other employment support services, including but not limited to, peer support programs, counseling, child care, transportation, and other similar services, in which the percentage of low and moderate income persons assisted is less than 51 percent may qualify under this paragraph in the following limited circumstance: (i) In such cases where such training or provision of supportive services assists business(es), the only use of ICDBG assistance for the project is to provide the job training and/or supportive services; and (ii) The proportion of the total cost of the project borne by ICDBG funds is no greater than the proportion of the total number of persons assisted who are low or moderate income. (c) Housing activities. An eligible activity carried out for the purpose of providing or improving permanent residential structures which, upon completion, will be occupied by low and moderate income households. This would include, but not necessarily be limited to, the acquisition or rehabilitation of property, conversion of non-residential structures, and new housing construction. Funds expended for activities which qualify under the provisions of this paragraph shall be counted as benefiting low and moderate income persons but shall be limited to an amount determined by multiplying the total cost (including ICDBG and non-ICDBG [[Page 753]] costs) of the acquisition, construction or rehabilitation by the percent of units in such housing to be occupied by low and moderate income persons. If the structure assisted contains two dwelling units, at least one must be occupied by low and moderate income households, and if the structure contains more than two dwelling units, at least 51 percent of the units must be so occupied. Where two or more rental buildings being assisted are or will be located on the same or contiguous properties, and the buildings will be under common ownership and management, the grouped buildings may be considered for this purpose as a single structure. For rental housing, occupancy by low and moderate income households must be at affordable rents to qualify under this criterion. The grantee shall adopt and make public its standards for determining ``affordable rents'' for this purpose. The following shall also qualify under this criterion: (1) When less than 51 percent of the units in a structure will be occupied by low and moderate income households, ICDBG assistance may be provided in the following limited circumstances: (i) The assistance is for an eligible activity to reduce the development cost of the new construction of a multifamily, non-elderly rental housing project; (ii) Not less than 20 percent of the units will be occupied by low and moderate income households at affordable rents; and (iii) The proportion of the total cost of developing the project to be borne by ICDBG funds is no greater than the proportion of units in the project that will be occupied by low and moderate income households. (2) When ICDBG funds are used for housing services eligible under Sec. 1003.201(j), such funds shall be considered to benefit low-and moderate-income persons if the housing for which the services are provided is to be occupied by low-and moderate-income households. (d) Job creation or retention activities. An activity designed to create or retain permanent jobs where at least 51 percent of the jobs, computed on a full time equivalent basis, involve the employment of low and moderate persons. For purposes of determining whether a job is held by or made available to a low or moderate income person, the person may be presumed to be a low or moderate income person if: he/she resides within a census tract (or block numbering area) where not less than 70 percent of the residents have incomes at or below 80 percent of the area median; or, if he/she resides in a census tract (or block numbering area) which meets the Federal Empowerment Zone or Enterprise Community eligibility criteria; or, if the assisted business is located in and the job under consideration is to be located in such a tract or area. As a general rule, each assisted business shall be considered to be a separate activity for purposes of determining whether the activity qualifies under this paragraph. However, in certain cases such as where ICDBG funds are used to acquire, develop or improve a real property (e.g., a business incubator or an industrial park) the requirement may be met by measuring jobs in the aggregate for all the businesses which locate on the property, provided such businesses are not otherwise assisted by ICDBG funds. Where ICDBG funds are used to pay for the staff and overhead costs of a CBDO under the provisions of Sec. 1003.204 making loans to businesses from non-ICDBG funds, this requirement may be met by aggregating the jobs created by all of the businesses receiving loans during any one year period. For an activity that creates jobs, the grantee must document that at least 51 percent of the jobs will be held by, or will be available to, low and moderate income persons. For an activity that retains jobs, the grantee must document that the jobs would actually be lost without the ICDBG assistance and that either or both of the following conditions apply with respect to at least 51 percent of the jobs at the time the ICDBG assistance is provided: The job is known to be held by a low or moderate income person; or the job can reasonably be expected to turn over within the following two years and that steps will be taken to ensure that it will be filled by, or made available to, a low or moderate income person upon turnover. Jobs will be considered to be [[Page 754]] available to low and moderate income persons for these purposes only if: (1) Special skills that can only be acquired with substantial training or work experience or education beyond high school are not a prerequisite to fill such jobs, or the business agrees to hire unqualified persons and provide training; and (2) The grantee and the assisted business take actions to ensure that low and moderate income persons receive first consideration for filling such jobs. (e) Additional criteria. (1) Where the assisted activity is acquisition of real property, a preliminary determination of whether the activity addresses the primary objective may be based on the planned use of the property after acquisition. A final determination shall be based on the actual use of the property, excluding any short-term, temporary use. (2) Where the assisted activity is relocation assistance that the grantee is required to provide, such relocation assistance shall be considered to address the primary objective as addressed by the displacing activity. (3) In any case where the activity undertaken for the purpose of creating or retaining jobs is a public improvement and the area served is primarily residential, the activity must meet the requirements of paragraph (a) of this section as well as those of paragraph (d) of this section in order to qualify as benefiting low and moderate income persons. (4) Expenditures for activities meeting the criteria for benefiting low and moderate income persons shall be used in determining the extent to which the grantee's overall program benefits such persons. In determining the percentage of funds expended for such activities: (i) Costs of administration and planning, eligible under Sec. 1003.205 and Sec. 1003.206 respectively, will be assumed to benefit low and moderate income persons in the same proportion as the remainder of the ICDBG funds and, accordingly, shall be excluded from the calculation. (ii) Funds expended for the acquisition, new construction or rehabilitation of property for housing those qualified under Sec. 1003.208(c) shall be counted for this purpose, but shall be limited to an amount determined by multiplying the total cost (including ICDBG and non-ICDBG costs) of the acquisition, construction, or rehabilitation by the percent of units in such housing occupied by low and moderate income persons. (iii) Funds expended for any other activity which qualifies under Sec. 1003.208 shall be counted for this purpose in their entirety. Sec. 1003.209 Prohibition on use of assistance for employment relocation activities. (a) Prohibition. ICDBG funds may not be used to directly assist a business, including a business expansion, in the relocation of a plant, facility, or operation from one Identified Service Area to another Identified Service Area, if the relocation is likely to result in a significant loss of jobs in the Identified Service Area from which the relocation occurs. (b) Definitions. The following definitions apply to this section: (1) Directly assist. Directly assist means the provision of ICDBG funds for activities pursuant to: (i) Sec. 1003.203(b); or (ii) Sec. Sec. 1003.201(a)-(d), 1003.201(k), 1003.203(a), or Sec. 1003.204 when the grantee, subrecipient, or, in the case of an activity carried out pursuant to Sec. 1003.204, a Community Based Development Organization (CBDO) enters into an agreement with a business to undertake one or more of these activities as a condition of the business relocating a facility, plant, or operation to the grantee's Identified Service Area. Provision of public facilities and indirect assistance that will provide benefit to multiple businesses does not fall under the definition of ``directly assist,'' unless it includes the provision of infrastructure to aid a specific business that is the subject of an agreement with the specific assisted business. (2) Area. The relevant definition of ``area'' for a Native American economic development project is the ``Identified Service Area'' for the eligible applicant, as defined in Sec. 1003.4. (3) Operation. A business operation includes, but is not limited to, any equipment, employment opportunity, [[Page 755]] production capacity, or product line of the business. (4) Significant loss of jobs. (i) A loss of jobs is significant if the number of jobs to be lost in the Identified Service Area in which the affected business is currently located is equal to or greater than one-tenth of one percent of the total number of persons in the labor force of that area; or, in all cases, a loss of 500 or more jobs. Notwithstanding the aforementioned, a loss of 25 jobs or fewer does not constitute a significant loss of jobs. (ii) A job is considered to be lost due to the provision of ICDBG assistance if the job is relocated within 3 years of the provision of assistance to the business; or the time period within which jobs are to be created, as specified by the agreement between the business and the recipient, is longer than 3 years. (c) Written agreement. Before directly assisting a business with ICDBG funds, the recipient, subrecipient, or a CBDO (in the case of an activity carried out pursuant to Sec. 1003.204) shall sign a written agreement with the assisted business. The written agreement shall include: (1) Statement. A statement from the assisted business as to whether the assisted activity will result in the relocation of any industrial or commercial plant, facility, or operation from one Identified Service Area to another, and, if so, the number of jobs that will be relocated from each Identified Service Area; and (2) Required certification. If the assistance will not result in a relocation covered by this section, a certification from the assisted business that neither it, nor any of its subsidiaries, has plans to relocate jobs, at the time the agreement is signed, that would result in a significant job loss as defined in this rule. (d) Assistance not covered by this section. This section does not apply to: (1) Relocation assistance. Relocation assistance under Sec. 1003.602(b), (c), or (d); (2) Microenterprises. Assistance to microenterprises as defined by section 102(a)(22) of the Housing and Community Development Act of 1974; and (3) Arms-length transactions. Assistance to a business that purchases business equipment, inventory, or other physical assets in an arms-length transaction, including the assets of an existing business, provided that the purchase does not result in the relocation of the sellers' business operation (including customer base or list, goodwill, product lines, or trade names) from one Identified Service Area to another Identified Service Area and does not produce a significant loss of jobs in the Identified Service Area from which the relocation occurs. [74 FR 1869, Jan. 13, 2009] Subpart D_Single Purpose Grant Application and Selection Process Sec. 1003.300 Application requirements. (a) Application information. A Notice of Funding Availability (NOFA) shall be published in the Federal Register not less than 30 days before the deadline for application submission. The NOFA will provide information relating to the date and time for application submission, the form and content requirements of the application, specific information regarding the rating and ranking criteria to be used, and any other information pertinent to the application process. (b) Costs incurred by applicant. Costs incurred by an applicant prior to the submission of the single purpose grant application to HUD will not be recognized by HUD as eligible ICDBG expenses. (c) HUD will not normally reimburse or recognize costs incurred before HUD approval of the application for funding. However, under unusual circumstances, the Area ONAP may consider and approve written requests to recognize and reimburse costs incurred after submission of the application where failure to do so would impose undue hardship on the applicant. Such written authorization will be made only before the costs are incurred and where the requirements for reimbursement have been met in accordance with 24 CFR 58.22 and with the understanding that HUD has no obligation whatsoever to approve the application or to reimburse [[Page 756]] the applicant should the application be disapproved. (Approved by the Office of Management and Budget under control number 2577-0191) Sec. 1003.301 Selection process. (a) Threshold requirement. An applicant that has an outstanding ICDBG obligation to HUD that is in arrears, or one that has not agreed to a repayment schedule, will be disqualified from the competition. (b) Application rating. NOFAs will define and establish weights for the selection criteria, will specify the maximum points available, and will describe how point awards will be made. [66 FR 4581, Jan. 17, 2001; 66 FR 8176, Jan. 30, 2001] Sec. 1003.302 Project specific threshold requirements. (a) Housing rehabilitation projects. All applicants for housing rehabilitation projects shall adopt rehabilitation standards and rehabilitation policies before submitting an application. The applicant shall assure that it will use project funds to rehabilitate units only when the homeowner's payments are current or the homeowner is current in a repayment agreement that is subject to approval by the Area ONAP. The Area ONAP administrator may grant exceptions to this requirement on a case-by-case basis. (b) New housing construction projects. New housing construction can only be implemented through a nonprofit organization that is eligible under Sec. 1003.204 or is otherwise eligible under Sec. 1003.207(b)(3). All applicants for new housing construction projects shall adopt, by current tribal resolution, construction standards before submitting an application. All applications which include new housing construction projects must document that: (1) No other housing is available in the immediate reservation area that is suitable for the household(s) to be assisted; and (2) No other sources can meet the needs of the household(s) to be assisted; and (3) Rehabilitation of the unit occupied by the household(s) to be assisted is not economically feasible; or (4) The household(s) to be housed currently is in an overcrowded housing unit (sharing with another household); or (5) The household(s) to be assisted has no current residence. (c) Economic development projects. All applicants for economic development projects must provide an analysis which shows public benefit commensurate with the ICDBG assistance requested will result from the assisted project. This analysis should also establish that to the extent practicable: reasonable financial support will be committed from non- Federal sources prior to disbursement of Federal funds; any grant amount provided will not substantially reduce the amount of non-Federal financial support for the activity; not more than a reasonable rate of return on investment is provided to the owner; and, that grant funds used for the project will be disbursed on a pro rata basis with amounts from other sources. In addition, it must be established that the project is financially feasible and that it has a reasonable chance of success. Sec. 1003.303 Project rating. Each project included in an application that meets the threshold requirements shall be competitively rated within each Area ONAP's jurisdiction under the five following rating factors. Additional details regarding the rating factors will be provided in the periodic NOFAs. (a) Capacity. This factor will address the applicant's organizational resources necessary to successfully implement the proposed activities in a timely manner. (b) Need/Extent of the problem. This factor will address the extent to which there is a need for the proposed project to address a documented problem among the intended beneficiaries. (c) Soundness of Approach. This factor will address the quality and cost effectiveness of the proposed project, the commitment to sustain the proposed activities, and the degree to which the proposed project provides other benefits to community members. [[Page 757]] (d) Leveraging of resources. This factor will address the level of tribal resources and resources from other entities that are used in conjunction with ICDBG funds to support the proposed project. HUD will evaluate the level of non-ICDBG resources based on the percentage of non-ICDBG resources provided relative to project costs. (e) Comprehensiveness and coordination. This factor will address the extent to which the applicant's proposed activities are consistent with the strategic plans or policy goals of the community and further on- going priorities and activities of the community. [66 FR 4581, Jan. 17, 2001, as amended at 66 FR 8176, Jan. 30, 2001] Sec. 1003.304 Funding process. (a) Notification. Area ONAPs will notify applicants of the approval or disapproval of their applications. Grant amounts offered may reflect adjustments made by the Area ONAPs in accordance with Sec. 1003.100(b)(2). (b) Grant award. (1) As soon as the Area ONAP determines that the applicant has complied with any pre-award requirements and absent information which would alter the threshold determinations under Sec. 1003.302, the grant will be awarded. The regulations become part of the grant agreement. (2) All grants shall be conditioned upon the completion of all environmental obligations and approval of release of funds by HUD in accordance with the requirements of part 58 of this title and, in particular, subpart J of part 58 of this title, except as otherwise provided in part 58 of this title. (3) HUD may impose other grant conditions where additional actions or approvals are required before the use of funds. (Approved by the Office of Management and Budget under OMB Control No. 2577-0191) Sec. 1003.305 Program amendments. (a) Grantees shall request prior HUD approval for program amendments which will significantly change the scope, location, objective, or class of beneficiaries of the approved activities, as originally described in the application. (b) Amendment requests of $100,000 or more shall include all application components required by the NOFA published for the last application cycle; those requests of less than $100,000 do not have to include the components which address the selection criteria. (c) Approval of an amendment request is subject to the following: (1) A rating equal to or greater than the lowest rating received by a funded project during the most recent funding competition must be attained by the amended project if the request is for $100,000 or more; (2) Demonstration by the grantee of the capacity to promptly complete the modified or new activities; (3) Demonstration by the grantee of compliance with the requirements of Sec. 1003.604 for citizen participation; and (4) The preparation of an amended or new environmental review in accordance with part 58 of this title, if there is a significant change in the scope or location of approved activities. (d) Amendments which address imminent threats to health and safety shall be reviewed and approved in accordance with the requirements of subpart E of this part. (e) If a program amendment fails to be approved and the original project is no longer feasible, the grant funds proposed for amendment shall be recaptured by HUD. Subpart E_Imminent Threat Grants Sec. 1003.400 Criteria for funding. The following criteria apply to requests for assistance under this subpart: (a) In response to requests for assistance, HUD may make funds available under this subpart to applicants to alleviate or remove imminent threats to health or safety. The urgency and immediacy of the threat shall be independently verified before the approval of an application. Funds may only be used to deal with imminent threats that are not of a recurring nature and which represent a unique and unusual circumstance, and which impact on an entire service area. [[Page 758]] (b) Funds to alleviate imminent threats may be granted only if the applicant can demonstrate to the satisfaction of HUD that other tribal or Federal funding sources cannot be made available to alleviate the threat. (c) HUD will establish grant ceilings for imminent threat applications. Sec. 1003.401 Application process. (a) Letter to proceed. The Area ONAP may issue the applicant a letter to proceed to incur costs to alleviate imminent threats to health and safety only if the assisted activities do not alter environmental conditions and are for temporary or permanent improvements limited to protection, repair, or restoration actions necessary only to control or arrest the effects of imminent threats or physical deterioration. Reimbursement of such costs is dependent upon HUD approval of the application. (b) Applications. Applications shall include the information specified in the Notice of Funding Availability (NOFA). (c) Application approval. Applications which meet the requirement of this section may be approved by the Area ONAP without competition in accordance with the applicable requirements of Sec. 1003.304. (Approved by the Office of Management and Budget under control number 2577-0191) Sec. 1003.402 Availability of funds. Of the funds made available by the NOFA for the ICDBG program, an amount to be determined by the Assistant Secretary may be reserved by HUD for grants under this subpart. The amount of funds reserved for imminent threat funding during each funding cycle will be stated in the NOFA. If any of the reserved funds are not used to fund imminent threat grants during a fiscal year, they will be added to the allocation of ICDBG funds for the subsequent fiscal year and will be used as if they were a part of the new allocation. Subpart F_Grant Administration Sec. 1003.500 Responsibility for grant administration. (a) One or more tribal departments or authorities, including existing tribal public agencies, may be designated by the chief executive officer of the grantee to undertake activities assisted by this part. A public agency so designated shall be subject to the same requirements as are applicable to subrecipients. (b) The grantee is responsible for ensuring that ICDBG funds are used in accordance with all program requirements. The use of designated public agencies, subrecipients, or contractors does not relieve the grantee of this responsibility. The grantee is also responsible for determining the adequacy of performance under subrecipient agreements and procurement contracts, and for taking appropriate action when performance problems arise, such as the actions described in Sec. 1003.701. Sec. 1003.501 Applicability of uniform administrative requirements and cost principles. (a) Grantees and subrecipients shall comply with the requirements and standards of 2 CFR part 200, except for the following sections: (1) Paragraph (a) of Sec. 200.302, ``Financial management.'' (2) Section 200.306, ``Cost sharing or matching.'' (3) Section 200.307, ``Program income'' applies as modified by Sec. 1003.503. (4) Section 200.308, ``Revisions of budget and program plans.'' (5) Section 200.311, ``Real property,'' except as provided in Sec. 1003.600. (6) Section 200.313, ``Equipment'' applies, except that in all cases in which the equipment is sold, the proceeds shall be program income. (7) Section 200.314, ``Supplies,'' applies, except in all cases in which the supplies are sold, the proceeds shall be program income. (8) Section 200.325, ``Bonding requirements'' applies. However, there may be circumstances under which the bonding requirements of 2 CFR 200.325 are inconsistent with other responsibilities and obligations of the grantee. In such circumstances, acceptable methods to provide performance and payment assurance may include: (i) Deposit with the grantee of a cash escrow of not less than 20 percent of [[Page 759]] the total contract price, subject to reduction during the warranty period, commensurate with potential risk; or (ii) Letter of credit for 25 percent of the total contract price, unconditionally payable upon demand of the grantee, subject to reduction during the warranty period commensurate with potential risk. (9) Paragraphs (b) through (d) and (f) of Sec. 200.328, ``Monitoring and reporting program performance.'' (10) Section 200.333, ``Retention requirements for records'' applies. However, the retention period referenced in 2 CFR 200.333 pertaining to individual ICDBG activities starts from the date of the submission of the final status and evaluation report as prescribed in Sec. 1003.506(a) in which the specific activity is reported. (11) Section 200.343, ``Closeout.'' (b) Cost principles. (1) All items of cost listed in 2 CFR part 200, subpart E, which require prior Federal agency approval are allowable without the prior approval of HUD to the extent that they comply with the general policies and principles stated in 2 CFR part 200, subpart E, and are otherwise eligible under subpart C of this part, except for the following: (i) Depreciation methods for fixed assets shall not be changed without the approval of the Federal cognizant agency. (ii) Fines, penalties, damages, and other settlements are unallowable costs to the ICDBG program. (iii) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and personal living expenses (goods or services for personal use), regardless of whether reported as taxable income to the employees (2 CFR 200.445), require HUD prior approval. (iv) Organization costs (2 CFR 200.455) require HUD prior approval. (2) No person providing consultant services in an employer-employee type of relationship shall receive more than a reasonable rate of compensation for personal services paid with ICDBG funds. In no event, however, shall such compensation exceed the equivalent of the daily rate paid for Level IV of the Executive Schedule. (Approved by the Office of Management and Budget under control number 2577-0191) [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015] Sec. 1003.502 Agreements with subrecipients. (a) Before disbursing any ICDBG funds to a subrecipient, the grantee shall sign a written agreement with the subrecipient. The agreement shall remain in effect during any period that the subrecipient has control over ICDBG funds, including program income. (b) At a minimum, the written agreement with the subrecipient shall include provisions concerning the following items: (1) Statement of work. The agreement shall include a description of the work to be performed, a schedule for completing the work, and a budget. These items shall be in sufficient detail to provide a sound basis for the grantee effectively to monitor performance under the agreement. (2) Records and reports. The grantee shall specify in the agreement the particular records the subrecipient must maintain and the particular reports the subrecipient must submit in order to assist the grantee in meeting its recordkeeping and reporting requirements. (3) Program income. The agreement shall include the program income requirements set forth in Sec. 2 CFR 200.307 as modified by Sec. 1003.503. (4) Uniform administrative requirements. The agreement shall require the subrecipient to comply with applicable administrative requirements, as described in Sec. 1003.501. (5) Other program requirements. The agreement shall require the subrecipient to carry out each activity in compliance with all Federal laws and regulations described in subpart G of this part, except that the subrecipient does not assume the grantee's environmental responsibilities described at Sec. 1003.605. (6) Conditions for religious organizations. Where applicable, the conditions prescribed by HUD for the use of [[Page 760]] ICDBG funds by religious organizations shall be included in the agreement. (7) Suspension and termination. The agreement shall set forth remedies for noncompliance and provisions on termination in accordance with 2 CFR part 200, subpart D. (8) Reversion of assets. The agreement shall specify that upon its expiration the subrecipient shall transfer to the grantee any ICDBG funds on hand at the time of expiration and any accounts receivable attributable to the use of ICDBG funds. It shall also include provisions designed to ensure that any real property under the subrecipient's control that was acquired or improved in whole or in part with ICDBG funds (including ICDBG funds provided to the subrecipient in the form of a loan) in excess of $25,000 is either: (i) Used to meet the primary objective as stated in Sec. 1003.208 until five years after expiration of the agreement, or for such longer period of time as determined to be appropriate by the grantee; or (ii) Not used in accordance with paragraph (b)(8)(i) of this section, in which event the subrecipient shall pay to the grantee an amount equal to the current market value of the property less any portion of the value attributable to expenditures of non-ICDBG funds for the acquisition of, or improvement to, the property. The payment is program income to the grantee if it is received during the grant period. (No payment is required after the period of time specified in paragraph (b)(8)(i) of this section.) (Approved by the Office of Management and Budget under control number 2577-0191) [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1003.503 Program income. (a) Program income requirements for ICDBG grantees are set forth in 2 CFR 200.307, as modified by this section. (b) Program income means gross income received by the grantee or a subrecipient directly generated from the use of ICDBG funds during the grant period, except as provided in paragraph (b)(4) of this section. When program income is generated by an activity that is only partially assisted with ICDBG funds, the income shall be prorated to reflect the percentage of ICDBG funds used. (1) Program income includes, but is not limited to, the following: (i) Proceeds from the disposition by sale or long-term lease of real property purchased or improved with ICDBG funds; (ii) Proceeds from the disposition of equipment purchased with ICDBG funds; (iii) Gross income from the use or rental of real or personal property acquired by the grantee or by a subrecipient with ICDBG funds, less costs incidental to generation of the income; (iv) Gross income from the use or rental of real property, owned by the grantee or by a subrecipient, that was constructed or improved with ICDBG funds, less costs incidental to generation of the income; (v) Payments of principal and interest on loans made using ICDBG funds, except as provided in paragraph (b)(3) of this section; (vi) Proceeds from the sale of loans made with ICDBG funds except as provided in paragraph (b)(4) of this section; (vii) Proceeds from sale of obligations secured by loans made with ICDBG funds; (viii) Interest earned on funds held in a revolving fund account; (ix) Interest earned on program income pending its disposition; and (x) Funds collected through special assessments made against properties owned and occupied by households not of low and moderate income, where the assessments are used to recover all or part of the ICDBG portion of a public improvement. (2) Program income does not include income earned on grant advances from the U.S. Treasury. The following items of income earned on grant advances must be remitted to HUD for transmittal to the U.S. Treasury and will not be reallocated: (i) Interest earned from the investment of the initial proceeds of a grant advance by the U.S. Treasury; (ii) Income (e.g., interest) earned on loans or other forms of assistance provided with ICDBG funds that are used [[Page 761]] for activities determined by HUD either to be ineligible or that fail substantially to meet any other requirement of this part. (3) The calculation of the amount of program income for the grantee's ICDBG program as a whole (i.e., comprising activities carried out by a grantee and its subrecipients) shall exclude payments made by subrecipients of principal and/or interest on loans received from grantees where such payments are made from program income received by the subrecipient. (By making such payments, the subrecipient shall be deemed to have transferred program income to the grantee.) The amount of program income derived from this calculation shall be used for reporting purposes and in determining limitations on planning and administration and public services activities to be paid for with ICDBG funds. (4) Program income does not include any income received in a single year by the grantee and all its subrecipients if the total amount of such income does not exceed $25,000. (5) Examples of other receipts that are not considered program income are proceeds from fundraising activities carried out by subrecipients receiving ICDBG assistance; funds collected through special assessments used to recover the non-ICDBG portion of a public improvement; and proceeds from the disposition of real property acquired or improved with ICDBG funds when the disposition occurs after the applicable time period specified in Sec. 1003.502(b)(8) for subrecipient-controlled property, or in Sec. 1003.504 for grantee- controlled property. (6) For purposes of determining the applicability of the program income requirements included in this part and in 2 CFR 200.307, the grant period is the time between the effective date of the grant agreement and the close-out of the grant pursuant to the requirements of Sec. 1003.508. (7) As provided for in 2 CFR 200.307(e)(2), program income received will be added to the funds committed to the grant agreement and shall be used for purposes and under the conditions of the grant agreement. (8) Recording program income. The receipt and expenditure of program income as defined in Sec. 1003.503(b) shall be recorded as part of the financial transactions of the grant program. (Approved by the Office of Management and Budget under control number 2577-0191) [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1003.504 Use of real property. The standards described in this section apply to real property within the grantee's control which was acquired or improved in whole or in part using ICDBG funds in excess of $25,000. These standards shall apply from the date ICDBG funds are first spent for the property until five years after the closeout of the grant from which the assistance to the property was provided. (a) A grantee may not change the use or planned use of any such property (including the beneficiaries of such use) from that for which the acquisition or improvement was made unless the grantee provides affected citizens with reasonable notice of, and opportunity to comment on, any proposed change, and either: (1) The new use of such property qualifies as meeting the primary objective set forth in Sec. 1003.208 and is not a building for the general conduct of government; or (2) The requirements in paragraph (b) of this section are met. (b) If the grantee determines, after consultation with affected citizens, that it is appropriate to change the use of the property to a use which does not qualify under paragraph (a)(1) of this section, it may retain or dispose of the property for the changed use if the grantee's ICDBG program is reimbursed in the amount of the current fair market value of the property, less any portion of the value attributable to expenditures of non-ICDBG funds for acquisition of, and improvements to, the property. (c) If the change of use occurs after program closeout, the proceeds from the disposition of the real property shall be used for activities which meet the eligibility requirements set forth in subpart C of this part and the primary objective set forth in Sec. 1003.208. (d) Following the reimbursement of the ICDBG program in accordance with [[Page 762]] paragraph (b) of this section, the property no longer will be subject to any ICDBG requirements. Sec. 1003.505 Records to be maintained. Each grantee shall establish and maintain sufficient records to enable the Secretary to determine whether the grantee has met the requirements of this part. This includes establishing and maintaining records demonstrating that the recipient has made the determinations required as a condition of eligibility of certain activities, including as prescribed in Sec. 1003.209. [74 FR 1869, Jan. 13, 2009] Sec. 1003.506 Reports. (a) Status and evaluation report. Grantees shall submit a status and evaluation report on previously funded open grants 45 days after the end of the Federal fiscal year and at the time of grant close-out. The report shall be in a narrative form addressing these areas. (1) Progress. The progress made in completing approved activities should be described. This description should include a listing of work remaining together with a revised implementation schedule, if necessary. (2) Expenditure of funds. A breakdown of funds spent on each major project activity or category should be provided. (3) Program performance. Data on program outputs and outcomes, in a form prescribed by HUD. (4) Grantee assessment. If the project has been completed, an evaluation of the effectiveness of the project in meeting the community development needs of the grantee should be provided. (b) Minority business enterprise reports. Grantees shall submit to HUD, by October 10, a report on contract and subcontract activity during the fiscal year. (Approved by the Office of Management and Budget under control number 2577-0191) [61 FR 40090, July 31, 1996. Redesignated at 62 FR 12349, Mar. 12, 1998, as amended at 75 FR 20271, Apr. 19, 2010] Sec. 1003.507 Public access to program records. Notwithstanding the provisions of 2 CFR 200.337, grantees shall provide citizens with reasonable access to records regarding the past use of ICDBG funds, consistent with applicable State and tribal laws regarding privacy and obligations of confidentiality. [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1003.508 Grant closeout procedures. (a) Criteria for closeout. A grant will be closed out when the Area ONAP determines, in consultation with the grantee, that the following criteria have been met: (1) All costs to be paid with ICDBG funds have been incurred, with the exception of closeout costs (e.g., audit costs) and costs resulting from contingent liabilities described in the closeout agreement pursuant to paragraph (c) of this section. Contingent liabilities include, but are not limited to, third-party claims against the grantee, as well as related administrative costs. (2) With respect to activities which are financed by means of escrow accounts, loan guarantees, or similar mechanisms, the work to be assisted with ICDBG funds has actually been completed. (3) Other responsibilities of the grantee under the grant agreement and applicable laws and regulations appear to have been carried out satisfactorily or there is no further Federal interest in keeping the grant agreement open for the purpose of securing performance. (b) Closeout actions. (1) Within 90 days of the date it is determined that the criteria for closeout have been met, the grantee shall submit to the Area ONAP a copy of the final status and evaluation report described in Sec. 1003.506(a) and a completed Financial Status Report (SF-269). If acceptable reports are not submitted, an audit of the grantee's program activities may be conducted by HUD. (2) Based on the information provided in the status report and other relevant information, the grantee, in consultation with the Area ONAP, will prepare [[Page 763]] a closeout agreement in accordance with paragraph (c) of this section. (3) The Area ONAP will cancel any unused portion of the awarded grant, as shown in the signed grant closeout agreement. Any unused grant funds disbursed from the U.S. Treasury which are in the possession of the grantee shall be refunded to HUD. (4) Any costs paid with ICDBG funds which were not audited previously shall be subject to coverage in the grantee's next single audit performed in accordance with 2 CFR part 200, subpart F. The grantee may be required to repay HUD any disallowed costs based on the results of the audit, or on additional HUD reviews provided for in the closeout agreement. (c) Closeout agreement. Any obligations remaining as of the date of the closeout shall be covered by the terms of a closeout agreement. The agreement shall be prepared by the grantee in consultation with the Area ONAP. The agreement shall identify the grant being closed out, and include provisions with respect to the following: (1) Identification of any closeout costs or contingent liabilities subject to payment with ICDBG funds after the closeout agreement is signed; (2) Identification of any unused grant funds to be canceled by HUD; (3) Identification of any program income on deposit in financial institutions at the time the closeout agreement is signed; (4) Description of the grantee's responsibility after closeout for: (i) Compliance with all program requirements, certifications and assurances in using program income on deposit at the time the closeout agreement is signed and in using any other remaining ICDBG funds available for closeout costs and contingent liabilities; (ii) Use of real property assisted with ICDBG funds in accordance with the principles described in Sec. 1003.504; and (iii) Ensuring that flood insurance coverage for affected property owners is maintained for the mandatory period; (5) Other provisions appropriate to any special circumstances of the grant closeout, in modification of or in addition to the obligations in paragraphs (c) (1) through (4) of this section. The agreement shall authorize monitoring by HUD, and shall provide that findings of noncompliance may be taken into account by HUD as unsatisfactory performance of the grantee in the consideration of any future grant award under this part. (d) Termination of grant for convenience. Grant assistance provided under this part may be terminated for convenience in whole or in part before the completion of the assisted activities, in accordance with the provisions of 2 CFR 200.339. The grantee shall not incur new obligations for the terminated portions after the effective date, and shall cancel as many outstanding obligations as possible. HUD shall allow full credit to the grantee for those portions of obligations which could not be canceled and which had been properly incurred by the grantee in carrying out the activities before the termination. The closeout policies contained in this section shall apply in such cases, except where the approved grant is terminated in its entirety. Responsibility for the environmental review to be performed under 24 CFR part 50 or 24 CFR part 58, as applicable, shall be determined as part of the closeout process. (e) Termination for cause. In cases in which HUD terminates the grantee's grant under the authority of subpart H of this part, or under the terms of the grant agreement, the closeout policies contained in this section shall apply, except where the approved grant is canceled in its entirety. The provisions in 2 CFR 200.342 on the effects of termination shall also apply. HUD shall determine whether an environmental review is required, and if so, HUD shall perform it in accordance with 24 CFR part 50. [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1003.509 Force account construction. (a) The use of tribal work forces for construction or renovation activities performed as part of the activities funded under this part shall be approved by the Area ONAP before the start of project implementation. In reviewing requests for an approval of [[Page 764]] force account construction or renovation, the area ONAP may require that the grantee provide the following: (1) Documentation to indicate that it has carried out or can carry out successfully a project of the size and scope of the proposal; (2) Documentation to indicate that it has obtained or can obtain adequate supervision for the workers to be used; (3) Information showing that the workers to be used are, or will be, listed on the tribal payroll and are employed directly by a unit, department or other governmental instrumentality of the tribe or village. (b) Any and all excess funds derived from the force account construction or renovation activities shall accrue to the grantee and shall be reprogrammed for other activities eligible under this part in accordance with Sec. 1003.305 or returned to HUD promptly. (c) Insurance coverage for force account workers and activities shall, where applicable, include worker's compensation, public liability, property damage, builder's risk, and vehicular liability. (d) The grantee shall specify and apply reasonable labor performance, construction, or renovation standards to work performed under the force account. (e) The contracting and procurement standards set forth in 2 CFR part 200, subpart D, apply to material, equipment, and supply procurement from outside vendors under this section. (Approved by the Office of Management and Budget under control number 2577-0191) [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1003.510 Indian preference requirements. (a) Applicability. HUD has determined that grants under this part are subject to Section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b). Section 7(b) provides that any contract, subcontract, grant or subgrant pursuant to an act authorizing grants to Indian organizations or for the benefit of Indians shall require that, to the greatest extent feasible: (1) Preference and opportunities for training and employment shall be given to Indians; and (2) Preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned economic enterprises as defined in section 3 of the Indian Financing Act of 1974 (25 U.S.C. 1452). (b) Definitions. (1) The Indian Self-Determination and Education Assistance Act [25 U.S.C. 450b] defines ``Indian'' to mean a person who is a member of an Indian tribe and defines ``Indian tribe'' to mean any Indian tribe, band, nation, or other organized group or community including any Alaska native village or regional or village corporation as defined or established pursuant to the Alaska Native Claims Settlement Act, which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. (2) In section 3 of the Indian Financing Act of 1974 (25 U.S.C. 1452) economic enterprise is defined as any Indian--owned commercial, industrial, or business activity established or organized for the purpose of profit, except that Indian ownership must constitute not less than 51 percent of the enterprise. This act defines Indian organization to mean the governing body of any Indian tribe or entity established or recognized by such governing body. (c) Preference in administration of grant. To the greatest extent feasible, preference and opportunities for training and employment in connection with the administration of grants awarded under this part shall be given to Indians. (d) Preference in contracting. To the greatest extent feasible, grantees shall give preference in the award of contracts for projects funded under this part to Indian organizations and Indian-owned economic enterprises. (1) Each grantee shall: (i) Advertise for bids or proposals limited to qualified Indian organizations and Indian-owned enterprises; or (ii) Use a two-stage preference procedure, as follows: (A) Stage 1. Invite or otherwise solicit Indian-owned economic enterprises to [[Page 765]] submit a statement of intent to respond to a bid announcement or request for proposals limited to Indian-owned firms. (B) Stage 2. If responses are received from more than one Indian enterprise found to be qualified, advertise for bids or proposals limited to Indian organizations and Indian-owned economic enterprises; or (iii) Develop, subject to Area ONAP one-time approval, the grantee's own method of providing preference. (2) If the grantee selects a method of providing preference that results in fewer than two responsible qualified organizations or enterprises submitting a statement of intent, a bid or a proposal to perform the contract at a reasonable cost, then the grantee shall: (i) Re-advertise the contract, using any of the methods described in paragraph (d)(1) of this section; or (ii) Re-advertise the contract without limiting the advertisement for bids or proposals to Indian organizations and Indian-owned economic enterprises; or (iii) If one approvable bid or proposal is received, request Area ONAP review and approval of the proposed contract and related procurement documents, in accordance with 2 CFR 200.320, in order to award the contract to the single bidder or offeror. (3) Procurements that are within the dollar limitations established for small purchases under 2 CFR 200.320 need not follow the formal bid or proposal procedures of paragraph (d) of this section, since these procurements are governed by the small purchase procedures of2 CFR 200.320. However, a grantee's small purchase procurement shall, to the greatest extent feasible, provide Indian preference in the award of contracts. (4) All preferences shall be publicly announced in the advertisement and bidding or proposal solicitation documents and the bidding and proposal documents. (5) A grantee, at its discretion, may require information of prospective contractors seeking to qualify as Indian organizations or Indian-owned economic enterprises. Grantees may require prospective contractors to include the following information prior to submitting a bid or proposal, or at the time of submission: (i) Evidence showing fully the extent of Indian ownership and interest; (ii) Evidence of structure, management and financing affecting the Indian character of the enterprise, including major subcontracts and purchase agreements; materials or equipment supply arrangements; and management salary or profit-sharing arrangements; and evidence showing the effect of these on the extent of Indian ownership and interest; and (iii) Evidence sufficient to demonstrate to the satisfaction of the grantee that the prospective contractor has the technical, administrative, and financial capability to perform contract work of the size and type involved. (6) The grantee shall incorporate the following clause (referred to as the Section 7(b) clause) in each contract awarded in connection with a project funded under this part: (i) The work to be performed under this contract is on a project subject to Section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b) (Indian Act). Section 7(b) requires that to the greatest extent feasible: (A) Preferences and opportunities for training and employment shall be given to Indians; and (B) Preferences in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned economic enterprises. (ii) The parties to this contract shall comply with the provisions of Section 7(b) of the Indian Act. (iii) In connection with this contract, the contractor shall, to the greatest extent feasible, give preference in the award of any subcontracts to Indian organizations and Indian-owned economic enterprises, and preferences and opportunities for training and employment to Indians. (iv) The contractor shall include this Section 7(b) clause in every subcontract in connection with the project, and shall, at the direction of the grantee, take appropriate action pursuant to the subcontract upon a finding by the grantee or HUD that the subcontractor has violated the Section 7(b) clause of the Indian Act. [[Page 766]] (e) Complaint procedures. The following complaint procedures are applicable to complaints arising out of any of the methods of providing for Indian preference contained in this part, including alternate methods enacted and approved in a manner described in this section: (1) Each complaint shall be in writing, signed, and filed with the grantee. (2) A complaint must be filed with the grantee no later than 20 calendar days from the date of the action (or omission) upon which the complaint is based. (3) Upon receipt of a complaint, the grantee shall promptly stamp the date and time of receipt upon the complaint, and immediately acknowledge its receipt. (4) Within 20 calendar days of receipt of a complaint, the grantee shall either meet, or communicate by mail or telephone, with the complainant in an effort to resolve the matter. The grantee shall make a determination on a complaint and notify the complainant, in writing, within 30 calendar days of the submittal of the complaint to the grantee. The decision of the grantee shall constitute final administrative action on the complaint. (Approved by the Office of Management and Budget under control number 2577-0191) [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1003.511 Use of escrow accounts for rehabilitation of privately owned residential property. (a) Limitations. A grantee may withdraw funds from its line of credit for immediate deposit into an escrow account for use in funding loans and grants for the rehabilitation of privately owned residential property under Sec. 1003.202(a)(1). The following additional limitations apply to the use of escrow accounts for residential rehabilitation loans and grants closed after September 7, 1990: (1) The use of escrow accounts under this section is limited to loans and grants for the rehabilitation of primarily residential properties containing no more than four dwelling units (and accessory neighborhood-scale non-residential space within the same structure, if any, e.g., a store front below a dwelling unit). (2) An escrow account shall not be used unless the contract between the property owner and the contractor selected to do the rehabilitation work specifically provides that payment to the contractor shall be made through an escrow account maintained by the grantee, by a subrecipient as defined in Sec. 1003.4, by a public agency designated under Sec. 1003.500(a), or by an agent under a procurement contact governed by the requirements of 2 CFR part 200, subpart D. No deposit to the escrow account shall be made until after the contract has been executed between the property owner and the rehabilitation contractor. (3) All funds withdrawn under this section shall be deposited into one interest earning account with a financial institution. Separate bank accounts shall not be established for individual loans and grants. (4) The amount of funds deposited into an escrow account shall be limited to the amount expected to be disbursed within 10 working days from the date of deposit. If the escrow account, for whatever reason, at any time contains funds exceeding 10 days cash needs, the grantee immediately shall transfer the excess funds to its program account. In the program account, the excess funds shall be treated as funds erroneously drawn in accordance with the requirements of U.S. Treasury Financial Manual, paragraph 6-2075.30. (5) Funds deposited into an escrow account shall be used only to pay the actual costs of rehabilitation incurred by the owner under the contract with a private contractor. Other eligible costs related to the rehabilitation loan or grant, e.g., the grantee's administrative costs under Sec. 1003.206 or rehabilitation services costs under Sec. 1003.202(b)(9), are not permissible uses of escrowed funds. Such other eligible rehabilitation costs shall be paid under normal ICDBG payment procedures (e.g., from withdrawals of grant funds under the grantee's line of credit with the Treasury). (b) Interest. Interest earned on escrow accounts established in accordance with this section, less any service [[Page 767]] charges for the account, shall be remitted to HUD at least quarterly but not more frequently than monthly. Interest earned on escrow accounts is not required to be remitted to HUD to the extent the interest is attributable to the investment of program income. (c) Remedies for noncompliance. If HUD determines that a grantee has failed to use an escrow account in accordance with this section, HUD may, in addition to imposing any other sanctions provided for under this part, require the grantee to discontinue the use of escrow accounts, in whole or in part. [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Subpart G_Other Program Requirements Sec. 1003.600 Equal participation of faith-based organizations. The HUD program requirements in Sec. 5.109 of this title apply to the ICDBG program, including the requirements regarding disposition and change in use of real property by a faith-based organization. [81 FR 19418, Apr. 4, 2016] Sec. 1003.601 Nondiscrimination. (a) Under the authority of section 107(e)(2) of the Act, the Secretary waives the requirement that grantees comply with section 109 of the Act except with respect to the prohibition of discrimination based on age, sex, religion, or against an otherwise qualified disabled individual. (b) A grantee shall comply with the provisions of title II of Pub. L. 90-284 (24 U.S.C. 1301--the Indian Civil Rights Act) in the administration of a program or activity funded in whole or in part with funds made available under this part. For purposes of this section, ``program or activity'' is defined as any function conducted by an identifiable administrative unit of the grantee; and ``funded in whole or in part with funds made available under this part'' means that ICDBG funds in any amount have been transferred by the grantee to an identifiable administrative unit and disbursed in a program or activity. (c) A grantee shall comply with the equal access to HUD-assisted or -insured housing requirements in 24 CFR 5.105(a)(2). [61 FR 40090, July 31, 1996, as amended at 81 FR 80993, Nov. 17, 2016] Sec. 1003.602 Relocation and real property acquisition. (a) Minimize displacement. Consistent with the other goals and objectives of this part, grantees shall assure that they have taken all reasonable steps to minimize the displacement of persons (households, businesses, nonprofit organizations, and farms) as a result of a project assisted under this part. (b) Temporary relocation. The following policies cover residential tenants who will not be required to move permanently but who must relocate temporarily for the project. Such tenants must be provided: (1) Reimbursement for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, including the cost of moving to and from the temporarily occupied housing and any increase in monthly housing costs (e.g., rent/utility costs). (2) Appropriate advisory services, including reasonable advance written notice of: (i) The date and approximate duration of the temporary relocation; (ii) The location of the suitable, decent, safe and sanitary dwelling to be made available for the temporary period; (iii) The terms and conditions under which the tenant may occupy a suitable, decent, safe, and sanitary dwelling in the building/complex following completion of the repairs; and (iv) The provisions of paragraph (b)(1) of this section. (c) Relocation assistance for displaced persons. A displaced person (defined in paragraph (g) of this section) must be provided relocation assistance at the levels described in, and in accordance with the requirements of, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA)(42 U.S.C. 4601-4655) and implementing regulations at 49 CFR part 24. (d) Optional relocation assistance. Under section 105(a)(11) of the Act, the grantee may provide relocation payments and other relocation assistance [[Page 768]] to persons displaced by a project that is not subject to paragraph (c) of this section. The grantee may also provide relocation assistance to persons receiving assistance under paragraph (c) of this section at levels in excess of those required. For assistance that is not required by State or tribal law, the grantee shall adopt a written policy available to the public that describes the relocation assistance that it has elected to furnish and provides for equal relocation assistance within each class of displaced persons. (e) Real Property acquisition requirements. The acquisition of real property for an assisted activity is subject to 49 CFR part 24, subpart B. Whenever the grantee does not have the authority to acquire the real property through condemnation, it shall: (1) Before discussing the purchase price, inform the owner: (i) Of the amount it believes to be the fair market value of the property. Such amount shall be based upon one or more appraisals prepared by a qualified appraiser. However, this provision does not prevent the grantee from accepting a donation or purchasing the real property at less than its fair market value. (ii) That it will be unable to acquire the property if negotiations fail to result in an amicable agreement. (2) Request HUD approval of the proposed acquisition price before executing a firm commitment to purchase the property. The grantee shall include with its request a copy of the appraisal(s) and, when applicable, a justification for any proposed acquisition payment that exceeds the fair market value of the property. HUD will promptly review the proposal and inform the grantee of its approval or disapproval. (f) Appeals. A person who disagrees with the grantee's determination concerning whether the person qualifies as a ``displaced person,'' or the amount of relocation assistance for which the person is eligible, may file a written appeal of that determination with the grantee. A person who is dissatisfied with the grantee's determination on his or her appeal may submit a written request for review of that determination to the HUD Area ONAP. (g) Responsibility of grantee. (1) The grantee shall certify that it will comply with the URA, the regulations at 49 CFR part 24, and the requirements of this section, i.e., provide assurance of compliance as required by 49 CFR part 24. The grantee shall ensure such compliance notwithstanding any third party's contractual obligation to the grantee to comply with these provisions. (2) The cost of required relocation assistance is an eligible project cost in the same manner and to the same extent as other project costs. However, such assistance may also be paid for with funds available to the grantee from any other source. (3) The grantee shall maintain records in sufficient detail to demonstrate compliance with this section. (h) Definition of displaced person. (1) For purposes of this section, the term displaced person means any person (household, business, nonprofit organization, or farm) that moves from real property, or moves his or her personal property from real property, permanently, as a direct result of rehabilitation, demolition, or acquisition for a project assisted under this part. The term ``displaced person'' includes, but is not limited to: (i) A tenant-occupant of a dwelling unit who moves from the building/complex permanently after the submission to HUD of an application for financial assistance that is later approved. (ii) Any person, including a person who moves before the date described in paragraph (h)(1)(i) of this section, that either HUD or the grantee determines was displaced as a direct result of acquisition, rehabilitation, or demolition for the assisted project. (iii) A tenant-occupant of a dwelling who moves from the building/ complex permanently, after the execution of the agreement between the grantee and HUD, if the move occurs before the tenant is provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe and sanitary dwelling in the same building/ complex, under reasonable terms and conditions, upon completion of the project. Such reasonable terms and conditions include a monthly rent and [[Page 769]] estimated average monthly utility costs that do not exceed the greater of: (A) The tenant's monthly rent and estimated average monthly utility costs before the agreement; or (B) 30 percent of gross household income. (iv) A tenant-occupant of a dwelling who is required to relocate temporarily, but does not return to the building/complex, if either: (A) The tenant is not offered payment for all reasonable out-of- pocket expenses incurred in connection with the temporary relocation, including the cost of moving to and from the temporarily occupied unit, any increased housing costs and incidental expenses; or (B) Other conditions of the temporary relocation are not reasonable. (v) A tenant-occupant of a dwelling who moves from the building/ complex after he or she has been required to move to another dwelling unit in the same building/complex in order to carry out the project, if either: (A) The tenant is not offered reimbursement for all reasonable out- of-pocket expenses incurred in connection with the move; or (B) Other conditions of the move are not reasonable. (2) Notwithstanding the provisions of paragraph (h)(1) of this section, a person does not qualify as a ``displaced person'' (and is not eligible for relocation assistance under the URA or this section), if: (i) The person moved into the property after the submission of the application for financial assistance to HUD, but, before signing a lease or commencing occupancy, was provided written notice of the project, its possible impact on the person (e.g., the person may be displaced, temporarily relocated or suffer a rent increase) and the fact that the person would not qualify as a ``displaced person'' or for any assistance provided under this section as a result of the project; (ii) The person is ineligible under 49 CFR 24.2(g)(2). (iii) The grantee determines the person is not displaced as a direct result of acquisition, rehabilitation, or demolition for an assisted project. To exclude a person on this basis, HUD must concur in that determination. (3) A grantee may at any time ask HUD to determine whether a specific displacement is or would be covered under this section. (i) Definition of initiation of negotiations. For purposes of determining the formula for computing the replacement housing assistance to be provided to a person displaced as a direct result of rehabilitation or demolition of the real property, the term ``initiation of negotiations'' means the execution of the agreement covering the rehabilitation or demolition. (Approved by the Office of Management and Budget under control number 2577-0191) Sec. 1003.603 Labor standards. In accordance with the authority under section 107(e)(2) of the Act, the Secretary waives the provisions of section 110 of the Act (Labor Standards) with respect to this part, including the requirement that laborers and mechanics employed by the contractor or subcontractor in the performance of construction work financed in whole or in part with assistance received under this part be paid wages at rates not less than those prevailing on similar construction in the locality, as determined by the Secretary of Labor in accordance with the Davis-Bacon Act (40 U.S.C. 276 a to a-7). Sec. 1003.604 Citizen participation. (a) In order to permit residents of Indian tribes and Alaska native villages to examine and appraise the applicant's application for funds under this part, the applicant shall follow traditional means of resident involvement which, at the least, include the following: (1) Furnishing residents with information concerning the amounts of funds available for proposed community development and housing activities and the range of activities that may be undertaken. (2) Holding one or more meetings to obtain the views of residents on community development and housing needs. Meetings shall be scheduled in ways and at times that will allow participation by residents. [[Page 770]] (3) Developing and publishing or posting a community development statement in such a manner as to afford affected residents an opportunity to examine its contents and to submit comments. (4) Affording residents an opportunity to review and comment on the applicant's performance under any active community development block grant. (b) Prior to submission of the application to HUD, the applicant shall certify by an official Tribal resolution that it has met the requirements of paragraph (a) of this section; and (1) Considered any comments and views expressed by residents and, if it deems it appropriate, modified the application accordingly; and (2) Made the modified application available to residents. (c) No part of the requirement under paragraph (a) of this section shall be construed to restrict the responsibility and authority of the applicant for the development of the application and the execution of the grant. Accordingly, the citizen participation requirements of this section do not include concurrence by any person or group in making final determinations on the contents of the application. (Approved by the Office of Management and Budget under control number 2577-0191) Sec. 1003.605 Environment. (a) In order to assure that the policies of the National Environmental Policy Act of 1969 and other provisions of Federal law which further the purposes of that act (as specified in 24 CFR 58.5) are most effectively implemented in connection with the expenditure of ICDBG funds, the grantee shall comply with the Environment Review Procedures for Entities Assuming HUD Environmental Responsibilities (24 CFR part 58). Upon completion of an environmental review, the grantee shall submit a certification and request for release of funds for particular projects in accordance with 24 CFR part 58. The grantee shall also be responsible for compliance with flood insurance, coastal barrier resource and airport clear zone requirements under 24 CFR 58.6. (b) In accordance with 24 CFR 58.34(a)(8), grants for imminent threats to health or safety approved under the provisions of subpart E of this part are exempt from some or all of the environmental review requirements of 24 CFR part 58, to the extent provided in that section. Sec. 1003.606 Conflict of interest. (a) Applicability. (1) In the procurement of supplies, equipment, construction, and services by grantees and subgrantees, the conflict of interest provisions in 2 CFR 200.112, 200.318(c), and 200.319(a)(5) shall apply. (2) In all cases not governed by 2 CFR 200.318, the provisions of this section shall apply. Such cases include the provision of assistance by the grantee or by its subrecipients to businesses, individuals, and other private entities under eligible activities that authorize such assistance (e.g., rehabilitation, preservation, and other improvements of private properties or facilities under Sec. 1003.202; or grants, loans, and other assistance to businesses, individuals, and other private entities under Sec. 1003.203 or Sec. 1003.204.). (b) Conflicts prohibited. Except for the use of ICDBG funds to pay salaries and other related administrative or personnel costs, the general rule is that no persons described in paragraph (c) of this section who exercise or have exercised any functions or responsibilities with respect to ICDBG activities assisted under this part or who are in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from an ICDBG assisted activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during their tenure or for one year thereafter. (c) Persons covered. The conflict of interest provisions of paragraph (b) of this section apply to any person who is an employee, agent, consultant, officer, or elected or appointed official of the grantee, or of any designated public agencies, or CBDOs under Sec. 1003.204, receiving funds under this part. [[Page 771]] (d) Exceptions requiring HUD approval--(1) Threshold requirements. Upon the written request of a grantee, HUD may grant an exception to the provisions of paragraph (b) of this section on a case-by-case basis, when it determines that such an exception will serve to further the purposes of the Act and the effective and efficient administration of the grantee's program or project. An exception may be considered only after the grantee has provided the following: (i) A disclosure of the nature of the possible conflict, accompanied by an assurance that there has been public disclosure of the conflict and a description of how the public disclosure was made; and (ii) An opinion of the grantee's attorney that the interest for which the exception is sought would not violate Tribal laws on conflict of interest, or applicable State laws. (2) Factors to be considered for exceptions: In determining whether to grant a requested exception after the grantee has satisfactorily met the requirements of paragraph (d)(1) of this section, HUD shall consider the cumulative effect of the following factors, where applicable: (i) Whether the exception would provide a significant cost benefit or essential expert knowledge to the program or project which would otherwise not be available; (ii) Whether an opportunity was provided for open competitive bidding or negotiation; (iii) Whether the affected person has withdrawn from his or her functions or responsibilities, or from the decision-making process, with reference to the specific assisted activity in question; (iv) Whether the interest or benefit was present before the affected person was in a position as described in paragraph (b) of this section; (v) Whether undue hardship will result, either to the grantee or to the person affected, when weighed against the public interest served by avoiding the prohibited conflict; (vi) Any other relevant considerations. (e) Circumstances under which the conflict prohibition does not apply. (1) In instances where a person who might otherwise be deemed to be included under the conflict prohibition is a member of a group or class of beneficiaries of the assisted activity and receives generally the same interest or benefits as are being made available or provided to the group or class, the prohibition does not apply, except that if, by not applying the prohibition against conflict of interest, a violation of Tribal or State laws on conflict of interest would result, the prohibition does apply. However, if the assistance to be provided is housing rehabilitation (or repair) or new housing, a public disclosure of the nature of the assistance to be provided and the specific basis for the selection of the proposed beneficiaries must be made prior to the submission of an application to HUD. Evidence of this disclosure must be provided as a component of the application. (f) Record retention. All records pertaining to the grantee's decision under this section shall be maintained for HUD review upon request. (Approved by the Office of Management and Budget under control number 2577-0191) [62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1003.607 Lead-based paint. The requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations part 35, subparts A, B, J, K, and R of this title apply to activities conducted under this program. [64 FR 50230, Sept. 15, 1999] Sec. 1003.608 Debarment and suspension. The requirements in 2 CFR part 2424 are applicable. ICDBG funds cannot be provided to excluded or disqualified persons. [72 FR 73497, Dec. 27, 2007] Subpart H_Program Performance Sec. 1003.700 Review of grantee's performance. (a) Objective. HUD will review each grantee's performance to determine whether the grantee has: [[Page 772]] (1) Complied with the requirements of the Act, this part, the grant agreement and other applicable laws and regulations; (2) Carried out its activities substantially as described in its application; (3) Made substantial progress in carrying out its approved program; (4) A continuing capacity to carry out the approved activities in a timely manner; and (5) The capacity to undertake additional activities funded under this part. (b) Basis for review. In reviewing each grantee's performance, HUD will consider all available evidence which may include, but not be limited to, the following: (1) The approved application and any amendments thereto; (2) Reports prepared by the grantee; (3) Records maintained by the grantee; (4) Results of HUD's monitoring of the grantee's performance, including field evaluation of the quality of the work performed; (5) Audit reports; (6) Records of drawdowns on the line of credit; (7) Records of comments and complaints by citizens and organizations; and (8) Litigation. Sec. 1003.701 Corrective and remedial action. (a) General. One or more corrective or remedial actions will be taken by HUD when, on the basis of the performance review, HUD determines that the grantee has not: (1) Complied with the requirements of the Act, this part, and other applicable laws and regulations, including the environmental responsibilities assumed under section 104(g) of title I of the Act; (2) Carried out its activities substantially as described in its applications; (3) Made substantial progress in carrying out its approved program; or (4) Shown the continuing capacity to carry out its approved activities in a timely manner. (b) Action. The action taken by HUD will be designed, first, to prevent the continuance of the deficiency; second, to mitigate any adverse effects or consequences of the deficiency; and third, to prevent a recurrence of the same or similar deficiencies. The following actions may be taken singly or in combination, as appropriate for the circumstances: (1) Request the grantee to submit progress schedules for completing approved activities or for complying with the requirements of this part; (2) Issue a letter of warning advising the grantee of the deficiency (including environmental review deficiencies and housing assistance deficiencies), describing the corrective actions to be taken, establishing a date for corrective actions, and putting the grantee on notice that more serious actions will be taken if the deficiency is not corrected or is repeated; (3) Advise the grantee to suspend, discontinue, or not incur costs for the affected activity; (4) Advise the grantee to reprogram funds from affected activities to other eligible activities, provided that such action shall not be taken in connection with any substantial violation of part 58 and provided that such reprogramming is subjected to the environmental review procedures of part 58 of this title; (5) Advise the grantee to reimburse the grantee's program account or line of credit in any amount improperly expended; (6) Change the method of payment from a line of credit basis to a reimbursement basis; and/or (7) Suspend the line of credit until corrective actions are taken. Sec. 1003.702 Reduction or withdrawal of grant. (a) General. A reduction or withdrawal of a grant under paragraph (b) of this section will not be made until at least one of the corrective or remedial actions specified in Sec. 1003.701(b) has been taken and only then if the grantee has not made an appropriate and timely response. Before making such a grant reduction or withdrawal, the grantee also shall be notified and given an opportunity within a prescribed time for an informal consultation regarding the proposed action. [[Page 773]] (b) Reduction or withdrawal. When the Area ONAP determines, on the basis of a review of the grantee's performance, that the objectives set forth in Sec. 1003.700(a)(2) or (3) have not been met, the Area ONAP may reduce or withdraw the grant, except that funds already expended on eligible approved activities shall not be recaptured. Sec. 1003.703 Other remedies for noncompliance. (a) Secretarial actions. If the Secretary finds a grantee has failed to comply with any provision of this part even after corrective actions authorized under Sec. 1003.701 have been applied, the following actions may be taken provided that reasonable notice and opportunity for hearing is made to the grantee. (The Administrative Procedure Act (5 U.S.C. 551 et seq.), where applicable, shall be a guide in any situation involving adjudications where the Secretary desires to take actions requiring reasonable notice and opportunity for a hearing): (1) Terminate the grant to the grantee; (2) Reduce the grant to the grantee by an amount equal to the amount which was not expended in accordance with this part; or (3) Limit the availability of funds to projects or activities not affected by such failure to comply; provided, however, that the Secretary may on due notice revoke the grantee's line of credit in whole or in part at any time if the Secretary determines that such action is necessary to preclude the further expenditure of funds for activities affected by such failure to comply. (b) Secretarial referral to the Attorney General. If there is reason to believe that a grantee has failed to comply substantially with any provision of the Act, the Secretary may refer the matter to the Attorney General of the United States with a recommendation that an appropriate civil action be instituted. Upon such a referral, the Attorney General may bring a civil action in any United States district court having venue thereof for such relief as may be appropriate, including an action to recover the amount of the assistance furnished under this part which was not expended in accordance with this part or for mandatory or injunctive relief. PART 1004 [RESERVED] PART 1005_LOAN GUARANTEES FOR INDIAN HOUSING (Eff. until 06 18 24)--Table of Contents Sec. 1005.101 What is the applicability and scope of these regulations? 1005.103 What definitions are applicable to this program? 1005.104 What lenders are eligible for participation? 1005.105 What are eligible loans? 1005.106 What is the Direct Guarantee procedure? 1005.107 What is eligible collateral? 1005.109 Guarantee fees. 1005.111 What safety and quality standards apply? 1005.112 How do eligible lenders and eligible borrowers demonstrate compliance with applicable tribal laws? 1005.113 How does HUD enforce lender compliance with applicable tribal laws? 1005.115 Equal access. 1005.120 Qualified mortgage. Authority: 12 U.S.C. 1715z-13a; 15 U.S.C. 1639c; 42 U.S.C. 3535(d). Source: 61 FR 9054, Mar. 6, 1996, unless otherwise noted. Redesignated at 63 FR 12349, Mar. 12, 1998. Effective Date Note: At 89 FR 20056, Mar. 20, 2024, part 1005 was revised, effective June 18, 2024. The text in effect June 18, 2024, follows this part. Sec. 1005.101 What is the applicability and scope of these regulations? Under the provisions of section 184 of the Housing and Community Development Act of 1992, as amended by the Native American Housing Assistance and Self-Determination Act of 1996 (12 U.S.C. 1715z-13a), the Department of Housing and Urban Development (the Department or HUD) has the authority to guarantee loans for the construction, acquisition, or rehabilitation of 1- to 4-family homes that are standard housing located on trust or restricted land or land located in an Indian or Alaska Native area. This part provides [[Page 774]] requirements that are in addition to those in section 184. [67 FR 19493, Apr. 19, 2002] Sec. 1005.103 What definitions are applicable to this program? In addition to the definitions that appear in Section 184 of the Housing and Community Development Act of 1992, the following definitions are applicable to loan guarantees under Section 184-- Default means the failure by a borrower to make any payment or to perform any other obligation under the terms of a loan, and such failure continues for a period of more than 30 days. Holder means the holder of the guarantee certificate and in this program is variously referred to as the lender holder, the holder of the certificate, the holder of the guarantee, and the mortgagee. Indian means any person recognized as being Indian or Alaska Native by an Indian tribe, the Federal Government, or any State, and includes the term ``Native American''. Mortgage means: (1)(i) A first lien as is commonly given to secure advances on, or the unpaid purchase price of, real estate under the laws of the jurisdiction where the property is located and may refer to a security instrument creating a lien, whether called a mortgage, deed of trust, security deed, or another term used in a particular jurisdiction; or (ii) A loan secured by collateral as required by 24 CFR 1005.107; and (2) The credit instrument, or note, secured thereby. Mortgagee means the same as ``Holder.'' Principal residence means the dwelling where the mortgagor maintains (or will maintain) his or her permanent place of abode, and typically spends (or will spend) the majority of the calendar year. A person may have only one principal residence at any one time. Property means the property constructed, acquired, or rehabilitated with the guaranteed loan, except when the context indicates that the term means other collateral for the loan. Section 184 means section 184 (entitled, ``Loan Guarantees for Indian Housing'') of the Housing and Community Development Act of 1992 (12 U.S.C. 1515z-13a). Trust or restricted land has the meaning given to ``trust land'' in section 184(k)(9) of the Housing and Community Development Act of 1992. [61 FR 9054, Mar. 6, 1996. Redesignated and amended at 63 FR 12349, 12372, Mar. 12, 1998; 63 FR 48990, Sept. 11, 1998] Sec. 1005.104 What lenders are eligible for participation? Eligible lenders are those approved under and meeting the qualifications established in this subpart, except that loans otherwise insured or guaranteed by an agency of the United States, or made by an organization of Indians from amounts borrowed from the United States, shall not be eligible for guarantee under this part. The following lenders are deemed to be eligible under this part: (a) Any mortgagee approved by HUD for participation in the single family mortgage insurance program under title II of the National Housing Act; (b) Any lender whose housing loans under chapter 37 of title 38, United States Code are automatically guaranteed pursuant to section 1802(d) of such title; (c) Any lender approved by the Department of Agriculture to make guaranteed loans for single family housing under the Housing Act of 1949; (d) Any other lender that is supervised, approved, regulated, or insured by any other agency of the United States; or (e) Any other lender approved by the Secretary under this part. [63 FR 12372, Mar. 12, 1998, as amended at 63 FR 48990, Sept. 11, 1998] Sec. 1005.105 What are eligible loans? (a) In general. Only fixed rate, fixed term loans with even monthly payments are eligible under the Section 184 program. (b) Eligible borrowers. A loan guarantee under section 184 may be made to: (1) An Indian family who will occupy the home as a principal residence and who is otherwise qualified under section 184; (2) An Indian Housing Authority or Tribally Designated Housing Entity; or [[Page 775]] (3) An Indian tribe. (c) Appraisal of labor value. The value of any improvements to the property made through the skilled or unskilled labor of the borrower, which may be used to make a payment on account of the balance of the purchase price, must be appraised in accordance with generally acceptable practices and procedures. (d) Construction advances. The Department may guarantee loans from which advances will be made during construction. The Department will provide guarantees for advances made by the mortgagee during construction if all of the following conditions are satisfied: (1) The mortgagor and the mortgagee execute a building loan agreement, approved by HUD, setting forth the terms and conditions under which advances will be made; (2) The advances may be made only as provided in the building loan agreement; (3) The principal amount of the mortgage is held by the mortgagee in an interest bearing account, trust, or escrow for the benefit of the mortgagor, pending advancement to the mortgagor or the mortgagor's creditors as provided in the loan agreement; and (4) The mortgage shall bear interest on the amount advanced to the mortgagor or the mortgagor's creditors and on the amount held in an account or trust for the benefit of the mortgagor. (e) Environmental compliance. (1) Section 1000.20 of this chapter applies to an environmental review in connection with a loan guarantee under this part. That section permits an Indian tribe to choose to assume environmental review responsibility. (2) Before HUD issues a commitment to guarantee any loan, or before HUD guarantees a loan if there is no commitment, HUD must: (i) Comply with environmental review procedures to the extent applicable under part 50 of this title, in accordance with Sec. 1000.20(a) and (c); or (ii) Approve a Request for Release of Funds and certification from an Indian tribe, in accordance with part 58 of this title, if the Indian tribe has assumed environmental review responsibility. (3) If the loan involves proposed or new construction, HUD will require compliance with procedures comparable to those required by Sec. 203.12(b)(2) of this title for FHA mortgage insurance. (f) Lack of access to private financial markets. In order to be eligible for a loan guarantee if the property is not on trust or restricted land, the borrower must certify that the borrower lacks access to private financial markets. Borrower certification is the only certification required by HUD. [61 FR 9054, Mar. 6, 1996. Redesignated and amended at 63 FR 12349, 12372, Mar. 12, 1998; 63 FR 48990, Sept. 11, 1998; 67 FR 19493, Apr. 19, 2002] Sec. 1005.106 What is the Direct Guarantee procedure? (a) General. A loan may be processed under a Direct Guarantee procedure approved by the Department, under which the Department does not issue commitments to guarantee or review applications for loan guarantees before mortgages are executed by lenders approved for Direct Guarantee processing. The Department will approve a loan before the loan is guaranteed. (b) Mortgagee sanctions. Depending on the nature and extent of the noncompliance with the requirements applicable to the Direct Guarantee procedure, as determined by the Department, the Department may take such actions as are deemed appropriate and in accordance with published guidelines. [63 FR 48990, Sept. 11, 1998] Sec. 1005.107 What is eligible collateral? (a) In general. A loan guaranteed under section 184 may be secured by any collateral authorized under and not prohibited by Federal, state, or tribal law and determined by the lender and approved by the Department to be sufficient to cover the amount of the loan, and may include, but is not limited to, the following: (1) The property and/or improvements to be acquired, constructed, or rehabilitated, to the extent that an interest in such property is not subject to the restrictions against alienation applicable to trust or restricted land; (2) A first and/or second mortgage on property other than trust land; (3) Personal property; or [[Page 776]] (4) Cash, notes, an interest in securities, royalties, annuities, or any other property that is transferable and whose present value may be determined. (b) Leasehold of trust or restricted land as collateral. If a leasehold interest in trust or restricted land is used as collateral or security for the loan, the following additional provisions apply: (1) Approved Lease. Any land lease for a unit financed under Section 184 must be on a form approved by both HUD and the Bureau of Indian Affairs, U.S. Department of Interior. (2) Assumption or sale of leasehold. The lease form must contain a provision requiring tribal consent before any assumption of an existing lease, except where title to the leasehold interest is obtained by the Department through foreclosure of the guaranteed mortgage or a deed in lieu of foreclosure. A mortgagee other than the Department must obtain tribal consent before obtaining title through a foreclosure sale. Tribal consent must be obtained on any subsequent transfer from the purchaser, including the Department, at foreclosure sale. The lease may not be terminated by the lessor without HUD's approval while the mortgage is guaranteed or held by the Department. (3) The mortgagee or HUD shall only pursue liquidation after offering to transfer the account to an eligible tribal member, the Indian tribe, or the Indian housing authority servicing the Indian tribe or the TDHE servicing the Indian tribe. The mortgagee or HUD shall not sell, transfer, or otherwise dispose of or alienate the property except to one of these three entities. (4) Priority of loan obligation. Any tribal government whose courts have jurisdiction to hear foreclosures must enact a law providing for the satisfaction of a loan guaranteed or held by the Department before other obligations (other than tribal leasehold taxes against the property assessed after the property is mortgaged) are satisfied. (5) Eviction procedures. Before HUD will guarantee a loan secured by trust land, the tribe having jurisdiction over such property must notify the Department that it has adopted and will enforce procedures for eviction of defaulted mortgagors where the guaranteed loan has been foreclosed. (i) Enforcement. If the Department determines that the tribe has failed to enforce adequately its eviction procedures, HUD will cease issuing guarantees for loans for tribal members except pursuant to existing commitments. Adequate enforcement is demonstrated where prior evictions have been completed within 60 days after the date of the notice by HUD that foreclosure was completed. (ii) Review. If the Department ceases to issue guarantees in accordance with paragraph (b)(5)(i) of this section, HUD will notify the tribe of the reasons for such action and that the tribe may, within 30 days after notification of HUD's action, file a written appeal with the Director, Office of Loan Guarantee (OLG), Office of Native American Programs (ONAP). Within 30 days after notification of an adverse decision by the OLG Director, the tribe may file a written request for review with the Deputy Assistant Secretary for ONAP. Upon notification of an adverse decision by the Deputy Assistant Secretary, the tribe has 30 additional days to file an appeal with the Assistant Secretary for Public and Indian Housing. The determination of the Assistant Secretary shall be final, but the tribe may resubmit the issue to the Assistant Secretary for review at any subsequent time, if new evidence or changed circumstances warrant reconsideration. (Any other administrative actions determined to be necessary to debar a tribe from participating in this program will be subject to the formal debarment procedures contained in 2 CFR part 2424.) [61 FR 9054, Mar. 6, 1996. Redesignated and amended at 63 FR 12349, 12373, Mar. 12, 1998; 63 FR 48991, Sept. 11, 1998; 67 FR 19493, Apr. 19, 2002; 72 FR 73497, Dec. 27, 2007] Sec. 1005.109 Guarantee fees. HUD shall establish and collect, at the time of issuance of the guarantee, a fee for the guarantee of loans under this section, in an amount not exceeding 3 percent of the principal obligation of the loan, or any increase established by statute. HUD shall establish the amount of the fee by publishing a notice in the Federal Register, and shall deposit any fees collected under [[Page 777]] this section in the Indian Housing Loan Guarantee Fund. [79 FR 12384, Mar. 5, 2014] Sec. 1005.111 What safety and quality standards apply? (a) Loans guaranteed under section 184 must be for dwelling units which meet the safety and quality standards set forth in section 184(j). (b) The relevant requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, H, J, K, M, and R of this title apply to this part. [63 FR 48991, Sept. 11, 1998, as amended at 64 FR 50230, Sept. 15, 1999] Sec. 1005.112 How do eligible lenders and eligible borrowers demonstrate compliance with applicable tribal laws? The lender and the borrower will each certify that they acknowledge and agree to comply with all applicable tribal laws. An Indian tribe with jurisdiction over the dwelling unit does not have to be notified of individual section 184 loans unless required by applicable tribal law. [63 FR 12373 Mar. 12, 1998, as amended at 63 FR 48991, Sept. 11, 1998] Sec. 1005.113 How does HUD enforce lender compliance with applicable tribal laws? Failure of the lender to comply with applicable tribal law is considered to be a practice detrimental to the interest of the borrower and may be subject to enforcement action(s) under section 184(g) of the statute. [63 FR 12373 Mar. 12, 1998] Sec. 1005.115 Equal access. The equal access to HUD-assisted or -insured housing requirements in 24 CFR 5.105(a)(2) apply to this part. [81 FR 80993, Nov. 17, 2016] Sec. 1005.120 Qualified mortgage. A mortgage guaranteed under section 184 of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13a), except for mortgage transactions exempted under Sec. 203.19(c)(2), is a safe harbor qualified mortgage that meets the ability-to-repay requirements in 15 U.S.C. 1639c(a). [78 FR 75237, Dec. 11, 2013] Effective Date Note: At 89 FR 20056, Mar. 20, 2024, part 1005 was revised, effective June 18, 2024. At 89 FR 22084, Mar. 29, 2024, in section 1005.749(c), paragraphs (7) and (8) were correctly redesignated as paragraphs (6) and (7). In section 1005.759, the second paragraph (b) was correctly redesignated as paragraph (c) and paragraphs (c) and (d) were correctly redesignated as paragraphs (d) and (e), respectively. At 89 FR 20088, in section 1005.805(b)(4), paragraphs (vi) and (vii) were correctly redesignated as paragraphs (v) and (vi). For the convenience of the user, the revised text is set forth as follows: PART 1005_LOAN GUARANTEES FOR INDIAN HOUSING (Eff. 06 18 24) Subpart A_General Program Requirements Sec. 1005.101 Purpose. This part implements the Section 184 Indian Housing Loan Guarantee Program (``Section 184 Program'') authorized under Section 184 of the Housing and Community Development Act of 1992, as amended, codified at 12 U.S.C. 1715z-13a. Section 184 authorizes the U.S. Department of Housing and Urban Development (HUD) to establish a loan guarantee program for American Indian and Alaskan Native families, Tribes, and tribally Designated Housing Entities (TDHE). The loans guaranteed under the Section 184 Program are used to construct, acquire, refinance, or rehabilitate one- to four-family standard housing located on Trust Land, land located in an Indian or Alaska Native area, and Section 184 Approved Program Area. These regulations apply to Lender Applicants, Holders, Direct and Non-Direct Guarantee Lenders, Servicers and Tribes seeking to or currently participating in the Section 184 Program. Sec. 1005.102 Severability. Any provision of this part held to be invalid or unenforceable as applied to any action should be construed so as to continue to give the maximum effect to the provision permitted by law, unless such holding is that the provision of this part is invalid and unenforceable in all circumstances, in which event the provision should be severable from the remainder of this part and shall not affect the remainder thereof. [[Page 778]] Sec. 1005.103 Definitions. The following definitions apply throughout this part: Acquisition Cost means the sum of the sales price or construction cost for a property and the cost of allowable repairs or improvements for the same property, less any unallowable sales concession(s). For the purposes of this definition, the term ``sales concession'' means an inducement to purchase a property paid by the seller to consummate a sales transaction. Amortization means the calculated schedule of repayment of a Section 184 Guaranteed Loan in full, through structured, regular payments of principal and interest within a certain time frame. Amortization Schedule means the document generated at the time of loan approval outlining the Borrower's schedule of payments of principal and interest for the life of the loan and the unpaid principal balance with and without the financed Upfront Loan Guarantee Fee, where applicable. Annual Loan Guarantee Fee means a fee calculated on an annual basis and paid in monthly installments by the Borrower, which is collected by the Servicer and remitted to HUD for the purposes of financing the Indian Housing Loan Guarantee Fund. BIA means the United States Department of Interior, Bureau of Indian Affairs. Borrower means every individual on the mortgage application. For the purposes of servicing the loan, Borrower refers to every original Borrower who signed the note and their heirs, executors, administrators, assigns, and approved substitute Borrowers. Borrowers include Tribes and TDHEs. Claim means the Servicer's application to HUD for payment of benefits under the Loan Guarantee Certificate for a Section 184 Guaranteed Loan. Conflict of Interest means any party to the transaction who has a direct or indirect personal business or financial relationship sufficient to appear that it may cause partiality or influence the transaction, or both. Date of Default means the day after the Borrower's obligation to make a loan payment or perform an obligation under the terms of the loan. Day means calendar day, except where the term ``business day'' is used. Default means when the Borrower has failed to make a loan payment or perform an obligation under the terms of the Section 184 Guaranteed Loan. Direct Guarantee Lender means a Lender approved by HUD under Sec. 1005.21 to Originate, underwrite, close, service, purchase, hold, or sell Section 184 Guaranteed Loans. Eligible Nonprofit Organization means a nonprofit organization established under Tribal law or organization of the type described in section 501(c)(3) of the Internal Revenue Code of 1986 as an organization exempt from taxation under section 501(a) of the Code, which has: (1) Two years' experience as a provider of low- or moderate-income housing; (2) A voluntary board; and (3) No part of its net earnings inuring to the benefit of any member, founder, contributor or individual. Financial Statements means audited financial statements or other financial records as required by HUD. Firm Commitment means a commitment by HUD to reserve funds, for a specified period of time, to guarantee a Loan under the Section 184 Program, when a Loan for a specific Borrower and property meets standards as set forth in subpart D of this part. First Legal Action means the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process. Good and Marketable Title means title that contains exceptions or restrictions, if any, which are permissible under subpart D of this part; and any objections to title that have been waived by HUD or otherwise cleared by HUD; and any discrepancies have been resolved to ensure the Section 184 Guaranteed Loan is in first lien position. In the case of Section 184 Guaranteed Loans on Trust Land, evidence of Good and Marketable Title must be reported in the Title Status Report issued by the BIA, or other HUD approved document issued by the Tribe, as prescribed by Section 184 Program Guidance and the document evidences the property interest rights. Holder means an entity that is named on the Promissory Note and any successor or assigns for the Section 184 Guaranteed Loan and has the right and responsibilities to enforce the Section 184 requirements and the Holder's interests arising under the mortgage or deed of trust. Identity of Interest means a sales transaction between family members, business partners, or other business affiliates. Indian means a person who is recognized as being an Indian or Alaska Native by a federally recognized Indian Tribe, a regional or village corporation as defined in the Alaska Native Claims Settlement Act, or a State recognized Tribe eligible to receive assistance under Title I of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA). Indian Family means one or more persons maintaining a household where at least one Borrower is an Indian. Indian Housing Loan Guarantee Fund or Fund means a fund established at the U.S. Department of Treasury for the purpose of providing loan guarantees under the Section 184 Program. Lease or Leasehold Interest means a written contract between a Borrower and a Tribe, entity, or individual, whereby the Borrower, as lessee, is granted a right of possession of [[Page 779]] Trust Land for a specific purpose and duration, according to applicable Tribal, Federal or State Law. Lender Applicant means: (1) A financial institution engaging in mortgage lending that is eligible to participate in the Section 184 Program under Sec. 1005.203 or Sec. 1005.205; (2) The financial institution has applied or will apply to HUD for approval to participate in the Section 184 Program; and (3) Has not received approval from HUD. Loan means a loan application or mortgage loan that has not received a Loan Guarantee Certificate. Loan Guarantee Certificate means evidence of endorsement by HUD of a Loan for guarantee issued under Sec. 1005.525. Loss Mitigation means an alternative to foreclosure offered by the Holder that is made available through the Servicer to the Borrower. Non-Direct Guarantee Lender means a Lender approved by HUD under Sec. 1005.207 who has selected a level of program participation limited to Originating Section 184 Guaranteed Loans. Month or monthly means thirty days in a month, regardless of the actual number of days. Origination, originate, or originating means the process by which the Lender accepts a new loan application along with all required supporting documentation. Origination does not include underwriting the loan. Owner of Record means, for fee simple properties, the owner of the property as shown on the records of the recorder in the county where the property is located. For Trust Land Properties, the current lessee or owner of property, as shown on the Title Status Report provided by the BIA or other HUD approved document issued by the Tribe, as prescribed by Section 184 Program Guidance and the document evidences the property interest rights. Partial Payment means a Borrower payment of any amount less than the full amount due under the terms of the Section 184 Guaranteed Loan at the time the payment is tendered. Property means one to four-family dwellings that meet the requirements for standard housing under Sec. 1005.419 and located on Trust Land, land located in an Indian or Alaska Native area, or Section 184 Approved Program Area. Section 184 Guaranteed Loan is a Loan that has received a Loan Guarantee Certificate. Section 184 Approved Program Area means the Indian Housing Block Grant (IHBG) Formula Area as defined in 24 CFR 1000.302 or any other area approved by HUD, in which HUD may guarantee Loans. Section 184 Program Guidance means administrative guidance documents that may be issued by HUD, including but not limited to Federal Register documents, Dear Lender Letters, handbooks, guidebooks, manuals, and user guides. Security means any collateral authorized under existing Tribal, Federal, or State law. Servicer means a Direct Guarantee Lender that chooses to service Section 184 Guaranteed Loans or a Non-Direct Guarantee Lender or a financial institution approved by HUD under Sec. 1005.705 to service Section 184 Guaranteed Loans. Sponsor means an approved Direct Guarantee Lender that enters into a relationship with a Non-Direct Guarantee Lender or another Direct Guarantee Lender (Sponsored Entity), whereby the Sponsor provides underwriting, closing, purchasing, and holding of Section 184 Guaranteed Loans and may provide servicing. Sponsored Entity means a Non-Direct Guarantee or Direct Guarantee Lender operating under an agreement with a Sponsor to Originate Section 184 Guaranteed Loans in accordance with Sec. 1005.213. Tax-exempt Bond Financing means financing which is funded in whole or in part by the proceeds of qualified mortgage bonds described in section 143 of the Internal Revenue Code of 1986, or any successor section, on which the interest is exempt from Federal income tax. The term does not include financing by qualified veterans' mortgage bonds as defined in section 143(b) of the Code. Title Status Report is defined in 25 CFR 150.2, as may be amended. Tribe means any Indian Tribe, band, nation, or other organized group or community of Indians, including any Alaska Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601, et seq.), that is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians pursuant to the Indian Self Determination and Education Assistance Act of 1975. Tribally Designated Housing Entity (TDHE) means any entity as defined in the Indian Housing Block Grant Program under the Native American Housing Assistance and Self Determination Act at 25 U.S.C. 4103(22). Trust Land means land title which is held by the United States for the benefit of an Indian or Tribe or title which is held by a Tribe subject to a restriction against alienation imposed by the United States or the Tribe. This definition shall include but is not limited to Tribal, individual, assigned trust, or restricted fee lands. Upfront Loan Guarantee Fee means a fee, paid by the Borrower at closing, collected by the Direct Guarantee Lender and remitted to HUD for the purposes of financing the Indian Housing Loan Guarantee Fund. [[Page 780]] Subpart B_Lender Eligibility and Requirements Sec. 1005.201 Lender Applicant approval and participation. (a) Approval types. The Section 184 Program has two types of Lender Applicant approvals: (1) Lender Applicants deemed approved by statute, as described in Sec. 1005.203; or (2) Lender Applicants required to obtain secretarial approval under Sec. 1005.205. (b) Lender Applicant participation. In accordance with Sec. 1005.207, Lender Applicants must select a level of program participation and submit a completed application package, as prescribed by Section 184 Program Guidance, to participate in the Section 184 Program. Sec. 1005.203 Lender Applicants deemed approved by statute. The following Lender Applicants are deemed approved by statute: (a) Any mortgagee approved by HUD for participation in the single- family mortgage insurance program under title II of the National Housing Act; (b) Any Lender Applicant whose housing loan under chapter 37 of title 38, United States Code are automatically guaranteed pursuant to 38 U.S.C. 3702(d); (c) Any Lender Applicant approved by the U.S. Department of Agriculture to make Guaranteed Loans for single family housing under the Housing Act of 1949; and (d) Any other Lender Applicant that is supervised, approved, regulated, or insured by any other Federal agency of the United States, including but not limited to Community Development Financial Institutions. Sec. 1005.205 Lender Applicants required to obtain Secretarial approval. (a) Lender Applicant application process. Lender Applicants not meeting the requirements of Sec. 1005.203 must apply to HUD for approval to participate in the Section 184 Program by submitting to HUD a completed application package, as prescribed by Section 184 Program Guidance. The application must establish that the Lender meets the following qualifications: (1) Business form. The Lender Applicant shall be a corporation or other chartered institution, a permanent organization having succession, or a partnership, organized under Tribal or State law. (i) Partnership requirements. A partnership must meet the following requirements: (A) Each general partner must be a corporation or other chartered institution consisting of two or more partners. (B) One general partner must be designated as the managing general partner. The managing general partner shall also comply with the requirements specified in paragraphs (a)(1)(i)(C) and (D) of this section. The managing general partner must have as its principal activity the management of one or more partnerships, all of which are mortgage lending institutions or property improvement or manufactured home lending institutions and must have exclusive authority to deal directly with HUD on behalf of each partnership. Newly admitted partners must agree to the management of the partnership by the designated managing general partner. If the managing general partner withdraws or is removed from the partnership for any reason, a new managing general partner shall be substituted, and HUD must be notified in writing within 15 days of the substitution. (C) The partnership agreement shall specify that the partnership shall exist for a minimum term of ten years, as required by HUD. All Section 184 Guaranteed Loans held by the partnership shall be transferred to a Lender Applicant approved under this part prior to the termination of the partnership. The partnership shall be specifically authorized to continue its existence if a partner withdraws. (D) HUD must be notified in writing within 15 days of any amendments to the partnership agreement that would affect the partnership's actions under the Section 184 Program. (ii) Use of business name. The Lender Applicant must use its HUD- registered business name in all advertisements and promotional materials related to the Guaranteed Loan. HUD-registered business names include any alias or ``doing business as'' (DBA) on file with HUD. The Lender must keep copies of all print and electronic advertisements and promotional materials for a period of 2 years from the date that the materials are circulated or used to advertise. (2) Identification and certification of employees. The Lender Applicant shall identify personnel and certify that they are trained and competent to perform their assigned responsibilities in mortgage lending, including origination, servicing, collection, and conveyance activities, and shall maintain adequate staff and facilities to Originate or service mortgages, or both, in accordance with applicable Tribal, Federal, or State requirements, to the extent it engages in such activities. (3) Identification and certification of officers. The Lender Applicant shall identify officers and certify that all employees who will sign applications for Guaranteed Loans on behalf of the Lender Applicant shall be corporate officers or shall otherwise be authorized to bind the Lender in the Origination transaction. The Lender Applicant shall certify that only authorized person(s) report on guarantees, purchases, and sales of Guaranteed Loans to HUD for the purpose of obtaining or transferring guarantee coverage. [[Page 781]] (4) Financial statements. The Lender Applicant shall: (i) Furnish to HUD a copy of its most current annual financial statements, as prescribed by Section 184 Program Guidance. (ii) Furnish such other information as HUD may request; and (iii) Submit to examination of the portion of its records that relates to its activities under the Section 184 Program. (5) Quality control plan. The Lender Applicant shall submit a written quality control plan in accordance with Sec. 1005.217. (6) Identification of branch offices. A Lender Applicant may maintain branch offices. A financial institution's branch office must be registered with HUD to originate or submit applications for Guaranteed Loans. The financial institution shall remain responsible to HUD for the actions of its branch offices. (7) Certification of conflict of interest policy. The Lender Applicant must certify that the lender shall not pay anything of value, directly or indirectly, in connection with any Guaranteed Loan to any person or entity if such person or entity has received any other consideration from the seller, builder, or any other person for services related to such transactions or related to the purchase or sale of the property, except that consideration, approved by HUD, may be paid for services actually performed. The Lender Applicant shall not pay a referral fee to any person or organization. (8) Licensing certification. A Lender Applicant shall certify that it has not been refused a license or has not been sanctioned by any Tribal, Federal, State, or other authority related to any lending activity. (9) Minimum net worth. Irrespective of size, a Lender Applicant shall have a net worth of not less than $1 million, or amount as provided in Section 184 Program Guidance. (10) Identification of operating area. The Lender Applicant must submit a list of states in which they wish to participate in the Section 184 Program and evidence of Lender Applicant's license to operate in those states, as may be prescribed by Section 184 Program Guidance. (11) Other qualifications. Other qualifications by notice for comment. (b) HUD approval. HUD shall review applications under Sec. 1005.203(a) and any other publicly available information related to the Lender Applicant, its officers, and employees. If HUD determines the Lender Applicant meets the requirements for participation in this subpart, HUD shall provide written notification of the approval to be a Non-Direct Guarantee Lender. (c) Limitations on approval. A Lender Applicant may only operate in the Section 184 Approved Program Area where they are licensed. (d) Denial of participation. A Lender Applicant may be denied approval to become a Section 184 Lender if HUD determines the Lender Applicant does not meet the qualification requirements of this subpart. HUD will provide written notification of denial and that decision may be appealed in accordance with the procedures set forth in Sec. 1005.909. Sec. 1005.207 Lender Applicant participation options. (a) Levels of participation. Lender Applicants must choose one of two levels of program participation, a Non-Direct Guarantee Lender or a Direct Guarantee Lender and submit an application to participate on a form prescribed by Section 184 Program guidance. A participation level must be selected by the Lender Applicant and approved by HUD before initiating any Section 184 Program activities. (b) Non-Direct Guarantee Lender. (1) A Non-Direct Guarantee Lender originates loans. (2) A Non-Direct Guarantee Lender must be a Sponsored Entity under Sec. 1005.213. (3) A Non-Direct Guarantee Lender must submit documentation supporting their eligibility as a Lender under Sec. 1005.203 or approved by HUD under Sec. 1005.205 and other documentation as prescribed by Section 184 Program Guidance to HUD through their Sponsor. (c) Direct Guarantee Lender. (1) A Direct Guarantee Lender may originate, underwrite, close, service, purchase, hold, and sell Section 184 Guaranteed Loans. (2) A Direct Guarantee Lender may sponsor Non-Direct Guarantee Lenders or other Direct Guarantee Lenders in accordance with Sec. 1005.213. (3) To become a Direct Guarantee Lender, Lender Applicants must submit additional documentation as provided in Sec. 1005.209 and obtain HUD approval under Sec. 1005.211. Sec. 1005.209 Direct Guarantee Lender application process. (a) For purposes of this section, Lender Applicants shall include Non-Direct Guarantee Lenders, Lender Applicants and financial institutions approved by HUD to only service under Sec. 1005.705. Lender Applicants may apply to HUD for approval to participate in the Section 184 Program as a Direct Guarantee Lender. Lenders Applicants must submit a completed application package in accordance with Section 184 Program Guidance. (b) To be approved as a Direct Guarantee Lender, a Lender Applicant must establish in its application that it meets the following qualifications: (1) Eligibility under Sec. 1005.203 or HUD approval under Sec. 1005.205, as evidenced by approval documents and most recent recertification documents. (2) Has a principal officer with a minimum of five years' experience in the origination of [[Page 782]] Loans guaranteed or insured by an agency of the Federal Government. HUD may approve a Lender applicant with less than five years of experience, if a principal officer has had a minimum of five years of managerial experience in the origination of Loans guaranteed or insured by an agency of the Federal Government. (3) Has on its permanent staff an underwriter(s) that meets the following criteria: (i) Two years' experience underwriting Loans guaranteed or insured by an agency of the Federal Government; (ii) Is an exclusive employee of the Lender Applicant; (iii) Authorized by the Lender Applicant to obligate the Lender Applicant on matters involving the origination of Loans; (iv) Is registered with HUD as an underwriter and continues to maintain such registration; and (v) Other qualifications as may be prescribed by Section 184 Program Guidance. (c) The Lender Applicant must submit a list of States or geographic regions in which it is licensed to operate, evidenced by submitting the active approvals for each State or region, and declare its interest in participating in the Section 184 Program. (d) The Lender Applicant must submit the quality control plan as required by its approving agency, modified for the Section 184 Program. (e) If a Lender Applicant wants to service Section 184 Guaranteed Loans as Direct Guarantee Lender, they must meet qualifications and apply in accordance with Sec. 1005.703. Sec. 1005.211 Direct Guarantee Lender approval. HUD shall review all documents submitted by a Lender Applicant under Sec. 1005.209 and make a determination of conditional approval or denial. (a) Conditional approval. Conditional approval is signified by written notification from HUD that the Lender Applicant is a conditionally approved Direct Guarantee Lender under the Section 184 Program subject to the following conditions: (1) The Lender Applicant signs an agreement to comply with requirements of this part, and any applicable Tribal, Federal, or State law; and (2) If applicable, the Lender Applicant submits a list of entities it currently sponsors under another Federal Loan program and intends to sponsor in the Section 184 Program. This list shall include the following for each Sponsored Entity: (i) Contact information, including mailing address, phone number, and email address for corporate officers. (ii) The Federal tax identification number (TIN) for the Sponsored Entity, and (iii) Names and Nationwide Multistate Licensing System and Registry numbers for all Loan originators and processors. (3) The Lender Applicant certifies it monitors and provides oversight of Sponsored Entities to ensure compliance with this part, and any applicable Tribal, Federal, or State law. (4) The Lender Applicant must, for each underwriter, submit ten test endorsement case binders, or a number prescribed by Section 184 Program Guidance, which meet the requirements of subparts D and E. Unsatisfactory performance by an underwriter during HUD's test case review may constitute grounds for denial of approval to participate as a Direct Guarantee Lender. If participation is denied, such denial is effective immediately and may be appealed in accordance with the procedures set forth in Sec. 1005.909; and (5) The Lender Applicant will operate only in accordance with the Lender's licensing in Section 184 Approved Program Areas. (b) Final approval. Final approval is signified by written notification from HUD that the Lender Applicant is an approved Direct Guarantee Lender under the Section 184 Program without further submission of test case endorsement case binders to HUD. HUD retains the right to request additional test cases as determined necessary. (c) Limitations on approval. (1) A Lender Applicant may only operate as a Direct Guarantee Lender in accordance with the Lender's Tribal or State licensing and within Section 184 Approved Program Areas. (2) The Lender Applicant must employ and retain an underwriter with the qualifications as provided in Sec. 1005.209(b)(3). Failure to comply with this provision may subject the Lender Applicant to sanctions under Sec. 1005.907. (d) Denial of participation. A Lender Applicant may be denied approval to become a Direct Guarantee Lender if HUD determines the Lender Applicant does not meet the qualification requirements of this subpart. HUD will provide written notification of denial and that decision may be appealed in accordance with the procedures set forth in Sec. 1005.909. Sec. 1005.213 Non-Direct Guarantee Lender application, approval, and Direct Guarantee Lender sponsorship. (a) Sponsorship. A Sponsorship is a contractual relationship between a Sponsor and a Sponsored Entity. (b) General responsibility requirements of a Sponsor. (1) The Sponsor must determine the eligibility of a Lender and submit to HUD, as prescribed in Section 184 Program Guidance, a recommendation for approval under Sec. 1005.207(b) or evidence of HUD approval under Sec. Sec. 1005. 205(b) or 211(b). [[Page 783]] (2) Upon HUD approval of eligibility under Sec. 1005.207(b), or HUD acknowledgement of the evidence of HUD approval under Sec. 1005.205(b) or Sec. 1005.211(b), the Sponsor may enter into a Sponsorship with the Sponsored Entity. (3) The Sponsor must notify HUD of changes in a Sponsorship within 10 days. (4) The Sponsor must provide HUD-approved training to the Sponsored Entity on the requirements of the Section 184 Program before the Sponsored Entity may originate Section 184 Guaranteed Loans for the Sponsor. (5) Each Sponsor shall be responsible to HUD for the actions of its Sponsored Entity in Originating Loans. If Tribal or State law requires specific knowledge by the Sponsor or the Sponsored Entity, HUD shall presume the Sponsor had such knowledge and shall remain liable. (6) The Sponsor is responsible for conducting quality control reviews of the Sponsored Entity's origination case binders and Loan performance to ensure compliance with this part. (7) The Sponsor is responsible for maintaining all records for Loans Originated by a Sponsored Entity in accordance with this part. (c) Responsibilities of the Sponsored Entity. A Sponsor must ensure that a Sponsored Entity complies with this part and any other Tribal, Federal, or State law requirements. Sec. 1005.215 Direct Guarantee Lender annual reporting requirements. Direct Guarantee Lenders must submit an annual report on Loan performance, including reporting on all its Sponsored Entities, where applicable, along with any other required reporting under Sec. 1005.903 and other such reports as prescribed by Section 184 Program Guidance. Sec. 1005.217 Quality control plan. (a) A quality control plan sets forth a Lender Applicant, Direct Guarantee Lender, or Non-Direct Guarantee Lender's procedures for ensuring the quality of the Direct Guarantee or Non-Direct Guarantee Lender's Section 184 Guaranteed Loan Origination, underwriting, closing, and/or servicing, as applicable. The purpose of the quality control plan is to ensure the Lender Applicant, Direct Guarantee and non-Direct Guarantee Lender's compliance with Section 184 Program requirements and protect HUD and the entities from unacceptable or unreasonable risks. A Lender Applicant, Direct Guarantee Lender, and Non-Direct Guarantee Lender must adopt and implement a quality control plan. (b) A quality control plan must: (1) Be maintained and updated, as needed, to comply with all applicable Section 184 Program requirements. (2) Cover all policies and procedures, whether performed by the Lender or an agent, to ensure full compliance with all Section 184 Program requirements. (3) Provide the Lender with information sufficient to adequately monitor and oversee the Lender's compliance and measure performance, as it relates to the Lender's Section 184 Guaranteed Loan activity. (4) Require the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender to retain all quality control plan related documentation, including selection criteria, review documentation, findings, and actions to mitigate findings, for a period of three years from initial quality control review, or from the last action taken to mitigate findings, whichever is later. (5) Allow the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender to use employees or agents to perform the quality control functions, so long as they do not directly participate in any Loan administration processes as outlined in Section 184 Program Guidance. (6) Ensure the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender assumes full responsibility for any agent's conduct of quality control reviews. (7) Require the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender to train all staff, agents working with the Section 184 Program on Loan administration and quality control processes and provide staff access to all current Section 184 legal authorities and policy guidance. The Lender, Direct Guarantee or Non-Direct Guarantee Lender must retain copies of training documentation for all staff working on the Section 184 Program in accordance with Sec. 1005.219(d)(3). Failure to comply with the training and documentation requirements may subject the Direct Guarantee Lender and Non-Direct Guarantee Lender to sanctions in accordance with Sec. 1005.907. (8) Require the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender to review a random statistical sample of rejected Loan applications within 90 days from the end of the month in which the decision was made. The reviews must be conducted no less frequently than monthly and with the goal of ensuring that the reasons given for the rejection were valid and each rejection received concurrence of an appropriate staff person with sufficient approval authority. The Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender must submit a report of this review in form and timeframe as prescribed in Section 184 Program Guidance. (9) Ensure that the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender's employees and agents are eligible to participate in the Section 184 Program. Any employees or agents deemed ineligible [[Page 784]] shall be restricted from participating in the Section 184 Program. (10) Require the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender to refer any suspected fraud or material misrepresentation by any party whatsoever directly to HUD's Office of Inspector General (OIG) and the Office of Native American Programs. (11) Require the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender to report all material deficiencies and submit a corrective action plan to HUD within 30 days, or a timeframe as prescribed by Section 184 Program Guidance. (12) Require the Lender Applicant, Direct Guarantee or Non-Direct Guarantee Lender to conduct appropriate Loan level quality control procedures, in accordance with Section 184 Program Guidance. (13) Require the Lender Applicant to comply with any other administrative requirement as may be prescribed by Section 184 Program Guidance. (c) Lender Applicants applying to be a Direct Guarantee Lender under Sec. 1005.209, must submit a quality control plan in accordance with paragraph (b) of this section and include the following additional requirements: (1) Require the Lender Applicant to collect and forward all Loan Guarantee Fees in accordance with the Section 184 Program requirements, with sufficient documentation evidencing the timely collection and payment of the fees to HUD. (2) Require the Lender Applicant to verify that the endorsement case binder is submitted to HUD for guarantee within required time frames. (3) Require the Lender Applicant to review a random statistical sample of its endorsement case binders for potential fraud, material misrepresentations, or other findings on a quarterly basis. The Lender Applicant must investigate and determine if fraud, material misrepresentation or other findings occurred. (4) Require the Lender Applicant to perform quality control review of its Sponsored Entities in the same manner and under the same conditions as required for the Lender's own operation. (5) Where applicable, require the Sponsor to apply paragraph (b) of this section to its Sponsored Entities. (d) All Sponsored Entities shall comply with paragraph (b) of this section and provide a quality control plan directly to their Sponsor in accordance with their sponsorship agreement. Sec. 1005.219 Other requirements. (a) Tribal, Federal, and State law. All Holders, Direct Guarantee Lenders, Non-Direct Guarantee Lenders and Servicers must comply with all applicable Tribal, Federal, and State laws which impact mortgage-related activities. (b) Dual employment. All Non-Direct Guarantee Lenders and Direct Guarantee Lenders must require its employees to be exclusive employees, unless the Non-Direct Guarantee and Direct Guarantee Lender has determined that the employee's other employment, including any self- employment, does not create a Conflict of Interest. (c) Reporting requirements. All Direct Guarantee Lenders must submit reports in accordance with Sec. 1005.903. Non-Direct Guarantee Lenders must submit required reports to their Sponsor, under this part or any requirements as prescribed by Section 184 Program Guidance. (d) Records retention. Records retention requirements are as follows: (1) Direct Guarantee Lenders must maintain an endorsement case binder for a period of three years beyond the date of satisfaction or maturity date of the Loan, whichever is sooner. However, where there is a payment of Claim, the endorsement case binder must be retained for a period of at least five years after the final Claim has been paid. Section 184 Program Guidance shall prescribe additional records retention time depending on the circumstances of the Claim. (2) All Direct Guarantee Lenders and Non-Direct Guarantee Lenders must retain personnel files of employees for one year beyond the employee's separation. (3) All Direct Guarantee Lenders and Non-Direct Guarantee Lenders must follow the applicable records retention requirements imposed by applicable Tribal, Federal, and State laws. (4) Direct Guarantee Lenders and Non-Direct Guarantee Lenders must maintain the quality control plan records for a period prescribed in Sec. 1005.217(b)(4). (e) Minimum level of lending on Trust Land. (1) Direct Guarantee Lenders must actively market, Originate, underwrite, and close Loans on Trust Land. A Sponsor must ensure its Sponsored Entities actively market and Originate Loans on Trust Land. HUD may impose a minimum level of lending on Trust Land, which may be adjusted periodically, through publication in the Federal Register. (2) Failure to meet the minimum level of lending on Trust Land may result in sanctions in accordance with Sec. Sec. 1005.905 and 1005.907. (3) HUD may grant exceptions for Direct Guarantee Lenders and Non- Direct Guarantee Lenders licensed and doing business in a State or States with limited Trust Lands. The process to request the exception will be prescribed by Section 184 Program Guidance. [[Page 785]] Sec. 1005.221 Business change reporting. (a) Within a timeframe as prescribed by Section 184 Program Guidance, Direct Guarantee Lenders shall provide written notification to HUD, in such a form as prescribed by Section 184 Program Guidance of: (1) All changes in the Direct Guarantee Lender or Sponsored Entity's legal structure, including, but not limited to, mergers, acquisitions, terminations, name, location, control of ownership, and character of business; (2) Staffing changes with senior leadership and Loan underwriters for Direct Guarantee Lenders and Sponsored Entities; and (3) Any sanctions by another supervising entity. (b) Failure to report changes within a reasonable timeframe prescribed in Section 184 Program Guidance may result in sanctions in accordance with Sec. Sec. 1005.905 and 1005.907. Sec. 1005.223 Direct Guarantee Lender Annual recertification requirements. (a) All Direct Guarantee Lenders are subject to annual recertification on a date and form as prescribed by Section 184 Program Guidance. (b) With each annual recertification, Direct Guarantee Lenders must submit updated contact information, continued eligibility documentation and other pertinent materials as prescribed by Section 184 Program Guidance, including but not limited to: (1) A certification that it has not been refused a license or sanctioned by any Tribe, State, or Federal entity or other governmental authority related to any lending activity; (2) A certification that the Direct Guarantee Lender is in good standing with any Tribe, State, or Federal entity in which it will perform Direct Guarantee Lender activities; and (3) Renewal documents and certification of continued eligibility from an authorizing entity listed in Sec. 1005.203. (4) Lenders approved under Sec. 1005.205 must submit documentation supporting continued eligibility as prescribed by Section 184 Program Guidance. (c) All Sponsored Entities shall comply with this requirement and provide the annual recertification documentation directly to their Sponsor in accordance with their sponsorship agreement. (d) Direct Guarantee Lenders must also submit the following in accordance with Section 184 Program Guidance: (1) A certification that the Direct Guarantee Lender continues to meet the direct guarantee program eligibility requirements in accordance with Sec. 1005.209; (2) A list of all Sponsored Entities with which the Direct Guarantee Lender has a sponsorship relationship, and a certification of their continued eligibility; and (3) All reports. (e) Direct Guarantee Lenders must retain documentation related to the continued eligibility of their Sponsored Entities for a period as prescribed by Section 184 Program Guidance. (f) Direct Guarantee Lenders may request an extension of the recertification deadline, but such a request must be presented to HUD at least 30 days before the recertification deadline. (g) HUD will review the annual recertification submission and may request any further information required to determine recertification. (h) HUD will provide written notification of approval to continue participation in the Section 184 Program or denial. A denial may be appealed pursuant to Sec. 1005.909. (1) If an annual recertification is not submitted by a reasonable deadline prescribed in Section 184 Program Guidance, HUD may subject the Direct Guarantee Lender to sanctions under Sec. 1005.907. (2) [Reserved] Sec. 1005.225 Program ineligibility. A Lender Applicant, Direct Guarantee Lender or Non-Direct Guarantee Lender may be deemed ineligible for Section 184 Program participation when HUD becomes aware that the entity or any officer, partner, director, principal, manager or supervisor, loan processor, loan underwriter, or loan originator of the entity was: (a) Suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under 2 CFR part 2424, or under similar procedures of any other Federal agency; (b) Indicted for, or have been convicted of, an offense that reflects adversely upon the integrity, competency, or fitness to meet the responsibilities of the Lender, Direct Guarantee Lender or Non- Direct Guarantee Lender to participate in the title I or title II programs of the National Housing Act, or Section 184 Program; (c) Found to have unresolved findings as a result of HUD or other governmental audit, investigation, or review; (d) Engaged in business practices that do not conform to generally accepted practices of prudent Lender Applicants, Direct or Non-Direct Guarantee Lenders or that demonstrate irresponsibility; (e) Convicted of, or have pled guilty or nolo contendere to, a felony related to participation in the real estate or mortgage loan industry during the 7-year period preceding the date of the application for licensing and registration, or at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust or money laundering; (f) In violation of provisions of the Secure and Fair Enforcement Mortgage Licensing [[Page 786]] Act of 2008 (12 U.S.C. 5101, et seq.) or any applicable provision of Tribal or State law; or (g) In violation of 12 U.S.C. 1715z-13a. Subpart C_Lending on Trust Land Sec. 1005.301 Tribal legal and administrative framework. (a) Tribal requirements. (1) A Tribe seeking to allow eligible Borrowers to place a mortgage lien on Trust Land under the Section 184 Program must apply to HUD for approval to participate in the program. (2) Tribes electing to make Trust Land available under the Section 184 Program must provide to HUD a legal and administrative framework for leasing, foreclosure, and eviction on Trust Land to protect the interests of the Borrower, Tribe, Direct Guarantee Lender, and HUD. (3) When Tribes are notified of the Borrower's default in accordance with Sec. 1005.501(j) or when the Tribe receives notice of Tribal right of first refusal pursuant to Sec. 1005.759, Tribes must assist, where practical, in facilitating loss mitigation and disposition, such as assisting with identifying potential purchasers or identifying Tribal members who may wish to assume the loan, encouraging Borrower to execute Lease-in-Lieu, and providing other general assistance to the Borrower. (4) Tribes must notify HUD in writing when the Tribe determines a property is vacant or abandoned and the property is not secured by the Servicer or HUD. (b) Legal and administrative framework. A Tribe may enact legal procedures through Tribal council resolution or any other recognized legislative action. These procedures must be legally enforceable and include the following requirements: (1) Foreclosure and assignment. When a Borrower is in default, and is unwilling or unable to successfully complete loss mitigation in accordance with subpart G of this part; and Servicer either completes First Legal Action against the Borrower, or assigns the loan to HUD after completing Tribal first right of refusal in accordance with Sec. 1005.759: (i) The Tribe must demonstrate that a foreclosure will be processed through the legal systems having jurisdiction over the Section 184 Guaranteed Loan. A foreclosure must be held in a court of competent jurisdiction, which includes Federal courts, when HUD forecloses on the property. (ii) Foreclosure ordinances must allow for the legal systems with jurisdiction to assign Borrower's property interest to HUD or Holder. (iii) Where applicable, if the Holder assigns the Section 184 Guaranteed Loan to HUD without initiating or completing the foreclosure process, or the property becomes vacant and abandoned during the loss mitigation or foreclosure process, the Tribe may assign the lease to HUD to facilitate disposition of the property, so long as the Tribe provides due process to the lessee in compliance with Tribal law. (2) Property disposition. Once a lease is vacated or reassigned, or the property interest has otherwise been conveyed to HUD or the Holder, the Tribe or the TDHE shall work with HUD or the Holder to sell the property to an eligible party. (3) Eviction. The Tribe must have a legal and administrative framework implementing eviction procedures, allowing for the expedited removal of the Borrower in default, all household residents, and any unauthorized occupants of the property. Eviction procedures must enable the Servicer or the Tribe to secure possession of the property. Eviction may be required upon: (i) The completion of a foreclosure; (ii) The involuntary termination of the lease; (iii) The reassignment of the lease or conveyance of the property interest to HUD or the Holder; or (iv) The sale of the property. (4) Lien priority. Section 184 Guaranteed Loans must be in a first lien position securing the property. (i) To ensure that each Section 184 Guaranteed Loan holds a first lien position, the Tribe must enact an ordinance that either: (A) Provides for the satisfaction of the Section 184 Guaranteed Loan before any and all other obligations; or (B) Follows State law to determine the priority of liens against the property. If a Tribal jurisdiction spans two or more states, the State in which the property is located is the applicable State law. (ii) For lien to be considered valid on Trust Land, the lien must be: (A) Approved by the Tribe, and BIA as applicable; and (B) Recorded by the Tribe and/or BIA, as applicable. (5) Lease provisions for Trust Land. Where applicable, the lease provisions for Trust Land must meet the following requirements: (i) Tribes may use a HUD model lease for Section 184 Guaranteed Loan lending on Trust Land. The Tribe may make modifications to the HUD model lease, with the approval of HUD and, as applicable, BIA. (ii) Tribes may draft their own lease in compliance with Federal requirements and contain mandatory lease terms and language as prescribed in Section 184 Program Guidance, with approval of HUD and, as applicable, BIA. At a minimum the lease must: (A) Identify lessor; (B) Identify the lessee; (C) Provide a legal description of the land and identify the property address covered by the lease; [[Page 787]] (D) The lease must have a minimum term of 50 years unless an extended term is approved by the Secretary. For refinances or lease transfers the lease must have a remaining term which exceeds the maturity date of the Loan by a minimum of ten years, or other period as prescribed by Section 184 Program Guidance. (E) The lease must be executed by all interested parties to be enforceable; (F) The Tribe shall require HUD consent for any lease termination or assignment of the lease when the Section 184 Guaranteed Loan is secured by the property. (G)(1) The lease must contain the following provision: ``In the case of a default on a Section 184 Guaranteed Loan: (i) The lessee may assign the lease and deliver possession of the leased premises, including any improvements thereon, to HUD; or (ii) The lessor may assign the lease and deliver possession of the leased premises, including any improvements thereon, to HUD when the Tribe has provided due process to lessee in compliance with Tribal law. (2) HUD may transfer this lease and the leased premises to a successor lessee if the successor lessee is another member of the Tribe or Tribal entity, as approved by the Tribe.'' (H) Lease language as prescribed by Section 184 Program Guidance. (I) The lease must also provide that in the event of foreclosure, the lease will not be subject to any forfeiture or reversion and will not be otherwise subject to termination. Sec. 1005.303 Tribal application. A Tribe shall submit an application on a form prescribed by HUD. The application must include a copy of the Tribe's foreclosure, eviction, lease, priority lien ordinances, all cross-referenced ordinances in those sections, and any other documents in accordance with Section 184 Program Guidance. Sec. 1005.305 Approval of Tribal application. HUD shall review applications under Sec. 1005.303 and where all requirements of Sec. 1005.301 are met, HUD shall provide written notification of the approval of the Tribe to participate in the Section 184 Program. If HUD determines the application is incomplete, or the documents submitted do not comply with the requirements of this subpart or any process prescribed in Section 184 Program Guidance, HUD will work with the Tribe to cure the deficiencies before there is a denial of the application. Sec. 1005.307 Tribal annual recertification. A Tribe shall recertify annually to HUD whether it continues to meet the requirements of this subpart, on a form and by a deadline prescribed by Section 184 Program Guidance. Recertification shall include Tribal certification of no changes to the Tribe's foreclosure, eviction, lease, and lien priority ordinances. The Tribe shall provide any updated contact information and similar information that may be required under Section 184 Program Guidance. Sec. 1005.309 Tribal duty to report proposed changes and actual changes. Based on the timeframe as prescribed by Section 184 Program Guidance, the Tribe must notify HUD of any proposed changes in the Tribe's foreclosure, eviction, lease, and lien priority ordinances or contact information. Tribes shall obtain HUD approval of the changes in the foreclosure, eviction, lease, and lien priority ordinances. HUD will provide written notification to the Tribe of HUD's review of the proposed ordinance changes and advise the Tribe whether the updated documents meet the requirements of this subpart. Sec. 1005.311 HUD notification of any lease default. In cases where the lessee is in default under the lease for any reason, the lessor shall provide written notification to HUD within 30 days of the lease default. Sec. 1005.313 Tribal reporting requirements. The Tribe shall provide accurate reports and certifications to HUD, as may be prescribed by Section 184 Program Guidance. Subpart D_Underwriting Eligible Borrowers Sec. 1005.401 Eligible Borrowers. (a) Eligible Borrowers. Eligible Borrowers are Indian Families, Tribes, or TDHEs. (b) Documentation. Indian Family Borrowers must document their status as American Indian or Alaska Native through evidence as prescribed by Section 184 Program Guidance. (c) Limitation on the number of loans. An Indian Family Borrower is limited to one Section 184 Guaranteed Loan, for primary residence, at a time unless the Indian Family Borrower is a non-occupant co-Borrower on one other Section 184 Guaranteed Loan. An Indian Family Borrower and/or non-occupant co-Borrower must meet all other applicable requirements of this subpart and any guidance provided in Section 184 Program Guidance. Sec. 1005.403 Principal Residence. (a) Principal Residence. Means the dwelling where the Indian Family Borrower maintains as a permanent place of abode. An Indian Family Borrower may have only one Principal Residence at any one time. [[Page 788]] (b) Occupancy requirement. An Indian Family Borrower must occupy the property as a Principal Residence. Borrowers who are a TDHE or a Tribe do not need to occupy the property as a Principal Residence and are not subject to the occupancy requirement. (c) Non-occupant co-Borrower. A co-Borrower who does not occupy the property as a principal resident is permitted and is not subject to paragraphs (a) and (b) of this section. A non-occupant co-Borrower must be related by blood, or an unrelated individual who can document evidence of a family-type, longstanding, and substantial relationship not arising out of the loan transaction. A non-occupant co-Borrower must meet all other applicable requirements of this subpart and any requirements as may be established in Section 184 Program Guidance. Sec. 1005.405 Borrower residency status. (a) An eligible Borrower who is an Indian must be: (1) A U.S. citizen; (2) A lawful permanent resident alien; or (3) A non-permanent resident alien. (b) Documentation must be provided to the Direct Guarantee Lender to support lawful residency status as defined in the Immigration and Nationality Act, codified at 8 U.S.C. 1101, et seq. Sec. 1005.407 Relationship of income to loan payments. (a) Adequacy of Borrower gross income. (1) All Borrowers must establish, in accordance with Section 184 Program Guidance, that their income is and will be adequate to meet: (i) The periodic payments required by the loan to be guaranteed by the Section 184 Program; and (ii) Other long-term obligations. (2) In cases where there is a non-occupant Co-Borrower, the occupying Borrower must meet a minimum qualifying threshold, in accordance with Section 184 Program Guidance. (b) Non-discrimination. Determinations of adequacy of Borrower income under this section shall be made in a uniform manner without regard to age, race, color, national origin, religion, sex (including gender identity and sexual orientation), familial status, disability, marital status, source of income of the Borrower, location of the property. Sec. 1005.409 Credit standing. (a) A Borrower must have a general credit standing satisfactory to HUD. A Direct Guarantee Lender must not use a Borrower's credit score when evaluating the Borrower's credit worthiness. The Direct Guarantee Lender must analyze the Borrower's credit history and payment pattern to determine credit worthiness. (b) If a Borrower had a previous default on a Section 184 Guaranteed Loan which resulted in a Claim payment by HUD, the Borrower shall be subject to a 7-year waiting period or other period as may be prescribed by Section 184 Program Guidance. Sec. 1005.411 Disclosure and verification of Social Security and Employer Identification Numbers or Tax Identification Number. All Borrowers must meet applicable requirements for the disclosure and verification of Social Security, Employer Identification Numbers, or Tax Identification Numbers. Eligible Properties Sec. 1005.413 Acceptable title. To be considered acceptable title, a Section 184 Guaranteed Loan must be secured by an interest in real estate held in fee simple or other property interest on Trust Land. Where the title evidences a lease that is used in conjunction with the Section 184 Guaranteed Loan on Trust Land, the lease must comply with relevant provisions of Sec. 1005.301. Sec. 1005.415 Sale of property. (a) Owner of Record requirement. The property must be or have been purchased from the Owner of Record and the transaction may not involve or had not involved any sale or assignment of the sales contract. (b) Supporting documentation. The Direct Guarantee Lender shall obtain and submit to HUD documentation verifying that the seller is the Owner of Record as part of the application for a loan guarantee under the Section 184 Program. Documentation must conform with the requirements set out in Section 184 Program Guidance. This documentation may include, but is not limited to, a property ownership history report from the State or local government, a copy of the recorded deed or other HUD approved document issued by the Tribe, as provided by Section 184 Program Guidance and the document evidences the property interest rights, as permitted by this subpart from the seller, or other documentation (such as a copy of a property tax bill, title commitment, or binder) demonstrating the seller's ownership. (c) Time restrictions on re-sales--(1) General. The eligibility of a property for a Loan guaranteed by HUD is dependent on the time that has elapsed between the date the seller acquired the property (based upon the date of settlement) and the date of execution of the sales contract that will result in the HUD guarantee (the re-sale date). The Direct Guarantee Lender shall obtain documentation verifying compliance with the time restrictions described in this paragraph and must submit this documentation to HUD as part of the application for the Section 184 Guaranteed Loan, in accordance with Sec. 1005.501. [[Page 789]] (2) Re-sales occurring 90 days or less following acquisition. If the re-sale date is 90 days or less following the date of acquisition by the seller, the property is not eligible under the Section 184 Program. (3) Re-sales occurring between 91 days and 180 days following acquisition. (i) If the re-sale date is between 91 days and 180 days following acquisition by the seller, the property is generally eligible under the Section 184 Program. (ii) However, HUD will require that the Direct Guarantee Lender obtain additional documentation if the re-sale price is 100 percent over the purchase price. Such documentation must include a second appraisal from a different appraiser. The Direct Guarantee Lender may also document its Loan file to support the increased value by establishing that the increased value results from the rehabilitation of the property. (iii) Additional documentation may be required, as prescribed by Section 184 Program Guidance. (4) Authority to address property re-sales occurring between 181 days and 12 months following acquisition. (i) If the re-sale date is more than 181 days after the date of acquisition by the seller, but before the end of the twelfth month after the date of acquisition, the property is eligible under the Section 184 Program. (ii) However, HUD may require that the Direct Guarantee Lender provide additional documentation to support the re-sale value of the property if the re-sale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months (as evidenced by the contract of sale). At HUD's discretion, such documentation must include, but is not limited to, a second appraisal from a different appraiser. HUD may exclude re-sales of less than a specific dollar amount from the additional value documentation requirements. (iii) If the additional value documentation supports a value of the property that is more than 5 percent lower than the value supported by the first appraisal, the lower value will be used to calculate the maximum principal loan amount under Sec. 1005.443. Otherwise, the value supported by the first appraisal will be used to calculate the maximum principal loan amount. (iv) Additional value documentation may be prescribed by Section 184 Program Guidance. (5) Re-sales occurring more than 12 months following acquisition. If the re-sale date is more than 12 months following the date of acquisition by the seller, the property is eligible under the Section 184 Program. (d) Exceptions to the time restrictions on sales. The time restrictions on sales described in paragraph (b) of this section do not apply to: (1) Sales by HUD of real estate owned (REO) properties under 24 CFR part 291 and of single-family assets in revitalization areas pursuant to section 204 of the National Housing Act (12 U.S.C. 1710); (2) Sales by an agency of the United States Government of REO single family properties pursuant to programs operated by such agencies; (3) Sales of properties by Tribes, TDHEs, State, or local governments, or Eligible Nonprofit Organizations approved to purchase HUD REO single family properties at a discount with resale restrictions; (4) Sales of properties that were acquired by the sellers by death, devise, or intestacy; (5) Sales of properties purchased by an employer or relocation agency in connection with the relocation of an employee; (6) Sales of properties by Tribes, TDHEs, State and local government agencies; and (7) Only upon announcement by HUD through issuance of a notice, sales of properties located in areas designated by the President as federally declared disaster areas. The notice will specify how long the exception will be in effect. (8) HUD may approve other exceptions on a case-by-case basis. Sec. 1005.417 Location of property. At the time a loan is guaranteed, the property must be for residential use under Tribal, State, or local law and be located within a Section 184 Approved Program Area. Sec. 1005.419 Requirements for standard housing. (a) General standards. Each dwelling unit located on a property guaranteed under the Section 184 Program must: (1) Be decent, safe, sanitary, and modest in size and design; (2) Conform with International Building Code, applicable general construction standards for the region, or other code as prescribed by Section 184 Program Guidance; (3) Contain a heating system that: (i) Has the capacity to maintain a minimum temperature in the dwelling of 65 degrees Fahrenheit during the coldest weather in the area; (ii) Is safe to operate and maintain; (iii) Delivers a uniform distribution of heat; and (iv) Conforms to any applicable Tribal heating code, or if there is no applicable Tribal code, an appropriate local, State, or International Building Code, or other code as prescribed by Section 184 Program Guidance. (4) Contains a plumbing system that: (i) Uses a properly installed system of piping; (ii) Includes a kitchen sink and partitional bathroom with lavatory, toilet, and bath or shower; and (iii) Uses water supply, plumbing, and sewage disposal systems that conform to any applicable Tribal building code or, if there is [[Page 790]] no applicable Tribal code, the minimum building standards established by the appropriate local or State code, or the International Building Code, or other code as prescribed by Section 184 Program Guidance; (5) Contain an electrical system using wiring and equipment properly installed to safely supply electrical energy for adequate lighting and for operation of appliances that conforms to any applicable Tribal code or, if there is no applicable Tribal code, an appropriate local, State, or International Building Code, or other code as prescribed by Section 184 Program Guidance; (6) Meets minimum square footage requirements and be not less than: (i) 570 square feet in size, if designed for a family of not more than 4 persons; (ii) 850 square feet in size, if designed for a family of not less than 5 and not more than 7 persons; (iii) 1020 square feet in size, if designed for a family of not less than 8 persons; or (iv) Current locally adopted standards for size of dwelling units, documented by the Direct Guarantee Lender. (v) Upon the written request of a Tribe, or TDHE, HUD may waive the minimum square footage requirements under paragraphs (a)(6)(i) through (iv) of this section. (7) Conform with the energy performance requirements for new construction established by HUD under section 526(a) of the National Housing Act (12 U.S.C. 1735f-4(a)). (b) Additional requirements. HUD may prescribe any additional requirements to permit the use of various designs and materials in housing acquired under this part. (c) One to four dwelling unit properties. Properties containing one to four dwelling units: (1) Must meet local zoning requirements; (2) For 2-4 dwelling unit properties, units may be attached or detached; and (3) Must have all dwelling unit(s) located on the property and included in the parcel legal description recorded under the loan. (d) Lead-based paint. The relevant requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at 24 CFR part 35, subparts A, B, H, J, K, M, and R shall apply. (e) Environmental review procedures. (1) The regulations in 24 CFR 1000.20 apply to an environmental review for Trust Land and for fee land within an Indian reservation, and on fee land owned by the Indian Tribe outside of the Tribe's Indian reservation boundaries, in connection with a Loan guaranteed under this part. That section permits a Tribe to choose to assume environmental review responsibility. (2) Before HUD issues a commitment to guarantee any loan, or before HUD guarantees a loan if there is no commitment, the Tribe or HUD must comply with environmental review procedures to the extent applicable under 24 CFR part 58 or 50, as appropriate. (3) If the Loan involves proposed or new construction, HUD will require the Direct Guarantee Lender to submit a signed Builder's Certification of Plans, Specifications and Site (Builder's Certification). The Builder's Certification must be in a form prescribed by Section 184 Program Guidance and must cover: (i) Flood hazards; (ii) Noise; (iii) Explosive and flammable materials storage hazards; (iv) Runway clear zones/clear zones; (v) Toxic waste hazards; (vi) Other foreseeable hazards or adverse conditions (i.e., rock formations, unstable soils or slopes, high ground water levels, inadequate surface drainage, springs, etc.) that may affect the health and safety of the occupants or the structural soundness of the improvements. (4) The Builder's Certification must be provided to the appraiser for reference before the performance of an appraisal on the property. (f) Flood insurance--(1) Special Flood Hazard Areas. A property is not eligible for a Section 184 loan guarantee if a residential building and related improvements to the property are located within a Special Flood Hazard Area (SFHA) designated by a FEMA Flood Insurance Rate Map unless insurance under the National Flood Insurance Program (NFIP), or notwithstanding 24 CFR 58.6(a), private flood insurance in lieu of NFIP insurance is secured for the property. (2) Eligibility for new construction in SFHAs. If any portion of the dwelling, related structures or equipment essential to the value of the property and subject to flood damage is located within an SFHA, the property is not eligible for a Section 184 Guaranteed Loan unless the Direct Guarantee Lender obtains from FEMA a final Letter of Map Amendment (LOMA) or final Letter of Map Revision (LOMR) that removes the property from the SFHA; or obtains a FEMA National Flood Insurance Program Elevation Certificate (FEMA Form 086-0-33) prepared by a licensed engineer or surveyor. The elevation certificate must document that the lowest floor including the basement of the residential building, and all related improvements/equipment essential to the value of the property, is built at or above the 100-year flood elevation in compliance with the NFIP criteria, and flood insurance must be obtained., notwithstanding 24 CFR 58.6(a), (3) Required flood insurance amount. Where flood insurance is required under paragraph (f)(1) of this section, flood insurance, whether NFIP insurance or private flood insurance in lieu of NFIP, must be maintained for the [[Page 791]] life of the Section 184 Guaranteed Loan in an amount that is not less than the lessor of: (i) The project cost less the estimated land cost; (ii) The outstanding principal balance of the loan; or, (iii) For NFIP insurance only, the maximum amount available with respect to the property improvements; (4) Required documentation. The Direct Guarantee Lender must obtain a Life of Loan Flood Certification for all Properties. If applicable, the Direct Guarantee Lender must provide all eligibility documentation obtained under paragraph (e)(2) of this section. (g) Restrictions on property within Coastal Barrier Resources System. In accordance with the Coastal Barrier Resources Act, a property is not eligible for a Section 184 Loan Guarantee if the improvements are or are proposed to be located within the Coastal Barrier Resources System. (h) Airport hazards--(1) Existing Construction. If a property is Existing Construction and is located within a Runway Clear Zone (also known as a Runway Protection Zone) at a civil airport or within a Clear Zone at a military airfield, the Direct Guarantee Lender must obtain a Borrower's acknowledgement of the hazard. (2) New Construction. If a New Construction property is located within a Runway Clear Zone (also known as a Runway Protection Zone) at a civil airport or within a Clear Zone at a military airfield, the Direct Guarantee Lender must reject the property for loan guarantee. Properties located in Accident Potential Zone 1 (APZ 1) at a military airfield may be eligible for a Section 184 loan guarantee provided that the Direct Guarantee Lender determines that the property complies with Department of Defense guidelines. Sec. 1005.421 Certification of appraisal amount. A Section 184 Guaranteed Loan must be accompanied by a sales contract satisfactory to HUD, executed by the seller, whereby the seller agrees that before any sale of the property, the seller will deliver to the purchaser of the property a certification of the appraisal, in a form satisfactory to HUD, setting forth the amount of the appraised value of the property. Sec. 1005.423 Legal Restrictions on Conveyance. (a) Legal Restrictions on Conveyance means any provision in any legal instrument, law, or regulation applicable to the Borrower or the mortgaged property, including but not limited to a lease, deed, sales contract, declaration of covenants, declaration of condominium, option, right of first refusal, will, or trust agreement, that attempts to cause a conveyance (including a lease) made by the Borrower to: (1) Be void or voidable by a third party; (2) Be the basis of contractual liability of the Borrower for breach of an agreement not to convey, including rights of first refusal, pre- emptive rights or options related to Borrower efforts to convey; (3) Terminate or subject to termination all or a part of the interest held by the Borrower in the property if a conveyance is attempted; (4) Be subject to the consent of a third party; (5) Be subject to limits on the amount of sales proceeds retainable by the seller; or (6) Be grounds for acceleration of the Guaranteed Loan or increase in the interest rate. (b) Section 184 Guaranteed Loans shall not be subject to any Legal Restrictions on Conveyance, except for restrictions in paragraphs (b)(1) through (4) of this section: (1) A lease or any other legal document that restricts the assignment of interest in properties held in trust or otherwise restricted to an eligible Indian Family. (2) A mortgage funded through tax-exempt bond financing and includes a due-on-sale provision in a form approved by HUD that permits the Direct Guarantee Lender to accelerate a mortgage that no longer meets Federal requirements for tax-exempt bond financing or for other reasons acceptable to HUD. A mortgage funded through tax-exempt bond financing shall comply with all form requirements prescribed under this subpart and shall contain no other provisions designed to enforce compliance with Federal or State requirements for tax-exempt bond financing. (3) A mortgaged property subject to protective covenants which restrict occupancy by, or transfer to, persons of a defined population if: (i) The restrictions do not have an undue effect on marketability as determined in the original plan. (ii) The restrictions do not constitute illegal discrimination and are consistent with the Fair Housing Act and all other applicable nondiscrimination laws under Tribal, Federal, State, or local law, where applicable. (4) HUD shall require that the previously approved restrictions automatically terminate if the lease or title to the mortgaged property is transferred by foreclosure, deed-in-lieu/lease-in-lieu of foreclosure, or if the loan is assigned to HUD. Sec. 1005.425 Rental properties. (a) When a Borrower is an Indian Family. A Section 184 Guaranteed Loan may be used to purchase, construct, rehabilitate, or refinance a property, which may contain up to four dwelling units. The Borrower must occupy one unit on the property as a Principal Residence and may rent the additional units. [[Page 792]] (b) When the Borrower is a Tribe or TDHE. There is no limit to the number of properties a Tribe or TDHE may purchase or own with a Section 184 Guaranteed Loan(s) on or off Trust Land. However, the Tribe or TDHE must meet all applicable Section 184 program requirements. Sec. 1005.427 Refinancing. (a) Refinance eligibility. HUD may permit a Borrower to refinance any qualified mortgage, including an existing Section 184 Guaranteed Loan, so long as the Borrower and property meet all Section 184 Program requirements. (b) Types of refinances. HUD may guarantee a Rate and Term refinance, a Streamline refinance, or a Cash-Out refinance, consistent with paragraphs (c) through (f) of this section. (c) General requirements. All types of refinances are subject to the following requirements: (1) The term of the refinancing may not exceed a term of 30 years. (2) The Borrower must have a payment history on the existing mortgage that is acceptable to HUD. (3) The Direct Guarantee Lender may not require a minimum principal amount to be outstanding on the loan secured by the existing mortgage. (4) If an Up-Front Loan Guarantee Fee was financed as part of the existing Section 184 Guaranteed Loan, no refund will be given. However, the maximum amount of the refinancing loan computed in accordance with Sec. 1005.443 may be increased by the amount of the Up-Front Loan Guarantee Fee associated with the new refinancing loan and exceed the applicable Section 184 Guaranteed Loan limit as established by HUD for an area pursuant to Sec. 1005.441. (5) The new loan must meet all other applicable Section 184 requirements, including maximum loan to value ratios, as prescribed by Section 184 Program Guidance. (d) Rate and Term Refinance Transaction. (1) Rate and term refinance is the refinancing of an existing mortgage for the purpose of changing the interest rate or term, or both, of a loan without advancing new funds on the loan, with the exception of allowable closing costs. (2) A Rate and Term Refinance Transaction must meet the following requirements: (i) The new loan must be in an amount that does not exceed the lesser of the original principal amount of the existing mortgage; or the sum of the unpaid principal balance of the existing mortgage plus loan closing charges and allowable fees approved by HUD. (ii) The new loan must result in a reduction in regular monthly payments by the Borrower, except when refinancing a mortgage for a shorter term will result in an increase in the Borrower's regular monthly payments. (iii) The new Loan is not subject to paragraphs (d)(2)(i) and (ii) of this section for an existing mortgage used to construct the property and where the property has been completed for less than one year. The new loan must be in an amount not to exceed the unpaid principal balance plus loan closing charges and allowable fees approved by HUD, plus, at Borrower's option, additional construction costs paid in cash by the Borrower, that were not included in the original construction contract. (e) Streamline Refinance Transaction. Streamline Refinance Transaction refers to the refinance of an existing Section 184 Guaranteed Loan requiring limited Borrower credit documentation and underwriting. (1) The new loan must be in an amount that does not exceed the unpaid principal balance of the existing Section 184 Guaranteed Loan. (2) The new loan with an appraisal may be in the amount equal to the unpaid principal balance of the existing mortgage plus Loan closing charges and allowable fees approved by HUD. The new loan must be subject to an appraisal. (f) Cash-out refinance transaction. (1) A Cash-out refinance transaction is when the new Loan is made for an amount larger than the existing mortgage's unpaid principal balance, utilizing the property's equity. (2) A Cash-out refinance Loan amount cannot exceed a maximum loan to value ratio, as established by HUD. (3) A Borrower may elect to receive a portion of equity in the form of cash in an amount up to a maximum allowed amount as prescribed by Section 184 Program Guidance. (4) All cash advances, except cash amounts to the Borrower, must be used for approved purposes in accordance with HUD and BIA requirements, and must be supported by verified documentation. (5) The Cash-out refinance must meet all other applicable Section 184 Program requirements. Sec. 1005.429 Eligibility of Loans covering manufactured homes. A Loan covering a manufactured home (as defined in 24 CFR part 3280), shall be eligible for a Section 184 Guaranteed Loan when the following requirements have been met: (a) For manufactured homes located on a fee simple property. (1) A manufactured home, as erected on the property, must be installed in accordance with 24 CFR part 3286; conform with property standards under Sec. 1005.419; and shall have been constructed in accordance with 24 CFR part 3280, as evidenced by the certification label. (2) The Loan shall cover the manufactured home(s) and site, shall constitute a loan on [[Page 793]] a property, and classified and taxed as real estate, as applicable. (3) In the case of a manufactured home which has not been permanently erected on a site for more than one year prior to the date of the application for the Loan Guarantee Certificate: (i) A manufactured home shall be erected on a site-built permanent foundation and shall be permanently attached thereto by anchoring devices adequate for all loads in accordance with 24 CFR part 3286. The towing hitch or running gear, which includes axles, brakes, wheels, and other parts of the chassis that operate only during transportation, shall have been removed. The finished grade level beneath the manufactured home shall be at least two feet above the 100-year return frequency flood elevation. The site, site improvements, and all other features of the property not addressed by the Manufactured Home Construction and Safety Standards shall meet or exceed applicable requirements of the Minimum Property Standards (MPS). (ii) The space beneath a manufactured home shall be enclosed by continuous foundation-type construction designed to resist all forces to which it is subject without transmitting forces to the building superstructure. The enclosure shall be adequately secured to the perimeter of the manufactured home and be constructed of materials that conform to MPS requirements for foundations. (iii) A manufactured home shall be braced and stiffened before it leaves the factory to resist racking and potential damage during transportation. (iv) Section 1005.433 is modified to the extent provided in this paragraph. Applications relating to the guarantee of loans under this paragraph (a) must be accompanied by an agreement in a form satisfactory to HUD executed by the seller or manufacturer or such other person as HUD may require, agreeing that in the event of any sale or conveyance of the property within a period of one year beginning with the date of initial occupancy, the seller, manufacturer, or such other person will, at the time of such sale or conveyance, deliver to the purchaser or owner of such property the manufacturer's warranty on a form prescribed by HUD. This warranty shall provide that the manufacturer's warranty is in addition to and not in derogation of all other rights and remedies the purchaser or owner may have, and a warranty in form satisfactory to HUD warranting that the manufactured home, the foundation, positioning, and anchoring of the manufactured home to its permanent foundation, and all site improvements are constructed in substantial conformity with the plans and specifications (including amendments thereof or changes and variations therein which have been approved in writing by HUD) on which HUD has based its valuation of the property. The warranty shall also expressly state that the manufactured home sustained no hidden damage during transportation, and if the manufactured home is a double-wide, that the sections were properly joined and sealed. The warranty must provide that upon the sale or conveyance of the property and delivery of the warranty, the seller, builder, or such other person will promptly furnish HUD with a conformed copy of the warranty establishing by the purchaser's receipt thereon that the original warranty has been delivered to the purchaser in accordance with this section. (4) In the case of a manufactured home which has been permanently erected on a site for more than one year prior to the date of the application for the Section 184 Guaranteed Loan: (i) A manufactured home shall be permanently anchored to and supported by permanent footings and shall have permanently installed utilities that are protected from freezing. The space beneath the manufactured home shall be a properly enclosed crawl space. (ii) The site, site improvements, and all other features of the property not addressed by 24 CFR parts 3280 and 3286 shall meet or exceed HUD requirements. The finished grade level beneath the manufactured home shall be at or above the 100-year return frequency flood elevation. (b) For manufactured homes located on Trust Land. Manufactured homes on Trust Land shall meet manufactured home installation standards pursuant to Tribal laws, if any. In the absence of Tribal laws, the requirements in paragraphs (a)(1), (3), and (4) of this section shall apply and other such requirements as established by Section 184 Program Guidance. Sec. 1005.431 Acceptance of individual residential water purification. If a property does not have access to a continuing supply of safe and potable water as part of its plumbing system without the use of a water purification system, the requirements of this section apply. The Direct Guarantee Lender must provide appropriate documentation with the submission for a Section 184 Guaranteed Loan to address each of the requirements of this section. (a) Equipment. Water purification equipment must be approved by a nationally recognized testing laboratory acceptable to Tribal, State, or local health authority. (b) Certification by Tribal, State, or local health authority. A Tribal, State, or local health authority certification must be submitted to HUD, which certifies that a point-of entry or point-of-use water purification system is used for the water supply, the treatment equipment meets the requirements of the Tribal, State, or local health authority, and has been determined to meet [[Page 794]] Tribal, State, or local health authority quality standards for drinking water. If neither Tribal, State, nor local health authority standards are applicable, then quality shall be determined in accordance with standards set by the Environmental Protection Agency (EPA) pursuant to the Safe Drinking Water Act. (EPA standards are prescribed in the National Primary Drinking Water requirements, 40 CFR parts 141 and 142.) (c) Borrower notices and certification. (1) The prospective Borrower must have received written notification, when the Borrower signs a sales contract, that the property does not have access to a continuing supply of safe and potable water without the use of a water purification system to remain safe and acceptable for human consumption. (2) Prior to final ratification of the sales contract, the Borrower must have received: (i) A water safety report identifying specific contaminants in the water supply serving the property, and the related health hazard arising from the presence of those contaminants. (ii) A written good faith estimate of the maintenance and replacement costs of the equipment necessary to assure continuing safe drinking water. (3) The prospective Borrower must sign a certification, acknowledging the required notices have been received by the Borrower, in the form prescribed by Section 184 Program Guidance, at the time the application for mortgage credit approval is signed by the Direct Guarantee Lender. The required certification must be submitted to HUD with the request for the Loan Guarantee Certificate. Sec. 1005.433 Builder warranty. (a) Applications relating to proposed construction must be accompanied by an agreement in a form satisfactory to HUD, executed by the seller or builder or such other person as HUD may require, and agreeing that in the event of any sale or conveyance of the property, within a period of one year beginning with the date of initial occupancy, the seller, builder, or such other person will, at the time of such sale or conveyance, deliver to the purchaser or owner of such property a warranty in a form satisfactory to HUD, warranting that the property is constructed in substantial conformity with the plans and specifications (including amendments thereof or changes and variations therein which have been approved in writing by HUD) on which HUD has based on the valuation of the property. (b) Such agreement must provide that upon the sale or conveyance of the property and delivery of the warranty, the seller, builder, or such other person will promptly furnish HUD with a confirmed copy of the warranty, establishing by the purchaser's receipt thereon that the original warranty has been delivered to the purchaser in accordance with this section. Eligible Loans Sec. 1005.435 Eligible collateral. A Section 184 Guaranteed Loan may be secured by any collateral authorized under existing Federal law or applicable State or Tribal law. The collateral must be sufficient to cover the amount of the loan, as determined by the Direct Guarantee Lender and approved by HUD. Improvements on Trust Lands may be considered as eligible collateral. Trust Land cannot be considered as part of the eligible collateral. Sec. 1005.437 Loan provisions. (a) Loan form. (1) The Loan shall be in a form meeting the requirements of HUD. HUD may prescribe loan closing documents. For each case in which HUD does not prescribe loan closing documents, HUD shall require specific language in the loan which shall be uniform for every loan. HUD may also prescribe the language or substance of additional provisions for all loans, as well as the language or substance of additional provisions for use only in particular jurisdictions. (2) Each Loan shall also contain any provisions necessary to create a valid and enforceable security interest under Tribal law or the laws of the jurisdiction in which the property is located. (b) Loan multiples. A Loan, in whole dollars, shall be in an amount not to exceed the maximum principal loan amount (as calculated under Sec. 1005.443) for the area where the property is located. (c) Payments. The Loan payments shall: (1) Be due on the first of the month; (2) Contain complete Amortization provisions in accordance with Sec. 1005.453 and an Amortization period not in excess of the term of the loan; and (3) Provide for payments to principal and interest to begin no later than the first day of the month, 60 days after the date the loan is executed. For closings taking place within the first seven days of the month, interest credit is acceptable. (d) Maturity. The Loan shall have a repayment term of not more than the maximum period as approved by HUD and fully amortized. (e) Property standards. The Loan must be a first lien upon the property that conforms with the requirements for standard housing under Sec. 1005.419. (f) Disbursement. The entire principal amount of the Loan must have been disbursed to the Borrower or to the Borrower's creditors for the Borrower's account and with the Borrower's consent. (g) Disbursement for construction advances. HUD may guarantee loans from which advances will be made during construction [[Page 795]] when all applicable Section 184 Program requirements are met and all the following conditions are satisfied: (1) The Direct Guarantee Lender and Borrower execute a building Loan agreement, in the form prescribed by Section 184 Program Guidance, setting forth the terms and conditions under which advances will be made. (2) The advances may be made only as provided in the building loan agreement. (3) The principal amount of the loan is held by the Direct Guarantee Lender in an interest-bearing account, trust, or escrow for the benefit of the Borrower, pending advancement to the Borrower or Borrower's creditors as provided in the building loan agreement; (4) The loan shall bear interest on the amount advanced to the Borrower or the Borrower's creditors and on the amount held in an account or trust for the benefit of the Borrower. (h) Changes to the Loan Agreement. Notwithstanding paragraph (g)(2) of this section, changes to the building loan Agreement must be approved and documented by the Direct Guarantee Lender prior to the construction advance. (i) Documentation. Direct Guarantee Lender must submit a construction completion package to HUD, as prescribed in Section 184 Program guidance. (j) Prepayment privilege. The Loan must contain a provision permitting the Borrower to prepay the Loan in whole or in part at any time. The Loan may not provide for the payment of any fee or penalty on account of such prepayment. Sec. 1005.439 Loan lien. (a) First lien. A Borrower must establish that, after the loan offered for guarantee has been recorded, the property will be free and clear of all liens other than such loan, and that there will not be outstanding any other unpaid obligations contracted in connection with the loan transaction or the purchase of the property, except obligations that are secured by property or collateral owned by the Borrower independently of the property. (b) Junior lien. The property may be subject to a junior lien held by a Tribe, Direct Guarantee Lender, TDHE, Federal, State, local government, or an Eligible Nonprofit Organization. Where applicable, a junior lien when intended to be utilized in conjunction with a Section 184 loan, must be evaluated in the Section 184 underwriting process by the Direct Guarantee underwriter in accordance with Section 184 Program Guidance. In cases where a junior lien is recorded after the Section 184 Loan Guarantee Certificate is issued, the junior lien must comply with this section. (1) Periodic payments, if any, shall be collected monthly and be substantially the same; (2) The monthly Loan payments for the Section 184 Guaranteed Loan and the junior lien shall not exceed the Borrower's reasonable ability to pay, as determined by HUD; (3) The sum of the principal amount of the Section 184 Guaranteed Loan and the junior lien shall not exceed the loan-to-value limitation applicable to the Section 184 Program, and shall not exceed the loan limit for the area, except as otherwise permitted by HUD; (4) The repayment terms shall not provide for a balloon payment before ten years unless approved by HUD; (5) The junior lien must become due and payable on sale or refinancing of the secured property covered by the Section 184 Guaranteed Loan, unless otherwise approved by HUD; and (6) The junior lien shall contain a provision permitting the Borrower to prepay the junior lien in whole or in part at any time and shall not require a prepayment penalty. (c) Junior liens to reduce Borrower monthly payments. With prior HUD acceptance, the property may be subject to a junior lien advanced to reduce the Borrower's monthly payments on the Section 184 Guaranteed Loan following the date it is guaranteed, if the junior lien meets the following requirements: (1) The junior lien shall not provide for any payment of principal or interest until the property securing the junior lien is sold or the Section 184 Guaranteed Loan is refinanced, at which time the junior lien shall become due and payable. (2) The junior lien shall not provide for any payment of principal or interest so long as the occupancy requirements are met; and, where applicable, shall provide for forgiveness of the junior lien amount at the end of the term of the junior lien. (d) Junior liens related to tax-exempt bond financing and low-income housing tax credits. HUD approval shall be required when Borrower seeks to encumber property with a junior lien pursuant to Sec. 1005.423(b). Sec. 1005.441 Section 184 Guaranteed Loan limit. The Section 184 Guaranteed Loan limit is the level set by HUD for the Section 184 Approved Program Area and is based upon the location of the property. The limit that is in effect on the date the Section 184 Program case number is issued in accordance with Sec. 1005.445 shall apply, regardless of the closing date. The limit shall be revised periodically by HUD and published in Section 184 Program guidance. Sec. 1005.443 Loan amount. (a) Minimum required investment. The Borrower is required to make a minimum investment in the property. This investment must come from the Borrower's own funds, gifts, or Tribal, State, or local funds awarded [[Page 796]] to the Borrower. The minimum investment in the property is the difference between the sales price and the base loan amount. (b) Calculating base loan amount. (1) The base loan amount is determined by calculating: (i) 97.75 percent of the appraised value of the property or the Acquisition Cost, whichever is less; or (ii) 98.75 percent of the lesser of the appraised value or sales price when the appraised value or sales price is $50,000 or less. (2) The base loan amount cannot exceed the Section 184 Guaranteed Loan limits established under Sec. 1005.441. (c) Maximum principal loan amount. The maximum principal loan amount is the base loan amount and the Up-Front Loan Guarantee Fee. The Section 184 Guaranteed Loan limit may only be exceeded by the amount of the Up- Front Loan Guarantee Fee. (d) Minimum principal loan amount. A Direct Guarantee Lender may not require a minimum loan amount for a Section 184 Guaranteed Loan. Sec. 1005.445 Case numbers. (a) Section 184 case numbers may only be obtained by a Direct Guarantee Lender. (b) To obtain a case number, the Direct Guarantee Lender must: (1) Have an active loan application from a Borrower(s) with an identified property; (2) Provide evidence of borrower eligibility, as prescribed in Sec. 1005.401(a); (3) Verify that the property is located in a Section 184 Approved Program Area; (4) Confirm that the Loan does not exceed the Section 184 Loan limit; and (5) Submit Loan specific information as prescribed in Section 184 Program Guidance. (c) Case numbers are automatically cancelled after a period as identified in Section 184 Program Guidance, unless a Firm Commitment is issued, or an extension is granted by HUD in accordance with Section 184 Program Guidance prior to the expiration of the case number. Sec. 1005.447 Maximum age of Loan documents. Documents reviewed at underwriting and at loan closing may not be older than the 120 days, or another time period prescribed by Section 184 Program Guidance. Documents whose validity for underwriting purposes is not affected by the passage of time, such as divorce decrees or tax returns, are not subject to time limitations. Sec. 1005.449 Qualified mortgage. A Section 184 Guaranteed Loan, except for mortgage transactions exempted under 15 U.S.C. 1639c(b)(3)(ii), is afforded safe harbor as a qualified mortgage that meets the ability-to-repay requirements in 15 U.S.C. 1639c(a). Sec. 1005.451 Agreed interest rate. The loan shall bear interest at the rate agreed upon by the Direct Guarantee Lender and the Borrower and determined by HUD to be reasonable. The agreed upon interest rate may not exceed the rate generally charged in the area for mortgage loans not guaranteed or insured by any agency or instrumentality of the Federal Government, or a rate determined by HUD, whichever is lower. The agreed upon interest rate must not take into consideration a Borrower's credit score in accordance with Sec. 1005.409 and must not be based on risk-based pricing. Sec. 1005.453 Amortization provisions. The loan must contain complete Amortization provisions satisfactory to HUD, requiring payments due on the first day of each month by the Borrower. The sum of the principal and interest payments in each month shall be substantially the same. Underwriting Sec. 1005.455 Direct guarantee underwriting. (a) Underwriter due diligence. A Direct Guarantee Lender shall exercise the same level of care which it would exercise in obtaining and verifying information for a Loan in which the Direct Guarantee Lender would be entirely dependent on the property as security to protect its investment. Direct Guarantee Lender procedures that evidence such due diligence shall be incorporated as part of the quality control plan required under Sec. 1005.219. Compliance with HUD-prescribed underwriting guidelines shall be the minimum standard of due diligence in underwriting the Loans. Failure to comply with HUD-prescribed underwriting guidelines may result in sanctions in accordance with Sec. Sec. 1005.905 and 1005.907. (b) Evaluating the Borrower(s) qualifications. The Direct Guarantee Lender shall evaluate the Borrower's credit characteristics, the adequacy and stability of the Borrower's income to meet the periodic payments under the loan and all other obligations, the adequacy of the Borrower's available assets to close the transaction, the Borrower's management capacity and grant performance, if applicable, and render an underwriting decision in accordance with applicable regulations, policies, and procedures. (c) Assumption. Applications for the assumption of an existing Section 184 Guaranteed Loan shall be underwritten using the same Borrower eligibility and underwriting standards in accordance with this subpart. Sec. 1005.457 Appraisal. (a) A Direct Guarantee Lender shall have the property appraised in accordance with all applicable Federal requirements, including but not limited to the Uniform Standards of Professional Appraisal Practice, [[Page 797]] Equal Credit Opportunity Act (15 U.S.C. 1691-1691f), and the Fair Housing Act (42 U.S.C. 3601-19). HUD may establish alternative requirements to Uniform Standards of Professional Appraisal Practice, when necessitated by location and availability of an appraiser, and publish such alternative requirements in Section 184 Program Guidance. (b) A Direct Guarantee Lender must select an appraiser identified on the Federal Housing Administration Appraiser Roster, compiled in accordance with 24 CFR part 200, subpart G. The Direct Guarantee Lender shall not discriminate on the basis of race, color, religion, sex (including gender identity and sexual orientation), disability, familial status, national origin, or age in the selection of an appraiser. HUD may establish guidance regarding the alternatives to the use of an appraiser identified on the Federal Housing Administration Appraiser Roster, when necessitated by a rural or remote location and the availability of an appraiser. (c) A Direct Guarantee Lender and an appraiser must ensure that an appraisal and related documentation satisfy Federal Housing Administration, Fannie Mae, or Freddie Mac appraisal requirements, and both bear responsibility for the quality of the appraisal in satisfying such requirements. (d) A Direct Guarantee Lender that submits, or causes to be submitted, an appraisal or related documentation that does not satisfy requirements under paragraphs (a) through (d) of this section may be subject to sanctions by HUD pursuant to Sec. Sec. 1005.905 and 1005.907. (e) The validity period of appraisals is 180 days or as provided by Section 184 Program Guidance. (f) Where the initial appraisal report will be more than 180 days at closing, an appraisal update may be performed to extend the appraisal validity period prior to closing, in accordance with Section 184 Program Guidance. The updated appraisal is valid for one year after the effective date of the initial appraisal report; and (g) The appraisal shall meet other guidance as prescribed in Section 184 Program Guidance. Sec. 1005.459 Loan submission to HUD for endorsement. (a) Deadline for submission. Within 60 days after the date of closing the loan, a Direct Guarantee Lender must submit an endorsement case binder to HUD, in accordance with Sec. 1005.503. (b) Late submission. If the endorsement case binder is submitted past 60 days, the Direct Guarantee Lender must include, as part of the case binder, a late endorsement request with supporting documentation, affirming: (1) The loan is not currently in default; (2) All escrow accounts for taxes, hazard insurance, and monthly Loan Guarantee Fees are current; (3) Neither the Direct Guarantee Lender nor Servicer provided the funds to bring or keep the loan current or to bring about the appearance of acceptable payment history; and (4) Notwithstanding paragraph (b)(3) of this section, with prior approval from HUD, Direct Guarantee Lender or Servicer may provide funds to bring or keep the loan current. Sec. 1005.461 HUD issuance of Firm Commitment. HUD may underwrite and issue a Firm Commitment when it is in the interest of HUD. Subpart E_Closing and Endorsement Closing Sec. 1005.501 Direct Guarantee Lender closing requirements. The Direct Guarantee Lender shall close the loan in accordance with the following: (a) Chain of title/interest. (1) For fee simple Properties, the Direct Guarantee Lender must obtain evidence of all prior ownership within 12 months of the case number assignment date. The Direct Guarantee Lender must review the evidence of prior ownership to determine any undisclosed Identity of Interest transactions. (i) If an Identity of Interest is discovered, the Direct Guarantee Lender must review for any possible Conflict of Interest. (ii) As a requirement of closing, all Borrowers must execute a Section 184 Borrower's Certification, addressing any Identity of Interest and Conflict of Interest. (2) For Trust Land transactions, the requirements for the determination of ownership title interest shall be prescribed by HUD in Section 184 Program Guidance. (b) Title/Title Status Report. The Direct Guarantee Lender must ensure that all objections to title binder/initial certified Title Status Report have been cleared, and any discrepancies have been resolved, to ensure that the Section 184 Guaranteed Loan will be in first security interest position. (c) Closing in compliance with Direct Guarantee Lender approval. The Direct Guarantee Lender must instruct the settlement agent to close the Section 184 Guaranteed Loan on the same terms or on the same assumptions in which it was underwritten and approved. (d) Closing in the Direct Guarantee Lender's name. A Section 184 Guaranteed Loan must close in the name of the Direct Guarantee Lender issuing the underwriting approval. (e) Required HUD documents at closing. The Direct Guarantee Lender must use the forms and language as prescribed in Section 184 Program Guidance. [[Page 798]] (f) Projected escrow. The Direct Guarantee Lender must establish an escrow account in accordance with Sec. 1005.717 and the Real Estate Settlement Procedures Act and any other escrow requirements as prescribed under applicable Tribal and Federal laws and regulations. (g) Closing costs and fees. The Direct Guarantee Lender may charge the Borrower reasonable and customary fees in accordance with Sec. 1005.515. (h) Closing date. The closing date must occur before the expiration of the Firm Commitment. (i) Per diem interest and interest credits. The Direct Guarantee Lender may collect per diem interest from the closing date to the date Amortization begins. Alternatively, the Direct Guarantee Lender may begin Amortization up to 7 days prior to the closing date and provide a per diem interest credit. Any per diem interest credit may not be used to meet Borrower's minimum required investment. Per diem interest must be computed using a factor of 1/365th of the annual rate. (j) Authorization of Tribal notification in the event of default. At closing and on a form provided by HUD, the Borrower must elect whether to authorize the Direct Guarantee Lender or Servicer to notify the Tribe in the event of a default, as prescribed in the Section 184 Program Guidance. (k) Signatures. Direct Guarantee Lender must ensure that the note, security instrument, and all closing documents are signed by the required parties. (l) Other requirements. Direct Guarantee Lender shall close the loan in accordance with any applicable Tribal, State, or Federal requirements. Direct Guarantee Lenders must execute any other documents as may be required by applicable Tribal, Federal, or State law. Sec. 1005.503 Contents of endorsement case binder. The Direct Guarantee Lender's endorsement case binder shall be submitted in a format as prescribed by HUD and contain the documents meeting the requirements of Sec. 1005.501 and any other documents supporting the Direct Guarantee Lender's underwriting determination. Sec. 1005.505 Payment of Upfront Loan Guarantee Fee. The Direct Guarantee Lender, shall provide evidence of the remittance of the Upfront Loan Guarantee Fee, as required under Sec. 1005.607, in accordance with a process provided by HUD in Section 184 Program Guidance. Sec. 1005.507 Borrower's payments to include other charges and escrow payments. (a) The Direct Guarantee Lender must include in the Section 184 Guaranteed Loan monthly payment the following charges and escrow payments: (1) The ground rents, if any, when the Tribe or TDHE does not have an existing withholding or payment policy in place; (2) Annual Loan Guarantee Fee, as prescribed in Sec. 1005.607, if any; (3) The estimated amount of all taxes; (4) Special assessments, if any; (5) Flood insurance premiums, if flood insurance is required; (6) Fire and other hazard insurance premiums, except master policy premiums payable to a condominium association or a Tribe and paid directly by the Borrower: (7) Other charges as allowed in Section 184 Program Guidance. (b) The Section 184 Guaranteed Loan shall further provide that such payments shall be held by the Direct Guarantee Lender in a manner satisfactory to HUD for the purpose of paying such ground rents, taxes, assessments, and insurance premiums before the same become delinquent, for the benefit and account of the Borrower. The Section 184 Guaranteed Loan must also make provisions for adjustments in case the estimated amount of such taxes, assessments, and insurance premiums shall prove to be more, or less, than the actual amount thereof so paid by the Borrower. Such payments shall be held in an escrow subject to Sec. 1005.717. (c) The Borrower shall not be required to pay premiums for fire or other hazard insurance which protects only the interests of the Direct Guarantee Lender, or for life or disability income insurance, or fees charged for obtaining information necessary for the payment of property taxes. The foregoing does not apply to charges made or penalties exacted by the taxing authority, except that a penalty assessed, or interest charged, by a taxing authority for failure to timely pay taxes or assessments shall not be charged by the Direct Guarantee Lender to the Borrower if the Direct Guarantee Lender had sufficient funds in escrow for the account of the Borrower to pay such taxes or assessments prior to the date on which penalty or interest charges are imposed. Sec. 1005.509 Application of payments. All monthly payments to be made by the Borrower to the Servicer shall be added together, and the aggregate amount shall be paid by the Borrower each month in a single payment by the Borrower, in accordance with the loan documents. The Servicer shall apply the Borrower's funds in accordance with Sec. 1005.715. Sec. 1005.511 Late fee. When the monthly Section 184 Guaranteed Loan payment is 15 or more days in arrears, the Servicer may collect from Borrower a late fee of up to four percent of the overdue payment of principal and interest, or any [[Page 799]] other limit as established by HUD through public notice with an opportunity for comment. The late fee provision must appear on the note executed at closing. Sec. 1005.513 Borrower's payments when Section 184 Guaranteed Loan is executed. The Borrower must pay to the Direct Guarantee Lender, upon execution of the Section 184 Guaranteed Loan, where applicable, the: (a) One-time Up-Front Loan Guarantee Fee or any portion payable pursuant to Sec. 1005.603; and (b) All other applicable monthly charges pursuant to Sec. 1005.507, including the Annual Loan Guarantee Fee pursuant to Sec. 1005.607 covering the period from the closing date to the due date of the first installment payment under the Section 184 Guaranteed Loan. Sec. 1005.515 Charges, fees, or discounts. (a) The Direct Guarantee Lender must ensure that all fees charged and disclosure requirements at closing to the Borrower comply with all applicable Tribal, Federal, State, and local laws. (b) The Direct Guarantee Lender may collect from the Borrower the following charges, fees, or discounts at closing: (1) A charge to compensate the Direct Guarantee Lender for expenses incurred in originating and closing the Loan. HUD may establish limitations on the amount of any such charge in Section 184 Program Guidance. (2) Reasonable and customary amounts, but not more than the amount actually paid by the Direct Guarantee Lender, for any of the following items: (i) Recording fees and recording taxes or other charges incident to recordation; (ii) Credit report; (iii) Survey, if required by Direct Guarantee Lender or Borrower; (iv) Title examination; (v) Title insurance, if any; (vi) Fees paid to an appraiser or inspector approved by HUD for the appraisal and inspection, if required, of the property; (vii) Reasonable and customary charges in the nature of discounts; and (viii) Interest calculations in accordance with Sec. 1005.501(i). (ix) Such other reasonable and customary charges as may be authorized by HUD. (c) All charges, fees or discounts are subject to review by HUD after endorsement. Sec. 1005.517 Certificate of nondiscrimination by the Direct Guarantee Lender. (a) Where applicable, a Direct Guarantee Lender shall certify to HUD as to each of the following: (1) That neither the Direct Guarantee Lender, nor anyone authorized to act for the Direct Guarantee Lender, will refuse to sell, after the making of a bona fide offer, or refuse to negotiate for the sale otherwise make unavailable or deny the property covered by the Section 184 Guaranteed Loan to any eligible purchaser or discriminate in making a loan or engaging in a residential real estate-related transaction (as defined in 42 U.S.C. 3605) because of age, race, color, religion, sex (including gender identity and sexual orientation), disability, familial status, or national origin, source of income of the Borrower, location of the property, or because the Borrower exercised any right under the Consumer Credit Protection Act, except as provided by law. (2) That any restrictive covenant, other than permissible restrictions on Trust Land, on such property relating to race, color, religion, sex (including gender identity and sexual orientation), disability, familial status, or national origin is hereby illegal, unenforceable, or void. (b) That civil action for preventative relief may be brought by the Attorney General in any appropriate U.S. District Court against any person responsible for a violation of this certification. Endorsement and Post-Closing Sec. 1005.519 Creation of the contract. The loan shall be a Section 184 Guaranteed Loan from the date of the issuance of a Loan Guarantee Certificate. The Direct Guarantee Lender is thereafter bound by the regulations in this subpart with the same force and to the same extent as if a separate contract had been executed relating to the Section 184 Guaranteed Loan, including the provisions of the regulations in this subpart and 12 U.S.C. 1715z-13a. Sec. 1005.521 Pre-endorsement review and requirements. Direct Guarantee Lender must complete a pre-endorsement review of the endorsement case binder. This review must be conducted by staff not involved in the originating, processing, or underwriting of the Loan. This review must also confirm that the loan was underwritten by an approved Direct Guarantee Lender. The endorsement case binder must contain all documentation relied upon by the Direct Guarantee Lender to justify its decision to approve the Loan in accordance with subpart D of this part. Upon finalizing the pre-endorsement review, the Direct Guarantee Lender must certify that all required documents are submitted and meet the requirements of Sec. 1005.503. Sec. 1005.523 HUD pre-endorsement review. (a) Direct Guarantee Lender shall submit to HUD within 60 days after the date of the closing of the Loan, or such additional time as permitted by HUD, the endorsement case binder. [[Page 800]] (b) Upon submission by a Direct Guarantee Lender of the endorsement case binder containing those documents required by Sec. 1005.503, HUD will review the documents to ensure that the Loan meets all statutory, regulatory, and administrative requirements, including but not limited to: (1) There is no fee, late charge, or interest due to HUD; (2) The Loan was not in default when submitted for the Loan Guarantee Certificate, unless otherwise approved by HUD, or if submitted for guarantee more than 60 days after the date of closing, the loan shows an acceptable payment history; and (3) The loan was underwritten by an approved Direct Guarantee Lender. (c) Upon review, if HUD determines the loan to meet program requirements, HUD will issue a Loan Guarantee Certificate. If HUD determines the loan is ineligible, HUD will provide the Direct Guarantee Lender with a written determination and specify any available corrective actions that may be available. If there is information indicating that any certification or required document is false, misleading, or constitutes fraud or misrepresentation on the part of any party, or that the loan fails to meet a statutory or regulatory requirement, HUD will conduct a complete audit of the endorsement case binder. Repeated submission of deficient endorsement case binders may subject the Direct Guarantee Lender to sanctions or civil money penalties pursuant to Sec. Sec. 1005.905 and 1005.907. Sec. 1005.525 Loan Guarantee Certificate. (a) HUD shall issue a Loan Guarantee Certificate as evidence of the guarantee when HUD completes a review of the Direct Guarantee Lender's endorsement case binder and determines the Loan complies with all applicable Section 184 Program requirements. HUD's issuance of the Loan Guarantee Certificate does not preclude HUD from conducting post- endorsement reviews under Sec. 1005.527, seeking indemnification under Sec. 1005.529, or imposing sanctions from originating Direct Guarantee Lender, Holder and/or Servicer under Sec. Sec. 1005.905 and 1005.907. (b) HUD may issue a Loan Guarantee Certificate for a loan involving a security interest in Trust Land before HUD receives the required trailing documents from BIA, where applicable, if the Direct Guarantee Lender agrees to indemnify HUD. The indemnification agreement between HUD and the Direct Guarantee Lender will terminate only upon receipt of the Trailing Documents in a form and manner acceptable to HUD. Trailing Documents may include the following documents: (1) A final certified TSR that identifies that the BIA or Tribe approved and recorded the mortgage instrument and residential lease related to the Section 184 Loan, as applicable; (2) A certified true copy of the recorded mortgage instrument; (3) A certified true copy of the recorded lease, if applicable; (4) A certified true copy of the recorded executed mortgage release documents for all prior mortgages identified on the initial certified TSR, if applicable; and (5) A certified true copy of any BIA approved and executed subordination agreements; (c) The Loan Guarantee Certificate is conclusive evidence of the eligibility of the Loan for guarantee under this part. Such evidence will be incontestable in the hands of the bearer and the full faith and credit of the United States is pledged to the payment of amounts agreed to be paid by HUD as security for such obligations. (d) This section may not be construed to preclude HUD from conducting a post-endorsement review. With respect to the original Direct Guarantee Lender, HUD may establish defenses against the original Direct Guarantee Lender based on fraud or material misrepresentation. This section may not be construed to bar HUD from establishing partial defenses to the amount payable on the Section 184 Guaranteed Loan. Sec. 1005.527 Post-endorsement review. (a) HUD may review an endorsement case binder at any time, including but not limited to a quality control review of all documents in Sec. 1005.503. (b) Within three business days of a request by HUD, the Direct Guarantee Lender must make available for review, or forward to HUD, copies of the identified endorsement case binder(s). (c) A Direct Guarantee Lender's failure to provide HUD access to any files may be grounds for sanctions in accordance with Sec. Sec. 1005.905 and 1005.907. (d) Based on HUD's review under paragraph (a) of this section, if HUD determines that: (1) The Loan does not satisfy the requirements of subpart F of this part; (2) The Direct Guarantee Lender or Sponsored Entity committed fraud or a material misrepresentation; or (3) The Direct Guarantee Lender or Sponsored Entity had known or should have known of fraud or a material misrepresentation in violation of this part, such that the Loan should not have been approved by the Direct Guarantee Lender; (e) HUD may request indemnification from the originating Direct Guarantee Lender and impose sanctions on the Direct Guarantee Lender and Sponsored Entity pursuant to Sec. Sec. 1005.905 and 1005.907. [[Page 801]] Sec. 1005.529 Indemnification. (a) When HUD conducts a pre- or post-endorsement review and HUD determines there is an underwriting deficiency where the Section 184 Guaranteed Loan should not have been approved, HUD may request the originating Direct Guarantee Lender to indemnify HUD. (b) Underwriting deficiencies with respect to the Section 184 Guaranteed Loan may include but is not limited to fraud or misrepresentation by the originating Direct Guarantee Lender. (c) HUD will notify the originating Direct Guarantee Lender in writing when an indemnification is required. (d) Under an indemnification, the originating Direct Guarantee Lender must reimburse HUD when a subsequent Holder files a Claim and HUD suffers a financial loss. (e) If the originating Direct Guarantee Lender fails to indemnify HUD, HUD may impose sanctions pursuant to Sec. Sec. 1005.905 and 1005.907. Subpart F_Section 184 Guaranteed Loan Fees Sec. 1005.601 Scope and method of payment. HUD shall charge a one-time Section 184 Up-Front Loan Guarantee Fee, and a recurring Annual Loan Guarantee Fee where applicable, which will be collected by a Direct Guarantee Lender or Servicer as required by Sec. Sec. 1005.603 and 1005.607 and remitted to HUD as required by Sec. Sec. 1005.605 and 1005.609. The fees collected by the Direct Guarantee Lender or Servicer on behalf of HUD shall be payable to HUD in cash, in the manner prescribed by Section 184 Program Guidance. Sec. 1005.603 Up-Front Loan Guarantee Fee. At settlement, the Direct Guarantee Lender will collect from the Borrower a one-time Up-Front Loan Guarantee Fee in an amount not exceeding three percent of the principal obligation of the Section 184 Guaranteed Loan. The amount will be set by HUD through a notice in the Federal Register. Sec. 1005.605 Remittance of Up-Front Loan Guarantee Fee. The Direct Guarantee Lender shall remit the Up-Front Loan Guarantee Fee to HUD within 15 days after settlement, using the payment system as prescribed by Section 184 Program Guidance. The Direct Guarantee Lender shall provide an account reconciliation of the Up-Front Loan Guarantee Fee in the time and manner as may be prescribed in Section 184 Program Guidance. Sec. 1005.607 Annual Loan Guarantee Fee. (a) Percentage of Annual Loan Guarantee Fee. Where applicable the Servicer must collect a monthly installment for the Annual Loan Guarantee Fee from the Borrower in an amount not exceeding one percent of the principal obligation of the loan. The percentage used to calculate the Annual Loan Guarantee Fee amount will be prescribed by notice in the Federal Register. (b) Payment of Annual Loan Guarantee Fee. Where applicable, the Section 184 Guaranteed Loan shall require monthly payments by the Borrower to the Servicer in an amount equal to one-twelfth of the Annual Loan Guarantee Fee, payable by the Servicer to HUD in accordance with the Amortization Schedule issued with the Loan approval. (c) Amortization Schedule. The amount of the Borrower's monthly installment will be based on an Amortization Schedule as prescribed in Section 184 Program Guidance. Sec. 1005.609 Remittance of Annual Loan Guarantee Fee. (a) Where applicable, monthly installment of the Annual Loan Guarantee Fee shall be due and payable to HUD no later than the 15th day of each month, beginning in the month in which the Borrower is required to make the first monthly loan payment. Monthly payments of the Annual Loan Guarantee Fee must be submitted using a HUD prescribed payment system, as prescribed by Section 184 Program Guidance. (b) Where applicable, subject to the exception in paragraph (d) of this section, the Servicer shall continue to collect from the Borrower, as established by a schedule provided in Sec. 1005.607(b) and pay HUD the monthly installment of the Annual Loan Guarantee Fee, without taking into account Borrower's default, loss mitigation, prepayments, agreements to postpone payments, or agreements to recast the loan. Any changes to the Annual Loan Guarantee Fee will be published in the Federal Register. (c) Where applicable, the Servicer shall adjust the monthly installment of the Annual Loan Guarantee Fee in accordance the schedule provided in Sec. 1005.607(b). Notwithstanding paragraph (a) of this section, the Servicer shall refund to the Borrower any overpayment of Annual Loan Guarantee Fees collected from the Borrower, due to a delayed adjustment of the Loan Guarantee Fee, within 30 days of the overpayment. Failure to refund the Borrower within this timeframe will result in a penalty in accordance with Sec. 1005.611. (d) Where applicable, the Servicer shall cease collecting the monthly installment of the Annual Loan Guarantee Fee when the amortized loan to value ratio equals an amount less than the Annual Loan Guarantee Fee termination threshold loan-to-value ratio as established by the Secretary in the Federal Register and established by a schedule provided in Sec. 1005.607(b). Notwithstanding paragraph (a) of this section, the Servicer shall refund to the Borrower any overpayment of Annual Loan Guarantee [[Page 802]] Fees collected when the loan-to-value ratio falls below the threshold established by the Secretary in the Federal Register, within 30 days of the overpayment. Failure to refund the Borrower within this timeframe will result in penalty in accordance with Sec. 1005.611. (e) Annual Loan Guarantee Fees paid, if any, in accordance with the schedule provided in Sec. 1005.607(b) shall not be refundable to the Borrower. (f) Where applicable, if the Servicer submits the monthly installment of the Annual Loan Guarantee Fee to HUD after the due date, the amount paid must include the required payment of penalties pursuant to Sec. 1005.611(c). (g)(1) When transfer of servicing occurs in accordance with Sec. 1005.707: (i) The schedule of monthly installment payments provided in Sec. 1005.607(b) must be provided to the new Servicer; and (ii) The account reconciliation of the Upfront Guarantee Fee and Annual Loan Guarantee Fee due and remitted to HUD must be provided to the new Servicer. (2) The new Servicer is responsible for compliance with all requirements of this part, including, but not limited to, any outstanding Annual Loan Guarantee Fee payments and penalties owed to HUD, or any Annual Loan Guarantee Fee adjustments or refunds due to the Borrower. (3) If a transfer results in missed monthly installment(s) of the Annual Loan Guarantee Fee, the new Servicer shall pay the overdue installment(s) in a lump sum to HUD within 30 days of acquisition of the loan and include any applicable penalties in accordance with Sec. 1005.611. (h) The Direct Guarantee Lender shall provide an account reconciliation of the Annual Loan Guarantee Fee in the time and manner as may be prescribed in Section 184 Program Guidance. Sec. 1005.611 HUD imposed penalties. (a) Prohibited penalty pass through. The Holder, Direct Guarantee Lender or Servicer shall not recover or attempt to recover from the Borrower any penalties HUD imposes upon the Holder, Direct Guarantee Lender or Servicer. (b) Failure of Direct Guarantee Lender to timely remit Up-Front loan guarantee to HUD. (1) The Direct Guarantee Lender shall include a late fee if the Up-Front Loan Guarantee Fee is not remitted to HUD within 15 days of settlement. (2) Failure to remit the Up-Front Loan Guarantee Fee, with a late fee where applicable, may result in HUD rejecting the endorsement or Claim case binder. (c) Failure of Servicer to timely remit the monthly installment of the Annual Loan Guarantee Fee to HUD. (1) The Servicer shall include a late fee for each monthly installment of the Annual Loan Guarantee Fee remitted to HUD after the15th of each month. (2) Failure to remit monthly installment of the Annual Loan Guarantee Fee to HUD, with late fee, may result in HUD rejecting the Claim case binder, where applicable. (d) Failure of Servicer to adjust the amount of the Annual Loan Guarantee Fee. (1) When a Servicer fails to make the annual adjustment to the amount of the monthly installment of the Annual Loan Guarantee Fee in accordance with Sec. 1005.607(b), the Holder shall, in addition to reimbursing the Borrower as required in Sec. 1005.609(c), pay HUD a penalty for each month the Servicer collects an overpayment of the Annual Loan Guarantee Fee. (2) The Servicer shall provide annual written notice, in the manner prescribed by Section 184 Program Guidance to the Borrower prior to the scheduled change in the monthly installment of the Annual Loan Guarantee Fee, with such advance notice as required by 12 CFR 1026.9, or other applicable Federal law. (e) Failure to cease collection of the Annual Loan Guarantee Fee. When a Servicer fails to cease collection of the monthly installment of the Annual Loan Guarantee Fee after the loan to value ratio reaches the threshold described in Sec. 1005.609(d), the Holder shall, in addition to reimbursing the Borrower as required in Sec. 1005.609(d), pay HUD a penalty for each month the Servicer collects an overpayment of the Annual Loan Guarantee Fee. (f) Late fee and penalty amounts. Late fees and penalty amounts under this section shall be prescribed by HUD in Section 184 Program Guidance. Subpart G_Servicing Servicing Section 184 Guaranteed Loans Generally Sec. 1005.701 Section 184 Guaranteed Loan servicing generally. This subpart identifies the servicing requirements for Section 184 Guaranteed Loans. All Section 184 Guaranteed Loans must be serviced by Section 184 approved Servicers, including Section 184 Guaranteed Loans owned by Holders. Holders are responsible for all servicing actions, including the acts of its Servicers. Servicers are responsible for their actions in servicing Section 184 Guaranteed Loans, including actions taken on behalf of, or at the direction of, the Holder. Failure to comply with this subpart may result in the reduction of the Claims amount in accordance with subpart H of this part or may subject Holder and/or Servicer to sanctions pursuant to subpart I. Holders and Servicers must comply with all applicable Tribal, Federal, and State requirements related to mortgage servicing. [[Page 803]] Sec. 1005.703 Servicer eligibility and application process. (a) To be eligible to service Section 184 Guaranteed Loans, a Direct Guarantee Lender, Non-Direct Guarantee Lender or other financial institution must be an approved mortgage Servicer for FHA or another agency of the Federal Government. (b) All eligible Direct Guarantee Lenders, Non-Direct Guarantee Lenders and other financial institutions must apply to become a Servicer in accordance with Section 184 Program Guidance. (c) Direct Guarantee Lenders servicing Section 184 Guaranteed Loans prior to June 18, 2024 may request an exemption from paragraph (a) of this section. Sec. 1005.705 Servicer approval. (a) Final approval. Approval is signified by: (1) Written notification from HUD that the Direct Guarantee Lender, Non-Direct Guarantee Lender, or other financial institution is approved as a Servicer under the Section 184 Program; and (2) Agreement by the Direct Guarantee Lender, Non-Direct Guarantee Lender, or other financial institution to comply with requirements of this part and any applicable Federal, State, or Tribal law requirement. (b) Limitations on approval. The Direct Guarantee Lender, Non-Direct Guarantee Lender or other financial institution may only be approved to service Section 184 Guaranteed Loans in areas where the Direct Guarantee Lender, Non-Direct Guarantee Lender or financial institution is licensed, as applicable. (c) Denial of participation. A Direct Guarantee Lender, Non-Direct Guarantee Lender or other financial institution may be denied approval to become a Servicer if HUD determines the Direct Guarantee Lender, Non- Direct Guarantee Lender or other financial institution does not meet the qualification requirements of Sec. 1005.703. HUD will provide written notification of denial and of the right to submit a written appeal in accordance with Sec. 1005.909. Sec. 1005.707 Responsibility for servicing. (a) Program compliance. (1) The Servicer must participate in HUD training on the Section 184 program. (2) A Servicer shall provide written notification to HUD of any changes that affect qualifications under this subpart within a timeframe prescribed by Section 184 Program Guidance. (b) Sub-Servicer. (1) If a Servicer elects to use a sub-servicer, the sub-servicer must be an approved Servicer under Sec. 1005.705. (2) Servicers are responsible for the actions of their sub- servicers. The Holder and Servicer shall remain fully responsible to HUD for Section 184 Guaranteed Loan servicing in accordance with this subpart, and the actions of a sub-Servicer shall be considered the actions of the Servicer. (c) Change in Servicer. (1) When the responsibility of servicing a Section 184 Guaranteed Loan is transferred from one Servicer to another, the acquiring Servicer shall assume responsibility for compliance with this part, this includes addressing any noncompliance by the former Servicer. (2) The former Servicer must notify HUD of the change in Servicer within 15 days of the transfer, or timeframe as prescribed by Section 184 Program Guidance. (3) The acquiring Servicer shall provide notice to the Borrower of the transfer of servicing in accordance with applicable Tribal, Federal and/or State laws that may require such notice. (4) HUD will hold the acquiring Servicer responsible for errors, omissions, and unresolved HUD review findings on the part of the former Servicer (or former sub-Servicer), discovered after the transfer is reported even when the errors or omissions took place prior to the transfer. (d) Transfer of servicing rights. The Servicer must submit written notification to HUD, within 15 days of transfer, or other time period as prescribed by Section 184 Program Guidance, of the transfer of servicing rights through the acquisition or sale of any Section 184 Guaranteed Loans. (e) Reporting requirements. (1) On a date and manner established by Section 184 Program Guidance, the Servicer shall report to HUD the status of all Section 184 Guaranteed Loans in its Servicing portfolio. (2) Where applicable, Servicer shall provide an Annual Loan Guarantee Fee reconciliation to the Borrower and HUD, in a manner and timeframe as prescribed by Section 184 Program Guidance. (3) Servicer must comply with any other reporting requirements under Sec. 1005.903. (4) The Servicer's failure to submit required reports on time may subject the Holder and/or Servicer to sanctions and civil money penalties pursuant to Sec. Sec. 1005.905 and 1005.907. (f) Business change reporting. Within a timeframe and on a form as prescribed by Section 184 Program Guidance, the Servicer shall provide written notification to HUD of: (1) All changes in the Servicer's legal structure, including, but not limited to, mergers, acquisitions, terminations, name, location, control of ownership, and character of business; (2) Staffing changes related to servicing Section 184 Guaranteed Loans; and (3) Any sanctions by another supervising entity. (4) Failure to report changes within the timeframe prescribed in Section 184 Program Guidance may result in sanctions in accordance with Sec. Sec. 1005.905 and 1005.907. [[Page 804]] (g) Annual recertification. (1) All Servicers are subject to annual recertification on a date and manner as prescribed by Section 184 Program Guidance. With each annual recertification, Servicers must submit updated contact information, current FHA or another Federal agency recertification status, and other pertinent documents as prescribed by Section 184 Program Guidance. (2) Servicers may request an extension of the recertification deadline in accordance with Section 184 Program Guidance. (3) HUD will review the annual recertification submission and may request any further information required to determine recertification. HUD will provide written notification of approval to continue participation in the Section 184 Program or denial. A denial may be appealed pursuant to Sec. 1005.909. (4) If an annual recertification is not submitted by the reasonable deadline as prescribed in Section 184 Program Guidance, HUD may subject the Servicer to sanctions under Sec. 1005.907. (h) Program ineligibility. Servicer may be deemed ineligible for Section 184 Program participation when HUD becomes aware that the entity or any officer, partner, director, principal, manager or supervisor of the entity was: (1) Suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under 2 CFR part 2424, or under similar procedures of any other Federal agency (2) Indicted for, or have been convicted of, an offense during the 7-year period preceding the date of the application for licensing and registration, or at any time preceding such date of the application, if such indictment or conviction reflects adversely upon the integrity, competency, or fitness to meet the responsibilities of the Servicer to participate in the title I or title II programs of the National Housing Act, or Section 184 Program; (3) Found to have unresolved findings as a result of HUD or other governmental audit, investigation, or review; (4) Engaged in business practices that do not conform to generally accepted practices of prudent Servicers or that demonstrate irresponsibility; (5) Convicted of, or have pled guilty or nolo contendere to, a felony related to participation in the real estate or mortgage Loan industry during the 7-year period preceding the date of the application for licensing and registration, or at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust or money laundering; (6) In violation of provisions of the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (12 U.S.C. 5101, et seq.) or any applicable provision of Tribal or State law; or (7) In violation of 12 U.S.C. 1715z-13a or any other requirement established by HUD. (i) Records retention. Servicers must maintain the servicing case binder for a period of three years beyond the date of satisfaction or maturity date of the Loan, whichever is sooner. However, where there is a payment of Claim, the Claim case binder must be retained for a period of at least five years after the final Claim has been paid. Section 184 Program Guidance shall prescribe additional records retention time depending on the circumstances of the Claim. (ii) [Reserved] Sec. 1005.709 Providing information to Borrower and HUD. (a) Servicers shall provide Section 184 Guaranteed Loan information to Borrowers and arrange for individual loan consultation on request. The Servicer must establish written procedures and controls to assure prompt responses to inquiries. At a minimum, the Servicer must provide contact information to the Borrower in accordance with applicable Tribal, Federal and/or State laws, including: (1) A written address a Borrower can use to request and submit information; and (2) A toll-free telephone number a Borrower can use to verbally ask questions and seek information. (b) All Borrowers must be informed of the system available for obtaining answers to loan inquiries, the Servicer's office from which needed information may be obtained and reminded of the system at least annually. (c) Within 30 days after the end of each calendar year, the Servicer shall furnish to the Borrower a statement of the interest paid, and of the taxes disbursed from the escrow account during the preceding year. (d) At the Borrower's request, the Servicer shall furnish a statement of the escrow account sufficient to enable the Borrower to reconcile the account. (e) Each Servicer shall deliver to the Borrower a written notice of any transfer of the Servicing of the Section 184 Guaranteed Loan. The notice must be sent in accordance with applicable Tribal, Federal and/or State laws. Servicers must respond to Borrower inquiries pertaining to the transfer of Servicing in accordance applicable Tribal, Federal and/ or State laws. (f) Servicers must respond to HUD's written or electronic requests for information concerning individual accounts within three business days, or other timeframe established by Section 184 Program Guidance, or the deadline placed by other applicable law, whichever is sooner. Sec. 1005.711 Assumption and release of personal liability. (a) Assumption. Section 184 Guaranteed Loans may be fully assumed by an eligible [[Page 805]] substitute Borrower(s), based on the following: (1) Creditworthiness. At least one person acquiring ownership must be determined to be creditworthy under subpart D of this part. If the Servicer is approved as a Direct Guarantee Lender, the Servicer performs a creditworthiness determination under Sec. 1005.409. If the Servicer or Holder is not approved as a Direct Guarantee Lender, then the Servicer shall request a creditworthiness determination in a manner prescribed by Section 184 Program Guidance. (2) Trust Lands. (i) As applicable, a lease approved by HUD, the Tribe or the BIA in the new Borrower's name is required. Servicers shall not proceed to closing on the assumption until and unless the Tribe has consented to assign the property interest to the new Borrower at closing. Where applicable, a final certified Title Status Report documenting the assignment of the lease or recordation of a new lease is required. (ii) Where applicable, the lease may contain other conveyance restrictions. Servicer must review the lease for conveyance restrictions and ensure the lease complies with Sec. 1005.303(b)(2). (iii) Other requirements prescribed in Section 184 Program Guidance. (b) Fees. The Servicer may collect from the Borrower the following fees and costs: (1) A charge to compensate the Direct Guarantee Lender for reasonable and necessary expenses incurred as part of the assumption review and processing. HUD may establish limitations on the amount of any such charge. (2) Reasonable and customary costs, but not more than the amount actually paid by the Direct Guarantee Lender, for any of the following items: credit report, verification of employment and the execution of additional release of liability forms. (3) Additional fees and costs over and above the assumption fee and reasonable and customary costs cannot be assessed. (c) Release of liability. At closing, the Servicer must release the existing Borrower from any personal liability on a form approved by HUD; the eligible and approved substitute Borrower assumes personal liability of the Section 184 Guaranteed Loan when the release is executed. (d) Modification of Loan Guarantee Certificate. Upon completion of an assumption, the Servicer shall submit copies of the documentation required in this section to HUD, in a manner and form prescribed by HUD. HUD will review the assumption for compliance prior to issuing a revised Loan Guarantee Certificate. Sec. 1005.713 Due-on-sale provision. A Section 184 Guaranteed Loan shall contain a due-on-sale clause permitting acceleration, as prescribed by Section 184 Program Guidance. The Servicer shall promptly advise HUD of any prohibited sale or other transfer of the property or leasehold interest that occurs. The Servicer must request approval from HUD to accelerate the Loan when any prohibited sale or transfer occurs. If acceleration is permitted by applicable Tribal, Federal, or State law, the Servicer shall certify as to the legal authority as part of the request for approval, in a form and manner prescribed by Section 184 Program Guidance. Within 30 days of receipt of HUD approval to accelerate, the Servicer shall notify the Borrower of default and acceleration. Sec. 1005.715 Application of Borrower payments. (a) Servicer shall comply with Sec. 1005.509 with respect to the application of Borrower payments. The Servicer shall apply the payments in the following order: (1) Escrow items, including monthly payments of the Annual Loan Guarantee Fee, rents, taxes, special assessments, and if required, flood insurance, fire, and other hazard insurance premiums; (2) Interest accrued on the Section 184 Guaranteed Loan; (3) Principal of the Section 184 Guaranteed Loan; and (4) Late charges, if permitted under the terms of the Section 184 Guaranteed Loan and subject to such conditions as HUD may prescribe. (b) Partial Payments shall be applied in accordance with Sec. 1005.723. Sec. 1005.717 Administering escrow accounts. (a) The Servicer shall not use escrow funds for any purpose other than that for which they were received. It shall segregate escrow commitment deposits, work completion deposits, and all periodic payments received on account of leasehold rents, taxes, assessments, monthly payments of Annual Loan Guarantee Fee, and insurance charges or premiums, and shall deposit such funds with one or more financial institutions in a special account or accounts that are fully insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. Leasehold rents on Trust Lands may require additional escrow segregation by Servicers, as may be prescribed in Section 184 Program Guidance. (b) It is the Servicer's responsibility to ensure timely escrow disbursements and their proper application. Servicers must establish controls to ensure that accounts payable from the escrow account or the information needed to pay such accounts payable is obtained on a timely basis. Penalties for late payments for accounts payable from the escrow account must not be charged to the Borrower or HUD unless the Servicer can show that the penalty was the direct result [[Page 806]] of the Borrower's error or omission. The Servicer shall further comply with applicable Tribal, Federal, or State laws, including method of calculations related to escrow, the methods of collection and accounting, and the payment of the accounts payable for which the money has been escrowed. (c) The Servicer shall not initiate foreclosure for escrow account shortfalls resulting from advances made pursuant to this section. (d) When a Loan Guarantee Certificate is terminated voluntarily or due to Borrower's prepayment, in total satisfaction of the Section 184 Guaranteed Loan, amounts in the escrow account designated to pay any HUD required program fees shall be remitted to HUD in a form approved by HUD at the time of the required reporting related to the voluntary termination or prepayment. When a Section 184 Guaranteed Loan is prepaid in full, amounts held in escrow for taxes, hazard insurance, or rents, if applicable, that are not yet due or incurred, shall be released to the Borrower. Sec. 1005.719 Fees and costs after endorsement. (a) After endorsement, the Servicer may collect reasonable and customary fees and costs from the Borrower only as provided below. The Servicer may collect these fees or costs from the Borrower only to the extent that the Servicer is not reimbursed for such fees or costs by HUD. Permissible fees and costs include: (1) Late fee in accordance with Sec. 1005.511; (2) Costs for processing or reprocessing a check returned as uncollectible (where bank policy permits, the Servicer must deposit a check for collection a second time before assessing an insufficient funds charge); (3) Fees for processing a change of ownership of the property; (4) Fees and costs for processing an assumption of the Section 184 Guaranteed Loan in connection with the sale or transfer of the property; (5) Costs for processing a request for credit approval incurred in the course of processing an assumption or substitute Borrower; (6) Costs for substitution of a hazard insurance policy at other than the expiration of term of the existing hazard insurance policy; (7) Costs for modification of the Section 184 Guaranteed Loan requiring recordation of the agreement, including those for extension of term or re-amortization; (8) Fees and costs for processing a partial release of the property; (9) Attorney's and trustee's fees and costs actually incurred (including the cost of appraisals and advertising) when a Section 184 Guaranteed Loan has been referred to foreclosure counsel and subsequently the Section 184 Guaranteed Loan is reinstated. No attorney's fee and cost that exceeds the reasonable limits prescribed by Section 184 Program Guidance may be collected from the Borrower, unless approved by HUD; (10) A trustee's fee, if the security instrument provides for payment of such a fee, for execution of a satisfactory release when the deed of trust is paid in full; (11) Where permitted by the security instrument, attorney's fees and costs actually incurred in the defense of any suit or legal proceeding wherein the Servicer shall be made a party thereto by reason of the Section 184 Guaranteed Loan. No attorney's fee may be charged for the services of the Servicer's staff attorney or other employee; (12) property preservation costs incurred, subject to reasonable limits prescribed by Section 184 Program Guidance, or otherwise approved by HUD; (13) Fees permitted for providing a beneficiary notice under applicable Tribal, Federal and/or State law, if such a fee is not otherwise prohibited by the applicable law(s); and (14) Such other reasonable and customary costs as may be authorized by HUD. (b) Reasonable and customary fees must be based upon the actual cost of the work performed, including out-of-pocket expenses. HUD may establish maximum fees and costs which are reasonable and customary in different geographic areas. Except as provided in this part, no fee or costs shall be based on a percentage of either the face amount of the Section 184 Guaranteed Loan or the unpaid principal balance due. Sec. 1005.721 Enforcement of late fees. (a) A Servicer shall not commence foreclosure when the Borrower's only default is his or her failure to pay a late fee(s). (b) A late fee that may be assessed under the Section 184 Guaranteed Loan but unpaid by the Borrower shall not justify Servicer's return of Borrower's payment. However, if the Servicer thereafter notifies the Borrower of his obligation to pay a late fee, such a fee may be deducted from any subsequent payment or payments submitted by the Borrower or on his behalf if this is not inconsistent with the terms of the Section 184 Guaranteed Loan. Partial Payments shall be treated as provided in Sec. 1005.723. (c) A payment submission may be returned because of failure to include a late fee only if the Servicer notifies the Borrower before imposition of the charge of the amount of the monthly payment, the date when the late fee will be imposed, and either the amount of the late charge or the total amount due when the late fee is included. (d) During the 60-day period beginning on the effective date of transfer of the Servicing of a Section 184 Guaranteed Loan, a late fee shall not be assessed. If a payment is received by the prior Servicer on or before the due date (including any applicable grace period allowed by the Section 184 Guaranteed [[Page 807]] Loan), no late fees shall be assessed by the new Servicer. (e) A Servicer shall not assess a late fee for failure to pay a late fee, as prohibited under 12 CFR 1026.36. Sec. 1005.723 Partial Payments. (a) A Servicer must have a written policy on how it handles Partial Payments, in compliance with this section and that policy shall be readily available to the public. (b) Upon receipt of a Partial Payment, a Servicer must provide the Borrower a copy of the Servicer's written Partial Payment policy and a letter explaining how it will handle the received Partial Payment. The Servicer may: (1) Accept a Partial Payment and either apply it to the Borrower's account; (2) Identify it with the Borrower's account number and hold it in a trust account pending disposition; or (3) Return the Partial Payment(s) to the Borrower. Sec. 1005.725 Handling prepayments. Notwithstanding the terms of the Section 184 Guaranteed Loan, the Servicer shall accept a prepayment at any time and in any amount. Monthly interest on the Section 184 Guaranteed Loan must be calculated on the actual unpaid principal balance of the Section 184 Guaranteed Loan as of the date the prepayment is received, and not as of the next payment due date. Sec. 1005.727 Substitute Borrowers. Where an original Borrower requests the substitution of an existing Borrower on the Section 184 Guaranteed Loan: (a) A Servicer who is Non-Direct Guarantee Lender or financial institution must obtain HUD approval for the substitution. A remaining original Borrower must be maintained and continue to be personally liable for the Section 184 Guaranteed Loan, notwithstanding any discharge entered in accordance with applicable Tribal, Federal, or State law. (b) A Servicer who is a Direct Guarantee Lender may, subject to limitations established by HUD, approve an eligible substitute Borrower that meets the requirements for Section 184 Guaranteed Loans which they own or service, without specific approval from HUD. The remaining original Borrower must be maintained and continue to be personally liable for the Section 184 Guaranteed Loan, notwithstanding any discharge entered in accordance with applicable Tribal, Federal, or State law. Servicing Default Section 184 Guaranteed Loans Sec. 1005.729 Section 184 Guaranteed Loan collection action. A Servicer shall take prompt action to collect amounts due from Borrowers to minimize the number of accounts in default status. The Servicer must exhaust all reasonable possibilities of collection, including assessing the Borrower's financial circumstances for loss mitigation options in accordance with Sec. 1005.739. No Servicer shall commence foreclosure, assign the loan to HUD, or acquire title to a property until the requirements of this subpart have been completed. Sec. 1005.731 Default notice to Borrower. The Servicer shall provide notice to the Borrower as prescribed by applicable Tribal, Federal, or State law. Sec. 1005.733 Loss mitigation application, timelines, and appeals. (a) Servicer response to loss mitigation application. Within five days after the Servicer receives the Borrower's loss mitigation application, the Servicer must, in writing: (1) Acknowledge receipt of the application; (2) Determine if the application is complete or incomplete; (3) If incomplete, notify the Borrower which documentation is required and missing, and that submission of the missing documents is required no later than fourteen days from the date of the response to provide missing documents to the Servicer. If the Borrower does not timely submit the requested documents, the Servicer must initiate live contact with the Borrower. (b) Servicer timeframe for evaluating complete loss mitigation application. Within fourteen days of receipt of a complete application from Borrower, the Servicer must evaluate the application. (c) Notification of Servicer determination. The Servicer shall provide written notification: (1) Informing the Borrower of all available loss mitigation options; (2) Encouraging the Borrower to review all available loss mitigation options and to contact the Servicer with any questions; (3) Encouraging Borrowers, when feasible, to consider pursuing simultaneous loss mitigation options, to the extent it is offered by the Servicer; (4) Informing the Borrower that if no loss mitigation option is elected or if all elected loss mitigation options fail, the Servicer may proceed with Tribal notice under Sec. 1005.757(a) or First Legal Action at 180 days of default in accordance with Sec. 1005.757 or Sec. 1005.761; and (5) Informing the Borrower that, upon First Legal Action or the assignment of the Section 184 Guaranteed Loan to HUD, the [[Page 808]] Servicer may no longer offer or authorize a pre-foreclosure sale as an alternative to foreclosure, and that the primary alternative to foreclosure shall be a deed-in-lieu/lease-in-lieu of foreclosure, subject to applicable Tribal, Federal, or State law or contractual requirements. HUD may permit other loss mitigation on a case-by-case basis if requested by the Servicer. (d) Appeal. (1) If, after the Borrower receives the Servicer's loss mitigation options, the Borrower disagrees with Servicer's loss mitigation determination, the Borrower may appeal in writing and request that the Servicer re-evaluate the Borrower's loss mitigation application. The Borrower must submit its appeal no later than 14 days from the date of notification of the Servicer's loss mitigation determination, or any other deadline as may be prescribed by Section 184 Program Guidance. Upon receipt of the Borrower's appeal of the Servicer's loss mitigation determination, the Servicer shall re-evaluate the Borrower's loss mitigation application within thirty days but may not use the same staff that made the initial loss mitigation determination and shall notify the Borrower of its appeal decision in writing. (2) If the Borrower submits a timely written appeal, the 180-day deadline for First Legal Action shall be suspended during the appeal process. Sec. 1005.735 Occupancy inspection. (a) Occupancy inspection. An occupancy inspection is a visual inspection of a Section 184 Guaranteed Loan property by the Servicer to determine if the property is vacant or abandoned and to confirm the identity of any occupants. (b) Occupancy follow-up. An occupancy follow-up is an attempt to communicate with the Borrower via letter, telephone, or other method of communication, other than on-site inspection, to determine occupancy when the Section 184 Guaranteed Loan remains in default after the initial occupancy inspection that did not result in determination of the Borrower's occupancy status. (c) Initial occupancy inspection. The Servicer must perform the initial occupancy inspection after the 45th day of default but no later than the 60th day of the default when: (1) A payment has not been received within 45 days of the due date or for any other defaults under the Section 184 Guaranteed Loan; and (2) Efforts to reach the Borrower or occupant have been unsuccessful. (d) Occupancy follow-ups and continued inspections. If the Servicer is unable to determine the Borrower's occupancy status through the initial occupancy inspection, the Servicer must perform occupancy follow-ups and, if necessary, occupancy inspections every 25-35 days from the last inspection until the occupancy status is determined. (e) Occupancy inspections during bankruptcy. When payments are not submitted and a Borrower is a debtor in bankruptcy, the Servicer must contact either the bankruptcy trustee or the Borrower's bankruptcy attorney, if the Borrower is represented, for information concerning the occupancy status of the property or if an occupancy inspection is necessary or requires authorization. If the Servicer cannot determine that the property is vacant or abandoned during the period of the automatic stay, the Servicer must document in the servicing case binder with evidence that it timely contacted the attorney or trustee. (f) Occupancy inspections on Trust Land. Servicers must make an initial contact with the Tribe in advance of any occupancy inspection on Trust Land to review the Tribe's protocol for conducting occupancy inspections. After the initial contact, Servicers must contact the Tribe in advance of an occupancy inspection on Trust Land in accordance with the Tribe's protocol. (g) Alternative deadlines. HUD may prescribe alternative extended deadlines to the requirements in paragraphs (c) and (d) of this section through Section 184 Program Guidance. (h) Conflicts with other law. Nothing in this section shall require a Servicer to conduct an inspection when prohibited by applicable Tribal, Federal, State, or local law. Sec. 1005.737 Vacant or abandoned property procedures. If the Servicer determines through an occupancy inspection or occupancy follow-up that the property is vacant or abandoned, or if the Servicer is notified by HUD that the Tribe or the TDHE determined the property is vacant or abandoned, the Servicer must send a letter, via certified mail or other method providing delivery confirmation, to all Borrowers at the property address, or other known address of Borrower, informing them of the Servicer's determination that the property is vacant or abandoned. This letter must include the Servicer's contact information. (a) If occupancy is verified through the delivery confirmation, the Servicer shall continue pursuing collection efforts and loss mitigation as required by Sec. Sec. 1005.729 and 1005.739 until the Servicer has the authority to proceed to First Legal Action in accordance with Sec. 1005.763 or Tribal First Right of Refusal in accordance with Sec. 1005.759. (b) If the Servicer verifies through the delivery confirmation process that the property is vacant or abandoned; then the Servicer shall: (1) Commence first-time vacant property inspection; [[Page 809]] (2) Take appropriate property preservation and protection actions to secure and maintain the property; (3) For properties on Trust Land: (i) Notify the Tribe that the property is vacant or abandoned; and (ii) Complete Tribal First Right of Refusal under Sec. 1005.759; (4) For fee simple Properties, complete First Legal Action within 30 days; (5) Continue to perform vacant property inspections every 25-35 days until the default is cured, the property is disposed of, or the bankruptcy court has granted approval for the Servicer to contact the Borrower or to take any required property preservation actions; and (6) Retain documentation in the servicing case binder providing evidence of activities required by HUD in this section or otherwise provided in Section 184 Program Guidance. (c) Alternative deadlines. HUD may prescribe alternative extended deadlines to the time requirements of this section in Section 184 Program Guidance. (d) Conflicts with other law. Nothing in this section shall require a Servicer to communicate with a Borrower in a manner prohibited by applicable Tribal, Federal, or State law. Servicing Default Section 184 Guaranteed Loans Under the Loss Mitigation Program Sec. 1005.739 Loss mitigation. (a) The purpose of loss mitigation is to attempt to cure the Borrower's default and minimize financial loss to HUD. (b) The Servicer must offer a loss mitigation option, if applicable, to the Borrower and if practical under the circumstances, within 180 days of the Date of Default, or any extended timeframe prescribed by Section 184 Program Guidance. (c) Loss mitigation options include: (1) A forbearance plan; (2) Assumption; (3) A loan modification; (4) Loss mitigation advance; (5) Pre-foreclosure sale; (6) A deed-in-lieu/lease-in-lieu of foreclosure; or (7) Other options, as may be prescribed in Section 184 Program Guidance. (d) A loss mitigation review shall, to the greatest extent possible, be based on a full financial assessment of the Borrower at time of default, and the collection technique(s) must take into account the circumstances particular to each Borrower. (e) HUD may prescribe conditions and requirements in Section 184 Program Guidance for the eligibility and appropriate use of loss mitigation options. (f) Within 180 days of default, or any extended timeframe prescribed by Section 184 Guidance, if the Borrower fails to meet their loss mitigation option requirements, the Servicer shall have up to 45 days from the date of the failure of the loss mitigation to determine whether the Borrower should continue with the current loss mitigation option or have Borrower enter into an alternate loss mitigation option. (g) If a Borrower does not accept, is not eligible for, or fails loss mitigation, the Servicer shall complete First Legal Action in accordance with Sec. 1005.763 or Tribal First Right of Refusal in accordance with Sec. 1005.759. (h) Documentation must be maintained for the initial and all subsequent evaluations and resulting loss mitigation actions in the servicing case binder in accordance with Sec. 1005.219(d)(2). (i) A Servicer that is found to have failed to engage in and comply with loss mitigation as required under this subpart may be subject to enforcement action by HUD, including but not limited to sanctions under Sec. Sec. 1005.905 and 1005.907. (j) HUD may provide alternative requirements to this section when there is a national emergency or disaster and publish such alternative requirements in Section 184 Program Guidance. Sec. 1005.741 Notice to Tribe and BIA--Borrower default. (a) When two consecutive Section 184 Guaranteed Loan payments are in default or sixty days after other default under the Section 184 Guaranteed Loan, the Servicer shall provide notice of default to: (1) The BIA, where applicable, for Section 184 Guaranteed Loan property that is on Trust Land, in accordance with applicable BIA requirements; and, (2) The Tribe, where applicable, for any Section 184 Guaranteed Loan property where a Borrower has provided consent of notification in accordance with Sec. 1005.501(j). (b) The Servicer shall continue exploring loss mitigation options, consistent with the requirements under this subpart, with the Borrower during the notification process to the Tribe and/or BIA, as applicable. Sec. 1005.743 Relief for Borrower in military service. (a) Postponement of principal payments. If the Borrower is a person in ``military service,'' as such term is defined in the Servicemembers Civil Relief Act (50 U.S.C. 3901-4043), the Servicer may, by written agreement with the Borrower, postpone for the period of military service and three months thereafter any part of the monthly payment which represents the Amortization of principal. The agreement shall contain a provision for the resumption of monthly payments after such a period in amounts which will completely amortize the Section 184 [[Page 810]] Guaranteed Loan within the maturity as provided in the original loan term. (b) Forbearance. Forbearance plans may be available to Borrowers in military service pursuant to Sec. 1005.745(e). (c) Postponement of foreclosure. If at any time during default the Borrower is a person in ``military service,'' as such term is defined in the Servicemembers Civil Relief Act, the period during which the Borrower is in such military service shall be excluded in computing the period within which the Servicer shall complete First Legal Action to acquire the property or Tribal notice under Sec. 1005.759(a). No postponement or delay in the prosecution of foreclosure proceedings during the period the Borrower is in such military service shall be construed as failure on the part of the Servicer to exercise reasonable diligence in prosecuting such proceedings to completion as required by this subpart. Sec. 1005.745 Forbearance plans. (a) General. Forbearance plans are arrangements between a Servicer and Borrower that may allow for a period of reduced and/or suspended payments and specific terms for the repayment plan. During the Forbearance period, where Borrower is in compliance with the Forbearance plan, the Servicer shall not proceed to First Legal Action or complete Tribal First Right of Refusal notice under Sec. 1005.759 until expiration or default of the Agreement. (b) Informal forbearance. Informal forbearance plans are oral agreements, where permitted under Tribal or State law, between a Servicer and Borrower allowing for reduced or suspended payments and may provide specific terms for repayment. (1) Eligibility. The Servicer may offer an informal forbearance plan to a Borrower with a delinquent Section 184 Guaranteed Loan who is not experiencing a loss of income or an increase in living expenses that can be verified. (2) Duration. The period shall be three months or less. (c) Formal forbearance. Formal forbearance plans are written agreements executed by the Servicer and Borrower, allowing for reduced or suspended payments and such plans may include specific terms for repayment. (1) Eligibility. The Servicer may offer a formal forbearance plan when: (i) The Borrower is not experiencing a loss of income or increase in living expenses that can be verified; or (ii) If the Servicer determines that the Borrower is otherwise ineligible for other loss mitigation options but has sufficient surplus income or other assets that could repay the indebtedness. (2) Agreement. The Servicer shall execute a written agreement with the Borrower outlining the terms and conditions of the formal forbearance. The Servicer must include in the formal forbearance agreement a provision for the resumption of monthly payments on a date certain, with repayment in amounts which will completely reinstate the Section 184 Guaranteed Loan no later than the original maturity date. The Servicer must retain in the servicing case binder a copy of the written formal forbearance agreement postponing principal and interest payments. (3) Duration. The repayment period shall be equal to or greater than three months but not to exceed six months, unless authorized by HUD. (4) Required documents. The Servicer must obtain from the Borrower any necessary supporting documentation and retain this documentation in the servicing case binder. (5) Property condition. The Servicer must conduct any review it deems necessary, including a property inspection, when the Servicer has reason to believe that the physical condition of the property adversely impacts the Borrower's use or ability to support the debt as follows: (i) Financial information provided by the Borrower indicating large expenses for property maintenance; (ii) The Servicer receives notice from local government or other third parties regarding property condition; or (iii) The property may be affected by a disaster event. (iv) If significant maintenance costs contributed to the default or are affecting the Borrower's ability to make payments under the loan or formal forbearance agreement, the Servicer may provide in the formal forbearance agreement a period of loan forbearance during which repairs specified in the agreement will be completed at the Borrower's expense. (d) Special forbearance-unemployment. The special forbearance- unemployment loss mitigation option is available when one or more of the Borrowers has become unemployed and the loss of employment has negatively affected the Borrower's ability to continue to make their monthly Section 184 Guaranteed Loan payment. It is a formal forbearance plan with a written agreement executed by the Servicer and Borrower, allowing for reduced or suspended payments and such plan may include specific terms for repayment. (1) Eligibility. The Servicer must ensure that the Borrower meets all the following eligibility requirements: (i) The Section 184 Guaranteed Loan must be at least three months in default. (ii) The Borrower is experiencing a verified loss of income or increase in living expenses due to loss of employment. (iii) The Borrower must continue to occupy the property as a Principal Residence. [[Page 811]] (iv) The Borrower must have a verified unemployment status and no Borrower is currently receiving continuous income; or an analysis of the Borrower's financial information indicates that special forbearance- unemployment is the best or only option available for the Borrower. (2) Agreement. The Servicer shall execute a written special forbearance-unemployment agreement with the Borrower outlining the terms and conditions of the special forbearance-unemployment. The Servicer must include in the special forbearance-unemployment agreement a provision for the resumption of monthly payments on a date certain, with repayment in amounts which will completely reinstate the Section 184 Guarantee Loan no later than the original maturity. The Servicer must retain in the servicing case binder a copy of the written special forbearance-unemployment agreement postponing principal and interest payments. (3) Duration. The repayment period shall not exceed six months. (4) Required documents. The Servicer must obtain from the Borrower such supporting third party documentation, including receipts of unemployment benefits or an affidavit signed by the Borrower, stating the date that the Borrower became unemployed and stating that the Borrower is actively seeking, and is available, for employment. The Servicer must retain this documentation in the servicing case binder. (5) Property condition. The Servicer must conduct any review it deems necessary, including a property inspection, when the Servicer has reason to believe that the physical condition of the property adversely impacts the Borrower's use or ability to support the debt as follows: (i) Financial information provided by the Borrower indicating large expenses for property maintenance; (ii) The Servicer receives notice from local government or other third parties regarding property condition; or (iii) The property may be affected by a disaster event. (iv) If significant maintenance costs contributed to the default or are affecting the Borrower's ability to make payments under the Section 184 Guaranteed Loan or special forbearance-unemployment agreement, the Servicer may provide in the special forbearance-unemployment agreement a period of forbearance during which repairs specified in the agreement will be completed at the Borrower's expense. (e) Special forbearance-servicemember. The Servicer may, by written special forbearance-servicemember agreement with the Borrower, postpone any part of the monthly Section 184 Guaranteed Loan that represents Amortization of principal, for the period permitted by HUD under Sec. 1005.743. (1) Eligibility. The servicemember must be in active-duty military service and meet the criteria established in 50 U.S.C. 3911. Dependents of servicemembers are entitled to protections in limited situations per the Servicemembers Civil Relief Act, as amended. (2) Duration. The repayment period shall be for the period of military service and three months thereafter. (3) Required documents. The Borrower shall provide the Servicer with a copy of the servicemember's deployment orders. (4) Agreement. (i) The Servicer shall execute a written special forbearance-servicemember agreement with the Borrower outlining the terms and conditions of the special forbearance-servicemember agreement. The Servicer must include in the special forbearance-servicemember agreement a provision for the resumption of monthly payments on a date certain, with repayment in amounts which will completely reinstate the Section 184 Guaranteed Loan no later than the original maturity date. The Servicer must retain in the servicing case binder a copy of the written special forbearance-servicemember agreement postponing principal and interest payments. (ii) The Servicer shall comply with all applicable requirements under the Servicemembers Civil Relief Act. (f) Continued review and re-evaluation. The Servicer shall monitor the Borrower's compliance with an agreement under Sec. 1005.743 every 30 days, until the end of the agreement. (g) Other special forbearances. HUD may provide for a special forbearance in response to a disaster or other national emergency or other circumstances approved by the Secretary. Sec. 1005.747 Assumption. The Servicer shall explore assumption as a loss mitigation option with the Borrower in accordance with Sec. 1005.711. Assumptions associated with loss mitigation must result in the cure of the default and reinstatement of the Section 184 Guaranteed Loan. Sec. 1005.749 Loan modification. (a) General. A Section 184 Guaranteed Loan modification may include a change in one or more of the following: interest rate; capitalization of delinquent principal, interest, or escrow items; or re-Amortization of the balance due. A Section 184 Guaranteed Loan modification may not be used as a means to reinstate the Section 184 Guaranteed Loan prior to sale or assumption. (b) Eligibility. The Servicer must ensure that the Borrower is able to support the monthly loan payment after the loan is modified. [[Page 812]] (c) Borrower qualifications. The Servicer must ensure that the Borrower meets the following eligibility criteria: (1) At least 12 months have elapsed since the closing date of the original Section 184 Guaranteed Loan. (2) The Borrower has not executed a loan modification agreement in the past 24 months. The number of loan modification agreements may be limited as prescribed by Section 184 Program Guidance. The Servicer may approve the first loan modification agreement under the Loan, and HUD must approve any subsequent loan modifications. (3) The Borrower's default is due to a verified loss of income or increase in living expenses. (4) One or more Borrowers receive continuous income sufficient to support the monthly payment under the modified rate and term, although not sufficient to sustain the original Section 184 Guaranteed Loan and repay the arrearage. (5) The Borrower's minimum percentage of net income shall be prescribed by HUD. (6) The Borrower's monthly payment, which consists of principal, interest, taxes, insurance, and other escrow, can be reduced by the greater of 10 percent of the existing monthly Section 184 Guaranteed Loan payment amount but no less than $100, using an agreed upon interested rate in accordance with Sec. 1005.451 and amortizing for a term up to 30 years or any other period as may be prescribed by HUD. (7) The Borrower has successfully completed a three-month trial payment plan based on the Section 184 Guaranteed Loan estimated modification monthly payment amount. (d) Property conditions. The Servicer must conduct any review it deems necessary, including a property inspection, when the Servicer has reason to believe that the physical conditions of the property adversely impact the Borrower's use or ability to support the debt as follows: (1) Financial information provided by the Borrower indicates large expenses for property maintenance; (2) The Servicer receives notice from local government or other third parties regarding property condition; or (3) The property is affected by a disaster event. (e) Trial payment plans. A trial payment plan is a written agreement executed by all parties on the Section 184 Guaranteed Loan, for a minimum period of three months, during which the Borrower must make the agreed-upon consecutive monthly payments prior to execution of the final loan modification. (1) Trial payment plan terms. The Servicer must ensure that the following apply to interest rates and monthly payment amounts under trial payment plan: (i) The interest rate for the trial payment plan and the loan modification must in accordance with Sec. 1005.451. (ii) The interest rate is established when the trial payment plan is offered to the Borrower. (iii) The established monthly loan modification payment must be the same or less than the established monthly trial payment. (2) Start of trial payments. The Servicer must send the proposed trial payment plan agreement to the Borrower at least 30 days before the date the first trial payment is due. (3) Trial payment plan signatures. (i) All parties on the Section 184 Guaranteed Loan and all parties that will be subject to the modified loan must execute the trial payment plan agreement unless: (A) A Borrower or co-Borrower is deceased; (B) A Borrower and a co-Borrower are divorced; or (C) A Borrower or co-Borrower on the Section 184 Guaranteed Loan has been released from liability as the result of an approved substitute Borrower. (ii) When a Borrower uses a non-Borrower household member's income to qualify for a loan modification, the non-Borrower household member must be on the modified note and Section 184 Guaranteed Loan and sign the trial payment plan agreement. (4) Application of trial payments. The Servicer must treat payments made under the trial payment plan as Partial Payments, held in a suspense account and applied in accordance with procedures in the Section 184 Program Guidance and applicable Federal regulations. (5) End of trial payment plan period. The Servicer must offer the Borrower a permanent loan modification after the Borrower's successful completion of a trial payment plan. (6) Trial payment plan failure. The Borrower fails a trial payment plan when one of the following occurs: (i) The Borrower does not return the executed trial payment plan agreement within the month the first trial payment is due; (ii) The Borrower vacates or abandons the property; or (iii) The Borrower does not make a scheduled trial payment plan payment by the last day of the month it was due. (7) Alternatives to foreclosure after trial payment plan failure. If a Borrower fails to successfully complete a trial payment plan, the Servicer must: (i) Provide notice to the Borrower of the failure to comply with the trial payment plan; and (ii) Offer the Borrower the opportunity for a deed-in-lieu/lease-in- lieu of foreclosure, with seven days to respond to the offer. (8) Funds remaining at the end of trial payment period. (i) At the end of a successful [[Page 813]] trial payment plan, any remaining funds that do not equal a full payment must be applied to any escrow shortage or be used to reduce the amount that would be capitalized onto the principal balance. (ii) Trial payment plan failure. If the Borrower does not complete the trial payment plan, the Servicer must apply all funds held in suspense to the Borrower's account in the established order of priority. (9) Reporting of trial payment plans. The Servicer must report the trial payment plans to HUD in the manner prescribed in Section 184 Program Guidance. (f) Loan modification documents. HUD does not require a specific format for the loan modification documents; however, the Servicer must use documents that conform to all applicable Tribal, Federal, and State laws. (g) Post-modification review and modification of Loan Guarantee Certificate. Upon completion of a successful trial payment plan and within 30 days of the execution of the loan modification documents, the Servicer shall provide copies of the loan modification documents to HUD. The Servicer shall comply with additional processing instructions as prescribed by Section 184 Program Guidance. Sec. 1005.751 Loss mitigation advance. (a) General. A loss mitigation advance is a reimbursement by HUD to the Holder for the advancement of funds on behalf of the Borrower in the amount necessary to assist in the reinstatement of the Borrower's Section 184 Guaranteed Loan. The loss mitigation advance is a subordinate lien in favor of HUD. More than one loss mitigation advance may be made to an eligible Borrower. (b) Borrower eligibility. To be eligible for a loss mitigation advance: (1) The Borrower's Section 184 Guaranteed Loan is 90 or more days past due: (2) The Borrower has the ability to resume making on-time monthly loan payments and the property is owner occupied. (3) [Reserved] (c) Terms. The loss mitigation advance shall: (1) Include all arrearages, which refers to any amounts needed to bring the Borrower's Section 184 Guaranteed Loan current; (2) Provide that all prior loss mitigation advances, if any, in total must not exceed 30 percent of the unpaid principal balance as of the date of default; (3) Include any other terms and conditions, as may be prescribed by Section 184 Program Guidance; and (4) Along with another loss mitigation, where applicable, fully reinstate the Section 184 Guaranteed Loan upon the Borrower's acceptance of the loss mitigation advance. Sec. 1005.753 Pre-foreclosure sale. (a) General. A pre-foreclosure sale, also known as a short sale, refers to the sale of real estate that generates proceeds that are less than the amount owed on the property and any junior lien holders have agreed to release their liens and forgive the deficiency balance on the real estate. (b) Eligibility. To be eligible for a pre-foreclosure sale, a Servicer must ensure: (1) The Section 184 Guaranteed Loan was Originated at least 12 months prior to default; (2) The default was due to an adverse and unavoidable financial situation impacting the Borrower; (3) The property has a current fair market value that is equal to or less than the unpaid principal balance; (4) The Borrower elected the pre-foreclosure sale option within 120 days, or any other date as prescribed by Section 184 Program Guidance, from default; and (5) All other requirements of the pre-foreclosure sale loss mitigation option under this section are met. (c) Surchargeable damages. Surchargeable damage is damage to the Section 184 Guaranteed Loan property caused by fire, flood, earthquake, tornado, boiler explosion (for condominiums only) or Servicer neglect. The Servicer is responsible for the cost of surchargeable damage, and these amounts are not reimbursable by HUD. The Servicer must request HUD approval before approving the use of the pre-foreclosure sale loss mitigation option when the property has sustained surchargeable damage. If the damage is not surchargeable damage, the Servicer is not required to obtain HUD approval prior to approving the Approval to Participate Agreement with Borrower. The Servicer must comply with paragraph (p) of this regulation where a hazard insurance claim must be filed. (d) Condition of title or Title Status Report. (1) For Section 184 Guaranteed Loans on fee simple lands, a Servicer must ensure the property has Good and Marketable Title. Before approving a pre- foreclosure sale loss mitigation option, the Servicer must obtain title evidence or a preliminary report verifying that the title is not impaired by unresolvable title defects or junior liens that cannot be discharged. (2) For Section 184 Guaranteed Loans on Trust Land, the Servicer shall obtain a certified Title Status Report from the BIA. Before approving a pre-foreclosure sale loss mitigation option, the Servicer must verify that the property is not encumbered by unresolvable title defects or junior liens that cannot be discharged. (e) Discharge of junior liens. The Servicer must contact all junior lienholders to verify the Borrower has secured a discharge of the junior liens. [[Page 814]] (f) Property list price and valuation--(1) List price. The Servicer must ensure that the Borrower lists the property for sale at no less than the ``as-is'' value, as determined by an appraisal completed in accordance with the requirements in Sec. 1005.457. (2) Appraisals. The Servicer must have the property appraised in accordance with Sec. 1005.457 and pursuant to the following requirements: (i) The appraisal must contain an ``as-is'' fair market value for the subject property; (ii) A copy of the appraisal must be provided to HUD. A copy of the appraisal must be provided to the Borrower or sales agent, upon request; (iii) A Servicer must present HUD with a request for a variance to approve a pre-foreclosure sale transaction if one of the following conditions exists: (A) The current appraised value of the property is less than the unpaid principal balance by an amount of $75,000 or greater; (B) The appraised value is less than 50 percent of the unpaid principal balance; or (C) The appraisal is deemed unacceptable because the as-is value cannot be affirmed using a Broker's Price Opinion or Automated Valuation Model within 10 percent of the value. (iv) Paragraph (f)(2)(iii) of this section is not applicable to property on Trust Land unless there is a viable real estate market; (v) Under paragraph (f)(2)(iii) of this section, the Servicer must note on the variance request the specific reason for the request and attach any supporting documents needed for HUD review; (vi) The Servicer must obtain HUD approval before authorizing the marketing of the property; and (vii) All pre-foreclosure appraisals must be accompanied by a broker's price opinion or an automated valuation model unless the property is located on Trust Land. (g) Required documents. After determining that a Borrower and property meet the pre-foreclosure sale eligibility requirements, the Servicer shall send to the Borrower: (1) Pre-foreclosure sale approval to participate agreement. The agreement, on a form prescribed by Section 184 Program Guidance, shall list the pre-foreclosure sale requirements, including the date by which the Borrower's sales contract must be executed during the pre- foreclosure sale marketing period; and (2) Pre-foreclosure addendum. The addendum shall be in the form prescribed by Section 184 Program Guidance. The pre-foreclosure sale addendum must be fully executed at closing. (h) Delivery of documents to Borrower. Documents listed under paragraphs (g)(1) and (2) of this section must be sent to the Borrower via methods providing delivery confirmation with a date and time stamp of delivery. The Servicer must inform the Borrower that the documents must be signed and returned to the Servicer within 10 days of receipt. (i) Copies to HUD. The Servicer must send signed copies of the documents in paragraphs (g)(1) and (2) of this section to HUD within 15 days of receipt from the Borrower. (j) Tribal Notification for Properties on Trust Land. At the same time the Servicer sends the Approval to Participate Agreement to the Borrower, in accordance with the requirements as prescribed by Section 184 Program Guidance, the Servicer shall send a notice to the Tribe and the TDHE of the option to assume the Section 184 Guaranteed Loan or purchase the property. (k) Use of a real estate broker. The Borrower is responsible for retaining the services of a HUD-approved real estate broker/agent within seven days of the signed Approval to Participate Agreement. For Trust Land, the Borrower may request, through the Servicer, an exception to this section. If an exception is granted, HUD will work with the Borrower, Servicer and Tribe or TDHE to sell the property or pursue another loss mitigation option. (l) Required listing disclosure. The Servicer shall require the listing agreement between the seller and the agent/broker to include the following cancellation clause: ``Seller may cancel this Agreement prior to the ending date of the listing period without advance notice to the Broker, and without payment of a commission or any other consideration if the property is conveyed to HUD or the Holder. The sale completion is subject to approval by the Servicer and HUD.'' This section is not applicable to property on Trust Land unless a HUD-approved real estate broker/agent is utilized. (m) Pre-foreclosure sale marketing, settlement period, failure to complete pre-foreclosure sale. The Borrower has seven days, or other timeframe as prescribed by Section 184 Program Guidance from the date of the signed approval to participate agreement to market the property in the Multiple Listing Service, or other marketing resource if the property is on Trust Land. (1) The property must be marketed in the Multiple Listing Service or other marketing resource for a period of 90 days, or other timeframe as prescribed by Section 184 Program Guidance before Borrower may consider any offers. (2) During the marketing period, Servicers must conduct a monthly review of the property's marketing status with the real estate broker/ agent or the Tribe or TDHE, for property on Trust Land. (3) The maximum marketing period for the sale of the property is 120 days from the execution date of the Approval to Participate Agreement and the date of the property settlement. If there is a signed contract of sale, but property settlement has not occurred by [[Page 815]] the end of the 120 Days, the marketing period may be extended up to 60 days to allow for closing to occur. (4) Within 30 days of the end the marketing period, or no earlier than 120 days of default, whichever is later, if no settlement has occurred, Servicer shall provide electronic or written notice to the Borrower of the Borrower's default under the pre-foreclosure sale agreement and present the agreed upon deed-in-lieu/lease-in-lieu of foreclosure, with title being taken in the name of the Secretary. The Borrower shall have ten days from the date of the notice to respond in writing or by electronic means. If the Servicer receives no response or if the Servicer receives notice of the Borrower's rejection of the alternative to foreclosure, the Servicer must complete First Legal Action within 30 days or Tribal First Right of Refusal within 14 days of the Borrower's deadline to respond or actual rejection response date, whichever is sooner. (n) Property inspections and maintenance. The Servicer shall inspect the property in accordance with Sec. 1005.735 and follow Sec. 1005.739, where applicable. (o) Disclosure of damage after pre-foreclosure sale approval. In the event the property becomes damaged, the Borrower must report damage to the Servicer in accordance with the pre-foreclosure sale agreement. When the Servicer becomes aware that the property has sustained damage after a Borrower has received the Approval to Participate Agreement, the Servicer must evaluate the property to determine if it continues to qualify for the pre-foreclosure sale program or terminate participation if the extent of the damage changes the property's fair market value. (p) Hazard insurance claim. Where applicable, the Servicer must work with the Borrower to file a hazard insurance claim and either: use the proceeds to repair the property; or adjust the Claim by the amount of the insurance settlement (Non-Surchargeable Damage) or the Secretary's repair cost estimate. (q) Evaluation of offers. The Servicer must receive from the listing real estate broker/agent an offer that yields the highest net return to HUD and meets HUD's requirements for bids, as follows: (1) Real estate broker/agent to ensure execution of documents. The real estate broker/agent must ensure that the accepted offer and the pre-foreclosure sale addendum are signed by all applicable parties before submitting to the Servicer for approval, and (2) Arm's length transaction. The transaction must be between two unrelated parties who are each acting in their own best interest. (3) Back-up offers. Once an offer has been submitted to the Servicer for approval, the real estate broker/agent must retain any offer that the seller elects to hold as backup offer until a determination has been made on the previously submitted offer. (r) Contract approval by Servicer--(1) Review of sales contract. In reviewing the contract of sale, the Servicer must: (i) Ensure that the pre-foreclosure sale is an outright sale of the property and not a sale by assumption. (ii) Review the sales documentation to determine that there are no hidden terms or special agreements existing between any of the parties involved in the pre-foreclosure sale transaction; and no contingencies that might delay or jeopardize a timely settlement. (iii) Determine that the property was marketed pursuant to HUD requirements. (iv) Not approve a Borrower for a pre-foreclosure sale if the Servicer knows or has reason to know of the Borrower's fraud or misrepresentation of information. (2) Sales contract review period. After receiving an executed contract of sale and pre-foreclosure sale addendum from the Borrower, the Servicer must send to the Borrower a Sales Contract Review, on a form prescribed by Section 184 Program Guidance, no later than five business days after the Servicer's receipt of an executed contract for sale. (3) Net sale proceeds. (i) Net sale proceeds are the proceeds of a pre-foreclosure sale, calculated by subtracting reasonable and customary closing and settlement costs from the property sales price. (ii) Regardless of the property sale price, a Servicer may only approve a pre-foreclosure sale contract for sale if the net sale proceeds are at or above minimum allowable thresholds established by HUD. The net sale proceeds must conform to the requirements on the Pre- Foreclosure Sale Approval to Participate Agreement. (iii) The Servicer is liable for any Claim overpayment on a pre- foreclosure sale transaction that closes with less than the required net sale proceeds unless a variance has been granted by HUD. (4) Unacceptable settlement costs. The Servicer must not include the following costs in the Net Sale Proceeds calculation: (i) Repair reimbursements or allowances; (ii) Home warranty fees; (iii) Discount points or loan fees; (iv) Servicer's title insurance fee; (v) Third-party fees incurred by the Servicer or Borrower to negotiate a pre-foreclosure sale; and (vi) Any other costs as may be prohibited in Section 184 Program Guidance. (5) Other third-party fees. (i) With the exception of reasonable and customary real estate commissions, the Servicer must ensure that third- party fees incurred by the Servicer or Borrower to negotiate a pre- foreclosure sale are not included on the Closing Disclosure or similar legal documents unless explicitly permitted by Tribal or State law. [[Page 816]] (ii) The Servicer, its agents, or any outsourcing firm it employs must not charge any fee to the Borrower for participation in the pre- foreclosure sale. (s) Closing and post-closing responsibilities. For the purpose of this section, with respect to Trust Land, the closing agent may be selected by the Tribe or TDHE. (1) Closing worksheet. Prior to closing, the Servicer must provide the closing agent with a Closing Worksheet, on a form prescribed by HUD, listing all amounts payable from net sale proceeds; and a pre- foreclosure sale addendum signed by all parties. (2) Servicer review of final terms of pre-foreclosure sale transaction. The Servicer will receive from the closing agent a calculation of the actual net sale proceeds and a copy of the Closing Disclosure or similar legal document. The Servicer must ensure that: (i) The final terms of the pre-foreclosure sale transaction are consistent with the purchase contract; (ii) Only allowable settlement costs have been deducted from the seller's proceeds; (iii) The net sale proceeds will be equal to or greater than the allowable thresholds; (iv) A Closing Worksheet form is included in the claim case binder; and (v) It reports the pre-foreclosure sale to consumer reporting agencies. (3) Closing agent responsibilities after final approval. Once the Servicer gives final approval for the pre-foreclosure sale and the settlement occurs, the closing agent must: (i) Pay the expenses out of the Net Sale Proceeds and forward the Net Sale Proceeds to the Servicer; (ii) Forward a copy of the Closing Disclosure or similar legal document to the Servicer to be included in the Claim case binder no later than three business days after the pre-foreclosure sale transaction closes; and, (iii) Sign the pre-foreclosure sale Addendum on or before the date the pre-foreclosure sale transaction closes, unless explicitly prohibited by Tribal or State statute. (4) Satisfaction of debt. Upon receipt of the portion of the net sale proceeds designated for Section 184 Guaranteed Loan satisfaction, the Servicer must apply the funds to the outstanding balance and discharge any remaining debt, release the lien in the appropriate jurisdiction, and may file a Claim. (5) Discharge of junior liens. The Servicer must verify the pre- foreclosure sale will result in the discharge of junior liens as follows: (i) If the Borrower has the financial ability, the Borrower must be required to satisfy or otherwise obtain release of liens. (ii) If no other sources are available, the Borrower may obligate up to a maximum amount from sale proceeds towards discharging the liens or encumbrances, such maximum amount will be prescribed by HUD. (t) Early termination of pre-foreclosure participation--(1) Borrower-initiated termination. The Servicer must permit a Borrower to voluntarily terminate participation in the pre-foreclosure sale loss mitigation option at any time. (2) Servicer-initiated termination. The Servicer shall terminate a Borrower's pre-foreclosure sale program participation for any of the following reasons: (i) Discovery of unresolvable title problems; (ii) Determination that the Borrower is not acting in good faith to market the property; (iii) Significant change in property condition or value; (iv) Re-evaluation based on new financial information provided by the Borrower that indicates that the case does not qualify for the pre- foreclosure sale option; or (v) Borrower has failed to complete a pre-foreclosure sale within the time limits prescribed by Section 184 Program Guidance and no extensions of time have been granted by HUD. (3) Notification of pre-foreclosure sale Program Participation Termination. The Servicer must forward to the Borrower a written explanation for terminating their program participation. This letter is to include the ``end-of-participation'' date for the Borrower. (4) Failure to complete a pre-foreclosure sale. Should the Borrower be unable to complete a pre-foreclosure sale transaction, the Servicer must proceed with a deed-in-lieu/lease-in-lieu of foreclosure in accordance with Sec. 1005.755. If the Servicer is unable to obtain a deed-in-lieu/lease-in-lieu of foreclosure, the Servicer must proceed to First Legal Action or assignment in accordance with Sec. Sec. 1005.763 and 1005.765. Sec. 1005.755 Deed-in-lieu/lease-in-lieu of foreclosure. (a) Requirements. In lieu of instituting or completing a foreclosure, the Servicer or HUD may acquire a property by voluntary conveyance from the Borrowers. Conveyance of the property by deed-in- lieu/lease-in-lieu of foreclosure is allowed subject to the Servicer's compliance with the following requirements: (1) The lease-in-lieu of foreclosure for a property on Trust Land shall be approved by the Tribe prior to execution and by the BIA at recordation. (2) The Section 184 Guaranteed Loan is in default at the time of the deed-in-lieu/lease-in-lieu of foreclosure is executed and delivered; (3) The Section 184 Guaranteed Loan is satisfied of record as a part of the consideration for such conveyance; [[Page 817]] (4) The deed-in-lieu/lease-in-lieu of foreclosure from the Borrower contains a covenant which warrants against the acts of the grantor and all claiming by, through, or under the grantor and conveys Good and Marketable Title, or for leases, assigns without objectionable encumbrances; (5) With respect to Section 184 Guaranteed Loans on fee simple lands, the Servicer transfers to HUD Good and Marketable Title accompanied by satisfactory title evidence. (6) With respect to Section 184 Guaranteed Loans on Trust Lands, the Servicer provides to HUD a certified Title Status Report, or other HUD approved document issued by the Tribe, as prescribed by Section 184 Program Guidance evidencing assignment to HUD without any objectionable encumbrances. (7) The property must meet the property conditions under Sec. 1005.769. HUD may consent to conveyance of the property by deed-in-lieu/ lease-in-lieu of foreclosure when property does not meet Sec. 1005.769 in accordance with procedures in Section 184 Program Guidance. (b) Required documentation. A written agreement must be executed by the Borrower and Servicer which contains all of the conditions under which the deed-in-lieu/lease-in-lieu of foreclosure will be accepted. (c) Conveyance to Servicer. Upon execution of the deed-in-lieu/ lease-in-lieu of foreclosure document(s), the Servicer must file for record no later than two business days from receipt. (d) Conveyance to HUD, where applicable. After evidence of recordation is available, the Servicer shall convey the property to HUD in accordance with Sec. 1005.771. (e) Reporting for Credit Purposes. The Servicer must comply with all applicable Tribal, Federal, State, and local reporting requirements, including but not limited to reporting to credit reporting agencies. Sec. 1005.757 Incentive payments. As an alternative to foreclosure, or eviction where applicable, as prescribed by Section 184 Program Guidance, HUD may authorize, an incentive payment to: (a) Borrowers that complete certain loss mitigation options or for their agreement to vacate the property after foreclosure, under the terms established by the Secretary; (b) Holders or Servicers for their completion of certain loss mitigation options; and (c) Tribes or TDHEs for their assistance in loss mitigation, sale, or transfer of the Trust Land property. Assignment of the Loan to HUD; Foreclosure and Conveyance Sec. 1005.759 Property on Trust Land--Tribal First Right of Refusal; foreclosure or assignment. (a) Tribal First Right of Refusal is written notice to the Tribe of the options to assume the Section 184 Guaranteed Loan or purchase the Note based on the current unpaid principal balance or appraised value for any property on Trust Land or other reasonable options as prescribed by Section 184 Program Guidance. (b) The Servicer shall provide Tribal First Right of Refusal no later than 14 days, or any extended timeframe prescribed by Section 184 Program Guidance, after the earlier of: (1) Any lease provision addressing Tribal First Right of Refusal; (2) 120 days after default, unless the Borrower is in active loss mitigation; (3) Failure of loss mitigation after 180 days from default; (4) The failure of loss mitigation after an extension of the loss mitigation period under Sec. 1005.739(f). (5) The date the property was determined vacant or abandoned in accordance Sec. 1005.737 or the earliest date the Servicer should have known the property was vacant or abandoned. (c) The Tribe shall have either the time frame provided in the lease or, if not defined in the lease, 60 days, or any extended timeframe prescribed by Section 184 Program Guidance, to accept or decline the offer of Tribal First Right of Refusal. (d) If the Tribe declines or does not respond to the Tribal First Right of Refusal within 60 days, or any extended timeframe prescribed by Section 184 Guidance, the Servicer must either complete First Legal Action or assignment to HUD, within the timeframes prescribed in Sec. Sec. 1005.763 and 1005.765. (e) Any costs associated with failure to initiate Tribal First Right of Refusal may be deemed ineligible for claim payment. Sec. 1005.761 Fee simple properties--foreclosure or assignment with HUD approval. (a) Unless a Borrower has completed a pre-foreclosure sale or a deed-in-lieu of foreclosure in accordance with Sec. Sec. 1005.753 and 1005.755, the Servicer must complete First Legal Action on the Section 184 Guaranteed Loan pursuant to Sec. 1005.763. (b) Under limited circumstances, HUD may approve an assignment of a Section 184 Guaranteed Loan to HUD for fee simple land properties. Sec. 1005.763 First Legal Action deadline and automatic extensions. (a) Deadline for First Legal Action. The Servicer must complete First Legal Action, [[Page 818]] within 180 days of default, unless a later date is authorized under this part. (b) Automatic extensions to the First Legal Action deadline. HUD permits automatic extensions to the First Legal Action deadline for the following reasons and HUD approval is not required. (1) If Federal law or the laws of the Tribe or State, in which the Section 184 Guaranteed Loan property is located, do not permit First Legal Action within the deadline designated above, then the Servicer must complete First Legal Action within 30 days after the expiration of the time during which First Legal Action is prohibited; or (2) If the Borrower is in compliance with an approved loss mitigation plan at 180 days of default and the Borrower subsequently fails loss mitigation, First Legal Action must be completed within 30 days of the loss mitigation failure or the Borrower's request to terminate the loss mitigation plan, whichever is sooner. (3) If the Borrower does not continue with their current loss mitigation option or enter into an alternative loss mitigation option during the 45-day period under Sec. 1005.739(f), the First Legal Action must be completed within 30 days or (4) If a Tribal First Right of Refusal was offered under Sec. 1005.759, and the Servicer decides to pursue foreclosure in Tribal court, instead of assigning the Loan to HUD, First Legal Action must be completed within 30 days of completing the Tribal First Right of Refusal. (c) Other extensions. Other necessary and reasonable extensions may be allowed, as prescribed by Section 184 Program Guidance. (d) Notice to HUD. The Servicer must provide notice to HUD, in a form as may be prescribed in Section 184 Program Guidance, within 15 days of completing First Legal Action. (e) Submission of claim. The Servicer must submit a claim to HUD within 45 days from the date the foreclosure was complete in accordance with Sec. 1005.809(a) or (c). Sec. 1005.765 Assignment of the Section 184 Guaranteed Loan. (a) Fee simple land properties. (1) The assignment of Section 184 Guaranteed Loans involving fee simple land properties requires prior HUD approval. The Servicer must submit a request for an assignment within 135 days of default, or any extended timeframe prescribed by Section 184 Program Guidance, unless the Servicer has determined the property is vacant pursuant to Sec. 1005.737. (2) The Servicer shall have five business days from HUD approval, or any extended timeframe prescribed by Section 184 Program Guidance, to submit the executed assignment for recordation with the appropriate jurisdiction. (b) Properties on Trust Land. HUD may accept assignment of the Section 184 Guaranteed Loan if HUD determines that the assignment is in the best interest of the United States. In cases where HUD accepts the assignment, upon completing the Tribal First Right of Refusal in accordance with Sec. 1005.759, the Servicer shall have five business days, or any extended timeframe prescribed by Section 184 Program Guidance, to submit the executed assignment for recordation with the BIA, as applicable, or other HUD approved document, as prescribed by Section 184 Program Guidance, that evidences the assignment. (c) Notice to HUD. The Servicer must provide notice to HUD, in a form as may be prescribed in Section 184 Program Guidance, within 15 days of submitting the assignment for recordation. (d) Submission of Claim. The Servicer shall have 45 days to submit the assignment and evidence of recordation as part of a Claim in accordance with 1005.809(b). The Servicer shall submit to HUD evidence of the filing and of a Claim in a manner so prescribed by Section 184 Program Guidance. (e) Acceptance by HUD. HUD will accept assignment of the Section 184 Guaranteed Loan in accordance with 1005.773. Sec. 1005.767 Inspection and preservation of properties. (a) If at any time the Servicer knows or should have known the property is vacant or abandoned, the Servicer shall comply with the inspection requirements under Sec. 1005.737. (b) The Servicer shall take appropriate action to protect and preserve the property until its conveyance to HUD, if such action does not constitute an illegal trespass or is not otherwise prohibited by Tribal, State, or Federal law. Taking ``appropriate action'' includes First Legal Action or assignment within the time required by Sec. Sec. 1005.763 and 1005.765, as applicable. Sec. 1005.769 Property condition. (a) Condition at time of transfer. (1) When the property is transferred, or a Section 184 Guaranteed Loan is assigned to HUD in accordance with Sec. 1005.765, the property must be undamaged by fire, earthquake, flood, tornado, and Servicer neglect, except as set forth in this subpart. (2) A vacant property must be in broom-swept condition, meaning the property is, at a minimum, reasonably free of dust and dirt, and free of hazardous materials or conditions, personal belongings, and interior and exterior debris. (3) A vacant property is secured and, if applicable, winterized. (b) Damage to property. The Servicer shall not be liable for documented damage to the property by waste, deterioration, or neglect [[Page 819]] committed by the Borrower, or heirs, successors, or assigns. (c) Servicer responsibility. The Servicer shall be responsible for: (1) Damage by fire, flood, earthquake, or tornado; (2) Damage to or destruction of property which is vacant or abandoned when such damage or destruction is due to the Servicer's failure to take reasonable action to inspect, protect, and preserve such property as required by Sec. 1005.737; and (3) Any damage, whatsoever, that the property has sustained while in the possession of the Servicer, when the property has been conveyed to HUD without notice or approval by HUD as required by Sec. 1005.765. Sec. 1005.771 Conveyance of property to HUD at or after foreclosure; time of conveyance. (a) At or after foreclosure, the Servicer shall convey the property to HUD by one of the following: (1) Direct conveyance to HUD. The Servicer shall cause for the deed to be transferred directly to HUD. The Servicer shall be responsible for determining that such conveyance will comply with all provisions of this part, including conveying Good and Marketable Title and producing satisfactory title evidence to HUD. (2) Conveyance by the Holder to HUD. The Holder shall acquire Good and Marketable Title and transfer the property to HUD within 30 days of the later of: (i) Execution of the foreclosure deed; (ii) Acquiring possession of the property; (iii) Expiration of the redemption period; (iv) Such further time as may be necessary to complete the title examination and perfect the title; or (v) Such further time as HUD may approve in writing. (b) On the date the deed is filed for record, the Servicer shall notify HUD, on a form prescribed by HUD, advising HUD of the filing of such conveyance and shall assign all rights without recourse or warranty any or all claims which the Servicer has acquired in connection with the loan transaction, and as a result of the foreclosure proceedings or other means by which the Servicer acquired or conveyed such property, except such claims as may have been released with the approval of HUD. The Servicer must file for record the deed no later than two business days after execution. The Servicer must document evidence of the submission in the file. Sec. 1005.773 HUD acceptance of assignment or conveyance. (a) Effective date of assignment. HUD accepts the assignment of a Section 184 Guaranteed Loan when: (1) The Servicer has assigned the Section 184 Guaranteed Loan to HUD; (2) The Servicer has provided HUD evidence of the recordation; and (3) HUD pays a claim for the unpaid principal balance under Sec. 1005.807(a). (b) Effective date of conveyance. HUD accepts conveyance of the property when: (1) The Servicer has deeded the property to HUD; (2) The Servicer has provided HUD evidence of the recordation; and (3) HUD pays a claim for the unpaid principal balance under Sec. 1005.807(a). (c) Servicer ongoing obligation. Notwithstanding the assignment of the Section 184 Guarantee Loan or the filing of the deed or other legal instrument conveying the property interest to the HUD, the Servicer remains responsible for ensuring compliance with this part, including any loss or damage to the property, and such responsibility is retained by the Servicer until the claim has been paid by HUD. Subpart H_Claims Claims Application, Submission Categories and Types Sec. 1005.801 Purpose. This subpart sets forth requirements that are applicable to a Servicer's submission of an application for a Claim for a Section 184 Guaranteed Loan benefits to HUD. The Servicer's submission of the Claim shall be in compliance with this subpart and must follow the process details as set forth in Section 184 Program Guidance. This subpart also sets forth requirements for processing and payment of the Claim. Sec. 1005.803 Claim case binder; HUD authority to review records. (a) A Servicer must maintain a claim case binder for each claim submitted for payment in accordance with Sec. 1005.219(d)(2). The claim case binder must contain documentation supporting all information submitted in the claim. (b) HUD may review a claim case binder and the associated endorsement case binder at any time. A Servicer's denial of HUD access to any files may be grounds for sanctions in accordance with Sec. Sec. 1005.905 and 1005.907. (c) Within three business days of a request by HUD, the Servicer must make available for review, or forward to HUD, copies of identified claim case binders. Sec. 1005.805 Effect of noncompliance. (a) When a claim case binder is submitted to HUD for consideration, HUD may conduct a post-endorsement review in accordance with Sec. 1005.527. If HUD determines that the Section 184 Guaranteed Loan does not satisfy the requirements of subpart D, HUD will take one or more of the following actions: [[Page 820]] (1) Reject the claim submission when the Holder is the Originating Direct Guarantee Lender. (2) Pay the claim to the current Holder and demand reimbursement of the claim from the Originating Direct Guarantee Lender. (3) Reconvey the property or reassign the deed of trust or mortgage in accordance with Sec. 1005.849. (4) Pursue sanctions against the Originating Direct Guarantee Lender or Sponsored Entity pursuant to Sec. Sec. 1005.905 and 1005.907. (b) When reviewing a claim case binder, if HUD determines: (1) The Servicer failed to service the Section 184 Guaranteed Loan in accordance with subpart G of this part; (2) The Servicer committed fraud or a material misrepresentation; or (3) The Servicer had known or should have known of fraud or a material misrepresentation in violation of this part. (4) HUD may take one or more of the following actions. (i) Place a hold on processing the claim for reimbursement of eligible reasonable expenses under Sec. 1005.807(b) and provide the Servicer the opportunity to remedy the deficiency. (ii) Reject the claim for reimbursement of eligible reasonable expenses under Sec. 1005.807(b) partially or in its entirety. (iii) Reconvey the property or reassign the deed of trust or mortgage in accordance with Sec. 1005.849, where applicable, and require the Holder to refund the claim payment of the unpaid principal balance under Sec. 1005.807(a) and expenses under Sec. 1005.807(b). The Holder may resubmit the claim when the deficiencies identified by HUD are cured. (iv) Pursue administrative offset for any unpaid amounts owed to HUD pursuant to 24 CFR part 17. (v) Pursue sanctions against the Servicer or Holder pursuant to Sec. Sec. 1005.905 and 1005.907. (vi) Pursue other remedies as determined by HUD. (c) If a property is reconveyed or the deed of trust or mortgage is reassigned to the Holder, the Holder may not be reimbursed for any expenses incurred after conveyance or reassignment. (d) If a claim is resubmitted after reconveyance or reassignment and HUD determines a decrease in the value of the property at the time of the resubmission, HUD may reduce the claim payment accordingly. Sec. 1005.807 Claim submission categories. There are three claim submission categories: (a) Payment of the unpaid principal balance; (b) Reimbursement of eligible reasonable expenses, including interest, from the Date of Default to the earlier of the deadlines provided in Sec. 1005.839(a) through (e). Allowable reasonable exceptions will be provided by Section 184 Program Guidance; and (c) Supplemental claim for eligible reasonable expenses incurred prior to the earlier of the deadlines provided in Sec. 1005.839(a)(1) through (5), for expenses omitted from the Servicer's prior claim or for a calculation error made by either Servicer or HUD. Sec. 1005.809 Claim types. HUD recognizes five different claim types. The Servicer must submit a claim based upon the type of property disposition. The Servicer shall submit claims within timeframes established below or any extended timeframe prescribed by Section 184 Program Guidance. The Claim types are: (a) Conveyance. When the property is deeded to HUD through foreclosure: (1) The Servicer must submit a claim under Sec. 1005.807(a) to HUD no later than 2 business days from the date the deed to HUD is executed. (2)(i) Fee simple land. The claim must include the final title policy evidencing HUD's ownership through foreclosure or transfer of the ownership of the property through deed-in-lieu to HUD, in accordance with Sec. 1005.817. (ii) Trust Land. The claim must include a certified Title Status Report evidencing HUD's property interest through foreclosure. (3) In cases where the Servicer is unable to comply with paragraph (a)(2)(ii) of this section, the Servicer shall submit the claim pending the certified Title Status Report in accordance with the time frame specified in paragraph (a)(1) of this section. (4) Servicers must submit claims under Sec. 1005.807(b) no later than 15 days following the submission of a claim under Sec. 1005.807(a). (b) Assignment of the loan. When the Holder assigns the Section 184 Guaranteed Loan to HUD: (1) The Servicer must submit a claim under Sec. 1005.807(a) and (b) no later than 45 days from the date of the assignment of the Section 184 Guaranteed Loan to HUD is executed. (2)(i) Trust Land. The claim must include the recorded assignment and a certified Title Status Report evidencing the assignment of the mortgage to HUD. (ii) Fee simple land. The claim must include the final title policy providing coverage through the transfer of the mortgage to HUD. (3) In cases where the Servicer is unable to comply with paragraph (b)(2)(i) of this section, the Servicer shall submit the claim pending the certified Title Status Report in accordance with the time frame specified in paragraph (b)(1) of this section. (4) At the time of assignment of the Section 184 Guaranteed Loan, the Servicer shall certify to HUD that: [[Page 821]] (i) Priority of Section 184 Guaranteed Loan. The Section 184 Guaranteed Loan has priority over all judgments, mechanics' and materialmen's liens, or any other liens, regardless of when such liens attached, unless approved by HUD; (ii) Amount due. The amount reported to HUD in accordance with Sec. 1005.707(d) prior to assignment is verified to be due and owing under the Section 184 Guaranteed Loan; (iii) Offsets or counterclaims and authority to assign. There are no offsets or counterclaims thereto and the Holder has the authority to assign; and (iv) The assignment of the Section 184 Guaranteed Loan to HUD meets the requirements of Sec. 1005.765. (c) Post-foreclosure claims without conveyance of title. When a third-party purchases the property at foreclosure, the Servicer must submit a claim under Sec. 1005.807(a) and (b) to HUD no later than 30 days from the date the property is conveyed to the third-party. If the Holder purchases the property at foreclosure and subsequently sells the property, the Servicer may submit a claim under this section. (d) Pre-foreclosure sale, deed-in-lieu or lease-in-lieu. When a property is sold or conveyed prior to foreclosure in accordance with Sec. 1005.753 or Sec. 1005.755, the Servicer must submit a claim under Sec. 1005.807(a) and (b) to HUD no later than 30 days from the date the sale or conveyance is executed. (e) Supplemental claim. The Servicer shall be limited to one supplemental claim for each Claim under submission categories in paragraphs (a) through (d) of this section. (1) The supplemental claim shall be limited to: (i) Reasonable eligible expenses incurred up to the date of conveyance of the property or assignment of the Section 184 Guaranteed Loan, when invoices are received after the payment of the claim under Sec. 1005.807(b); or (ii) Calculation error(s) made by either the Servicer or HUD. (2) Supplemental claims must be submitted within six months of the claim submission under Sec. 1005.807(b). Supplemental claims received after six months of the claim submission will not be reviewed or paid by HUD. (3) Any supplemental claim paid by HUD shall be considered final satisfaction of the Loan Guarantee Certificate. Submission of Claims Sec. 1005.811 Claims supporting documentation. The Servicer shall submit supporting documentation to the satisfaction of HUD for each Claim. Such documentation will be provided for in Section 184 Program Guidance. Sec. 1005.813 Up-front and Annual Loan Guarantee Fee reconciliation. (a) The Servicer must include in the claims case binder a reconciliation evidencing the payment of the Up-front and Annual Loan Guarantee Fees to HUD. (b) Where the Servicer fails to comply with paragraph (a) of this section or the reconciliation shows unpaid amounts owed to HUD, and the unpaid amounts, along with late fees, have not been satisfied by the Servicer, HUD shall reject the claim. (c) The Servicer may resubmit the claim after providing the reconciliation required under paragraph (a) of this section or after the Annual Loan Guarantee Fee amounts, along with late fees, owed to HUD are paid by the Servicer. (d) Allowance to resubmit in accordance with paragraph (c) of this section shall not be construed to extend any deadlines to file claims specified in this subpart. Sec. 1005.815 Conditions for withdrawal of claim. With HUD's consent, a Holder may withdraw a claim. When HUD consent is granted, the Holder shall agree, where applicable, in writing that it will: (a) Accept a reconveyance of the property under a conveyance which warrants against the acts of HUD and all claiming by, through or under HUD; (b) Promptly file for record the reconveyance from HUD; (c) Accept without continuation, the title evidence which the Servicer furnished to HUD; and (d) Reimburse HUD for the expenditures and amounts set forth in Sec. 1005.851. Property Title Transfers and Title Waivers Sec. 1005.817 Conveyance of Good and Marketable Title. (a) Satisfactory conveyance of title and transfer of possession. The Servicer shall tender to HUD a satisfactory conveyance of title and transfer of possession of the property. The deed or other instrument of conveyance shall convey Good and Marketable Title to the property, which shall be accompanied by title evidence satisfactory to HUD. (b) Conveyance of property without Good and Marketable Title. (1) If the title to the property conveyed by the Holder to HUD does not have Good and Marketable Title, the Holder must correct any title defect within 60 days after receiving notice from HUD, or within such further time as HUD may approve in writing. (2) If the defect is not corrected within 60 days, or such further time as HUD approves in writing, the Holder must reimburse HUD's costs of holding the property. Such holding [[Page 822]] costs accrue on a daily basis and include interest on the amount of the loan guarantee benefits paid to the Holder at an interest rate set in conformity with the Treasury Fiscal Requirements Manual from the date of such notice to the date the defect is corrected or until HUD reconveys the property to the Holder, as described in paragraph (b)(3) of this section. The daily holding costs to be charged to the Holder shall also include the costs specified in Sec. 1005.851. (3) If the title defect is not corrected within a reasonable time, as determined by HUD, HUD will, after notice, reconvey the property to the Holder and the Holder must reimburse HUD in accordance with Sec. Sec. 1005.849 and 1005.851. Sec. 1005.819 Types of satisfactory title evidence. The following types of title evidence shall be satisfactory to HUD: (a) Fee or owner's title policy. A fee or owner's policy of title insurance, a guaranty or guarantee of title, or a certificate of title, issued by a title company, duly authorized by law and qualified by experience to issue such instruments. If an owner's policy of title insurance is furnished, it shall show title in HUD's name and inure to the benefit of the Department. The policy must be drawn in favor of the Holder and HUD, ``and their successors and assigns, as their interests may appear'', with the consent of the title company endorsed thereon. (b) Policy of title insurance. A Holder's policy of title insurance supplemented by an abstract and an attorney's certificate of title covering the period subsequent to the date of the loan, the terms of the policy shall be such that the liability of the title company will continue in favor of HUD after title is conveyed to HUD. The policy must be drawn in favor of the Servicer and HUD, ``and their successors and assigns, as their interests may appear'', with the consent of the title company endorsed thereon; (c) Abstract and legal opinion. An abstract of title prepared by an abstract company or individual engaged in the business of preparing abstracts of title and accompanied by the legal opinion as to the quality of such title signed by an attorney at law experienced in examination of titles. If title evidence consists of an abstract and an attorney's certificate of title, the search shall extend for at least forty years prior to the date of the Certificate to a well-recognized source of good title; (d) Torrens or similar certificate. A Torrens or similar title certificate; (e) Title standard of U.S., Tribal, or State government. Evidence of title conforming to the standards of a supervising branch of the Government of the United States or of any Tribe, State or Territory thereof; or (f) Title Status Report. Certified Title Status Report issued by the BIA or other comparable document approved by HUD in accordance with Section 184 Program Guidance, shall not be more than sixty (60) days from the date of the Sec. 1005.807(a) claim submission. Extensions may be granted under certain reasonable circumstances, as prescribed by Section 184 Program Guidance. Sec. 1005.821 Coverage of title evidence. (a) Evidence of title or Title Status Report shall include the recordation of the conveyance or assignment to HUD. The evidence of title, the Title Status Report or direct verification from the Tribe or TDHE, shall further show that, according to the public or Tribal records, there are no outstanding prior liens, including any past-due and unpaid ground rents, general taxes or special assessments, if applicable, on the date of conveyance or assignment. (b) If the title evidence and Title Status Report are acceptable generally in the community in which the property is situated, such title evidence and Title Status Report shall be satisfactory to HUD and shall be considered Good and Marketable Title. In cases of disagreement, HUD will make the final determination in its sole discretion. Sec. 1005.823 Waived title objections for properties on fee simple land. Reasonable title objections for fee simple land properties shall be waived by HUD. Reasonable title objections will be prescribed in Section 184 Program Guidance. Sec. 1005.825 Waived title objections for properties on Trust Land. HUD shall not object to title restrictions placed on the tract of Trust Land by the Tribe or the BIA so long as those restrictions do not adversely impact the property or marketability. Condition of the Property Sec. 1005.827 Damage or neglect. (a) If the property has been damaged by fire, flood, earthquake, or tornado, or if the property has suffered damage because of the Servicer 's failure to take action as required by Sec. 1005.767 or for any other reason, the Servicer must submit a claim to the hazard insurance policy, as applicable and the damage must be repaired before conveyance of the property or assignment of the Section 184 Guaranteed Loan to HUD. (b) If the property has been damaged as described in paragraph (a) of this section and the damage is not covered by a hazard insurance policy, the Servicer must provide notice of such damage to HUD. The property may not be conveyed or assigned until directed to do so by HUD. Upon receipt of such notice, HUD will either: [[Page 823]] (1) Allow the Holder to convey the damaged property; (2) Require the Holder to repair the damage before conveyance, and HUD will reimburse the Holder for reasonable payments, not in excess of HUD's estimate of the cost of repair, less any hazard insurance recovery; or (3) Require the Holder to repair the damage before conveyance, at the Holder's own expense. (c) In the event the damaged property is conveyed to HUD without prior notice or approval as provided in paragraph (a) or (b) of this section, HUD may, after notice, reconvey the property and demand reimbursement to HUD for the expenses in accordance with Sec. Sec. 1005.849 and 1005.851. Sec. 1005.829 Certificate of property condition. (a) As part of the claim submission, the Servicer shall either: (1) Certify that as of the date of the deed or assignment of the loan to HUD the property was: (i) Undamaged by fire, flood, earthquake, or tornado; (ii) Undamaged due to failure of the Servicer to act as required by Sec. 1005.767; and, (iii) Undamaged while the property was in the possession of the Borrower; or, (2) Include a copy of HUD's authorization to convey the property in damaged condition. (b) In the absence of evidence to the contrary, the Servicer's certificate or description of the damage shall be accepted by HUD as establishing the condition of the property, as of the date of the deed or assignment of the Section 184 Guaranteed Loan. Sec. 1005.831 Cancellation of hazard insurance. The Holder shall cancel any hazard insurance policy as of the date of the deed to HUD, subject to the following conditions: (a) The amount of premium refund due to the Servicer resulting from such cancellation must be deducted from the total amount claimed. (b) If the Holder's calculation of the premium refund is less than the actual premium refund, the amount of the difference between the actual refund and the calculated refund shall be remitted to HUD, accompanied by the insurance company's or agent's statement. (c) If the Holder's calculation of the premium refund is more than the actual refund, the Servicer must include in a supplemental Claim submission in accordance with Sec. 1005.809(c), accompanied by the insurance company's or agent's statement, the amount of the difference as an eligible cost in accordance with Sec. 1005.843(c). Payment of Guarantee Benefits Sec. 1005.833 Method of payment. If the claim is acceptable to HUD, payment of the guarantee benefits shall be made by electronic transfer of funds to the Holder or other such allowable payment method. Sec. 1005.835 Claim payment not conclusive evidence of claim meeting all HUD requirements. Payment of any claim by HUD is not conclusive evidence of compliance with the subparts D or G of this part. HUD reserves the right to conduct post-claim payment review of claims. Where non-compliance with any requirements of this part is identified, HUD will take appropriate action against the Holder, Originating Direct Guarantee Lender and/or Servicer, including but not limited to HUD's remedies under Sec. 1005.805 and sanctions under Sec. Sec. 1005.905 and 1005.907. Sec. 1005.837 Payment of claim: unpaid principal balance. HUD will pay a claim under Sec. 1005.807(a) in the amount of the unpaid principal balance less all receipts for the sale or transfer of the property, if applicable, in accordance with the requirements of this subpart. Sec. 1005.839 Payment of claim: interest on unpaid principal balance. HUD shall pay interest on the unpaid principal balance from the date of default to the earlier of the following: (a) The execution of deed-in-lieu/lease-in-lieu of foreclosure; (b) The execution of the conveyance to either Holder, HUD or a third-party; (c) The execution of the assignment of the Section 184 Guaranteed Loan to HUD; (d) The expiration of the reasonable diligence timeframe; or (e) Other event as prescribed by Section 184 Program Guidance. Sec. 1005.841 Payment of claim: reimbursement of eligible and reasonable costs. The claim will be paid in accordance with Sec. 1005.807(b) and will include eligible and reasonable costs, as prescribed by Section 184 Program Guidance. Sec. 1005.843 Reductions to the claim submission amount. A Holder shall reduce the claim when the following amounts are received or held by the Holder: (a) All amounts received by the Holder to the account of the borrower after default. (b) All amounts received by the Holder from any source relating to the property on account of rent, reimbursement or other payments. (c) All cash retained by the Holder including amounts held or deposited in the account of the Borrower or to which it is entitled [[Page 824]] under the loan transaction that have not been applied in reduction of the principal loan indebtedness. Sec. 1005.845 Rights and liabilities under Indian Housing Loan Guarantee Fund. (a) No Borrower, Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder, or Servicer shall have any vested right in the Indian Housing Loan Guarantee Fund. (b) No Borrower, Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder, or Servicer shall be subject to any liability arising under the Indian Housing Loan Guarantee Fund. (c) The Indian Housing Loan Guarantee Fund will be credited and debited in accordance with 12 U.S.C. 1715z-13a(i)(2). Sec. 1005.847 Final payment. (a) HUD's payment of a claim(s) shall be deemed as final payment to the Holder, notwithstanding the Holder's ability to present additional claim(s) in accordance with Sec. 1005.807 as applicable. The Holder shall have no further rights against the Borrower or HUD when there is a final payment. This paragraph does not preclude HUD from seeking reimbursement of costs and return of amounts from the Holder or Originating Direct Guarantee Lender pursuant to Sec. Sec. 1005.849 and 1005.851. (b) In cases where HUD reconveys the property to the Holder and HUD is reimbursed for all expenses and Holder returns all amounts pursuant to Sec. Sec. 1005.849 and 1005.851, provisions under paragraph (a) of this section shall not apply. However, the resubmission of the Claim, if any, shall be subject to Sec. 1005.849(b) and any additional processes as prescribed by Section 184 Program Guidance. Sec. 1005.849 Reconveyance and reassignment. (a) HUD may reconvey the property or reassign the deed of trust or mortgage to the Holder due to: (1) Noncompliance with this part or any requirements as prescribed by Section 184 Program Guidance; or (2) An authorized withdrawal of a claim in accordance with Sec. 1005.815. (b) HUD may take appropriate action against the Holder associated with the reconveyance or reassignment authorized in paragraph (a) of this section, including but not limited to, seeking reimbursement of all claim costs paid by HUD and carrying costs incurred by HUD in accordance with Sec. 1005.851. (c) Notwithstanding any other provision in this subpart, in cases where HUD has conveyed the property or reassigned the deed of trust or mortgage back to the Holder in accordance with Sec. 1005.851, and where the Servicer resubmits the claim, HUD will not reimburse the Holder any expenses incurred after the date of the HUD conveyance or assignment. (d) Additional reasonable and necessary restrictions may be imposed, as prescribed by Section 184 Program Guidance. Sec. 1005.851 Reimbursement of expenses to HUD. Where reconveyance or reassignment is sought by HUD pursuant to Sec. 1005.849 or when HUD determines noncompliance, the Holder or the Originating Direct Guarantee Lender shall reimburse HUD for: (a) All Claim costs paid by HUD. (b) HUD's cost of holding the property, including but not limited to expenses based on the estimated taxes, maintenance and operating expenses of the property, and administrative expenses. Adjustments shall be made by HUD for any income received from the property. (c) The reimbursement shall include interest on the amount of the claim payment returned by the Holder or the originating Direct Guarantee Lender from the date the claim was paid to the date HUD receives the reimbursement from Holder or the originating Direct Guarantee Lender. The interest rate set shall be in conformity with the Treasury Fiscal Requirements Manual. Subpart I_Program Performance, Reporting, Sanctions, and Appeals Sec. 1005.901 Performance reviews. HUD may conduct periodic performance reviews of Direct Guarantee Lenders, Non-Direct Guarantee Lenders, Holders, and Servicers. These may include analytical reviews, customer surveys and on-site or remote monitoring reviews. These reviews may include, but are not limited to, an evaluation of compliance with this part. HUD will provide written notice of its assessment and any proposed corrective action, if applicable. Sec. 1005.903 Reporting and certifications. (a) The Direct Guarantee Lender, Non-Direct Guarantee Lender or Servicer shall provide timely and accurate reports and certifications to HUD, which may include but is not limited to reports in connection with performance reviews under Sec. 1005.901, any special request for information from HUD, and any reasonable reports prescribed by Section 184 Program Guidance, within reasonable time frames prescribed by HUD. (b) The Direct Guarantee Lender, Non-Direct Guarantee Lender or Servicer's failure to provide timely and accurate reports and certifications to HUD may subject the Direct Guarantee Lender, Non- Direct Guarantee Lender, Holder, or Servicer to sanctions and civil money penalties pursuant to Sec. Sec. 1005.905 and 1005.907. [[Page 825]] Sec. 1005.905 Notice of sanctions. (a) Prior to the notice of sanctions or civil money penalties, HUD shall inform the Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder, or Servicer of the specific non-compliance with this part and, where applicable, afford the Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder, or Servicer a reasonable time, as prescribed in Section 184 Program Guidance, to return to compliance. (b) If it is determined that the Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder or Servicer fails to return to compliance within the allowed time, HUD shall provide written notice of the sanctions and civil money penalties to be imposed and the basis for the action. Sec. 1005.907 Sanctions and civil money penalties. (a) Where the Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder or Servicer fails to comply with this part, including failure to maintain adequate accounting records, failure to adequately service loans, or failure to exercise proper credit or underwriting judgment, or becomes ineligible to participate pursuant to Sec. 1005.225, or has engaged in practices otherwise detrimental to the interest of a Borrower or the United States, including but not limited to, failure to provide timely reporting, or failure to follow underwriting requirements set forth in this part, or failure to comply with Section 184 Program Guidance when it specifically provides times, processes, and procedures for complying with the requirements of this part, HUD may take any combination of the following actions: (1) Either temporarily or permanently terminate a Director Guarantee Lender or Non-Direct Guarantee Lender's status. If such action is taken and the terminated Direct Guarantee Lender wishes to maintain servicing rights to the Section 184 Guaranteed Loans, the terminated Direct Guarantee Lender must seek HUD approval as prescribed in Section 184 Program Guidance. (2) Bar the Direct Guarantee Lender or Holder from acquiring additional Section 184 Guaranteed Loans. (3) Require that the Direct Guarantee Lender assume not less than 10 percent of any loss on further Section 184 Guaranteed Loans made by the Direct Guarantee Lender. (4) Require that the Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder, or Servicer comply with a corrective action plan or amend the Direct Guarantee Lender, Non-Direct Guarantee Lender or Holder's quality control plan, subject to HUD approval, to remedy the non-compliance with this part and any process prescribed by Section 184 Program Guidance. The plan shall also address methods to prevent the reoccurrence of any practices that are detrimental to the interest of the Borrower or HUD. The corrective action plan or amended quality control plan shall afford the Direct Guarantee Lender, Non-Direct Guarantee Lender, or Holder reasonable time to return to compliance. (b) HUD is authorized pursuant to 12 U.S.C. 1715z-13a(g)(2) to impose civil money penalties upon Direct Guarantee Lenders, Non-Direct Guarantee Lender, or Holders as set forth in 24 CFR part 30. The violations for which a civil money penalty may be imposed are listed in subpart B of 24 CFR part 30. Sec. 1005.909 Appeals process. (a) Lenders denied participation in the Section 184 Program pursuant to subpart B of this part, or a Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder, or Servicer subject to sanctions pursuant to Sec. 1005.907, may appeal to HUD's Office of Loan Guarantee within 15 days, or other timeframe as prescribed in Section 184 Program Guidance. After consideration of the Lender, Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder or Servicer's appeal, HUD shall advise the Lender, Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder or Servicer in writing whether the denial is rescinded, modified or affirmed. The Lender, Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder, or Servicer may then appeal such decision to the Deputy Assistant Secretary for Office of Native American Programs, or his or her designee. A decision by the Deputy Assistant Secretary or designee shall constitute final agency action. (b) Hearings to challenge the imposition of civil money penalties shall be conducted according to the applicable rules of 24 CFR part 30. PART 1006_NATIVE HAWAIIAN HOUSING BLOCK GRANT PROGRAM--Table of Contents Subpart A_General Sec. 1006.1 Applicability. 1006.10 Definitions. 1006.20 Grants for affordable housing activities. 1006.30 Waivers. Subpart B_Housing Plan 1006.101 Housing plan requirements. 1006.110 Review of plans. Subpart C_Eligible Activities 1006.201 Eligible affordable housing activities. 1006.205 Development. [[Page 826]] 1006.210 Housing services. 1006.215 Housing management services. 1006.220 Crime prevention and safety activities. 1006.225 Model activities. 1006.227 Tenant-based or project-based rental assistance. 1006.230 Administrative and planning costs. 1006.235 Types of investments and forms of assistance. Subpart D_Program Requirements 1006.301 Eligible families. 1006.305 Low-income requirement and income targeting. 1006.306 Income verification for receipt of NHHBG assistance. 1006.307 Non-low-income families. 1006.310 Rent and lease-purchase limitations. 1006.315 Lease requirements. 1006.320 Tenant or homebuyer selection. 1006.325 Maintenance, management and efficient operation. 1006.330 Insurance coverage. 1006.335 Use of nonprofit organizations and public-private partnerships. 1006.340 Treatment of program income. 1006.345 Labor standards. 1006.350 Environmental review. 1006.355 Nondiscrimination requirements. 1006.360 Conflict of interest. 1006.365 Program administration responsibilities. 1006.370 Uniform administrative, requirements, cost principles, and audit requirements for Federal awards. 1006.375 Other Federal requirements. 1006.377 Other Federal requirements: Displacement, Relocation, and Acquisition. Subpart E_Monitoring and Accountability 1006.401 Monitoring of compliance. 1006.410 Performance reports. 1006.420 Review of DHHL's performance. 1006.430 Corrective and remedial action. 1006.440 Remedies for noncompliance. Authority: 12 U.S.C. 1701x, 1701x-1; 25 U.S.C. 4221 et seq.; 42 U.S.C. 3535(d), Pub. L. 115-141, Pub. L. 116-6, Pub. L. 116-94, Pub. L. 116-260, Pub. L. 117-103, Pub. L. 117-328. Source: 67 FR 40776, June 13, 2002, unless otherwise noted. Subpart A_General Sec. 1006.1 Applicability. The requirements and procedure of this part apply to grants under the Native Hawaiian Housing Block Grant (NHHBG) Program, authorized by the Hawaiian Homelands Homeownership Act of 2000 (HHH Act), which adds Title VIII--Housing Assistance For Native Hawaiians (25 U.S.C. 4221 et seq.), to the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) (25 U.S.C. 4101 et seq.). Sec. 1006.10 Definitions. The following definitions apply in this part: Act means title VIII of NAHASDA, as amended. Adjusted income means the annual income that remains after excluding the following amounts: (1) Youths, students, and persons with disabilities. $480 for each member of the family residing in the household (other than the head of the household or the spouse of the head of the household): (i) Who is under 18 years of age; or (ii) Who is: (A) 18 years of age or older; and (B) A person with disabilities or a full-time student. (2) Elderly and disabled families. $400 for an elderly or disabled family. (3) Medical and attendant expenses. The amount by which 3 percent of the annual income of the family is exceeded by the aggregate of: (i) Medical expenses, in the case of an elderly or disabled family; and (ii) Reasonable attendant care and auxiliary apparatus expenses for each family member who is a person with disabilities, to the extent necessary to enable any member of the family (including a member who is a person with disabilities) to be employed. (4) Child care expenses. Child care expenses, to the extent necessary to enable another member of the family to be employed or to further his or her education. (5) Earned income of minors. The amount of any earned income of any member of the family who is less than 18 years of age. (6) Travel expenses. Excessive travel expenses, not to exceed $25 per family per week, for employment--or education-related travel. (7) Other amounts. Such other amounts as may be provided in the housing plan for Native Hawaiians. Affordable Housing means housing that complies with the requirements of the Act and this part. The term includes permanent housing for homeless [[Page 827]] persons who are persons with disabilities, transitional housing, and single room occupancy housing. Annual income has one or more of the following meanings, as determined by the Department of Hawaiian Home Lands: (1) ``Annual income'' as defined for HUD's Section 8 programs in 24 CFR part 5, subpart F (except when determining the income of a homebuyer for an owner-occupied rehabilitation project, the value of the homeowner's principal residence may be excluded from the calculation of net family assets); or (2) The definition of income as used by the U.S. Census Bureau. This definition includes: (i) Wages, salaries, tips, commissions, etc.; (ii) Self-employment income; (iii) Farm self-employment income; (iv) Interest, dividends, net rental income, or income from estates or trusts; (v) Social security or railroad retirement; (vi) Supplemental Security Income, Aid to Families with Dependent Children, or other public assistance or public welfare programs; (vii) Retirement, survivor, or disability pensions; and (viii) Any other sources of income received regularly, including Veterans' (VA) payments, unemployment compensation, and alimony; or (3) Adjusted gross income as defined for purposes of reporting under Internal Revenue Service (IRS) Form 1040 series for individual Federal annual income tax purposes. Assistant Secretary means HUD's Assistant Secretary for Public and Indian Housing. Department of Hawaiian Home Lands (DHHL) means the agency or department of the government of the State of Hawaii that is responsible for the administration of the Hawaiian Homes Commission Act, 1920 (HHCA 1920) (42 Stat. 108 et seq.). Director means the Director of the Department of Hawaiian Home Lands. Drug-Related Criminal Activity means the illegal manufacture, sale, distribution, use, or possession with intent to manufacture, sell, distribute, or use a controlled substance (as such term is defined in section 102 of the Controlled Substances Act). Elderly families; near-elderly families means: (1) In general. The term ``elderly family'' or ``near-elderly family'' means a family whose head (or his or her spouse), or whose sole member, is: (i) For an elderly family, an elderly person; or (ii) For a near-elderly family, a near-elderly person. (2) Certain families included. The term ``elderly family'' or ``near-elderly family'' includes: (i) Two or more elderly persons or near-elderly persons, as the case may be, living together; and (ii) One or more persons described in paragraph (2)(i) of this definition living with one or more persons determined under the housing plan to be essential to their care or well-being. Elderly person means an individual who is at least 62 years of age. Family includes, but is not limited to, a family with or without children, an elderly family, a near-elderly family, a disabled family, a single person, as determined by the DHHL. Hawaiian Home Lands means lands that: (1) Have the status as Hawaiian home lands under section 204 of the HHCA 1920 (42 Stat. 110); or (2) Are acquired pursuant to the HHCA 1920. Homebuyer payment means the payment of a family purchasing a home pursuant to a long-term lease purchase agreement. Housing area means an area of Hawaiian Home Lands with respect to which the DHHL is authorized to provide assistance for affordable housing under the Act and this part. Housing plan means a plan developed by the DHHL pursuant to the Act and this part, particularly Sec. 1006.101. HUD means the Department of Housing and Urban Development. Income means the term ``income'' as defined in Section 4(9) of NAHASDA. Low-income family means a family whose income does not exceed 80 percent of the median income for the area, as determined by HUD with adjustments for smaller and larger families, except that HUD may, for purposes of [[Page 828]] this paragraph, establish income ceilings higher or lower than 80 percent of the median for the area on the basis of the findings of HUD or the agency that such variations are necessary because of prevailing levels of construction costs or unusually high or low family incomes. Median income means, with respect to an area that is a housing area, the greater of: (1) The median income for the housing area, which shall be determined by HUD; or (2) The median income for the State of Hawaii. NAHASDA means the Native American Housing Assistance and Self- Determination Act of 1996 (25 U.S.C. 4101 et seq.). Native Hawaiian means any individual who is: (1) A citizen of the United States; and (2) A descendant of the aboriginal people, who, prior to 1778, occupied and exercised sovereignty in the area that currently constitutes the State of Hawaii, as evidenced by: (i) Genealogical records; (ii) Verification by kupuna (elders) or kama'aina (long-term community residents); or (iii) Birth records of the State of Hawaii. Native Hawaiian Housing Block Grant (NHHBG) Funds means funds made available under the Act, plus program income. Near-elderly person means an individual who is at least 55 years of age and less than 62 years of age. Nonprofit means, with respect to an organization, association, corporation, or other entity, that no part of the net earnings of the entity inures to the benefit of any member, founder, contributor, or individual. Person with a disability, as further explained in 28 CFR 35.108, is defined as follows: (1) Definition of person with a disability. ``Person with a disability'' means a person who: (i) Has a physical or mental impairment which substantially limits one or more major life activities; (ii) Has a record of having such an impairment; (iii) Is regarded as having such an impairment; (iv) Has a disability as defined in section 223 of the Social Security Act; or (v) Has a developmental disability as defined in section 102 of the Developmental Disabilities Assistance and Bill of Rights Act. (2) Definition of physical or mental impairment. For the purposes of this definition, the term ``physical or mental impairment'' means: (i) Any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more body systems, such as: neurological, musculoskeletal, special sense organs, respiratory (including speech organs), cardiovascular, reproductive, digestive, genitourinary, immune, circulatory, hemic, lymphatic, skin, and endocrine; or (ii) Any mental or psychological disorder such as intellectual disability, organic brain syndrome, emotional or mental illness, and specific learning disability. (3) Nonexhaustive list of physical and mental impairments. For the purposes of this definition, the term ``physical or mental impairment'' includes, but is not limited to, contagious and noncontagious diseases and conditions such as the following: orthopedic, visual, speech, and hearing impairments, and cerebral palsy, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, intellectual disability, emotional illness, dyslexia and other specific learning disabilities, Attention Deficit Hyperactivity Disorder, Human Immunodeficiency Virus infection (whether symptomatic or asymptomatic), tuberculosis, drug addiction, and alcoholism. (4) Nonexhaustive list of major life activities. For the purposes of this definition, the term ``major life activities'' includes, but is not limited to: (i) Caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, sitting, reaching, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, writing, communicating, interacting with others, and working; and (ii) The operation of a major bodily function, such as the functions of the [[Page 829]] immune system, special sense organs and skin, normal cell growth, and digestive, genitourinary, bowel, bladder, neurological, brain, respiratory, circulatory, cardiovascular, endocrine, hemic, lymphatic, musculoskeletal, and reproductive systems. The operation of a major bodily function includes the operation of an individual organ within a body system. Project-based rental assistance means rental assistance provided through an agreement for use of a DHHL property or a contract with the owner of an existing structure, where the owner agrees to lease the subsidized units to program participants. Program participants will not retain the rental assistance if they move from the project. Secretary means the Secretary of Housing and Urban Development. Tenant-based rental assistance means a form of rental assistance in which the assisted tenant may move from a dwelling unit with a right to continued assistance. Tenant-based rental assistance under this part also includes security deposits for rental of dwelling units. Transitional housing means housing that: (1) Is designed to provide housing and appropriate supportive services to persons, including (but not limited to) deinstitutionalized individuals with disabilities, homeless individuals with disabilities, and homeless families with children; and (2) Has as its purpose facilitating the movement of individuals and families to independent living within a time period that is set by the DHHL or project owner before occupancy. [67 FR 40776, June 13, 2002, as amended at 89 FR 9760, Feb. 12, 2024] Sec. 1006.20 Grants for affordable housing activities. (a) Annual grant. Each fiscal year, HUD will make a grant (to the extent that amounts are made available) under the Act to the DHHL to carry out affordable housing activities for Native Hawaiian families who are eligible to reside on the Hawaiian Home Lands, if: (1) The Director has submitted to HUD a housing plan for that fiscal year; and (2) HUD has determined that the housing plan complies with the requirements of Sec. 1006.101. (b) Waiver. HUD may waive housing plan requirements if HUD finds that the DHHL has not complied or cannot comply with those requirements due to circumstances beyond the control of the DHHL. Sec. 1006.30 Waivers. Upon determination of good cause, the Secretary may, subject to statutory limitations, waive any provision of this part and delegate this authority in accordance with section 106 of the Department of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3535(q)). Subpart B_Housing Plan Sec. 1006.101 Housing plan requirements. The DHHL must submit a housing plan each year prior to the start of its fiscal year. The housing plan has two components, a five-year plan and a one-year plan, as follows: (a) Five-year plan. Each housing plan must contain, for the 5-year period beginning with the fiscal year for which the plan is first submitted, the following information: (1) Mission statement. A general statement of the mission of the DHHL to serve the needs of the low-income Native Hawaiian families eligible to live on the Hawaiian Home Lands to be served by the DHHL; (2) Goals and objectives. A statement of the goals and objectives of the DHHL to enable the DHHL to serve the needs identified in paragraph (a)(1), of this section during the 5-year period; and (3) Activities plans. An overview of the activities planned during the 5-year period including an analysis of the manner in which the activities will enable the DHHL to meet its mission, goals, and objectives. (b) One-year plan. The housing plan must contain the following information for the fiscal year for which the assistance under the Act is to be made available: [[Page 830]] (1) Goals and objectives. A statement of the goals and objectives to be accomplished by the DHHL with its annual grant allocation that are measurable in a quantitative way. (2) Statement of needs. A statement of the housing needs of the low- income families served by the DHHL and the means by which those needs will be addressed during the period covered by the plan, including: (i) A description of the estimated housing needs and the need for assistance for the low-income families to be served by the DHHL, including a description of the manner in which the geographical distribution of assistance is consistent with: (A) The geographical needs of those families; and (B) Needs for various categories of housing assistance; and (ii) A description of the estimated housing needs for all families to be served by the DHHL. (3) Financial resources. An operating budget for the DHHL that includes an identification and a description of: (i) The NHHBG funds and other financial resources reasonably available to the DHHL to carry out eligible activities, including an explanation of the manner in which NHHBG funds will be used to leverage additional resources; and (ii) Eligible activities to be undertaken and their projected cost, including administrative expenses. (4) Affordable housing resources. A statement of the affordable housing resources currently available at the time of the submittal of the plan and to be made available during the period covered by the plan, including: (i) A description of the significant characteristics of the housing market in the State of Hawaii, including the availability of housing from other public sources and private market housing; (ii) The effect of the characteristics identified under paragraph (b)(4)(i) of this section, on the DHHL's decision to use the NHHBG for: (A) Rental assistance; (B) The production of new units; (C) The acquisition of existing units; or (D) The rehabilitation of units; (iii) A description of the structure, coordination, and means of cooperation between the DHHL and any other governmental entities in the development, submission, or implementation of the housing plan, including a description of: (A) The involvement of private, public, and nonprofit organizations and institutions; (B) The use of loan guarantees under section 184A of the Housing and Community Development Act of 1992; and (C) Other housing assistance provided by the United States, including loans, grants, and mortgage insurance; (iv) A description of the manner in which the plan will address the needs identified pursuant to paragraph (b)(2) of this section; (v) A description of: (A) Any existing or anticipated homeownership programs and rental programs to be carried out during the period covered by the plan; and (B) The requirements and assistance available under the programs referred to in paragraph (b)(4)(v)(A) of this section; (vi) A description of: (A) Any existing or anticipated housing rehabilitation programs necessary to ensure the long-term viability of housing to be carried out during the period covered by the plan; and (B) The requirements and assistance available under the programs referred to in paragraph (b)(4)(vi)(A) of this section; (vii) A description of: (A) All other existing or anticipated housing assistance provided by the DHHL during the period covered by the plan, including transitional housing; homeless housing; college housing; and supportive services housing; and (B) The requirements and assistance available under such programs; (viii) A description of: (A) Any housing to be demolished or disposed of; (B) A timetable for that demolition or disposition; (C) A financial analysis of the proposed demolition/disposition; and (D) Any additional information HUD may request with respect to that demolition or disposition. [[Page 831]] (ix) A description of the manner in which the DHHL will coordinate with welfare agencies in the State of Hawaii to ensure that residents of the affordable housing will be provided with access to resources to assist in obtaining employment and achieving self-sufficiency; (x) A description of the requirements established by the DHHL to: (A) Promote the safety of residents of the affordable housing; (B) Facilitate the undertaking of crime prevention measures; (C) Allow resident input and involvement, including the establishment of resident organizations; and (D) Allow for the coordination of crime prevention activities between the DHHL and local law enforcement officials; and (xi) A description of the entities that will carry out the activities under the plan, including the organizational capacity and key personnel of the entities. (5) Certifications of compliance. The DHHL must certify that it: (i) Will comply with: (A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) and with the Fair Housing Act (42 U.S.C. 3601 et seq.), to the extent applicable as described in Sec. 1006.355, in carrying out the Native Hawaiian Housing Block Grant Program; and (B) Other applicable Federal statutes; (ii) Will require adequate insurance coverage for housing units that are owned and operated or assisted with NHHBG funds, in compliance with the requirements of Sec. 1006.330; (iii) Has policies in effect and available for review by HUD and the public governing the eligibility, admission, and occupancy of families for housing assisted with NHHBG funds and governing the selection of families receiving other assistance under the Act and this part; (iv) Has policies in effect and available for review by HUD and the public governing rents charged, including the methods by which such rents or homebuyer payments are determined, for housing assisted with NHHBG funds; and (v) Has policies in effect and available for review by HUD and the public governing the management and maintenance of rental and lease- purchase housing assisted with NHHBG funds. (c) Updates to plan--(1) In general. Subject to paragraph (c)(2) of this section, after the housing plan has been submitted for a fiscal year, the DHHL may comply with the provisions of this section for any succeeding fiscal year with respect to information included for the 5- year period under paragraph (a) of this section by submitting only such information regarding such changes as may be necessary to update the 5- year period of the plan previously submitted. Information for the 1-year period under paragraph (b) of this section must be submitted each fiscal year. (2) Complete plans. The DHHL shall submit a complete plan that includes a new five-year plan under this section not later than 4 years after submitting an initial plan, and not less frequently than every 4 years thereafter. (d) Amendments to plan. The DHHL must submit any amendment to the one-year housing plan for HUD review before undertaking any new activities that are not addressed in the current plan that was reviewed by HUD and found to be in compliance with section 803 of NAHASDA and this part. The amendment must include a description of the new activity and a revised budget reflecting the changes. HUD will review the revised plan and will notify DHHL within 30 days whether the amendment complies with applicable requirements. [67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024] Sec. 1006.110 Review of plans. (a) Review--(1) In general. Within 60 days of receipt of the housing plan, HUD will conduct a limited review to ensure that the contents of the plan comply with the requirements of Sec. 1006.101, are consistent with information and data available to HUD, and are not prohibited by or inconsistent with any provision of the Act and this part or any other applicable law. (2) Limitation. HUD will review the housing plan only to the extent that HUD considers that the review is necessary. [[Page 832]] (3) Incomplete plans. If HUD determines that any of the required certifications are not included in the housing plan, the plan shall be considered to be incomplete. HUD may also consider a housing plan to be incomplete if it does not address all of the requirements of Sec. 1006.101, and the DHHL has not requested a waiver of the missing requirement. (b) Notice--(1) In general. Not later than 60 days after receiving the housing plan, HUD will notify the DHHL whether or not the plan complies with applicable requirements. (2) Notice of reasons for determination of noncompliance. If HUD determines that the contents of the housing plan do not comply with the requirements of Sec. 1006.101, or are not consistent with information and data available to HUD, or are prohibited by or inconsistent with any provision of the Act and this part or any other applicable law, HUD will specify in the notice under paragraph (b)(1) of this section: (i) The reasons for noncompliance; and (ii) Any modifications necessary for the plan to be in compliance. (3) Effect of HUD's failure to take action. If HUD does not notify the DHHL, upon the expiration of the 60-day period described in paragraph (a)(1) of this section, the plan shall be considered to have been determined to comply with the requirements under Sec. 1006.101 and the DHHL shall be considered to have been notified of compliance. Subpart C_Eligible Activities Sec. 1006.201 Eligible affordable housing activities. Eligible affordable housing activities are development, housing services, housing management services, crime prevention and safety activities, and model activities. Affordable housing activities under this part are activities conducted in accordance with subpart D of this part to develop, operate, maintain, or support housing for rental or homeownership; or provide services with respect to affordable housing through the activities described in this subpart. NHHBG funds may only be used for eligible activities that are consistent with the DHHL's housing plan. [89 FR 9761, Feb. 12, 2024] Sec. 1006.205 Development. (a) NHHBG funds may be used for the acquisition, new construction, reconstruction, or moderate or substantial rehabilitation of affordable housing for homeownership or rental, which may include: (1) Real property acquisition; (2) Acquisition of affordable housing; (3) Financing acquisition of affordable housing by homebuyers through: (i) Down payment assistance; (ii) Closing costs assistance; (iii) Direct lending; and (iv) Interest subsidies or other financial assistance (4) New construction of affordable housing; (5) Reconstruction of affordable housing; (6) Moderate rehabilitation of affordable housing, including but not limited to: (i) Lead-based paint hazards elimination or reduction; (ii) Improvements to provide physical accessibility for disabled persons; and (iii) Energy-related improvements; (7) Substantial rehabilitation of affordable housing, including but not limited to: (i) Lead-based paint hazards elimination or reduction; (ii) Improvements to provide physical accessibility for disabled persons; and (iii) Energy-related improvements; (8) Site improvement, including recreational areas and playgrounds for use by residents of affordable housing and on-site streets and sidewalks; (9) The development and rehabilitation of utilities, necessary infrastructure, and utility services; (10) Conversion; (11) Demolition; (12) Administration and planning; and (13) Other related activities, such as environmental review and architectural and engineering plans for the affordable housing project. (b) Multi-unit projects. NHHBG funds may be used to assist one or more housing units in a multi-unit project. [[Page 833]] Only the actual NHHBG eligible development costs of the assisted units may be charged to the NHHBG Program. If the assisted and unassisted units are not comparable, the actual costs may be determined based upon a method of cost allocation. If the assisted and unassisted units are comparable in terms of size, features, and number of bedrooms, the actual cost of the NHHBG-assisted units can be determined by pro-rating the total NHHBG eligible development costs of the project so that the proportion of the total development costs charged to the NHHBG Program does not exceed the proportion of the NHHBG-assisted units in the project. [67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024] Sec. 1006.210 Housing services. NHHBG funds may be used for the provision of housing-related services for affordable housing, including: (a) Housing counseling, as defined in Sec. 5.100, in connection with rental or homeownership assistance must be carried out in accordance with 24 CFR 5.111; (b) The establishment and support of resident organizations and resident management corporations; (c) Energy auditing; (d) Activities related to the provisions of self-sufficiency and other services; (e) Homelessness prevention activities, which may include short term subsidies to defray rent and utility bills of an eligible family; (f) Payments to prevent foreclosure on a home; (g) Other services related to assisting owners, tenants, contractors, and other entities participating or seeking to participate in other housing activities assisted pursuant to the Act and this part. [67 FR 40776, June 13, 2002, as amended at 81 FR 90660, Dec. 14, 2016; 89 FR 9761, Feb. 12, 2024] Sec. 1006.215 Housing management services. NHHBG funds may be used for the provision of management services for affordable housing, including: (a) The preparation of work specifications; (b) Loan processing; (c) Inspections; (d) Tenant selection; (e) Management of tenant-based rental assistance; (f) The costs of operation and maintenance of units occupied by NHHBG eligible families; and (g) Management of affordable housing projects. [67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024] Sec. 1006.220 Crime prevention and safety activities. NHHBG funds may be used for the provision of safety, security, and law enforcement measures and activities appropriate to protect residents of affordable housing from crime, including the costs of: (a) Physical improvements for affordable housing to enhance security, such as, fences, monitors, locks, and additional lighting; (b) Security personnel for affordable housing; and (c) Equipment for patrols. Sec. 1006.225 Model activities. NHHBG funds may be used for housing activities under model programs that are: (a) Designed to carry out the purposes of the Act and this part; and (b) Specifically approved by HUD as appropriate for those purposes. Sec. 1006.227 Tenant-based or project-based rental assistance. NHHBG funds may be used for the provision of tenant-based rental assistance, which may include security deposits and first month's rent, and project-based rental assistance. (a) Rental assistance must comply with the requirements of this part and be provided to eligible families. (b) Rental assistance may be provided to eligible families both on and off the Hawaiian Home Lands provided such use is consistent with the applicable appropriations acts governing the use of the NHHBG funds. [89 FR 9761, Feb. 12, 2024] [[Page 834]] Sec. 1006.230 Administrative and planning costs. Up to such amount as HUD may authorize, or such other limit as may be specified by statute, of each grant received under the Act may be used for any reasonable administrative and planning expenses of the DHHL relating to carrying out the Act and this part and activities assisted with NHHBG funds, including: (a) General management, oversight and coordination. Reasonable costs of overall program management, coordination, monitoring, and evaluation. Such costs include, but are not limited to, necessary expenditures for the following: (1) Salaries, wages, and related costs of the DHHL's staff. In charging costs to this category the DHHL may either include the entire salary, wages, and related costs allocable to the NHHBG Program of each person whose primary responsibilities with regard to the program involves program administration assignments, or the prorated share of the salary, wages, and related costs of each person whose job includes any program administration assignments. The DHHL may use only one of these methods. Program administration includes the following types of assignments: (i) Developing systems and schedules for ensuring compliance with program requirements; (ii) Developing interagency agreements and agreements with entities receiving NHHBG funds; (iii) Monitoring NHHBG-assisted housing for progress and compliance with program requirements; (iv) Preparing reports and other documents related to the program for submission to HUD; (v) Coordinating the resolution of audit and monitoring findings; (vi) Evaluating program results against stated objectives; and (vii) Managing or supervising persons whose primary responsibilities with regard to the program include such assignments as those described in paragraphs (a)(1)(i) through (vi) of this section; (2) Travel costs incurred for official business in carrying out the program; (3) Administrative services performed under third party contracts or agreements, including such services as general legal services, accounting services, and audit services; and (4) Other costs for goods and services required for administration of the program, including such goods and services as rental or purchase of equipment, insurance, utilities, office supplies, and rental and maintenance (but not purchase) of office space. (b) Staff and overhead. Staff and overhead costs directly related to carrying out a project or service, such as work specifications preparation, loan processing, inspections, and other services related to assisting potential owners, tenants, and homebuyers (e.g., housing counseling); and staff and overhead costs directly related to providing advisory and other relocation services to persons displaced by the a project, including timely written notices to occupants, referrals to comparable and suitable replacement property, property inspections, counseling, and other assistance necessary to minimize hardship. These costs may be charged as administrative costs or as project costs under Sec. 1006.205 or service costs under Sec. Sec. 1006.210 or 1006.215, at the discretion of the DHHL. (c) Public information. The provision of information and other resources to residents and citizen organizations participating in the planning, implementation, or assessment of projects being assisted with NHHBG funds. (d) Indirect costs. Indirect costs may be charged to the NHHBG Program under a cost allocation plan prepared in accordance with 2 CFR part 200, subpart E. (e) Preparation of the housing plan and reports. Preparation of the housing plan under Sec. 1006.101 and performance reports under Sec. 1006.410. Preparation includes the costs of public hearings, consultations, and publication. (f) Other Federal requirements. Costs of complying with the Federal requirements in Sec. Sec. 1006.370, 1006.375, and 1006.377 of this part. Project-specific environmental review costs may be charged as administrative costs or as [[Page 835]] project costs, at the discretion of the DHHL. [67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015; 89 FR 9761, Feb. 12, 2024] Sec. 1006.235 Types of investments and forms of assistance. Subject to the requirements of this part and to the DHHL's housing plan, the DHHL has the discretion to use NHHBG funds for affordable housing activities in the form of equity investments, interest-bearing loans or advances, noninterest-bearing loans or advances, interest subsidies, the leveraging of private investments, and other forms of assistance that HUD determines to be consistent with the purposes of the Act. The DHHL has the right to establish the terms of assistance provided with NHHBG funds. [67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024] Subpart D_Program Requirements Sec. 1006.301 Eligible families. (a) General. Assistance for eligible housing activities under the Act and this part is limited to low-income Native Hawaiian families who are eligible to reside on the Hawaiian Home Lands, except as provided under paragraphs (b) and (c) of this section. (b) Exception to low-income requirement--(1) Other Native Hawaiian families. The DHHL may provide assistance for homeownership activities, which may include assistance in conjunction with loan guarantee activities to Native Hawaiian families who are not low-income families, as approved by HUD, to address a need for housing for those families that cannot be reasonably met without that assistance. DHHL must determine and document the need for housing for each family that cannot reasonably be met without such assistance. (2) HUD approval. HUD approval is required, except as provided in paragraph (b)(3)(i) of this section, if the DHHL plans to use grant amounts provided under the Act for assistance in accordance with paragraph (b)(1) of this section. HUD approval shall be obtained by DHHL submitting proposals in its housing plan, by amendment of the housing plan, or by special request to HUD at any time. (3) Limitations. (i) DHHL may use up to 10 percent of the amount planned in its Housing Plan for its fiscal year for families whose income is 81 to 100 percent of the median income without HUD approval. HUD approval is required if DHHL plans to use more than 10 percent of the amount planned for its fiscal year for such assistance or to provide housing for families with income over 100 percent of median income. (ii) Non-low-income families cannot receive the same benefits provided low-income Native Hawaiian families. The amount of assistance non-low-income families may receive will be determined by DHHL as established in its written policies. (iii) The requirements set forth in paragraphs 3(i) and (ii) of this section do not apply to other families who are non-low income that DHHL has determined to be essential under paragraph (c) of this section. (c) Other families. The DHHL may provide housing or NHHBG assistance to a family that is not low-income and is not a Native Hawaiian family without HUD approval if the DHHL documents that: (1) The presence of the family in the housing involved is essential to the well-being of Native Hawaiian families; and (2) The need for housing for the family cannot be reasonably met without the assistance. (d) Written policies. The DHHL must develop, follow, and have available for review by HUD written policies governing the eligibility, admission, and occupancy of families for housing assisted with NHHBG funds and governing the selection of families receiving other assistance under the Act and this part. [89 FR 9761, Feb. 12, 2024] Sec. 1006.305 Low-income requirement and income targeting. (a) In general. Housing qualifies as affordable housing for purposes of the Act and this part, provided that the family occupying the unit is low-income at the following times: [[Page 836]] (1) In the case of rental housing, at the time of the family's initial occupancy of such unit; (2) In the case of housing for homeownership, at the time of purchase. When DHHL enters into a loan contract with the family for NHHBG assistance to purchase or construct a homeownership unit, the time of purchase means the time that loan contract is executed; (3) In the case of owner-occupied housing units, at the time the family receives NHHBG assistance; (4) In the case of a lease-purchase agreement for existing housing or for housing to be constructed, at the time the lease-purchase agreement is signed; and (5) In the case of emergency assistance to prevent homelessness or foreclosure, at the time the family receives NHHBG assistance. (b) Affordability requirements. NHHBG-assisted rental and homeownership units must meet the affordability requirements for the remaining useful life of the property, as determined by HUD, or such other period as HUD determines in accordance with section 813(a)(2)(B) of the Act. (c) Enforceable agreements. (1) The DHHL, through binding contractual agreements with owners or other authorized entities, shall ensure long-term compliance with the provisions of this part. (2) The agreements referred to in paragraph (c)(1) of this section shall provide for: (i) To the extent allowable by Federal and State law, the enforcement of the provisions of the Act and this part by the DHHL and HUD; and (ii) Remedies for breach of the provisions of the Act and this part. (d) Exception. Notwithstanding the requirements of this section, housing assisted with NHHBG funds pursuant to Sec. 1006.301(b) shall be considered affordable housing for purposes of the Act and this part. [67 FR 40776, June 13, 2002, as amended at 89 FR 9762, Feb. 12, 2024] Sec. 1006.306 Income verification for receipt of NHHBG assistance. (a) Initial determination of eligibility. DHHL must verify that the family is income eligible based on anticipated annual income. The family is required to provide documentation to verify this determination. DHHL is required to maintain the documentation on which the determination of eligibility is based. (b) Periodic verification. DHHL may require a family to periodically verify its income in order to determine housing payments or continued occupancy consistent with DHHL's written policies. When income verification is required, the family must provide documentation which verifies its income, and this documentation must be retained by DHHL. [89 FR 9762, Feb. 12, 2024] Sec. 1006.307 Non-low-income families. A family that was low-income at the times described in Sec. 1006.305 but subsequently becomes a non-low-income family may continue to participate in the program in accordance with DHHL's admission and occupancy policies. The 10 percent limitation in Sec. 1006.301(b)(3)(i) in this part shall not apply to such families. Such families may be made subject to the additional requirements in Sec. 1006.301(b)(3)(ii) of this part based on those policies. [89 FR 9762, Feb. 12, 2024] Sec. 1006.310 Rent and lease-purchase limitations. (a) Rents. The DHHL must develop and follow written policies governing rents for rental housing units assisted with NHHBG funds, including methods by which rents are determined. (1) Maximum and minimum rent. The maximum monthly tenant rent payment for a low-income family may not exceed 30 percent of the family's monthly adjusted income. DHHL may also decide to compute rental or homebuyer payments on any lesser percentage of the adjusted income of the family. The Act does not set minimum rent or homebuyer payments; however, DHHL may do so. (2) Flat or income-adjusted rent. Flat rent means the tenant's rent payment is set at a specific dollar amount or specific percent of market rent. Income-adjusted rent means the tenant's [[Page 837]] rent payment varies based on the tenant's income (i.e., 30 percent of monthly adjusted income). DHHL may charge flat or income-adjusted rents, provided the rental or homebuyer payment of the low-income family does not exceed 30 percent of the family's adjusted income. (3) Utilities. Utilities may be considered a part of rent or homebuyer payments if DHHL decides to define rent or homebuyer payments to include utilities in its written policies on rents and homebuyer payments required by section 811(a)(1) of NAHASDA. DHHL may define rents and homebuyer payments to exclude utilities. (b) Lease-purchase. If DHHL assists low-income families to become homeowners of rental housing through a long-term lease (i.e., 10 or more years) with an option to purchase the housing, DHHL must develop and follow written policies governing lease-purchase payments (i.e., homebuyer payments) for rental housing units assisted with NHHBG funds, including methods by which payments are determined. The maximum monthly payment for a low-income family may not exceed 30 percent of the family's monthly adjusted income. (c) Exception for certain homeownership payments. Homeownership payments for families who are not low-income, as permitted under Sec. 1006.301(b), are not subject to the requirement that homebuyer payments may not exceed 30 percent of the monthly adjusted income of that family. (d) Applicability. Low-income families who receive homeownership assistance other than lease-purchase assistance are not subject to the limitations in paragraphs (a) and (b) of this section. [89 FR 9762, Feb. 12, 2024] Sec. 1006.315 Lease requirements. Except to the extent otherwise provided by or inconsistent with the laws of the State of Hawaii, in renting dwelling units in affordable housing assisted with NHHBG funds, the DHHL, owner, or manager must use leases that: (a) Do not contain unreasonable terms and conditions; (b) Require the DHHL, owner, or manager to maintain the housing in compliance with applicable local housing codes and quality standards; (c) Require the DHHL, owner, or manager to give adequate written notice of termination of the lease, which shall be the period of time required under applicable State or local law; (d) Specify that, with respect to any notice of eviction or termination, notwithstanding any State or local law, a resident shall be informed of the opportunity, before any hearing or trial, to examine any relevant documents, record, or regulations directly related to the eviction or termination; (e) Require that the DHHL, owner, or manager may not terminate the tenancy, during the term of the lease, except for serious or repeated violation of the terms and conditions of the lease, violation of applicable Federal, State, or local law, or for other good cause; and (f) Provide that the DHHL, owner, or manager may terminate the tenancy of a resident for any activity, engaged in by the resident, any member of the household of the resident, or any guest or other person under the control of the resident, that: (1) Threatens the health or safety of, or right to peaceful enjoyment of the premises by, other residents or employees of the DHHL, owner, or manager; (2) Threatens the health or safety of, or right to peaceful enjoyment of their premises by, persons residing in the immediate vicinity of the premises; or (3) Involves criminal activity (including drug-related criminal activity) on or off the premises. Sec. 1006.320 Tenant or homebuyer selection. As a condition to receiving grant amounts under the Act, the DHHL must adopt and use written tenant and homebuyer selection policies and criteria that: (a) Are consistent with the purpose of providing housing for low- income families; (b) Are reasonably related to program eligibility and the ability of the tenant or homebuyer assistance applicant to perform the obligations of the lease; and (c) Provide for: [[Page 838]] (1) The selection of tenants and homebuyers from a written waiting list in accordance with the policies and goals set forth in the housing plan; and (2) The prompt notification in writing of any rejected applicant of the grounds for that rejection. Sec. 1006.325 Maintenance, management and efficient operation. (a) Written policies. The DHHL must develop and enforce policies governing the management and maintenance of rental housing assisted with NHHBG funds. (b) Disposal of housing. This section may not be construed to prevent the DHHL, or any entity funded by the DHHL, from demolishing or disposing of housing, pursuant to regulations established by HUD. Sec. 1006.330 Insurance coverage. (a) In general. As a condition to receiving NHHBG funds, the DHHL must require adequate insurance coverage for housing units that are owned or operated or assisted with more than $5,000 of NHHBG funds, including a loan of more than $5,000 that includes payback provisions. (b) Adequate insurance. Insurance is adequate if it is a purchased insurance policy from an insurance provider or a plan of self-insurance in an amount to cover replacement cost. (c) Loss covered. The DHHL must provide for or require insurance in adequate amounts to indemnify against loss from fire, weather, and liability claims for all housing units owned, operated or assisted by the DHHL. NHHBG funds may only be used to purchase insurance for low- income homeowners and only in amounts sufficient to protect against the loss of the NHHBG funds at risk in the property. The cost of such insurance may not include coverage for a resident's personal property. (d) Exception. The DHHL shall not require insurance if the assistance is in an amount less than $5000. (e) Contractor's coverage. The DHHL shall require contractors and subcontractors to either provide insurance covering their activities or negotiate adequate indemnification coverage to be provided by the DHHL in the contract. Sec. 1006.335 Use of nonprofit organizations and public-private partnerships. (a) Nonprofit organizations. The DHHL must, to the extent practicable, provide for private nonprofit organizations experienced in the planning and development of affordable housing for Native Hawaiians to carry out affordable housing activities with NHHBG funds. (b) Public-private partnerships. The DHHL must make all reasonable efforts to maximize participation by the private sector, including nonprofit organizations and for-profit entities, in implementing its housing plan. Sec. 1006.340 Treatment of program income. (a) Defined. Program income is income realized from the use of NHHBG funds. If gross income is used to pay costs incurred that are essential or incidental to generating the income, these costs may be deducted from gross income to determine program income. Program income includes income from fees for services performed; from the use or rental of real or personal property acquired or assisted with NHHBG funds; from the sale of property acquired or assisted with NHHBG funds; from payments of principal and interest on loans made with NHHBG funds; and from payments of interest earned on investment of NHHBG funds pursuant to section 812(b) of the Act. (b) Authority to retain. The DHHL may retain any program income that is realized from any NHHBG funds if: (1) That income was realized after the initial disbursement of the NHHBG funds received by the DHHL; and (2) The DHHL agrees to use the program income for affordable housing activities in accordance with the provisions of the Act and this part; and (3) The DHHL disburses program income before disbursing additional NHHBG funds in accordance with 2 CFR 200.305. (c) Exclusion of amounts. If the amount of income received in a single fiscal year by the DHHL, which would otherwise be considered program income, does not exceed $25,000, such [[Page 839]] funds may be retained but will not be considered program income. [67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015; 89 FR 9763, Feb. 12, 2024] Sec. 1006.345 Labor standards. (a) Davis-Bacon wage rates. (1) As described in section 805(b) of the Act, contracts and agreements for assistance, sale or lease under this part must require prevailing wage rates determined by the Secretary of Labor under the Davis-Bacon Act (40 U.S.C. 276a-276a-5) to be paid to laborers and mechanics employed in the development of affordable housing. (2) When NHHBG assistance is only used to assist homebuyers to acquire single family housing, the Davis-Bacon wage rates apply to the construction of the housing if there is a written agreement with the owner or developer of the housing that NHHBG assistance will be used to assist homebuyers to buy the housing. (3) Prime contracts not in excess of $2000 are exempt from Davis- Bacon wage rates. (b) HUD-determined wage rates. Section 805(b) of the Act also mandates that contracts and agreements for assistance, sale or lease under the Act require that prevailing wages determined or adopted (subsequent to a determination under applicable State or local law) by HUD shall be paid to maintenance laborers and mechanics employed in the operation, and to architects, technical engineers, draftsmen and technicians employed in the development, of affordable housing. (c) Contract Work Hours and Safety Standards Act. Contracts in excess of $100,000 to which Davis-Bacon or HUD-determined wage rates apply are subject by law to the overtime provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327). (d) Volunteers. The requirements in 24 CFR part 70 concerning exemptions for the use of volunteers on projects subject to Davis-Bacon and HUD-determined wage rates are applicable. (e) Other laws and issuances. The DHHL, contractors, subcontractors, and other participants must comply with regulations issued under the labor standards provisions cited in this section, and other applicable Federal laws and regulations pertaining to labor standards. Sec. 1006.350 Environmental review. (a) In order to ensure that the policies of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) (NEPA) and other provisions of Federal law which further the purposes of that act (as specified in 24 CFR 58.5) are most effectively implemented in connection with the expenditure of NHHBG funds, HUD will provide for the release of funds for specific projects to the DHHL if the Director of the DHHL assumes all of the responsibilities for environmental review, decision-making, and action under NEPA and other provisions of Federal law which further the purposes of that act (as specified in 24 CFR 58.5) that would apply to HUD were HUD to undertake those projects as Federal projects. (b) An environmental review does not have to be completed before a HUD finding of compliance for the housing plan or amendments to the housing plan submitted by the DHHL. (c) No funds may be committed to a grant activity or project before the completion of the environmental review and approval of the request for release of funds and related certification required by sections 806(b) and 806(c) of the Act, except as authorized by 24 CFR part 58. (d) As set forth in section 806(a)(2)(B) of the Act and 24 CFR 58.77, HUD will: (1) Provide for the monitoring of environmental reviews performed by the DHHL under this section; (2) At its discretion, facilitate training for the performance of such reviews by the DHHL; and, (3) At its discretion, provide for the suspension or termination of the assumption of responsibilities under this section based upon a finding of substantial failure of the DHHL to execute responsibilities under this section. [67 FR 40776, June 13, 2002, as amended at 89 FR 9763, Feb. 12, 2024] [[Page 840]] Sec. 1006.355 Nondiscrimination requirements. Program eligibility under the Act and this part may be restricted to Native Hawaiians. Subject to the preceding sentence, no person may be discriminated against on the basis of race, color, national origin, religion, sex, familial status, or disability, or excluded from program eligibility because of actual or perceived sexual orientation, gender identity, or marital status. The following nondiscrimination requirements are applicable to the use of NHHBG funds: (a) The requirements of the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and HUD's implementing regulations in 24 CFR part 146; (b) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and HUD's regulations at 24 CFR part 8; and (c) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) and the Fair Housing Act (42 U.S.C. 3601 et seq.), to the extent that nothing in their requirements concerning discrimination on the basis of race shall be construed to prevent the provision of NHHBG assistance: (1) To the DHHL on the basis that the DHHL served Native Hawaiians; or (2) To an eligible family on the basis that the family is a Native Hawaiian family. (d) The equal access to HUD-assisted or -insured housing requirements in 24 CFR 5.105(a)(2). [67 FR 40776, June 13, 2002, as amended at 81 FR 80993, Nov. 17, 2016] Sec. 1006.360 Conflict of interest. In the procurement of property and services by the DHHL and contractors, the conflict of interest provisions in 2 CFR 200.317 (for DHHL) and 2 CFR 200.318 (for subrecipients). [67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1006.365 Program administration responsibilities. (a) Responsibilities. The DHHL is responsible for managing the day- to-day operations of the NHHBG Program, ensuring that NHHBG funds are used in accordance with all program requirements and written agreements, and taking appropriate action when performance problems arise. The use of contractors does not relieve the DHHL of this responsibility. (b) Agreements with contractors. The DHHL may enter into agreements with private contractors selected under the provisions of 2 CFR part 200, subpart D, for purposes of administering all or part of the NHHBG program for the DHHL. [67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015] Sec. 1006.370 Uniform administrative, requirements, cost principles, and audit requirements for Federal awards. (a) The DHHL and subrecipients receiving NHHBG funds shall comply with the requirements and standards of 2 CFR part 200, ``Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards''. (b)(1) With respect to the applicability of cost principles, all items of cost listed in 2 CFR part 200, subpart E, which require prior Federal agency approval are allowable without the prior approval of HUD to the extent that they comply with the general policies and principles stated in 2 CFR part 200, subpart E, and are otherwise eligible under this part, except for the following: (i) Depreciation methods for fixed assets shall not be changed without the approval of the Federal cognizant agency. (ii) Fines, penalties, damages, and other settlements are unallowable costs to the NHHBG program. (iii) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and personal living expenses (goods or services for personal use) regardless of whether reported as taxable income to the employees (2 CFR 200.445). (iv) Organization costs (2 CFR 200.455). (2) In addition, no person providing consultant services in an employer-employee type of relationship shall receive funds. In no event, however, shall such compensation exceed the equivalent of the daily rate paid for Level IV [[Page 841]] of the Executive Schedule. The Executive Pay Schedule may be obtained by https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages. [80 FR 75945, Dec. 7, 2015] Sec. 1006.375 Other Federal requirements. (a) Lead-based paint. The following subparts of HUD's lead-based paint regulations at 24 CFR part 35, which implement the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4822-4846) and the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), apply to the use of assistance under this part: (1) Subpart A (Sec. Sec. 35.80 through 35.98) for disclosures of known lead-based paint hazards upon sale or lease of residential property; (2) Subpart B (Sec. Sec. 35.100 through 35.175) for general lead- based paint requirements and definitions; (3) Subpart H (Sec. Sec. 35.700 through 35.830) for project-based rental assistance; (4) Subpart J (Sec. Sec. 35.900 through 35.940) for rehabilitation; (5) Subpart K (Sec. Sec. 35.1000 through 35.1020) for acquisition, leasing, support services, or operation; (6) Subpart M (Sec. Sec. 35.1200 through 35.1225) for tenant-based rental assistance; and (7) Subpart R (Sec. Sec. 35.1300 through 35.1355) for methods and standards for lead-based paint hazard evaluation and Reduction activities. (b) Drug-free workplace. The Drug-Free Workplace Act of 1988 (41 U.S.C. 701, et seq.) and HUD's implementing regulations in 2 CFR part 2429 apply to the use of assistance under this part. (c) Audits. The DHHL must comply with the requirements of the Single Audit Act and 2 CFR part 200, subpart F, with the audit report providing a schedule of expenditures for each grant. A copy of each audit must be submitted to the Federal Audit Clearinghouse. (d) Housing counseling. Housing counseling, as defined in Sec. 5.100, that is funded with or provided in connection with NHHBG funds must be carried out in accordance with 24 CFR 5.111. (e) Section 3. Requirements under Section 3 of the Housing and Urban Development Act of 1968 and 24 CFR part 75 apply. (f) Debarment and suspension. The nonprocurement, debarment, and suspension requirements at 2 CFR part 2424 are applicable. [89 FR 9763, Feb. 12, 2024] Sec. 1006.377 Other Federal requirements: Displacement, Relocation, and Acquisition. The following relocation and real property acquisition policies are applicable to programs developed or operated under the Act and this part: (a) Real property acquisition requirements. The acquisition of real property for an assisted activity is subject to the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (42 U.S.C. 4601 et seq.) (URA) and the requirements of 49 CFR part 24, subpart B. (b) Minimize displacement. Consistent with the other goals and objectives of the Act and this part, the DHHL shall assure that it has taken all reasonable steps to minimize the displacement of persons (households, businesses, nonprofit organizations, and farms) as a result of a project assisted under the Act and this part. (c) Relocation assistance for displaced persons. A displaced person (defined in paragraph (f) of this section) must be provided relocation assistance at the levels described in, and in accordance with the URA and the requirements of 49 CFR part 24. A displaced person must be advised of his or her rights under the Fair Housing Act (42 U.S.C. 3601 et seq.). Whenever possible, minority persons shall be given reasonable opportunities to relocate to comparable and suitable decent, safe, and sanitary replacement dwellings, not located in an area of minority concentration, that are within their financial means. For a displaced person with a disability, a unit is not a comparable replacement dwelling under the URA unless it is free of any barriers which would preclude reasonable ingress, egress, or use of the dwelling by such a displaced person in accordance with the definition of ``Decent, safe, and sanitary dwelling'' at 49 CFR 24.2. Furthermore, the unit must also meet the [[Page 842]] requirements of section 504 of the Rehabilitation Act (29 U.S.C. 794) as implemented by HUD's regulations at 24 CFR part 8, subpart C. (d) Appeals to the DHHL. A person who disagrees with the DHHL's determination concerning whether the person qualifies as a ``displaced person,'' or the amount of relocation assistance for which the person is eligible, may file a written appeal of that determination with the DHHL in accordance with URA requirements of 49 CFR 24.10. (e) Responsibility of DHHL. (1) The DHHL shall certify that it will comply with the URA requirements of 49 CFR part 24, and the requirements of this section. The DHHL shall ensure such compliance notwithstanding any third party's contractual obligation to the DHHL to comply with the provisions in this section. (2) The cost of required relocation assistance is an eligible project cost in the same manner and to the same extent as other project costs. However, such assistance may also be paid for with funds available to the DHHL from any other source. (3) DHHL must provide proper and timely distribution of notices to residents in accordance with the URA regulations. This includes the General Information Notice (GIN), the Notice of Relocation Eligibility, the Notice to Owner, and the 90-Day Notice. All notices must be sent in accordance with 49 CFR 24.203 and 24.102. Notices of Relocation Eligibility are typically triggered by the Initiation of Negotiation (ION). (4) The DHHL shall maintain records in sufficient detail to demonstrate compliance with this section. (f) Definition of displaced person. (1) For purposes of this section, the term ``displaced person'' means any person (household, business, nonprofit organization, or farm) that moves from real property, or moves his or her personal property from real property, permanently, as a direct result of rehabilitation, demolition, or acquisition for a project assisted under the Act. The term ``displaced person'' includes, but is not limited to: (i) A tenant-occupant of a dwelling unit who moves from the building/complex permanently after the submission to HUD of a housing plan that is later approved; (ii) Any person, including a person who moves before the date the housing plan is submitted to HUD, that the DHHL determines was displaced as a direct result of acquisition, rehabilitation, or demolition for the assisted project; (iii) A tenant-occupant of a dwelling unit who moves from the building/complex permanently after execution of the agreement between the DHHL and HUD, if the move occurs before the tenant is provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe and sanitary dwelling in the same building/ complex, under reasonable terms and conditions, upon completion of the project. Such reasonable terms and conditions include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: (A) The tenant-occupant's monthly rent and estimated average monthly utility costs before the agreement; or (B) Thirty percent of gross household income. (iv) A tenant-occupant of a dwelling who is required to relocate temporarily, but does not return to the building/complex, if: (A) The tenant-occupant is not offered payment for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, including the cost of moving to and from the temporarily occupied unit, any increased housing costs and incidental expenses; (B) The tenant-occupant is required to temporarily relocate for more than one year; or (C) Other conditions of the temporary relocation are not reasonable. (v) A tenant-occupant of a dwelling who moves from the building/ complex after he or she has been required to move to another dwelling unit in the same building/complex in order to carry out the project, if either: (A) The tenant-occupant is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move; or (B) Other conditions of the move are not reasonable. [[Page 843]] (2) Notwithstanding the provisions of this section for the definition of ``Displaced Person,'' a person does not qualify as a ``displaced person'' (and is not eligible for relocation assistance under the URA or this section), if: (i) The person moved into the property after the submission of the housing plan to HUD, but before signing a lease or commencing occupancy, was provided written notice of the project, its possible impact on the person (e.g., the person may be displaced, temporarily relocated or suffer a rent increase) and the fact that the person would not qualify as a ``displaced person'' or for any assistance provided under this section as a result of the project; (ii) The person meets the definition of ``persons not displaced'' as defined in 49 CFR 24.2; or (iii) The DHHL determines the person is not displaced as a direct result of acquisition, rehabilitation, or demolition for an assisted project. To exclude a person on this basis, HUD must concur in that determination in accordance with 49 CFR 24.2. (3) The DHHL may at any time ask HUD to determine whether a specific displacement is or would be covered under this section. (g) Definition of initiation of negotiations. For purposes of determining the formula for computing the replacement housing assistance to be provided to a person displaced from a dwelling as a direct result of acquisition, rehabilitation, or demolition of the real property, the term Initiation of Negotiations (ION) date means the execution of the written agreement covering the acquisition, rehabilitation, or demolition (See 49 CFR 24.2). [89 FR 9763, Feb. 12, 2024] Subpart E_Monitoring and Accountability Sec. 1006.401 Monitoring of compliance. (a) Periodic reviews and monitoring. At least annually, the DHHL must review the activities conducted and housing assisted with NHHBG funds to assess compliance with the requirements of the Act and this part. This review must encompass and incorporate the results of the monitoring by the DHHL of all contractors involved in the administration of NHHBG activities. (b) Review. Each review under paragraph (a) of this section must include on-site inspection of housing to determine compliance with applicable requirements. (c) Results. The results of each review under paragraph (a) of this section must be: (1) Included in a performance report of the DHHL submitted to HUD under Sec. 1006.410; and (2) Made available to the public. Sec. 1006.410 Performance reports. (a) Requirement. For each fiscal year, the DHHL must: (1) Review the progress the DHHL has made during that fiscal year in achieving goals stated in its housing plan; and (2) Submit a report in a form acceptable to HUD, within 90 days of the end of the DHHL's fiscal year, describing the conclusions of the review. (3) DHHL may submit a written request for an extension of the deadline. HUD will establish a new date for submission if the extension is granted. (b) Content. Each report submitted under this section for a fiscal year shall: (1) Describe the use of grant amounts provided to the DHHL for that fiscal year; (2) Assess the relationship of the use referred to in paragraph (b)(1), of this section, to the goals identified in its housing plan; (3) Indicate the programmatic accomplishments of the DHHL; and (4) Describe the manner in which the DHHL would change its housing plan as a result of its experiences administering the grant under the Act. (c) Public availability--(1) Comments by Native Hawaiians. In preparing a report under this section, the DHHL shall make the report publicly available to Native Hawaiians who are eligible to reside on the Hawaiian Home Lands and give a sufficient amount of time to permit them to comment on that report, in such manner and at such time as the DHHL may determine, before it is submitted to HUD. [[Page 844]] (2) Summary of comments. The report under this section must include a summary of any comments received by the DHHL from beneficiaries under paragraph (c)(1) of this section, regarding the program to carry out the housing plan. (d) HUD review. HUD will: (1) Review each report submitted under the Act and this part; and (2) With respect to each such report, make recommendations as HUD considers appropriate to carry out the purposes of the Act. [67 FR 40776, June 13, 2002, as amended at 89 FR 9764, Feb. 12, 2024] Sec. 1006.420 Review of DHHL's performance. (a) Objective. HUD will, at least annually, review DHHL's performance to determine whether the DHHL has: (1) Carried out eligible activities in a timely manner; (2) Carried out and made certifications in accordance with the requirements and the primary objectives of the Act and this part and with other applicable laws; (3) A continuing capacity to carry out the eligible activities in a timely manner; (4) Complied with its housing plan; and (5) Submitted accurate performance reports. (b) Basis for review. In reviewing DHHL's performance, HUD will consider all available evidence, which may include, but not be limited to, the following: (1) The DHHL's housing plan and any amendments thereto; (2) Reports prepared by the DHHL; (3) Records maintained by the DHHL, including their retention under 2 CFR 200.333, noting that the NHHBG Annual Performance Report is the program's final expenditure report; (4) Results of HUD's monitoring of the DHHL's performance, including field evaluation of the quality of the work performed; (5) Audit reports; (6) Records of drawdowns on the line of credit; (7) Records of comments and complaints by citizens and organizations; and (8) Litigation. (c) Failure to maintain records. The DHHL's failure to maintain records may result in a finding that the DHHL failed to meet the applicable requirement to which the record pertains. [67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015; 89 FR 9764, Feb. 12, 2024] Sec. 1006.430 Corrective and remedial action. (a) General. One or more corrective or remedial actions will be taken by HUD when, on the basis of a performance review, HUD determines that the DHHL has not: (1) Complied with the requirements of the Act and this part and other applicable laws and regulations, including the environmental responsibilities assumed under Sec. 1006.350; (2) Carried out its activities substantially as described in its housing plan; (3) Made substantial progress in carrying out its program and achieving its quantifiable goals as described in its housing plan; or (4) Shown the continuing capacity to carry out its approved activities in a timely manner. (b) Action. The action taken by HUD will be designed, first, to prevent the continuance of the deficiency; second, to mitigate any adverse effects or consequences of the deficiency; and third, to prevent a recurrence of the same or similar deficiencies. The following actions may be taken singly or in combination, as appropriate for the circumstances: (1) Issue a letter of warning advising the DHHL of the performance problem(s), describing the corrective actions that HUD believes should be taken, establishing a completion date for corrective actions, and notifying the DHHL that more serious actions may be taken if the performance problem(s) is not corrected or is repeated; (2) Request the DHHL to submit progress schedules for completing activities or complying with the requirements of the Act and this part; (3) Recommend that the DHHL suspend, discontinue, or not incur costs for the affected activity; [[Page 845]] (4) Recommend that the DHHL redirect funds from affected activities to other eligible activities; (5) Recommend that the DHHL reimburse its program account or line of credit under the Act in the amount improperly expended and reprogram the use of the funds; and (6) Recommend that the DHHL obtain appropriate technical assistance using existing grant funds or other available resources to overcome the performance problem(s). Sec. 1006.440 Remedies for noncompliance. (a) Remedies. If HUD finds that the DHHL has failed to comply substantially with any provision of the Act or this part, the following actions may be taken by HUD: (1) Terminate payments to the DHHL; (2) Reduce payments to the DHHL by an amount equal to the amount not expended in accordance with the Act or this part; (3) Limit the availability of payments to programs, projects, or activities not affected by such failure to comply; or (4) Adjust, reduce or withdraw grant amounts or take other action as appropriate in accordance with reviews and audits. (b) Exception. Grant amounts already expended on affordable housing activities may not be recaptured or deducted from future assistance provided to the DHHL. (c) HUD may, upon due notice, suspend payments at any time after the issuance of the opportunity for hearing pending such hearing and final decision, to the extent HUD determines such action necessary to preclude the further expenditure of funds for activities affected by such failure to comply. (d) Hearing requirement. Before imposing remedies under this section, HUD will: (1) Take at least one of the corrective or remedial actions specified under Sec. 1006.430 and permit the DHHL to make an appropriate and timely response; (2) Provide the DHHL with the opportunity for an informal consultation with HUD regarding the proposed action; and (3) Provide DHHL with reasonable notice and opportunity for a hearing. (e) Continuance of actions. If HUD takes an action under paragraph (a) of this section, the action will continue until HUD determines that the failure of the DHHL to comply with the provision has been remedied and the DHHL is in compliance with the provision. (f) Referral to the Attorney General. In lieu of, or in addition to, any action HUD may take under paragraph (a) of this section, if HUD has reason to believe that the DHHL has failed to comply substantially with any provision of the Act or this part, HUD may refer the matter to the Attorney General of the United States with a recommendation that an appropriate civil action be instituted. Upon receiving a referral, the Attorney General may bring a civil action in any United States district court of appropriate jurisdiction for such relief as may be appropriate, including an action to recover the amount of the assistance furnished under the Act that was not expended in accordance with the Act or this part or for mandatory or injunctive relief. PART 1007_SECTION 184A LOAN GUARANTEES FOR NATIVE HAWAIIAN HOUSING--Table of Contents Sec. 1007.1 Purpose. 1007.5 Definitions. 1007.10 Eligible Borrowers. 1007.15 Eligible uses. 1007.20 Eligible housing. 1007.25 Eligible lenders. 1007.30 Security for loan. 1007.35 Loan terms. 1007.40 Environmental requirements. 1007.45 Nondiscrimination. 1007.50 Certificate of guarantee. 1007.55 Guarantee fee. 1007.60 Liability under guarantee. 1007.65 Transfer and assumption. 1007.70 Disqualification of lenders and civil money penalties. 1007.75 Payment under guarantee. 1007.80 Qualified mortgage. Authority: 12 U.S.C. 1715z-13b; 15 U.S.C. 1639c; 42 U.S.C. 3535(d). Source: 67 FR 40776, June 13, 2002, unless otherwise noted. [[Page 846]] Sec. 1007.1 Purpose. This part provides the requirements and procedures that apply to loan guarantees for Native Hawaiian Housing under section 184A of the Housing and Community Development Act of 1992. Section 184A permits HUD to guarantee an amount not to exceed 100 percent of the unpaid principal and interest that is due on an eligible loan. The purpose of section 184A and this part is to provide access to sources of private financing to Native Hawaiian families who otherwise could not acquire housing financing because of the unique legal status of the Hawaiian Home Lands or as a result of a lack of access to private financial markets. Sec. 1007.5 Definitions. The following definitions apply in this part: Department of Hawaiian Home Lands (DHHL) means the agency or department of the government of the State of Hawaii that is responsible for the administration of the Hawaiian Homes Commission Act, 1920 (42 Stat. 108 et seq.). Eligible entity means a Native Hawaiian family, the Department of Hawaiian Home Lands, the Office of Hawaiian Affairs, and private nonprofit or private for-profit organizations experienced in the planning and development of affordable housing for Native Hawaiians. Family means one or more persons maintaining a household, and includes, but is not limited to, a family with or without children, an elderly family, a near-elderly family, a disabled family, or a single person. Guarantee Fund means the Native Hawaiian Housing Loan Guarantee Fund under this part. Hawaiian Home Lands means lands that: (1) Have the status of Hawaiian Home Lands under section 204 of the Hawaiian Homes Commission Act (42 Stat. 110); or (2) Are acquired pursuant to that Act. HUD means the Department of Housing and Urban Development. Native Hawaiian means any individual who is: (1) A citizen of the United States; and (2) A descendant of the aboriginal people, who, prior to 1778, occupied and exercised sovereignty in the area that currently constitutes the State of Hawaii, as evidenced by: (i) Genealogical records; (ii) Verification by kupuna (elders) or kama'aina (long-term community residents); or (iii) Birth records of the State of Hawaii. Native Hawaiian family means a family with at least one member who is a Native Hawaiian. Office of Hawaiian Affairs means the entity of that name established under the constitution of the State of Hawaii. Sec. 1007.10 Eligible borrowers. A loan guaranteed under this part may only be made to the following borrowers: (a) A Native Hawaiian family; (b) The Department of Hawaiian Home Lands; (c) The Office of Hawaiian Affairs; or (d) A private, nonprofit organization experienced in the planning and development of affordable housing for Native Hawaiians. Sec. 1007.15 Eligible uses. (a) In general. A loan guaranteed under this part may only be used to construct, acquire, or rehabilitate eligible housing. (b) Construction advances. Advances made by the lender during construction are eligible if: (1) The mortgagor and the mortgagee execute a building loan agreement, approved by HUD, setting forth the terms and conditions under which advances will be made; (2) The advances are made only as provided in the building loan agreement; (3) The principal amount of the mortgage is held by the mortgagee in an interest bearing account, trust, or escrow for the benefit of the mortgagor, pending advancement to the mortgagor or to his or her creditors as provided in the loan agreement; and (4) The mortgage bears interest on the amount advanced to the mortgagor or to his or her creditors and on the amount held in an account or trust for the benefit of the mortgagor. [[Page 847]] Sec. 1007.20 Eligible housing. (a) A loan guaranteed under this part may only be made for one to four-family dwellings that are standard housing, in accordance with paragraph (b), of this section. The housing must be located on Hawaiian Home Lands for which a housing plan that provides for the use of loan guarantees under this part has been submitted and approved under part 1006 of this chapter. (b) Standard housing must meet housing safety and quality standards that: (1) Provide sufficient flexibility to permit the use of various designs and materials; and (2) Require each dwelling unit to: (i) Be decent, safe, sanitary, and modest in size and design; (ii) Conform with applicable general construction standards for the region in which the housing is located; (iii) Contain a plumbing system that: (A) Uses a properly installed system of piping; (B) Includes a kitchen sink and a partitional bathroom with lavatory, toilet, and bath or shower; and (C) Uses water supply, plumbing, and sewage disposal systems that conform to any minimum standards established by the applicable county or State; (iv) Contain an electrical system using wiring and equipment properly installed to safely supply electrical energy for adequate lighting and for operation of appliances that conforms to any appropriate county, State, or national code; (v) Be not less than the size provided under the applicable locally adopted standards for size of dwelling units, except that HUD, upon request of the DHHL may waive the size requirements under this paragraph; and (vi) Conform with the energy performance requirements for new construction established by HUD under section 526(a) of the National Housing Act (12 U.S.C.A. 1735f-4), unless HUD determines that the requirements are not applicable. (c) The relevant requirements of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, and R of this title and Sec. Sec. 200.805 and 200.810 of this title apply to housing eligible for a loan guaranteed under this part. (d) Housing that meets the minimum property standards for Section 247 mortgage insurance (12 U.S.C. 1715z-12) is deemed to meet the required housing safety and quality standards. [67 FR 40776, June 13, 2002, as amended at 68 FR 66985, Nov. 28, 2003] Sec. 1007.25 Eligible lenders. (a) In general. To qualify for a guarantee under this part, a loan shall be made only by a lender meeting qualifications established in this part and approved by HUD, including any lender described in paragraph (b), of this section, except that a loan otherwise insured or guaranteed by an agency of the Federal Government or made by the DHHL from amounts borrowed from the United States shall not be eligible for a guarantee under this part. (b) Approval. The following lenders shall be considered to be lenders that have been approved by HUD: (1) Any mortgagee approved by HUD for participation in the single family mortgage insurance program under title II of the National Housing Act (12 U.S.C.A. 1707 et seq.); (2) Any lender that makes housing loans under chapter 37 of title 38, United States Code, that are automatically guaranteed under section 3702(d) of title 38, United States Code; (3) Any lender approved by the Secretary of Agriculture to make guaranteed loans for single family housing under the Housing Act of 1949 (42 U.S.C.A. 1441 et seq.); (4) Any other lender that is supervised, approved, regulated, or insured by any agency of the Federal Government; and (5) Any other lender approved by HUD under this part. Sec. 1007.30 Security for loan. (a) In general. A loan guaranteed under section 184A of the Housing and Community Development Act of 1992 and this part may be secured by any collateral authorized under and not prohibited by Federal or State law and determined by the lender and approved by HUD to be sufficient to cover the [[Page 848]] amount of the loan. Eligible collateral may include, but is not limited to, the following: (1) The property and/or improvements to be acquired, constructed, or rehabilitated, to the extent that an interest in such property is not subject to any restrictions against alienation applicable to Hawaiian Home Lands; (2) A security interest in non-Hawaiian Home Lands property; (3) Personal property; or (4) Cash, notes, an interest in securities, royalties, annuities, or any other property that is transferable and whose present value may be determined. (b) Hawaiian Home Lands property interest as collateral. If a property interest in Hawaiian Home Lands is used as collateral or security for the loan, the following additional provisions apply: (1) Approved Lease. Any land lease for a unit financed under section 184A of the Housing and Community Development Act of 1992 must be on a form approved by both the DHHL and HUD. (2) Assumption or sale of leasehold. The lease form must contain a provision requiring the DHHL's consent before any assumption of an existing lease, except where title to the leasehold interest is obtained by HUD through foreclosure of the guaranteed mortgage or a deed in lieu of foreclosure. A mortgagee other than HUD must obtain the DHHL's consent before obtaining title through a foreclosure sale. The DHHL's consent must be obtained on any subsequent transfer from the purchaser, including HUD, at foreclosure sale. The lease may not be terminated by the lessor without HUD's approval while the mortgage is guaranteed or held by HUD. (3) Liquidation. The lender or HUD shall only pursue liquidation after offering to transfer the account to another eligible Native Hawaiian family or the DHHL. The lender or HUD shall not sell, transfer, or otherwise dispose of or alienate the property except to another eligible Native Hawaiian family or the DHHL. (4) Eviction procedures. Before HUD will guarantee a loan secured by a Hawaiian Home Lands property, the DHHL must notify HUD that it has adopted and will enforce procedures for eviction of defaulted mortgagors where the guaranteed loan has been foreclosed. (i) Enforcement. If HUD determines that the DHHL has failed to enforce adequately its eviction procedures, HUD will cease issuing guarantees for loans under this part except pursuant to existing commitments. (ii) Review. If HUD ceases issuing guarantees for the DHHL's failure to enforce its eviction procedures, HUD shall notify the DHHL of such action and that the DHHL may, within 30 days after notification of HUD's action, file a written appeal with the Deputy Assistant Secretary, Office of Native American Programs (ONAP). Upon notification of an adverse decision by the Deputy Assistant Secretary, the DHHL has 30 additional days to file an appeal with the Assistant Secretary for Public and Indian Housing. The determination of the Assistant Secretary shall be final, but the DHHL may resubmit the issue to the Assistant Secretary for review at any subsequent time if new evidence or changed circumstances warrant reconsideration. [67 FR 40776, June 13, 2002, as amended at 68 FR 66985, Nov. 28, 2003] Sec. 1007.35 Loan terms. To be eligible for guarantee under this part, the loan shall: (a) Be made for a term not exceeding 30 years; (b) Bear interest (exclusive of the guarantee fee under Sec. 1007.55 and service charges, if any) at a rate agreed upon by the borrower and the lender and determined by HUD to be reasonable, but not to exceed the rate generally charged in the area (as determined by HUD) for home mortgage loans not guaranteed or insured by any agency or instrumentality of the Federal Government; (c) Involve a principal obligation not exceeding: (1) 97.75 percent of the appraised value of the property as of the date the loan is accepted for guarantee (or 98.75 percent if the value of the property is $50,000 or less); or (2) The amount approved by HUD under this section; and (d) Involve a payment on account of the property: (1) In cash or its equivalent; or [[Page 849]] (2) Through the value of any improvements, appraised in accordance with generally accepted practices and procedures. Sec. 1007.40 Environmental requirements. Before HUD issues a commitment to guarantee any loan or (if no commitment is issued) before guarantee of any loan, there must be compliance with environmental review procedures to the extent applicable under part 50 of this title. If the loan involves proposed or new construction, HUD will require compliance with procedures similar to those required by Sec. 203.12(b)(2) of this title for FHA mortgage insurance. Sec. 1007.45 Nondiscrimination. (a) To the extent that the requirements of title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) or of the Fair Housing Act (42 U.S.C.A. 3601 et seq.) apply to a guarantee provided under this part, nothing in the requirements concerning discrimination on the basis of race shall be construed to prevent the provision of the guarantee to an eligible entity on the basis that the entity serves Native Hawaiian families or is a Native Hawaiian family. (b) The equal access to HUD-assisted or -insured housing requirements in 24 CFR 5.105(a)(2) apply to this part. [67 FR 40776, June 13, 2002, as amended at 81 FR 80993, Nov. 17, 2016] Sec. 1007.50 Certificate of guarantee. (a) Approval process--(1) In general. Before HUD approves any loan for guarantee under this section, the lender shall submit the application for the loan to HUD for examination. (2) Approval. If HUD approves the application submitted under paragraph (a)(1) of this section, HUD will issue a certificate as evidence of the loan guarantee approved. (b) Standard for approval. HUD may approve a loan for guarantee under this part and issue a certificate under this section only if HUD determines that there is a reasonable prospect of repayment of the loan. (c) Effect--(1) As evidence. A certificate of guarantee issued under this part by HUD shall be conclusive and incontestable evidence in the hands of the bearer of the eligibility of the loan for guarantee under this part and the amount of that guarantee. (2) Full faith and credit. The full faith and credit of the United States is pledged to the payment of all amounts agreed to be paid by HUD as security for the obligations made by HUD under this section. (d) Fraud and misrepresentation. This section may not be construed: (1) To preclude HUD from establishing defenses against the original lender based on fraud or material misrepresentation; or (2) To bar HUD from establishing regulations that are (on the date of issuance or disbursement, whichever is earlier) partial defenses to the amount payable on the guarantee. Sec. 1007.55 Guarantee fee. The lender shall pay to HUD, at the time of issuance of the guarantee, a fee for the guarantee of loans under this part, in an amount equal to 1 percent of the principal obligation of the loan. This amount is payable by the borrower at closing. Sec. 1007.60 Liability under guarantee. The liability under a guarantee provided under this section shall decrease or increase on a pro rata basis according to any decrease or increase in the amount of the unpaid obligation under the provisions of the loan agreement involved. Sec. 1007.65 Transfer and assumption. Notwithstanding any other provision of law, any loan guaranteed under this section, including the security given for the loan, may be sold or assigned by the lender to any financial institution subject to examination and supervision by an agency of the Federal Government or of any State or the District of Columbia. Sec. 1007.70 Disqualification of lenders and civil money penalties. (a) In general--(1) Grounds for action. HUD may take action under paragraph (a)(2) of this section if HUD determines that any lender or holder of a guarantee certificate: (i) Has failed: (A) To maintain adequate accounting records; [[Page 850]] (B) To service adequately loans guaranteed under this section; or (C) To exercise proper credit or underwriting judgment; or (ii) Has engaged in practices otherwise detrimental to the interest of a borrower or the United States. (2) Actions. Upon a determination by HUD that any of the grounds for action in paragraph (a)(1)(i), of this section apply to the holder of a guarantee certificate, HUD may: (i) Refuse, either temporarily or permanently, to guarantee any further loans made by such lender or holder; (ii) Bar such lender or holder from acquiring additional loans guaranteed under this part; and (iii) Require that such lender or holder assume not less than 10 percent of any loss on further loans made or held by the lender or holder that are guaranteed under this part. (b) Civil money penalties for intentional violations--(1) In general. HUD may impose a civil monetary penalty on a lender or holder of a guarantee certificate if HUD determines that the holder or lender has intentionally failed: (i) To maintain adequate accounting records; (ii) To adequately service loans guaranteed under this section; or (iii) To exercise proper credit or underwriting judgment. (2) Penalties. A civil monetary penalty imposed under this section shall be imposed in the manner and be in an amount provided under section 536 of the National Housing Act (12 U.S.C.A. 1735f-1) with respect to mortgagees and lenders under that Act. (c) Payment on loans made in good faith. Notwithstanding paragraphs (a) and (b) of this section, if a loan was made in good faith, HUD may not refuse to pay a lender or holder of a valid guarantee on that loan, without regard to whether the lender or holder is barred under this section. Sec. 1007.75 Payment under guarantee. (a) Lender options--(1) Notification. If a borrower on a loan guaranteed under this part defaults on the loan, the holder of the guarantee certificate shall provide written notice of the default to HUD. (2) Payment. Upon providing the notice required under paragraph (a)(1), of this section, the holder of the guarantee certificate shall be entitled to payment under the guarantee (subject to the provisions of this section) and may proceed to obtain payment in one of the following manners: (i) Foreclosure. The holder of the certificate may initiate foreclosure proceedings (after providing written notice of that action to HUD). Upon a final order by the court authorizing foreclosure and submission to HUD of a claim for payment under the guarantee, HUD will pay to the holder of the certificate the pro rata portion of the amount guaranteed (as determined under Sec. 1007.60) plus reasonable fees and expenses as approved by HUD. HUD's rights will be subrogated to the rights of the holder of the guarantee, who shall assign the obligation and security to HUD. (ii) No foreclosure. Without seeking foreclosure (or in any case in which a foreclosure proceeding initiated under paragraph (a)(2)(i) of this section continues for a period in excess of 1 year), the holder of the guarantee may submit to HUD a request to assign the obligation and security interest to HUD in return for payment of the claim under the guarantee. HUD may accept assignment of the loan if HUD determines that the assignment is in the best interest of the United States. Upon assignment, HUD will pay to the holder of the guarantee the pro rata portion of the amount guaranteed (as determined under Sec. 1007.60). HUD's rights will be subrogated to the rights of the holder of the guarantee, who shall assign the obligation and security to HUD. (b) Requirements. Before any payment under a guarantee is made under paragraph (a) of this section, the holder of the guarantee shall exhaust all reasonable possibilities of collection. Upon payment, in whole or in part, to the holder, the note or judgment evidencing the debt shall be assigned to the United States and the holder shall have no further claim against the borrower or the United States. HUD will then take such action to collect as HUD determines to be appropriate. [[Page 851]] Sec. 1007.80 Qualified mortgage. A mortgage guaranteed under section 184A of the Housing and Community Development Act of 1992 (1715z-13b), except for mortgage transactions exempted under Sec. 203.19(c)(2), is a safe harbor qualified mortgage that meets the ability-to-repay requirements in 15 U.S.C. 1639c(a). [78 FR 75238, Dec. 11, 2013] PARTS 1008 1699 [RESERVED] [[Page 853]] FINDING AIDS -------------------------------------------------------------------- A list of CFR titles, subtitles, chapters, subchapters and parts and an alphabetical list of agencies publishing in the CFR are included in the CFR Index and Finding Aids volume to the Code of Federal Regulations which is published separately and revised annually. Table of CFR Titles and Chapters Alphabetical List of Agencies Appearing in the CFR List of CFR Sections Affected [[Page 855]] Table of CFR Titles and Chapters (Revised as of April 1, 2024) Title 1--General Provisions I Administrative Committee of the Federal Register (Parts 1--49) II Office of the Federal Register (Parts 50--299) III Administrative Conference of the United States (Parts 300--399) IV Miscellaneous Agencies (Parts 400--599) VI National Capital Planning Commission (Parts 600--699) Title 2--Grants and Agreements Subtitle A--Office of Management and Budget Guidance for Grants and Agreements I Office of Management and Budget Governmentwide Guidance for Grants and Agreements (Parts 2--199) II Office of Management and Budget Guidance (Parts 200-- 299) Subtitle B--Federal Agency Regulations for Grants and Agreements III Department of Health and Human Services (Parts 300-- 399) IV Department of Agriculture (Parts 400--499) VI Department of State (Parts 600--699) VII Agency for International Development (Parts 700--799) VIII Department of Veterans Affairs (Parts 800--899) IX Department of Energy (Parts 900--999) X Department of the Treasury (Parts 1000--1099) XI Department of Defense (Parts 1100--1199) XII Department of Transportation (Parts 1200--1299) XIII Department of Commerce (Parts 1300--1399) XIV Department of the Interior (Parts 1400--1499) XV Environmental Protection Agency (Parts 1500--1599) XVIII National Aeronautics and Space Administration (Parts 1800--1899) XX United States Nuclear Regulatory Commission (Parts 2000--2099) XXII Corporation for National and Community Service (Parts 2200--2299) XXIII Social Security Administration (Parts 2300--2399) XXIV Department of Housing and Urban Development (Parts 2400--2499) XXV National Science Foundation (Parts 2500--2599) XXVI National Archives and Records Administration (Parts 2600--2699) [[Page 856]] XXVII Small Business Administration (Parts 2700--2799) XXVIII Department of Justice (Parts 2800--2899) XXIX Department of Labor (Parts 2900--2999) XXX Department of Homeland Security (Parts 3000--3099) XXXI Institute of Museum and Library Services (Parts 3100-- 3199) XXXII National Endowment for the Arts (Parts 3200--3299) XXXIII National Endowment for the Humanities (Parts 3300-- 3399) XXXIV Department of Education (Parts 3400--3499) XXXV Export-Import Bank of the United States (Parts 3500-- 3599) XXXVI Office of National Drug Control Policy, Executive Office of the President (Parts 3600--3699) XXXVII Peace Corps (Parts 3700--3799) LVIII Election Assistance Commission (Parts 5800--5899) LIX Gulf Coast Ecosystem Restoration Council (Parts 5900-- 5999) LX Federal Communications Commission (Parts 6000--6099) Title 3--The President I Executive Office of the President (Parts 100--199) Title 4--Accounts I Government Accountability Office (Parts 1--199) Title 5--Administrative Personnel I Office of Personnel Management (Parts 1--1199) II Merit Systems Protection Board (Parts 1200--1299) III Office of Management and Budget (Parts 1300--1399) IV Office of Personnel Management and Office of the Director of National Intelligence (Parts 1400-- 1499) V The International Organizations Employees Loyalty Board (Parts 1500--1599) VI Federal Retirement Thrift Investment Board (Parts 1600--1699) VIII Office of Special Counsel (Parts 1800--1899) IX Appalachian Regional Commission (Parts 1900--1999) XI Armed Forces Retirement Home (Parts 2100--2199) XIV Federal Labor Relations Authority, General Counsel of the Federal Labor Relations Authority and Federal Service Impasses Panel (Parts 2400--2499) XVI Office of Government Ethics (Parts 2600--2699) XXI Department of the Treasury (Parts 3100--3199) XXII Federal Deposit Insurance Corporation (Parts 3200-- 3299) XXIII Department of Energy (Parts 3300--3399) XXIV Federal Energy Regulatory Commission (Parts 3400-- 3499) XXV Department of the Interior (Parts 3500--3599) [[Page 857]] XXVI Department of Defense (Parts 3600--3699) XXVIII Department of Justice (Parts 3800--3899) XXIX Federal Communications Commission (Parts 3900--3999) XXX Farm Credit System Insurance Corporation (Parts 4000-- 4099) XXXI Farm Credit Administration (Parts 4100--4199) XXXIII U.S. International Development Finance Corporation (Parts 4300--4399) XXXIV Securities and Exchange Commission (Parts 4400--4499) XXXV Office of Personnel Management (Parts 4500--4599) XXXVI Department of Homeland Security (Parts 4600--4699) XXXVII Federal Election Commission (Parts 4700--4799) XL Interstate Commerce Commission (Parts 5000--5099) XLI Commodity Futures Trading Commission (Parts 5100-- 5199) XLII Department of Labor (Parts 5200--5299) XLIII National Science Foundation (Parts 5300--5399) XLV Department of Health and Human Services (Parts 5500-- 5599) XLVI Postal Rate Commission (Parts 5600--5699) XLVII Federal Trade Commission (Parts 5700--5799) XLVIII Nuclear Regulatory Commission (Parts 5800--5899) XLIX Federal Labor Relations Authority (Parts 5900--5999) L Department of Transportation (Parts 6000--6099) LII Export-Import Bank of the United States (Parts 6200-- 6299) LIII Department of Education (Parts 6300--6399) LIV Environmental Protection Agency (Parts 6400--6499) LV National Endowment for the Arts (Parts 6500--6599) LVI National Endowment for the Humanities (Parts 6600-- 6699) LVII General Services Administration (Parts 6700--6799) LVIII Board of Governors of the Federal Reserve System (Parts 6800--6899) LIX National Aeronautics and Space Administration (Parts 6900--6999) LX United States Postal Service (Parts 7000--7099) LXI National Labor Relations Board (Parts 7100--7199) LXII Equal Employment Opportunity Commission (Parts 7200-- 7299) LXIII Inter-American Foundation (Parts 7300--7399) LXIV Merit Systems Protection Board (Parts 7400--7499) LXV Department of Housing and Urban Development (Parts 7500--7599) LXVI National Archives and Records Administration (Parts 7600--7699) LXVII Institute of Museum and Library Services (Parts 7700-- 7799) LXVIII Commission on Civil Rights (Parts 7800--7899) LXIX Tennessee Valley Authority (Parts 7900--7999) LXX Court Services and Offender Supervision Agency for the District of Columbia (Parts 8000--8099) LXXI Consumer Product Safety Commission (Parts 8100--8199) [[Page 858]] LXXIII Department of Agriculture (Parts 8300--8399) LXXIV Federal Mine Safety and Health Review Commission (Parts 8400--8499) LXXVI Federal Retirement Thrift Investment Board (Parts 8600--8699) LXXVII Office of Management and Budget (Parts 8700--8799) LXXX Federal Housing Finance Agency (Parts 9000--9099) LXXXIII Special Inspector General for Afghanistan Reconstruction (Parts 9300--9399) LXXXIV Bureau of Consumer Financial Protection (Parts 9400-- 9499) LXXXVI National Credit Union Administration (Parts 9600-- 9699) XCVII Department of Homeland Security Human Resources Management System (Department of Homeland Security--Office of Personnel Management) (Parts 9700--9799) XCVIII Council of the Inspectors General on Integrity and Efficiency (Parts 9800--9899) XCIX Military Compensation and Retirement Modernization Commission (Parts 9900--9999) C National Council on Disability (Parts 10000--10049) CI National Mediation Board (Parts 10100--10199) CII U.S. Office of Special Counsel (Parts 10200--10299) CIII Federal Mediation and Conciliation Service (Parts 10300--10399) CIV Office of the Intellectual Property Enforcement Coordinator (Part 10400--10499) Title 6--Domestic Security I Department of Homeland Security, Office of the Secretary (Parts 1--199) X Privacy and Civil Liberties Oversight Board (Parts 1000--1099) Title 7--Agriculture Subtitle A--Office of the Secretary of Agriculture (Parts 0--26) Subtitle B--Regulations of the Department of Agriculture I Agricultural Marketing Service (Standards, Inspections, Marketing Practices), Department of Agriculture (Parts 27--209) II Food and Nutrition Service, Department of Agriculture (Parts 210--299) III Animal and Plant Health Inspection Service, Department of Agriculture (Parts 300--399) IV Federal Crop Insurance Corporation, Department of Agriculture (Parts 400--499) V Agricultural Research Service, Department of Agriculture (Parts 500--599) VI Natural Resources Conservation Service, Department of Agriculture (Parts 600--699) VII Farm Service Agency, Department of Agriculture (Parts 700--799) [[Page 859]] VIII Agricultural Marketing Service (Federal Grain Inspection Service, Fair Trade Practices Program), Department of Agriculture (Parts 800--899) IX Agricultural Marketing Service (Marketing Agreements and Orders; Fruits, Vegetables, Nuts), Department of Agriculture (Parts 900--999) X Agricultural Marketing Service (Marketing Agreements and Orders; Milk), Department of Agriculture (Parts 1000--1199) XI Agricultural Marketing Service (Marketing Agreements and Orders; Miscellaneous Commodities), Department of Agriculture (Parts 1200--1299) XIV Commodity Credit Corporation, Department of Agriculture (Parts 1400--1499) XV Foreign Agricultural Service, Department of Agriculture (Parts 1500--1599) XVI [Reserved] XVII Rural Utilities Service, Department of Agriculture (Parts 1700--1799) XVIII Rural Housing Service, Rural Business-Cooperative Service, Rural Utilities Service, and Farm Service Agency, Department of Agriculture (Parts 1800-- 2099) XX [Reserved] XXV Office of Advocacy and Outreach, Department of Agriculture (Parts 2500--2599) XXVI Office of Inspector General, Department of Agriculture (Parts 2600--2699) XXVII Office of Information Resources Management, Department of Agriculture (Parts 2700--2799) XXVIII Office of Operations, Department of Agriculture (Parts 2800--2899) XXIX Office of Energy Policy and New Uses, Department of Agriculture (Parts 2900--2999) XXX Office of the Chief Financial Officer, Department of Agriculture (Parts 3000--3099) XXXI Office of Environmental Quality, Department of Agriculture (Parts 3100--3199) XXXII Office of Procurement and Property Management, Department of Agriculture (Parts 3200--3299) XXXIII Office of Transportation, Department of Agriculture (Parts 3300--3399) XXXIV National Institute of Food and Agriculture (Parts 3400--3499) XXXV Rural Housing Service, Department of Agriculture (Parts 3500--3599) XXXVI National Agricultural Statistics Service, Department of Agriculture (Parts 3600--3699) XXXVII Economic Research Service, Department of Agriculture (Parts 3700--3799) XXXVIII World Agricultural Outlook Board, Department of Agriculture (Parts 3800--3899) XLI [Reserved] [[Page 860]] XLII Rural Business-Cooperative Service, Department of Agriculture (Parts 4200--4299) L Rural Business-Cooperative Service, Rural Housing Service, and Rural Utilities Service, Department of Agriculture (Parts 5000--5099) Title 8--Aliens and Nationality I Department of Homeland Security (Parts 1--499) V Executive Office for Immigration Review, Department of Justice (Parts 1000--1399) Title 9--Animals and Animal Products I Animal and Plant Health Inspection Service, Department of Agriculture (Parts 1--199) II Agricultural Marketing Service (Fair Trade Practices Program), Department of Agriculture (Parts 200-- 299) III Food Safety and Inspection Service, Department of Agriculture (Parts 300--599) Title 10--Energy I Nuclear Regulatory Commission (Parts 0--199) II Department of Energy (Parts 200--699) III Department of Energy (Parts 700--999) X Department of Energy (General Provisions) (Parts 1000--1099) XIII Nuclear Waste Technical Review Board (Parts 1300-- 1399) XVII Defense Nuclear Facilities Safety Board (Parts 1700-- 1799) XVIII Northeast Interstate Low-Level Radioactive Waste Commission (Parts 1800--1899) Title 11--Federal Elections I Federal Election Commission (Parts 1--9099) II Election Assistance Commission (Parts 9400--9499) Title 12--Banks and Banking I Comptroller of the Currency, Department of the Treasury (Parts 1--199) II Federal Reserve System (Parts 200--299) III Federal Deposit Insurance Corporation (Parts 300--399) IV Export-Import Bank of the United States (Parts 400-- 499) V (Parts 500--599) [Reserved] VI Farm Credit Administration (Parts 600--699) VII National Credit Union Administration (Parts 700--799) VIII Federal Financing Bank (Parts 800--899) [[Page 861]] IX (Parts 900--999)[Reserved] X Consumer Financial Protection Bureau (Parts 1000-- 1099) XI Federal Financial Institutions Examination Council (Parts 1100--1199) XII Federal Housing Finance Agency (Parts 1200--1299) XIII Financial Stability Oversight Council (Parts 1300-- 1399) XIV Farm Credit System Insurance Corporation (Parts 1400-- 1499) XV Department of the Treasury (Parts 1500--1599) XVI Office of Financial Research, Department of the Treasury (Parts 1600--1699) XVII Office of Federal Housing Enterprise Oversight, Department of Housing and Urban Development (Parts 1700--1799) XVIII Community Development Financial Institutions Fund, Department of the Treasury (Parts 1800--1899) Title 13--Business Credit and Assistance I Small Business Administration (Parts 1--199) III Economic Development Administration, Department of Commerce (Parts 300--399) IV Emergency Steel Guarantee Loan Board (Parts 400--499) V Emergency Oil and Gas Guaranteed Loan Board (Parts 500--599) Title 14--Aeronautics and Space I Federal Aviation Administration, Department of Transportation (Parts 1--199) II Office of the Secretary, Department of Transportation (Aviation Proceedings) (Parts 200--399) III Commercial Space Transportation, Federal Aviation Administration, Department of Transportation (Parts 400--1199) V National Aeronautics and Space Administration (Parts 1200--1299) VI Air Transportation System Stabilization (Parts 1300-- 1399) Title 15--Commerce and Foreign Trade Subtitle A--Office of the Secretary of Commerce (Parts 0--29) Subtitle B--Regulations Relating to Commerce and Foreign Trade I Bureau of the Census, Department of Commerce (Parts 30--199) II National Institute of Standards and Technology, Department of Commerce (Parts 200--299) III International Trade Administration, Department of Commerce (Parts 300--399) IV Foreign-Trade Zones Board, Department of Commerce (Parts 400--499) [[Page 862]] VII Bureau of Industry and Security, Department of Commerce (Parts 700--799) VIII Bureau of Economic Analysis, Department of Commerce (Parts 800--899) IX National Oceanic and Atmospheric Administration, Department of Commerce (Parts 900--999) XI National Technical Information Service, Department of Commerce (Parts 1100--1199) XIII East-West Foreign Trade Board (Parts 1300--1399) XIV Minority Business Development Agency (Parts 1400-- 1499) XV Office of the Under-Secretary for Economic Affairs, Department of Commerce (Parts 1500--1599) Subtitle C--Regulations Relating to Foreign Trade Agreements XX Office of the United States Trade Representative (Parts 2000--2099) Subtitle D--Regulations Relating to Telecommunications and Information XXIII National Telecommunications and Information Administration, Department of Commerce (Parts 2300--2399) [Reserved] Title 16--Commercial Practices I Federal Trade Commission (Parts 0--999) II Consumer Product Safety Commission (Parts 1000--1799) Title 17--Commodity and Securities Exchanges I Commodity Futures Trading Commission (Parts 1--199) II Securities and Exchange Commission (Parts 200--399) IV Department of the Treasury (Parts 400--499) Title 18--Conservation of Power and Water Resources I Federal Energy Regulatory Commission, Department of Energy (Parts 1--399) III Delaware River Basin Commission (Parts 400--499) VI Water Resources Council (Parts 700--799) VIII Susquehanna River Basin Commission (Parts 800--899) XIII Tennessee Valley Authority (Parts 1300--1399) Title 19--Customs Duties I U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury (Parts 0--199) II United States International Trade Commission (Parts 200--299) III International Trade Administration, Department of Commerce (Parts 300--399) [[Page 863]] IV U.S. Immigration and Customs Enforcement, Department of Homeland Security (Parts 400--599) [Reserved] Title 20--Employees' Benefits I Office of Workers' Compensation Programs, Department of Labor (Parts 1--199) II Railroad Retirement Board (Parts 200--399) III Social Security Administration (Parts 400--499) IV Employees' Compensation Appeals Board, Department of Labor (Parts 500--599) V Employment and Training Administration, Department of Labor (Parts 600--699) VI Office of Workers' Compensation Programs, Department of Labor (Parts 700--799) VII Benefits Review Board, Department of Labor (Parts 800--899) VIII Joint Board for the Enrollment of Actuaries (Parts 900--999) IX Office of the Assistant Secretary for Veterans' Employment and Training Service, Department of Labor (Parts 1000--1099) Title 21--Food and Drugs I Food and Drug Administration, Department of Health and Human Services (Parts 1--1299) II Drug Enforcement Administration, Department of Justice (Parts 1300--1399) III Office of National Drug Control Policy (Parts 1400-- 1499) Title 22--Foreign Relations I Department of State (Parts 1--199) II Agency for International Development (Parts 200--299) III Peace Corps (Parts 300--399) IV International Joint Commission, United States and Canada (Parts 400--499) V United States Agency for Global Media (Parts 500--599) VII U.S. International Development Finance Corporation (Parts 700--799) IX Foreign Service Grievance Board (Parts 900--999) X Inter-American Foundation (Parts 1000--1099) XI International Boundary and Water Commission, United States and Mexico, United States Section (Parts 1100--1199) XII United States International Development Cooperation Agency (Parts 1200--1299) XIII Millennium Challenge Corporation (Parts 1300--1399) XIV Foreign Service Labor Relations Board; Federal Labor Relations Authority; General Counsel of the Federal Labor Relations Authority; and the Foreign Service Impasse Disputes Panel (Parts 1400--1499) [[Page 864]] XV African Development Foundation (Parts 1500--1599) XVI Japan-United States Friendship Commission (Parts 1600--1699) XVII United States Institute of Peace (Parts 1700--1799) Title 23--Highways I Federal Highway Administration, Department of Transportation (Parts 1--999) II National Highway Traffic Safety Administration and Federal Highway Administration, Department of Transportation (Parts 1200--1299) III National Highway Traffic Safety Administration, Department of Transportation (Parts 1300--1399) Title 24--Housing and Urban Development Subtitle A--Office of the Secretary, Department of Housing and Urban Development (Parts 0--99) Subtitle B--Regulations Relating to Housing and Urban Development I Office of Assistant Secretary for Equal Opportunity, Department of Housing and Urban Development (Parts 100--199) II Office of Assistant Secretary for Housing-Federal Housing Commissioner, Department of Housing and Urban Development (Parts 200--299) III Government National Mortgage Association, Department of Housing and Urban Development (Parts 300--399) IV Office of Housing and Office of Multifamily Housing Assistance Restructuring, Department of Housing and Urban Development (Parts 400--499) V Office of Assistant Secretary for Community Planning and Development, Department of Housing and Urban Development (Parts 500--599) VI Office of Assistant Secretary for Community Planning and Development, Department of Housing and Urban Development (Parts 600--699) [Reserved] VII Office of the Secretary, Department of Housing and Urban Development (Housing Assistance Programs and Public and Indian Housing Programs) (Parts 700-- 799) VIII Office of the Assistant Secretary for Housing--Federal Housing Commissioner, Department of Housing and Urban Development (Section 8 Housing Assistance Programs, Section 202 Direct Loan Program, Section 202 Supportive Housing for the Elderly Program and Section 811 Supportive Housing for Persons With Disabilities Program) (Parts 800--899) IX Office of Assistant Secretary for Public and Indian Housing, Department of Housing and Urban Development (Parts 900--1699) X Office of Assistant Secretary for Housing--Federal Housing Commissioner, Department of Housing and Urban Development (Interstate Land Sales Registration Program) (Parts 1700--1799) [Reserved] [[Page 865]] XII Office of Inspector General, Department of Housing and Urban Development (Parts 2000--2099) XV Emergency Mortgage Insurance and Loan Programs, Department of Housing and Urban Development (Parts 2700--2799) [Reserved] XX Office of Assistant Secretary for Housing--Federal Housing Commissioner, Department of Housing and Urban Development (Parts 3200--3899) XXIV Board of Directors of the HOPE for Homeowners Program (Parts 4000--4099) [Reserved] XXV Neighborhood Reinvestment Corporation (Parts 4100-- 4199) Title 25--Indians I Bureau of Indian Affairs, Department of the Interior (Parts 1--299) II Indian Arts and Crafts Board, Department of the Interior (Parts 300--399) III National Indian Gaming Commission, Department of the Interior (Parts 500--599) IV Office of Navajo and Hopi Indian Relocation (Parts 700--899) V Bureau of Indian Affairs, Department of the Interior, and Indian Health Service, Department of Health and Human Services (Part 900--999) VI Office of the Assistant Secretary, Indian Affairs, Department of the Interior (Parts 1000--1199) VII Office of the Special Trustee for American Indians, Department of the Interior (Parts 1200--1299) Title 26--Internal Revenue I Internal Revenue Service, Department of the Treasury (Parts 1--End) Title 27--Alcohol, Tobacco Products and Firearms I Alcohol and Tobacco Tax and Trade Bureau, Department of the Treasury (Parts 1--399) II Bureau of Alcohol, Tobacco, Firearms, and Explosives, Department of Justice (Parts 400--799) Title 28--Judicial Administration I Department of Justice (Parts 0--299) III Federal Prison Industries, Inc., Department of Justice (Parts 300--399) V Bureau of Prisons, Department of Justice (Parts 500-- 599) VI Offices of Independent Counsel, Department of Justice (Parts 600--699) VII Office of Independent Counsel (Parts 700--799) [[Page 866]] VIII Court Services and Offender Supervision Agency for the District of Columbia (Parts 800--899) IX National Crime Prevention and Privacy Compact Council (Parts 900--999) XI Department of Justice and Department of State (Parts 1100--1199) Title 29--Labor Subtitle A--Office of the Secretary of Labor (Parts 0--99) Subtitle B--Regulations Relating to Labor I National Labor Relations Board (Parts 100--199) II Office of Labor-Management Standards, Department of Labor (Parts 200--299) III National Railroad Adjustment Board (Parts 300--399) IV Office of Labor-Management Standards, Department of Labor (Parts 400--499) V Wage and Hour Division, Department of Labor (Parts 500--899) IX Construction Industry Collective Bargaining Commission (Parts 900--999) X National Mediation Board (Parts 1200--1299) XII Federal Mediation and Conciliation Service (Parts 1400--1499) XIV Equal Employment Opportunity Commission (Parts 1600-- 1699) XVII Occupational Safety and Health Administration, Department of Labor (Parts 1900--1999) XX Occupational Safety and Health Review Commission (Parts 2200--2499) XXV Employee Benefits Security Administration, Department of Labor (Parts 2500--2599) XXVII Federal Mine Safety and Health Review Commission (Parts 2700--2799) XL Pension Benefit Guaranty Corporation (Parts 4000-- 4999) Title 30--Mineral Resources I Mine Safety and Health Administration, Department of Labor (Parts 1--199) II Bureau of Safety and Environmental Enforcement, Department of the Interior (Parts 200--299) IV Geological Survey, Department of the Interior (Parts 400--499) V Bureau of Ocean Energy Management, Department of the Interior (Parts 500--599) VII Office of Surface Mining Reclamation and Enforcement, Department of the Interior (Parts 700--999) XII Office of Natural Resources Revenue, Department of the Interior (Parts 1200--1299) [[Page 867]] Title 31--Money and Finance: Treasury Subtitle A--Office of the Secretary of the Treasury (Parts 0--50) Subtitle B--Regulations Relating to Money and Finance I Monetary Offices, Department of the Treasury (Parts 51--199) II Fiscal Service, Department of the Treasury (Parts 200--399) IV Secret Service, Department of the Treasury (Parts 400--499) V Office of Foreign Assets Control, Department of the Treasury (Parts 500--599) VI Bureau of Engraving and Printing, Department of the Treasury (Parts 600--699) VII Federal Law Enforcement Training Center, Department of the Treasury (Parts 700--799) VIII Office of Investment Security, Department of the Treasury (Parts 800--899) IX Federal Claims Collection Standards (Department of the Treasury--Department of Justice) (Parts 900--999) X Financial Crimes Enforcement Network, Department of the Treasury (Parts 1000--1099) Title 32--National Defense Subtitle A--Department of Defense I Office of the Secretary of Defense (Parts 1--399) V Department of the Army (Parts 400--699) VI Department of the Navy (Parts 700--799) VII Department of the Air Force (Parts 800--1099) Subtitle B--Other Regulations Relating to National Defense XII Department of Defense, Defense Logistics Agency (Parts 1200--1299) XVI Selective Service System (Parts 1600--1699) XVII Office of the Director of National Intelligence (Parts 1700--1799) XVIII National Counterintelligence Center (Parts 1800--1899) XIX Central Intelligence Agency (Parts 1900--1999) XX Information Security Oversight Office, National Archives and Records Administration (Parts 2000-- 2099) XXI National Security Council (Parts 2100--2199) XXIV Office of Science and Technology Policy (Parts 2400-- 2499) XXVII Office for Micronesian Status Negotiations (Parts 2700--2799) XXVIII Office of the Vice President of the United States (Parts 2800--2899) Title 33--Navigation and Navigable Waters I Coast Guard, Department of Homeland Security (Parts 1--199) II Corps of Engineers, Department of the Army, Department of Defense (Parts 200--399) [[Page 868]] IV Great Lakes St. Lawrence Seaway Development Corporation, Department of Transportation (Parts 400--499) Title 34--Education Subtitle A--Office of the Secretary, Department of Education (Parts 1--99) Subtitle B--Regulations of the Offices of the Department of Education I Office for Civil Rights, Department of Education (Parts 100--199) II Office of Elementary and Secondary Education, Department of Education (Parts 200--299) III Office of Special Education and Rehabilitative Services, Department of Education (Parts 300--399) IV Office of Career, Technical, and Adult Education, Department of Education (Parts 400--499) V Office of Bilingual Education and Minority Languages Affairs, Department of Education (Parts 500--599) [Reserved] VI Office of Postsecondary Education, Department of Education (Parts 600--699) VII Office of Educational Research and Improvement, Department of Education (Parts 700--799) [Reserved] Subtitle C--Regulations Relating to Education XI [Reserved] XII National Council on Disability (Parts 1200--1299) Title 35 [Reserved] Title 36--Parks, Forests, and Public Property I National Park Service, Department of the Interior (Parts 1--199) II Forest Service, Department of Agriculture (Parts 200-- 299) III Corps of Engineers, Department of the Army (Parts 300--399) IV American Battle Monuments Commission (Parts 400--499) V Smithsonian Institution (Parts 500--599) VI [Reserved] VII Library of Congress (Parts 700--799) VIII Advisory Council on Historic Preservation (Parts 800-- 899) IX Pennsylvania Avenue Development Corporation (Parts 900--999) X Presidio Trust (Parts 1000--1099) XI Architectural and Transportation Barriers Compliance Board (Parts 1100--1199) XII National Archives and Records Administration (Parts 1200--1299) XV Oklahoma City National Memorial Trust (Parts 1500-- 1599) XVI Morris K. Udall Scholarship and Excellence in National Environmental Policy Foundation (Parts 1600--1699) [[Page 869]] Title 37--Patents, Trademarks, and Copyrights I United States Patent and Trademark Office, Department of Commerce (Parts 1--199) II U.S. Copyright Office, Library of Congress (Parts 200--299) III Copyright Royalty Board, Library of Congress (Parts 300--399) IV National Institute of Standards and Technology, Department of Commerce (Parts 400--599) Title 38--Pensions, Bonuses, and Veterans' Relief I Department of Veterans Affairs (Parts 0--199) II Armed Forces Retirement Home (Parts 200--299) Title 39--Postal Service I United States Postal Service (Parts 1--999) III Postal Regulatory Commission (Parts 3000--3099) Title 40--Protection of Environment I Environmental Protection Agency (Parts 1--1099) IV Environmental Protection Agency and Department of Justice (Parts 1400--1499) V Council on Environmental Quality (Parts 1500--1599) VI Chemical Safety and Hazard Investigation Board (Parts 1600--1699) VII Environmental Protection Agency and Department of Defense; Uniform National Discharge Standards for Vessels of the Armed Forces (Parts 1700--1799) VIII Gulf Coast Ecosystem Restoration Council (Parts 1800-- 1899) IX Federal Permitting Improvement Steering Council (Part 1900) Title 41--Public Contracts and Property Management Subtitle A--Federal Procurement Regulations System [Note] Subtitle B--Other Provisions Relating to Public Contracts 50 Public Contracts, Department of Labor (Parts 50-1--50- 999) 51 Committee for Purchase From People Who Are Blind or Severely Disabled (Parts 51-1--51-99) 60 Office of Federal Contract Compliance Programs, Equal Employment Opportunity, Department of Labor (Parts 60-1--60-999) 61 Office of the Assistant Secretary for Veterans' Employment and Training Service, Department of Labor (Parts 61-1--61-999) 62--100 [Reserved] Subtitle C--Federal Property Management Regulations System 101 Federal Property Management Regulations (Parts 101-1-- 101-99) 102 Federal Management Regulation (Parts 102-1--102-299) [[Page 870]] 103--104 [Reserved] 105 General Services Administration (Parts 105-1--105-999) 109 Department of Energy Property Management Regulations (Parts 109-1--109-99) 114 Department of the Interior (Parts 114-1--114-99) 115 Environmental Protection Agency (Parts 115-1--115-99) 128 Department of Justice (Parts 128-1--128-99) 129--200 [Reserved] Subtitle D--Federal Acquisition Supply Chain Security 201 Federal Acquisition Security Council (Parts 201-1-- 201-99) Subtitle E [Reserved] Subtitle F--Federal Travel Regulation System 300 General (Parts 300-1--300-99) 301 Temporary Duty (TDY) Travel Allowances (Parts 301-1-- 301-99) 302 Relocation Allowances (Parts 302-1--302-99) 303 Payment of Expenses Connected with the Death of Certain Employees (Part 303-1--303-99) 304 Payment of Travel Expenses from a Non-Federal Source (Parts 304-1--304-99) Title 42--Public Health I Public Health Service, Department of Health and Human Services (Parts 1--199) II--III [Reserved] IV Centers for Medicare & Medicaid Services, Department of Health and Human Services (Parts 400--699) V Office of Inspector General-Health Care, Department of Health and Human Services (Parts 1000--1099) Title 43--Public Lands: Interior Subtitle A--Office of the Secretary of the Interior (Parts 1--199) Subtitle B--Regulations Relating to Public Lands I Bureau of Reclamation, Department of the Interior (Parts 400--999) II Bureau of Land Management, Department of the Interior (Parts 1000--9999) III Utah Reclamation Mitigation and Conservation Commission (Parts 10000--10099) Title 44--Emergency Management and Assistance I Federal Emergency Management Agency, Department of Homeland Security (Parts 0--399) IV Department of Commerce and Department of Transportation (Parts 400--499) [[Page 871]] Title 45--Public Welfare Subtitle A--Department of Health and Human Services (Parts 1--199) Subtitle B--Regulations Relating to Public Welfare II Office of Family Assistance (Assistance Programs), Administration for Children and Families, Department of Health and Human Services (Parts 200--299) III Office of Child Support Services, Administration of Families and Services, Department of Health and Human Services (Parts 300--399) IV Office of Refugee Resettlement, Administration for Children and Families, Department of Health and Human Services (Parts 400--499) V Foreign Claims Settlement Commission of the United States, Department of Justice (Parts 500--599) VI National Science Foundation (Parts 600--699) VII Commission on Civil Rights (Parts 700--799) VIII Office of Personnel Management (Parts 800--899) IX Denali Commission (Parts 900--999) X Office of Community Services, Administration for Children and Families, Department of Health and Human Services (Parts 1000--1099) XI National Foundation on the Arts and the Humanities (Parts 1100--1199) XII Corporation for National and Community Service (Parts 1200--1299) XIII Administration for Children and Families, Department of Health and Human Services (Parts 1300--1399) XVI Legal Services Corporation (Parts 1600--1699) XVII National Commission on Libraries and Information Science (Parts 1700--1799) XVIII Harry S. Truman Scholarship Foundation (Parts 1800-- 1899) XXI Commission of Fine Arts (Parts 2100--2199) XXIII Arctic Research Commission (Parts 2300--2399) XXIV James Madison Memorial Fellowship Foundation (Parts 2400--2499) XXV Corporation for National and Community Service (Parts 2500--2599) Title 46--Shipping I Coast Guard, Department of Homeland Security (Parts 1--199) II Maritime Administration, Department of Transportation (Parts 200--399) III Coast Guard (Great Lakes Pilotage), Department of Homeland Security (Parts 400--499) IV Federal Maritime Commission (Parts 500--599) [[Page 872]] Title 47--Telecommunication I Federal Communications Commission (Parts 0--199) II Office of Science and Technology Policy and National Security Council (Parts 200--299) III National Telecommunications and Information Administration, Department of Commerce (Parts 300--399) IV National Telecommunications and Information Administration, Department of Commerce, and National Highway Traffic Safety Administration, Department of Transportation (Parts 400--499) V The First Responder Network Authority (Parts 500--599) Title 48--Federal Acquisition Regulations System 1 Federal Acquisition Regulation (Parts 1--99) 2 Defense Acquisition Regulations System, Department of Defense (Parts 200--299) 3 Health and Human Services (Parts 300--399) 4 Department of Agriculture (Parts 400--499) 5 General Services Administration (Parts 500--599) 6 Department of State (Parts 600--699) 7 Agency for International Development (Parts 700--799) 8 Department of Veterans Affairs (Parts 800--899) 9 Department of Energy (Parts 900--999) 10 Department of the Treasury (Parts 1000--1099) 12 Department of Transportation (Parts 1200--1299) 13 Department of Commerce (Parts 1300--1399) 14 Department of the Interior (Parts 1400--1499) 15 Environmental Protection Agency (Parts 1500--1599) 16 Office of Personnel Management, Federal Employees Health Benefits Acquisition Regulation (Parts 1600--1699) 17 Office of Personnel Management (Parts 1700--1799) 18 National Aeronautics and Space Administration (Parts 1800--1899) 19 Broadcasting Board of Governors (Parts 1900--1999) 20 Nuclear Regulatory Commission (Parts 2000--2099) 21 Office of Personnel Management, Federal Employees Group Life Insurance Federal Acquisition Regulation (Parts 2100--2199) 23 Social Security Administration (Parts 2300--2399) 24 Department of Housing and Urban Development (Parts 2400--2499) 25 National Science Foundation (Parts 2500--2599) 28 Department of Justice (Parts 2800--2899) 29 Department of Labor (Parts 2900--2999) 30 Department of Homeland Security, Homeland Security Acquisition Regulation (HSAR) (Parts 3000--3099) 34 Department of Education Acquisition Regulation (Parts 3400--3499) [[Page 873]] 51 Department of the Army Acquisition Regulations (Parts 5100--5199) [Reserved] 52 Department of the Navy Acquisition Regulations (Parts 5200--5299) 53 Department of the Air Force Federal Acquisition Regulation Supplement (Parts 5300--5399) [Reserved] 54 Defense Logistics Agency, Department of Defense (Parts 5400--5499) 57 African Development Foundation (Parts 5700--5799) 61 Civilian Board of Contract Appeals, General Services Administration (Parts 6100--6199) 99 Cost Accounting Standards Board, Office of Federal Procurement Policy, Office of Management and Budget (Parts 9900--9999) Title 49--Transportation Subtitle A--Office of the Secretary of Transportation (Parts 1--99) Subtitle B--Other Regulations Relating to Transportation I Pipeline and Hazardous Materials Safety Administration, Department of Transportation (Parts 100--199) II Federal Railroad Administration, Department of Transportation (Parts 200--299) III Federal Motor Carrier Safety Administration, Department of Transportation (Parts 300--399) IV Coast Guard, Department of Homeland Security (Parts 400--499) V National Highway Traffic Safety Administration, Department of Transportation (Parts 500--599) VI Federal Transit Administration, Department of Transportation (Parts 600--699) VII National Railroad Passenger Corporation (AMTRAK) (Parts 700--799) VIII National Transportation Safety Board (Parts 800--999) X Surface Transportation Board (Parts 1000--1399) XI Research and Innovative Technology Administration, Department of Transportation (Parts 1400--1499) [Reserved] XII Transportation Security Administration, Department of Homeland Security (Parts 1500--1699) Title 50--Wildlife and Fisheries I United States Fish and Wildlife Service, Department of the Interior (Parts 1--199) II National Marine Fisheries Service, National Oceanic and Atmospheric Administration, Department of Commerce (Parts 200--299) III International Fishing and Related Activities (Parts 300--399) [[Page 874]] IV Joint Regulations (United States Fish and Wildlife Service, Department of the Interior and National Marine Fisheries Service, National Oceanic and Atmospheric Administration, Department of Commerce); Endangered Species Committee Regulations (Parts 400--499) V Marine Mammal Commission (Parts 500--599) VI Fishery Conservation and Management, National Oceanic and Atmospheric Administration, Department of Commerce (Parts 600--699) [[Page 875]] Alphabetical List of Agencies Appearing in the CFR (Revised as of April 1, 2024) CFR Title, Subtitle or Agency Chapter Administrative Conference of the United States 1, III Advisory Council on Historic Preservation 36, VIII Advocacy and Outreach, Office of 7, XXV Afghanistan Reconstruction, Special Inspector 5, LXXXIII General for African Development Foundation 22, XV Federal Acquisition Regulation 48, 57 Agency for International Development 2, VII; 22, II Federal Acquisition Regulation 48, 7 Agricultural Marketing Service 7, I, VIII, IX, X, XI; 9, II Agricultural Research Service 7, V Agriculture, Department of 2, IV; 5, LXXIII Advocacy and Outreach, Office of 7, XXV Agricultural Marketing Service 7, I, VIII, IX, X, XI; 9, II Agricultural Research Service 7, V Animal and Plant Health Inspection Service 7, III; 9, I Chief Financial Officer, Office of 7, XXX Commodity Credit Corporation 7, XIV Economic Research Service 7, XXXVII Energy Policy and New Uses, Office of 2, IX; 7, XXIX Environmental Quality, Office of 7, XXXI Farm Service Agency 7, VII, XVIII Federal Acquisition Regulation 48, 4 Federal Crop Insurance Corporation 7, IV Food and Nutrition Service 7, II Food Safety and Inspection Service 9, III Foreign Agricultural Service 7, XV Forest Service 36, II Information Resources Management, Office of 7, XXVII Inspector General, Office of 7, XXVI National Agricultural Library 7, XLI National Agricultural Statistics Service 7, XXXVI National Institute of Food and Agriculture 7, XXXIV Natural Resources Conservation Service 7, VI Operations, Office of 7, XXVIII Procurement and Property Management, Office of 7, XXXII Rural Business-Cooperative Service 7, XVIII, XLII Rural Development Administration 7, XLII Rural Housing Service 7, XVIII, XXXV Rural Utilities Service 7, XVII, XVIII, XLII Secretary of Agriculture, Office of 7, Subtitle A Transportation, Office of 7, XXXIII World Agricultural Outlook Board 7, XXXVIII Air Force, Department of 32, VII Federal Acquisition Regulation Supplement 48, 53 Air Transportation Stabilization Board 14, VI Alcohol and Tobacco Tax and Trade Bureau 27, I Alcohol, Tobacco, Firearms, and Explosives, 27, II Bureau of AMTRAK 49, VII American Battle Monuments Commission 36, IV American Indians, Office of the Special Trustee 25, VII Animal and Plant Health Inspection Service 7, III; 9, I Appalachian Regional Commission 5, IX Architectural and Transportation Barriers 36, XI Compliance Board [[Page 876]] Arctic Research Commission 45, XXIII Armed Forces Retirement Home 5, XI; 38, II Army, Department of 32, V Engineers, Corps of 33, II; 36, III Federal Acquisition Regulation 48, 51 Benefits Review Board 20, VII Bilingual Education and Minority Languages 34, V Affairs, Office of Blind or Severely Disabled, Committee for 41, 51 Purchase from People Who Are Federal Acquisition Regulation 48, 19 Career, Technical, and Adult Education, Office 34, IV of Census Bureau 15, I Centers for Medicare & Medicaid Services 42, IV Central Intelligence Agency 32, XIX Chemical Safety and Hazard Investigation Board 40, VI Chief Financial Officer, Office of 7, XXX Child Support Services, Office of 45, III Children and Families, Administration for 45, II, IV, X, XIII Civil Rights, Commission on 5, LXVIII; 45, VII Civil Rights, Office for 34, I Coast Guard 33, I; 46, I; 49, IV Coast Guard (Great Lakes Pilotage) 46, III Commerce, Department of 2, XIII; 44, IV; 50, VI Census Bureau 15, I Economic Affairs, Office of the Under- 15, XV Secretary for Economic Analysis, Bureau of 15, VIII Economic Development Administration 13, III Emergency Management and Assistance 44, IV Federal Acquisition Regulation 48, 13 Foreign-Trade Zones Board 15, IV Industry and Security, Bureau of 15, VII International Trade Administration 15, III; 19, III National Institute of Standards and Technology 15, II; 37, IV National Marine Fisheries Service 50, II, IV National Oceanic and Atmospheric 15, IX; 50, II, III, IV, Administration VI National Technical Information Service 15, XI National Telecommunications and Information 15, XXIII; 47, III, IV Administration National Weather Service 15, IX Patent and Trademark Office, United States 37, I Secretary of Commerce, Office of 15, Subtitle A Commercial Space Transportation 14, III Commodity Credit Corporation 7, XIV Commodity Futures Trading Commission 5, XLI; 17, I Community Planning and Development, Office of 24, V, VI Assistant Secretary for Community Services, Office of 45, X Comptroller of the Currency 12, I Construction Industry Collective Bargaining 29, IX Commission Consumer Financial Protection Bureau 5, LXXXIV; 12, X Consumer Product Safety Commission 5, LXXI; 16, II Copyright Royalty Board 37, III Corporation for National and Community Service 2, XXII; 45, XII, XXV Cost Accounting Standards Board 48, 99 Council on Environmental Quality 40, V Council of the Inspectors General on Integrity 5, XCVIII and Efficiency Court Services and Offender Supervision Agency 5, LXX; 28, VIII for the District of Columbia Customs and Border Protection 19, I Defense, Department of 2, XI; 5, XXVI; 32, Subtitle A; 40, VII Advanced Research Projects Agency 32, I Air Force Department 32, VII Army Department 32, V; 33, II; 36, III; 48, 51 Defense Acquisition Regulations System 48, 2 Defense Intelligence Agency 32, I [[Page 877]] Defense Logistics Agency 32, I, XII; 48, 54 Engineers, Corps of 33, II; 36, III National Imagery and Mapping Agency 32, I Navy, Department of 32, VI; 48, 52 Secretary of Defense, Office of 2, XI; 32, I Defense Contract Audit Agency 32, I Defense Intelligence Agency 32, I Defense Logistics Agency 32, XII; 48, 54 Defense Nuclear Facilities Safety Board 10, XVII Delaware River Basin Commission 18, III Denali Commission 45, IX Disability, National Council on 5, C; 34, XII District of Columbia, Court Services and 5, LXX; 28, VIII Offender Supervision Agency for the Drug Enforcement Administration 21, II East-West Foreign Trade Board 15, XIII Economic Affairs, Office of the Under-Secretary 15, XV for Economic Analysis, Bureau of 15, VIII Economic Development Administration 13, III Economic Research Service 7, XXXVII Education, Department of 2, XXXIV; 5, LIII Bilingual Education and Minority Languages 34, V Affairs, Office of Career, Technical, and Adult Education, Office 34, IV of Civil Rights, Office for 34, I Educational Research and Improvement, Office 34, VII of Elementary and Secondary Education, Office of 34, II Federal Acquisition Regulation 48, 34 Postsecondary Education, Office of 34, VI Secretary of Education, Office of 34, Subtitle A Special Education and Rehabilitative Services, 34, III Office of Educational Research and Improvement, Office of 34, VII Election Assistance Commission 2, LVIII; 11, II Elementary and Secondary Education, Office of 34, II Emergency Oil and Gas Guaranteed Loan Board 13, V Emergency Steel Guarantee Loan Board 13, IV Employee Benefits Security Administration 29, XXV Employees' Compensation Appeals Board 20, IV Employees Loyalty Board 5, V Employment and Training Administration 20, V Employment Policy, National Commission for 1, IV Employment Standards Administration 20, VI Endangered Species Committee 50, IV Energy, Department of 2, IX; 5, XXIII; 10, II, III, X Federal Acquisition Regulation 48, 9 Federal Energy Regulatory Commission 5, XXIV; 18, I Property Management Regulations 41, 109 Energy, Office of 7, XXIX Engineers, Corps of 33, II; 36, III Engraving and Printing, Bureau of 31, VI Environmental Protection Agency 2, XV; 5, LIV; 40, I, IV, VII Federal Acquisition Regulation 48, 15 Property Management Regulations 41, 115 Environmental Quality, Office of 7, XXXI Equal Employment Opportunity Commission 5, LXII; 29, XIV Equal Opportunity, Office of Assistant Secretary 24, I for Executive Office of the President 3, I Environmental Quality, Council on 40, V Management and Budget, Office of 2, Subtitle A; 5, III, LXXVII; 14, VI; 48, 99 National Drug Control Policy, Office of 2, XXXVI; 21, III National Security Council 32, XXI; 47, II Presidential Documents 3 Science and Technology Policy, Office of 32, XXIV; 47, II Trade Representative, Office of the United 15, XX States [[Page 878]] Export-Import Bank of the United States 2, XXXV; 5, LII; 12, IV Families and Services, Administration of 45, III Family Assistance, Office of 45, II Farm Credit Administration 5, XXXI; 12, VI Farm Credit System Insurance Corporation 5, XXX; 12, XIV Farm Service Agency 7, VII, XVIII Federal Acquisition Regulation 48, 1 Federal Acquisition Security Council 41, 201 Federal Aviation Administration 14, I Commercial Space Transportation 14, III Federal Claims Collection Standards 31, IX Federal Communications Commission 2, LX; 5, XXIX; 47, I Federal Contract Compliance Programs, Office of 41, 60 Federal Crop Insurance Corporation 7, IV Federal Deposit Insurance Corporation 5, XXII; 12, III Federal Election Commission 5, XXXVII; 11, I Federal Emergency Management Agency 44, I Federal Employees Group Life Insurance Federal 48, 21 Acquisition Regulation Federal Employees Health Benefits Acquisition 48, 16 Regulation Federal Energy Regulatory Commission 5, XXIV; 18, I Federal Financial Institutions Examination 12, XI Council Federal Financing Bank 12, VIII Federal Highway Administration 23, I, II Federal Home Loan Mortgage Corporation 1, IV Federal Housing Enterprise Oversight Office 12, XVII Federal Housing Finance Agency 5, LXXX; 12, XII Federal Labor Relations Authority 5, XIV, XLIX; 22, XIV Federal Law Enforcement Training Center 31, VII Federal Management Regulation 41, 102 Federal Maritime Commission 46, IV Federal Mediation and Conciliation Service 5, CIII; 29, XII Federal Mine Safety and Health Review Commission 5, LXXIV; 29, XXVII Federal Motor Carrier Safety Administration 49, III Federal Permitting Improvement Steering Council 40, IX Federal Prison Industries, Inc. 28, III Federal Procurement Policy Office 48, 99 Federal Property Management Regulations 41, 101 Federal Railroad Administration 49, II Federal Register, Administrative Committee of 1, I Federal Register, Office of 1, II Federal Reserve System 12, II Board of Governors 5, LVIII Federal Retirement Thrift Investment Board 5, VI, LXXVI Federal Service Impasses Panel 5, XIV Federal Trade Commission 5, XLVII; 16, I Federal Transit Administration 49, VI Federal Travel Regulation System 41, Subtitle F Financial Crimes Enforcement Network 31, X Financial Research Office 12, XVI Financial Stability Oversight Council 12, XIII Fine Arts, Commission of 45, XXI Fiscal Service 31, II Fish and Wildlife Service, United States 50, I, IV Food and Drug Administration 21, I Food and Nutrition Service 7, II Food Safety and Inspection Service 9, III Foreign Agricultural Service 7, XV Foreign Assets Control, Office of 31, V Foreign Claims Settlement Commission of the 45, V United States Foreign Service Grievance Board 22, IX Foreign Service Impasse Disputes Panel 22, XIV Foreign Service Labor Relations Board 22, XIV Foreign-Trade Zones Board 15, IV Forest Service 36, II General Services Administration 5, LVII; 41, 105 Contract Appeals, Board of 48, 61 [[Page 879]] Federal Acquisition Regulation 48, 5 Federal Management Regulation 41, 102 Federal Property Management Regulations 41, 101 Federal Travel Regulation System 41, Subtitle F General 41, 300 Payment From a Non-Federal Source for Travel 41, 304 Expenses Payment of Expenses Connected With the Death 41, 303 of Certain Employees Relocation Allowances 41, 302 Temporary Duty (TDY) Travel Allowances 41, 301 Geological Survey 30, IV Government Accountability Office 4, I Government Ethics, Office of 5, XVI Government National Mortgage Association 24, III Grain Inspection, Packers and Stockyards 7, VIII; 9, II Administration Great Lakes St. Lawrence Seaway Development 33, IV Corporation Gulf Coast Ecosystem Restoration Council 2, LIX; 40, VIII Harry S. Truman Scholarship Foundation 45, XVIII Health and Human Services, Department of 2, III; 5, XLV; 45, Subtitle A Centers for Medicare & Medicaid Services 42, IV Child Support Services, Office of 45, III Children and Families, Administration for 45, II, IV, X, XIII Community Services, Office of 45, X Families and Services, Administration of 45, III Family Assistance, Office of 45, II Federal Acquisition Regulation 48, 3 Food and Drug Administration 21, I Indian Health Service 25, V Inspector General (Health Care), Office of 42, V Public Health Service 42, I Refugee Resettlement, Office of 45, IV Homeland Security, Department of 2, XXX; 5, XXXVI; 6, I; 8, I Coast Guard 33, I; 46, I; 49, IV Coast Guard (Great Lakes Pilotage) 46, III Customs and Border Protection 19, I Federal Emergency Management Agency 44, I Human Resources Management and Labor Relations 5, XCVII Systems Immigration and Customs Enforcement Bureau 19, IV Transportation Security Administration 49, XII HOPE for Homeowners Program, Board of Directors 24, XXIV of Housing and Urban Development, Department of 2, XXIV; 5, LXV; 24, Subtitle B Community Planning and Development, Office of 24, V, VI Assistant Secretary for Equal Opportunity, Office of Assistant 24, I Secretary for Federal Acquisition Regulation 48, 24 Federal Housing Enterprise Oversight, Office 12, XVII of Government National Mortgage Association 24, III Housing--Federal Housing Commissioner, Office 24, II, VIII, X, XX of Assistant Secretary for Housing, Office of, and Multifamily Housing 24, IV Assistance Restructuring, Office of Inspector General, Office of 24, XII Public and Indian Housing, Office of Assistant 24, IX Secretary for Secretary, Office of 24, Subtitle A, VII Housing--Federal Housing Commissioner, Office of 24, II, VIII, X, XX Assistant Secretary for Housing, Office of, and Multifamily Housing 24, IV Assistance Restructuring, Office of Immigration and Customs Enforcement Bureau 19, IV Immigration Review, Executive Office for 8, V Independent Counsel, Office of 28, VII Independent Counsel, Offices of 28, VI Indian Affairs, Bureau of 25, I, V [[Page 880]] Indian Affairs, Office of the Assistant 25, VI Secretary Indian Arts and Crafts Board 25, II Indian Health Service 25, V Industry and Security, Bureau of 15, VII Information Resources Management, Office of 7, XXVII Information Security Oversight Office, National 32, XX Archives and Records Administration Inspector General Agriculture Department 7, XXVI Health and Human Services Department 42, V Housing and Urban Development Department 24, XII, XV Institute of Peace, United States 22, XVII Intellectual Property Enforcement Coordinator, 5, CIV Office of Inter-American Foundation 5, LXIII; 22, X Interior, Department of 2, XIV American Indians, Office of the Special 25, VII Trustee Endangered Species Committee 50, IV Federal Acquisition Regulation 48, 14 Federal Property Management Regulations System 41, 114 Fish and Wildlife Service, United States 50, I, IV Geological Survey 30, IV Indian Affairs, Bureau of 25, I, V Indian Affairs, Office of the Assistant 25, VI Secretary Indian Arts and Crafts Board 25, II Land Management, Bureau of 43, II National Indian Gaming Commission 25, III National Park Service 36, I Natural Resource Revenue, Office of 30, XII Ocean Energy Management, Bureau of 30, V Reclamation, Bureau of 43, I Safety and Environmental Enforcement, Bureau 30, II of Secretary of the Interior, Office of 2, XIV; 43, Subtitle A Surface Mining Reclamation and Enforcement, 30, VII Office of Internal Revenue Service 26, I International Boundary and Water Commission, 22, XI United States and Mexico, United States Section International Development, United States Agency 22, II for Federal Acquisition Regulation 48, 7 International Development Cooperation Agency, 22, XII United States International Development Finance Corporation, 5, XXXIII; 22, VII U.S. International Joint Commission, United States 22, IV and Canada International Organizations Employees Loyalty 5, V Board International Trade Administration 15, III; 19, III International Trade Commission, United States 19, II Interstate Commerce Commission 5, XL Investment Security, Office of 31, VIII James Madison Memorial Fellowship Foundation 45, XXIV Japan-United States Friendship Commission 22, XVI Joint Board for the Enrollment of Actuaries 20, VIII Justice, Department of 2, XXVIII; 5, XXVIII; 28, I, XI; 40, IV Alcohol, Tobacco, Firearms, and Explosives, 27, II Bureau of Drug Enforcement Administration 21, II Federal Acquisition Regulation 48, 28 Federal Claims Collection Standards 31, IX Federal Prison Industries, Inc. 28, III Foreign Claims Settlement Commission of the 45, V United States Immigration Review, Executive Office for 8, V Independent Counsel, Offices of 28, VI Prisons, Bureau of 28, V Property Management Regulations 41, 128 Labor, Department of 2, XXIX; 5, XLII Benefits Review Board 20, VII Employee Benefits Security Administration 29, XXV Employees' Compensation Appeals Board 20, IV [[Page 881]] Employment and Training Administration 20, V Federal Acquisition Regulation 48, 29 Federal Contract Compliance Programs, Office 41, 60 of Federal Procurement Regulations System 41, 50 Labor-Management Standards, Office of 29, II, IV Mine Safety and Health Administration 30, I Occupational Safety and Health Administration 29, XVII Public Contracts 41, 50 Secretary of Labor, Office of 29, Subtitle A Veterans' Employment and Training Service, 41, 61; 20, IX Office of the Assistant Secretary for Wage and Hour Division 29, V Workers' Compensation Programs, Office of 20, I, VI Labor-Management Standards, Office of 29, II, IV Land Management, Bureau of 43, II Legal Services Corporation 45, XVI Libraries and Information Science, National 45, XVII Commission on Library of Congress 36, VII Copyright Royalty Board 37, III U.S. Copyright Office 37, II Management and Budget, Office of 5, III, LXXVII; 14, VI; 48, 99 Marine Mammal Commission 50, V Maritime Administration 46, II Merit Systems Protection Board 5, II, LXIV Micronesian Status Negotiations, Office for 32, XXVII Military Compensation and Retirement 5, XCIX Modernization Commission Millennium Challenge Corporation 22, XIII Mine Safety and Health Administration 30, I Minority Business Development Agency 15, XIV Miscellaneous Agencies 1, IV Monetary Offices 31, I Morris K. Udall Scholarship and Excellence in 36, XVI National Environmental Policy Foundation Museum and Library Services, Institute of 2, XXXI National Aeronautics and Space Administration 2, XVIII; 5, LIX; 14, V Federal Acquisition Regulation 48, 18 National Agricultural Library 7, XLI National Agricultural Statistics Service 7, XXXVI National and Community Service, Corporation for 2, XXII; 45, XII, XXV National Archives and Records Administration 2, XXVI; 5, LXVI; 36, XII Information Security Oversight Office 32, XX National Capital Planning Commission 1, IV, VI National Counterintelligence Center 32, XVIII National Credit Union Administration 5, LXXXVI; 12, VII National Crime Prevention and Privacy Compact 28, IX Council National Drug Control Policy, Office of 2, XXXVI; 21, III National Endowment for the Arts 2, XXXII National Endowment for the Humanities 2, XXXIII National Foundation on the Arts and the 45, XI Humanities National Geospatial-Intelligence Agency 32, I National Highway Traffic Safety Administration 23, II, III; 47, VI; 49, V National Imagery and Mapping Agency 32, I National Indian Gaming Commission 25, III National Institute of Food and Agriculture 7, XXXIV National Institute of Standards and Technology 15, II; 37, IV National Intelligence, Office of Director of 5, IV; 32, XVII National Labor Relations Board 5, LXI; 29, I National Marine Fisheries Service 50, II, IV National Mediation Board 5, CI; 29, X National Oceanic and Atmospheric Administration 15, IX; 50, II, III, IV, VI National Park Service 36, I National Railroad Adjustment Board 29, III National Railroad Passenger Corporation (AMTRAK) 49, VII National Science Foundation 2, XXV; 5, XLIII; 45, VI [[Page 882]] Federal Acquisition Regulation 48, 25 National Security Council 32, XXI; 47, II National Technical Information Service 15, XI National Telecommunications and Information 15, XXIII; 47, III, IV, V Administration National Transportation Safety Board 49, VIII Natural Resource Revenue, Office of 30, XII Natural Resources Conservation Service 7, VI Navajo and Hopi Indian Relocation, Office of 25, IV Navy, Department of 32, VI Federal Acquisition Regulation 48, 52 Neighborhood Reinvestment Corporation 24, XXV Northeast Interstate Low-Level Radioactive Waste 10, XVIII Commission Nuclear Regulatory Commission 2, XX; 5, XLVIII; 10, I Federal Acquisition Regulation 48, 20 Occupational Safety and Health Administration 29, XVII Occupational Safety and Health Review Commission 29, XX Ocean Energy Management, Bureau of 30, V Oklahoma City National Memorial Trust 36, XV Operations Office 7, XXVIII Patent and Trademark Office, United States 37, I Payment From a Non-Federal Source for Travel 41, 304 Expenses Payment of Expenses Connected With the Death of 41, 303 Certain Employees Peace Corps 2, XXXVII; 22, III Pennsylvania Avenue Development Corporation 36, IX Pension Benefit Guaranty Corporation 29, XL Personnel Management, Office of 5, I, IV, XXXV; 45, VIII Federal Acquisition Regulation 48, 17 Federal Employees Group Life Insurance Federal 48, 21 Acquisition Regulation Federal Employees Health Benefits Acquisition 48, 16 Regulation Human Resources Management and Labor Relations 5, XCVII Systems, Department of Homeland Security Pipeline and Hazardous Materials Safety 49, I Administration Postal Regulatory Commission 5, XLVI; 39, III Postal Service, United States 5, LX; 39, I Postsecondary Education, Office of 34, VI President's Commission on White House 1, IV Fellowships Presidential Documents 3 Presidio Trust 36, X Prisons, Bureau of 28, V Privacy and Civil Liberties Oversight Board 6, X Procurement and Property Management, Office of 7, XXXII Public and Indian Housing, Office of Assistant 24, IX Secretary for Public Contracts, Department of Labor 41, 50 Public Health Service 42, I Railroad Retirement Board 20, II Reclamation, Bureau of 43, I Refugee Resettlement, Office of 45, IV Relocation Allowances 41, 302 Research and Innovative Technology 49, XI Administration Rural Business-Cooperative Service 7, XVIII, XLII, L Rural Housing Service 7, XVIII, XXXV, L Rural Utilities Service 7, XVII, XVIII, XLII, L Safety and Environmental Enforcement, Bureau of 30, II Science and Technology Policy, Office of 32, XXIV; 47, II Secret Service 31, IV Securities and Exchange Commission 5, XXXIV; 17, II Selective Service System 32, XVI Small Business Administration 2, XXVII; 13, I Smithsonian Institution 36, V Social Security Administration 2, XXIII; 20, III; 48, 23 Soldiers' and Airmen's Home, United States 5, XI Special Counsel, Office of 5, VIII Special Education and Rehabilitative Services, 34, III Office of [[Page 883]] State, Department of 2, VI; 22, I; 28, XI Federal Acquisition Regulation 48, 6 Surface Mining Reclamation and Enforcement, 30, VII Office of Surface Transportation Board 49, X Susquehanna River Basin Commission 18, VIII Tennessee Valley Authority 5, LXIX; 18, XIII Trade Representative, United States, Office of 15, XX Transportation, Department of 2, XII; 5, L Commercial Space Transportation 14, III Emergency Management and Assistance 44, IV Federal Acquisition Regulation 48, 12 Federal Aviation Administration 14, I Federal Highway Administration 23, I, II Federal Motor Carrier Safety Administration 49, III Federal Railroad Administration 49, II Federal Transit Administration 49, VI Great Lakes St. Lawrence Seaway Development 33, IV Corporation Maritime Administration 46, II National Highway Traffic Safety Administration 23, II, III; 47, IV; 49, V Pipeline and Hazardous Materials Safety 49, I Administration Secretary of Transportation, Office of 14, II; 49, Subtitle A Transportation Statistics Bureau 49, XI Transportation, Office of 7, XXXIII Transportation Security Administration 49, XII Transportation Statistics Bureau 49, XI Travel Allowances, Temporary Duty (TDY) 41, 301 Treasury, Department of the 2, X; 5, XXI; 12, XV; 17, IV; 31, IX Alcohol and Tobacco Tax and Trade Bureau 27, I Community Development Financial Institutions 12, XVIII Fund Comptroller of the Currency 12, I Customs and Border Protection 19, I Engraving and Printing, Bureau of 31, VI Federal Acquisition Regulation 48, 10 Federal Claims Collection Standards 31, IX Federal Law Enforcement Training Center 31, VII Financial Crimes Enforcement Network 31, X Fiscal Service 31, II Foreign Assets Control, Office of 31, V Internal Revenue Service 26, I Investment Security, Office of 31, VIII Monetary Offices 31, I Secret Service 31, IV Secretary of the Treasury, Office of 31, Subtitle A Truman, Harry S. Scholarship Foundation 45, XVIII United States Agency for Global Media 22, V United States and Canada, International Joint 22, IV Commission United States and Mexico, International Boundary 22, XI and Water Commission, United States Section U.S. Copyright Office 37, II U.S. Office of Special Counsel 5, CII Utah Reclamation Mitigation and Conservation 43, III Commission Veterans Affairs, Department of 2, VIII; 38, I Federal Acquisition Regulation 48, 8 Veterans' Employment and Training Service, 41, 61; 20, IX Office of the Assistant Secretary for Vice President of the United States, Office of 32, XXVIII Wage and Hour Division 29, V Water Resources Council 18, VI Workers' Compensation Programs, Office of 20, I, VI World Agricultural Outlook Board 7, XXXVIII [[Page 885]] List of CFR Sections Affected All changes in this volume of the Code of Federal Regulations (CFR) that were made by documents published in the Federal Register since January 1, 2019 are enumerated in the following list. Entries indicate the nature of the changes effected. Page numbers refer to Federal Register pages. The user should consult the entries for chapters, parts and subparts as well as sections for revisions. For changes to this volume of the CFR prior to this listing, consult the annual edition of the monthly List of CFR Sections Affected (LSA). The LSA is available at www.govinfo.gov. For changes to this volume of the CFR prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. The ``List of CFR Sections Affected 1986-2000'' is available at www.govinfo.gov. 2019 24 CFR 84 FR Page Subtitle B Chapter IX Chapter IX Notification............................................54009 2020 24 CFR 85 FR Page Subtitle B Chapter IX 903.7 (a)(1)(iii) and (o) revised..................................47911 903.15 Revised.....................................................47911 903.23 (f) revised.................................................47911 905.308 (b)(10) amended............................................61568 960.257 (c)(3)(i) amended..........................................27139 964.320 Revised....................................................61568 982.516 (b)(3)(i) amended..........................................27139 983.4 Amended......................................................61568 983.154 (c) introductory text and (1) removed; (c)(2) redesignated as new (c).................................................61568 1000.42 Revised....................................................61568 2021 24 CFR 86 FR Page Subtitle B Chapter VIII 880.607 (c)(6) added; interim......................................55701 882.511 (d)(1)(i) revised; (d)(2)(iv) added; (d)(3) amended; interim....................................................55701 884.216 (d) added; interim.........................................55701 Chapter IX 903.7 (o) revised; interim.........................................30792 903.15 (c) added; interim..........................................30793 903.23 (f) revised; interim........................................30793 966.8 Added; interim...............................................55701 982 Guidance.......................................................53207 983 Guidance.......................................................53207 2022 24 CFR 87 FR Page Subtitle B Chapter VIII 880.612 Revised....................................................37997 884.224 Revised....................................................37997 886.130 Revised....................................................37997 886.309 (e) amended................................................37997 886.335 Revised....................................................37997 887 Added..........................................................30046 891.582 Added......................................................37997 Chapter IX 984 Revised........................................................30047 [[Page 886]] 2023 24 CFR 88 FR Page Subtitle B Chapter VIII 880 Announcement...................................................56764 882.404 (d) removed................................................30499 882.515 (a) amended; (b) and (d) revised; (e) and (f) added; eff. 1-1-24......................................................9667 882.516 Heading, (b), (c), and (e) revised.........................30499 882.808 (i)(1) amended; (i)(4) and (5) added; eff. 1-1-24...........9668 884.217 Revised....................................................30499 886.113 (b) and (i) removed........................................30500 886.123 Revised....................................................30500 886.307 (b), (i), and (m) removed..................................30500 886.323 Revised....................................................30500 888 Announcement...................................................56764 891.105 Amended; eff. 1-1-24........................................9668 891.230 Removed; eff. 1-1-24........................................9668 891.410 (g)(1), (2), and (3)(i) revised; eff. 1-1-24................9668 891.435 (a) and (c)(2) revised; eff. 1-1-24.........................9669 891.440 Amended; eff. 1-1-24........................................9669 891.445 (d) amended; eff. 1-1-24....................................9669 891.510 (f)(1)(iii)(A)(2) amended..................................75233 891.520 Amended; eff. 1-1-24........................................9669 Amended........................................................75233 891.575 (a)(2) amended.............................................75233 891.610 (e), (g)(1), (2), and (3)(i) revised; eff. 1-1-24...........9669 891.655 Amended; eff. 1-1-24........................................9669 Amended........................................................75233 891.720 (a)(3) revised.............................................75233 891.740 (a)(2) revised.............................................75233 891.750 (b) introductory text, (3), (c)(1), (2), and (3)(i) revised....................................................75234 Chapter IX 902 Authority citation revised.....................................30500 902.3 Amended......................................................30500 902.13 (b)(2) revised..............................................30500 902.20 Removed.....................................................30500 902.21 Revised.....................................................30500 902.22 Revised.....................................................30501 902.24 Removed.....................................................30501 902.26 Removed.....................................................30501 902.68 Removed.....................................................30501 902.101--902.113 (Subpart H) Added.................................30501 903 Announcement...................................................56764 905 Announcement...................................................56764 Chapter IX 960.102 (b) amended.................................................9669 960.201 (a)(1) revised; eff. 1-1-24.................................9670 960.206 (b)(6) added................................................9670 960.253 (a)(3) added; (f)(1) revised................................9670 960.255 (e) and (f) added; eff. 1-1-24..............................9670 960.257 (a)(5) added; (d) amended...................................9670 (b) revised; (e) and (f) added; eff. 1-1-24.....................9670 960.259 (c)(2) revised; eff. 1-1-24.................................9671 960.261 Removed.....................................................9671 960.507 Added.......................................................9671 960.509 Added.......................................................9671 Second (b)(6)(xii) redesignated as (b)(6)(xiii)................12560 960.600 Revised.....................................................9675 960.601 (b) amended.................................................9675 964 Announcement...................................................56764 964.125 (a) amended.................................................9675 965.800--965.805 (Subpart I) Removed...............................30503 966.4 (a)(2)(iii) revised; (l)(2)(ii) amended; (l)(2)(iii) redesignated as (l)(2)(iv); (a)(2)(iv) and new (l)(2)(iii) added.......................................................9675 970 Announcement...................................................56764 982.4 (b) amended..................................................30503 982.352 (b)(1)(iv)(A)(3) revised...................................30503 982.401 Revised....................................................30503 982.402 (b)(2) amended.............................................30503 982.405 (a) revised................................................30503 982.516 (a)(3), (c), (d), (e)(1), and (f) revised; (h) added; eff. 1-1-24......................................................9675 982.552 (b)(6) added; eff. 1-1-24...................................9676 982.605 (a) revised................................................30503 982.609 (a) revised................................................30504 982.614 (a) and (b)(1) revised.....................................30504 982.618 (b) and (c) revised........................................30504 982.621 Introductory text revised..................................30504 982.628 (a)(4) revised.............................................30504 983 Announcement...................................................56764 983.2 (c)(4) amended...............................................30504 983.3 (b) amended..................................................30504 983.10 (b)(2)(ii) revised..........................................30504 983.101 (a) through (c) revised....................................30504 983.103 (d) heading revised; (d)(4) added..........................30504 985 Authority citation and heading revised.........................30505 985.1 (b) revised; (c) added.......................................30505 985.201--985.211 (Subpart D) Added.................................30505 1000 Notification..................................................87899 1003 Notification..................................................87899 1006 Notification..................................................87899 [[Page 887]] 2024 (Regulations published from January 1, 2024, through April 1, 2024) 24 CFR 89 FR Page Subtitle A Chapter IX Chapter IX Notification.............................................7612 1005 Revised; eff. 6-18-24.........................................20056 1005.749 (c)(7) and (8) correctly redesignated as (c)(6) and (7); eff. 6-18-24...............................................22084 1005.759 Second (b), (c) and (d) correctly redesignated as (c), (d) and (e); eff. 6-18-24..................................22084 1005.805 Correction: (b)(4)(vi) and (vii) correctly redesignated as (b)(4)(v) and (vi); eff. 6-18-24........................22084 1006 Authority citation revised.....................................9760 1006.10 Amended.....................................................9760 1006.101 Introductory text, (c), and (d) revised....................9761 1006.201 Revised....................................................9761 1006.205 (a)(9) revised.............................................9761 1006.210 (g) removed; (h) redesignated as new (g)...................9761 1006.215 (e) revised; (f) redesignated as (g); new (f) added........9761 1006.227 Added......................................................9761 1006.230 (f) amended................................................9761 1006.235 Heading revised............................................9761 1006.301 Revised....................................................9761 1006.305 (a) and (b) revised........................................9762 1006.306 Added......................................................9762 1006.307 Added......................................................9762 1006.310 Revised....................................................9762 1006.340 (a) amended................................................9763 1006.350 (a) amended................................................9763 1006.375 Revised....................................................9763 1006.377 Added......................................................9763 1006.410 (a)(2) and (c)(1) revised; (a)(3) added....................9764 1006.420 (c) heading added..........................................9764 [all]

usgpo

2024-10-08T13:26:21.406695

CRPT

CRPT-118srpt183

THE 2024 JOINT ECONOMIC REPORT

United States Congress Senate

[Senate Report 118-183] [From the U.S. Government Publishing Office] 118th Congress } { Report SENATE 2nd Session } { 118-183 ====================================================================== THE 2024 JOINT ECONOMIC REPORT __________ REPORT OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES ON THE 2024 ECONOMIC REPORT OF THE PRESIDENT JUNE 17, 2024.--Ordered to be printed [Text is not available online see PDF format]

usgpo

2024-10-08T13:27:15.000636

CRPT

CRPT-118hrpt534

ELECTRONIC FILING OF ELECTIONEERING COMMUNICATION REPORTS ACT

United States Congress House of Representatives

[House Report 118-534] [From the U.S. Government Publishing Office] 118th Congress } { Report HOUSE OF REPRESENTATIVES 2d Session } { 118-534 ====================================================================== ELECTRONIC FILING OF ELECTIONEERING COMMUNICATION REPORTS ACT _______ June 3, 2024.--Committed to the Committee of the Whole House on the State of the Union and ordered to be printed _______ Mr. Steil, from the Committee on House Administration, submitted the following R E P O R T together with ADDITIONAL VIEWS [To accompany H.R. 7321] [Including cost estimate of the Congressional Budget Office] The Committee on House Administration, to whom was referred the bill (H.R. 7321) to amend the Federal Election Campaign Act of 1971 to modernize certain reporting requirements for electioneering communications, and for other purposes, having considered the same, reports favorably thereon without amendment and recommends that the bill do pass. CONTENTS Page Purpose and Summary.............................................. 2 Background and Need for Legislation.............................. 2 Committee Action................................................. 6 Committee Consideration.......................................... 7 Committee Votes.................................................. 7 Statement of Constitutional Authority............................ 7 Committee Oversight Findings..................................... 7 Statement of Budget Authority and Related Items.................. 7 Congressional Budget Office Estimate............................. 7 Performance Goals and Objectives................................. 9 Duplication of Federal Programs.................................. 9 Advisory on Earmarks............................................. 9 Federal Mandates Statement....................................... 9 Advisory Committee Statement..................................... 9 Applicability to Legislative Branch.............................. 9 Section-by-Section Analysis...................................... 9 Changes in Existing Law as Reported.............................. 9 Additional Views................................................. 26 Purpose and Summary H.R. 7321, the Electronic Filing of Electioneering Communication Reports Act, introduced by Representative Joseph Morelle (NY-25) and co-sponsored by Representative's Bryan Steil (WI-01) and Joe Neguse (CO-02) requires entities that report more than $50,000 in electioneering communications to file their electioneering communication reports electronically with the Federal Election Commission. The electioneering communication report is the last remaining campaign finance report not subject to a mandatory electronic filing. This will allow the Federal Election Commission to process and disseminate these reports more effectively and efficiently and increase public transparency as the reports will be available for download within minutes of being submitted. Background and Need for Legislation BACKGROUND Congress created the Federal Election Commission (``FEC'') in 1974\1\ and gave it the authority to enforce all civil violations of federal campaign finance law.\2\ The agency is a bipartisan commission of six commissioners who serve single, non-renewable six-year terms, though many commissioners ``hold over'' until a new commissioner is appointed.\3\ No more than three commissioners may be affiliated with the same political party.\4\ Commissioners are appointed by the president, traditionally upon the recommendation of Senate leadership, and are subject to confirmation by the United States Senate.\5\ For the FEC to act, a majority vote of the commissioners is required.\6\ --------------------------------------------------------------------------- \1\Federal Election Campaign Act Amendments of 1974, 52 U.S.C. Sec. 30106 (1974). \2\Id. at Sec. Sec. 30106(b)(1), 30107(e). \3\Id. at Sec. 30106(a)(2)(A)-(B). Commissioners are allowed to serve holdover terms in the event a replacement is not confirmed before their term expires. One commissioner has been at the FEC since 2002, 15 years longer than the standard term. \4\Id. at Sec. 30106(a)(2)(A). \5\Id. at Sec. 30106(a)(1). \6\Id. at Sec. 30106(c). --------------------------------------------------------------------------- The Federal Election Campaign Finance Act (``FECA'') requires individuals and other persons, including corporations and labor organizations, that make disbursements for electioneering communications aggregating over $10,000 in the calendar year, to file an electioneering communication report with the FEC.\7\ FECA defines an electioneering communication as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate,\8\ is publicly distributed\9\ within 30 days of a primary or 60 days of a general election and is targeted to the relevant electorate.\10\ To give an example of an electioneering communication, the Wisconsin Right to Life once ran several radio advertisements in Wisconsin, asking voters to contact then Wisconsin Senator Russ Feingold and ask him to oppose filibustering President George W. Bush's federal judicial nominees.\11\ The ads ran in Wisconsin, throughout August 2004, and Senator Feingold's primary was slated to take place on August 15th, 2004.\12\ --------------------------------------------------------------------------- \7\Id. at Sec. 30104(f). \8\A candidate is ``clearly identified'' if the candidate's name, nickname, photograph or drawing appears, or the identity of the candidate is otherwise apparent through an unambiguous reference such as ``the President,'' ``your Representative,'' or ``the incumbent.'' See 11 CFR Sec. 100.29(b)(2). \9\A communication is ``publicly distributed'' for the purposes of the rules governing electioneering communications when it is aired, broadcast, cablecast or otherwise disseminated through the facilities of a radio or television station, cable television system or a satellite system. See 11 CFR Sec. 100.29(b)(3). \10\52 U.S.C. Sec. 30104(f)(3)(A). A communication is ``targeted to the relevant electorate'' when it is receivable by 50,000 or more persons in the candidate's district (for a House candidate) or state (for a Senate candidate). In the case of presidential and vice- presidential candidates, the communication is publicly distributed if it can be received by 50,000 or more people in a state where a primary election or caucus is being held within 30 days or anywhere in the United States 30 days prior to the nominating convention or 60 days prior to the general election. See 11 CFR Sec. 100.29(b)(5). \11\See generally Federal Election Comm'n v. Wisconsin Right to Life, Inc., 127 S. Ct. 2652 (2007). \12\Id. --------------------------------------------------------------------------- The Bipartisan Campaign Reform Act of 2002 (``BCRA'') commonly known as ``McCain-Feingold''\13\ significantly cut back on the ability of corporations and labor unions to engage in political speech. Before BCRA, corporations could engage in political speech through independent expenditures\14\ so long as their speech did not expressly advocate the election or defeat of a clearly identified federal candidate.\15\ The BCRA made it a crime for corporations and labor unions to use their general treasury funds to make electioneering communications (``electioneering communication prohibition'').\16\ This prohibition meant that for corporations or labor unions to fund an electioneering communication, they needed to create a separate segregated fund run by a political action committee.\17\ The BCRA also imposed disclaimer and disclosure requirements on entities making certain electioneering communications.\18\ --------------------------------------------------------------------------- \13\See Pub. L. No. 107-155, 116 Stat. 81 (2002). The law is referred to as ``McCain-Feingold'' because the main sponsors of the bill were then-Senators John McCain (AZ) and Russ Feingold (WI). \14\An independent expenditure is an expenditure for a communication, such as an advertisement through a website, digital device, application, advertising platform, newspaper, TV or direct mail that: expressly advocates the election or defeat of a clearly identified candidate; and is not made in consultation or cooperation with, or at the request or suggestion of any candidate, or his or her authorized committees or agents, or a political party committee or its agents. See 52 U.S.C. 30101(17). \15\Wisconsin Right to Life, 127 S. Ct. at 2659. \16\Wisconsin Right to Life, 127 S.Ct. at 2658-59. \17\Id. at 2675-76 (Scalia, J., concurring in concurring in part and concurring in the judgment.) \18\See 52 U.S.C. Sec. Sec. 30104(f)(2), 30120 with enabling regulations at 11 CFR Sec. 110.11. --------------------------------------------------------------------------- In the first constitutional challenge to the BCRA, the Supreme Court upheld a facial challenge to the electioneering communication prohibition with the caveat that the electioneering communication constituted express advocacy or its functional equivalent.\19\ But several years later, the Supreme Court held that the BCRA, as applied to the Wisconsin electioneering communications described above, was unconstitutional as it regulated issue advertisements.\20\ Finally, in Citizens United v. Federal Election Commission, the Supreme Court invalidated BCRA's electioneering communication prohibition, thereby allowing corporations and labor unions to use their general treasury funds on any type of electioneering communications.\21\ The Court also upheld BCRA's disclaimer and disclosure requirements and left unscathed the federal prohibition on foreign individuals or associations from engaging in political speech.\22\ --------------------------------------------------------------------------- \19\McConnell v. Federal Election Comm'n, 540 U.S. 93, 206 (2003). In Federal Election Comm'n v. Wisconsin Right to Life, Inc., Chief Justice Roberts and Justice Alito reasoned that ``a court should find that an ad is the functional equivalent of express advocacy only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.'' Wisconsin Right to Life, 127 S.Ct. at 2667 (opinion of Roberts, C.J.). In an opinion concurring in part and concurring in the judgment, Justice Scalia, joined by Justices Kennedy and Thomas argued that McConnell's holding bifurcating between express advocacy or its functional equivalent and everything else was wrong, unconstitutionally infringed on political speech, and that part of the opinion should be overturned. Id. at 2684- 86 (Scalia., J. concurring in part and concurring in the judgment). \20\Wisconsin Right to Life, 127 S.Ct. at 2670-71. The advertisements were not express advocacy or its functional equivalent because they ``. . . may reasonably be interpreted as something other than as an appeal to vote for or against a specific candidate . . . and therefore fall outside the scope of McConnell's holding.'' As such, the BCRA's application to the advertisements were unconstitutional under the First Amendment because the Supreme Court has never recognized a compelling government interest in regulating issue advertisements. Id. at 2671. \21\Citizens United v. Federal Election Comm'n, 130 S.Ct. 876, 917 (2010). Importantly, the Court rejected Citizens United's argument that its film entitled Hillary: The Movie was not express advocacy or its functional equivalent. Id. at 888-892. Therefore, the Court's invalidation of BCRA's electioneering communication prohibition covers both the prohibition on general treasury funds and those funds being used to fund communications that constitute express advocacy or its functional equivalent. \22\Id. at 911, 913-17. See also Bluman v. FEC, 800 F. Supp. 2d 281, 288 (D.D.C. 2011), aff'd, 565 U.S. 1104 (2012). In this case, the Supreme Court of the United States has never been presented with the question whether the foreign national prohibition violates the First Amendment, it has previously affirmed a three-judge court's decision, authored by then-Judge Kavanaugh, which upheld the foreign national prohibition with respect to foreign nationals who wanted to make contributions to federal and State candidates. In addition, on November 30, 2023, the U.S. House of Representatives Committee on House Administration passed H.R. 3229, Stop Foreign Funds in Elections Act out of committee. That legislation prohibits foreign nationals from making a contribution or donation of money or other thing of value, or to make an express or implied promise to make a contribution or donation to a State or local ballot initiative, referendum, or recall election. --------------------------------------------------------------------------- Entities filing an electioneering communication report must file a 24 Hour Notice of Disbursements/Obligations for Electioneering Communications on Form 9 within 24 hours of the disclosure date.\23\ This form must be received by the FEC by 11:59 p.m. Eastern Standard/Daylight Time of the day following the disclosure date.\24\ Entities that fail to meet this deadline because they file their report late or do not file them at all are subject to a number of different FEC enforcement mechanisms.\25\ The contents of the report must include: the identity of the entity making the disbursement, its principal place of business, the amount of each disbursement of more than $200 during the period covered by the statement, the identity of the person to whom the disbursement was made, the election to which the communication pertains, and the names of the candidates identified or to be identified, among other requirements.\26\ --------------------------------------------------------------------------- \23\52 U.S.C. Sec. 30104(f)(1), 11 CFR 104.20(b). \24\11 CFR 104.20(b). \25\See generally 52 U.S.C. Sec. Sec. 30107, 30109-30111. Unlike reports filed by political committees that have clear deadlines, the FEC does not know when an electioneering communication report will be filed because entities can choose to make these communications at any time. As such, the FEC will often receive complaints when an entity does not file an electioneering communication report on time or at all. \26\Id. at Sec. 30104(f)(2). --------------------------------------------------------------------------- While the scope of an electioneering communication seems broad, it comes with several exceptions. First, if a political committee were to run an electioneering communication, it would be reported as an expenditure or independent expenditure,\27\ for which committees file separate reports.\28\ Second, communications publicly disseminated through means other than broadcast, cable, or satellite do not qualify.\29\ Communications that appear in a news story or editorial that is not owned or controlled by a political party or candidate also does not qualify.\30\ And importantly, a candidate debate or forum or the promotion of by the sponsor of the event does not qualify.\31\ Finally, the FEC is permitted to promulgate other exceptions as well.\32\ --------------------------------------------------------------------------- \27\Id. at Sec. 30104(f)(B)(ii). See also 11 CFR Sec. 104.20(b) (``Political committees that make communications that are described in 11 CFR 100.29(a) must report such communications as expenditures or independent expenditures under 11 CFR 104.3 and 104.4, and not under this section.'') \28\See Id. Sec. 30104(a)(1)-(2). \29\52 U.S.C. Sec. 30104(f)(3)(A)(i). \30\Id. Sec. 30104(f)(B)(i). \31\Id. at Sec. 30104(f)(B)(iii). \32\Id. at Sec. 30104(f)(b)(iv). --------------------------------------------------------------------------- Mandatory electronic filing of all reports is already required under current law once a political committee receives contributions or make expenditures in excess of $50,000\33\ in the calendar year or has reason to expect to do so.\34\ Once this threshold is exceeded, the committee must file their reports electronically for the remainder of the calendar year.\35\ Similarly, if the committee also has reason to expect to exceed the threshold during the next two calendar years once the $50,000 threshold is exceeded and must file electronically in those years as well.\36\ The FEC provides free electronic filing software to help committees file their reports online.\37\ However, because political committees do not file electioneering reports, the law does not require entities that do file them to do so electronically. Therefore, some entities still file them on paper. --------------------------------------------------------------------------- \33\The FEC established the $50,000 figure in response to a Congressional mandate for the FEC to have final rules on electronic filing in effect on January 1, 2001. See Pub. L. No. 106-58, 113 Stat. 476 (1999), as amended, codified at 52 U.S.C. Sec. 30104(a)(11)(i)-(ii) with the final rule published at 60 Fed. Reg. 120 (June 21, 2000). See also 11 CFR Sec. 104.18(a). The $50,000 figure has not been changed since this rule was promulgated. \34\52 U.S.C. Sec. 30103(a)(11) with enabling regulations at 11 CFR Sec. 104.18(a). \35\Id. \36\Id. \37\FECFile: the FEC's free software, FEC, available at https:// www.fec.gov/help-candidates-and-committees/filing-reports/fecfile- software/. --------------------------------------------------------------------------- In the 117th Congress, former Ranking Member on the Committee on House Administration, Representative Rodney Davis (IL-13), introduced H.R. 8528, the American Confidence in Elections Act,\38\ which included legislation substantially similar to Rep. Morelle's H.R. 7321, the Electronic Filing of Electioneering Communication Reports Act. --------------------------------------------------------------------------- \38\American Confidence in Elections Act, H.R. 8528, 117th Cong. Sec. 2 (2022). --------------------------------------------------------------------------- In the 118th Congress, Representative Bryan Steil (WI-01), introduced H.R. 4563, an updated version of the American Confidence in Elections Act,\39\ which includes Rep. Morelle's H.R. 7321, the Electronic Filing of Electioneering Communication Reports Act. --------------------------------------------------------------------------- \39\American Confidence in Elections Act, H.R. 4562, 118th Cong. Sec. 1 (2023). --------------------------------------------------------------------------- NEED FOR LEGISLATION Rep. Morelle's (NY-25) Electronic Filing of Electioneering Communication Reports Act would require entities that report more than $50,000 of electioneering communications in a calendar year to file their electioneering communication reports electronically with the FEC. Entities that report less than $50,000, a threshold set by the FEC,\40\ would still be allowed to file these reports on paper. --------------------------------------------------------------------------- \40\Supra note 33. --------------------------------------------------------------------------- Despite strong political differences among the commissioners, this legislative change was the FEC's top legislative recommendation in 2021,\41\ a priority legislative recommendation in 2022,\42\ and a similar proposal was a priority legislative recommendation in 2023.\43\ --------------------------------------------------------------------------- \41\Legislative Recommendations of the Federal Election Commission 2021, FEC (May 6, 2021), available at https://www.fec.gov/resources/ cms-content/documents/legrec2021.pdf. \42\Legislative Recommendations of the Federal Election Commission 2022, FEC (Dec. 15, 2022), available at https://www.fec.gov/resources/ cms-content/documents/legrec2022.pdf. \43\Legislative Recommendations of the Federal Election Commission 2023, FEC (Dec. 14, 2023), available at https://www.fec.gov/resources/ cms-content/documents/legrec2023.pdf. --------------------------------------------------------------------------- Today, federal law already requires the mandatory electronic filing for political committees and other persons if they receive contributions or make expenditures in excess of $50,000 in the current calendar year, or have reason to expect to do so.\44\ Similarly, mandatory electronic filing is required for many independent expenditure reports.\45\ However, as described above, because political committees do not file electioneering communication reports, federal law does not require entities that file electioneering communication reports to do so electronically. As such, this legislative change will ensure that all major filings with the FEC are done so electronically. --------------------------------------------------------------------------- \44\52 U.S.C. Sec. 30104(a)(11) with enabling regulations at 11 CFR Sec. 104.18(a). \45\Id. --------------------------------------------------------------------------- Electronic filing of electioneering communication reports also promotes transparency and public awareness. Electronic reports are received, processed, and disseminated more expeditiously than paper filings. This ensures FEC staff do not have to waste time or resources handling paper filings and uploading them to the internet. Moreover, reports filed electronically can be available for public viewing and download within minutes, whereas the FEC estimates it takes at least 48 hours before a paper filing's initial appearance on the FEC's website.\46\ Finally, electronic filings are not subject to the impediments that paper filings face due to post office processing or disruptions in the delivery of mail. --------------------------------------------------------------------------- \46\Legislative Recommendations of the Federal Election Commission 2022 at page 7, FEC (Dec. 15, 2022), available at https://www.fec.gov/ resources/cms-content/documents/legrec2022.pdf. --------------------------------------------------------------------------- Committee Action INTRODUCTION AND REFERRAL On February 13, 2024, Representative Joseph Morelle (NY- 25), Ranking Member of the Committee on House Administration, joined by Representative Bryan Steil (WI-01), Chairman of the Committee on House Administration and Representative Joe Neguse (CO-02), introduced H.R. 7321, the Electronic Filing of Electioneering Communication Reports Act. The bill was referred to the U.S. House of Representatives Committee on House Administration. HEARINGS For the purposes of clause 3(c)(6)(A) of House rule XIII, in the 118th Congress, the Committee held one full committee hearing to develop H.R. 7321. 1. On September 20, 2023, the Committee held a full committee hearing titled, ``Oversight of the Federal Elections Commission.'' The hearing represented the first traditional oversight hearing of the Federal Election Commission in more than a decade.\47\ The committee heard testimony from all six commissioners and the agency's inspector general. The first panel of witnesses included the Honorable Dara Lindenbaum, Chairwoman, the Honorable Sean Cooksey, Vice Chairman, the Honorable Shana Broussard, Commissioner, the Honorable Allen Dickerson, Commissioner, the Honorable Ellen Weintraub, Commissioner, and the Honorable James Trainor, Commissioner. The second panel featured Mr. Christopher Skinner, Inspector General.\48\ --------------------------------------------------------------------------- \47\The last traditional oversight hearing of the Federal Election Commission before the Committee on House Administration occurred on November 3, 2011. See Federal Election Commission: Reviewing Policies, Processes and Procedures: Hearing Before the Subcomm. on Elections of the H. Comm. on Admin., 112th Cong. (2011). \48\Oversight of the Federal Election Commission: Hearing Before the H. Comm. on Admin., 118th Cong. (2023). --------------------------------------------------------------------------- Committee Consideration On February 14, 2024, the Committee on House Administration met in open session and ordered the bill, H.R. 7321, the Electronic Filing of Electioneering Communication Reports Act, reported favorably to the House of Representatives, by voice vote, a quorum being present. Committee Votes In compliance with clause 3(b) of House rule XIII, the following vote occurred during the Committee's consideration of H.R. 5734: 1. Vote to report H.R. 7321 favorably to the House of Representatives, passed by voice vote. Statement of Constitutional Authority Congress has the power to enact this legislation pursuant to the following: Article I, Section 8, Clause 18--``To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.\49\ --------------------------------------------------------------------------- \49\U.S. Const. art. I, Sec. 8, cl. 18. --------------------------------------------------------------------------- Committee Oversight Findings In compliance with clause 3(c)(1) of House rule XIII, the Committee advises that the findings and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. Statement of Budget Authority and Related Items Pursuant to clause 3(c)(2) of rule XIII of the Rules of the House of Representatives and section 308(a)(I) of the Congressional Budget Act of 1974, the Committee provides the following opinion and estimate with respect to new budget authority, entitlement authority, and tax expenditures. The Committee believes that there will be no additional costs attributable to H.R. 7321. Congressional Budget Office Estimate With respect to the requirement of clause 3(c)(3) of rule XIII of the Rules of the House of Representatives, a cost estimate provided by the Congressional Budget Office (``CBO'') pursuant to section 402 of the Congressional Budget Act of 1974 was made available to the Committee in time for the filing of this report. CBO estimated that implementing H.R. 7321 would cost less than $500,000 over the 2024-2029 period. The CBO report is attached with the committee report materials submitted to the Clerk. H.R. 7321 would amend the Federal Election Campaign Act of 1971 to require the Federal Election Commission (FEC) to expand the communication reporting requirements for candidates running for federal office. Using information from the FEC, CBO estimates that implementing H.R. 7321 would cost less than $500,000 over the 2024-2029 period. Any related spending would be subject to the availability of appropriated funds. The bill also could increase the collection of fines and penalties from violations of campaign finance laws, which are recorded in the budget as revenues. However, CBO estimates that any additional collections of penalties and fines resulting from the legislation would not be significant because of the small number of anticipated violations. H.R. 7321 would impose a private-sector mandate as defined in the Unfunded Mandates Reform Act (UMRA) by expanding the reporting requirements on candidates running for federal office. The bill would require candidates for federal office to report electioneering communications in excess of a threshold to be determined by the FEC. Because federal campaigns are subject to existing requirements and the duty would impose only a minor additional burden, CBO estimates that the cost of the mandate would fall below the private-sector threshold established in UMRA ($200 million in 2024, adjusted annually for inflation). H.R. 7321 contains no intergovernmental mandates as defined in UMRA. The CBO staff contacts for this estimate are Matthew Pickford (for federal costs) and Grace Watson (for mandates). The estimate was reviewed by H. Samuel Papenfuss, Deputy Director of Budget Analysis. Phillip L. Swagel, Director, Congressional Budget Office. Performance Goals and Objectives The performance goals and objectives of H.R. 7321 are to require entities that report more than $50,000 in electioneering communications to file their electioneering communication reports electronically with the Federal Election Commission. Duplication of Federal Programs Pursuant to clause 3(c)(5) of House rule XIII, no provision of H.R. 7321 establishes or reauthorizes a program of the federal government known to be duplicative of another federal program. Advisory on Earmarks In accordance with clause 9 of House rule XXI, H.R. 7321 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clauses 9(d), 9(e), or 9(f) of House rule XXI. Federal Mandates Statement An estimate of federal mandates prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act was not made available to the Committee in time for the filing of this report. The Chairman of the Committee shall cause such an estimate to be printed in the Congressional Record if it is received by the Committee. Advisory Committee Statement H.R. 7321 does not establish or authorize any new advisory committees. Applicability to Legislative Branch The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. Section-by-Section Analysis Section 1. Short title This section provides a short title for the bill, the Electronic Filing of Electioneering Communication Reports Act. Section 2. Modernization of certain reporting requirements for Electioneering Communications This section requires entities that report more than $50,000 in electioneering communications to file their electioneering communication reports electronically with the Federal Election Commission. Changes in Existing Law Made by the Bill, as Reported In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (new matter is printed in italics and existing law in which no change is proposed is shown in roman): FEDERAL ELECTION CAMPAIGN ACT OF 1971 * * * * * * * TITLE III--DISCLOSURE OF FEDERAL CAMPAIGN FUNDS * * * * * * * reports Sec. 304. (a)(1) Each treasurer of a political committee shall file reports of receipts and disbursements in accordance with the provisions of this subsection. The treasurer shall sign each such report. (2) If the political committee is the principal campaign committee of a candidate for the House of Representatives or for the Senate-- (A) in any calendar year during which there is regularly scheduled election for which such candidate is seeking election, or nomination for election, the treasurer shall file the following reports: (i) a pre-election report, which shall be filed no later than the 12th day before (or posted by any of the following: registered mail, certified mail, priority mail having a delivery confirmation, or express mail having a delivery confirmation, or delivered to an overnight delivery service with an on-line tracking system, if posted or delivered no later than the 15th day before) any election in which such candidate is seeking election, or nomination for election, and which shall be complete as of the 20th day before such election; (ii) a post-general election report, which shall be filed no later than the 30th day after any general election in which such candidate has sought election, and which shall be complete as of the 20th day after such general election; and (iii) additional quarterly reports, which shall be filed no later than the 15th day after the last day of each calendar quarter, and which shall be complete as of the last day of each calendar quarter: except that the report for the quarter ending December 31 shall be filed no later than January 31 of the following calendar year; and (B) in any other calendar year the treasurer shall file quarterly reports, which shall be filed not later than the 15th day after the last day of each calendar quarter, and which shall be complete as of the last day of each calendar quarter, except that the report for the quarter ending December 31 shall be filed not later than January 31 of the following calendar year. (3) If the committee is the principal campaign committee of a candidate for the office of President-- (A) in any calendar year during which a general election is held to fill such office-- (i) the treasurer shall file monthly reports if such committee has on January 1 of such year, received contributions aggregating $100,000 or made expenditures aggregating $100,000 or anticipates receiving contributions aggregating $100,000 or more or making expenditures aggregating $100,000 or more during such year: such monthly reports shall be filed no later than the 20th day after the last day of each month and shall be complete as of the last day of the month, except that, in lieu of filing the report otherwise due in November and December, a pre-general election report shall be filed in accordance with paragraph (2)(A)(i), a post-general election report shall be filed in accordance with paragraph (2)(A)(ii), and a year end report shall be filed no later than January 31 of the following calendar year; (ii) the treasurer of the other principal campaign committees of a candidate for the office of President shall file a pre-election report or reports in accordance with paragraph (2)(A)(i), a post-general election report in accordance with paragraph (2)(A)(ii), and quarterly reports in accordance with paragraph (2)(A)(iii); and (iii) if at any time during the election year a committee filing under paragraph (3)(A)(ii) receives contributions in excess of $100,000 or makes expenditures in excess of $100,000, the treasurer shall begin filing monthly reports under paragraph (3)(A)(i) at the next reporting period; and (B) in any other calendar year, the treasurer shall file either-- (i) monthly reports, which shall be filed no later than the 20th day after the last day of each month and shall be compete as of the last day of the month; or (ii) quarterly reports, which shall be filed no later than the 15th day after the last day of each calendar quarter and which shall be complete as of the last day of each calendar quarter. (4) All political committees other than authorized committees of a candidate shall file either-- (A)(i) quarterly reports, in a calendar year in which a regularly scheduled general election is held, which shall be filed no later than the 15th day after the last day of each calendar quarter: except that the report for the quarter ending on December 31 of such calendar year shall be filed no later than January 31 of the following calendar year. (ii) a pre-election report, which shall be filed no later than the 12th day before (or posted by any of the following: registered mail, certified mail, priority mail having a delivery confirmation, or express mail having a delivery confirmation, or delivered to an overnight delivery service with an on-line tracking system, if posted or delivered no later than the 15th day before) any election in which the committee makes a contribution to or expenditure on behalf of a candidate in such election, and which shall be complete as of the 20th day before the election; (iii) a post-general election report, which shall be filed no later than the 30th day after the general election and which shall be complete as of the 20th day after such general election; and (iv) in any other calendar year, a report covering the period beginning January 1 and ending June 30, which shall be filed no later than July 31 and a report covering the period beginning July 1 and ending December 31, which shall be filed no later than January 31 of the following calendar year; or (B) monthly reports in all calendar years which shall be filed no later than the 20th day after the last day of the month and shall be complete as of the last day of the month, except that, in lieu of filing the reports otherwise due in November and December of any year in which a regularly scheduled general election is held, a pre-general election report shall be filed in accordance with paragraph (2)(A)(i), a post-general election report shall be filed in accordance with paragraph (2)(A)(ii), and a year end report shall be filed no later than January 31 of the following calendar year. Notwithstanding the preceding sentence, a national committee of a political party shall file the reports required under subparagraph (B). (5) If a designation, report, or statement filed pursuant to this Act (other than under paragraph (2)(A)(i) or (4)(A)(ii) or subsection (g)(1)) is sent by registered mail, certified mail, priority mail having a delivery confirmation, or express mail having a delivery confirmation, the United States postmark shall be considered the date of filing the designation, report or statement. If a designation, report or statement filed pursuant to this Act (other than under paragraph (2)(A)(i) or (4)(A)(ii), or subsection (g)(1)) is sent by an overnight delivery service with an on-line tracking system, the date on the proof of delivery to the delivery service shall be considered the date of filing of the designation, report, or statement. (6)(A) The principal campaign committee of a candidate shall notify the Secretary or the Commission, and the Secretary of State, as appropriate, in writing, of any contribution of $1,000 or more received by any authorized committee of such candidate after the 20th day, but more than 48 hours before, any election. This notification shall be made within 48 hours after the receipt of such contribution and shall include the name of the candidate and the office sought by the candidate, the identification of the contributor, and the date of receipt and amount of the contribution. (B) Notification of expenditure from personal funds.-- (i) Definition of expenditure from personal funds.-- In this subparagraph, the term ``expenditure from personal funds'' means-- (I) an expenditure made by a candidate using personal funds; and (II) a contribution or loan made by a candidate using personal funds or a loan secured using such funds to the candidate's authorized committee. (ii) Declaration of intent.--Not later than the date that is 15 days after the date on which an individual becomes a candidate for the office of Senator, the candidate shall file a declaration stating the total amount of expenditures from personal funds that the candidate intends to make, or to obligate to make, with respect to the election that will exceed the State-by- State competitive and fair campaign formula with-- (I) the Commission; and (II) each candidate in the same election. (iii) Initial notification.--Not later than 24 hours after a candidate described in clause (ii) makes or obligates to make an aggregate amount of expenditures from personal funds in excess of 2 times the threshold amount in connection with any election, the candidate shall file a notification with-- (I) the Commission; and (II) each candidate in the same election. (iv) Additional notification.--After a candidate files an initial notification under clause (iii), the candidate shall file an additional notification each time expenditures from personal funds are made or obligated to be made in an aggregate amount that exceed $10,000 with-- (I) the Commission; and (II) each candidate in the same election. Such notification shall be filed not later than 24 hours after the expenditure is made. (v) Contents.--A notification under clause (iii) or (iv) shall include-- (I) the name of the candidate and the office sought by the candidate; (II) the date and amount of each expenditure; and (III) the total amount of expenditures from personal funds that the candidate has made, or obligated to make, with respect to an election as of the date of the expenditure that is the subject of the notification. (C) Notification of disposal of excess contributions.--In the next regularly scheduled report after the date of the election for which a candidate seeks nomination for election to, or election to, Federal office, the candidate or the candidate's authorized committee shall submit to the Commission a report indicating the source and amount of any excess contributions (as determined under paragraph (1) of section 315(i)) and the manner in which the candidate or the candidate's authorized committee used such funds. (D) Enforcement.--For provisions providing for the enforcement of the reporting requirements under this paragraph, see section 309. (E) The notification required under this paragraph shall be in addition to all other reporting requirements under this Act. (7) The reports required to be filed by this subsection shall be cumulative during the calendar year to which they relate, but where there has been no change in an item reported in a previous report during such year, only the amount need be carried forward. (8) The requirement for a political committee to file a quarterly report under paragraph (2)(A)(iii) or paragraph (4)(A)(i) shall be waived if such committee is required to file a pre-election report under paragraph (2)(A)(i), or paragraph (4)(A)(ii) during the period beginning on the 5th day after the close of the calendar quarter and ending on the 15th day after the close of the calendar quarter. (9) The Commission shall set filing dates for reports to be filed by principal campaign committees of candidates seeking election, or nomination for election, in special elections and political committees filing under paragraph (4)(A) which make contributions to or expenditures on behalf of a candidate or candidates in special elections. The Commission shall require no more than one pre-election report for each election and one post-election report for the election which fills the vacancy. The Commission may waive any reporting obligation of committees required to file for special elections if any report required by paragraph (2) or (4) is required to be filed within 10 days of a report required under this subsection. The Commission shall establish the reporting dates within 5 days of the setting of such election and shall publish such dates and notify the principal campaign committees of all candidates in such election of the reporting dates. (10) The treasurer of a committee supporting a candidate for the office of Vice President (other than the nominee of a political party) shall file reports in accordance with paragraph (3). (11)(A) The Commission shall promulgate a regulation under which a person required to file a designation, statement, or report under this Act-- (i) is required to maintain and file a designation, statement, or report for any calendar year in electronic form accessible by computers if the person has, or has reason to expect to have, aggregate contributions or expenditures or makes electioneering communications in excess of a threshold amount determined by the Commission; and (ii) may maintain and file a designation, statement, or report in electronic form or an alternative form if not required to do so under the regulation promulgated under clause (i). (B) The Commission shall make a designation, statement, report, or notification that is filed with the Commission under this Act available for inspection by the public in the offices of the Commission and accessible to the public on the Internet not later than 48 hours (or not later than 24 hours in the case of a designation, statement, report, or notification filed electronically) after receipt by the Commission. (C) In promulgating a regulation under this paragraph, the Commission shall provide methods (other than requiring a signature on the document being filed) for verifying designations, statements, and reports covered by the regulation. Any document verified under any of the methods shall be treated for all purposes (including penalties for perjury) in the same manner as a document verified by signature. (D) As used in this paragraph, the term ``report'' means, with respect to the Commission, a report, designation, or statement required by this Act to be filed with the Commission. (12) Software for filing of reports.-- (A) In general.--The Commission shall-- (i) promulgate standards to be used by vendors to develop software that-- (I) permits candidates to easily record information concerning receipts and disbursements required to be reported under this Act at the time of the receipt or disbursement; (II) allows the information recorded under subclause (I) to be transmitted immediately to the Commission; and (III) allows the Commission to post the information on the Internet immediately upon receipt; and (ii) make a copy of software that meets the standards promulgated under clause (i) available to each person required to file a designation, statement, or report in electronic form under this Act. (B) Additional information.--To the extent feasible, the Commission shall require vendors to include in the software developed under the standards under subparagraph (A) the ability for any person to file any designation, statement, or report required under this Act in electronic form. (C) Required use.--Notwithstanding any provision of this Act relating to times for filing reports, each candidate for Federal office (or that candidate's authorized committee) shall use software that meets the standards promulgated under this paragraph once such software is made available to such candidate. (D) Required posting.--The Commission shall, as soon as practicable, post on the Internet any information received under this paragraph. (b) Each report under this section shall disclose-- (1) the amount of cash on hand at the beginning of the reporting period; (2) for the reporting period and the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office), the total amount of all receipts, and the total amount of all receipts in the following categories: (A) contributions from persons other than political committees; (B) for an authorized committee, contributions from the candidate; (C) contributions from political party committees; (D) contributions from other political committees; (E) for an authorized committee, transfers from other authorized committees of the same candidate; (F) transfers from affiliated committees and, where the reporting committee is a political party committee, transfers from other political party committees, regardless of whether such committees are affiliated; (G) for an authorized committee, loans made by or guaranteed by the candidate; (H) all other loans; (I) rebates, refunds, and other offsets to operating expenditures; (J) dividends, interest, and other forms of receipts; and (K) for an authorized committee of a candidate for the office of President, Federal funds received under chapter 95 and chapter 96 of the Internal Revenue Code of 1954; (3) the identification of each-- (A) person (other than a political committee) who makes a contribution to the reporting committee during the reporting period, whose contribution or contributions have an aggregate amount or value in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office), or in any lesser amount if the reporting committee should so elect, together with the date and amount of any such contribution; (B) political committee which makes a contribution to the reporting committee during the reporting period, together with the date and amount of any such contribution; (C) authorized committee which makes a transfer to the reporting committee; (D) affiliated committee which makes a transfer to the reporting committee during the reporting period and, where the reporting committee is a political party committee, each transfer of funds to the reporting committee from another political party committee, regardless of whether such committees are affiliated, together with the date and amount of such transfer; (E) person who makes a loan to the reporting committee during the reporting period, together with the identification of any endorser or guarantor of such loan, and the date and amount or value of such loan; (F) person who provides a rebate, refund, or other offset to operating expenditures to the reporting committee in an aggregate amount or value in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office), together with the date and amount of such receipt; and (G) person who provides any dividend, interest, or other receipt to the reporting committee in an aggregate value or amount in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office), together with the date and amount of any such receipt; (4) for the reporting period and the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office), the total amount of all disbursements, and all disbursements in the following categories: (A) expenditures made to meet candidate or committee operating expenses; (B) for authorized committees, transfers to other committees authorized by the same candidate; (C) transfers to affiliated committees and, where the reporting committee is a political party committee, transfers to other political party committees, regardless of whether they are affiliated; (D) for an authorized committee, repayment of loans made by or guaranteed by the candidate; (E) repayment of all other loans; (F) contribution refunds and other offsets to contributions; (G) for an authorized committee, any other disbursements; (H) for any political committee other than an authorized committee-- (i) contributions made to other political committees; (ii) loans made by the reporting committees; (iii) independent expenditures; (iv) expenditures made under section 315(d) of this Act; and (v) any other disbursements; and (I) for an authorized committee of a candidate for the office of President, disbursements not subject to the limitation of section 315(b); (5) the name and address of each-- (A) person to whom an expenditure in an aggregate amount or value in excess of $200 within the calendar year is made by the reporting committee to meet a candidate or committee operating expense, together with the date, amount, and purpose of such operating expenditure; (B) authorized committee to which a transfer is made by the reporting committee; (C) affiliated committee to which a transfer is made by the reporting committee during the reporting period and, where the reporting committee is a political party committee, each transfer of funds by the reporting committee to another political party committee, regardless of whether such committees are affiliated, together with the date and amount of such transfers; (D) person who receives a loan repayment from the reporting committee during the reporting period, together with the date and amount of such loan repayment; and (E) person who receives a contribution refund or other offset to contributions from the reporting committee where such contribution was reported under paragraph (3)(A) of this subsection, together with the date and amount of such disbursement; (6)(A) for an authorized committee, the name and address of each person who has received any disbursement not disclosed under paragraph (5) in an aggregate amount or value in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office), together with the date and amount of any such disbursement; (B) for any other political committee, the name and address of each-- (i) political committee which has received a contribution from the reporting committee during the reporting period, together with the date and amount of any such contribution; (ii) person who has received a loan from the reporting committee during the reporting period, together with the date and amount of such loan; (iii) person who receives any disbursement during the reporting period in an aggregate amount or value in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office) in connection with an independent expenditure by the reporting committee, together with the date, amount, and purpose of any such independent expenditure and a statement which indicates whether such independent expenditure is in support of, or in opposition to, a candidate, as well as the name and office sought by such candidate, and a certification, under penalty of perjury, whether such independent expenditure is made in cooperation, consultation, or concert, with, or at the request or suggestion of, any candidate or any authorized committee or agent of such committee; (iv) person who receives any expenditure from the reporting committee during the reporting period in connection with an expenditure under section 315(d) in the Act, together with the date, amount, and purpose of any such expenditure as well as the name of, and office sought by, the candidate on whose behalf the expenditure is made; and (v) person who has received any disbursement not otherwise disclosed in this paragraph or paragraph (5) in an aggregate amount or value in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office) from the reporting committee within the reporting period, together with the date, amount, and purpose of any such disbursement; (7) the total sum of all contributions to such political committee, together with the total contributions less offsets to contributions and the total sum of all operating expenditures made by such political committee, together with total operating expenditures less offsets to operating expenditures, for both the reporting period and the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office); and (8) the amount and nature of outstanding debts and obligations owed by or to such political committee; and where such debts and obligations are settled for less than their reported amount or value, a statement as to the circumstances and conditions under which such debts or obligations were extinguished and the consideration therefor. (c)(1) Every person (other than a political committee) who makes independent expenditures in an aggregate amount or value in excess of $250 during a calendar year shall file a statement containing the information required under subsection (b)(3)(A) for all contributions received by such person. (2) Statements required to be filed by this subsection shall be filed in accordance with subsection (a)(2), and shall include-- (A) the information required by subsection (b)(6)(B)(iii), indicating whether the independent expenditure is in support of, or in opposition to, the candidate involved; (B) under penalty of perjury, a certification whether or not such independent expenditure is made in cooperation, consultation, or concert, with, or at the request or suggestion of, any candidate or any authorized committee or agent of such candidate; and (C) the identification of each person who made a contribution in excess of $200 to the person filing such statement which was made for the purpose of furthering an independent expenditure. (3) The Commission shall be responsible for expeditiously preparing indices which set forth, on a candidate-by-candidate basis, all independent expenditures separately, including those reported under subsection (b)(6)(B)(iii), made by or for each candidate, as reported under this subsection, and for periodically publishing such indices on a timely pre-election basis. (d)(1) Any person who is required to file a statement under subsection (c) or (g) of this section, except statements required to be filed electronically pursuant to subsection (a)(11)(A)(i) may file the statement by facsimile device or electronic mail, in accordance with such regulations as the Commission may promulgate. (2) The Commission shall make a document which is filed electronically with the Commission pursuant to this paragraph accessible to the public on the Internet not later than 24 hours after the document is received by the Commission. (3) In promulgating a regulation under this paragraph, the Commission shall provide methods (other than requiring a signature on the document being filed) for verifying the documents covered by the regulation. Any document verified under any of the methods shall be treated for all purposes (including penalties for perjury) in the same manner as a document verified by signature. (e) Political Committees.-- (1) National and congressional political committees.--The national committee of a political party, any national congressional campaign committee of a political party, and any subordinate committee of either, shall report all receipts and disbursements during the reporting period. (2) Other political committees to which section 323 applies.-- (A) In general.--In addition to any other reporting requirements applicable under this Act, a political committee (not described in paragraph (1)) to which section 323(b)(1) applies shall report all receipts and disbursements made for activities described in section 301(20)(A), unless the aggregate amount of such receipts and disbursements during the calendar year is less than $5,000. (B) Specific disclosure by state and local parties of certain non-federal amounts permitted to be spent on federal election activity.--Each report by a political committee under subparagraph (A) of receipts and disbursements made for activities described in section 301(20)(A) shall include a disclosure of all receipts and disbursements described in section 323(b)(2)(A) and (B). (3) Itemization.--If a political committee has receipts or disbursements to which this subsection applies from or to any person aggregating in excess of $200 for any calendar year, the political committee shall separately itemize its reporting for such person in the same manner as required in paragraphs (3)(A), (5), and (6) of subsection (b). (4) Reporting periods.--Reports required to be filed under this subsection shall be filed for the same time periods required for political committees under subsection (a)(4)(B). (f) Disclosure of Electioneering Communications.-- (1) Statement required.--Every person who makes a disbursement for the direct costs of producing and airing electioneering communications in an aggregate amount in excess of $10,000 during any calendar year shall, within 24 hours of each disclosure date, file with the Commission a statement containing the information described in paragraph (2). (2) Contents of statement.--Each statement required to be filed under this subsection shall be made under penalty of perjury and shall contain the following information: (A) The identification of the person making the disbursement, of any person sharing or exercising direction or control over the activities of such person, and of the custodian of the books and accounts of the person making the disbursement. (B) The principal place of business of the person making the disbursement, if not an individual. (C) The amount of each disbursement of more than $200 during the period covered by the statement and the identification of the person to whom the disbursement was made. (D) The elections to which the electioneering communications pertain and the names (if known) of the candidates identified or to be identified. (E) If the disbursements were paid out of a segregated bank account which consists of funds contributed solely by individuals who are United States citizens or nationals or lawfully admitted for permanent residence (as defined in section 101(a)(20) of the Immigration and Nationality Act (8 U.S.C. 1101(a)(20))) directly to this account for electioneering communications, the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more to that account during the period beginning on the first day of the preceding calendar year and ending on the disclosure date. Nothing in this subparagraph is to be construed as a prohibition on the use of funds in such a segregated account for a purpose other than electioneering communications. (F) If the disbursements were paid out of funds not described in subparagraph (E), the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more to the person making the disbursement during the period beginning on the first day of the preceding calendar year and ending on the disclosure date. (3) Electioneering communication.--For purposes of this subsection-- (A) In general.--(i) The term ``electioneering communication'' means any broadcast, cable, or satellite communication which-- (I) refers to a clearly identified candidate for Federal office; (II) is made within-- (aa) 60 days before a general, special, or runoff election for the office sought by the candidate; or (bb) 30 days before a primary or preference election, or a convention or caucus of a political party that has authority to nominate a candidate, for the office sought by the candidate; and (III) in the case of a communication which refers to a candidate for an office other than President or Vice President, is targeted to the relevant electorate. (ii) If clause (i) is held to be constitutionally insufficient by final judicial decision to support the regulation provided herein, then the term ``electioneering communication'' means any broadcast, cable, or satellite communication which promotes or supports a candidate for that office, or attacks or opposes a candidate for that office (regardless of whether the communication expressly advocates a vote for or against a candidate) and which also is suggestive of no plausible meaning other than an exhortation to vote for or against a specific candidate. Nothing in this subparagraph shall be construed to affect the interpretation or application of section 100.22(b) of title 11, Code of Federal Regulations. (B) Exceptions.--The term ``electioneering communication'' does not include-- (i) a communication appearing in a news story, commentary, or editorial distributed through the facilities of any broadcasting station, unless such facilities are owned or controlled by any political party, political committee, or candidate; (ii) a communication which constitutes an expenditure or an independent expenditure under this Act; (iii) a communication which constitutes a candidate debate or forum conducted pursuant to regulations adopted by the Commission, or which solely promotes such a debate or forum and is made by or on behalf of the person sponsoring the debate or forum; or (iv) any other communication exempted under such regulations as the Commission may promulgate (consistent with the requirements of this paragraph) to ensure the appropriate implementation of this paragraph, except that under any such regulation a communication may not be exempted if it meets the requirements of this paragraph and is described in section 301(20)(A)(iii). (C) Targeting to relevant electorate.--For purposes of this paragraph, a communication which refers to a clearly identified candidate for Federal office is ``targeted to the relevant electorate'' if the communication can be received by 50,000 or more persons-- (i) in the district the candidate seeks to represent, in the case of a candidate for Representative in, or Delegate or Resident Commissioner to, the Congress; or (ii) in the State the candidate seeks to represent, in the case of a candidate for Senator. (4) Disclosure date.--For purposes of this subsection, the term ``disclosure date'' means-- (A) the first date during any calendar year by which a person has made disbursements for the direct costs of producing or airing electioneering communications aggregating in excess of $10,000; and (B) any other date during such calendar year by which a person has made disbursements for the direct costs of producing or airing electioneering communications aggregating in excess of $10,000 since the most recent disclosure date for such calendar year. (5) Contracts to disburse.--For purposes of this subsection, a person shall be treated as having made a disbursement if the person has executed a contract to make the disbursement. (6) Coordination with other requirements.--Any requirement to report under this subsection shall be in addition to any other reporting requirement under this Act. (7) Coordination with internal revenue code.--Nothing in this subsection may be construed to establish, modify, or otherwise affect the definition of political activities or electioneering activities (including the definition of participating in, intervening in, or influencing or attempting to influence a political campaign on behalf of or in opposition to any candidate for public office) for purposes of the Internal Revenue Code of 1986. (g) Time for Reporting Certain Expenditures.-- (1) Expenditures aggregating $1,000.-- (A) Initial report.--A person (including a political committee) that makes or contracts to make independent expenditures aggregating $1,000 or more after the 20th day, but more than 24 hours, before the date of an election shall file a report describing the expenditures within 24 hours. (B) Additional reports.--After a person files a report under subparagraph (A), the person shall file an additional report within 24 hours after each time the person makes or contracts to make independent expenditures aggregating an additional $1,000 with respect to the same election as that to which the initial report relates. (2) Expenditures aggregating $10,000.-- (A) Initial report.--A person (including a political committee) that makes or contracts to make independent expenditures aggregating $10,000 or more at any time up to and including the 20th day before the date of an election shall file a report describing the expenditures within 48 hours. (B) Additional reports.--After a person files a report under subparagraph (A), the person shall file an additional report within 48 hours after each time the person makes or contracts to make independent expenditures aggregating an additional $10,000 with respect to the same election as that to which the initial report relates. (3) Place of filing; contents.--A report under this subsection-- (A) shall be filed with the Commission; and (B) shall contain the information required by subsection (b)(6)(B)(iii), including the name of each candidate whom an expenditure is intended to support or oppose. (4) Time of filing for expenditures aggregating $1,000.--Notwithstanding subsection (a)(5), the time at which the statement under paragraph (1) is received by the Commission or any other recipient to whom the notification is required to be sent shall be considered the time of filing of the statement with the recipient. (h) Reports From Inaugural Committees.--The Federal Election Commission shall make any report filed by an Inaugural Committee under section 510 of title 36, United States Code, accessible to the public at the offices of the Commission and on the Internet not later than 48 hours after the report is received by the Commission. (i) Disclosure of Bundled Contributions.-- (1) Required disclosure.--Each committee described in paragraph (6) shall include in the first report required to be filed under this section after each covered period (as defined in paragraph (2)) a separate schedule setting forth the name, address, and employer of each person reasonably known by the committee to be a person described in paragraph (7) who provided 2 or more bundled contributions to the committee in an aggregate amount greater than the applicable threshold (as defined in paragraph (3)) during the covered period, and the aggregate amount of the bundled contributions provided by each such person during the covered period. (2) Covered period.--In this subsection, a ``covered period'' means, with respect to a committee-- (A) the period beginning January 1 and ending June 30 of each year; (B) the period beginning July 1 and ending December 31 of each year; and (C) any reporting period applicable to the committee under this section during which any person described in paragraph (7) provided 2 or more bundled contributions to the committee in an aggregate amount greater than the applicable threshold. (3) Applicable threshold.-- (A) In general.--In this subsection, the ``applicable threshold'' is $15,000, except that in determining whether the amount of bundled contributions provided to a committee by a person described in paragraph (7) exceeds the applicable threshold, there shall be excluded any contribution made to the committee by the person or the person's spouse. (B) Indexing.--In any calendar year after 2007, section 315(c)(1)(B) shall apply to the amount applicable under subparagraph (A) in the same manner as such section applies to the limitations established under subsections (a)(1)(A), (a)(1)(B), (a)(3), and (h) of such section, except that for purposes of applying such section to the amount applicable under subparagraph (A), the ``base period'' shall be 2006. (4) Public availability.--The Commission shall ensure that, to the greatest extent practicable-- (A) information required to be disclosed under this subsection is publicly available through the Commission website in a manner that is searchable, sortable, and downloadable; and (B) the Commission's public database containing information disclosed under this subsection is linked electronically to the websites maintained by the Secretary of the Senate and the Clerk of the House of Representatives containing information filed pursuant to the Lobbying Disclosure Act of 1995. (5) Regulations.--Not later than 6 months after the date of enactment of the Honest Leadership and Open Government Act of 2007, the Commission shall promulgate regulations to implement this subsection. Under such regulations, the Commission-- (A) may, notwithstanding paragraphs (1) and (2), provide for quarterly filing of the schedule described in paragraph (1) by a committee which files reports under this section more frequently than on a quarterly basis; (B) shall provide guidance to committees with respect to whether a person is reasonably known by a committee to be a person described in paragraph (7), which shall include a requirement that committees consult the websites maintained by the Secretary of the Senate and the Clerk of the House of Representatives containing information filed pursuant to the Lobbying Disclosure Act of 1995; (C) may not exempt the activity of a person described in paragraph (7) from disclosure under this subsection on the grounds that the person is authorized to engage in fundraising for the committee or any other similar grounds; and (D) shall provide for the broadest possible disclosure of activities described in this subsection by persons described in paragraph (7) that is consistent with this subsection. (6) Committees described.--A committee described in this paragraph is an authorized committee of a candidate, a leadership PAC, or a political party committee. (7) Persons described.--A person described in this paragraph is any person, who, at the time a contribution is forwarded to a committee as described in paragraph (8)(A)(i) or is received by a committee as described in paragraph (8)(A)(ii), is-- (A) a current registrant under section 4(a) of the Lobbying Disclosure Act of 1995; (B) an individual who is listed on a current registration filed under section 4(b)(6) of such Act or a current report under section 5(b)(2)(C) of such Act; or (C) a political committee established or controlled by such a registrant or individual. (8) Definitions.--For purposes of this subsection, the following definitions apply: (A) Bundled contribution.--The term ``bundled contribution'' means, with respect to a committee described in paragraph (6) and a person described in paragraph (7), a contribution (subject to the applicable threshold) which is-- (i) forwarded from the contributor or contributors to the committee by the person; or (ii) received by the committee from a contributor or contributors, but credited by the committee or candidate involved (or, in the case of a leadership PAC, by the individual referred to in subparagraph (B) involved) to the person through records, designations, or other means of recognizing that a certain amount of money has been raised by the person. (B) Leadership pac.--The term ``leadership PAC'' means, with respect to a candidate for election to Federal office or an individual holding Federal office, a political committee that is directly or indirectly established, financed, maintained or controlled by the candidate or the individual but which is not an authorized committee of the candidate or individual and which is not affiliated with an authorized committee of the candidate or individual, except that such term does not include a political committee of a political party. * * * * * * * ADDITIONAL VIEWS H.R. 7321 is a meaningful, bipartisan bill to ensure that the public receives important information about election- relevant communications. It would amend the Federal Election Campaign Act of 1971 to require electioneering communications to be filed electronically with the Federal Election Commission (``FEC''). As the FEC has informed Congress, ``[c]ompared to data from paper reports, data from electronically filed reports is received, processed and disseminated more easily and efficiently, resulting in better use of resources. Reports that are filed electronically are normally available to the public, and may be downloaded, within minutes.''\1\ In contrast, paper filings take days to be available--they provide critical information for the public. This bill would aid transparency by including electioneering communications among those accessible to the public online. --------------------------------------------------------------------------- \1\Legislative Recommendations of the Federal Election Commission 2023, Fed. Election Comm'n (Dec. 14, 2023), https://www.fec.gov/ resources/cms-content/documents/legrec2023.pdf. --------------------------------------------------------------------------- The United States Supreme Court has long recognized that disclosure requirements are vitally important to provide the electorate with information ``as to where political campaign money comes from and how it is spent.''\2\ American voters are best equipped to choose our leaders when they have the most fulsome, most up-to-date information at hand. H.R. 7321 will aid every American voter as they exercise their fundamental rights. --------------------------------------------------------------------------- \2\Buckley v. Valeo, 424 U.S. 1, 66 (1976). Joseph D. Morelle, Ranking Member.

usgpo

2024-10-08T13:26:29.664984

BILLS

BILLS-118s4036rs

Government Spending Oversight Act of 2024

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4036 Reported in Senate (RS)] <DOC> Calendar No. 431 118th CONGRESS 2d Session S. 4036 [Report No. 118-186] To establish a Government Spending Oversight Committee within the Council of the Inspectors General on Integrity and Efficiency, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES March 21, 2024 Mr. Peters (for himself, Mr. Romney, Mr. Lankford, and Ms. Rosen) introduced the following bill; which was read twice and referred to the Committee on Homeland Security and Governmental Affairs July 8, 2024 Reported by Mr. Peters, with an amendment [Strike out all after the enacting clause and insert the part printed in italic] _______________________________________________________________________ A BILL To establish a Government Spending Oversight Committee within the Council of the Inspectors General on Integrity and Efficiency, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, <DELETED>SECTION 1. SHORT TITLE.</DELETED> <DELETED> This Act may be cited as the ``Government Spending Oversight Act of 2024''.</DELETED> <DELETED>SEC. 2. GOVERNMENT SPENDING OVERSIGHT COMMITTEE.</DELETED> <DELETED> (a) In General.--Section 424 of title 5, United States Code, is amended by adding at the end the following:</DELETED> <DELETED> ``(f) Government Spending Oversight Committee.--</DELETED> <DELETED> ``(1) Definitions.--In this subsection:</DELETED> <DELETED> ``(A) Agency.--The term `agency' has the meaning given the term in section 551 of this title.</DELETED> <DELETED> ``(B) Appropriate congressional committees.--The term `appropriate congressional committees' means--</DELETED> <DELETED> ``(i) the Committees on Appropriations of the Senate and the House of Representatives;</DELETED> <DELETED> ``(ii) the Committee on Homeland Security and Governmental Affairs of the Senate;</DELETED> <DELETED> ``(iii) the Committee on Oversight and Accountability of the House of Representatives; and</DELETED> <DELETED> ``(iv) any other relevant congressional committee of jurisdiction.</DELETED> <DELETED> ``(C) Chairperson.--The term `Chairperson' means the Chairperson of the Committee.</DELETED> <DELETED> ``(D) Committee.--The term `Committee' means the Government Spending Oversight Committee established under paragraph (2).</DELETED> <DELETED> ``(E) Covered funds.--The term `covered funds' means any funds, including loans, that are made available in any form to any non-Federal entity or individual, under--</DELETED> <DELETED> ``(i) division A or B of the CARES Act (Public Law 116-136);</DELETED> <DELETED> ``(ii) the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (Public Law 116- 123);</DELETED> <DELETED> ``(iii) the Families First Coronavirus Response Act (Public Law 116- 127);</DELETED> <DELETED> ``(iv) the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139);</DELETED> <DELETED> ``(v) division M or N of the Consolidated Appropriations Act, 2021 (Public Law 116-260);</DELETED> <DELETED> ``(vi) the American Rescue Plan Act of 2021 (Public Law 117-2);</DELETED> <DELETED> ``(vii) any loan guaranteed or made by the Small Business Administration, including any direct loan or guarantee of a trust certificate, under the Small Business Act (15 U.S.C. 631 et seq.), the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.), or any other provision of law;</DELETED> <DELETED> ``(viii) unemployment compensation, as defined in section 85 of the Internal Revenue Code of 1986;</DELETED> <DELETED> ``(ix) the Infrastructure Investment and Jobs Act (Public Law 117- 58);</DELETED> <DELETED> ``(x) the Inflation Reduction Act (Public Law 117-169);</DELETED> <DELETED> ``(xi) the Honoring our PACT Act of 2022 (Public Law 117-168); or</DELETED> <DELETED> ``(xii) the CHIPS Act of 2022 (division A of Public Law 117-167) (commonly known as the `CHIPS and Science Act of 2022').</DELETED> <DELETED> ``(2) Establishment.--There is established within the Council the Government Spending Oversight Committee to promote transparency and conduct and support oversight of covered funds to--</DELETED> <DELETED> ``(A) prevent and detect fraud, waste, abuse, and mismanagement; and</DELETED> <DELETED> ``(B) mitigate major risks that cut across program and agency boundaries.</DELETED> <DELETED> ``(3) Chairperson.--The Chairperson of the Committee--</DELETED> <DELETED> ``(A) shall be selected by the Chairperson of the Council from among Inspectors General appointed by the President and confirmed by the Senate; and</DELETED> <DELETED> ``(B) should have with experience managing oversight of large organizations and expenditures.</DELETED> <DELETED> ``(4) Membership.--The members of the Committee shall include--</DELETED> <DELETED> ``(A) the Chairperson;</DELETED> <DELETED> ``(B) the Inspector General of the Department of the Labor;</DELETED> <DELETED> ``(C) the Inspector General of the Department of Health and Human Services;</DELETED> <DELETED> ``(D) the Inspector General of the Small Business Administration;</DELETED> <DELETED> ``(E) the Inspector General of the Department of the Treasury;</DELETED> <DELETED> ``(F) the Inspector General of the Department of Transportation;</DELETED> <DELETED> ``(G) the Treasury Inspector General for Tax Administration;</DELETED> <DELETED> ``(H) the Inspector General of the Department of Veterans Affairs;</DELETED> <DELETED> ``(I) the Inspector General of the Department of Commerce;</DELETED> <DELETED> ``(J) the Inspector General of the Department of Justice;</DELETED> <DELETED> ``(K) the Inspector General of the Department of Defense;</DELETED> <DELETED> ``(L) the Inspector General of the Department of Education;</DELETED> <DELETED> ``(M) the Inspector General of the Department of Homeland Security; and</DELETED> <DELETED> ``(N) any other Inspector General, as designated by the Chairperson, from any agency that expends or obligates covered funds.</DELETED> <DELETED> ``(5) Executive director.--</DELETED> <DELETED> ``(A) In general.--There shall be an Executive Director of the Committee.</DELETED> <DELETED> ``(B) Appointment; qualifications.--The Executive Director of the Committee shall--</DELETED> <DELETED> ``(i) be appointed by the Chairperson of the Committee, in consultation with the majority leader of the Senate, the Speaker of the House of Representatives, the minority leader of the Senate, and the minority leader of the House of Representatives;</DELETED> <DELETED> ``(ii) have demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations;</DELETED> <DELETED> ``(iii) have experience managing oversight of large organizations and expenditures; and</DELETED> <DELETED> ``(iv) be full-time employees of the Committee.</DELETED> <DELETED> ``(C) Duties.--The Executive Director of the Committee shall--</DELETED> <DELETED> ``(i) report directly to the Chairperson;</DELETED> <DELETED> ``(ii) appoint staff of the Committee, subject to the approval of the Chairperson, consistent with this subsection;</DELETED> <DELETED> ``(iii) supervise and coordinate Committee functions and staff; and</DELETED> <DELETED> ``(iv) perform any other duties assigned to the Executive Director by the Committee.</DELETED> <DELETED> ``(6) Prohibition on additional compensation.-- Members of the Committee may not receive additional compensation for services performed.</DELETED> <DELETED> ``(7) Duties of the committee.--</DELETED> <DELETED> ``(A) In general.--The Committee shall conduct oversight of covered funds and support Inspectors General in the oversight of covered funds in order to--</DELETED> <DELETED> ``(i) detect and prevent fraud, waste, abuse, and mismanagement; and</DELETED> <DELETED> ``(ii) identify major risks that cut across programs and agency boundaries.</DELETED> <DELETED> ``(B) General functions.--The Committee, in coordination with relevant Inspectors General, may-- </DELETED> <DELETED> ``(i) provide support to, and collaborate with, relevant Inspectors General in conducting investigations, audits, and reviews relating to covered funds, including through--</DELETED> <DELETED> ``(I) data analytics;</DELETED> <DELETED> ``(II) the sharing of data, tools, and services;</DELETED> <DELETED> ``(III) the development and enhancement of data practices, analysis, and visualization; and</DELETED> <DELETED> ``(IV) any other appropriate means as determined by the Committee;</DELETED> <DELETED> ``(ii) provide analytical products to agencies, in coordination with Inspectors General, to promote program integrity, prevent improper payments, and facilitate verification efforts to ensure proper expenditure and utilization of covered funds;</DELETED> <DELETED> ``(iii) review the economy, efficiency, and effectiveness in the administration of, and the detection of fraud, waste, abuse, and mismanagement in, programs and operations using covered funds;</DELETED> <DELETED> ``(iv) review whether there are appropriate mechanisms for interagency collaboration relating to the oversight of covered funds, including coordinating and collaborating to the extent practicable with State and local government entities; and</DELETED> <DELETED> ``(v) expeditiously report to the Attorney General any instance in which the Committee has reasonable grounds to believe there has been a violation of Federal criminal law.</DELETED> <DELETED> ``(C) Additional functions.--The Committee may provide investigative support to prosecutive and enforcement authorities to protect program integrity and prevent, detect, and prosecute fraud of covered funds.</DELETED> <DELETED> ``(D) Reporting.--</DELETED> <DELETED> ``(i) Alerts.--The Committee shall submit to the President and Congress, including the appropriate congressional committees, management alerts on potential management, risk, and funding problems that require immediate attention.</DELETED> <DELETED> ``(ii) Reports and updates.--The Committee shall submit to Congress such other reports or provide such periodic updates on the work of the Committee as the Committee considers appropriate on the use of covered funds.</DELETED> <DELETED> ``(iii) Biannual reports.--The Committee shall submit biannual reports to the President and Congress, including the appropriate congressional committees, and may submit additional reports as appropriate summarizing the findings of the Committee and any recommended changes to the scope of covered funds.</DELETED> <DELETED> ``(iv) Public availability.--All reports submitted under this subparagraph shall be made publicly available and posted on the website established under paragraph (16).</DELETED> <DELETED> ``(v) Redactions.--Any portion of a report submitted under this paragraph may be redacted when made publicly available, if that portion would disclose information that is not subject to disclosure under sections 552 and 552a of this title, or is otherwise prohibited from disclosure by law.</DELETED> <DELETED> ``(E) Recommendations.--</DELETED> <DELETED> ``(i) In general.--The Committee shall make recommendations to agencies on measures to prevent or address fraud, waste, abuse and mismanagement, and to mitigate risks that cut across programs and agency boundaries, relating to covered funds.</DELETED> <DELETED> ``(ii) Report.--Not later than 30 days after receipt of a recommendation under clause (i), an agency shall submit a report to the President and the appropriate congressional committees on--</DELETED> <DELETED> ``(I) whether the agency agrees or disagrees with the recommendations; and</DELETED> <DELETED> ``(II) any actions the agency will take to implement the recommendations, which shall also be included in the report required under section 2(b) of the GAO-IG Act (31 U.S.C. 1105 note; Public Law 115- 414).</DELETED> <DELETED> ``(8) Authorities.--</DELETED> <DELETED> ``(A) In general.--In carrying out the duties and functions under this subsection with respect to the oversight of covered funds, the Committee shall--</DELETED> <DELETED> ``(i) carry out those duties and functions in accordance with section 404(b)(1) of this title;</DELETED> <DELETED> ``(ii) in coordination with relevant Inspectors General, have the authorities provided under and be subject to paragraphs (1) through (4) of subsection (a) and subsections (h), (j), and (k) of section 406;</DELETED> <DELETED> ``(iii) be considered to be conducting civil or criminal law enforcement activity for the purposes of section 552a(b)(7) of this title; and</DELETED> <DELETED> ``(iv) for the purposes of sections 552 and 552a of this title, be considered to be a component which performs as its principal function an activity pertaining to the enforcement of criminal laws, and its records may constitute investigatory material compiled for law enforcement purposes.</DELETED> <DELETED> ``(B) Limitation on subpoena authority.-- When carrying out subpoena authority under section 406(a)(4) of this title, the following limitations shall apply to the Committee:</DELETED> <DELETED> ``(i) Any subpoena issued under this subsection shall be signed by the Chairperson of the Committee, and this power is non-delegable.</DELETED> <DELETED> ``(ii) On a quarterly basis, the Committee shall notify the Committee on Homeland Security and Governmental Affairs of the Senate and the Committee on Oversight and Accountability of the House of Representatives of any subpoenas issued during the preceding quarter.</DELETED> <DELETED> ``(iii) The authority to issue a subpoena under this subsection shall terminate on the date that is 5 years after the date of enactment of this subsection.</DELETED> <DELETED> ``(9) Refusal of information or assistance.-- Whenever information or assistance requested by the Committee or an Inspector General is unreasonably refused or not provided, the Committee shall immediately report the circumstances to the appropriate congressional committees.</DELETED> <DELETED> ``(10) Use of existing resources.--The Committee shall leverage existing information technology resources within the Council, such as oversight.gov and those developed by the Pandemic Response Accountability Committee established under section 15010 of the CARES Act (Public Law 116-136; 135 Stat. 533), to carry out the duties of the Committee.</DELETED> <DELETED> ``(11) Contracts.--The Committee may enter into contracts to enable the Committee to discharge its duties, including contracts and other arrangements for audits, studies, analyses, and other services with public agencies and with private persons, and make such payments as may be necessary to carry out the duties of the Committee.</DELETED> <DELETED> ``(12) Subcommittees.--The Committee may establish subcommittees to facilitate the ability of the Committee to discharge its duties.</DELETED> <DELETED> ``(13) Transfer of funds, assets, and obligations.--</DELETED> <DELETED> ``(A) Funds.--The Committee may transfer funds appropriated to the Committee--</DELETED> <DELETED> ``(i) for expenses to support administrative support services and audits, reviews, or other activities related to oversight by the Committee of covered funds to any Office of the Inspector General or the General Services Administration; and</DELETED> <DELETED> ``(ii) to reimburse for services provided by the Council.</DELETED> <DELETED> ``(B) Assets and obligations.--</DELETED> <DELETED> ``(i) Assets defined.--In this subparagraph, the term `assets' includes contracts, agreements, facilities, property, data, records, unobligated or unexpended balances of appropriations, and other funds or resources (other than personnel).</DELETED> <DELETED> ``(ii) Transfer.--Upon the effective date of this subsection, the assets and obligations held by or available in connection with the Pandemic Response Accountability Committee established under 15010 of the CARES Act (Public Law 116-136; 135 Stat. 540) shall be transferred to the Committee.</DELETED> <DELETED> ``(14) Additional staff.--</DELETED> <DELETED> ``(A) In general.--Subject to subparagraph (B), the Committee may exercise the authorities of subsections (b) through (i) of section 3161 of this title (without regard to subsection (a) of that section) to meet temporary or urgent needs of the Committee under this subsection, as certified by the Chairperson to the appropriate congressional committees that such temporary or urgent needs exist, as if the Committee were a temporary organization.</DELETED> <DELETED> ``(B) Head of organization.--For purposes of exercising the authorities described in subparagraph (A), the term `Chairperson' shall be substituted for the term `head of a temporary organization'.</DELETED> <DELETED> ``(C) Consultation.--In exercising the authorities described in subparagraph (A), the Chairperson shall consult with members of the Committee.</DELETED> <DELETED> ``(D) Additional detailees.--In addition to the authority provided by section 3161(c) of this title, upon the request of an Inspector General, the Committee may detail, on a nonreimbursable basis, any personnel of the Committee to that Inspector General to assist in carrying out any audit, review, or investigation pertaining to the oversight of covered funds.</DELETED> <DELETED> ``(E) Limitations.--In exercising the employment authorities under section 3161(b) of this title, as provided under subparagraph (A) of this paragraph--</DELETED> <DELETED> ``(i) section 3161(b)(2) of this title (relating to periods of appointments) shall not apply; and</DELETED> <DELETED> ``(ii) no period of appointment may exceed the date on which the Committee terminates.</DELETED> <DELETED> ``(F) Competitive service.--A person employed by the Committee shall acquire competitive status and conditional tenure for appointment to any position in the competitive service for which the employee possesses the required qualifications upon the completion of 2 years of continuous service as an employee under this subsection.</DELETED> <DELETED> ``(G) Annuitants.--</DELETED> <DELETED> ``(i) In general.--The Committee may employ annuitants covered by section 9902(g) of this title for purposes of the oversight of covered funds.</DELETED> <DELETED> ``(ii) Treatment of annuitants.-- The employment of annuitants under this paragraph shall be subject to the provisions of section 9902(g) of this title, as if the Committee was the Department of Defense.</DELETED> <DELETED> ``(15) Provision of information.--</DELETED> <DELETED> ``(A) Requests.--Upon request of the Committee for information or assistance from any agency or other entity of the Federal Government, the head of such entity shall, insofar as is practicable and not in contravention of any existing law, and consistent with section 406 of this title, furnish such information or assistance to the Committee, or an authorized designee, including an Inspector General designated by the Chairperson.</DELETED> <DELETED> ``(B) Inspectors general.--Any Inspector General responsible for conducting oversight related to covered funds may, consistent with the duties, responsibilities, policies, and procedures of the Inspector General, provide information requested by the Committee or an Inspector General on the Committee relating to the responsibilities of the Committee.</DELETED> <DELETED> ``(16) Website.--</DELETED> <DELETED> ``(A) In general.--Not later than 30 days after the date of enactment of this subsection, the Committee shall establish and maintain a user-friendly, public-facing website--</DELETED> <DELETED> ``(i) to foster greater accountability and transparency in the use of covered funds, which shall have a uniform resource locator that is descriptive and memorable; and</DELETED> <DELETED> ``(ii) that shall be a portal or gateway to key information relating to the oversight of covered funds and provide connections to other Government websites with related information.</DELETED> <DELETED> ``(17) Coordination.--The Committee shall coordinate its oversight activities with the Comptroller General of the United States and State auditors.</DELETED> <DELETED> ``(18) Rules of construction.--Nothing in this subsection shall be construed to--</DELETED> <DELETED> ``(A) affect the independent authority of an Inspector General to determine whether to conduct an audit or investigation of covered funds; or</DELETED> <DELETED> ``(B) require the Council or any Inspector General to provide funding to support the activities of the Committee.</DELETED> <DELETED> ``(19) Authorization of appropriations.--For the purposes of carrying out the mission of the Committee under this subsection, there are authorized to be appropriated such sums as may be necessary to carry out the duties and functions of the Committee.''.</DELETED> <DELETED> (b) Effective Date.--This Act and the amendments made by this Act shall take effect on September 30, 2025.</DELETED> SECTION 1. SHORT TITLE. This Act may be cited as the ``Government Spending Oversight Act of 2024''. SEC. 2. GOVERNMENT SPENDING OVERSIGHT COMMITTEE. (a) In General.--Section 424 of title 5, United States Code, is amended by adding at the end the following: ``(f) Government Spending Oversight Committee.-- ``(1) Definitions.-- In this subsection: ``(A) Agency.--The term `agency' has the meaning given the term in section 551 of this title. ``(B) Appropriate congressional committees.--The term `appropriate congressional committees' means-- ``(i) the Committees on Appropriations of the Senate and the House of Representatives; ``(ii) the Committee on Homeland Security and Governmental Affairs of the Senate; ``(iii) the Committee on Oversight and Accountability of the House of Representatives; and ``(iv) any other relevant congressional committee of jurisdiction. ``(C) Chairperson.--The term `Chairperson' means the Chairperson of the Committee. ``(D) Committee.--The term `Committee' means the Government Spending Oversight Committee established under paragraph (2). ``(E) Covered funds.--The term `covered funds' means-- ``(i) any funds, including loans, that are made available in any form to any non-Federal entity or individual, under-- ``(I) division A or B of the CARES Act (Public Law 116-136); ``(II) the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (Public Law 116-123); ``(III) the Families First Coronavirus Response Act (Public Law 116-127); ``(IV) the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139); ``(V) division M or N of the Consolidated Appropriations Act, 2021 (Public Law 116-260); ``(VI) the American Rescue Plan Act of 2021 (Public Law 117-2); ``(VII) any loan guaranteed or made by the Small Business Administration, including any direct loan or guarantee of a trust certificate, under the Small Business Act (15 U.S.C. 631 et seq.), the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.), or any other provision of law; ``(VIII) unemployment compensation, as defined in section 85 of the Internal Revenue Code of 1986; ``(IX) the Infrastructure Investment and Jobs Act (Public Law 117-58); ``(X) Public Law 117-169 (commonly known as the `Inflation Reduction Act'); ``(XI) the Honoring our PACT Act of 2022 (Public Law 117-168); or ``(XII) the CHIPS Act of 2022 (division A of Public Law 117-167 (commonly known as the `CHIPS and Science Act of 2022')); ``(ii) any Federal grant of not less than $50,000; and ``(iii) any intramural payment made Government wide for research activity. ``(2) Establishment.--There is established within the Council the Government Spending Oversight Committee to promote transparency and conduct and support oversight of covered funds to-- ``(A) prevent and detect fraud, waste, abuse, and mismanagement; and ``(B) mitigate major risks that cut across programs and agency boundaries. ``(3) Chairperson.--The Chairperson of the Committee-- ``(A) shall be selected by the Chairperson of the Council from among Inspectors General appointed by the President and confirmed by the Senate; and ``(B) should have experience managing oversight of large organizations and expenditures. ``(4) Membership.--The members of the Committee shall include-- ``(A) the Chairperson; ``(B) the Inspector General of the Department of Labor; ``(C) the Inspector General of the Department of Health and Human Services; ``(D) the Inspector General of the Small Business Administration; ``(E) the Inspector General of the Department of the Treasury; ``(F) the Inspector General of the Department of Transportation; ``(G) the Treasury Inspector General for Tax Administration; ``(H) the Inspector General of the Department of Veterans Affairs; ``(I) the Inspector General of the Department of Commerce; ``(J) the Inspector General of the Department of Justice; ``(K) the Inspector General of the Department of Defense; ``(L) the Inspector General of the Department of Education; ``(M) the Inspector General of the Department of Homeland Security; and ``(N) any other Inspector General, as designated by the Chairperson, from any agency that expends or obligates covered funds. ``(5) Executive director.-- ``(A) In general.--There shall be an Executive Director of the Committee. ``(B) Appointment; qualifications.--The Executive Director of the Committee shall-- ``(i) be appointed by the Chairperson, in consultation with the majority leader of the Senate, the Speaker of the House of Representatives, the minority leader of the Senate, and the minority leader of the House of Representatives; ``(ii) have demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations; ``(iii) have experience managing oversight of large organizations and expenditures; and ``(iv) be a full-time employee of the Committee. ``(C) Duties.--The Executive Director of the Committee shall-- ``(i) report directly to the Chairperson; ``(ii) appoint staff of the Committee, subject to the approval of the Chairperson, consistent with this subsection; ``(iii) supervise and coordinate Committee functions and staff; and ``(iv) perform any other duties assigned to the Executive Director by the Committee. ``(D) Notice.--The Chairperson shall provide notice to the Committee on Homeland Security and Governmental Affairs of the Senate and the Committee on Oversight and Accountability of the House of Representatives when appointing or removing the Executive Director of the Committee. ``(6) Prohibition on additional compensation.--Members of the Committee may not receive additional compensation for services performed. ``(7) Duties of the committee.-- ``(A) In general.--The Committee shall conduct oversight of covered funds and support Inspectors General in the oversight of covered funds in order to-- ``(i) detect and prevent fraud, waste, abuse, and mismanagement; and ``(ii) identify major risks that cut across programs and agency boundaries. ``(B) General functions.--The Committee, in coordination with relevant Inspectors General, may-- ``(i) provide support to, and collaborate with, relevant Inspectors General in conducting investigations, audits, and reviews relating to covered funds, including through-- ``(I) data analytics; ``(II) the sharing of data, tools, and services; ``(III) the development and enhancement of data practices, analysis, and visualization; and ``(IV) any other appropriate means as determined by the Committee; ``(ii) provide analytical products to agencies, in coordination with Inspectors General, to promote program integrity, prevent improper payments, and facilitate verification efforts to ensure proper expenditure and utilization of covered funds; ``(iii) review the economy, efficiency, and effectiveness in the administration of, and the detection of fraud, waste, abuse, and mismanagement in, programs and operations using covered funds; ``(iv) review whether there are appropriate mechanisms for interagency collaboration relating to the oversight of covered funds, including coordinating and collaborating to the extent practicable with State and local government entities; and ``(v) expeditiously report to the Attorney General any instance in which the Committee has reasonable grounds to believe there has been a violation of Federal criminal law. ``(C) Additional functions.--The Committee may provide investigative support to prosecutive and enforcement authorities to protect program integrity and prevent, detect, and prosecute fraud of covered funds. ``(D) Reporting.-- ``(i) Alerts.--The Committee shall submit to the President and Congress, including the appropriate congressional committees, management alerts on potential management, risk, and funding problems that require immediate attention. ``(ii) Reports and updates.--The Committee shall submit to Congress such other reports or provide such periodic updates on the work of the Committee as the Committee considers appropriate on the use of covered funds. ``(iii) Biannual reports.--The Committee shall submit biannual reports to the President and Congress, including the appropriate congressional committees, and may submit additional reports as appropriate summarizing the findings of the Committee and any recommended changes to the scope of covered funds. ``(iv) Public availability.--All reports submitted under this subparagraph shall be made publicly available and posted on the website established under paragraph (16). ``(v) Redactions.--Any portion of a report submitted under this paragraph may be redacted when made publicly available, if that portion would disclose information that is not subject to disclosure under sections 552 and 552a of this title, or is otherwise prohibited from disclosure by law. ``(E) Recommendations.-- ``(i) In general.--The Committee shall make recommendations to agencies on measures to prevent or address fraud, waste, abuse, and mismanagement, and to mitigate major risks that cut across programs and agency boundaries, relating to covered funds. ``(ii) Report.--Not later than 30 days after receipt of a recommendation under clause (i), an agency shall submit a report to the President and the appropriate congressional committees on-- ``(I) whether the agency agrees or disagrees with the recommendations; and ``(II) any actions the agency will take to implement the recommendations, which shall also be included in the report required under section 2(b)(3) of the GAO-IG Act (31 U.S.C. 1105 note; Public Law 115-414). ``(8) Authorities.-- ``(A) In general.--In carrying out the duties and functions under this subsection with respect to the oversight of covered funds, the Committee shall-- ``(i) carry out those duties and functions in accordance with section 404(b)(1) of this title; ``(ii) in coordination with relevant Inspectors General, have the authorities provided under and be subject to paragraphs (1) through (4) of subsection (a) and subsections (h), (j), and (k) of section 406; ``(iii) be considered to be conducting civil or criminal law enforcement activity for the purposes of section 552a(b)(7) of this title; and ``(iv) for the purposes of sections 552 and 552a of this title, be considered to be a component which performs as its principal function an activity pertaining to the enforcement of criminal laws, and its records may constitute investigatory material compiled for law enforcement purposes. ``(B) Limitation on subpoena authority.--When carrying out subpoena authority under section 406(a)(4) of this title, the following limitations shall apply to the Committee: ``(i) Any subpoena issued under this subsection shall be signed by the Chairperson, and this power is non-delegable. ``(ii) On a quarterly basis, the Committee shall notify the Committee on Homeland Security and Governmental Affairs of the Senate and the Committee on Oversight and Accountability of the House of Representatives of any subpoenas issued during the preceding quarter. ``(iii) The authority to issue a subpoena under this subsection shall terminate on the date that is 5 years after the effective date of this subsection. ``(9) Refusal of information or assistance.-- Whenever information or assistance requested by the Committee or an Inspector General on the Committee is unreasonably refused or not provided, the Committee shall immediately report the circumstances to the appropriate congressional committees. ``(10) Use of existing resources.--The Committee shall leverage existing information technology resources within the Council, such as oversight.gov and those developed by the Pandemic Response Accountability Committee established under section 15010 of the CARES Act (Public Law 116-136; 134 Stat. 533), to carry out the duties of the Committee. ``(11) Contracts.--The Committee may enter into contracts to enable the Committee to discharge its duties, including contracts and other arrangements for audits, studies, analyses, and other services with public agencies and with private persons, and make such payments as may be necessary to carry out the duties of the Committee. ``(12) Subcommittees.--The Committee may establish subcommittees to facilitate the ability of the Committee to discharge its duties. ``(13) Transfer of funds, assets, and obligations.-- ``(A) Funds.--The Committee may transfer funds appropriated to the Committee-- ``(i) for expenses to support administrative support services and audits, reviews, or other activities related to oversight by the Committee of covered funds to any Office of the Inspector General or the General Services Administration; and ``(ii) to reimburse for services provided by the Council. ``(B) Assets and obligations.-- ``(i) Assets defined.--In this subparagraph, the term `assets' includes contracts, agreements, facilities, property, data, records, unobligated or unexpended balances of appropriations, and other funds or resources (other than personnel). ``(ii) Transfer.--Upon the effective date of this subsection, the assets and obligations held by or available in connection with the Pandemic Response Accountability Committee established under 15010 of the CARES Act (Public Law 116-136; 134 Stat. 533) shall be transferred to the Committee. ``(14) Additional staff.-- ``(A) In general.--Subject to subparagraph (B), the Committee may exercise the authorities of subsections (b) through (i) of section 3161 of this title (without regard to subsection (a) of that section) to meet temporary or urgent needs of the Committee under this subsection, as certified by the Chairperson to the appropriate congressional committees that such temporary or urgent needs exist, as if the Committee were a temporary organization. ``(B) Head of organization.--For purposes of exercising the authorities described in subparagraph (A), the term `Chairperson' shall be substituted for the term `head of a temporary organization'. ``(C) Consultation.--In exercising the authorities described in subparagraph (A), the Chairperson shall consult with members of the Committee. ``(D) Additional detailees.--In addition to the authority provided by section 3161(c) of this title, upon the request of an Inspector General, the Committee may detail, on a nonreimbursable basis, any personnel of the Committee to that Inspector General to assist in carrying out any audit, review, or investigation pertaining to the oversight of covered funds. ``(E) Limitations.--In exercising the employment authorities under section 3161(b) of this title, as provided under subparagraph (A) of this paragraph-- ``(i) section 3161(b)(2) of this title (relating to periods of appointments) shall not apply; and ``(ii) no period of appointment may exceed the date on which the Committee terminates. ``(F) Competitive service.--A person employed by the Committee shall acquire competitive status and conditional tenure for appointment to any position in the competitive service for which the employee possesses the required qualifications upon the completion of 2 years of continuous service as an employee under this subsection. ``(G) Annuitants.-- ``(i) In general.--The Committee may employ annuitants covered by section 9902(g) of this title for purposes of the oversight of covered funds. ``(ii) Treatment of annuitants.--The employment of annuitants under this paragraph shall be subject to the provisions of section 9902(g) of this title, as if the Committee were the Department of Defense. ``(15) Provision of information.-- ``(A) Requests.--Upon request of the Committee for information or assistance from any agency or other entity of the Federal Government, the head of such entity shall, insofar as is practicable and not in contravention of any existing law, and consistent with section 406 of this title, furnish such information or assistance to the Committee, or an authorized designee, including an Inspector General designated by the Chairperson. ``(B) Inspectors general.--Any Inspector General responsible for conducting oversight related to covered funds may, consistent with the duties, responsibilities, policies, and procedures of the Inspector General, provide information requested by the Committee or an Inspector General on the Committee relating to the responsibilities of the Committee. ``(16) Website.-- ``(A) In general.--Not later than 30 days after the effective date of this subsection, the Committee shall establish and maintain a user-friendly, public-facing website-- ``(i) to foster greater accountability and transparency in the use of covered funds, which shall have a uniform resource locator that is descriptive and memorable; and ``(ii) that shall be a portal or gateway to key information relating to the oversight of covered funds and provide connections to other Government websites with related information. ``(17) Coordination.--The Committee shall coordinate its oversight activities with the Comptroller General of the United States and State auditors. ``(18) Notice.--The Chairperson shall provide notice to the Committee on Homeland Security and Governmental Affairs of the Senate and the Committee on Oversight and Accountability of the House of Representatives when designating or removing an Inspector General from the membership of the Committee under paragraph (4). ``(19) Rules of construction.--Nothing in this subsection shall be construed to-- ``(A) affect the independent authority of an Inspector General to determine whether to conduct an audit or investigation of covered funds; or ``(B) require the Council or any Inspector General to provide funding to support the activities of the Committee. ``(20) Authorization of appropriations.-- ``(A) In general.--For the purposes of carrying out the mission of the Committee under this subsection, there are authorized to be appropriated $17,000,000 for each of fiscal years 2026 and 2027 to carry out the duties and functions of the Committee. ``(B) Report to congress.--Not later than 1 year after the effective date of this subsection, the Chairperson shall submit to the appropriate congressional committees a report that details the anticipated future budgetary needs of the Committee.''. (b) Effective Date.--This Act and the amendments made by this Act shall take effect on September 30, 2025. Calendar No. 431 118th CONGRESS 2d Session S. 4036 [Report No. 118-186] _______________________________________________________________________ A BILL To establish a Government Spending Oversight Committee within the Council of the Inspectors General on Integrity and Efficiency, and for other purposes. _______________________________________________________________________ July 8, 2024 Reported with an amendment

usgpo

2024-10-08T13:27:05.384153

CRPT

CRPT-118hrpt536

INTERNET APPLICATION INTEGRITY AND DISCLOSURE ACT

United States Congress House of Representatives

[House Report 118-536] [From the U.S. Government Publishing Office] 118th Congress } { Report HOUSE OF REPRESENTATIVES 2d Session } { 118-536 ====================================================================== INTERNET APPLICATION INTEGRITY AND DISCLOSURE ACT _______ June 4, 2024.--Committed to the Committee of the Whole House on the State of the Union and ordered to be printed _______ Mrs. Rodgers of Washington, from the Committee on Energy and Commerce, submitted the following R E P O R T together with MINORITY VIEWS [To accompany H.R. 784] [Including cost estimate of the Congressional Budget Office] The Committee on Energy and Commerce, to whom was referred the bill (H.R. 784) to require any person that maintains an internet website or that sells or distributes a mobile application that is owned, wholly or partially, by the Chinese Communist Party or by a non-state-owned entity located in the People's Republic of China, to disclose that fact to any individual who downloads or otherwise uses such website or application, having considered the same, reports favorably thereon with amendments and recommends that the bill as amended do pass. CONTENTS Page Purpose and Summary.............................................. 2 Background and Need for Legislation.............................. 3 Committee Action................................................. 3 Committee Votes.................................................. 4 Oversight Findings and Recommendations........................... 6 New Budget Authority, Entitlement Authority, and Tax Expenditures 6 Congressional Budget Office Estimate............................. 6 Federal Mandates Statement....................................... 7 Statement of General Performance Goals and Objectives............ 7 Duplication of Federal Programs.................................. 7 Related Committee and Subcommittee Hearings...................... 7 Committee Cost Estimate.......................................... 8 Earmark, Limited Tax Benefits, and Limited Tariff Benefits....... 8 Advisory Committee Statement..................................... 8 Applicability to Legislative Branch.............................. 8 Section-by-Section Analysis of the Legislation................... 8 Changes in Existing Law Made by the Bill, as Reported............ 9 Minority Views................................................... 10 The amendments are as follows: Strike all after the enacting clause and insert the following: SECTION 1. SHORT TITLE. This Act may be cited as the ``Internet Application Integrity and Disclosure Act'' or the ``Internet Application I.D. Act''. SEC. 2. CHINESE OWNERSHIP DISCLOSURE REQUIREMENTS. (a) Disclosure.--Any person that owns, provides, or controls an internet website or that sells or distributes a mobile application that is owned, wholly or partially, by the Chinese Communist Party or by a non-state-owned entity domiciled in the People's Republic of China shall clearly and conspicuously disclose to any individual who downloads or otherwise uses such website or application in the United States that such website or application is owned, wholly or partially, by the Chinese Communist Party or by a non-state-owned entity domiciled in the People's Republic of China. (b) False Information.--It shall be unlawful for any person to knowingly disclose false information under this section. SEC. 3. ENFORCEMENT BY FEDERAL TRADE COMMISSION. (a) Unfair or Deceptive Acts or Practices.--A violation of this Act shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)). (b) Powers of Commission.-- (1) In general.--The Federal Trade Commission shall enforce this Act in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this Act. (2) Privileges and immunities.--Any person who violates this Act shall be subject to the penalties, and entitled to the privileges and immunities, provided in the Federal Trade Commission Act (15 U.S.C. 41 et seq.). (3) Authority preserved.--Nothing in this Act may be construed to limit the authority of the Federal Trade Commission under any other provision of law. SEC. 4. INDIVIDUAL DEFINED. In this Act, the term ``individual'' means a natural person residing in the United States. SEC. 5. EFFECTIVE DATE. This Act shall take effect on the date that is 180 days after the date of the enactment of this Act. Amend the title so as to read: A bill to require any person that owns, provides, or controls an internet website or that sells or distributes a mobile application that is owned, wholly or partially, by the Chinese Communist Party or by a non-state-owned entity domiciled in the People's Republic of China to disclose that fact to any individual who downloads or otherwise uses such website or application in the United States. PURPOSE AND SUMMARY H.R. 784, the ``Internet Application Integrity and Disclosure Act'' or the ``Internet Application I.D. Act'' was introduced by Representatives Fulcher and Pappas on February 2, 2023, and referred to the Committee on Energy and Commerce. H.R. 784 requires any person or entity that owns, provides, or controls an internet website or sells or distributes a mobile application that is wholly or partially owned by the Chinese Communist Party (CCP) or a non-state-owned entity domiciled in the People's Republic of China to disclose, in a clear and conspicuous manner, that fact to any individual who downloads or uses such website or application. The legislation would make it unlawful for any person knowingly to provide false information required under the disclosure and would provide enforcement authority for the Federal Trade Commission (FTC). H.R. 784 will increase transparency and provide consumers with information about the ownership of the websites and mobile applications they use. The disclosure requirement is intended to inform users about the potential risks associated with using websites or applications owned by the CCP or non-state-owned entities domiciled in the People's Republic of China. BACKGROUND AND NEED FOR LEGISLATION The CCP and the Chinese government have a track record of using websites and applications to collect data on U.S. businesses, governments, and individual Americans. American's unwittingly download applications onto their work and personal devices--not knowing the ties those websites and applications have with the CCP and the ability for the CCP to collect and retain information as a result of such relationship. H.R. 784 provides Americans with greater transparency to help them to understand which websites and applications they use are tied to the CCP and to make better decisions about their use of such websites and applications. COMMITTEE ACTION On February 1, 2023, the Subcommittee on Innovation, Data, and Commerce held a hearing on the fight for global leadership in the age of emerging technology. The title of the hearing was ``Economic Danger Zone: How America Competes to Win the Future Versus China.'' The Subcommittee received testimony from the following witnesses: Brandon Pugh, Policy Director and Resident Senior Fellow, R Street Institute; Jeff Farrah, Executive Director, Autonomous Vehicle Industry Association (AVIA); and Samm Sacks, Cyber Policy Fellow, International Security Program, New America. On March 1, 2023, the Subcommittee on Innovation, Data, and Commerce held a hearing on the current digital ecosystem and the importance of enacting a comprehensive preemptive federal data privacy and security law. The title of the hearing was ``Promoting U.S. Innovation and Individual Liberty through a National Standard for Data Privacy.'' The Subcommittee received testimony from the following witnesses: Alexandra Reeve Givens, President and CEO, Center for Democracy & Technology; Graham Mudd, Founder and Chief Product Officer, Anonym; and Jessica Rich, Of Counsel and Senior Policy Advisor for Consumer Protection, Kelley Drye & Warren, LLP. On February 7, 2023, the Subcommittee on Innovation, Data, and Commerce met in open markup session and forwarded H.R. 784, without amendment, to the full Committee by a voice vote. On March 9, 2023, the full Committee on Energy and Commerce met in open markup session and ordered H.R. 784, as amended, favorably reported to the House by a record vote of 28 yeas and 22 nays. COMMITTEE VOTES Clause 3(b) of rule XIII requires the Committee to list the record votes on the motion to report legislation and amendments thereto. The following reflects the record votes taken during the Committee consideration: OVERSIGHT FINDINGS AND RECOMMENDATIONS Pursuant to clause 2(b)(1) of rule X and clause 3(c)(1) of rule XIII, the Committee held hearings and made findings that are reflected in this report. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES Pursuant to clause 3(c)(2) of rule XIII, the Committee finds that H.R. 784 would result in no new or increased budget authority, entitlement authority, or tax expenditures or revenues. CONGRESSIONAL BUDGET OFFICE ESTIMATE Pursuant to clause 3(c)(3) of rule XIII, the following is the cost estimate provided by the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974: H.R. 784 would require entities that own, provide, or control websites or mobile applications that are owned by the Chinese Communist Party or located in China to disclose that information to U.S. users. The bill would direct the Federal Trade Commission (FTC) to enforce that requirement. Using information from the FTC, CBO estimates that implementing H.R. 784 would cost $4 million over the 2024-2029 period; any spending would be subject to the availability of appropriated funds. CBO expects that one employee, at an average annual cost of $225,000, would be needed in 2024 to issue guidance to clarify both the content of the disclosures and which entities would need to make the disclosures. CBO estimates that the FTC would need three employees after 2024 to enforce potential violations. H.R. 784 also would authorize the FTC to collect civil monetary penalties from businesses found in violation of the bill, along with pursuing other remedies. Civil monetary penalties are generally remitted to the Treasury and recorded in the budget as revenues. However, the extent to which those businesses would violate the new rules after they go into effect is uncertain. Furthermore, if a business does violate the new rules and the FTC chooses to proceed with an enforcement action, the extent to which the agency would pursue civil penalties rather than other remedies is also uncertain, as is the amount of time it would take to resolve a case. As a result, CBO estimates that any additional revenues collected under the bill would be insignificant over the 2024-2034 period. The bill would impose a private-sector mandate as defined by the Unfunded Mandates Reform Act (UMRA) by requiring entities that own, provide, or control websites or mobile applications owned wholly or partially by a Chinese entity to disclose that fact to consumers. Because those mobile applications and website owners could use an established disclosure procedure to comply with the bill's requirements, CBO estimates that the cost of the mandate would be small and would not exceed the threshold established in UMRA ($200 million in 2024, adjusted annually for inflation). The bill contains no intergovernmental mandates as defined in UMRA. The CBO staff contacts for this estimate are David Hughes (for federal costs) and Rachel Austin (for mandates). The estimate was reviewed by H. Samuel Papenfuss, Deputy Director of Budget Analysis. Phillip L. Swagel, Director, Congressional Budget Office. FEDERAL MANDATES STATEMENT The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES Pursuant to clause 3(c)(4) of rule XIII, the general performance goal or objective of this legislation is to require any person or entity who owns, provides, or controls an internet website or sells or distributes a mobile application that is wholly or partially owned by the Chinese Communist Party or a non-state-owned entity domiciled in the People's Republic of China to disclose, in a clear and conspicuous manner, that fact to any individual who downloads or uses such application. DUPLICATION OF FEDERAL PROGRAMS Pursuant to clause 3(c)(5) of rule XIII, no provision of H.R. 784 is known to be duplicative of another Federal program, including any program that was included in a report to Congress pursuant to section 21 of Public Law 111-139 or the most recent Catalog of Federal Domestic Assistance. RELATED COMMITTEE AND SUBCOMMITTEE HEARINGS Pursuant to clause 3(c)(6) of rule XIII, the following related hearings were used to develop or consider H.R. 784: On February 1, 2023, the Subcommittee on Innovation, Data, and Commerce held a hearing on the fight for global leadership in the age of emerging technology. The title of the hearing was ``Economic Danger Zone: How America Competes to Win the Future Versus China.'' The Subcommittee received testimony from the following witnesses: Brandon Pugh, Policy Director and Resident Senior Fellow, R Street Institute; Jeff Farrah, Executive Director, Autonomous Vehicle Industry Association (AVIA); and Samm Sacks, Cyber Policy Fellow, International Security Program, New America. On March 1, 2023, the Subcommittee on Innovation, Data, and Commerce held a hearing on the current digital ecosystem and the importance of enacting a comprehensive preemptive federal data privacy and security law. The title of the hearing was ``Promoting U.S. Innovation and Individual Liberty through a National Standard for Data Privacy.'' The Subcommittee received testimony from the following witnesses: Alexandra Reeve Givens, President and CEO, Center for Democracy & Technology; Graham Mudd, Founder and Chief Product Officer, Anonym; and Jessica Rich, Of Counsel and Senior Policy Advisor for Consumer Protection, Kelley Drye & Warren, LLP. COMMITTEE COST ESTIMATE Pursuant to clause 3(d)(1) of rule XIII, the Committee adopts as its own the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974. EARMARK, LIMITED TAX BENEFITS, AND LIMITED TARIFF BENEFITS Pursuant to clause 9(e), 9(f), and 9(g) of rule XXI, the Committee finds that H.R. 784 contains no earmarks, limited tax benefits, or limited tariff benefits. ADVISORY COMMITTEE STATEMENT No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation. APPLICABILITY TO LEGISLATIVE BRANCH The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION Section 1. Short title Section 1 provides that the Act may be cited as the ``Internet Application Integrity and Disclosure Act'' or the ``Internet Application I.D. Act''. Section 2. Chinese ownership disclosure requirements Section 2 requires any person who owns, provides, or controls an internet website or sells or distributes a mobile application that is owned, wholly, or partially by the CCP or by a non-state-owned entity domiciled in China, to disclose such fact to anyone who would download or use such website or mobile application. This section also makes it unlawful to disclose knowingly false information under this section. Section. 3. Enforcement by Federal Trade Commission Section 3 provides that a violation of the Act shall be treated as a violation of the Federal Trade Commission's rule defining an unfair or deceptive act or practice and will be subject to any associated penalties. Section. 4. Individual defined This section defines the term ``individual'' as ``a natural person residing in the United States.'' Section. 5. Effective date This section provides that the legislation becomes effective 180 days after the date of enactment of the Act. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED This legislation does not amend any existing Federal statute. MINORITY VIEWS H.R. 784, the ``Internet Application Integrity and Disclosure Act,'' as amended would require that any person that owns, provides, or controls an internet website or that sells or distributes a mobile application that is owned, wholly or partially, by the Chinese Communist Party (CCP) or by a non- state-owned entity domiciled in the People's Republic of China to clearly and conspicuously disclose that such website or application is owned by the CCP or a non-state-owned entity domiciled in the People's Republic of China. The breadth of the language and scope of those required to make and receive disclosures could lead to a deluge of notifications that are ignored by most recipients and confusing and useless to those who do try to understand them. An extensive body of privacy policy research has found that consumers typically don't read online notices, do not understand the content of these notices, and may misunderstand the purpose of such notices.\1\ The notice required by this legislation are particularly problematic because they will not provide consumers any information about the significance of a company being owned by the CCP or a non-state-owned entity domiciled in the People's Republic of China. The legislation also includes vague terms that could complicate compliance and make it more difficult for the Federal Trade Commission to enforce. --------------------------------------------------------------------------- \1\World Economic Forum, Redesigning Data Privacy: Reimagining Notice & Consent for Human-Technology Interaction (July 2020) (https:// www3.weforum.org/docs/WEF_Redesigning_ Data_Privacy_Report_2020.pdf). Frank Pallone, Jr. Ranking Member.

usgpo

2024-10-08T13:26:23.433627

BILLS

BILLS-118hr9367ih

Preventing Vape Use Act

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9367 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9367 To amend the Federal Food, Drug, and Cosmetic Act to require a recall of electronic nicotine delivery systems that have not been subject to premarket review, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 16, 2024 Mr. DeSaulnier introduced the following bill; which was referred to the Committee on Energy and Commerce _______________________________________________________________________ A BILL To amend the Federal Food, Drug, and Cosmetic Act to require a recall of electronic nicotine delivery systems that have not been subject to premarket review, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Preventing Vape Use Act''. SEC. 2. INCLUSION OF ENDS IN DEFINITION OF TOBACCO PRODUCT. (a) Confirmation of Inclusion of ENDS in Definition of Tobacco Product.--Section 201(rr)(1) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(rr)(1)) is amended by adding at the end the following: ``Such term includes an electronic nicotine delivery system.''. (b) ENDS Defined.--Section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) is amended by adding at the end the following: ``(ss) The term `electronic nicotine delivery system' means a tobacco product that is an electronic device that delivers nicotine, flavor, or another substance via an aerosolized solution to the user inhaling from the device (including e-cigarettes, e-hookah, e-cigars, vape pens, advanced refillable personal vaporizers, and electronic pipes) and any component, liquid, part, or accessory of such a device, whether or not sold separately.''. SEC. 3. MANDATORY RECALL OF ENDS PENDING PREMARKET REVIEW. Section 908(c) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 387h(c)) is amended by adding at the end the following: ``(4) Mandatory recall of ends pending premarket review.-- ``(A) Issuance of order.--Notwithstanding paragraphs (1) and (2), in the case of a tobacco product that is an electronic nicotine delivery system with respect to which, as of the date of the enactment of this subparagraph, an order under section 910(c)(1)(A)(i) has not been issued, the Secretary shall, not later than 60 days after such date of enactment, issue an order requiring-- ``(i) the appropriate person (including a manufacturer, importer, distributor, or retailer of the tobacco product) to immediately cease distribution of such tobacco product; and ``(ii) the recall of such tobacco product. ``(B) Hearing.--The order under subparagraph (A) shall provide the person subject to the order with an opportunity for an informal hearing, to be held not later than 10 days after the date of the issuance of the order, on the actions required by the order and the terms of the recall required by such order. ``(C) Contents of order.--An order issued under subparagraph (A) shall specify a timetable in which the tobacco product recall will occur and shall require periodic reports to the Secretary describing the progress of the recall. ``(D) Notice.--An order under subparagraph (A)-- ``(i) shall not include recall of a tobacco product from individuals; and ``(ii) shall provide for notice to persons subject to the risks associated with the use of such tobacco product. ``(E) Assistance allowed.--In providing the notice required by subparagraph (D)(ii), the Secretary may use the assistance of retailers and other persons who distributed such tobacco product. If a significant number of such persons cannot be identified, the Secretary shall notify such persons under section 705(b). ``(F) Withdrawal of order.--The Secretary may only withdraw an order issued under subparagraph (A) with respect to a tobacco product described in such subparagraph upon the issuance of an order section 910(c)(1)(A)(i) with respect to that product.''. SEC. 4. NO EXEMPTIONS ALLOWED FOR ENDS. Section 910(a) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 387j(a)) is amended-- (1) in paragraph (2), by adding at the end the following: ``(C) Application to ends.--Notwithstanding clauses (i) and (ii) of subparagraphs (A) and (B), beginning on the date that is 60 days after the date of the enactment of this subparagraph-- ``(i) electronic nicotine delivery systems are deemed to be not substantially equivalent to any predicate tobacco product; and ``(ii) the requirement for premarket review under subparagraph (A) shall apply to a tobacco product that is an electronic nicotine delivery system.''; and (2) in paragraph (3)(C)-- (A) by striking ``equivalent to a predicate'' and inserting the following: ``equivalent-- ``(A) to a predicate''; (B) by striking ``adulterated.'' and inserting ``adulterated; or''; and (C) by adding at the end the following: ``(B) beginning on the date that is 60 days after the date of the enactment of this subparagraph, if the tobacco product is an electronic nicotine delivery system.''. <all>

usgpo

2024-10-08T13:26:28.411763

BILLS

BILLS-118hr9374ih

Stand with Israel Act

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9374 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9374 To amend the United Nations Participation Act of 1945 to provide for a prohibition on contributions to the United Nations relating to Israel. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 16, 2024 Mr. Lawler (for himself, Mr. Moskowitz, Ms. Tenney, Mr. Gottheimer, Mr. Weber of Texas, Mr. Feenstra, Mr. Fitzpatrick, Ms. Salazar, Mr. Landsman, Mr. Garbarino, Mrs. Chavez-DeRemer, Mr. Burchett, Mr. D'Esposito, Mr. Steube, Ms. Malliotakis, Mr. Kean of New Jersey, Mr. Williams of New York, Mr. Dunn of Florida, Mr. Biggs, Mr. Higgins of Louisiana, Mr. LaLota, Mr. Gooden of Texas, Mr. Hill, Ms. Stefanik, and Mr. Tony Gonzales of Texas) introduced the following bill; which was referred to the Committee on Foreign Affairs _______________________________________________________________________ A BILL To amend the United Nations Participation Act of 1945 to provide for a prohibition on contributions to the United Nations relating to Israel. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Stand with Israel Act''. SEC. 2. PROHIBITION ON CONTRIBUTIONS TO THE UNITED NATIONS RELATING TO ISRAEL. The United Nations Participation Act of 1945 (22 U.S.C. 287 et seq.) is amended by adding at the end the following: ``SEC. 13. PROHIBITION ON CONTRIBUTIONS TO THE UNITED NATIONS RELATING TO ISRAEL. ``No funds made available to the Department of State or any other Federal department or agency may be made available for contributions to the United Nations or any of its funds, programs, specialized agencies, or other related entities that expels, downgrades or suspends membership, or otherwise restricts the participation of Israel such that it may not participate fully and equivalently with other Member States of the United Nations or the respective fund, program, specialized agency, or other related entity.''. <all>

usgpo

2024-10-08T13:26:21.681700

BILLS

BILLS-118s4720is

Allied Burden Sharing Report Act

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4720 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 4720 To require the Secretary of Defense to submit annual reports on allied contributions to the common defense, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES July 11 (legislative day, July 10), 2024 Mr. Lee (for himself, Mr. Tuberville, and Mr. Paul) introduced the following bill; which was read twice and referred to the Committee on Foreign Relations _______________________________________________________________________ A BILL To require the Secretary of Defense to submit annual reports on allied contributions to the common defense, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Allied Burden Sharing Report Act''. SEC. 2. ANNUAL REPORT ON ALLIED CONTRIBUTIONS TO THE COMMON DEFENSE. (a) Finding.--Congress finds that section 1003 of the Department of Defense Authorization Act, 1985 (Public Law 98-525; 63 Stat. 2241)-- (1) expresses the sense of Congress that, due to threats that are ever-changing, Congress must be informed with respect to allied contributions to the common defense to properly assess the readiness of the United States and the countries described in subsection (c)(2) for threats; and (2) requires the Secretary of Defense to submit to Congress an annual report on the contributions of allies to the common defense. (b) Sense of Congress.--It is the sense of Congress that-- (1) the threats facing the United States-- (A) extend beyond the global war on terror; and (B) include near-peer threats; and (2) the President should seek from each country described in subsection (c)(2) acceptance of international security responsibilities and agreements to make contributions to the common defense in accordance with the collective defense agreements or treaties to which such country is a party. (c) Annual Report on Allied Contributions to the Common Defense.-- (1) In general.--Not later than March 1 each year, the Secretary of Defense, in coordination with the heads of other Federal agencies, as the Secretary determines to be necessary, shall submit to the appropriate committees of Congress a report containing a description of-- (A) the annual defense spending by each country described in paragraph (2), including available data on nominal budget figures and defense spending as a percentage of the gross domestic products of each such country for the fiscal year immediately preceding the fiscal year in which the report is submitted; (B) the activities of each such country to contribute to military or stability operations in which the Armed Forces of the United States are a participant or may be called upon in accordance with a cooperative defense agreement to which the United States is a party; (C) any limitations placed by any such country on the use of such contributions; and (D) any actions undertaken by the United States or by other countries to minimize such limitations. (2) Countries described.--The countries described in this paragraph are the following: (A) Each member country of the North Atlantic Treaty Organization. (B) Each member country of the Gulf Cooperation Council. (C) Each country party to the Inter-American Treaty of Reciprocal Assistance (Rio Treaty), done at Rio de Janeiro September 2, 1947, and entered into force December 3, 1948 (TIAS 1838). (D) Australia. (E) Japan. (F) New Zealand. (G) The Philippines. (H) South Korea. (I) Thailand. (3) Form.--Each report under paragraph (1) shall be submitted in unclassified form, but may contain a classified annex. (4) Availability.--A report submitted under paragraph (1) shall be made available on request to any Member of Congress. (d) Appropriate Committees of Congress Defined.--In this section, the term ``appropriate committees of Congress'' means-- (1) the Committee on Armed Services, the Committee on Foreign Relations, and the Committee on Appropriations of the Senate; and (2) the Committee on Armed Services, the Committee on Foreign Affairs, and the Committee on Appropriations of the House of Representatives. <all>

usgpo

2024-10-08T13:26:19.381154

BILLS

BILLS-118hr9331ih

Higher Education Accountability Tax Act

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9331 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9331 To amend the Internal Revenue Code of 1986 to modify the excise tax on investment income of private colleges and universities. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 9, 2024 Mr. Joyce of Ohio (for himself and Ms. Malliotakis) introduced the following bill; which was referred to the Committee on Ways and Means _______________________________________________________________________ A BILL To amend the Internal Revenue Code of 1986 to modify the excise tax on investment income of private colleges and universities. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Higher Education Accountability Tax Act''. SEC. 2. MODIFICATION OF EXCISE TAX ON INVESTMENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES. (a) Increase in Rate of Tax.--Section 4968(a) of the Internal Revenue Code of 1986 is amended by striking ``1.4 percent'' and inserting ``10 percent''. (b) Additional Increase in Rate of Tax for Institutions With Increases in Net Price.-- (1) In general.--Section 4968(a) of such Code, as amended by subsection (a), is amended by inserting ``(20 percent in the case of a net-price-increase institution)'' after ``10 percent''. (2) Net-price-increase institution.--Section 4968(b) of such Code is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph: ``(2) Net-price-increase institution.--The term `net-price- increase institution' means any applicable educational institution for any taxable year if, during the 3-taxable-year period ending with the taxable year immediately preceding such taxable year, the net price of such institution increased at a rate which exceeds the rate of increase in the Consumer Price Index (as defined in section 1(f)(5)) for such period. For purposes of the preceding sentence, the term `net price' has the meaning given such term by section 132(a)(3) of the Higher Education Act of 1986 (20 U.S.C. 1015a(a)(3)) except that such price shall be determined by taking into account all first- time, full-time undergraduate students at the institution (in addition to such students who receive student aid).''. (c) Expansion of Institutions Subject to Tax.--Section 4968(b)(1)(D) of such Code is amended by striking ``$500,000'' and inserting ``$250,000''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2024. <all>

usgpo

2024-10-08T13:26:16.260947

BILLS

BILLS-118hr9347ih

Strengthening Tracking Of Poisonous Tranq Requiring Analyzed National Quantification Act of 2024; STOP TRANQ Act

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9347 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9347 To include the identification of countries that are significant sources of xylazine in the annual International Narcotics Control Strategy Report. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 13, 2024 Mr. Fong (for himself and Ms. Spanberger) introduced the following bill; which was referred to the Committee on Foreign Affairs _______________________________________________________________________ A BILL To include the identification of countries that are significant sources of xylazine in the annual International Narcotics Control Strategy Report. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLES. This Act may be cited as the ``Strengthening Tracking Of Poisonous Tranq Requiring Analyzed National Quantification Act of 2024'' or the ``STOP TRANQ Act''. SEC. 2. INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT. Section 489(a)(11) of the Foreign Assistance Act of 1961 (22 U.S.C. 2291h(a)(11)) is amended-- (1) in subparagraph (A), by inserting ``, xylazine,'' after ``illicit fentanyl''; and (2) in subparagraph (D), by inserting ``)'' before the semicolon at the end. <all>

usgpo

2024-10-08T13:26:28.873789

BILLS

BILLS-118s5088is

Entrepreneurs with Disabilities Reporting Act of 2024

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 5088 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 5088 To require the Administrator of the Small Business Administration to submit to Congress a report on the entrepreneurial challenges facing entrepreneurs with a disability, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES September 18, 2024 Ms. Duckworth (for herself and Ms. Lummis) introduced the following bill; which was read twice and referred to the Committee on Small Business and Entrepreneurship _______________________________________________________________________ A BILL To require the Administrator of the Small Business Administration to submit to Congress a report on the entrepreneurial challenges facing entrepreneurs with a disability, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Entrepreneurs with Disabilities Reporting Act of 2024''. SEC. 2. REPORT ON ENTREPRENEURSHIP CHALLENGES OF ENTREPRENEURS WITH DISABILITIES. (a) Definitions.--In this section, the terms ``Administration'' and ``Administrator'' mean the Small Business Administration and the Administrator thereof, respectively. (b) Report.--Not later than 180 days after the date of enactment of this Act, the Administrator shall submit to Congress a report on the challenges that entrepreneurs with a disability encounter with starting and operating a business, including-- (1) an assessment of the challenges and needs of entrepreneurs with a disability; (2) a description of the resources and support that the Administration provides to entrepreneurs with a disability; (3) a description of outreach to entrepreneurs with a disability by the Administration, including by district and regional offices of the Administration, small business development centers (as defined in section 3(t) of the Small Business Act (15 U.S.C. 632(t))), and women's business centers (as defined in section 29(a) of such Act (15 U.S.C. 656(a))); (4) a description of any joint efforts between offices of the Administration or between the Administration and other Federal agencies to advance the goal of supporting the economic success of entrepreneurs with a disability; (5) a discussion of any deficiencies in the resources and support described under paragraph (2); (6) a description of the use of, and access to, resources of the Administration by entrepreneurs with a disability; and (7) any recommendations for legislative actions that are necessary to address the challenges or needs of entrepreneurs with a disability that are identified in the report. (c) Compliance With CUTGO.--No additional amounts are authorized to be appropriated to carry out this Act. <all>

usgpo

2024-10-08T13:26:48.555142

CHRG

CHRG-118shrg55363

Confirmation Hearing on Federal Appointments

United States Congress Senate

[Senate Hearing 118-29, Part 8] [From the U.S. Government Publishing Office] S. Hrg. 118-29, Part 8 CONFIRMATION HEARING ON FEDERAL APPOINTMENTS ======================================================================= HEARING before the COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION ---------- JULY 26, 2023 ---------- Serial No. J-118-2 ---------- PART 8 ---------- Printed for the use of the Committee on the Judiciary [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] CONFIRMATION HEARING ON FEDERAL APPOINTMENT S. Hrg. 118-29, Part 8 CONFIRMATION HEARING ON FEDERAL APPOINTMENTS ======================================================================= HEARING before the COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ JULY 26, 2023 __________ Serial No. J-118-2 __________ PART 8 __________ Printed for the use of the Committee on the Judiciary [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] www.judiciary.senate.gov www.govinfo.gov ______ U.S. GOVERNMENT PUBLISHING OFFICE 55-363 PDF WASHINGTON : 2024 COMMITTEE ON THE JUDICIARY RICHARD J. DURBIN, Illinois, Chair DIANNE FEINSTEIN, California LINDSEY O. GRAHAM, South Carolina, SHELDON WHITEHOUSE, Rhode Island Ranking Member AMY KLOBUCHAR, Minnesota CHARLES E. GRASSLEY, Iowa CHRISTOPHER A. COONS, Delaware JOHN CORNYN, Texas RICHARD BLUMENTHAL, Connecticut MICHAEL S. LEE, Utah MAZIE K. HIRONO, Hawaii TED CRUZ, Texas CORY A. BOOKER, New Jersey JOSH HAWLEY, Missouri ALEX PADILLA, California TOM COTTON, Arkansas JON OSSOFF, Georgia JOHN KENNEDY, Louisiana PETER WELCH, Vermont THOM TILLIS, North Carolina MARSHA BLACKBURN, Tennessee Joseph Zogby, Chief Counsel and Staff Director Katherine Nikas, Republican Chief Counsel and Staff Director C O N T E N T S ---------- JULY 26, 2023, 10:03 A.M. STATEMENTS OF COMMITTEE MEMBERS Page Coons, Hon. Christopher A., a U.S. Senator from the State of Delaware....................................................... 1 Graham, Hon. Lindsey O., a U.S. Senator from the State of South Carolina....................................................... 1 INTRODUCERS Stabenow, Hon. Debbie, a U.S. Senator from the State of Michigan, introducing Brandy R. McMillion, Nominee to be United States District Judge for the Eastern District of Michigan............ 2 Casey, Hon. Robert P., Jr., a U.S. Senator from the State of Pennsylvania, introducing Hon. Karoline Mehalchick, Nominee to be United States District Judge for the Middle District of Pennsylvania................................................... 3 Schumer, Hon. Charles E., a U.S. Senator from the State of New York, introducing Margaret M. Garnett, Nominee to be United States District Judge for the Southern District of New York.... 5 Carper, Hon. Thomas R., a U.S. Senator from the State of Delaware, introducing Hon. Jennifer L. Hall, Nominee to be United States District Judge for the District of Delaware...... 7 STATEMENTS OF THE NOMINEES Witness List..................................................... 33 Garnett, Margaret M., Nominee to serve as United States District Judge for the Southern District of New York.................... 10 questionnaire and biographical information................... 34 Hall, Hon. Jennifer L., Nominee to serve as United States District Judge for the District of Delaware.................... 11 questionnaire and biographical information................... 87 Laroski, Joseph A., Jr., Nominee to serve as a Judge for the United States Court of International Trade..................... 14 questionnaire and biographical information................... 133 McMillion, Brandy R., Nominee to serve as United States District Judge for the Eastern District of Michigan..................... 12 questionnaire and biographical information................... 168 Mehalchick, Hon. Karoline, Nominee to serve as United States District Judge for the Middle District of Pennsylvania......... 13 questionnaire and biographical information................... 201 Wang, Lisa W., Nominee to serve as a Judge for the United States Court of International Trade................................... 15 questionnaire and biographical information................... 259 QUESTIONS Questions submitted to Margaret M. Garnett by: Ranking Member Graham........................................ 289 Senator Klobuchar............................................ 295 Senator Lee.................................................. 296 Senator Cruz................................................. 299 Senator Kennedy.............................................. 307 Senator Tillis............................................... 311 Questions submitted to Hon. Jennifer L. Hall by: Ranking Member Graham........................................ 319 Senator Klobuchar............................................ 325 Senator Lee.................................................. 326 Senator Cruz................................................. 329 Senator Kennedy.............................................. 335 Senator Tillis............................................... 339 Questions submitted to Joseph A. Laroski, Jr., by: Ranking Member Graham........................................ 347 Senator Klobuchar............................................ 352 Senator Lee.................................................. 353 Senator Tillis............................................... 355 Questions submitted to Brandy R. McMillion by: Ranking Member Graham........................................ 357 Senator Klobuchar............................................ 363 Senator Lee.................................................. 364 Senator Cruz................................................. 367 Senator Kennedy.............................................. 374 Senator Tillis............................................... 378 Questions submitted to Hon. Karoline Mehalchick by: Chair Durbin................................................. 386 Ranking Member Graham........................................ 387 Senator Klobuchar............................................ 394 Senator Lee.................................................. 395 Senator Cruz................................................. 398 Senator Kennedy.............................................. 405 Senator Tillis............................................... 409 Questions submitted to Lisa W. Wang by: Ranking Member Graham........................................ 417 Senator Klobuchar............................................ 422 Senator Lee.................................................. 423 Senator Cruz................................................. 426 Senator Tillis............................................... 432 ANSWERS Responses of Margaret M. Garnett to questions submitted by: Ranking Member Graham........................................ 434 Senator Klobuchar............................................ 450 Senator Lee.................................................. 452 Senator Cruz................................................. 461 Senator Kennedy.............................................. 478 Senator Tillis............................................... 491 Responses of Hon. Jennifer L. Hall to questions submitted by: Ranking Member Graham........................................ 499 Senator Klobuchar............................................ 513 Senator Lee.................................................. 514 Senator Cruz................................................. 521 Senator Kennedy.............................................. 536 Senator Tillis............................................... 548 Responses of Joseph A. Laroski, Jr., to questions submitted by: Ranking Member Graham........................................ 555 Senator Klobuchar............................................ 568 Senator Lee.................................................. 570 Senator Tillis............................................... 577 Responses of Brandy R. McMillion to questions submitted by: Ranking Member Graham........................................ 580 Senator Klobuchar............................................ 594 Senator Lee.................................................. 595 Senator Cruz................................................. 602 Senator Kennedy.............................................. 617 Senator Tillis............................................... 628 Responses of Hon. Karoline Mehalchick to questions submitted by: Chair Durbin................................................. 635 Ranking Member Graham........................................ 637 Senator Klobuchar............................................ 654 Senator Lee.................................................. 656 Senator Cruz................................................. 663 Senator Kennedy.............................................. 677 Senator Tillis............................................... 687 Responses of Lisa W. Wang to questions submitted by: Ranking Member Graham........................................ 694 Senator Klobuchar............................................ 706 Senator Lee.................................................. 707 Senator Cruz................................................. 713 Senator Tillis............................................... 726 LETTER RECEIVED WITH REGARD TO MARGARET M. GARNETT Former prosecutors from the U.S. Attorney's Office for the Southern District of New York who worked with Ms. Garnett, July 24, 2023....................................................... 728 LETTERS RECEIVED WITH REGARD TO HON. KAROLINE MEHALCHICK Blewitt, Hon. Thomas M., retired, July 25, 2023.................. 730 Corbett, Hon. Trish, July 21, 2023............................... 731 Current and former law clerks for Judge Mehalchick, July 19, 2023 733 Durkin, Robert F., July 11, 2023................................. 736 Jones, Hon. John E., III, retired, July 7, 2023.................. 737 Lackawanna Bar Association, Scranton, Pennsylvania, July 25, 2023 739 Moschella, Matthew C., July 21, 2023............................. 741 Moyle, Douglas S., July 25, 2023................................. 743 Murray, Albert R., Jr., July 18, 2023............................ 744 Simcox, Elizabeth G., July 12, 2023.............................. 746 Vanaskie, Hon. Thomas I., retired, July 19, 2023................. 748 MISCELLANEOUS SUBMISSIONS FOR THE RECORD American Bar Association's Standing Committee on the Federal Judiciary, evaluation of the professional qualifications of Margaret M. Garnett............................................ 750 American Bar Association's Standing Committee on the Federal Judiciary, evaluation of the professional qualifications of Hon. Jennifer L. Hall.......................................... 751 American Bar Association's Standing Committee on the Federal Judiciary, evaluation of the professional qualifications of Joseph A. Laroski, Jr.......................................... 752 American Bar Association's Standing Committee on the Federal Judiciary, evaluation of the professional qualifications of Brandy R. McMillion............................................ 753 American Bar Association's Standing Committee on the Federal Judiciary, evaluation of the professional qualifications of Hon. Karoline Mehalchick....................................... 754 American Bar Association's Standing Committee on the Federal Judiciary, evaluation of the professional qualifications of Lisa W. Wang................................................... 755 CONFIRMATION HEARING ON FEDERAL APPOINTMENTS ---------- WEDNESDAY, JULY 26, 2023 United States Senate, Committee on the Judiciary, Washington, DC. The Committee met, pursuant to notice, at 10:03 a.m., in Room 226, Dirksen Senate Office Building, Hon. Christopher A. Coons, presiding. Present: Senators Coons [presiding], Blumenthal, Hirono, Ossoff, Welch, Graham, Lee, Cruz, Hawley, Kennedy, and Blackburn. Also present: Senators Stabenow, Casey, Schumer, and Carper. [Audio malfunction.] OPENING STATEMENT OF HON. CHRISTOPHER A. COONS, A U.S. SENATOR FROM THE STATE OF DELAWARE Senator Coons [presiding]. This hearing will come to order. Today we will hear from six nominees: Margaret Garnett, nominated to the U.S. District Court for the Southern District of New York; Judge Jennifer Hall, nominated to the U.S. District Court for the District of Delaware; Brandy McMillion, nominated for the U.S. District Court for the Eastern District of Michigan; Judge Karoline Mehalchick, nominated to the U.S. District Court for the Middle District of Pennsylvania; Joseph Laroski, nominated to the U.S. Court of International Trade; and, Lisa Wang, also nominated to the U.S. Court of International Trade. Congratulations to all of the nominees, and their families. There are several Members who will be joining us this morning for introductions. First, I will turn to Ranking Member Graham for any opening remarks he would like to make. OPENING STATEMENT OF HON. LINDSEY O. GRAHAM, A U.S. SENATOR FROM THE STATE OF SOUTH CAROLINA Senator Graham. Thank you very much. And we hope Senator Durbin has a full recovery. So, really not about the hearing, but sort of a notice to the Committee. What's going on in the House with the two IRS whistleblowers? If you've followed that? It's getting to be incredibly unnerving about the accusations they're making about how the Hunter Biden case was handled. Mr. Garland said he had absolutely no influence. Mr. Weiss has said that, you know, he made all the calls. Well, something's not adding up because there's direct contradiction of those scenarios. So, I'll, when Senator Durbin gets back, I think it's very important that we get the Attorney General before this Committee to reconcile what happened. And, one of our nominees today, I think Ms. Garnett, praised Alexander Vindman for his remarkable courage to come forward and kick-start the first impeachment inquiry about President Trump. Well, I hope she feels the same way about whistleblowers in general. So, just remember that statement, and thank you very much. And I'm ready for the hearing to start. Senator Coons. Thank you, Senator Graham. We have at least four currently serving Senators who would like to be here to provide introductions. We will take them as they come. I am grateful to my colleagues from Michigan and Pennsylvania for being here promptly at the beginning of the hearing. So, we will begin with Senator Stabenow, who's here to introduce Ms. McMillion. STATEMENT OF HON. DEBBIE STABENOW, A U.S. SENATOR FROM THE STATE OF MICHIGAN, INTRODUCING BRANDY R. MCMILLION, NOMINEE TO BE UNITED STATES DISTRICT JUDGE FOR THE EASTERN DISTRICT OF MICHIGAN Senator Stabenow. Well, thank you so much, Senator Coons. And, I want to echo what Senator Graham said, about we wish Senator Durbin a full recovery. But, it's nice to see you as Acting Chair, Senator Coons, and Ranking Member Graham. Thanks so much for holding the hearing today. I'm really honored to be here to introduce Brandy McMillion, President Biden's nominee to serve as the U.S. district judge for the Eastern District of Michigan. She's here today with her husband, Brian; her children, Brianna, Bryce, and Braden; and, her aunt, Barbara Anderson. And I know other family and friends that are so excited and supportive of her efforts. So, welcome to everyone. We're so glad to have them all join us. It's fitting that Ms. McMillion is surrounded by her family and friends today because the love and support of her family is why she's sitting here. From the time she was a 6-year-old growing up in Ohio, Ms. McMillion wanted to be a lawyer. It was her dream and she never wavered from it. Her mom knew just how much her little girl wanted to reach that goal. So, she did one of the most difficult and selfless things a mom can do. She sent her daughter off for a better future. And, from age 12 on, Ms. McMillion was raised by her aunt, Barbara, in Michigan, and so glad she's here today. And she is incredibly grateful to these two women for helping her achieve her dreams. Ms. McMillion earned engineering degrees at the University of Michigan. And then, she earned her law degree from George Washington University Law School, and practiced law in Chicago. But, she didn't stay away from her adopted State for very long, and we're so glad. Since 2015, she has served as an Assistant U.S. Attorney in the U.S. Attorney's Office for the Eastern District of Michigan. This last year, she became Chief of the Office's General Crimes Unit, where she prosecutes offenses including bank robberies, gun crimes, and Federal crimes against children. The American Bar Association Standing Committee on the Federal Judiciary unanimously rated Ms. McMillion as ``well qualified.'' When she's not at work, she spends a lot of her time behind the wheel driving her kids to all their sporting events and other activities. We all know about that as parents. ``Mom's CEO,'' she likes to say. She also is active in her community. She's a very involved member of Delta Sigma Theta Sorority. She also mentors moms through the organization, Warrior Women Against Poverty, which aims to: ``Change lives one woman at a time.'' Ms. McMillion knows, better than anyone, how the right support at the right time can change a woman's life. She is an outstanding nominee. And Senator Peters joins me in wholeheartedly supporting her nomination. Thank you so much. I would urge the Committee to vote yes on her nomination. Thank you. Senator Coons. Thank you, Senator Stabenow. We now have Senator Casey to introduce Judge Mehalchick. STATEMENT OF HON. ROBERT P. CASEY, JR., A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA, INTRODUCING HON. KAROLINE MEHALCHICK, NOMINEE TO BE UNITED STATES DISTRICT JUDGE FOR THE MIDDLE DISTRICT OF PENNSYL- VANIA Senator Casey. Thank you, Senator Coons, and for serving as Acting Chair, today. And, I want to thank Ranking Member Graham, as well, for the opportunity to speak before the Committee. I'm proud to have the privilege to introduce Judge Karoline Mehalchick, who's the nominee to serve as the United States district court judge for the Middle District of Pennsylvania. First, I want to thank her family. Both of her children are here, John and Anna. Her father, George, is here as well. They've traveled here from Northeastern Pennsylvania, but the same part of the State that I'm from, to be here today. And, we're grateful for that, and we're grateful for their support of her in her efforts to serve the people of the Middle District of Pennsylvania. I also want to thank my Pennsylvania colleague, Senator Fetterman, for his support and his partnership on nominations like this, and for his support of Judge Mehalchick. Judge Mehalchick graduated from the Schreyer Honors College at Penn State University before going on to Louisiana to attend law school at Tulane University Law School. Fortunately for the people of Northeastern Pennsylvania, Judge Mehalchick returned home after graduation to serve as a law clerk for Judge Trish Corbett on the Lackawanna County Court of Common Pleas. From there, she worked as an associate and partner at the law firm of Oliver, Price & Rhodes in the Middle District before becoming a United States magistrate judge for the United States District Court for the Middle District of Pennsylvania. That was in July of 2013. She was appointed as chief United States magistrate judge in January of 2021. That court, as the Members of the Committee knows, deals with a whole range of issues that a district court judge would deal with: criminal matters, issuing search warrants, arrest warrants, accepting criminal complaints, adjudicating civil cases, and so much else. Her work in the Middle District has garnered accolades and recognition not only across Pennsylvania, but indeed the Nation. In July of 2021, she was appointed by Supreme Court Chief Justice John Roberts to a 3-year term on the Judicial Conference Committee on Codes of Conduct. Among the many awards and honors she has received in Pennsylvania, she was recognized as a trailblazer by the Pennsylvania Bar Association Commission on Women in the Profession, in 2020. Her reputation and commitment to the Middle District are further highlighted by numerous letters of support she's received from across the community. The former chief judge of the Middle District, Judge John Jones, who is now the president of Dickinson College, wrote, and I quote, ``The greatest appellation I can award to a fellow jurist is that she is a judge's judge. This fits Judge Mehalchick perfectly,'' unquote. Specifically, Judge Jones spoke of Judge Mehalchick's, quote, ``exemplary character,'' unquote, her hard work, impressive temperament, and, quote, ``brilliant writing, and dedication to the rule of law.'' Ten of Judge Mehalchick's former law clerks wrote of her strong mentorship, and how the judge would foster, quote, ``open discourse in chambers, welcoming our interpretation of the law even when it differs from hers,'' unquote. This is a sign of an excellent judge, one who's committed to hearing all sides of an argument to ensure that her rulings are consistent with the rule of law. Her nomination also received support beyond the legal community. For example, the president of the Greater Scranton Chamber of Commerce, Bob Durkin, wrote, quote, ``the first-rate judiciary of the Middle District''--speaking of the court itself, and then highlighted how Judge Mehalchick, quote, ``has been a critical player in this institution,'' unquote, speaking of the court. And that her confirmation will further strengthen, and bring honor to, that bench. Judge Mehalchick has dedicated her career to the people of the Middle District of Pennsylvania from her legal practice and judicial service, to her community work with organizations like St. Joseph's Center, and serving seniors, just to mention a few. Her experience, her temperament, her intellect, her integrity, and her commitment to equal justice under the law prepares her well to be an outstanding United States district court judge. Thank you for giving me the opportunity to provide the remarks on her behalf. Senator Coons. Thank you, Senator Casey and Senator Stabenow. We understand how busy you both are. Thank you for offering those introductions. You may leave at a time of your choosing. My understanding is that Senator Schumer and Senator Carper are on their way. Before they arrive, I will take the opportunity to introduce two of our nominees to the Court of International Trade. Joseph Laroski, nominated to the Court of International Trade, received his undergraduate degree from Georgetown, his J.D. from Fordham, his LL.M. from Georgetown. After clerking for the Court of International Trade, he began his legal career in private practice specializing in international trade. He served for 5 years in the Federal Government working in the Office of the U.S. Trade Representative, U.S. International Trade Commission, and the International Trade Administration. He represented our Government in dispute settlements under free trade agreements, advised Department of Commerce officials on trade matters, and oversaw negotiations on international trade agreements. Over the course of his career, Mr. Laroski has handled matters before the International Trade Commission, Court of International Trade, and the WTO. I look forward to hearing more about Mr. Laroski's breadth of experience. Congratulations to you and your family. I'll also briefly introduce Assistant Secretary of Commerce, Lisa Wang, also nominated to the Court of International Trade. Ms. Wang is a graduate of Cornell University, and Georgetown Law. After law school, Ms. Wang entered into private practice here in DC as a trade associate. She then spent 3 years as a senior import administration officer at the U.S. Embassy in Beijing, before joining the Office of the U.S. Trade Representative as assistant general counsel. Ms. Wang served in the Commerce Department's Office of the Chief Counsel for Trade Enforcement before completing another stint in private practice. President Biden nominated Ms. Wang to serve as Assistant Secretary of Commerce for Enforcement and Compliance in 2021, and the full Senate confirmed her to that position by voice vote. Ms. Wang has extensive experience in international trade, has dedicated her career to ensuring a level playing field for American industry. And, I welcome her and her family, and look forward to your testimony. We will now turn to Senator Schumer, who is here to introduce Ms. Garnett. Senator Schumer. STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE STATE OF NEW YORK, INTRODUCING MARGARET M. GARNETT, NOMINEE TO BE UNITED STATES DISTRICT JUDGE FOR THE SOUTHERN DISTRICT OF NEW YORK Senator Schumer. Thank you, Mr. Chairman, Mr. Ranking Member, and the entire Committee. It's a pleasure always to come back to the Senate Judiciary Committee where I spent 18 happy years. Tip O'Neill begged me to go on the Judiciary Committee because in those days, no one wanted to go on. So, I got two good Committees, Banking and Judiciary, back in 1981. Anyway, I come before you today with great enthusiasm because it's my honor to introduce an outstanding public servant this morning, Margaret Garnett. A proud resident of Brooklyn, a brilliant legal thinker, and someone whose entire life story has been defined, quite literally, by public service. [Audio malfunction.] Senator Schumer. I was proud to recommend Margaret to President Biden to serve as a district judge for the Southern District in New York, and I'm confident, by the end of this hearing, you will understand why. But first, a couple of guests: Margaret's wonderful family. I understand that her husband, Seth Coppens, is here today. Where are you, Seth? There you are. [Laughter.] Senator Schumer. And, I am told Margaret's parents, Frank and Suzanne, as well as her siblings, are watching online. Hi, Frank and Suzanne [waves to camera], I'm sure you're very proud. [Video malfunction.] Senator Schumer. And, while her 11-year-old twins can't make it today, they have a good excuse. They're off at camp. Probably having a much better time than sitting here at the hearing, so--if you're an 11-year-old, that is. For us, who knows? Now, the first thing to know about Margaret Garnett is that her family is deeply rooted in public service: Not only were her father and stepfather career army officers who retired with the rank of colonel; not only was her grandfather a career military officer for the Army and the Air Force; but, even her great-grandfather answered the call to our country, serving the military, and presiding as a judge, at the Nuremberg Tribunal at the Mauthausen Concentration Camp after World War II. In fact, eight consecutive generations of Margaret's family have been West Point graduates. I think that deserves a round of applause. [Applause.] Senator Schumer. And, by the way, to all West Point graduates, I was up there with Senator Gillibrand last week. They had terrible damage from the storm, and we're working very quickly to repair those beautiful buildings in that vital campus. Now, in lockstep with the family tradition, Margaret's devoted her legal career to strengthening our Nation, preserving our democracy, and ensuring all Americans have access to equal justice. A graduate of Notre Dame, Yale, Columbia Law School, Margaret had a brief stint in private practice before clerking for the Honorable Gerard Lynch--and one of the nominees I've made and put on the bench, and I'm most proud of, for the Southern District of New York. And that's the very same court now she's nominated at. She had more than a decade of experience as a litigator in the U.S. Attorney's Office for the Southern District, one of the great U.S. Attorney's Offices in the country, where she prosecuted cases ranging from murder, to robbery, to financial fraud, and sex crimes--15 times she tried a case all the way to a jury verdict while at the U.S. Attorney's Office, including U.S. v. John Larson, at the time, the largest tax fraud case in U.S. history. At the Office of Attorney General, she oversaw a team of 150 prosecutors, 130 investigators that covered a wide range of criminal matters. And, she was a steady force at the New York City Department of Investigations, appointed by the mayor, to lead the organization during the difficult times of the pandemic. So, she's had excellent work on the prosecutorial side of the law, but she's also a staunch defender of the rights of the accused. In 2020, she was instrumental in exonerating five individuals wrongly convicted of murder. She once said that, quote, ``Our job is to do justice, and that's a much broader task and quest than racking up convictions.'' [Video malfunction.] Senator Schumer. Mr. Chairman, I believe that this kind of perspective, the ability to look at the bigger picture, the ability to see all sides of a case without pre-judgment, is essential for judges on the Federal bench. That's why our courts need more people like Margaret Garnett. Someone described by her colleagues not just as brilliant, but wise. Not just determined, but kind. Not just an outstanding lawyer, but a true friend, and defender of our system of justice. So, again, I say, Margaret Garnett would be an outstanding addition to the Southern District, and it's why I'm so glad--so glad to support her nomination. And, Mr. Chairman, just to let your august Committee know, we will continue focusing on confirming even more outstanding judicial nominees on the floor as we move forward. Under this administration, the Senate has now confirmed 140 judges, including 103 district judges, many with bipartisan support. Many who have toppled longstanding barriers to the halls of justice. We've advanced more women nominees, 94 in total, more nominees of color, more nominees from unique backgrounds, than we've seen, in such a short period of time, just 2\1/2\ years. We're really proud of this record, and I'm grateful for all the Members, on both sides of the aisle, who have made it possible. We'll continue confirming outstanding judicial nominees, like Margaret, in the months and years to come. I thank the Committee for its courtesy. Senator Coons. Thank you, Senator Schumer. Thank you for making time in your busy schedule to speak on behalf of a talented and qualified New York nominee. I now turn to my senior Senator from my home State of Delaware, Senator Carper, to introduce Judge Hall. STATEMENT OF HON. THOMAS R. CARPER, A U.S. SENATOR FROM THE STATE OF DELAWARE, INTRODUCING HON. JEN- NIFER L. HALL, NOMINEE TO BE UNITED STATES DISTRICT JUDGE FOR THE DISTRICT OF DELAWARE Senator Carper. Thank you, Mr. Chairman. I had expected to come in, coming in on a train today, to see a different Chairman up here. And I understand Dick Durbin's tested positive for COVID. And I don't know if he's watching this, but if he is, just know that we're thinking of him, and wishing him a speedy--a speedy recovery. But, Mr. Chairman, and to our Ranking Member Graham, good morning, to both of you, to Members of the Committee. It's an honor to be here with you, once again, for the Senate Judiciary Committee to introduce an exceptional judicial nominee, Magistrate Judge Jennifer Hall, to serve as the next U.S. district court judge for Delaware. I also want to acknowledge my friend and wingman from Delaware. Senator Coons shares my belief that Magistrate Judge Hall is well qualified, well qualified to serve in this important role. The collaborative process that Senator Coons, and I, have used for putting forward U.S. district court nominees to the President is simple, and it is straightforward. The collaborative process that we use actually reminds me of what we used to do when I was governor. And we had a judicial nominating committee. They recommended great judges, and I nominated them to the State legislature. And, they were literally all confirmed, if you could believe that, over 8 years. We rely, today, on a judicial nominating commission, and charge them with helping us identify the most qualified individuals, regardless of political party, to recommend to the President. We believe it serves Delaware well. We believe it serves our Nation well, and has yielded yet another extraordinary nominee. So, colleagues, let me share just a little bit more about Jennifer, with you this morning. I kid that Jennifer, even this morning, about being waitlisted at the Ohio State University-- one of my alma maters. But, all kidding aside, Jenn grew up in Minnesota, is a proud graduate of the University of Minnesota. Home of the Golden Gophers. She earned her bachelor's degree in biochemistry, but then decided that one degree wasn't enough. So, Jenn made her way to Yale, where she would meet her husband, Dave, and earn not one, but two more degrees: a master's in molecular physics and biochemistry, as well as a Ph.D. in the same discipline. But, apparently three degrees weren't enough. So, Jenn applied to, and was accepted into, the University of Delaware-- no, not the University of Delaware Law School, but University of Pennsylvania Law School, where she graduated magna cum laude, and immediately began a successful legal career. In the years that followed, she had the distinction clerking for two Federal judges appointed by former President George W. Bush: Judge Jordan and Judge Prost--who are, I believe, with us here today, and delighted to welcome them. Jenn went on to work at the Wilmington, Delaware, law firm of Fish & Richardson, where she focused on patent law and other complex business cases. But, after 3 years in private practice, she felt called to serve the people of Delaware, and of America. She spent the next 8 years at the U.S. Attorney's Office in Delaware, where she served under U.S. Attorneys appointed by both Republican and Democratic Presidents. Then in 2019, Jenn was selected to serve as a magistrate judge on the U.S. District Court for the State of Delaware, the same court to which she's now been nominated to serve as a Federal judge. The last 4 years have given her the best preparation, and on-the-job training, that someone could ask for. Magistrate Judge Hall has impressed her colleagues on the bench, both with her intellect and her work ethic, and she has a deep perspective knowledge of the law. Her background as a scientist, a legal scholar, and a magistrate judge have prepared her for this new role. And, I'm certain she'll be ready to hit the ground running on day one, especially in the district court as busy as Delaware's is. Jenn is joined here today by her husband of 21 years, Dave, and by her proud parents. And they are the proud parents of a son and a daughter. I know they're not--I don't think either of them are here today, they're a little bit younger. But, I'm sure they are at school somewhere cheering their mom on. Her parents, Thomas and Mary Larson, are here, though, and we welcome them. We want to thank you, especially the mom, for bringing your daughter into the world. And, with the help of her husband, in helping her raise her, and prepare her for this opportunity in this service. I also want to recognize Judge Jordan and Judge Ambro from the Third Circuit Court of Appeals, who are with us today, in support of Jenn's nomination, and Judge Prost from the Federal Circuit Court of Appeals. I'm proud to join the Chairman of today's hearing, Senator Coons, in giving Magistrate Jennifer Hall my very strongest possible endorsement. I thank you, Mr. Chairman, Ranking Member Graham, for the opportunity to introduce her to the Members of this Committee, today, and wish her well. Thank you so much. Senator Coons. Great. Thank you, Senator Carper. Thank you for that fulsome introduction of Magistrate Judge Jennifer Hall. Rather than repeat an introduction that is substantially identical to what you just said, I'll just make a few additional comments, if I might. And, please, I know how busy you are. If you choose to stay for my brief remarks, you may, but, I understand most of us have several hearings going on at the same time. Thank you for joining us, Senator Carper. Judge Hall, if confirmed, will be joining a critically important court in the District of Delaware that handles a remarkable volume of complex patent cases, and significant commercial litigation. It has one of the busiest dockets in the country. One district judge has just described it as, ``not drinking from a fire hose, but standing under a waterfall,'' and it takes an extraordinary person to serve in that court. Judge Hall is an ideal candidate for this seat because of her unique blend of skills, and experience, and her intimate familiarity with our district. You've already heard about her education, her clerkships, her background. I'll emphasize that Judge Hall worked at Fish & Richardson, where she litigated intellectual property, and other complex commercial cases. I think her doctorate in molecular biophysics and molecular biochemistry is expertise that will be exceptionally helpful, and relevant, in deciding complex intellectual property cases. I want to emphasize that the American Bar Association unanimously rated her as ``well qualified.'' And, that, on top of her public service, and personal and professional accomplishments, she is a mother, daughter, and wife. I welcome your family. I also must acknowledge the esteemed guests in the audience: Judges Ambro and Jordan of the Third Circuit, Vice Chancellor Zurn, Judge Hall's current clerks, and, I believe, and Judge Prost of the Federal Circuit. You have been very well prepared by education, by clerkship, by service. You are balanced and grounded. Your exceptional qualifications, and strong character, and even temperament, will make you an asset to the District of Delaware, and I urge my colleagues to support your nomination. With that, if I might, with the assistance of the clerks, we're going to change the names in front of us. If all six of the nominees would please come forward. I will swear you in, and we will begin with the opening statements of all six of the nominees. [Pause.] Senator Coons. Please raise your right hand and repeat after me. [Witnesses are sworn in.] Senator Coons. Thank you. All witnesses having been sworn, Ms. Garnett, once you've settled in. Welcome to all six of you, to your families. And, again, my thanks to my colleagues who were able to join us to introduce you to this Committee today. Ms. Garnett, your opening statement, please. STATEMENT OF MARGARET M. GARNETT, NOMINEE TO SERVE AS UNITED STATES DISTRICT JUDGE FOR THE SOUTHERN DISTRICT OF NEW YORK Ms. Garnett. Good morning, Chair Coons, Ranking Member Graham, and Members of the Committee. And, thank you, to Chair Durbin, in his absence, for scheduling this hearing today. I'd like to begin by thanking Senator Schumer for his kind words of introduction, and for trusting me with this opportunity when he recommended me to the President. I'm grateful for Senator Gillibrand's support, as well. I also want to thank President Biden for the tremendous honor of this nomination. I want to thank all of my family who are watching this hearing around the country, and who have been steadfast in their support. I've been so fortunate in my professional life to have many wonderful mentors and colleagues who have made me the lawyer I am today, and have encouraged, and supported, me throughout this process. I can't possibly name them all, but several of them are here today. All of them began as colleagues at the U.S. Attorney's Office, and have become treasured friends: Jeffrey Brown, Jenna Dabbs, Dan Gitner, Margaret Graham, Parvin Moyne, and Rebecca Ricigliano. I'm blessed to have my husband, Seth Coppens, here with me, who is my partner and companion in all things. In the lottery of marriage, I truly am the luckiest. To my son and my daughter, who are at camp today, but will watch this later--I hope--I want to say that being your mother is the most important job I will ever have. Helping you two grow up into the people you are meant to be, pushes me to be the best version of myself, and to try to bring that best self to everything else I do in life. I was born in the Southern District of New York, in West Point Army Hospital. My father was teaching there, at the time, after having, himself, been the sixth consecutive generation of our family to graduate from West Point. Both of my parents grew up as military kids, too, and so, I learned early from my parents, my grandparents, and my great-grandparents, the values of duty, service, and love of country. My father and stepfather's army career took my family all over the country, and the world, but I returned to the Southern District of New York as a young adult. And, I have built both my own family and my legal career as a proud resident of New York City. It has been my great privilege to spend most of my career as a lawyer in service to the people of New York City, New York State, and the United States, and I would be incredibly honored to continue that service as a United States district judge for the Southern District of New York if I'm lucky enough to be confirmed by this Senate. Today, especially, I feel profoundly grateful for my family's long legacy of service to this country, which has formed the bedrock of my life. I hope to earn the support of this Committee, and I'm happy to be here, today, to answer your questions. Senator Coons. Thank you very much, Ms. Garnett. Judge Hall, your opening statement. STATEMENT OF HON. JENNIFER L. HALL, NOMINEE TO SERVE AS UNITED STATES DISTRICT JUDGE FOR THE DISTRICT OF DELAWARE Judge Hall. I would like to thank Chair Durbin, and Ranking Member Graham, for scheduling this hearing. And thank you, Senator Coons, for presiding over the hearing today. Thank you to all the Members of the Committee for the opportunity to appear before you, today, as you consider my nomination. I'm so grateful to President Biden for the incredible honor of this nomination. I would like to thank our Delaware Senators, Senator Carper and Senator Coons, for their generous introductions this morning, and for their support of my nomination. Some of my family are here with me today. My husband, Dave, is here. We met 26 years ago, and since that time, he has been my best friend and my biggest supporter. He supported me, and my decisions to go to law school, and to devote my career to public service. I thank him for his love and encouragement. Dave and I have two incredible children. They're very busy kids, and they're back home enjoying their summer activities this week. My son is a talented tennis player and computer coder. And, my family just returned last week from my daughter's national dance competition, where her team and solo routines had a successful end to their competition season. Also here to support me are my parents, Thomas and Mary Larson, of Chincoteague Island, Virginia. I'd also like to recognize two people who are not physically here today, but watching online, my parents-in-law, Don and Dana Hall, of Smyrna, Georgia. Three of my current, and former, law clerks are here with me today: Gregory Gramling, Ellen Watlington, and Sara Metzler. These talented lawyers, along with my other former clerks, and my courtroom deputy, Cailah Garfinkel, make up my chambers family. I have been so privileged to work with them to keep the wheels of justice turning during the 4 years I have served as a Federal magistrate judge. Also here today supporting me is my dear friend, Vice Chancellor Morgan Zurn, of the Delaware Court of Chancery, who I've known since we met the first year of law school. I had the incredible good fortune to begin my legal career clerking for Judge Sharon Prost of the United States Court of Appeals for the Federal Circuit, and Judge Kent Jordan of the Third Circuit. There are no better role models for a young lawyer than Judge Jordan and Judge Prost. Their commitment to public service and the rule of law is inspiring, and I've carried the lessons I learned from them with me throughout my career and onto the bench. Both of them are here today, as is their colleague on the Third Circuit, Judge Thomas Ambro. I appreciate their support. I would also like to thank my colleagues from the practice of law, and on the bench. It has been the honor of my life to serve alongside the judges in the District of Delaware, and I'm absolutely thrilled about the possibility of continuing to serve with them in a new role, if I'm so fortunate as to be confirmed as a United States district judge. Members of the Committee, I truly appreciate your consideration of my nomination, and I look forward to answering your questions. Senator Coons. Thank you, Judge Hall. Ms. McMillion. STATEMENT OF BRANDY R. MCMILLION, NOMINEE TO SERVE AS UNITED STATES DISTRICT JUDGE FOR THE EASTERN DISTRICT OF MICHIGAN Ms. McMillion. Good morning. Thank you, to Chair Durbin and Ranking Member Graham, for holding this hearing today, and to Senator Coons for presiding, and to all the Senators for considering my nomination. I would also like to thank my home State Senators, Debbie Stabenow and Gary Peters, for their confidence in me, and to Senator Stabenow for the warm introduction provided this morning. I would like to thank President Biden for nominating me for the position of a lifetime. I am honored, extremely humbled, and grateful for the opportunity to serve the citizens of the Eastern District of Michigan. There are so many people to thank, near and far, that have gotten me to this point. I would like to thank my supporters that are watching remotely: all of my family and friends, my Trinity Church family, my sorors, and Intrigue, the Warrior Women, my U.S. Attorney's Office family back in Michigan, all of my colleagues and mentors, past and present. I have special thanks to the people who did join me here, today. First, to my cousin, Lynn Bradley, for traveling from South Carolina. I knew this was something you would not miss. And, to my law school study partners, Jewel Taylor and Arika Pierce Williams: What a long way we've come since the student lounge at 20th and 8th Street. There are two women in my life that I would not be who I am without their undying love and support. First to my mother, Cynthia Anderson, who could not be here today. Thank you for everything and all of your sacrifices. Thank you for sending your 12-year-old little girl away to live with your sister so that I could have the best opportunity at a brighter future. And, thank you to my aunt, Barbara Anderson, who is here today, for everything that she instilled in me. She taught me the importance of education, humility, strong work ethic, and family. But, most importantly, she taught me selflessness, service, and giving back. She instilled in me that a legacy of service is greater than anything I could ever earn. There's no doubt that without her, I would not be sitting before you, today. And to the four most important people in my life that sit here behind me. My husband, Brian McMillion: Without you, there is no me. Thank you for all your support, for being the best friend that I could have ever asked for, for being my life partner, and believing in and supporting me, every step of this journey. Who would've pictured us here when we met as 17-year- old kids at the University of Michigan? And to my three little heartbeats--my daughter and my two sons--being your mother is by far my greatest accomplishment. You each inspire me to be better, every day, and I love you beyond words. I sit here today praying that if you don't take anything away from this experience, you know that if you dream it, you can be it. I would be remiss if I didn't acknowledge my three guardian angels who are not here with me in the physical form, but who I carry with me in spirit daily. My brother, John Murphy, who was my first friend and fiercest protector. My grandparents, Robert and Bessie Anderson, who loved me unconditionally, and would give me the world, and are, in large part, the reason why I was able to attend law school. I know that they are looking down on this moment. And, as I sit here, I am living my grandparents' wildest dreams. Senators, I thank you for the opportunity to appear before you today, and for your considering my nomination, and I look forward to your questions. Thank you. Senator Welch [presiding]. Thank you. Ms. Mehalchick. Did I say that right? Judge Mehalchick. Yes, Senator. It's Mehalchick, yes. Senator Welch. Mehalchick. Thank you. Judge Mehalchick. Thank you. STATEMENT OF HON. KAROLINE MEHALCHICK, NOMINEE TO SERVE AS UNITED STATES DISTRICT JUDGE FOR THE MID- DLE DISTRICT OF PENNSYLVANIA Judge Mehalchick. Thank you, Chair Durbin, Ranking Member Graham, Senator Welch, Members of this Committee. Thank you for today's hearing, and taking your time this morning to hear from us. I am so honored and humbled to be here today, and to be considered for an appointment as a judge on the District Court for the Middle District of Pennsylvania. I'd like to begin by thanking President Biden for the great honor of this nomination. Thank you to Senator Casey and Senator Fetterman, for their support. And, thank you, especially, to Senator Casey for his kind words this morning in his introduction, and for his unwavering support through this process. I am tremendously grateful for the support and love of my parents. My mother, Rita, is watching from her home in Vermont, and for my father, George Mehalchick, who's here with me today on his birthday. My father was my first mentor. A role model of hard work, patience, and perseverance. My parents instilled in me the value and importance of hard work, of service to the public, and of giving back to my community. And those are values that I hold close, every day, in all of my work. I'm also joined by my children, here today. My son, John, who is 16, and my daughter, Anna, who is 14. The two of them are the lights of my life, and they inspire me, every day, to be the best example I can be for them. You both make me so proud every day in your own accomplishments, as you grow into amazing young adults. Thank you to the rest of my family that could not be here today, but, I know are watching, and supporting me, from home, including my sister, Annie, in San Francisco. To the members of my Scranton, my Lackawanna County, Pennsylvania, and Federal bar communities, who have supported me, both in my career and in this process, I must thank you. A special thank you to Judge Trish Corbett, the first female judge in Lackawanna County, and my first professional mentor. Thank you, Judge Corbett, for giving me the opportunity to clerk for you all those years ago, and for being my first model of a fair, open-minded, patient, and diligent judge. And thank you to the members of my personal community. My village. Without your support, I would not be here today, and you're all truly friends who are family. So, Corey, Cindy, Judy, Julie, and Brian. Thank you. Thank you for everything. Ten years ago, I had the great honor of being appointed to serve as a magistrate judge in the Middle District of Pennsylvania. And that's been a privilege that I never even dreamed of: to be able to serve the community, in which I grew up, for the past decade. I'm so grateful for the support of that court family, and especially my courtroom deputy, and my law clerks, and my district and magistrate judge colleagues. I welcome the opportunity to continue to serve those communities, and my Middle District Court family, if I am so fortunate as to be confirmed as a district judge for that same court. Senators, it is an honor beyond my wildest dreams, and a great privilege to be here today before you. Thank you for your consideration of my nomination. I look forward to your questions. Senator Welch. Thank you very much. Mr. Laroski. STATEMENT OF JOSEPH A. LAROSKI, JR., NOMINEE TO SERVE AS A JUDGE FOR THE UNITED STATES COURT OF INTER- NATIONAL TRADE Mr. Laroski. Thank you. Thank you, Chair Durbin, Ranking Member Graham for scheduling this hearing, Senator Welch for presiding today, Senator Coons for his introduction, and Members of this Committee, here today. I would first like to thank President Biden for nominating me. There has been no greater honor for me, in my career as a lawyer thus far, than to stand up and present myself as for the United States. It is with great pride and humility that I come to this Committee today seeking to, again, serve my country and its laws as a judge on the Court of International Trade. Perhaps my only greater points of pride sit behind me, and I'd like to introduce my family. First, my wife, Kathleen Kohl: my partner, my best friend, my playmate, my mentor, my colleague. A woman of great vision and intellect. Together, we're on a life journey, and mission, founded on unconditional love and hard work, in the service of God, our country, and our family. None of this would be possible without her. Central to our mission are the three beautiful, strong, smart, kind children sitting with Kathleen. They have shown us, each in their own unique way, what is possible when we stay true to our passions, and summon our grit. Watching their growth as individuals reminds and encourages me to use my gifts fully, and to share them freely. I would also like to acknowledge my parents, who are not here. My mother, Judy, who modeled for me a commitment to our country through 38 years of civilian service at Fort Monmouth, New Jersey. And, my father, Joe, who passed in 2010. After finishing an overnight shift at the plant, he would always somehow manage to make it to cheer on my races in the afternoon. He, and his co-workers at Plant F, lent a human face for me to an area of law that focuses on commodities, rather than the workers and farmers that produce them. Finally, I want to thank my colleagues in the International Trade Bar, including Chris Cloutier who's here, as well as all who've guided my education and my development as a lawyer. Thank you, again, for considering my nomination, and I look forward to answering your questions. Senator Welch. Thank you very much. Ms. Wang. STATEMENT OF LISA W. WANG, NOMINEE TO SERVE AS A JUDGE FOR THE UNITED STATES COURT OF INTERNA- TIONAL TRADE Ms. Wang. Thank you, Senator Welch, Ranking Member Graham, and Members of the Committee, for convening this hearing, and for considering my nomination as a judge of the U.S. Court of International Trade. I am humbled and honored to be here today, and I am thankful to the Biden-Harris administration for my nomination. I also am grateful for Senator Coon's introduction and kind words. I also hope for Senator Durbin's speedy recovery. I would like to begin by thanking my parents. Two immigrants who came to the United States with little more than their dreams for a better future for their only child. My success is a direct result of their hard work and determination, and I will remain forever thankful for their support and guidance. I'd also like to thank my husband, Tim, and our two daughters, for their encouragement and unending optimism. For all the rain in life, they are the rainbow at the end of the storm. Finally, I want to express my appreciation for my current colleagues at the U.S. Department of Commerce who work, day in and day out, to ensure the success of U.S. businesses and U.S. workers. It remains the honor of a lifetime to work alongside them each day. Once again, Senators, thank you. Senator Welch. Thank you very much. The Chair will recognize himself for 5 minutes of questions, but, I want to just start by saying it's pretty inspiring listening to each of you. It's extraordinary accomplishments and careers you've had. And, when I listen to you speak about the people who are so important to your lives and helped you, I think we've got some future jurists in the mix. But, thank you all very much. I'll start--Ms. Garnett, tell us, just in your own words, how you see your experience helping you be effective in the new position to which you've been nominated. Ms. Garnett. Thank you, Senator. I think I feel very fortunate to have, kind of, grown up as a lawyer in the U.S. Attorney's Office for the Southern District of New York where, I think, the culture and ethic is that of doing the right thing in the right way, every day. So, I've learned a lot from that experience about not just winning, you know, while being an advocate for the Government, as is our role as Assistant U.S. Attorneys, also to care about what's in the public interest, what is in the interest of justice. So, I think I will carry that training and culture with me on the bench, as well as the practical experience of spending an awful lot of hours in the courtrooms of the Southern District of New York. Senator Welch. Thank you. And, Mr. Laroski, your activity has been as an advocate in trade. In your new position, you'll not be an advocate. How do you--just talk a little bit about how you're going to make that transition from the role and responsibility you had as an advocate to the neutral role that you would have as a judge. Mr. Laroski. Thank you, Senator. My 25 years of experience primarily as an advocate have been really formative, and will certainly inform my understanding of the laws. I've wrestled with the laws that are subject to the appeals to this court from every perspective: from the domestic producer's perspective, the foreign producer, and U.S. importer's perspective, as well as from the Government agencies that have been charged with administering and enforcing these laws. It's been a breadth of experience that's allowed me to see issues from all sides as an advocate, and anticipate opposing arguments. And, I think, as a judge on the Court of International Trade, if I'm so lucky, it will serve me well in that capacity, as well. I've also had the opportunity to adjudicate certain matters as the Acting Assistant Secretary at Commerce, and in my role as the Deputy Assistant Secretary, which also gave me the opportunity to look at things through. Senator Welch. Thank you. And, Ms. Wang, while you were at the U.S. Embassy in Beijing, you were very active in overseeing U.S. response to all the Chinese allegations of unfair subsidies. And I want to give you an opportunity to explain how your time in that office will help you in your position on this court. Ms. Wang. My time at the U.S. Embassy in Beijing, representing the U.S. Government in our defense of China's countervailing duty cases against the United States, really established the importance of rule of law in our international trading system. And the fairness that is fundamental in trade was formative during my experience at the Embassy. Senator Welch. Okay. Thank you very much. I'm going to ask Ms. Mehalchick. You served as magistrate for 10 years, and chief magistrate recently, and I understand you've argued cases in many, many courts before that, including the Supreme Court. I want you to have an opportunity to express how you'll make the transition from being a magistrate judge to this new position. Judge Mehalchick. Thank you, Senator. As a magistrate judge in the Middle District for the last 10 years, I've had the opportunity to preside over nearly every type of civil case that I would be assigned as a district judge in our court. I have presided over all kinds of initial criminal appearances, and bail, and detention hearings. And the matters which I would be presiding over as a district judge, if I have the honor of being confirmed, that I have not had the opportunity to do as a magistrate judge, are felony criminal trials. I have presided over misdemeanor criminal trials and petty offense trials. And so, I think that that transition, while there would certainly be more complex cases, and like I said, felony criminal trials, my decade of experience as a magistrate judge has prepared me to make that transition very well. Senator Welch. Thank you very much. The Chair recognizes Senator Graham. Senator Graham. Thank you very much. Ms. Garnett, you authored a opinion piece with another individual about whistleblowers, and, I think, in New York Law, compelling people to come forward. Is that correct? Ms. Garnett. That's correct, Senator. Senator Graham. In the first paragraph, you said--this is in 2019, I think, ``Over the past few weeks, the country has been riveted by the news of a whistleblower within the intelligence community who filed a formal complaint alleging wrongdoing by President Trump. In turn, we have watched the whistleblower defamed by the President, his allies, even accused of treason, despite his having meticulously followed the lawful process to report possible criminal conduct. This took remarkable courage. There was no legal obligation to report it. There were serious risks to career reputation, even personal safety for doing so.'' Was that your view of Mr. Vindman? Ms. Garnett. Yes, Senator. Senator Graham. Okay. Ms. Garnett. I stand by what I wrote in that op-ed. Senator Graham. Okay. Are you aware that whistleblowers have come forward from the IRS challenging the impartiality of the Hunter Biden investigation? Ms. Garnett. Yes. I've read about that in the newspaper. Senator Graham. Okay. So, would your kind words extend to them? Ms. Garnett. Yes, I think, Senator, as I've said repeatedly, when I was commissioner of the New York City Department of Investigation, that having lawful channels for government employees to come forward to report what they believe is wrongful, fraudulent, corrupt conduct, is vitally important to honest government. And I would extend that view to any whistleblower. Yes. Senator Graham. Ms. Hall, you worked with Mr. Weiss. Is that correct? Judge Hall. Yes, I did. Senator Graham. What time periods did you work for him? Judge Hall. I was hired in that office by former United States Attorney Oberly in 2011, Mr. Weiss was in the office in a career position at that time, and I left the office in 2019, when I took the job as a United States magistrate judge. Senator Graham. In 2019, 2018, were you aware of the investigation of Hunter Biden by Mr. Weiss? Judge Hall. Sitting here today, I can't remember if I knew that there was an investigation at that time. I've since learned, in the news, that the investigation originated while I was still at the office. But, I had no involvement in that investigation while I was at the office. Senator Graham. Was there any chatter in the office about this investigation at all? Judge Hall. Not that I recall, Senator. Senator Graham. Okay. So, you know nothing about it. Judge Hall. I know nothing about this investigation. Senator Graham. Are you aware of recent reports that on October the 7th, 2022, two whistleblowers claimed to have been in attendance at a meeting with Mr. Weiss, where he indicated that the decision of how to charge, and where to charge, Hunter Biden, was not his. It was other people had made that decision. Judge Hall. I am aware from reading the newspaper that there are whistleblowers that have come forward. Senator Graham. Given what you know about Mr. Weiss, how does that strike you? Judge Hall. I appreciate the question, Senator. The code of conduct for United States Federal judges prohibits me from commenting on any pending case--pending before any court. And so, I don't feel that it'd be appropriate for me to comment on anything regarding a pending case. I can tell you that I have no involvement in that case. Senator Graham. Well, Ms. Garnett, based on your view of whistleblowers, all of us should take these allegations seriously. Do you agree? Ms. Garnett. Yes, Senator. I would just--I would say, in my experience, almost two decades, as a prosecutor and investigator, that my own approach would not--to be, to take the word of any whistleblower, informant, cooperating witness, at face value, and look for corroboration. But, I definitely, as I said in my previous---- Senator Graham. And if you found---- Ms. Garnett [continuing]. Answer. Senator Graham [continuing]. Corroboration, what does that mean to you? Ms. Garnett. I'm sorry, Senator? Senator Graham. If you found corroboration of what they said, what does that mean to you? Ms. Garnett. Well, I think that any investigator or prosecutor would view corroboration as important to assessing the credibility of witnesses. Senator Graham. Ms. Hall, are you aware that one of the whistleblowers actually sent an email about the meeting to other people, in real time, identifying the substance of the allegation on the same day it was made? Judge Hall. I was not aware of that, Senator. Senator Graham. Ms. Garnett, would you consider that corroboration? Ms. Garnett. I don't know the facts of this case, Senator, but I would. In my experience as a prosecutor, contemporaneous statements are important in assessing witness' credibility. Yes. Senator Graham. Thank you. Ms. Mehalchick. Is that right? Judge Mehalchick. Mehalchick---- Senator Graham. Okay. Thank you. Judge Mehalchick [continuing]. Yes, Senator. Senator Graham. So, you were a magistrate judge in the Spanier case. Did I say that--Graham Spanier? Judge Mehalchick. Yes. Senator Graham. He was the former president of Penn State. He was convicted by State court, and you granted a habeas petition. Can you tell us a bit about that? Judge Mehalchick. Yes, Senator. He petitioned the court to--seeking his conviction to be set aside, and a new trial granted, due to a jury instruction that was given by the State court. And that was his request. Senator Graham. And you granted that request? Judge Mehalchick. I, after careful review of the law related to that habeas petition, and the arguments made by the parties, I determined that the jury instruction that was given by the State court was in violation of the petitioner's due process. Yes. Senator Graham. Did the Third Circuit overrule your decision? Judge Mehalchick. Yes, they did. Senator Graham. How many times have you been overruled by higher courts? Judge Mehalchick. In my decade on the bench, Senator, I have issued over 1,500 written opinions, and memorandum decisions, and reports, and recommendations in civil matters, and issued---- Senator Graham. Are all of those reviewed by higher courts? Judge Mehalchick [continuing]. And then, in addition to that, the over a thousand criminal orders and decisions on release and detention. And they are all subject to review by either the district court or the Third---- Senator Graham. Were they reviewed? Judge Mehalchick. They were not all reviewed because the parties didn't always seek review of them. And it---- Senator Graham. So, I've been told that you've been reversed 31 times. Does that sound about right? Judge Mehalchick. That sounds about right. Of those 31, I believe, at least two-thirds of them were only in part. Senator Graham. Yes. So, you were criticized by the court for not understanding the Eleventh Amendment applied to cities---- [Gavel gently tapped.] Senator Graham [continuing]. Oh, yes. I'm sorry. Yes, there are not many of us here. So, I'll just try to wrap it up. The Eleventh Amendment applied to cities, not just States. Do you remember that case? Judge Mehalchick. I don't know specifically which case you're referring to, Senator. Senator Graham. Okay. Do you remember a case where the court criticized you for confusing sovereign immunity and qualified immunity? The Potter County case? Judge Mehalchick. I don't remember that specific case either, Senator. Senator Graham. Okay. Thank you. Senator Welch. Senator Lee. Senator Lee. Thank you very much. Thanks to each of you for being here, and for your willingness to serve. Ms. Mehalchick, I'd like to start with you, if that's all right. I want to talk about Lochner v. New York, for a moment. Was that case correctly decided? And, I'd love to know your reasoning as to why it was, or was not, correctly decided. Judge Mehalchick. Senator, I believe that is still binding caselaw in our---- Senator Lee. It's not. Judge Mehalchick. I'm sorry, Senator. I---- Senator Lee. Lochner v. New York. Judge Mehalchick. Lochner v. New York. Senator Lee. Yes. Judge Mehalchick. No. So, because that is no longer binding caselaw, I would stand by whatever the precedent of the Third Circuit, and the Supreme Court, is. And that is the appropriate standards and law to apply in any cases that come before me. Senator Lee. Yes. That's why I chose this one because it's dead precedent. It's---- Judge Mehalchick. Yes. Senator Lee [continuing]. Not around anymore. Judge Mehalchick. Correct. Senator Lee. If you remember, this is the case where the Supreme Court invalidated some minimum wage, maximum hour laws passed by the State of New York---- Judge Mehalchick. Yes, Senator. Senator Lee [continuing]. Affecting bakery employees. Do you still feel you can't opine on that, even though it's dead? Judge Mehalchick. Senator, I think that it would be inappropriate for me to opine on it, in the sense that what is binding, and appropriate for me to apply, would be the binding precedent of the Third Circuit and the Supreme Court, at this point. Senator Lee. Got you. It's unusual, and that's why I choose that case, on occasion, is because it is dead letter. So, it's disappointing that you won't get into it. I hope you reconsider when I submit questions for the record. Ms. Garnett, let's go to you next, if possible. On July 10th, the U.S. Attorney's Office for the Southern District of New York, which is the Office where you now work as Special Counsel, announced that it was bringing charges against Dr. Gal Luft, who claims that, in 2019, he gave incriminating information about Hunter Biden to the Department of Justice. About this indictment--his indictment, Dr. Luft said, quote, ``I've volunteered to inform the U.S. Government about a potential security breach, and about compromising information about a man vying to be the next President, and I'm now being hunted by the very same people who I informed,'' closed quote. Are those charges against Dr. Luft, are they retribution for his willingness to speak out about Biden family corruption? Ms. Garnett. No, Senator, those were charges--were actually returned in the fall of last year. That indictment was returned in the fall of last year. Mr. Luft was arrested in, I believe, Cyprus, and he was bailed pending extradition, and he fled from his bail. Senator Lee. Would you agree that they could be perceived as retribution for blowing the whistle on Hunter Biden? Ms. Garnett. I suppose someone could make that accusation Senator, but I don't believe it's accurate. Senator Lee. Do you think, at least, the timing of those charges--I mean, wasn't it on July 10th that the U.S. Attorney's Office announced that it was bringing those charges? Ms. Garnett. Actually, Senator, the charges were returned last fall. The indictment in the United States, I believe, was unsealed on July 10th. I had no involvement with that decision. The indictment was unsealed in the United States, at that time, because it was determined, if--as I understand it, that Mr. Luft had fled from his bail in Cyprus---- Senator Lee. Okay. Ms. Garnett [continuing]. And was not likely to be rearrested. Senator Lee. They were returned then. When were the statements made to the Government--the underlying statements? Weren't they made in 2019? Ms. Garnett. I had no involvement with that, Senator, so I don't know the details. Senator Lee. Okay. Given the concerns you've expressed about whistleblowers in the past, aren't you concerned about this whistleblower, and about the appearance, or the perception, that he might have been the victim of retribution here? Ms. Garnett. I understand that some folks have expressed that perception. I can tell you from my experience, in the case last year, that that is not accurate. Senator Lee. Okay. Ms. Wang, I'd like to ask you a couple questions, if that's all right. When you were a student at Cornell, you made a statement to the effect that, quote, ``One of the things I've run into, in America, is that people pay lip service to liberal causes, but still have deeply rooted prejudices.'' Is it fair to say, that this is what you perceive about left, leftist hypocrisy? Or, what is it? Ms. Wang. Senator---- Senator Lee. Or poser leftists? Or is it---- Ms. Wang. Senator, those statements were made during my time at Cornell as an undergraduate regarding anti-Asian bias incidents of hate crimes. And so, it was efforts to get the administration to have an open dialogue, and to acknowledge that there was violence against a particular group of students on campus. Senator Lee. Okay. Would you agree, then, that the consideration of race in college admissions, an issue that's recently been addressed by the Supreme Court of the United States, might be one of the causes that one could refer to, that's, on its face, liberal, and yet, it's deeply rooted in prejudice? Ms. Wang. Senator, my personal views are irrelevant to my current standing before you. Because as a judge, I would be a neutral arbiter, faithfully applying precedent, and the text of the statute. Senator Lee. Okay. I'm out of time. It appears to me that sometimes the candidates are being invoked a little bit excessively. We can talk about things. We can reason with things, without weighing in on how you might rule as a judge. Thank you. Senator Welsh. Thank you, Senator. Senator Coons. Senator Coons. Thank you, Chairman Welsh. It is good to be with you. If I might---- Senator Welsh. There are a few changes around here. [Laughter.] Senator Coons. It's amazing how quickly you have ascended to the Chairmanship, but, given the depth of your experience in the House, and your wisdom, I am in no way surprised. Judge Mehalchick, if I might, many of your experiences have involved sharing your skills to help others build their skills. You've taught graduate students, trained pro se plaintiffs, worked to educate other judges about the code of conduct. I think it's particularly important that you serve on the Judicial Conference Committee on Codes of Conduct. I just wanted to invite you to speak more about what it means to give back through education, and how your experience training others has shaped your experience on the court. Judge Mehalchick. Thank you, Senator. I think that through my work, whether it's presenting ethics education programs to my fellow magistrate judges, or speaking with high school and middle school students as part of scholar exchanges on constitutional issues, it's part of giving back to the community. I think it's important to involve the community in the judiciary, teach them, have an open dialogue with them about what it is that we do, so that our work is as transparent as possible, and it instills more public trust, especially in younger generations as they grow up in this country. Senator Coons. Thank you. Mr. Laroski, Ms. Wang, you are both nominated to the Court of International Trade, which is unique among Federal courts where it's very limited subject matter jurisdiction. You both have significant experience directly related to international trade. Could each of you, Mr. Laroski, then Ms. Wang, just briefly tell us how your career has prepared you for this highly specialized role? Mr. Laroski. Senator, I first started my career in international trade at the court. And there, gained a good grounding, one, in the conduct of the court and how the judges comport themselves, the importance of collegiality, and the flow of the case work. Since leaving the court, I have dug deep into the international trade laws, both customs and the anti- dumping and countervailing duty laws, from the perspective of virtually every party in litigation that would come before me. And, in my negotiations and discussions with foreign nations, presented and promoted the rule of law, and the American way of proceeding through these cases. Senator Coons. Thank you. Ms. Wang. Ms. Wang. Senator, my qualifications for the Court of International Trade is evident in my trade litigation experience. For example, while at the U.S. Trade Representative, I defended the United States' sovereign ability for the concurrent application of anti-dumping and countervailing duties to non-market economy countries like China. In my current role as the Assistant Secretary of Commerce, I am the sole decision-maker for 667 tariff duty orders, and the thousands of derivative proceedings that stem from it. Thank you. Senator Coons. Thank you. Magistrate Hall, the District of Delaware sees some of the most complex commercial and patent cases of any district in the country. Some of them are very difficult, very technical, and most of them involve some aspect of intellectual property. You have a doctorate in molecular physics and biochemistry. How has that scientific background helped you in your service as a magistrate judge when overseeing IP cases? Judge Hall. Thank you so much for the question, Senator. As you mentioned, the vast majority of the time the judges spend in the District of Delaware is spent on complex intellectual property cases. Hopefully, my degree in molecular biophysics and biochemistry gives the parties confidence that the evidence and the arguments they're presenting to the court on IP cases is going to be understood and appropriately examined by the court. As was also mentioned earlier in the hearing, the court is very, very busy. It is like drinking from a fire hose every single day. And so, my background, in teaching myself science, and the scientific background that I already have, enables me to get up to speed very quickly on a case when it comes before the court, so that I can more efficiently do the hard work of the court. Senator Coons. Thank you, Magistrate. Frankly, the District of Delaware has long been one of the busiest in the country. It was ranked the third busiest, by weighted caseload, last year. It is in no small part because of your tremendous work ethic and your experience as a magistrate that will allow you to step right into this role when confirmed--or if confirmed, I should say--that help make me confident that you were the best nominee for this position. Thank you, Mr. Chairman. Senator Welch. Senator Kennedy. Senator Kennedy. Thank you, Mr. Chairman. Congratulations to all of the nominees. Judge Mehalchick, do you remember a case called Yentzer v. Potter County? Judge Mehalchick. I have a recollection that I presided over that case. I don't know if I recall the details of it. Senator Kennedy. Okay. And, you were reversed. Is that right? Judge Mehalchick. I believe that was a case that I issued. I was a magistrate judge in that role and in the referral role on it. And it was reviewed by the district court. Yes. Senator Kennedy. And you were reversed. Right? Judge Mehalchick. I don't recall in that case if I was--if the report and the recommendation was adopted in full, or not adopted---- Senator Kennedy. Well---- Judge Mehalchick [continuing]. In full, but, yes. Senator Kennedy [continuing]. The higher court said, you incorrectly analyzed qualified immunity, and you incorrectly cited the Eleventh Amendment. Do you remember a case called Myers v. Clinton County Correctional Facility? Judge Mehalchick. I recall that case, as well. Senator Kennedy. And you were reversed in that case, too. Weren't you? Judge Mehalchick. I believe I was--it was adopted in part. Yes. Senator Kennedy. Do you remember a case called Dennis v. Sheridan? Judge Mehalchick. Yes. I believe I recall that case, as well. Senator Kennedy. And you were reversed in that case, too? Judge Mehalchick. I believe that R&R was not adopted in full. Correct, yes. Senator Kennedy. Okay. But, you were reversed? Judge Mehalchick. It was not adopted in--yes, by---- Senator Kennedy. Is that---- Judge Mehalchick [continuing]. The district court. Senator Kennedy [continuing]. The same thing as being reversed? Judge Mehalchick. It's a different--the district court declined to adopt the report---- Senator Kennedy. The higher court---- Judge Mehalchick [continuing]. And recommendation. Senator Kennedy [continuing]. Said you were wrong. Judge Mehalchick. The district court disagreed with my report. Yes. Senator Kennedy. Yes. Okay. Do you remember a case called Chinniah v. East Pennsboro? Judge Mehalchick. Yes. The Chinniahs are pro se plaintiffs who have brought a number of cases---- Senator Kennedy. Right, right. Judge Mehalchick [continuing]. So, I'm not sure which one you're referring to, but, yes. Senator Kennedy. I'm just curious. You were reversed in that case, too. Were you not? Judge Mehalchick. In part, yes. Senator Kennedy. Okay. Do you remember a case called Spanier v. Libby? Judge Mehalchick. Yes, I do. Senator Kennedy. You--the president of Pennsylvania State University was convicted of covering up child sex abuse crimes, and you let him go on a habeas corpus petition. And the Third Circuit reversed you. Is that right? Judge Mehalchick. I directed that a new trial should be held with a different jury instruction. And the Third Circuit disagreed and found that he was--he had received the due process he was entitled to. Yes. Senator Kennedy. Well, the Third Circuit said you failed to cite, analyze, or properly apply the relevant caselaw. You were reversed. Right? Judge Mehalchick. The Third Circuit reversed my decision. Yes. Senator Kennedy. Okay. Do you remember a case called Hassel v. Centric Bank? Judge Mehalchick. I vaguely recall that case, yes, Senator. Senator Kennedy. You were reversed. Weren't you? Judge Mehalchick. I believe the district court failed to adopt my--it declined to adopt my recommendation. Yes. Senator Kennedy. Okay. Do you remember a case called Ramsey v. Amtrak? Judge Mehalchick. Yes, I do. Senator Kennedy. And, the higher court reversed in that case, too. Didn't they? Judge Mehalchick. The district court concluded that I was correct in finding that he--that the petitioner did not pay a filing fee. And, where I had recommended that the case be dismissed, he granted the petitioner 30 days to correct that. Senator Kennedy. So, you were reversed, in part? Judge Mehalchick. Yes. Senator Kennedy. Okay. Do you remember a case called McCracken v. Fulton County? Judge Mehalchick. Yes, I do. Senator Kennedy. You were reversed in that case, too. Weren't you? Judge Mehalchick. I believe that was in part. Yes. Senator Kennedy. You remember a case called Byrd v. Brittain? Judge Mehalchick. I do. Senator Kennedy. And were you reversed in that case? Judge Mehalchick. In part, yes. Senator Kennedy. Okay. Do you remember a case called Allen v. Lackawanna County Board of Commissioners? Judge Mehalchick. I believe I recall that case, Senator. I'm---- Senator Kennedy. And you---- Judge Mehalchick [continuing]. Not sure. Senator Kennedy [continuing]. You were reversed in that case, too. Weren't you? Judge Mehalchick. I believe I was reversed in part in that case. Yes. Senator Kennedy. Do you remember a case called Daniels v. Capital One Bank? Judge Mehalchick. Yes. Senator Kennedy. And I believe you were reversed in that case, too? Judge Mehalchick. I believe it was--yes, I believe so. Senator Kennedy. Do you remember a case called Downey v. Pennsylvania Department of Corrections? Judge Mehalchick. Yes, I recall that case. Senator Kennedy. And were you reversed in that case? Judge Mehalchick. Yes, I believe I was. Senator Kennedy. Remember a case called Risjan v. Wetzel? Judge Mehalchick. I vaguely recall that case, yes, sir. Senator Kennedy. And were you reversed by the higher court there, too? Judge Mehalchick. I believe that our report and recommendation was not adopted in full. Senator Kennedy. Okay. I don't have time to finish this list. I mean, it's longer than King Kong's arm here. You've been reversed a lot. In fact, you've been nominated before. Haven't you? Judge Mehalchick. No, I have not, sir. Senator Kennedy. Well, you--your nomination was talked about, and Senator Toomey refused to send in a blue slip for you. Did he not? Judge Mehalchick. I'm not--I'm not sure exactly what happened. I know that this process has been ongoing for 2 years. Senator Kennedy. Yes. But, you know that Senator Toomey refused to even--thought that you were so unqualified that he refused to even allow the Judiciary Committee to consider you. Isn't that correct? Judge Mehalchick. I do not know what Senator Toomey's reasons were, sir. Senator Kennedy. You've never talked to Senator Toomey about it? Judge Mehalchick. I never discussed it with Senator---- Senator Kennedy. And---- Judge Mehalchick [continuing]. Toomey. Senator Kennedy [continuing]. You don't know anything about a blue slip being withheld on you? Judge Mehalchick. I do not know---- Senator Kennedy. You're under oath. Judge Mehalchick. I am under oath, and I know I did not speak with Senator Toomey about his reasons for not---- Senator Kennedy. Was Senator Toomey's concern that you were unqualified? Judge Mehalchick. Again, Senator, I did not speak with Senator Toomey, or his staff, about his reasons for not supporting me. Senator Kennedy. Okay. Thank you, Mr. Chairman. Senator Welch. Thank you, Senator. Senator Hirono. Senator Hirono. Thank you, Mr. Chairman. Welcome, to the panelists. Congratulations on your nominations. I'd like to start with Judge Mehalchick. So, there's been a number of instances where you have been criticized, or reversed. But, as I look at your record, I think you are uniquely qualified to serve on the Federal bench. In fact, the person who's seat you'll be sitting on, the judicial vacancy you'll be sitting on, wrote a letter of recommendation for you, should you be confirmed. And, in fact, out of more than 1,200 cases, only 31 involved any reversal, or a substantial criticism, by a reviewing court. That is a success rate of 97.4 percent. That is a pretty good batting average in anybody's opinion. So, you've had extensive experience. You've been the--you are the chief magistrate judge. As I've said, you've authored over 1,200 memorandums, opinions, reports, and recommendations. You've been on the bench for 10 years. You got a recommendation, as I said, from the judge who you will be replacing. If confirmed, how has your extensive experience as a Federal magistrate judge prepared you to serve on the Federal district court? Judge Mehalchick. Thank you, Senator. In my 10 years as a magistrate judge, I have issued, like you referenced, over 1,200 written opinions, and reports, and recommendations. I've issued over a thousand orders in criminal matters related to detention and release, and I have presided over a number of civil trials to verdict. I presided over criminal misdemeanor trials to verdict, and petty offense trials. I--all of that experience translates directly to the work I would be doing as a district judge in the Middle District of Pennsylvania. And I believe that extensive record prepares me well for the position of district judge in the Middle District of Pennsylvania. Senator Hirono. I agree with you, regarding your experiences and preparation. I would like to go back to two questions that I ask of all nominees, to any of the Committees on which I sit. So, I will ask each of you, and we'll just go down the line very quickly, starting with Ms. Garnett. Since you became a legal adult, have you ever made unwanted requests for sexual favors, or committed any verbal or physical harassment or assault of a sexual nature? Ms. Garnett. No, Senator, I have not. Judge Hall. No, Senator. Ms. McMillion. No, Senator. Judge Mehalchick. No, Senator. Mr. Laroski. No, Senator. Ms. Wang. No, Senator. Senator Hirono. Same question. Have you ever faced discipline, or entered into a settlement, related to this kind of conduct? Ms. Garnett. No, Senator. Judge Hall. No, Senator. Ms. McMillion. No, Senator. Judge Mehalchick. No, Senator. Mr. Laroski. No, Senator. Ms. Wang. No, Senator. Senator Hirono. For Judge Hall, I don't think it's often that we have a nominee who has a Ph.D. in biochemistry. That is highly impressive, I'd say. So, as a magistrate judge, you have organized multiple events to encourage attorneys to participate in pro bono legal services for survivors of domestic violence, dating violence, and sexual abuse. Why is pro bono service important, particularly for this uniquely vulnerable community? Judge Hall. Well, I think as the Supreme Court has recognized, our legal system is very complicated. And having an attorney is often essential to litigate in the Federal court. Senator Hirono. For Ms. McMillion, you also have quite a lot of pro bono hours. Prior to entering public service with the U.S. Attorney's Office, you dedicated over 100 hours a year to pro bono matters while in private practice. And this included civil rights complaints and asylum applications. Why is pro bono service so important to you? Ms. McMillion. Senator, I believe that everyone deserves representation in our legal system. And, for those that are not fortunate enough to be able to afford that representation, I think that it's very important that--for the justice system to work, that we provide representation to all, and that quality representation be presented to people, regardless of background. Senator Hirono. For Ms. Wang, I note that you are an immigrant. And so, you came here at the age of five, and your career was inspired by your father's American dream. How has your personal experience as an immigrant informed your work in international trade? And, if confirmed, how will it inform your work as a judge on the U.S. Court of International Trade? Ms. Wang. Senator, first, thank you for recognizing my father. He passed away a few years ago and is the greatest inspiration of my life. He came to the United States with a dream for fairness, and equal opportunity. And, it's through that belief that I entered international trade, because international trade, at its fundamental core, is about fairness. And, as an Assistant Secretary of Commerce right now, I've traveled across the country talking to U.S. businesses and workers about fairness, and leveling the playing field against unfair trade practices. I think I would carry all of that with me, should I be confirmed to the U.S. Court of International Trade. Thank you. Senator Hirono. Thank you. Mr. Chairman, I think we have a very, very well-qualified panel today. Senator Welch. Thank you, Senator. Senator Blackburn. Senator Blackburn. Thank you, Mr. Chairman. And, congratulations to each of you on your nominations, and thank you for being here today. And I know we're going to have some questions that'll come to you as QFRs. So, we would ask that you address those. Judge Hall, I want to come to you. I think this work with David Weiss is something that you've heard us go back to. Senator Graham asked you about that, and you said you had no information, participated in no way in that investigation. Is that accurate? Judge Hall. That is accurate, Senator. Senator Blackburn. Okay. Let me ask you this. Did you have any knowledge of, or any communication with, the two IRS whistleblowers, Gary Shapley and Joseph Ziegler? Judge Hall. Senator, when I read about that whistleblowing in the news, I had no recollection of ever having met either individual. Senator Blackburn. Okay. Would you like to check your records, and be sure you had no communication with them? And we'll put that in a QFR for you to give you the opportunity to---- Judge Hall. Certainly, Senator. Senator Blackburn [continuing]. Double-check your records. Thank you very much. Judge Mehalchick, if I may come to you. We've had some discussion about the Spanier case, and I want to return to that because we're quite sensitive to this issue in this Committee. The President nominated Michael Delaney for a position. Mr. Delaney ended up withdrawing his nomination, and it all came down to his hardball tactics with a young woman. And this was in a sexual assault case. So, it is, first of all, perplexing that we have another nominee before us who has a questionable ruling in a case, which we have in your ruling, and dealing with the role of Mr. Spanier's conviction of endangering the welfare of a child during his role as president of Penn State. So, this comes across as lack of respect for children and the rule of law. And, Senator Kennedy laid out, very well, how the court came back to you. And the Third Circuit actually said, and wrote--and I'm quoting, again, that, ``you did not examine this case closely.'' And, therefore, talk for about 30 seconds. If you don't examine cases closely, and if you have a record--a high rate of reversals--then, how do we expect you, as you move to the court, to be more careful in your job, and more careful in your decision-making? Judge Mehalchick. Senator, my rate of reversal, in considering the body of my work over the last 10 years, including all civil and criminal decisions, is less than 2 percent. Most of the decisions reference---- Senator Blackburn. Okay. Let me--how--you're not answering my question. All right, let's put it like this: How do we know you're going to be able to fulfill your duties as a judge when we look at this--and the Third Circuit has written that you did not examine this case closely? This was a pretty high-profile case. And they called you down about that, and they reversed you in your decision. So, how do we know you'll do your job? And, how do we know what your method of statutorial interpretation is, with the record that you've had? Judge Mehalchick. Senator, the bulk of my record, over the last 10 years, reflects cases that have been either not appealed, or sought reconsideration of, by the parties before me. And I think that that evidences a trust by the bar, and the public, in my work. The bulk of my work that has been appealed has been affirmed by the district court, and by the Third Circuit. And I think that that exhibits a basis for having faith in my work. When I--when there has been a reversal---- Senator Blackburn. Okay. Let me ask you this. Do you think you were right, or wrong, in the Spanier case? Judge Mehalchick. Senator, the Third Circuit said, that I got---- Senator Blackburn. No, that's not what I'm asking. I said, were you right, or were you wrong? Judge Mehalchick. Senator, I---- Senator Blackburn. What led you to make that decision? Judge Mehalchick. When I approached that case, like I approach any case before me, I carefully read the party's briefs. I had open and engaging argument with---- Senator Blackburn. Do you think---- Judge Mehalchick [continuing]. The party---- Senator Blackburn [continuing]. You were right, or wrong? Judge Mehalchick. I--when I issued that decision, I thought I was doing it correctly. The Third Circuit found that I did it incorrectly---- Senator Blackburn. And, after they---- Judge Mehalchick [continuing]. And I read that decision---- Senator Blackburn [continuing]. Reversed you, did you agree with their reversal? Judge Mehalchick. Yes. I would stand by what---- Senator Blackburn. Okay---- Judge Mehalchick [continuing]. The Third Circuit has done. Senator Blackburn [continuing]. Thank you, Mr. Chairman. Senator Welch. I want to thank our nominees, and families, for being here. And, before we close, I would like to introduce two letters---- [Voice off microphone.] Senator Welch. You beat the--you beat the gavel. Senator Cruz. Senator Cruz. Thank you, Mr. Chairman. Welcome, to each of the nominees. Judge Mehalchick, I want to talk to you about a case you've already discussed, considerably, which is the Spanier v. Libby case. That's a case involving Graham Spanier, the former president of Pennsylvania State University who was investigated, terminated, and subsequently criminally charged for his role in covering up the child sex abuse crimes committed by Jerry Sandusky. The sentencing memo, written by the prosecutors in that case--State case, noted that Spanier had, quote, ``shown a stunning lack of remorse of his victims.'' It further called for him to be punished for, quote, ``choosing to protect his personal reputation, and that of the university, instead of the welfare of children.'' It further highlighted that Spanier, quote, ``was the ultimate decision-maker when it came to reporting Sandusky.'' Your decision in that case was reversed, unanimously, by the Third Circuit. Is that correct? Judge Mehalchick. A three-judge panel of the circuit reversed my decision. Yes. Senator Cruz. Unanimously? Judge Mehalchick. Yes. Senator Cruz. The Third Circuit concluded that, quote, ``Under clearly established Federal law, State courts have considerable latitude to rule on the meaning of statutes.'' Yet, you construed the rule more narrowly, than the State courts, to Spanier's benefit. Jerry Sandusky was an evil man. And, Spanier, the ultimate decision-maker, protected his own reputation at the expense of the children. Why did you deviate in your decision from clearly established Federal law, particularly when it had the effect of protecting such a man? Judge Mehalchick. Senator, the acts of--the crimes of Jerry Sandusky are beyond horrible. They're unspeakable. And, as a member of the community, and as a mother of two children, they are the worst nightmare for most parents. That was not absent from my mind when I was looking at the case before me. The issue before me was whether the petitioner, who I looked at and treated as I would every habeas petitioner that comes in front of me, received due process in State court. I determined that there had been a violation of his due process rights, in the use of the jury instruction that the State court had, and the Third Circuit disagreed with me. Senator Cruz. The Third Circuit did more than that. Did the Third Circuit criticize your opinion for not only admitting irrelevant precedents, but also, for not closely analyzing the caselaw that you did cite? Judge Mehalchick. I can't recall verbatim what the Third Circuit opinion said. There were, as I recall, there were three cases involved in that case, in terms of precedent. And, I relied more heavily on one of them, than the other two. Senator Cruz. Do you recall the names of those three cases? Judge Mehalchick. I know one was the Bouie case. I can't recall the names of the other two. Senator Cruz. Well, here's what the Third Circuit said, quote, ``The district court cited Bouie and Rogers, but did not examine them closely, nor did it mention Metrish.'' Now, I do find it a little bit amazing, you knew in this confirmation hearing you'd get asked about this case. Judge Mehalchick. Yes, Senator. Senator Cruz. I find it actually quite remarkable that for this hearing, you still don't even know the three cases the Third Circuit said were critical to resolving the issue of law. Judge Mehalchick. Senator, I reviewed 10 years of work in preparing for this hearing. I don't recall those three cases specifically. Senator Cruz. So, you didn't have an inkling that you would get questioned, and questioned pretty vigorously, about a decision with egregious consequences that was unanimously reversed by the Court of Appeals? Judge Mehalchick. Did I have an inkling that I would be questioned about the Spanier case? Yes, Senator, I did. Senator Cruz. Let me ask you this. Did then-Pennsylvania attorney general, and now Democrat Governor Josh Shapiro, praise the Third Circuit's reversal of your opinion? Judge Mehalchick. I am--I don't know what his comments were, following the issuance of the opinion. Senator Cruz. Well, I will point out that he submitted a-- he released a press release-- statement, by the Attorney General Josh Shapiro on the U.S. Third Court of Appeals ruling, reinstating the conviction of Graham Spanier. And you can read that. And he was effusive in his praise. There's a long, and unfortunate, pattern in this administration of Joe Biden nominating individuals to serve on the bench who have a repeated pattern of showing excessive leniency to criminals, of releasing violent criminals from jail, of releasing murderers from jail, of releasing rapists from jail, of releasing those who've committed child sexual assault from jail. I don't believe doing so is in the interest of the American people. I think it is contrary to the views of the constituents of just about every one of ours. But, nonetheless, that pattern continues, and the consequences are deeply harmful. Senator Hirono [presiding]. I'd like to enter into the record two letters in support of Judge--sorry, pronunciation-- Mehalchick. So, without objection, I'll enter those into the record. [The information appears as submissions for the record.] And, before I adjourn, I would like to thank the panel, and the questions for the record will be due to the nominees by 5 p.m. on Wednesday, August 2nd. And the record will likewise remain open until that time to submit letters and similar materials. With that, this hearing is adjourned. [Whereupon, at 11:33 a.m., the hearing was adjourned.] [Additional material submitted for the record follows.] A P P E N D I X Additional Material Submitted for the Record [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [all]

usgpo

2024-10-08T13:26:33.994232

CHRG

CHRG-118shrg55193

Fentanyl in Native Communities: Native Perspectives on Addressing the Growing Crisis

United States Congress Senate

[Senate Hearing 118-252] [From the U.S. Government Publishing Office] S. Hrg. 118-252 FENTANYL IN NATIVE COMMUNITIES: NATIVE PERSPECTIVES ON ADDRESSING THE GROWING CRISIS ======================================================================= HEARING BEFORE THE COMMITTEE ON INDIAN AFFAIRS UNITED STATES SENATE ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ NOVEMBER 8, 2023 __________ Printed for the use of the Committee on Indian Affairs [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] __________ U.S. GOVERNMENT PUBLISHING OFFICE 55-193 PDF WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON INDIAN AFFAIRS BRIAN SCHATZ, Hawaii, Chairman LISA MURKOWSKI, Alaska, Vice Chairman MARIA CANTWELL, Washington JOHN HOEVEN, North Dakota JON TESTER, Montana STEVE DAINES, Montana CATHERINE CORTEZ MASTO, Nevada MARKWAYNE MULLIN, Oklahoma TINA SMITH, Minnesota MIKE ROUNDS, South Dakota BEN RAY LUJAN, New Mexico Jennifer Romero, Majority Staff Director and Chief Counsel Amber Ebarb, Minority Staff Director C O N T E N T S ---------- Page Hearing held on November 8, 2023................................. 1 Statement of Senator Cantwell.................................... 3 Statement of Senator Cortez Masto................................ 50 Statement of Senator Daines...................................... 47 Statement of Senator Hoeven...................................... 5 Statement of Senator Lujan....................................... 6 Statement of Senator Murkowski................................... 2 Statement of Senator Schatz...................................... 1 Statement of Senator Smith....................................... 52 Statement of Senator Tester...................................... 6 Witnesses Azure, Hon. Jamie S., Chairman, Turtle Mountain Band of Chippewa Indians........................................................ 10 Prepared statement........................................... 12 Gettis, Eric M., Senior Vice President of Behavioral Health, Southeast Alaska Regional Health Consortium; accompanied by Corey P. Cox, M.D., Clinical Director for Addiction Services... 22 Prepared statement........................................... 24 Hillaire, Hon. Tony, Chairman, Lummi Nation...................... 7 Prepared statement........................................... 8 Kirk, Hon. Bryce, Councilman, Assiniboine and Sioux Tribes of the Fort Peck Reservation.......................................... 14 Prepared statement........................................... 15 Seabury, A. Aukahi Austin, Ph.D., Executive Director/Licensed Clinical Psychologist, I Ola Lahui, Inc........................ 19 Prepared statement........................................... 21 Soto, Claradina, Ph.D., Associate Professor, Department of Population and Public Health Sciences, Keck School of Medicine, University of Southern California.............................. 25 Prepared statement........................................... 27 Appendix Lewis, Nickolaus D., Council, Northwest Portland Area Indian Health Board, prepared statement............................... 64 National Indian Health Board, prepared statement................. 59 Response to written questions submitted by Hon. Ben Ray Lujan to: Hon. Jamie S. Azure.......................................... 75 Hon. Tony Hillaire........................................... 76 Hon. Bryce Kirk.............................................. 74 Response to written questions submitted by Hon. Brian Schatz to Hon. Jamie Azure............................................... 75 Response to written questions submitted by Hon. Tina Smith to: Hon. Tony Hillaire........................................... 77 Claradina Soto, Ph.D......................................... 78 Seneca Nation, prepared statement................................ 66 United South and Eastern Tribes Sovereignty Protection Fund, prepared statement............................................. 70 FENTANYL IN NATIVE COMMUNITIES: NATIVE PERSPECTIVES ON ADDRESSING THE GROWING CRISIS ---------- WEDNESDAY, NOVEMBER 8, 2023 U.S. Senate, Committee on Indian Affairs, Washington, DC. The Committee met, pursuant to notice, at 2:35 p.m. in room 628, Dirksen Senate Office Building, Hon. Brian Schatz, Chairman of the Committee, presiding. OPENING STATEMENT OF HON. BRIAN SCHATZ, U.S. SENATOR FROM HAWAII The Chairman. Good afternoon. I call this oversight hearing to order. Today the Committee will hear directly from tribal leaders, practitioners specializing in Native behavioral health and a Native public health expert on opioid use disorder about the devastating impacts of fentanyl in Native communities. We will also learn about specific culturally based practices, dedicated facilities and other promising tools Native communities have developed and tailored to address their own needs. This is a really important conversation. Fentanyl, a potent synthetic opioid, is contributing to a rapid rise in opioid related deaths across the Country. Native communities are getting hit extra hard. From 2020 to 2021, American Indians and Alaska Natives experienced an alarming 33 percent rise in drug overdose deaths, the second biggest of all groups in the United States. Native Hawaiians and Pacific Islanders saw the largest increase at 47 percent. These overdose death rates are nothing short of staggering. In the past year, several tribes issued emergency declarations over the rate of fentanyl deaths among their members, and accidental overdoses, where users are unaware their drug of choice is mixed with fentanyl, also on the rise among American Indians, Alaska Natives, and Native Hawaiians. Last August, tribes from across the Country came together to strategize on solutions and offer policy recommendations to address the fentanyl crisis in their own communities at the National Tribal Opioids Summit. White House officials, Federal and State leaders, members of Congress, including Senator Cantwell, also participated. I want to thank her for sounding the alarm and asking for today's hearing. This growing crisis is rooted in longstanding structural inequities in Native communities. Lack of affordable housing, limited access to high quality health care, and underfunded public safety programs compound fentanyl's impact on Native communities. Other unique factors, such as checkerboard tribal lands, which create a jurisdictional maze for law enforcement, and a lack of available public health data further complicate our response. It has been more than five years since we last held a hearing on the opioid epidemic in Native communities. COVID-19 contributed to a significant increase in substance abuse and overdoses nationwide. New threats from synthetic opioids, including fentanyl, have shifted the response paradigm. The time is now for the Committee to reengage. Our work doesn't end by simply identifying the problems. There is no one-size-fits-all solution. We have to listen to Native leaders and organizations, health care providers and support Native-led solutions to fight fentanyl in their home lands and surrounding communities. I look forward to hearing from all of our witnesses today and thank them for joining us in this important discussion. Vice Chair Murkowski, you are recognized for your opening statement. STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA Senator Murkowski. Thank you, Mr. Chairman. I do appreciate the fact that we are having this very important hearing in front of us today, and Senator Cantwell, thank you for making sure that it was scheduled here as we hold this hearing. Hopefully it is the first in a series of how we respond, how we deal with what we have in front us. You have cited the statistics. It is just really disturbing to know that among American Indians and Alaska Native populations we see the highest drug overdose rates in the Country for both 2020 and 2021 in terms of population. We have certainly seen it in Alaska, the significant increase in overdose and deaths due to fentanyl, due to opioids. Thanks to ANTHC's epidemiology center, we know that from 2018 to 2022 the annual number of opioid deaths among Alaska Natives increased by 383 percent. During the COVID pandemic, opioid overdose mortality rate among Alaska Native people doubled. There was a very, very troubling article in our statewide Anchorage paper, the Anchorage Daily News, on the 6th of November. Mr. Chairman, I would ask that a full copy of this article be included as part of the record. The Chairman. Without objection, so ordered. Senator Murkowski. It speaks to the situation that we are seeing in Alaska right now. This involved a drug ring operated within a prison. What the article states is during a 15-month period, members in this ring sent 58.5 kilos of fentanyl, that is nearly 130 pounds of fentanyl, to Alaskan communities. They sent it to communities like Savoonga, population 826 people, like Tyonek, population 415 people, like Good News Bay, New Stuyahok, Togiak, Ketchikan, Dillingham, Sitka, islanded communities where the population is so small and predominantly Native populations. Why are they doing this? Why are they doing this? Because they know that they can get ten times more for this lethal poison that is being sent. The comment that was provided here was that a dose of fentanyl that might sell in Anchorage for $15 could be worth $40 in Utqiagvik, $80 in Kodiak, or $100 in Bethel. So they are targeting these small, remote, rural, vulnerable communities. It is the worst predation there can possibly be. Last year, the Alaska Federation of Natives approved a resolution calling for support for increased resources to combat the drug epidemic that we are seeing in our Alaska Native communities. It speaks to the lack of resources for education, for treatment, for preventive services and public safety in Alaska Native communities. We are working on so many different levels. But I think it is so important today to understand from our witnesses how they are specifically addressing fentanyl, whether it is tribal law enforcement investigations and seizures, more opioid treatment centers in rural communities, how we deal with the stigma that we know is attached. I have introduced a bill that we call Bruce's Law to educate the public about the lethality of fentanyl, particularly with our youth. And then just last week we introduced the Tele-health Response for E-Prescribing and Addiction Therapy Services, we call it the TREATS Act. It seeks to continue access of tele- health services when prescribing opioid treatment program medications. So there is a lot to talk about. I want to welcome our Alaska witness, Mr. Eric Gettis. He is going to be joined by Dr. Corey Cox during the question period of the hearing. Mr. Gettis is the Senior VP for Behavioral Health at SEARHC in Juneau, and Dr. Cox is a dual board certified family medicine and addiction medicine physician, also with SEARHC. He is currently working to expand access to quality addiction treatment services in rural Southeast Alaska. I am pleased that they are going to be with us today with their input. Again, thank you, Mr. Chairman. The Chairman. Thank you, Vice Chair. I will now recognize Senator Cantwell, who has been, as a lot of members on this Committee, a leader on this particular challenge. Senator Cantwell was instrumental in making sure that this hearing happened. Senator Cantwell? STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON Senator Cantwell. Thank you, Chairman Schatz, you and Vice Chair Murkowski, for holding this very, very important hearing today to hear directly from Indian Country how they are fighting this battle, and how they need a better Federal partner. I want to take a moment to introduce one of the witnesses, the Chairman of the Lummi Nation, Anthony Hillaire. I want to acknowledge the presence of multiple Lummi Nation leaders who are with us, key staffers, and Council Member Maureen Kinley and Jim Washington. In addition, the Lummi National Policy Advisor, Merisa Jones, Recovery Specialist Tabitha Jefferson, and the Lummi Nation youth leaders who are here as a delegation. Thank you all for traveling all this way to make this voice heard, and to get people to understand the scourge of this crisis. Your presence here today is a testament to the devastating impact the fentanyl crisis has had on the Lummi Nation. When I visited Lummi Nation in October of last year, fentanyl was already taking its toll. But a year later, the Lummi community lost five people to fentanyl overdoses within one week. In 2022, the Centers for Disease Control and Prevention reported that American Indians and Alaska Natives had the highest drug overdose rate of any ethnic group for both 2020 and 2021. The rise of this illicit fentanyl is a problem. We have hosted nine roundtables throughout the State of Washington and have spoken at many of the organizational meetings to talk about what are the solutions. In fact, the National Tribal Opioid Summit was also held in the State. That was partly organized by the Northwest Portland Indian Health Board, it happened at Lummi Nation. We have talked to tribal leaders in Spokane, Colville, Yakama, Cowlitz, Jamestown, the Puyallups, the Tulalips, and many people about how their particular communities are being impacted. What we know is we must increase treatment and recovery capacity. As one doctor told me, ``We should have access to recovery be as easy as access to the drug, and at this point, it is not.'' We need to better educate young people and get them involved in prevention and recovery. That is why I am glad to see the youth delegation that is here today, because they can help us understand how we can better reach out to young people. The next generation can lead the way in educating their peers. In August, as I spoke to the National Tribal Opioid Summit at Tulalip, a key theme raised by many of the officials gathered at the session was how understanding where illicit fentanyl is coming from, and how we respond to it is a top priority. Data is needed and vital to our response in the pandemic. Adequate resources, whether that is helping them recognize the crisis or addressing it in responding, is critical. But a few examples. The Jamestown S'Klallam opened a healing clinic which provides addiction and MAT treatment, and averages 120 patients per day. The Native Project in Spokane is working to build the youth and child services that will focus on tribal children's services to stay away from opioids and fentanyl. And the Lummi Nation opened a new stabilization and recovery center for their community members, and is currently working to construct and open a detox and health care center. So I welcome Chair Hillaire today to share the breadth and depth of your unique experience. I am so sorry that this is what the Lummi Nation has had to deal with. I know that you as a tribal leader and a community council member in the past know what it is like to deal with these issues and to prioritize them. Hopefully, we can work better together as a Federal partner. I thank you again, Madam Chair, for the opportunity for this hearing to take place, and hopefully our Committee to come up with ideas to better help Indian Country and our whole United States deal with this crisis. Thank you. Senator Murkowski. [Presiding.] Thank you, Senator Cantwell. Are there other members wishing to make an opening statement? Senator Hoeven? STATEMENT OF HON. JOHN HOEVEN, U.S. SENATOR FROM NORTH DAKOTA Senator Hoeven. Thank you, Ranking Member Murkowski. I want to thank both you and Chairman Schatz as well as our witnesses for being here this afternoon. I appreciate the Committee holding this very important hearing on the impact of fentanyl in our tribal communities. It is a huge problem for the entire Country, in essence every State, and the tribe as well has become a border State or border reservation because of the fentanyl that is pouring in over the southern border, a lot of it of course originating in China. So this is a problem we have to address across the County. We are seeing record numbers of overdose deaths, and of course, it is a huge problem on the reservation as well. And Senator Cantwell, as well, for everyone who said we need to have a hearing on this problem, they are right. We do, and we need to find ways to address it. We need to do that now. Again, I want to welcome all of our witnesses today, and I would particularly like to take a minute to welcome and introduce Chairman Azure. Jamie Azure is Chairman of the Turtle Mountain Band of Chippewa Indians. He attended the University of Minnesota, and we don't hold that against him in North Dakota, that is okay. He earned Bachelor of Science degrees in both business management and political science. He has served on the tribal council since December 2016, and has been chairman since 2018. He continues to build up his community, foster economic development, and advocate on behalf of both tribal youth and elders. He also serves on the United Tribes Technical College board of directors. He owns the J. Azure Construction Company, and through his company is involved in community philanthropic efforts such as dedicating a percentage of the company's profits to supporting youth organizations. He resides in Belcourt with his wife, Denise, and their two children. Again, Chairman Azure, I want to thank you for being here today, but even more than that for the important work you do as chairman for your tribes and the good work that you do both through your company as well as through your leadership as tribal chairman. Thanks so much. Thank you, Madam Chair pro tem. Senator Murkowski. Pro tem. Thank you, Senator Hoeven. Senator Tester, I know you want to introduce your witness and maybe make an opening statement. STATEMENT OF HON. JON TESTER, U.S. SENATOR FROM MONTANA Senator Tester. I do. I first want to thank you and the Chairman for hosting this hearing that I think we can all say is really important. Thank you, Senator Cantwell, for your leadership. I want to welcome everybody who is here testifying, the people who are here in person and the people who are here virtually. I also want to have a special introduction for Councilman Bryce Kirk, who is here in the Indian Affairs room I think for the first time. He is from the Fort Peck Assiniboine and Sioux Tribes, joining us from that metropolis of Poplar, Montana, which is incredibly rural. Chairman Kirk is serving a second term on the tribal council. He sits on the Law and Justice Committee there, and also the Tribal Education Committee. Chairman Kirk knows first-hand the effects of fentanyl in his community, and he does important work combatting this drug on the reservation. Bryce, it is an honor to have you here today to testify to us. When your time comes up, we look forward to your testimony. Senator Murkowski. Thank you, Senator Tester. Senator Lujan, do you care to make any comments? STATEMENT OF HON. BEN RAY LUJAN, U.S. SENATOR FROM NEW MEXICO Senator Lujan. Madam Chair, thank you so much for this important hearing and the leadership of the Committee, and for each of you traveling to share these stories, to share your thoughts and your ideas of what needs to be done, where there is negligence as well with lack of support or jurisdictions where there are questions where criminals learn to take advantage of them as well. I certainly look forward to your testimony and thank you all for being here. Thank you, Madam Chair. Senator Murkowski. Thank you. We will now turn to our witnesses. Senator Cantwell has introduced our first witness, Chairman Hillaire, from the Lummi Nation. He will be followed by Chairman Azure, who has been introduced by Senator Hoeven, with the Turtle Mountain Band of Chippewas. Next, we will turn to Councilman Kirk, who has been introduced by Senator Tester, from the Fort Peck Reservation. I understand that Dr. Aukahi Austin Seabury will be virtual with us. She is the Executive Director and Licensed Clinical Psychologist at I Ola Lahui, Inc. in Honolulu. We will also be joined virtually by Mr. Eric Gettis, who is with Southeast Alaska Regional Health Consortium as introduced previously. He will be accompanied by Dr. Corey Cox, Clinical Director for Addiction Services, also there at SEARHC. Our final witness will be Claradina Soto, Ph.D., Associate Professor, Department of Population and Public Health Sciences at the Keck School of Medicine at UCLA. I want to remind our witnesses that your full written testimony will be made part of the official record. So we would ask that you try to keep your comments to no more than five minutes so members have an opportunity to ask questions. But we realize that these comments that you make are very important and the information will gain today is exceptionally important. So for those of you who have made the trip to be here, thank you, and for those of you who are giving your time online, thank you very much. Chairman Hillaire, if you will proceed, please. STATEMENT OF HON. TONY HILLAIRE, CHAIRMAN, LUMMI NATION Mr. Hillaire. Ey'skweyel e ne schaleche si'iam, Tony Hillaire tse ne sna, Tse Sum Ten tse ne sna, che' xlemi sen. My dear friends and relatives, my name is Tony Hillaire, my name is Tse Sum Ten. I come from Lummi. I serve as the Chairman of the Lummi Indian Business Council. Good afternoon, Vice Chair Murkowski and Chairman Schatz and distinguished members of this Committee. Thank you for having us here today. I am here with my team. Thank you, Senator, for introducing them. We are traveling from afar, from Lummi Nation, located in Washington State. We are here on behalf of our great Lummi Nation, we are here on behalf of our ancestors, our elders, our children, our fishermen, our fisherwomen. But most of all and most importantly, we are here on behalf of the grieving grandmothers and mothers who are burying their children to drug overdose. It is becoming way too normalized. Just yesterday, we had a funeral for a 26-year-old Lummi woman who passed away from a drug overdose, leaving behind two children who will grow up now without a mother. These are not just anyone to us, these are our family, these are the people we grew up with, these are our future chairmen and chairwomen, our future cultural leaders, language speakers, the ones who will carry the torch into the next generations. We want to thank you and this Committee for holding this hearing so we can discuss this important matter, so that we can change the world for the better for these next generations. And a special thank you to Senator Cantwell, our dear friend, for your immediate response when we have five deaths within three days at Lummi Nation, four of them being drug overdose. Senator Cantwell helped respond immediately and gave us some assistance. In addition to calling this hearing as well as for introducing the Parity for Tribal Law Enforcement Act, as well as attending the National Fentanyl Summit hosted at Tulalip Tribes, thank you for standing with us and for your ongoing friendship. I want to start real quick just acknowledging our resilience as Lummi people. When we talk about these issues and the drastic scenes of the fentanyl crisis at home, it goes without saying how resilient we are as a people, and that we are self-determining, that we want to take care of ourselves and that we know how to do that. The impacts of fentanyl and opioids at home have been very drastic and very overwhelming. I just ask rhetorically to the Committee, how many funerals have you been to in the last year? How many have you ben to in the last month, in the last week? For us, it is pretty much every day. That is not just for fentanyl overdose, which is completely devastating, but also all of the health disparities that we see at Lummi Nation that we are up against. We don't have time to meet, and I understand that it is much needed, but right now our people need leadership, they need hope. That is our responsibility, to ensure that we never take away hope from our people. So when we had those deaths, and when I was talking to Senator Cantwell, we responded immediately. At Lummi Nation, we declared a state of emergency. We implemented checkpoints to limit the amount of drugs that were coming onto our reservation. We got K-9 units, Senator Cantwell helped us get FBI agents who helped us get drugs off of the street. That was the first response, was immediate action is the best message to the mothers who are grieving at Lummi Nation. So we did just that. As we continue to intervene, we are learning the need for better outreach, better treatment services. The more drugs we get off the street, the more we disrupt the market of drugs. Our people who struggle with addiction are really needing that fix. So we opened up a stabilization center which is an expansion of services for medication assisted treatment, and is open 24-7. Since our drug interdiction efforts, the beds have been completely full. In addition to that, we have noticed children being in the homes of where we found drugs and where we shut down drug homes. That brings up the need for our Lummi Youth Academy, which is a residential facility next to our Lummi Nation School, that ensures that our children can be home, that they can be closely tied to our people, our culture, and our way of life as a way of ensuring prevention. Finally, our need for a detox facility is an immediate need right now. The severity of withdrawals to fentanyl is really concerning. Right now, we have plans to build a detox facility, but through the bureaucracy and through the lack of funding resources, it has been really challenging. We have raised $15 million over the last few years, lobbying for this very issue. We need $12 million more to finish the project. There is so much more to this, more time is needed for really, really grasping and getting into the weeds of what needs to be done. But those are the three top priorities for Lummi Nation. [Phrase in Native tongue.] Thank you. [The prepared statement of Mr. Hillaire follows:] Prepared Statement of Hon. Tony Hillaire, Chairman, Lummi Nation Good afternoon, Chairman Schatz, Vice-Chair Murkowski, and the distinguished members of this Committee. Ey'skweyel e ne schaleche si'iam, Tony Hillaire tse ne sna, Tse Sum Ten tse ne sna, che' xlemi sen. My name is Tony Hillaire, my name is Tse Sum Ten. I come from Lummi. I serve as the Chairman of the Lummi Indian Business Council. I am here today with my fellow council members, my team, our Lummi Youth Council members, and Community Leaders. And we are here today on behalf of the great Lummi Nation, our ancestors, our elders, our children, our fishermen and fisherwomen. But most of all, we are here today on behalf of our grieving mothers and grandmothers. Burying our children is a mother's worst nightmare, and this nightmare is becoming way too normal. We want to thank you for holding this hearing so we can discuss this very important matter. So that we can change the world for the better, for our next generations. A special thank you to Senator Cantwell, our dear friend, for her immediate support, for calling the hearing, for introducing the Parity for Tribal Law Enforcement Act, and for attending the National Fentanyl Summit. The impacts of the opioid/fentanyl crisis that have hit our community are devastating, heartbreaking, and personal. As I give this testimony, I ask that you reflect on how many people you know that have lost their lives to fentanyl. How many funerals have you been to this year that were due to fentanyl-related overdoses? The Lummi Nation has had a total of seven overdose-related deaths in 2023, with five of those deaths occurring just from September to October. In the Lummi Nation, we are not only battling fentanyl but have also come across Carfentanil, a drug 100 times more lethal than fentanyl and 10,000 times stronger than morphine. Just when we think we have a grasp on how we are handling this drug epidemic and reducing harm, a new, more robust version of fentanyl appears and comes back at us with even deadlier effects. These fentanyl-related deaths have impacted every area of our lives, as our community is left in constant grief and sorrow as we are barely able to lay our loved one to rest before we get word of the next. In late August this year, we had the opportunity to escort Dr. Delphin-Rittmon, Assistant Secretary of SAMHSA, to a homeless camp in Bellingham Whatcom County, Washington. At the time, we had over 70 tribal members who were living in squalor with no sanitation facilities. The conditions in which these tribal members are living are like nothing I have seen before, and it truly is heartbreaking. Our people are sick, and they are all crying and begging for help. When our nation took action against the drug epidemic and began shutting down drug homes, we learned that there are children who are living within these homes. This is when we understood the need for a safe place for our children living in an unsafe environment. Previously, we had a facility that did just this that we called the Lummi Youth Academy, and there are many success stories of children attending. The Lummi Youth Academy provided our children with access to shelter, food, education, and mental health services. There is an urgent need for funding to help support programs such as this, which is crucial as it is a form of Youth Prevention that allows them the tools needed to break the intergenerational traumas they've endured. Unless we address the root causes of addiction, we will continue in this cycle. Another crucial step is Detoxification and treatment. When our people want help, too often, we must turn them away because we do not have beds or capacity. The Lummi Nation has accumulated almost $15 million to build a culturally attuned detox center, but we need another $12 million. Currently, our tribal members have a deep fear of getting off fentanyl, as the withdrawal symptoms are unbearable. When a tribal member seeks assistance in withdrawing, there is only a tiny window of time, and we must get them into detox before they change their mind. Sometimes, it can take a few days for a detox bed to open, and by the time a bed opens, most of them do not return. The Lummi Nation has been lobbying for the funds to build their own detox center and has the support of 29 other tribes in the region. Despite all we have been through, I do want to say that our people are strong and resilient. We know how to take care of our people, and our cultural-based recovery programs have shown that we do recover. We have sought funds from HHS and IHS, and so far, we have been unsuccessful despite all the evidence we have provided on loss of life and suffering. We would like to highlight the importance of Congress passing the opioid supplemental funding request as this includes a $250M transfer to the Indian Health Service (IHS), representing an almost 16 percent set aside of the overall amount to help tribes specifically address the crisis. We hope some of these funds will be accessible to support us finalize construction of the SWMS, which has been endorsed by all Portland Area. The longer we struggle to get funds or wait for resources, the more likely people are to overdose or die due to overdose-related deaths. Law enforcement is another critical area. We need more resources from the BIA, DEA, and FBI. Due to the lack of prosecutions from the DOJ and local authorities, we also need the ability to prosecute and hold accountable non-Indian drug dealers who are killing our people through this drug crisis. The lack of tribal jurisdiction over non- Indian drug dealers coming onto our reservation undermines our efforts to combat the drug crisis and protect our community. We urge Congress to recognize special criminal jurisdiction over non-Indians who committed drug offenses in our communities. Lastly, to fully confront this crisis, we must address issues of poverty, homelessness, and unresolved trauma that are not only catalysts for addiction but also perpetuate its vicious cycle. Conclusion Our plea for assistance is urgent; the loss of even one individual in our small community not only ends a lineage but also extinguishes future generations. The pain and sense of loss affects us all. We know what we need to help heal our people, but we have barriers that keep us from doing so. In September of 2023, the Lummi Nation Declared a State of Emergency in response to the Drug Crisis. This allowed us to remove our internal barriers and create policies that allowed us to respond in an urgent manner. We ask that the federal government hear our cries and declare this a National Emergency. Declaring a National Emergency would allow us to tear down the barriers and bureaucracy that hinder our ability to take care of our people. In these times of darkness and sorrow, our people are looking for hope, and they are looking to leadership for answers and action. On behalf of the Lummi Nation, I thank the Committee for convening this important hearing on the fentanyl crisis. Thank you for listening, for really hearing us, and for standing with us as we face this terrible crisis. At this time, I would be happy to answer any questions that the Committee may have. Thank you. Senator Murkowski. Thank you, Chairman Hillaire. We so appreciate your testimony. We will next turn to Chairman Azure. STATEMENT OF HON. JAMIE S. AZURE, CHAIRMAN, TURTLE MOUNTAIN BAND OF CHIPPEWA INDIANS Mr. Azure. Good afternoon, Vice Chairman Murkowski and Committee. Thank you for the opportunity to present testimony at today's hearing entitled Fentanyl in Native Communities: Native Perspectives on Addressing the Growing Crisis. My name is Jamie Azure. I am an enrolled member of the Turtle Mountain Band of Chippewa Indians and Chairman of the Tribe. It is an honor to be here with you today. According to the Centers for Disease Control, nationwide over 150 people die every day from overdoses related to synthetic opioids like fentanyl. In 2020 alone, there were over 56,000 people who died of a fentanyl overdose. This threat is real all over the United States and in my home State of North Dakota. According to recent statistics from the North Dakota Department of Health and Human Services, there has also been a significant increase in overdose deaths. The fentanyl and opioid overdose death rate has steadily increased from 2019 where one individual per 10,000 died of an opioid or fentanyl overdose to 2022 where 2 per 10,000 in North Dakota have passed away. On average two North Dakotans die each week from opioid and fentanyl overdoses, with the highest percentages of those deaths coming from Native Americans. That is right, in North Dakota, home of five tribes, Native Americans die at a rate of almost nine individuals per 10,000. More alarming and closer to our home in Benson County, North Dakota, we have seen the one of the largest increases of fentanyl and opioid deaths in the State at almost two times higher than the State's average. Those numbers continue to tick upward as we end 2023. Within the Turtle Mountain Reservation we also have seen family members perish at the hands of this deadly poison. In response, we have set up several drug task forces that work with State and local authorities to stop this drug trafficking before it reaches our communities. For example, last year the Turtle Mountain Band of Chippewa Indians authorized its own tribal Division of Drug Enforcement, the DDE, with tribal resources. We hired a director, who along with the Law and Policy Department, formulated policy and procedures to get the DDE operational. We hired some experienced staff and became effective in March of 2023. As of today, we have four staff on this team. Prior to this we had to rely on BIA-OJS's Drug Unit's agents. At one point we relied on one agent, among five North Dakota reservations. As you can imagine, this was ineffective. This was far too large of an area to assign to one drug agent. Since March of 2023 we have had four major fentanyl drug busts. The DDE stopped a large quantity of drugs from reaching our people. We utilized tribal intelligence and were able to intercept large shipments before they were on the streets of the community. Please understand that these shipments are coming mostly from the Detroit metropolitan area, and sometimes as far as Las Vegas. In intercepting these shipments, we coordinated with State and Federal partners for arrests coming off Amtrak in Rugby, North Dakota, around 40 miles from the Turtle Mountains. Please note that all these drug shipments are from non- Indians delivering to the reservation. We have also learned through our law enforcement efforts that these drug dealers often move into our HUD units with promises of wealth from drug proceeds for our vulnerable populations. These individuals have significantly disrupted the lives of our children, resulting in foster parents when the parents are arrested. Also, note that these drug dealers are also using social media platforms such as Facebook, TikTok, Instagram, Snapchat, and more. Because of the effectiveness of the DDE, the drug dealers are complaining about loss of profits and reduction of supply. I am hopeful that we can continue to develop effective partnerships with State and Federal agencies. But let me be clear: the BIA Office of Justice Services must step up their job. As the Committee has been made aware, we have been strapped with limited BIA law enforcement resources. For example, the Bureau of Indian Affairs Law Enforcement continues to shift away resources from Turtle Mountain. In fact, BIA law enforcement has recently shifted away our Chief of Police to work elsewhere. I as tribal chairman wasn't even notified. I found out by a text from the Chief of Police asking if I was notified. These decisions have made Turtle Mountain members less safe. Can you imagine if in a major city such as Detroit or Chicago law enforcement was suddenly transferred someplace else? What kind of message would that send? I want to take a moment to thank Senator Hoeven for looking into this important matter for us. Hopefully the Senator can get answers from the Department of Interior before any more tribal members are victims of crime or drug overdose. I would also like to take a moment and offer my continued support for the following. Number one, S. 465-BADGES sponsored by Senator Cortez Masto and Senator Hoeven. This bill will help expedite background checks for BIA law enforcement so they can get hired more expeditiously. Part of the problem of hiring law enforcement is how long it takes to go through the background process. It should not take nine to twelve months. Number two, advance BIA Law Enforcement Training Center at Camp Grafton, North Dakota. This training center is the only BIA law enforcement training center located in the Great Plains region. This training center helps those communities that cannot send their police officers all the way to New Mexico and allows for specialized investigation classes to occur such as drug interdiction classes. And number three, keeping the Drug Elimination Program in the Native American Housing Assistance and Self Determination Act, NAHASDA funding, which is currently in the Senate version of the National Defense Authorization Act, NDAA. This program will allow my community to utilize housing dollars to provide drug treatment services, rehabilitation, education, and relapse prevention in a cultural manner. In closing, I want to thank you all for allowing me to speak to this important subject. I look forward to answering any questions that may come after. I would also like to mention that on behalf of the tribal leadership that is sitting at this table, that is watching, that is sitting here in support, this Committee needs to remember that we took a vow to sit in the chairs that we sit in, in the leadership roles that we have taken on for that next generation. We are very close to losing a generation to an opioid, to a synthetic drug. We need to figure out a way that we can work together to address a lot of these I sues that are going to be bought up today, and a lot that we don't have time to get into. It is not in my nature to read off the paper that I just read off. But it was important to get the right facts across. These are our children; these are the next generation. As Chairman Hillaire had mentioned earlier, these are the next round of leaders that we are fighting for. We as tribal leaders refuse to allow a generation to be lost. I just wanted to get that point across. Thank you very much. [The prepared statement of Mr. Azure follows:] Prepared Statement of Hon. Jamie S. Azure, Chairman, Turtle Mountain Band of Chippewa Indians Dear Chairman Schatz and Vice Chairwomen Murkowski: Thank you for the opportunity to present testimony at today's hearing entitled, ``Fentanyl in Native Communities: Native Perspectives on Addressing the Growing Crisis.'' I am Jamie Azure; I am an enrolled member of the Turtle Mountain Band of Chippewa Indians and Chairman of the Tribe. Its great to be with you today. According to the Centers for Disease Control, nationwide over 150 people die every day from overdoses related to synthetic opioids like fentanyl. In 2020 alone, there were over 56,000 people who died of a Fentanyl overdose. This threat is real all over the United States and in my home state of North Dakota. According to recent statistics from the North Dakota Department of Health and Human Services, there also been a significant increase in overdose deaths. The fentanyl and opioid overdose death rate has steadily increased from 2019 where 1 individual per 10,000 died ofan opioid or fentanyl overdose to 2022 where 2 per 10,000 in North Dakota pass away. On average 2 North Dakotans die each week from opioid and fentany 1 overdoses with the highest percentages of those deaths coming from Native Americans. That's right, in North Dakota, home of five tribes, Native Americans die at a rate of almost 9 individuals per 10,000. More alarming and closer our home of Benson Country, North Dakota has seen the one of the largest increases of fentanyl and opioid deaths in the State at almost 2 times higher than the States average. And those numbers continue to tick upward as we end 2023. Within the Turtle Mountain Reservation we also have seen family members perish at the hands of this deadly poison. In response, we have set up several drug task forces that work with state and local authorities to stop this drug trafficking before it reaches out communities. For example, last year the Turtle Mountain Band of Chippewa Indians authorized its own tribal Division of Drug Enforcement, (DDE), with tribal resources. We hired a director, who along with the Law and Policy Department, formulated policy and procedures to get the DDE operational. We hired some experienced staff and became effective in March of 2023. Today we have four staff on this team. Prior to this we had to rely on BIA-OJS 's Drug Unit's agents. At one point we relied on one agent, among five North Dakota reservations. As you can imagine, this was ineffective. This was far too large of an area to assign to one Drug Agent. Since March of2023 we have had four major fentanyl drug busts. The DDE stopped a large quantity of drugs from reaching our people. We utilized tribal intelligence and were able to intercept large shipments before they were on the streets of the Community. Please understand that these shipments are coming mostly from the Detroit metropolitan areas, and sometimes as far as Las Vegas. In intercepting these shipments, we coordinated with State and Federal partners for arrests coming off Amtrack in Rugby, North Dakota. Please note that all these drug shipments are from non-Indians delivering to the reservation. We have also learned through our law enforcement efforts, that these drug dealers often move into our HUD units with promises of wealth from drugs proceeds for our vulnerable populations. These individuals have significantly disrupted the lives of our children resulting in foster parents when the parents are arrested. Also, note that these drug dealers also use social media platforms such as Facebook, Tic Toc, Instagram, Snapchat, and more. Because of the effectiveness of our DDE, the drug dealers are complaining about loss of profits and reduction of supply. I am hopeful that we can continue and develop effective partnerships with state and federal agencies but let me be clear the BIA Office of Justice Services must step up do their job. As the Committee has been made aware, we have been strapped with limited BIA law enforcement resources. For example, the Bureau of Indian Affairs Law Enforcement continues to shift away resources from Turtle Mountain. In fact, BIA Law Enforcement recently shifted away our Chief of Police to work elsewhere. These decisions have made Turtle Mountain members less safe. Can you imagine if a major city such as Detroit or Chicago law enforcement were suddenly transferred someplace else? What kind of message would that send? I want to take a moment to thank Senator Hoeven for looking into this important matter for us. Hopefully you Senator can get answers from the Department ofinterior before any more tribal members are victims of crime and drug overdose. I also want to take a moment and offer my continued support for the following: 1) S. 465- BADGES sponsored by Senator Cortez Masto and Senator Hoeven. This bill will help expedite background checks for BIA Law Enforcement so they can get hired more expeditiously. Part of the problem of hiring law enforcement is how long it takes to go through the background process. It should not take 9-12 months for this. 2) Advance BIA Law Enforcement Training Center at Camp Grafton, North Dakota. This training center is the only BIA law enforcement training center located in the Great Plains region. This training helps those communities that cannot send their police officers all the way to New Mexico and allows for specialized investigation classes occur such as drug interdiction classes. 3) Keeping the Drug Elimination Program in the Native American Housing Assistance and Self Determination Act ( NAHASDA) which is currently in the Senate version of the National Defense Authorization Act (NDAA). This program will allow my community to utilize housing dollars to provide drug treatment services, rehabilitation, education, and relapse prevention in a cultural manner. Senator Murkowski. Thank you, Chairman Azure. Mr. Kirk? STATEMENT OF HON. BRYCE KIRK, COUNCILMAN, ASSINIBOINE AND SIOUX TRIBES OF THE FORT PECK RESERVATION Mr. Kirk. Hi, I am Bryce Kirk, Councilman for the Fort Peck Assiniboine and Sioux Tribes on the Fort Peck Indian Reservation. I would like to thank the Committee and Vice Chair Murkowski, for allowing me to testify on fentanyl in our communities. I will start off with a story of a couple brothers that I have lost because of fentanyl that leave behind, both entail six kids, a wife, two wives, and kids that continue to lose their parents. When I was coming in the door, I remembered a young lady that I coached in seventh and eighth grade in basketball. Right now, she is a ninth grader, addicted to fentanyl right now, today. As we continue to sit here, fentanyl has no boundaries. It affects men, women, children, and the elderly from all walks of life. People deal drugs, including suboxone, to pay for their own habits. They deal, who will buy to feed their habits? Our people can go to Spokane with $1,000 and bring 1,000 pills back and make $120,000 off those pills. This is destroying families. We have higher crime rates and increased violent rapes, murders, kidnappings. Suicide remains a large leading cause of death of our people. Where did we get that it is okay for people to continue to lose their loved ones from walking in front of trains, that it is just okay for them to deal with the pain that they have dealt with their whole lives and stuffing it down with drugs, deadly drugs, just to feed the pain that they feel growing up, the abuse, sexually, physically, emotionally, abuse that no kid, no person should ever go through? I myself am a recovered addict. I have been clean and sober for 11 years, and have now been elected to our tribal council to be able to lead our people and fight for our people. While the crisis is daunting, it is not hopeless. I am there with them, but a mentor also. Before I got on the council, I had a business that actually helped people come off the streets that were just like myself, to reach down and start reaching our people that we have an obligation. In the end of our swearing in ceremony, we say, ``So help me God.'' As you guys take an oath, we take an oath too. This isn't just a red or blue issue. This issue is everybody. It contains our kids. We on Fort Peck have lost a generation of kids right now. We have grandparents taking care of great- grandchildren because the grandchildren that they were taking care of are now lost to the addictions that we face today. What we need is more law enforcement. We don't need doors slammed in our face when we try to reach out to our Federal partners. We need them opened. We need to be able to work together with information that they have with people coming onto our reservation. We need more mental and behavioral health. One of the biggest things is there is always talk about funding. There can never be enough funding to catch up where we are. It is sad to say that it is going to get worse before it gets better. Without the help of Federal Government and Congress and acts that we need on reservations to be able to help support our people, we need the direct funding to come to our tribes, to come to our reservations, to where we know what it takes us as leaders, we know what our people need, we know traditional ways that our people need to go. We could lead our people there. We need jobs and training for our people. We need more housing, we need more community facilities. One of the biggest things, in conclusion, is my wife and I are a testament to this, and no matter what happens, we as Indian people are resilient and will continue to come out of this as we always have. But we need additional support from all parts of the Federal Government, and we need Federal agencies to be true partners with us in this effort. We don't need bureaucrats in D.C. telling us how to solve the problem. We already have the blueprint for how to solve the crisis in the way that is best for our communities, which is informed by our experiences on the ground and successes we have already achieved. What we need is support and tools to grow our efforts and start helping us reach the people that are already lost, so that way we don't lose any more grandparents, grandchildren, moms, dads and kids, kids that haven't even graduated yet. I thank you for the time. I thank you for everything. Hopefully we can move forward. Thank you. [The prepared statement of Mr. Kirk follows:] Prepared Statement of Hon. Bryce Kirk, Councilman, Assiniboine and Sioux Tribes of the Fort Peck Reservation I am Bryce Kirk, Councilman for the Assiniboine and Sioux Tribes of the Fort Peck Reservation. I would like to thank the Committee for the invitation to testify on the impact of fentanyl in Native communities. The Fort Peck Reservation is in northeast Montana, forty miles west of the North Dakota border, and fifty miles south of the Canadian border, with the Missouri River defining its southern border. The Reservation encompasses over two million acres of land. We have approximately 12,000 enrolled tribal members, with approximately 7,000 tribal members living on the Reservation. We have a total Reservation population of approximately 11,000 people. As I will discuss in greater detail, there is no greater crisis on the Fort Peck Reservation than addressing the trade and trafficking of drugs, in particular fentanyl, on the Reservation. I think the Fort Peck Tribes are as capable a Tribe as any in the country to combat this crisis, but we need the support of our federal partners. We stand ready to work with our partners from law enforcement, social service agencies and health care agencies to do this necessary work. At Fort Peck, we have long believed that a strong tribal government is the way to best keep our community safe. So, we have taken action to maximize our authorities to protect everyone living within our boundaries. In this regard, the Fort Peck Tribes have provided law enforcement and correction services on our Reservation since 1996 under an Indian Self-Determination and Education Assistance Act contract. We were also one of the first Indian tribes in the nation to enter into a cross-deputization agreement with state, county and city law enforcement agencies. Under this agreement, first ratified more than twenty years ago, tribal officers are deputized to enforce state and local law on the Reservation and state and local officers are authorized to enforce tribal law. For more than fifty years, the Fort Peck Tribes have had an independent judicial system, including an appellate court. It is through this system that we provide justice to our victims and our defendants. Currently, our judicial system includes law-trained judges, law-trained prosecutors, law-trained public defenders, probation officers, a published tribal code, and experienced court clerks and court reporters. Our court's opinions are published and available to the public. Notwithstanding a strong Tribal government and strong governmental institutions, we still are facing a crisis of fentanyl use in our community that threatens every aspect of our Reservation. This drug has infested every corner of our community, from the young to the old and without regard to gender or any other demographic. What we as tribal leaders are the most worried about is our youth. We fear this drug is robbing us of an entire generation: our very future. This crisis happened almost overnight. According to the Montana Attorney General's Office, since 2019, fentanyl seizures in the state have risen 11,000 percent. See, https://www.kfyrtv.com/2023/02/24/ag- reports-skyrocketing-fentanyl-crisis-montana. In 2022, the State Task Force agencies seized 206,955 dosage units of fentanyl, triple the amount recorded in 2021. Id. Throughout the entire state of Montana, the fentanyl-related overdose deaths increased by 167 percent from 2016 to 2020. See, https://leg.mt.gov/content/publications/fiscal/2023- Interim/IBCD/MT_Fentanyl_Trends_2021.pdf. The largest percentage of these deaths is adults between the ages of 24 and 44. Id. These are the people who should be the most productive in our communities. These people are our future leaders. Instead, they are dying. The Montana Department of Justice Division of Criminal Investigation reports that 10 percent of all high school students in Montana had taken a prescription drug without a prescription. Id. These children are not taking Lipitor. They are taking painkillers--opioids. Tragically for the Tribes in Montana, the opioid overdose death rate for Indian people is twice that of non-Indians. See, https://www.npr.org/sections/health- shots/2022/06/01/1101799174/tribal-leaders-sound-thealarm-after- fentanyl-overdoses-spike-at-blackfeet-nation. On the Fort Peck Reservation, what our law enforcement officers report is that an average opioid user's daily dosage is between 10-20 pills. In an urban area, the average cost per pill is $1. On the Fort Peck Reservation, the average cost per pill is $120. So how does a user support this habit? He deals. According to our law enforcement, the average user is selling at least 50 pills a day to pay for his 20-pill habit. To put these numbers in context, a single illicit fentanyl pill can contain a potentially lethal dose. See, Facts about Fentanyl (dea.gov). In fact, DEA analysis of counterfeit pills found that 42 percent of pills tested for fentanyl contained a potentially lethal dose. Id. This means that many in our community--and especially many of our young people--are gambling their lives 10 or 20 times a day. The toll that this is having on our community is devastating. I lost two men I considered my brothers this last year. Now their children will grow up without a father. We have children as young as middle school taking fentanyl. Suicide remains extremely high on our Reservation. Unfortunately, suicide remains a leading cause of death across all the Reservations in Montana. The crimes against our children--our babies--are unspeakable. This drug affects all families from all walks of life on the Reservation. We had a Tribal law enforcement officer plead guilty to stealing drugs from our tribal evidence room. This man is a decorated military veteran. He is the grandson of a former Chairman and son of a former Councilman. More importantly, he is a husband and father. But he was suffering from PTSD from his time in the military and from what he experienced as a law enforcement officer on the Reservation. We are thankful that he took the opportunity that the arrest presented him to go to the VA and get the treatment services he needed, and the federal judge gave him a sentence that recognized he could come back to our community and be a productive husband and father--opportunities that not many of our members who battle addiction receive and, as a result, some people who could be productive members of our Tribe end up in the federal criminal justice system for their entire productive life. I battled with addiction myself. But for a man who mentored me and is still very much like a father to me, I would not be here today. My children would not have a dad. I never would have been elected to serve my people. I am thankful every day for my life that I have now. In March 2023, we had to close our Tribal Court because someone chose to smoke fentanyl in one of the bathrooms. An officer was poisoned simply by entering the bathroom in question. The cleaning of the Court facility and its air systems took time and was costly. Another indicator of the fentanyl crisis is the increased crime rate on the Reservation. In September, the Tribal Executive Board issued a state of emergency due to the severe increase in juvenile crime. The increase in crime is across all sectors of crime from property crimes to violent crimes, including sexual assaults, kidnapping and murders. Men, women and juveniles are the perpetrators. And virtually every crime can be attributed to fentanyl: Either a person was high when they perpetrated the crime, or they committed the crime to secure money to buy drugs, or they committed an act of violence in retaliation for something related to fentanyl use or distribution. While this crisis is daunting, it is not hopeless, and we must continue to take action to combat it. This is why I appreciate the Committee's attention to this issue. There is no single solution. We must look at this problem from every angle. It is a law enforcement problem, a mental health problem, a social services problem, an economic development problem and a community development problem. Thus, we must craft solutions in all these areas so that we are responding to the cause of the whole sickness and not just the individual symptoms. In the area of law enforcement, we need the Department of Justice and Drug Enforcement Agency to remain strong partners in the investigation and prosecution of drug crimes on the Reservation. I want to commend our U.S. Attorney's Office for the hard work they do. One area where we would like more attention is the level at which a U.S. Attorney is prosecuting a drug trafficking case. It is our understanding that a person must be in possession of more than fifty pills, to be prosecuted for possession with the intent to distribute. As I stated above, many people are possessing 50 to 100 pills simply to fund their own drug habit--and this is true especially of the young people. We must stop these transactions before these people become much larger dealers. In this regard, we need our federal partners to be true partners. In one instance, the DEA knew there was a known high level drug dealer traveling through Fort Belknap, Rocky Boys and Fort Peck and at no time did DEA share this information with the Tribal law enforcement agencies. It seems like to us there is a turf battle related to who is going to bust who, and no one cares about the ultimate victims of these crimes. They just care about who is going to get the major bust. While we need strong federal law enforcement, I must acknowledge that the federal criminal justice system adds additional layers to the problem. Therefore, we need creative solutions from our federal partners. The federal criminal system disproportionately impacts Native people. And due to statutory mandates, federal criminal sentences are lengthy. Data shows increased incarceration is linked with increased recidivism. Moreover, there are no federal BOP facilities in Montana, which means Fort Peck members incarcerated are sent to federal facilities far away from home, community, and support systems. This increases the barriers to successful reintegration into our community after incarceration--thereby aggravating many of the problems that may have led to substance use and incarceration in the first place. While the Residential Drug Abuse Program (RDAP) within the BOP system has proven to be highly effective, it is a lengthy program to complete, and the wait list to get into the program can be very long. This means that it may not be available for individuals unless they are incarcerated for many years and, even then, the program maintains strict eligibility criteria that disqualify many individuals altogether. Again, we need our federal partners to explore creative solutions that can help combat this crisis. What we know is that just arresting and putting people in prison and letting them out when they have done their time does little to combat this crisis. We need Federal prosecutors and the federal court system to expand opportunities for deferred prosecution and programs that emphasize rehabilitation over incarceration--especially for nonviolent simple drug offenses--not major drug dealing. This work must also look to develop programs that provide culturally appropriate treatment and counseling. In addition, our law enforcement officers need greater support. Like every law enforcement agency in the country, we are having difficulty recruiting and retaining officers. There are several reasons this problem is exacerbated in in Indian country. These jobs are dangerous. They frequently involve dealing with the heaviest--even traumatic--situations and events, which would be difficult to witness for anyone but may be especially so for officers who are from our community. Yet, these officers do not have access to adequate benefits and resources to manage the stress of the job. As my story earlier indicated, our officers need specific mental health services and a support system. And they must, at the very least, receive the same benefits--in particular pensions--as other federal officers. Thus, we would ask that Congress take up the Tribal Law Enforcement Parity Act, S. 2695, which would ensure that Tribal Officers operating pursuant to a Self-Determination Act contract, like ours at Fort Peck, would have access to the federal pension program as they would if they were BIA officers. Another area of greater support is the need for additional K-9 Units in Indian country. We had one K-9 unit from Northern Cheyenne for a week and it shut down drug trafficking on the Reservation for that week. We need greater support for the technology that can assist in this work, whether it is additional cameras and monitoring equipment or drones. We have too few officers and they cannot be everywhere they need to be. These tools will help our officers see what is happening on the Reservation. In the area of mental health: We need more mental health and substance abuse treatment services. We remain thankful that Montana adopted Medicaid expansion as this has allowed for greater access to mental health services. We are thankful for the Veterans Administration and its work to provide mental health and treatment services to Native Veterans. We urge Congress to continue to fund the Substance Abuse and Mental Health Administration's programs that allow Tribes to develop treatment and prevention programs and initiatives that are culturally appropriate. We urge Congress to fund the $80 million that was authorized last year specifically to support Native Behavioral Health and Substance Abuse Disorders within our communities. In addition, we need greater support within the Indian Health Service for treatment. Right now, we only have an outpatient treatment facility on our Reservation. While I acknowledge this is more than many Reservations have, it is not enough--we do not have the capacity to provide services to all who need it, and many people on our Reservation need inpatient treatment. Thus, we need additional facilities to provide inpatient treatment to people within our communities. We also voice our support for the President's supplemental funding request of $250 million for the Indian Health Service (IHS), as part of a $1.55 billion total investment in the fight against opioids and addiction in America which was transmitted to Congress on October 25, 2023. This funding is urgently needed to help Tribal communities address the severe impacts of the opioid and fentanyl crisis. Tribal nations and Tribal health systems are innovating when it comes to behavioral health. By focusing on holistic care, traditional healing practices, and indigenous ways of knowing, we have seen remarkable results in Tribal communities for treatment of opioid use. This investment of $250 million will build on these important successes and will save lives for generations to come. We call upon Congress to swiftly enact this funding. In addition, we need the Indian Health Service to better support self-determination on the Reservation. For the last 14 months, the Fort Peck Tribes have sought to assume the Dental and Public Health Nursing programs on the Reservation, and we have encountered nothing but resistance from the Fort Peck Service Unit. It is as if the Indian Health Service wants the Tribes to fail. By assuming the operation of both programs, we will improve the health status on the Reservation, and thereby combat one factor that leads to addiction. We can't do this if the Indian Health Service continues to put up barriers to our assumption of these programs. In the area of social services: We need more foster homes on the Reservation. Far too often when someone loses their children, we have no other option but to place the child in non-Indian homes off the Reservation. This simply continues the cycle of trauma for our children. We also need a real mentorship program on the Reservation. As I said, it was a mentor who made the difference in my life. If we had a sustained, intentional program that matched people with others willing to serve as mentors, I believe this could make a difference. We think the Tiwahe Program within the BIA must be expanded to all Reservations to be able to provide these kinds of services. This program is intended to provide full wrap around support services to families, which is what is needed for families in recovery. In the area of economic development: We need jobs and job training for our people. A job gives a person the means to support their family; it also gives them a sense of purpose and fulfillment, which helps their mental health, as well as the physical and mental health of those in their household. My wife operates a coffee shop on the Reservation. She has made it her mission to provide hope through employment for our youth and now adults are coming to her asking for the opportunity to work. She is making a difference for our people and is an important asset in battling this crisis on the Reservation. Thus, supporting more job training and workforce development programs and entrepreneurs like my wife is critical to this effort. The Department of Labor's Indian Employment and Training Program must be better funded and streamlined to provide better services throughout Indian country. Finally, community development: We need more housing on the Reservation. I want to thank Senator Schatz for his work to reauthorize the Native Housing Assistance and Self-Determination Act. People are living in overcrowded homes, which adds to stress and contributes to addictions. But also, as we learned with the incident at the Tribal Court, fentanyl can easily contaminate a space which places every person living in a home with a user at risk of being poisoned. We need transitional housing for people who have received treatment so that they are not forced back into the same environment that led them into addiction. We also need community facilities that are safe for our children, whether it is more recreational opportunities like our skate park or additional Head Start facilities to lay a strong educational foundation. These facilities are needed across Indian country. My community is resilient--my wife and I are a testament to this. We will survive this latest crisis, but we need additional support from all parts of the federal government, and we need federal agencies to be true partners with us in this effort. We do not need bureaucrats in D.C. telling us how to solve the problem. We already have the blueprint for how to solve this crisis in the way that is best for our communities, which is informed by our experiences on the ground and the successes we have already achieved. What we need is the support and tools to grow our efforts. Thank you for the opportunity to testify on the vitally important issue of addressing this crisis that is facing our communities. I would be pleased to answer any questions and to provide any additional information that may assist the Committee. The Chairman. [Presiding.] Thank you very much, Mr. Kirk. Next, I am pleased to introduce and welcome online Dr. A. Aukahi Austin Seabury, Ph.D., Executive Director and Licensed Clinical Psychologist, I Ola Lahui, Inc. in Honolulu, Hawaii. Welcome, Dr. Seabury. STATEMENT OF A. AUKAHI AUSTIN SEABURY, Ph.D., EXECUTIVE DIRECTOR/LICENSED CLINICAL PSYCHOLOGIST, I OLA LAHUI, INC. Ms. Seabury. Aloha mai kakou. The Chairman. Aloha. Ms. Seabury. Mahalo nui loa, thank you so much for this welcome. In Hawaii, we have a saying about health as being contained in [phrase in Native tongue] the four corners of the body, speaking about the two shoulders and the two sides of the hips as holding the most vital organs. So if this convening is about all of America and the continent, then Hawaii represents the right hip. And so welcome and greetings from that part of the vital organs of the Country. Aloha. It is a pleasure to speak with you. I feel a lot of gratitude for the time today, to be among my brothers, sisters, and cousins throughout the Country who are coming to speak today about the First Nations people. We are in a important time when all of us are being together to speak about the needs of our specific communities is very critical to this moment, especially as the people performing the sharing because of how important it is that we contribute the ways in which our specific traditional wisdom has been a promising factor in recovery for people in healing and well-being. The solutions that come from our traditional cultural practices and well-being have been shown to be so vital to how this is all going to work. So Native-led, Native voices is the sort of resounding call from across all of these parts of the world. So I am appreciative to be able to join the voices in that way. A little bit about the porch that I am speaking from. I am a licensed clinical psychologist by training and run a non- profit behavioral health organization whose focus is on culturally minded, evidence-based behavioral health services for Native Hawaiian, medically underserved, and rural communities. I have spent my career in the service of my people as a therapist, as a healer, specifically as an advocate and program builder, and someone who builds and maintains relationships as a Hawaiian health leader. What I share today is informed by my patients that I serve, the communities that I have listened to and been a part of, and the community partners that I have maintained and their sharing of their experience of this. The parts I probably don't need to spend too much time on is that there are similar factors that affect the First Nations peoples across the world, such as cultural and historical trauma, systemic bias and marginalization that is going on currently, and of course the social determinants that directly impact all of our health outcomes, including economics and housing. In Hawaii specifically we have a really big housing crisis occurring at the moment as well as very significant impacts and threats to our freshwater sources. All of those things being factors that predict the higher rates of substance use and misuse in the Native community here probably in some ways probably parallel what occurs in other First Nations. And those trends tend to be over time. If fentanyl follows the same path as opioids have and meth have before that, then what we tend to see is that we follow behind the continent a few years. So where everyone else is at what I am hoping is at the peak of the fentanyl, the impacts that you are at that sort of crisis state, in Hawaii we are seeing that increasing and rising trend. I don't believe that we are yet at the peak that we will see for this particular substance. So if we are to believe that it is going to follow the same path, that is what we can predict, because we saw cases initially among individuals who have acquired fentanyl for prescriptive purposes, but then it was part of their care plan, and that misuse and that was following along with a lack of information about the risks of its use, and then of course, into that sort of misuse category. And then seeing fentanyl as mixed in with other substances as a street drug, that is following behind but not reached its sort of influx, at least in my experience in the communities that I work in. It is not yet at that peak, widely accessible utilization component just yet. So we are not seeing as many. Now, we are seeing opioid deaths, of course. But the rise, we are still on that increasing arc at this time. So my hope is that participating in this conversation today, we are talking in two categories. One of course is about preventive strategies to help us not follow the way that each of the other substances has followed across the Country from the continent to us in Hawaii, to prevent that and sort of stave it off. Because as you can imagine, our health system is finite, we are an isolated island nation, and in that way that we have the substance services that are available; they are all that exist. So it is vital for us. So with respect to prevention and intervention, there are some very specific things that I will focus on. Those are that for some of our communities, standard, evidence-based western practices work fine. But for everybody else, that something else seems to give real promise in the use of cultural practice as part of healing and recovery. Those programs that have emphasized those things seem to have really wonderful outcomes. We even have some third party insurers that have been experimenting with models for how to fund it. So with respect to an ask of this Committee, it is to support those initiatives that find ways to fund through Medicare, Medicaid funding, because our third party insurers tend to follow those of the leaders, that they fund those mechanisms for funding traditional cultural practices as a vital aspect of healing for our communities. I would say that is probably the greatest ask that I would have of this Committee with respect to different, any other requests that have already been made with respect to supporting prevention initiatives that include education or health providers more generally, both in the risks of inappropriate use and of course misuse of fentanyl, as well as the value add and necessity of culturally informed care as well as the use of traditional cultural practices for healing and well-being as part of the inclusive health system, instead of as sort of viewed as marginal the way that it has been historically. For our community in particular, our folks would much rather see a traditional healer than a western medical doctor, especially our men. So in that way that this could be legitimized and valued in our community we need that training for our health system and providers alongside support and funding mechanisms for the programs that are already using cultural practices as healing. [The prepared statement of Ms. Seabury follows:] Prepared Statement of A. Aukahi Austin Seabury, Ph.D., Executive Director/Licensed Clinical Psychologist, I Ola Lahui, Inc. Welina me ke aloha mai ke one kaulana o Kakuhihewa. Greeting with aloha from O`ahu, Hawai`i, the famous sands of the great chief Kakuhihewa. It is with great respect that I come before you today to provide information, insight, and perspective on the impacts of Fentanyl and other substance use on Native Hawaiians in the communities that I serve. A little about the porch that I am speaking from. I am a licensed clinical psychologist and director of I Ola Lahui, a nonprofit behavioral health organization that provides culturally-minded, evidence-based behavioral health services to Native Hawaiian, medically underserved, and rural communities. I have spent my career in the service of my people as a therapist, healer, advocate, community builder, program developer, pilina relationship maintainer, and Hawaiian health leader. What I share is informed by direct patient care, community listening and observation, and feedback from other community health partners. Due to similar factors affecting other first nations peoples of the world including cultural and historical trauma, systemic bias and marginalization, and the social determinants directly impact our health outcomes including economics and housing, Native Hawaiians experience high rates of substance use and suffer the more serious consequences of misuse including judiciary involvement and incarceration, loss of social support and global impacts on families, and health impacts that result in poor functioning, heavy reliance on health system resources, and shortened lifespan. What we are seeing with respect to Fentanyl seems to follow a pattern similar to what we have seen with other substances over the past several decades where the extent of use in Hawai`i tends to lag a few years behind what is occurring on the continent. Cases of misuse were initially just seen among individuals who had acquired Fentanyl initially for a prescription purpose that then changed into misuse, dependence, and the whole host of known health risks. In the typical pattern, increased availability and use as a street drug is following, although use in communities I serve does not seem to have reached the high rates that are seen elsewhere on the continent yet. The ``yet'' there is the critical note. Access, cost of the drug, and its addiction potential will likely impact the speed with which this drug will flood our community. Looking at this as an opportunity to intervene sooner and reduce the scope of impact overall, the question of best practices for Native communities becomes central to the conversation. It has long been recognized in substance use treatment that interventions that don't just address substance avoidance, but include healing, a spiritual component, and support for rebuilding a life are effective in recovery and relapse prevention. For some portion of our community, conventional western best practices work fine. For that portion, access and affordability of care are the main predictors of success. I will focus my comments here on the rest of our community, and I would argue the greater portion, who need something beyond what is conventionally offered. This ``something beyond'' is the incorporation of traditional Native Hawaiian cultural practices and worldview. Given the high occurrence of cultural and historical trauma, Adverse Childhood Experiences, and current systemic factors, an approach that focuses on healing and restoration of balance is critical to recovery. Hawaiian cultural practices provide stability, focus, and growth opportunities through the learning process that is more easily accepted than traditional western substance use treatment approaches. They show a person how to live a life instead of just how to avoid the life they used to have which was solely focused on substances. For this type of care to be broadly available requires support in two areas. The first is prevention. Funding that supports developing healthy relationship skills, leadership development, and self-efficacy in youth is a critical deterrent for substance misuse pathways. Policies and resources that educate prescribing health providers, limit access to the substance, and make it less available as a street drug further support this effort. Looking further upstream, funding and initiatives to address the desperate housing shortage and affordability, safety of our land, water, and natural resources, and support for native voices in leadership will make a significant impact in this and other health areas for years to come. The second type of support needed is for intervention. Currently, traditional native cultural practices are not a universally reimbursed service as part of Medicare/Medicaid plans. This limits the capacity of already underfunded substance use programs to provide the healing services needed by this community. They provide the care when and how they can, given these constraints, making it very difficult to sustain and offer more broadly. Some promising efforts are occurring in our state related to reimbursement for cultural practices that could serve as a model. An addition support in this area is needed for health provider trainings related to knowledge of traditional healing as a valid treatment approach and the incorporation of Hawaiian worldview and culture into health services. Increasing the number of providers with these competencies will improve health and well being outcomes overall for this and other Native communities. Mahalo for your time. The Chairman. Thank you, Dr. Seabury. Mahalo. Mr. Gettis, please proceed with your testimony. STATEMENT OF ERIC M. GETTIS, SENIOR VICE PRESIDENT OF BEHAVIORAL HEALTH, SOUTHEAST ALASKA REGIONAL HEALTH CONSORTIUM; ACCOMPANIED BY COREY P. COX, M.D., CLINICAL DIRECTOR FOR ADDICTION SERVICES Mr. Gettis. Chairman Schatz, Vice Chair Murkowski, and members of the Committee, and those who have spoken so expertly and passionately today, thank you for the opportunity to testify on the issues of fentanyl, the opioid crisis, and the impact on Native communities. My name is Eric Gettis. I serve as Senior Vice President for Behavioral Health at Southeast Alaska Regional Health Consortium, known as SEARHC. SEARHC is an Alaska Native- controlled tribal health organization. We are authorized by the resolutions of 15 federally recognized Alaska Native tribes to administer a comprehensive health care delivery for the Tlingit, Haida, Tsimshian and other residents of Southeast Alaska. Founded in 1975, SEARHC is one of the oldest and largest Native-run health organizations in the Nation with a service area stretching over 35,000 square miles. SEARHC is accredited by the Joint Commission and operates two critical access hospitals, two long-term care facilities, and 22 rural Community Health Centers. The decades-long opioid crisis has impacted communities across the United States and multiple studies, confirmed here today, show that Alaska Native and American Indian people are disproportionately impacted by opioid use, opioid related overdose, and opioid related deaths. The Native Communities of Southeast Alaska continue to suffer through the heartache and despair brought about by substance use. SEARHC has addressed opioid use disorder over the past 10 years by significantly reducing opiate prescriptions, promoting holistic interventions for pain management, implementing harm reduction services and activities, and providing buprenorphine and naltrexone throughout the region. Recognizing more services were needed, in February 2022 SEARHC opened an Opioid Treatment Program, or OTP, in Juneau. OTPs are the only facilities that offer patients all three forms of medication for opioid use disorder: methadone, buprenorphine, and naltrexone. No other setting is permitted to provide methadone. OTPs are critical to reducing overdose deaths and providing lifesaving addiction treatment. In the past year, SEARHC added two additional OTPs; in Sitka and in Klawock. Before these programs opened, those with opioid use disorder had to physically move hundreds of miles away, to Anchorage or Seattle, to engage in treatment. Our programs have dramatically improved people's lives, yet serious challenges remain. Fentanyl has rapidly replaced prescription opiates and heroin as the primary driver of opioid misuse in Southeast Alaska. Fentanyl is profoundly potent, quickly physically addictive, easily attainable, and has a very short half-life leading to escalating quantities of use and lethality. This has led to yet another widespread wave of opioid use resulting in more overdoses and preventable deaths. We consistently find patients developing dependence on fentanyl over relatively short periods of time. It is essential that treatment and medication for opioid use disorder be available and expanded. The COVID pandemic allowed several long-standing OTP regulations to be eased. These revised rules improved treatment availability by permitting telemedicine and allowing prescribers more clinical discretion for some methadone take-home administration. SEARHC wholeheartedly supports maintaining these relaxed emergency regulations. However, there are efforts around the Country seeking to ease methadone regulations even further. We urge great caution with these proposals and recommend that methadone remain part of a comprehensive opioid treatment program. Access to and availability of harm reduction services and overdose reversing medications is paramount for saving lives. Oftentimes these medication supplies are limited. Additionally, preconceived beliefs about substance use and associated stigma prevent harm reduction services from being accepted in some communities. Changing our words and descriptions, helping communities reframe beliefs, and realizing that people can and do recover are all essential components to battle stigma. Finally, as a nation, we must recognize the necessity of developing a strong behavioral health workforce. Native communities across Alaska continually struggle with inadequate staffing. Behavioral health specialists and peers have long operated in an under-resourced system that discourages many from entering or remaining in the field. Effective treatment requires qualified compassionate professionals grounded in culturally responsive practices and relationships. These are the fundamental elements that foster healing and recovery. In conclusion, SEARHC truly appreciates the opportunity to speak before the Committee today on this very important issue. Thank you. [The prepared statement of Mr. Gettis follows:] Prepared Statement of Eric M. Gettis, Senior Vice President of Behavioral Health, Southeast Alaska Regional Health Consortium Chairman Schatz, Vice Chair Murkowski, and members of the Committee, thank you for the opportunity to testify today on the issues of Fentanyl, the opioid crisis, and the impact on Native communities. My name is Eric Gettis. I serve as Senior Vice President for Behavioral Health at Southeast Alaska Regional Health Consortium (SEARHC). SEARHC is an Alaska Native-controlled tribal health organization. We are authorized by the resolutions of 15 federally-recognized Alaska Native tribes to administer a comprehensive health care delivery system for the Tlingit, Haida, Tsimshian and other residents of Southeast Alaska under a Self-Governance Compact with the Indian Health Service entered into pursuant to Title V of the Indian Self-Determination Act. Founded in 1975, SEARHC is one of the oldest and largest Native-run health organizations in the Nation with a service area stretching over 35,000 square miles. SEARHC is accredited by the Joint Commission and operates two critical access hospitals, two long-term care facilities, and 22 rural Community Health Centers. The decades long opioid crisis has impacted communities across the United States and multiple studies have confirmed that Alaska Native and American Indian populations are disproportionately impacted by opioid use, opioid related overdose, and opioid related deaths. The Native Communities of Southeast Alaska continue to suffer through the heartache and despair brought about by substance use. SEARHC has addressed opioid use disorder over the past 10 years by significantly reducing opiate prescriptions, promoting holistic interventions for pain management, implementing harm reduction activities, and providing buprenorphine and naltrexone throughout the region. Recognizing more services were needed, in February 2022 SEARHC opened an Opioid Treatment Program (OTP) in Juneau, Alaska. OTPs are the only facilities that offer patients all three forms of medication for opioid use disorder: methadone, buprenorphine, and naltrexone. No other setting is permitted to provide methadone. OTPs are critical to reducing overdose deaths and providing lifesaving addiction treatment. In the past year, SEARHC added two additional OTPs; in Sitka, Alaska, in March 2023, and in Klawock, Alaska, in October 2023. Before these programs opened, those with opioid use disorder had to physically move hundreds of miles away, to Anchorage or Seattle, to engage in treatment. Our programs have dramatically improved people's lives, yet serious challenges remain. Fentanyl has rapidly replaced prescription opiates and heroin in Southeast Alaska as the primary driver of opioid misuse. Fentanyl is profoundly potent, quickly physically addictive, easily attainable, and has a very short half-life leading to escalating quantities of use and lethality. This has led to another widespread wave of opioid use resulting in more overdoses and preventable deaths. We consistently find patients developing dependence on Fentanyl over relatively short periods of time. It is essential that treatment and medication for opioid use disorder be available and expanded. The COVID pandemic allowed several long-standing OTP regulations to be eased. These revised rules improved treatment availability by permitting telemedicine and allowing prescribers more clinical discretion for some methadone take-home administration. SEARHC wholeheartedly supports maintaining these relaxed emergency regulations. However, there are efforts around the country seeking to ease methadone regulations even further. We urge great caution with these proposals and recommend that methadone remain part of a comprehensive OTP. Access to and availability of harm reduction services and overdose reversing medication is paramount for saving lives. Oftentimes these medication supplies are limited. Additionally, preconceived beliefs about substance use and associated stigma prevent harm reduction services from being accepted in some communities. Changing our words and descriptions, helping communities reframe beliefs, and realizing that people can and do recover are all essential components to battle stigma. Finally, as a nation, we must recognize the necessity of developing a strong behavioral health workforce. Native communities across Alaska continually struggle with inadequate staffing. Behavioral health specialists and peers have long operated in an under resourced system that discourages many from entering or remaining in the field. Effective treatment requires qualified compassionate professionals grounded in culturally responsive practices and relationships. These are the fundamental elements that foster healing and recovery. In conclusion, SEARHC truly appreciates the opportunity to speak before the Committee today. Thank you. Senator Murkowski. [Presiding.] Thank you, Mr. Gettis. Our last witness will be Dr. Soto. Thank you for joining the Committee today. STATEMENT OF CLARADINA SOTO, Ph.D., ASSOCIATE PROFESSOR, DEPARTMENT OF POPULATION AND PUBLIC HEALTH SCIENCES, KECK SCHOOL OF MEDICINE, UNIVERSITY OF SOUTHERN CALIFORNIA Ms. Soto. Thank you for having me. Before I begin, I would like to make a correction that I am from the University of Southern California. I know it is a rival to UCLA, but that is okay. Actually, my daughter is there at UCLA. I am Claradina Toya, or Soto-Toya. I am an urban Indian born and raised in the east bay area of California. I am Navajo from my mother's side and Jemez Pueblo from my father's side. Thank you, Chairman Schatz, Vice Chairman Murkowski, and all the members of the Senate Committee on Indian Affairs for this opportunity to address to you today about the fentanyl crisis that is killing my people. In my written testimony, I offer information about this critical issue, the work that we are doing specifically in California reaching tribal and urban Indian populations, and several policies that fall within the scope of your Committee's duty to address the issues affecting our Native people today. I would like to mention that the work here in California, our populations are very unique and diverse. We have the largest American Indian and Alaskan Native population of any other State. We have 109 federally recognized tribes in California, as well as numerous State recognized tribes and non-federally recognized tribes, plus a large urban Indian population. Today I would like to discuss how American Indian and Alaska Native communities face unique challenges and vulnerabilities that have contributed to the opioid crisis. I would like to offer four recommendations to the Committee. This is based on our community engaged research work with community organizations, tribal governments, Indian health clinics and our community advisory boards. We understand that effective change requires a deep understanding of both the challenges faced by and strengths inherent to our Native communities. I would like to note, my recommendations may vary by community and when implementation is considered, it should be decided by each community. My first recommendation, and this has been shared by others, is to increase the accessibility, quality and sustainability of residential detox and sober living facilities for tribal and urban Indian populations. We need residential treatment programs in counties and tribal communities with high opioid use and overdose deaths. Discussions with our leaders and stakeholders must immediately happen to expand Native- specific and culturally centered services, especially among regions where no recovery services exist. We must expand medication assisted treatment, MAT, also known as medication for opioid use disorder. Yes, this is use of medication, in combination with counseling and behavioral therapy. That is essential to support and promote opioid use recovery. So as we think about this critical infrastructure, this is important in the treatment life cycle for opioid use disorders. So there is a need for detox and sober living homes serving our Native community. One of the critical components missing from the Indian health care network, particularly here in California, is detox, that coordinates on a system level with Indian health clinics. When individuals graduate from residential or other outpatient treatment programs, sober living and traditional housing for American Indian and Alaska Natives are critical to providing a safe culturally centered recovery experience for individuals to integrate recovery tools into their home and community settings. My second recommendation is to integrate cultural modalities into recovery treatment programs. This includes but is not limited to healing ceremonies such as prayers, smudging, sweat lodges, and meeting with traditional healers that offer safe, sober, and supportive spaces to gather and express traditional ways of healing. Studies have found that many Native community members do strongly favor traditional healing over strict medication use, and I have indicated that healing begins with culture, and with practices that are grounded in our traditional way of life. Access to these approaches and practices and healing for patient wellness is one of the most critical junctures in the recovery cycle of change. This is very apparent. My third recommendation again as also mentioned by others is to focus on our Native youth in urban and rural areas, with community based and culturally relevant opioid use prevention and treatment services. According to CDC, in 2021, Native adolescents experienced the highest overdose deaths from fentanyl due to the increased availability of illicit fentanyl, again highlighting the need for harm reduction education and greater access to naloxone and mental health services. Specifically, there is a need for youth rehab programs to treat and reduce opioid use disorders. We must use family cohesion, cultural and traditional practices, and culturally based youth programs as protective factors against our youth engaging in opioid substance use. My fourth recommendation, and last, is to address the challenges of collecting reliable data for our populations to ensure accurate demographic data and respect the cultural and ethnic identities of our Native people. All too often, we are racially misclassified, especially in urban areas, where we are assumed to belong to another ethnicity based on appearance. We are not invisible, and we must improve our data collection methods and collaborate with tribal governments and Native organizations that are working on these data issues to advocate for policies that provide data collection and representation of our Native communities. This will help us determine our impact in addressing the opioid epidemic in Indian Country. Thank you so much for your time and this opportunity to share. [The prepared statement of Ms. Soto follows:] Prepared Statement of Claradina Soto, Ph.D., Associate Professor, Department of Population and Public Health Sciences, Keck School of Medicine, University of Southern California Chairman Brian Schatz, Vice Chairman Lisa Murkowski, and all members of the Senate Committee on Indian Affairs, thank you for the opportunity to address you today about the fentanyl crisis that is killing my people. Fentanyl in the American Indian and Alaska Native (AIAN) community is a public health crisis. I offer information below about this critical issue, the work that we are doing, and several policy recommendations that fall within the scope of your committee's duty to study the issues affecting the AIAN people and report recommendations to the Senate. The Obligation There are 574 federally recognized Tribal Nations distributed across Turtle Island; there are also stateonly-recognized Tribes in 16 states, \1\ Tribes without any official recognition, and AIAN people who are not enrolled members of any Tribal nation. These non-federally recognized Tribes and individuals do not receive federal benefits or have the same political status as federally recognized Tribes. Below, I describe the factors impacting my people as they relate to health disparities around the opioid crisis, and I explain the federal responsibility to address these concerns. Although we once knew how to be healthy, living in balance and harmony, we have experienced centuries of violence, discrimination, and disparity resulting from settler colonialism and its associated harms. Sovereign AIAN nations negotiated treaties with the federal government over a period of nearly 100 years (1774-1871), \2\ trading ``400 million plus acres of land and our way of life and our very lives for peace and for the provisions that are provided in the treaties and a basic human dignity of having basic services for AIAN people.'' \3\ Invaded by European conquerors and ravaged by new diseases such as smallpox, my people traded their land--their connection to the earth, their source of wealth, life, food, water, spirituality, and medicine-- in hopes of receiving health and public health services (among other treaty obligations). In turn, the United States government took upon itself the federal trust responsibility, ``moral obligations of the highest responsibility and trust'' \4\ to be provided to the Indian Nations. Critical aspects of AIAN policy were created and affirmed in the Marshall Trilogy (early 1800s, identifying Tribes as ``domestic dependent nations''), the Snyder Act (1921), and the Indian Self Determination and Education Assistance Act (Public Law 93-638) (1975), \5\ as well as in more recent executive orders 13175 (2000) and 13647 (2013). \6\ However, access to health care is limited and has been complicated by federal policies. Congress initially funded Indian health care and defined the federal government's responsibility in the Snyder Act, \7\ but termination and relocation policies in the 1950s and 1960s impeded the ability of many to access care by stripping Tribes of their federal recognition and moving AIANs off of Tribal reservations into urban areas. \8\ Many Tribes had their federal recognition restored, but others have not. \9\ The broadening of the Snyder Act under the Indian Health Care Improvement Act of 1976 ensured the provision of health care specifically for AIAN individuals. \10\ But although the Indian Health Service (IHS), an agency within the Department of Health and Human Services, is intended to provide direct medical and public health services, access to health care within California can be complicated because IHS facilities in California are limited. \11\ The federal government has not met its obligations to the Tribes. Despite the obligations the US government has to provide health services to members of Tribal nations, IHS is not an entitlement program like Medicaid, and its spending comes out of discretionary funding appropriations; IHS is currently funded at 60 percent of need. \12\ As described in the US Commission on Civil Rights 2018 report, titled ``Broken Promises: Continuing Federal Funding Shortfall for Native Americans,'' the Indian Health Service is significantly and disproportionally underfunded, covering only ``a fraction'' of the physical and mental health needs of Tribal and Urban Indians and failing to increase the budget to keep up with population growth and rising costs; for example, in 2016, IHS allocated only $2834 per person compared to $9,990 nationwide. \13\ Lastly, in addition to the federal obligations the US government owes to federally recognized Tribes, I argue that there is a separate moral responsibility to make restitution to all AIAN communities, which have been so harmed by federal policies and other forms of mistreatment, violence, and discrimination. For example, historical and intergenerational trauma are frequently cited as reasons contributing to the use of substances; we know that people use harmful substances to cope with pain and trauma. Since so much of this trauma was inflicted directly or indirectly by federal policies such as relocation, termination, and boarding schools, as discussed more in detail below, I argue that the federal government is directly responsible, at least in part, for the dire rates of substance use in AIAN communities today. \14\ The Opioid and Fentanyl Crisis National data The United States has been experiencing an opioid and fentanyl crisis. The Centers for Disease Control and Prevention (CDC) Injury Center reports that nearly 645,000 people died due to overdoses between 1991-2021, with three waves of overdoses starting respectively in the 1990s, in 2010, and in 2013. \15\ Figure 1 below, from the same source, depicts how significantly deaths have spiked since 2013 due to both 1.) all opioid overdoses and 2.) synthetic opioid overdoses specifically. Table 1 Overdose Death Rates Involving Opioids, by Type, United States (deaths per 100,000 people) ------------------------------------------------------------------------ Synthetic opioid analgesics Any opioid Any opioid excluding methadone ------------------------------------------------------------------------ 2.9 0.3 1999 5.9 0.9 2006 6.8 1.0 2010 7.4 0.8 2012 9.0 1.8 2014 13.3 6.2 2016 14.6 9.9 2018 21.4 17.8 2020 ------------------------------------------------------------------------ Fentanyl is a synthetic opioid up to 100 times stronger than morphine that can be prescribed pharmaceutically or created illegally; most overdoses are related to the illegal form, which can be mixed into other illegal drugs such as heroin and meth, resulting in dangerous effects due to its strength. \18\ For example, the National Institutes of Health (NIH) National Institute on Drug Abuse (NIDA) reports that 20 percent of benzodiazepine-related deaths included fentanyl in 2015, increasing to 70 percent just six years later. \19\ The COVID pandemic only exacerbated the opioid crisis. While fentanyl resulted in 53,480 preventable deaths in 2020, this increased 26 percent to $67,325 only one year later, in 2021. \20\ Nationally, AIAN communities face significant disparities in the opioid crisis. In 2020 and 2021, AIANs experienced the highest death rates from drug overdoses compared to all other racial and ethnic groups, as shown in the graphic below, even though rates rose for all groups in 2021. \21\ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] California data Fentanyl-related deaths in California have also increased exponentially between 2016 and 2021, as shown in the figure below from the California Department of Public Health (CDPH) Substance and Addiction Prevention Branch. \22\ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Preliminary 2022 data from the California Overdose Surveillance Dashboard estimates 6,959 deaths related to any opioid overdose and 6,095 specifically related to fentanyl; additionally, 21,316 overdoses are estimated to have led to an emergency department visit. \23\ According to the California Department of Justice, the 2022 data above shows a quick and significant rise from 2020, when nearly 4,000 deaths were estimated to be fentanyl related. \24\ While much of the data focuses on overdose deaths, it is important to remember that these numbers show only a fraction of the impact of addiction. Each individual and their loved ones may struggle with addiction and its challenges for years before an overdose occurs, if it occurs. These grim statistics show the terrible consequences of the rise in fentanyl. To help put this into perspective, more people died in California in 2021 from fentanyl-related drug overdoses than from all car accident deaths, with certain groups--men, Black and AIAN racial groups, and 30-34-year-olds--disproportionally affected. \25\ AIAN health disparities overall Considering AIAN policies and historical and social factors described above, it should be unsurprising that AIAN communities face extensive disparities in a variety of health issues around both diagnosis and outcome. This section describes the challenges AIAN face in overall health and how these existing disparities interact with and lead to OUD/SUD disparities. According to IHS, the life expectancy of AIAN people is 5.5 years below the average, and the AIAN community faces disparities in mortality from many infectious and chronic diseases (e.g., diabetes, influenza), from violence (e.g., suicide, assault/homicide), and from drug- and alcohol-induced deaths. \26\ These disparities arise not only from the underfunded health system but also from a wide range of social and historical determinants of health, historical trauma and other forms of trauma, the losses experienced by the AIAN community, factors such as education level and income, geographic isolation and technological access challenges, high rates of interpersonal violence and abuse, health care access challenges, and limited access to culturally and linguistically appropriate services. Moreover, the significant underfunding and access to health care issues discussed above and other inequities (e.g., the reservation system, housing insecurity, poverty) help perpetuate the cycles of family dysfunction, such as abuse, domestic violence, and adverse childhood experiences, that have harmed AIAN families. Urban Indians As mentioned above, in the 1950s and 1960s, federal relocation policies pushed AIAN to move into urban areas. Additionally, many AIANs also moved to urban areas voluntarily for better economic, educational, and housing opportunities as well as improved access to health care and other services. Today, the combination of these factors has led to 87 percent of the AIAN population living in urban areas today as a diverse and inter-tribal community according to the 2020 census. \27\ Many Urban Indians have made California cities their new homes; ``1 in 7 American Indians in the United States lives in California and 1 in 9 American Indians in the United States lives in a California city.'' \28\ Although urban areas theoretically offer more geographical access to healthcare and other services, in fact, Urban Indians have less access to the IHS and Tribal services they are entitled. \29\ Urban Indians continue to face disparities in many different areas compared to other ethnic groups. For example, Urban Indians experience 54 percent higher rates of diabetes, 126 percent higher rates of liver disease and cirrhosis, and 178 percent higher rates of alcohol-related deaths compared to general population. \30\ Some small studies have reported up to 30 percent of all AIAN have depression, with strong reasons to believe that the number is even higher among AIAN living in cities. \31\ The unemployment rate of Urban Indians is 11.2 percent compared to 4.9 percent of non-Hispanic whites in urban areas. \32\ Some cities have reported poverty rates among Urban Indians of 30 percent to 50 percent. \33\ The numerous poor health outcomes, economic challenges, sense of cultural loss, assimilation, and historical trauma has led to a much more challenging life experience for Urban Indians compared to the general population. AIAN communities: reasons for opioid use AIAN communities have been and continue to be disproportionately affected by health disparities related to substance use and the opioid epidemic. Substances have been used as a ``tool of genocide'' against the AIAN people since before the United States was a country; as early as 1749, Benjamin Franklin wrote about the plan and blessing of ``Providence'' to annihilate ``these savages'' with alcohol to get rid of them so colonists could capture their land. \34\ Many complex factors go into the high rates of substance use in the AIAN community, to include historical trauma, lack of resources, lack of opportunity, isolation, discrimination, loss of culture and land, loss of identity, feelings of hopelessness, and numerous other factors. Unfortunately, the use of substances perpetuates this cycle by setting up individuals and families for further trauma, such as adverse childhood experiences, which may increase the likelihood of future substance use. As one of our study participants stated, ``Hopelessness. I mean, that's pretty much rock bottom. I think that if you have a plan, strong backing, and a sense of purpose, you will steer clear of those things. But if you don't, you will fall prey to making bad decisions.'' This quote summarizes some of the challenges AIAN face that contribute to OUD/SUD. The following statistics come directly from our team's original research, which is discussed further below: Eight of 19 urban AIAN individuals experiencing homelessness attributed their substance use to trauma in the form of family separation or loss. A specific challenge among female participants with children was navigating child protective services, losing custody of their children, and coping with these lifechanging and traumatic situations. Participants mentioned coping with family loss such as death or separation. One participant mentioned drinking to cope with their mother's passing. \35\ Intergenerational trauma was a common theme among the 19 homeless participants. Boarding school was identified as a main factor for intergenerational trauma among their parents, which led to substance use in the household growing up and subsequently their own substance use. Some participants mentioned they were raised by relatives because their parents were unable due to their substance use. National AIAN data According to recent data from the Centers for Disease Control and Prevention, AIANs experienced the second highest rate of overdose from all types of opioid use in 2017 (15.7 deaths/100,000 persons) when compared to other racial and ethnic groups. \36\ In 2017 and 2018, AIAN communities experienced a rapid increase in opioid and synthetic opioid overdose mortality rates. AIAN communities currently have the second highest rate of opioid overdose when compared to other racial and ethnic groups. \37\ These disparities have only been magnified by the COVID-19 pandemic over the last several years. According to the Indian Health Service (IHS), fentanyl and other synthetic opioids were associated with increases in opioid overdose deaths among AIANs during the COVID-19 pandemic. Between January to September 2019 and January to September 2020, AIAN drug overdose deaths increased disproportionately compared to deaths among non-Hispanic Whites, Hispanics, and Asians. \38\ In 2019, 22.3 AIAN overdose deaths were reported per 100,000 persons, and in 2020, reported overdose deaths increased to 29.8 per 100,000; although this number includes overdoses from several drugs, most of these deaths involved opioids. \39\ Limited access to care and organizational closures during the COVID-19 pandemic contributed to these increases, alongside increased stress and disruptions in people's lives (e.g., work schedules, stay-at-home orders) were also associated with increases in opioid deaths. \40\ California AIAN data California has the largest AIAN population in the US, with over 772,394 AIAN individuals (approximately 2 percent of the total California population). \41\ There are 109 federally recognized Tribes in California, as well as numerous state-recognized Tribes and non- federally recognized Tribes. \42\, \43\ Additionally, there are an estimated 78 state Tribes petitioning for federal recognition \44\. AIANs in California, including California Indians and AIANs who relocated from other states, are dispersed throughout rural and urban areas around the state, primarily due to federal policies relocating AIANs from reservations to urban areas. \45\ This data clearly shows the high need within California's Native communities. According to the California Rural Indian Health Board, Inc. (CRIHB) California Tribal Epidemiology Center (TEC), California AIANs experience the highest rate of opioid overdose deaths and have borne the greatest burden of suffering from opioid deaths since 2006, but even these numbers are growing: from 2019 to 2020, there was a 39 percent increase among AIANs opioid-related overdoses nationwide. \46\ For fentanyl-related overdoses specifically, Figure 4 below shows the rising rates of fentanyl among all California racial and ethnic groups but highlights that AIANs are the hardest hit, and Figure 5 visually depicts the counties where AIANs have been most greatly impacted by fentanyl deaths. \47\ However, the same source shows that both Black and White patients surpass AIAN for fentanyl overdose emergency department visits and hospitalizations both, perhaps due to challenges around equal health care access. [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Data Challenges Obtaining comprehensive and accurate data about the AIAN population is a challenge for many complex reasons. As cited in the California Consortium for Urban Indian Health's 2020 report, ``A Profile of Data Availability on American Indians & Alaska Natives in California,'' there is extensive documentation in the literature regarding ``data capacity issues which under-report health conditions and causes of death'' among this population. \48\ The report elaborates that AIAN, are frequently subject to racial misclassification, especially in California urban areas where they are assumed to belong to another ethnicity based on appearance; being wrongly classified as non-AIAN 30- 60 percent of the time often renders this group ``invisible,'' for example, when AIAN data is not reported due to a small sample size. Compounding this issue is the fact that the AIAN population is already proportionally small compared to other racial and ethnic groups; as cited earlier in this document, AIAN make up only around 2 percent of California. Another consideration is that a full 61 percent of AIAN individuals reported identifying with multiple racial groups on the 2020 census, the highest rate of any other group, compared to only 13 percent of White, 12 percent of Black, and 17 percent of Asian respondents. \49\ This is particularly concerning, the same source elaborates, since individuals of multiple races are often combined into one category regardless of racial background (i.e., mixed individuals of any races in combination would also be part of this category), further rendering the unique needs of the AIAN population invisible. This is so severe that it has been called a ``data genocide.'' Furthermore, there are challenges collecting reliable data among AIAN due to unique considerations such as high mobility, variations in definitions of AIAN groups, residences in extremely rural areas or without designated addresses, and challenges around question phrasing and survey completion, among others. \50\ For example, some questions include different definitions (e.g., are indigenous Central American populations included?) and terms (e.g., ``Native American'' vs. ``AIAN'' or ``indigenous'') or ask for specific Tribal affiliations. Challenges also arise around identity vs. official Tribal enrollments, eligibilities for membership in varying Tribes, and the differing political statuses of federally vs. staterecognized or unrecognized Tribal nations. CCUIH also identifies challenges around collaboration and data sharing, such as limited access to data among AIAN organizations and non-Native data not being affirmed by Urban Indian organizations. \51\ Even though TECs are designated ``public health authorities,'' \52\ there may be misunderstandings or lack of knowledge about this that lead to reluctance to share data. Figure 7 below, from a presentation at the NIHB 2023 Tribal Health Equity Data Symposium created by the Northwest Portland Area Indian Health Board, groups these issues into three primary categories: data access, data collection, and data analysis. \53\ The presentation also includes a very telling quote that speaks to the cycle of invisibility from a 2019 journal article published by Michelle Connolly (Blackfeet/ Cree) et al.: ``It is not clear if invisibility results from lack of data or if lack of data leads to invisibility.'' These challenges are extremely complicated, and there may be factors even beyond these mentioned here, such as concerns about data sovereignty, collaboration challenges, poor relationships, past negative experiences, structural issues, state vs. federal considerations, and others. Whatever the specifics, it is clear that accurate data is critical to reliably gain a picture of AIAN issues and gain the funding and support needed to address them. [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Our Work and Findings I lead the Initiative for California American Indian Health Research and Evaluation (I-CAIHRE) at the University of Southern California (USC). Our mission is to improve the lives of individuals in California's AIAN communities by conducting high-quality research that is informed by and responsive to the community's needs and perspectives. We understand that effective change requires a deep understanding of both the challenges faced by and strengths inherent to our Native communities, which can only be achieved through gathering relevant, community-informed data. Therefore, we are committed to providing research that incorporates community perspectives and supports meaningful, sustainable improvements in health and well-being for AIAN communities in California. The bulk of I-CAIHRE's work focuses on substance use and commercial tobacco. Our substance use work is funded by DHCS [contract # 17- 94722], through the California Opioid State Targeted Response (STR) to the Opioid Crisis Grant from the Substance Abuse and Mental Health Services Administration (SAMHSA) as part of the state's Tribal Medication-Assisted Treatment (MAT) Project. Details about our past and current projects are available on our website: https://pphs.usc.edu/center/icaihre/with the substance use- related work falling under the Tribal Medication-Assisted Treatment (TMAT) sub-section: https://pphs.usc.edu/center/i-caihre/tribal- medication-assisted-treatment-projects/. Several highlights and the associated findings and recommendations are available below. Addressing the Opioid Crisis in American Indian & Alaska Native Communities in California: A Statewide Needs Assessment: \54\ This 2019 report publishes research conducted using a participatory action approach to gather community perspectives from Tribal and Urban Indians across the state. A total of 279 AIAN individuals (including 83 youth) participated in key informant interviews or focus groups. They indicated a high presence of substances in AIAN communities, including a shift from prescription drugs to heroin. This research found that youth have access to a wider range of substances than in the past, and substance use is common within families. Community and individual stressors were found to be risk factors for opioid use, while historical and intergenerational trauma drive mental health issues and substance use. Barriers to treatment were found to include stigma and structural barriers such as cost, insufficient insurance coverage, unstable housing, fragmented service delivery, and a lack of residential treatment facilities. Youth prevention programs and services were found to be lacking, and recommendations arose around enhancing prevention and recovery services overall. Another critical finding was the need for culturally centered activities and treatment/ preventive services to promote whole-person development and maintain community resiliency. In summary, this research found that California AIAN communities have a significant need for OUD/SUD service development and implementation; furthermore, these services should expand and better integrate cultural and traditional approaches. This research resulted in recommendations at the individual, interpersonal, organizational, community, and policy levels. Policy recommendations include the following: Provide funding for and increased access to MAT Recognize and fund community-defined evidence-based practices Remove prior authorization requirements and limits on coverage, provide financial incentives for medical providers to become MAT certified, charge a fee on opioid sales to be deposited into a recovery fund, increase rigor on reporting requirements to limit access to addictive substances, and adopt policies supporting more time at patient visits Allocate funding for AIAN programs specifically and include Urban Indian Health Programs in federal opioid response dollars and all federal opioid grants and allowing funding for AIANs (e.g., through Tribal Opioid Response Grants) to go to Urban Indian Health Programs as well Fund further research regarding the impact of homelessness and housing insecurity Provide more funding and attention to understand the link between the opioid crisis and AIAN youth in foster care Urban American Indians and Alaska Natives Experiencing Homelessness in California: Strategies for Addressing Housing Insecurities and Substance Use Disorder: \55\ This 2020 report and published in 2021, stemmed from a recommendation in the above 2019 report to explore SUD/ OUD issues related to homelessness. Nineteen AIAN adults who were experiencing homelessness and impacted by SUD/OUD in California's urban areas were interviewed. The report describes how AIAN individuals experience disproportionate rates of homelessness and displacement due to federal policies such as the Indian Removal Act of 1830, the Indian Relocation Act of 1956, the boarding school policies forced upon AIAN families, and overcrowding in housing. The report also discusses the high rates of homelessness in California, the greater risk of SUD among unhoused individuals (17 percent of homeless individuals experience chronic substance use), and challenges around access to treatment. Policy recommendations include the following: \56\ Address individual needs for AIAN individuals experiencing homelessness, for example supporting and funding California AIAN Housing First programs (prioritizing housing to provide a foundation for recovery), AIAN housing education and home ownership programs, housing cash assistance programs for AIANs, affordable housing programs for AIANs, meal programs for homeless AIANs, hotel voucher programs for AIANs, employment placement programs for homeless AIANs, and emergency shelters Provide harm reduction services for AIANs Increase education and awareness of SUD treatment options, for example offering mentorship programs and service guides Increase the availability of and access to SUD treatment services, including transportation support, simplifying intake and application processes, simplifying communication, and offering more welcoming, compassionate, and culturally appropriate staff and environments Increase the availability of culturally centered recovery programs, to include increasing program outreach capacities to target homeless AIANs and offering culturally centered detox programs for AIANs Tribal Response to the Opioid Epidemic in California: \57\ This 2020 report presents our evaluation of five programs that received funding from DHCS's Tribal MAT Program. These programs serve the AIAN community in California used Tribal MAT funding to increase the accessibility and use of MAT services with the larger goal of reducing opioid deaths. Policy recommendations derived from this work include the following: Continue and increase funding for Tribal MAT Advocate for AIAN communities to be included in future funding opportunities Provide trainings to community members to empower them to develop future policies Outreach to address issues of stigma and trust Fund community-based navigators to serve as resources for information; continued funding will also support the incorporation of traditional healing and recovery approaches Ensure sustainability, include training that prepares stakeholders to apply for MAT and OUD funding while retaining their community workforce Incorporate increased access to technology in future funding (e.g., broadband Internet to support telehealth access) Mapping the Network of Care: Substance Use Treatment and Recovery Services for American Indians and Alaska Natives in California: \58\ This research, published May 2021, explored another recommendation from the above 2019 report to increase the availability of detox, residential, and sober living facilities. During this research, the USC team gathered and compiled information on available services and facilities. This research resulted in the following key recommendations: Create access to the Drug Medi-Cal Program for AIANs and Indian Health Providers through an Indian Health Program Organized Delivery System (DMC IHP-ODS) Develop a more integrated and collaborative system of care, to include culturally based service inclusion and the availability of culturally centered recovery programs such as healing ceremonies Increase the availability of AIAN residential treatment facilities, including those that allow treatment of parents with children Increase the availability of AIAN-specific detox treatment programs Increase sober living and transitional housing for AIANs Increase job placement and workforce services for AIANs Increase youth treatment and recovery programs Develop permanent sources of funding for community-defined evidence-based practices Increase awareness of AIAN-specific community and service needs Implementation of Medication for Opioid Use Disorder Treatment in Indian Health Clinics in California: A Qualitative Evaluation: \59\ This study, published in the Journal of Substance Use and Addiction Treatment in 2023, explored needs, barriers, and successes related to implementing medications for opioid use disorder (MOUD)* in Indian health clinics. Eleven clinics and 29 staff participated in the interviews. Results found challenges including a lack of education around MOUD, few clinic resources, and limited provider ability. MOUD effectiveness was limited by challenges integrating medical and behavioral care, patient barriers such as geographic isolation, and limited workforce capacity. Stigma at the clinic level was a barrier to implementation. Implementation challenges also included insufficient waivered providers and unmet needs for technical assistance and MOUD policy and procedure development. MOUD program maintenance was limited by staff turnover and physical infrastructure limitations. Recommendations based on this study include the following: *Note that the terms ``MOUD'' and ``MAT'' are both used to refer to medications treating addiction. ``MAT'' is used for much of our work because it is funded by the state ``Tribal MAT'' project. However, some people are shifting from the term ``MAT'' to other terms like ``MOUD'' because some find the term ``MAT'' to be less preferred or even stigmatizing. Strengthen clinical infrastructure Integrate culture into clinical services Increase AIAN staff to represent the served population Address stigma at various levels Consider complex barriers AIAN communities face related to MOUD implementation and outcomes Tribal and Urban Indian Community-Defined Best Practices (TUICDBP) and California Native Medications for Addiction Treatment (NMAT) Network for Healing and Recovery Projects: \60\ These projects are currently underway, with our team taking on evaluation and technical assistance support roles. The TUICDBP grant, acknowledging that culture is medicine, provides funding for grantees to identify and integrate traditional cultural healing practices into recovery. The NMAT grant funds grantees to develop, operationalize, and sustain medications for addiction treatment services. The current round of funding provides up to $150,000 for each grantee per project. Preliminary data shows the critical role of these projects and the importance of incorporating traditional practices into OUD/SUD treatment and prevention. Current policy recommendations include the following: Provide sustained funding to heal disparities through a return to tradition Make systemic policy changes that would support continued funding of cultural practices (e.g., allow reimbursement through Medicaid/Medi-Cal) Provide/fund data collection support tailored to AIAN needs to help address challenges around AIAN data collection Continue and expand technical assistance State, Local, and Tribal Collaboration Project: \61\ This project, also ongoing, conducted a needs assessment around state, local, and Tribal partnership challenges related to SUD/OUD, with the eventual goal of addressing some of the identified issues. While this project focuses on state and local collaboration, which is different from federal collaboration due to the trust responsibility and federal agencies responsible for Tribal partnership and services, identified issues include challenges that likely exist at the federal level as well: staff turnover, lack of knowledge and awareness about Tribal considerations, different worldviews, lack of resources, lack of infrastructure, existing Tribal disparities, poor communication, past negative experiences, bias, bureaucracy, differences between different communities and individuals, etc. We recommend including Tribes, Tribal organizations, Urban Indian organizations, and other AIAN-serving applicants in federal funding opportunities and encouraging and facilitating their applications. We recommend including provisions that states and localities receiving federal funding include Tribal constituents at a rate that considers not only their population but also their high level of need. This funding may be offered as pass- through funding from the state/locality to the Tribes in its area (which more fully respects Tribal sovereignty and self-determination) or via state/locality efforts to outreach to AIAN constituents or AIAN partners; it could also include training for funding recipients around Tribal considerations. Substance Use Disorder Policy Advocacy Training Program: \62\ This current project helps address the need for policy advocates focused on SUD issues in California's AIAN communities by providing beginner/ intermediate-level training around public and AIAN policy, policy development, and policy advocacy as well as information about SUD trends and data. Data from previous training cohorts (2021-2022) show that participants reported that their knowledge and skills related to the training program goals were ``greatly improved'' and that participants found the knowledge, resources, step-by-step guidance, and peer interaction were the most beneficial aspects. Our team recommends additional funding for policy training to support AIAN SUD/OUD advocacy and policy development. Additionally, we recommend federal funding to provide resources and training or workforce programs for AIAN to support greater AIAN participation in policy-making processes. Policy Recommendations In the section above, we provide recommendations from our projects and other findings. In addition, I recommend the following based on my experience and perspectives: Provide sufficient funding appropriations for IHS to provide the support truly needed for all IHSeligible individuals. Ideally, IHS could be shifted to become an entitlement program rather than relying on discretionary funding during each budget period. Regardless of mechanism, the IHS underfunding needs to be addressed to provide adequate treatment for OUD/SUD and also support prevention. This includes the provision of OUD/SUD treatment but also mental health treatment (e.g., for historical trauma and adverse childhood experiences) that can help build healthier individuals, families, and communities, preventing and reducing OUD/SUD rates overall. An adequately funded system will support lowering OUD/SUD rates beyond simply funding direct OUD/SUD treatment. For example, better physical health care may lead to improved mood, greater employability and thus higher socioeconomic status, less hopelessness, greater access to care, etc. Increase enrollment of IHS-eligible AIANs in entitlement programs like Medicaid as well as other insurance coverage options. Since IHS is the ``payer of last resort,'' additional health care payment options save IHS funding (including purchased referred care) for those who need it most, taking the burden off IHS and improving access to care, particularly in urban areas or other areas without IHS services. Gather input from Tribes, including via Tribal consultations with federal agencies, in areas regarding relevant policies and funding around the opioid crisis. Follow best practices for engagement with Tribal Nations and facilitate participation. Tribal consultations should be offered consistently and begin early. Tribal Nations have extremely varying needs, and participation and decisionmaking should reflect the diversity of Tribes. Tribal solutions are not ``one size fits all'' and must consider varying factors like need, size, location, infrastructure, culture, etc. Facilitate access to grant funding for Tribes from the federal government and mandate a reasonable portion of state funding with federal origins be used to support Tribal constituents. Closing Statement Thank you again, Chairman Brian Schatz, Vice Chairman Lisa Murkowski, and all members of the Senate Committee on Indian Affairs, for this opportunity to speak to you and share information about the AIAN community. I hope that you will consider the great impact of the opioid crisis on my people and do your part to address these disparities and remedy the harms done throughout history. I implore you to use this information to bring about change for one of the most vulnerable and underserved populations: the first Americans. I want to thank the following individuals for their assistance in the written testimony, Mrs. Angelica Al Janabi and Mrs. Ellen Rippberger, with the University of Southern California Tribal Medication-Assistant Treatment (TMAT) Project research team. ENDNOTES 1 National Conference of State Legislatures: https://www.ncsl.org/ research/state-tribal-institute/list-of-federaland-state-recognized- tribes#State 2 National Archives: https://www.archives.gov/research/native- americans/treaties 3 Stacy Bohlen, CEO of the National Indian Health Board 4 Department of the Interior, Indian Affairs: https://www.bia.gov/ faqs/what-federal-indian-trust-responsibility 5 National Indian Health Board, Working with Tribal Nations training: https://www.nihb.org/public_health/wtt/story.html 6 US General Services Administration, Relevant Federal Laws, Regulations, Executive Orders: https://www.gsa.gov/real-estate/ historic-preservation/historic-preservation-policy-tools/legislation- policy-andreports/section-106-of-the-national-historic- preservation-act/native-american-tribal-consultations/relevantfederal- laws-regulations-executive-orders 7 Warne, D., & Frizzell, L. B. (2014). American Indian Health Policy: Historical trends and contemporary issues. In American Journal of Public Health (Vol. 104, Issue SUPPL. 3, pp. S263-S267). American Public Health Association Inc. https://doi.org/10.2105/AJPH.2013.301682 8 California Rural Indian Health Board: https://crihb.org/about/ history/ 9 https://www.kcet.org/shows/tending-the-wild/untold-history-the- survival-of-californiasindians 10 https://oig.hhs.gov/oei/reports/oai-09-87-00027.pdf 11 Indian Health Service California office: Fiscal Year 2015 Annual Report. https://www.ihs.gov/california/tasks/sites/default/assets/ assets/File/FY2015IHSCAOAnnualReport.pdf 12 Indian Health Service: https://www.ihs.gov/forpatients/faq/ 13 US Commission on Civil Rights, Broken Promises Report: https:// www.usccr.gov/files/pubs/2018/12-2009Broken-Promises.pdf 14FOOTNOTE WAS MISSING 15 Centers for Disease Control and Prevention (CDC): https:// www.cdc.gov/opioids/data/analysis-resources.html 16 CDC: https://www.cdc.gov/drugoverdose/data/OD-death-data.html 17 National Institutes of Health (NIH): https://nida.nih.gov/ research-topics/trends-statistics/overdose-death-rates 18 CDC: https://www.cdc.gov/stopoverdose/fentanyl/index.html 19 NIH: https://nida.nih.gov/research-topics/trends-statistics/ overdose-death-rates 20 NIH: https://injuryfacts.nsc.org/home-and-community/safety- topics/drugoverdoses/data-details/ 21 CDC: https://www.cdc.gov/nchs/products/databriefs/ db457.htm#Key_finding 22 California Department of Public Health: https://www.cdph.ca.gov/ Programs/CCDPHP/sapb/Pages/Fentanyl.aspx 23 California Overdose Surveillance Dashboard: https:// skylab.cdph.ca.gov/ODdash/?tab=Home 24 https://health.ucdavis.edu/blog/cultivating-health/fentanyl- overdose-facts-signs-and-how-you-can-help -save-alife/2023/01 25 CAL MATTERS: https://calmatters.org/explainers/california- opioid-crisis 26 Indian Health Service: https://www.ihs.gov/newsroom/factsheets/ disparities/ 27 Office of Minority Health: https://minorityhealth.hhs.gov/ american-indianalaska-native-health 28 California Consortium for Urban Indian Health: https:// ccuih.org/about/about-urban-indians/ 29 Office of Minority Health: https://minorityhealth.hhs.gov/ american-indianalaska-native-health 30 National Urban Indian Family Coalition: https://assets.aecf.org/ m/resourcedoc/AECFUrbanIndianAmerica-2008-Full.pdf 31 Urban Indian Health Commission: https://www2.census.gov/cac/nac/ meetings/2015-10-13/invisibletribes.pdf 32 The National Council on Aging. https://www.ncoa.org/article/ american-indians-and-alaska-natives- keydemographics-and-characteristics 33 New York Times. https://www.nytimes.com/2013/04/14/us/as- american-indians-move-to-cities-oldand -new-challenges-follow.html 34 https://nativephilanthropy.candid.org/events/alcohol-as-tool-of- genocide/ 35 https://pphs.usc.edu/wp-content/uploads/2023/04/NAH-Report- Tribal-MAT.pdf 36 Scholl, L., Seth, P., Kariisa, M., Wilson, N., & Baldwin, G. (2018). Drug and Opioid-Involved Overdose Deaths--United States, 2013- 2017. MMWR. Morbidity and Mortality Weekly Report, 67(5152), 2013-2017. https://doi.org/10.15585/mmwr.mm675152e1 37 Wilson, N., Kariisa, M., Seth, P., Smith, H., & Davis, N. L. (2020). Drug and Opioid-Involved Overdose Deaths_United States, 2017- 2018. MMWR. Morbidity and Mortality Weekly Report, 69(11), 290-297. https://doi.org/10.15585/mmwr.mm6911a4 38 Kaiser Family Foundation: https://www.kff.org/coronavirus-covid- 19/press-release/drug-overdose-deaths-roseduring-the-covid-19- pandemic-particularly-among-black-and-american-indian-alaska-native- people/ 39 The Hill: https://thehill.com/changing-america/well-being/ prevention -cures/3476061-indigenous-americanssee-five- fold-increase-in-fatal-opioid-overdoses-over-two-decades-study-says/ 40 IHS: https://www.ihs.gov/opioids/covid19/ 41 US Census Bureau: https://data.census.gov/cedsci/ table?q=S0201&t=009- AmericanIndianandAlaskaNativealoneorincombinationwithoneormoreotherraces &g= 0400000US06&tid=ACSSPP1Y2019.S0201 42 Bureau of Indian Affairs: https://www.federalregister.gov/ documents/2014/01/29/2014-01683/indian-entitiesrecognized-and- eligible-to-receive-services-from-the-united-states-bureau-of-indian 43 http://2010.census.gov/news 44 Judicial Council of California: https://www.courts.ca.gov/ 3066.htm 45 Intertribal Friendship House. (2002). Urban Voices: The Bay Area American Indian Community (S. Lobo (ed.); 1st ed.). University of Arizona Press. 46 California Rural Indian Health Board: https:// public.tableau.com/app/profile/krista7713/viz/ HealthEquityDashboardOpioids/OpioidsFinal 47 California Overdose Surveillance Dashboard: https:// skylab.cdph.ca.gov/ODdash/?tab=CA 48 California Consortium on Urban Indian Health: https://ccuih.org/ wpcontent/uploads/2021/03/AIANDC_Report_Draft_3_23_Edited.pdf 49 Brookings: https://www.brookings.edu/articles/why-the-federal- government -needs-to-change-how-it-collectsdata-on-native-americans/ 50 National Library of Medicine: https://www.ncbi.nlm.nih.gov/pmc/ articles/PMC5967841/ 51 CCUIH: https://ccuih.org/wp-content/uploads/2021/03/ AIANDC_Report_Draft _3_23_Edited.pdf 52 https://tribalepicenters.org/ 53 https://www.nihb.org/resources/2023DataSymposium/ MondayAfternoonPresentations.pdf 54 https://pphs.usc.edu/wp-content/uploads/2022/11/ USC_AI_Report.pdf 55 https://pphs.usc.edu/wp-content/uploads/2023/04/NAH-Report- Tribal-MAT.pdf 56 Ramos GG, West AE, Begay C, Telles VM, D'Isabella J, Antony V, Soto C. Substance use disorder and homelessness among American Indians and Alaska Natives in California. J Ethn Subst Abuse. 2023 Apr- Jun;22(2):350-371. doi: 10.1080/15332640.2021.1952125. Epub 2021 Aug 2. PMID: 34339341 57 https://pphs.usc.edu/wp-content/uploads/2023/04/NAH-Report- Tribal-MAT.pdf 58 https://pphs.usc.edu/wp-content/uploads/2023/04/Residential-Tx- Project-Report-for-Community.pdf 59 Soto C, Miller K, Moerner L, Nguyen V, Ramos GG. Implementation of medication for opioid use disorder treatment in Indian health clinics in California: A qualitative evaluation. Journal of Substance Use and Addiction Treatment. 2023 Jul 1:209115 60 https://pphs.usc.edu/research/data-collection-and-analysis- technical- assistance-for-tribal-mat-grantees/ 61 https://pphs.usc.edu/research/collaboration-improvement-project/ 62 https://pphs.usc.edu/research/substance-use-disorder-policy- advocacy-training-program/ FOLLOW-UP COMMENTS Chairman Brian Schatz, Vice Chairman Lisa Murkowski, and all members of the Senate Committee on Indian Affairs, thank you for the opportunity to present at your recent hearing. I also appreciate the opportunity to submit follow-up comments regarding the fentanyl crisis in Indian Country. During the hearing, I heard discussion around the importance and effectiveness of culturally relevant care, as well as how this differs from care that is broadly compassionate and respectful. I would like to share several thoughts and perspectives for your consideration. 1. Generally, the benefits of cultural competence/cultural humility and the importance of access to culturally and linguistically appropriate health care services have been widely documented without being specific to any one population. Access to appropriate and relevant care for marginalized groups is particularly important considering the health disparities and other disparities faced by many of these populations. The lack of culturally appropriate, culturally relevant, respectful care may contribute to and exacerbate these disparities. It is also widely known that bias and discrimination are embedded in the current health care system. Many aspects of modern medical treatment in the US, particularly around mental/behavioral health, are rooted in Western worldviews and ideals that may not align with all cultures. For example, seeing a therapist has helped people from many backgrounds, but it is closely aligned with a White, middle-class worldview and workforce, and it may be inaccessible, unnatural, or uncomfortable for some individuals or communities. When communities offer alternate solutions, nothing should stand in the way of their self-determination. 2. When people think of different cultures, many may think of factors like music, dance, food, and style of dress, but there are often far deeper considerations. For the American Indian and Alaska Native (AIAN) population, for example, culture is ``a cognitive map on how to be.'' \1\ In other words, culture is a way of understanding one's identity, relationships, sense of purpose, and place/role in the world. While there are many commonalities across AIAN cultures, specifics may vary (e.g., by Tribe or community). --------------------------------------------------------------------------- \1\ https://pubmed.ncbi.nlm.nih.gov/37085784/ For example, the Swinomish Indian Tribal Community in Washington State formally developed their own ``Indigenous Health Indicators,'' reflecting ``non-physiological aspects of health''; the community identified many indicators that are not typically considered aspects of health in today's broader US culture, such as sense of place, the teachings of Elders, and practice, which includes being ``able to honor proper rituals, prayers, and thoughtful intentions'' as well as ``able to satisfy spiritual/cultural needs, e.g., consume foods and medicines in order to satisfy Spirit's `hunger.''' \2\ Similar ideas have been repeatedly discussed in indigenous communities. --------------------------------------------------------------------------- \2\ https://pubmed.ncbi.nlm.nih.gov/27618086/ 3. Indigenous communities have raised concerns around the --------------------------------------------------------------------------- emphasis on ``evidence-based'' treatment. First, the focus on evidence may not always align with Native ideas around indigenous ways of knowing or traditional ecological knowledge; it forces Native peoples to adopt a Western model of thinking. Native communities may be reluctant to start from scratch and ``lab test'' practices that have been carried out in their communities for thousands of years, with lived experience demonstrating their effectiveness. Furthermore, the Western, ``evidence based'' model may be particularly burdensome for Native communities to accommodate with their often-limited staff and resources. In some cases, even when Western model testing or evaluation is desired, the resources and funding may not be there to support, especially if non-Native individuals and organizations deprioritize Native practices. As indigenous conceptions of health are largely much more holistic than those of Western medicine, providing evidence of effectiveness can be particularly challenging. For example, Native communities have repeatedly expressed the importance of (re)connecting with culture and tradition to build or maintain the community's health; however, the cause and effect may not be as immediate and clear as, for example, taking a pill and seeing tangible, concrete results (e.g., lower blood sugar levels). Many of these concepts are difficult, if not impossible, to isolate, randomly assign to participants, and laboratory test, as may occur in a clinical trial. Finally, AIAN communities may be reluctant to share their knowledge for Western testing. This can occur for several reasons: 1.) the knowledge may be considered sacred or only considered appropriate for those in the community, and there may be restrictions on sharing outside the Tribe, in some cases, even with other Tribal communities, and 2.) the community may have concerns around exploitation, theft, or misuse of their knowledge, or they may simply fear that the knowledge may be disrespected or mocked. These fears are valid and arise from historical precedent, including several ``'high- profile' cases of patenting of traditional medicines, without consent from or compensation to their holders.'' \3\ Unsurprisingly, Native communities may hesitate to turn over their knowledge, passed down by generations of ancestors and maintained at great cost due to extensive loss (e.g., of knowledge keepers, of natural medicine on their traditional homelands before relocation) and bans on traditional culture to 1.) pharmaceutical companies hoping to sell their sacred wisdom or take the Tribe's own resources away for profit, potentially so the Tribal citizens can no longer access it (e.g., due to limited availability or high cost) or 2.) to a broader society that has disrespected, harmed, mocked, and exploited them for centuries. --------------------------------------------------------------------------- \3\ https://pubmed.ncbi.nlm.nih.gov/12821021/ In short, I argue that it is the US government's moral obligation to listen to our communities and Nations, as the original inhabitants of this land and as the experts in our people, when we speak. Since time immemorial, we have known how to keep our bodies, minds, spirits, and communities healthy, but centuries of trauma and genocide have led to the disparities we are facing today, including the crisis around substance use that is another means of destruction and genocide. The fact that we are still here today is testament to our resilience and brilliance. Furthermore, we have repeatedly heard that disconnection from culture is one of the causes of substance use, and that culture, tradition, and connection are medicine--they are healing for the whole person, the community, and future generations. With these considerations in mind, I ask that you consider the following regarding the fentanyl crisis: Provide funding to the Tribes and to Tribal organizations to address these issues, including the 16 percent of funding that is being considered for this purpose from the larger $1.5 billion SAMHSA Opioid Response funding. Allow Tribes and Native communities to self-identify needs, priorities, and solutions, including those that prioritize culture and may not align with standard Western models of evaluation or implementation. Thank you for your time and consideration. The Chairman. [Presiding.] Senator Cantwell? Senator Cantwell. Thank you, Mr. Chairman, and thank you for allowing me to proceed with the questioning. I want to talk about law enforcement specifically, since several of the chairmen and council members brought that up. I want to say that the Opioid Summit held by the Northwest Portland office at Tulalip, I see some fascinating treatment work being done by Indian Country, holistic, simplistic, and certainly responsive to on-reservation focus. I don't want to diminish that side of the equation. But what I feel and hear particularly, Mr. Chairman, from the Lummi is that without adequate tribal law enforcement resources, I almost feel like Indian Country is being targeted, that people know that you don't have the law enforcement, that you don't have the capabilities, and that is where people are setting up shop. Consequently, what is happening is the most powerful, the money is so good everywhere, that the drug is just being made as quick as possible and as powerful as possible, and people don't even know the impact of it, and the consequences. You had, I am not clear if it was four or five deaths, five deaths, four related to this in one week. Chairman Azure mentioned the fact that he wants help from the BIA justice law enforcement, and in your case, we tried to partner with the FBI. But that was even, I am not saying kludgey, but there are issues of how you all coordinate and how we get the FBI to come out and do a bust with you, because you had to get that product off your reservation. You knew how deadly it was, and you had to respond. But who were you calling? Who were you calling to help you respond to this crisis? I want to know, Senator Mullin and I have introduced the Parity for Tribal Law Enforcement, a self- determination contract for Federal law enforcement officers, making them eligible for benefits as way to try to build capacity on reservations. But what are the two or three things we need to do to help right away with better law enforcement tools for Indian County to help fight this? If I could hear from each of the three tribal chairs here. Mr. Hillaire. Thank you, Senator, and again thank you to the Committee for holding this hearing. Yes, law enforcement is a big issue. Not only the severity of this drug and us being a close-knit community, just one, the smallest amount is deadly to us. It impacts our future generations. So it is a really serious problem. At Lummi Nation, we come against issues that pertain to jurisdiction, especially when we have a reservation that is a peninsula, a road that goes, we call it going around the horn at Lummi Nation, it is surrounded by water. The road has a right-of-way by the county which is an access road for non- tribals living on fee land as well as for the Lummi Island ferry residents, which is not reservation land. So what do we do when we implement checkpoints and we have somebody who is non-tribal, and there is no reasonable cause, and they are bringing drugs on the reservation? It is always an ongoing issue. I want to back up just a little bit before I mention a little bit more on some of the law enforcement thing. This is a leadership issue. Even just based on everything we have heard in this short amount of time, we can already see the complexity of how we are supposed to address it. It is law enforcement, it is prevention, it is intervention and it is rehabilitation. It is workforce, it is housing. There is so much to this. I think a way for us to ensure that we have resources, and the area of law enforcement being one of them, is that the United States declare an emergency, a national emergency to fentanyl. That way we can tear down the barriers, tear down the bureaucracy, everything that is hindering our ability to take care of our people, ensure that we don't have to compete with our brothers and sisters across Indian Country for a grant that helps us with law enforcement through DOJ or through other program services, to ensure that we don't have such extensive reporting systems, to ensure that we have direct funding, because as you can hear, we know how to take care of ourselves. But going back to enforcement, I think we definitely need more resources, BIA, DEA, and the FBI, the lack of prosecutions from DOJ and local authorities. We also need the ability to prosecute and hold accountable non-Indian drug dealers who are murdering our people through this drug, fentanyl and carfentanil and all the various versions of it. The lack of tribal jurisdiction over non-Indian drug dealers coming onto reservation undermines our efforts to combat the drug crisis and protect our community. We urge Congress to recognize a special criminal jurisdiction over non-Indians who commit drug offenses in our communities. I am sure we will see more through the track that is being introduced. Right now, we do everything we can to exert our sovereignty, to protect our children. We have this very scary image of carfentanil which seems to be reaching our smaller communities, which is 100 times stronger than regular fentanyl, 10,000 times stronger than morphine, and if it is sitting on a coffee table where there are children, then we have to get this drug off of our reservation. Right now we are doing everything that we can with the resources that we have. With the ability of getting the FBI agents to Lummi Nation, we worked closely with them, we got over 4,500 pills off of the reservation just within a few days, with the checkpoints and the K 9 units. So we are going to keep doing, doing everything we can. But it does come down to a matter of resources, and brings up what we mentioned earlier, when we go into a drug interdiction, when we get over 4,500 pills off of the road, our beds become full at our stabilization center. That is why there are so many different pieces to this. But if we start with the highest level possible, that the United States of America declares this a national emergency, I believe that we can overcome a lot of the barriers that we are facing. Thank you. Senator Cantwell. I know my time is expired, Mr. Chairman, so I will either take it for the record, or you can give me 30 seconds. The Chairman. Go ahead. Senator Cantwell. I didn't know if they wanted to respond quickly, 30 seconds, I know that is not a lot of time to respond. Mr. Azure. Sure, and I want to thank Chairman Hillaire for hitting the major points. But to break it all down, what we are asking for are resources that cannot be taken away. I know I mentioned earlier with the detailing of our law enforcement. Let's just be honest: in the State of North Dakota we have five tribes and one FBI agents. We do understand that violent crimes will take that FBI agent to a different case, and it prolongs the cases and the investigations. Right now the Bureau is currently sitting on a mutual aid agreement that we had brought forward, still sitting on that, which is why I mentioned earlier that the Turtle Mountains have moved forward in self-determining our own tribal drug task force. Because we can't wait any more. I speak on behalf of all tribes, that we refuse to wait any more, and we will do what we can to save our next generations. Thank you. The Chairman. Mr. Kirk? Mr. Kirk. One of the things for me is Amtrak. Right now, Amtrak flows right through reservations in Montana. When do we become sovereign and be able to inflict that when it comes to our reservations? I can go, as Jon Tester, to Spokane without an i.d. and somebody just buys me a ticket and they scan it off my phone. When are we going to be able to put drug dogs and enforce those as soon as that Amtrak hits our reservation boundaries? As we continue to battle that, the other thing just at the tip over here, at the BIA formulation, they are bringing data to the Congress that states that major crimes, rapes, homicides and everything are down in Indian Country 50 percent. So when we come for more funding in those aspects, in public safety and justice, that is why we don't get an increase, because it shows there is a decrease. But once you talk to tribal leaders and you talk to people, we need to get the right data out there that helps us when it is coming to you guys to be able to help us with the funding that we need. If there is a decrease, you guys don't see a reason for an increase. So without numbers and the right numbers, we are not going to be able to fund and be able to do the things that my brothers and sisters need on different reservations and also on ours. Thank you. The Chairman. Thank you very much. Vice Chair Murkowski? Senator Murkowski. [Presiding.] Thank you, Mr. Chairman. And just to follow up on that point here, we know the numbers, we know that Native Americans, Alaska Natives as a population demographically are dying in the past two years of drug overdoses more than any other populations out there. We just had a hearing in Appropriations this morning on an emergency supplemental. This was domestic, we talked about the border, several of my colleagues were there in Committee, we talked about fentanyl. There is a significant increase, significant provision in the supplement to combat fentanyl. There is $250 million directed to IHS. I am looking at the situation in Indian Country, I am looking at the situation in again, communities like Tyonek, Savoonga, Dillingham, tiny little Native communities that are so far off the grid most people don't even know that they exist. And yet the drugs are coming in, and they are killing people. So we need this data. We need to understand how it is moving so rapidly. I think we all recognize we have to be doing more when it comes to treatment. But we are dealing with a drug the lethality of which is almost incomprehensible for most people. So when we talk about treatment facilities, you just can't take your standard five-week treatment facility and get somebody who is addicted to fentanyl and somebody who got addicted in less than a month and think that in five weeks you are going to flip this, and you are going to have somebody that is now clean. We have a challenge that is so big and so enormous, it is going to take exactly what you all are doing in Lummi Nation, Chairman, with saying as a community, we have to wrap our arms around it, we pretty much have to figure out how we do this from within. So I know that resources will be a challenge. I would ask the three of you as tribal leaders, knowing that IHS is going to be receiving a specific increment to go toward these services, where would you specifically direct that? Give that to us in writing. I think that would be helpful for us. I want to ask Mr. Gettis about what you have been able to do. You have established these three different opioid treatment programs. You have them in Juneau, in Sitka, now in Klawock. We know that for far too many of our communities, whether you are islanded like you are in Southeast, or in many parts of Indian Country where the distances are just so great that tele-health is really one way where we can make a difference. Can you describe how the tele-health authority has helped to improve treatment for patients who aren't able to get to it, but also speak to the stigma part of it? I am hearing more and more and more that people, they don't want to go into the behavioral health clinic, because they are going to get tagged as, that guy has a problem, we all know what it is, don't want to even be seen in there. But through tele-health, it gives you that level of anonymity that might help address this stigma. Mr. Gettis, can you speak to that, please? Mr. Gettis. Thank you, Senator Murkowski. Yes, as you pointed out, Southeast Alaska is a group of islands that span 600 miles, very, very small Native communities throughout the region, and much of Alaska is the same way. With the advancement and availability of tele-health services we were able to create follow-up after-care programs, because once you enter into a service and maybe work on sobriety or abstaining, then you need to return home. Because people need to be part of their communities, they need to be part of their families. They need to have that family kinship. Being able to return home and participate in an after-care program is just essential. Tele-health has been a big component of that. Not only has it allowed people to enter by phone or by a Teams meeting or some sort of venue like this, but you can then do that without stepping into sometimes that stigmatizing treatment facility that doesn't fit for everyone. So we have been able to see significant gains with tele- health access. It is particularly valuable here throughout our region We have seasonal workers who need to go fishing, who need to go hunting, who need to be out, and then with tele- health, we can bring that in. We have also seen, and I don't want this lost, I have heard from communities across Alaska, about elders also having improved ability for any sort of tele-health access. It improves health care, it improves and reduces disparities. I strongly support improving and keeping tele-health opportunities as available as possible. Senator Murkowski. Thank you. Just to our panelists, know that we have been in a series of votes, so when you see us popping up and down, it is not because we are not being attentive. Because we do have to go over and vote. That is where the Chairman is now and that is where I will be going when he comes back. But not for lack of attention. Senator Tester? Senator Tester. Thank you, Vice Chair Murkowski, and thanks for having this hearing. I want to thank everybody who testified. Councilman Kirk, let's say that a non-Native is selling drugs on your reservation. Does the tribal justice system have the ability to arrest and prosecute them? Mr. Kirk. No. Senator Tester. So to further clarify, you can't arrest them? Mr. Kirk. We can work with our cross-deputization that we do have with the county. The county then, if they have beds available, can hold them. But we cannot prosecute non-Natives in tribal court on reservations. Senator Tester. So what happens to a drug dealer that is peddling dope, peddling fentanyl on your reservation and they get caught? What happens to them? Where do they go? Anything? Mr. Kirk. Hopefully if the county has enough room, they are able to house them there. Senator Tester. But if the county does not, do you let them loose? Mr. Kirk. Have to let them loose or try to find the nearest county that has a bed for them. Senator Tester. So let's just talk about that problem, because that indeed is a problem. What can we do about that? Is it simply prison space, or is it a jurisdictional space? Mr. Kirk. Give us the criminal jurisdiction to be able to charge them in tribal court, so we are able to hold them in our jails. Senator Tester. Okay. Is that done, let's say somebody murders somebody, and it is a non-Native, do you have the ability to arrest them? Mr. Kirk. Now, pertaining to kids and police officers, and with the VAWA, we are able to. Senator Tester. So there is a precedent that has been set here. Mr. Kirk. Yes. Senator Tester. So we need to tweak it a little bit on our end. I know that Senator Cantwell talked about law enforcement. What are the barriers for you right now, the major barriers on the ground when it comes to law enforcement? Is it FBI? Because I think we are in the same both North Dakota is in, by the way. Is it lack of BIA personnel? Is it a lack of tribal enforcement? I don't know if you guys do your own law enforcement up there or not in Fort Peck. You do? Mr. Kirk. Yes, we are a 638 through the BIA, and we control our own. Senator Tester. Do you get the money from the BIA to be able to hire the officers you need, or are you understaffed? Mr. Kirk. Yes, but we are also understaffed because our people start out at $20 an hour, and nobody wants to come live in northeastern Montana for $20 an hour. Senator Tester. So how much do you think it would take? Mr. Kirk. Right now, we can use another 100 officers, but we will never get it. Right now we are trying to get our pay up to $27 an hour, so that way we are able to bring more interest to our reservation. Senator Tester. Do you have the funding to do that, or does that mean you have to limit the number of officers you hire? Mr. Kirk. For the lack of people that we have had there, and with the carry-over that we had, making $27 sustainable, is it's going to sustain itself for long, just using carry-over from the previous years that we are able to use. Senator Tester. I got you. If you were sitting on this side of the rostrum, what would you do? Mr. Kirk. I would properly fund BIA to be able to help Indian Country. Because I would want that for every part of the Nation, to be able to give them the right, adequate stuff to fight this and stop this from killing our people. Senator Tester. So your number one priority would be funding for law enforcement? Mr. Kirk. Yes. Senator Tester. Thank you very much for your testimony. I appreciate it. I yield to the Senator from Montana. Senator Murkowski. Senator Daines? STATEMENT OF HON. STEVE DAINES, U.S. SENATOR FROM MONTANA Senator Daines. Thank you, Senator Tester, and to Chairman Schatz and Vice Chairman Murkowski, thanks for this important hearing. Councilman Kirk, you have come a long way. When you come from northeast Montana, there is no quick and easy way to get here. Thanks for coming all the way for Poplar, no less, to be here. I know first-hand that the Fort Peck Reservation has been hit hard by massive amounts of fentanyl coming into the Country. A few years ago I was down on the southern border, in fact, I spent the night from about 10:00 p.m. to 6:00 a.m. with border patrol, doing a ride-along in their pickups. We would get out, we literally were apprehending illegals coming into the Country. That was on a Monday when I did that. I went back to Washington, D.C. and then came back to Montana Thursday night, and was out in Wolf Point Friday morning of that same week. I was talking to the folks in Wolf Point, their law enforcement. I asked the officer there, so, I was on the border Monday night, drugs were coming across the border Monday night on the southern border between Texas and Mexico, when did those drugs get here to Wolf Point, do you think? He said, sir, those drugs got here before you did. The ongoing fentanyl crisis is devastating. It is destroying communities, families, lives. And the Montana tribal communities are ground zero for this destruction. The Montana crime lab has reported a 1,000 percent increase in fentanyl- related overdoses since 2017. Native Americans are suffering the highest overdose death rate by a massive margin. It is not even close. In fact, in Montana, Native Americans are twice as likely to die over an overdose than any other Montanan. The Blackfeet Nation recently had to declare a state of emergency because of the staggering number of overdoses they are seeing. Fentanyl seizures at the border are up 18 percent since 2019. The drugs that aren't stopped are making their way to Montana. Here is a staggering stat. Montana Highway Patrol, in the first half of 20213, seized enough fentanyl to kill 300,000 people. That is nearly a third of our entire State. This is the human cost of the open border catastrophe that is going on right now on our southern border. The crisis at the border is not a funding problem. It is not a funding problem. I was down there again just three weeks ago with Border Patrol. They will tell you, we don't need more money. They will take some money and turn it into some more personnel, they would like to get the wall built, put in other video camera surveillance systems and so forth. That would be needed. But they say the most important thing you can do is to slow the flow of the flood of people coming across the border. It is policies, policies that President Biden reversed that were working in the prior Administration. This is not a political statement, it is just a fact. Law enforcement solutions are needed to combat this problem. The consequences of fentanyl bleed into every part of our communities. When you have the flood of encounters, some 8 million since the President took office, plus $1.6 million known got-aways. Known got-aways means Border Patrol seized the people coming across either physically or through a video camera, but they were not able to apprehend. We don't know who these people are. On top of that, there is probably another 500,000 that come across, we have no idea. It is a massive problem. And by flooding the zone with all the encounters, our Border Patrol is stretched, and they can't stop the drugs coming across. It is a zero sum situation. Councilman Kirk, I know this issue is deeply personal to you. We spoke this morning at Montana Coffee. I would like to give you a moment to speak on how this crisis has affected you, the tribe. You told me that just in the last 24 hours, we have had more deaths to fentanyl. Councilman Kirk? Mr. Kirk. Yes, most definitely. It seems like without Narcan, we would have one every hour. There are people overdosing even right now at the moment. But the Narcan is what is saving them. As we discussed this morning, talking to one of the agents that goes throughout Indian Country for us, lives on our reservation, I went in and I was like, okay, I want to learn more. What do we do? What do we do to be able to subside everything that we are going to do? I never thought I would hear it from anybody, and the first thing he said was, shut the border down. Give us a chance. Give us a chance to stop the flow of whatever is going on here. Because how does it make it all the way from down there to a little tiny place in northeastern Montana? How do we get that there, or in Turtle Mountain, or up in Lummi, or up in Alaska? All these places are devastated with this. So again, it is just being able to work together to find the right answers and the right things for us to do, so that way we don't lose any more parents, mothers, daughters, grandchildren, grandparents. We need to work together to be able to make this happen. Thank you. Senator Daines. Thank you. I am out of time, but I just hope we can come together, there is a chance right now to actually get a bipartisan solution, we are dealing with Israel, Ukraine, Taiwan and the Pacific challenges as well as the border. This is a moment we can do something to change the policies and slow the flow. We don't need to put more money into processing people through faster. We need to put money toward actually slowing the flow. Councilman Kirk, then I am done. Mr. Kirk. We see that in Indian Country, we see all these billion dollar packages going to Ukraine and going to Israel. When is Indian Country going to matter? When are the treaties and obligations and trust obligations going to matter to us? When is one of those bills going to reach us so that we are able to adequately take care of our people? If packages and bills can be like that, but we have been underfunded all these years on everything, when is a package going to come so we can start fighting for our people the right way? Thank you so much. Senator Daines. Thanks, Councilman. The Chairman. [Presiding.] Thank you, Senator Daines. Before moving on, I wanted to address your point. First of all, I want to acknowledge your point. Generations of disinvestment, disenfranchisement, disintermediation of culture and language and land, and water, all of it. So I don't mean to diminish the point you are making. I do think it is worth pointing out that this Committee, both through IIJA, through the various COVID relief bills and through IRA, made the biggest investment in Indian Country and Native communities in American history. So both things are true, that we did that, and also that it is not nearly enough. But I did think it was worth pointing out that we have made a down payment in a way that is historically unusual. Again, it doesn't solve anything, but it is the first, most important step in the right direction. Senator Cortez Masto? STATEMENT OF HON. CATHERINE CORTEZ MASTO, U.S. SENATOR FROM NEVADA Senator Cortez Masto. Thank you. Thank you, Mr. Chairman. I too agree, I think we have to do an all-of-the-above approach to address fentanyl that is not only coming into all of our communities, but our tribal communities, and address the needs there. I think it is important. And I want to talk about one of them, the law enforcement piece of it. I see it in my tribal communities. But before I do, I have to address some of the conversation here from some of my colleagues. There is a comprehensive approach, we can work in a bipartisan way to address what is happening at the southern border, it is something I worked on as attorney general, to address the drug trafficking. What I hear from those on the border is additional funds to help that drug trafficking. That is why the current President, in his supplemental, has actually requested from Congress $849 million for the procurement of non-intrusive inspection systems to make sure that cars and trucks are being scanned and can counter illicit drug activity, including that fentanyl, and human trafficking. The President is also requesting $4.4 billion for Customers and Border Patrol to be able to hire additional agents and officers to make sure that the criminals and traffickers can't get into the Country. There is additional funding he has also put in to address the migrant flow, to really focus on this issue. This is part of what I think is the all-of-the-above approach. I am here to tell you, as somebody who worked to fight these transnational criminal cartels, you can shut down the border, but those drugs are going to find it here another way, ports of entry, other ways in. Unless we are doing an all-of-the-above approach, we are really not going to make a dent in this. I support HIDA, I support law enforcement, I support our tribal communities helping them really address the gaps that I see in some of the cross-jurisdictional issues that we have. I see in my own tribes, I was just with Fort McDermott Paiute Shoshone Tribe, which is on the Nevada-Oregon border. They don't have enough resources to even hire tribal police. We know that. Some of our communities don't even have tribal police, so they have to rely on BIA. Well, that one BIA agent has to cover a region the size of Nevada and other territory. And there is only one or two of them, let alone one FBI agent and maybe one AUSA to prosecute at a Federal level. That is ridiculous. That is where we come in as well. I think at a Federal level it is important for us to really focus on how we address the BIA issue, to support and supplement what our tribes already, if they have the ability to hire tribal police, but those that don't, we actually have adequate law enforcement in this communities. That is where we really have to come together in this Committee to focus on what is necessary. I will tell you, there are 28 tribal communities in Nevada. As a former attorney general, I worked with them. One of the things that we did was enter into memoranda of understanding between Federal, State, and local law enforcement, because of the cross-jurisdictional issues, because of the lack of law enforcement in some of our tribal communities. I understand, Councilman Kirk, you have done something similar with the cross-deputization. What are the benefits that you see of that cross-deputization? If you would talk a little bit about that, if that helps address some of the gaps and services until we fix those? Mr. Kirk. Most definitely. The cross-deputization is with the county, the Montana Highway Patrol and also the City of Wolf Point. It works really great to have more boots on the ground to be able to combat more, to be able to have other people fighting. Right now, our tribal cops are in the major cities like Poplar and Wolf Point. And on the outer communities we also have an MOU with Valley County, also. So they are able to cover, Valley County covers our west end, and also Roosevelt County covers our east end. So we are able to implement different things, but also implement a security program back home to be able to help us alleviate different parts of it. Senator Cortez Masto. Thank you. I am going to ask Chairman Azure, talk about some of the challenges people don't realize. I think if you have maybe three or four BIA officers, that is going to be enough. But they forget that there is a large territory to cover, places like Nevada and in the west, there is a lot of coverage, travel time between some cities where unfortunately a lot of illicit activity can occur. If you want to hide somewhere, you are able to do it because of the lack of coverage. Do you see that in your area, in your State and in your community and your tribal Nation, as you are working with the State and Feds as well? I am curious if that is a part of a barrier that we need to deal with as well. Mr. Azure. In the Turtle Mountains, we are a unique demographic. We are a smaller land base, but we have a large population. They call it The Old Six by Twelve, on our land base back home. But we have over 14,000 people living on or right off that Six by Twelve on our reservation. Sometimes that is where the frustration with the details come into play. Sometimes we are down to two officers on the weekends. And that is a major misconception with people, where they think that the bad guys aren't very smart. Bad guys are smart, and that is why they prey on reservations, because they know the red tape, they know the bureaucracy, they know that if they make a phone call saying that there is an issue on the southeastern side of our reservation, while the drugs are being transferred onto the northwest side of it, there are how many people in that 45-minute drive that they are driving by, or how many phone calls are coming in. So they know what they are doing. And it is another major misconception that this is only happening on tribes. It isn't. It is happening in small town America. There is a microscope over the top of our tribes because of who we are. They know the red tape and they know how to get away with things. As an attorney general, you know that there is a number some of the States have where you have to hit $50,000 to prosecute on a drug charge. Forty thousand and ninety-nine dollars is what people will be caught with. So there are so many issues. That is why it needs to be a joint partnership of everybody working together and taking down the bureaucracy and taking that red tape down and figuring out a way of how are we going to protect that next generation. Not only tribes, but citizens of this great Country. Senator Cortez Masto. Yes, thank you. I know my time is up, but I am hopeful, Mr. Chairman, I think when I first got here, we may have had a conversation around this. It is time for us to have another conversation about how we fund BIA along with our U.S. attorneys and FBI as they coordinate as partners with our tribal communities and our local communities as well. I don't think we are doing a service here to really address what we are hearing that is happening in our communities right now. I think it is time for us to revisit that conversation. Thank you. The Chairman. Thank you very much, Senator Cortez Masto. Senator Smith? STATEMENT OF HON. TINA SMITH, U.S. SENATOR FROM MINNESOTA Senator Smith. Thanks, Mr. Chair, and thank you, Senator Cortez Masto, for those great questions. Thanks to all of you for being here. I am so glad to be with you. As I was listening to all of this, I want to talk mostly about the criminal problems that we have around drug trafficking. I also want to acknowledge that we also have a severe mental health crisis, behavioral health crisis that we need to be looking at as well. To my mind, substance use disorder is a disease. The fact that you have that is a health challenge that needs to be addressed. I want to note that there are just far too few resources and tools available to address that, and to address it in the context of the generational trauma that we know is driving so much of that. There is a very important piece of legislation that we passed called the Native Behavioral Access Improvement Act. This is legislation that is built on something that we passed, which is the Special Diabetes program. Modeled on that Special Diabetes program is this behavioral health program that would allow for tribes to be able to use their best knowledge and their sovereignty to be able to understand how to put together programs that are going to be able to address that mental health challenge. I want to draw attention to that, because I think it is important. But this crisis is also, as we have been hearing from many of you, a result of this legal quagmire where drug traffickers exploit, as you are saying, to keep opioids flowing into tribal communities without any accountability. Take the Red Lake Nation in northern Minnesota, Minnesota is a Public Law 280 States. Red Lake Nation is not under Public Law 280, so it is a closed reservation. What happens there is that they repeatedly pick up the same drug traffickers who are not Native, they then take those folks to the border, those folks are then picked up by county or Federal law enforcement and a week later, those folks are right back there again doing exactly the same crime. It is a revolving door that there is no end to, and no accountability for. So this question of how to address the need for criminal jurisdiction on tribal lands is important. It has gotten a lot more complicated following some of these Supreme Court decisions that we are dealing with. As you have been saying, those complications have been exploited by these criminal networks that are trafficking fentanyl and other drugs. I am going to ask this question to you, Chair Hillaire, because I think Senator Cantwell was getting at this a little bit. If you think about what we accomplished with that special criminal jurisdiction for missing and murdered indigenous people on reservations, so that you had that special criminal jurisdiction, can you speak to how that has been working, what you see as the strengths of that, and anything we can learn for what we could do if we were able to extend it to drug trafficking, for example? Mr. Hillaire. Yes, absolutely, I think that is a great idea. I want to add on to some of the things you mentioned. We were reminded by some of our elders that this mental health crisis and fentanyl crisis is one and the same. So it is a holistic, comprehensive approach that is needed to address it. Also, you mentioned two weeks, that somebody is taken to the border, handed over to other jurisdictions, and then you see them two weeks later. For us, try two hours later. We are a sovereign nation and we have to do what is in the best interests of our people. So when we go to a known drug home where there is known drug activity, known drug dealing, and we get them off the reservation, I do want to mention we also have MOA with our county as well, which allows us to at least enforce, but then we hand them over to the county authorities, and then two hours later, they are hitchhiking back onto the reservation. It is an ongoing issue. I think that would be an absolutely great idea, along with our ability to, if there is a way we can have special prosecutors that we can prosecute ourselves, because that is another big barriers, again, we prosecute them federally, but who is going to take up a case for something that could be seen as a small crime compared to the vast amount of crime that can happen in this world. We would be fully supportive of something like that. It would just be a matter of narrowing down the details of how that would work with VAWA. Senator Smith. Yes. I really appreciate that. We are working on legislation to accomplish that. I think the feedback you are giving us, which is we need resources to be able to do the accountability, but we also need jurisdiction, as we have learned from VAWA, we have learned from the extensions we did in VAWA how that can work. I think we should put that learning into action. Thank you. Thank you, Mr. Chair. The Chairman. Thank you, Senator Smith. Senator Lujan? Senator Lujan. Thank you, Mr. Chairman. I want to thank everyone for being here today. One issue, Mr. Chairman, I want to raise before I get to my questions, in New Mexico, thousands of tribal members over the last couple of years have fallen victim to extensive sober home Medicaid fraud schemes, where people were being kidnapped and driven hundreds of miles away into the State of Arizona under the false promise of treatment, and left there without means to return home, left homeless, when they were at their most vulnerable state. While this has been tragic not just to the families, but to everyone who has paid attention to this, to the entire community, it also highlighted the extreme need in communities to have more treatment. I very much appreciate the conversations we have had today in all spaces, especially the line of questioning coming from Senator Cortez Masto and Senator Smith. I certainly agree with their assessments. Now, Councilman Kirk, it is my understanding that there is a presence of a treatment facility on your tribal lands to help reduce overdose deaths and overall substance use disorder. Is that facility making a difference? Mr. Kirk. Right now, with the facility, we are waiting on sprinkler systems, and also with it being an old residential place, we have to do commercial water, commercial sewer. So that continues to back up. There are 12 beds now at the bottom of it. So right now what is going on in Montana is throughout the region, the Rocky Mountain region, tribes that cover Montana, Idaho, and Wyoming, there is a regional healing center right now that is going right now that we are starting from the ground up and working on it. We are trying to get a 62-bed facility. Right now I believe it is about $28 million to get it going. But that is for all the tribes. So if we are able to get funding with that and also bring the holistic healing and everything that needs to happen with that, that would be great. But as for the facility back home, it has not been going for the past five years. Senator Lujan. So that facility needs help. Mr. Kirk. Yes. Senator Lujan. So let me ask the question differently, Councilman, will more treatment facilities closer to home make a difference? Mr. Kirk. Yes. Because we are also all the way in northeastern Montana, we are victims that are being left down in Arizona, and we are still continuing to fly them back. As of yesterday we got a woman back, and paying for her luggage and everything to get back home. So we are also subject to that. Senator Lujan. I appreciate that, Councilman. Dr. Soto, in your written testimony you discussed a study you authored on medications for opioid use disorders in Indian health clinics. Were these IHS clinics Urban Indian Organizations or tribally run clinics? Ms. Soto. Can you repeat the question, please? Senator Lujan. In your written question, you discussed a study you authored on medications for opioid use disorders in Indian health clinics. Were these IHS clinics Urban Indian Organizations or tribally run clinics? Ms. Soto. Yes, they were Urban Indian health clinics. Tribal health programs and Urban Indian health clinics as well throughout the State of California. California does have over 50 Indian health clinics in the State. Senator Lujan. From your research, how available is culturally competent treatment for American Indians and Alaska Natives in the IHS system and the UIO system, or in other clinical systems? Ms. Soto. It is offered, and I really want to advocate for the need for more culture being integrated into our programs. I can't stress it enough. I am a behavioral health scientist working with our tribal communities. I have just learned in engaging and talking with them that culture really is the foundation of our Native people. It has been there before colonization, and it is still strong and alive today. It really is what has kept our people resilient against systemic racism, structural violence, all the things that we are talking about. It is really essential to be able to help our communities recover. So it is good for prevention as well as recovery, because without this, people in recovery need these cultural ways to heal. There is so much grief, and there is so much healing in our communities, I have heard many say today. There is a lot of unintended grief. We need more of that healing. So having our traditional ways, and that may be very different for many of our different communities, drumming, dancing, song, traditional ceremonies, bringing in our community, our elders. One of the other things that we have learned is it would be great if they are advocating to approve reimbursements by tribal clinics for the cost of traditional healing services, healers themselves, or these services to help bring them into these programs. So they have them, but it takes a lot of resources, it takes a lot of time. But to have those would really help support. Culture is essential. As many have said, culture is prevention and culture is the way of life. Senator Lujan. Dr. Soto, the data that I have seen shows that this works. I think that it is something I fully support, and I have seen work, especially with lessons I have learned from leaders on the Navajo Nation. So I am hopeful we can find a path forward there. If I may, Mr. Chairman, I do have one question that is technical for Dr. Soto. It is about purchase-referred care coverage for AIAN patients living outside their service area. Does that present an obstacle to accessing medication assisted treatment, MAT? Ms. Soto. I guess it depends on who has it, but that purchase-referred care is additional funding, it is never enough. Sometimes one person can take that entire cost, as they may need that to help support their travel or support their rehab, to support the service that they need that may not be offered at that clinic. Every clinic is obviously very different. Some of them specialize in certain services. So that is really important for us to think about. I really appreciate that comment, because more funding needs to go within that as well. It is not quite reaching all of our communities or individuals when support is needed. Senator Lujan. Thank you very much. Mr. Chairman, I have other questions, I will submit them into the record. But just to reiterate what Senator Smith and Senator Cortez Masto said, associated with resources to the Bureau of Indian Affairs, to be more supportive as well in planning and jurisdictional questions. I hope that there can be time for us to have a conversation about cross-commissioning and MOUs. In New Mexico, I constantly hear that liability is an issue where there is an unwillingness sometimes to enter into these agreements. I don't understand that. But if that is an impediment, then what can be done through the Bureau of Indian Affairs or others, so that we have more eyes, more ears, more people on the ground to keep us safer? I always felt safer when there were more patrols through where I lived as opposed to fewer patrols. Living adjacent to Nambe Pueblo and Pojoaque Pueblo and the communities where I live and where I have the honor of visiting, those constraints are making it less safe for people as opposed to more safe, not supporting that. Then lastly, with the Bureau of Indian Affairs, as more conversations are taking place specific to law enforcement, I certainly hope that we can gather and have a much larger conversation about the Bureau of Indian Affairs being supportive of sovereign nations as opposed to punitive in many areas. I think the times have definitely grown and moved and matured from the inception of the Bureau of Indian Affairs as we look to what that could become to provide more support to our sovereign nations and to our brothers and sisters. Thank you, Mr. Chairman, and thank you all again for being here today. I really appreciate it. The Chairman. Thank you, Senator Lujan. Just on the particular line of questioning you had around fraud, I would be happy to work with your staff on anything that we can do to follow up and make sure there is accountability but also prevent it going forward. Thank you for that. My first question is for Dr. Seabury. I guess it is a bit of a broad one. I am always cautious not to use words that people outside of the hearing room might not understand. I want to put a fine point on what do we mean by culturally competent care? I think I know. But I want to describe it both as a concept, but also maybe, Dr. Seabury, you can give me an example in the Native Hawaiian community of what that actually looks like. Ms. Seabury. Mahalo for the question. It is actually a favorite opening conversation for me. I usually use the words culturally mindful care, instead of competent. Competent sounds like you take a class and you get certified and we check off and you have your papers. When it comes to being relevant and responsive to a Native community, like the Native Hawaiian community, the needs are dynamic. So in this moment in time, we are talking about 2023 culturally mindful or culturally competent care, there are probably sort of two domains of knowledge. So if you are talking about a regular health provider, like a primary care physician or a behavioral health provider, then the aspects of what they would need to know to be culturally competent or relevant for working with a Native person might include specifics such as an awareness of what are the contemporary issues facing our community today. So why, related to our review, and our emphasis on our connection to land and water, for example, why are we having so many conversations about water use and access? What are the current stressors and coming issues that face this community right now related to housing and water, relevant to their history and situation currently socially. So I would say part of cultural competence is really about contemporary issues. Then the second piece, which is more foundational, is an understanding of how our shared history as a people and values show up in the way that we engage in the world. For example, there is a lot of research that shows that in primary care situations, health providers interrupt their patients after about 15 seconds of saying what is wrong. When they look at cultural understandings of that, we see, Native Hawaiians, like many other Native people across the Country and other represented groups, they wait until they are sicker before they come, because they have had more experiences where they are bouncing off of the health system, feeling that they were not seen, but they were criticized or scolded, that assumptions were made about them because of the group they belong to, that they don't care about their health, for example. The Chairman. Doctor, let me interrupt, because I have a very specific question here. How does that differ from just being kind and nice and respectful? I do think it differs, but I want you to put a find point on it. What you are describing is someone who interrupts their patient, which should be bad in any context. Ms. Seabury. Yes, so specifically, in general good western care is great. Here is the thing. It is not just that part. It has to do specifically with assumptions that are made about the person and what are the aspects of their life that are helpful. So there is discrimination that we can talk specifically about, assumptions about income, where you live, biases about your diet and what you might be doing that affect the quality of the care that they are then provided. So yes, when we are talking about patient engagement, we are not just talking about being warm, receptive, sort of general trauma-informed approach, although that is very helpful. We are talking specifically about recognizing that every instance of engaging with the health system without these modifications of cultural competence and awareness can re- traumatize members of the Native Hawaiian community because of the assumptions that are made about them that then make them not want to seek help in the future. So they are not able to access it. And when they do, the assumptions that are made about them impact the quality of the care they then receive. That is the issue with respect with competence, in my opinion. The Chairman. And the assumptions are, I don't want to repeat a bunch of stereotypes with the microphone on, but the assumptions are some series of assumptions that it is their fault? Ms. Seabury. Yes. That means behaviors are their fault, that they must come from a violent family, for example, or that they are unemployed or don't have secure housing because of a lack of effort, knowledge, education or wisdom on their part. Those are also assumptions that are made. And so in many ways I think the sort of lack of recognition of what are the current systemic factors that impact health far beyond whether or not you took the medication I told you to take is vital when we are talking about Native communities, because 90 percent of health has nothing to do with the health system. Access to safe sidewalks, street lights matter, law enforcement in your community, how many fast food joints and liquor stores are in your community versus libraries and farmer's markets. Those things affect health in ways that then the individual person seeking help bears the responsibility for in the bias of the provider. So their assumption is that they are not eating healthy foods because they don't want to, rather than because they don't have access. The Chairman. Thank you so much for that. Just one final request to all the testifiers. It is not mandatory, because some of you may have access to data and some may not. I do think it is important that this hearing establish a record of the efficacy of culturally mindful care. Because part of what we have to do, this is what we had to do with Native Hawaiian education and health and what we have had to do with immersion schools, is that we had to prove that meeting people where they are culturally actually gets you better outcomes, even if you have entirely western metrics. You are still going to get better test scores, attendance rates, graduation rates, medical outcomes, if you meet people where they are. I think there is a tendency in the medical establishment, in the executive branch of various Federal and State administrations, that this stuff is not backed up by hard science. I think that is wrong. But it would be great if we can be at least a little bit of a repository of the record that demonstrates, this is the most efficacious way for us to deliver care, so that we can translate some of that cultural competency into the kind of western analysis that basically enables us to get more money for the projects. I appreciate all of your work. I appreciate the challenges in front of us together in fighting fentanyl, but also just generally in trying to keep our communities safe and healthy. If there are no more question for our witnesses, members may also submit follow-up written questions for the record. The hearing record will be open for two weeks. I want to thank all the witnesses, both online and in person, for their time and their testimony. This hearing is adjourned. [Whereupon, at 4:20 p.m., the hearing was adjourned.] A P P E N D I X Prepared Statement of the National Indian Health Board Members of the Senate Committee on Indian Affairs, on behalf of the National Indian Health Board (NIHB) and the 574 sovereign federally recognized American Indian and Alaska Native (AI/AN) Tribal nations we serve, thank you for the opportunity to provide testimony. Introduction The United States recently experienced what some have called a once-in-a-generation crisis. The COVID-19 pandemic reshaped the very fabric of our economy, society, culture, relationships and our personal livelihood. Tribal Nations stood up, when the federal government would not, to protect our people from this devastating pandemic. As a result, AI/AN people had a life expectancy at birth of 65.2 years in 2021-- equal to the life expectancy of the total U.S. population in 1944. AI/ AN life expectancy has declined 6.6 years from 2019 to 2021, according to the 2021 Report of the Centers for Disease Control and Prevention (CDC). \1\ To date, there has been no response to this crisis of the loss of life expectancy. --------------------------------------------------------------------------- \1\ U.S. Department of Health and Human Services, Centers for Disease Prevention and Control, Provisional Life Expectancy Estimates for 2021 (hereinafter, ``Provisional Life Expectancy Estimates''), Report No. 23, August 2022, available at: https://www.cdc.gov/nchs/ data/vsrr/vsrr023.pdf, accessed on: March 20, 2023 (total for All races and origins minus non-Hispanic American Indian or Alaska Native). --------------------------------------------------------------------------- Now, two short years later, our Tribal Nations are facing another pandemic. This pandemic looks different than that of COVID-19, but has the potential to shift the very fabric of our communities in the same profound way. Fentanyl and opioids are spreading through our communities like an uncontained, unchecked virus. Every day, Tribal communities across the country grapple with the lives that are being cut short by this plague. While we wish we could provide some glaring statistics that would awaken a sense of urgency, such data does not exist, and what data that does exist is grossly out of date or inaccurate. Like during the COVID-19 pandemic, the federal government has an opportunity to take swift action to protect our communities. We hope Congress will not wait until it's too late. Today, our nation is confronted by the fentanyl and opioid pandemic that continues to disproportionately ravage the most marginalized among us, and Indian Country has been ground zero. In order to understand how to address and overcome these challenges and realize the opportunity for transformation before us, we must first insist on an honest reckoning of our history. The challenges we face today--most recently evidenced through the impacts of COVID-19 on Tribal communities--are the fruits of colonization. This system of exploitation, violence and opportunism is the foundation on which this Nation was constructed. Despite the poor social determinants of health most frequently found in the Indigenous and other communities of color--circumstances that proceed from hundreds of years of colonization--we are often blamed for our poor circumstances. What our communities are experiencing from the rise of fentanyl and opioid overdoses is simply the expected outcome of this historical truth. Centuries of genocide, oppression, and simultaneously ignoring our appeals while persecuting Our People and our ways of life persist and are now manifest in the vast health and socioeconomic inequities we face. The historical and intergenerational trauma our families endure, all rooted in colonization, are the underpinnings of our vulnerability to substance use disorders. Indeed, we tell our stories of treaties, Trust responsibility and sovereignty--over and over--and it often appears the listeners are numb to our historic and current truths. But the truth does not change: that is the ground we stand on. The underpinnings of colonization may finally be loosening as a consequence of the exposed neglect, abuse, bad faith and inequities AI/AN People have experienced during the COVID-19 pandemic. But it did not start with COVID-19. We hope that Indian country is not once again ground zero for another once-in-a-generation pandemic. Opioid Crisis in Indian Country Opioids are the latest face of a mental health and substance use crisis in America that is disproportionately impacting our Tribal communities. AI/ANs experience some of the highest rates of substance use issues as compared to other racial and ethnic groups, which has been attributed--in significant part--to the ongoing impacts of historical trauma. The high rates of substance use naturally lead to high rates of overdose from illicit substances, like fentanyl. According to the CDC, \2\ AI/ANs have experienced the highest age- adjusted overdose death rates of any group for the past decade, with many of those deaths resulting from opioid use, including fentanyl and fentanyl-laced substances. --------------------------------------------------------------------------- \2\ https://www.cdc.gov/nchs/products/databriefs/ db457.htm#Key_finding --------------------------------------------------------------------------- In the past year, several Tribes issued emergency declarations over the rate of fentanyl deaths among their members. Accidental overdoses-- where a person using drugs is unaware that a substance is mixed with fentanyl--are also on the rise among American Indians and Alaska Natives. CDC reports that AI/ANs had the highest overdose rate of any ethnic group for both 2020 and 2021, driven by a 33 percent rise in drug overdose deaths during the same period. \3\ The Alaska Native Tribal Health Consortium's (ANTHC) Alaska Native Epidemiology Center reported that the annual number of opioid deaths among Alaska Natives increased by 383 percent between 2018 and 2022, with the rate of opioid overdose mortality doubling during the COVID-19 pandemic. \4\ AI/AN adolescents experienced the highest overdose deaths from fentanyl in 2021. \5\ Those numbers are gravely concerning, and if we do not do more to prevent substance use among our children, then our culture, heritage, and way of life are at risk. It is up to all of us to ensure that our children can carry on our traditions into the next generation. --------------------------------------------------------------------------- \3\ Spencer MR, Minino AM, Warner M. Drug overdose deaths in the United States, 2001-2021. NCHS Data Brief, no 457. Hyattsville, MD: National Center for Health Statistics. 2022. DOI: https://dx.doi.org/ 10.15620/cdc:122556 \4\ Senate Committee on Indian Affairs Hearing on ``Fentanyl in Native Communities: Native Perspectives on Addressing the Growing Crisis.'' (2023). Testimony of the Record. Washington, DC: U.S. Senate Committee on Indian Affairs. https://www.indian.senate.gov/hearings/ oversight-hearing-titled-fentanyl-in-native-communities- nativeperspectives-on-addressing-the-growing-crisis/ \5\ Friedman J, Godvin M, Shover CL, Gone JP, Hansen H, Schriger DL. Trends in Drug Overdose Deaths Among US Adolescents, January 2010 to June 2021. JAMA. 2022 Apr 12;327(14):1398-1400. doi: 10.1001/ jama.2022.2847. PMID: 35412573; PMCID: PMC9006103. --------------------------------------------------------------------------- Social injustices, perpetuated over multiple generations, have had enduring consequences for many American Indian and Alaska Native individuals, families and communities. Research documents massacres, genocidal policies, pandemics from the effects of introduced diseases, forced relocations, forced removal of children through boarding school policies, and prohibition of spiritual and cultural practices (including the prohibition of the use of Native languages \6\). \7\ This ongoing and pervasive historical trauma has contributed to the high rates of opioid and fentanyl use in AI/AN communities. The symptoms and long-term effects of historical trauma include psychological distress, poor overall physical and mental health, and unmet medical and psychological needs, evidenced by increased exposure to trauma, depressive symptoms, substance misuse, and suicidal thoughts and attempts. \8\ --------------------------------------------------------------------------- \6\ Stannard, D.E. (1992). American Holocaust: The Conquest of the New World. New York, NY: Oxford University Press. \7\ Thornton, R. (1987). American Indian holocaust and survival: A population history since 1492. Norman, OK: University of Oklahoma Press. \8\ Tribal Behavioral Health Agenda. (2016). Available at: https:// www.nihb.org/docs/12052016/FINAL%20TBHA%2012-4-16.pdf --------------------------------------------------------------------------- Tribal leaders and federal partners must work together to protect our Tribal communities with effective and well-funded policy solutions to address the opioid crisis. Tribes are targeted by those in the drug trade because it is not a secret that Tribes lack the resources (and sometimes jurisdictional sovereignty) to adequately police their communities. As a result, it is difficult for Tribes to stop illicit opioids from entering and being distributed through their communities. Legislative solutions are needed to address the targeting that Tribes are experiencing. Senators Hoeven and Cortez Masto introduced S. 465, the ``Bridging Agency Data Gaps & Ensuring Safety (BADGES) for Native Communities Act.'' The bipartisan legislation would expedite background checks for those seeking employment as law enforcement with the Bureau of Indian Affairs (BIA), thereby reducing what is currently a 12-month process. Senators Cantwell and Mullin introduced S. 2695, the ``Parity for Tribal Law Enforcement Act.'' The bipartisan legislation would allow Tribal law enforcement to be cross-deputized as federal law enforcement, thereby shrinking the divide between Tribal and federal law enforcement partners and granting Tribal law enforcement access to federal benefits. We appreciate the efforts that Congress is putting toward addressing policing shortages in our communities, but more can be done and must be done to address this opioid crisis. Supplemental Funding Request Tribes must see a substantial increase in funding to address the opioid crisis. NIHB and Tribal nations were glad to see the President's recognition of this crisis through the inclusion of funding in his recent supplemental budget request to Congress. The President's proposal to address the crisis would provide $1.55 billion in additional funding to the Substance Abuse and Mental Health Services Administration (SAMHSA), including $250 million that would be transferred to the IHS and made available for two years. Despite the clear need in Indian Country, few federal dollars have been solely dedicated for this purpose to Tribal nations. For example, in FY 2023, State Opioid Response (SOR) funding was $1.575 billion, and the Tribal Opioid Response (TOR) Grants were $55 million, which is roughly 3 percent of the total. Given the impact of the opioid crisis in Indian Country, $250 million will be a long overdue investment that will save lives for generations to come. Policy Recommendations The opioid crisis has created serious and complex issues across Indian Country. Despite these serious challenges, Tribal nations and Tribal health systems are innovating when it comes to behavioral health. By focusing on holistic care, traditional healing practices, and Indigenous ways of knowing, we have seen remarkable results in Tribal communities for the treatment of opioid use. Tribes have combined culturally centered prevention, treatment, and recovery services with the implementation of key evidenced-based practices, including medications for Opioid Use Disorder (OUD); syringe service programs; training, administration, and distribution of the lifesaving overdose reversal medication naloxone; peer recovery support services; outpatient therapy and behavioral health integration. Nearly 50 years of self-determination and self-governance policy have clearly demonstrated that empowering Tribes works and results in better outcomes at the same dollar-for-dollar investment. In simple terms, good governance. Additional funding through the supplemental will allow Tribes to improve and expand this programming that we know is effective. Any policies or initiatives designed to improve Tribal behavioral health must be grounded in culture, tradition, language, and Native ways of knowing. To that end, in order to reduce AI/AN behavioral health inequity and improve health outcomes, Congress should pursue the following priorities: Advance Comprehensive Tribal Prevention, Treatment, and Recovery Services to Address the Opioid, Fentanyl, and Suicide Crises in Indian Country. The lived experiences of AI/AN historical trauma and adversity have contemporary descriptions and diagnoses: adverse childhood experiences (ACEs), substance use disorders (SUDs), and suicidal ideation--all of which intersect and have accompanying strategies for prevention, treatment, and recovery. Following an intervention, services should provide ongoing, comprehensive support for an established continuum of care. Congress should work to strengthen and assess the availability of critical services, gaps in services, and opportunities for improvement to meet community needs related to the opioid and fentanyl crisis. Improve Federal Standards for Data Collection and Reporting to Improve AI/AN Visibility and Better Measure Health Inequities. High-quality, meaningful AI/AN health data is essential for identifying disparities, setting priorities, designing strategies, and highlighting successes related to health equity. However, racial misclassification, missing data, and other quality issues impede the representation of AI/ANs in many data sets. With AI/AN people and communities so often missing from the data, this becomes one more form of erasure of AI/ANs--our experiences are not represented, our needs are not heard, and our very existence becomes invisible. In addition, the way federal data is reported often excludes the many AI/ANs who identify as Hispanic or with multiple racial identities. Reframing the data away from focusing on race and instead focusing on ``AI/AN'' as a political status is a more effective, empowering, strengths-based approach supporting Tribal self-determination. Congress must improve data practices as this is a crucial step to undo the centuries of AI/AN erasure contributing to the ongoing health inequities in Tribal communities, including the opioid and fentanyl crisis. Elevate a Tribal Perspective in Federal Health Equity Plans and Initiatives that Honor Trust and Treaty Obligations to Tribal Nations. Effective efforts for health equity in Indian Country must approach health equity plans through the lens of Tribal sovereignty, the nation-to-nation relationship, and the federal trust responsibility. In addition, these plans must conceptualize this work around understanding AI/ANs as a group with a unique political status, not as a racial minority. Health programs and initiatives need to prioritize Tribal self- determination and supporting connection to culture and community. Tribes know their people, communities, social and historical context, needs, and strengths best--Tribes are the experts in charting a path to health equity for their people. In addition, achieving health equity requires recognizing and rectifying historical injustices and providing resources according to need. Create and Invest in an Indigenous Model of Social and Structural Determinants of Health. Decades of research have documented health inequities experienced by AI/ANs--including those inequities around SUD and OUD--and the powerful role played by underlying social and structural determinants of health. However, these determinants that drive health inequities for AI/ANs are often distinct and require a unique perspective and customized approach to address. Current research on social determinants of health is missing this Indigenous perspective. Health equity for AI/ANs will advance with a Tribally created and Indigenous model of social and structural determinants of health that will identify root causes of inequities and priorities for intervention. In July 2023, the 76th World Health Assembly (WHA) adopted a resolution prioritizing the health of Indigenous Peoples around the World, including developing a global action plan by 2026. We call on the United States to invest in, adopt and advance these priorities as a Tribally-informed path toward achieving health equity and end crises like the opioid and fentanyl crisis in our communities. Address Housing and Homelessness in Indian Country. All Tribal members should have access to stable, safe, sanitary, and affordable housing. Individuals cannot have access to recovery or treatment services without first having safe, adequate and secure housing. Tribal housing issues and challenges exacerbate health disparities and lower health status experienced by AI/AN individuals and communities. Congress must reauthorize the ``Native American Housing Assistance and Self- Determination Act of 1996'' (NAHASDA) and advocate for additional resources for Tribal housing needs. Housing policies should focus on ``housing first'' before individuals may be able to live in recovery. Address Historical and Intergenerational Trauma. SUDs are among the many health problems worsened by discrimination and oppression, both historical and current. Research has directly linked historical trauma, colonization and its methods to substance use among AI/AN Peoples. Traumatic events experienced by American Indians and Alaska Natives are not confined to a single catastrophic period in the past, nor are they confined to a single event but from many sources; they are ongoing and present in modern times. Additionally, the detrimental, intergenerational harm from boarding school policies is associated with increased SUDs, mental illness, and numerous chronic health conditions. As we examine our past, we must continue to look toward the future to identify and address these policies' impact on our communities, our cultural integrity including tradition-informed ways of being healthy. One of the most insidious aspects of historical trauma is its heritability. It is passed down through families and communities--most often unknowingly--exposing future generations to centuries-old sorrow and trauma. Opportunities to intervene in this process are often overlooked or not identified, and so the cycle continues. An important way to actively promote healing is to break this cycle and interrupt the passing down of messages that contribute to trauma. Trauma should be proactively addressed in informed ways by the appropriate tribal (e.g., family members, teachers, leaders, traditional practitioners, behavioral health professionals) and non-tribal parties. \9\ --------------------------------------------------------------------------- \9\ Ibid. Promote Culturally Centered and Tribally Driven Behavioral Health Policy and Programs. AI/AN cultures serve as key protective factors and primary prevention of many mental health and substance use disorders. Historically, traditional healing and culturally centered ways of living provided holistic mental wellness. Forced assimilation policies and programs harmed Tribes and created behavioral health disparities and negative health outcomes. Just as federal policy and programs once sought to eradicate AI/AN identity, there must be an equally vigorous contemporary response that assists in reconnection and revitalization of identity. Cultural restoration is an essential aspect to the needed approach to these programs. Support for traditional healing practices and modalities and investment in community restoration are essential if we are --------------------------------------------------------------------------- going to recover from the many policies of colonization. To that end, Congress must provide that the funding for these programs be available through self-governance contracts and compacts, and tribally driven, and informed. Too often, federal policies seek to fit support to tribal communities in a system that was originally designed without their input, and in many cases, designed to eradicate our people. Instead, programs serving Tribal communities should focus on culture, healing, and traditional ways of knowing. Without federal policy supporting the restoration of culture, community and traditional knowledge, we will not be able to heal from the trauma of colonization. All prevention and treatment programs are not designed to meet the diverse needs of differing communities, nor are they designed to readily incorporate traditional American Indian and Alaska Native worldviews that promote health and healing. Tribal communities must have the flexibility, support, and resources to implement prevention, treatment, and recovery programming that meet the needs of their populations. Congress should: Create and support culturally and spiritually based programming and healing that aligns with the diversity and needs of the local Tribal population and engages communities in the development of diversion and reentry programs. Support and coordinate reentry programming across service sectors and programming for incarcerated persons and their families, especially their children. Support and promote Tribal Healing to Wellness Courts, Veterans Courts (or the VA Diversion Courts Peer-to-Peer Support Program), and other courts that support recovery Formulate and implement long-term, communitywide engagement and mobilization strategies that emphasize community ownership of their issues and solutions. Support and train community members to serve as peer counselors. \10\ --------------------------------------------------------------------------- \10\ Ibid. Strengthen Tribal Behavioral Health Systems. Many barriers impact access, quality, and availability of health, behavioral health, and related services for AI/AN people. These issues include provider and personnel shortages, limited resources, and obtaining services without traveling great distances. Additionally, there are concerns related to funding, such as amounts, distribution mechanisms, allocations, sufficiency, and reporting requirements. Congress must invest in adequate resources to address the chronic behavioral health needs of Indian Country. This includes providing funding at the full authorized amount for the newly enacted the Behavioral Health and Substance Use Disorder Resources for Native Americans located at SAMHSA. Congress should also enact legislation to expand the use of contracts and compacts under the ``Indian Self-Determination and Education Assistance Act'' (ISDEAA) for --------------------------------------------------------------------------- programs outside of the IHS. We believe that one of the ways to do strengthen behavioral health systems is to follow other effective programs. One of the most successful models for addressing chronic health issues is the Special Diabetes Program for Indians. This program provides funding to over 300 grantees to treat and prevent type 2 diabetes through approaches that are culturallydriven and tailored to local community needs. Data shows the program being remarkably successful with type 2 diabetes onset and complications for AI/ANs decreasing year after year. Congress should enact a similar program for behavioral health challenges that would focus on local needs, and cultural practices. Conclusion For centuries, AI/AN people have endured genocide, destruction of culture, poverty, removal, forced assimilation, and countless traumas that have all contributed the crisis of OUD and SUD that we see in Tribal communities today. Addressing the opioid and fentanyl crisis is a complex issue that involves all sectors including health, public safety and justice, child welfare, economic opportunity, and many others. While there is not one policy answer that will eradicate the impacts of opioids and fentanyl in our communities, we do know that the core of this answer is restoration of culture. Restoring Tribal culture, honoring tribal sovereignty, and supporting self-determination will ensure that Tribal nations have the tools available to support their communities. This includes enacting policy that is focused on individualized communities, and does not force our communities to fit in to the boxes determined by federal officials. We know what to do. We know how to heal. We need support to achieve it. This includes investments in behavioral health facilities are necessary to ensure that those who suffer from opioid use disorders and the detrimental effects of illicit fentanyl can seek the treatment they need. We must have investments in housing support, employment, and public safety. But most of all, cultural and traditional healing practices that protect AI/AN communities should be a priority and fully funded through self-governance. There is no quick fix to this crisis, but adequate funding for Indian country is the first step in preventing more overdoses and treating those with addiction. ______ Prepared Statement of Nickolaus D. Lewis, Council, Northwest Portland Area Indian Health Board Greetings Chairman Schatz and Vice Chairman Murkowski, and Members of the Committee. My name is Nickolaus D. Lewis, and I serve as Council on the Lummi Indian Business Council, and as Chair of the Northwest Portland Area Indian Health Board (NPAIHB or Board). I thank the Committee for the opportunity to provide testimony on ``Fentanyl in Native Communities: Native Perspectives on Addressing the Growing Crisis.'' NPAIHB was established in 1972 and is a tribal organization under the Indian Self-Determination and Education Assistance Act (ISDEAA), P.L. 93-638. The Board advocates on specific health care issues in support of the 43 federally-recognized Indian tribes in Idaho, Oregon, and Washington (Northwest or Portland Area). The Board's mission is to eliminate health disparities and improve the quality of life for American Indians and Alaska Natives (AI/AN) by supporting Northwest Tribes in the delivery of culturally-appropriate, high-quality health care. ``Wellness for the seventh generation'' is the Board's vision. We thank the Subcommittee for their continued support in improving the delivery of healthcare services in Indian Country. I provide the following testimony on the fentanyl crisis in the Northwest: Opioid and Fentanyl Epidemic in the Northwest AI/AN people in the Northwest are facing a devastating opioid and fentanyl epidemic with increased overdoses and deaths. The rate of drug overdose deaths, specifically for opioid and fentanyl deaths, are disproportionately higher among AI/ANs in the U.S. compared to other racial groups. But, the death rate from drug overdose among AI/ANs in Washington state is almost three (3) times higher than the national AI/ AN rate and the Washington state average. Alarmingly, the overdose death rate among AI/AN in Oregon has more than doubled from 2015 to 2020. While the national and state averages have also increased during this timeframe, the rate among AI/AN in Oregon has increased more--a 158.5 percent increase. The COVID-19 pandemic caused isolation from familial, social, and cultural activities, increased anxiety and depression, significant deaths, economic instability, and barriers accessing mental health services and substance use treatment. As a consequence, the pandemic precipitated this devastating opioid and fentanyl epidemic and Northwest Tribes are experiencing significantly poor mental health and substance use outcomes. This opioid and fentanyl epidemic is overwhelming tribal programs and services, including health care, public safety and tribal justice systems, child welfare, housing, social services and elder care programs. The Northwest Tribal Leaders advocated for a convening of Tribes nationally to develop policy priorities and strategic action items to address this crisis. In August, the NPAIHB hosted the National Tribal Opioid Summit which convened over 1,000 tribal leaders, frontline workers, and federal and state policymakers in Tulalip, Washington to develop solutions, collaboration, and policy recommendations to directly address the devastating impacts of fentanyl and opioid drug abuse in tribal communities. The National Tribal Opioid Summit (NTOS) Resource Hub, available at https://www.npaihb.org/national-tribal- opioid-summit/, houses all ongoing resources and materials related to the Summit, including a draft set of policy recommendations and Executive Summary. A NTOS Report will be forthcoming and posted to the Resource Hub webpage. Based upon the NTOS and NPAIHB priorities, we make the following recommendations to the Committee to address the fentanyl crisis: Declare a National Emergency for the Opioid Epidemic We request the Committee calls upon the President to declare a national emergency for the opioid epidemic devastating Tribal communities under the National Emergencies Act, 50 U.S.C.  1601 et. seq., the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C.  5121 et. seq., and Public Health Service Act, 42 U.S.C.  247d. We also request that the Administration utilize all authorities under the Stafford Act, National Emergencies Act, and Public Health Service Act to: allow Medicaid and Medicare reimbursement at the Indian Health Service (IHS) encounter rate for traditional healing and tribal based practices and all services furnished by behavioral health providers; facilitate access to community wide harm reduction training and access to supplies, including Narcan and fentanyl test strips, from the Strategic National Stockpile and the Indian Health Service's National Service Supply Center; fully fund tribally operated treatment facilities, wrap around services, and medically assisted treatment programs; streamline certification requirements for treatment facilities and Opioid Treatment Programs; and provide flexibility for Tribes to incorporate and fund tribal and cultural practices and to address social determinants of health, including addressing safe housing, food security, and training and workforce opportunities. Expand the use of ISDEAA Self-Determination Contracts and Self- Governance Compacts Northwest Tribes have had longstanding requests to the IHS and Health and Human Services (HHS) to move away from grant funding and allow tribes the option to receive funds through their contracts and compacts. Self-determination and Self-governance contracts and compacts honor tribal sovereignty and the government-to-government relationship and authorize Tribes to rapidly deploy programs and services to meet the needs of their communities. IHS and other HHS agencies continue to provide funding through grant programs. Grant programs result in significant administrative costs to operate the grant program that are not reimbursable. We need HHS funding to be flexible and allow us to address the mental health and substance use needs within our communities as the needs arise and without restrictions. This Committee must support an option for tribally-operated facilities to receive all HHS grant funds through their ISDEAA contracts and compacts. In addition, HHS agencies have previously allocated funding to IHS that was distributed to tribes through existing formulas and ISDEAA contracts and compacts (e.g., Centers for Disease Control and Prevention). This process successfully allowed tribes to receive funds quickly from CDC and to use those funds to best meet the needs in their communities. All HHS funding should be allocated to Tribes through this mechanism. This Committee must support legislation expanding ISDEAA contracting and compacting to HHS and its agencies. Support for Increased Funding to Address Opioid Response The President is proposing to provide $1.55 billion in additional funding to the Substance Abuse and Mental Health Services Administration (SAMHSA) to address the opioid crisis, including $250 million that would be transferred to the IHS and made available for two years. We support this long overdue investment to tribal opioid response but request that IHS is directed to provide those funds to Tribes and Tribal organizations through their existing ISDEAA contracts and compacts. We also request support for increased funding to construct facilities for detox and treatment and to address housing shortages for individuals in recovery and their families. Improve Opioid Treatment Program (OTP) Service Delivery Currently, it's an onerous process to open an opioid treatment program (OTP) due to the number of inspections, reviews, policies, and procedures necessary to be in place prior to opening. Under 42 C.F.R.  8.2, the medical director of an OTP is defined as ``a physician, licensed to practice medicine in the jurisdiction of the location of the OTP.'' However, there are numerous medically trained providers such as ARNPs or PA-Cs working for tribes who have the experience and knowledge to serve in the medical director role. By limiting the credentials of who can be an OTP medical director, tribes are paying exorbitant salaries to people who may not be the best fit for the tribe's needs. We request this Committee to urge SAMHSA to initiate rulemaking to streamline the certification and accreditation process for OTPs and to give Tribes the flexibility to choose other medically trained providers to serve as medical director. Expand the Community Health Aide Program (CHAP) in the Lower 48 Tribal Leaders in the Portland Area support long term sustainable solutions that build up our communities, create opportunities for our youth and tribal citizens, educate our healers and train the next generation of work force. Lack of behavioral health providers is a significant issue and need in the Portland Area. The Community Health Aide Program (CHAP) is a program that was designed and implemented by the Alaska Native Health system over 60 years ago. In nationalizing it to the rest of the country, tribes everywhere have an important opportunity to tackle social determinants of health while improving healthcare workforce and retention especially focused on behavioral health workforce. CHAP is unique because it not only increases access to care, but creates access points to health education so that tribal citizens can become health care providers with professional wage jobs on reservations and in tribal health programs throughout the country. Thus, CHAP is critical to addressing poverty and supporting economic viability in Tribal communities. The education programs associated with CHAP are the foundation of the program. In the Northwest, we have established a Dental Therapy Education Program, two Behavioral Health Aide Education Programs, and in the process of developing the Community Health Aide Education programs. We have also worked with the Portland Area IHS Office to standup a CHAP Certification Board to certify our Portland Area CHAP providers. Portland Area Tribes and NPAIHB have been innovative and creative in securing funding for CHAP expansion despite only receiving one IHS grant of $1 million (of the $20 million appropriated to IHS for the expansion of CHAP in the lower 48). This Committee must consider this crucial opportunity to address workforce shortages in Tribal communities and further support increased access to behavioral health services. Support the National Tribal Opioid Summit (NTOS) Recommendations The NTOS Policy Recommendations and Final Report are being reviewed and finalized by Tribal Leaders. The Policy Recommendations and Final Report will be available on the NTOS Resource Hub available at https:// www.npaihb.org/national-tribal-opioid-summit/. We urge the Committee to support the NTOS Recommendations in order to address this devastating epidemic affecting Indian Country. During the NTOS, Tribal Leaders and other Summit attendees participated in a policy survey that requested their input on how Congress and the President could address the fentanyl crisis. The policy survey results are being compiled and will be posted on the NTOS Resource Hub. We encourage the Committee to review the policy results when posted. Conclusion Thank you for this opportunity to provide testimony on the fentanyl crisis in the Northwest. As evidenced by our testimony, Tribes need resources now to save lives from this devastating epidemic. I invite you to visit the Northwest to learn more about the fentanyl crisis in our Area. I look forward to working with the Committee on our requests. \1\ --------------------------------------------------------------------------- \1\ For more information, please contact Karol Dixon, NPAIHB, Director of Government Affairs/Health Policy. --------------------------------------------------------------------------- ______ Prepared Statement of the Seneca Nation Chairman Brian Schatz, Vice Chair Lisa Murkowski, and Members of the Committee, these comments are being submitted on behalf of the Seneca Nation in response to the two recent hearings the Committee held regarding the epidemic of fentanyl use in Native American communities. The Seneca Nation appreciates the Committee holding two hearings on this public health crisis in such a short time, and we request you continue to hold additional hearings and roundtables on the matter throughout 2024. After monitoring both hearings and reviewing the written statements of the witnesses, we think it is critical that the Committee continue to shine a light on this matter through formal hearings (including field hearings) and roundtable discussions for the following reasons: 1. Effectively combatting the fentanyl crisis is a multi- government effort and will require resources from the federal and state governments along with Native Nation governments. The Seneca Nation and other Native Nations need to be at the table and need to be a part of the dialogue about potential solutions and information sharing regarding the fentanyl crisis. The federal government has a treaty obligation to help us respond to this epidemic, and federal partnership is necessary to make any effective progress in this fight. Holding additional hearings and roundtable discussions ensures that our Native voices are heard and creates transparency and accountability for making meaningful progress on this matter; and 2. In addition to ensuring that we are at the table and are a part of the discussions, hearings improve the level of information sharing between governments and communities. The recent hearings shared useful information about the public health crisis experienced in other parts of Indian Country. This information helps guide strategies for combatting the surge of fentanyl use in our own community. The Seneca Nation submits these comments to ensure our experiences are placed on the record to inform the federal government and other Native Nations about what we are doing to combat fentanyl and its root causes within our community. One thing that is clear from the hearings is that Congress and federal agencies are taking too long to adopt protective laws and policies and to develop best practices. Fighting the scourge of fentanyl cannot wait for changes in laws and policies, and sharing information is vital for those of us who are not getting the same level of outreach and support from our local federal and state government entities. The Seneca Nation cannot wait for federal laws and policies to change. We are taking an active role in addressing our growing fentanyl crisis. This is why we created our own Opioid Taskforce, compromised of Seneca Nation leadership and community members, committing our own resources to develop an action strategy to combat the root causes of the fentanyl crisis. Despite committing our own resources, it is still the federal government's responsibility to aid us and provide additional funding. The Seneca Nation is one of the largest of the six Native Nations from the historic Iroquois Confederacy, a democratic government that predates the formation of the United States. We are located in what is now called Western New York State. We have over 8,500 enrolled members, most of whom reside on or within fifty miles of our multiple non- contiguous territories. Our territories span four counties: Erie, Cattaraugus, Chautauqua, and Niagara. Our judicial system is comprised of a Peacemakers Court that focuses on civil matters, a Surrogates Court that oversees probate matters, and a Court of Appeals. The primary enforcers of Seneca Nation laws are the Seneca Nation Marshals and Conservation Officers. The Nation does not have its own criminal code or criminal laws and, therefore, the Nation's law enforcement officers do not enforce any criminal laws and the Nation's Courts do not process any criminal complaints. Federal and state law enforcement officials share authority under federal law to exercise criminal jurisdiction over the Nation's territories, but their limited resources and competing interests often mean that the enforcement of criminal laws on Nation territories may not receive the same attention as neighboring off-territory communities. Like other Native Nations, the Seneca Nation experiences drug- related challenges and a surge in opioid abuse and fentanyl related overdoses and deaths. No family in our Nation has been spared from this heartache, and we all know someone who is suffering from the fentanyl crisis. We have had instances where babies are born addicted to opioids and our community must watch these babies go through the detox process. Many of our children have lost their parents due to overdose, and many more watch their parents struggle with active addiction. These situations place additional burdens on extended families and our foster care system who must now care for these children. A spiritual person in our community had a dream in which an elder Seneca woman on the other side came back to our community and expressed concern about all the Seneca children without parents. This woman delivered a message that we need to do more for these children who have lost their parents to opioids. We have seen some of our young adults overdose on opioids, including fentanyl, and discarded on the street instead of rushed to a hospital where they might have a chance to survive. In one case, a 24- year-old Seneca man was discarded only several houses away from his mother's house. Worse is that these stories have become so frequent that our people are becoming numb and desensitized to the crisis and long-term trauma it is causing. The effects of addiction and loss ripple through our community. Like other Native Nations, our community feels like an extended family, and we are all connected. Thus, deaths affect all of us-neighbors, friends, and family. Over the past 10 years, the number of funerals in our community has increased tremendously and the devastation that untimely and unnecessary deaths leave behind is often unbearable. Between 2015-2020 alone, there were 110 documented overdoses on two of our territories. There have been so many funerals within our community over the past year that a group of Senecas formed a grass roots organization to help grieving families. It is the custom and tradition of Seneca people to bring the bodies of our loved ones home when they pass away so that our community may care for them with traditional ceremonies. This can involve hundreds of people coming to a home to participate in the ceremonies and grieving process. Since most homes cannot fit this many people, large canopies, tables, and chairs are set up outside the home to accommodate the number of mourners who visit throughout the day and night. Given the increased number of funerals in our community, the grass roots organization also provides resources to Seneca families for the mourning process and provides grief support. The opioid epidemic, particularly fentanyl, is our number one priority, which is why we are so grateful that the Committee held two hearings on the matter. Fentanyl is such an important issue to us that the Seneca Nation representative attending the annual White House Tribal Nations Summit left the Summit to attend the Committee's hearing on December 6th. These hearings allow for much information to be shared and conveyed on the record and highlight why it is so important for the Committee to continue holding additional hearings and shed more light on this critical issue that impacts all Native Nations. There are three key things we took away from the two hearings held by the Committee: 1. There is a significant need for more data collection and data sharing to help combat this crisis; 2. The experiences of Native Nations across the country with respect to fentanyl and access to federal and state resources varies greatly; and 3. More federal and state resources are needed now, and needed quickly, for Native Nations to effectively combat fentanyl. The hearings highlighted the disparity in data collection and sharing across the country and how better data can help each community develop targeted action items. Councilman Bryce Kirk from the Assiniboine and Sioux Tribes of the Fort Peck Reservation provided very good data collected by his government, in combination with data that was shared by the state government. This data allowed the Assiniboine and Sioux Tribes' government to develop concrete recommendations for what is needed to combat the fentanyl crisis on their reservation. The Seneca Nation has been collecting data but we also have encountered barriers to accessing data collected by local governments. For instance, we know from our own data that the use of Narcan has helped prevent deaths from opioid overdoses. Our Seneca Emergency Management Services tracks the number of calls for dispatch and how many get cancelled and for what reason. We have had a number of cancelled calls over the past few months because Narcan was successfully administered. From this data, we know that increasing the availability of Narcan and educating people on how to use it reduces the number of overdoses in our community. We also know from data collected by Erie County that Senecas are disproportionately impacted by fentanyl and overdoses. Over one-third of the Seneca population resides in Erie County and data from the County government indicates that overdoses among Native Americans is triple that of other groups. However, data from Cattaraugus County, where many Seneca people also live, is lacking because of discrepancies in the data collection methods and available funding. In Cattaraugus County, the specific cause of death for many opioid overdoses is listed as heart attacks because the County only has a coroner, not a medical examiner. Not having the financial resources to hire a medical examiner means that Cattauragus County is unable to adequately collect the data surrounding deaths related to fentanyl overdose. Thus, we do not have an acurate picture of the impact on our people in Cattauragus County. The hearings also highlighted the disparities in the level of interactions between the Bureau of Indian Affairs (BIA) and Department of Justice with various Native Nations across the country. The Director of the BIA's Office of Justice Services shared valuable information about some of the threats of opioids in Indian Country. However, the information also highlighted what the BIA fails to know, such as the impacts on each Native Nation's community, government and social services. Additionally, very few, if any, Native Nations in the Northeast have a BIA presence in our territories. The Eastern Region Office of the BIA is located in Nashville, Tennessee, and serves 34 Native Nations located in 12 states East of the Mississippi River. BIA law enforcement officers have a very limited presence in any Native Nations in the Eastern Region, with field offices only in three Native communities and all of those are in the Southeast. The Director of the BIA's Office of Justice Services provided the Penobscot Nation's Healing to Wellness Court as an example of a Native Nation combatting the fentanyl crisis even though the BIA has no presence on the Penobscot Reservation. The New York Field Office formerly located in Syracuse, NY no longer exists and is temporally located in Cherokee, North Carolina. The hearings show how the BIA's Office of Justice Services needs additional resources to offer any real assistance to Native Nations across the country. The same is true with regards to the various entities within the U.S. Department of Justice. We were surprised to hear the testimony of U.S. Attorney Vanessa Waldrefin which she conveyed very detailed data about fentanyl in Eastern Washington State, the level of coordination between her office, Native Nations in the district, the FBI, the BIA, and the DEA. Also surprising was the number of consultations her office convenes with Native Nations, the Safe Trails Task Force, and the DEA's Operation Engage, which focuses on prevention and education. Our interactions in Western New York are far different from what U.S. Attorney Waldref describes as occurring in Eastern Washington. There has been only limited outreach in recent years to us from the U.S. Attorney for the Western District of New York, and even less from the BIA or FBI. We are impressed with the level of coordination and outreach that U.S. Attorney Waldref described in her testimony and believe that the U.S. Department of Justice could increase its effectiveness if similar levels of coordination and outreach were performed throughout Indian Country. The Seneca Nation shares many of the same experiences as those Native Nations in Eastern Washington. Our lands are in rural areas, our people suffer from intergenerational trauma, and our communities and government are still recovering from broken treaties and promises made by the United States. We believe that our territories and people are being specifically targeted by drug cartels and dealers for the same jurisdictional complexities and lack ofresources that U.S. Attorney Waldreftestified about for Eastern Washington. Our territories border the State of Pennsylvania and are close to the Canadian border, and we are positioned in a main corridor to access New York City. Thus, drug dealers seeking to smuggle drugs into New York City often target the Seneca Nation territories as places to set up shop for strategic access. Yet, the amount of interaction and information we are receiving from the federal government and State of New York is far less than what U.S. Attorney Waldref describes as occurring in Eastern Washington. Finally, the hearings highlighted that additional resources are needed in Indian Country to combat the fentanyl crisis. All the data shared during the hearings point to how Native Americans and our communities are disproportionately impacted by opioid abuse and are targeted by drug dealers and smugglers because of complex jurisdictional issues and a lack of information sharing and coordination with the federal and state governments. Yet, we receive no additional resources to mitigate these disproportionate impacts. We need more resources, and we need them now! We need more financial resources, more information and consultation, and more flexibility and less red tape from the federal government on how we use our federal funding so we can address this crisis with the flexibility it requires. As several of the Native Nation leaders testified during the hearings, there is no single solution to the fentanyl crisis, and we must take a holistic approach to solving the problem and its root causes. A holistic approach means that we need to focus on supporting cultural practices, mental health, detoxification, and treatment, in addition to law enforcement. Like other Native Nations, our people lack access to detox treatment and adequate mental health services. We need federal funding to address these issues and the flexibility to develop comprehensive communitybased programs in a culturally relevant manner. Many states receive federal funding for addiction services and support services, but this federal funding is not making its way to Native Nations even though we are disproportionately impacted by the fentanyl crisis. New York State has an Office of Addiction Services and Support, but the Seneca Nation receives no funding or assistance from this office. We need direct funding from the federal Substance Abuse and Mental Health Services Administration (SAMHSA) rather than relying solely on State resources. And, we should not have to compete with other Native Nations for such vital funding; every Native Nation should receive fundin to address mental health issues and intergenerational trauma. As a part of the Seneca Nation's commitment to take an active role in addressing fentanyl abuse and its root causes, we are hosting the World Indigenous Suicide Prevention Conference in the summer of 2024. This will be the first time the Conference will be held in the United States and held on Indigenous lands. Yet, we are not receiving any federal funding to host the Conference even though opioid and fentanyl use is directly related to suicides in Native American communities. Our hope is the Department of Health and Human Services and the Indian Health Service will become partners with us on this Conference. In addition to increased federal funding, Native Nations need far more flexibility in how we can use federal funding so that we can quickly take actions targeted towards various health crises, such as fentanyl, without having to wait for Congress to make changes to existing laws or agencies to revise policies and regulations. We appreciate President Biden issuing Executive Order 14112 To Promote the Next Era of Tribal Self Determination. This Executive Order is intended to make federal funding more accessible, flexible, and equitable for Native Nations by reducing red tape and allowing Native Nations to exercise more autonomy over how we use federal funds. Additionally, the Executive Order creates a one-stop-shop website for Native Nations to research the federal funding available to us and requires the federal government to better assess its unmet obligations to Native Nations. It sounds like good progress, but how long will it take to implement this Executive Order, and specifically what can be done now pursuant to the Executive Order to help the Seneca Nation and other Native Nations to combat the fentanyl crisis in our communities? We need the Committee to push for the Executive Branch to answer these questions and to provide answers quickly versus a year from now. In closing, the Seneca Nation again thanks the Committee for holding its two recent hearings on the fentanyl crisis, and we ask that the Committee continue to hold hearings on this important issue in 2024. ______ Prepared Statement of the United South and Eastern Tribes Sovereignty Protection Fund As the Committee well knows, the opioid crisis has had a devastating effect on USET SPF Tribal Nations and Tribal Nations across the country who continue to experience the destructive effects of opioid addiction at rates higher than non-Indian communities. According to the Centers for Disease Control and Prevention (CDC), American Indians and Alaskan Natives (AI/ANs) experienced the highest rates of opioid overdose deaths of any racial or ethnic group in both 2020 and 2021. Between 2020 and 2021 alone, Tribal communities experienced a staggering 33 percent rise in overdose deaths, \1\ the vast majority of which are the result of opioids, particularly synthetic opioids like fentanyl. Despite the disproportionate impact opioid use has had in Indian Country, Tribal Nations continue to lack access to sufficient, critical resources to address the damaging effects of opioid abuse in our communities. USET SPF offers the following comments and recommendations to the Committee to underscore the need for Congressional action, in accordance with trust and treaty obligations, to ensure Tribal Nations have the resources necessary to address this epidemic. --------------------------------------------------------------------------- \1\ ``Drug Overdose Deaths in the United States, 2001-2021,'' Centers of Disease Control and Prevention --------------------------------------------------------------------------- USET SPF is a non-profit, inter-tribal organization advocating on behalf of thirty-three (33) federally recognized Tribal Nations from the Northeastern Woodlands to the Everglades and across the Gulf of Mexico. \2\ USET SPF is dedicated to promoting, protecting, and advancing the inherent sovereign rights and authorities of Tribal Nations and in assisting its membership in dealing effectively with public policy issues. --------------------------------------------------------------------------- \2\ USET SPF member Tribal Nations include: Alabama-Coushatta Tribe of Texas (TX), Aroostook Band of Micmac Indians (ME), Catawba Indian Nation (SC), Cayuga Nation (NY), Chickahominy Indian Tribe (VA), Chickahominy Indian Tribe-Eastern Division (VA), Chitimacha Tribe of Louisiana (LA), Coushatta Tribe of Louisiana (LA), Eastern Band of Cherokee Indians (NC), Houlton Band of Maliseet Indians (ME), Jena Band of Choctaw Indians (LA), Mashantucket Pequot Indian Tribe (CT), Mashpee Wampanoag Tribe (MA), Miccosukee Tribe of Indians of Florida (FL), Mississippi Band of Choctaw Indians (MS), Mohegan Tribe of Indians of Connecticut (CT), Monacan Indian Nation (VA), Nansemond Indian Nation (VA), Narragansett Indian Tribe (RI), Oneida Indian Nation (NY), Pamunkey Indian Tribe (VA), Passamaquoddy Tribe at Indian Township (ME), Passamaquoddy Tribe at Pleasant Point (ME), Penobscot Indian Nation (ME), Poarch Band of Creek Indians (AL), Rappahannock Tribe (VA), Saint Regis Mohawk Tribe (NY), Seminole Tribe of Florida (FL), Seneca Nation of Indians (NY), Shinnecock Indian Nation (NY), Tunica- Biloxi Tribe of Louisiana (LA), Upper Mattaponi Indian Tribe (VA) and the Wampanoag Tribe of Gay Head (Aquinnah) (MA). --------------------------------------------------------------------------- Data Collection and Access Challenges Result in Insufficient Resources It is unquestionable that opioid abuse, deaths, and trafficking have reached epidemic levels in the United States, but particularly in Indian Country. Available statistics already show that AI/AN peoplehad the highest rates of drug related deaths in recent years, and information from the Indian Health Service (IHS) indicates that AIANs are more likely than any other race/ethnicity to have an illicit drug use disorder. According to the National Institutes of Health (NIH), opioid mortality rates for AI/AN populations have risen almost continuously for nearly two decades. However, USET SPF suspects that rates of AI/AN opioid overdose and addiction among Tribal Nations are likely much higher than even national statistics and current data reveal. Per the CDC, misclassification of race on death certificates ``results in the underestimation of death rates by as much as 34%'' for AI/AN people. Further, currently available data fails to fully illustrate the impacts opioids are having in Tribal communities, as data access within the Indian Health System is limited and often incomplete. To assess the full scope of impacts opioids are having in our communities, Tribal Nations require strengthened data collection activities at all levels. However, no funding is currently available to Tribal Nations to create data systems that could more adequately and appropriately illustrate the impacts of the opioid crisis, and access to necessary federal data sets. As we have testified in the past, an overall lack of data surrounding the opioid crisis, as well as barriers to data collection and dissemination within the Indian Health System, has not only impeded Tribal Nation prevention and treatment efforts, but also efforts to secure increased federal funding. In the absence of robust, comprehensive data demonstrating the disproportionate effects of opioid use in Indian Country, effort to expand treatment and prevention services are greatly hampered. To remedy this, Congress must provide direct funding to Tribal Nations and Tribal Epidemiology Centers (TECs) in order to improve opioid data collection. Without access to critical data, direct funding, or Congressional champions when strategies are being developed, Tribal Nations will continue to feel the impacts of the opioid epidemic for generations. USET SPF urges the Committee to prioritize addressing this shortfall by working to ensure Tribal Nations have access to direct funding to improve opioid data and provide for the treatment and prevention of substance abuse. Moreover, Tribal Nations and Tribal Epidemiology Centers (TECs) continue to experience frequent challenges in accessing not just public health data on both the federal and state level, but Tribal data as well, which often is not reported back to the Tribal Nation when collected by other jurisdictions. Despite being designated as Public Health Authorities, a Government Accountability Office Report, and Congressional oversight measures, both Tribal Nations and TECs continue to experience frequent challenges in accessing data on both the federal and state level--on top of the consistent lack of investment in TECs and Tribal public health capacity. As Public Health Authorities, TECs provide invaluable Tribal Nation-specific public health data and information to Tribal leaders, health directors and public health professionals in Indian Country. TECs continue to petition both the CDC and state public health departments for this vital information but have only received state data where there are positive Tribal-state relationships. Congress must remedy this problem, including through compelling the CDC and states to share all relevant data sets with Tribal Nations and TECs. CDC must ensure that TECs have access to critical public health data from federal and state governments. Both should be statutorily required to share all available public health data with TECs and Tribal Nations. This should be made a requirement of state cooperative agreements with CDC. CDC must also take steps to improve the quality of public health data shared with TECs and Tribal Nations. This includes requiring states work with Tribal Nations to correct racial misclassification. Increased, Direct Funding for the Indian Health System The federal government has trust and treaty obligations to ensure Tribal Nations have access to resources, financial and otherwise, to combat the opioid epidemic. The federal government has affirmed many times over its requirement to ``provide all resources necessary'' to ensure ``the highest possible health status'' for Tribal Nations and citizens. This necessarily includes flexible and substantial funding to create programs and services that are responsive to the challenges facing our communities. Though the data on this issue is incomplete, that which is available shows that Indian Country is being disproportionately and significantly affected by the opioid crisis. And yet, we remain without access to critical resources, particularly direct federal dollars. USET SPF urges the Committee to prioritize addressing this shortfall by working to ensure Tribal governments have access to direct funding. Access to funding for federal opioid grant programs is also important for Tribal Nations and communities. Programs like the Tribal Opioid Response (TOR) Grant Program at the Substance Abuse and Mental Health Services Administration (SAMHSA) are valuable tools in fighting the opioid epidemic in Indian Country. USET SPF urges Congress to increase funding for this program, as well as appropriate dedicated funding for the $80 million Behavioral Health and Substance Use Disorder Program for Native Americans authorized (but not funded) at SAMHSA last year. In addition, USET SPF continues to support and urge the immediate passage of The Native Behavioral Health Access Improvement Act, legislation authored by Senator Tina Smith that would establish and provide substantial funding for a Special Behavioral Health Program for Indians, with dollars eligible for receipt through self-governance compacting and self-determination contracting. Further, USET SPF supports the adoption of the President's supplemental funding request to combat the opioid epidemic. This $1.55 billion request includes a $250 million transfer to the IHS via the State Opioid Response (SOR) grant program. However, it is yet unclear how the funding would be disbursed from the IHS. USET SPF asserts our expectation that these funds will be eligible for self-governance contracting and compacting so that Tribal Nations can directly access these dollars and determine how best to utilize them in our communities. It is important to note that while existing federal programs have been valuable tools in the fight against the opioid epidemic so far, there remain significant issues with the provision of funding to Indian Country through grants and other mechanisms that do not uphold Tribal sovereignty and self-determination. Many federal grant programs require funding to pass through the states before it can be delivered to Tribal Nations if it is delivered at all. Further, when applying for these grants, states will often include Tribal population and prevalence numbers in the overall state data used to determine each state's award. Yet, Tribal Nations are not provided with outreach for these programs and are left with minimal resources to address the opioid crisis in their communities. Even when grant programs are specifically provided for Tribal Nations and organizations, the grant funding is often extremely limited, and the sheer nature of competitive grants often excludes many Tribal Nations that would benefit from the programs. Tribal Nations must not be made to compete with one another for these limited resources, as funding to Tribal Nations is provided in fulfillment of federal trust and treaty obligations--not in response to relative ``need'' or circumstances. To force Tribal Nations to compete for limited resources through competitive grants is an abrogation of the trust responsibility and an affront to Tribal sovereignty. To ensure that Tribal Nations are able to access federal funds fully and meaningfully in the future, USET SPF recommends the Committee and Congress: Pass and implement ``The Native Behavioral Health Access Improvement Act'' legislation and provide substantial funding for a Special Behavioral Health Program for Indians, with dollars eligible for receipt through self-governance compacting and self-determination contracting. Fully fund and implement programs such as the Behavioral Health and Substance Use Disorder Resources for Native Americans Program at SAMHSA; Expand language within grant funding programs to specifically include Tribal Nations such that states cannot exclude us in grant funding disbursements and are held accountable by the federal government for delivering funds directly to Tribal Nations; and Enact delivery of all federal dollars, including opioid funding, to Tribal Nations via self-governance contracting and compacting in recognition of Tribal sovereignty and self- determination. Telehealth and Medication Assisted Treatment Well before the COVID-19 pandemic increased the prevalence and availability of telehealth services, USET SPF advocated for expanded telehealth services in Indian Country to combat the rising substance abuse crisis. Existing telehealth programs within Indian Country have made significant improvements in their communities when it comes to access to care, diagnosis, and treatment. In response to the COVID-19 pandemic, the federal government eased several long-standing regulations regarding opioid treatment programs. For example, prior to 2020, people suffering from opioid use disorder were required to meet in-person with a health care provider to start medication assisted treatment. During the COVID-19 pandemic, the federal government implemented flexibilities that allowed practitioners to prescribe medications like buprenorphine remotely to new patients via telehealth. They also allowed for expanded payment for telehealth services and flexibility on accepted communication technologies (like audio-only services) to deliver care for substance use disorders via telehealth. Expanding the use of telehealth for treating substance use disorders is a vital component in efforts to address the opioid epidemic in Tribal communities. A study by the National Institutes of Health (NIH) demonstrates that opioid use disorder treatment via telehealth was associated with an increased likelihood of staying in treatment, as well as an increased in treatment access overall. USET SPF urges the permanent adoption of these temporary authorities so that expanded access to services may be maintained. However, though Tribal telehealth continues to make strides, Indian Country continues to fall behind in establishing sustainable, standard telehealth system due to limited, or often, lack of existing infrastructure and bandwidth. The same NIH study referenced above found that the ``benefits of telehealth are not reaching all populations equitably.'' It is crucial that Congress invest not only in opioid addiction telehealth services within Tribal Nations and communities, but also in infrastructure and bandwidth capabilities. Telehealth funding and expanded authorities will not be beneficial if barriers to access, such as infrastructure and bandwidth issues, are not addressed. Increased Law Enforcement Resources In addition to health and treatment resources, USET SPF member Tribal Nations require adequate law enforcement infrastructure to combat the opioid epidemic. Opioid trafficking is a persistent and growing problem in Indian Country, as several witnesses noted, and the USET region is not an exception. In order sufficiently address the growing opioid abuse and trafficking within our Tribal Nations, our BIA Drug Enforcement Region needs additional resources, including human capital. Tribal Nation law enforcement agencies, much like other entities operating in Indian Country, face chronic underfunding, understaffing and other challenges due to inadequate federal appropriations. Additional resources must be made available to Tribal Nations when it comes to critical drug enforcement investigations. These services are conducted primarily by specialized units or task forces on departmental, statewide and federal levels and involve enhanced intelligence gathering, information sharing, controlled buys, surveillances and other factors. As the Committee approaches this crisis, it must not forget the importance of stopping the supply of opioids on Tribal lands through well-equipped law enforcement. In a March 2023 report to Congress (as required under the Tribal Law and Order Act), the Bureau of Indian Affairs (BIA) indicated that, ``the total estimated costs for public safety and justice programs is $1.4 billion for law enforcement programs, $247.7 million for existing detention centers, and $1.2 billion for Tribal courts.'' At approximately $2.9 billion, this exceeds the entire current BIA budget. This underscores the chronic underinvestment in law enforcement and other public safety programs, and the need for this Committee to support full and mandatory funding for Tribal programs, including Public Safety & Justice line items. Culturally Competent Treatment and Services The incorporation of traditional healing practices and a holistic approach to health care are fundamental to successful opioid treatment and aftercare programs in Indian Country. Culturally appropriate care has had positive, measurable success within Tribal communities, and the incorporation of traditional healing practices and holistic approaches to healthcare has become central to many Tribal treatment programs. Tribal communities have unique treatment needs when it comes to substance abuse disorders, as AI/ANs experience high levels of substance abuse disorders, with a strong link to historical trauma. Opioid addiction treatment in Indian Country, then, must be cognizant of this trauma, respectful of community factors, and utilize traditional health care practices. Additionally, opioid addiction treatment within Tribal communities must include adequate culturally appropriate aftercare programs to help prevent substance abuse relapse. These services must be accessible through the Indian Health Care Delivery System. Even though culturally competent care has been successful across Indian Country, treatment options that incorporate cultural healing aspects are oftentimes not available within or near Tribal communities due to a lack of resources. However, some USET SPF member Tribal Nations are engaging in innovative practices that have the potential to be replicated across Indian Country. For example, one Tribal Nation's treatment program incorporates a culturally-based recovery model that has had great success, including in preventing early relapse following treatment. Other best practices within USET SPF member Tribal Nations include: Extended, culturally-based recovery support in a sober living environment Trauma informed care training for health and behavioral health staff Establishment of innovative, culturally-appropriate Tribal restorative justice models, such as the Penobscot Nation's Healing to Wellness Court. With additional funding and guidance, Tribal Nations could expand these best practices and incorporate additional practices such as rapid entry into acute care facilities and additional prevention and control interventions. USET SPF encourages the Committee to explore how it might expand these models through legislative action and provide direct funding to support the best practices that have already been implemented. Conclusion USET SPF appreciates the Committee holding a hearing to hear specifically from Tribal Nations and leaders as the opioid crisis continues to disproportionately affect our communities. Opioid addiction is unquestionably causing devastating effects and suffering in Indian Country. As Congress considers legislative action on combatting the opioid crisis nationwide, as well as Fiscal Year 2024 federal funding, it must prioritize Tribal Nation access to all the resources necessary to address this crisis. ______ Response to Written Questions Submitted by Hon. Ben Ray Lujan to Hon. Bryce Kirk Questions. Councilman Kirk, in your written testimony, you wrote about the lack of information sharing between the Drug Enforcement Agency (DEA) and Tribal law enforcement. I have heard similar concerns from Tribes in New Mexico, including the Navajo Nation. Can you expand on this? Have you broached this concern with the DEA? What has been the response? Lack of prosecutions in the Missing and Murdered Indigenous Peoples space is an area where I've tried to hold DOJ accountable, and I'm frustrated that the same problem applies to drug dealers. Are you also having problems with DOJ and local law enforcement failing to prosecute non-Indian drug dealers on Tribal lands? Senator Lujan thank you for the question. Answer. Our law enforcement officials have let the DEA and the ATF know our frustration that they were aware of a known drug dealer on our Reservation and that they failed to inform us or include our law enforcement in their investigation. The response from the federal agencies is that they were engaged in an investigation and that they cannot compromise their investigation by sharing information with the Tribes' law enforcement agencies. Our sense is that this is almost a turf war, where one agency wants the big bust and the credit for the bust, rather than focusing on what should be the objective, which is removing drug dealers from our communities and working with all involved law enforcement agencies to accomplish this goal. We think this can be addressed by supporting multi-agency drug task forces, which include ATF, DEA, FBI, the Tribal and State law enforcement agencies. We should all know where the threats are and how we as cooperative law enforcement agencies are responding to these threats. Such a task force could report to the Attorney General's office directly and that way he could ensure that all the agencies within his purview are working cooperatively. Regarding your question if we are having problems with DOJ and local law enforcement failing to prosecute non-Indian drug dealers on tribal lands, the answer is two-fold. First our challenge with the Department of Justice is that they focus on the big drug dealers, transporting pounds of illegal drugs. However, a significant issue on the Fort Peck Reservation is that there are people who are dealing 50 pills or less, and the Department of Justice has no interest in prosecuting these people. As to working with local agencies, we have a cross-deputization agreement with Roosevelt County, the State Patrol, the City of Poplar and the City of Wolf Point where we work to ensure that criminals, including drug dealers, are properly prosecuted. However, we appreciate that the State of Montana respects our sovereignty and the proper role of the federal government to prosecute crimes by non-Indians against Indians. Again, the challenge for us is that the DOJ does not have the resources to arrest and prosecute the ``smaller'' drug dealers and thus they are left to continue to poison our community 20-30 pills at a time. We would support the federal recognition of the inherent sovereignty of tribes to prosecute non-Indians engaged in drug dealing on the Reservation, akin to when Congress recognized the inherent authority of tribes to prosecute non-Indians who commit domestic violence crimes and crimes against children on our Reservation. We look forward to working with you to address this crisis in our community. ______ Response to Written Questions Submitted by Hon. Brian Schatz to Hon. Jamie S. Azure Question. The National High Intensity Drug Trafficking Area (HIDTA) Program under the Office of National Drug Control Policy partners with federal, state, local and tribal law enforcement to combat drug trafficking. Would expansion of the program to include Turtle Mountain help with your tribe's enforcement efforts? Answer. Thank you, Chairman Schatz, for the question, the nearest HIDTA that we could participate is in Kansas City, Missouri for the Great Plains region. There is a North Dakota Interdiction Trask force that is headed by the DEA and the North Dakota State Police. Although we have good relations with the North Dakota State Police, this task force is primarily a DEA/State oriented task force. However, what's missing from HIDTA and the most recent 2021 DEA Drug Threat Assessments is the lack of information or intelligence regarding drugs in Indian Country. What would be useful would be a requirement that DEA conduct a separate drug threat assessment focusing on Indian Country especially where a Federally recognized tribes are within the HIDTA. This information would be critical for intelligence gathering and resource deployment. Turtle Mountain Band (TMB) DDE (Division of Drug Enforcement) Drug Supervisor Brock Baker worked on several HIDTA task forces throughout North Dakota over the last 20 years, namely the Grand Forks Narcotics Task Force and Cass County Drug Task Force. Mr. Baker has a great working relationship with both task forces. However, many of the relationships have been formed through previous work relationships he had with them. Mr. Baker estimates that 75 percent of their cases come from the Red River Valley area with the majority coming from Grand Forks and Fargo metro areas. Both locations have a huge urban Native population and many drug traffickers use our Native people for entrance or introduction to tribal members on the reservations. Mr. Baker spoke with ND BCI Director Lonnie Grabowski, and he and his Task Force Coordinators in Grand Forks and Fargo, and all are supportive of placing a tribal officer on one of their task forces to create a ``liaison'' between the tribe and state HIDTA task forces. This officer would bridge a state task force and the tribal drug unit. ______ Response to Written Questions Submitted by Hon. Ben Ray Lujan to Hon. Jamie S. Azure Question. What has been your experience in working with the DEA? Are they good partners? Answer. Thank you, Senator Lujan, for the question. DEA traditionally has been a good partner, but the partnership has been difficult recently due to the DEA being short-staffed and being detailed out to other areas of the country. One of the areas that the DEA lacks is a consistent presence in Indian Country to conduct drug operations and investigations. Historically, the DEA is known to conduct larger-scale investigations, such as drug conspiracy cases involving large-scale dealers who may target Indian Reservations. Many of the cases involving tribal members mainly involve non-enrolled individuals who conspire with a tribal member to traffic drugs on or near tribal lands. DEA did conduct a large arrest operation in the summer/fall of 2022. TMB DDE assisted in the arrest operation. TMB DDE has attempted to conduct investigative operations with the DEA RO Fargo office; however, due to that office being short-staffed, they have had to push back operations several times in 2023 and canceled an operation set for September 2023. Mr. Baker, who had previously been assigned to the DEA Task Force Fargo from 2010 to 2014, inquired about placing a tribal drug investigator with the DEA Task Force. The DEA Resident Agent in Charge was very interested, and several meetings were held between Mr. Baker and the DEA supervisor over the course of 2023 to discuss placing an officer with DEA Fargo RO. Although being with the DEA Task Force would be beneficial, having an officer on a state-run HIDTA task force may provide the most benefit in connecting street-level drug crimes and larger-scale, multi- jurisdictional investigations on or near tribal lands. ______ Response to Written Questions Submitted by Hon. Ben Ray Lujan to Hon. Tony Hillaire Question 1. The IHS Community Opioid Intervention Pilot Project awarded 35 grants in 2021 using a little over $16 million in funding appropriated by Congress, including one to the Albuquerque Area Indian Health Board in New Mexico and one to the Lummi Nation in Washington. Chairman Hillaire, what was the impact of these grant funds on the Lummi Nation? Answer. We are pleased to report significant progress in our healthcare services, made possible through the Indian Health Service Community Opioid Pilot Project. The Lurnmi Nation received $300,000 in 2021. With this grant we have successfully reached and provided services to over 500 individuals. This milestone is a testament to the effectiveness of our outreach and support strategies, which have been crucial in engaging with individuals struggling with addiction and connecting them with necessary care. Specifically, our efforts have focused on outreach to homeless camps, jails, and patients who have left medical facilities against medical advice. Our staff provided counseling to encourage those who have disengaged to re-enter treatment and offered guidance on harm reduction around drug use as well as providing access to overdose reversal kits, information on clinical care access for health-related concerns and wound care. By going directly to where the need is greatest, we have been able to make a tangible difference in the lives of those most affected by the opioid crisis. Additionally, some of the funding has been used towards transportation services for patients being admitted to supports such as clinical, outpatient and in-patient care. Transportation continues to play a crucial role in our strategy, ensuring that logistical and geographical challenges do not hinder individuals from accessing ccntinuous care. This support has been vital in maintaining treatment adherence and fostering overall health. healing, and recovery. Question 1a. And, given that this pilot grant program is not permanently authorized, wty is it so important that Congress support the President's domestic supplemental request, including the 16 percent set-aside for IHS within the $1.55 billion he requested to combat the fentanyl crisis? Answer. The President's domestic supplemental request, particularly the 16 percent set-aside for the Indian Health Service (IHS) within the $1.55 billion proposed to combat the fentanyl crisis, is of paramount importance. The Lumrni Nation, like many other Tribal nations, is facing an acute and escalating crisis due to fentanyl. The potency and prevalence of this drug have led to a drastic increase in overdoses and deaths and our Tribe is in urgent need of resources to combat this crisis effectively. Without adequate funding, the efforts to tackle this epidemic are significantly hampered. Currently, our Tribe faces a heartbreaking situation where individuals seeking help for their addiction are often turned away due to the lack of resources and treatment capacity. This reality is devastating. When an individual courageously seeks assistance for addiction, facing rejection due to lack of available treatment options can be devastating and potentially fatal. Often, by the time a treatment bed becomes available, it may already be too late for those who were previously denied access. Many may have fallen deeper into their addiction or reached a point where they are unable or unwilling to seek further help. This creates a pattern of relapse and missed opportunities for meaningful intervention and recovery. With sufficient funding, we can significantly expand our treatment facilities and services. This expansion means more beds for inpatient care, enhanced outpatient services, and the availability of medically assisted treatments. Additionally, increased funding can be allocated to prevention and education programs. By informing our community, especially the youth, about the dangers of fentanyl and other opioids, we can prevent addiction before it takes hold. Furthermore, recovery from addiction is a long-term process. Additional funding would allow us to provide essential support services, including counseling, job training, and aftercare programs, to help individuals reintegrate into the community after treatment. Question 2. Chairman Hillaire, in your testimony you stated that due to a lack of prosecutions from the DOJ and local authorities, Tribal law enforcement is unable to hold accountable non-Indian drug dealers on Tribal lands. Lack of prosecutions in the Missing and Murdered Indigenous Peoples space is an area where I've tried to hold DOJ accountable, and I'm frustrated that the same problem applies to drug dealers. Can you tell me more about this problem? Answer. One of the main challenges is the jurisdictional limitations imposed by federal law. Tribal authorities do not have the power to prosecute and punish non-Indians for drug trafficking offenses committed within our reservation. This situation creates a significant legal loophole that non-Indian drug traffickers exploit. They operate on tribal lands, knowing that the Tribal government lacks the authority to prosecute or incarcerate them. This has been a persistent issue, despite past legislative efforts to enhance tribal authority in criminal matters. One of the critical challenges is the categorization of these drug- related offense, as non-violent crimes. As a result, when state authorities apprehend non-Indian drug dealers on our reservation, they are often immediately released due to the non-violent classification of their offenses. This practice has led to a `'catch and release'' pattern, where offenders are briefly detained but quickly return to their illicit activities, either on our lands or in the neighboring non-Indian communities. Cross-deputization agreements, which allow for shared enforcement authority between tribal and non-tribal law enforcement agencies, have been seen as a potential solution. However, in practice, these agreements often have significant gaps. They may not comprehensively cover all aspects of law enforcement needs or may not be adequately supported by the necessary resources. In the context of drugrelated crimes, these gaps become particularly pronounced. Over the years, Congress has passed laws to strengthen tribal authority in certain areas, like the Tribal Law and Order Act of 2010 and the Violence Against Women Act Reauthorization Act of 2022. However, these measures have not effectively addressed the issue of drug trafficking by non-Indians on tribal lands. The lack of effective jurisdictional authority not only allows drug trafficking to flourish but also contributes to other related crises, such as the Missing and Murdered Indigenous Peoples issue. Drug trafficking and its associated violence and exploitation are often intertwined with these broader social challenges. A proposed solution is to amend the Indian Civil Rights Act to explicitly recogrjze the authority of tribal governments to prosecute non-Indian drug traffickers. This amendment would be a significant step forward, providing Tribes with the legal framework necessary to address this critical issue. It could include provisions for incarcerating convicted offenders in federal prison, thereby offering a more robust deterrent against drug trafficking in Indian Country. ______ Response to Written Questions Submitted by Hon. Tina Smith to Hon. Tony Hillaire Question. Given the high overdose data in urban and rural Native communities alike, how can Congress support Tribal members living off- reservation and in urban communities in our response to rising levels of fentanyl use? Answer. We are in an opioid crisis of critical proportions, the likes of which we have never before seen. Drug harms are ravaging for Native Americans and Alaska Natives (AI/AN) no matter where they reside across the United States, and across the age spectrum from infants to Elders \1\, \2\. Even with all the services we need in place right away, it will take a generation to address even the basic harms of the opioid crisis. This is a complex and multi-faceted challenging situation and we must be prepared to mitigate these harms over the short and long-term utilizing all the resources and flexibilities of policies and legislation possible to the fullest extent of laws and be prepared to modify these where necessary. Right now, we urgently need improvements in law enforcement, health services, prevention, education and access to culturally attuned, based care. The right approach to treatment and full access to services is vital. There is a grave lack of resources provided for infrastructural support for Indian health care substance use treatment which undermines the availability oflife saving detox stabilization and withdrawal services. This is one of the acute needs. This gap represents a barrier to recovery and perpetuates long standing health disparities especially for those who experience the disease of addiction in this time of the fentanyl crisis. --------------------------------------------------------------------------- \1\ Indian Health Service IHS Supports Tribal Communities in Addressing the Fentanyl Crisis May 2023 Blogs [Accessed 3/7/2024) \2\ Centers for Disease Control and Prevention Drug Overdose In Tribal Communities Drug Overdose Prevention in Tribal Communities Drug Overdose CDC Injury Center [Accessed 3/7/2024) --------------------------------------------------------------------------- Indian Health Service's (IHS) has no sufficient funds allocated for the construction of detox facilities despite the fact Tribes have sounded the alarm and provided data over multiple years which shows all across the Nation, Tribes are being hit hard by deadly and deadlier drugs. Despite all the evidence that has been provided to date, which shows we experience higher levels ofloss and demonstrated an acute and urgent need; we still have not been able to secure all the funds needed to build a facility. \3\, \4\ The Lummi Nation has put in requests for funding assistance through demonstration funds as well as for help from the Health and Human Services (HHS) Non-Recurring Expense Funds (NEF), to no avail. On multiple occasions we have met with federal representatives and leaders to ask for assistance. To date, as far as funding goes, only the Department of Commerce and Legislators of the State of Washington have authorized some financial support towards constructing a detox facility. The facility would be designed to serve both urban and rural based Tribal members, as well as any others who are eligible. The need is great, and the facility is supported by the 29 Tribes in our state as well as the Portland IHS Area regional Tribes. This lack of funding support from our federal trustees for what is one of the crucial pillars to begin recovery is unfathomable given the acuity of the situation. --------------------------------------------------------------------------- \3\ Drug Overdose Deaths in the United States, 2001-2021 NCHS Data Brief. Number 457. December 2022 (cdc.gov) [Accessed 3/7/2024) \4\ Opioid Deaths Risen 5-FoldAmong Indigenous Americans Opioid overdose deaths risen 5-fold among Indigenous Americans BMJ (3/7/2024] --------------------------------------------------------------------------- One other area of support we seek is to ask that you review the funding allocated for Indian health care programs especially for alcohol and substance use services and Public Health. Lummi Nation receives limited funds for these programs, which does little to provide the level of services and support staff we actually need given we are in an emergency. Secretary from HHS, on multiple occasions, has renewed the opioid public health emergency pursuant to the authorities vested in his office under section 319 of the Public Health Service Act, 42 U.S.C  247d, \5\ originally determined by Secretary Eric Hargan from HHS in October 26th 2017 under the Trump Administration. This ongoing acknowledgment by the Secretary that a public health opioid crisis exists, flies in the face of reason when funding and resources are not forthcoming from one of the federal trustee administrations and whose actions do not match the scale of the problem we are facing. --------------------------------------------------------------------------- \5\ ASPR Administration for Strategic Preparedness and Response Renewal of Determination that a Public Health Emergency Exists as a Result of the Continued Consequences of the Opioid Crisis Affecting our Nation (hhs.gov) [Accessed 3/7/2024] --------------------------------------------------------------------------- Fentanyl as well as new types of synthetic opioids cut with deadly additives such as TRANQ and Carfentanil are now so widely available, we are seeing a dramatic increase in opioid related health conditions as well as deaths country wide. We consider what is occurring as a genocidal and existential threat to our very survival. This crisis is impacting Tribal members equally in both urban and rural locations, whole generations and future lineages have been lost. We have repeatedly requested support from the President to declare a national emergency. In effect, this would create greater flexibility for federal resources and assistance to supplement existing state, tribal and local efforts, and capabilities to save lives, protect property, as well as bolster public health and safety. In addition, these measures would contribute significantly to help address gaps and barriers in addressing treatment, recovery, traditional healing, housing and rehabilitation, supply and demand and prevention. With all of these considerations the availability of resources and increased flexibility will help lessen the catastrophic threat facing tribal communities, urban and rural and others within the United States. The opioid crisis is a major national disaster affecting us all and causing untold damage, loss, hardship, and suffering. In closing, we want to thank you for this opportunity to provide testimony and for your ongoing support to help bring this devastating situation to an end. If you have any further questions regarding this additional testimony, please contact us. ______ Response to Written Questions Submitted by Hon. Tina Smith to Claradina Soto, Ph.D. Question. Given the high overdose data in urban and rural Native communities alike, how can Congress support Tribal members living off- reservation and in urban communities in our response to rising levels of fentanyl use? Answer. While it is true that fentanyl abuse is a problem for Native communities who live on designated tribal areas, the profound disparities faced by American Indian and Alaska Native (AIAN) communities in off-reservation urban and rural areas regarding the opioid epidemic is equally urgent. Recent data highlights an alarming trend where, in both 2020 and 2021, AIANs experienced the highest death rates from drug overdoses compared to all other racial and ethnic groups, even as rates surged across the board in 2021. Presently, approximately 87 percent of the AIAN population resides in urban areas, constituting a diverse and inter-tribal community, with a significant concentration in California cities. Despite the theoretical advantages of urban living, Urban Indians, constituting 1 in 7 American Indians nationwide and 1 in 9 in California cities, face substantial barriers to accessing essential healthcare and tribal services. This reality is exacerbated by disparaging health statistics, with Urban Indians experiencing higher rates of diabetes, liver disease, cirrhosis, and alcohol-related deaths compared to the general population. Congress must take swift and comprehensive action to address these disparities, ensuring equitable access to healthcare and addressing the root causes of the opioid crisis in offreservation AIAN communities. While opioid treatment services are available to tribal members through IHS and Tribal Health Programs, rural and urban Indian health programs serve disproportionally larger AIAN populations with a fraction of the funding and resources needed to address the crises. Furthermore, tribal members utilize services such as residential SUD treatment located off-reservation and rely on these services when their tribe may not offer them. These recovery services however lack components that would fill those gaps for a more complete continuum of care including culturally responsive detox centers, residential treatment that can accommodate families with children, sober living facilities both on and off tribal lands, and comprehensive reentry programs to assist tribal members with reintegration back into their home communities that sustain their sobriety and foster healthy and positive contributions to their communities. Below are 7 steps recommended for Congress to act in addressing the fentanyl abuse and opioid epidemic for off-reservation, urban, and rural AIAN communities. 1. Funding for Prevention and Treatment Programs: Congress can increase allocations of funding specifically earmarked for urban AIAN and rural off-reservation AIAN communities to develop and implement prevention and treatment programs targeting fentanyl and other substance use disorders. This funding can support culturally appropriate interventions, outreach efforts, and access to mental health services. 2. Enhanced Law Enforcement Resources: Congress can provide additional resources to law enforcement agencies to combat fentanyl trafficking and distribution in off-reservation and urban areas. This may include funding for specialized training, equipment, and task forces dedicated to addressing the opioid crisis in partnership with Urban Indian Health Programs and AIAN serving agencies. 3. Expansion of Healthcare Services: Congress can support the expansion of healthcare services in urban AIAN and off- reservation communities, including access to medication- assisted treatment (MAT) programs, mental health counseling, and substance abuse rehabilitation services. This may involve increasing funding for Indian Health Service (IHS) facilities and expanding IHS treatment and detox facilities nationally, in addition to expanding Medicaid coverage for Tribally enrolled and state recognized Tribal members. 4. Culturally Centered Education and Outreach: Congress can support initiatives aimed at increasing awareness of the dangers of fentanyl use within urban AIAN and off-reservation communities through culturally competent education and outreach campaigns. This may involve partnering with AIAN leaders, elders, youth, and community organizations to develop messaging and materials that resonate with AIAN community members. 5. Data Collection and Research: Congress can allocate funding for research and data collection efforts to better understand the scope of fentanyl use among Tribal members living off- reservation and in urban areas. This data can inform policy decisions and resource allocation strategies to effectively address the issue and strengthen University partnerships with urban AIAN and off-reservation communities. 6. Support for Housing and Economic Development: Congress can provide support for urban AIAN and off-reservation housing programs and economic development initiatives to address underlying social determinants of health that contribute to substance abuse, including poverty, unemployment, and lack of stable housing. Primarily, the expansion of sober living and transitional housing for urban AIAN and offreservation individuals is a critical need. 7. Collaboration and Coordination: Congress can encourage collaboration and coordination among urban Indian Health Programs, federal agencies, state and local governments, and community organizations to develop comprehensive strategies for addressing fentanyl use and its associated harms in Tribal communities. By taking these steps, Congress can play a critical role in supporting Tribal members living off-reservation and in urban communities in their response to rising levels of fentanyl use, ultimately helping to prevent overdose deaths and improve the health and well-being of Tribal communities. ______ *Responses to the following questions were not available at the time this hearing went to print* Written Questions Submitted by Hon. Brian Schatz to A. Aukahi Austin Seabury, Ph.D. Question. How is I Ola Lahui using American Rescue Plan funds to meet the behavioral health needs of rural Native Hawaiian communities? [all]

usgpo

2024-10-08T13:27:14.774761

CHRG

CHRG-118shrg53116

Artificial Intelligence and Intellectual Property--Part II: Copyright

United States Congress Senate

[Senate Hearing 118-66] [From the U.S. Government Publishing Office] S. Hrg. 118-66 ARTIFICIAL INTELLIGENCE AND INTELLECTUAL PROPERTY--PART II: COPYRIGHT ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON INTELLECTUAL PROPERTY OF THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ JULY 12, 2023 __________ Serial No. J-118-25 __________ Printed for the use of the Committee on the Judiciary [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] U.S. GOVERNMENT PUBLISHING OFFICE 53-116 PDF WASHINGTON : 2024 COMMITTEE ON THE JUDICIARY RICHARD J. DURBIN, Illinois, Chair DIANNE FEINSTEIN, California LINDSEY O. GRAHAM, South Carolina, SHELDON WHITEHOUSE, Rhode Island Ranking Member AMY KLOBUCHAR, Minnesota CHARLES E. GRASSLEY, Iowa CHRISTOPHER A. COONS, Delaware JOHN CORNYN, Texas RICHARD BLUMENTHAL, Connecticut MICHAEL S. LEE, Utah MAZIE K. HIRONO, Hawaii TED CRUZ, Texas CORY A. BOOKER, New Jersey JOSH HAWLEY, Missouri ALEX PADILLA, California TOM COTTON, Arkansas JON OSSOFF, Georgia JOHN KENNEDY, Louisiana PETER WELCH, Vermont THOM TILLIS, North Carolina MARSHA BLACKBURN, Tennessee Joseph Zogby, Chief Counsel and Staff Director Katherine Nikas, Republican Chief Counsel and Staff Director Subcommittee on Intellectual Property CHRISTOPHER A. COONS, Delaware, Chair MAZIE K. HIRONO, Hawaii THOM TILLIS, North Carolina, ALEX PADILLA, California Ranking Member JON OSSOFF, Georgia JOHN CORNYN, Texas PETER WELCH, Vermont TOM COTTON, Arkansas MARSHA BLACKBURN, Tennessee James Barton, Democratic Chief Counsel Seth Williford, Republican General Counsel C O N T E N T S ---------- JULY 12, 2023, 3:03 P.M. STATEMENTS OF COMMITTEE MEMBERS Page Coons, Hon. Christopher A., a U.S. Senator from the State of Delaware....................................................... 1 Tillis, Hon. Thom, a U.S. Senator from the State of North Carolina....................................................... 3 WITNESSES Witness List..................................................... 33 Brooks, Ben, head of public policy, Stability AI, San Francisco, California..................................................... 5 prepared statement........................................... 34 Harleston, Jeffrey, general counsel and executive vice president, business and legal affairs, Universal Music Group, Santa Monica, California............................................. 12 prepared statement........................................... 45 Ortiz, Karla, concept artist, illustrator, and fine artist, San Francisco, California.......................................... 10 prepared statement........................................... 51 Rao, Dana, executive vice president, general counsel, and chief trust officer, Adobe, Inc., San Jose, California............... 7 prepared statement........................................... 63 Sag, Matthew, professor of law, artificial intelligence, machine learning, and data science, Emory University School of Law, Atlanta, Georgia............................................... 9 prepared statement........................................... 71 QUESTIONS Questions submitted to Ben Brooks by Senator Tillis.............. 98 Questions submitted to Jeffrey Harleston by Senator Tillis....... 104 Questions submitted to Karla Ortiz by Senator Tillis............. 110 Questions submitted to Dana Rao by Senator Tillis................ 115 Questions submitted to Matthew Sag by Senator Tillis............. 121 ANSWERS Responses of Ben Brooks to questions submitted by Senator Tillis. 128 Responses of Jeffrey Harleston to questions submitted by Senator Tillis......................................................... 138 Responses of Karla Ortiz to questions submitted by Senator Tillis 151 Responses of Dana Rao to questions submitted by Senator Tillis... 161 Responses of Matthew Sag to questions submitted by Senator Tillis 171 MISCELLANEOUS SUBMISSIONS FOR THE RECORD Submitted by Chair Coons: Computer and Communications Industry Association (CCIA), letter, July 12, 2023...................................... 192 Copyright Alliance, letter, July 17, 2023, and attachment.... 195 Digital Media Association (DiMA), letter, July 12, 2023...... 201 Motion Picture Association (MPA), statement.................. 203 Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA), statement....................... 211 Songwriters Guild of America (SGA), et al., letter, July 18, 2023....................................................... 214 ARTIFICIAL INTELLIGENCE AND INTELLECTUAL PROPERTY--PART II: COPYRIGHT ---------- WEDNESDAY, JULY 12, 2023 United States Senate, Subcommittee on Intellectual Property, Committee on the Judiciary, Washington, DC. The Subcommittee met, pursuant to notice, at 3:03 p.m., in Room 226, Dirksen Senate Office Building, Hon. Christopher A. Coons, Chair of the Subcommittee, presiding. Present: Senators Coons [presiding], Klobuchar, Hirono, Padilla, Tillis, and Blackburn. Also present: Chair Durbin. OPENING STATEMENT OF HON. CHRISTOPHER A. COONS, A U.S. SENATOR FROM THE STATE OF DELAWARE Chair Coons. This hearing will come to order. I'd like to thank all of our witnesses for participating today, and I'd like to especially thank my friend and colleague, Ranking Member Thom Tillis and his staff for working with us on such a collaborative basis to put this hearing together. Welcome back from Vilnius. Senator Tillis was over at the NATO summit, and I am thrilled he is able to join us, and we are able to do this hearing today. This is our second hearing in as many months on the intersection of artificial intelligence and intellectual property law and policy. You and your team have been great partners in pursuing this. If you will indulge me for a moment, Senator, and before I proceed with my remarks, I'd like to ask that we play just a little clip of something to frame the challenges of this topic--made with the permission of all the relevant rights holders. [Laughter.] [Video is shown.] Chair Coons. Thank you for your forbearance. Yes, a round of applause is certainly welcomed. [Applause.] Chair Coons. My team actually produced a version of that where it is a duet between me and Frank Sinatra, but my voice came out so horribly flat, I didn't want to impose that on any of you. Senator Tillis. Thank you, Mr. Chair, for your judgment. [Laughter.] Chair Coons. Creating the song, ``AI, AI'' to the tune of ``New York, New York'' was great fun and I appreciate my team that worked so hard on pulling that off, but the very existence of it highlights a couple of the core questions around copyright raised by generative artificial intelligence. ChatGPT wrote the lyrics following the style of ``New York, New York,'' although perhaps not quite as moving and inspiring as the original words to any but IP enthusiasts. Another generative AI tool was used to take Mr. Sinatra's recorded songs and his voice and his phrasing and his style and set that to music. So, a couple of those core questions: Did ChatGPT infringe the copyright on ``New York, New York'' when it drafted lyrics representing its lyrical style? What about the AI tool that set those lyrics to music? Did either that tool or did I run afoul of Mr. Sinatra's rights by mimicking his voice? In my case, no, because we got specific approval. Or did I just use AI tools to enhance my own creativity? And if so, should this newly created song be entitled to copyright protection? These are just a few of the questions I hope we will explore with our panel of talented and insightful witnesses as we consider the impact of artificial intelligence on copyright law and policy and the creative community. As we all know, AI is rapidly developing. Generative AI tools have brought many new people into the creative fold and have opened new avenues for innovation. People who may not have ever considered themselves creatives are now using these tools to produce new works of art. Artists themselves have used AI tools to enhance their own creativity. Paul McCartney recently made headlines announcing that AI helped create the very last Beatles song 50 years after the band broke up. As I have previewed, AI creates new copyright law issues, including whether using copyrighted content to train AI models is copyright infringement, whether AI-generated content should be given copyright protection, and many more. These questions are working their way through the courts. How the courts decide them, and the decisions we make here in the Senate and in Congress about how to respect and reinforce existing copyright protections and works will have significant consequences, not just for the creative community, but our overall competitiveness as a country. While generative AI models are trained on copyrighted content, IP considerations haven't been included or sufficiently considered in proposed IP regulatory frameworks here in the U.S. In contrast, some of our competitors recognize IP policy as an important tool. The EU is currently planning to require AI companies to publish the copyrighted materials used in training models. The UK provides copyright protection for computer- generated works. These are just some initial concerns, and I think there are initial steps that we can take to ensure sustained U.S. leadership on artificial intelligence. First, it is critical to include IP considerations in any regulatory framework for artificial intelligence and to give our Copyright Office, in this framework, a seat at the table. We should also consider whether changes to our copyright laws or whole new protections like a Federal right of publicity may be necessary to strike the right balance between creators' rights and AI's ability to enhance innovation and creativity. I am excited to explore these issues today. We have got a great panel, and great partner, and great Members of the Committee. With Senator Tillis' cooperation, we have assembled this wonderful panel. I will introduce them shortly, but first I will turn it over to my Ranking Member, Senator Thom Tillis. OPENING STATEMENT OF HON. THOM TILLIS, A U.S. SENATOR FROM THE STATE OF NORTH CAROLINA Senator Tillis. Thank you, Mr. Chairman, and thanks for everyone here. It is great to see the number of participants in the audience. It is even more amazing to see an equal number who would like to get in here, but who says AI and IP can't be sexy? But, you know, in all seriousness, I appreciate that we are having another hearing on the opportunity to highlight the importance of intellectual property when it comes to emerging technologies, and today we are talking about AI. During our last hearing, we really discussed the impact of AI on patent-- in a patent context, which explored ideas such as whether or not AI can be considered an inventor. And it cannot, and hopefully it will not in the future. But while many of these issues we discussed in the last hearing were perspective, the creative community is experiencing immediate and acute challenges due to the impact generative AI in a copyright context. Strong, reliable, predictable IP rights are paramount to incentivizing U.S. innovation and creativity. It is this innovation and creativity that fuels growth of our country's prosperity and drives enormous economic growth. In fact, core copyright industries added $1.8 trillion of value to U.S. GDP, accounting for almost 8 percent of the U.S. economy. These copyright industries also employ 9.6 million American workers. The sales of major U.S. copyright products overseas in markets also constitute $230 billion and outpaced exports of other major U.S. industries. Advances in generative AI have raised new questions regarding how copyright principles such as authorship, infringement, and fair use will apply to content created or used by AI. We must not only consider how our current IP laws apply to the field of generative AI, but also what changes, if any, may be necessary to incentivize future AI innovators and creators. So, Chairman Coons, I am happy to have this Committee. I will submit the remainder of my statement for the record. But for those of you who have watched our Committee over the past several Congresses where either Senator Coons or I were in Ranking Member or Chairmanship, I think if anything, I hope people understand that we are very thorough and we are very persistent in our approach, and we are inclusive. I have told everyone on this issue, whichever end of the spectrum you are, if you are at the table and the work groups, we are going to find a reasonable solution and compromises. If you are outside of the work group process and you are just taking shots at it, you may find yourself on the table, from my perspective. So, we encourage you to get to the table and make what we are doing better. The reason why I think it is so important, and I am glad the IP Subcommittee is leading on this in terms of formal hearings with a focus on potentially drafting legislation, is I think we run the risk of some in Congress who think AI is bad--that it's a threat to the future. I am not in that camp. I think that AI is good. It is something that I first developed expertise in back in the late 80s, and have followed it every sense. It is a matter of getting the regulatory construct, the intellectual property construct, all the other underlying policies that you need when a new, I think positive--in a positive term, disruptive technology hits the field. So, the reason that we need to move forward, address potential concerns is precisely because I want the United States to lead in innovation. And so much innovation is going to be premised on properly exploiting the capabilities responsibly, and that is what I hope we learn in this hearing and subsequent hearings and work group. So, thank you all for being here. And thank you, Mr. Chair, for having the hearing. Chair Coons. Thank you, Senator Tillis. I am now going to turn to our witness panel today. We welcome five witnesses to testify about the intersection of artificial intelligence and copyright law. Our first witness is Mr. Ben Brooks, head of public policy at Stability AI, a company that develops a range of AI models that help users generate images, text, audio, and video. Next, we have Dana Rao, executive VP, general counsel, and chief trust officer at Adobe. I'd like to be chief trust officer in the United States. Senator Tillis. They don't have titles like that. [Laughter.] Chair Coons. Mr. Rao leads Adobe's legal security and policy organization, including Adobe's Content Authenticity Initiative, which promotes transparency principles around the use of AI. Next, we have Professor Matthew Sag, a professor of law in artificial intelligence, machine learning, and data science at Emory University School of Law. Professor Sag is a leading U.S. authority on the fair use doctrine in copyright law and its implications for researchers in text data mining, machine learning, and AI. Next, we will hear from Karla Ortiz, an artist, a concept artist, illustrator, and fine artist who has worked on a variety of well-known and widely enjoyed projects, including ``Jurassic World,'' ``Black Panther,'' ``Loki,'' and she is most famous for designing, in my assessment at least, for designing Doctor Strange for Marvel's first ``Doctor Strange'' film. Welcome. Last but certainly not least, we have Jeffrey Harleston, general counsel and executive VP of business and legal affairs for Universal Music Group. Mr. Harleston is responsible for overseeing business transactions, contracts, litigation for all of Universal Music Group's worldwide operations in more than 60 countries. After I swear all of you in, each of you will have 5 minutes to make an opening statement. We will then proceed to questioning. Each Senator, depending on attendance, questioning, and time, will have a first round of 5 minutes. We may well have a second round in 5 minutes, and we may be the only two left for a third round of 5 minutes, but we will see. So, could all the witnesses please stand to be sworn in. Please raise your right hand. Do you swear or affirm that the testimony you are about to give before this Committee will be the truth, the whole truth, and nothing but the truth, so help you God? [Witnesses are sworn in.] Chair Coons. Thank you. Mr. Brooks, you may proceed with your opening statement. STATEMENT OF BEN BROOKS, HEAD OF PUBLIC POLICY, STABILITY AI, SAN FRANCISCO, CALIFORNIA Mr. Brooks. Thank you, Chair Coons and Ranking Member Tillis, for the opportunity to testify today. AI can help to unlock creativity, drive innovation, and open up new opportunities for creators and entrepreneurs across the United States. As with any groundbreaking technology, AI raises important questions, and we recognize the depth of concern among creators. While we don't have all the answers, we are committed to an open and constructive dialog, and we are actively working to address emerging concerns through new technology standards and good practices. At Stability AI, our goal is to unlock humanity's potential with AI technology. We developed a range of AI models. These models are essentially software programs that can help a user to create new content. Our flagship model, Stable Diffusion, can take plain language instructions from a user and help to produce a new image. We are also working on research for safe language models that can help to produce new passages of text or software code. AI is a tool that can help to accelerate the creative process. In our written testimony, we shared examples of how Broadway designers, architects, photographers, and researchers are using our models to boost their productivity, experiment with new concepts, or even study new approaches to diagnosing complex medical disorders. We are committed to releasing our models openly with appropriate safeguards. That means we share the underlying software as a public resource. Creators, entrepreneurs, and researchers can customize these models to develop their own AI tools, build their own AI businesses, and find novel applications of AI that best support their work. Importantly, open models are transparent. We can look under the hood to scrutinize the technology for safety, performance, and bias. These AI models study vast amounts of data to understand the subtle relationships between words, ideas, and visual or textual features, much like a person visiting an art gallery or library to learn how to draw or how to write. They learn the irreducible facts and structures that make up our systems of communication. And through this process, they develop an adaptable body of knowledge that they can then apply to help produce new and unseen content. In other words, compositions that did not appear in the training data and may not have appeared anywhere else. These models don't rely on a single work in their training data, nor did they store their training data. But instead, they learn by observing recurring patterns over billions of images and trillions of words of text. We believe that developing these models is an acceptable and socially beneficial use of existing content that is permitted by fair use and helps to promote the progress of science and useful arts. Fair use and a culture of open learning is essential to recent developments in AI. It is essential to help make AI useful, safe, unbiased, and it is doubtful that these groundbreaking technologies would be possible without it. The U.S. has established global leadership in AI thanks in part to an adaptable and principles-based fair use doctrine that balances creative rights with open innovation. We acknowledge emerging concerns, and these are early days, and we don't have all the answers, but we are actively working to address these concerns through safe technology, standards, and good practices. First, we have committed to voluntary opt-outs so that creators can choose if they don't want their online work to be used for AI training. We have received opt-out requests for over 160 million images to date, and we are incorporating these into upcoming training. We are hoping to develop digital opt- out labels as well that follow the content wherever it goes on the internet. Second, we are implementing features to help users and tech platforms identify AI content. Images generated through our platform can be digitally stacked with metadata and watermarks to indicate if the content was generated with AI. These signals can help ensure that users exercise appropriate care when interacting with AI content and help tech platforms distinguish AI content before amplifying it online. We welcome Adobe's leadership in driving the development of some of these open standards. Third, we have developed layers of mitigations to make it easier to do the right thing with AI and harder to do the wrong thing. Today, we filter datasets of unsafe content. We test and evaluate our models before release. We apply ethical use licenses, disclose known risks, filter content generated through our computing services, and implement new techniques to mitigate bias. As we integrate AI into the digital economy, we believe the community will continue to value human-generated art and perhaps value it at a premium. Smartphones didn't destroy photography, and word processors didn't diminish literature, despite radically transforming the economics of creation. Instead, they gave rise to new demand for services, new markets for content, and new creators. We expect the same will be true of AI, and we welcome an ongoing dialog with the creative community about the fair deployment of these technologies. Thank you for the opportunity to testify, and we welcome your questions. [The prepared statement of Mr. Brooks appears as a submission for the record.] Chair Coons. Thank you, Mr. Brooks. Mr. Rao. STATEMENT OF DANA RAO, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL, AND CHIEF TRUST OFFICER, ADOBE, INC., SAN JOSE, CALIFORNIA Mr. Rao. Chair Coons, Ranking Member Tillis, and Members of the Committee, thank you for the opportunity to testify here today. My name is Dana Rao, and I am general counsel, and, as Senator Coons noted, chief trust officer at Adobe. I am happy to provide you with this secret certificate you need to get that title, if you would like, after the hearing. Since our founding in 1982, Adobe has pioneered transformative technologies in all types of digital creation, from digital documents like PDF to image editing with Photoshop. Our products allow our customers who range from aspiring artists to wartime photojournalists, to advertisers and more, to unleash their creativity, protect their craft, empower their businesses in a digital world. AI is the latest disruptive technology we have been incorporating into our tools help creators realize their potential. You have all seen the magic of text to image generative AI. Type in the prompt, cat driving a 1950s sportscar through the desert, and in seconds you will see multiple variations of a cat on a retro road trip appear before your eyes. We have launched generative AI in our own tools, Adobe Firefly, and has provided--this proved to be wildly popular with our creative professionals and consumers alike. In my written testimony, I explore a comprehensive framework for responsible AI development that includes addressing misinformation, harmful bias, creative rights, and intellectual property. Today, given Adobe's focus and our millions of creative customers and our leadership in AI, I will focus on how the United States can continue to lead the world in AI development by both supporting the access to data that AI requires and strengthening creator rights. The question of data access is critical for the development of AI because AI is only as powerful and as good as the data on which it is trained. Like the human brain, AI learns from the information you give it. In the AI's case, the data it is trained on. Training on a larger dataset can help ensure your results are more accurate because the AI has more facts to learn from. A larger dataset will also help the AI avoid perpetuating harmful biases in its results by giving it a wider breadth of experiences from which it can build its understanding of the world. More data means better answers and fewer biases. Given those technical realities, United States and governments should support access to data to ensure that AI innovation can flourish accurately and responsibly. However, one of the most important implications of AI's need for data is the impact on copyright and creators' rights. There are many outstanding questions in this space, including whether creating an AI model, which is a software program, from a set of images, is a permitted fair use. And whether that analysis changes if the output of that AI model creates an image that is substantially similar to an image on which it is trained. These questions will certainly be addressed by courts and perhaps Congress, and we are prepared to help assist in those discussions. Adobe recognized the potential impact of AI on creators and society, and we have taken several steps. First, we trained our own generative AI tool, Adobe Firefly, only on licensed images from our Adobe Stock Collection, which is a stock photography collection, openly licensed content, and works that are in the public domain where the copyright has expired. This approach supports creators and customers by training on a dataset that is designed to be commercially safe. In addition, we are advocating for other steps we can all take to strengthen creators' rights. First, we believe creators should be able to attach a ``Do Not Train'' tag to their work. With industry and Government support, we can ensure AI data crawlers will read and respect this tag, giving creators the option to keep their data out of AI training datasets. Second, creators using AI tools want to ensure they can obtain copyright protection over their work in this new era of AI-assisted digital creation. An AI output alone may not receive copyright protection, but we believe the combination of human expression and AI expression will and should. Content editing tools should enable creators to obtain a copyright by allowing them to distinguish the AI work from the human work. In my written testimony, I discuss our open standards-based technology content credentials, which can help enable both of these creator protections. Finally, even though Adobe has trained its AI on permitted work, we understand the concern that an artist can be economically dispossessed by an AI trained on their work that generates arts in their style, in the Frank Sinatra example you gave. We believe artists should be protected against this type of economic harm, and we propose Congress establish a new Federal anti-impersonation right that would give artists a right to enforce against someone intentionally attempting to impersonate their style or likeness. Holding people accountable who misuse AI tools is a solution we believe goes to the heart of some of the issues our customers have, and this new right would help address that concern. The United States has led the world through technological transformations in the past, and we have all learned it is important to be proactively responsible to the impact of these technologies. Pairing innovation with responsible innovation will ensure that AI ultimately becomes a transformative and true benefit to our society. Thank you, Chair Coons, Ranking Member Tillis, and Members of the Committee. [The prepared statement of Mr. Rao appears as a submission for the record.] Chair Coons. Thank you, Mr. Rao. Professor. STATEMENT OF MATTHEW SAG, PROFESSOR OF LAW, ARTIFICIAL INTELLIGENCE, MACHINE LEARNING, AND DATA SCIENCE, EMORY UNIVERSITY SCHOOL OF LAW, ATLANTA, GEORGIA Professor Sag. Chair Coons, Ranking Member Tillis, Members of the Subcommittee, thank you for the opportunity to testify here today. I am a professor of law in AI, machine learning, and data science at Emory University, where I was hired as part of Emory's AI Humanity Initiative. Although we are still a long way from the science fiction version of artificial general intelligence that thinks, feels, and refuses to open the pod bay doors, recent advances in machine learning and artificial intelligence have captured the public's attention and apparently lawmakers' interest. We now have large language models, or LLMs, that can pass the bar exam, carry on a conversation, create new music and new visual art. Nonetheless, copyright law does not and should not recognize computer systems as authors. Even where an AI produces images, text, or music that is indistinguishable from human authored works, it makes no sense to think of a machine learning program as the author. The Copyright Act rightly reserves copyrights for original works of authorship. As the Supreme Court explained long ago in the 1884 case of Burrow-Giles Lithographic, authorship entails original, intellectual conception. An AI can't produce a work that reflects its own original intellectual conception because it has none. Thus, when AI models produce content with little or no human oversight, there is no copyright in those outputs. However, humans using AI as tools of expression may claim authorship if the final form of the work reflects their original intellectual conception in sufficient detail. And I have elaborated in my written submissions how this will depend on the circumstances. Training generative AI on copyrighted works is usually fair use because it falls into the category of non-expressive use. Courts addressing technologies such as reverse engineering, search engines, and plagiarism detection software have held that these non-expressive uses are fair use. These cases reflect copyright's fundamental distinction between protectable original expression and unprotect-able facts, ideas, and abstractions. Whether training an LLM is in non-expressive use depends ultimately on the outputs of the model. If an LLM is trained properly and operated with appropriate safeguards, its outputs will not resemble its inputs in a way that would trigger a copyright liability. Training such an LLM on copyrighted works would thus be justified under current fair use principles. It is important to understand that generative AI are not designed to copy original expression. One of the most common misconceptions about generative AI is the notion that the training data is somehow copied into the model. Machine learning models are influenced by the data. They would be pretty useless without it. But they typically don't copy the data in any literal sense. So rather than thinking of an LLM as copying the training data like a scribe in a monastery, it makes more sense to think of it as learning from the training data like a student. If an LLM like GPT3 is working as intended, it doesn't copy the training data at all. The only copying that takes place is when the training corpus is assembled and pre-processed, and that is what you need a fair use justification for. Whether a generative AI produces truly new content or simply conjures up an infringing cut and paste of works in the training data depends on how it is trained. Accordingly, companies should adopt best practices to reduce the risk of copyright infringement and other related harms, and I have elaborated on some of these best practices in my written submission. Failure to adopt best practices may potentially undermine claims of fair use. Generative AI does not, in my opinion, require a major overhaul of the U.S. copyright system at this time. If Congress is considering new legislation in relation to AI and copyright, that legislation should be targeted at clarifying the application of existing fair use jurisprudence, not overhauling it. Israel, Singapore, and South Korea have recently incorporated fair use into their copyright statutes because these countries recognize that the flexibility of the fair use doctrine gives U.S. companies and U.S. researchers a significant competitive advantage. Several other jurisdictions, most notably Japan, the United Kingdom, and the European Union, have specifically adopted exemptions for text data mining that allow use of copyrighted works as training for machine learning and other purposes. Copyright law should encourage the developers of generative AI to act responsibly. However, if our laws become overly restrictive, then corporations and researchers will simply move key aspects of technology development overseas to our competitors. Thank you very much. [The prepared statement of Professor Sag appears as a submission for the record.] Chair Coons. Thank you, Professor. Ms. Ortiz. STATEMENT OF KARLA ORTIZ, CONCEPT ARTIST, ILLUSTRA- TOR, AND FINE ARTIST, SAN FRANCISCO, CALIFORNIA Ms. Ortiz. Yes. Chairman Coons, Ranking Member Tillis, and esteemed Members of the Committee, it is an honor to testify before you today about AI and copyright. My name is Karla Ortiz. I am a concept artist, illustrator, and fine artist, and you may not know my name, but you know my work. My paintings have shaped the worlds of blockbuster Marvel films and TV shows, including ``Guardians of the Galaxy 3,'' ``Black Panther,'' ``Loki,'' you know, but specifically, the one I am most happiest of is that I, my work helped shape the look of Doctor Strange in the first ``Doctor Strange'' movie. I have to brag about that a little bit, sir. I love what I do. I love my craft. Artists train their entire lives to be able to bring the imaginary to life. All of us who engage in this craft love every little bit of it. Through hard work, support of loved ones, and dedication, I have been able to make a good living from my craft via the entertainment industry, an industry that thrives when artists' rights to consent, credit, and compensation are respected. I have never worried about my future as an artist until now. Generative AI is unlike any other technology that has come before. It is a technology that uniquely consumes and exploits the hard work, creativity, and innovation of others. No other tool is like this. What I found, when first researching AI, horrified me. I found that almost the entirety of my work, the work of almost every artist I know, and the work of hundreds of thousands of artists had been taken without our consent, credit, or compensation. These works were stolen and used to train for profit technologies with datasets that contain billions of image and text data pairs. Through my research, I learned many AI companies gather copyrighted training data by relying on a practice called data laundering. This is where a company outsources its data collection to a third party under the pretext of research to then immediately use commercially. I found these companies use big terms like ``publicly available data'' or ``openly licensed content'' to disguise their extensive reliance on copyrighted works. No matter what they are saying, these models are illegally trained on copyrighted works. To add even more insult to injury, I found that these for-profit companies were not only permitting users to use our full names to generate imagery but encouraging it. For example, Polish artist Frederic Koski had had his name used as a prompt in AI products over 400,000 times, and those are the lower end of the estimate. My own name, Karla Ortiz, has also been used by these companies thousands of times. Never once did I give consent. Never once have I gotten credit. Never once have I gotten compensation. It should come as no surprise that major productions are replacing artists with generative AI. Goldman Sachs estimates that generative AI will diminish or outright destroy approximately 300 million full-time jobs worldwide. As Ranking Member Tillis mentioned earlier, copyright-reliant industries alone contribute $1.8 trillion value to the U.S. GDP, accounting for 7.76 percent of the entire U.S. economy. This is an industry that employs 9.6 million American workers alone. The game plan is simple, to go as fast as possible, to create mesmerizing tales of progress, and to normalize the exploitation of artists as quickly as possible. They hope when we catch our breath, it will be too late to right the wrongs, and exploiting Americans will become an accepted way of doing things. But that game can't succeed as we are here now, giving this the urgency it so desperately deserves. Congress should act to ensure what we call the 3Cs and a T: consent, credit, compensation, and transparency. The work of artists like myself were taken without our consent, credit, nor compensation, and then used to compete with us directly in our own markets--an outrageous act that under any other context would immediately be seen as unfair, immoral, and illegal. Senators, there is a fundamental fairness issue here. I am asking Congress to address this by enacting laws that require these companies to obtain consent, give credit, pay compensation, and be transparent. Thank you. [The prepared statement of Ms. Ortiz appears as a submission for the record.] Chair Coons. Thank you, Ms. Ortiz. Last but certainly not least, Mr. Harleston. STATEMENT OF JEFFREY HARLESTON, GENERAL COUNSEL AND EXECUTIVE VICE PRESIDENT, BUSINESS AND LEGAL AFFAIRS, UNIVERSAL MUSIC GROUP, SANTA MONICA, CALIFORNIA Mr. Harleston. Thank you, Chairman Coons, Ranking Member Tillis, and Members of the Committee. It is an honor to be here before you today. I am Jeff Harleston. I am the general counsel of Universal Music Group. And what is Universal Music Group? We are the world leader in music-based entertainment. We are home to legendary record labels such as Motown, Def Jam, Island, Blue Note, Capitol, just to name a few. We have a music publishing company that signs songwriters, and we have a music merchandizing company as well, and an audio division--an audiovisual division that produces award-winning documentaries based on music. UMG identifies, develops artists across every musical genre. I think it is fair to note that Frank Sinatra is one of our artists, and I think based on what we didn't hear today, I am not sure if we will be pursuing a developing artist out of Delaware named Chris Coons, but maybe we will get back to that. Chair Coons. I am confident you will not. [Laughter.] Mr. Harleston. All jokes aside, I have been at the company, I have been honored to be with the company for 30 years, and most of the time I have spent as a lawyer, but I have also spent some time leading the Def Jam label and also as the management team of Geffen Records. So, I have been on both sides of the business. We have also helped broker deals with digital services, platforms, social media outlets where you, all of you can access the music that you love. It has been my life's honor to work with countless talented and creative artists. Their creativity is the soundtrack to our lives, and without the fundamentals of copyright, we might not have ever known them. I would like to make four key points to you today. The first, copyright artists and human creativity must be protected. Art and human creativity are central to our identity. Artists and creators have rights. They must be respected. If I leave you with one message today, it is this: AI in the service of artists and creativity can be a very, very good thing. But AI that uses, or worse yet, appropriates the work of these artists and creators and their creative expression, their name, their image, their likeness, their voice, without authorization, without consent, simply is not a good thing. The second point I want to make is that generative AI raises challenging issues in the copyright space. I think you have heard from the other panelists and they all would agree. We are the stewards at Universal of tens of thousands, if not hundreds of thousands, of copyrighted creative works from our songwriters and artists, and they have entrusted us to honor, value, and protect them. Today they are being used to train generative AI systems without authorization. This irresponsible AI is violative of copyright law and completely unnecessary. There is a robust digital marketplace today in which thousands of responsible companies properly obtain the rights they need to operate. There is no reason that the same rules that apply to everyone else should not apply equally to AI companies and AI developers. My third point, AI can be used responsibly to enhance artistic expression. Just like other technologies before, artists can use AI to enhance their art. AI tools have long been used in recording studios for drum tracks, chord progressions, and even creating immersive audio technologies. One of our distributed artists used a generative AI tool to simultaneously release a single in six languages in his own voice, on the same day. The generative AI tool extended the artist's creative intent and expression with his consent to new markets and fans instantly. In this case, consent is the key. There is no reason we can't legitimate--we can't create a legitimate AI marketplace in the service of artists. There is a robust free market for music sampling, synchronization licensing, and deals with new entrants to the digital marketplace, social media companies, and all manner of new technologies. We can do the same thing with AI. And my fourth and final point, to cultivate a lawful, responsible AI marketplace, Congress needs to establish rules that ensure creators are respected and protected. One way to do that is to enact a Federal right of publicity. Deepfakes and/or unauthorized recordings or visuals of artists generated by AI can lead to consumer confusion, unfair competition against the artist that actually was the original creator, market dilution, and damage to the artist's reputation, potentially irreparably harming their career. An artist's voice is often the most valuable part of their livelihood and public persona, and to steal it, no matter the means, is wrong. A Federal right of publicity would clarify and harmonize the protections currently provided at the State level. Visibility into AI training data is also needed. If the data on AI training is not transparent, then the potential for a healthy marketplace will be stymied as information on infringing content would be largely inaccessible to the individual creators. And I might add, based on some of the comments I heard earlier, it would be hard to opt out if you don't know what has been opted in. Finally, AI-generated content should be labeled as such. We are committed to protecting our artists and the authenticity of their creative works. As you all know, consumers deserve to know exactly what they are getting. I look forward to the discussion this afternoon, and I thank you for the opportunity to present my point of view. Thank you. [The prepared statement of Mr. Harleston appears as a submission for the record.] Chair Coons. Thank you, Mr. Harleston. Thank you to all of the witnesses today. We will begin our first 5-minute round. And I am going to start by just exploring how we can respect existing copyrighted works, copyright protections, while continuing to safely develop and advance AI technologies. If we run out of time, we will do a second round. My hunch is there is at least that much interest. Mr. Brooks, if I might just start with you. Generative AI models like those your company creates are trained in no small part on vast quantities of copyrighted content, on data from copyrighted content. Do copyright owners know if their works have been used to train Stability's models? Is Stability paying rights holders for that use? Why not, if not? And how would doing so impact your business and your business model? Mr. Brooks. Thank you, Senator. So, to the first question, models like Stable Diffusion are trained on open datasets or curated subsets of those datasets. So Stable Diffusion, for example, takes a 5 billion image dataset. We filter that for content, bias, quality, and then we use a 2 billion image subset to train a model like Stable Diffusion. Because it is open, you can go to a website, you can type in the URL of an image, you can type in a name. You can see if that work has appeared in the training dataset. And then we are working with partners to take those opt-out requests, and as I say, to incorporate them into our own training and development processes. So, we do think open datasets are important. They are one part of how we are able to inspect AI for fairness and bias and safety. And so that is I think to the first part. Chair Coons. So, if I heard you right, if an artist takes the initiative to search your training set, they might be able to identify that a copyrighted work was used and then submit an opt-out request. And you are in the process of facilitating that use. But to my second question, do you pay any of the rights holders? Mr. Brooks. As I say, Senator, we--this is 2 billion images, a large amount of content. A lot of it, you know, all kinds of content. Tech language models, for example, it is not just books, it is snippets of text from all over the internet. As I say, to make that workable, we believe, you know, that it is important to have that diversity, to have that scale. That is how we make these models safe. It is how we make them effective. And so--and so we collected, as I say, from online data. What I will say is that the datasets that we use, like that 5 billion image dataset I mentioned, they respect protocols like robots.txt. So, robots.txt is a digital standard that basically says, I want my website to be available for ancillary purposes, such as search engine indexing. And so, the dataset that was compiled respected that robots.txt signal, and then on top of that, as I say, we have the opt-out facility that we have implemented. Chair Coons. Thank you. Mr. Rao, it is my understanding that Adobe is taking a distinctly different approach. Your generative AI model, Firefly, was only trained on licensed data. Were there any downsides economically to that decision? Is your model less robust or has it had any impact on its performance? And how would you compare these two approaches in terms of the incorporation of opt-out and licensed? Mr. Rao. Thank you for the question. So, as I mentioned in the opening remarks, that we--Firefly, our generative AI tool was trained on our stock photography collection, which are all licensed assets with the contributors, and that is actually the only dataset used in the version that you can use on Firefly on the web. We think about the quality of this, and when we think about the quality to your question, we have to put a lot of image science behind that to make sure it was up to the level we require because we didn't have the most expensive version of that dataset. So, we had to put more computer science behind it to make it have the higher quality we needed. As we go forward, we are looking at whether or not there are other areas where we need to supplement that dataset, and for those we referred to as opening licensed content or places where the copyright has expired. Opening licensed to us means images that come from the rights holders who have licensed it without restriction. So, very similar to what we are talking about in the licensed content, this is a place--this is also what we call commercially safe. Chair Coons. My sense, Mr. Brooks, is Stability is trying to honor something like 160 million opt-out requests in training your next model. Mr. Rao, Mr. Brooks, just this will be my last question, and then I will turn to Senator Tillis. Should Congress be working to ensure that creatives can opt out of having their works used to train AI models? How would you best do that, briefly? Mr. Rao. So, we have this technology we refer to as content credentials in my opening remarks, and what that does, it is a metadata that goes along with any content. So, if you are in Photoshop right now, you can say, I want content credentials to be associated with this image. As part of that, you can choose to say, I want it not to be trained on it--a ``Do Not Train'' tag that gets associated with the image and it goes wherever the content goes. So, we do think the technology is there and available, and we are talking to other companies, including Stability, about this as an approach to honor that tag so people who are crawling it can see the tag and choose not to train on them. Chair Coons. Should we require that? Mr. Rao. And I do think that there is an opportunity for Congress to mandate the carrying of a tag like that, a credential like that, wherever the content goes. Right now, it is a voluntary decision to choose to do that. Chair Coons. Should we require that? Mr. Brooks. There is some very interesting precedent internationally for this. The European Union has introduced certain kinds of text and data mining exceptions. And part of that is to say that you can use this for commercial, noncommercial purposes. There is an opt-out requirement, but the opt-out has to be machine readable, as I say, as a matter of practicality, when you are dealing with trillions of words of content, for example, or billions of images, in this case. The machine readability is important, and that is where these tags become an important part of how to implement it in practice. Chair Coons. We will keep exploring this further. Senator Tillis. Senator Tillis. Thank you, Chairman. I'll have Senator Blackburn go and then I will follow Senator Hirono. Senator Blackburn. Excellent. Thank you, Senator Tillis. And Mr. Chairman, thank you for the hearing today. It is so appropriate that we have this. I am from Tennessee. We have thousands of artists and songwriters and musicians, and we have actors and actresses, and we have authors and publishers. And everywhere I go, people are talking about the impact of AI, to the positive or the negative. You know, you look at health care, you look at logistics, you look at autos, you look at entertainment, and there are pros and cons. But the one point of agreement is, we've got to do something about this so that it is going to be fair, and it is going to be level. Mr. Harleston, I want to come to you right off the bat because you mentioned the NIL issue, which I think is an imperative for artists to be able to own that. And you also mentioned the right of publicity laws, and of course, those are State level laws. And as you rightly said, we don't have a federally preemptive right to publicity law. And I think the dust up--a lot of people came to realize this over Drake and The Weeknd, and ``heart on my sleeve.'' And this is something that does have to be addressed. So, for the record, give us about 30 seconds and then you guys, I see your capable team behind you, you can submit something longer in writing, if you would like, on the reason State level publicity laws are not enough. Mr. Harleston. In 30 seconds---- [Laughter.] Mr. Harleston. State level publicity laws are inconsistent from State to State. A Federal right of publicity that really elevates right of publicity to an intellectual property is critically important to protect---- Senator Blackburn. Okay, I am going to help you out with this---- Mr. Harleston. Okay. Senator Blackburn. A federally preemptive right to publicity law would provide more of that constitutional guarantee to her works that Ms. Ortiz has mentioned. Mr. Harleston. Absolutely. Senator Blackburn. All right. And---- Mr. Harleston. And we will follow up with you, Senator. Senator Blackburn. Yes, excellent. I think something in writing would be very helpful there. Now, I think it was very appropriate that you had Spotify and Apple Music take down ``heart on my sleeve.'' Important to do. And talk about the role that the streaming platforms should play. Should they be the arbiter when it comes to dealing with this generative AI content? Mr. Harleston. These streaming platforms, we acknowledge that they are in a challenging position, but certainly in some instances when there is clear, or it is clear that the content that has been submitted to them for distribution---- Senator Blackburn. So, a knowing and willingness standard would be nice. Mr. Harleston. That would be very nice, yes. Senator Blackburn. Okay. I am helping you out there. Mr. Harleston. You are doing great. Senator Blackburn. Thanks for being here. Okay, Professor Sag, want to come to you. This spring, the Supreme Court issued a--what I thought was a very appropriate decision in Warhol v. Goldsmith, and I was very pleased to see them come down on the side of the artist. I filed an amicus brief in this case arguing for strong, fair use protections for creators. Now, we have been through this thing in the music industry where ``fair use'' became a fairly useful way to steal my property. And artists don't want to go through that again. Right, Ms. Ortiz? [Voice off microphone.] Senator Blackburn. It didn't work the way it was supposed to. And I would like for you to talk for a moment, should AI, unlicensed AI ingestion of copyrighted works might be considered fair use when the output of AI replaces or competes with the human-generated work. Now, Ms. Ortiz has laid this out fairly well in her comments and the Supreme Court has sided with the artist in Warhol v. Goldsmith. But this fair use standard comes into play every time we talk about our fabulous creative community and keeping them compensated. So, the floor is yours. Professor Sag. Senator Blackburn, commercial replacement should not be the test. The test should be exactly what the Supreme Court said in the Andy Warhol case. The question is, is this significantly transformative? What that means in relation to training AI models is, does the output of the model bear too much resemblance to the inputs? And that is a different question to, is it competing with the inputs? Could it be used as a commercial substitute? If you look at some of the old cases on reverse engineering software, companies were allowed to crack open software, find the secret keys to interoperability, and build new competing products that did not contain any copyrightable expression, and the Court said that that was fair use. So, I think on current law, the answer is no. Potential substitution in terms of a competing product is not the test. The test is, are you taking an inappropriate amount of an artist's original expression. Senator Blackburn. Well, my time has expired. Thank you for that. We just don't want it to become a fairly useful way to steal an artist's product. Thank you, Mr. Chairman. Chair Coons. Thank you, Senator Blackburn. And thank you for the passionate engagement you have always brought to these issues on behalf of the creative community. [Laughter.] Chair Coons. Senator Hirono. Senator Hirono. Thank you, Mr. Chairman. Mr. Harleston, whenever the idea of negotiating licenses is raised, people express concerns about how complex it would be and how AI platform developers could never possibly negotiate with all rights holders. But in the music context, at least, you have a lot of experience negotiating rights. Could you tell us a little bit about your industry's history of negotiating rights with digital music services and lessons that history could teach us, for whether rights negotiations would be possible with AI platforms? Mr. Harleston. Thank you, Senator. As you referenced, we have had a long history with the transition of our business from a physical business to a digital business, and having to encounter digital platforms that were very quickly adapted by consumers and had lots of our content on there. What we found was ingenuity does play a role. It is not easy. But we were able to identify or find ways to identify our copyrights, to work out licensing schemes that allowed the platforms to be able to carry and distribute the music. And in a commercial environment that was positive for them, while at the same time allowing the artists to be properly compensated. And this is, you know, with the--in the music side, we have two sets of rights, which makes it even more complicated, but we have done great work over the years to develop systems that allow identifying not only the sound recording, but also the underlying composition. So, it could be done. But what it needs, it needs--what we would need is we need help to make sure that everyone understands that there are rights that are affected and that the activity that is happening now is violative. And once they understand that what they are doing is violative, that brings them to the table so we can negotiate a deal. Senator Hirono. I note that in your testimony you said that consent is the key. So is your position that every artist's work before it can be used to train AI models, that the company that is wanting to use that information has got to get the consent of the originator? Mr. Harleston. In a very short answer, yes. Senator Hirono. And you think that we are able to do this knowing that these platforms incorporate billions and billions of information to train their AI models? Mr. Harleston. Understanding that, but it absolutely could be done as these--as the digital platforms that exist today, the licensed platforms ingest millions and millions of songs every week. So, it is not a problem in that respect. There is metadata that we could license. We could absolutely do that. But there has to be an initiative on the side of the companies to reach out. Senator Hirono. So, Ms. Ortiz, if I--Mr. Brooks, rather, sorry. My--what I heard you say in response to the Chairman's question is that for all of the data that you input into your model, you do not get the consent of the artist or originator. Is that correct, Mr. Brooks? Mr. Brooks. So, we, Senator, we believe that yes, if that image data is on the internet and robots.txt says it can be subject to aggregated data collection, and if it is not subject to an opt-out request in our upcoming models, then certainly we will use those images, potentially use those images if it passes our filters. Senator Hirono. So basically, you don't pay for the data that you put into your--to train your model. Mr. Brooks. For the base, the kind of initial training or teaching of these models with those billions of images, there is no arrangement in place. Senator Hirono. So, you have Ms. Ortiz who says that that is wrong. Is that correct, Ms. Ortiz? Ms. Ortiz. One hundred percent, Senator. Senator Hirono. So do you know if--well, I think you mentioned that your work has been used to train AI models and you have gotten not one cent for that use. Ms. Ortiz. I have never been asked. I have never been credited. I have never been compensated one penny. And that is for the use of almost the entirety of my work, both personal and commercial, Senator. Senator Hirono. So, if you were to allow your works to be used to train, you would--do you think that you would negotiate--if there was a law that required compensation, then that compensation negotiation should be left to you and the entity such as Mr. Brooks'. Ms. Ortiz. Personally, I love what I do, so I wouldn't outsource it to an AI, but that is not a choice for me to make, and it is all about that. It is about being able to have that choice and artists don't have that right now. Senator Hirono. Thank you. Senator Tillis. Thank you, Mr. Chair. I was actually inspired by one of the opening statements, so I went out and generated a cat driving a 1960 Corvette with a surfboard in it. And I produced that picture. [Phone is held up with the screen facing the witnesses.] Senator Tillis. Actually, it gave me four options. This one I found the most interesting. But it raised a question that I wanted to ask you, Mr. Brooks. If an artist looked at that and said, that is in part developed by that 60s Corvette in South Beach, how does that artist then go about saying--I am trying to get an understanding of your current opt-out policy. And one of the issues that we have had here and not completely related, but we have a notice, a takedown notice and stay down discussion in the past around creative works. So, I was just trying to understand, and I think it is going to be a lengthy answer. And then if I talk to a creative, it is going to be a lengthy answer. But for the record, it would be very helpful to me for your specific platform to understand how that opt-out process works. I think I heard right that you could embed within the works certain things that already create an opt-out, or that that work shouldn't be used. But I want to drill down. We don't have time to do that now. And in a twist of irony, I was wondering if any of the witnesses would suggest any creative works by other governmental bodies that we should steal and use as a baseline. In other words, what good policy seems to be being discussed or passed? What particularly problematic at either end of the spectrum? Because I am sympathetic to the issues at both ends of the spectrum on this argument. So maybe we start with you, Professor. Are you aware of any Western democracy states, I am not particularly interested in what China is doing because whatever they agree to, they are going to rip off anyway, but any best practices that we should look out there, or bad practices, or trends that we should avoid or be concerned with as we move forward? Professor Sag. I think that the European Union's approach, where they have different rules for commercial and noncommercial use, and opt-outs have to be respected for commercial uses of the text mining in Article 4 of the DSM has something to recommend it. By the same token, I would note that opt-outs do not apply to researchers working at proper research institutions in the EU, nor do contractual overrides, which is a position that I can't see Congress adopting, but it is certainly something to look at. That's--that's really it. Senator Tillis. Anyone else briefly could add what--Ms. Ortiz, I should also add, I have seen all your works and it has been since 11 o'clock last night that I was talking about ``Guardians of the Galaxy'' with my colleagues as we were coming back from Vilnius. Ms. Ortiz. It was a really fun project to work on, Senator, so thank you. So, what the artists community have suggested is that models be built starting from scratch via public domain- only works, that's work that belongs to everyone. Any expansion upon that to be done via licensing. And there is a couple of reasons for this. Current opt-out measures are inefficient. For starters, machine learning models, once they are trained on data, they cannot forget. And machine unlearning procedures are just dead on the water right now, and this is not according to me. I am an artist. I have no idea on this. This is according to machine learning experts in the field. Second, things, safety filters like, for example, prompt, you know, filters are so easily bypassed by users. So unfortunately, when companies say, hey, opt out, there is no real way to do that. But even further, what happens if someone doesn't know how to write a robot.txt? Like, how does a person who may not know the language, may not know the internet, may not even know that their work is in there, recognize that, you know, they need to opt out. This is why my community in particular has suggested over and over, opt in should be the key in order to base the foundations of consent, credit, and compensation. Senator Tillis. And Mr. Brooks, I can understand the challenges with opt-in versus opt-out in terms of the task that you would have ahead of you. But what is your view of the concerns that creatives have expressed in this light and the current opt-out process that you all have in place or procedures which I would like to get information for, for the record. Mr. Brooks. Thank you, Ranking Member. Look, I will say at the start that we do need to think through what the future of the digital economy looks like. What do incentives look like? How do we make these technologies a win-win for everyone involved? These are very early days from our perspective. We don't have all the answers, but we are working to think through what that looks like---- Senator Tillis. I am going to stick around for a second round, so we will get a little bit deeper into that. But I want to defer to my colleague from California. Chair Coons. Thank you, Senator Tillis. Senator Padilla. Senator Padilla. Thank you, Mr. Chair. And I want to thank the witnesses for your testimony and participation today. Speaking of California, I can't help but observe that California is very well represented on this panel. Not only a point of pride for me as a Senator from California, but it is frankly not a surprise since we are the creative and tech hub of the Nation. Now, generative AI tools, as we have been talking about, present remarkable opportunities and challenges for the creative community and our broader society. And I couldn't help but observe that in reviewing the testimony from each of you, I noted the common goal of seeking to leverage and develop AI tools to complement and encourage human creativity and artistry, while also respecting the rights and dignity of the original creators. So, it is a tall order, a delicate balancing act in many ways, but that is--this seems to be the shared objective here. So, I want to thank you again for participating in this hearing as we are working to determine what role we play in fostering the development of AI in a manner that is a net positive for innovation and creativity. My first question, and I will keep it brief because it is sort of piggybacking on--Senator Hirono has raised it, Senator Tillis was just trying to expand upon it, and is directed at Mr. Brooks. This whole opt in, opt out: We can talk about what the process is, whether it is easy, clear, or not for artists. And, you know, I don't completely agree with you that we are in an early stage because it is happening fast. Tell me how it is possible--explain how it works to have a system unlearn inputs that have already been taken, if you get this after-the- fact opt-out from an artist. It is happening now. While you are trying to think what it means long term, it is happening now. So how does it work, not just process, checking a box, filling out a form, but technically? Mr. Brooks. Thank you, Senator. So, just in terms of the data collection piece, I just want to make it clear that today it is very much a kind of work in process framework. You know, you can go to this website. You can indicate you want to opt out. We will take those opt-out requests as they come in. But as we were talking about before, it is important that eventually there is a standardized kind of metadata that just attaches to these works as they go out into the wild. And as I said, that is what the EU is requiring, and I think there will be a lot of standards development in that space, again, with-- in terms like Adobe and others. In terms of what then happens, you know, as I say, we filter that training data for a few reasons. We take out unsafe content, we adjust for issues like bias to correct the bias. And then in addition to that, we start to incorporate, as I say, the opt-out requests. Sometimes some of the models we release are retrained from scratch with new datasets. Again, they take into account the lessons learned through previous development, both as an organization, as a company, and potentially technical things that we have learned as well in that process. Some of the models that are released are just fine-tuned variations of the model, and so those ones may have the same kind of basic knowledge from that original training process, and there has just been some additional training to correct for certain behaviors or improve performance in specific tasks. So, in terms of, you know, the future of this space, you know, there is a lot of work being done on unlearning in general. You know, how do you interpret the relationship between training and the data in training and the performance of the model? How do you potentially adjust to that, different ways? But as I say, at this stage, we treat it as a process of incorporating those opt-out requests, retraining, and then releasing a new model trained on that new dataset. Senator Padilla. I hear you, and I just want a level set a little bit, not just out of the concern for the artists, but knowing that unless you are getting one, two, three inputs today, which may be small enough to keep your arms around, I doubt that is the case as we are getting into the hundreds and thousands of inputs per day to go in and relearn, unlearn, and comply with any consent or opt-out. It gets overwhelming and unfeasible real quick, and it is happening now. I also wanted to follow up on a subject matter that Senator Coons touched on earlier. We know that generative AI models need to be fed large datasets to learn how to generate images based on user prompts, just like Senator Tillis did. By the way, that looked much more like Pacific Coast Highway than South Beach. Now, AI for--this is now talking to folks back home, can only understand what it is taught, making it critical that for AI companies to train their models with data that captures the full range of the human experience, want to be inclusive and diverse, if we are going to be accurate in representing our users, representing the diverse backgrounds of all users. Now, Mr. Rao, you have explained how Adobe's Firefly seeks to avoid copyright infringement by being trained on only licensed Adobe Stock images, openly licensed content, and public domain content. So how do you reconcile both? You want to be as inclusive as possible, which means as much data input as possible, but to avoid the copyright infringement, you are being selective in those inputs. That diversity of input is important, I think, for the diversity of output. So how do you reconcile? Mr. Rao. It is definitely a tension in the system. Right? The more data you have, the less bias you will see. So, it is great to have more data. But when you set the expectations that we had for ourselves of trying to design a model that was going to be commercially safe, we took on the challenge of saying, can we also do that and minimize harmful bias? And the way we did that, we have an AI ethics team. We started that 4 years ago. And one of the key things they did when we were developing Adobe Firefly was not only do we have the dataset and we understand what that is, we also did a lot of testing on it. We have a series of prompts, hundreds and hundreds and hundreds of prompts. We were testing against it to see what the distribution of model is. Is there going to be a bias. If you type in ``lawyer,'' are you only going to get men--or white men, and what does that mean, and how, then, do you change that? And you either change it by adding more data, making it more diverse--and so that means you have to get ethically- sourced, more data to diversify the dataset, or you can add filters on top of the dataset to force a distribution of what you expect to see if you are typing in certain search terms and make sure the bias is removed. So, you can either do it by adding more data or you can do it with through adding filters on top of the model itself to ensure that you are going to get the right result. Senator Padilla. And if you ask--if you input ``Senator,'' what comes out? Mr. Rao. An amazingly handsome man and woman, just very intellectual. [Laughter.] Senator Padilla. Men and women--colors across the spectrum. Mr. Rao. Across the spectrum. Senator Padilla. Thank you, Mr. Chair. Mr. Rao. The first time we did ``lawyer,'' though, we only had white men. And as general counsel, I was like, there should be some people who look like me as well. Chair Coons. Thank you, Senator Padilla. Senator Klobuchar. Senator Klobuchar. Okay, very good. Thank you. I was glad to be here for all your testimony and thank you for that. I guess, I will start with you, Mr. Harleston. Approximately, and I know you talked about this a bit with some of the other Senators, Senator Blackburn. Approximately half the States have laws that give individuals control over the use of their name, image, and voice. But in the other half of the country, someone who was harmed by a fake recording purporting to be them has little recourse. In your testimony, you talk about new laws and how they could protect musicians' names, likenesses, and voices-- the right of publicity, I think you called it. Can you talk about why creating this is important in the face of emerging AI? And how have statutes in States that have these protections helped artists? Mr. Harleston. Thank you, Senator, for the question. It is critical in this environment when we are talking about the creative expression that the artist has made, that the right of publicity also be extended at the Federal level. There is inconsistency, but more importantly, the preemptive element of it is critical. Raising it to the level of an intellectual property is also critical. What we have seen, and this is really in the area of deepfakes, where you have seen, I think, Ms. Ortiz referenced how many times her name was listed. We are finding with our artists, particularly the ones that are most established, that their names are, you know, daily-- hundreds and hundreds of thousands of posts with their names. And also, there is sometimes images that are used as well. Senator Klobuchar. Mm-hmm. Mr. Harleston. So, it is critical to have this right to protect the artists and their use. And if I could just say one thing on the--I know this is not your question, but I have to say---- Senator Klobuchar. There we go. Mr. Harleston. Because it is killing me---- Senator Klobuchar. I will just add it to my time. [Laughter.] Mr. Harleston. All right, thank you, thank you. On the opt in, opt out, there is an element beyond commerciality. And I want to make sure everyone understands. Ms. Ortiz did reference it, about she didn't really--she probably wouldn't want a license to AI. And there are--we have artists that don't want a license to streaming services. So, they are not--it is not always about the commerciality. Some artists just don't want their art distributed in certain ways. And the Beatles didn't come onto streaming platforms till about 7 or 8 years ago. That was a decision that was very important to them. So, I want to add that into the conversation. I know that wasn't your question, sorry. Senator Klobuchar. Okay, very good. And so, what do you see as the obligations of social media platforms on this? Mr. Harleston. With respect to AI? Senator Klobuchar. Uh-huh. Mr. Harleston. Oh, great--fantastic question. We believe that the social media platforms absolutely have an obligation. I will say this, that we could help them by giving them a hook beyond copyright in terms of being able to take down some of the---- Senator Klobuchar. Exactly---- Mr. Harleston. Some of the deepfakes. They have challenges with some of the platforms on this. Senator Klobuchar. Yes. Right, exactly. And I think we are seeing the same thing. I guess I would turn to you, Mr. Brooks. You talked about advocating for creating ways to help people identify AI-created content. And when we talk about deepfakes, we are already seeing this with political ads, and not even paid ads, just videos that are put out there. There's one of my colleague Senator Warren that was just a total lie that, saying that--acting like it was her that she was saying people from one party shouldn't be able to vote. And we have seen it in the Republican Presidential primary. A number of us on a bipartisan basis are working on this. I chair the Rules Committee, so it is kind of my other hat. Do you agree that without tools for people to determine whether an image or video generated by AI, that that would pose a risk to our free and fair elections, if you can't tell if the candidate you are seeing is the candidate or not? Mr. Brooks. Thank you, Senator. We absolutely believe that these transparency initiatives like CAI with Adobe are a really important part of how we make the information ecosystem more robust. This isn't just an AI problem or a social media problem. It is going to require everyone, and it is going to require accountability right across that ecosystem. But what we think is, you know, we have in place things like metadata, things like watermarking for content. They are just some more of the signals that social media platforms can use to decide whether they are going to amplify certain content. Senator Klobuchar. Yes, and we have got this REAL Political Advertisement Act, with Senator Booker and Senator Bennet. There is a version initially that was also introduced in the House. And so, that is one solution. But we are also going to have to look at, I would say, banning some of this content, because even a label or a watermark--it is not going to help the artist or the candidate if everyone thinks it is them and it is not, and then at the end, it says generated by AI. Mr. Brooks. It is a great question and a really important one, I think, Senator, because there are a few things in there. I think there's the question of the use of likeness, particularly for improper purposes, where you are implying that there is some kind of endorsement or affiliation between a particular person and a particular work or idea. That is different, I think, to the use of the kind of free experimentation with style and some of these other issues that tend to get lumped together in AI outputs. Senator Klobuchar. Mm-hmm. Mr. Brooks. And so, in terms of these scenarios that you are talking about, there is this kind of improper use. You are implying that someone endorses or embraces a cause or a work that they are not affiliated with. And there needs to be clear rules around how like this is used in that context, whether through right of publicity or through some of the bespoke deepfake legislation. Senator Klobuchar. Okay. Last, Mr. Rao, our recent study-- and I know you have worked on this democracy issue, which I truly appreciate. A recent study by Northwestern predicted that one third of the U.S. newspapers that existed roughly 2 decades ago will be gone by 2025. The bill that Senator Kennedy and I have, the Journalism Competition and Preservation Act, would allow local news organizations to negotiate with online platforms, including generative AI platforms. This bill passed through this Committee now twice. Could you describe how Adobe approaches this issue? And in your experience, is it possible to train sophisticated, generative AI models without using copyrighted materials, absent consent? Mr. Rao. Thanks for the question. Absolutely. We--our current model that is out there is trained using the licensed content that I had mentioned before and other content that has no restrictions on it, and it comes from the rights holders directly. So, we definitely think it is possible. We have done it. It is out there on our website, and it is also in Photoshop, and people love it. The creative professionals are using that AI. It makes their day easy. It lets them start their creative work in just one click and then they finish it in the tool. So, it has really revolutionized how we think about things. In terms of how we acquire datasets, and we have a group inside Adobe whose--that is their job. Their job is to think about where do we need to go next? Do we need to get to different media types? Do we--are we missing some sort of subject matter for our AI to be more accurate? That was a question we had before. We think about that content. Maybe there is a newspaper that you mentioned that has the kind of content we need. We go approach that organization and say, look, we need to license that content in to make sure our AI is more accurate. So, we have a team that thinks about this--sources it, and brings it in. Senator Klobuchar. And in the absence of that? I mean, what impacts do you anticipate this could have on local journalism if there are no rules of the road put in place? Mr. Rao. Yes, I think that, you know, both on the authenticity side and on this side, if people are able to, you know, create images and these newspapers are not able to get, you know, the ability to license the work they are doing, it could certainly have a negative impact to them. On the authenticity side, the reason why so many media companies have joined the Content Authenticity Initiative, like AP, Reuters, Wall Street Journal, New York Times, Washington Post, is because they know that when they are showing images, they need to be able to show that they are actually true. Senator Klobuchar. Mm-hmm. Mr. Rao. They need to be able to prove that it happened. If people stop believing that any of these digital images they are seeing are real, then they are going to stop consuming newspapers. They are going to stop consuming that content because they are not going to believe it. So, you have to give those local newspapers a way to prove what they are showing is true---- Senator Klobuchar. Right. Absolutely. Mr. Rao [continuing]. So people can still consume it. Senator Klobuchar. Of course, there is a lot less famous newspapers, including some very small ones in my State that just you might not mention. Right? And so, I think that part of it, is that, you know, the Ms. Ortizes of this story need to be able to have some kind of power to be able to protect their content, too, because they don't have a general counsel, and they are not going to be able to, on their own, start some major lawsuit. And so, I think that is how we have to think about that, too, as we look at all of this. Mr. Rao. And that is why I would say again that when we designed the Firefly, we designed it that way. Right? Senator Klobuchar. Mm-hmm. Mr. Rao [continuing]. To be commercially safe first, right, making sure that we built the model the way---- Senator Klobuchar. Yes, no, I am not--I am saying it sort of rhetorically to the world and to everyone that needs to get this done, as opposed to you, Mr. Rao. Mr. Rao. Thank you so much. Senator Klobuchar. All right. Appreciate it. And I thank you, both of you, for your continual bipartisan work in taking on this very important issue. Thanks. Chair Coons. Thank you, Senator Klobuchar. We are going to do a last round of questioning. We may be joined by other colleagues, but we are also in the middle of a vote. So, my hunch is we will resolve this in 10 to 15 minutes at the most, if I might. I am interested in pursuing the question of a Federal statutory right of publicity. And to me, the core issue really is, what is the remedy? Often, preemption is motivated by a desire for there to be consistency, the elevation in terms of process and access to justice, and potential remedies that comes with a Federal right as opposed to a State right. But, Professor, if I could start with you. You testified earlier in response to a question from Senator Blackburn that commercial replacement is not the appropriate test under current fair use law in the United States. Should we adopt a Federal right of publicity with commercial replacement as the test or part of the test, and how would that play out? What other remedy might you suggest under a new Federal right of publicity? Professor Sag. Senator, thank you for that question, because I was quite alarmed by some of the discourse here about the right of publicity. I think, as well as---- Chair Coons. Regulated by discourse. Professor Sag [continuing]. As well as thinking about publicity rights for well-known artists, musicians, etcetera, Congress should be thinking about the right of publicity of ordinary people, people who are anonymous, people who have no commercially valuable reputation. All of us deserve to be protected from deepfakes and synthetic reproductions of our name, image, and likeness, regardless of whether we are a famous politician or a famous artist or just an anonymous law professor. So, I think---- Chair Coons. How would you focus the remedy in order to make that effective? Professor Sag. Senator, in terms of remedy, I think that right of publicity statutes have traditionally had injunctive relief, usually incorporating equitable balancing tests. That is the remedy I would go for, which would mean, the models might have to be retrained. Chair Coons. Injunctive relief only, not commercial? Professor Sag. Damages, potential as well. But statutory damages, I don't think so. Statutory damages can be quite distorting. They tend to be a honeypot for opportunistic lawyers, as well as genuinely aggrieved plaintiffs. So, I would steer clear of statutory damages, but actual damage and injunctions, absolutely. Chair Coons. Mr. Rao, I'd be interested in your views on what a right of publicity might potentially do. I'd also be interested in hearing your thoughts on how we should be trying to balance respecting copyright through this or other means, while incentivizing investment in AI and accelerating innovation in the United States? Mr. Rao. Thank you for the question. So, we talked about in our testimony similar to, but not exactly like, a right of publicity. We referred to as a Federal anti-impersonation right. And the reason we thought about it from an anti-impersonation perspective is actually some of the same questions Professor Sag raised, which is we want to make sure Professor Sag himself is not--does not have a deepfake made of him. So, if you think about it as an impersonation right, that would apply to everybody. And what we are really targeting there is we see the economic displacement that we have been talking about here, where an AI is trained on an artist and creates an output that is exactly like the artist, and they are getting displaced by that work. And copyright may not reach them, like that has been the question. So that is why we believe they do need this right so they can go after these people who are impersonating work, whether that is likeness, whether that is style. And then the test would be something that we would work out through 6 months of deliberation here in this body, exactly how you would decide that. But I think that is the right approach, because you want to focus on people who are intentionally impersonating someone in order to make or get some commercial benefit, and I think that will help clarify what harm we are trying to address. Chair Coons. Mr. Brooks, how do you think a Federal anti- impersonation right---- Mr. Rao. By the way, that spells FAIR. Just want to make that clear. I know how Congress loves acronyms. Yes? Chair Coons. We are enthusiastic about acronyms. We actually are producing a Senate-only version of ChatGPT that only produces acronyms for bill names. [Laughter.] Chair Coons. Mr. Brooks, how do you think a Federal publicity right or an anti-impersonation right, a Federal requirement that there be opt-in only rather than opt-out would impact the business model that you are currently representing? Mr. Brooks. So, Chair Coons, I think the actual instrument and the content of that instrument, I think is really diagnostic at this stage. As I said to Senator Klobuchar, it is important from our perspective that there are clear rules governing the use of likeness in an improper way. I think the important thing to stress there is that it is a use. And to some extent we can't escape the fact that the determination of whether it is proper or improper will depend on the application, what the user does or does not do with that content downstream. And so, as I say, you know, from our perspective, the lines in the sand between improper use of likeness, free experimentation with style, or other kinds of good or bad use of these tools aren't easy to draw. They are very fact sensitive. It may be appropriate for courts to determine that. But at a high level, as I say, I think there is a core of things around that improper use of likeness, especially voice likeness, that there may be some legislative intervention there that makes sense and may have obligations, as I say, across the supply chain, across the ecosystem. Chair Coons. Mr. Harleston, if I might, the Copyright Office recently issued guidance about human authorship being critical to any copyright protection. Is their guidance accessible enough, relevant? Did they strike the right balance? Should we be looking at a different policy in terms of how broadly copyright protection should reach when there is AI assisted creativity as opposed to AI generated? Mr. Harleston. I think the Copyright Office did a pretty good job. One can debate whether an AI component in a broader work should also be afforded some form of copyright. You know, I think they landed in the right place, that it shouldn't. That copyright should only be afforded to human creation. So, for example, if you had an AI-generated song--well, if you had a song that was created by an artist and they used--a piece of it was generative AI, there should be a copyright in that entire work, but the AI-generated portion would not be protectable. So, if someone were to actually sample it, which would lift it out and use it in another context, it would not be subject to copyright. I think they did a pretty good job trying to strike that balance. Chair Coons. In the conversation I had previously with Professor Sag, how do you feel about the scope of potential remedies if we were to craft an anti-impersonation statute? Mr. Harleston. I am glad you asked me that question. Chair Coons. I thought you'd be. [Laughter.] Mr. Harleston. Thank you. I think there should be a private right of action. I think that it is--I think commerciality is, again, not always the proper standard here. I think that in some instances we have had artists who have had been victim of deepfakes where the voice was appropriated, and the lyric content was something the artist would never have said. And that is something that can have irreparable harm to their career, you know, in trying to explain that it wasn't them, because there is stuff that is really good, these--sort of these AI-generated things are really good. Chair Coons. Ms. Ortiz, last but not least, has, in producing some of the interesting, engaging, powerful, inspiring content you have generated, have you ever relied on an AI tool to help you expand or produce some of the works you have worked on? And what is your hope about what we might do going forward here in Congress in response to what we have heard from you about your concerns? Ms. Ortiz. I am very happy you asked this question, Senator. So, I have never really--I was curious very early on before I knew the extent of the exploitation of artists. Very briefly used an AI to generate references, and I didn't enjoy it at all. I am--you know, I love every step of the process of being an artist. And ever since I found out, you know, last August, September, of what actually went behind the scenes, I just--I cannot use it. My peers refuse to use it. My industry is very clear that we do not want to exploit each other. And again, it is important to remember that these, you know, models basically compete in our own market. And this isn't something that is hypothetical. It has happened now with our own works. And one of the things that I would hope, you know, would be kind of addressed here is that a lot of the solutions that have been proposed--or, you know, basically you cannot enact them unless you know what is in the dataset. And for this, we need to ensure that there is clear transparency built from ground up. Like, no offense to some of the companies here, but if you don't know what exactly is in the dataset, how do we know? How does the licensor know that my work is in the dataset? And that I feel like it is one of the starting foundations for artists and other individuals as well to be able to gain consent, credit, and compensation. Chair Coons. Thank you. Mr. Tillis, before I just hand it over to you, and then we are going to conclude, I just appreciate all of you taking the time and effort helping educate us. You are literally training us as we try to produce some fidelity in our legislative work. Senator Tillis. Senator Tillis. Yes, to me, trying to figure out what may or may not be in the language model is a lot like taking roll in a dark classroom. I just don't understand how you would do it. So, you know, I can see that we have to work at it. But I want to start, Mr. Brooks, by thanking you for being here. I think that anyone that is watching this needs to understand that this isn't unique to Stability AI. This is a broader set of issues that we have to deal with, and I appreciate the fact that you'd be willing to come here because you should expect that some of the concerns are--that were going to be expressed to begin with. I have one question. The bad news for you all is that my staff are really excited about this. These are the questions [papers are shown to the witnesses]---- [Laughter.] Senator Tillis [continuing]. That we are going to submit for the record. But rather than expect you all to respond to every one of them, you are welcome to do that, your area of expertise, your priorities, just use that to guide you, and get that information back for the record. But one of the ones I won't have to ask because I will ask it now is, a recent survey on how consumers view AI found that most consumers, nearly 80 percent, believe the use of AI should be explicitly disclosed. Now, in Vilnius, I happened to stay at a hotel that is called the Shakespeare Hotel, and every room was named after the greats. I don't see a day 100 hundred years from now where those rooms are going to be named after great LLMs. And the reason for that is I think there is a natural cultural bias for rewarding the human beings who are truly the creators and the lifeblood of our creative community. So, does anyone here disagree that a work that is derived even from, let's say, licensed content, that the consumer should know that this was created by a machine versus an original creative work by human beings? Anybody disagree with that, or maybe technical issues I should look at? No different than Mr. Rao, me, I use Photoshop. I could create Corvette cat with a skateboard or surfboard really quickly. No different than I want that, which, as you know, again, based on prior creative work, somehow have disclosures. Does that make sense to you? Mr. Rao. Yes, I think the question, and we thought about, we think it is definitely of interest to our creative customers, is to be able to show something human created versus AI created. In Adobe Firefly, it all comes out saying something is AI created. That is on by default. So, you will always know that it is AI created. The trick going forward, though, is we anticipate our AI features are our most popular features in Photoshop, so we expect going forward, most images are going to have a part that is AI and a part that is human, and you sort of have to start thinking about what are you disclosing when you disclose that. Right? The content credential we mentioned before that you could use a ``Do Not Train'' tag on it, or you could use it for, you know, addressing deepfakes. Also, we will record the human part versus the AI part. So, you could think about using that as a disclosure. But I am not sure over time people are going to be as interested in knowing the identity of the artist who created the work as opposed to which part of it they did with AI, and which---- Senator Tillis. That is fair. Professor Sag, do you have a comment? Professor Sag. Just to follow up on that. You also have to think that you are not just talking visual works here. Like take the same thing with written works. Someone uses GPT to help smooth over their writing, refine something, explain it more clearly. There are some awkward line drawing questions, but the spirit of the disclosure requirement is correct. The implementation, I think, just will be difficult. Senator Tillis. I agree. And Mr. Chair, I am checking the votes. I think it is probably time for us to wrap up the Committee. I think you could see from this just by the sheer number of Members who came to the Subcommittee, this is an area of interest and a priority for us. Mr. Chair, I have decided that maybe for the next hearing, it is going to take a little bit more tuning for me to get the answer, but I am going to do a--with the--you know the song, ``Who Let the Dogs Out''? [Laughter.] Senator Tillis. I was thinking we would set that to ``Don't steal my IP,'' and I will see if I can get that done. If you think about it, it'd be pretty snappy. [Laughter.] Senator Tillis. But I will work on that for those of you-- you may have to get a bigger room if people know about that in advance. Chair Coons. We may end up doing this as a duet. [Laughter.] Senator Tillis. But again, I think this Committee has demonstrated that we are very thoughtful, and we are very diligent, and I, for one, could sit at that table and probably present the interests of either side of the spectrum, which is why I believe that we need legislative certainty. We need to learn like data privacy, data ownership. In Europe, they don't always get it right in the first tranche, so we wouldn't necessarily lift something up and implement it here, but we want to think it through and make sure it is something that scales properly. But this is clearly an area where I don't think anyone--they would be hard pressed to convince me that no action is required. And again, my bias on this Committee from the beginning, having grown up in innovation, technological innovation, seeing the compelling numbers about how important it is to our economy and our culture, there is a lot of work to do. And I am confident with the leadership of the Chair, we are going to get work done. We look forward to your continued engagement. Thank you. Chair Coons. Thank you, Senator Tillis. I think it was Mr. Brooks, I may be wrong, who early on said that other technological developments, perhaps it was you Professor, word processing didn't end authorship, smartphones didn't end photography, but they impacted them. They impacted them. And we need to closely, and with some deliberation, realign what Federal rights and protections there are, both to deal with things like deepfakes--some argue that Shakespeare himself was a deepfake--to protect the rights of individuals, protect the rights of those who earn their living by being creative, to ensure that consumers understand what they are consuming, and to make sure that we are aligning with other countries that share our core values and our priority on a free market and the rights of individuals in contrast to other countries with other systems. So, I am grateful to all of you for testifying today, for taking your time and contributing to this. These are very challenging questions. Members can submit questions for the record for these witnesses if they were not able to attend. Questions for the record are due by 5 p.m., one week from today, July 19th. Again, thank you, all. I look forward to your input as we try and craft a good legislative solution. With that, this hearing is adjourned. [Whereupon, at 4:40 p.m., the hearing was adjourned.] [Additional material submitted for the record follows.] A P P E N D I X Additional Material Submitted for the Record [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [all]

usgpo

2024-10-08T13:27:11.787018

BILLS

BILLS-118hr9594ih

Protecting Taxpayers’ Wallets Act

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9594 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9594 To amend chapter 71 of title 5, United States Code, to charge labor organizations for the agency resources and employee time used by such labor organizations, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES September 16, 2024 Mr. Perry introduced the following bill; which was referred to the Committee on Oversight and Accountability _______________________________________________________________________ A BILL To amend chapter 71 of title 5, United States Code, to charge labor organizations for the agency resources and employee time used by such labor organizations, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Protecting Taxpayers' Wallets Act''. SEC. 2. CHARGING LABOR ORGANIZATIONS FOR USE OF FEDERAL RESOURCES. (a) In General.--Chapter 71 of title 5, United States Code, is amended by adding at the end the following new section: ``Sec. 7136. Charging labor organizations for use of Federal resources ``(a) Fees for Use of Agency Resources.-- ``(1) In general.--Notwithstanding any other provision of this chapter, the head of each agency shall charge each labor organization recognized as an exclusive representative of employees of such agency a fee each calendar quarter for the use of the resources of such agency during such quarter. ``(2) Fee calculation.--The amount of the fee the head of an agency charges a labor organization under paragraph (1) with respect to a calendar quarter shall be equal to the amount that is the sum of-- ``(A) the value of the union time of each labor representative for such labor organization while employed by such agency in such quarter; and ``(B) the value of agency resources provided for union use to such labor organization by such agency in such quarter. ``(3) Timing.-- ``(A) Notice.--Not later than 30 days after the end of each calendar quarter, the head of each agency shall submit to each labor organization charged a fee by such head under paragraph (1) with respect to such calendar quarter a notice stating the amount of such fee. ``(B) Due date.--Payment of a fee charged under paragraph (1) is due not later than 60 days after the date on which the labor organization charged such fee receives a notice under paragraph (A) with respect to such fee. ``(4) Payment.-- ``(A) In general.--Payment of a fee charged under paragraph (1) shall be made to the head of the agency that charged such fee. ``(B) Transfer to general fund.--The head of an agency shall transfer each payment of a fee charged under paragraph (1) that such head receives to the general fund of the Treasury. ``(b) Value Determinations.-- ``(1) In general.--The head of an agency charging a labor organization a fee under subsection (a) shall determine the value of union time used by labor representatives and the value of agency resources provided for union use for the purposes of paragraph (2) of such subsection in accordance with this subsection. ``(2) Values.--For the purposes of paragraph (2) of subsection (a), with respect to a fee charged to a labor organization by the head of an agency under paragraph (1) of such subsection-- ``(A) the value of the union time of a labor representative during a calendar quarter is equal to amount that is the product of the hourly rate of pay of such labor representative paid by such agency and the number of hours of union time of such labor representative during such calendar quarter during which such labor representative was on duty as an employee of such agency; and ``(B) such head of such agency shall determine the value of agency resources provided for union use during a calendar quarter using rates established by the General Services Administration, where applicable, or to the extent that such rates are inapplicable to such the use of such resources, the market rate for the use of such resources, except that with respect to resources used for both agency business and for purposes pertaining to matters covered by this chapter, only the value of the portion of the use of such resources for the business of such labor organization shall be included. ``(3) Determinations not subject to review.--No determination of the head of an agency described in paragraph (1) may be determined to be an unfair labor practice or subject to collective bargaining or grievance procedures under this chapter, or otherwise contested or appealed. ``(c) Enforcement and Penalties.-- ``(1) Penalties.-- ``(A) In general.--If a labor organization does not pay a fee charged to such labor organization under subsection (a)(1) on or before the date on which payment for such fee becomes due, during the period beginning on the date on which such payment becomes due and ending on the date on which every fee charged to such labor organization under such subsection is fully paid-- ``(i) the amount of such fee shall be increased at a rate equal to the interest rate; ``(ii) the head of each agency shall-- ``(I) beginning on the date that is 90 days after the date on which such period begins-- ``(aa) deny such labor organization and the labor representatives for such labor organization any further union time; ``(bb) cease providing and the deny further use of agency resources provided for union use by such labor representatives for the business of such labor organization; and ``(cc) not be subject to-- ``(AA) any grievance procedures or binding arbitration invoked by such labor organization under section 7121; or ``(BB) any unfair labor practice complaints or proceedings under this chapter pertaining to such labor organization or employees represented by such labor organization; and ``(II) beginning on the date that is 180 days after the date on which such period begins-- ``(aa) terminate all allotments made by or on behalf of the agency with respect to such labor organization under section 7115; and ``(bb) not authorize any such allotments with respect to such labor organization; and ``(III) on the date that is 365 days after the date on which such period begins, inform the Authority and such labor organization that such period has reached a duration of 365 days; and ``(iii) on the date that is 380 days after the date on which such period begins, the Authority shall terminate the certification of such labor organization as the exclusive representative of employees of such agency. ``(B) Exclusive representative prohibition.--A labor organization for which the Authority terminates a certification as the exclusive representatives of employees of an agency under subparagraph (A)(iii) may not be certified as the exclusive representative of any employee of such agency unless such labor organization pays all fees charged to such labor organization by the head of such agency under subsection (a)(1), including any increases to such fees under subparagraph (A)(i). ``(C) Rule of construction.--Subparagraph (A)(ii)(I)(cc) may not be construed as-- ``(i) tolling any statutory or contractual deadline for the filing of a grievance, complaint of an unfair labor practice, or proceeding to binding arbitration; or ``(ii) preventing or limiting an agency from filing any grievance against a labor organization or advancing such grievances to binding arbitration. ``(2) Time tracking.-- ``(A) In general.--Each agency shall track the use of union time by labor representatives using the applicable time and attendance tracking system of such agency. ``(B) Failure to record.-- ``(i) In general.--A labor representative who uses union time and fails to record such use in the applicable time and attendance tracking system shall be considered absent without leave and subject to appropriate adverse action. ``(ii) Willful or repeated failures.--A failure of a labor representative described in clause (i) shall constitute an impairment to the efficient of the service if such failure is willful or occurs in the same fiscal year as another such failure by such labor representative. ``(iii) Limited review.--Adverse action take against an employee under clause (i)-- ``(I) may not be determined to be an unfair labor practice or subject to grievance procedures or binding arbitration under section 7121; and ``(II) notwithstanding any other provision of law, shall be sustained on appeal if the determination of the agency to take such adverse action against such employee is supported by substantial evidence. ``(3) Payment required.--The head of an agency may not forgive, reimburse, waive, or in any other manner reduce any fee charged under this section. ``(4) Compliance.--Not later than two years after the date of the enactment of this section, and every two years thereafter, the Inspector General of each agency shall-- ``(A) conduct an evaluation of the compliance of such agency and each relevant labor organization with the requirements of this section, including the accuracy with which labor representatives recorded the use of union time, the promptness with which fees under subsection (a) were charged and paid, and the valuation of agency resources provided for union use by such agency pursuant to subsection (b)(2)(B); and ``(B) submit to the head of such agency, the Committee on Oversight and Accountability of the House of Representatives, and the Committee on Homeland Security and Governmental Affairs of the Senate a report on the findings of the evaluation required by subparagraph (A). ``(d) Definitions.--In this section: ``(1) Agency business.--The term `agency business' means work performed by employees on behalf of an agency, or under the direction and control of the agency. ``(2) Agency resources provided for union use.--The term `agency resources provided for union use' means the resources of an agency, other than the time of employees in a duty status, that such agency provides to labor representatives for purposes pertaining to matters covered by this chapter, including agency office space, parking space, equipment, and reimbursement for expenses incurred while on union time or otherwise performing non-agency business, except that this term does not include any resource to the extent that such resource is used for agency business. ``(3) Labor organization.--The term `labor organization' means a labor organization recognized as an exclusive representative of employees of an agency under this chapter or as a representative of agency employees under any system established by the Transportation Security Administration Administrator pursuant to section 111(d) of the Aviation and Transportation Security Act (49 U.S.C. 44935 note). ``(4) Hourly rate of pay.--The term `hourly rate of pay' means the total cost to an agency of employing an employee in a pay period or pay periods, including wages, salary, and other cash payments, agency contributions to employee health and retirement benefits, employer payroll tax payments, paid leave accruals, and the cost to the agency for other benefits, divided by the number of hours such employee worked in such pay period or pay periods. ``(5) Interest rate.--The term `interest rate' means the average market yield of outstanding marketable obligations of the United States having maturities of 30 years plus one percentage point. ``(6) Labor representative.--The term `labor representative' means an employee of an agency serving in any official or other representative capacity for a labor organization (including as any officer or steward of a labor organization) that is the exclusive representative of employees of such agency under this chapter or is the representative of employees under any system established by the Transportation Security Administration Administrator pursuant to section 111(d) of the Aviation and Transportation Security Act (49 U.S.C. 44935 note). ``(7) Union time.--The term `union time' means the time an employee of an agency who is a labor representative for a labor organization spends performing non-agency business while on duty, either in service of such labor organization or otherwise acting in the capacity as an employee representative, including official time authorized under section 7131.''. (b) Clerical Amendment.--The table of sections for chapter 71 of title 5, United States Code, is amended by adding at the end the following new item: ``7136. Charging labor organizations for use of Federal resources.''. <all>

usgpo

2024-10-08T13:26:28.360725

BILLS

BILLS-118hr9395ih

To direct the Secretary of Defense to provide to Congress a briefing on any instance of an attempted breach of certain military installations.

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9395 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9395 To direct the Secretary of Defense to provide to Congress a briefing on any instance of an attempted breach of certain military installations. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 23, 2024 Mr. Arrington introduced the following bill; which was referred to the Committee on Armed Services _______________________________________________________________________ A BILL To direct the Secretary of Defense to provide to Congress a briefing on any instance of an attempted breach of certain military installations. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. BRIEFING ON INSTANCES OF ATTEMPTED BREACHES OF DEPARTMENT OF DEFENSE MILITARY INSTALLATIONS REQUIRED. (a) In General.--The Secretary of Defense shall provide to Congress a briefing on any instance of an attempted breach of a military installation under the jurisdiction of the Department of Defense during the period beginning on January 1, 2021, and ending on the date of the provision of such briefing. (b) Elements.--Each briefing under subsection shall include, with respect to each perpetrator of an attempted breach described in such subsection, a statement of the applicable immigration status and citizenship status. <all>

usgpo

2024-10-08T13:26:29.632201

BILLS

BILLS-118s4717is

Military Moms Act

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4717 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 4717 To include pregnancy and loss of pregnancy as qualifying life events under the TRICARE program and to require a study on maternal health in the military health system, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES July 11 (legislative day, July 10), 2024 Mr. Rubio (for himself and Mr. Risch) introduced the following bill; which was read twice and referred to the Committee on Armed Services _______________________________________________________________________ A BILL To include pregnancy and loss of pregnancy as qualifying life events under the TRICARE program and to require a study on maternal health in the military health system, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Military Moms Act''. SEC. 2. DEFINITIONS. In this Act: (1) Covered beneficiary; dependent; tricare program.--The terms ``covered beneficiary'', ``dependent'', and ``TRICARE program'' have the meanings given those terms in section 1072 of title 10, United States Code. (2) Maternal health.--The term ``maternal health'' means care during labor, birthing, prenatal care, and postpartum care. (3) Maternity care desert.--The term ``maternity care desert'' means a county in the United States that does not have-- (A) a hospital or birth center offering obstetric care; or (B) an obstetric provider. (4) Prenatal care.--The term ``prenatal care'' means medical care provided to maintain and improve fetal and maternal health during pregnancy. (5) Secretary.--The term ``Secretary'' means the Secretary of Defense. SEC. 3. MODIFICATION OF QUALIFYING LIFE EVENTS. (a) In General.--Not later than one year after the date of the enactment of this Act, the Secretary shall-- (1) update the list of qualifying life events under the TRICARE program to include pregnancy and loss of pregnancy; and (2) issue guidance to covered beneficiaries describing the documentation required to make enrollment changes under the TRICARE program due to such qualifying life events, such as written confirmation from a medical provider confirming a pregnancy or loss of pregnancy. (b) Prohibition.--This section shall not apply to a covered beneficiary who seeks to claim an abortion as a qualifying life event. (c) Definitions.--In this section: (1) Abortion.--The term ``abortion'' means the use or prescription of any instrument, medicine, drug, or other substance or device to intentionally-- (A) kill the unborn child of a woman known to be pregnant; or (B) prematurely terminate the pregnancy of a woman known to be pregnant, with an intention other than to-- (i) increase the probability of a live birth or preserve the life or health of the child after a live birth; (ii) remove a dead unborn child; or (iii) treat an ectopic pregnancy. (2) Loss of pregnancy.--The term ``loss of pregnancy'' means miscarriage or stillbirth. SEC. 4. REPORT ON ACCESS TO MATERNAL HEALTH CARE WITHIN THE MILITARY HEALTH SYSTEM. (a) In General.--Not later than two years after the date of the enactment of this Act, the Secretary shall submit to the Committee on Armed Services and the Committee on Appropriations of the Senate and the Committee on Armed Services and the Committee on Appropriations of the House of Representatives a report on access to maternal health care within the military health system for covered beneficiaries during the preceding two-year period. (b) Contents.--The report required under subsection (a) shall include the following: (1) With respect to military medical treatment facilities, the following: (A) An analysis of the availability of maternal health care for covered beneficiaries who access the military health system through such facilities. (B) An identification of staffing shortages in positions relating to maternal health and childbirth, including obstetrician-gynecologists, certified nurse midwives, and labor and delivery nurses. (C) A description of specific challenges faced by covered beneficiaries in accessing maternal health care at such facilities. (D) An analysis of the timeliness of access to maternal health care, including wait times for and travel times to appointments. (E) A description of how such facilities track patient satisfaction with maternal health services. (F) A process to establish continuity of prenatal care and postpartum care for covered beneficiaries who experience a permanent change of station during a pregnancy. (G) An identification of barriers with regard to continuity of prenatal care and postpartum care during permanent changes of station. (H) A description of military-specific health challenges impacting covered beneficiaries who receive maternal health care at military medical treatment facilities, and a description of how the Department tracks such challenges. (I) For the 10-year period preceding the date of the submission of the report, the amount of funds annually expended-- (i) by the Department of Defense on maternal health care; and (ii) by covered beneficiaries on out-of- pocket costs associated with maternal health care. (J) An identification of each medical facility of the Department of Defense located in a maternity care desert. (K) Recommendations and legislative proposals-- (i) to address staffing shortages that impact the positions described in subparagraph (B); (ii) to improve the delivery and availability of maternal health services through military medical treatment facilities and improve patient experience; and (iii) to improve continuity of prenatal care and postpartum care for covered beneficiaries during a permanent change of station. (2) With respect to providers within the TRICARE program network that are not located at or affiliated with a military medical treatment facility, the following: (A) An analysis of the availability of maternal health care for covered beneficiaries who access the military health system through such providers. (B) An identification of staffing shortages for such providers in positions relating to maternal health and childbirth, including obstetrician-gynecologists, certified nurse midwives, and labor and delivery nurses. (C) A description of specific challenges faced by covered beneficiaries in accessing maternal health care from such providers. (D) An analysis of the timeliness of access to maternal health care, including wait times for and travel times to appointments. (E) A description of how such providers track patient satisfaction with maternal health services. (F) A process to establish continuity of prenatal care and postpartum care for covered beneficiaries who experience a permanent change of station during a pregnancy. (G) An identification of barriers with regard to continuity of prenatal care and postpartum care during permanent changes of station. (H) The number of dependents who choose to access maternal health care through such providers. (I) For the 10-year period preceding the date of the submission of the report, the amount of funds annually expended-- (i) by the Department of Defense on maternal health care; and (ii) by covered beneficiaries on out-of- pocket costs associated with maternal health care. (J) Recommendations and legislative proposals-- (i) to address staffing shortages that impact the positions described in subparagraph (B); (ii) to improve the delivery and availability of maternal health services through the TRICARE program and improve patient experience; (iii) to improve continuity of prenatal care and postpartum care for covered beneficiaries during a permanent change of station; and (iv) to improve the ability of contractors under the TRICARE program to build a larger network of providers for maternal health, including obstetrician-gynecologists, certified nurse midwives, and labor and delivery nurses. SEC. 5. UPDATES TO MILITARY ONESOURCE PROGRAM. (a) In General.--Not later than one year after the date of the enactment of this Act, the Secretary shall publish on a publicly available website of the Military OneSource program of the Department of Defense a dedicated webpage that includes a comprehensive guide of resources available to covered beneficiaries, including-- (1) a list of maternal health services that are available to covered beneficiaries under the TRICARE program and at military medical treatment facilities; (2) information on mental health counseling, pregnancy counseling, and other prepartum and postpartum services, including what services are reportable or non-reportable for members of the Armed Forces; (3) information on prenatal development, including anticipated prenatal appointments and available care for covered beneficiaries during prenatal development; (4) information on-- (A) organizations that provide services and other resources to assist covered beneficiaries with maternal health needs and pregnancy support services located at, or in vicinity of, military installations; and (B) Federal, State, and local maternal health care resources that are either covered by the TRICARE program or could otherwise be made available to a covered beneficiary; (5) information on resources to assist covered beneficiaries who are pregnant with anticipated changes and health challenges that result from pregnancy, including information on anticipated postnatal appointments, available postnatal care for covered beneficiaries, and post-birth instructions specific to covered beneficiaries; (6) information on financial assistance available to covered beneficiaries to support pregnancy needs; (7) a best practice guide for smooth continuity of pregnancy care during a permanent change of station; and (8) information specific to pregnant members of the Armed Forces, including leave options and regulations, career field specific information and restrictions, physical fitness requirements, and uniform resources and requirements. (b) Limitations.--The guide required by subsection (a) may not include information, references, or resources on abortion. (c) Training.--The Secretary shall provide training to military and family life counselors available through the Military OneSource program on addressing the non-medical needs of covered beneficiaries who are pregnant. (d) Notification of Pregnancy.--The Secretary shall notify the head of the Military OneSource program when a covered beneficiary makes the Secretary aware of a pregnancy. (e) Plan.--Not later than 540 days after the date of the enactment of this Act, the Secretary shall develop and submit to Congress a plan for the Secretary to disseminate to beneficiaries of the Military OneSource program the guide required by subsection (a). <all>

usgpo

2024-10-08T13:26:23.494365

BILLS

BILLS-118sres777is

Keeping guns out of classrooms.

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. Res. 777 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. RES. 777 Keeping guns out of classrooms. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES July 30, 2024 Mr. Murphy submitted the following resolution; which was referred to the Committee on Health, Education, Labor, and Pensions _______________________________________________________________________ RESOLUTION Keeping guns out of classrooms. Whereas Congress has consistently made clear that it is unlawful for Federal funds to be used to arm school personnel with firearms or to train such personnel in the use of firearms; Whereas, in response to the shooting in Parkland, Florida, Congress passed the STOP School Violence Act of 2018 (title V of division S of Public Law 115-141; 132 Stat. 1128), which amended part AA of title I of the Omnibus Crime Control and Safe Streets Act of 1968 (34 U.S.C. 10551 et seq.) to specify that ``[n]o amounts provided as a grant [for school security under that part] may be used for the provision to any person of a firearm or training in the use of a firearm''; Whereas section 4102 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7112), as added by section 4101 of the Every Student Succeeds Act (Public Law 114-95; 129 Stat. 1968), defines drug and violence prevention in schools as including the ``creation . . . of a school environment that is free of weapons''; Whereas existing research demonstrates that arming school personnel with firearms or training such personnel to use firearms will not make schools safer; Whereas a recent analysis by the Federal Bureau of Investigation found that casualties for trained law enforcement during active shooter incidents increased from 2021 to 2022; Whereas a survey of gun violence on school campuses showed that out of 225 incidents of gun violence between 1999 and 2018, trained armed personnel or school-based police failed to disarm an active shooter 223 times; Whereas proposed and existing programs to arm school personnel with firearms or to train such personnel in the use of firearms provide significantly less training than law enforcement officers receive; Whereas research demonstrates that-- (1) increased gun access and possession are not associated with protection from violence; and (2) a greater prevalence of guns increases the likelihood of gun violence; Whereas a greater prevalence of guns in schools creates undue risk of students gaining unauthorized access to firearms and the potential for unintentional shootings and school staff using guns in situations that do not warrant lethal force; Whereas students of color, students with disabilities, and other vulnerable groups would experience a disparate impact of programs that arm school personnel as those students are disproportionately disciplined and arrested; Whereas heightened policing within public school spaces decreases the sense of safety of a student and the associated anticipation of violence leads to increased anxiety, fear, and depression; Whereas 54 percent of teachers in the United States believe carrying firearms will make schools less safe, according to a RAND Research Report from May 2023; Whereas the majority of parents of school-aged children oppose arming school personnel, according to surveys; Whereas the National Association of School Resource Officers, the National Education Association, and the American Federation of Teachers have all publicly opposed State-level policies to arm teachers and school personnel; Whereas, as of June 2024, there is no evidence supporting the value of arming school personnel; Whereas, before the enactment of the Bipartisan Safer Communities Act (Public Law 117-159; 136 Stat. 1313), the December 2018 report of the Federal Commission on School Safety endorsed the use of Federal funds to train school personnel to use firearms even though, according to transcripts of the affiliated listening tour, the broad consensus among listening tour participants was disagreement with programs that would arm school personnel; and Whereas section 13401 of the Bipartisan Safer Communities Act (Public Law 117- 159; 136 Stat. 1338) added a provision to the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.) that prohibits using funds under that Act to provide any person with a dangerous weapon or training in the use of a dangerous weapons: Now, therefore, be it Resolved, That it is the sense of the Senate that Federal funds should not be used to arm school personnel with firearms or to train such personnel in the use of firearms. <all>

usgpo

2024-10-08T13:27:47.248154

BILLS

BILLS-118s4886is

Native Arts and Culture Promotion Act

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4886 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 4886 To amend the American Indian, Alaska Native, and Native Hawaiian Culture and Art Development Act to modify the program for Native Hawaiian and Alaska Native culture and arts development, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES July 31, 2024 Mr. Schatz (for himself, Ms. Hirono, and Ms. Murkowski) introduced the following bill; which was read twice and referred to the Committee on Indian Affairs _______________________________________________________________________ A BILL To amend the American Indian, Alaska Native, and Native Hawaiian Culture and Art Development Act to modify the program for Native Hawaiian and Alaska Native culture and arts development, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Native Arts and Culture Promotion Act''. SEC. 2. AMENDMENTS TO AMERICAN INDIAN, ALASKA NATIVE, AND NATIVE HAWAIIAN CULTURE AND ART DEVELOPMENT ACT. Section 1521 of the American Indian, Alaska Native, and Native Hawaiian Culture and Art Development Act (20 U.S.C. 4441) is amended-- (1) in subsection (a), in the matter preceding paragraph (1), by striking ``private,''; and (2) in subsection (c)-- (A) by striking paragraph (2) and inserting the following: ``(2) For any grants made with respect to Native Hawaiian art and culture, the members of the governing board which is required to be established under paragraph (1) shall-- ``(A) include Native Hawaiians and individuals widely recognized in the field of Native Hawaiian art and culture; and ``(B) serve for a fixed term.''; and (B) in paragraph (3)-- (i) in subparagraph (A), by striking the comma at the end and inserting ``; and''; (ii) by striking subparagraph (B); and (iii) by redesignating subparagraph (C) as subparagraph (B). <all>

usgpo

2024-10-08T13:26:56.618629

BILLS

BILLS-118hr9515ih

Lower Colorado River Multi-Species Conservation Program Amendment Act of 2024

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9515 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9515 To establish an interest-bearing account for the non-Federal contributions to the Lower Colorado River Multi-Species Conservation Program, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES September 10, 2024 Mr. Calvert (for himself, Mrs. Napolitano, Ms. Lee of Nevada, and Ms. Titus) introduced the following bill; which was referred to the Committee on Natural Resources _______________________________________________________________________ A BILL To establish an interest-bearing account for the non-Federal contributions to the Lower Colorado River Multi-Species Conservation Program, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Lower Colorado River Multi-Species Conservation Program Amendment Act of 2024''. SEC. 2. INTEREST-BEARING FUND. Section 9402 of the Omnibus Public Land Management Act of 2009 (Public Law 111-11; 123 Stat. 1328) is amended by adding at the end the following: ``(c) Interest-Bearing Account for Non-Federal Contributions.-- ``(1) Definitions.--In this subsection: ``(A) Agreement.--The term `Agreement' means the agreement entitled the `Lower Colorado River Multi- Species Conservation Program Funding and Management Agreement' and dated April 4, 2005. ``(B) Fund.--The term `Fund' means the Non-Federal Funding Account for the Lower Colorado River Multi- Species Conservation Program established by paragraph (2). ``(C) Non-federal contribution.--The term `non- Federal contribution' means an amount contributed by a State Party for the non-Federal cost share described in section 8 of the Agreement. ``(D) State party.--The term `State Party' has the meaning given the term in section 3 of the Agreement. ``(2) Establishment.--There is established in the Treasury of the United States a fund, to be known as the `Non-Federal Funding Account for the Lower Colorado River Multi-Species Conservation Program', consisting of-- ``(A) any amounts deposited in the Fund under paragraph (3); and ``(B) any interest earned on investment of amounts in the Fund under paragraph (4). ``(3) Deposits to fund.-- ``(A) In general.--Pursuant to section 8.4 of the Agreement, the Secretary of the Treasury shall deposit in the Fund-- ``(i) any unexpended non-Federal contributions provided before the date of enactment of this subsection; and ``(ii) any non-Federal contributions provided on or after the date of enactment of this subsection. ``(B) Availability of amounts; expenditure.-- Amounts deposited in the Fund under subparagraph (A) and any interest on those amounts in the Fund shall be made available to the Secretary, without further appropriation, for expenditure-- ``(i) as provided in the Program Documents; and ``(ii) in accordance with this section. ``(4) Investment of amounts.-- ``(A) In general.--The Secretary may request the Secretary of the Treasury to invest any portion of the Fund that is not, as determined by the Secretary, required to meet the current needs of the Fund. ``(B) Requirement.--An investment requested under subparagraph (A) shall be made by the Secretary of the Treasury in a public debt security-- ``(i) with a maturity suitable to the needs of the Fund, as determined by the Secretary; and ``(ii) bearing interest at a rate determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable maturity. ``(C) Credits to fund.--The income on investments of the Fund under this paragraph shall be credited to, and form a part of, the Fund. ``(5) Transfers of amounts.-- ``(A) Transfer of previously contributed funds.-- The amounts required to be deposited in the Fund under paragraph (3)(A)(i) shall be transferred from the general fund of the Treasury to the Fund not later than 90 days after the date of enactment of this subsection. ``(B) Transfer of future contributed funds.--As soon as practicable after the date on which amounts described in paragraph (3)(A)(ii) are contributed, those amounts shall be transferred to the Fund. ``(C) Responsibility of state parties.--In accordance with the Agreement, on deposit of amounts in the Fund under paragraph (3), the State Parties shall not be responsible for any losses due to investment of those amounts the Fund.''. <all>

usgpo

2024-10-08T13:26:21.701786

CHRG

CHRG-118hhrg55549

FAA Reauthorization: Securing the Future of General Aviation

United States Congress House of Representatives

[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] FAA REAUTHORIZATION: SECURING THE FUTURE OF GENERAL AVIATION ======================================================================= (118-5) HEARING BEFORE THE SUBCOMMITTEE ON AVIATION OF THE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ MARCH 9, 2023 __________ Printed for the use of the Committee on Transportation and Infrastructure [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available online at: https://www.govinfo.gov/committee/house- transportation?path=/browsecommittee/chamber/house/committee/ transportation __________ U.S. GOVERNMENT PUBLISHING OFFICE 55-549 PDF WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE Sam Graves, Missouri, Chairman Rick Larsen, Washington, Eric A. ``Rick'' Crawford, Ranking Member Arkansas Eleanor Holmes Norton, Daniel Webster, Florida District of Columbia Thomas Massie, Kentucky Grace F. Napolitano, California Scott Perry, Pennsylvania Steve Cohen, Tennessee Brian Babin, Texas John Garamendi, California Garret Graves, Louisiana Henry C. ``Hank'' Johnson, Jr., Georgiavid Rouzer, North Carolina Andre Carson, Indiana Mike Bost, Illinois Dina Titus, Nevada Doug LaMalfa, California Jared Huffman, California Bruce Westerman, Arkansas Julia Brownley, California Brian J. Mast, Florida Frederica S. Wilson, Florida Jenniffer Gonzalez-Colon, Donald M. Payne, Jr., New Jersey Puerto Rico Mark DeSaulnier, California Pete Stauber, Minnesota Salud O. Carbajal, California Tim Burchett, Tennessee Greg Stanton, Arizona, Dusty Johnson, South Dakota Vice Ranking Member Jefferson Van Drew, New Jersey, Colin Z. Allred, Texas Vice Chairman Sharice Davids, Kansas Troy E. Nehls, Texas Jesus G. ``Chuy'' Garcia, Illinois Lance Gooden, Texas Chris Pappas, New Hampshire Tracey Mann, Kansas Seth Moulton, Massachusetts Burgess Owens, Utah Jake Auchincloss, Massachusetts Rudy Yakym III, Indiana Marilyn Strickland, Washington Lori Chavez-DeRemer, Oregon Troy A. Carter, Louisiana Chuck Edwards, North Carolina Patrick Ryan, New York Thomas H. Kean, Jr., New Jersey Mary Sattler Peltola, Alaska Anthony D'Esposito, New York Robert Menendez, New Jersey Eric Burlison, Missouri Val T. Hoyle, Oregon John James, Michigan Emilia Strong Sykes, Ohio Derrick Van Orden, Wisconsin Hillary J. Scholten, Michigan Brandon Williams, New York Valerie P. Foushee, North Carolina Marcus J. Molinaro, New York Mike Collins, Georgia Mike Ezell, Mississippi John S. Duarte, California Aaron Bean, Florida Subcommittee on Aviation Garret Graves, Louisiana, Chairman Steve Cohen, Tennessee, Ranking Memberric A. ``Rick'' Crawford, Henry C. ``Hank'' Johnson, Jr., Georgiakansas Andre Carson, Indiana Thomas Massie, Kentucky Julia Brownley, California Scott Perry, Pennsylvania Mark DeSaulnier, California Bruce Westerman, Arkansas Greg Stanton, Arizona Brian J. Mast, Florida Colin Z. Allred, Texas Pete Stauber, Minnesota Sharice Davids, Kansas Tim Burchett, Tennessee Jesus G. ``Chuy'' Garcia, Illinois Dusty Johnson, South Dakota Jake Auchincloss, Massachusetts Jefferson Van Drew, New Jersey Mary Sattler Peltola, Alaska, Lance Gooden, Texas Vice Ranking Member Tracey Mann, Kansas Hillary J. Scholten, Michigan Burgess Owens, Utah Dina Titus, Nevada Rudy Yakym III, Indiana, Vice Donald M. Payne, Jr., New Jersey Chairman Salud O. Carbajal, California Lori Chavez-DeRemer, Oregon Robert Menendez, New Jersey Thomas H. Kean, Jr., New Jersey Eleanor Holmes Norton, Anthony D'Esposito, New York District of Columbia John James, Michigan Frederica S. Wilson, Florida Marcus J. Molinaro, New York Rick Larsen, Washington (Ex Officio) Mike Collins, Georgia Aaron Bean, Florida Sam Graves, Missouri (Ex Officio) CONTENTS Page Summary of Subject Matter........................................ vii STATEMENTS OF MEMBERS OF THE COMMITTEE Hon. Garret Graves, a Representative in Congress from the State of Louisiana, and Chairman, Subcommittee on Aviation, opening statement...................................................... 1 Prepared statement........................................... 2 Hon. Steve Cohen, a Representative in Congress from the State of Tennessee, and Ranking Member, Subcommittee on Aviation, opening statement.............................................. 3 Prepared statement........................................... 5 Hon. Sam Graves, a Representative in Congress from the State of Missouri, and Chairman, Committee on Transportation and Infrastructure, opening statement.............................. 6 Prepared statement........................................... 6 Hon. Rick Larsen, a Representative in Congress from the State of Washington, and Ranking Member, Committee on Transportation and Infrastructure, opening statement.............................. 7 Prepared statement........................................... 9 WITNESSES Mark Baker, President and Chief Executive Officer, Aircraft Owners and Pilots Association, oral statement.................. 10 Prepared statement........................................... 12 Jack J. Pelton, Chief Executive Officer and Chairman of the Board, Experimental Aircraft Association, oral statement....... 24 Prepared statement........................................... 25 Rick Crider, A.A.E., Executive Vice President of Airport/Railport and Military Relations, Port San Antonio, on behalf of the American Association of Airport Executives, oral statement..... 29 Prepared statement........................................... 31 Curt Castagna, President and Chief Executive Officer, National Air Transportation Association, oral statement................. 38 Prepared statement........................................... 40 SUBMISSIONS FOR THE RECORD Letter of March 9, 2023, to Hon. Sam Graves, Chairman, and Hon. Rick Larsen, Ranking Member, Committee on Transportation and Infrastructure, and Hon. Garret Graves, Chairman, and Hon. Steve Cohen, Ranking Member, Subcommittee on Aviation, from the Aircraft Owners and Pilots Association et al., Submitted for the Record by Hon. Rudy Yakym III.............................. 20 Statement of Gregory Pecoraro, President and Chief Executive Officer, National Association of State Aviation Officials, Submitted for the Record by Hon. Garret Graves................. 81 APPENDIX Questions to Mark Baker, President and Chief Executive Officer, Aircraft Owners and Pilots Association, from: Hon. Sam Graves.............................................. 87 Hon. Bruce Westerman......................................... 87 Hon. Hillary J. Scholten..................................... 89 Questions to Jack J. Pelton, Chief Executive Officer and Chairman of the Board, Experimental Aircraft Association, from: Hon. Sam Graves.............................................. 90 Hon. Hillary J. Scholten..................................... 90 Questions from Hon. Hillary J. Scholten to Rick Crider, A.A.E., Executive Vice President of Airport/Railport and Military Relations, Port San Antonio, on behalf of the American Association of Airport Executives.............................. 93 Question from Hon. Hillary J. Scholten to Curt Castagna, President and Chief Executive Officer, National Air Transportation Association..................................... 94 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] March 3, 2023 SUMMARY OF SUBJECT MATTER TO: LMembers, Subcommittee on Aviation FROM: LStaff, Subcommittee on Aviation RE: LSubcommittee Hearing on ``FAA Reauthorization: Securing the Future of General Aviation'' _______________________________________________________________________ I. PURPOSE The Subcommittee on Aviation will meet on Thursday, March 9, 2023, at 10:00 a.m. ET in 2167 Rayburn House Office Building for a hearing titled, ``FAA Reauthorization: Securing the Future of General Aviation.'' The hearing will examine challenges facing the general aviation community in advance of Congress acting to reauthorize the Federal Aviation Administration's (FAA) statutory authorities, which expire on October 1, 2023. This year's FAA reauthorization bill is expected to include the first-ever general aviation title for which this hearing will provide an opportunity to hear from stakeholders of the general aviation community on issues and potential legislative solutions prior to the upcoming FAA reauthorization bill. The Subcommittee will hear testimony from witnesses representing the Aircraft Owners and Pilots Association (AOPA), the Experimental Aircraft Association (EAA), the American Association of Airport Executives (AAAE), and the National Air Transportation Association (NATA). II. BACKGROUND According to the FAA, ``general aviation'' describes a diverse range of aviation activities and includes all segments of the aviation industry except commercial air carriers and the military.\1\ General aviation activities include training of new pilots and pilots interested in additional ratings or certifications, aerial firefighting, air tourism, crop dusting and surveying, movement of heavy loads by helicopter, experimental and sport flying, flying for personal or business reasons, and emergency medical services.\2\ General aviation aircraft range from one-seat single-engine piston aircraft to long-range corporate jets.\3\ It also includes rotorcraft, gliders, and amateur-built aircraft.\4\ --------------------------------------------------------------------------- \1\ FAA, FAA Aerospace Forecasts FY 2003-2014, Chapter 5 (2014), available at https://www.faa.gov/data_research/aviation/ aerospace_forecasts/2003-2014/. \2\ Id. \3\ Id. \4\ Id. --------------------------------------------------------------------------- General aviation is commonly referred to as the backbone of the aviation system as it underpins the aviation industry, and is an important part of our National economy. According to a 2018 study, general aviation supported more than 1.2 million jobs, generated $247 billion in output, and contributed $128 billion to the United States Gross Domestic Product.\5\ --------------------------------------------------------------------------- \5\ Dan Namowitz, GA a Force in National, Local Economies, AOPA, (Feb. 19, 2020), available at https://www.aopa.org/news-and-media/all- news/2020/february/19/ga-a-force-in-national-and-local-economies. --------------------------------------------------------------------------- In terms of fleet size, ``the active general aviation fleet, which showed a decline of 3.2 percent between 2019 and 2020, is projected to increase from its 2021 level of 204,405 aircraft to 208,905 by 2042,'' a 2.2 percent increase.\6\ The FAA forecasts general aviation operations will increase an average of 0.6 percent a year through 2042, as increases in the use of turbine powered aircraft offset declines in piston aircraft use.\7\ Specifically, ``general aviation operations accounted for 57 percent of operations in 2021 . . . and has been increasing since the pandemic, from 51 percent in 2019 to 56 percent in 2020, and 57 percent in 2021.'' \8\ Despite forecasted operational growth, the FAA projects that the number of general aviation pilots (excluding students and Airline Transport Pilots) will remain flat between 2021 and 2042, at around 306,400.\9\ --------------------------------------------------------------------------- \6\ FAA, FAA Aerospace Forecast Fiscal Years 2022-2042 at 28 (June 28, 2022), available at https://www.faa.gov/sites/faa.gov/files/2022- 06/FY2022_42_FAA_Aerospace_Forecast.pdf [hereinafter Aerospace Forecast]. \7\ Id. \8\ Id. \9\ Id. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Source: FAA Aerospace Forecast Fiscal Years 2022-2042 FUNDING FOR GENERAL AVIATION AIRPORTS A general aviation airport is a public-use airport that does not have scheduled service or has scheduled service with less than 2,500 annual passenger boardings.\10\ The current National Plan of Integrated Airport Systems (NPIAS) identifies 2,904 nonprimary airports that serve mainly general aviation activity, accounting for approximately 90 percent of existing NPIAS airports.\11\ --------------------------------------------------------------------------- \10\ 49 U.S.C. Sec. 47102(8). \11\ FAA, United States Dep't of Transportation, Nat'l Plan of Integrated Airport Systems (NPIAS) 2023-2027, (Sept. 30, 2022), available at https://www.faa.gov/sites/faa.gov/files/npias-2023-2027- narrative.pdf. [hereinafter NPIAS 2023-2027]. --------------------------------------------------------------------------- Unlike commercial airports, general aviation airports do not have access to the passenger facility charge (PFC), which helps fund airport terminal and other capital projects at commercial airports.\12\ However, general aviation airports included in the NPIAS are eligible for Airport Improvement Program (AIP) funds.\13\ General aviation airports are able to receive funds through entitlements, or formula funds, to airports, which can be used for eligible airport development projects.\14\ Usually, general aviation, reliever, and nonprimary commercial service airports are allocated 20 percent of AIP funds, subject to apportionment.\15\ From that share, those airports receive the lesser of either $150,000 or one- fifth of the estimated five-year costs for airport development for each airport as listed in the most recent NPIAS.\16\ Any remaining funds are then distributed to each airport according to a state-based population and area formula.\17\ General aviation airports that receive entitlements can also apply for discretionary funds, which are awarded on a competitive basis.\18\ --------------------------------------------------------------------------- \12\ See 49 U.S.C. Sec. 40117 (b). \13\ FAA, Overview: What is AIP & What is Eligible?, (last updated Aug. 2, 2022), available at https://www.faa.gov/airports/aip/overview/ #eligible_airports. \14\ 49 U.S.C. Sec. 47114. \15\ Financing Airport Improvements, Cong. Research Service (R43327), at 6 (2019), available at https://crsreports.congress.gov/ product/pdf/R/R43327. \16\ Id. at 6-7. \17\ Id. at 7. \18\ Id. --------------------------------------------------------------------------- GENERAL AVIATION SAFETY Over the past four decades, general aviation has become significantly safer with the number of fatal and nonfatal accidents declining since 2000.\19\ Experts suggest this is due to numerous factors, including advancements in aircraft equipment and technologies, improved pilot training, improved education programs, and advocacy efforts across the general aviation community.\20\ Preliminary general aviation safety data shows the fatality rate per 100,000 flight hours has steadily declined in the past few decades.\21\ The average fatality rate from 2012 to 2020 was 1.07, while the preceding decades were 1.29 and 1.49 respectively.\22\ Despite these marked advancements, significant room for improvement remains. General aviation has the highest aviation accident rates within civil aviation. In 2012, the National Transportation Safety Board (NSTB) found that general aviation accident rates were about six times higher than small commuter and air taxi operations and over 40 times higher than larger transport category operations.\23\ --------------------------------------------------------------------------- \19\ Bureau of Transp. Statistics, United States General Aviation Safety Data, available at https://www.bts.gov/content/us-general- aviationa-safety-data (last visited Feb 21, 2023), [hereinafter General Aviation Safety Data]. \20\ FAA Reauthorization: Aviation Safety and General Aviation: Hearing Before the Subcomm. on Aviation & Operations of the S. Comm. on Commerce, Science, & Transp., 114th Cong., (Apr. 28, 2015) (statement of Margaret Gilligan, Assoc. Admin. for Aviation Safety, FAA); see also John Zimmerman, General Aviation Safety Trends: What Should We Worry About?, Plane&Pilot Magazine (Dec. 13, 2021), available at https:// www.planeandpilotmag.com/news/pilot-talk/2021/12/13/general-aviation- safety-trends-what-should-we-worry-about/; see also General Aviation Safety Continues To Improve, Plane&Pilot Magazine, (Dec. 18, 2019), available at https://www.planeandpilotmag.com/article/general-aviation- safety-continue-improve/. \21\ General Aviation Safety Data, supra note 19. \22\ Id. \23\ NTSB, NTSB Most Wanted List: Improve General Aviation (2012), available at https://www.ntsb.gov/Advocacy/mwl/Documents/ga_safety.pdf. --------------------------------------------------------------------------- As required by section 308 of the FAA Reauthorization Act of 2018 (P.L. 115-254), the FAA, in coordination with the NTSB, conducted a study of all general aviation accidents from 2000 through 2018.\24\ The study showed there were 18,481 general aviation accidents that involved 18,613 aircraft over that period, resulting in 3,647 fatal accidents.\25\ When taking all factors into consideration, the most common type of factors analyzed by the FAA and NTSB relating to general aviation accidents involved the pilot's control of the aircraft and actions or decisions--particularly those related to weather.\26\ --------------------------------------------------------------------------- \24\ Pub. L. 115-254, Sec. 308, 132 Stat. 3186. \25\ FAA, Report to Congress, FAA and NTSB Review of General Aviation Safety (Jan. 13, 2021), available at https://www.faa.gov/ about/plansreports/ntsb-review-general-aviation-safety. \26\ Id. --------------------------------------------------------------------------- III. GENERAL AVIATION: ISSUES FOR CONSIDERATION DESIGNATED PILOT EXAMINERS A designated pilot examiner (DPE) is an appointed individual who is authorized to conduct the flight tests necessary for issuing pilot certificates and ratings.\27\ Several general aviation operators and flight schools assert there is a Nationwide shortage of the DPEs necessary to meet the needs of student pilots and pilots seeking additional certifications and ratings.\28\ Significant wait times to schedule a check ride with a DPE can prolong an applicant's training time and costs.\29\ A 2022 survey conducted by the Flight School Association of North America found that 38 percent of 519 respondents reported that their wait was more than a month to schedule an initial practical test.\30\ --------------------------------------------------------------------------- \27\ 14 C.F.R. Sec. 183.23 (2023). \28\ Janice Wood, How much did you pay for your check ride?, General Aviation News, (Oct. 19, 2022), available at https:// generalaviationnews.com/2022/10/31/how-much-did-you-pay-for-your-check- ride/. \29\ Id. \30\ Id. --------------------------------------------------------------------------- Section 319 of the FAA Reauthorization Act of 2018 required a review of all regulations and policies related to DPEs appointed under section 183.23 of title 14, Code of Federal Regulations.\31\ From this review, a working group proposed 12 recommendations to improve the overall DPE system.\32\ In response, the FAA accepted three recommendations, partially accepted five recommendations, rejected two recommendations, and noted that two recommendations were already implemented or in progress.\33\ Several general aviation stakeholders were party to the mandated review and some have encouraged the Subcommittee to examine supply and demand of DPEs Nationwide. --------------------------------------------------------------------------- \31\ Pub. L. 115-254, Sec. 319, 132 Stat. 3186. \32\ Aviation Rulemaking Advisory Committee, Designated Pilot Examiner Reforms Working Group, A Report From the Designated Pilot Examiner Reforms Working Group to the Aviation Rulemaking Advisory Committee (June 17, 2021), available at https://www.faa.gov/ regulations_policies/rulemaking/committees/documents/media/ ARAC%20DPEWG%20Final%20Recommendation%20Report%20June%202021.pdf. \33\ FAA, FAA Response to the Report From the Designated Pilot Examiner Reforms Working Group to the Aviation Rulemaking Advisory Committee Dated June 17, 2021, (May 25, 2022), available at https:// www.faa.gov/regulations_policies/rulemaking/committees/ documents/media/FAA%20Response%20to%20DPE%20RWG%20ARAC%20Report_ FINAL_2022-05-25B_SenttoARM.pdf. --------------------------------------------------------------------------- TRANSITION TOWARDS AN UNLEADED FUTURE According to the National Academies of Sciences, Engineering, and Medicine, ``nearly all the country's approximately 170,000 active piston-engine aircraft burn a grade of aviation gasoline (avgas), designated as `100LL,' that contains lead.'' \34\ Avgas remains one of the only transportation fuels in the United States to contain lead, with more than 222,600 registered piston-engine aircraft that can operate on leaded avgas.\35\ This leaded fuel contains tetra- ethyl-lead, which is an additive used to prevent engine damage at higher power settings.\36\ Because 100LL can be used by all kinds of piston-engine aircraft, this single grade is the only type of fuel consistently available for general aviation operations and is the only FAA-certified fuel for use by these aircraft.\37\ Although the FAA does not have direct regulatory responsibility for aviation fuels, it provides the initial certification approval of the aircraft with the fuel it operates on, and it oversees aircraft operators to ensure use of the correct fuel.\38\ --------------------------------------------------------------------------- \34\ Nat'l Academies Press, Options for Reducing Lead Emissions From Piston-Engine Aircraft, (Transp. Research Board Spec. Rep. 336) (2021), available at https://nap.nationalacademies.org/read/26050/ chapter/1#vii. [hereinafter Nat'l Acad. of Sci. Report]. \35\ FAA, Aviation Gasoline, (last visited Feb. 21, 2022), available at https://www.faa.gov/about/initiatives/avgas. \36\ Id. \37\ Nat'l Acad. of Sci. Report, supra note 34. \38\ Id. --------------------------------------------------------------------------- Section 177 of the FAA Reauthorization Act of 2018 directed the National Academies of Science to study avgas.\39\ The committee conducting the study noted in its 2021 report ``that currently there is no individual, certain solution to the aviation lead problem, and therefore a multi-pathway mitigation approach offers the greatest potential for tangible and sustained progress.'' \40\ --------------------------------------------------------------------------- \39\ Pub. L. 115-254, Sec. 177, 132 Stat. 3186. \40\ Nat'l Acad. of Sci. Report, supra note 34. --------------------------------------------------------------------------- In February 2022, the FAA, the Environmental Protection Agency (EPA), fuel suppliers and distributors, airports, and engine and aircraft manufacturers announced the Eliminate Aviation Gasoline Lead Emissions (EAGLE) Initiative--a collaborative initiative to permit both new and existing general aviation aircraft to operate lead-free, without compromising aviation safety and the economic and broader public benefits of general aviation.\41\ Specifically, the initiative seeks to (1) establish the necessary infrastructure, efficient distribution channels, and widespread usage of unleaded fuels; (2) support research and testing of piston engine modifications and/or engine retrofits necessary for unleaded fuel operations; and (3) address fleet-wide authorization of unleaded aviation fuels of different octane levels.\42\ --------------------------------------------------------------------------- \41\ Press Release, FAA, FAA, Industry Chart Path to Eliminate Lead Emissions from General Aviation by the end of 2030, (Feb. 23, 2022) available at https://www.faa.gov/newsroom/faa-industry-chart-path- eliminate-lead-emissions-general-aviation-end-2030. \42\ Id. --------------------------------------------------------------------------- General aviation stakeholders, in coordination with the FAA, are working to move the piston aviation fleet towards a viable and safe unleaded future in an efficient and economical manner. The EAGLE Initiative proposes to achieve the widely held goal of eliminating lead emissions from general aviation by 2030.\43\ As part of this effort, the FAA announced in September 2022 it had granted a supplemental type certificate (STC) approval for the first unleaded fuel for use in every general aviation engine using spark-ignition; more are expected to follow.\44\ --------------------------------------------------------------------------- \43\ Id. \44\ Julie Boatman, GAMI Gains Avgas STC for Pistons on Unleaded Fuel, Flying Mag, (Sept. 2, 2022), available at https:// www.flyingmag.com/gami-gains-avgas-stc-for-pistons-on-unleaded-fuel/. --------------------------------------------------------------------------- That said, some general aviation operators may be concerned about the continued availability of avgas at airports until unleaded alternative fuels are widely available to the piston aviation fleet. Concerns pertaining to the larger effort to remove lead from avgas include: (1) ensuring the reliable production and distribution of unleaded alternative fuels once approved; (2) educating general aviation pilots during the transition to prevent misfuelling; and (3) ensuring the installation of unleaded avgas storage and dispensing systems at thousands of small airports across the country.\45\ --------------------------------------------------------------------------- \45\ Jill Tallman, FAA Approves Unleaded Fuel For Piston Fleet, AOPA, (Sept. 1, 2022), available at https://aopa.org/news-and-media/ all-news/2022/september/01/closer-to-an-unleaded-future. --------------------------------------------------------------------------- AIRPORT & AIRSPACE ISSUES AIRPORT FUNDING As previously stated, since general aviation airports do not have access to the PFC to fund airport terminal and other capital projects, smaller airports are much more reliant on the AIP to meet their capital needs. The current NPIAS estimates that through 2027, there are $19 billion in AIP-eligible development costs at nonprimary airports which are estimated to service 58 percent of the active general aviation fleet.\46\ Meanwhile, contract authority for AIP has remained flat, at $3.35 billion per year, for more than a decade. Moreover, there are growing concerns that inflation and rising construction costs continue to undermine the ability for general aviation airports to complete cost-effective projects and threaten the value these projects provide to the communities they serve. --------------------------------------------------------------------------- \46\ NPIAS 2023-2027, supra note 11. --------------------------------------------------------------------------- Separately, there are nearly 2,000 public-use, general aviation airports not eligible to receive Federal funding for capital improvement projects.\47\ These airports are often located in rural areas and potentially provide critical access to the communities they serve. Many general aviation operators and lawmakers are interested in ensuring continued air service and airspace access through the maintenance and modernization of infrastructure at all general aviation airports. --------------------------------------------------------------------------- \47\ NPIAS 2023-2027, supra note 11. --------------------------------------------------------------------------- FAA CONTRACT TOWER PROGRAM The FAA Contract Tower (FCT) Program is a public-private partnership that serves as an integral component of the air traffic management system managing over 25 percent of the Nation's air traffic control operations at towered airports.\48\ The program currently provides for the contract operation of air traffic control services at over 250 airports in at least 46 states.\49\ General aviation operators and airports continue to underscore the importance of the FCT program and advocate for critical infrastructure upgrades to ensure contract towers can continue to operate safely and efficiently. --------------------------------------------------------------------------- \48\ The State of General Aviation: Hearing Before the Subcomm. on Aviation of the H. Comm. on Transp. and Infrastructure, 117th Cong., (July 13, 2022) (statement of Chris Rozansky, Exec. Dir., Naples Airport Authority; on behalf of the American Assoc'n of Airport Executives). \49\ FAA, FAA Contract Tower Program, (last visited Feb. 27, 2023), available at https://www.faa.gov/about/office_org/headquarters_offices/ ato/service_units/mission_support/faa_contract_tower_program. --------------------------------------------------------------------------- REMOTE AIR TRAFFIC CONTROL TOWERS Technology could enable some airports to provide air traffic services remotely. Remote air traffic control towers propose to leverage cameras, microphones, meteorological sensors, and other monitoring equipment to provide air traffic control specialists with sufficient information to provide air traffic control tower services.\50\ The controllers themselves are located at facilities which receive real-time data and video from these sensors and equipment.\51\ For some locations, it has been proposed that the controllers would still be on- site, using the remote capabilities to erect a cheaper mast with sensors instead of a brick and mortar tower; at other locations it has been proposed that the controllers could be located off-site altogether. Regardless, the controller at the remote location would provide air traffic services to the airport the same way he or she would in a normal tower.\52\ The FAA is currently exploring using this technology at airports located in rural and remote areas, possibly improving safety and increasing access to the National Airspace System (NAS). --------------------------------------------------------------------------- \50\ Id. \51\ Id. \52\ Id. --------------------------------------------------------------------------- WORKFORCE DEVELOPMENT AVIATION WORKFORCE DEVELOPMENT GRANTS Section 625 of the FAA Reauthorization Act of 2018 authorized five million dollars for a pilot workforce development program and five million dollars for an aviation maintenance technician workforce development program.\53\ This workforce development program has enjoyed broad support from many general aviation stakeholders as it encourages collaboration between government, industry, and local entities to address skills gaps and encourage more Americans to pursue good-paying careers in aviation. Several stakeholders are concerned that the program is oversubscribed, with the FAA receiving hundreds of grant applications in the initial funding round, but only able to award 30 workforce development grants. Many general aviation stakeholders have expressed interest in continuing and potentially expanding this program in the next FAA reauthorization bill. --------------------------------------------------------------------------- \53\ Pub. L. 115-254, Sec. 625, 132 Stat. 3186. --------------------------------------------------------------------------- NATIONAL CENTER FOR THE ADVANCEMENT OF AVIATION A proposal to establish a ``National Center for the Advancement of Aviation'' (NCAA) is supported by a broad coalition of general aviation stakeholders, who believe that such a center would improve government and aviation industry collaboration on programs to enhance the United States aviation workforce and help maintain United States global leadership in aviation.\54\ In the 117th Congress, the House passed H.R. 3482, a bill to establish the NCAA, a federally-chartered, independent entity focused that would promote aviation workforce development and aviation education.\55\ The NCAA would fund scholarships, apprenticeships, aviation curriculum development, and other outreach efforts to encourage students to pursue careers in aviation. It would also launch initiatives to assist military personnel and veterans seeking a career in civil aviation. Furthermore, the NCAA would serve as a central repository for universities, industry, and other institutions to share information on workforce development and skills training. Many stakeholders have requested that the Subcommittee include the authorization for the NCAA in the 2023 FAA reauthorization bill. --------------------------------------------------------------------------- \54\ Letter to Representative DeFazio and Representative Graves, Industry Letter in support of the Nat'l Center for the Advancement of Aviation, (Apr. 28, 2022) (on file with Comm.). \55\ Nat'l Center for the Advancement of Aviation Act of 2022, H.R. 3482, 117th Cong. (2021). --------------------------------------------------------------------------- OTHER ISSUES In addition to the issues discussed above, the following subjects may also be raised at the hearing: LAircraft Registry Backlog: Several general aviation aircraft owners have been negatively affected by the aircraft registry backlog which has resulted in aircraft owners waiting upwards of six months to register, or re-register, their aircraft with the FAA.\56\ As of February 20, 2023, the FAA's registry office was still processing some documents received on October 6, 2022.\57\ Although the FAA's recently promulgated rule extending aircraft registration to seven years (up from three years) is expected to provide relief to the backlog, many lawmakers and general aviation stakeholders remain concerned about the Agency's ability to address the backlog in a timely manner. --------------------------------------------------------------------------- \56\ Time running out for 2022 aircraft registrations, General Aviation News, (Dec. 6, 2022), available at https:// generalaviationnews.com/2022/12/06/time-running-out-for-2022-aircraft- registrations/. \57\ FAA, Aircraft Registration, (last updated Feb. 6, 2023), available at https://www.faa.gov/licenses_certificates/ aircraft_certification/aircraft_registry/. --------------------------------------------------------------------------- LModernization of Special Airworthiness Certification (MOSAIC) Rulemaking: The FAA is collaborating with the general aviation community to modernize regulations for Light Sport Aircrafts (LSAs) with the goal of providing greater operational capabilities and improving performance standards for these aircraft.\58\ The forthcoming rule has been subject to delays, but it is widely anticipated that the FAA will make demonstrable progress this year.\59\ --------------------------------------------------------------------------- \58\ Press Release, EAA, Pushing GA Forward with MOSAIC, (Jan. 3, 2019), available at https://www.eaa.org/eaa/news-and-publications/eaa- news-and-aviation-news/news/2019-01-03-pushing-ga-forward-with-mosaic. \59\ Dan Johnson, Proposed changes to LSA delayed, General Aviation News, (Aug. 7, 2022), available at https://generalaviationnews.com/ 2022/08/07/proposed-changes-to-lsa-delayed/. --------------------------------------------------------------------------- LNew Entrants in the National Airspace System: The general aviation community supports the safe enabling and operation of new entrant technologies into the NAS, including unmanned aircraft system (UAS) and advanced air mobility (AAM) operations.\60\ However, there are differences in opinion regarding the planned safe integration of these new entrants, with a recent focus on unmanned operations following publication of the final report issued by the UAS Beyond Visual Line-of-Sight (BVLOS) Operations Aviation Rulemaking Committee (ARC).\61\ Of particular concern to some stakeholders are the BVLOS ARC's proposed changes to right-of-way flight rules and low altitude operations near structures.\62\ Enabling BVLOS operations for UAS offers substantial opportunities and also raises important policy issues such as airspace rules and aviation safety. --------------------------------------------------------------------------- \60\ BVLOS ARC Coalition of Aviation Associations Statement of Non- Concurrence, Letter from AIA, AOPA, ALPA, GAMA, HAI, and Praxis Aerospace Corp. to BVLOS ARC Co-Chairs Eileen Lockhart and Sean Cassidy, (Mar. 3, 2022), available at https://www.faa.gov/ regulations_policies/rulemaking/committees/documents/media/APPENDIX_F- Combined_ Voting_Ballots_03242022.pdf. \61\ Id. \62\ Id. --------------------------------------------------------------------------- IV. WITNESSES LMr. Mark Baker, President and Chief Executive Officer, Aircraft Owners and Pilots Association LMr. Jack Pelton, Chief Executive Officer and Chairman of the Board, Experimental Aircraft Association LMr. Rick Crider, Executive Vice President of Airport/Railport & Military Relations, Port San Antonio, on behalf of the American Association of Airport Executives LMr. Curt Castagna, President and Chief Executive Officer, National Air Transportation Association FAA REAUTHORIZATION: SECURING THE FUTURE OF GENERAL AVIATION ---------- THURSDAY, MARCH 9, 2023 House of Representatives, Subcommittee on Aviation, Committee on Transportation and Infrastructure, Washington, DC. The subcommittee met, pursuant to call, at 10:02 a.m. in room 2167 Rayburn House Office Building, Hon. Garret Graves (Chairman of the subcommittee) presiding. Mr. Graves of Louisiana. The subcommittee will come to order. I want to start out this morning, and I want to congratulate and welcome my good friend, Steve Cohen, as ranking member. I often remind him that he used to represent my sister, who then moved to an adjacent district to get better representation. [Laughter.] Mr. Graves of Louisiana. No, seriously, Congressman Cohen and I have had the opportunity to work together on a number of initiatives and travel together over the years, and he is a good friend, and I am looking forward to working together with you this year. I ask unanimous consent that the chairman be authorized to declare a recess at any time during today's hearing. Without objection, so ordered. I also ask unanimous consent that all Members not on the subcommittee be permitted to sit with the subcommittee at today's hearing and ask questions. Without objection, so ordered. As a reminder, if Members want to insert a document into the record, please also email it to [email protected]. I now recognize myself for 5 minutes for an opening statement. OPENING STATEMENT OF HON. GARRET GRAVES OF LOUISIANA, CHAIRMAN, SUBCOMMITTEE ON AVIATION Mr. Graves of Louisiana. It is no secret that aviation is at a pivotal moment in history. Advancements in technology and innovation in aircraft design have not just made aviation or air travel safer, but it has also lowered the threshold and allowed more Americans than ever to be able to be given the opportunity to experience flight. The aviation sector wouldn't be where it is today without the general aviation sector. Just last night I led a night tour, and I think I was in the rotunda around midnight, looking up at the frieze over the west front, the fresco or what have you that goes around the rim of the rotunda. And it begins with a depiction of Christopher Columbus coming off the boat and discovering the New World, and it goes around, and it ends with the Wright brothers' discovery of flight. And it is such an important part of America's history that it is actually depicted right there in the Capitol, in the rotunda. To see how far we have come over that period of time is remarkable. And what is even more exciting is that we have not fallen flat, not even close. Advancements in innovation are ushering in new users and use cases for the National Airspace System, including eVTOL, or electric vertical takeoff and landing aircraft, and drones. I am excited to witness in real time the safe integration of these new technologies, these new entrants. And I am excited to learn more from our witnesses about how Congress can bridge any gaps to achieve the shared goal of moving forward on America's leadership in aviation. We have the opportunity in the upcoming FAA bill to examine the challenges the general aviation community faces and address as many challenges as we can to put general aviation on a sound footing for many, many years to come, and we need to capitalize on this opportunity. I worry that kicking the can until the next reauthorization bill will set back American global leadership in aviation. The time is now that we make smart investments in general aviation. We also have to ensure that all areas of the Federal Government are supporting our GA community. I have been excited to work with our Livingston Parish Airport District as they move forward to create a new GA facility in our district. But while the airport has received a commitment of funding from our State and locals through COVID response, I do have to say the Treasury Department has been a complete pain and given us the Heisman for months and months as we try and get confirmation on the eligible use of funds for support for drainage mitigation and other uses for the airport. GA facilities are an incredible asset in our district, and I would like to take this opportunity to ask the Treasury Department: Return our phone calls and emails, please. I look forward to working with the full committee chairman and members of the subcommittee in this effort. [Mr. Graves of Louisiana's prepared statement follows:] Prepared Statement of Hon. Garret Graves of Louisiana, Chairman, Subcommittee on Aviation It is no secret that aviation is at a pivotal moment in history. Advancements in technology and innovations in aircraft design have not just made aviation safer, they have given more Americans than ever before the opportunity to fly. And the aviation sector wouldn't be where it is today without General Aviation (GA). Just last night I led a night tour of the U.S. Capitol, and I was in the Rotunda around midnight, looking up at the Frieze of American History--the fresco that goes around the rim of the Rotunda. It begins with a depiction of Christopher Columbus stepping foot in the Americas and ends with the Wright brothers' discovery of flight. It's such an important part of America's history that it's actually depicted in the U.S. Capitol Rotunda. Seeing how far we've come is remarkable, and even more exciting is that we have not fallen flat. Not even close. In the upcoming Federal Aviation Administration (FAA) reauthorization bill, we have the opportunity to examine the challenges the general aviation community faces and address as many challenges as we can to put general aviation on a sound footing for many years to come. We need to capitalize on this opportunity. I worry that kicking the can until the next reauthorization bill will set back American global leadership in aviation. The time is now to make smart investments in general aviation, and we also have to ensure that all areas of the federal government support our GA community. I've been excited to work with the Livingston Parish Airport District as they move forward to create a new GA facility in our district. But while the airport has received a commitment of funding from our state and locals through COVID response, I do have to say the Treasury Department has been a complete pain and given us the ``Heisman'' for months as we try and get confirmation on the eligible use of funds for support for drainage mitigation, and other uses for the airport. GA facilities are an incredible asset in our district, and I would like to take this opportunity to ask the Treasury Department: return our phone calls and emails, please. Innovative advancements are also ushering in new users of and use cases for the National Airspace System (NAS), including Electric Vertical Takeoff and Landing (eVTOL) aircraft and drones. I'm excited to witness in real time the safe integration of these new entrants and to learn more today from our witnesses about how Congress can bridge gaps to achieve the shared goal of moving forward in America's leadership in aviation. I look forward to working with the Full Committee Chairman and Members of the Subcommittee on this effort to support the GA Community and build a strong vision for the future of this important sector. Mr. Graves of Louisiana. I now recognize Ranking Member Cohen for 5 minutes. Mr. Cohen. Thank you, Mr. Chair. It is a pleasure to be here as ranking member and to serve with you. You are my friend, and in spite of the fact that in Memphis we put our refuse in the river and send it downstream, and it goes to Baton Rouge. Mr. Graves of Louisiana. Rodney Davis, Jr. Mr. Cohen. I have never had the opportunity to sit next to a former Governor, a present Governor, or a future Governor, so, it is a great honor. [Laughter.] Mr. Cohen. That frieze he talked about, if they did it in 1969 or 1972, would have stopped with FedEx. So, it would have continued on into aviation great moments. OPENING STATEMENT OF HON. STEVE COHEN OF TENNESSEE, RANKING MEMBER, SUBCOMMITTEE ON AVIATION Mr. Cohen. As we kick off our first Aviation Subcommittee hearing and continue our efforts to reauthorize the FAA, I welcome this opportunity to discuss the challenges facing the general aviation community. As we have heard from our chairman of our subcommittee, and we will hear from our chairman of our full committee, Mr. Graves, our FAA reauthorization bill have the first-ever general aviation title, and I look forward to hearing from our witnesses on ways our committee can work with Mr. Graves the first on these important issues. General aviation is an important sector of our aviation system, spanning from sport and recreational aviation to medical transport to business travel to aerial firefighting and more. According to the FAA, the United States has the largest and most diverse general aviation community in the world with more than the 220,000 active aircraft. Moreover, general aviation supports over 1.2 million jobs and is estimated to generate nearly $250 billion in economic output. It is encouraging that general aviation has become significantly safer over the past four decades, with the number of fatal and nonfatal accidents declining since 2000. When we held our hearing on this topic in July of 2022, I appreciated hearing from the National Transportation Safety Board, Chair Jennifer Homendy. As she noted, however, the vast majority of the NTSB's aviation investigations involve general aviation accidents--this is because of the numbers, I guess--and the subsequent new regulations derived from their recommendations continue to contribute to improved aviation safety. Since 2000, the NTSB has issued 294 safety recommendations addressing issues related to noncommercial general aviation operations. Of the 294 recommendations, 231 have been closed, while 63 remain open. As we will hear today, it is important that we all continue to work together to maintain the positive trend in general aviation and continue to increase safety for all of our general aviation users. I look forward to discussing ways in which we can continue to work together to transition towards an unleaded future. Aviation gasoline, or avgas, remains one of the only transportation fuels in the United States that contains lead, with more than 222,600 registered piston-engine aircraft that can operate on this type of gas. The use of leaded avgas continues to remain a significant public health concern. It has been well documented by medical institutions and the CDC that lead exposure in children can lead to increased cognitive performance--decreased cognitive performance--I must have had a little lead around me at some time--and potentially lead to long-term learning and behavioral problems. I certainly did have it. In the 2018 FAA Reauthorization Act, we directed the National Academies of Science to study aviation gasoline and how to transition away from it. In a 2021 report, the National Academies noted that there is currently ``no [singular], certain solution to the aviation lead problem, and therefore a multipathway mitigation approach offers the greatest potential for tangible and sustained progress.'' I applaud current efforts to research and develop alternative fuels, such as the Eliminate Aviation Gasoline Lead Emissions--or the acronym EAGLE--initiative and recognize it will take a collaborative effort to move forward to a safe transition towards unleaded fuel. As we will hear today, there are several issues that need our attention as we work on our next FAA reauthorization bill. I look forward to working with the subcommittee, the full committee, particularly with my friend Garret Graves, and coming together with a bipartisan bill that helps America's fliers, and passengers, and everybody connected to aviation. [Mr. Cohen's prepared statement follows:] Prepared Statement of Hon. Steve Cohen of Tennessee, Ranking Member, Subcommittee on Aviation As we kick off our first Aviation Subcommittee hearing and continue our efforts to reauthorize the Federal Aviation Administration, I welcome the opportunity to discuss the challenges facing the general aviation community. As we've heard from our esteemed Chairman, Mr. Sam Graves, our FAA reauthorization bill will have the first-ever general aviation title, and I look forward to hearing from our witnesses on ways our Committee can work with you on these important issues. General aviation is an important sector of our aviation system spanning from sport and recreational aviation to medical transport to business travel to aerial firefighting and more. According to the FAA, the United States has the largest and most diverse general aviation community in the world with more than 220,000 active aircraft. Moreover, general aviation supports to over 1.2 million jobs and is estimated to generate nearly $250 billion dollars in economic output. It is encouraging that general aviation has become significantly safer over the past four decades with the number of fatal and nonfatal accidents declining since 2000. When we held a hearing on this topic in July 2022, I appreciated hearing from National Transportation Safety Board, Chair Jennifer Homendy. As she noted, however, the vast majority of the NTSB's aviation investigations involve general aviation accidents, and the subsequent new regulations derived from the NTSB's recommendations continue to contribute to improved aviation safety. Since 2000, the NTSB has issued 294 safety recommendations addressing issues related to non-commercial general aviation operations. Of the 294 recommendations, 231 have been closed, while 63 recommendations remain open. As we'll hear today, it is important that we all work together to maintain the positive trend in general aviation and continue to increase safety for all our general aviation users. I also look forward to discussing ways in which we can continue to work together to transition towards an unleaded future. Aviation gasoline, or avgas, remains one of the only transportation fuels in the United States to contain lead, with more than 222,600 registered piston-engine aircraft that can operate on leaded avgas. The use of leaded avgas continues to remain a significant public health concern. It has been well documented by medical institutions and the Centers for Disease Control and Prevention that lead exposure in children can lead to decreased cognitive performance and potentially lead to long-term learning and behavioral problems. In the 2018 FAA Reauthorization Act, we directed the National Academies of Science to study aviation gasoline, or avgas, and how to transition away from it. In its 2021 report, the National Academies noted that there is currently ``no [singular], certain solution to the aviation lead problem, and therefore a multi-pathway mitigation approach offers the greatest potential for tangible and sustained progress.'' I applaud current efforts to research and develop alternative fuels such as the Eliminate Aviation Gasoline Lead Emissions or EAGLE initiative and recognize it will take a collaborative effort to move toward the safe transition towards unleaded fuel. As we'll hear today, there are several issues that need our attention as we work on our next FAA reauthorization bill, and I appreciate hearing the perspectives of important voices in our general aviation community. Mr. Cohen. I yield back the balance of my time. Mr. Graves of Louisiana. Thank you, Mr. Cohen. Our next opening statement, I am convinced--we were talking about the Wright brothers--if this guy had been around, after I spent a little time in Tarkio at his hangar, I am convinced that the Wright brothers' timeframe would have been cut in half, if he was involved in developing that plane. I yield 5 minutes to the chairman of the full committee, Sam Graves. OPENING STATEMENT OF HON. SAM GRAVES OF MISSOURI, CHAIRMAN, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE Mr. Graves of Missouri. Thank you, Mr. Chairman and Ranking Member. So, I think everybody has pretty much heard that I intend to do in the next FAA reauthorization a GA title. It will be the first time that we have done that. And I am looking forward to doing the FAA reauthorization, I really am. We have got so many challenges out there, whether it's workforce, or air traffic control, or organization within the FAA, or some certification issues. But regardless, I am looking forward to it. There are basically two tracks to get into the aviation industry, whether that is a mechanic, or a pilot, even air traffic control. You can come up through the military or you can come up through general aviation. And my concern within this committee's purview is, obviously, general aviation, and it is the cornerstone of aviation. Everybody that pursues a career in aviation starts out as a GA pilot. That is just a fact. And they start out at that local airfield. And there are challenges throughout that. We have to make sure that we figure out how to break down those barriers to get young people involved, and young people excited again. And there are a lot of challenges out there, expense being one of them. But it is incumbent upon us in general aviation to do everything we can to encourage those young people to choose a career in aviation, and that is something that we need to be thinking about, and something that we need to do. I have said many times before that one of the worst things that happened when it comes to the FAA is when advocacy was removed from the mission statement. And that is absolutely a fact. We need more advocates within the FAA and throughout aviation than we do so many other things, whether that's inspectors, or enforcement, or whatever the case may be. We have to be good advocates, and we have to get these young people. So, I want to thank all of our witnesses for being here. I am looking forward to hearing the testimony and reading through the testimony that has been provided. And this is our start to FAA reauthorization. And again, we are going to put some serious focus on the GA community, whether that's local airfields or, again, pilot training. And our organizations that represent general aviation are vital to that. And I appreciate all the input that we have gotten from the stakeholders and everybody from all of the organizations, and I, again, look forward to the testimony. [Mr. Graves of Missouri's prepared statement follows:] Prepared Statement of Hon. Sam Graves of Missouri, Chairman, Committee on Transportation and Infrastructure I'm looking forward to passing a bipartisan FAA reauthorization this year, and I think most people know that I intend to include the first ever general aviation (GA) title. We've got so many challenges facing our aviation system--whether it's the workforce shortage, air traffic control issues, or issues with FAA's organization and certification processes. To address these issues, we need a good pipeline of aviation professionals, and there are basically two tracks to get into the aviation industry. People can come up through the military or they can come up through general aviation, and my concern within this Committee's purview is obviously general aviation--which is the cornerstone of aviation. So many who pursue a career in aviation start out as a GA pilot, starting out at their local airfield. But there are challenges to that, such as expense, and we have to make sure that we figure out how to break down barriers to get young people involved and excited in aviation again. It's incumbent upon us in general aviation to do everything we can to encourage young people to choose a career in aviation, and that's something we need to be thinking about in terms of this reauthorization bill. I've said many times before that one of the worst things that happened with the FAA is when advocacy was removed from the mission statement. Safety will always be fundamental to FAA, but we need more advocates within the agency and throughout aviation, whether that's inspectors, enforcement, or whatever the case may be. We have to be good advocates and we have to get young people involved. I want to thank all of our witnesses for being here. Here at the start to the FAA reauthorization process, we're placing some serious focus on the GA community, whether that's local airfields or pilot training, and our organizations that represent general aviation are vital to that. Mr. Graves of Missouri. And thanks for allowing me the time, Mr. Chairman. And with that I yield back. Mr. Graves of Louisiana. Thank you, Mr. Chairman. And I now recognize the ranking member of the full committee, another great friend. And also, Mr. Larsen, I want to congratulate you for your position, and I look forward to working with you on the FAA bill this year. I yield 5 minutes to the gentleman from Washington. OPENING STATEMENT OF HON. RICK LARSEN OF WASHINGTON, RANKING MEMBER, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE Mr. Larsen of Washington. Thank you, Chair Graves, and I appreciate the opportunity. And Ranking Member Cohen, thanks for calling the hearing today on securing the future of general aviation. So, in my home State of Washington and across the country, general aviation means good-paying jobs, and it is part of the key to long-term economic growth. A recent study found the GA industry supported an estimated $247 billion in economic output and 1.2 million jobs in the U.S. in 2018. It seems we maybe want to update that now. In terms of fleet size, the active GA fleet is projected to increase from its 2021 level of more than 204,000 aircraft to 209,000 by 2042. This means more manufacturing, more maintenance, and more flightcrew training will be needed, resulting in opportunities for growth in communities with general aviation airports. And that, of course, means investing in the workforce and developing the future workforce in aviation. But first and foremost, we must continue to champion aviation safety. Over the past few decades, general aviation has become significantly safer, with the number of fatal and nonfatal accidents declining since 2000. However, there is still room for improvement in GA, which has the highest aviation accident rate within civil aviation. In 2021, the NTSB found that most aviation fatalities in 2020 took place during general aviation operations, where 332 people were killed; compared to zero fatal accidents involving part 121 air carriers in that same year. I would note the accident of the Mutiny Bay crash in my own district, killing 10 last year as an example of that. With new technologies available for general aviation aircraft, the expansion of analytical tools to study safety trends and patterns, and improved training, we can, will, and, frankly, we should do better. As well, general aviation also improves equity and access to the National Airspace System for people across the country. Many small and rural communities do not have access to commercial service airports or regularly scheduled air service. For instance, 82 percent of communities in Alaska are only accessible via air, yet only a handful have regularly scheduled commercial flights. General aviation and charter services provide these communities with lifelines to critical resources and services. To that end, Congress specifically targeted general aviation in the Bipartisan Infrastructure Law, investing $500 million annually over 5 years for general aviation and nonprimary airports and $300 million for contract towers, creating jobs and increasing mobility. These types of investments are critical to ensuring that NAS is available to all people. Unfortunately, as the NAS expands, we have to be cognizant of consequences. And as the ranking member discussed already with regards to leaded fuel, certain piston-powered general aviation aircraft still use avgas, which contains lead. So, while general aviation is the only transportation mode still using leaded fuel, we have to ensure that transition to newly available unleaded alternatives is safe and thoughtful. To expedite this transition, the Eliminate Aviation Gasoline Lead Emissions--or EAGLE--initiative was launched in the last couple of years. This Federal and industry initiative aims to transition GA completely to unleaded fuel by 2030. And the general aviation sector is also committed to addressing the industry's contributions to climate change. In recent years, the development of electric and hybrid-powered aircraft have been among the efforts to reduce carbon and noise emissions. For example, Arlington Municipal Airport in my hometown of Arlington, Washington, is home to Eviation, an aviation company which is developing the nine-seat, all- electric Alice aircraft. GA is also working to adopt alternative fuel sources to reduce carbon emissions, such as the development and distribution of SAF. To support the sustainable growth of the general aviation sector, Congress must create a regulatory framework that prioritizes safety, invests in the necessary infrastructure, and helps to make our communities globally competitive well into the 2050s and beyond. So, while the future of U.S. aviation remains bright, general aviation is part of that picture, and still faces challenges that have to be addressed. And we have that opportunity, working with the FAA reauthorization, to work with GA to ensure that future remains bright. Finally, before I yield back, Mr. Chair, I do want to recognize representatives from the Colgan family who are here to continue their valiant and necessary effort to ensure continued safety in the national airspace. With that I look forward to tackling these issues together with everyone here. [Mr. Larsen of Washington's prepared statement follows:] Prepared Statement of Hon. Rick Larsen of Washington, Ranking Member, Committee on Transportation and Infrastructure Thank you, Chairman Graves, for calling today's FAA Reauthorization hearing on ``Securing the Future of General Aviation.'' In my home state of Washington and across the country, general aviation (GA) means well-paying jobs and is key to long-term economic growth. A recent study found the general aviation industry supported an estimated $247 billion in economic output and 1.2 million jobs in the U.S. in 2018. In terms of fleet size, the active general aviation fleet, is projected to increase from its 2021 level of more than 204,000 aircraft to nearly 209,000 by 2042. This means more manufacturing, maintenance and flight crew training will be needed, resulting in additional opportunities for growth in communities with general aviation airports. First and foremost, we must continue to champion safety as our top priority. Over the past few decades, general aviation has become significantly safer--with the number of fatal and nonfatal accidents declining since 2000. However, there is still significant room for improvement as general aviation has the highest aviation accident rate within civil aviation. In 2021, the National Transportation Safety Board (NSTB) found that most aviation fatalities in 2020 took place during general aviation operations, where 332 people were killed; compared to zero fatal accidents involving Part 121 air carriers in that same year. With new technologies available for general aviation aircraft, the expansion of analytical tools to study safety trends and patterns, and improved training, we can and will do better. General aviation also improves equity and access to the National Airspace System (NAS) for people across the country. Many small and rural communities do not have access to commercial service airports or regularly scheduled air service. For instance, 82 percent of communities in Alaska are only accessible via air; yet only a handful have regularly scheduled commercial flights. General aviation and charter services provide these communities with lifelines to critical resources and services. To that end, Congress specifically targeted general aviation in the Bipartisan Infrastructure Law investing $500 million annually over 5 years for general aviation and non-primary airports and $300 million for contract towers, creating jobs and increasing mobility. These types of investments are critical to ensuring that the NAS is available to all Americans. Unfortunately, as the NAS expands, we must also be cognizant of its consequences. Certain piston-powered general aviation aircraft still use Avgas which contains lead--a neurotoxin that can be particularly detrimental to children. While general aviation is the only transportation mode still using leaded fuel, we must ensure the transition to newly available unleaded alternatives is a safe and thoughtful one. To expedite this transition, the Eliminate Aviation Gasoline Lead Emissions (EAGLE) Initiative was launched in February 2022. This federal and industry initiative aims to transition general aviation completely to unleaded fuel by 2030. The general aviation sector is also committed to addressing the industry's contributions to climate change. In recent years, the development of electric and hybrid-powered aircraft have been among the efforts to reduce carbon and noise emissions. For example, Arlington Municipal Airport in my hometown of Arlington, Washington, is home to Eviation, an aviation company which is developing the nine-seat, all-electric ``Alice'' aircraft. The general aviation industry is also working to adopt alternative fuel sources to reduce carbon emissions, such as the development and distribution of sustainable aviation fuel (SAF). To support sustainable growth of the general aviation sector, Congress must create a regulatory framework that prioritizes safety, invests in the necessary infrastructure and helps to make communities globally competitive well into the 2050s and beyond. While the future of U.S. aviation remains bright, general aviation still faces several challenges that must be addressed. Today's witnesses will provide much needed insight on the industry's priorities and how Congress can be a better partner in these efforts. Thank you, and I look forward to tackling these issues together. Mr. Larsen of Washington. I yield back. Mr. Yakym [presiding]. Thank you, Mr. Larsen. I would like to welcome our witnesses today and thank them for being here. Briefly, I would like to take a moment to explain how our lighting system works to our witnesses. There are three lights in front of you. Green means go; yellow means you are running out of time; and red means wrap it up and conclude your remarks. I would ask unanimous consent that the witnesses' full statements be included in the record. And without objection, so ordered. As your written testimony has been made a part of the record, the subcommittee asks that you limit your oral remarks to 5 minutes. And with that, Mr. Baker, president and chief executive officer of the Airline Owners and Pilots Association, you are recognized for 5 minutes for your testimony. TESTIMONY OF MARK BAKER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AIRCRAFT OWNERS AND PILOTS ASSOCIATION; JACK J. PELTON, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD, EXPERIMENTAL AIRCRAFT ASSOCIATION; RICK CRIDER, A.A.E., EXECUTIVE VICE PRESIDENT OF AIRPORT/RAILPORT AND MILITARY RELATIONS, PORT SAN ANTONIO, ON BEHALF OF THE AMERICAN ASSOCIATION OF AIRPORT EXECUTIVES; AND CURT CASTAGNA, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL AIR TRANSPORTATION ASSOCIATION TESTIMONY OF MARK BAKER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AIRCRAFT OWNERS AND PILOTS ASSOCIATION Mr. Baker. Thank you. Chairman Graves, Ranking Member Cohen, members of the subcommittee, thank you for the opportunity to provide the Aircraft Owners and Pilots Association's perspective on how to secure general aviation's future as you develop this year's FAA reauthorization. First, let me thank the committee and the professional staff for all the work and effort that goes into compiling such an important, comprehensive bill that impacts every segment of aviation. We are very appreciative, and encouraged that the full committee Chairman Graves has announced his intention, for the first time ever, to include in the title general aviation for this year's FAA reauthorization. As a pilot himself, the chairman fully recognizes the service and the contribution GA brings to thousands of communities, and I am certain he hears from private pilots every day. General aviation faces many challenges today, including the most significant: removing lead from aviation gasoline. The entire industry and the FAA are working on this issue every day, and we have made progress. One thing I can report to the committee is that general aviation has never been safer. With over 26 million flight- hours transporting hundreds of millions of passengers, including more than 30 million takeoffs and landings, last year was the safest on record for general aviation, and this has been a positive trend. We also believe that, in order to maintain the safest aviation system in the world, the committee should support investments in modernizing systems that are core to FAA's mission, whether it is ATC systems, the NOTAM system, the aircraft registration systems, the pilot medical system, all of which fall under the primary safety certification and regulatory functions of the agency. In order to secure the future of general aviation, the committee has an opportunity to address many of these issues that will set the course for years to come. We have provided the committee with a list of priorities and legislative concepts as a starting point. Many of these are outlined in my written testimony. However, being respectful of everyone's time, let me briefly address the following issues: workforce development; the FAA's Designated Pilot Examiner program; hangar construction; and transient ramp space at public-use airports. With respect to workforce development, I am very proud of AOPA's award-winning, 4-year high school STEM aviation curriculum, which we provide to high schools for free. Our curriculum now is in more than 400 schools in 43 States. And since the program's inception, we have reached more than 50,000 students, and more than 70 percent of those who have graduated report they are actively pursuing a career in aviation. And while we appreciate the committee's leadership in addressing and investing in aviation workforce challenges, we don't believe these issues will fall under the core mission of FAA. We join the entire aviation industry in supporting the establishment of the National Center for the Advancement of Aviation, which this committee and the House passed with Congress with nearly 400 votes. This center would allow the FAA to refocus its core on safety missions and help create effectiveness and efficiencies for Government and many that work in the industry workforce programs. In the 2018 reauthorization, the committee stood up an industrywide FAA working group to address shortcomings of the Designated Pilot Examiner program. As you know, the DPE examines and checkrides for pilots to determine the pilot's knowledge and capability of flying aircraft. Just last summer, the working group developed 12 recommendations to improve the program, and we would like the committee to review and assist with possible implementation to avoid the years of delay in fixing this program. We simply don't have enough DPEs in the system to keep up with the demand. Pilots, whether new or experienced, shouldn't have to wait weeks or months to get a checkride. AOPA conducted a national survey of 800 airports that found that 71 percent have a shortage of GA hangars. In many instances, airports have the land to construct hangars but lack financial resources, and may have a waiting list years' long for hangars. Finally, Mr. Chairman, I would like to bring the subcommittee's attention to an issue that has been and remains a top concern among every sector of the pilot community: the lack of transient ramp space at federally obligated public-use airports. While we support the FBO industry and most provide excellent services, I have a letter here that has over 300 organizations on board representing hundreds of thousands of pilots flying every category of aircraft from every region across the country, and I urge the committee to address this issue. This has been one of the most frustrating issues since the committee addressed the medical reform for GA pilots. I want to be clear. This is a national problem, not a one- off or a local issue. All federally obligated airports are subject to rules and regulations that impact safety and the users of the national system. All of these airports should be required to treat all users the same when it comes to public access. For pilot organizations like AOPA representing general aviation pilots, we believe that one should not be required to pay private business for services the pilot never asked for or needed. This is exactly what is happening at hundreds of public-use airports, especially those that have entered into lease agreements with large chain FBOs in a monopoly position. Not a day goes by that I don't hear from pilots about this. I have been in business all my life. I have never known anyone that charges a customer for services the person never wanted or asked for. So, I hear about it often. On behalf of the organizations and the pilots across the country, we strongly support and request the committee to include a provision in the reauthorization bill that addresses public-use airports in these areas. Thank you. [Mr. Baker's prepared statement follows:] Prepared Statement of Mark Baker, President and Chief Executive Officer, Aircraft Owners and Pilots Association Introduction Chairman Graves, Ranking Member Cohen and Members of the Subcommittee, thank you for the opportunity to provide the Aircraft Owners and Pilots Association's (or AOPA) perspective on ``Securing the Future of General Aviation.'' AOPA is the world's largest aviation membership organization, representing the general aviation interests of more than 300,000 aircraft owners and pilots across the country. Our members collectively operate over 85% of all general aviation (GA) aircraft in the United States and represent two-thirds of all pilots. AOPA was founded in 1939, and for 84 years, we have stayed true to our mission of protecting the freedom to fly. Safety remains AOPA's north star--guiding, protecting, and promoting this uniquely American experience, so we can pass it along, better than we received it, to the next generation of aviators. Introducing the next generation of Americans, especially young people from diverse backgrounds into aviation and aerospace is vital to our industry's future. Impact of General Aviation: General aviation in America provides a significant economic impact to the communities in which we all live and fly--GA is a $247 billion industry and supports more than 1.2 million jobs. Through the network of more than 5,000 public-use airports across the country, which is 10 times the amount served by commercial airlines, as well as over 14,700 privately owned landing facilities nationwide, general aviation is an integral part of the transportation system that supports communities across the United States, especially in rural areas. GA is simply institutional in the fabric of America. General aviation provides a great deal of public-benefit flying in times of need. These vital operations include emergency medical personnel and supplies delivery, disaster relief and recovery, search and rescue, humanitarian assistance, law enforcement, agricultural aviation activities, and much more. GA also provides the most efficient and cost-effective way to conduct wildlife surveys, map wetland losses and soil erosion, and detect pipeline spills. The Committee's leadership in several areas impacting GA are noteworthy including the BasicMed program, in which nearly 80,000 pilots in the United States having completed the requirements to fly safely since the program's inception. We are encouraged Full Committee Chairman Graves announced he will include a standalone general aviation title in the upcoming FAA Reauthorization bill. I know others have also expressed support for this valuable inclusion, and we look forward to working with all Members of the Committee to help secure the future of general aviation. Improving General Aviation Safety: The FAA operates the largest, most complicated, and safest aviation system in the world. While every aircraft accident makes headline news, what does not make the news is that general aviation comprises 26 million flight hours per year, representing more than 30 million takeoffs and landings by hundreds of thousands of general aviation pilots. In short, general aviation has never been safer--and it's getting safer every day. According to the latest available data through fiscal year (FY) 2021--see chart below--the general aviation fatal accident rate has fallen to just 0.74 occurrences per 100,000 flight hours. This rate is less than half of what it was in the mid-1990s. [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] What is as impressive, and demonstrates this strong safety culture of GA, is that this ongoing, steady decline has happened while the skies are busier than ever. When I'm asked if GA is safe--I don't hesitate with a resounding ``absolutely.'' The General Aviation Joint Safety Committee (GAJSC), co-chaired by leaders from AOPA's Air Safety Institute (ASI) and the FAA, analyzes mishap data to develop safety recommendations and drive implementation across the industry. Once again, we are on track to exceed the safety goal established by the GAJSC which will result in another 10% reduction in fatal accidents over ten years. As indicated in the chart below, the outlook for GA safety continues to improve as the number of fatal GA accidents so far in FY23 are below the goals established by the GAJSC. [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] While we have come a long way in general aviation safety and achieved impressive results there is always so much more we can do. Safety is embedded in our culture and our highly respected Air Safety Institute continues to work every day to educate and improve safety where we can. Filling the Aviation Workforce Pipeline: Aviation--whether GA, commercial, or military--cannot exist without qualified professionals to fly, design, build, operate, and maintain our crewed and uncrewed aircraft. Today, we face a critical shortage of workers in all these fields. The Boeing Pilot and Technician Outlook for 2022-2041 predicts that the long-term demand for newly qualified aviation personnel remains strong, as 602,000 new pilots, 610,000 new maintenance technicians and 899,000 new cabin crew members will be needed worldwide over the next 20 years. In North America alone, Boeing predicts the need for 435,000 personnel, including 128,000 new pilots, 134,000 new technicians and 173,000 new cabin crew members during this time period. Most people that aspire to become aviators start in general aviation, so it is important that we collaborate on efforts to ensure that this pipeline remains open to all. AOPA has taken a leadership role in attracting young people interested in aviation by making major investments in high school and STEM curriculum. Through the AOPA Foundation, we have developed a rigorous four-year high school aviation STEM curriculum. AOPA High School Aviation STEM Curriculum is now in more than 400 schools in 43 states, engaging more than 16,300 students. Since the program's inception five years ago, we have reached more than 50,000 students, and a full 70% of those who have graduated report they are actively pursuing an aviation career. Moreover, nearly half of our curriculum students are students of color, with more than 20% female. This participation represents a significant increase in diversity when compared to the current aviation workforce. Congress and this Committee has played an important role to address the workforce challenges as well. The 2018 FAA Reauthorization law included two aviation workforce development programs (aircraft pilots and aviation maintenance technicians) which had strong bipartisan support. These programs, commonly referred to as Section 625 and authorized at $5 million per year through FY23 have helped introduce high school students and others to science, technology, engineering, math (STEM) aviation education and opportunities. However, workforce issues are not a core mission of the FAA and with the Section 625 grant programs set to expire, now is the time to establish the National Center for the Advancement of Aviation (NCAA) and let the FAA focus on modernizing the air traffic control system, the NOTAM system, the pilot medical system, the aircraft registration system, and airman and aircraft certification, these are the primary safety and regulatory functions of the FAA. National Center for the Advancement of Aviation Act: During the 117th Congress, bipartisan and bicameral legislation was introduced to establish a National Center for the Advancement of Aviation (HR 3482/S. 1752) to address the aviation workforce challenges our industry faces. We appreciate the leadership of this Committee to move the bill which overwhelmingly passed the House last September by a vote of 369-56. A national aviation center would create programs to further build a diverse and skilled aviation workforce and ensure the deployment of STEM aviation educational opportunities for middle and high school students. In fact, the center would do more to grow, develop, and promote aviation and bring the needed and long overdue collaboration of our collective industry that is so vital to our nation's economy. The NCAA has the support of the entire aviation industry from general aviation, airlines, unions, airports, and others. We look forward to working with the Committee to advance this bipartisan legislation once again. Public-Use Airports/Transient Ramps/Pricing Transparency: Our nation's public-use airports are clearly a valuable and critical part of America's infrastructure. AOPA has heard from thousands of our members and pilots across the country who are frustrated when they land at airports and learn of unexpected fees being levied by FBOs even when not receiving or requesting services and often surprised at the amounts being charged. Fixed based operators (FBO) owned by small companies or by the airport sponsor do a great job making their parking fees transparent and provide excellent service to pilots of all types of aircraft. However there remains a general lack of transparency of parking fees charged by the major fixed based operators (FBO), as well as the lack of transient parking areas at federally funded public-use airports. Everywhere I travel, I hear from AOPA members who believe there needs to be a requirement for FBOs to make their fees transparent and easily available to pilots like any other product or service today. The type of fees charged to pilots by the FBOs include tie-down fees, facility fees, infrastructure fees, access fees, security fees, and handling fees. AOPA receives thousands of complaints from pilots who are often charged for services they don't even ask for or receive. There is absolutely no reason a pilot should be charged exorbitant fees to park his or her aircraft when receiving no services from the FBO. It doesn't happen on our nation's highway rest areas, and it shouldn't happen at public-use airports. We believe pilots should have the information they need to make informed preflight planning decisions before landing at a public-use airport. In 2018, AOPA led a voluntary industry campaign known as ``Know Before You Go'' to encourage FBOs to publicly list their fees online. Most FBOs serve the general aviation community by balancing their need for profitability with the need to provide reasonable prices, and while a vast majority of FBOs now openly disclose their pricing, many still don't. After four years of direct outreach to the chain FBO companies to encourage parking fee transparency, at least 25% of these FBOs are still not complying with the ``Know Before You Go'' program. While the call for fee and pricing transparency has been a voluntary effort, we believe pilots have a right to know, before they fly, what fees they should expect when arriving at an airport and what they cost. In addition to fee and pricing transparency, we hear from thousands of members about the lack of GA transient aircraft parking space, especially at airports where a chain FBO controls the entire parking ramp or has a monopoly position. Upon landing at these airports, pilots are directed to the FBO parking ramp, where many only stay for a few hours and do not need or require the services of the FBO. It is no surprise these pilots are outraged when presented with a bill, in the hundreds if not thousands of dollars to simply park their aircraft or drop off a passenger. AOPA was recently made aware of a pilot who flew his single engine turboprop-powered aircraft from Ormond Beach, Florida to the St Augustine airport for lunch--about a twenty-minute flight. He was directed to park at the only FBO on the airport, and after a one-hour visit, he was presented with parking and security fees totaling $280.00. A flight instructor and a student pilot landed at an airport so the student could use the restroom--10 minutes--and the pilot was charged $80. We have thousands of examples like these. We also dedicated considerable time and resources over the last four years to research how GA transient parking areas are depicted at the 700 public-use airports with published airport diagrams. Just last year, the FAA agreed to publish guidance to airports in using these terms to describe GA parking areas, which includes the term ``GA Transient Apron''. This term describes a parking area where transient general aviation operators can park their aircraft without FBO services and may be subject to a fair and reasonable fee if the airport decided to implement such a fee. The FAA is planning to expand the number of diagramed airports from 700 to 3,000 in the near future and airport managers will be asked to choose the appropriate standardized labels for their diagrams. We appreciate the FAA's action in this area, but with the large number of complaints about high parking fees charged by chain FBOs and the lack of GA transient parking options at federally funded public-use airports, we believe the Committee should address these issues. We believe public-use airports should be required to designate a transient GA parking area to be made available to pilots of all privately operated general aviation aircraft, regardless of make or model. Additionally, airports should retain the ability to either waive a transient fee or impose a transient fee, so long as that fee is fair and reasonable (essentially whatever it costs the airport to operate and maintain the ramp). We have a national system of airports and designating GA transient parking should not be delegated to airports as a local issue. With the recent increase in FBO consolidation, including equity firms acquiring large chain FBOs and expecting a return on their investment, this lack of fair and reasonably priced GA transient parking at public-use airports is troubling. At the few hundred airports that provide commercial air service, and also support high levels of GA aircraft, airport managers must satisfy TSA security requirements to maintain their FAA Part 139 certification. These airports should also be required to designate GA transient parking areas, and pilots wishing to use these GA transient parking areas should be allowed to apply for TSA security badges for access when they are located near commercial service activities. This would also eliminate the need for added security personnel and would help defray any additional security costs at these airports. The Committee should consider addressing the transient ramp issue. Such a proposal should include the following: 1) All public-use airports should have a transient ramp space (construct or designate) and have the ability to charge a fair and reasonable fee (cost to operate and maintain); 2) Transient ramp space should be made available to all privately- operated aircraft, regardless of make or model; 3) Private pilots should have the ability to apply for a SIDA badge to defray security costs at airports where TSA security requirements are in place; and 4) Public-use airports should be required to either impose a fair and reasonable fee and continue to have the ability to waive fees (like many small and municipal airports do today). Need for Additional GA Hangars: Another area of concern to GA's future is the decreasing supply of general aviation hangars across the country. Aircraft hangars are integral to the utility of any airport and invite economic investment and growth to local communities. They are also increasingly important, and sometimes required by aircraft insurance companies, to protect the fabric or composite airframes of aircraft, new and old. Airports wishing to build new hangars find that federal AIP funds are not prioritized for GA hangar construction, and the price to build hangars usually exceeds the airports' ability to pay for them outright. In 2021, AOPA conducted a national survey of 800 airports and found that 71% of airports have a shortage of individual GA hangars. In fact, 55% of those surveyed said they have the land to develop additional hangars but do not have the financial resources to do so. Airport managers also report that hangars provide 45% of their gross revenue, making hangars a critical source of financial self-sustainability for any GA airport. Even if an airport is in the National Plan of Integrated Airport Systems (NPIAS), hangars are generally not approved for AIP funding due to other priorities. Certain airports are turning to the construction of corporate hangars and have developed plans, which the FAA has approved, to remove smaller less profitable hangars to make room for the larger more profitable hangars. Therefore, small aircraft hangars are systematically replaced with larger corporate hangars, forcing these aircraft off the airport or parking outside where they are subjected to wind, rain, sun, and snow. This happened recently when over 70 GA storage hangars were replaced with corporate hangars at a Scottsdale, Arizona airport, and it is about to happen with 51 hangars at the Birmingham-Shuttleworth airport in Alabama. Under current FAA policy, hangars are among the lowest priorities for AIP funding and grants for hangar development are rarely issued. With a nationwide shortage of small aircraft storage hangars, we need to protect the ones we have while also investing in the development of new GA hangars to meet the overwhelming demand. We believe Congress should dedicate adequate AIP funding for GA hangar development. The result is securing the future of GA and a win- win as airports would gain a much-needed source of sustainable revenue, and pilots would be able to protect the investment in their aircraft. The new hangars would attract additional aircraft which would boost the airports economic contribution to the community and improve the airport's ability to achieve financial self-sustainability. Crosswind Runways: Crosswind runways enhance the safety and capacity of the National Plan of Integrated Airport Systems. Nearly one third of airports in the NPIAS have a crosswind runway in addition to the airport's primary runway. They were constructed at airports where changes in wind conditions during certain periods made the primary runway unsafe to use. Like all pavement, crosswind runways require periodic maintenance, or they deteriorate until they become unserviceable. Although runway projects are supposed to be among the highest priority projects, current FAA policy has created an insurmountable barrier for hundreds of airports in the system to maintain their crosswind runways. GA's excellent safety record is attributable, in part, to the existence of more than 900 crosswind runways. They are critically important to light GA aircraft, particularly those with conventional landing gear. If crosswind runways are allowed to deteriorate, it will affect flight safety. Moreover, flight training will be hindered as student pilots will be grounded when crosswinds prevail. Today's FAA policy fails to account for the diversity and limitations of GA aircraft. It focuses on the most demanding (usually heaviest or fastest) aircraft to use an airport. These aircraft can tolerate stronger crosswinds than lighter, smaller aircraft can. What may be a safe crosswind level for large aircraft is often not safe for light GA aircraft. Yet, once it is determined that the airport is safe for large aircraft, the needs of light GA aircraft are not considered unless very specific, unrealistic conditions are met. As we look to make meaningful investments in airports, Congress should direct the FAA to make grants available for crosswind runway projects in a manner that serves all segments of aviation. Non-Primary Entitlement Program: The Airport Improvement Program provides federal grants for the planning and development of public-use airports that are included in the National Plan of Integrated Airport Systems. Funding for small general aviation airports comes partly from AIP grants under the Non- Primary Entitlement (NPE) category and discretionary account. GA airports are each currently eligible to receive up to $150,000 in annual entitlements. The entitlements are often not enough to finance projects and are often unused and returned to the FAA discretionary account. We believe Congress should reform the NPE program to ensure funds are spent at airports for which they are intended. This action will also help secure the future of general aviation. AOPA works closely with our partners at DOT, FAA, and other federal agencies on the many issues that impact general aviation and pilots. We value the work that has been accomplished but more can be done to benefit the general aviation community. Designated Pilot Examiners (DPEs): For several years now, pilots have raised concerns regarding the lack of availability of designated pilot examiners (DPEs) across the country. To become a certified pilot, an individual must complete numerous flight examinations throughout their flight training which are typically performed by delegates of the FAA, known as DPEs. The next generation of aviation professionals will be unable to meet their aviation dreams without adequate availability and access to DPEs to take and complete the required FAA flight examinations. While the FAA has implemented some programs that have provided limited relief, designee availability remains a challenge. To ensure the future growth of the pilot population, especially with the increased demand for flight training and this nation's overall need for pilots, additional DPE reform is needed to ensure an adequate number of DPEs are available and accessible. To address these concerns, Congress should require the FAA to implement the recommendations in the report from the Designated Pilot Examiner Reform Working Group to ensure an adequate number of designees are available. Additionally, the FAA should complete a review of current DPEs for their activity and replace DPEs not performing an appropriate number of examinations, while ensuring newly selected examiners can fully support applicants in their area. Additional focus must be placed on selecting DPEs who do not provide examinations exclusively to one school to ensure trained applicants at schools without examining authority have appropriate access to DPE services. Flight Training: The FAA has long recognized the importance of pilots obtaining flight instruction in the aircraft they intend to operate. Doing so ensures pilots have access to relevant training, experience, and flight testing in the specific aircraft to be flown, which is a significant factor in making our aviation system the safest in the world. Unfortunately, pilots and flight instructors who operate certain categories of aircraft suddenly had their accessibility to flight instruction and flight testing restricted due to a 2021 FAA legal argument that instruction and testing as carrying a person ``for hire'' like a commercial carrier. With the Transportation and Infrastructure Committee's leadership and support, the National Defense Authorization Act (NDAA) for Fiscal Year 2023 included language that addressed the 2021 FAA directive. Unfortunately, the final version only addressed a small sector of the general aviation industry and it did not fully return the flight training accessibility to what had been in place for over 70 years. Since at least 1949, student instruction was not considered carriage of goods or persons for compensation or hire. For safety, we must restore this commonsense approach and Congress should direct the FAA to mandate that student instruction, flight training and testing shall not be considered carrying persons or property for compensation or hire. This clarification will restore safety in the National Airspace System through reducing barriers to training and will reduce the FAA's administrative burdens. Aircraft Registration Renewal and Registration Numbers: With the Committee's leadership to change the aircraft registration renewal from three years to seven years under the 2018 FAA Reauthorization Act, we are pleased the FAA has finally moved the aircraft registration renewal period to seven years. The extension from three to seven years will have a positive effect on reducing the FAA's unacceptable backlog of registration renewals of six months and sometimes longer. However, while the FAA registry has been making progress to reduce the backlog from a high of over 190 days to under 120 days, there is still a long way to go for the FAA to get down to a reasonable renewal time. Congress should mandate a review of the FAA's aircraft registration system and require the agency to come up with a plan to bring the registration process time down to 30 days in the near term. In addition, the FAA should ensure that once an aircraft owner submits a renewal application and it is accepted into the FAA registry for processing, the temporary registration remains in effect until the permanent registration is received, regardless of how long the FAA takes to provide the permanent registration. Another concern is aircraft registration numbers (or N numbers) being routinely reserved via computers and held in bulk which can unfairly eliminate the possibility of general aviation aircraft owners from obtaining the registration numbers they request. Some companies reserving N numbers in bulk are then selling them for exorbitant fees to aircraft owners desiring the N number. The current process is unfair by not allowing aircraft owners to obtain desired registration numbers. To address this unfair and predatory practice, Congress should require the FAA to review how registration numbers are reserved and enact process changes to ensure fair participation by eliminating computer- generated bulk reservations for aircraft registration numbers. Unleaded Aviation Fuel and the EAGLE Initiative: There is no more pressing issue that general aviation faces today than the need to transition to 100% unleaded fuel. We in General Aviation want lead out of fuel but it must be done in a safe and smart way. The general aviation community and FAA have been working to find an unleaded fuel for more than a decade, now with two approval pathways: the Piston Aviation Fuels Initiative (PAFI), a public-private initiative, and Supplemental Type Certificate (STC), which allows the FAA to approve fuels developed by private entities. Congress has strongly supported the effort, and since FY12, Congress has appropriated $57 million to PAFI, which includes an additional $10 million provided in the FY23 Omnibus Appropriations bill. Just last year, the FAA gave STC approval for virtually the entire GA piston fleet for a 100-octane unleaded avgas developed by General Aviation Modifications Inc. (GAMI) of Oklahoma. GAMI is currently working on commercializing its fuel, encompassing the refinement, logistics, and storage needed to get this fuel to our airports. Swift Fuels is working on another 100-octane unleaded fuel and reports that it should gain STC approval later this year. In addition, two fuels are showing progress through the PAFI program. The industry's clear goal is to find a drop-in 100-octane fuel that can be safely used by all piston powered aircraft in the GA fleet. The FAA, and hundreds of industry stakeholders representing every corner of aviation and those that have a vested interest in this safe transition, have come together under the public-private EAGLE initiative (which stands for Eliminate Aviation Gasoline Lead Emissions). This partnership has one goal in mind: removing lead from all aviation fuel no later than 2030 and no matter from where that fuel(s) come from. I serve as co-chair of the Eliminate Aviation Gasoline Lead Emissions (EAGLE) program, along with the FAA's executive director of aircraft certification, and we are laser focused on the goal of removing lead from aviation gasoline by 2030, hopefully sooner. While these are very positive steps, a real threat to general aviation safety is being played out in Santa Clara County, California, with other locales looking closely at what is happening there. Santa Clara County's action last year to prematurely ban the higher-octane fuel (100 low lead) that is required by thousands of general aviation aircraft to fly safely is simply irresponsible. Putting the wrong fuel in an aircraft can cause catastrophic engine failure--placing the pilot and those on the ground in danger. Aircraft needing this higher-octane fuel include those flying missions of search and rescue, disaster relief and law enforcement. We understand that some of these important missions from Reid-Hillview in Santa Clara County have shelved, which is unfortunate news to local residents who rely on these services. In addition, there has already been one reported aircraft accident in Santa Clara County that has been directly attributed to misfuelling, primarily because the fuel needed to fly safely was not available. AOPA and the general aviation community, including airports, fully supports removing lead from aviation gasoline. As we transition, we also need to ensure the safety of pilots and require airports to fulfill their AIP grant assurances by making 100LL available until a fleet wide solution is readily available. Airports accepting funds are legally bound to not discriminate against any class of aircraft at their airports, including the fuel they need to fly safely. The unfortunate action by Santa Clara County, left unchecked, could have an unfortunate domino effect across the 5,000 public-use airports across this country, thereby posing significant consequences to general aviation in the United States. By working together, we can achieve our goal of removing lead from aviation gasoline and ensuring a safe and smart transition to get us there. Conclusion: We have an opportunity with this year's FAA Reauthorization to set the course for securing the future for general aviation. I would like to again thank the Subcommittee for this important hearing today. AOPA looks forward to working with the Committee on the upcoming FAA Reauthorization bill on the issues outlined today and others that impact pilots and aircraft owners. Mr. Yakym. Thank you, Mr. Baker. I ask unanimous consent to enter into the record the letter referenced by Mr. Baker in his testimony. And without objection, so ordered. [The information follows:] Letter of March 9, 2023, to Hon. Sam Graves, Chairman, and Hon. Rick Larsen, Ranking Member, Committee on Transportation and Infrastructure, and Hon. Garret Graves, Chairman, and Hon. Steve Cohen, Ranking Member, Subcommittee on Aviation, from the Aircraft Owners and Pilots Association et al., Submitted for the Record by Hon. Rudy Yakym III March 9, 2023. Honorable Sam Graves, Chairman, House Committee on Transportation and Infrastructure, 2167 Rayburn House Office Building, Washington, DC 20515. Honorable Rick Larsen, Ranking Member, House Committee on Transportation and Infrastructure, 2167 Rayburn House Office Building, Washington, DC 20515. Honorable Garret Graves, Chairman, House Aviation Subcommittee, 2167 Rayburn House Office Building, Washington, DC 20515. Honorable Steve Cohen, Ranking Member, House Aviation Subcommittee, 2167 Rayburn House Office Building, Washington, DC 20515. Dear Messrs. Graves, Larsen, Graves, and Cohen, We write today to express our strong support for an effort being led by the Aircraft Owners and Pilots Association (AOPA) that calls for the construction or implementation of transient parking ramps at public-use airports. Our organizations represent hundreds of thousands of pilots who own and operate virtually every general aviation aircraft type in the fleet, and we cannot agree more with AOPA and applaud their efforts. We believe individual owner-operators of aircraft should not be required to pay fees to a private business on a public-use airport when their products and services are not used, needed, or requested. Most Fixed-Based Operators (FBOs) provide excellent service and are integral to our nation's aviation fabric. Unfortunately, there is a lack of competition at many airports in our system which has led to increasing prices and above normal profits. We have and continue to see unprecedented consolidation in the FBO market, which has led to monopolistic behaviors at many of our nation's public-use airports. Clearly, private equity firms have prioritized returns on their investments and placed the burden on the backs of pilots. Simply said, we need policies at federally funded airports that create competition and help incentivize aviation activity, not unfettered practices that allow users of our aviation system to be penalized. Unlike the airlines, private pilots do not have a process available to negotiate fees and charges at airports. Today, pilots are subject to a multitude of fees including tie down fees, security fees, maintenance fees, building fees, handling fees, habitat fees (offset for FBO employees working in high-cost areas), and others even when no fuel is purchased or when their services have not been requested. Many FBOs waive or reduce these fees when fuel is purchased but those entities most often have extraordinarily high, above market, fuel prices. Again, we firmly believe policies at federally obligated public-use airports should allow access without requiring private pilots to pay businesses for something they did not need or request. We also believe public-use airports should be required to provide access to an itinerant ramp for parking with the ability to impose a fair and reasonable fee. In order for general aviation to grow and prosper in this nation, we respectfully request the House Transportation and Infrastructure Committee address this issue in the impending FAA Reauthorization. We are more than happy to provide any additional information the Committee may need. Sincerely, Aircraft Owners and Pilots Association. AAA Flying Club, Inc. Fort Wayne, IN. Acanthus Flying Club, MA. Acorn Mutual Flying Club, Lancaster, PA. Aerial Perspectives, LLC, OK. Aero Club Valkaria, FL. Aero Fliers, Inc., OH. AeroFlyte of Pomona, Inc., CA. AESOP, LLC, OR. A Great Bonanza, LLC, TX. Airborne Aviation, NC. Air Care Alliance. Aircraft Pilots of the Bay Area, CA. Aksarben Flying Club, NE. Alameda Aero Club, Oakland, CA. Alaska Airmen's Association. American Bonanza Society, KS. Ambrose Air Charter, IA. American Dream SkyRanch, SC. Archer Aviation, LLC, IA. Arizona Cloudbusters Flying Club, AZ. Arizona Pilots Association. Arkansas General Aviation Association. Altron Industrial, LLC, VA. Armed Forces Aero Club, San Diego, CA. Associated Aviation Services, LLC, CA. Association of Professional Warbird Operators, Inc., FL. Augusta Flying Club, GA. Austin Aviators Flight Club, TX. Aviation Adventures Flight Schools. Backcountry Aviation, LLC, VA. Bakalar Flying Club, Columbus, IN. Barnstormers Flying Club, Inc., TN. Bates Aero Club, AL. Bay Area Aero Club, Pearland, TX. Beaver Valley Flying Club, PA. Big Bear Airport Pilots Association, CA. Black Hole, Inc., Flying Club, Georgetown, TX. Bloomsburg Flying Club, PA. Blue Horizons Flying Club, OH. Blue Ridge Flyers, VA. Boca Raton Pilots Association, FL. Boyertown Flying Club, Pottstown, PA. Bradley Flying Association, Peoria, IL. Bridge City Flyers, IA. Brighton Airport Association, MI. Brighton Flying Club, MI. Broomstick Aviation, LLC, IA. California Pilots Association. Caltech/JPL Flying Club. Camas Washougal Flying Club, WA. Capitol City Flyers, Inc., WI. Capitol Flying, Inc., CA. Cardinal Flyers Club, CA. Carrabelle Flying Club, Inc., FL. Cascade Flyers, Inc., WA. Centex Aero, LLC, TX. Central Oklahoma Aviators Flying Club. Cereal City Flying Club, MI. Chesaning Sportplane Association, MI. Chesapeake Skyhawks, MD. Chocks Away Aviation, LLC, MD. Cirrus Owners and Pilots Association. Citation Jet Pilots Association. Civil Air Patrol Flying Association Inc, Hartford, CT. Cloud Dodgers Flying Club, FL. Collegedale Pilots Association, TN. Colorado Pilots Association. Columbia Aviation Association, OR. Columbia Flight Club, MO. Commemorative Air Force. Compass Rose Aviation, KS. Congressional Flying Club, MD. Connell Aviation Group, Inc., IA. Connellsville Flying Club, PA. Consult Air, LLC, MS. Corporate Aircraft Association. Courtesy Aircraft Sales, Rockford, IL. Craig Airport Pilot Association, FL. Crossroads Flying Club, NM. Crosswinds Flying Club, Inc., Bloomington, IL. Dearborn Flying Club, MI. Dee Howard Foundation, TX. Deer Valley Skyhawks, AZ. Delaware Valley Aviation, PA. Denton Aviation, Inc., OK. Departure Aviation Services, NC. Desert Flying Club, NV. Destin Airport Association, FL. Downwind Flying Club, WA. Dunedin Flying Club, Inc., FL. Experimental Aircraft Association. EAA Chapter 25, Lakeville, MN. EAA Chapter 38, Perry, GA. EAA Chapter 52, Sacramento, CA. EAA Chapter 99, Vero Beach, FL. EAA Chapter 150, Collegedale, TN. EAA Chapter 193, Jacksonville, FL. EAA Chapter 351, Enterprise AL. EAA Chapter 485, Pensacola, FL. EAA Chapter 724, Merritt Island Flying Club, FL. EAA Chapter 731, Hickory, NC. EAA Chapter 797, Live Oak, FL. EAA Chapter 905, St. Simons Island, GA. EAA Chapter 908, Fort Pierce, FL. EAA Chapter 943, Amelia Island, FL. EAA Chapter 977, Lake City, FL. EAA Chapter 1023, Greenwood, SC. EAA Chapter 1025, Covington, GA. EAA Chapter 1027, Willits, CA. EAA Chapter 1047, Wilson, NC. EAA Chapter 1175, Grass Valley, CA. EAA Chapter 1271, Spruce Pine, NC. EAA Chapter 1355, Greenville, SC. EAA Chapter 1432, Stockton, CA. EAA Chapter 1494, Morristown, TN. EAA Chapter 1646, Apalachicola, FL. EAA Chapter 1674, Inverness, FL. Eagle LLC, MT. East Central Ohio Pilots Association, OH. Eclipse Owners and Pilots Association. EnginAires Aero Club, IL. Every Aviation, LLC, TX. Falcon RV Squadron, GA. Fightertown, LLC, VA. Final Approach Aviation, Inc. Fliegend Flying Club, Inc., IN. Flight Crew Aviation Services, IA. Florida Aero Club. Florida Bonanza Owners and Pilots. Flyboys Flying Club, LLC, Georgetown, SC. FlybyAir, LLC, LA. Flying Club of Kansas City, KS. Flying Educators, Inc., Ft. Lauderdale, FL. Flying Engineers, Inc., Indianapolis, IN. Flying Javelina Aero-Club, AZ. Flying Knights Flying Club, OH. Flying Ten Flying Club, AZ. Friends of Boeing Field, WA. Friends of Horry Airport, SC. Friends of Lone Pine Airport, CA. Friends of Oceano Airport, CA. Friends of Pryor Field, AL. Friends of Sikorsky Airport, CT. 43rd Aviation Flying Club--Brainard Field, Hartford, CT. Gateway Flying Club, MN. GB Aviation, LLC, OH. GEM Flyers, Inc., IL. General Aviation Council of Hawaii. Gillespie Pilots Association, CA. Gnoss Field Community Association, CA. Golden Age Flying Museum, CA. Golden Eagle Aviators, West Jordon, UT. Golden Empire Flying Association, CA. G.P.A. Aviation Club, NJ. Green Lantern Aviation, LLC, TX. Grumman Owners and Pilots Association. Half Moon Bay Pilots Association, CA. Hammond Flying Club, LA. Hangar 6 Aviation, LLC, FL. Happy Landings, LLC, GA. Hartford Brainard Airport Association, CT. Hemacinto Valley Flying Club, CA. High Sierra Flying Club, CA. Hill Country Flyers, TX. Hokie Flying Club, Blacksburg, VA. Hostess City Aviators, Inc., Savannah, GA. Hotstuff Air Racing, LLC, SC. International Flying Club, DuPage, IL. Intrepid Red Barons Club, Green Bay, WI. Iowa Aviation Association. Jackson Air, LLC, TX. JCP Flying Club, MD. JKA Pilots Association, Gulf Shores, AL. Kenedy Regional Airport, TX. Kentucky Pilots Association. Kimmel Aviation Insurance, MS. Kingdom Pilots Association, MO. Knoxville Aviation, IA. Kootenai Flying Club, ID. K-T Industries, Inc., IA. Lake Shelbyville Flying Club, IL. Lakeway Flying Club, TX. Lancair Owners and Builders Organization. Lantana Airport Advisory Board, FL. Leading Edge Aviation Foundation, LLC, AR. Legacy Aero Sport, LLC, NM. Liga International, Flying Doctors of Mercy, CA. Lima Whiskey Flying Club, PA. Lockhart Flying Club, TX. Long Beach Flying Club, CA. Long Island Business Aviation Association. Low Flying Angels, CA. Mach 5 Aviation, CA. Magic Valley Aero Club, ID. Maine Aeronautics Association. Marco Aviation Club, FL. Marshall Aviation Services, Inc., IN. Mid-Tenn Aero Club, Murfreesboro, TN. Mighty Mule Flying Club. Mineral Wells Flying Club, TX. Minnesota Pilots Association. Monroe County Airport Association, Aberdeen, MS. Montana Pilots Association. Monterey Pilots, CA. Moresco Services, Inc., PA. Morgantown Aero Club, PA. Mountain Flyers, Inc., Asheville, NC. Mother Lode Flying Club, Calaveras County, CA. National Warbird Operator Conference, LLC, IL. National WASP WWII Museum, Sweetwater, TX. New Bedford Regional Pilots Association, MA. New Braunfels Flying Club, TX. New England Flying Club, MA. New Jersey Aviation Association. New Mexico Pilots Association. New River Flying Club, WV. NorCal Flight Club, CA. North American Trainer Association. Northeast Florida Aero Club, FL. North Shore Aero Club, MA. Oceanside Airport Association, CA. Octopus Flying Club, MD. Odyssey Aero Club, Sanford, NC. 150th Aero Flying Club, NJ. Olds Forge Flyers, Inc., MI. One Way Holding, LLC, VA. Onslaught Air Racing, LLC, SC. Oregon Aviation Industries. Oregon Pilots Association. Orlando Aero Club, FL. Orlando Christian Flying Club, Inc., FL. Pacific Bonanza Society, CA. Pacific Gold Aviation Association, CA. Page Field Association, Fort Myers, FL. Palm Beach Aircraft Services, FL. Panther Aviation, LLC, VA. Payson Aero Club, LLC, AZ. PDK Airport Association, Atlanta, GA. Penn Yan Flying Club, NY. Perkins Flying Club, AZ. Petro Blend Corp, IA. Phoenix Flying Club, AZ. Pilatus Owners and Pilots Association. Pinellas Pilots Association, FL. Pine Mountain Aviation Association, CA. Pittsburgh Flying Club, PA. Plane Lease, LLC, IA. Plymouth Flying Club, Inc., NH. Premier Flight Solutions, FL. Princeton Flying Club, NJ. Recreational Aviation Foundation. Red Baron Flyers, Inc., Caledonia, MN. Redlands Airport Association, CA. Redlands Flying Club, CA. Reedsburg Area Flying Club, LLC, WI. Reno-Tahoe Aviation Group, NV. RFC Flying Club, Inc. Cedar Rapids, IA. Ridgeland Aviation Community Association, SC. Riverside Pilots Flying Club, CA. RPM Flying Club, IL. Runway Three-Six, LLC, IA. Runyon Aviation, LLC TX. RWJ Airpark Property Owners Association, TX. Salem Aero Club, DE. San Carlos Airport Association, CA. Sandpiper Aviation, NV. Sarasota Westwind Flying Club, FL. Savannah Area Aviation Association, GA. 7 AC Club, Inc., Clearwater, FL. Servos, LLC, VA. Shenandoah Valley Soaring Club, VA. Sheridan Pilots 307, LLC, Flight School, WY. Silver City Aviation, LLC, KS. Silver City Flying Club, CT. Sky Bryce Flying Club, LLC, VA. Skycrafters, Tri-Cities, TN. Skyhawk Flying Club, NE. SkyMaster Company, LLC, SC. Skyriders Flying Club, CO. Skyriders Flying Club, ID. Sky's the Limit Flying Club, OH. Skytrain Company, LLC, SC. Sky-Vu Flyers, Inc., IN. SoCal Pilots Association, CA. South Shore Flying Club, Marshfield, MA. Southern Heritage Air Foundation, MS. SouthWings Spirit Flyers, Inc., Chesterfield, MO. Spirit of Meriden Flight Club, CT. St. Augustine Airport Pilots Association, FL. Strikehalk Aviation, AL. Sun Country Aero Club, FL. Swift Arrow Flight Club, TX. Swift Museum Foundation, Athens, TN. Syracuse Flying Club, NY. Taildragger Flyers, Inc., MI. Tailwind Aviation Solutions, Perry, GA. Taunton Pilots Association, MA. TBM Owners and Pilots Association. TDM Aviation, LLC, TN. TFC Flying Club, Inc., CT. Tennessee Flyers Flying Club. The Bluff City Flyers, Inc., TN. The Nashville IMC Club, TN. Thomasville Flying Club, GA. Tidewater Flying Club, VA. Tillamook Pilots Association, OR. TLM Holdings, LLC, OR. TopFlight Aviation, Inc., Nashville, TN. Torrance Airport Association, CA. Triangle North Pilots Association, NC. Tuolumne County Aeronautical Association, CA. Turris Flight Training, SC. T-34 Association. 20 Awesome, LLC, NM. United Flying Club, CA. Upper Valley Flying Club, Inc., Lebanon, NH. Upstate Flying Club, NY. U.S. Aero Club, LLC, CA. Valley Aircraft Restoration Society, Mesa, AZ. Valley Pilots Flying Club, Inc., Concord, CA. Van's Aircraft, Inc., OR. Venice Aviation Society, Venice, FL. Veterans Airlift Command. Wachusett Flying Club, LLC, MA. Warbird Adventures, SC. Warbird Aviation Services, LLC, PA. Warbird Museum, LLC, VA. Washington Pilots Association, WA. Washington Seaplane Pilots Association, WA. Watsonville Pilots Association, CA. WB Hangars, LLC, SC. Western Air Flying Club of Los Angeles, Inc. Western Flying Club, NC. Western Reserve Flight Club, OH. Westminster Aerobats Flying Club, Inc., MD. Westwood Property Management, OR. Whiteman Airport Association, CA. Windwalker Aviation, AL. Wind River Flyers, WY. Wilmington Pilots Association, NC. Wing And A Prayer Flying Club, Athens, GA. Wingnuts Flying Club, Chesterfield, VA. Wings Over Winyah Flying Club, SC. Yellow Bird Flying Club, OH. York Travelers Flying Club, PA. Youth Eagles Aviation, CA. Zephyrhills Flying Club, Inc., FL. Zephyrus Flying Club, NV. Mr. Yakym. Next we are going to hear from Mr. Jack Pelton, CEO and chairman of the board for the Experimental Aircraft Association. You are recognized for 5 minutes for your testimony. TESTIMONY OF JACK J. PELTON, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD, EXPERIMENTAL AIRCRAFT ASSOCIATION Mr. Pelton. Thank you and good morning, Chairman Graves, Ranking Member Larsen, and the rest of the Aviation Subcommittee. Thank you for inviting EAA, the Experimental Aircraft Association, today to provide our input on ``FAA Reauthorization: Securing the Future of General Aviation.'' EAA is an organization that has been around for 70 years, who originally was founded for people who are building and restoring their own airplanes. Today, we essentially represent the entire spectrum of recreational aviation. We have over one- quarter of a million members, over 900 local chapters, and we host over 14,000 aviation activities each year. If you look at the fleetwide survey that was done by the FAA, the active fleet of amateur-built aircraft has grown by more than 30 percent in the last 20 years. And actually, on an annual basis, there are about 1,000 new amateur-built aircraft that enter the NAS. One of the initiatives that we are well known for is our Young Eagles program, which is in its 30th year. Our Young Eagles program takes young people for their first experience in flight, through our members who provide their airplane, their time, and their fuel to provide these free introductory flights. We have flown over 2.3 million young people, and this experience has introduced them to general aviation, and then many of them have pursued careers as military or airline pilots, aerospace engineers, and a host of other aviation- related activities. So, we have created a generation, essentially, of people who have a deeper appreciation for aviation, thanks to their first flight with EAA. We also participate in summer Air Academy residence camps in Oshkosh, Wisconsin. And we have online portals for young people and teachers to learn and understand more about general aviation. A lot of people think of us as just the association that has an annual convention held in Oshkosh, Wisconsin, where over 10,000 aircraft arrive, and 600,000 people attend from 90 nations. I had the opportunity to take the equivalent of the FAA Administrator from Germany around, who looked at me and said, ``You have more airplanes, general aviation airplanes, on the ground here than we have registered in the country of Germany.'' Ranking Member Cohen had outlined general aviation's importance to the aviation industry, and I will not continue to go back over that. It is clear that we are positioned as a world leader, but we have concerns. One of the foundations is general aviation, and we must retain this position. We must take action to ensure that our general aviation remains safe, healthy, and robust, since we are the gateway to aviation. We want to thank Transportation and Infrastructure Committee Chairman Graves for understanding this, and addressing GA specifically in the next reauthorization bill. Key components to the industry's success is effective, efficient, and consistent regulatory oversight. FAA oversees and regulates almost all aspects of aviation, including air traffic control; aircraft design; production and maintenance; pilot, mechanic, and crew certification; and airport operations. Aviation struggles when FAA is unable to provide timely oversight or inefficiently exercises its regulatory authority. Industry is stymied by the delays in processing of aircraft registrations, or the issuance of pilot and mechanic certificates at all levels, and timely completion of aircraft certification programs. Pilot training is a great example. As Mr. Baker mentioned, the shortage that we have with the Designated Pilot Examiners is a crisis that needs to be addressed. And we hope that in an FAA reauthorization, you can implement the recommendations of the Designated Pilot Examiner Reforms Working Group that came up with the recommendation to have national oversight as opposed to oversight at the local FSDOs. We also think, as part of that specialty, DPEs should have the ability to go back to when we had the all makes and model authorization for experimental warbirds. Our number-one issue is Modernization of Special Airworthiness Certificates. This is a regulatory rulemaking activity with a significant opportunity to grow general aviation with the expansion of existing aircraft categories called light-sport aircraft, the current class of aircraft whose size and weight limitations restrict their useful training and commercial viability in the market. We are asking Congress to ensure that critical rulemaking continues to have the support it needs by directing the FAA to publish, by the end of 2024, this very important regulatory change. The EAGLE fuel program was mentioned, of which we are strong supporters and participants in. And what we do need is to make sure that Congress can help the safe introduction of the new fuel, while still maintaining the supply of 100 Low Lead, so that nobody is left grounded. I greatly appreciate the opportunity to appear before this committee and provide our views, the challenges, and opportunities. I look forward to working with Congress and the FAA to ensure the United States remains the gold standard in aviation, and that general aviation continues as a vibrant foundation to that standard. Thank you. [Mr. Pelton's prepared statement follows:] Prepared Statement of Jack J. Pelton, Chief Executive Officer and Chairman of the Board, Experimental Aircraft Association Introduction Good morning Chairman Graves, Ranking Member Cohen, and members of the Subcommittee. Thank you for inviting the Experimental Aircraft Association (EAA) to be here today and to provide our input on FAA Reauthorization: Securing the Future of General Aviation. My name is Jack Pelton and I am EAA's Chief Executive Officer and Chairman of the Board. Founded on January 26, 1953, in Milwaukee, Wisconsin, as a local club for those who built and restored their own aircraft, EAA has developed to become a vibrant and growing international aviation community representing virtually the entire spectrum of recreational aviation. Today, EAA is headquartered in Oshkosh, Wisconsin, as a non- profit 501(c)(3) corporation, we encompass more than a quarter million members in more than 100 countries, with over 900 local chapters. The Chapter network is the backbone of EAA and is responsible for more than 14,000 aviation activities each year. While the initial purpose of EAA was to aid and assist amateur aircraft builders, we now encompass all of recreational aviation and the promotion of aviation safety throughout general aviation. EAA initially established the segment of general aviation called experimental amateur-built, supporting those people that choose to build and fly their own aircraft. According to the FAA's General Aviation and Part 135 Activity Survey, the active fleet of amateur- built aircraft has grown more than 30% over the past 20 years. This proves that the homebuilding community is an essential growth sector of general aviation--with challenges across the general aviation industry over the past few decades this steady gain is an impressive accomplishment. Today, amateur-built aircraft encompass more than 17% of the entire active single-engine piston fleet, and every year our members add approximately one thousand new amateur-built aircraft to the National Airspace System. As we celebrate our 70th anniversary this year, our mission remains unchanged. We are as dedicated to growing participation in aviation as our founders were in the beginning. We strive to make aviation easier, more accessible, more rewarding, and more fun--igniting and nurturing interest by embracing ``The Spirit of Aviation'' in all that we do. In 2022 we celebrated the 30th anniversary of our Young Eagles program, which provides free introductory flights to youth through a well-structured program utilizing our chapters and members who volunteer to provide these flights. Acting on our mission of growing participation, Young Eagles has to date provided nearly 2.3 million flight experiences. That's millions of young people who have been introduced to general aviation, many who have then pursued careers as military or airline pilots, aerospace engineers or a host of other aviation related professions. This program has created a generation of people who have a deeper appreciation for aviation thanks to that free first flight. EAA's focus on youth education also includes our Air Academy residence camp, our online AeroEducate portal for young people and teachers, and numerous other youth-focused aviation programs based within our local chapters and at our headquarters in Oshkosh. In addition, EAA's annual convention, EAA AirVenture Oshkosh, is the world's largest fly-in event, with 10,000 aircraft gathering in Oshkosh along with an annual attendance surpassing 600,000, from more than 90 nations. It is THE gathering place for general aviation in America each summer, where new innovations and technologies are unveiled, and more than 1,000 forums cover all facets of aviation. General Aviation's Value to the United States The general aviation industry contributes an estimated $247 billion in economic output and 1.2 million jobs in the United States. It provides a lifeline to many towns across the country and provides critical services in times of natural disasters such as hurricanes, flooding, and wildfires. Our nation is served by more than 5,000 public-use airports, 13,000 private airports and airstrips, and 5,500 heliports across the country. General aviation is an integral part of the transportation system that supports communities across the United States, especially in rural areas, by providing essential air travel options to businesses and the public, forging links between thousands of companies, their suppliers, and their customers. General aviation operations include emergency medical personnel and supplies delivery, disaster relief and recovery, search and rescue, agricultural aviation activities, recreational pursuits, personal transportation, and more. General aviation also supports commercial aviation through the training of a significantly large percentage of airline pilots. The United States as a World Leader in Aviation The United States' position as the world leader in aviation is established on the foundation provided by general aviation. For the United States to retain this leadership position, we must take action to ensure that our general aviation community remains healthy and robust. General aviation typically serves as the gateway to almost all others facets of aviation. The nation's local airports, located in big cities, small towns, and rural areas repeatedly serve as the introduction to aviation for nearly everyone who enters or is associated with aviation. Ask any pilot or aircraft mechanic, commercial, military, or civilian, about how they were introduced to aviation, and it will likely involve an early encounter with general aviation at a local airport. The United States' position as the leader in training of pilots and maintainers, designing and producing of new aircraft, and developing and implementing new technologies can only continue with a robust and healthy aviation industry, and that must include a robust and healthy general aviation component. Challenges and Opportunities Facing General Aviation A key component to the success of the aviation industry in the United States is to have effective, efficient, timely, and consistent regulatory oversight. The Federal Aviation Administration (FAA) serves as the regulatory agency with responsibility for the National Airspace System (NAS) and safety must always be its primary focus. To do so, the FAA oversees almost all aspects of aviation including air traffic control, aircraft design, production and maintenance, pilot, mechanic and crew certification, airport operations, and installation and maintenance of navigation aids. Many sectors of general aviation struggle when the FAA is unable to provide timely oversight or to exercise its regulatory authority effectively or efficiently. Today, our industry is being stymied by delays in the processing of aircraft registrations, the issuance of pilot and mechanic certificates at all levels, and the timely completion of aircraft certification programs. In many cases, it is not just the delay, but the uncertainty of not knowing how long the delay will be. For individuals preparing for practical tests, the delay adds cost to already expensive training programs. Additional training including instructor and equipment costs to maintain proficiency and, in some cases, needed travel expenses, adds stress and hassle to an already challenging situation. Companies developing new aircraft or components and undergoing certification, or those that rely on their aircraft and are awaiting approval of new equipment installations, are in the position of not knowing when they may be granted their approvals. From a business perspective, the uncertainty of not having a timeline is worse than having a very long timeline. To be successful, industry must be able to rely on a consistent regulatory structure and timelines. These delays are the result of a combination of dated programs, lack of staffing, and a shortage of qualified individuals in many critical FAA offices. These delays are compounded by a lack of agency-wide reporting of key performance indicators that provide important statistics on the status, efficiency, and effectiveness of the FAA's oversight of the industry. Designated Pilot Examiners To address the issues in pilot certification, the agency should expand its use of the Designated Pilot Examiners by moving oversight from the local to national level to further leverage the resources and knowledge of the General Aviation industry. The aviation industry is currently facing a significant shortage of Designated Pilot Examiners (DPE) nationwide, with some Examiners maintaining a wait time of 4-6 weeks to schedule a practical test to issue a pilot certificate. The problem appears to be rooted in the systematic oversight of Examiners through the FAA Flight Standards District Office (FSDO) network. The FAA should implement the recommendations of the Designated Pilot Examiner Reforms Working Group (DPERWG) as established by the Aviation Rulemaking Advisory Committee (ARAC) which includes the implementation of a national oversight program for all Examiners. Nationalizing Examiner oversight, moving oversight to the FAA Headquarters level, will address the issue of Examiner shortage by removing the requirement for an appropriately qualified Aviation Safety Inspector at each office. This program will also focus the FAA's resources ensuring Examiner deployment is adequately resourced and will standardize the selection process making for a more transparent national system. Modernization of Special Airworthiness Certificates EAA works closely with a number of FAA offices on the development and ongoing improvement of programs important to the growth and health of general aviation. One effort currently underway that presents a significant opportunity to grow the general aviation industry is the Modernization of Special Airworthiness Certificates (MOSAIC) rulemaking. MOSAIC is the expansion of the current Light Sport Aircraft (LSA) standards. LSA is a current class of aircraft whose size and weight restrictions limits their usefulness as training aircraft and their commercial viability in the market. MOSAIC, as envisioned and when implemented, has the potential to demonstrate how an Agency can effectively expand a regulatory structure to support growth while maintaining safety. Thanks to action taken by current FAA leadership, the MOSAIC Notice of Proposed Rulemaking (NPRM) is now expected in summer of 2023. We feel Congress should ensure this critical rulemaking continues to have the support it needs by directing the FAA to publish, by the end of calendar year 2024, a final rule that expands the utilization of light- sport aircraft, promotes their use in flight training and does so in a manner that ensures U.S. manufacturers are not at a disadvantage to foreign manufacturers. Future Fuel for General Aviation EAA remains firm in our support of efforts to remove lead from aviation gasoline, and it is our position that any transition from leaded to unleaded gasoline must be effectuated with safety as the highest priority. In an exhaustive 2021 report to the FAA on options for reducing aviation lead emissions, the National Academies of Sciences, Engineering, and Medicine recommended that the ``FAA should continue to collaborate with the [general aviation] industry, aircraft users, airports, and fuel suppliers in the search for and deployment of an acceptable and universally usable unleaded replacement fuel,'' urging a ``holistic process'' to develop and deploy such a fuel. Only through a government-industry effort that would involve the private sector, the FAA, and Congress could the aviation system eliminate lead emissions. We agree with that conclusion, and accordingly the FAA, general aviation associations, and other aviation stakeholders have launched a public-private initiative titled ``General Aviation Commitment to Eliminate Aviation Gasoline Lead Emissions,'' or ``EAGLE,'' which intends to achieve its firm goal--elimination of lead emissions from general aviation aircraft by the end of 2030, or sooner if possible-- through development and deployment of a viable high-octane unleaded replacement aviation gasoline that can be safely operated by the U.S. fleet with minimum impact. The next 12 to 18 months will provide our industry with a better understanding of our unleaded future. Four high-octane unleaded fuels are currently in evaluation and/or deployment phases to determine whether they are a viable replacements for our current fuel. In September of 2022, the FAA approved the first high octane unleaded fuel after many years of testing. The developers of this fuel, working with industry partners, are now focused on the production and distribution infrastructure needed to support the commercialization of this fuel. Another of the four fuels has indicated that they expect to receive their authorization from the FAA sometime this year. They will then also be exploring the production and distribution of their fuels. The two additional fuels are in various stages of testing with results and potential authorizations anticipated in 2024. Vital to a successful and stable transition to an unleaded fuel is maintaining the availability of our current avgas during this period of development, authorization for use, commercialization, and deployment. The FAA plays a vital role in protecting the avgas supply throughout this process, particularly on federally funded airports. It is imperative that the FAA ensure the safe and coherent operation of the National Airspace System by protecting the continued supply of aviation gasoline with the timely and expedient enforcement of airport grant obligations. We cannot undermine the vitality and importance of the general aviation community while making progress toward an unleaded future. Additionally, the EAGLE initiative is currently looking at areas for potential federal investment to facilitate this transition and we would like to work with Congress as these initiatives are developed. Uncrewed Aircraft Systems (UAS or Drone) Integration EAA remains committed to the philosophy that Uncrewed Aircraft Systems (UAS) should be integrated into the National Airspace System, while maintaining that the safety and sanctity of crewed aircraft must remain absolutely paramount. Any changes to existing airspace, procedures, or regulations that provide access to UAS cannot decrease the safety, encumber in any operation that is presently allowed, nor impose any equipment mandates on crewed aircraft beyond what is already required. EAA supports integration and recognizes the benefits of safely integrating UAS operations into the NAS. However, safety of crewed aircraft and the public must always be the first priority of integration. We encourage Congress to ensure that the FAA continues to integrate UAS into the National Airspace System without burdening the general aviation community with cost or operating restrictions. FAA Industry Engagement and Presence With these challenges, we have seen a trend within the FAA to be hesitant to send staff to in-person industry meetings and events. At a time when the FAA is challenged to effectively administer programs, engagement and communication with industry should be increased, not decreased. We strongly encourage the FAA to continue to staff these important meetings to ensure that industry is kept abreast of the agency's challenges. It is through these meetings and discussions that FAA and industry can develop strategies to work together to find solutions and paths to most effectively utilize limited resources. Many of these events also allow the FAA to maximize travel expenditures by seeing numerous groups of the regulated community on the same trip, which otherwise would require multiple trips or would eliminate valuable face-to-face opportunities with the FAA. Closing We greatly appreciate the opportunity to appear before this committee and provide our views on the challenges and opportunities facing general aviation. Throughout our history, EAA has worked closely with the FAA to develop programs that enabled and expanded the scope of recreational aviation. We look forward to working with this Congress and the FAA to ensure that the United States remains the gold-standard in aviation and that general aviation continues as the vibrant foundation to that standard. Mr. Yakym. Thank you. Mr. Rick Crider, testifying on behalf of the American Association of Airport Executives, you are recognized for 5 minutes. TESTIMONY OF RICK CRIDER, A.A.E., EXECUTIVE VICE PRESIDENT OF AIRPORT/RAILPORT AND MILITARY RELATIONS, PORT SAN ANTONIO, ON BEHALF OF THE AMERICAN ASSOCIATION OF AIRPORT EXECUTIVES Mr. Crider. Thank you. Good morning, Vice Chair Yakym, Ranking Member Cohen, members of the subcommittee. Thank you for the opportunity to provide testimony and comment regarding general aviation issues and the upcoming FAA reauthorization process. I am appearing today on behalf of AAAE and member airports across the country, along with my own perspectives from operating Kelly Field in San Antonio--one example of a vibrant, joint-use industrial GA airport. It is an honor to join this distinguished panel of industry leaders today and highlight the importance of general aviation and GA airports. GA airports often serve as key operational hubs for law enforcement, firefighting, aerospace manufacturing, aircargo, agriculture, and pilot training. They are important community portals for business and private aircraft operations and, in some cases, play the role of economic engines, job centers, and R&D sites for new and emerging technologies. While GA airports vary significantly in size, complexity, and configuration, each provide unique functions and vital capabilities. Industrial GA airports like Kelly Field provide critical services to aircraft operators that require fleet maintenance, refurbishment, updates, and modifications. Ten months ago, the Port San Antonio opened a state-of-the-art innovation center, which I described in my written testimony, aimed at sparking interest in STEM within the student populations of San Antonio and exposing opportunities in aerospace and advanced technologies to the workforce of tomorrow. Kelly Field and other industrial GA airports are critical to maintaining our Nation's dominant position in global aerospace industry. When an aircraft is either delivered to its customer or returned to service, thousands if not millions of parts, components, and labor-hours are delivered to market. The FAA NPIAS reports $12.5 billion in annual AIP and BIL- eligible projects at civil airports. Almost $4 billion of that total exists at nonprimary airports alone. When projects that are not AIP or BIL-eligible are added in, airport infrastructure needs to exceed well more than $20 billion annually. This is roughly twice what airports received in AIP grants, BIL funding, and PFC revenue every year. Congress can help address this gap by increasing AIP funding to at least $4 billion annually, authorizing additional funds for supplemental grants, and providing airports with more flexibility on how they invest those dollars. We urge Congress to adjust the outdated GA entitlement, which has remained stagnant at $150,000 for more than 20 years, and have other recommendations that are more fully described in my written testimony. I thank the subcommittee for its strong support of the FAA Contract Tower Program, a successful public-private partnership that enhances aviation safety at GA and commercial service airports around the country. Twenty-five Texas airports participate in the Contract Tower Program. On behalf of my colleagues in the Lone Star State, I urge you to take additional steps to address staffing challenges, upgrade outdated towers, and ensure controllers have access to equipment that can increase their situational awareness. Like our counterparts at commercial airports, GA airports strive to be strong environmental stewards for their communities. Through AAAE, GA airports are participating in the EAGLE initiative to transition to lead-free avgas for piston- engine aircraft by the end of 2030. Airports are also eager to transition away from using firefighting foam that contains PFAS to fluorine-free foam, which is safer for the environment and firefighters alike. The FAA is expected to approve fluorine-free alternatives soon, and we ask Congress to help airports with that transition and acknowledge FAA's longstanding mandate to use PFAS by providing airports with CERCLA liability protection. The future of advanced air mobility is quickly becoming the present for the aviation industry. GA airports will likely play a major role in this new AAM ecosystem, and are excited to help make AAM a reality. However, to accommodate widespread use of eVTOLs in the future, we will need significantly greater electrical grid capacity and charging capabilities. We will also need to work together to find ways to pay for this infrastructure without reducing funds for traditional airport projects. Although travel has largely returned to pre-pandemic levels, stakeholders across the aviation system are still adjusting to the ripple effect caused by the pandemic. With the current FAA authorization set to expire on September 30th, I would like to commend this subcommittee for moving forward quickly to complete a multiyear bill on time. Short-term extensions bring about both uncertainty and a lack of predictability for the aviation system, particularly for airports that rely on AIP funds to modernize our infrastructure. On behalf of AAAE and all my colleagues at GA and commercial service airports around the country, we look forward to working with this subcommittee as you prepare for the next FAA reauthorization bill. And I thank you, and look forward to the questions that the subcommittee might have. [Mr. Crider's prepared statement follows:] Prepared Statement of Rick Crider, A.A.E., Executive Vice President of Airport/Railport and Military Relations, Port San Antonio, on behalf of the American Association of Airport Executives Chairs Graves and Graves, Ranking Members Larsen and Cohen, and members of the subcommittee, thank you for the opportunity to appear before you today to highlight the perspective of an airport operator on securing the future of general aviation (GA). My name is Rick Crider, and I am the Executive Vice President of Airport/Railport and Military Relations at Port San Antonio, in San Antonio, Texas. I am testifying today on behalf of the American Association of Airport Executives (AAAE), where I serve on the Executive Committee as Second Vice Chair. AAAE is the world's largest professional organization for airport executives representing thousands of individuals who manage and operate more than 850 public-use commercial and GA airports across the country. The Impact of General Aviation Let me begin by thanking this subcommittee and its members for your steadfast support of GA airports and the broader GA industry. General aviation is an integral part of our National Airspace System (NAS). In fact, the U.S. has the largest and most diverse system of GA airports in the world, supporting more than one million jobs and helping generate nearly $250 billion in economic impact annually. There are more than 4,400 public-use GA airports in the United States, providing communities small and large across the country access to the nation's air transportation system. While GA facilities are present and important in every state, I would note that in Vice Ranking Member Mary Peltola's state of Alaska, 82 percent of communities are not connected to the road system and are fully dependent on air service and GA facilities for life, health, and safety needs. The benefits of GA airports to individuals, businesses, and communities, as connection points to the nation's air transportation system, cannot be overstated. While GA airports vary significantly in size, complexity, and configuration, each provides unique functions and vital capabilities. In many cases, GA airports are centers for industrial aerospace activities, training hubs for the next generation of pilots, and access points to the NAS for businesses in smaller and rural communities. GA airports serve as incubators for revolutionary technologies like electric vertical takeoff and landing (eVTOL) vehicles, and other applications of advanced technologies. Law enforcement, firefighting, aerospace engineering and manufacturing, air cargo, agriculture and recreation are other examples of activities that take place at GA airports every day. Kelly Field and Workforce Development My role at Port San Antonio includes the oversight and development of the civil portions of Kelly Field, a joint use industrial airport in southwest San Antonio. Kelly Field is home to a vibrant private-sector maintenance, repair and overhaul campus that supports aircraft ranging from large commercial transport utilized by the federal government to military fighter and cargo to new commercial aircraft. Kelly Field is an industrial airport, as described in recent Federal Aviation Administration (FAA) National Plan of Integrated Airport Systems (NPIAS) reports, but classified as a GA airport. Industrial GA airports across the country provide critical services to aircraft operators, from airlines to corporate flight departments, that require fleet maintenance, refurbishment, updates, and modifications. At Kelly Field, these activities, combined with the Air National Guard and Air Force Reserve pilot training missions, generate over 11,300 jobs and $3.2 billion in annual economic impact throughout San Antonio and the south Texas region, according to a 2021 report. Without properly investing in infrastructure and developing an aviation workforce that meets the demand of industrial aerospace, those jobs and economic impact are at risk of migrating beyond our borders to places where excess capacity exists. This scenario could erode the leadership position our nation holds within the global aerospace industry. The direct correlation between airport infrastructure and aerospace commerce through the myriad of parts, components, and labor utilized is evident every time a new aircraft or an aircraft being returned to use after heavy maintenance or specialized service leaves an industrial airport. Port San Antonio recognizes that the real limiting factor in industrial aviation growth and program retention is workforce. Ten months ago, the Port opened a state-of-the-art innovation center that houses, among other things, an arena for live performances and seminars, a competition gaming center for students, and an interactive science and technology museum. The sole focus of this development is to provide a space for students, specifically the socio-economically challenged students that reside in the southern areas of San Antonio, to be exposed to opportunities in the advanced technology realm. Flight simulators, robotic displays, a town built of Legos to highlight control systems and vulnerability to cybersecurity threats, a mock security operations center, and 3D printing present STEM through the lens of legacy aerospace and emerging industries. The innovation center is owned by and resides on Port property and is just a few blocks from Kelly Field. The Port's vision is to excite and prepare a pipeline of future workers who are enthusiastic and engaged in the pursuit of technical careers. The 80-plus companies that call Port San Antonio home use this platform to introduce themselves to future talent, and in many cases provide internships to help young people make this transformational journey. We firmly believe that an effective workforce pipeline is critical to the future of our local economy, the region, and the continued vitality of the nation's aerospace and aviation sectors. FAA Reauthorization Overview With the current FAA authorization set to expire in less than seven months, AAAE and Airports Council International-North America (ACI-NA) have crafted a joint list of recommendations that would help GA and commercial service airports alike. This joint list--which is included at the conclusion of my testimony--contains various reforms that would benefit airports as well as the passengers and local communities they serve. To help airports of all sizes build critical infrastructure, the two associations are calling for increasing Airport Improvement Program (AIP) funding; modifying the AIP formula to benefit both GA and commercial service airports should additional resources materialize; eliminating the outdated federal cap on local Passenger Facility Charges (PFCs); and expanding eligibility for both funding sources. AAAE and ACI-NA are also urging Congress to reduce federal red tape and streamline regulations; address noise and other environmental concerns; preserve and enhance small community air service; and enhance the FAA Contract Tower Program. Although travel has largely returned to pre-pandemic levels at both GA and commercial airports, stakeholders across the aviation system are still adjusting to the ripple effects caused by the pandemic, including workforce shortages and significant changes in the distribution of travel. The next FAA reauthorization bill is an opportunity for this subcommittee and Congress to address both persistent and newly emerged challenges, and to help airports and the aviation industry prepare for the challenges and opportunities that lie ahead. Given the importance of the aviation industry to the nation's economy and the crucial need for certainty and stability for the aviation system, we commend leaders and members of the subcommittee for your commitment to pass the FAA reauthorization before programs expire on September 30. As you know, a series of short-term extensions can have an adverse impact on airports and make it challenging for them to move ahead with critical infrastructure projects. With your leadership, we hope the next FAA bill will be finished on time. I'm sure all of you agree that the nation's aviation system is simply too important to operate on autopilot. Rising Infrastructure Needs As travel demand continues to rise at GA and commercial service airports, there is a growing need for infrastructure investment. The Infrastructure Investment and Jobs Act (IIJA) provided airports with $20 billion over five years for infrastructure and terminal grants, with $2.5 billion of that total specifically allotted for nonprimary commercial service and GA airports. We are grateful for that investment, which will help airports of all sizes build critical infrastructure to meet increased demand. While IIJA funding serves as an important down payment to help bridge the enormous funding gap for airport infrastructure nationwide and will help offset inflationary and cost escalation impacts, the need for additional federal investment remains. According to the FAA's most recent NPIAS, commercial service and GA airports have $62.4 billion in AIP and IIJA-eligible projects--or around $12.5 billion annually--over the next five years. Those totals do not include other non-eligible infrastructure projects and requirements, which increase total airport capital needs significantly. According to the latest NPIAS, the capital needs for nonprimary and GA airports are more than $19 billion over the next five years. And that figure does not factor in rising inflation, increasing labor and construction costs, or supply chain constraints. As members of this subcommittee know, GA and smaller commercial service airports disproportionately rely on AIP funding to meet their infrastructure needs. The combination of stagnant authorization levels for traditional AIP funding for the past two decades and rising construction costs has greatly limited these airports from completing critical safety and improvement projects. As Congress prepares for the next FAA reauthorization bill, AAAE and ACI-NA are urging Congress to increase traditional AIP funding to at least $4 billion and to continue to authorize funds for supplemental discretionary grants to help GA and commercial service airports meet their ongoing infrastructure needs. In conjunction with increasing AIP funding, we recommend Congress provide airports with more flexibility in how they are permitted to use that funding consistent with provisions in IIJA and in recognition of evolving airport infrastructure needs and existing limitations. Additionally, we recommend adjusting the AIP entitlement for nonprimary airports, including GA airports, since it has remained stagnant at $150,000 for more than 20 years despite rising costs and infrastructure needs. The current funding approach for nonprimary entitlements (NPE) also fails to recognize the dramatic differences in aircraft activity, operations, and economic impact within the wide spectrum of diverse GA airports. The NPIAS categorizes nonprimary airports based on their activity level as either national, regional, local, or basic. Instead of the current one-size-fits-all policy, Congress should modernize GA entitlements by providing increased funding levels to airports with more activity or that serve larger aircraft. Specifically, we propose a tiered approach where the GA entitlement be set at $1 million for national airports, $500,000 for regional airports, $250,000 for local airports, and $150,000 for basic airports. It is important to note that our recommendation for this proposed formula change is contingent upon AIP funding of at least $4 billion annually. The need for adjusting the $150,000 nonprimary entitlement is evident at Kelly Field, where design is underway for a consolidated facility that will promote eVTOL, along with other new and existing aircraft. But the investment in infrastructure required far surpasses the abilities of today's NPE formula. Notably, other GA airports are on the forefront of efforts to develop, test, and build electric and second-generation supersonic passenger aircraft. Kelly Field is proud to support the very smallest of aircraft that operate today, but it also serves the very largest. Wide body aircraft operate from Kelly Field daily, requiring Airplane Design Group (ADG) V and VI infrastructure rather than ADG I or II prevalent at many GA airports that receive the same nonprimary entitlement. We need additional resources for a new taxiway and apron complex associated with a new terminal and hangars. Additional resources are also needed to expand our public aircraft parking apron used by industrial aviation activities and designed for ADG VI aircraft. Additional investment in GA airports will support the wide range of aircraft that operate today, but it will also stimulate the fertile ground of applied technology and allow the private sector to make the next leaps in aerospace advancement at Kelly Field and at other airports across the NAS. Regulatory Reform Airports need help cutting through unnecessary red tape and regulatory burdens imposed by the FAA that are time-consuming, delay critical infrastructure projects, and unnecessarily increase costs. As inherently public institutions with a primary goal of serving communities and travelers, airports have every incentive to use federal and local dollars responsibly and to pursue important policy objectives without the need for heavy-handed federal regulation. Congress can help by directing the FAA to correct their misinterpretation of the airport land use streamlining provisions (Section 163) included in the last FAA bill, which has resulted in overly burdensome processes and inhibited airport development. Commercial service airports should not be required to submit PFC applications for AIP projects already approved by the FAA, and we urge Congress to reject any proposals that would impose additional unnecessary grant assurances on GA and commercial service airports, which lead to costly, unfunded federal mandates that impede the delivery of critical infrastructure projects. Leaded Avgas Like our counterparts at commercial service airports, GA airports strive to be strong environmental stewards for their community. For decades, the GA industry has been focused on a smart and safe transition toward an unleaded high-octane fuel that meets the needs of the entire GA fleet. So far, only low-compression engines can burn the unleaded fuels that are currently available, and 75 percent of the total GA aviation gas (avgas) consumption is by aircraft requiring 100- octane fuel, which presently can only be achieved with a lead-based additive. Through AAAE, GA airports are participating in the Eliminate Aviation Gasoline Lead Emissions (EAGLE) initiative, a public-private partnership between the federal government and industry stakeholders to transition to lead-free avgas for piston-engine aircraft by the end of 2030. Like the blender's tax credit for sustainable aviation fuels, we believe similar incentives to scale up the production and distribution of these new GA fuels will be critical to a successful transition. GA airports are eager to be part of the solution for transitioning away from leaded avgas and await a better understanding of what types of infrastructure improvements are needed to support the widespread use of the new fuel. Updated AIP eligibility criteria for new storage and distribution systems at GA airports will likely be needed, but a premature ban of leaded avgas before a viable replacement is approved will threaten the economic viability of most GA airports and should be rejected. PFAS Since the 1970s, FAA has required Part 139 commercial service airports to provide aircraft rescue and firefighting (ARFF) services using aqueous film forming foams (AFFF) that meet specific standards for firefighting. These approved foams contain PFAS. Many GA airports have relied upon and follow FAA guidance in using AFFF to ensure aviation safety, and like Part 139 airports GA airports, are anxiously awaiting the FAA to approve a fluorine-free foam (F3). On January 12, the Department of Defense (DOD) and U.S. Navy released new performance standards for F3 fire-extinguishing agents, a significant milestone that is expected to ultimately allow airports to transition away from AFFF agents beginning later this year. However, there are still unanswered questions regarding supply chain constraints, standards and practices to decontaminate ARFF equipment, and new firefighting training, which could delay airports' ability to transition. That is why Congress, as part of the explanatory statement accompanying the FY23 omnibus appropriations bill, directed the FAA, in coordination with the Environmental Protection Agency (EPA) and DOD, to develop a transition plan within 120 days to provide airports with the necessary guidance to ensure an orderly and cost-effective transition over the next few years. EPA could take future regulatory action that might impede a successful transition and lead to substantial financial costs for airports. This year, EPA is expected to issue a final rule designating two PFAS chemicals, PFOA and PFOS, as ``hazardous substances'' under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). For airports, which have used AFFF in accordance with federal law and the interest of public safety for decades, such a designation could trigger potentially costly litigation and cleanup efforts to address PFOA and/or PFOS-related contamination. While the FAA is moving closer to approving an F3 agent, most, if not all airports, will still be using AFFF for the next several years because there are many factors and challenges in making an industry- wide transition, such as the lack of transition-related guidance from the federal government and supply constraints. A final rule from EPA, before the industry is prepared to transition, would be a draconian measure that puts airports in an especially untenable position of using a designated hazardous substance in an emergency situation in accordance with federal law. We urge Congress to acknowledge the longstanding federal requirement for airports to use AFFF by providing liability protection, including CERCLA liability protection, for airports. This sensible request isn't new; in fact, the PFAS Action Act, which the House passed in the last two Congresses, included CERCLA liability exemption for airports. However, both efforts ultimately stalled in the Senate. Additional funding will be needed to help airports procure the new F3s, dispose of their old AFFF, and clean up any potential PFAS contamination. These steps, coupled with much-needed guidance from the FAA and EPA, will help the airport community transition quicker to a PFAS-free future. FAA Contract Tower Program I would like to thank the leadership and members of this subcommittee for being strong supporters of the FAA Contract Tower (FCT) Program--a successful public-private partnership that enhances aviation safety at GA and commercial service airports around the country. The FCT program encompasses 262 airports in 46 states, including 24 in Texas. The program has been audited numerous times by the Department of Transportation Office of Inspector General, which has consistently validated that contract towers are cost-effective and maintain safety records comparable to FAA-staffed towers. The IIJA included at least $300 million over five years to repair, replace, or relocate aging air traffic control towers at FCT airports-- $100 million for sponsor-owned facilities and $200 million for FAA- owned facilities. Many air traffic control towers are 50 years of age or older, so this funding is a welcome step in the right direction. However, with the most modest control towers costing $10 million or more to construct, we urge Congress to provide additional resources to address outdated facilities that are in desperate need of repair or replacement. We also call on Congress to require the FAA to deploy radar displays, Automatic Dependent Surveillance-Broadcast displays, and other technology at contract towers to increase situational awareness for air traffic controllers. Contract tower controllers should have access to the same technology advances and equipment used at FAA- staffed facilities. These actions would ensure that contract towers continue to operate safely and have information that is consistent with FAA towers, as air traffic operations continue to rise. The pilot shortage has understandably received a great deal of attention but we're facing an increasing shortage of air traffic controllers as well. The companies that operate contract towers are experiencing intensifying staffing pressures brought upon by COVID-19, the rising cost of living, and frequent vacancies created when younger controllers leave their positions at FCT airports to serve at FAA- staffed towers. The CONTRACT Act, which Congress passed as part of the FY23 omnibus appropriations bill, will certainly help by removing a disincentive for retired FAA controllers to continue serving at contract tower airports. We thank Rep. Julia Brownley (D-CA) and other members of this committee for their work in getting that bill enacted into law. We encourage the FAA to work with the companies that operate contract towers to allow innovative hiring and training processes to increase the stream of applicants to be qualified controllers. We also recommend that the FAA collaborate with the Department of Labor to address the rising cost of living for controllers, by updating the outdated wage determination that has failed to keep up with inflation. It is important that the FAA work with contractors and minimize the adverse impact when the agency hires controllers from contract towers for FAA-staffed facilities. Further, we recommend that the FAA carefully consider how any proposed realignment of service areas could impact the successful FCT program. Advanced Air Mobility The future of Advanced Air Mobility (AAM) is quickly becoming the present for the aviation industry, with several companies currently developing eVTOL aircraft. These aircraft, which will range in size from single-passenger aircraft to large shuttles, will bring accessibility to cities, underserved communities, and geographically distant regions, while offering immense environmental advantages. Existing infrastructure, at GA airports in particular, will likely play a major role in this new AAM ecosystem. Airports are excited to help make AAM a reality, though there are a few issues that Congress and FAA must ultimately address to set AAM up for success. To accommodate widespread use of eVTOL aircraft in the future, airports will need significantly greater electrical infrastructure and grid capacity to support the charging requirements of these new vehicles. This will require dedicated funding outside of the regular AIP program to ensure that airports are not sacrificing funding for critical safety projects and infrastructure modernization. Additionally, Congress must ensure that new entrants pay their fair share for the costs of air traffic control services, FAA resources, and infrastructure needed to accommodate their operations. Conclusion GA airports like Kelly Field are complex aviation centers, acting as national assets that play an indispensable role in meeting the unique needs of the communities they serve. I am grateful for the opportunity to provide these views of the GA airport community, on how we can maintain and grow GA operations across the country and offer suggestions on how to better position airports to meet current and future challenges and opportunities as part of FAA reauthorization legislation. Thank you for your consideration and the opportunity to testify. Attachment Airports Council International-North America and American Association of Airport Executives Airport Industry Policy Recommendations january 2023 Infrastructure Airport Improvement Program Increase the authorized funding levels to a minimum of $4 billion annually. Extend AIP eligibility to all activities allowed under the PFC program, as in the bipartisan infrastructure law, and require that FAA adjust its programmatic funding priorities to take the new eligibility into account. Authorize supplemental discretionary AIP funding and allow airports to use funds for more terminal projects and other PFC- eligible projects. Rebalance funding allocations by reducing the percentage of AIP entitlements large hub and medium hub airports with $4.50 PFC turn back to the program and then replenishing the Small Airports Fund with a commensurate amount of funding. The proposed formula change is contingent upon AIP funding of at least $4 billion annually. Provide additional funding for small hub and non-hub airports. Remove the $20 million cap on the amount of discretionary funds allowed in terminal projects at non-hubs and some small hub airports. Modernize GA entitlements by providing increased funding levels to airports with more activity ($1 million for national airports, $500,000 for commercial-service non-primary airports, $500,000 for regional airports, $250,000 for local airports, $150,000 for basic airports, and $0 for unclassified airports.) The proposed formula change is contingent upon AIP funding of at least $4 billion annually. Require the FAA to distribute AIP funding as quickly as possible and with as much flexibility as possible, in part by allowing airports to report on their usage of the funds for eligible activities, rather than directing airports on the agency's preferred use of the funds. Establish pilot program for the FAA to begin accommodating alternative-delivery and advance-construction methods that can expedite projects and reduce costs. Continue using Calendar Year 2019 enplanement figures (or current year figures, whichever is higher) to determine AIP entitlement apportionments for two additional years beyond Fiscal Year 2023. Support continued funding for ACRP. Passenger Facility Charges Eliminate the federal cap on local PFC user fees. Extend PFC eligibility to include any lawful capital cost of the airport. Eliminate PFC exemptions for non-revenue passengers. Fully implement the PFC streamlining provision (Section 121) included in the FAA Reauthorization Act of 2018, which expands to all-size airports a streamlined process for imposing/using PFCs, as previously provided only to non-hub airports. Eliminate PFC application requirement when airports use PFCs for local match on AIP-approved projects. Bag Fees Include airline bag fees in the domestic passenger ticket tax that helps fund the Airport and Airway Trust Fund. Regulatory Reform Accelerate airport land use development by directing FAA to fully implement Section 163. Remove costly hurdles to implementation of Bipartisan Infrastructure Law: + DOT should reinstate a nationwide waiver for new Buy America provisions until at least 180-days after the FAA issues airport- specific guidance on implementation and a sound assessment of supply chains and product/material availability in the United States is made. + Since airports are involved in complex, multifaceted construction programs with a mix of federal, local, and private resources, there should be an exemption for airports to the applicability of Buy America to the entirety of a project. It is federal overreach to apply federal procurement law to a project or portion of a project funded with an airport's own resources. + Direct the FAA to accommodate alternative-delivery and advance-construction methods that can expedite and reduce costs for projects using federal funds, especially for projects already underway at many airports. Protect airports in Safety Management System implementation: + Provide liability protection for those airport personnel designated as responsible for SMS implementation. + Provide airports with public disclosure protection for the safety-related data generated as part of their SMS programs. Set a 45-day deadline for FAA to approve NEPA purpose- and-need statements. Extend the eligibility date for the TIFIA for Airports provisions to align with the authorization date of the new FAA reauthorization bill. Avoid the imposition of additional grant assurances on airports. Environmental Issues PFAS Firefighting Foam Direct the FAA, in collaboration with industry stakeholders, to develop a national transition plan to assist airports in moving to fluorine-free firefighting foams. Provide federal funds for an acquisition program for the new foam, a disposal program for the old foam, and PFAS remediation at airports. As the EPA continues to pursue plans to designate PFAS as hazardous materials, Congress should acknowledge the longstanding federal requirement on airports to use this firefighting foam by providing liability protection to airports, including CERCLA liability protection. Voluntary Airport Low Emissions Program Expand eligibility to include all airports, including those outside of non-attainment areas, to enable efforts towards meeting Net Zero commitments. Broaden the program to address overall greenhouse gas emissions. Allow the program to include actions taken as part of a State Implementation Plan or Federal Clean Air Act requirement. Incorporate energy management and renewable energy projects where emissions reductions occur at a utility, rather than an airport. Resiliency/Sustainability Provide separate, dedicated general funds (est. $1 billion annually) for projects eligible the under Voluntary Airport Low Emissions Program; Airport Zero Emissions Vehicle and Infrastructure Pilot Program; noise mitigation (such as public education programs and sound insulation); sustainability; resiliency projects and planning; and installation of electric charging stations. Establish funding program to support planning and development of electric capability and resiliency projects at airports. Direct FAA to work with NOAA and US Army Corps of Engineers on resiliency initiatives for coastal airports. Noise Direct FAA to update Part 150 noise standards to reflect all relevant laws and regulations. Require FAA to help reduce impact of aircraft noise on local communities by: 1) implementing flight procedures that can attenuate aircraft noise; 2) working with airports on arrival and departure routes; and 3) discouraging local encroachment that could create future noise challenges and impact airport operations and aviation safety. Direct the FAA to clarify future noise policy/standards and seek feedback from airports and their stakeholders before implementing any changes per the recently conducted Neighborhood Environmental Survey that could affect airport operations. Direct FAA to evaluate the community impact of noise from AAM and UAS integration into the NAS, and not hold airports responsible for noise resulting from AAM and UAS operations not associated with airport operations. Sustainable Aviation Fuel Establish funding program for planning and development of appropriate SAF infrastructure at airports, which will help promote greater SAF availability at airports as SAF production, transportation, blending, and storage needs increase. Small Community Air Service/Workforce Modernize and maintain funding for the Essential Air Service Program. Enhance the Small Community Air Service Development Program: + Increase funding to at least $20 million annually. + Allow communities to receive multiple grants for the same purpose. Support the Contract Tower Program: + Provide incentives for retired federal controllers to continue working at contract towers. + Require FAA and Labor Department to review the outdated wage determinations for contract tower controllers. + Provide funds to install radar displays and other ATC equipment at contract tower facilities. Take steps to address the pilot and aviation workforce shortage, such as: 1) increasing federal student loan aid for pilot training; and 2) extending and increasing funding for Aviation Workforce Development Grants to $10 million annually. FAA Facilities and Equipment/Operations Require the FAA to work with airports, aviation stakeholders, and TSA to ensure (1) new entrants are safely integrated into the National Airspace System, and (2) airports are protected from unsafe UAS activities. Ensure new entrants pay their fair share for the costs of ATC services and infrastructure needed to accommodate their operations. Increase funding for ATC towers and equipment. Expand the Remote Tower Pilot Program. Mr. Yakym. Thank you, Mr. Crider. Mr. Curt Castagna, president and CEO of the National Air Transportation Association, you are recognized for 5 minutes for your testimony. TESTIMONY OF CURT CASTAGNA, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL AIR TRANSPORTATION ASSOCIATION Mr. Castagna. Chairs Graves and Graves, Ranking Members Larsen and Cohen, and distinguished members of the Aviation Subcommittee, as president and CEO of the National Air Transportation Association and as an aviation business owner, I appreciate the opportunity to offer solution-based testimony today drawn from member input. I am pleased to join the other members of today's panel in advocating for a healthy general aviation ecosystem that supports collaborative partnerships between airports, aviation businesses, airport users, and local communities consistent with FAA policy, airport access, and self-sustainability. As the voice of aviation business for more than 83 years, NATA represents a vital transportation industry that employs over 1 million individuals, creates $247 billion in economic output, and provides critical access to aeromedical emergency services, rescue, cargo, and on-demand passenger service to countless communities. Our 3,700 member locations include fixed-based operators, air charter providers, maintenance repair stations, and flight schools, as well as more than 300 general aviation airports. Collectively, NATA members serve the general public, recreational pilots, business aviation, airlines, and the military. Today's hearing comes at a critical juncture for both general aviation industry, which is experiencing high activity levels and rapid innovation in aircraft design, safety, and alternative fuel sources, and, as well, the FAA, which provides critical regulatory oversight of our industry. NATA appreciates the many competent, collaborative, and committed FAA leaders we work with on a daily basis. However, we also recognize the current antiquated systems hinder the agency's ability to perform timely certification, rulemaking, and oversight duties. The on-demand charter industry offers a perfect example. With 680 new certification requests currently in the FAA's backlog, it takes up to 2 years to secure a part 135 certificate under the existing process. Adding a new aircraft to an existing certificate also takes up to 1 year, even when that aircraft has been subject to ongoing FAA conformity. Lastly, part 135 operators cannot secure timely checks with FAA inspectors, and struggle to get their own check pilots approved, which compounds our acute workforce shortage. Congress can legislate solutions for these problems by mandating FAA industry working groups, digitize processes and online dashboards, expanded use of third-party evaluators and carrier checks, and, in some cases, just simple implementation of existing FAA policy. We also encourage Congress to address the needs of general aviation airports to modernize infrastructure, prepare for advanced air mobility, and increase sustainability. As my colleague Mr. Crider mentioned, the $150,000 AIP entitlement for GA airports has remained stagnant for over 20 years, and rising inflation and soaring construction costs make that current entitlement not very effective. We ask Congress to increase the GA entitlement and to adopt a tiered funding formula based on flight activity to account for the diversity of size and needs of GA airports. As the industry grapples with dangerous PFAS chemicals in airport rescue trucks and hangar foam fire systems, we seek Federal guidance and assistance on a transition away from fluorinated foams, an exemption from PFAS-related litigation for airports, and, as well, aircraft hangar owners that have been subject to those regulations. NATA is committed to removing lead from avgas. We support funding to accelerate testing and approval for unleaded fuel that meets the requirements of the entire piston fleet, as well as the investments in infrastructure now to make the existing unleaded fuel more widely available. We must take creative steps now for the adoption of alternative unleaded fuels, increasing their commercial availability and expanding infrastructure to accommodate them. For example, short-term tax credits for refiners, blenders, and distributors of approved unleaded fuel would incentivize production and accelerate deployment, much as in the case of SAFs. Advanced air mobility holds enormous promise to reduce aircraft emissions, enhance cargo and medical transport in rural areas, and facilitate urban mobility. NATA sees a natural nexus between existing part 135 operators, general aviation airports, FBOs, and the AAM innovation. Both urban and rural general aviation airports offer ideal spaces to introduce eVTOL technology, and NATA members are preparing to support and maintain this next generation of aircraft. Lastly, we ask Congress to help our industry efforts to recruit a diverse and resilient workforce by expanding section 625 grants, extending Federal loan programs to aspiring pilots and aircraft mechanics, and broadening the on-ramp to nontraditional technical jobs with new grants targeting other aviation workforce sectors. Thank you for your opportunity to testify on behalf of aviation businesses, and I look forward to your questions. [Mr. Castagna's prepared statement follows:] Prepared Statement of Curt Castagna, President and Chief Executive Officer, National Air Transportation Association Committee Chairman Graves and Ranking Member Larsen, Subcommittee Chairman Graves and Ranking Member Cohen, and distinguished Members of the Aviation Subcommittee: Thank you for the opportunity to testify on behalf of the National Air Transportation Association (NATA) and its nearly 3,700 aviation business members. Of critical importance to the future of the general aviation industry is FAA Reauthorization legislation that will maintain the security and increase the resiliency of our National Airspace System while refining the focus and improving the efficiency of its regulatory agency. I deeply appreciate the Transportation and Infrastructure Committee's commitment to a timely, comprehensive, and bipartisan reauthorization process, and offer sincere thanks to Committee Chairman Sam Graves for his decision to include the first- ever general aviation title in the 2023 bill. To support that effort, I am pleased to offer solution-focused testimony that reflects the direct input of NATA's membership and the recommendations of our member-driven policy committees, which convene thought-provoking industry leaders, examine contemporary issues, and pursue solutions to prioritize the safety and economic viability of our industry. For more than 80 years, NATA has been the voice of aviation business. Our advocacy began in 1940, when the threat of war put general aviation in the United States at risk. As the U.S. Army sought to ban all flights by privately owned aircraft, 83 charter members representing all types of general aviation businesses united as a singular voice to successfully ask Congress and the Administration to keep the airspace open to this important industry. Today, NATA continues to advocate for a broad cross-section of the general and business aviation industry, including fixed base operators (FBOs), part 135 on-demand air carriers, part 145 maintenance repair stations (MROs), aviation fuel producers and suppliers, flight schools, air medical operators, and airport sponsors at general aviation airports. I will briefly explain the function and impact of each of these general aviation industry segments. Fixed Base Operators Fixed base operators (FBOs), as the primary service and fuel providers to general aviation aircraft operators, provide mission- critical support and infrastructure to general aviation as well as to many essential public services including law enforcement, EMS, fire management, military, and National Guard units. FBOs often provide private general aviation passenger and customer service terminals; line service, such as aircraft parking, fueling, tie-down, and hangar space; technical services, such as airframe and engine maintenance; aircraft rentals, charters, management and/or sales; flight instruction; aircraft catering; ground transportation and parking; and amenities for pilots, passengers, and crew. In addition, FBOs at many commercial airports perform line maintenance, cabin cleaning, and baggage handling for part 121 commercial, passenger, and cargo airline customers. NATA's FBO members range in size from single-location small businesses to regional, national, and international chains. In total, the domestic FBO industry includes nearly 3,000 business locations operating under lease with airport authorities around the country. Part 135 On-Demand Air Charter One of the most critical contributions of general aviation is providing on-demand transportation for freight and passengers, especially to communities that have no scheduled commercial air carrier service. Most operators using general aviation aircraft in a for-hire passenger and/or cargo capacity are certificated to operate under Title 14 of the Code of Federal Regulations (CFR) Part 135 and conduct numerous types of missions, including governmental, business, and recreational travel, as well as medical flights and disaster relief. NATA's air charter members regularly transport organ transplant surgical teams; private charter often offers the only transportation solution in such cases because of the short window of time to move organs from donor to recipient. The majority of NATA's air charter members are small businesses operating a range of aircraft from large turbo-powered business jets to small, single-engine piston-powered airplanes and helicopters. In total, nearly 2,000 FAA-certified charter operators operate in all 50 states and U.S. Territories. Part 145 Maintenance/Repair Stations The term ``repair station'' refers to a maintenance facility that has been issued an FAA certificate under 14 CFR Part 145 and engages in the maintenance, preventive maintenance, inspection, and alteration of aircraft and aircraft products. Another more general term used throughout the industry is MRO, referring to repair stations as maintenance, repair, and overhaul facilities. FAA certified repair stations receive class ratings under the categories of airframe, powerplant, propeller, radio, instrument, and accessory. At last count, there were approximately 5,000 FAA-certified repair stations located domestically and abroad. General Aviation Fuel Suppliers NATA represents all of the nation's major general aviation fuel suppliers who provide aviation businesses with Jet A, Avgas, refueler trucks, financing for fuel infrastructure, contract fuel, sustainability programs, and other logistical services. NATA's fuel members include domestic producers of sustainable aviation fuel (SAF) and alternative unleaded fuel. Flight Training In the U.S., flight training is provided under three different sets of regulations: 14 CFR Part 61, 141, and 142. Part 61 training is often provided by individual, for-hire flight instructors, as well as some flight schools and FBOs. The curriculum is flexible and can be tailored to a student's specific needs, such as the amount of time he or she can devote to training. In contrast, Part 141/142 certification mandates the use of a detailed, FAA-approved course outline, with students meeting specific performance standards. Across the country, accredited colleges and universities integrate flight training curriculums under 14 CFR 141 into the academic requirements for a degree in aviation science, catering to the full-time flight student who desires a structured training regimen. Together, these flight programs are educating and training the next generation of aircraft operators for both general and commercial aviation. Aeromedical Services Approximately 250 organizations in the U.S. are currently engaged in the transport of seriously ill or injured people to hospitals for emergency care. Air medical transport saves lives by bringing more medical capabilities to the patient than are normally provided by ground emergency medical services, along with faster transit times to the appropriate specialty care location--services not typically provided by commercial air carriers. These operators also support door- to-door service for organ transplant teams utilizing both helicopters and fixed wing aircraft. General Aviation Airports One of NATA's fastest-growing membership categories is that of general aviation airports. Our nation's 4,500 general aviation airports are vital economic engines, serving as arrival and departure points for economic developers; supporting agricultural, law enforcement, and fire-fighting missions; and providing access to critical medical care, especially in remote communities. By contrast, scheduled air carriers fly only to those places where the economics of operation justify service, approximately 500 airports nationally. The FAA defines general aviation airports as public-use airports that do not have scheduled service or have less than 2,500 annual passenger boardings. General aviation airports vary greatly in scope and complexity of operations, from single-runway airstrips with little infrastructure to larger airports supporting more operations than some primary commercial airports. Regardless of size, however, they all provide a vital lifeline to communities across the country, driving local economies and supporting essential services. General Aviation Industry Together, NATA's diverse member businesses form a critical portion of the general aviation industry, which supports 1.2 million jobs; provides over $247 billion in economic output in the United States alone; and contributes to the nation's competitiveness, growth, and continued innovation. The title of today's hearing, ``Securing the Future of General Aviation,'' is particularly apt for the current state of our vital industry, as record-high activity levels coupled with rapid innovation in aircraft design, safety systems, and alternative fuel sources signal an ever evolving, ever growing, and ever relevant general aviation sector. The task before this Subcommittee--to craft legislation updating and modernizing the Federal Aviation Administration--comes at a critical juncture for both the Agency and the industry it regulates. U.S. aviation continues to set the gold standard for safety and efficiency, but evidence of FAA inefficiency and inconsistency is growing even as the aviation industry experiences unprecedented growth and innovation, with the next generation of aircraft and fuels around the corner. FAA Certification and Oversight I want to begin by expressing NATA's appreciation of the existing FAA workforce. Tasked with maintaining the gold standard of aviation safety for the world's most complex airspace system, the Agency presides over almost every facet of the general aviation industry. NATA finds FAA leaders at all levels within the organization to be competent, committed, and collaborative, yet the Agency's understaffed workforce is shackled by antiquated methods and lack of permanent leadership in key positions. The resulting backlogs of critical FAA certification, rulemaking, and oversight functions is evidence that the Agency struggles to meet current industry needs, much less prepare for the growth emerging technologies will bring in the coming years. I expect all of the members of today's distinguished panel will testify to ways that their respective memberships have been impacted by FAA's inefficient processing of its basic functions for the general aviation industry; I will focus on its effect on NATA's part 135 on- demand charter members. Part 135 Certification Process Prospective entrants to the on-demand air charter industry must complete a five-phase certification process, beginning with a pre- application stage that utilizes the Certification Service Oversight Process (CSOP) to determine FAA resources for initial certification and continued oversight of the prospective operator. Applications are either assigned to a certification team or placed on a waiting list. Currently, that CSOP queue contains approximately 680 new certificate applications--a number that has tripled over just the past twelve months. Even without this current backlog, completion of the four remaining phases can take an applicant up to two years, deterring new industry entrants and increasing the risk of dangerous, illegal charter activity. This process, based on an outdated, inefficient principles lacking in transparency, results in an unnecessarily costly and lengthy experience for applicants seeking legal entrance to the regulated on- demand charter industry. Inconsistencies among Flight Standard District Offices (FSDOs) and the current allocation procedures for the regional FAA workforce further exacerbate the problem. We are concerned that with the rapid pace of Advanced Air Mobility (AAM) development, the demands for 135 certification and oversight will only continue to grow. To ensure U.S. global leadership in this emerging sector while maintaining the economic viability of the air charter sector, FAA must modernize its processes. To facilitate, NATA asks Congress to mandate a collaborative FAA/ industry working group to study methods for modernizing the part 135 certification process and to recommend long-term solutions for effective management of FAA resources. This working group should consider technological advancements to enhance efficiency, certification process benchmarks and timelines for both FAA and applicants, centralized management of FAA inspectors, and use of designee authority. In the meantime, the FAA should provide immediate transparency to Congress and industry on the current certification backlog, allocation of FAA resources, and expected time to process all pending applicants. NATA believes an online certification dashboard would provide this increased transparency and could be easily implemented. In addition to making public the total number of applicants in the CSOP queue, de- identified data for each applicant should include certification category, start and completion date for each certification stage, and FAA resources assigned. Part 135 Check Pilot Functions Once certified, regulations require all part 135 on-demand carriers to have sufficient qualified instructors and check pilots approved by the FAA to meet the training and checking needs of the carrier's pilots.\1\ For operators with sufficient staff to perform checks themselves in accordance with existing regulatory requirements, the FAA has issued guidance to inspectors and operators to encourage the approval of more carrier check pilots. Only when the carrier lacks adequate resources should the FAA be required to provide these checks. Despite this, significant gaps persist in ensuring timely checks for air charter pilots, in particular completion of the pilot line check required by Sec. 135.299. --------------------------------------------------------------------------- \1\ See 14 CFR Sec. 135.323 (a)(4) --------------------------------------------------------------------------- One challenge is that the FAA imposes higher qualification requirements for a carrier's check pilots than it does for FAA inspectors conducting the same checks.\2\ If the FAA standards, which presumably provide an acceptable level of safety, were applied to industry check pilots, many more carriers could provide their own line checks as the regulations intend. This would free up FAA workforce to attend to other duties and to assist smaller operators. Yet there also seems to be a persistent reluctance of local inspectors to approve qualified carrier personnel as check pilots--even when those carrier pilots meet the more stringent standards for industry check pilots. --------------------------------------------------------------------------- \2\ Carrier check pilots are individually authorized by local FAA inspectors and meet requirements of Sec. Sec. 135.337 & 135.339. FAA Order 8900.1, Volume 1, Chapter 3, Section 6, Figure 1-2, Item 12, Operations Inspector Qualifications and Currency Requirements Matrix, provides FAA inspector qualifications. --------------------------------------------------------------------------- In 2020, NATA petitioned the FAA to revise applicable regulations to align qualifications for carrier check pilots more closely with the qualifications required for FAA personnel providing checks.\3\ The FAA has not acted upon that petition. --------------------------------------------------------------------------- \3\ See https://www.regulations.gov/document/FAA-2020-0556-0001 --------------------------------------------------------------------------- Dependency on the FAA for pilot checking tasks causes undue delays for operators waiting for an available inspector, diverts Agency resources away from other safety oversight tasks, and increases FAA costs as inspectors travel to the carrier to perform the check. The smallest of carriers, who by size are necessarily dependent upon FAA for checks, are subject to further unreasonable delays while the FAA workforce provides checks for larger carriers that are otherwise able and willing to supply their own check pilots. NATA believes a Congressional directive could alleviate this problem by requiring FAA to engage with stakeholders, evaluate why check pilot approval continues to lag, and determine further actions to increase the number of carrier check pilots. This engagement could be a separate working group, an additional tasking for an existing rulemaking committee, or another appropriate assembly assigned to report recommendations back to the Agency. The FAA should specifically review why it has different qualification standards for FAA inspectors than for carrier check pilots. In addition, it should consider information in the NATA petition for rulemaking as well as the recommendations provided by prior rulemaking committees such as the Part 135/125 Aviation Rulemaking Committee (ARC), the Flight Crew Member Training Hours Requirement Review ARC, and the Air Carrier Training ARC. Part 135 Aircraft Conformity In addition to backlogs related to certification and check pilot functions, NATA members also report difficulties and delays in adding new aircraft to existing certificates due to varied workloads at local FSDOs and inconsistent interpretations of FAA regulations and directives by Principal Inspectors. This problem will only become more acute when the current CSOP backlog of approximately 680 pending new carrier certifications breaks and the expected flood of new entrants from emerging technologies, such as electric vertical take-off and landing vehicles (eVTOL) and unmanned aerial vehicles (UAV), become operational. The FAA must adjust its policy to provide timely oversight on an ever-expanding and increasingly complex industry. First, FAA regulations do not require aircraft configuration evaluation to be carried out by the Agency. These functions can--and should--be carried out in partnership between certified entities and local FSDOs in a manner that is efficient, timely, and consistent throughout the country. Policies can be adopted to enable carriers or third-party evaluators to certify the conformity of an aircraft being added to a certificate--a process that will relieve the Agency of quality assurance checks and refocus the FAA workforce on its legally mandated oversight duties. In addition, aircraft often move from one part 135 carrier to another at the aircraft owner's discretion. Even if the aircraft has continuously been on a part 135 carrier's certificate and subject to Agency oversight, this process currently requires a full conformity review, resulting in unnecessary delays prior to the aircraft being used in service by the new carrier. An NATA member recently spent ten months attempting to add a new aircraft to its certificate--ten months that the aircraft was grounded for no reason other than regulatory red tape. Establishing policy honoring the previously accepted aircraft configuration evaluation would eliminate needlessly repetitive functions and, once again, free inspectors to perform necessary safety oversight. Best of all, NATA believe this policy change would not necessitate rulemaking. General Aviation Airports NATA's member businesses operate at nearly 4,500 airports that support vital economic activity and connectivity in thousands of communities, many of which are not served by commercial aviation. In addition, our association represents nearly 300 general aviation airports, including more than 100 airport-sponsored FBOs. Although these general aviation airports vary in their complexity and frequency of flight operations, together with associated aviation businesses they support law enforcement and emergency services; non-emergency medical and organ transport; executive, recreational, and cargo transport; vocational and aeronautical schools; powerline and pipeline patrol; and agricultural and conservation efforts. In addition, general aviation airports will be the first to implement Advanced Air Mobility (AAM) operations in both urban and rural areas, making it even more critical that Reauthorization legislation prioritizes the ongoing maintenance and urgent modernization of GA airport infrastructure. Our nation's general aviation airports require both federal investment and increased public/ private partnership opportunities to meet current demands, create more high-skilled and high-paying jobs, and advance innovative aviation technology. Airport Improvement Program Funding Currently, the general aviation airport annual entitlement under the Airport Improvement Program (AIP) is $150,000--a figure that has remained stagnant for decades despite increased activity, rapid industry innovation, and inevitable inflation. Although the federal cost share of qualifying projects for non-primary entitlements is set at 90-95 percent and qualifying airports may stack AIP grands for four years, rising inflation and the soaring cost of construction make these funds insufficient for many urgent airport improvement projects. Furthermore, the non-primary entitlement fails to account for the diversity in size and needs of general aviation airport operations. Much in our industry has changed since Congress set the $150,000 basic AIP entitlement more than twenty years ago. It is time for this Congress to take action to not only account for inflation but also for the changing needs of general aviation airports by adjusting the basic entitlement for all GA airports and by introducing a formula to further increase grants for larger GA airports based on flight activity. In addition, Congressional action to increase the federal cost share to 100 percent and extend entitlement grant expiration to four years would allow airports to amass more funding for eligible projects and assist the smallest GA airports that struggle to come up with matching funds. PFAS at General Aviation Airports Another challenge facing airports across the country is the presence of ``forever chemicals.'' FAA regulations have long required part 139 certified airports to provide aircraft rescue and firefighting (ARFF) services utilizing aqueous film forming foam (AFFF) that contains per-and polyfluoroalkyl substances (PFAS) chemicals, even as the Environmental Protection Agency has taken steps to designate such substances as hazardous under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). Historically, many non-part 139 general aviation airports have voluntarily adopted FAA policies regarding AFFF, looking toward the Agency's regulations as safety best practices. Furthermore, until last year, the National Fire Protection Association (NFPA) 409: Standard on Aircraft Hangars--the primary standard for hangar fire protection that is referenced by the international building code; the international fire code; and state and local statutes, ordinances, and regulations--required most modern general aviation hangars to maintain automatic foam fire suppression systems, many of which utilized fire-fighting foams containing PFAS chemicals. The presence of these foam systems on airport property represents a risk to all stakeholders--airport sponsors and aviation businesses alike. NATA's work in this area includes educating local authorities on alternative fire suppression methods and advocating for building requirements that accurately reflect the low risk of fuel fires in aircraft hangars, the propensity for costly accidental discharges of foam fire suppression systems, and the harmful environmental impact of such occurrences. Because of NATA's efforts, the latest edition of NFPA 409 incorporated some of the Association's proposed changes, providing aviation businesses with more tools to protect against fire without the use of foam systems. But these efforts are not enough. NATA needs Congress to partner with airports and aviation businesses by requiring federal guidance on a transition away from fluorinated foams as well as protection from potential litigation. Congress should provide exemption from PFAS-related litigation-- including CERCLA liability--for all federally obligated airports that maintained AARF services, as well as for airport sponsors, owners of aircraft hangars, and landlords and lessees at public-use airports that were required to install and maintain foam fire suppression systems by authorities having jurisdiction. In addition, Congress should direct FAA to provide guidance on PFAS removal, remediation, and disposal for airports and associated aviation businesses located on airport properties, as well as establish a short- term grant program available to both airport sponsors and private businesses located on airport properties to assist in PFAS removal, remediation, and disposal. Aviation Industry Sustainability and Innovation Alternative Fuels NATA is an active supporter of efforts to accelerate production and adoption of sustainable aviation fuel (SAF) as well as development of a commercially viable, fleet authorization, unleaded alternative to 100LL. NATA commends the Congressional creation of SAF-specific tax incentives in 2022 and believes such credits should serve as a model to similarly incentivize production of a fleet-authorized unleaded aviation fuel. As a stakeholder in the Eliminate Aviation Gasoline Lead Emissions (EAGLE) initiative, NATA is committed to laying out a clear plan to transition piston-engine aircraft to lead-free aviation fuels by the end of 2030--or sooner if possible--without compromising the existing U.S. transportation infrastructure system, aviation safety, or the economic and broader public benefits of general aviation. NATA supports funding to accelerate required testing and regulatory approval for the implementation of an unleaded avgas, as well as investments in infrastructure to make alternative unleaded fuel more widely available while we await an unleaded fuel that meets the needs of the entire piston-aircraft fleet. The association opposes any efforts to ban 100LL before a safe, fleet authorization alternative is widely available and strongly supports fuel production tax incentives once that alternative is approved. NATA understands that we must take creative steps now to minimize the use of leaded fuel in affected communities. To facilitate the use of current unleaded fuels, which can service a portion of the piston- aircraft fleet, the Association has published a white paper educating fuel service providers on best practices for deploying multiple fuels at airports. In addition, NATA has updated its Safety 1st General Aviation Misfueling Prevention Program--a free, online training resource for pilots, line service professionals, and other aircraft refueling stakeholders--to address the risks associated with the introduction of an additional grade of fuel. To increase the commercial availability of current alternative unleaded fuels, however, production must also increase. NATA strongly believes that short-term tax credits for refiners, blenders, and distributors of approved unleaded fuels would incentivize increased production and accelerated deployment to airports. The introduction of a second grade of fuel requires investments to expand existing fuel infrastructure. In addition to AIP funding, NATA believes the development of a short-term grant program available to both public and private entities could be used to support unleaded fuel infrastructure for airports and FBOs, incentivize flight school adoption of alternative fuels, and subsidize supplemental type certificate (STCs) or other end-user costs that could affect fuel adoption. Lastly, Congress should also ensure a safe transition by requiring unleaded fuel alignment with engine and airframe original equipment manufacturers (OEMs) and American Society for Testing and Materials (ASTM) standards beyond any minimum standard determined by an STC. Such requirements best assure a universally acceptable standard for refinement and blending of products that can be consistently delivered to airports, FBOs, and aircraft operators. Advanced Air Mobility Also critical to the future of general aviation is Advanced Air Mobility (AAM), which holds enormous promise to reduce aircraft emissions and noise impacts, to speed up cargo and medical transport in rural areas, and to facilitate multi-modal urban mobility. However, we must swiftly prepare for its adoption in the existing aviation ecosystem if we hope to fully harness AAM's potential to reduce the aviation industry's environmental impact and maintain U.S. global aviation leadership. NATA applauds Congressional passage of the Advanced Aviation Infrastructure Modernization (AAIM) Act and the Advanced Air Mobility Coordination and Leadership Act, and we thank the members of this Subcommittee, including Subcommittee Chair Graves and Ranking Member Larsen, for their leadership on those critical pieces of legislation in the last Congress. Now we ask Congress to take further action to ensure FAA development of a sound regulatory framework for AAM operations, as well as guidance for and investment in the physical infrastructure necessary to support them. We see a natural nexus between existing part 135 on-demand carrier operations, existing general aviation airports, existing FBO infrastructure, and emerging AAM innovation. First, NATA believes both urban and rural general aviation airports offer logical spaces to introduce eVTOL aircraft and other AAM technologies. Second, NATA members from all sectors are preparing to support, maintain, fuel, and operate this next generation of aircraft, but many are seeking guidance on the necessary infrastructure and operational guidelines to do so safely and successfully. In 2022, NATA formed its Advanced Air Mobility Committee to ensure a unified approach to modernization of both our infrastructure and operational framework. We believe communication, collaboration, and cooperation between government partners all aviation sectors stakeholders will be key to creating a healthy and vibrant AAM ecosystem. To that end, NATA hosted a town hall in January to foster connections between the AAM community, federal regulators, and leaders from NATA's other policy committees. The discussions on operations, ground infrastructure, safety, maintenance, security, and ground handling training will inform NATA's legislative and regulatory advocacy as we partner with Congress and the FAA to move this technology forward and help stakeholders prepare for its adoption. Aviation Funding Stability Risks of Government Shutdown As an operational Agency with a critical safety mission, the FAA must be protected from risks associated with budget battles and potential government shutdowns. The longest government shutdown in U.S. history (2018-2019) drew national attention to the dire consequences such shutdowns pose to the safety and security of the NAS, the effectiveness of the FAA, and the economic growth of the aviation industry. For 35 days, essential government employees such as air traffic controllers and TSA agents were required to work without pay, while nearly 18,000 FAA employees involved in a range of activities-- from certification and safety inspections to NextGen deployment--were furloughed. Legislation introduced in both the 116th and 117th Congresses authorizing the FAA to draw from the Airport and Airway Trust Fund in the event of a government shutdown enjoyed broad aviation industry support. NATA asks this Congress to take final action on this issue in FAA Reauthorization legislation to ensure that FAA's critical operations continue without interruption in the event of a government shutdown. Allowing the FAA to draw from the Airport and Airways Trust Fund would avoid the furlough of essential workers and maintain the Agency's vital safety and operational functions. Fuel Fraud Diversion To further maintain the stability of the Airport and Airway Trust Fund, NATA urges Congress to end the diversion of non-commercial jet fuel tax revenues. The Fixing America's Surface Transportation (FAST) Act (PL 114-94) directed the Government Accountability Office (GAO) to study the impacts of a 2005 highway bill provision that increased the tax rate on non-commercial jet fuel to 24.4 cpg. GAO's 2016 report \4\ found that the change in tax law has the unintended effect of diverting these non-commercial jet fuel tax revenues from the Airport and Airway Trust Fund to the Highway Trust Fund. Specifically, the GAO report concludes the diversion results in an annual loss to the Airport and Airway Trust Fund of between $100 million and $200 million--one to two billion dollars over a decade. The report also cast doubt on the rationale behind the 2005 change in tax law and the provision's utility going forward. NATA believes the GAO report serves as sufficient justification for repealing the 2005 provision or requiring a transfer of the appropriate tax funds to the Airport and Airway Trust Fund. --------------------------------------------------------------------------- \4\ See https://www.gao.gov/products/gao-16-746r --------------------------------------------------------------------------- Aviation Industry Workforce One of the greatest threats to our current and future general aviation industry is the workforce shortage that continues to plague NATA's member businesses at all organizational levels and across all industry segments. Of ongoing concern is the gap between the supply and demand for skilled aviation professionals such as aircraft pilots and A&P mechanics, which Congress recognized by the creation of the section 625 workforce grants in the 2018 FAA Reauthorization. Designed to bolster the pilot and mechanic workforce, these grants have enormous potential to affect change but are inadequately funded to meet even a fraction of the demand. NATA thanks Transportation and Infrastructure Committee Ranking Member Larsen for his introduction of the Aviation WORKS Act to reauthorize the section 625 grants, extend them to other aviation sectors, and increase funding levels to $20 million annually. We ask this Subcommittee to include similar provisions in this year's Reauthorization; we also encourage Congress to allocate sufficient funding and resources for FAA to administer the grants more efficiently and effectively. Congress should also consider the expansion of existing federal programs that can alleviate barriers to entry for aspiring pilots and aircraft mechanics, such as eligibility for federal student loans. Establishment of a National Center for the Advancement of Aviation will also help recruit the next generation of aviation workforce by raising awareness of aviation career opportunities and facilitating collaboration between all industry sectors. Legislation to create such a center passed the House of Representative by a wide, bipartisan majority in 2022; we encourage its inclusion in Reauthorization legislation. Lastly, we ask the Subcommittee to carefully examine the recommendations made by the Women in Aviation Advisory Board and the Youth in Aviation Taskforce created by the 2018 FAA Reauthorization. Collectively, these provisions will help our industry develop and recruit the diverse, resilient workforce needed to advance the general aviation industry. NATA appreciates the dedication of the Transportation and Infrastructure Committee and the Aviation Subcommittee toward an on- time reauthorization of the Federal Aviation Administration, as well as your commitment to meaningful engagement with general aviation stakeholders throughout the process. We look forward to continued collaboration on these and other solutions to the challenges facing our industry and the FAA. Together, we will secure a sustainable, safe, and successful future for our nation's general aviation industry and the countless communities it serves. Mr. Yakym. Thank you to our witnesses for taking time to come here today and provide testimony. I now yield 5 minutes to myself for questions. I know many different people have different entry points into the aviation world, whether it is a career or even just a hobby. And I want to share a little bit of my own story before I begin. As an 8-year-old child, I was over at my Uncle Chuck's house and looked on the floor in the corner, and I noticed an F-16 sitting on the floor. It was a model F-16 that was a remote-controlled airplane. And I began asking questions. And from a little 8-year-old child, it spawned a lifelong fascination with aviation. I went on after that to fly anything you can fly with a remote control, everything from airplanes to seaplanes to helicopters, drones, I mean, you name it, and I fly it with a remote control. And as I sit here today, I am an FAA checkride and an FAA written exam away from having my own general aviation certificate. But one of the things I am concerned about as I look at the next generation is the overall pipeline for the next generation of pilots and airplane mechanics. And I know there is a lot of focus on older students in aviation, but I would think 8-year- old Rudy would say that sometimes that interest is sparked at a much younger age. And one of the things that my interest in model aviation taught me at a very early age is everything from physics to aerodynamics to control surfaces and flying, and just the overall fascination of how an airplane actually works. But the hobby, it didn't break the bank. And it seems to me that, even looking at the last FAA reauthorization bill, there were a lot of new regulations that were added to the hobby, and so, we may need to revisit that, and maybe even recalibrate that in the upcoming reauthorization. I am not sure--maybe even perhaps you, Mr. Pelton, can speak to this--I know it is a little bit out of your lane. But even more broadly, I am curious to know, what are some of the efforts of your respective associations to reach even further down into the education system and reach even younger students today? Mr. Pelton. Thank you for the question. And actually, it is in my lane. I am glad that I turned out to be a better pilot than my RC flying when I was a kid like you, because I crashed an awful lot of them. But we have a program at EAA through our chapters, which we have collaborated with the AMA, the Academy of Model Aeronautics. It is called our Build and Fly Program. And we have RC models that are--we believe that part of our mission is getting kids to work with their hands in the learning of basic education, and they build an RC kit at the local EAA chapter, and then they collaborate with the AMA chapter in that area to actually go learn to fly that model, because we understand that the 8-year-old to the 15-year-old has to have a different type of learning experience for aviation, because you can't go out and take a written test, you can't start your flight training, or do any of that. So, we are trying to fill that gap, where--Mark does such a great job, then, of taking the formal education piece in the post-secondary or in the high schools, and so, we collaborate, between the two of us, on that. We do think that the modeling rules got wrapped up in the UAS craze of when hobby drones were so popular, and there was such a concern for the number of those being flown improperly and in incorrect areas that we did leave behind the fixed-wing RC airplanes that fly at designated model fields that are already out there and identified and confined to basically 400 feet around that airfield. And we should go back and re-address that, because it has really put a damper on the RC flying for young kids. Mr. Yakym. Thank you. And now I would like to yield 5 minutes to Mr. Cohen, the Aviation Subcommittee ranking member. Mr. Cohen. Thank you, Mr. Chair. That was an interesting story about your having that experience when you were 8 years old. I understand President Zelenskyy had one, too. Mr. Baker, in your testimony you mentioned that the general aviation industry is on track to exceed the safety goals established by the General Aviation Joint Safety Committee, which would result in another 10 percent reduction in fatal accidents over 10 years. In your opinion, which factors and policies contributed most to this decline, and how can we continue to decrease general aviation accidents? Mr. Baker. The question--I appreciate it--is about safety and how do we keep on track with the technologies that we continue to move through and get approved to be used in general aviation aircraft. For instance, ADS-B, which gives you traffic inside your aircraft, certainly it helps in terms of awareness, whether that comes into your cockpit today on your iPad or whatever device you are using. So, I think a big part of reduction of accidents is the situational awareness that you have today in your cockpit. And that is provided by the FAA for free. So, that has been a big, huge reduction in the accident rate. We still have more to go. We all agree with that. But to see that we have got flight-hours up to 26 million flight-hours from 20 million flight-hours just 4 years ago, and have fatal accident rates way down, we see it as a huge improvement. Mr. Cohen. I had a constituent who was a friend and a great member of our community in Memphis who died in a plane accident maybe 6 months, 1 year ago. And he was in one of those planes that had a parachute that could come out and help it come down. He was pretty independent, ornery, and refused to do it. He said, ``I am landing this plane.'' Well, he didn't make it. How are those parachutes coming? They can only be on very small planes. Are there any efforts to get them on a little bit larger planes and to use that as a capacity? Mr. Baker. Primarily used by the Cirrus company, the Cirrus Aircraft company out of Duluth, Minnesota, they use it on piston airplanes. They also have it on their small jet today. So, they are the only company that actually builds it into the aircraft today as part of a production model. There are some aftermarket models available, as well. But the Cirrus group has proven hundreds of lives have been saved by using the term ``just pull.'' And it is hard to ingrain that in a lot of pilots, because we think we can figure it out. Mr. Cohen. Yes. Mr. Baker. But at the end of the day, just pull. Mr. Cohen. Thank you, sir. Mr. [pause] Castagna? Mr. Castagna Castagna. Mr. Cohen. Castagna. Thank you, I guess. In your opinion, what investments in safety equipment, either at airports or on aircraft, can be made by Congress to improve the safety record of general aviation? Mr. Castagna. Great question. I will use the State of Alaska---- Mr. Cohen [interrupting]. Your microphone is not on, I don't think. Mr. Castagna. Thank you, Congressman. If I may, I will use the State of Alaska as an example. With more than 200 airports throughout that State, 80 percent of the communities are dependent on aviation for year- round access. Part 135 charter industries are critical to the life of Alaskans in that State, where we actually do medical service, deliver food, and, in fact, even take kids to school via aircraft. And the things that we can do in that area with the rugged terrain and the unpredictable weather are critical investments in weather cameras and weather stations that, while they are in place today, they need to be upgraded, and they need to be maintained. Twenty years ago, we provided that system, and the agency announced there are eight new automated weather observation systems bringing continuous, real-time weather, which has a direct impact to safety of the operations of those flights. And while I use Alaska as just an example, those same automated weather systems and camera systems could be certainly used in the lower 48 States in more airports that would help enhance the safety of operations of general aviation activities. Mr. Cohen. Thank you, sir. Mr. Baker, you mentioned the AOPA's high school aviation STEM curriculum. Nearly half of your students are students of color. What steps can the committee take to continue to advance diversity in our aviation workforce? And how can a proposed National Center for the Advancement of Aviation advance this goal? Mr. Baker. Something I am very proud of, and thank you for that question about the STEM program that AOPA provides free to any high school that wants it. All we are required to do is teach the teacher how to teach the class. We made this product free for the 9th through the 12th grade, because I wanted to make sure we could be in any school in the country. We do home schools in Alaska. We do inner city schools all over the country. About half the students are people of color that are taking this, and over 25 percent are young women are taking this class. And it is a very hard and difficult class. In STEM education, you have to pay attention. And to have over 50,000 young people that have touched this class already, the opportunity of putting the NCAA together is to broaden the reach of every State. There are 43 today, but we have States like Oklahoma that have 70 high schools that are teaching this today. We have 16,000 students right now, sitting in classrooms around the country, learning about aviation education and then career opportunities that have never been better. Mr. Cohen. Do you, by chance, know if they have that in Memphis? Mr. Baker. Sorry? Mr. Cohen. Do they have that program in Memphis schools? Mr. Baker. Yes, they do. Mr. Cohen. Excellent. FedEx can use those pilots. Thank you, sir. I yield back. Mr. Yakym. Thank you, Mr. Cohen. I now yield 5 minutes to my colleague, Mr. Collins. Mr. Collins. Thank you, Mr. Chairman. Mr. Baker, what can we do to--and I am asking the question because I heard it twice in a row there, and I am a student pilot, so, I am not to my checkride yet. DPEs, what do we do to get more people into that? Mr. Baker. Into aviation? Mr. Collins. Yes, sir. Mr. Baker. So, I think this high school program is a way-- and Mr. Pelton and the team at EAA, in terms of giving rides, and bringing people to the airport, and having great events at the airport, and exposing young people to the idea that they have careers, whether they be military, airline, or flying for general aviation. The opportunities have never been better, and so, that is why I am excited about what our high school program does. And working together with some of these EAA chapters around the country, getting kids out to the airport and seeing that they can be part of this great community, that is part of the exposure. I think we have more opportunity. We are doing really well. This year, you are going to see a record number of pilot's licenses being granted. Mr. Collins. OK. Did you want to add something to that, Mr. Pelton? Mr. Pelton. You brought up DPE also? Mr. Collins. No, sir. Mr. Pelton. OK. Well, I--Mark covered it very well. Mr. Collins. OK. All right. Mr. Baker, I want to venture over to some cybersecurity. NOTAM. It seems like the FAA had more focus on changing the name of that acronym, writing a 176- page rule, spending thousands and thousands of dollars to do that. Notice to Airmen was changed to Notice to Air Missions. I asked if it was a safety change, which--no answer was given. That is a 30-year-old software program. They could have spent time improving that, which they didn't. They spent time changing the name, because their focus was more on being woke than they are on safety. On Tuesday, the TSA released emergency updates for aviation cybersecurity requirements for aircraft operators and airports. Do you think the FAA is being proactive to invest, direct, and implement cybersecurity requirements for aircraft? Is the FAA doing enough to keep the pilots, crew, and passengers safe from potential cyber attack? Mr. Baker. So, from the perspective of the cyber attack, I was surprised, I think, as everybody else in aviation, that there was a single point of failure around the NOTAM system, which has been around for a long period of time. Very frustrating. We know some of the systems that we use for aircraft registration and medical certificates are months and months and months behind. So, the FAA needs to focus on all of these systems that they are employing today to make sure that they are up to date. Mr. Collins. I would open it up to anybody else. Mr. Pelton. I think the concern we all should have is anybody that is running a business today knows what the threats are and what we are spending on an ongoing basis to prevent cyber attacks. And I think we ought to probably have the FAA go benchmark what are these large companies that have been held hostage by ransomware and other cyber attacks like that, to see what kind of plans they put in place. Because it is not only the protection, but it is also the ability to recover and stand your systems back up. Mr. Collins. On February 7th, Representative Rouzer asked Acting Administrator Boulter that same question, basically. And it was a pretty insufficient response. So, I think I will just ask it again to everybody: Do you think the FAA has an actual plan to cyber secure the aircraft that we all depend on to get to our jobs and see our loved ones? Or is the FAA falling behind on their responsibilities to keep Americans safe? Mr. Pelton. I certainly don't have any insight as to what they are doing. Mr. Collins. OK. Mr. Pelton. That wouldn't be in my swim lane. Mr. Castagna. Congressman, I would say that the technology advancement in aircraft today that require Wi-Fi and other connectivity in the technology at our aviation businesses, there is a huge demand for creating more bandwidth. And with that bandwidth comes more risk for cybersecurity and attacks, where a lot of these software programs in the aircraft are dependent on that access at airports to upgrade their software systems. And so, I am not sure there is a plan that is in place today to accommodate that, but there is certainly a need for it. Mr. Crider. I would echo that, too, that there is a focus on cybersecurity from the airport operators, because there is so much connection between airline information, user information, FAA information that all comes together, that platform. So, very much a focus of the airport industry and close collaboration with the FAA and CERCLA, as well. Mr. Collins. Thank you. From what I have been hearing, people I have been talking to, it seems like there is a big disconnect between the mid-level management and the executive branch of the FAA. Thank you, Mr. Chairman. I yield back. Mr. Yakym. Thank you, Mr. Collins. I now recognize Mr. Larsen, ranking member of the full committee, for 5 minutes. Mr. Larsen of Washington. Thank you, Mr. Chair. First off, I want to make a note that I am very happy that FAA has changed the name of NOTAMs to Notice to Air Missions. It is inclusive, and we need to send a message to everybody to attract as many people into aviation as possible. And the problem with NOTAMs isn't the name change, the problem with NOTAMs is a lack of technology investment, which we have an opportunity to work together on to resolve. And we can stay focused on working together to resolve this problem as part of the FAA reauthorization. I am looking forward to doing that in a bipartisan manner. Mr. Castagna, with the first unleaded fuel finally certified last year, the FAA's new goal for completely transitioning the GA fleet is 2030. Is that timeline still realistic? Mr. Castagna. The process for the transition to unleaded fuel, as we know, is a complex process. We believe that there is a pathway forward to do that, and potentially the means to do that in advance of 2030. I would say that there is a commercially viable unleaded fuel product that is out in the market today. While we know that it only serves 70 percent of the fleet, we know that those airports that are critically sensitive to environmental impacts--and if they do an inventory of their own piston fleet, in some cases, airports--their base piston aircraft could exceed that 70 percent. So, our position is really to encourage airports to work together with FBOs and the user community to find ways to bring the commercially available product to the marketplace today, especially in those environmentally sensitive communities that are impacted, in advance of 2030, and ask Congress to put the resources necessary into--whether it is tax credits or incentives--for the refinement and blending of that fuel to get it out into the marketplace sooner. Mr. Larsen of Washington. Yes, thanks. Mr. Baker, can you answer that same question? Mr. Baker. So, yes. I believe that we have one fuel that has an STC today that was approved in September of last year. I believe there is an attempt to start rolling that out, airport by airport, in a controlled environment, hopefully in the next several months. I believe that that is our first opportunity. There is another STC applicant right behind that, and the pathing process is still in process. But I have more confidence today than I did a year ago, when we started the EAGLE, that we have got the whole industry working together to solve this problem as quickly as possible, but as safely as possible, because we cannot just transfer this to 94 octane and hope that the other airplanes find that fuel somewhere else. We have to keep low lead available while we have this process going on. Mr. Larsen of Washington. Yes, and I appreciate that. The transition has to still result in aviation safety. That has to be the priority of the committee as we move forward. But if there are ways--because frustrated communities, angry communities because of leaded fuel--finding a way to move that timeline safely is going to be important. And I hope we put some focus on that, and not resist that as we move forward on FAA reauthorization. I was going to ask--oh, yes. Mr. Crider, on the funding side of things through the BIL, are you satisfied--or maybe that is the wrong question, since you represent a lot of airports. If you had to pick your friends, which one would you have--no. [Laughter.] Mr. Larsen of Washington. The distribution of the dollars from the BIL for airports, from either a percentage or from an absolute numbers perspective, is GA getting its fair share-- airports, smaller airports, nonprimary airports--getting this fair share? How would you assess that? Mr. Crider. Well, I can speak to my own example at Kelly Field. That was a huge shot in the arm. We are putting that money to work for design of a consolidated facility which supports fixed-based operations, Federal inspection station, advanced air mobility, all those good things. But I think, at the end of the day, we are looking at the formula, how GA airports are funded. The entitlement portion is really critical. And that is part of the testimony that many of us have touched on. I represent a large industrial commercial--a lot of commercial activity. So, we have everything from the very largest design Group VI aircrafts, like 747-8s, all the way down to a Cessna 172. So, that $150,000 is really a drop in the bucket, frankly, on projects that respond to that scale. So, I think it is a mixed bag. But certainly BIL was a great shot in the arm, and hopefully this reauthorization can have more good to come. Mr. Larsen of Washington. Yes, thanks. Mr. Pelton, on the safety issue, the safety within GA and Arlington Municipal, where I grew up, a small town, has a pretty active experimental aviation crowd. They are doing good things. We also in the past have had some serious accidents, as well. Can you chat a little bit, maybe specific to your part of the industry, on safety and what you do to try to decrease incidents and accidents? Mr. Pelton. Yes, absolutely. Thank you for the question. The experimental amateur-built started out back in the 1950s, with a pretty poor safety record. One was because they weren't necessarily well engineered and designed products. They were people on their own in their garage coming up with designs to go fly. As this industry has evolved, it really is now down to major aircraft kit manufacturers who have extremely well designed, tested, and proven products that are holding up well with the safety record. They are also including now, because of the ability to not have to put certified products in the airplane, it has the latest up-to-date safety enhancements in the cockpits that we are seeing. So, that is improving also. And last year, we made a significant change to the flight testing program for anybody that does build a new airplane that really helps add a second pilot in the airplane that has experience in that make and model to ensure it is tested appropriately and properly. So, we are seeing very good progress. We track it monthly. Mr. Larsen of Washington. That is great. Mr. Chair, I want to apologize for 2 days in a row going a full 54 seconds over my time, and I will do better in the future with that. I will not yield back, since I have no time to yield back. Thank you. Mr. Yakym. The Chair will reserve his comments. I now yield 5 minutes to my friend, Mr. Stauber. Mr. Stauber. Mr. Chair, thank you very much, and thanks to the witnesses. We talked about the NOTAM bill that passed out of the House with 424 votes, bipartisan. I would encourage us all to talk to our Senators to get it across the finish line, because we can get that task force up and running very, very quickly, which will increase safety in the skies. I am very excited that we will have a general aviation title in this reauthorization bill. General aviation is the backbone of our aviation system. As someone who started working on their private pilot license later in life, I want to encourage more and more individuals to get involved with aviation at a younger age, and I want to make it more accessible. That is why I would like to focus my time on the National Center for the Advancement of Aviation, or, as it is commonly referred to, the NCAA bill. As you know, the NCAA bill was introduced in the last Congress by Mr. Carson and my former colleague, the late Don Young from Alaska. While nobody can fill Congressman Young's shoes, I am announcing today that I will be joining Mr. Carson to reintroduce the bipartisan, bicameral NCAA bill. I firmly believe this center will help coordinate industry and Government aviation workforce efforts, inspire and train the next generation of aviators, and boost innovation in American flight. Mr. Baker, thank you for being here. It is always good to have a fellow Minnesotan on the panel. I know AOPA has long been a champion of the NCAA. It also has been intimately involved in workforce programs such as your high school STEM program, which is quite impressive. Could you please speak to your AOPA STEM program a bit more, and share how the NCAA will help expand the STEM program and grow it? Mr. Baker. Thank you for the question, fellow Minnesotan. The STEM program was started about 6 years ago, and we built the ninth grade curriculum, which is about introduction of all things aviation. By the 10th grade program, they start to learn about airfoils, building wind tunnels out of a box, covered box, with a fan. These are very low-cost ways to get young people to understand lift and drag and all those things that go into the components, and hopefully inspire people to be an engineer, as well as a controller, as well as a pilot, or whatever, mechanic, that comes out of the opportunities. And we show them the lifetime earnings by the time they are in the 11th grade, about the money you can make today in an aviation career everywhere. And what I am really proud to say is we now know, because we have been doing this for 5 years, the graduating class, 70 percent of these young people are going into some form of aviation career pattern. One-third of them are actually looking at the military as one of the possibilities, as well. We work with the Air Force and their recruiting staff to make sure that we are tying these young people--there are over 80 colleges today around the country that will give you college credits for taking these classes in high school. Mr. Stauber. Yes. Mr. Baker. So, it really saves this young person a lot of money for their freshman year, or their junior year college credit. So, we are really proud of the program. Today, with 400 high schools, I think the opportunity is to get to 2,500 high schools, about 10 percent of all the high schools in this country, working with the NCAA, which is coordinating all the other things that go on in this aviation industry, because we all care about the same outcome: workforce. Mr. Stauber. The return on the investment, 70 percent go into the aviation sector. That is tremendous. That is what is called great success. In closing I will say that the National Center for the Advancement of Aviation overwhelmingly passed the House last year. It has the support of the entire aviation industry, from general aviation, airlines, airports, unions, manufacturers, and many others. Again, I appreciate working on this issue to honor the late Congressman Don Young. I know myself and Mr. Carson will work with our colleagues to see this included in the FAA reauthorization. And, Mr. Chair, I yield back. Mr. Yakym. Thank you, Mr. Stauber. The Chair now recognizes Ms. Brownley for 5 minutes. Ms. Brownley. Thank you, Mr. Chairman. Mr. Crider, first, thank you for mentioning the CONTRACT Act in your testimony. I appreciate it very much. I am very glad that we got it in the omnibus package at the end of last year. You mentioned in your testimony that controller staffing still continues to be a challenge. So, can you talk a little bit about what else you think Congress can do to help ensure that we have enough controllers at contract tower airports? Mr. Crider. Certainly. Well, first of all, Representative Brownley, thank you for your leadership on that appropriations language. That was important. The CONTRACT Act was very impactful. But I think, to answer your question, looking at the wage scales, we have seen a period of inflation. And so, the Contract Tower Program has fell prey to that. So, Department of Labor focus on the wage scales that contract tower contractors are able to pay, I think, is important. And I think better coordination between the FAA Tower Programs and the Contract Tower Programs--we understand that there is a migration of folks, especially young people, that start at the contract tower and then move up to the FAA. A better coordination about how that workforce happens, so that we don't unintentionally impact contract hours at smaller airports, GA airports, small commercial service airports. I think those are two important improvements that could be addressed. Ms. Brownley. So, what would that look like in terms of FAA and contract and that transition? Mr. Crider. The transition? Well, one of the things we hear from the contractors is a little more flexibility in how they do the training. So, speed to market, if you will, the ability to do some on-the-job training and training more regionally, as opposed to being constricted by the flow of students that can go through Oklahoma City or other traditional. So, part of it is just a more aggressive and more innovative approaches to training, I think, will help that workforce pipeline. Ms. Brownley. Thank you for that. And from your perspective, what do airports need from Congress to be able to expand the availability of sustainable aviation fuels? Mr. Crider. Well, I think airports stand ready to be part of that conversation. We are excited to be part of EAGLE. It is a great collaboration of associations from OEMs, from the fuel manufacturers. So, being a part of that, I think, is important. It was mentioned before that we don't want to throw the baby out with the bath water. Airports stand ready to make sure the infrastructure is in place for this transition. But we don't want to be premature about making the change. In other words, be a part of the conversation, help with the solutions, but also be mindful that we don't want to impede the important activities that happen at GA airports, many of those with avgas-burning aircraft. Ms. Brownley. Great. Mr. Baker, do you have anything to add with regards to that? Mr. Baker. I think, if I understand the question correctly, how does Congress help us grow aviation with these general aviation airports. As I mentioned a bit ago, a real hot button for our users of these airports today is the requirement that all federally obligated airports provide a transient ramp space for aircraft so that they can park their airplanes there, regardless of make or model, whether they need or don't need an FBO service, a place to park at these airports. And as well, I mentioned hangars. We are woefully short on hangars on these federally supported airports. They need to have those spaces there. I think there is opportunity to get badging requirements, so that we can work together with the FBO so that, instead of having a different badge for each airport, we could work with the TSA so we can expedite in and out of the airports with security needs that they may have at those airports. Those are some of the things that Congress could really help us with. Ms. Brownley. Thank you. Mr. Castagna, do you have anything else to add on sustainable aviation fuel? Mr. Castagna. Thank you, Congresswoman, for passing the blender's tax credit. I think that supply cannot meet demand today with SAF, so, we must continue to incentivize the commercializing of that product. We also must continue funding FAA's ASCENT program and the Department of Energy's BETO office to continue their excellent work on SAF feedstocks and technology. And SAF represents the best way for today's aircraft to really reduce the environmental carbon footprint. And so, the investments in these areas, we think, are critical. Ms. Brownley. What about incentives for production of SAF? Mr. Castagna. So, those same tax incentives and credits would be for production and refinement and blending and, ultimately, delivery to the airports. Ms. Brownley. Very good. Thank you, Mr. Chairman. I yield back. Mr. Yakym. Thank you, Ms. Brownley. The Chair now recognizes Mr. Perry for 5 minutes. Mr. Perry. I thank the chair. Mr. Baker, your testimony raises AOPA's concerns about Santa Clara County's decision to ban 100 Low Lead aviation fuel. And I think I am going to quote you here by saying, `` . . . required by thousands of general aviation aircraft to fly safely . . . '' and that the decision to ban it is `` . . . simply irresponsible.'' Now, look, if you want to have a private airport and ban airplanes, that is your business. God bless you. But if we are going to be federally funding your airport, then we ought to have something to say about it. And I find it particularly offensive--not only unsafe and irresponsible, but offensive-- that for some insane Green New Deal ideology, you are going to ban anything. If you are going to have a partially federally funded airport, you are going to provide the fuel necessary. And I don't know if anybody is familiar with catastrophic engine failure in flight, but I can guarantee you, it is an unpleasant experience. Mr. Baker, can you explain the impact on those maybe flying law enforcement missions, disaster relief, search and rescue, understanding that we all would like to fly something that uses Jet A, that is awesome, but we all can't afford Jet A. Can you explain the impact? Mr. Baker. Yes, it is a huge impact. Thank you for the question. We believe, working with the FAA and trying to enforce the idea that a federally obligated airport, you are required to carry the fuel that allows for the safe transportation of all aircraft, not just some of the aircraft. And we have already had one accident in Santa Clara today. We have had other misfuellings that have had to refuel or defuel the airplane. This ecosystem that goes together with these 5,000 public- use airports is so important that they all provide the same level of safety and fuel for these aircraft. We all believe we can get to this transition by 2030, but we need to make sure that we don't have gaps in that system in the meantime. So, that is one of the things we are pushing really hard, to make sure that we have a supply of low-lead fuel until there is an alternative fuel in place that can support all aircraft, not just some. Mr. Perry. And the alternative needs to be affordable, right, not just some alternative that meets the specific requirement but that nobody can afford to use, again, to go after the insane Green New Deal ideology. Could you provide the subcommittee with some details surrounding the accident in question regarding Santa Clara's ban of 100 Low Lead, and the misfuelling that took place? Mr. Baker. As I understand it, a high-horsepower, approximately 300-horsepower engine, got to the airport, needed fuel to get on to the next airport, put on some fuel. And I don't know exactly what happened to the detonation of that engine, but the engine came apart shortly after takeoff. Mr. Perry. And what resulted at that point? Mr. Baker. Fortunately, there were no fatalities. But certainly any time you have an aircraft coming out of the space in an urban area, there is high risk. Mr. Perry. Yes, high risk. And I will tell you the pucker factor, if you are sitting in the seat or anywhere in the aircraft--and that is what we call it when we are in the seat, the pucker factor--like, you can't pull a fishing line out of your rear end with a tractor, all right? And that is not a position to put pilots in for, again, insane Green New Deal, woke ideology. In the past few committee hearings, I have raised the issue and, unfortunately, these concerns that I have had have become reality. The upcoming FAA reauthorization bill is something that we are looking forward to. And in your opinion--I know mine, but I want to hear yours, because you are representing folks that don't get to sit in these seats--what should Congress do to ensure these things don't happen? Mr. Baker. I think there are two things that Congress can do. One is to make sure that we don't lose availability of 100 Low Lead until there is a suitable, affordable replacement. The second thing we could do is to try and work with some of these STC holders to try to go faster and get the fuel in these markets faster, so, we get some learnings done and some demonstrations done. I think there should be some money allocated to these STC holders to try and get that fuel in the market faster. But in the meantime, we cannot allow slippage in any part of this ecosystem that doesn't keep 100 Low Lead available. Mr. Perry. So, should there be a penalty of sorts for airports federally funded that decide to ban it? Mr. Baker. That is correct. Mr. Perry. You would agree there should be? Mr. Baker. I agree. Mr. Perry. All right. Thank you, Mr. Chairman. I yield the balance. Mr. Yakym. Thank you, Mr. Perry. The Chair now recognizes Mr. Stanton for 5 minutes. Mr. Stanton. Thank you very much, Mr. Chairman, for holding this hearing today. Thank you to each of our witnesses for being here today. General aviation is a key part of Arizona's aviation economy, supporting nearly 19,000 jobs and contributing $3.3 billion in economic activity just in 2019. And in Arizona, we have 3 of the top 10 busiest general aviation airports in the country. So, ensuring continued support for and growth of general aviation must be a top priority for FAA reauthorization. Today, I want to focus on the Contract Tower Program, which is one of the FAA's most successful Government-industry partnerships and serves the general aviation community. In Arizona, we have seven contract towers, including Phoenix-Mesa Gateway, the busiest contract tower in the country, in terms of traffic. This important air traffic safety program maintains and develops general aviation activity and supports DoD flight training operations and military readiness, as well as the pilot flight schools all across the country. And it is also important to note that contract towers account for approximately one-third of all tower operations in the Nation, and about 70 percent of contract controllers are veterans. Mr. Crider, what benefits does the Contract Tower Program provide to the National Airspace System, especially for the general aviation community? Mr. Crider. Well, I think it is a tremendous success story. It has been proven many times that the safety record is on par with the FAA towers. It really serves as an entry point for airports that have reached that point of operations where they need a tower. So, it is a great entry point for ATC activities. We talked before about some of the workforce issues, but I think a renewed focus on reconstruction, rebuilding, refurbishing the towers that are in place, the workforce itself, as we talked about, but also the real-time equipment that the controllers need to integrate into our National Airspace System, make sure they have the situational awareness and the equipment that facilitates that safe transition. Mr. Stanton. And you mentioned workforce. I know my colleague, Congresswoman Brownley, had a question about workforce earlier. Staffing shortages continue to be a major challenge throughout the industry, including the Phoenix-Mesa Gateway Airport. We recently opened a brandnew $30 million air traffic control tower at Phoenix-Mesa Gateway, but staffing shortages have reduced operations at the tower by 4 hours each day because contract employees have, unfortunately, left, often with only a few weeks' notice, to go work for the FAA instead. These positions cannot easily be filled, as it often takes 6 months to train a new controller. And that leaves airports like Phoenix-Mesa Gateway with difficult operational decisions in order to adjust. I want to ask a question about it, because you already talked about workforce issues. But Mr. Crider, on a different note, your written testimony highlights the important role that the general aviation sector will play in the deployment of advanced air mobility. Can you elaborate on general aviation airports' potential infrastructure needs to help accommodate this new technology? Mr. Crider. Absolutely. I think that what we are seeing, whether it is the eVTOLs, or some of the other emerging technologies, that R&D is done at GA airports. Typically, it is for reasons of operations, or available land, or for whatever reason. So, I think GA airports will continue to play a really important role in where those vehicles are built, where they are tested and proven. And ultimately, I think they provide a new dimension for underserved markets, for regional air mobility, for last mile, if you will, or connectivity to the hub and spoke system. So, I think this entire discussion of advanced air mobility is truly ripe for the GA airport community and communities that are served by GA airports. Mr. Stanton. My last question is for Mr. Castagna: What key elements should the FAA consider as it develops the necessary certification and operating standards for AAM? Mr. Castagna. Thank you, Congressman. Great question. I think that there is an extreme nexus between the current part 135 operators that exist today, and those regulatory processes, and the AAM community, where it is a natural segue, where we believe that that industry is going to rely on that same type of regulatory platform. Our organization is prepared to--and we have already established a committee to meet with the AAM and the vertiport community to see how we can integrate those activities into our regulatory process to advocate for those. And to tap into what Mr. Crider said, the infrastructure required at airports, it requires the streamlining of building codes and other types of coordination, where we will be able to provide the necessary power grid to support those activities. Mr. Stanton. I appreciate your answers. I yield back. Mr. Yakym. Thank you, Mr. Stanton. The Chair now recognizes Mr. Burchett for 5 minutes. Mr. Burchett. Thank you, Mr. Chairman. You all probably got up this morning and thought, ``Wow, I am going to go to Congress. It is going to be really exciting.'' And then they brought you in here, and they didn't offer you any snacks. So, I will try to make this as painful as possible for each and every one of you. [Laughter.] Mr. Burchett. Mr. Crider, the FAA required airports to use a toxic firefighting foam. And now, of course, it is warning the airports that it may be held liable for doing so. Is that correct? Mr. Crider. That is correct. I think that that is a big focus of airports, to make sure that there are protections in place. Mr. Burchett. What do these airports need to do to transition to a new firefighting material? Mr. Crider. Well, first of all, we need to patiently wait for the new materials. Mr. Burchett. Say that again. I am sorry. Mr. Crider. Well, I think, first of all, we are all patiently waiting for the new materials to be approved. So, having a viable alternative to PFAS materials is the first in line. But generally, airports preparing to make the transition as far as vehicles and equipment, those are all big factors. So, again, it is another topic. You don't want to throw the baby out with the bath water. It is a regulated material. It is used to enhance safety. So, none of us want to jeopardize safety or an important tool to save lives until there is a valid alternative in place. Mr. Burchett. But you are confident something is in the pipeline, so to speak? Mr. Crider. Sir? Mr. Burchett. You are confident that this new material is in the pipeline, so to speak? Mr. Crider. Yes. Mr. Burchett. Any idea when they will wave the magic wand and say it is OK? Mr. Crider. No magic wand, sir. I can get you an IOU on that, certainly, but I don't have that in front of me. Mr. Burchett. Right. Probably about the time the of the new one, they'll need another one. Mr. Castagna, how do you say that name? Help me out there, brother. Mr. Castagna. Castagna, like lasagna. Mr. Burchett. Castagna, I got it. Mr. Castagna. Castagna, there you go. Mr. Burchett. I got you. Well, Burchett. Nobody gets it right, either, so, don't worry about it. Do you think the FAA issues timely rulemakings? Of course, this is a leading question, so, go ahead. Mr. Castagna. So, the rulemaking process is certainly troubling for our members and needs refinement. Mr. Burchett. What kind of timeline do you usually put on something like that, I mean, when you are sitting around at the coffee table at work? Mr. Castagna. Well, when we are looking at rulemaking today, you are looking at at least a year-long process or more. Mr. Burchett. Well, if it is any consolation, it takes me over 6 months to get a response from the IRS. That's not for me, personally, it is for my constituents. Do you feel like this affects America's influence on international aviation standards? Mr. Castagna. The rulemaking? I absolutely do, from the standpoint of our collective industry here has been the world's leading power in aviation. And the fact that we are slowing down the process, we are competing now with other foreign governments that are moving technology and moving activities at a much faster pace than we are. Mr. Burchett. Mr. Pelton or Mr. Baker, do you have anything to add to any of this? Mr. Pelton. As far as rulemaking is concerned, it is absurdly long. I mean, I don't think--when you talk about 12 months, it is usually 24 months. We have been working this MOSAIC issue, which is very important to the growth of general aviation, and I think everybody is in agreement as to what needs to be done. And it will be 2024 before we see it. Because of that, we will not be able to certify electric-powered airplanes, which, right now, this is some of the environmental issues that we are dealing with, along with new technologies that are being held behind. What is probably the most offensive, as a U.S. citizen, is Brazil has already put this in place, and they did it in less than 1 year. Mr. Burchett. Brazil has? Mr. Pelton. They put the equivalent of MOSAIC improvements to LSA, the LSA category of airplanes. Mr. Burchett. You mentioned the electric airplanes. I know that I saw something on hydrogen airplanes, hydrogen-powered, new green hydrogen or whatever that is. I mean, it is just a byproduct of water. But go ahead. I am wondering where is that in your all's figuring? Mr. Pelton. Hydrogen has been around in development, and everybody jumped all the way to electric power, which I think we have all found that the battery density power is not where it needs to be, from a---- Mr. Burchett. Yes, I suspect the big boys at the table, corporate table, probably figured that out pretty quick, that somebody could fill up in Knoxville down there at Fort Loudoun Lake, and cut them out of their deal. So--but I am not a conspiracy theorist. [Laughter.] Mr. Burchett. And I am not bitter, either. Mr. Pelton. I think that when you get back to the rulemaking piece, this is another example of there are many technologies out there that we need to explore, and let those who are ready to be able to be implemented, allow them to move forward without jumping to the far end of the technology curve. Mr. Burchett. Thank you. Thank you, sir. Mr. Baker, I have no time left, so, if you can say something quickly so you can earn your keep today. You are good? All right. That is great. Mr. Chairman, I yield back the remainder of my time. Thank you very much. Mr. Yakym. Thank you, Mr. Burchett. The Chair now recognizes Mr. Auchincloss for 5 minutes. Mr. Auchincloss. Thank you, Chair. And Mr. Baker, I will let you get a turn here. You mentioned in your testimony that modernizing the air traffic control system is among the primary safety and regulatory functions of the FAA. How can Congress use this FAA reauth bill to help modernize outdated air traffic control systems, and improve the workforce pipeline? Mr. Baker. So, the workforce pipeline--I think the support of the NCAA bill, which has been mentioned, is the number-one way that we can move that forward. And as was mentioned before, 400 Members of Congress approved it the last time around. It is important to get that done and pull the whole aviation community together to work on workforce, because there is a lot of young people that want to be in aviation. As far as other things that the Congress can do, from a safety perspective and growing aviation, we think it is really important that we take these technologies, as Jack just mentioned, some of these things, these technologies, need to get approved faster and faster, and we are way too slow today in the rulemaking process. Mr. Auchincloss. Thank you. Mr. Crider, I am interested in ways that airports can more effectively manage curbside traffic to improve the passenger experience, and improve throughput from curb all the way to the gate. One way smart cities are tackling this issue is through remote enforcement of curb management policies: drop off, parking, et cetera. This allows cities to better manage the curb and in a more cost effective way. How could large and medium-sized airports benefit from remote curbside enforcement? Mr. Crider. Well, I think there is a myriad of technologies that are being deployed at airports, whether it is for TNCs, which speaks directly to curbside management. Mr. Auchincloss. TMCs? Mr. Crider. Transportation Network Carriers. Mr. Auchincloss. Oh, TNCs, got it. Mr. Crider. TNCs--I am sorry, the Ubers and Lyfts of the world, to wait time analysis, that give the passenger better information and a better experience. So, I think the short answer is more technology and more integration of technology into the terminal. Mr. Auchincloss. At the Federal level, are there proscriptions or laws that are impairing the ability of airports to do remote enforcement of curbside management? So, obviously, you are allowed to get traffic---- Mr. Crider [interrupting]. Nothing I am aware of, but we can certainly get an answer back to you. I will be---- Mr. Auchincloss [interrupting]. I would appreciate that. If you could follow up with my office on impediments you see to the ability to use technology to do remote enforcement, I would appreciate that. Mr. Crider. OK. So, specifically to remote enforcement? Mr. Auchincloss. We would love your input on the entire curb management situation, but particularly on whether airports are interested in trying to do remote enforcement and are held back by existing Federal law or regulation from FAA. Mr. Crider. OK. Mr. Auchincloss. And then, again for you, Mr. Crider, you mentioned in your testimony that capital needs for nonprimary and GA airports are more than $19 billion over the next 5 years. And I agree that supplementary discretionary grants and increased AIP funding could help support commercial and GA airports' ongoing infrastructure needs, coupled with additional flexibility in how airports can spend AIP funds. Could you walk us through why airports need that additional flexibility, especially larger airports like Logan at Boston? Mr. Crider. Well, I think there are some trends--regulatory process, environmental clearances, part 163 requirements--that slow down development, and candidly, add cost to the development. So, I think those are some areas that--a better collaboration between the airports community, the FAA, and Congress to find the right mix. Certainly, we don't want to go backwards in the advancements of the reasons for those laws. I think a streamlining of the regulatory process and approval process is really what we are asking for. Mr. Auchincloss. Terrific. I am going to yield back, actually, the rest of my time. Mr. Yakym. Thank you, Mr. Auchincloss. The Chair now recognizes Mr. Molinaro for 5 minutes. Mr. Molinaro. Thank you, Mr. Chairman. I appreciate that. I spent the last 12 years overseeing one of the largest general aviation airports in New York State: Poughkeepsie, New York. Recognizing the valuable role general aviation plays in the aviation community, I can tell you in my district alone, it is responsible for hundreds of jobs and $60 million worth of economic activity. It is very much the backbone of America's aviation world and, in many ways, the pipeline to jobs. And so, I would like to continue down the workforce development path for a moment. Mr. Pelton, we recognize that there is increased obvious demand for pilots and moving them through that pipeline. U.S. flight schools are oversubscribed, both large and small, we know. We are not able to meet the demand. And in many cases, of course, this is slowing down the ability to move pilots from general aviation to other occupations in the commercial sector. Could you just talk briefly about what happens to America's aviation system, if you will, if these flight schools don't exist? And quite frankly, also what we might do to expand capacity. Mr. Pelton. Well, thank you for the question. I think, when you forecast forward what we are seeing as far as the needs and demands from pilots, whether it be the military or commercial aviation over the next 10 years, the facts pretty much stand for themselves as to, if we are not able to keep that pipeline going, then our commercial travel will be slowed down because of the shortage of pilots to be able to operate in the commercial sector. So, that is really where we will see it, long term. And that is an effort that is compounded by the retirement of airline pilots in the baby boomer era, and then the lack of new pilots coming forward. So, it is critically important that we have a viable training sector, that we support it. Again, some of our earlier discussion around the ability to have Designated Pilot Examiners, which are a shortage right now, is one of the leading factors to it. And we also believe that MOSAIC, which is the regulatory change, rulemaking change, that we are hoping will be able to bring new aircraft into the market that are more affordable and more efficient for the flight training market. Also hoping to be able to reduce the costs associated with training with those new developments. Mr. Molinaro. I appreciate that. So, we developed, in conjunction with our community college--and I certainly would like to see more of this across the country--an experiential hangar for pilot training and airframe mechanics. Mr. Baker, could you just--following up on your testimony regarding AOPA, the aviation STEM curriculum, speak specifically to the value of the section 625 workforce development grants, how they help to prepare the next generation of aviation workforce. Mr. Baker. So, yes, our STEM program, which was funded exclusively by donors to the AOPA Foundation, was built over 4 or 5 years to create STEM education from the 9th to the 12th grade. And again, it is free to all the schools that want to do it. Today, we are in 400 schools. I think the opportunity to be in 2,500 high schools around this country with about 1 out of every 10 is the opportunity if we get the NCAA moving along the right way. I think we can get a lot of energy around this, because these opportunities can be used in high school to get college credits, whatever career it is, whether it is mechanic, technician, controller, pilot, engineer, all these career opportunities have never been better, and these young people are excited about it. And today, we have got over 40 percent of these young people are people of color. We have got over 25 percent young women taking these tough classes in high school. Mr. Molinaro. Yes, it is truly tremendous. And the truth of the matter is, I think America does itself a disservice by not putting value on this education in K-12, and certainly then connecting to higher education in those flight schools to build out not only the workforce, but to create that connection to jobs that, quite frankly, pay exceptionally well. With the last name Molinaro, I only feel badly, Mr. Castagna, that I had nothing to ask you. But if you wanted to add, I feel like Mr. Baker was given an extra 8 seconds a few moments ago, feel free to jump in. Mr. Castagna. If I may. Mr. Molinaro. And then I yield, Mr. Chairman. Mr. Castagna. As an adjunct professor for over 30 years, and having taught at the collegiate level for aviation and airport management, I would encourage us, as we look for opportunities to increase the workforce development, that we go beyond the traditional air traffic controller, pilot, flight attendant, mechanic, and look for the thousands of technical jobs that are available to our workforce in the airport and aviation community, and that we expand those grant opportunities beyond the traditional roles, and we look for more widespread use of technical jobs that might not require 4- year educations. Mr. Molinaro. Thank you. And thanks, Mr. Chairman. Mr. Yakym. Thank you, Mr. Molinaro. The Chair now recognizes Ms. Titus for 5 minutes. Ms. Titus. Thank you, Mr. Chairman. Well, I represent Las Vegas, so, you know how important general aviation is to my district. Without it, we wouldn't have corporate planes bringing people to our conventions or individuals coming out for big events. Now we are going to have the Grand Prix right down the Strip in the middle of my district, and the Super Bowl, also in my district. So, I am going to see a lot of you all's planes coming in and out, I feel like. So, this is important, and I appreciate all the testimony. Last session of Congress, I worked with Mr. Larsen and Mr. Graves--Mr. Garret Graves--to include the Advanced Aviation Infrastructure Modernization Act. And that gave money to local governments, Tribal governments to modernize airports. And I wonder, as this program rolls out, if you could talk about the potential infrastructure needs that general aviation has, as opposed to regular commercial airports, when it comes to AAM technology. Mr. Crider. Well, I can start. I think, in our example at Kelly Field, we are building a consolidated facility that has advanced air mobility attributes to it, so, preparing the electrical grid and the capacity for charging electrical vehicles. I would like to give a shout out, too, though, to the FAA. I think they have been very thoughtful. We talked about hydrogen earlier. Electric vehicles are the current. But we don't know what is going to be in the future. So, I think a thoughtful consideration about how a hydrogen vehicle or a solar vehicle or a hybrid vehicle might utilize that infrastructure, I think, is also well informed. So, those are the ideas. And I think, as airports like Kelly do more with advanced air mobility and connect up with other ecosystems like the military that is doing great things in advanced air mobility, and airports that are doing the research and development, the production, that building out the ecosystem and recognizing that AAM is an important part of the future and funding it appropriately is the right thing to do. Ms. Titus. Thank you. Anybody else? Mr. Castagna. I would just add that, in the design and the build of these facilities, the necessity for standards in the technology for, let's say, charging systems and connectivity to the grid between the various different user groups that we are dealing with, much like we do with aircraft, traditional aircraft, there is a standardization process there that we follow. And so, from a development standpoint of aviation facilities for AAM at airports, one of the things we are really looking to understand is what are the infrastructure requirements, what are the power needs, down to the connectivity to the actual charging unit, to the aircraft so that we can bring those technologies to market faster. Ms. Titus. It is always better to do it in advance than to have to go back and rehab it down the road. So, I appreciate that. Also, I would like to build on something that Ms. Brownley started asking about. And in the Inflation Reduction Act, we have a credit for sustainable aviation fuel. And I wonder if there are any barriers that you all particularly face in general aviation transitioning from leaded gas, and also if there should be allocations for GA use. Mr. Castagna. So, I will start with the SAF piece of that. Ms. Titus. OK. Mr. Castagna. So, we greatly appreciate the efforts of Congress to provide the tax credits, I believe, for 5 years. We would really like to see those get pushed out, and the incentives, for 10 years. The supply chain obstacles that we have in getting that product to market sooner is one of our challenges. In lieu of that, we are working with book and claim programs, so that our users can buy the fuel where they can, and book and claim it and use it in markets where the fuel is currently not available. Ms. Titus. OK. Mr. Castagna. So, the credits and the incentives to bring that product to the entire country, where right now it is really on either coast line is--bringing it to the center of the country will make it more widely distributed--it will also make it--the price point of it more competitive. Mr. Baker. I think there is an opportunity for Congress to look at--as these new fuel users come online, there are going to be very small batches of fuel being built. It is not going to be very competitive, and could cost, probably, a little bit more than the current supply. We want to get the transition going as fast as possible and as safely as possible. So, having some money set aside for these new fuels to come on board, get them introduced, whether they need tanks, things like that, I think would be an important part of the discussion. Ms. Titus. Thank you. Well, thank you, and I yield back. Mr. Owens [presiding]. Thank you, Ms. Titus. Mr. Mann? Mr. Mann. Well, thank you all for being here this morning. I represent the ``Big First'' district of Kansas, which is 60 primarily rural counties, a little bit eastern, a lot in the central, and the entire western part of our State. Transportation infrastructure is vitally important. There is a strong relationship between the Kansas economy and aviation, has been for decades. Our State system of commercial service and general aviation airports provide the gateway to the Nation's air transportation system and the world's economy for our businesses. Aviation ranked second in economic impact in our State of Kansas, only after agriculture. The ``Big First,'' my district, is home to 39 general aviation airports, with Kansas having a total of 73. Our airports support thousands of jobs and billions of dollars in economic activity, which is why it is imperative that aviation safety remain a top priority. One of the FAA's most successful Government industry partnerships, in my view, is the FAA Contract Tower Program, which enhances safety in our country, improves air traffic control services, and has increased savings to taxpayers. There are currently 262 airports in 46 States that participate in the Contract Tower Program, which you all know. Eight of those are located in Kansas. This critical air traffic safety program is important to maintain and develop general aviation activity, and supports DoD flight training operations and military readiness, as well as pilot flight schools all across the country. It is also important to note that contract towers account for approximately one-third of all tower operations in the Nation, and about 70 percent of contract controllers are veterans. A couple of questions for Mr. Crider. What benefits does the Contract Tower Program provide the National Airspace System, especially or specifically for the general aviation community? Mr. Crider. I think it is a huge part of enhancing safety. I mean, as I mentioned before, many airports that grow in operations to the point that they need air traffic separation, it is a great entry point. So, having that contract tower then interface with the National Airspace System, talking to centers and TRACONs and FAA tower facilities, that is all really important. So, I think, one, it plays a tremendous role in safety. It plays a tremendous role in enhancing a system of separation-- air traffic separation. But I think the challenge is that the program is a few years old now, so, the towers that first entered that program are aging. They need refurbishment, in some cases, replacement. So, an investment in that regard--BIL, again, touches on that. But there is more work to be done. You mentioned the 200-plus, 260-plus towers across the country. So, there are pretty vast needs out there for refurbishment, for replacement, for equipment that helps the integration of the controllers and workforces as we discussed earlier. Mr. Mann. I agree. The nine in Kansas--I have not toured all of them, but I have toured quite a few of them, and a lot of them need updating as the technology continues to change. The second question, and you touched on this, Mr. Crider, staffing shortages. Labor is tight in a lot of parts of the country, Kansas is no exception. Staffing shortages continue to be a challenge throughout the aviation industry, including with contract towers. Do you have any thoughts on how FAA and the industry can work collaboratively to really address staffing challenges at these towers? And what do we need to do to really help improve the situation and to truly move the needle? Mr. Crider. Well, I think there are some specifics like we discussed earlier, looking at the labor rates, increasing the pipeline. But whether it is pilots or controllers or maintainers, I think the system--and Mr. Castagna touched on this--it is really a system and a network of labor that is important. And I think communities--one example in San Antonio I mentioned in my testimony, we opened an innovation center that invites and brings young people to the airport, a couple hundred yards from Kelly Field, in an environment that introduces them to STEM and technologies, and robotics, and cybersecurity, and flight simulators, gaming, all the things that are transportable to the skill sets in aviation. And I think that maybe that is transportable to other communities and other States because, at the end of the day, communities and airports have the opportunity to integrate some of the great curriculum, the great touches that we have talked about earlier, locally. In our case, Kelly Field has a legacy of being the ladder to the middle class. So, we are really anxious and passionate about getting the thousands of young people and students that come from, frankly, socio-economically depressed communities through the innovation center, get them excited about aerospace, excited about robotics, excited about applied technologies, because our industries that are there on the campus like Boeing and Standard Air and others, they need that workforce for the future. And so, I think that communities can play that role in that workforce pipeline. Mr. Mann. I agree. Thank you--again, you all--for being here. And with that, I yield back. Mr. Yakym [presiding]. Thank you, Mr. Mann. The Chair now recognizes Mrs. Peltola for 5 minutes. Mrs. Peltola. Thank you, Mr. Chairman. Good morning. This has been fun listening to this morning. It seems like the prerequisite to get on this subcommittee is to have logbook hours, but no pilot's license. That is the trend I am seeing here. But I really appreciated your comments, Mr. Baker, and especially your comments in regard to improving weather cams and weather stations in Alaska. Even 20 years ago or 10 years ago, pilots--let's say out of Bethel--would call the village agent to find out what the weather was. And my favorite answer was, ``It is good; I can see my four-wheel.'' [Laughter.] Mrs. Peltola. So, I know agents are being trained to be a lot more specific about, like, visibility, and ceiling, and wind direction, and all of that, but we are really grateful for the weather cams and weather station improvements. Weather can be fast-changing, as it is everywhere. But in Alaska, you fly such great distances to get where you are going. I really appreciate how many comments have been made about the dependence Alaskans have on our airfields. But I am wondering, Mr. Baker, if you could share with us what the committee can do to help these efforts. Mr. Baker. Thank you on that question. Yes, I have flown the great State of Alaska on a floatplane every year, and it is a great place to fly. But those weather cameras are critical, and looking into those canyons, and understanding if there is a fog bank, or rain, or moisture, or whatever else is going to inhibit your ability to stay VFR flying through that part of Alaska. So, we have had some interruptions from time to time, where they haven't been able to keep them up. They seem like they are better today than they have been for a while. But it is really critical. We are now starting to take some of that learning from Alaska, and employ those cameras in the lower 48 in some of the Rocky Mountain areas, where there is no weather forecasting or broadcasting, or no station to do that. So, it is one of the areas of funding for the FAA to make sure that they can support that, from a safety perspective, in the lower routes for Alaska, particularly, where the weather is down an awful lot, as we know, and the rain. But they have now just put in some lower routes in Alaska, so, you can take a VFR corridor, and stay at a very low altitude, and know where you are at. So, I think the Congress can do--between the things that we need to get the funding for, like I mentioned before, the hangars and transient ramp spaces, and things like that that keep aviation safe and moving, as well as keeping people aware of all the weather things. Mrs. Peltola. Thank you, Mr. Chairman. I yield back my time. Thank you. Mr. Yakym. Thank you, Mrs. Peltola. The Chair now recognizes Mr. D'Esposito for 5 minutes. Mr. D'Esposito. Thank you, Mr. Chairman, and good morning, everyone. It is still morning. I represent the Fourth Congressional District on Long Island in New York. My district is just blocks away from JFK Airport, and most of my constituents, if they are flying anywhere, would utilize LaGuardia, JFK, or perhaps MacArthur out in Islip. On January 13th, two planes had a close call at JFK Airport. A Delta flight had to abort its takeoff when an American Airlines flight had crossed over into its path from an adjacent taxiway. They were approximately 1,000 feet from one another, which is, obviously, dangerously close. Thanks to the staff at the tower, the Delta plane was able to cancel their trajectory before any serious damage occurred. A few days later, a JetBlue plane scheduled to depart from JFK bumped into an unoccupied aircraft. The airlines and the FAA say this happened during pushback, which occurs when an aircraft is pushed back from its parked position at the gate before heading toward the tarmac to take flight. Thankfully, no one was hurt. However, these events underscore the importance of runway safety. Mr. Baker, what additional measure can the FAA do to ensure we have runway safety measures in place at our airports? Because it seems like these issues are happening more often. Mr. Baker. Certainly, there are a lot of new players and people in aviation today, and making sure that the training is in place at all of these different activities, whether it be at control tower, whether it be the ramp management. The good news is aviation is growing and booming. The other thing that comes along with that is a lot of new players. Mr. D'Esposito. Understood. Mr. Baker. So, reinforcing the training. Mr. D'Esposito. OK, thank you. And what are the AOPA's priorities for the FAA reauthorization that will advance implementing safety measures, as well as training? Mr. Baker. So, again, the big things that we believe in safety--the number-one thing is keeping low-lead fuel available until we have the safe transition to the unleaded fuel. It is the number-one priority, because we believe we should get rid of low-lead fuel, but we need to do it in a safe, meaningful, methodical way, an airport at a time. And to get the funding in place to make sure that that happens is the number-one safety issue that we look at for the Congress to give guidance to. Mr. D'Esposito. OK, thank you. Mr. Chairman, I yield back my time. Mr. Yakym. Thank you, Mr. D'Esposito. The Chair now recognizes Mr. Johnson for 5 minutes. Mr. Johnson of Georgia. Thank you, Mr. Chairman, for holding this hearing. And I thank the witnesses for your time and attention, and for your testimony. While commercial aviation consumes much of our attention, it is general aviation that plays a huge role in providing foundational flight activities such as business travel, humanitarian aid, environmental conservation, and many others. DeKalb-Peachtree Airport is in my district in Georgia, and has averaged about 228,000 operations per year over the past 30 years. It is the second busiest airport in the State of Georgia in its number of operations, only behind Hartsfield-Jackson Atlanta International Airport. Only 8 miles from the heart of downtown Atlanta, this airport makes it the airport of choice for general aviation operators visiting the Atlanta metropolitan area. I have some questions. Mr. Castagna, you mentioned that there was a huge workforce shortage in aviation. Is that correct? Mr. Castagna. Yes, sir. We are experiencing workforce shortages, from the ramp worker to the pilot community. Mr. Johnson of Georgia. And do you find, generally, that the aviation workforce is underrepresented in terms of people of color and women? Mr. Castagna. So, our position is we believe that a diverse workforce is certainly a resilient workforce. And the efforts that have been made in the last few years in working with different groups, the Tuskegee Airmen and the Women in Aviation groups, and bringing more persons of color and women into this aviation industry is certainly important to our organization. I think all of us here at the table feel that that is a critical role. I think it ties to the going back into the schools and into the younger--and introducing aviation in all different workforces at all levels and attract them. We were mentioning the air traffic control and what can we do to increase that. It really opened the kimono, introduced the air traffic control world down to those community groups, and opened them up. The FAA had a program that's, I don't think, active now during the pandemic, where you could actually book tours and go visit air traffic control facilities and bring student groups to go see those. Doing that and bringing inner city school kids, and bringing kids from high schools to that will certainly open the door of interest. Mr. Johnson of Georgia. OK, thank you. How about you, Mr. Baker? In terms of the pilots, do you find the same dilemma exists? Mr. Baker. Yes, I am very excited, though, that our high school initiative, which is about 40 percent young people of color that are taking these classes, STEM education, because they see the career opportunities, and the opportunities have never been richer and better. And 25 percent young women, which is a category--we only have 5 percent of our whole pilots that are women today. So, it is really a new opportunity. But you have to bring that to them to show them the pathways exist for them to get onto this program. So, that is why it is really critically important we get the support of the NCAA to get this thing rolled out to 2,500 high schools around this country. Mr. Johnson of Georgia. Yes, because, I mean, it is a fact that our country is becoming more diverse. And if we don't target underrepresented groups--and they may be underrepresented for whatever the reason might be, but if we fail to reach out to try to recruit or try to inspire folks, we are doing ourselves and our industry a disservice. And so, I just want to apologize to everyone for sinking into just a small bit of wokeness. I am so sorry. Now, Mr. Pelton, what impact does limited airport infrastructure funding have on general aviation airports? Mr. Pelton. I am probably not the best served to answer that, but the immediate need is if we believe that our 5,000 current general aviation airports are critical to the infrastructure of this country, we need to make sure that we maintain them as we do with our road systems or any of our other infrastructure. So, it is critically important, because a lot of these areas, that is a vital link, whether it be for medical services or rescue or other issues. So, we should be making equal investments in our 5,000 public-use airports around the country, other than the major airports. Otherwise, we are letting our infrastructure deteriorate. Mr. Johnson of Georgia. Thank you, and my time has expired. Mr. Yakym. Thank you, Mr. Johnson. The Chair now recognizes Mr. Kean for 5 minutes. Mr. Kean of New Jersey. Thank you, Mr. Chairman. My district starts, really, 20 minutes away from the Newark Airport, and has many other local airports within its boundaries. And I think we all certainly understand that general aviation is the backbone of the United States aviation system, as it contains pilot training, workforce training, and emerging technologies for safe skies, and as general aviation supports more than 1.2 million jobs and contributes approximately $128 billion to the United States GDP. On the issue of so many middle class families in my district and across the country being impacted by the inflation rate when they are sitting around their dining room tables, but many do not realize that the inflation is hitting the aviation and the aviation construction industry, as well. Mr. Crider, can you please tell us about how inflation and rising construction costs continue to undermine the ability for general aviation airports to complete projects, thus hurting the communities that they are intended to serve? Mr. Crider. Absolutely. I think the short answer is that the dollar just doesn't go as far with inflation and, frankly, competition. One of the unintended consequences of so much investment in infrastructure is that airports compete with road projects and many other dimensions to get those needed pieces of work done. I think, back to the funding level, if you look at the basic AIP entitlement for general aviation airports, it has been about $150,000 for the last 23 years. So, to your point, sir, $150,000 23 years ago, what that buys you today is radically reduced. So, I think a focus on both changing those formulas--because you have some very large airports, we talked earlier about Peachtree, Kelly Fields is another great example. We have large-scale commercial aircraft that operate from those GA airports. Understanding and differentiating how that entitlement and that funding works is important. And then also recognizing that there is both pressure on competition and inflation at play that just doesn't buy you as much as it did a few years ago. Mr. Kean of New Jersey. So, as a follow up, therefore, do you think that there should be more flexibility in how airports are permitted to use AIP and IIJA funding in recognition of these evolving needs? And specifically, what type of flexibility should this committee consider? Mr. Crider. I do. I think, as we talked before about the regulatory process, getting approval to build projects, but also where those funds are directed, relying on airport sponsors to invest those dollars most appropriately. That speaks to eligibility items and, frankly, a recognition of facets like industrial airports, infrastructure that supports large job centers and commerce that is essential to our system. I think those are some areas for improvement, but greater flexibility overall, the ability to invest wisely, appropriate to that specific community and airport. Mr. Kean of New Jersey. OK. Thank you, and thank you for the panel for being here today. I yield back. Thank you, Mr. Chairman. Mr. Yakym. Thank you, Mr. Kean. The Chair now recognizes Ms. Holmes Norton for 5 minutes. Ms. Norton. Thank you, Mr. Chairman. Mr. Castagna, as cochair of the Quiet Skies Caucus, I am glad you brought up advanced air mobility and the ability of new aircraft designed to limit aviation noise. Can you speak more to the benefits of AAM technologies and the necessity of integrating them into the regulatory system of the FAA and the infrastructure of general aviation airports? Mr. Castagna. Thank you, Congresswoman. Airports in urban communities are certainly challenged by the continued need to maximize their economic potential and opportunities in workforce development, and at the same time mitigate to the best of their abilities environmental impacts to their neighborhoods such as noise and other issues. AAM provides a huge opportunity to airports, if the infrastructure can be brought in to support the electric aircraft or hydrogen and these new technologies, which are ultimately going to reduce the footprint of noise in these neighborhoods because those aircraft are significantly quieter. So, the advent of electric aircraft or hydrogen aircraft and these technologies will have, ultimately, a direct impact to airport operations, where airports themselves are the natural introduction point for these types of activities. Where they ultimately want to establish footholds inside communities off-airport, the airport provides the first opportunity for the AAM community to introduce operations into the airspace system. Ms. Norton. Thank you. Mr. Baker, in your testimony you mentioned the need to maintain a qualified workforce in the general aviation sector. You reported that nearly half of AOPA Foundation's curriculum students are students of color, and 20 percent are women. What measures are AOPA and others in the general aviation sector taking to increase diversity in training and hiring to meet the employment goals of companies like Boeing? Mr. Baker. So, I believe that the opportunity for the whole industry--and again, under the form of the National Center for the Advancement of Aviation--is getting everybody on the same page. We see lots of young people that want to be in these aviation careers. And we have seen the success of our program in the 9th to the 12th grade. And again, many inner city schools, rural schools, home schools, all kinds of high schools--we are now in 400. I think the opportunity to be in 1 out of every 10--2,500 high schools in this country--is a real opportunity to create that exposure, create the pathways, and get the whole industry working together to solve this problem and create opportunities that have never been better. Ms. Norton. Thank you for that response. Mr. Crider, you mentioned that Port San Antonio has expanded its outreach to recruit students in lower socio- economic status in order to build up the industry's workforce. How has this recruitment to underserved communities benefited the maintenance of your workforce? Mr. Crider. Well, I think it has been a success. The innovation center I described earlier not only introduces young people to careers and opportunities of the future, it provides a place and a space for industrial aerospace operators to recruit. So, we have experienced a variety of internships, hands-on experiences, as well as just direct awareness of opportunities. So, it is really connective tissue. The innovation center serves as a place to introduce students, but it also allows great organizations like AOPA, EAA, Ninety-Nines, Girls Inc., many of those communities that have the diversity that the companies desire, it brings them together and allows a recruiting forum so that a pathway to success is established. And that may be internships, that may be exposure, that may be just counsel. So, it is really a space where all those things can happen. Ms. Norton. Thank you very much. My time has expired. Mr. Yakym. Thank you, Ms. Norton. The Chair now recognizes Ms. Davids. Ms. Davids of Kansas. Thank you, and thank you to our witnesses today for coming. And we have heard a lot about the FAA reauthorization that is coming up. And it is, obviously, a critical piece of legislation for the entire country. But I definitely appreciate the opportunity to have a discussion about the future of our national airspace and what that might look like. And obviously, we all want the United States to continue to be the gold standard, but we are going to have a challenge--we have heard a little bit about this--of constructing, well, constructing things, but also of constructing a bill that is going to promote these innovative technologies that we have and, certainly, the businesses that are right here at home that can do that. One of the things that I have been very focused on and was very happy and proud to get to work on in the last session of Congress with now chairman of this subcommittee, Garret Graves, was the Advanced Air Mobility Coordination and Leadership Act. And we got that across the finish line. It is going to establish an interagency working group to plan and coordinate those efforts. And again, we have heard a bunch about this already. And so, I do want to--Mr. Castagna, I know in your written testimony, you talked about NATA's Advanced Air Mobility Committee. And then we heard you, I think, when Mr. Stanton was asking about the recommendations that you all might be making. I am definitely very curious about not just the role that your Advanced Air Mobility Committee is going to be playing, but how you think we should be integrating and looking at the issues or problems, and then those recommendations. Because I think right now, with such new technology, it might surprise folks to know that the Federal Government is not always on the cutting edge of these things, and I would hate to see what happened when drones were really starting to come on the scene to similarly happen with advanced air mobility. So, if you want to, talk a little bit about that. And Mr. Crider, I know you have some comments and thoughts. If you want to expand on those, because I know you started talking a little bit about the infrastructure needs that we are going to have going forward. Mr. Castagna. Thank you. I would just start by saying, so, we established the committee, since we have existing members that are flying traditional aircraft for charter and other types of activities, where we see there is a nexus between those operators following those same Federal guidelines that would apply to the AAM community. So, having those two community groups talking to each other, and where we could support one another for that integration, we thought, was critical. As well, the AAM community needs to work through the certification process for their aircraft, and we know that that has been a challenge. Just from the traditional aircraft process, we know that they are in that same complicated network, and it is delaying their integration into the airspace. And then lastly, I would just say, for our businesses that are based at the airport, introducing those two into the airspace in such a way that we can introduce them to communities and establishing, let's say, arrival and departure procedures and things that are sensitive to an airport's community and can operate safely and efficiently, that is the natural course where we believe it should start. But we ultimately know that AAM wants to branch out beyond the airport boundaries, out into communities to operate. But the airport environment provides that first exposure to do so, and introduce it safely. Mr. Crider. And on that a little bit, I think an intentional investment and funding that addresses AAM is prudent. We don't want to be in a situation where investment in advanced air mobility reprioritizes or shuffles or subordinates safety projects and other needed projects. But I think an intentional investment in that is important. We are, as I mentioned before, investing in a facility that accommodates AAM, in addition to other things. But I think more of that, as the vehicles come online, and also an awareness that it is electric today, but it is going to be--who knows what the future will bring. Ms. Davids of Kansas. Thank you. And Mr. Castagna--lasagna, Castagna, I was trying--I probably will want to follow up, because I am running out of time, about those certifications. Which part the certifications will come under as we look at AAM, and trying to make sure that we are--just that this committee and the folks on the T&I Committee in general understand what that process is looking like for you all as you are trying to work through it. I know it is with the FAA, but-- -- Mr. Castagna [interrupting]. I would be happy to have our staff reach out to you, as well as---- Ms. Davids of Kansas [interposing]. Thank you. Mr. Castagna [continuing]. Our sister organization, GAMA, the General Aviation Manufacturers Association. So, it is part 23 of the Federal process. Ms. Davids of Kansas. OK. Thank you so much. I yield back. Mr. Yakym. Thank you, Ms. Davids. The Chair now recognizes Mr. Payne for 5 minutes. Mr. Payne. Thank you, Mr. Chairman, and congratulations on being chosen as vice chairman of this committee. Mr. Castagna, how is that? That's close? All right. As a cosponsor of Mr. Larsen's Advanced Aviation Infrastructure Modernization Act, I was pleased to read in the testimony of your support of adding electric vertical takeoff and landing, or eVTOL, aircraft into our air system. Is it possible that commercial vertical vehicle service could begin in the next few years under the FAA reauthorization? Mr. Castagna. So, we know that there are a number of participants in the AAM space. There are several hundred, in some cases, of these manufacturers. We know there is going to be a lot of consolidation in the manufacturing world. But at the top of the pinnacle today of those different companies, some are farther along in their certification process. Some have aspirations to being in the air on the west coast, where there is a large focus for the Olympics, where they introduced this model for transportation. So, to answer your question, I think it is realistically possible. I don't think it will be widespread throughout the country, but I think you will see it in certain urban markets, where they see an opportunity where the connectivity to the urban air mobility for various transportation modes can take place. Mr. Payne. Thank you. And in light of this, what priorities should the committee consider that would make this transportation successful and sustainable? Mr. Castagna. So, I think the conformity or consistency in the regulations that exist today that we are operating under for part 135 and in other types of regulations, including the certification, that we apply those standards consistently to those operators so that they are following the same path as our traditional aircraft operations are. Mr. Payne. Thank you. Mr. Crider, are airports ready to add this service? And what else can this committee do to help you add these new aircraft to your operations? Mr. Crider. Well, I would say it is a mixed bag. There are some airports that are very, very aggressive in seeking these new technologies and setting up systems, Kelly Field being one of them. But there are others out there that are anxious to integrate those vehicles into the system. There are others that are waiting to see. So, it is definitely a mixed bag. But I think, as Mr. Castagna said, that being ready for that through electrical grid, through standards, through standardization of charging stations, the takeoff and landing processes and the procedures, all that standardization and all that pre-work, it is not too early to start. So, I think that that is the work before us, as was said here today. Mr. Payne. Thank you. And now, Mr. Baker, over the past few years we have seen a huge increase in the commercial use of uncrewed systems, both remotely piloted and autonomous. How can this committee help prepare the general aviation pilots to deal with these new entrants to our airspace? Mr. Baker. So, we welcome all the new entrants into the airspace. We think it is good for the economy. We think it is good for the technology that we can apply to general aviation, as well. One of the things that we feel very strongly about is we don't want to add any more technology into the cockpit of a busy airplane, the busiest time, when you are below 500 feet coming and going from an airport. So, by not requiring any, mandating more equipment--we already have ADS-B. What we have always done in general aviation is see and avoid or detect and avoid. Those rules still have to apply as we add new entrants to the airspace. Mr. Payne. Thank you. And Mr. Chairman, I am excited. I am actually going to yield back 32 seconds. Thank you. Mr. Yakym. Very well done, Mr. Payne. I am impressed. The Chair now recognizes Mr. Carbajal for 5 minutes. Mr. Carbajal. Thank you, Mr. Chair. I will take those extra seconds. I am kidding. Mr. Crider, as we move forward with advancements in technology, specifically low- and zero-emission aircraft and sustainable aviation fuels, SAF, we have an opportunity to decarbonize our skies to make air travel greener. Some of the new developments include full or hybrid-electric aircrafts, which the FAA is working to develop a regulatory framework for certification and operation of them. From your perspective, what are the infrastructure needs to promote SAF and the use of hybrid or fully electric aircraft? And do you have any specific recommendations for us as we draft the FAA reauthorization? Mr. Crider. Well, I think for the fuels, the fuels piece, certainly the infrastructure, the fuel systems being prepared for that transition, again, not prematurely, but being ready for when the transition takes place. On the electric and the emerging technologies front, electrification is going to be the big thing, especially at commercial airports that are already facing demands for electric charging stations, for vehicles, for rental cars, for privately owned vehicles. So, that is only amplified by the electric vertical takeoff and landing, which have a fairly high requirement for electricity. So, I think capacity in the grid, ability to charge, compatibility from one aircraft to the other, standards, those are all things that are important next steps, and perhaps opportunities for this reauthorization bill to consider. Mr. Carbajal. Thank you. Mr. Crider, the Airport Improvement Program is a critical source of Federal funding for capital airport projects. In your written testimony, you have an extensive list of recommendations to improve that program. One of your recommendations to this committee is that we increase the authorized levels of Airport Improvement Program to $4 billion annually. Can you elaborate on the needs to increase the authorization? Mr. Crider. Yes, sir. Yes, I think that recent history has proven that there are many great projects that absorb supplemental appropriations, discretionary appropriations, the BIL work. More work has yet to be done, though. I think we have had a fairly stagnant level of basic AIP for the last few years--so, $3.35 billion, I believe is the baseline. So, increasing to $4 billion, in our opinion, makes great sense on a number of fronts. Its recalibration of the formulas, the formula for GA airports, but also medium and large-hub airports. So, a bit of a recalibration, if you will, that recognizes the different level of investment required at airports of a wide variety, and a variety of activity levels. So, yes, we think $4 billion is certainly warranted, in addition to the supplemental appropriations that we have seen in the last few years. Mr. Carbajal. Thank you. Mr. Baker, you have made great points on the impacts of the general aviation industry. It is an economic driver and supports more than 1.2 million jobs. But you also discussed workforce gaps and the need to train the next generation of pilots. How can Congress help support this, and what partnerships can we increase with schools across the country to achieve that goal? Mr. Baker. OK, a couple of those things are important. Thank you again for that question and the point of view. We still believe we have got an opportunity today to make general aviation even better by having transient ramp spots at all these airports, so people can come and go to all these 5,000 public-use airports unencumbered by some of the FBO costs that we see today. But we look at the opportunity to grow aviation and bring young people into aviation. I think the NCAA bill, which nearly passed the House last year with 400 votes, should get through today in Congress to support a bigger, broader way of bringing high school education to more than 2,500 high schools, more than 10 percent of the high schools that exist in this country, giving everybody a pathway and an opportunity to join this great career: aviation. Mr. Carbajal. Thank you very much, Mr. Chair. I yield back. Mr. Yakym. I thank the gentleman for yielding. Are there any further questions from members of the subcommittee who have not been recognized? Seeing none, that concludes our hearing for today. I would like to thank each of the witnesses for your testimony. I ask unanimous consent that the record of today's hearing remain open until such time as our witnesses have provided any answers to questions that may have been submitted to them in writing. Without objection, so ordered. I also ask unanimous consent that the record remain open for 15 days for any additional comments and information submitted by Members or witnesses to be included in the record of today's hearing. Without objection, so ordered. The subcommittee stands adjourned. [Whereupon, at 12:18 p.m., the subcommittee was adjourned.] Submissions for the Record ---------- Statement of Gregory Pecoraro, President and Chief Executive Officer, National Association of State Aviation Officials, Submitted for the Record by Hon. Garret Graves Chairmen Graves and Graves, Ranking Members Larsen and Cohen, and members of the Subcommittee on Aviation, thank you for the opportunity to share my thoughts on behalf of the National Association of State Aviation Officials (NASAO) regarding the future of general aviation. For the past 92 years, NASAO has represented state government aviation agencies in all 50 states, Guam and Puerto Rico. Like you, in your roles on this subcommittee, we serve the public interest. State aviation agencies play a critical role in managing the National Aviation System, from developing state-wide aviation system plans to performing airport safety inspections on behalf of the Federal Aviation Administration (FAA) of general aviation airports. In addition to these activities, state aviation agencies work closely with the general aviation airports in their states in a variety of ways. General aviation airports often lack the staffing and expertise available to larger airports and rely on their state aviation agencies for a wide range of technical support and guidance, as well as for assistance in interacting with the FAA. For example, ten states administer block grants for FAA Airport Improvement Program (AIP) grants to general aviation airports, many others act as channeling states \1\ for the FAA where they work with the airport to accept and distribute grant funds, and most states provide funds to help meet the matching requirements for FAA AIP grants. --------------------------------------------------------------------------- \1\ State channeling of federal airport grants occurs in various forms within numerous states. Normally, when an airport is in a channeling act state, the sponsor submits payment request information to the state, who then submits the request to the FAA. In this case, the FAA makes payments to the state, and the state then distributes the payment to the sponsor. In some cases the state may also provide technical oversight and review, which may include state submittal of grant applications and/or closeout requests. This is based on state enabling legislation, rather than federal law. In many cases, the state also signs the grant agreements. Channeling agreements based on state enabling legislation do not need approval from the FAA Airport District Office (ADO). AIP Handbook, Chapter 2, https://www.faa.gov/airports/ aip/aip_handbook/?Chapter=2 --------------------------------------------------------------------------- This testimony will focus on the top three policies that state aviation agencies believe would have the greatest impact on general aviation in their states if enacted: (1) increase Airport Improvement Program (AIP) funding levels; (2) modernize the Nonprimary Entitlement (NPE) Program; and (3) invest now to prepare for the next generation of aircraft. NASAO has also developed a list of recommendations for Congress to consider as you craft a FAA reauthorization bill, which is included at the end the testimony. Continue Investments in Airport Infrastructure NASAO urges Congress to increase funding levels for the Airport Improvement Program (AIP) to a minimum of $4 billion annually. The AIP funding levels have remained stagnant for a decade at $3.35 billion a year. While funding levels have remained stagnant, construction and material costs continue to rise. There continues to be a great need for federal investment in our nation's airport infrastructure as there is more than $62 billion in AIP and IIJA-eligible projects from now until 2027 \2\. Our general aviation airports have unmet needs for construction, repair, and maintenance of runway, taxiways, and other AIP eligible projects. Looking to the future, general aviation airports must transform into greener, more sustainable facilities, as well as increase their connection to a multi-modal transportation system. This will take much needed focus and increased investments for this to happen. --------------------------------------------------------------------------- \2\ Federal Aviation Administration, National Plan for Integrated Airport Systems (2023-2027), p. 3, https://www.faa.gov/sites/faa.gov/ files/npias-2023-2027-narrative.pdf --------------------------------------------------------------------------- State aviation agencies also urge Congress to reauthorize supplemental discretionary airport infrastructure grants and ensure 50 percent of funds are used for non-hub and small hub airports and general aviation airports. These funds go a long way for non-hub and small hub airports that are not able to leverage other funding sources, like the Passenger Facility Charge (PFC) fees and bonds. Modernize the Nonprimary Entitlement (NPE) Program General aviation, nonprimary commercial and reliever airports rely on the Nonprimary Entitlement (NPE) Program for minimal level of a capital funding. Unfortunately, the NPE program has not changed since its inception in the early 2000s. It needs to be modernized to meet to the current needs of general aviation airports. The NPE program provides up to $150,000 annually from AIP to general aviation, reliever, and nonprimary commercial service airports for critical projects that would otherwise go unfunded. However, in today's environment, these annual NPE grants are so small that they must be carried over for a period of years to accumulate up to $600,000 to go toward an airport project. More meaningful paving projects are starting at $1 million today. For example, in Louisiana, John H. Hooks Jr. Memorial Airport is in need of a runway rehabilitation due to pavement and base challenges. The cost estimate for the runway rehabilitation was nearly eight times the maximum amount of entitlements that could be accrued. In Missouri, many of the National Plan of Integrated Airport Systems (NPIAS) airports that are planning projects have had to break the projects in half or phase them due to the yearly NPE funds not being enough to meet the current construction prices. This greatly increases the overall cost of the pavement maintenance due to paying for mobilization, bidding, and design twice. If the NPE program is to provide airports with a meaningful opportunity to make improvements in a cost-efficient way, the program must be reformed to ensure that these airport projects are moving forward. NASAO proposes modernizing the program by increasing the funding levels to airports with more activity: $1 million for national airports, $500,000 for commercial service non-primary airports, $500,000 for regional airports, $250,000 for local airports, $150,000 for basic airports, and $0 for unclassified airports. Equally important is increasing State Apportionment at the same proportion to ensure that an increase in NPE does not further reduce State Apportionment funds. Raising overall AIP funding levels above $4 billion annually will be critical to implementing this proposal. NASAO also urges Congress to include language that would allow for the option of airport sponsors to transfer unused NPE funds to State aviation agencies and make them available to NPIAS airports within their state. This will ensure that this funding that was intended for the state remains in the state. Preparing for Advanced Air Mobility Congress has recognized the importance of this new era of aviation by enacting the Advanced Air Mobility Leadership and Coordination Act and the Advanced Aviation Infrastructure Modernization Act. NASAO is grateful for Congress' action on these two important bills to continue to keep the United States at the forefront of aviation. State aviation agencies and airport sponsors have an important role to play in facilitating AAM and need assistance with this transformational challenge. They will need access to expertise and funding to plan for airport transformation, charging for eVTOL aircraft, electrification of ground support equipment, on airport clean power generation, and EV charging for airport parking facilities. Congress should encourage and fund the development and implementation of these solutions by directing the FAA to develop plans and policies and identify how to make federal funding available to support both on and off airport development for AAM. With both electric and hydrogen propelled aircraft in development, it is critical that the FAA start planning how it will support airports and off airport transportation nodes with these new infrastructure needs. It is also vital that Congress continues to support integration of these new technologies by tasking the FAA with establishing national standards to address AAM airspace coordination and control. Established standards will help the system to expand more rapidly as AAM aircraft become certified. Federal expectations and rules for this new technology must be developed and shared with all stakeholders soon, and it is critical for state and local governments to be part of the conversation in integrating these technologies into the larger transportation system. As planning will be an initial crucial step in facilitating AAM, we need to ensure that FAA sets infrastructure standards that can be applied across the nation in order for states and other stakeholders to conduct more in depth planning for the facility requirements. Some of this planning will require airport sponsors or vertiport managers to study their existing electrical grid to see what needs to be done to upgrade power or bring in additional power for electric vehicles, ground support equipment, public transportation and electric aircraft. NASAO urges Congress to charge the FAA to provide states baseline standards to assist with the infrastructure planning requirements to accommodate AAM, such as electrical requirements and charging standards. In closing, Congress has an opportunity with an FAA reauthorization bill to help set general aviation airports on a path that will enable them to not only improve the current infrastructure but prepare for the future of aviation. We appreciate the Subcommittee's focus and support of the general aviation community. NASAO looks forward to continuing to work with you in the upcoming FAA reauthorization bill. Thank you for your consideration. NASAO's FAA Reauthorization Proposals Provide Robust Aviation Funding Increase Airport Improvement Program (AIP) investment to not less than $4 billion annually. The cost of construction has risen over the years, but we are spending less through the Airport Improvement Program (AIP) on airport infrastructure than we did in past years. An increase would enable states to not only update existing infrastructure but upgrade that infrastructure to take advantage of new aeronautical technologies that will keep the United States in the forefront of global aviation. Reauthorize supplemental discretionary airport infrastructure grants and ensure 50 percent of funds are used for non- hub and small hub airports and general aviation airports. These funds will go a long way for non-hub and small hub airports that are not able to leverage other funding sources, like Passenger Facility Charge (PFC) fees and bonds, to address their infrastructure needs. Continue to apportion AIP funding based on airports' calendar year 2019 or 2020 or 2021 passenger enplanements, whichever is highest, for FY 2024 to 2026 (consistent with the Bipartisan Infrastructure Law). This would ensure that airports continue to remain eligible for AIP and are able to fund critical airport safety projects. Raise and index the Passenger Facility Charge (PFC) rates at commercial service airports. Raising the PFC cap would give small airports, who have less options to raise airport revenue, a greater share of AIP entitlement funds. Large commercial service airports would be able to collect and use PFC revenue for airport infrastructure and forgo their AIP entitlements. Modernize the Non-Primary Entitlement (NPE) Program To ensure that the Non-Primary Entitlement (NPE) program better meets the needs of non-primary airports, NASAO urges Congress to: Increase the funding levels to airports with more activity ($1 million for national airports, $500,000 for commercial service non-primary airports, $500,000 for regional airports, $250,000 for local airports, $150,000 for basic airports, and $0 for unclassified airports) and correspondingly increase State Apportionment to ensure that an increase in NPE does not further reduce State Apportionment funds. The General Aviation (GA) entitlement portion of AIP is divided into two categories: State Apportionment and Non-Primary Entitlement (NPE). NPE grants are available for general aviation, reliever, and nonprimary commercial service airports at up to $150,000 per year. The remainder of the funds are then allocated for State Apportionment and go to the highest priority projects that are determined through a sound and established planning formula. These grants have been very effective at preserving an important component of the nation's aviation system. However, NPE grants must be carried over for a period of years to provide adequate funding for most airport improvement projects given that the buying power of these funds has decreased significantly since the program was established. In addition, State Apportionment has seen year-over-year reductions since the inception of the NPE program in 2001. It will be critical for Congress to address both NPE and State Apportionment funding levels when looking at enhancing the NPE program. Increasing the funding levels of these two programs will ensure that these airports are able to begin critical shovel-ready improvement projects sooner rather than later. Allow for the option of airport sponsors to transfer unused NPE funds to State aviation agencies and make them available to National Plan of Integrated Airport Systems (NPIAS) airports within their state. Non-primary airports can bank/carryover these funds for up to four years to accumulate $600,000. When non-primary airports have expired NPE funds, these funds are transferred to FAA's discretionary fund for use by FAA in that fiscal year. This proposal would ensure that these funds are invested in the respective states as intended. Prepare for a New Era of Aviation To ensure that the United States is ready for the next generation of aircraft and the states and localities are able to adequately prepare for these new aircraft, NASAO urges Congress to: Advanced Air Mobility (AAM) Task the FAA with developing plans and policies and identify how to make federal funding available to support both on and off airport development for AAM. With both electric and hydrogen propelled aircraft in development, it is critical that the FAA start planning how it will support airports and off airport transportation nodes with these new infrastructure needs. Charge the FAA with providing states baseline standards to assist with the infrastructure planning requirements to accommodate AAM, such as electrical requirements, and charging standards. Planning that could be accomplished now at airports and within communities will help speed up the incorporation of AAM aircraft as they become available. Require the FAA to establish a national standard to address advanced air mobility (AAM) airspace coordination and control informed by the ongoing work of the Advanced Aviation Advisory Committee. Allowing for third party providers operating under the guidance of the FAA and the established standards would enable the federated system to expand more rapidly as AAM aircraft become certified while maintaining the appropriate level of safety. Uncrewed Aircraft System (UAS) Require the FAA to establish an outline for a constructive Federal regulatory framework for drone integration strategies that support the application of a low-altitude drone activity and require the FAA to work collaboratively with states to develop an acceptable framework. The role of state government in integrating UAS technology into the airspace has been recognized by the inclusion of NASAO designees on the relevant UAS advisory and rulemaking committees. NASAO believes that a constructive federal, state, local partnership can be reached by the levels of government proactively working with industry stakeholders. Authorize a grant program that provides not less than $100 million to state, local, and tribal governments to purchase drones for infrastructure inspection purposes and not less than $100 million to community colleges/universities to support drone education and workforce training programs. State aviation agencies recognize the value in and are looking to leverage drone technology to inspect ageing infrastructure. This grant program will support the efforts of state, local, and tribal governments to capitalize on those benefits while investing in workforce development programs to bolster the workforce of the future. Sustainable Aviation Fuel (SAF) Continue federal support of SAF development and production to significantly reduce harmful greenhouse gas (GHG) emissions and ultra fine particulate matter. SAF is a viable bridging strategy to reduce carbon emissions while AAM aircraft have time to mature. Ensure Air Service to Small Communities Allow communities that successfully exited EAS and were then locked out of EAS due to provisions in the FAA Modernization and Reform Act of 2012 (P.L. 112-95) to rejoin the program to help restore scheduled air service that has been reduced or suspended as a result of the pandemic. NASAO urges Congress to continue investments in the Essential Air Service (EAS), Small Community Air Service Development (SCASDP), and the Contract Tower Programs. These programs ensure small communities have access to commercial air service. NASAO urges Congress to address the aviation workforce shortage, including the pilot shortage. Provide Federal Support for PFAS Clean-up Efforts at Airports Implement federally assisted clean-up programs for PFAS contamination at airports stemming from FAA-required use of firefighting foams containing PFAS, including airports that were not required to, but used the FAA-approved firefighting foam as a best practice. In addition, NASAO urges Congress to review and provide liability protections for all U.S. airports faced with this challenge. While some progress has been made in identifying PFAS as an emerging contaminant, direct federal support of all airports (separate from the Airport Improvement Program) is needed to accelerate the clean-up process at contaminated sites. Not only are airports faced with difficult choices when called upon to extinguish fires using the only FAA-approved firefighting foams, airports are now subject to environmental enforcement actions in many states, harming the viability of the national transportation system. Airports should not be held liable for PFAS contamination as a result of complying with a federal requirement. Enhance Infrastructure Investment and Jobs Act (IIJA) Implementation Provide administrative funding to States to assist with implementation. States' workload has doubled since the pandemic with the flow of federal funds to airports, which has strained State aviation agencies' resources and staff. Many States are concerned about the inadequate staff levels that they currently have to implement IIJA. Regardless of a State aviation agencies' status (e.g., Block Grant State or Channeling State), program funding assistance to States is needed to ensure IIJA funds is efficiently and effectively rolled out. Ensure funds are spent efficiently by allowing airports to transfer IIJA funds between airports, including the option for State aviation agencies to assist in transferring funds between airports in their State. The IIJA does not address the issue of transferring funds, but FAA's FAQ states that airports are not allowed to do this. Without being able to transfer funds between airports, we may see many airports carry over funds year to year and are trying to complete projects in year 4 and 5, which could create a shortage of contractors and increase prices because many airports are trying to complete projects at the same time. Allowing those State aviation agencies who are willing to assist airports within in their States to transfer funds will also help ensure that funds are spent efficiently. Several States have been using this tool successfully for many years with AIP entitlement funds. Improve Weather Observation Resiliency and Redundancy Direct the U.S. Government Accountability Office (GAO) to review the Automated Surface Observing Systems (ASOS) and Automated Weather Observing System (AWOS) and provide recommendations on how to improve the reliability and redundancy of the system. The ASOS \3\ (jointly managed program by the National Weather Service (NWS), FAA, and U.S. Department of Defense) and AWOS (airport-owned and managed system that compliments ASOS) are the country's primary surface weather observing network supporting weather forecast activities and aviation operations (e.g., regional air carriers and cargo operators). Both systems are aging and in need of updated infrastructure. While the FAA/ NWS are in the process of updating ASOS, States and airports are facing challenges in updating its AWOS infrastructure as the lack of suppliers and cost of installing and maintaining the systems is becoming unmanageable. For example, when a weather station goes down, it can take up to a week before flights can resume due to delays in acquiring and installing replacement parts. A study is needed to address the complexity of the challenges of this critical weather reporting system as it's an integral part of ensuring safety in our aviation system. The need for and importance of affordable weather reporting will only grow as vertiports are integrated into the National Airspace System. --------------------------------------------------------------------------- \3\ ASOS reports basic weather elements such as sky conditions, visibility, present weather conditions, visual obstructions, barometric pressure, ambient temperature, wind speed and direction, and precipitation. With more than 900 ASOS sites in the United States, these automated systems are critical to providing weather information at airports. Direct the FAA to provide aviation weather observer training to interested candidates to improve access to the program, thereby ensuring aircraft operation safety at rural airports. Aviation weather observers detect and track weather conditions to back up the ASOS system. Having aviation weather observers available to support weather observations when an ASOS experiences an outage due to repair/ replacement or unexpected downtime is critically important to ensuring aircraft operations continue at airports. To become an aviation weather observer, interested candidates must pass a background check and the FAA Weather Observation Certification Test. The NWS previously managed the program and provided aviation weather observation training to assist those interested in obtaining an aviation weather observer certification and prepare them to pass the certification test. However, obtaining this certification has become much more difficult under FAA as the agency places the burden on the candidate to find the necessary observer certification training. Enhance the State Block Grant Program Authorize the FAA to provide funding to participating Block Grant States to be used to administer the State Block Grant Program (SBGP) to bring the administrative costs borne by the States more in line with other modal programs of the U.S. Department of Transportation. NASAO recommends an amount that is equal to an amount that the FAA would have spent to perform the delegated responsibility or three percent of the total funds administered by the Block Grant States, whichever is higher. NASAO also recommends that the FAA should provide SBGP states with program administration training sufficient to carry out the obligations of the SBGP at no cost to the SBGP states. Improve the Timeliness of FAA Issuance AIP Grants Direct the U.S. Government Accountability Office (GAO) to review FAA's process for releasing/issuing grants and provide recommendations on how FAA can improve its process to ensure timely grant issuance. The FAA has had a history of issuing grants late in the federal fiscal year due to a variety of factors. This poses a problem, especially for the northern states, as the construction period is very short. For instance, when bids open in June and FAA then issues the grant in September, those construction projects may not start until the following Spring, thus driving up construction costs even further. Delays in FAA issuing grants has caused airport sponsors to have to request that contractors provide a written extension to further hold/ lock in the bid prices past the usual 60 or 90 days. In today's construction environment, bid holds exceeding 120 days are no longer being granted by contractors, and airport sponsors are having to re-bid projects or sign a local contract with the contractor at risk without the grant from FAA to lock in bids. Contractors have stated that they are including contingency in their bid prices if an airport sponsor requests 120 days for a bid hold since materials costs fluctuate almost daily. Appendix ---------- Questions from Hon. Sam Graves to Mark Baker, President and Chief Executive Officer, Aircraft Owners and Pilots Association Question 1. In the 2018 Federal Aviation Administration (FAA) Reauthorization bill, language was inserted to extend the duration of aircraft registration certificates from three years to seven years. It took the FAA four years to implement something as simple as a mandated date change in the regulations. This change is long overdue and certainly welcome given the unacceptable backlog that has built up in the aircraft registry office in recent years. As of the March 9, 2023, Subcommittee hearing, the office was processing documents received the week before Thanksgiving last year. Do you expect this date change to alleviate the backlog? Additionally, what can Congress do to help the aircraft registration office get back on track? Answer. The extension from three to seven years will have a positive effect on reducing the FAA's unacceptable backlog of registration renewals and we appreciate Chairman Graves getting this provision in the 2018 FAA Reauthorization bill. The FAA registry has been reducing the number from a high of over 190 days in late 2022 to 148 days by the end of January 2023. As of the end of July 2023, aircraft registration renewals were down to 41 days. While the decline is good news and long overdue, AOPA continues to help keep aircraft registration delay reduction a high FAA priority. We are grateful to Chairman Graves for including two provisions in the House passed FAA Reauthorization bill that will further improve aircraft registration. Sec. 241 Aircraft Registration Validity During Renewal will allow an aircraft to continue to be operated on or after the registration's expiration date as long as the operator is awaiting a pending registration renewal application and meets certain criteria. AOPA also supports Section 248 Deadline to Eliminate Aircraft Registration Backlog that sets a deadline for the FAA to eliminate the aircraft registration backlog so that on average, applications are processed not later than 10 business days after receipt. Questions from Hon. Bruce Westerman to Mark Baker, President and Chief Executive Officer, Aircraft Owners and Pilots Association Question 1. As the committee formulates plans for the FAA Reauthorization, we all want to ensure that our nation's airspace is the safest in the world. The US airspace is extremely safe, of course, but we can always do better. I'm especially concerned with the safety of General Aviation (GA) pilots who are routinely flying to and from small, regional, non-commercial airports. I'm concerned that the FAA isn't taking strong enough steps to ensure safety of these pilots at small airports. For example, there's an airport in my district in Mena, Arkansas, where pilots lose contact with the Memphis Air Route Traffic Control Center when below 4,000 feet. Radio signals are blocked by mountains in the area. Instead of fixing the problem by installing a Remote Center Air/Ground site closer to Mena to ensure reliable radio contact, pilots have been instructed to land without communication with controllers. Once they get on the ground, they're supposed to check-in with Memphis to close their flight plans. Of course, the airport manager in Mena tells me that doesn't always happen, and he's been called after hours at times to verify a safe landing. When he's out of town, the sheriff's office has been known to take on this task. I've read myriad news stories referencing a Boeing study showing that takeoff and landing are statistically the most dangerous portions of a flight. I realize that was a commercial aircraft study, but I'm assuming there's a similar concern with GA aircraft during takeoff and landing. As such, as a GA expert, can you tell me the following: Question 1.a. What safety concerns do you have with the situation I've outlined above? Answer. The circumstance outlined above is not an abnormal situation. Communication with ATC is not available at all airports (including at Mena Intermountain Municipal Airport, which is an uncontrolled airport) and is not required for the safe operation of aircraft, including during arrivals and departures. While the presence of a remote communications outlet (RCO) or Remote Communications Air/ Ground (RCAG) would be helpful, pilots are trained very early to operate safely at uncontrolled airports. It may, however, affect efficiency and convenience. When ATC is aware of an arrival or departure at an airport, and cannot communicate with that aircraft, they typically shift to a ``1 in, 1 out'' operation--in other words, no other arrivals/departures are permitted until radio/radar contact has been established. Flying in and out of airports surrounded by mountainous terrain does require additional consideration and planning. Less experienced pilots should use care, or even seek additional training, before operating at these airports. However, these operations are common and are not unsafe. The takeoff and landing phases of flight are widely considered to be the most critical phases of flight, both in commercial and private operations. However, as noted above, communication with ATC is a separate consideration--aircraft can conduct completely safe takeoffs and landings while not communicating with ATC. In fact, the vast majority of airports in the United States are uncontrolled airports, where pilots are not in contact with ATC (although they do utilize a common traffic advisory frequency to announce their position and intentions to other nearby aircraft). Question 1.b. Would your operation of an airplane be as safe without continuous radio contact as it would be with that contact? Answer. The answer to this depends on the type of operation being conducted. Pilots are trained to operate an aircraft while not in contact with ATC (as mentioned above). Flying an aircraft in or out of an airport where ATC services are not available is in no way unsafe. Rather, it is more a matter of convenience and efficiency. That said, it can be argued that there is an additional layer of safety when a pilot has the ability to communicate with ATC, whether in the event of an emergency or just for additional situational awareness. Question 1.c. In a bad weather situation with limited visibility, would you be more comfortable as a GA pilot if you were in continuous radio contact with controllers versus no contact below 4,000 feet? Answer. Again, this would depend on the experience level of the pilot and on the circumstances. Less experienced pilots would likely welcome communication with ATC, giving them the ability to ask for assistance if needed. More experienced pilots would feel perfectly comfortable in instrument meteorological conditions (IMC) and out of contact with ATC. The specific circumstances might affect the comfort level as well. For a single pilot flying a single-engine aircraft, in IMC, perhaps in icing conditions, contact with ATC might be preferred. It might allow for more timely updates of airport conditions or for guidance in the event of an emergency. Question 1.d. In many parts of rural America, cell phone signals aren't 100% reliable. What would you do if you had no radio contact, only spotty cell phone contact with the controllers, and it was after hours at the airport? Would this affect your decision to fly into this airport? Answer. This question speaks to the importance of thorough pre- flight planning. Pilots are trained to be prepared for the conditions they are expected to encounter. Pilots know they need to close a flight plan after arrival and need to be prepared to do so. If a pilot is flying into an airport in a rural area, this might mean they need to carry a satellite phone, or perhaps they need to call ahead and find out where the nearest land line phone can be found. The absence of a convenient means to contact ATC on the ground might very well impact the decision about whether or not to make the trip. To address the concern, the airport could provide an outdoor courtesy landline for pilot use or encourage the cellular carriers to improve their coverage in the area. Question 1.e. What would you suggest the FAA do to fix this issue? Question 1.f. If you have any other concerns or statements to make on this issue, I welcome your expertise. Answer to 1.e. & 1.f. Flying in general is an exercise in managed risk. There is risk in every human endeavor and flying certainly carries its share of them, but safety is always the top priority for pilots. The key for pilots is to examine each flight and determine if the risks are acceptable and to look for ways to mitigate or eliminate any residual risks. There may very well be a case for FAA to provide an RCO at the airport in question. Doing so would certainly improve the convenience for pilots and could, arguably, improve the level of safety. However, it is important to stipulate that the lack of radio communication with ATC, via an RCO, is not unsafe. The cost of an RCO should also be considered--both the capital expenditure to provide it and the ensuing annual operating expenses. If the concern is primarily one of ensuring pilots can close flight plans after arrival, it is likely to be more cost-effective for the airport to provide an outdoor courtesy phone for use after hours. Question from Hon. Hillary J. Scholten to Mark Baker, President and Chief Executive Officer, Aircraft Owners and Pilots Association Question 1. Can you talk about the role smaller airfields, and more broadly, general aviation, play for economic development for a community, and how we can encourage further growth in the general aviation space? Answer. General aviation (GA) in America provides a significant economic impact contributing $247 billion to the economy and supporting more than 1.2 million jobs. Hundreds of thousands of GA pilots fly over 26 million flight hours, including more than 30 million take offs and landings while also transporting hundreds of millions of passengers. Through the network of more than 5,000 public-use airports across the country, which is 10 times the amount served by commercial airlines, as well as over 14,700 privately owned landing facilities nationwide, GA is an integral part of the transportation system that supports communities across the country. General aviation airports play a vital role in our national airspace system, and they are economic engines for local communities by creating jobs, generating local revenue, and attracting businesses. Thousands of small airports across the country, many of which are in rural areas, are often the lifeline for businesses. In Michigan alone, general aviation airports support over 33,000 jobs resulting in more than $1.4 billion in labor income throughout the state. General aviation and these small airports forge links between thousands of businesses, their suppliers, and their customers and allow those businesses to move people, equipment, and products with a degree of speed and efficiency available through no other mode of transportation. In fact, an estimated 65% of general aviation flights are conducted for business and public services. GA airports are currently eligible to receive up to $150,000 in annual entitlements from the Airport Improvement Program's Non-Primary Entitlement (NPE) program. Unfortunately, even with a four-year rollover provision, these funds are not enough to meet costly safety projects. Therefore, millions of dollars of unused NPE funds are returned annually to the FAA discretionary account where they are spent at airports across the country including at primary airports. To help smaller airports, Congress should ensure that any NPE carryover funds be spent exclusively on non-primary airport projects at GA airports, which will allow these airports to better serve the surrounding community and foster a welcoming environment for businesses. Also, aircraft storage is integral to the utility of any airport, and 71% of airports across the country report a waiting list for general aviation aircraft hangars. Congress should invest in local airports by dedicating specific funding for new GA hangar development. Airport managers have reported that hangars provide 45% of their gross revenue, making them a critical source of financial self-sustainability for any GA airport. In addition, Congress should address the lack of transient (visiting) parking for aircraft at federally funded public-use airports. Today, airport access is limited for many GA pilots due to the fact that pilots are being forced to park their aircraft at commercial fixed based operators (FBOs) and, in many cases, pay unreasonably high fees for services they never requested or needed. Congress should require public-use airports to provide transient parking areas for visiting GA aircraft and if airports choose to impose a transient parking fee, it must be fair and reasonable. Congress should also pass legislation that would expand security badging for private pilots so they can escort themselves and their passengers off secure areas at airports where TSA requirements are imposed. Congress should also create a Public-Private Partnership Airport Pilot Program that authorizes funds for marketing and education programs to attract private sector investment at smaller airports. Public-private partnerships can also go a long way to help local communities that are cash-strapped to inject new life into their airports and benefit the local taxpayers by increasing the airport's economic output. Question from Hon. Sam Graves to Jack J. Pelton, Chief Executive Officer and Chairman of the Board, Experimental Aircraft Association Question 1. Airmen in the past have been issued letters of authorizations (LOAs) with the authorization for ``all makes and models of single-engine and multiengine, piston-powered authorized aircraft,'' commonly known as an unlimited LOA. The Federal Aviation Administration (FAA) changed its policy in 2007 and no longer allows such an authorization. Can you explain why it is important to the experimental community for the FAA to bring back ``all makes and models'' authorizations? Answer. Thank you, Chairman Graves, for your question and the opportunity to provide a response. The ``all makes and models'' Letter of Authorization (LOA) is important for the experimental aircraft community, specifically for those historic warbird aircraft with experimental airworthiness certificates. This community is limited in size and scope by the rare nature of the aircraft operated. Currently, some experimental aircraft operating limitations require that before acting as Pilot in Command (PIC), a pilot must receive an aircraft authorization for each specific make and model on his or her pilot certificate. The process is similar to seeking a type rating in a type certificated aircraft. The rarity of aircraft and small size of the community often leads to a lack of qualified and experienced Experimental Aircraft Examiners and/or FAA Inspectors qualified in specific aircraft who may issue the aircraft authorization. EAA supports the FAA reinstating the ``all makes and models authorization.'' Allowing skilled and knowledgeable pilots with operational experience and authorizations in a significant variety of other similar experimental aircraft to be issued the ``all makes and models'' authorization can address the shortage of qualified examiners. As a part of reinstating, EAA encourages that the FAA be directed to work with industry to develop the suitable framework of such a program. Engaging experienced and knowledgeable industry experts will help ensure that the correct parameters are established with an eye towards ensuring safety while implementing this enhanced form of PIC qualifications in experimental aircraft. Industry is well positioned with familiarity and understanding of these aircraft and can assist in developing the appropriate qualifications and training as well as suitable currency requirements to ensure safe operations by those that hold these authorization. Question from Hon. Hillary J. Scholten to Jack J. Pelton, Chief Executive Officer and Chairman of the Board, Experimental Aircraft Association Question 1. Can you talk about the role smaller airfields, and more broadly, general aviation, play for economic development for a community, and how we can encourage further growth in the general aviation space? Answer. Thank you, Representative Scholten, for your question and the opportunity to provide a response. General aviation serves as the gateway to aviation and as an economic generator for many small communities. Local airports, and the general aviation aircraft and pilots they serve, provide a transportation infrastructure and business network well suited to supporting commercial and business development in surrounding communities. Aircraft based at these general aviation airports, and the airports themselves, support small and large businesses providing fast and efficient access to customers, facilities and markets. Local flight schools, maintenance facilities, and small aviation businesses found at most general aviation airports serve as the introduction to aviation for the vast majority of people. Additionally, across the country these businesses train the vast majority of new pilots and provide the training ground for large numbers of new maintenance technicians and serve as an important, and often overlooked, component of addressing the current and future shortage of pilots and aviation professionals. EAA feels that there are a number of actions that can be taken to encourage growth and to promote general aviation. Modernization of General Aviation and Flight Training Aircraft EAA sees the FAA's Modernization of Special Airworthiness Certificates (MOSAIC) rulemaking currently underway as an area of critical importance to the future of general aviation. Small flight schools around the country are most people's entry point to the world of aviation. Many of these flight schools have found themselves priced out of new, versatile training aircraft. A new generation of Light- Sport Aircraft (LSA) could change that. Current size and weight regulations limit the usefulness of LSA as training aircraft for flight schools. Changing the limitations of LSAs will allow for larger and more capable aircraft and permit a wider range of students and instructors to fly them, significantly increasing access to flight training. Additionally, this change should also stimulate production of these aircraft by providing the needed market to bring existing manufacturers of kit and amateur-built aircraft into the LSA market and stimulate current manufacturers to increase production. The first MOSAIC Notice of Proposed Rulemaking (NPRM) is now expected in summer of 2023. Congress should direct the FAA to publish, by the end of calendar year 2024, a final rule that expands the utilization of light-sport aircraft, promotes their use in flight training and does so in a manner that ensures U.S. manufacturers are not at a disadvantage to foreign manufacturers. Protect and Grow General Aviation Airports Supporting and growing general aviation airports through the funding of additional infrastructure, promotion of compatible use of surrounding land and protecting the availability of access to aviation gasoline through 2030. General Aviation Airport Funding EAA supports the request of many of the general aviation associations in encouraging Congress to increase the maximum funding available to general aviation airports in the FAA's Airport Improvement Program (AIP). AIP funding for general aviation airports has been consistent at $150,000 and has not been increased for many years. An increase in this amount would meet increased cost factors and serve as an investment in the infrastructure needed to improve and expand the economic and commercial engines of many small communities and their associated businesses. Education and Promotion of Compatible Land Use Surrounding Airports Many challenges facing general aviation airports and stressors on the relationships between these airports and their surrounding communities stem from improper land use allowed near these airports. Airports, once originally built far from residential communities, now find themselves surrounded by residents, schools, and other noise sensitive land uses. These situations could have been mitigated with proper zoning promoting more compatible land uses such as agricultural, industrial or commercial. These types of land uses are generally less noise sensitive, many benefiting from groupings with similar uses. The FAA should continue to educated airport sponsors to ensure proper zoning and land use around airports to mitigate future concerns resulting from incompatible land use. Protect the Availability of Avgas at Airports through Transition to Unleaded Fuel in 2030 or Sooner EAA remains firm in our support of efforts to remove lead from aviation gasoline and it is our position that any transition from leaded to unleaded gasoline must be effectuated with safety as the highest priority. The FAA, General Aviation Associations, and other aviation stakeholders have launched a public-private initiative titled ``Eliminate Aviation Gasoline Lead Emissions,'' or ``EAGLE,'' which intends to achieve its firm goal--elimination of lead emissions from general aviation aircraft by the end of 2030, or sooner--through development and deployment of a viable high-octane unleaded replacement aviation gasoline that can be safely operated by the U.S. fleet with minimum impact. The continued use of leaded avgas through the transition period will undoubtedly result in growing pressure on airports and operators at the state and local levels. A patchwork of airport-specific requirements leading to inconsistency in what fuels are available would lead to airports that may or may not carry the necessary fuels, thus creating a situation where aircraft cannot be adequately fueled or could be misfueled, leading to safety, efficiency, and operational concerns. Vital to a successful and stable transition is maintaining the availability of 100LL avgas during the period of unleaded fuel development, authorization for use, commercialization, and deployment. The FAA plays a vital role in protecting the avgas supply throughout this process, particularly on federally funded airports. Congress should direct the FAA to ensure the safe and coherent operation of the National Airspace System by protecting the continued supply of aviation gasoline with the timely and expedient enforcement of airport grant obligations. Airport owners or sponsors who accept funds from FAA-administered airport financial assistance programs agree to grant assurance obligations that require them to maintain and operate their facilities in accordance with specified conditions. Obligated airports who no longer provide reasonable access to 100LL aviation gasoline should be found in non-compliance with their grant obligations and appropriate action taken by the FAA. National Center for the Advancement of Aviation EAA strongly supports and encourages Congress to establish and fund the National Center for the Advancement of Aviation (NCAA), originally introduced in H.R. 3482. The NCAA is envisioned to be a national, independent forum facilitating collaboration and cooperation between all sectors of aviation and aerospace stakeholders and related partners thus coordinating, promoting, and supporting the future of aviation. The NCAA is proposed to focus on four key areas: aviation and aerospace STEM curriculum; workforce development, economic and safety data and research sharing, and being a forum for cross-disciplinary collaboration. The NCAA would help promote an understanding of the aviation industry, including general aviation, while ensuring that the United States remains a global aviation and aerospace leader. EAA's Efforts to Promote and Grow General Aviation I would like to take this opportunity to discuss a few of the initiatives and programs that EAA has developed and implemented that encourages further growth in the General Aviation space. At EAA we feel strongly that general aviation is best positioned to be an economic engine for local communities when our industry is well understood and when the relationships between our communities and their airports are jointly beneficial. EAA Chapters--General Aviation Engaging with their Communities EAA has over 900 local chapters located throughout the country at many of the nation's general aviation airports. The Chapter network is the backbone of EAA and is responsible for more than 14,000 aviation activities each year. Many of these events are social events, open to the public and advertised within the local community. These include open houses, breakfast socials, youth activities and educational opportunities. Young Eagles--30 Years of Introducing Young People to Aviation Our Young Eagles program provides free introductory flights to youth through a well-structured program utilizing our chapters and members who volunteer to provide these flights. Acting on our mission of growing participation, Young Eagles has to date provided nearly 2.3 million flight experiences. This number represents an entire generation of young people who have been introduced to general aviation, many who have then pursued careers as military or airline pilots, aerospace engineers or a host of other aviation related professions. This program has created a generation of people who have a deeper appreciation for aviation and a better understanding of the value of their local airport thanks to that free first flight. AeroEducate--Inspiring Aviation Professionals of the Future AeroEducate is a free resource filled with age-based activities and clear pathways to aviation and aerospace industry careers where K-12 students can discover and ignite their curiosity in aviation. Being a pilot is only one of many exciting careers in aviation. There are a variety of career possibilities, from aeronautical engineering to air traffic controlling to airplane maintenance to aviation management--and a real path to that dream. Whether the interest is science, technology, engineering, or math, or just a curiosity about how things work, AeroEducate offers engaging aviation-based activities developed and tested by some of the top minds in the country. Questions from Hon. Hillary J. Scholten to Rick Crider, A.A.E., Executive Vice President of Airport/Railport and Military Relations, Port San Antonio, on behalf of the American Association of Airport Executives Question 1. Can you talk about the role smaller airfields, and more broadly, general aviation, play for economic development for a community, and how we can encourage further growth in the general aviation space? Answer. There are more than 4,400 public-use general aviation (GA) airports in the United States, providing communities across the country access to the nation's air transportation system. The benefits of GA airports to individuals, businesses, and communities as connection points to the nation's air transportation system are significant. While GA airports vary significantly in size, complexity, and configuration, each provides unique functions and vital capabilities. In many cases, GA airports are centers for industrial aerospace activities, training hubs for the next generation of pilots, and access points to the NAS for businesses in smaller and rural communities. Law enforcement, firefighting, aerospace engineering and manufacturing, air cargo, agriculture and recreation are other examples of activities that take place at GA airports every day. GA airports are also playing a key role with the development of Advanced Air Mobility (AAM). Recent hearings before the Committee have highlighted the immense promise that AAM offers to travelers, small communities, and the environment. AAM has the potential to reduce the need on aviation's reliance for fossil fuels, reduce commute times for the traveling public, and promote both economic and workforce development opportunities globally. The utilization of emerging technologies such as electric vertical takeoff and landing (eVTOL) aircraft will help create new methods in transporting people, cargo, and local emergency response teams between urban and rural areas. GA airports can serve as incubators for these revolutionary technologies and will undoubtedly play a key role as the industry evolves to include the development and utilization of vehicles powered by batteries, hydrogen fuel cells, and hybrid electric systems. GA airports have the fundamental infrastructure in place to support ``Day 1 Operations'' and generally have less concerns with airspace congestion compared to commercial service airports. The leaders and members of the Committee have long supported the general aviation community and we are grateful that Committee leaders have indicated a desire to include a GA title in the upcoming FAA reauthorization bill. AAAE and its member airports of all sizes from across the country look forward to working with the Committee as part of the FAA reauthorization process to advance the priorities outlined in my written testimony for the hearing. Specifically, we are seeking increased funding for the Airport Improvement Program and more flexibility to airports in how they are permitted to use AIP funds; an adjustment to the AIP entitlement for nonprimary airports, including GA airports; and continued support and funding for the Contract Tower Program. Question 2. The Bipartisan Infrastructure Law which passed last Congress is bringing billions of dollars to airports across the country. Most of this will go to improving commercial services at larger airports, but there is $500 million set aside annually for non- primary airports. How can we use this funding to also strengthen general aviation infrastructure? Answer. As travel demand continues to rise at GA and commercial service airports, there is a growing need for infrastructure investment. The Infrastructure Investment and Jobs Act (IIJA) provided airports with $20 billion over five years for infrastructure and terminal grants, with $2.5 billion of that total specifically allotted to and allocated among the thousands of nonprimary commercial service and GA airports spread out across the country. We are grateful for that investment. While IIJA funding serves as an important down payment to help bridge the enormous funding gap for airport infrastructure nationwide and will help offset inflationary and cost escalation impacts, the need for additional federal investment remains. According to the FAA's most recent NPIAS, commercial service and GA airports have $62.4 billion in AIP and IIJA-eligible projects--or around $12.5 billion annually--over the next five years. Those totals do not include other non-eligible infrastructure projects and requirements, which increase total airport capital needs significantly. According to the latest NPIAS, the capital needs for nonprimary and GA airports are more than $19 billion over the next five years. And that figure does not factor in rising inflation, increasing labor and construction costs, or supply chain constraints. As members of the House Aviation Subcommittee know, GA and smaller commercial service airports disproportionately rely on AIP funding to meet their infrastructure needs. The combination of stagnant authorization levels for traditional AIP funding for the past two decades and rising construction costs has greatly limited these airports from completing critical safety and improvement projects. As Congress prepares for the next FAA reauthorization bill, AAAE and ACI-NA are urging Congress to increase traditional AIP funding to at least $4 billion and to continue to authorize funds for supplemental discretionary grants to help GA and commercial service airports meet their ongoing infrastructure needs. In conjunction with increasing AIP funding, we recommend Congress provide airports with more flexibility in how they are permitted to use that funding consistent with provisions in IIJA and in recognition of evolving airport infrastructure needs and existing limitations. Additionally, we recommend adjusting the AIP entitlement for nonprimary airports, including GA airports, since it has remained stagnant at $150,000 for more than 20 years despite rising costs and infrastructure needs. The current funding approach for nonprimary entitlements (NPE) also fails to recognize the dramatic differences in aircraft activity, operations, and economic impact within the wide spectrum of diverse GA airports. The NPIAS categorizes nonprimary airports based on their activity level as either national, regional, local, or basic. Instead of the current one-size-fits-all policy, Congress should modernize GA entitlements by providing increased funding levels to airports with more activity or that serve larger aircraft. Specifically, we propose a tiered approach where the GA entitlement be set at $1 million for national airports, $500,000 for regional airports, $250,000 for local airports, and $150,000 for basic airports. It is important to note that our recommendation for this proposed formula change is contingent upon AIP funding of at least $4 billion annually. The need for adjusting the $150,000 nonprimary entitlement is evident at Kelly Field, where design is underway for a consolidated facility that will promote eVTOL, along with other new and existing aircraft. But the investment in infrastructure required far surpasses the abilities of today's NPE formula. Notably, other GA airports are on the forefront of efforts to develop, test, and build electric and second-generation supersonic passenger aircraft. Question from Hon. Hillary J. Scholten to Curt Castagna, President and Chief Executive Officer, National Air Transportation Association Question 1. Can you talk about the role smaller airfields, and more broadly, general aviation, play for economic development for a community, and how we can encourage further growth in the general aviation space? Answer. Approximately 4,500 general aviation (GA) airports provide transportation options and support critical services for diverse communities across the nation, including in many remote regions that are not serviced by commercial airlines. These airports serve as powerful economic drivers in their communities by offering arrival and departure points for business developers and employing a well-paid, skilled workforce. At the same time, GA airports support law enforcement and emergency services; non-emergency medical and organ transport; executive, recreational, and cargo transport; vocational and aeronautical schools; powerline and pipeline patrol; and agricultural and conservation efforts. GA airports also serve as the proving ground for emerging technology, offering space to safely test and implement the next generation of aircraft and aviation innovation. All told, GA airports and the associated GA industry are responsible for 1.2 million jobs and nearly $250 billion in economic output. To help GA airports meet increasing demand and prepare for emerging technologies, both federal investment and public/private partnerships must be leveraged. Expanding the Contract Tower Program and increasing the Airport Improvement Program's long-stagnant GA airport entitlement are first steps toward that goal. Creating innovative public/private grant opportunities will further allow aviation businesses to partner with airport sponsors on the infrastructure needed to charge electric aircraft, offer sustainable and unleaded fuels, install solar panel projects, and more. The GA ecosystem is a valuable resource not only to individual communities, but to our national economy and global aviation leadership. Equipping GA airports to foster innovation, improve sustainability, and meet the transportation and service needs of their surrounding communities is a critical investment in our nation's future. [all]

usgpo

2024-10-08T13:26:19.494308

BILLS

BILLS-118hr8993ih

Focus on Learning Act

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 8993 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 8993 To direct the Secretary of Education to conduct a study regarding the use of mobile devices in elementary and secondary schools, and to establish a pilot program of awarding grants to enable certain schools to create a school environment free of mobile devices. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES July 10, 2024 Mr. Westerman (for himself, Mr. Trone, Mr. LaTurner, and Mr. Crow) introduced the following bill; which was referred to the Committee on Education and the Workforce _______________________________________________________________________ A BILL To direct the Secretary of Education to conduct a study regarding the use of mobile devices in elementary and secondary schools, and to establish a pilot program of awarding grants to enable certain schools to create a school environment free of mobile devices. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Focus on Learning Act''. SEC. 2. DEFINITIONS. In this Act: (1) ESEA terms.--The terms ``child with a disability'', ``elementary school'', ``English learner'', ``local educational agency'', and ``secondary school'' have the meaning given those terms in section 8101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801). (2) Mobile device.--The term ``mobile device'' means any personal mobile telephone or other portable electronic communication device with which a user engages in a call or writes or sends a message or any device in which the user plays a game or watches a video, except that such term does not include school-issued devices. (3) School environment free of mobile devices.--The term ``school environment free of mobile devices'' means an elementary school or secondary school in which mobile devices of students are kept in a secure container that is controlled by a school administrator. (4) School hours.--The term ``school hours'' means regular school hours for instruction, including lunch periods, free periods on school grounds, and time between classroom instruction. SEC. 3. STUDY. (a) In General.--Not later than 2 years after the date of enactment of this Act, the Secretary of Education, in consultation with the Secretary of Health and Human Services, shall complete a study regarding the use of mobile devices in elementary schools and secondary schools nationwide, including-- (1) the impact of such use on-- (A) student learning and academic achievement; (B) student educational outcomes and engagement; (C) student mental health; (D) classroom instruction; and (E) school climate and student behavior; and (2) an analysis of data collected from participating schools in the pilot program under section 4. (b) Report.--The Secretary of Education, in consultation with the Secretary of Health and Human Services, shall submit a report to Congress containing the results of the study conducted under subsection (a), and shall make such report publicly available. SEC. 4. PILOT PROGRAM. (a) Program Established.--The Secretary of Education shall establish a pilot program, through which the Secretary of Education shall award grants to local educational agencies to enable participating schools served by such agencies (referred to in this section as ``participating schools'') to purchase secure containers and install lockers in order to create a school environment free of mobile devices. (b) Application.--A local educational agency desiring to participate in the program under this section shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may reasonably require, including-- (1) an assurance that such local educational agency will identify and select participating schools in a manner that engages the students, parents, educators, principal, school leaders, and specialized instructional support personnel, of such schools; (2) an assurance that each participating school will have a communication system (which may be mobile devices) allowing teachers, administrators, and staff to communicate with each other and with local emergency responders; (3) an assurance that each participating school will have a clear process for students to be able to contact their parents; (4) the policy of each participating school on mobile device use during school hours as of the date of the application; and (5) a description of what each participating school's new policy on mobile device use during school hours will be upon beginning participation in the pilot program under this section. (c) Selection.--The Secretary of Education shall select local educational agency applicants for participation in the pilot program based on the Secretary of Education's determination that the applicant's participation will likely yield helpful information relevant to testing a school environment free of mobile devices. (d) Exemptions.--Participating schools may, while maintaining a school environment free of mobile devices, allow exemptions such that mobile devices may be used during school hours-- (1) to monitor or treat health conditions; (2) by students who are children with disabilities; and (3) by students who are English learners for translation purposes. (e) Parental Notification.--Each local educational agency that applies for participation in the pilot program under this section shall-- (1) notify parents of students enrolled in elementary schools and secondary schools that are served by the agency and that may become participating schools-- (A) not less than 30 days before submitting an application under this section; and (B) upon receipt of a grant award under this section; and (2) solicit feedback from such parents before applying for the grant about the local educational agency's desire to implement a school environment free of mobile devices. (f) Administrative Expenses.--The Secretary of Education may use not more than 2 percent of the amounts made available to carry out this section for administrative expenses, data collection, and carrying out the study required under section 3. (g) Authorization of Appropriations.--There are authorized to be appropriated to carry out this section, $5,000,000 for the period of fiscal years 2024 through 2028. <all>

usgpo

2024-10-08T13:26:16.814918

BILLS

BILLS-118hr9360ih

To designate the facility of the United States Postal Service located at 300 Macedonia Lane in Knoxville, Tennessee, as the Reverend Harold Middlebrook Post Office Building.

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9360 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9360 To designate the facility of the United States Postal Service located at 300 Macedonia Lane in Knoxville, Tennessee, as the ``Reverend Harold Middlebrook Post Office Building''. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 16, 2024 Mr. Burchett introduced the following bill; which was referred to the Committee on Oversight and Accountability _______________________________________________________________________ A BILL To designate the facility of the United States Postal Service located at 300 Macedonia Lane in Knoxville, Tennessee, as the ``Reverend Harold Middlebrook Post Office Building''. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. REVEREND HAROLD MIDDLEBROOK POST OFFICE BUILDING. (a) Designation.--The facility of the United States Postal Service located at 300 Macedonia Lane in Knoxville, Tennessee, shall be known and designated as the ``Reverend Harold Middlebrook Post Office Building''. (b) References.--Any reference in a law, map, regulation, document, paper, or other record of the United States to the facility referred to in subsection (a) shall be deemed to be a reference to the ``Reverend Harold Middlebrook Post Office Building''. <all>

usgpo

2024-10-08T13:26:16.278874

BILLS

BILLS-118sres809is

Supporting the designation of September 13, 2024, as National Sepsis Day.

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. Res. 809 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. RES. 809 Supporting the designation of September 13, 2024, as ``National Sepsis Day''. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES September 11, 2024 Mr. Schumer (for himself and Mr. Van Hollen) submitted the following resolution; which was referred to the Committee on Health, Education, Labor, and Pensions _______________________________________________________________________ RESOLUTION Supporting the designation of September 13, 2024, as ``National Sepsis Day''. Whereas sepsis is a medical condition caused by a severe immune response to infection or traumatic injury; Whereas the overwhelming flood of inflammatory signals released into the blood to fight infection can impair blood flow, injuring the body's organs; Whereas sepsis is a serious infection and a leading cause of death and disability in the United States; Whereas severe sepsis can result in septic shock, exposing the patient to potentially fatal multiple organ failure; Whereas 1,700,000 people in the United States are infected by sepsis annually; Whereas sepsis kills 350,000 people in the United States each year; Whereas sepsis is one of the most expensive conditions to treat in hospitals in the United States, with high spending compounded by frequent hospital readmissions, including 1 in 5 patient readmissions within 30 days of discharge and 1 in 3 patient readmissions within 180 days of discharge; Whereas, according to the Centers for Disease Control and Prevention, 80 percent of sepsis cases begin outside the hospital; Whereas most sepsis fatalities are preventable, and early recognition, diagnosis, and treatment of sepsis can prevent loss of life; Whereas the sepsis protocols for hospitals in New York State, called ``Rory's Regulations'' for Rory Staunton who died from preventable, treatable sepsis at 12 years of age, have been proven to save lives through rapid identification and treatment of sepsis; Whereas providers and public health experts should study and learn from Rory's Regulations to find ways to end preventable deaths from sepsis; and Whereas September 13, 2024, would be an appropriate date to designate as ``National Sepsis Day'' to coincide with the international designation of September 13 as ``World Sepsis Day'', to raise awareness of the condition, to encourage the education of patients, families, health care professionals, and government agencies on the seriousness of sepsis and the importance of early detection as the key to survival, and to focus attention and energy towards the ultimate goal of ending sepsis: Now, therefore, be it Resolved, That the Senate supports the designation of September 13, 2024, as ``National Sepsis Day''. <all>

usgpo

2024-10-08T13:26:33.967557

BILLS

BILLS-118hres1471ih

Countering disinformation, propaganda, and misinformation in Latin America and the Caribbean, and calling for multi-stakeholder efforts to address the significant detrimental effects that the rise in disinformation, propaganda, and misinformation in regional information environments has on democratic governance, human rights, and United States national interests.

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H. Res. 1471 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. RES. 1471 Countering disinformation, propaganda, and misinformation in Latin America and the Caribbean, and calling for multi-stakeholder efforts to address the significant detrimental effects that the rise in disinformation, propaganda, and misinformation in regional information environments has on democratic governance, human rights, and United States national interests. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES September 19, 2024 Mr. Castro of Texas (for himself, Mr. Espaillat, Ms. Titus, Mrs. Torres of California, Ms. Kamlager-Dove, Mrs. Cherfilus-McCormick, and Mrs. Ramirez) submitted the following resolution; which was referred to the Committee on Foreign Affairs _______________________________________________________________________ RESOLUTION Countering disinformation, propaganda, and misinformation in Latin America and the Caribbean, and calling for multi-stakeholder efforts to address the significant detrimental effects that the rise in disinformation, propaganda, and misinformation in regional information environments has on democratic governance, human rights, and United States national interests. Whereas the rights to freedom of expression and freedom of the press are core pillars of democratic governance throughout Latin America and the Caribbean, as recognized in the Inter-American Democratic Charter, done at Lima September 11, 2001; Whereas the vulnerability of existing information environments in Latin America and the Caribbean and the growing spread of inaccurate or false news through disinformation and misinformation activities pose serious threats to democratic governance and human rights in the Americas, which are likely to be further exacerbated by the rise of disinformation generated and enhanced by artificial intelligence; Whereas disinformation and misinformation activities in Latin American and the Caribbean have-- (1) promoted harmful, false narratives spread by the People's Republic of China and the Russian Federation, according to research by Global Americans and the Equis Institute, including with respect to the COVID-19 pandemic and the unjustified invasion of Ukraine by the Russian Federation; (2) posed risks to the integrity of electoral processes throughout the region, including in Brazil, Colombia, and Mexico, according to a report entitled ``Disinformation in Democracies: Strengthening Digital Resilience in Latin America'' issued in March 2019 by the Atlantic Council; (3) contributed to protests in Bolivia, Chile, Colombia, and Ecuador, oftentimes amplified by operations linked to the Russian Federation, according to reporting by the New York Times; (4) contributed to the exploitation of migrants by human smuggling networks that drive irregular migration, according to multiple investigations by the Tech Transparency Project; and (5) contributed to a rise in xenophobic violence against migrants and refugees, according to multiple sources, including the Digital Forensic Research Lab; Whereas information environments are closely interconnected between the United States and Latin America and the Caribbean, such that disinformation and misinformation flows between Latino populations in the United States and populations in Latin America and the Caribbean, according to a report entitled ``Latinos and a Growing Crisis of Trust'' issued in June 2022 by the Equis Institute; Whereas, according to the report entitled ``Measuring the Impact of Misinformation, Disinformation, and Propaganda in Latin America'' issued in October 2021 by Global Americans (referred to in this preamble as the ``Global Americans Report''), intra- and extra-regional actors operate independently and in tandem to create and spread disinformation in Latin America and the Caribbean on both traditional and digital media platforms, including YouTube, Twitter, Facebook, TikTok, WhatsApp, and Telegram, where such activities are amplified through coordinated inauthentic behavior, such as the use of bots, trolls, and cyber troops; Whereas political actors throughout Latin America and the Caribbean have manipulated domestic information environments by targeting citizens through disinformation activities, including in-- (1) Brazil, where former President Jair Bolsonaro had a direct role in spreading electoral disinformation, according to the Superior Electoral Court of Brazil and the Federal Police of Brazil; (2) El Salvador, where President Nayib Bukele uses coordinated inauthentic networks to attack political opponents and bolster the perception of support for his policies, according to reporting by Reuters; (3) Guatemala, where malicious actors with links to the then ruling party of former President Alejandro Giammattei carried out information operations to artificially amplify narratives eroding trust in the country's 2023 electoral process and targeting now President Bernardo Arevalo and his political party Semilla, according to research by the Digital Forensic Research Lab; (4) Honduras, where actors linked to former President Juan Orlando Hernandez developed coordinated inauthentic networks to spread falsehoods about, and undermine support for, opposition party candidates, according to reporting by Time; (5) Mexico, where President Andres Manuel Lopez Obrador spreads false and misleading narratives against the media and other independent institutions, according to research by the Digital Forensic Research Lab; and (6) Venezuela, where actors linked to the regime of Nicolas Maduro have engaged in a sustained and synchronized campaign of disinformation to undermine the country's 2023-2024 electoral process, invalidate the results of such elections, and attack Maria Corina Machado and other opposition leaders, according to multiple sources, including the Digital Forensic Research Lab; Whereas, in addition to spreading and amplifying disinformation against their own populations, authoritarian regimes in Cuba, Nicaragua, and Venezuela have also engaged in such activities against other countries in the region for purposes of undermining democratic values and spreading narratives contrary to the interests of the United States and its allies, including through coordinated efforts with extra-regional actors, such as publishing and amplifying false narratives by Russian state-controlled media outlets; Whereas, according to the Global Americans Report, the Governments of the People's Republic of China, the Russian Federation, and the Islamic Republic of Iran have engaged in disinformation and propaganda operations aimed at undermining the influence and interests of the United States in Latin America and the Caribbean, particularly through the use of state-affiliated media networks targeting Spanish-speaking audiences, such as CGTN TV and Xinhua News, RT and Sputnik, and HispanTV; Whereas, according to a public statement by the Department of State on November 7, 2023, the Russian Federation is ``currently financing an on-going, well-funded disinformation campaign across Latin America'', including in Argentina, Bolivia, Chile, Colombia, Cuba, Mexico, Venezuela, Brazil, Ecuador, Panama, Paraguay, Peru, and Uruguay; Whereas, according to the Digital Forensic Research Lab and EUvsDisinfo, the Russian Federation considers social media outreach to Spanish-speaking and Portuguese-speaking audiences an important component of its state- sponsored media strategy, and the Spanish-language social media accounts of Kremlin-controlled media RT and Sputnik have more followers and engagement than their English- and Russian-language counterparts and comparable programming from the United States Agency for Global Media; Whereas information environments in Latin America and the Caribbean are further distorted by the rise in the practice of disinformation for hire, by which political actors outsource information operations to regional and extra-regional public relations firms that impersonate local news outlets, civic organizations, and other entities through fake social media accounts and engage in other deceptive practices to create and amplify disinformation for profit; Whereas the threats and effects of disinformation and misinformation in Latin America and the Caribbean are exacerbated by-- (1) the widespread use of social media and closed messaging platforms, where disinformation and misinformation is spread faster and farther, as primary communication and news sources, as indicated by the Reuters Institute Digital News Report 2022; (2) high barriers of access to other forms of independent media and low media and digital literacy rates that lead to the unintentional spread of disinformation and misinformation; (3) growing levels of distrust in public institutions, as indicated by recent AmericasBarometer surveys by the Latin American Public Opinion Project; and (4) low levels of transnational coordination among relevant stakeholders within the region; Whereas, on March 3, 2017, the United Nations Special Rapporteur on Freedom of Opinion and Expression, the Organization for Security and Co-operation in Europe (OSCE) Representative on Freedom of the Media, the Organization of American States (OAS) Special Rapporteur on Freedom of Expression, and the African Commission on Human and Peoples' Rights Special Rapporteur on Freedom of Expression and Access to Information issued a declaration entitled ``Joint Declaration on Freedom of Expression and Fake News, Disinformation and Propaganda'', which cautioned against the criminalization and regulation of disinformation and misinformation activities and called instead for joint efforts by relevant stakeholders; Whereas some current efforts by governments in Latin American and the Caribbean to counter disinformation raise serious freedom of expression concerns that run counter to the recommendations made in the ``Joint Declaration on Freedom of Expression and Fake News, Disinformation and Propaganda''; Whereas government and political actors in some Latin American and Caribbean countries have undertaken notable efforts to address the threat of disinformation in ways consistent with the protection of freedoms of expression and the press, including-- (1) political parties in Uruguay, which signed an ethics pact in April 2019 pledging to not generate or promote disinformation against political adversaries; and (2) the national electoral institution of Panama, which engaged in joint workshops with the electoral institutions of Argentina in June 2019 and Costa Rica in September 2021 to share best practices on monitoring and countering information operations on social media; Whereas, despite discernible progress in taking down accounts used by prominent, often foreign-backed, disinformation networks to engage in coordinated inauthentic activity and partnering with regional stakeholders, efforts by social media companies, including Facebook and Twitter, to address disinformation and misinformation in Latin America and the Caribbean continue to be hampered by-- (1) insufficient resources and attention devoted to countering such activities in low- and middle-income countries, as documented by multiple sources, including the Facebook Papers; (2) significant gaps in the detection and enforcement of Spanish- language disinformation and misinformation relative to such English- language activities; (3) enduring barriers to transparency and access for social media datasets and algorithms that are critical to independent disinformation and misinformation research; and (4) limited cooperation among social media companies on plans and best practices to mitigate disinformation networks operating across platforms; Whereas independent media, civil society, and academic groups have launched several initiatives to address disinformation and misinformation on social media and closed messaging platforms in Latin America and the Caribbean through fact-checking, media and digital literacy, and information sharing services, including Chequeado, Comprova, Verificado, and Cazadores de Fake News; and Whereas the United States has pursued efforts to support the strengthening of information environments, promote independent media, and counter disinformation activities in Latin America and the Caribbean, including through initiatives led by the Global Engagement Center, the United States Agency for International Development, the United States Agency for Global Media, and United States embassies in the region: Now, therefore, be it Resolved, That the House of Representatives-- (1) recognizes the serious threats the distortion of information environments through the creation and amplification of disinformation and misinformation on traditional and digital media platforms poses to democratic governance and human rights in Latin America and the Caribbean; (2) denounces independent and coordinated efforts by malicious actors to create and amplify disinformation in the Western Hemisphere, including foreign information operations led by the Governments of the People's Republic of China, the Russian Federation, the Islamic Republic of Iran, Cuba, and Nicaragua and the Maduro regime in Venezuela; (3) urges social media companies to take additional steps to address how social media platforms are used to facilitate malicious activities, including disinformation, in Latin America and the Caribbean, including by-- (A) devoting significantly more resources to monitoring how such platforms are being exploited to spread false news, incite violence, and interfere with democratic electoral processes in the region; (B) strengthening detection and removal enforcement capabilities against sources of Spanish-language and other non-English disinformation content; (C) improving transparency over regional content moderation efforts to counter disinformation, the training and auditing of social media algorithms for Spanish-language and other non-English content, and datasets critical for disinformation and misinformation research; (D) expanding and strengthening partnerships with local actors, including initiatives with third-party fact checkers and independent, democratic electoral institutions; (E) investing in media and digital literacy education in the region; and (F) strengthening coordination with one another on plans and best practices to help limit the spread of disinformation content online; (4) calls on governments in Latin America and the Caribbean to counter disinformation activities and strengthen information environments by-- (A) bolstering regional mechanisms to coordinate responses and share best practices on countering disinformation; (B) advancing efforts by political parties and other actors to publicly commit to refrain from generating or amplifying disinformation content through coordinated inauthentic behavior or outsourcing such activities to public relations firms; and (C) safeguarding and strengthening free and independent media, promoting fact-checking, increasing use of digital forensics, and boosting media literacy efforts by civil society, journalists, and academia; and (5) calls on the President and the heads of all relevant Federal agencies and departments to strengthen the role of the United States in countering the creation and amplification of disinformation in Latin America and the Caribbean and bolstering regional information environments, including by-- (A) increasing support for the activities described in paragraph (4); (B) ensuring strong support for and coordination of concurrent efforts between all relevant bureaus and offices of the Department of State and the United States Agency for International Development; (C) ensuring strong support for relevant efforts within the United States Agency for Global Media; (D) convening regional fora, with participation from all relevant stakeholders, to discuss and develop methods to promote a strong, independent media and counter the spread and amplification of disinformation, including through a high-level summit and a Global Engagement Center Tech Challenge; (E) pursuing measures--such as public identification, targeted sanctions, and information sharing and coordination with social media companies in identifying accounts spreading disinformation--to deter and hold accountable government officials in Latin America and the Caribbean who undermine democratic governance by targeting independent media or engaging in activities to create and amplify disinformation; and (F) strengthening the capacity of the United States Government to mitigate the impact and influence of local state-affiliated media outlets of malicious extra-regional actors by offering objective, reliable, and accurate information, including through-- (i) increased investment in public diplomacy programming by the United States in Latin America and the Caribbean, particularly programming aimed at engaging with local audiences through social media and messaging platforms; and (ii) increased resources and programming from the United States Agency for Global Media tailored to audiences in Latin America and the Caribbean. <all>

usgpo

2024-10-08T13:26:48.530623

BILLS

BILLS-118hr9597ih

Federal Acquisition Security Council Improvement Act of 2024

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9597 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9597 To amend title 41, United States Code, to make changes with respect to the Federal Acquisition Security Council, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES September 16, 2024 Mr. Comer (for himself, Mr. Raskin, Mr. Moolenaar, and Mr. Krishnamoorthi) introduced the following bill; which was referred to the Committee on Oversight and Accountability _______________________________________________________________________ A BILL To amend title 41, United States Code, to make changes with respect to the Federal Acquisition Security Council, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Federal Acquisition Security Council Improvement Act of 2024''. SEC. 2. CHANGES WITH RESPECT TO THE FEDERAL ACQUISITION SECURITY COUNCIL. (a) Definition of Source of Concern, Covered Source of Concern, Recommended Order, and Desiganted Order.--Section 1321 of title 41, United States Code, is amended-- (1) by redesignating paragraphs (5) through (8) as paragraphs (7) through (10); (2) by inserting after paragraph (4) the following: ``(5) Covered source of concern.--The term `covered source of concern' means a source of concern that is specifically designated as a `covered source of concern' by a statute that states that such designation is for the purposes of this subchapter. ``(6) Designated order.--The term `designated order' means an order described under section 1323(c)(3).''; and (3) by adding at the end the following: ``(11) Recommended order.--The term `recommended order' means an order recommended under section 1323(c)(2). ``(12) Source of concern.-- ``(A) In general.--The term `source of concern' means a source-- ``(i) subject to the jurisdiction, direction, or control of the government of a foreign adversary, or operates on behalf of the government of a foreign adversary; or ``(ii) that poses a risk to the national security of the United States based on collaboration with, whole or partial ownership or control by, or being affiliated with a military, internal security force, or intelligence agency of a foreign adversary. ``(B) Foreign adversary defined.--In this paragraph, the term `foreign adversary' has the meaning given the term `covered nation' in section 4872(d) of title 10.''. (b) Establishment and Members of Council.--Section 1322 of title 41, United States Code, is amended-- (1) in subsection (a), by striking ``executive branch'' and inserting ``Executive Office of the President''; (2) in subsection (b)-- (A) by amending paragraph (1) to read as follows: ``(1) In general.--The members of the Council shall be as follows: ``(A) The Administrator for Federal Procurement Policy. ``(B) The Deputy Director for Management of the Office of Management and Budget. ``(C) The following officials, each of whom shall occupy a position at the level of Assistant Secretary or Deputy Assistant Secretary (or equivalent): ``(i) Two officials from the Office of the Director of National Intelligence, one of which shall be from the National Counterintelligence and Security Center. ``(ii) Two officials from the Department of Defense, one of which shall be one from the National Security Agency. ``(iii) Two officials from the Department of Homeland Security, one of which shall be one from the Cybersecurity and Infrastructure Security Agency. ``(iv) An official from the General Services Administration. ``(v) An official from the Office of the National Cyber Director. ``(vi) Two officials from the Department of Justice, one of which shall be one from the Federal Bureau of Investigation. ``(vii) One official from the National Institute of Standards and Technology and one official from the Bureau of Industry and Security. ``(viii) An official from any executive agency not listed under clauses (i) through (vii) whose temporary or permanent participation is determined by the Chairperson of the Council to be necessary to carry out the functions of the Council.''; and (B) in paragraph (2)-- (i) in the heading, by striking ``Lead representatives'' and inserting ``Members''; (ii) by amending subparagraph (A)(i) to read as follows: ``(i) In general.--The head of each executive agency listed under paragraph (1)(C) shall designate the official or officials from that agency who shall serve on the Council in accordance with such paragraph.''; (iii) by amending subparagraph (A)(ii) to read as follows: ``(ii) Requirements.--To the extent feasible, any official designated under clause (i) shall have expertise in supply chain risk management, acquisitions, law, or information and communications technology.''; (iv) by amending subparagraph (B) to read as follows: ``(B) Functions.--A member of the Council shall-- ``(i) regularly participate in the activities of the Council; ``(ii) ensure that any information requested by the Council from the agency represented by the member is provided to the Council; and ``(iii) ensure that the head of the agency represented by the member and other appropriate personnel of the agency are aware of the activities of the Council.''; (3) in subsection (c)-- (A) by amending paragraph (1) to read as follows: ``(1) In general.--The Chairperson of the Council shall be-- ``(A) the National Cyber Director; or ``(B) another member of the Council designated by the National Cyber Director.''; and (B) in paragraph (2)-- (i) in subparagraph (B), by striking ``(b)(1)(H)'' and inserting ``(b)(1)(F)(vii)''; and (ii) in subparagraph (C), by striking ``lead representative of each agency represented on the Council'' and inserting ``members of the Council''; and (4) in subsection (d)-- (A) by striking ``The Council'' and inserting the following: ``(1) Council meetings.--The Council''; and (B) by adding at the end the following: ``(2) Other meetings.--The Chairperson of the Council shall meet, not less frequently than semiannually, with-- ``(A) the Secretary of Homeland Security, Secretary of Defense, and Director of National Intelligence; or ``(B) in the case that any of the officials under subparagraph (A) delegated authority to an official under section 1323(c)(6)(C), with the delegated official.''. (c) Functions and Authorities.--Section 1323 of title 41, United States Code is amended-- (1) in subsection (a)-- (A) by striking ``supply chain'' each place it appears and inserting ``acquisition security and supply chain''; (B) in paragraph (1), as amended by subparagraph (A), by striking ``, particularly'' and inserting ``that arise''; (C) in paragraph (2), as amended by subparagraph (A), by inserting ``associated with the acquisition and use of covered articles'' after ``risk''; (D) in paragraph (6), as amended by subparagraph (A)-- (i) by striking ``posed by'' and inserting ``associated with''; and (ii) by inserting ``and use'' before ``of covered articles''; (E) in paragraph (7), by striking ``posed by acquisitions'' and inserting ``associated with the acquisition''; (F) by redesignating paragraph (7) as paragraph (11); and (G) by inserting after paragraph (6) the following: ``(7) Implementing a prioritization scheme for evaluating the security risks associated with the acquisition and use of covered articles provided or produced by a covered source of concern. ``(8) Evaluating each covered source of concern to determine whether to issue a designated order with respect to the covered source of concern or a covered article produced or provided by the covered source of concern. ``(9) Evaluating sources of concern to determine whether to issue a recommended order with respect to the source of concern, or any covered article produced or provided by the source of concern. ``(10) Monitoring and evaluating compliance by the Secretary of Homeland Security, Secretary of Defense, and Director of National Intelligence with the requirement to issue designated orders under subsection (c)(6)(B). ``(11) Reporting to Congress annually on the security risks associated with the acquisition and use of covered articles produced or provided by sources of concern.''; (2) in subsection (b)-- (A) by striking ``The Council'' and inserting the following: ``(1) In general.--The Council''; and (B) in paragraph (1), as so redesignated, by striking ``a program office and''; and (C) by adding at the end the following: ``(2) Federal acquisition security council program office.-- ``(A) Establishment.--The Council shall establish a Federal Acquisition Security Council Program Office (referred to in this paragraph as the `Program Office') within the Office of the National Cyber Director to carry out the functions of the Council duties described under subparagraph (B). ``(B) Duties.--The Program Office shall provide to the Council, including any committees, working groups, or other constituent bodies established by the Council under paragraph (1)-- ``(i) administrative, legal, and policy support; and ``(ii) analysis and subject matter expertise on information communications technology acquisition security and supply chain risk. ``(C) Structure.--The head of the Program Office shall be a senior official from the Office of the National Cyber Director that occupies a position at the level of Assistant Secretary or Deputy Assistant Secretary (or equivalent). ``(D) Prohibition.--The Program Office may not provide administrative support to the Council for any activities of the Council carried out pursuant to a provision of law other than a provision of law under this subchapter. ``(E) Funding and resources.--The Program Office may use the staff and resources of the Office of the National Cyber Director or maintain dedicated staff and resources, as appropriate, in the performance of the duties of the Office. ``(F) Shared staffing authority.-- ``(i) In general.--The Program Office may accept officers or employees of the United States or members of the Armed Forces on a detail from an element of the intelligence community (as such term is defined in section 3 of the National Security Act of 1947 (50 U.S.C. 3003)) or from another element of the Federal Government on a nonreimbursable basis, as jointly agreed to by the heads of the receiving and detailing elements, for a period not to exceed three years. ``(ii) Rule of construction.--Nothing in this subparagraph may be construed as imposing any limitation on any other authority for reimbursable or nonreimbursable details. ``(iii) Nonreimbursable detail.--A nonreimbursable detail made under this subparagraph shall not be considered an augmentation of the appropriations of the receiving element of the Program Office or the Office of the National Cyber Director. ``(G) Sunset.--The Program Office shall terminate on the date described under section 1328.''; (3) in subsection (c)-- (A) in paragraph (1)-- (i) in the matter preceding subparagraph (A), by striking ``supply chain risk'' and inserting ``acquisition security and supply chain risk associated with the acquisition of covered articles''; (ii) in subparagraph (A), by inserting ``recommended'' before ``exclusion orders''; (iii) in subparagraph (B), by inserting ``recommended'' before ``removal orders''; (iv) in subparagraph (C), by striking ``; and'' and inserting a semicolon; (v) in subparagraph (D), by striking the period at the end and inserting ``; and''; and (vi) by adding at the end the following: ``(E) issuing designated orders.''; (B) in paragraph (2)-- (i) in the heading, by striking ``Recommendations'' and inserting ``Recommended orders''; (ii) by striking ``use'' and inserting ``, using''; (iii) by striking ``subsection (a)(3)'' and inserting ``subsection (a)(4)''; (iv) by striking ``to issue recommendations'' and inserting ``, recommend orders''; (v) by striking ``Such recommendations'' and inserting ``Any such order recommended''; (vi) by inserting ``to the officials described under clause (iii) of paragraph (6)(A) for issuance under such paragraph'' after ``thereof,''; (vii) in subparagraph (D), by striking ``supply chain risk'' and inserting ``acquisition security and supply chain risk associated with the acquisition of covered articles''; and (viii) in subparagraph (E), by striking ``exclusion or removal''; (C) by redesignating paragraphs (3) through (7) as paragraphs (4) through (8); (D) by inserting after paragraph (2) the following: ``(3) Designated orders.-- ``(A) Exclusion or removal of covered sources of concern.-- ``(i) In general.--Not later than 270 days after a source of concern is designated as a covered source of concern, the Council-- ``(I) shall provide to the officials described under clause (iii) of paragraph (6)(B) for issuance under such paragraph orders requiring-- ``(aa) the exclusion of the covered source of concern from any executive agency procurement action, including source selection and consent for a contractor; or ``(bb) the removal of covered articles produced or provided by the covered source of concern from the information system of executive agencies; or ``(II) report to Congress why the Council has determined to not issue an order described under subclause (I) with respect to the covered source of concern or covered articles produced or provided by the covered source of concern. ``(ii) Contents of order.--Any order provided under clause (i) shall include-- ``(I) information regarding the scope and applicability of the order, including any information necessary to positively identify the covered source of concern or covered articles produced or provided by the covered source of concern required to be excluded or removed under the order; ``(II) a summary of any risk assessment reviewed or conducted in support of the order; ``(III) a summary of the basis for the order, including a discussion of less intrusive measures that were considered and why such measures were not reasonably available to reduce security risk; ``(IV) a description of the actions necessary to implement the order; and ``(V) where practicable, in the Council's sole and unreviewable discretion, a description of mitigation steps that could be taken by the covered source of concern that may result in the Council rescinding the order. ``(B) Exclusion or removal of second order sources or covered articles.-- ``(i) Issuance.--In the case that the Council provides an order under subparagraph (A), the Council may also provide an order to the officials described under paragraph (6)(A)(iii) requiring the exclusion of sources or covered articles from executive agency procurement actions or removal of covered articles from executive agency information systems if-- ``(I) such covered articles or such sources use a covered source of concern in the performance of a contract with the executive agency; or ``(II) such sources enter into a contract, the performance of which such source knows or has reason to believe will require, in the performance of a contract with the executive agency, the use of a covered source of concern or the use of a covered article produced or provided by a covered source of concern. ``(ii) Effective date considerations.--Any effective date prescribed by the Council for an order issued pursuant to clause (i) shall take into account-- ``(I) the risk posed by the covered source of concern or the covered article produced or provided by the covered source of concern to the national security of the United States; ``(II) the likelihood of the covered source of concern or the covered article produced or provided by the covered source of concerned causing imminent threat to public health and safety; and ``(III) an assessment of the potential direct or quantifiable costs that may be incurred by the Federal Government, a State, local, or Tribal government, or by the private sector, as a result of compliance by the head of an executive agency with such an exclusion or removal order.''; (E) in paragraph (4), as so redesignated-- (i) in the heading, by striking ``of recommendation and review'' and inserting ``and review of recommended and designated orders''; (ii) by striking `` the recommendation'' each place the term appears, and inserting `` the order''; (iii) in the matter preceding subparagraph (A), by striking ``A notice of the Council's recommendation under paragraph (2)'' and inserting ``Before the Council recommends an order under paragraph (2) or issues an order under paragraph (3), a notice''; (iv) in subparagraph (A), by striking ``recommendation has been made'' and inserting ``the order will be recommended or issued''; and (v) in subparagraph (D), by striking ``paragraph (5)'' and inserting ``paragraph (6)''; (F) in paragraph (5), as so redesignated-- (i) by striking ``paragraph (3)'' and inserting ``paragraph (4)''; (ii) in subparagraph (A), by striking ``paragraph (5)'' and inserting ``paragraph (6)''; and (iii) in subparagraph (B), by striking ``paragraph (6)'' and inserting ``paragraph (7)''; (G) in paragraph (6), as so redesignated-- (i) by amending subparagraph (A) to read as follows: ``(A) Issuance of recommended orders.-- ``(i) Modifications to order.--After considering any response properly submitted by a source under paragraph (4) related to an order to be recommended under paragraph (2), the Council shall-- ``(I) make such modifications to the order as the Council considers appropriate; and ``(II) provide the order (together with any information submitted by a source under paragraph (4) related to such order) to the officials described under clause (iii). ``(ii) Order.--Not later than 90 days after receiving a recommended order, the officials described under clause (iii) shall-- ``(I) issue the order to the heads of the applicable agencies; or ``(II) submit a notification to the Council and the source named in the order that the order will not be issued, that includes in the notification to the Council, all the reasons for why the order will not be issued. ``(iii) Officials.--The officials described in this clause are as follows: ``(I) The Secretary of Homeland Security, for exclusion and removal orders applicable to civilian agencies, to the extent not covered by subclause (II) or (III). ``(II) The Secretary of Defense, for exclusion and removal orders applicable to the Department of Defense and national security systems other than sensitive compartmented information systems. ``(III) The Director of National Intelligence, for exclusion and removal orders applicable to the intelligence community and sensitive compartmented information systems, to the extent not covered by subclause (II).''; (ii) by redesignating subparagraphs (B) through (E) as subparagraphs (C) through (F), respectively; (iii) by inserting after subparagraph (A) the following: ``(B) Issuance of designated order.-- ``(i) Modifications.--After considering any response properly submitted by a source under paragraph (4) related to a designated order, the Council shall-- ``(I)(aa) make any such modifications to the order as the Council considers appropriate; or ``(bb) if the Council determines that the issuance of a designated order is not warranted, rescind the designated order and notify the source of the rescission; and ``(II) except in the case that the Council rescinds the designated order under subclause (I)(bb), provide the designated order (including any modifications made to such order by the Council) to the officials described in clause (iii). ``(ii) Issuance.--The officials described in clause (iii) shall, not later than 30 days after receiving a designated order, issue the order to the heads of the applicable agencies. ``(iii) Officials.--The officials described in this clause are as follows: ``(I) The Secretary of Homeland Security, for exclusion and removal orders applicable to civilian agencies, to the extent not covered by subclause (II) or (III). ``(II) The Secretary of Defense, for exclusion and removal orders applicable to the Department of Defense and national security systems other than sensitive compartmented information systems. ``(III) The Director of National Intelligence, for exclusion and removal orders applicable to the intelligence community and sensitive compartmented information systems, to the extent not covered by subclause (II). ``(iv) Waiver.--An official described under clause (iii) may waive for a period of not more than 365 days the application of an order issued by such official under clause (ii) with respect to a covered source of concern or a covered article produced or provided by a covered source of concern if-- ``(I) the Council approves the waiver; and ``(II) the official submits, not later than 30 days after making such waiver, a written notification to the appropriate congressional committees and leadership that contains the justification for such waiver. ``(v) Renewal of waiver.--An official described under clause (iii) may renew a waiver under clause (iv) for an additional period of not more than 180 days if-- ``(I) the Council approves the renewal of the waiver; ``(II) the renewal of the waiver is in the national security interests of the United States; and ``(III) the official submits, not later than 30 days after renewing such waiver, a written notification to the appropriate congressional committees and leadership that includes the justification for renewing the wavier. ``(vi) Rescission of order.--An exclusion or removal order issued under this subparagraph by an official may be rescinded only by the Council.''. (iv) in subparagraph (C), as so redesignated-- (I) by striking ``subparagraph (A)'' and inserting ``subparagraph (A)(iii) or (B)(iii)''; (II) by striking ``this subparagraph'' and inserting ``subparagraph (A)(iii) or (B)(iii)''; and (III) by striking ``, except'' and all that follows before the period at the end; (v) in subparagraph (D), as so redesignated-- (I) by striking ``this paragraph'' and inserting ``subparagraph (A)(iii) or (B)(iii)''; and (II) by striking ``help''; (vi) in subparagraph (E), as so redesignated, by striking ``this paragraph'' and inserting ``subparagraph (A)''; and (vii) by adding after subparagraph (F), as so redesignated, the following: ``(G) Effective date of orders.--The effective date of an order issued under this paragraph may not be more than 180 days after the order is issued.''; (H) in paragraph (7), as so redesignated, by striking ``paragraph (5)(A)'' and inserting ``subparagraph (A) or (B) of paragraph (6)''; and (I) in paragraph (8), as so redesignated, by striking ``paragraph (5)'' and inserting ``paragraph (6)''; (4) by redesignating subsections (d) through (f) as subsections (e) through (g), respectively; (5) in subsection (f), as so redesignated, by inserting ``the Chief Data Officers Council,'' before ``the Chief Acquisition''; and (6) in subsection (g)(2), as so redesignated, by striking the period at the end and inserting ``unless such source is specifically designated by statute as a covered source of concern for the purposes of this subchapter.'' (d) Strategic Plan.--Section 1324(a) of title 41, United States Code, is amended-- (1) by inserting ``, and periodically thereafter'' after ``2018''; (2) in the matter preceding paragraph (1), by inserting ``acquisition security and'' before ``supply chain risks''; (3) in paragraph (8), by inserting ``acquisition security and'' before ``supply chain risks''; and (4) in paragraph (9)(A), by inserting ``acquisition security and'' before ``supply chain risk''. (e) Requirements for Executive Agencies.--Section 1326 of title 41, United States Code, is amended-- (1) in subsection (a), (A) in paragraph (1), by striking ``; and'' and inserting a semicolon; (B) in paragraph (2), by striking the period at the end and inserting ``; and''; and (C) by adding at the end the following: ``(3) providing any information requested by the Chairperson of the Council for the purpose of carrying out activities of this subchapter.''; (2) by striking ``supply chain'' each place such term appears and inserting ``security and supply chain''; and (3) in subsection (b)(6), by striking ``supply chain'' and inserting ``security or supply chain''. (f) Judicial Procedure.--Section 1327(b) of title 41, United States Code, is amended-- (1) in paragraph (1), by striking ``section 1323(c)(6)'' and inserting ``section 1323(c)(7)''; (2) in paragraph (3), by striking ``sections 1323(c)(5)'' and inserting ``sections 1323(c)(6)''; and (3) in paragraph (4), by amending subparagraph (B)(i) to read as follows: ``(i) Filing of record.--The United States shall file with the court an administrative record, which shall consist of-- ``(I) the information the Council relied upon in issuing a designated order under 1323(c)(6); and ``(II) the information that the appropriate official relied upon in issuing an exclusion or removal order under section 1323(c)(6) or a covered procurement action under section 4713.''. (g) Additional Provisions.--Subchapter III of chapter 13 of title 41, United States Code, is amended by adding at the end the following: ``Sec. 1329. Additional provisions ``(a) Compliance With Existing Prohibitions.--In implementing this subchapter, the Council shall coordinate, as applicable and practicable, with the head of an agency to ensure compliance by the agency with-- ``(1) section 889 of the John S. McCain National Defense Authorization Act of 2019 (Public Law 115-232; 41 U.S.C. 3901 note); ``(2) section 5949 of the James M. Inhofe National Defense Authorization Act of 2023 (Public Law 117-263; 41 U.S.C. 4713 note); and ``(3) sections 1821 through 1833 of the American Security Drone Act of 2023 (Public Law 118-31). ``(b) Update to Regulations.--The Federal Acquisition Security Council shall update, within two years after the date of the enactment of this section, any regulations of the Council as necessary.''. (h) Technical and Conforming Changes.--Subchapter III of chapter 13 of title 41, United States Code, is amended-- (1) in the table of sections for the subchapter by adding after the item related to section 1328 the following: ``1329. Additional provisions.''; (2) in section 1321(1)(B), by striking ``Government Reform'' and inserting ``Accountability''; and (3) by striking ``of this title'' each place the term appears. SEC. 3. REALLOCATING EXISTING RESOURCES. Section 5949(l) of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 (Public Law 117-263) is amended-- (1) in paragraph (1), by striking ``Office of Management and Budget'' and inserting ``Office of the National Cyber Director''; and (2) in paragraph (2), by striking ``Office of Management and Budget'' and inserting ``Office of the National Cyber Director''. <all>

usgpo

2024-10-08T13:26:28.911405

BILLS

BILLS-118s4651is

Securing America’s Federal Equipment in Supply Chains Act; SAFE Supply Chains Act

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4651 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 4651 To require agencies to use information and communications technology products obtained from original equipment manufacturers or authorized resellers, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES July 10, 2024 Mr. Cornyn (for himself and Mr. Peters) introduced the following bill; which was read twice and referred to the Committee on Homeland Security and Governmental Affairs _______________________________________________________________________ A BILL To require agencies to use information and communications technology products obtained from original equipment manufacturers or authorized resellers, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Securing America's Federal Equipment in Supply Chains Act'' or the ``SAFE Supply Chains Act''. SEC. 2. AGENCY USE OF IT PRODUCTS. (a) Definitions.--In this section: (1) Agency.--The term ``agency'' has the meaning given the term in section 3502 of title 44, United States Code. (2) Appropriate congressional committees.--The term ``appropriate congressional committees'' means the Committee on Homeland Security and Governmental Affairs of the Senate and the Committee on Oversight and Accountability of the House of Representatives. (3) Authorized reseller.--The term ``authorized reseller'' means a reseller, after market manufacturer, supplier, or distributor of a covered product with a direct or prime contractual arrangement with, or the express written authority of, the original equipment manufacturer of the covered product to manufacture, buy, stock, repackage, sell, resell, repair, service, otherwise support, or distribute the covered product. (4) Covered product.--The term ``covered product''-- (A) means an information and communications technology end-use hardware product or component, including software and firmware that comprise the end- use hardware product or component; and (B) does not include-- (i) other software; or (ii) an end-use hardware product-- (I) in which there is embedded information and communications technology; and (II) the principal function of which is not the creation, manipulation, storage, display, receipt, or transmission of electronic data and information. (5) End-use product.--The term ``end-use product'' means a product ready for use by the maintainer, integrator, or end user of the product. (6) Information and communications technology.--The term ``information and communications technology''-- (A) has the meaning given the term in section 4713 of title 41, United States Code; and (B) includes information and communications technologies covered by definitions contained in the Federal Acquisition Regulation, including definitions added after the date of the enactment of this Act by the Federal Acquisition Regulatory Council pursuant to notice and comment. (7) Original equipment manufacturer.--The term ``original equipment manufacturer'' means a company that manufactures a covered product that the company-- (A) designed from self-sourced or purchased components; and (B) sells under the name of the company. (b) Prohibition on Procurement and Use.--Subject to subsection (c) and notwithstanding sections 1905 through 1907 of title 41, United States Code, the head of an agency may not procure or obtain, renew a contract to procure or obtain, or use a covered product that is procured from an entity other than-- (1) an original equipment manufacturer; or (2) an authorized reseller. (c) Waiver.-- (1) In general.--Upon written notice to the Director of the Office of Management and Budget, the head of an agency may waive the prohibition under subsection (b) with respect to a covered product if the head of the agency determines that-- (A) the waiver is necessary in the interest of national security; or (B) procuring, obtaining, or using the covered product is necessary-- (i) for the purpose of scientifically valid research (as defined in section 102 the Education Sciences Reform Act of 2002 (20 U.S.C. 9501)); or (ii) to avoid jeopardizing the performance of mission critical functions. (2) Notice.--The notice described in paragraph (1)-- (A) shall-- (i) specify, with respect to the waiver under paragraph (1)-- (I) the justification for the waiver; (II) any security mitigations that have been implemented; and (III) with respect to a waiver that necessitates a security mitigation, the plan of action and milestones to avoid future waivers for subsequent similar purchases; and (ii) be submitted in an unclassified form; and (B) may include a classified annex. (3) Duration.--With respect to a waiver for the purpose of research, as described in paragraph (1)(B)(i), the waiver shall be effective for the duration of the research identified in the waiver. (d) Reports to Congress.-- (1) In general.--Not later than 1 year after the date of enactment of this Act, and annually thereafter until the date that is 6 years after the date of enactment of this Act, the Director of the Office of Management and Budget shall submit to the appropriate congressional committees a report that lists-- (A) the number and types of covered products for which a waiver under subsection (c)(1) was granted during the 1-year period preceding the date of the submission of the report; and (B) the legal authority under which each waiver described in subparagraph (A) was granted, such as whether the waiver was granted pursuant to subparagraph (A) or (B) of subsection (c)(1). (2) Classification of report.--Each report submitted under this subsection-- (A) shall be submitted in unclassified form; and (B) may include a classified annex that contains the information described in paragraph (1)(B). (e) Effective Date.--This section shall take effect on the date that is 1 year after the date of enactment of this Act. <all>

usgpo

2024-10-08T13:26:56.591035

CRPT

CRPT-118hrpt650

VIOLENCE AGAINST WOMEN BY ILLEGAL ALIENS ACT

United States Congress House of Representatives

[House Report 118-650] [From the U.S. Government Publishing Office] 118th Congress} { REPORT 2d Session } HOUSE OF REPRESENTATIVES { 118-650 ====================================================================== VIOLENCE AGAINST WOMEN BY ILLEGAL ALIENS ACT _______ September 6, 2024.--Committed to the Committee of the Whole House on the State of the Union and ordered to be printed _______ Mr. Jordan, from the Committee on the Judiciary, submitted the following R E P O R T together with DISSENTING VIEWS [To accompany H.R. 7909] [Including cost estimate of the Congressional Budget Office] The Committee on the Judiciary, to whom was referred the bill (H.R. 7909) to amend the Immigration and Nationality Act to provide that aliens who have been convicted of or who have committed sex offenses or domestic violence are inadmissible and deportable, having considered the same, reports favorably thereon with an amendment and recommends that the bill as amended do pass. CONTENTS Page Purpose and Summary.............................................. 2 Background and Need for the Legislation.......................... 2 Hearings......................................................... 8 Committee Consideration.......................................... 8 Committee Votes.................................................. 8 Committee Oversight Findings..................................... 11 New Budget Authority and Tax Expenditures........................ 11 Congressional Budget Office Cost Estimate........................ 11 Committee Estimate of Budgetary Effects.......................... 12 Duplication of Federal Programs.................................. 12 Performance Goals and Objectives................................. 12 Advisory on Earmarks............................................. 12 Federal Mandates Statement....................................... 12 Advisory Committee Statement..................................... 12 Applicability to Legislative Branch.............................. 12 Section-by-Section Analysis...................................... 13 Changes in Existing Law Made by the Bill, as Reported............ 13 Dissenting Views................................................. 72 The amendment is as follows: Strike all that follows after the enacting clause and insert the following: SECTION 1. SHORT TITLE. This Act may be cited as the ``Violence Against Women by Illegal Aliens Act''. SEC. 2. INADMISSIBILITY AND DEPORTABILITY RELATED TO SEX OFFENSES, DOMESTIC VIOLENCE, STALKING, CHILD ABUSE, OR VIOLATION OF PROTECTION ORDER. (a) Inadmissibility.--Section 212(a)(2) of the Immigration and Nationality Act (8 U.S.C. 1182(a)(2)) is amended by adding at the end the following: ``(J) Sex offenses.--Any alien who has been convicted of, who admits having committed, or who admits committing acts which constitute the essential elements of a sex offense (as such term is defined in section 111(5) of the Adam Walsh Child Protection and Safety Act of 2006 (34 U.S.C. 20911(5))), or a conspiracy to commit such an offense, is inadmissible. ``(K) Domestic violence, stalking, child abuse, or violation of protection order.--Any alien who has been convicted of, who admits having committed, or who admits committing acts which constitute the essential elements of-- ``(i) a crime of domestic violence (as such term is defined in section 237(a)(2)(E)); ``(ii) a crime of stalking; ``(iii) a crime of child abuse, child neglect, or child abandonment; or ``(iv) a crime of violating the portion of a protection order (as such term is defined in section 237(a)(2)(E)) that involves protection against credible threats of violence, repeated harassment, or bodily injury to the person or persons for whom the protection order was issued, is inadmissible.''. (b) Deportability.--Section 237(a)(2) of the Immigration and Nationality Act (8 U.S.C. 1227(a)(2)) is amended-- (1) in subparagraph (E)-- (A) in the heading, by striking ``crimes against children and'' and inserting ``and crimes against children''; and (B) in clause (i), by inserting before the period at the end the following ``, and includes any crime that constitutes domestic violence, as such term is defined in section 40002(a) of the Violent Crime Control and Law Enforcement Act of 1994 (34 U.S.C. 12291(a), regardless of whether the jurisdiction receives grant funding under that Act''; and (2) by adding at the end the following: ``(G) Sex offenses.--Any alien who has been convicted of a sex offense (as such term is defined in section 111(5) of the Adam Walsh Child Protection and Safety Act of 2006 (34 U.S.C. 20911(5))) or a conspiracy to commit such an offense, is deportable.''. Purpose and Summary H.R. 7909, the Violence Against Women by Illegal Aliens Act, introduced by Rep. Nancy Mace (R-SC), creates a ground of inadmissibility for aliens who are convicted of, who admit having committed, or who admit committing acts that constitute the essential elements of a sex offense as defined under the Adam Walsh Child Protection and Safety Act of 2006. The bill creates an identical ground of removability for aliens who are convicted of such offenses. It also closes a glaring loophole in immigration law by establishing a new ground of inadmissibility for several domestic violence-related offenses. Background and Need for the Legislation The Biden-Harris Administration's immigration failures have spread from the southwest border to the interior of the country, as many of President Biden's new illegal alien arrivals terrorize communities and commit crimes against Americans and legal residents every day. H.R. 7909, the Violence Against Women by Illegal Aliens Act, makes crystal clear that illegal aliens who commit sex offenses are inadmissible to and removable from the United States. The bill also fixes a discrepancy in current immigration law by creating a ground of inadmissibility for domestic violence to mirror the existing ground of removability for the same offenses. The Biden-Harris Administration's Lax Immigration Enforcement In addition to the Biden-Harris Administration releasing more than 5.6 million illegal aliens into the United States in just three years,\1\ President Biden, ``border czar'' Vice President Kamala Harris, and Department of Homeland Security (DHS) Secretary Mayorkas have ensured that most of those aliens can remain in the country indefinitely--even after they have committed a crime.\2\ In fact, instead of handcuffing criminal aliens and ensuring their quick removal from the United States, President Biden, Vice President Harris, and Secretary Mayorkas have made it more difficult for ICE officers to arrest criminals.\3\ --------------------------------------------------------------------------- \1\Information provided to the H. Comm. on the Judiciary by U.S. Dep't of Homeland Sec., Table 1: Detention Histories of CBP Encounters, January 20, 2021-March 31, 2024 (Aug. 16, 2024); U.S. Customs and Border Prot., Custody and Transfer Statistics FY 2024, U.S. Dep't of Homeland Sec. (last accessed Aug. 19, 2024); Camilo Montoya-Galvez, Biden administration has admitted more than 1 million migrants into U.S. under parole policy Congress is considering restricting, CBS News (Jan. 22, 2024); Latest UC Data, Total Monthly Discharges to Individual Sponsors Only, U.S. Dep't of Health and Human Servs. (last accessed Mar. 22, 2024); Off. of Refugee Resettlement, Unaccompanied Children Released to Sponsors by State, U.S. Dep't of Health and Human Servs. (last accessed Aug. 19, 2024); U.S. Customs and Border Prot., CBP Releases July 2024 Monthly Update, U.S. Dep't of Homeland Sec. (Aug. 16, 2024); Immigr. and Customs Enf't, Daily SWB Placemat, U.S. Dep't of Homeland Sec. (May-July 2024) (on file with Comm.); Off. of Homeland Sec. Statistics, Immigr. Enf't and Legal Processes Monthly Tables--Apr. 2024, U.S. Dep't of Homeland Sec. (last accessed Aug. 19, 2024). \2\See H. Comm. on the Judiciary, Interim Staff Rep., The Biden Border Crisis: How the Biden Admin. Opened the Sw. Border and Abandoned Interior Immigr. Enf't, at 11-17 (Oct. 9, 2023), https:// judiciary.house.gov/sites/evo-subsites/republicans-judiciary.house.gov/ files/evo-media-document/2023-10-09-New-Data-and-Testimony.pdf [hereinafter Oct. Interim Staff Rep.]. \3\See id. at 14-16. --------------------------------------------------------------------------- For nearly four years, the Biden-Harris Administration has chosen to ignore the Immigration and Nationality Act (INA), which specifies the grounds for which an alien ``shall . . . be removed'' from the United States.\4\ Despite that mandate, during the first eight months of the Biden-Harris Administration, then-acting DHS Secretary David Pekoske, Acting ICE Director Tae Johnson, and DHS Secretary Mayorkas issued three memoranda that articulated different enforcement priorities for the new Administration.\5\ In September 2021, Secretary Mayorkas issued the third and final memo, entitled ``Guidelines for the Enforcement of Civil Immigration Law'' (``Mayorkas Memo''), outlining three enforcement priorities: national security, public safety, and border security.\6\ As the Committee detailed in an October 2023 staff report: --------------------------------------------------------------------------- \4\8 U.S.C. Sec. 1227(a). \5\See Texas v. United States, 40 F.4th 205, 213-214 (5th Cir. 2022). \6\Id.; see Memorandum from Alejandro N. Mayorkas, Sec'y, Dep't of Homeland Sec., to Tae Johnson, Acting Dir., U.S. Immigr. and Customs Enf't, et al., ``Guidelines for the Enforcement of Civil Immigration Law'' (Sept. 30, 2021). The Mayorkas Memo begins with the assumption that ``undocumented noncitizens'' work hard and contribute to ``our communities'' and that ``bipartisan groups'' have ``tried to pass legislation that would provide a path to citizenship or other lawful status for the approximately 11 million undocumented noncitizens'' in the country. From that premise, Secretary Mayorkas articulated a new policy that the mere fact that aliens are removable pursuant to U.S. law ``should not alone be the basis of an enforcement action against them.'' Under the Mayorkas Memo, for instance, ``[b]efore ICE officers [could] arrest and detain aliens as a threat to public safety, they [were] now required to conduct an assessment of the individual and the totality of facts and circumstances, including various aggravating or mitigating factors.'' In this assessment, ICE officers were prohibited from relying solely on the fact of an alien's conviction, regardless of the seriousness of the underlying crime. After listing certain aggravating and mitigating factors, the Mayorkas Memo states that the listed factors were ``not exhaustive'' and that ``the overriding question is whether the noncitizen poses a current threat to public safety.'' The Mayorkas Memo also does not presumptively subject aliens with aggravated felony convictions to enforcement action or detention.\7\ --------------------------------------------------------------------------- \7\Oct. Interim Staff Rep., supra note 2, at 14-15. Consequently, the Mayorkas Memo requires ``a lengthier review process before an ICE officer can arrest or remove an illegal alien,'' contributes to ``fewer ICE arrests of criminal aliens,'' and is responsible for ``lower removal numbers.''\8\ In Mayorkas Memo training materials obtained by the Committee and published in an April 2024 staff report, DHS failed to answer seemingly clear-cut questions, such as whether an alien who served a 20-year drug-related prison sentence or an alien who discharged a firearm outside a police station should be priorities for apprehension and removal.\9\ --------------------------------------------------------------------------- \8\Id. at 15. \9\See H. Comm. on the Judiciary, Interim Staff Rep., How the Biden Administration's Lax Immigration Enforcement Allows Dangerous Criminal Aliens to Run Free in American Communities, at 11-13 (Apr. 16, 2024), https://judiciary.house.gov/sites/evo-subsites/republicans- judiciary.house.gov/files/evo-media-document/ 2024-04-16-How-the-Biden- Administration%27s-Lax-Immigration-Enforcement-Allows-Dangerous- Criminal-Aliens-to-Run-Free-in-American-C.pdf. --------------------------------------------------------------------------- The numbers speak for themselves: well over half a million criminal aliens are on ICE's non-detained docket, meaning that aliens with criminal convictions or pending criminal charges are out on American streets and ``free to reoffend.''\10\ Moreover, ``in fiscal year 2023, ICE removed 41 percent fewer aliens with criminal convictions and criminal charges than in fiscal year 2020--and nearly 60 percent fewer than in fiscal year 2019.''\11\ The lack of interior immigration enforcement begins with far fewer arrests of criminal aliens. As the Committee outlined in a January 2024 staff report: --------------------------------------------------------------------------- \10\See H. Comm. on the Judiciary, Interim Staff Rep., New Data Reveal Worsening Magnitude of the Biden Border Crisis and Lack of Interior Immigr. Enf't, at 9 (Jan. 18, 2024), https:// judiciary.house.gov/sites/evo-subsites/republicans-judiciary.house.gov/ files/evo-media-document/ 2024-01-18-new-data-reveal-worsening- magnitude-of-the-biden-border-crisis-and-lack-of-interior-immigration- enforcement.pdf. \11\Id. A comparison of administrative arrests by criminal charge or conviction category further highlights the differences in immigration enforcement between the Trump and Biden Administrations. In fiscal year 2018, the Trump Administration arrested aliens responsible for 76,585 dangerous drug offenses compared to 40,698 under the Biden Administration in fiscal year 2023. For assault offenses, the Trump Administration arrested aliens with 50,753 criminal charges and convictions in fiscal year 2018, with only 33,209 in fiscal year 2023. For sex offenses, the number of was 6,888 in 2018 but 5,746 in 2023. Across the board, in categories ranging from murder to kidnapping to weapons offenses, the Trump Administration in 2018 arrested far more criminal aliens than the Biden Administration in 2023.\12\ --------------------------------------------------------------------------- \12\Id. at 8-9. Meanwhile, the Biden-Harris Administration has lodged significantly fewer detainers on criminal aliens than the Trump Administration. To ensure that criminal aliens are deported, ICE issues detainers on aliens who have been arrested ``and who ICE has probable cause to believe are removable'' from the United States.\13\ Under a detainer, ICE ``asks the other law enforcement agency to notify ICE before a removable [alien] is released from custody and to maintain custody of the [alien] for a brief period of time'' so ICE can take custody of the alien.\14\ Detainers not only conserve law enforcement resources but also protect Americans by ensuring that dangerous criminal aliens are not released into communities.\15\ In fiscal year 2019, for example, ICE issued 165,487 detainers for aliens whose criminal histories included 56,000 assaults, 14,500 sex crimes, 5,000 robberies, 2,500 homicides, and 2,500 kidnappings.\16\ During the first three fiscal years of the Biden-Harris Administration, ICE lodged 44 percent fewer detainers than during the first three fiscal years of the Trump Administration.\17\ --------------------------------------------------------------------------- \13\U.S. Immigr. and Customs Enf't, Detainers 101 (Sept. 27, 2022), https://www.ice.gov/features/detainers. \14\Id. \15\See U.S. Immigr. and Customs Enf't, Fiscal Year 2019 Enf't and Removal Operations Rep., U.S. Dep't of Homeland Sec. at 16 (2020), https://www.ice.gov/sites/default/files/documents/Document/2019/ eroReportFY2019.pdf [hereinafter 2019 ICE Annual Rep.]. \16\Id. \17\In fiscal years 2017, 2018, and 2019, ICE issued 484,990 detainers (142,356 in 2017, 177,147 in 2018, and 165,487 in 2019) compared to 270,127 in fiscal years 2021, 2022, and 2023 (with just 65,940 issued in 2021, 78,829 in 2022, and 125,358 in 2023). See 2019 ICE Annual Report, supra note 15, at 17; U.S. Immigr. and Customs Enf't, ICE Annual Report, Fiscal Year 2023, U.S. Dep't of Homeland Sec. at 17 (Dec. 29, 2023), https://www.ice.gov/doclib/eoy/ iceAnnualReportFY2023.pdf [hereinafter 2023 ICE Annual Rep.]. --------------------------------------------------------------------------- Overall removals have similarly declined under the Biden- Harris Administration. From fiscal year 2017 through fiscal year 2019, there were 749,462 total removals.\18\ From fiscal year 2021 through fiscal year 2023, there were only 273,768 removals.\19\ The significant drop in removals from the first three fiscal years of the Trump Administration to the first three fiscal years of the Biden-Harris Administration is also reflected in the number of removals of aliens from the interior of the United States. From fiscal year 2017 through fiscal year 2019, ICE removed 262,921 aliens from the interior of the U.S.\20\ From fiscal year 2021 through fiscal year 2023, ICE removed from the U.S. interior only 104,016 aliens, a decrease of 60 percent from the first three years of the Trump Administration.\21\ --------------------------------------------------------------------------- \18\See U.S. Immigr. and Customs Enf't, Fiscal Year 2018 ICE Enf't and Removal Operations Rep., U.S. Dep't of Homeland Sec. at 10, https:/ /www.ice.gov/doclib/about/offices/ero/pdf/eroFY2018Report.pdf [hereinafter 2018 ICE Annual Rep.]; 2023 ICE Annual Rep., supra note 17, at 26. \19\2023 ICE Annual Rep., supra note 17, at 26. \20\2018 ICE Annual Rep., supra note 18, at 7; 2023 ICE Annual Rep., supra note 17, at 28. \21\2023 ICE Annual Rep., supra note 17, at 28. --------------------------------------------------------------------------- Consequences of Open Borders and Limited Enforcement The real-life consequences of the Biden-Harris Administration's open borders and non-existent immigration enforcement are stark. For example, in fiscal year 2019, the Trump Administration arrested aliens with 5,435 convictions and charges for ``family offenses.''\22\ That number dropped to a mere 3,439 in fiscal year 2023, a 36.7 percent decrease.\23\ Despite that decrease, domestic violence remains prevalent in America, with ``nearly 5.3 million incidents'' among adult women in the United States each year.\24\ That violence ``results in nearly 1,300 deaths and 2 million injuries every year in the United States.''\25\ Both the victims and perpetrators include illegal aliens, such as a 26-year-old Mexican national arrested by ICE in February 2024 for a domestic violence conviction\26\ and a 40-year-old Salvadoran national arrested for punching, choking, and threatening to kill a woman if she cooperated with authorities.\27\ --------------------------------------------------------------------------- \22\2019 ICE Annual Rep., supra note 15, at 14. \23\2023 ICE Annual Rep., supra note 17, at 15. \24\Domestic Violence/Intimate Partner Violence Facts, Emory Univ. School of Medicine, https://med.emory.edu/departments/psychiatry/nia/ resources/domestic_violence.html. \25\Id. \26\Press Release, ERO Salt Lake City arrests 6 during enforcement action in resort town, U.S. Dep't of Homeland Sec. (Feb. 8, 2024), https://www.ice.gov/news/releases/ero-salt-lake-city-arrests-6-during- enforcement-action-resort-town. \27\Press Release, Salvadoran sentenced federal prison for illegally possessing handguns, threatening to kill domestic abuse victim following ERO Chicago, HSI Chicago investigation, U.S. Dep't of Homeland Sec. (Dec. 18, 2023), https://www.ice.gov/news/releases/ salvadoran-sentenced-federal-prison-illegally-possessing-handguns- threatening-kill. --------------------------------------------------------------------------- As explained by a women's shelter in Dallas, Texas, ``rates of intimate partner violence [are] almost three times the national average for immigrant and undocumented women.''\28\ Nonetheless, under current law, there is not a specific ground of inadmissibility for aliens who commit certain domestic violence offenses, despite a ground of removability for crimes of domestic violence, stalking, child abuse, child neglect, child abandonment, and protection order violation.\29\ Although aliens could be found inadmissible for committing certain domestic violence offenses if they are considered to be a crime involving moral turpitude, this bill makes it explicit that such offenders are inadmissible to the United States. By cross- referencing an additional statutory definition of domestic violence, H.R. 7909 also expands the existing ground of removability for domestic violence offenses. --------------------------------------------------------------------------- \28\The Intersection of Domestic Violence & Immigration, Genesis Women's Shelter & Support (July 20, 2022), https:// www.genesisshelter.org/the-intersection-of-domestic-violence- immigration/. \29\Compare 8 U.S.C. Sec. 1182(a), with 8 U.S.C. Sec. 1227(a)(2)(E). --------------------------------------------------------------------------- Under existing law, the ground of removability for domestic violence offenses includes a broad waiver that allows for consideration of various underlying factors before the ground of removability is applied to an alien.\30\ Although there is not currently a corresponding ground of inadmissibility for domestic violence offenses, such crimes could make an alien inadmissible if the crimes qualify under existing grounds of inadmissibility.\31\ Importantly, however, those existing grounds of inadmissibility do not include an identical waiver authority, meaning that any effort to include a waiver under the new ground of inadmissibility would only serve to decrease, and not increase, the number of criminal aliens who are found inadmissible from the United States for domestic violence.\32\ A waiver would unnecessarily complicate already lengthy removal proceedings and allow aliens to escape immigration consequences for their criminal activity. --------------------------------------------------------------------------- \30\See 8 U.S.C. Sec. 1227(a)(7). \31\See generally 8 U.S.C. Sec. 1182(a)(2)(A)(i)(I) (crime of moral turpitude). \32\See generally 8 U.S.C. Sec. 1182(a). --------------------------------------------------------------------------- Foreign nationals are also routinely arrested for committing sex offenses, including sex crimes against children. In May 2024, authorities arrested a 20-year-old illegal alien from Guatemala for ``allegedly snatching an 11-year-old girl off the street in front of her Lake Worth [Florida] home and sexually assaulting her.''\33\ According to local officials, the Guatemalan national ``crossed the U.S.-Mexico Border in early January'' 2024, ``made his way to Florida shortly after,'' and does not have an immigration court date until 2027.\34\ --------------------------------------------------------------------------- \33\Amber Raub, Undocumented immigrant arrested for kidnapping and assaulting 11-year-old in Lake Worth, CBS 12 NEWS (May 6, 2024, 12:45 PM), https://cbs12.com/news/local/lake-worth-man-arrested-for- kidnapping-sexually-assaulting-minor-marvin-dionel-perez-lopez-white- van-k-9-unit-saturday-captive-florida-may-6-2024. \34\Id. --------------------------------------------------------------------------- As another example, on April 22, 2024, ICE arrested a Bangladeshi national who had been charged ``with multiple counts of commercial sex abuse, illegal sexual contact with a minor, fourth[-]degree sexual assault, risk of injury to [a] child[,] and illegal sale of tobacco to a person under 21 years of age.''\35\ Just days earlier, ICE arrested a Dominican national who had been charged with ``two counts of first-degree child molestation, one count of second-degree child molestation, and one count of first-degree sexual assault.''\36\ In February 2024, ICE arrested a Jamaican national in Connecticut who was ``convicted locally of sexual assault of a minor child.''\37\ --------------------------------------------------------------------------- \35\Press Release, ERO Boston apprehends Bangladeshi citizen arrested locally for sexual assault of minors, U.S. Dep't of Homeland Sec. (May 7, 2024), https://www.ice.gov/news/releases/ero-boston- apprehends-bangladeshi-citizen-arrested-locally-sexual-assault-minors. \36\Press Release, ERO Boston apprehends Dominican citizen charged locally with child molestation and sexual assault, U.S. Dep't of Homeland Sec. (May 8, 2024), https://www.ice.gov/news/releases/ero- boston-apprehends-dominican-citizen-charged-locally-child-molestation- and-sexual. \37\Press Release, ERO Boston arrests Jamaican national convicted of sexual assault of a minor in Connecticut, U.S. Dep't of Homeland Sec. (Mar. 6, 2024), https://www.ice.gov/news/releases/ero-boston- arrests-jamaican-national-convicted-sexual-assault-minor-connecticut. --------------------------------------------------------------------------- Despite these cases of illegal aliens who committed sex offenses, enforcement against aliens who commit such crimes has decreased under the Biden-Harris Administration. In fiscal year 2019, for instance, ICE arrested aliens who were responsible for 6,650 sex offenses and 5,061 sexual assault offenses.\38\ Under the Biden-Harris Administration, in fiscal year 2023 ICE arrested aliens responsible for only 5,746 sex offenses and 4,390 sexual assault offenses.\39\ --------------------------------------------------------------------------- \38\2019 ICE Annual Rep., supra note 15, at 14. \39\2023 ICE Annual Rep., supra note 17, at 15. --------------------------------------------------------------------------- Under current law, aliens already can be found inadmissible to and removable from the United States for sex offenses if those offenses constitute a crime involving moral turpitude or, in the case of removability, an aggravated felony.\40\ By cross-referencing the Adam Walsh Child Protection and Safety Act of 2006, however, H.R.7909 expands the specific sex offenses for which an alien could be found inadmissible to and removable from the country. By creating new grounds of inadmissibility and removability and expanding current grounds for aliens who commit sex offenses and domestic violence offenses, H.R. 7909 produces safer streets for every American, prevents new victims from being targeted, and allows for such criminal aliens to be removed from the United States. --------------------------------------------------------------------------- \40\See generally 8 U.S.C. Sec. Sec. 1101(a)(43), 1182(a)(2), 1227(a)(2). --------------------------------------------------------------------------- Hearings For the purposes of clause 3(c)(6)(A) of House rule XIII, the following hearing was used to develop H.R. 7909: ``The Consequences of Criminal Aliens on U.S. Communities,'' a hearing held on July 13, 2023, before the Subcommittee on Immigration Integrity, Security, and Enforcement of the Committee on the Judiciary. The Subcommittee heard testimony from the following witnesses: Donald Rosenberg, Founder, Advocates for Victims of Illegal Alien Crime; Bradley Schoenleben, Senior Deputy District Attorney, Orange County, California, District Attorney's Office; John Fabbricatore, Former Field Office Director, U.S. Immigration and Customs Enforcement, Enforcement and Removal Operations; and Ramon Batista, Police Chief, Santa Monica, California. The hearing addressed liberal jurisdictions' harboring of criminal aliens and the Biden-Harris Administration's lax policies that allow criminal aliens to remain in the United States indefinitely. Committee Consideration On May 22, 2024, the Committee met in open session and ordered the bill, H.R. 7909, favorably reported with an amendment in the nature of a substitute, by a roll call vote of 19 to 6, a quorum being present. Committee Votes In compliance with clause 3(b) of House rule XIII, the following roll call votes occurred during the Committee's consideration of H.R. 7909: 1. Vote on Amendment #1 to H.R. 7909 ANS offered by Mr. Nadler--failed 5 ayes to 15 nays. 2. Vote on favorably reporting H.R. 7909, as amended--passed 19 ayes to 6 nays. Committee Oversight Findings In compliance with clause 3(c)(1) of House rule XIII, the Committee advises that the findings and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. New Budget Authority and Tax Expenditures Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives does not apply where a cost estimate and comparison prepared by the Director of the Congressional Budget Office under section 402 of the Congressional Budget Act of 1974 has been timely submitted prior to filing of the report and is included in the report. Such a cost estimate is included in this report. Congressional Budget Office Cost Estimate With respect to the requirement of clause 3(c)(3) of rule XIII of the Rules of the House of Representatives and section 402 of the Congressional Budget Act of 1974, the Committee has received the enclosed cost estimate for H.R. 7909 from the Director of the Congressional Budget Office: H.R. 7909 would make an alien (a non-U.S. national) inadmissible to or deportable from the United States if that person admitted to or was convicted of sex offenses or other crimes involving domestic violence, stalking, and child abuse or neglect. Under current law, spousal violence, sexual activity with a minor, and stalking are all deemed to be crimes involving moral turpitude; the admission of or conviction for such a crime makes an alien inadmissible. Further, a conviction for domestic violence, stalking, or child abuse, child neglect, or child abandonment renders an alien deportable. Therefore, CBO expects that only a few people would be deported based solely on enacting this bill. Enacting H.R. 7909 would reduce direct spending and spending subject to appropriation because aliens are eligible for certain federal benefits, such as emergency Medicaid, if they otherwise meet the eligibility requirements for those benefits. Because few people would be affected by the bill, CBO estimates that those effects would not be significant in any year and over the 2024-2034 period. The CBO staff contact for this estimate is David Rafferty. The estimate was reviewed by H. Samuel Papenfuss, Deputy Director of Budget Analysis. Phillip L. Swagel, Director, Congressional Budget Office. Committee Estimate of Budgetary Effects With respect to the requirements of clause 3(d)(1) of rule XIII of the Rules of the House of Representatives, the Committee adopts as its own the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974. Duplication of Federal Programs Pursuant to clause 3(c)(5) of House rule XIII, no provision of H.R. 7909 establishes or reauthorizes a program of the federal government known to be duplicative of another federal program. Performance Goals and Objectives The Committee states that pursuant to clause 3(c)(4) of House rule XIII, H.R. 7909 would create a ground of inadmissibility for aliens who are convicted of, who admit having committed, or who admit committing acts that constitute the essential elements of a sex offense as defined under the Adam Walsh Child Protection and Safety Act of 2006. The bill creates an identical ground of removability for aliens who are convicted of such offenses. Advisory on Earmarks In accordance with clause 9 of House rule XXI, H.R. 7909 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clauses 9(d), 9(e), or 9(f) of House Rule XXI. Federal Mandates Statement Pursuant to section 423 of the Unfunded Mandates Reform Act, the Committee has determined that the bill does not contain federal mandates on the private sector. The Committee has determined that the bill does not impose a federal intergovernmental mandate on state, local, or tribal governments. Advisory Committee Statement No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation. Applicability to Legislative Branch The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act (Pub. L. 104- 1). Section-by-Section Analysis Section 1. Short title. This section sets forth the short title of the bill as the ``Violence Against Women by Illegal Aliens Act.'' Section 2. Inadmissibility and Deportability Related to Sex Offenses and Domestic Violence. This section creates a ground of inadmissibility for aliens who are convicted of, who admit having committed, or who admit committing acts that constitute the essential elements of a sex offense as defined under the Adam Walsh Child Protection and Safety Act of 2006. It creates an identical ground of removability for aliens who are convicted of such offenses. The section establishes a new ground of inadmissibility for several domestic violence-related offenses and expands the existing ground of removability related to crimes of domestic violence. Changes in Existing Law Made by the Bill, as Reported In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, and existing law in which no change is proposed is shown in roman): IMMIGRATION AND NATIONALITY ACT * * * * * * * TITLE II--IMMIGRATION * * * * * * * Chapter 2--Qualifications for Admission of Aliens; Travel Control of Citizens and Aliens * * * * * * * general classes of aliens ineligible to receive visas and ineligible for admission; waivers of inadmissibility Sec. 212. (a) Classes of Aliens Ineligible for Visas or Admission.--Except as otherwise provided in this Act, aliens who are inadmissible under the following paragraphs are ineligible to receive visas and ineligible to be admitted to the United States: (1) Health-related grounds.-- (A) In general.--Any alien-- (i) who is determined (in accordance with regulations prescribed by the Secretary of Health and Human Services) to have a communicable disease of public health significance; (ii) except as provided in subparagraph (C), who seeks admission as an immigrant, or who seeks adjustment of status to the status of an alien lawfully admitted for permanent residence, and who has failed to present documentation of having received vaccination against vaccine- preventable diseases, which shall include at least the following diseases: mumps, measles, rubella, polio, tetanus and diphtheria toxoids, pertussis, influenza type B and hepatitis B, and any other vaccinations against vaccine-preventable diseases recommended by the Advisory Committee for Immunization Practices, (iii) who is determined (in accordance with regulations prescribed by the Secretary of Health and Human Services in consultation with the Attorney General)-- (I) to have a physical or mental disorder and behavior associated with the disorder that may pose, or has posed, a threat to the property, safety, or welfare of the alien or others, or (II) to have had a physical or mental disorder and a history of behavior associated with the disorder, which behavior has posed a threat to the property, safety, or welfare of the alien or others and which behavior is likely to recur or to lead to other harmful behavior, or (iv) who is determined (in accordance with regulations prescribed by the Secretary of Health and Human Services) to be a drug abuser or addict, is inadmissibility. (B) Waiver authorized.--For provision authorizing waiver of certain clauses of subparagraph (A), see subsection (g). (C) Exception from immunization requirement for adopted children 10 years of age or younger.--Clause (ii) of subparagraph (A) shall not apply to a child who-- (i) is 10 years of age or younger, (ii) is described in subparagraph (F) or (G) of section 101(b)(1); and (iii) is seeking an immigrant visa as an immediate relative under section 201(b), if, prior to the admission of the child, an adoptive parent or prospective adoptive parent of the child, who has sponsored the child for admission as an immediate relative, has executed an affidavit stating that the parent is aware of the provisions of subparagraph (A)(ii) and will ensure that, within 30 days of the child's admission, or at the earliest time that is medically appropriate, the child will receive the vaccinations identified in such subparagraph. (2) Criminal and related grounds.-- (A) Conviction of certain crimes.-- (i) In general.--Except as provided in clause (ii), any alien convicted of, or who admits having committed, or who admits committing acts which constitute the essential elements of-- (I) a crime involving moral turpitude (other than a purely political offense) or an attempt or conspiracy to commit such a crime, or (II) a violation of (or a conspiracy or attempt to violate) any law or regulation of a State, the United States, or a foreign country relating to a controlled substance (as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802)), is inadmissible. (ii) Exception.--Clause (i)(I) shall not apply to an alien who committed only one crime if-- (I) the crime was committed when the alien was under 18 years of age, and the crime was committed (and the alien released from any confinement to a prison or correctional institution imposed for the crime) more than 5 years before the date of application for a visa or other documentation and the date of application for admission to the United States, or (II) the maximum penalty possible for the crime of which the alien was convicted (or which the alien admits having committed or of which the acts that the alien admits having committed constituted the essential elements) did not exceed imprisonment for one year and, if the alien was convicted of such crime, the alien was not sentenced to a term of imprisonment in excess of 6 months (regardless of the extent to which the sentence was ultimately executed). (B) Multiple criminal convictions.--Any alien convicted of 2 or more offenses (other than purely political offenses), regardless of whether the conviction was in a single trial or whether the offenses arose from a single scheme of misconduct and regardless of whether the offenses involved moral turpitude, for which the aggregate sentences to confinement were 5 years or more is inadmissible. (C) Controlled substance traffickers.--Any alien who the consular officer or the Attorney General knows or has reason to believe-- (i) is or has been an illicit trafficker in any controlled substance or in any listed chemical (as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802)), or is or has been a knowing aider, abettor, assister, conspirator, or colluder with others in the illicit trafficking in any such controlled or listed substance or chemical, or endeavored to do so; or (ii) is the spouse, son, or daughter of an alien inadmissible under clause (i), has, within the previous 5 years, obtained any financial or other benefit from the illicit activity of that alien, and knew or reasonably should have known that the financial or other benefit was the product of such illicit activity, is inadmissible. (D) Prostitution and commercialized vice.-- Any alien who-- (i) is coming to the United States solely, principally, or incidentally to engage in prostitution, or has engaged in prostitution within 10 years of the date of application for a visa, admission, or adjustment of status, (ii) directly or indirectly procures or attempts to procure, or (within 10 years of the date of application for a visa, entry, or adjustment of status) procured or attempted to procure or to import, prostitutes or persons for the purpose of prostitution, or receives or (within such 10-year period) received, in whole or in part, the proceeds of prostitution, or (iii) is coming to the United States to engage in any other unlawful commercialized vice, whether or not related to prostitution, is inadmissible. (E) Certain aliens involved in serious criminal activity who have asserted immunity from prosecution.--Any alien-- (i) who has committed in the United States at any time a serious criminal offense (as defined in section 101(h)), (ii) for whom immunity from criminal jurisdiction was exercised with respect to that offense, (iii) who as a consequence of the offense and exercise of immunity has departed from the United States, and (iv) who has not subsequently submitted fully to the jurisdiction of the court in the United States having jurisdiction with respect to that offense, is inadmissible. (F) Waiver authorized.--For provision authorizing waiver of certain subparagraphs of this paragraph, see subsection (h). (G) Foreign government officials who have committed particularly severe violations of religious freedom.--Any alien who, while serving as a foreign government official, was responsible for or directly carried out, at any time, particularly severe violations of religious freedom, as defined in section 3 of the International Religious Freedom Act of 1998 (22 U.S.C. 6402), is inadmissible. (H) Significant traffickers in persons.-- (i) In general.--Any alien who commits or conspires to commit human trafficking offenses in the United States or outside the United States, or who the consular officer, the Secretary of Homeland Security, the Secretary of State, or the Attorney General knows or has reason to believe is or has been a knowing aider, abettor, assister, conspirator, or colluder with such a trafficker in severe forms of trafficking in persons, as defined in the section 103 of such Act, is inadmissible. (ii) Beneficiaries of trafficking.-- Except as provided in clause (iii), any alien who the consular officer or the Attorney General knows or has reason to believe is the spouse, son, or daughter of an alien inadmissible under clause (i), has, within the previous 5 years, obtained any financial or other benefit from the illicit activity of that alien, and knew or reasonably should have known that the financial or other benefit was the product of such illicit activity, is inadmissible. (iii) Exception for certain sons and daughters.--Clause (ii) shall not apply to a son or daughter who was a child at the time he or she received the benefit described in such clause. (I) Money laundering.--Any alien-- (i) who a consular officer or the Attorney General knows, or has reason to believe, has engaged, is engaging, or seeks to enter the United States to engage, in an offense which is described in section 1956 or 1957 of title 18, United States Code (relating to laundering of monetary instruments); or (ii) who a consular officer or the Attorney General knows is, or has been, a knowing aider, abettor, assister, conspirator, or colluder with others in an offense which is described in such section; is inadmissible. (J) Sex offenses.--Any alien who has been convicted of, who admits having committed, or who admits committing acts which constitute the essential elements of a sex offense (as such term is defined in section 111(5) of the Adam Walsh Child Protection and Safety Act of 2006 (34 U.S.C. 20911(5))), or a conspiracy to commit such an offense, is inadmissible. (K) Domestic violence, stalking, child abuse, or violation of protection order.--Any alien who has been convicted of, who admits having committed, or who admits committing acts which constitute the essential elements of-- (i) a crime of domestic violence (as such term is defined in section 237(a)(2)(E)); (ii) a crime of stalking; (iii) a crime of child abuse, child neglect, or child abandonment; or (iv) a crime of violating the portion of a protection order (as such term is defined in section 237(a)(2)(E)) that involves protection against credible threats of violence, repeated harassment, or bodily injury to the person or persons for whom the protection order was issued, is inadmissible. (3) Security and related grounds.-- (A) In general.--Any alien who a consular officer or the Attorney General knows, or has reasonable ground to believe, seeks to enter the United States to engage solely, principally, or incidentally in-- (i) any activity (I) to violate any law of the United States relating to espionage or sabotage or (II) to violate or evade any law prohibiting the export from the United States of goods, technology, or sensitive information, (ii) any other unlawful activity, or (iii) any activity a purpose of which is the opposition to, or the control or overthrow of, the Government of the United States by force, violence, or other unlawful means, is inadmissible. (B) Terrorist activities.-- (i) In general.--Any alien who-- (I) has engaged in a terrorist activity; (II) a consular officer, the Attorney General, or the Secretary of Homeland Security knows, or has reasonable ground to believe, is engaged in or is likely to engage after entry in any terrorist activity (as defined in clause (iv)); (III) has, under circumstances indicating an intention to cause death or serious bodily harm, incited terrorist activity; (IV) is a representative (as defined in clause (v)) of-- (aa) a terrorist organization (as defined in clause (vi)); or (bb) a political, social, or other group that endorses or espouses terrorist activity; (V) is a member of a terrorist organization described in subclause (I) or (II) of clause (vi); (VI) is a member of a terrorist organization described in clause (vi)(III), unless the alien can demonstrate by clear and convincing evidence that the alien did not know, and should not reasonably have known, that the organization was a terrorist organization; (VII) endorses or espouses terrorist activity or persuades others to endorse or espouse terrorist activity or support a terrorist organization; (VIII) has received military- type training (as defined in section 2339D(c)(1) of title 18, United States Code) from or on behalf of any organization that, at the time the training was received, was a terrorist organization (as defined in clause (vi)); or (IX) is the spouse or child of an alien who is inadmissible under this subparagraph, if the activity causing the alien to be found inadmissible occurred within the last 5 years, is inadmissible. An alien who is an officer, official, representative, or spokesman of the Palestine Liberation Organization is considered, for purposes of this Act, to be engaged in a terrorist activity. (ii) Exception.--Subclause (IX) of clause (i) does not apply to a spouse or child-- (I) who did not know or should not reasonably have known of the activity causing the alien to be found inadmissible under this section; or (II) whom the consular officer or Attorney General has reasonable grounds to believe has renounced the activity causing the alien to be found inadmissible under this section. (iii) Terrorist activity defined.--As used in this Act, the term ``terrorist activity'' means any activity which is unlawful under the laws of the place where it is committed (or which, if it had been committed in the United States, would be unlawful under the laws of the United States or any State) and which involves any of the following: (I) The highjacking or sabotage of any conveyance (including an aircraft, vessel, or vehicle). (II) The seizing or detaining, and threatening to kill, injure, or continue to detain, another individual in order to compel a third person (including a governmental organization) to do or abstain from doing any act as an explicit or implicit condition for the release of the individual seized or detained. (III) A violent attack upon an internationally protected person (as defined in section 1116(b)(4) of title 18, United States Code) or upon the liberty of such a person. (IV) An assassination. (V) The use of any-- (a) biological agent, chemical agent, or nuclear weapon or device, or (b) explosive, firearm, or other weapon or dangerous device (other than for mere personal monetary gain), with intent to endanger, directly or indirectly, the safety of one or more individuals or to cause substantial damage to property. (VI) A threat, attempt, or conspiracy to do any of the foregoing. (iv) Engage in terrorist activity defined.--As used in this Act, the term ``engage in terrorist activity'' means, in an individual capacity or as a member of an organization-- (I) to commit or to incite to commit, under circumstances indicating an intention to cause death or serious bodily injury, a terrorist activity; (II) to prepare or plan a terrorist activity; (III) to gather information on potential targets for terrorist activity; (IV) to solicit funds or other things of value for-- (aa) a terrorist activity; (bb) a terrorist organization described in clause (vi)(I) or (vi)(II); or (cc) a terrorist organization described in clause (vi)(III), unless the solicitor can demonstrate by clear and convincing evidence that he did not know, and should not reasonably have known, that the organization was a terrorist organization; (V) to solicit any individual-- (aa) to engage in conduct otherwise described in this subsection; (bb) for membership in a terrorist organization described in clause (vi)(I) or (vi)(II); or (cc) for membership in a terrorist organization described in clause (vi)(III) unless the solicitor can demonstrate by clear and convincing evidence that he did not know, and should not reasonably have known, that the organization was a terrorist organization; or (VI) to commit an act that the actor knows, or reasonably should know, affords material support, including a safe house, transportation, communications, funds, transfer of funds or other material financial benefit, false documentation or identification, weapons (including chemical, biological, or radiological weapons), explosives, or training-- (aa) for the commission of a terrorist activity; (bb) to any individual who the actor knows, or reasonably should know, has committed or plans to commit a terrorist activity; (cc) to a terrorist organization described in subclause (I) or (II) of clause (vi) or to any member of such an organization; or (dd) to a terrorist organization described in clause (vi)(III), or to any member of such an organization, unless the actor can demonstrate by clear and convincing evidence that the actor did not know, and should not reasonably have known, that the organization was a terrorist organization. (v) Representative defined.--As used in this paragraph, the term ``representative'' includes an officer, official, or spokesman of an organization, and any person who directs, counsels, commands, or induces an organization or its members to engage in terrorist activity. (vi) Terrorist organization defined.--As used in this section, the term ``terrorist organization'' means an organization-- (I) designated under section 219; (II) otherwise designated, upon publication in the Federal Register, by the Secretary of State in consultation with or upon the request of the Attorney General or the Secretary of Homeland Security, as a terrorist organization, after finding that the organization engages in the activities described in subclauses (I) through (VI) of clause (iv); or (III) that is a group of two or more individuals, whether organized or not, which engages in, or has a subgroup which engages in, the activities described in subclauses (I) through (VI) of clause (iv). (C) Foreign policy.-- (i) In general.--An alien whose entry or proposed activities in the United States the Secretary of State has reasonable ground to believe would have potentially serious adverse foreign policy consequences for the United States is inadmissible. (ii) Exception for officials.--An alien who is an official of a foreign government or a purported government, or who is a candidate for election to a foreign government office during the period immediately preceding the election for that office, shall not be excludable or subject to restrictions or conditions on entry into the United States under clause (i) solely because of the alien's past, current, or expected beliefs, statements, or associations, if such beliefs, statements, or associations would be lawful within the United States. (iii) Exception for other aliens.--An alien, not described in clause (ii), shall not be excludable or subject to restrictions or conditions on entry into the United States under clause (i) because of the alien's past, current, or expected beliefs, statements, or associations, if such beliefs, statements, or associations would be lawful within the United States, unless the Secretary of State personally determines that the alien's admission would compromise a compelling United States foreign policy interest. (iv) Notification of determinations.--If a determination is made under clause (iii) with respect to an alien, the Secretary of State must notify on a timely basis the chairmen of the Committees on the Judiciary and Foreign Affairs of the House of Representatives and of the Committees on the Judiciary and Foreign Relations of the Senate of the identity of the alien and the reasons for the determination. (D) Immigrant membership in totalitarian party.-- (i) In general.--Any immigrant who is or has been a member of or affiliated with the Communist or any other totalitarian party (or subdivision or affiliate thereof), domestic or foreign, is inadmissible. (ii) Exception for involuntary membership.--Clause (i) shall not apply to an alien because of membership or affiliation if the alien establishes to the satisfaction of the consular officer when applying for a visa (or to the satisfaction of the Attorney General when applying for admission) that the membership or affiliation is or was involuntary, or is or was solely when under 16 years of age, by operation of law, or for purposes of obtaining employment, food rations, or other essentials of living and whether necessary for such purposes. (iii) Exception for past membership.--Clause (i) shall not apply to an alien because of membership or affiliation if the alien establishes to the satisfaction of the consular officer when applying for a visa (or to the satisfaction of the Attorney General when applying for admission) that-- (I) the membership or affiliation terminated at least-- (a) 2 years before the date of such application, or (b) 5 years before the date of such application, in the case of an alien whose membership or affiliation was with the party controlling the government of a foreign state that is a totalitarian dictatorship as of such date, and (II) the alien is not a threat to the security of the United States. (iv) Exception for close family members.--The Attorney General may, in the Attorney General's discretion, waive the application of clause (i) in the case of an immigrant who is the parent, spouse, son, daughter, brother, or sister of a citizen of the United States or a spouse, son, or daughter of an alien lawfully admitted for permanent residence for humanitarian purposes, to assure family unity, or when it is otherwise in the public interest if the immigrant is not a threat to the security of the United States. (E) Participants in nazi persecution, genocide, or the commission of any act of torture or extrajudicial killing.-- (i) Participation in nazi persecutions.--Any alien who, during the period beginning on March 23, 1933, and ending on May 8, 1945, under the direction of, or in association with-- (I) the Nazi government of Germany, (II) any government in any area occupied by the military forces of the Nazi government of Germany, (III) any government established with the assistance or cooperation of the Nazi government of Germany, or (IV) any government which was an ally of the Nazi government of Germany, ordered, incited, assisted, or otherwise participated in the persecution of any person because of race, religion, national origin, or political opinion is inadmissible. (ii) Participation in genocide.--Any alien who ordered, incited, assisted, or otherwise participated in genocide, as defined in section 1091(a) of title 18, United States Code, is inadmissible (iii) Commission of acts of torture or extrajudicial killings.--Any alien who, outside the United States, has committed, ordered, incited, assisted, or otherwise participated in the commission of-- (I) any act of torture, as defined in section 2340 of title 18, United States Code; or (II) under color of law of any foreign nation, any extrajudicial killing, as defined in section 3(a) of the Torture Victim Protection Act of 1991 (28 U.S.C. 1350 note), is inadmissible. (F) Association with terrorist organizations.--Any alien who the Secretary of State, after consultation with the Attorney General, or the Attorney General, after consultation with the Secretary of State, determines has been associated with a terrorist organization and intends while in the United States to engage solely, principally, or incidentally in activities that could endanger the welfare, safety, or security of the United States is inadmissible. (G) Recruitment or use of child soldiers.-- Any alien who has engaged in the recruitment or use of child soldiers in violation of section 2442 of title 18, United States Code, is inadmissible. (4) Public charge.-- (A) In general.--Any alien who, in the opinion of the consular officer at the time of application for a visa, or in the opinion of the Attorney General at the time of application for admission or adjustment of status, is likely at any time to become a public charge is inadmissible. (B) Factors to be taken into account.--(i) In determining whether an alien is inadmissible under this paragraph, the consular officer or the Attorney General shall at a minimum consider the alien's-- (I) age; (II) health; (III) family status; (IV) assets, resources, and financial status; and (V) education and skills. (ii) In addition to the factors under clause (i), the consular officer or the Attorney General may also consider any affidavit of support under section 213A for purposes of exclusion under this paragraph. (C) Family-sponsored immigrants.--Any alien who seeks admission or adjustment of status under a visa number issued under section 201(b)(2) or 203(a) is inadmissible under this paragraph unless-- (i) the alien has obtained-- (I) status as a spouse or a child of a United States citizen pursuant to clause (ii), (iii), or (iv) of section 204(a)(1)(A), or (II) classification pursuant to clause (ii) or (iii) of section 204(a)(1)(B); or (III) classification or status as a VAWA self- petitioner; or (ii) the person petitioning for the alien's admission (and any additional sponsor required under section 213A(f) or any alternative sponsor permitted under paragraph (5)(B) of such section) has executed an affidavit of support described in section 213A with respect to such alien. (D) Certain employment-based immigrants.--Any alien who seeks admission or adjustment of status under a visa number issued under section 203(b) by virtue of a classification petition filed by a relative of the alien (or by an entity in which such relative has a significant ownership interest) is inadmissible under this paragraph unless such relative has executed an affidavit of support described in section 213A with respect to such alien. (E) Special rule for qualified alien victims.--Subparagraphs (A), (B), and (C) shall not apply to an alien who-- (i) is a VAWA self-petitioner; (ii) is an applicant for, or is granted, nonimmigrant status under section 101(a)(15)(U); or (iii) is a qualified alien described in section 431(c) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641(c)). (5) Labor certification and qualifications for certain immigrants.-- (A) Labor certification.-- (i) In general.--Any alien who seeks to enter the United States for the purpose of performing skilled or unskilled labor is inadmissible, unless the Secretary of Labor has determined and certified to the Secretary of State and the Attorney General that-- (I) there are not sufficient workers who are able, willing, qualified (or equally qualified in the case of an alien described in clause (ii)) and available at the time of application for a visa and admission to the United States and at the place where the alien is to perform such skilled or unskilled labor, and (II) the employment of such alien will not adversely affect the wages and working conditions of workers in the United States similarly employed. (ii) Certain aliens subject to special rule.--For purposes of clause (i)(I), an alien described in this clause is an alien who-- (I) is a member of the teaching profession, or (II) has exceptional ability in the sciences or the arts. (iii) Professional athletes.-- (I) In general.--A certification made under clause (i) with respect to a professional athlete shall remain valid with respect to the athlete after the athlete changes employer, if the new employer is a team in the same sport as the team which employed the athlete when the athlete first applied for the certification. (II) Definition.--For purposes of subclause (I), the term ``professional athlete'' means an individual who is employed as an athlete by-- (aa) a team that is a member of an association of 6 or more professional sports teams whose total combined revenues exceed $10,000,000 per year, if the association governs the conduct of its members and regulates the contests and exhibitions in which its member teams regularly engage; or (bb) any minor league team that is affiliated with such an association. (iv) Long delayed adjustment applicants.--A certification made under clause (i) with respect to an individual whose petition is covered by section 204(j) shall remain valid with respect to a new job accepted by the individual after the individual changes jobs or employers if the new job is in the same or a similar occupational classification as the job for which the certification was issued. (B) Unqualified physicians.--An alien who is a graduate of a medical school not accredited by a body or bodies approved for the purpose by the Secretary of Education (regardless of whether such school of medicine is in the United States) and who is coming to the United States principally to perform services as a member of the medical profession is inadmissible, unless the alien (i) has passed parts I and II of the National Board of Medical Examiners Examination (or an equivalent examination as determined by the Secretary of Health and Human Services) and (ii) is competent in oral and written English. For purposes of the previous sentence, an alien who is a graduate of a medical school shall be considered to have passed parts I and II of the National Board of Medical Examiners if the alien was fully and permanently licensed to practice medicine in a State on January 9, 1978, and was practicing medicine in a State on that date. (C) Uncertified foreign health-care workers.--Subject to subsection (r), any alien who seeks to enter the United States for the purpose of performing labor as a health-care worker, other than a physician, is inadmissible unless the alien presents to the consular officer, or, in the case of an adjustment of status, the Attorney General, a certificate from the Commission on Graduates of Foreign Nursing Schools, or a certificate from an equivalent independent credentialing organization approved by the Attorney General in consultation with the Secretary of Health and Human Services, verifying that-- (i) the alien's education, training, license, and experience-- (I) meet all applicable statutory and regulatory requirements for entry into the United States under the classification specified in the application; (II) are comparable with that required for an American health-care worker of the same type; and (III) are authentic and, in the case of a license, unencumbered; (ii) the alien has the level of competence in oral and written English considered by the Secretary of Health and Human Services, in consultation with the Secretary of Education, to be appropriate for health care work of the kind in which the alien will be engaged, as shown by an appropriate score on one or more nationally recognized, commercially available, standardized assessments of the applicant's ability to speak and write; and (iii) if a majority of States licensing the profession in which the alien intends to work recognize a test predicting the success on the profession's licensing or certification examination, the alien has passed such a test or has passed such an examination. For purposes of clause (ii), determination of the standardized tests required and of the minimum scores that are appropriate are within the sole discretion of the Secretary of Health and Human Services and are not subject to further administrative or judicial review. (D) Application of grounds.--The grounds for inadmissibility of aliens under subparagraphs (A) and (B) shall apply to immigrants seeking admission or adjustment of status under paragraph (2) or (3) of section 203(b). (6) Illegal entrants and immigration violators.-- (A) Aliens present without admission or parole.-- (i) In general.--An alien present in the United States without being admitted or paroled, or who arrives in the United States at any time or place other than as designated by the Attorney General, is inadmissible. (ii) Exception for certain battered women and children.--Clause (i) shall not apply to an alien who demonstrates that-- (I) the alien is a VAWA self- petitioner; (II)(a) the alien has been battered or subjected to extreme cruelty by a spouse or parent, or by a member of the spouse's or parent's family residing in the same household as the alien and the spouse or parent consented or acquiesced to such battery or cruelty, or (b) the alien's child has been battered or subjected to extreme cruelty by a spouse or parent of the alien (without the active participation of the alien in the battery or cruelty) or by a member of the spouse's or parent's family residing in the same household as the alien when the spouse or parent consented to or acquiesced in such battery or cruelty and the alien did not actively participate in such battery or cruelty, and (III) there was a substantial connection between the battery or cruelty described in subclause (I) or (II) and the alien's unlawful entry into the United States. (B) Failure to attend removal proceeding.-- Any alien who without reasonable cause fails or refuses to attend or remain in attendance at a proceeding to determine the alien's inadmissibility or deportability and who seeks admission to the United States within 5 years of such alien's subsequent departure or removal is inadmissible. (C) Misrepresentation.-- (i) In general.--Any alien who, by fraud or willfully misrepresenting a material fact, seeks to procure (or has sought to procure or has procured) a visa, other documentation, or admission into the United States or other benefit provided under this Act is inadmissible. (ii) Falsely claiming citizenship.-- (I) In general.--Any alien who falsely represents, or has falsely represented, himself or herself to be a citizen of the United States for any purpose or benefit under this Act (including section 274A) or any other Federal or State law is inadmissible. (II) Exception.--In the case of an alien making a representation described in subclause (I), if each natural parent of the alien (or, in the case of an adopted alien, each adoptive parent of the alien) is or was a citizen (whether by birth or naturalization), the alien permanently resided in the United States prior to attaining the age of 16, and the alien reasonably believed at the time of making such representation that he or she was a citizen, the alien shall not be considered to be inadmissible under any provision of this subsection based on such representation. (iii) Waiver authorized.--For provision authorizing waiver of clause (i), see subsection (i). (D) Stowaways.--Any alien who is a stowaway is inadmissible. (E) Smugglers.-- (i) In general.--Any alien who at any time knowingly has encouraged, induced, assisted, abetted, or aided any other alien to enter or to try to enter the United States in violation of law is inadmissible. (ii) Special rule in the case of family reunification.--Clause (i) shall not apply in the case of alien who is an eligible immigrant (as defined in section 301(b)(1) of the Immigration Act of 1990), was physically present in the United States on May 5, 1988, and is seeking admission as an immediate relative or under section 203(a)(2) (including under section 112 of the Immigration Act of 1990) or benefits under section 301(a) of the Immigration Act of 1990 if the alien, before May 5, 1988, has encouraged, induced, assisted, abetted, or aided only the alien's spouse, parent, son, or daughter (and no other individual) to enter the United States in violation of law. (iii) Waiver authorized.--For provision authorizing waiver of clause (i), see subsection (d)(11). (F) Subject of civil penalty.-- (i) In general.--An alien who is the subject of a final order for violation of section 274C is inadmissible. (ii) Waiver authorized.--For provision authorizing waiver of clause (i), see subsection (d)(12). (G) Student visa abusers.--An alien who obtains the status of a nonimmigrant under section 101(a)(15)(F)(i) and who violates a term or condition of such status under section 214(l) is inadmissible until the alien has been outside the United States for a continuous period of 5 years after the date of the violation. (7) Documentation requirements.-- (A) Immigrants.-- (i) In general.--Except as otherwise specifically provided in this Act, any immigrant at the time of application for admission-- (I) who is not in possession of a valid unexpired immigrant visa, reentry permit, border crossing identification card, or other valid entry document required by this Act, and a valid unexpired passport, or other suitable travel document, or document of identity and nationality if such document is required under the regulations issued by the Attorney General under section 211(a), or (II) whose visa has been issued without compliance with the provisions of section 203, is inadmissible. (ii) Waiver authorized.--For provision authorizing waiver of clause (i), see subsection (k). (B) Nonimmigrants.-- (i) In general.--Any nonimmigrant who-- (I) is not in possession of a passport valid for a minimum of six months from the date of the expiration of the initial period of the alien's admission or contemplated initial period of stay authorizing the alien to return to the country from which the alien came or to proceed to and enter some other country during such period, or (II) is not in possession of a valid nonimmigrant visa or border crossing identification card at the time of application for admission, is inadmissible. (ii) General waiver authorized.--For provision authorizing waiver of clause (i), see subsection (d)(4). (iii) Guam and northern mariana islands visa waiver.--For provision authorizing waiver of clause (i) in the case of visitors to Guam or the Commonwealth of the Northern Mariana Islands, see subsection (l). (iv) Visa waiver program.--For authority to waive the requirement of clause (i) under a program, see section 217. (8) Ineligible for citizenship.-- (A) In general.--Any immigrant who is permanently ineligible to citizenship is inadmissible. (B) Draft evaders.--Any person who has departed from or who has remained outside the United States to avoid or evade training or service in the armed forces in time of war or a period declared by the President to be a national emergency is inadmissible, except that this subparagraph shall not apply to an alien who at the time of such departure was a nonimmigrant and who is seeking to reenter the United States as a nonimmigrant. (9) Aliens previously removed.-- (A) Certain aliens previously removed.-- (i) Arriving aliens.--Any alien who has been ordered removed under section 235(b)(1) or at the end of proceedings under section 240 initiated upon the alien's arrival in the United States and who again seeks admission within 5 years of the date of such removal (or within 20 years in the case of a second or subsequent removal or at any time in the case of an alien convicted of an aggravated felony) is inadmissible. (ii) Other aliens.--Any alien not described in clause (i) who-- (I) has been ordered removed under section 240 or any other provision of law, or (II) departed the United States while an order of removal was outstanding, and who seeks admission within 10 years of the date of such alien's departure or removal (or within 20 years of such date in the case of a second or subsequent removal or at any time in the case of an alien convicted of an aggravated felony) is inadmissible. (iii) Exception.--Clauses (i) and (ii) shall not apply to an alien seeking admission within a period if, prior to the date of the alien's reembarkation at a place outside the United States or attempt to be admitted from foreign contiguous territory, the Attorney General has consented to the alien's reapplying for admission. (B) Aliens unlawfully present.-- (i) In general.--Any alien (other than an alien lawfully admitted for permanent residence) who-- (I) was unlawfully present in the United States for a period of more than 180 days but less than 1 year, voluntarily departed the United States (whether or not pursuant to section 244(e)) prior to the commencement of proceedings under section 235(b)(1) or section 240, and again seeks admission within 3 years of the date of such alien's departure or removal, or (II) has been unlawfully present in the United States for one year or more, and who again seeks admission within 10 years of the date of such alien's departure or removal from the United States, is inadmissible. (ii) Construction of unlawful presence.--For purposes of this paragraph, an alien is deemed to be unlawfully present in the United States if the alien is present in the United States after the expiration of the period of stay authorized by the Attorney General or is present in the United States without being admitted or paroled. (iii) Exceptions.-- (I) Minors.--No period of time in which an alien is under 18 years of age shall be taken into account in determining the period of unlawful presence in the United States under clause (i). (II) Asylees.--No period of time in which an alien has a bona fide application for asylum pending under section 208 shall be taken into account in determining the period of unlawful presence in the United States under clause (i) unless the alien during such period was employed without authorization in the United States. (III) Family unity.--No period of time in which the alien is a beneficiary of family unity protection pursuant to section 301 of the Immigration Act of 1990 shall be taken into account in determining the period of unlawful presence in the United States under clause (i). (IV) Battered women and children.--Clause (i) shall not apply to an alien who would be described in paragraph (6)(A)(ii) if ``violation of the terms of the alien's nonimmigrant visa'' were substituted for ``unlawful entry into the United States'' in subclause (III) of that paragraph. (V) Victims of a severe form of trafficking in persons.--Clause (i) shall not apply to an alien who demonstrates that the severe form of trafficking (as that term is defined in section 103 of the Trafficking Victims Protection Act of 2000 (22 U.S.C. 7102)) was at least one central reason for the alien's unlawful presence in the United States. (iv) Tolling for good cause.--In the case of an alien who-- (I) has been lawfully admitted or paroled into the United States, (II) has filed a nonfrivolous application for a change or extension of status before the date of expiration of the period of stay authorized by the Attorney General, and (III) has not been employed without authorization in the United States before or during the pendency of such application, the calculation of the period of time specified in clause (i)(I) shall be tolled during the pendency of such application, but not to exceed 120 days. (v) Waiver.--The Attorney General has sole discretion to waive clause (i) in the case of an immigrant who is the spouse or son or daughter of a United States citizen or of an alien lawfully admitted for permanent residence, if it is established to the satisfaction of the Attorney General that the refusal of admission to such immigrant alien would result in extreme hardship to the citizen or lawfully resident spouse or parent of such alien. No court shall have jurisdiction to review a decision or action by the Attorney General regarding a waiver under this clause. (C) Aliens unlawfully present after previous immigration violations.-- (i) In general.--Any alien who-- (I) has been unlawfully present in the United States for an aggregate period of more than 1 year, or (II) has been ordered removed under section 235(b)(1), section 240, or any other provision of law, and who enters or attempts to reenter the United States without being admitted is inadmissible. (ii) Exception.--Clause (i) shall not apply to an alien seeking admission more than 10 years after the date of the alien's last departure from the United States if, prior to the alien's reembarkation at a place outside the United States or attempt to be readmitted from a foreign contiguous territory, the Secretary of Homeland Security has consented to the alien's reapplying for admission. (iii) Waiver.--The Secretary of Homeland Security may waive the application of clause (i) in the case of an alien who is a VAWA self- petitioner if there is a connection between-- (I) the alien's battering or subjection to extreme cruelty; and (II) the alien's removal, departure from the United States, reentry or reentries into the United States; or attempted reentry into the United States. (10) Miscellaneous.-- (A) Practicing polygamists.--Any immigrant who is coming to the United States to practice polygamy is inadmissible. (B) Guardian required to accompany helpless alien.--Any alien-- (i) who is accompanying another alien who is inadmissible and who is certified to be helpless from sickness, mental or physical disability, or infancy pursuant to section 232(c), and (ii) whose protection or guardianship is determined to be required by the alien described in clause (i), is inadmissible. (C) International child abduction.-- (i) In general.--Except as provided in clause (ii), any alien who, after entry of an order by a court in the United States granting custody to a person of a United States citizen child who detains or retains the child, or withholds custody of the child, outside the United States from the person granted custody by that order, is inadmissible until the child is surrendered to the person granted custody by that order. (ii) Aliens supporting abductors and relatives of abductors.--Any alien who-- (I) is known by the Secretary of State to have intentionally assisted an alien in the conduct described in clause (i), (II) is known by the Secretary of State to be intentionally providing material support or safe haven to an alien described in clause (i), or (III) is a spouse (other than the spouse who is the parent of the abducted child), child (other than the abducted child), parent, sibling, or agent of an alien described in clause (i), if such person has been designated by the Secretary of State at the Secretary's sole and unreviewable discretion, is inadmissible until the child described in clause (i) is surrendered to the person granted custody by the order described in that clause, and such person and child are permitted to return to the United States or such person's place of residence. (iii) Exceptions.--Clauses (i) and (ii) shall not apply-- (I) to a government official of the United States who is acting within the scope of his or her official duties; (II) to a government official of any foreign government if the official has been designated by the Secretary of State at the Secretary's sole and unreviewable discretion; or (III) so long as the child is located in a foreign state that is a party to the Convention on the Civil Aspects of International Child Abduction, done at The Hague on October 25, 1980. (D) Unlawful voters.-- (i) In general.--Any alien who has voted in violation of any Federal, State, or local constitutional provision, statute, ordinance, or regulation is inadmissible. (ii) Exception.--In the case of an alien who voted in a Federal, State, or local election (including an initiative, recall, or referendum) in violation of a lawful restriction of voting to citizens, if each natural parent of the alien (or, in the case of an adopted alien, each adoptive parent of the alien) is or was a citizen (whether by birth or naturalization), the alien permanently resided in the United States prior to attaining the age of 16, and the alien reasonably believed at the time of such violation that he or she was a citizen, the alien shall not be considered to be inadmissible under any provision of this subsection based on such violation. (E) Former citizens who renounced citizenship to avoid taxation.--Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible. (b) Notices of Denials.-- (1) Subject to paragraphs (2) and (3), if an alien's application for a visa, for admission to the United States, or for adjustment of status is denied by an immigration or consular officer because the officer determines the alien to be inadmissible under subsection (a), the officer shall provide the alien with a timely written notice that-- (A) states the determination, and (B) lists the specific provision or provisions of law under which the alien is excludable or ineligible for entry or adjustment of status. (2) The Secretary of State may waive the requirements of paragraph (1) with respect to a particular alien or any class or classes of inadmissible aliens. (3) Paragraph (1) does not apply to any alien inadmissible under paragraph (2) or (3) of subsection (a). (d)(1) The Attorney General shall determine whether a ground for inadmissible exists with respect to a nonimmigrant described in section 101(a)(15)(S). The Attorney General, in the Attorney General's discretion, may waive the application of subsection (a) (other than paragraph (3)(E)) in the case of a nonimmigrant described in section 101(a)(15)(S), if the Attorney General considers it to be in the national interest to do so. Nothing in this section shall be regarded as prohibiting the Immigration and Naturalization Service from instituting removal proceedings against an alien admitted as a nonimmigrant under section 101(a)(15)(S) for conduct committed after the alien's admission into the United States, or for conduct or a condition that was not disclosed to the Attorney General prior to the alien's admission as a nonimmigrant under section 101(a)(15)(S). (3)(A) Except as provided in this subsection, an alien (i) who is applying for a nonimmigrant visa and is known or believed by the consular officer to be ineligible for such visa under subsection (a) (other than paragraphs (3)(A)(i)(I), (3)(A)(ii), (3)(A)(iii), (3)(C), and clauses (i) and (ii) of paragraph (3)(E) of such subsection), may, after approval by the Attorney General of a recommendation by the Secretary of State or by the consular officer that the alien be admitted temporarily despite his inadmissibility, be granted such a visa and may be admitted into the United States temporarily as a nonimmigrant in the discretion of the Attorney General, or (ii) who is inadmissible under subsection (a) (other than paragraphs (3)(A)(i)(I), (3)(A)(ii), (3)(A)(iii), (3)(C), and clauses (i) and (ii) of paragraph (3)(E) of such subsection), but who is in possession of appropriate documents or is granted a waiver thereof and is seeking admission, may be admitted into the United States temporarily as a nonimmigrant in the discretion of the Attorney General. The Attorney General shall prescribe conditions, including exaction of such bonds as may be necessary, to control and regulate the admission and return of inadmissible aliens applying for temporary admission under this paragraph. (B)(i) The Secretary of State, after consultation with the Attorney General and the Secretary of Homeland Security, or the Secretary of Homeland Security, after consultation with the Secretary of State and the Attorney General, may determine in such Secretary's sole unreviewable discretion that subsection (a)(3)(B) shall not apply with respect to an alien within the scope of that subsection or that subsection (a)(3)(B)(vi)(III) shall not apply to a group within the scope of that subsection, except that no such waiver may be extended to an alien who is within the scope of subsection (a)(3)(B)(i)(II), no such waiver may be extended to an alien who is a member or representative of, has voluntarily and knowingly engaged in or endorsed or espoused or persuaded others to endorse or espouse or support terrorist activity on behalf of, or has voluntarily and knowingly received military-type training from a terrorist organization that is described in subclause (I) or (II) of subsection (a)(3)(B)(vi), and no such waiver may be extended to a group that has engaged terrorist activity against the United States or another democratic country or that has purposefully engaged in a pattern or practice of terrorist activity that is directed at civilians. Such a determination shall neither prejudice the ability of the United States Government to commence criminal or civil proceedings involving a beneficiary of such a determination or any other person, nor create any substantive or procedural right or benefit for a beneficiary of such a determination or any other person. Notwithstanding any other provision of law (statutory or nonstatutory), including section 2241 of title 28, or any other habeas corpus provision, and sections 1361 and 1651 of such title, no court shall have jurisdiction to review such a determination or revocation except in a proceeding for review of a final order of removal pursuant to section 1252 of this title, and review shall be limited to the extent provided in section 1252(a)(2)(D). The Secretary of State may not exercise the discretion provided in this clause with respect to an alien at any time during which the alien is the subject of pending removal proceedings under section 1229a of this title. (ii) Not later than 90 days after the end of each fiscal year, the Secretary of State and the Secretary of Homeland Security shall each provide to the Committees on the Judiciary of the House of Representatives and of the Senate, the Committee on International Relations of the House of Representatives, the Committee on Foreign Relations of the Senate, and the Committee on Homeland Security of the House of Representatives a report on the aliens to whom such Secretary has applied clause (i). Within one week of applying clause (i) to a group, the Secretary of State or the Secretary of Homeland Security shall provide a report to such Committees. (4) Either or both of the requirements of paragraph (7)(B)(i) of subsection (a) may be waived by the Attorney General and the Secretary of State acting jointly (A) on the basis of unforeseen emergency in individual cases, or (B) on the basis of reciprocity with respect to nationals of foreign contiguous territory or of adjacent islands and residents thereof having a common nationality with such nationals, or (C) in the case of aliens proceeding in immediate and continuous transit through the United States under contracts authorized in section 238(c). (5)(A) The Attorney General may, except as provided in subparagraph (B) or in section 214(f), in his discretion parole into the United States temporarily under such conditions as he may prescribe only on a case-by-case basis for urgent humanitarian reasons or significant public benefit any alien applying for admission to the United States, but such parole of such alien shall not be regarded as an admission of the alien and when the purposes of such parole shall, in the opinion of the Attorney General, have been served the alien shall forthwith return or be returned to the custody from which he was paroled and thereafter his case shall continue to be dealt with in the same manner as that of any other applicant for admission to the United States. (B) The Attorney General may not parole into the United States an alien who is a refugee unless the Attorney General determines that compelling reasons in the public interest with respect to that particular alien require that the alien be paroled into the United States rather than be admitted as a refugee under section 207. (7) The provisions of subsection (a) (other than paragraph (7)) shall be applicable to any alien who shall leave Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, or the Virgin Islands of the United States, and who seeks to enter the continental United States or any other place under the jurisdiction of the United States. Any alien described in this paragraph, who is denied admission to the United States, shall be immediately removed in the manner provided by section 241(c) of this Act. (8) Upon a basis of reciprocity accredited officials of foreign governments, their immediate families, attendants, servants, and personal employees may be admitted in immediate and continuous transit through the United States without regard to the provisions of this section except paragraphs (3)(A), (3)(B), (3)(C), and (7)(B) of subsection (a) of this section. (11) The Attorney General may, in his discretion for humanitarian purposes, to assure family unity, or when it is otherwise in the public interest, waive application of clause (i) of subsection (a)(6)(E) in the case of any alien lawfully admitted for permanent residence who temporarily proceeded abroad voluntarily and not under an order of removal, and who is otherwise admissible to the United States as a returning resident under section 211(b) and in the case of an alien seeking admission or adjustment of status as an immediate relative or immigrant under section 203(a) (other than paragraph (4) thereof), if the alien has encouraged, induced, assisted, abetted, or aided only an individual who at the time of such action was the alien's spouse, parent, son, or daughter (and no other individual) to enter the United States in violation of law. (12) The Attorney General may, in the discretion of the Attorney General for humanitarian purposes or to assure family unity, waive application of clause (i) of subsection (a)(6)(F)-- (A) in the case of an alien lawfully admitted for permanent residence who temporarily proceeded abroad voluntarily and not under an order of deportation or removal and who is otherwise admissible to the United States as a returning resident under section 211(b), and (B) in the case of an alien seeking admission or adjustment of status under section 201(b)(2)(A) or under section 203(a), if no previous civil money penalty was imposed against the alien under section 274C and the offense was committed solely to assist, aid, or support the alien's spouse or child (and not another individual). No court shall have jurisdiction to review a decision of the Attorney General to grant or deny a waiver under this paragraph. (13)(A) The Secretary of Homeland Security shall determine whether a ground for inadmissibility exists with respect to a nonimmigrant described in section 101(a)(15)(T), except that the ground for inadmissibility described in subsection (a)(4) shall not apply with respect to such a nonimmigrant. (B) In addition to any other waiver that may be available under this section, in the case of a nonimmigrant described in section 101(a)(15)(T), if the Secretary of Homeland Security considers it to be in the national interest to do so, the Secretary of Homeland Security, in the Attorney General's discretion, may waive the application of-- (i) subsection (a)(1); and (ii) any other provision of subsection (a) (excluding paragraphs (3), (4), (10)(C), and (10(E)) if the activities rendering the alien inadmissible under the provision were caused by, or were incident to, the victimization described in section 101(a)(15)(T)(i)(I). (14) The Secretary of Homeland Security shall determine whether a ground of inadmissibility exists with respect to a nonimmigrant described in section 101(a)(15)(U). The Secretary of Homeland Security, in the Attorney General's discretion, may waive the application of subsection (a) (other than paragraph (3)(E)) in the case of a nonimmigrant described in section 101(a)(15)(U), if the Secretary of Homeland Security considers it to be in the public or national interest to do so. (e) No person admitted under section 101(a)(15)(J) or acquiring such status after admission (i) whose participation in the program for which he came to the United States was financed in whole or in part, directly or indirectly, by an agency of the Government of the United States or by the government of the country of his nationality or his last residence, (ii) who at the time of admission or acquisition of status under section 101(a)(15)(J) was a national or resident of a country which the Director of the United States Information Agency pursuant to regulations prescribed by him, had designated as clearly requiring the services of persons engaged in the field of specialized knowledge or skill in which the alien was engaged, or (iii) who came to the United States or acquired such status in order to receive graduate medical education or training, shall be eligible to apply for an immigrant visa, or for permanent residence, or for a nonimmigrant visa under section 101(a)(15)(H) or section 101(a)(15)(L) until it is established that such person has resided and been physically present in the country of his nationality or his last residence for an aggregate of a least two years following departure from the United States: Provided, That upon the favorable recommendation of the Director, pursuant to the request of an interested United States Government agency (or, in the case of an alien described in clause (iii), pursuant to the request of a State Department of Public Health, or its equivalent), or of the Commissioner of Immigration and Naturalization after he has determined that departure from the United States would impose exceptional hardship upon the alien's spouse or child (if such spouse or child is a citizen of the United States or a lawfully resident alien), or that the alien cannot return to the country of his nationality or last residence because he would be subject to persecution on account of race, religion, or political opinion, the Attorney General may waive the requirement of such two-year foreign residence abroad in the case of any alien whose admission to the United States is found by the Attorney General to be in the public interest except that in the case of a waiver requested by a State Department of Public Health, or its equivalent, or in the case of a waiver requested by an interested United States Government agency on behalf of an alien described in clause (iii), the waiver shall be subject to the requirements of section 214(l): And provided further, That, except in the case of an alien described in clause (iii), the Attorney General may, upon the favorable recommendation of the Director, waive such two-year foreign residence requirement in any case in which the foreign country of the alien's nationality or last residence has furnished the Director a statement in writing that it has no objection to such waiver in the case of such alien. (f) Whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation, and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate. Whenever the Attorney General finds that a commercial airline has failed to comply with regulations of the Attorney General relating to requirements of airlines for the detection of fraudulent documents used by passengers traveling to the United States (including the training of personnel in such detection), the Attorney General may suspend the entry of some or all aliens transported to the United States by such airline. (g) The Attorney General may waive the application of-- (1) subsection (a)(1)(A)(i) in the case of any alien who-- (A) is the spouse or the unmarried son or daughter, or the minor unmarried lawfully adopted child, of a United States citizen, or of an alien lawfully admitted for permanent residence, or of an alien who has been issued an immigrant visa, (B) has a son or daughter who is a United States citizen, or an alien lawfully admitted for permanent residence, or an alien who has been issued an immigrant visa; or (C) is a VAWA self-petitioner, in accordance with such terms, conditions, and controls, if any, including the giving of bond, as the Attorney General, in the discretion of the Attorney General after consultation with the Secretary of Health and Human Services, may by regulation prescribe; (2) subsection (a)(1)(A)(ii) in the case of any alien-- (A) who receives vaccination against the vaccine-preventable disease or diseases for which the alien has failed to present documentation of previous vaccination, (B) for whom a civil surgeon, medical officer, or panel physician (as those terms are defined by section 34.2 of title 42 of the Code of Federal Regulations) certifies, according to such regulations as the Secretary of Health and Human Services may prescribe, that such vaccination would not be medically appropriate, or (C) under such circumstances as the Attorney General provides by regulation, with respect to whom the requirement of such a vaccination would be contrary to the alien's religious beliefs or moral convictions; or (3) subsection (a)(1)(A)(iii) in the case of any alien, in accordance with such terms, conditions, and controls, if any, including the giving of bond, as the Attorney General, in the discretion of the Attorney General after consultation with the Secretary of Health and Human Services, may by regulation prescribe. (h) The Attorney General may, in his discretion, waive the application of subparagraphs (A)(i)(I), (B), (D), and (E) of subsection (a)(2) and subparagraph (A)(i)(II) of such subsection insofar as it relates to a single offense of simple possession of 30 grams or less of marijuana if-- (1)(A) in the case of any immigrant it is established to the satisfaction of the Attorney General that-- (i) the alien is inadmissible only under subparagraph (D)(i) or (D)(ii) of such subsection or the activities for which the alien is inadmissible occurred more than 15 years before the date of the alien's application for a visa, admission, or adjustment of status, (ii) the admission to the United States of such alien would not be contrary to the national welfare, safety, or security of the United States, and (iii) the alien has been rehabilitated; or (B) in the case of an immigrant who is the spouse, parent, son, or daughter of a citizen of the United States or an alien lawfully admitted for permanent residence if it is established to the satisfaction of the Attorney General that the alien's denial of admission would result in extreme hardship to the United States citizen or lawfully resident spouse, parent, son, or daughter of such alien; or (C) the alien is a VAWA self-petitioner; and (2) the Attorney General, in his discretion, and pursuant to such terms, conditions and procedures as he may by regulations prescribe, has consented to the alien's applying or reapplying for a visa, for admission to the United States, or adjustment of status. No waiver shall be provided under this subsection in the case of an alien who has been convicted of (or who has admitted committing acts that constitute) murder or criminal acts involving torture, or an attempt or conspiracy to commit murder or a criminal act involving torture. No waiver shall be granted under this subsection in the case of an alien who has previously been admitted to the United States as an alien lawfully admitted for permanent residence if either since the date of such admission the alien has been convicted of an aggravated felony or the alien has not lawfully resided continuously in the United States for a period of not less than 7 years immediately preceding the date of initiation of proceedings to remove the alien from the United States. No court shall have jurisdiction to review a decision of the Attorney General to grant or deny a waiver under this subsection. (i)(1) The Attorney General may, in the discretion of the Attorney General, waive the application of clause (i) of subsection (a)(6)(C) in the case of an immigrant who is the spouse, son, or daughter of a United States citizen or of an alien lawfully admitted for permanent residence if it is established to the satisfaction of the Attorney General that the refusal of admission to the United States of such immigrant alien would result in extreme hardship to the citizen or lawfully resident spouse or parent of such an alien or, in the case of a VAWA self-petitioner, the alien demonstrates extreme hardship to the alien or the alien's United States citizen, lawful permanent resident, or qualified alien parent or child. (2) No court shall have jurisdiction to review a decision or action of the Attorney General regarding a waiver under paragraph (1). (j)(1) The additional requirements referred to in section 101(a)(15)(J) for an alien who is coming to the United States under a program under which he will receive graduate medical education or training are as follows: (A) A school of medicine or of one of the other health professions, which is accredited by a body or bodies approved for the purpose by the Secretary of Education, has agreed in writing to provide the graduate medical education or training under the program for which the alien is coming to the United States or to assume responsibility for arranging for the provision thereof by an appropriate public or nonprofit private institution or agency, except that, in the case of such an agreement by a school of medicine, any one or more of its affiliated hospitals which are to participate in the provision of the graduate medical education or training must join in the agreement. (B) Before making such agreement, the accredited school has been satisfied that the alien (i) is a graduate of a school of medicine which is accredited by a body or bodies approved for the purpose by the Secretary of Education (regardless of whether such school of medicine is in the United States); or (ii)(I) has passed parts I and II of the National Board of Medical Examiners Examination (or an equivalent examination as determined by the Secretary of Health and Human Services), (II) has competency in oral and written English, (III) will be able to adapt to the educational and cultural environment in which he will be receiving his education or training, and (IV) has adequate prior education and training to participate satisfactorily in the program for which he is coming to the United States. For the purposes of this subparagraph, an alien who is a graduate of a medical school shall be considered to have passed parts I and II of the National Board of Medical Examiners examination if the alien was fully and permanently licensed to practice medicine in a State on January 9, 1978, and was practicing medicine in a State on that date. (C) The alien has made a commitment to return to the country of his nationality or last residence upon completion of the education or training for which he is coming to the United States, and the government of the country of his nationality or last residence has provided a written assurance, satisfactory to the Secretary of Health and Human Services, that there is a need in that country for persons with the skills the alien will acquire in such education or training. (D) The duration of the alien's participation in the program of graduate medical education or training for which the alien is coming to the United States is limited to the time typically required to complete such program, as determined by the Director of the United States Information Agency at the time of the alien's admission into the United States, based on criteria which are established in coordination with the Secretary of Health and Human Services and which take into consideration the published requirements of the medical specialty board which administers such education or training program; except that-- (i) such duration is further limited to seven years unless the alien has demonstrated to the satisfaction of the Director that the country to which the alien will return at the end of such specialty education or training has an exceptional need for an individual trained in such specialty, and (ii) the alien may, once and not later than two years after the date the alien is admitted to the United States as an exchange visitor or acquires exchange visitor status, change the alien's designated program of graduate medical education or training if the Director approves the change and if a commitment and written assurance with respect to the alien's new program have been provided in accordance with subparagraph (C). (E) The alien furnishes the Attorney General each year with an affidavit (in such form as the Attorney General shall prescribe) that attests that the alien (i) is in good standing in the program of graduate medical education or training in which the alien is participating, and (ii) will return to the country of his nationality or last residence upon completion of the education or training for which he came to the United States. (2) An alien who is a graduate of a medical school and who is coming to the United States to perform services as a member of the medical profession may not be admitted as a nonimmigrant under section 101(a)(15)(H)(i)(b) unless-- (A) the alien is coming pursuant to an invitation from a public or nonprofit private educational or research institution or agency in the United States to teach or conduct research, or both, at or for such institution or agency, or (B)(i) the alien has passed the Federation licensing examination (administered by the Federation of State Medical Boards of the United States) or an equivalent examination as determined by the Secretary of Health and Human Services, and (ii)(I) has competency in oral and written English or (II) is a graduate of a school of medicine which is accredited by a body or bodies approved for the purpose by the Secretary of Education (regardless of whether such school of medicine is in the United States). (3) The Director of the United States Information Agency annually shall transmit to the Congress a report on aliens who have submitted affidavits described in paragraph (1)(E), and shall include in such report the name and address of each such alien, the medical education or training program in which such alien is participating, and the status of such alien in that program. (k) Any alien, inadmissible from the United States under paragraph (5)(A) or (7)(A)(i) of subsection (a), who is in possession of an immigrant visa may, if otherwise admissible, be admitted in the discretion of the Attorney General if the Attorney General is satisfied that inadmissibility was not known to, and could not have been ascertained by the exercise of reasonable diligence by, the immigrant before the time of departure of the vessel or aircraft from the last port outside the United States and outside foreign contiguous territory or, in the case of an immigrant coming from foreign contiguous territory, before the time of the immigrant's application for admission. (l) Guam and Northern Mariana Islands Visa Waiver Program.-- (1) In general.--The requirement of subsection (a)(7)(B)(i) may be waived by the Secretary of Homeland Security, in the case of an alien applying for admission as a nonimmigrant visitor for business or pleasure and solely for entry into and stay in Guam or the Commonwealth of the Northern Mariana Islands for a period not to exceed 45 days, if the Secretary of Homeland Security, after consultation with the Secretary of the Interior, the Secretary of State, the Governor of Guam and the Governor of the Commonwealth of the Northern Mariana Islands, determines that-- (A) an adequate arrival and departure control system has been developed in Guam and the Commonwealth of the Northern Mariana Islands; and (B) such a waiver does not represent a threat to the welfare, safety, or security of the United States or its territories and commonwealths. (2) Alien waiver of rights.--An alien may not be provided a waiver under this subsection unless the alien has waived any right-- (A) to review or appeal under this Act an immigration officer's determination as to the admissibility of the alien at the port of entry into Guam or the Commonwealth of the Northern Mariana Islands; or (B) to contest, other than on the basis of an application for withholding of removal under section 241(b)(3) of this Act or under the Convention Against Torture, or an application for asylum if permitted under section 208, any action for removal of the alien. (3) Regulations.--All necessary regulations to implement this subsection shall be promulgated by the Secretary of Homeland Security, in consultation with the Secretary of the Interior and the Secretary of State, on or before the 180th day after the date of enactment of the Consolidated Natural Resources Act of 2008. The promulgation of such regulations shall be considered a foreign affairs function for purposes of section 553(a) of title 5, United States Code. At a minimum, such regulations should include, but not necessarily be limited to-- (A) a listing of all countries whose nationals may obtain the waiver also provided by this subsection, except that such regulations shall provide for a listing of any country from which the Commonwealth has received a significant economic benefit from the number of visitors for pleasure within the one-year period preceding the date of enactment of the Consolidated Natural Resources Act of 2008, unless the Secretary of Homeland Security determines that such country's inclusion on such list would represent a threat to the welfare, safety, or security of the United States or its territories; and (B) any bonding requirements for nationals of some or all of those countries who may present an increased risk of overstays or other potential problems, if different from such requirements otherwise provided by law for nonimmigrant visitors. (4) Factors.--In determining whether to grant or continue providing the waiver under this subsection to nationals of any country, the Secretary of Homeland Security, in consultation with the Secretary of the Interior and the Secretary of State, shall consider all factors that the Secretary deems relevant, including electronic travel authorizations, procedures for reporting lost and stolen passports, repatriation of aliens, rates of refusal for nonimmigrant visitor visas, overstays, exit systems, and information exchange. (5) Suspension.--The Secretary of Homeland Security shall monitor the admission of nonimmigrant visitors to Guam and the Commonwealth of the Northern Mariana Islands under this subsection. If the Secretary determines that such admissions have resulted in an unacceptable number of visitors from a country remaining unlawfully in Guam or the Commonwealth of the Northern Mariana Islands, unlawfully obtaining entry to other parts of the United States, or seeking withholding of removal or asylum, or that visitors from a country pose a risk to law enforcement or security interests of Guam or the Commonwealth of the Northern Mariana Islands or of the United States (including the interest in the enforcement of the immigration laws of the United States), the Secretary shall suspend the admission of nationals of such country under this subsection. The Secretary of Homeland Security may in the Secretary's discretion suspend the Guam and Northern Mariana Islands visa waiver program at any time, on a country-by-country basis, for other good cause. (6) Addition of countries.--The Governor of Guam and the Governor of the Commonwealth of the Northern Mariana Islands may request the Secretary of the Interior and the Secretary of Homeland Security to add a particular country to the list of countries whose nationals may obtain the waiver provided by this subsection, and the Secretary of Homeland Security may grant such request after consultation with the Secretary of the Interior and the Secretary of State, and may promulgate regulations with respect to the inclusion of that country and any special requirements the Secretary of Homeland Security, in the Secretary's sole discretion, may impose prior to allowing nationals of that country to obtain the waiver provided by this subsection. (m)(1) The qualifications referred to in section 101(a)(15)(H)(i)(c), with respect to an alien who is coming to the United States to perform nursing services for a facility, are that the alien-- (A) has obtained a full and unrestricted license to practice professional nursing in the country where the alien obtained nursing education or has received nursing education in the United States; (B) has passed an appropriate examination (recognized in regulations promulgated in consultation with the Secretary of Health and Human Services) or has a full and unrestricted license under State law to practice professional nursing in the State of intended employment; and (C) is fully qualified and eligible under the laws (including such temporary or interim licensing requirements which authorize the nurse to be employed) governing the place of intended employment to engage in the practice of professional nursing as a registered nurse immediately upon admission to the United States and is authorized under such laws to be employed by the facility. (2)(A) The attestation referred to in section 101(a)(15)(H)(i)(c), with respect to a facility for which an alien will perform services, is an attestation as to the following: (i) The facility meets all the requirements of paragraph (6). (ii) The employment of the alien will not adversely affect the wages and working conditions of registered nurses similarly employed. (iii) The alien employed by the facility will be paid the wage rate for registered nurses similarly employed by the facility. (iv) The facility has taken and is taking timely and significant steps designed to recruit and retain sufficient registered nurses who are United States citizens or immigrants who are authorized to perform nursing services, in order to remove as quickly as reasonably possible the dependence of the facility on nonimmigrant registered nurses. (v) There is not a strike or lockout in the course of a labor dispute, the facility did not lay off and will not lay off a registered nurse employed by the facility within the period beginning 90 days before and ending 90 days after the date of filing of any visa petition, and the employment of such an alien is not intended or designed to influence an election for a bargaining representative for registered nurses of the facility. (vi) At the time of the filing of the petition for registered nurses under section 101(a)(15)(H)(i)(c), notice of the filing has been provided by the facility to the bargaining representative of the registered nurses at the facility or, where there is no such bargaining representative, notice of the filing has been provided to the registered nurses employed at the facility through posting in conspicuous locations. (vii) The facility will not, at any time, employ a number of aliens issued visas or otherwise provided nonimmigrant status under section 101(a)(15)(H)(i)(c) that exceeds 33 percent of the total number of registered nurses employed by the facility. (viii) The facility will not, with respect to any alien issued a visa or otherwise provided nonimmigrant status under section 101(a)(15)(H)(i)(c)-- (I) authorize the alien to perform nursing services at any worksite other than a worksite controlled by the facility; or (II) transfer the place of employment of the alien from one worksite to another. Nothing in clause (iv) shall be construed as requiring a facility to have taken significant steps described in such clause before the date of the enactment of the Nursing Relief for Disadvantaged Areas Act of 1999. A copy of the attestation shall be provided, within 30 days of the date of filing, to registered nurses employed at the facility on the date of filing. (B) For purposes of subparagraph (A)(iv), each of the following shall be considered a significant step reasonably designed to recruit and retain registered nurses: (i) Operating a training program for registered nurses at the facility or financing (or providing participation in) a training program for registered nurses elsewhere. (ii) Providing career development programs and other methods of facilitating health care workers to become registered nurses. (iii) Paying registered nurses wages at a rate higher than currently being paid to registered nurses similarly employed in the geographic area. (iv) Providing reasonable opportunities for meaningful salary advancement by registered nurses. The steps described in this subparagraph shall not be considered to be an exclusive list of the significant steps that may be taken to meet the conditions of subparagraph (A)(iv). Nothing in this subparagraph shall require a facility to take more than one step if the facility can demonstrate that taking a second step is not reasonable. (C) Subject to subparagraph (E), an attestation under subparagraph (A)-- (i) shall expire on the date that is the later of-- (I) the end of the one-year period beginning on the date of its filing with the Secretary of Labor; or (II) the end of the period of admission under section 101(a)(15)(H)(i)(c) of the last alien with respect to whose admission it was applied (in accordance with clause (ii)); and (ii) shall apply to petitions filed during the one- year period beginning on the date of its filing with the Secretary of Labor if the facility states in each such petition that it continues to comply with the conditions in the attestation. (D) A facility may meet the requirements under this paragraph with respect to more than one registered nurse in a single petition. (E)(i) The Secretary of Labor shall compile and make available for public examination in a timely manner in Washington, D.C., a list identifying facilities which have filed petitions for nonimmigrants under section 101(a)(15)(H)(i)(c) and, for each such facility, a copy of the facility's attestation under subparagraph (A) (and accompanying documentation) and each such petition filed by the facility. (ii) The Secretary of Labor shall establish a process, including reasonable time limits, for the receipt, investigation, and disposition of complaints respecting a facility's failure to meet conditions attested to or a facility's misrepresentation of a material fact in an attestation. Complaints may be filed by any aggrieved person or organization (including bargaining representatives, associations deemed appropriate by the Secretary, and other aggrieved parties as determined under regulations of the Secretary). The Secretary shall conduct an investigation under this clause if there is reasonable cause to believe that a facility fails to meet conditions attested to. Subject to the time limits established under this clause, this subparagraph shall apply regardless of whether an attestation is expired or unexpired at the time a complaint is filed. (iii) Under such process, the Secretary shall provide, within 180 days after the date such a complaint is filed, for a determination as to whether or not a basis exists to make a finding described in clause (iv). If the Secretary determines that such a basis exists, the Secretary shall provide for notice of such determination to the interested parties and an opportunity for a hearing on the complaint within 60 days of the date of the determination. (iv) If the Secretary of Labor finds, after notice and opportunity for a hearing, that a facility (for which an attestation is made) has failed to meet a condition attested to or that there was a misrepresentation of material fact in the attestation, the Secretary shall notify the Attorney General of such finding and may, in addition, impose such other administrative remedies (including civil monetary penalties in an amount not to exceed $1,000 per nurse per violation, with the total penalty not to exceed $10,000 per violation) as the Secretary determines to be appropriate. Upon receipt of such notice, the Attorney General shall not approve petitions filed with respect to a facility during a period of at least one year for nurses to be employed by the facility. (v) In addition to the sanctions provided for under clause (iv), if the Secretary of Labor finds, after notice and an opportunity for a hearing, that a facility has violated the condition attested to under subparagraph (A)(iii) (relating to payment of registered nurses at the prevailing wage rate), the Secretary shall order the facility to provide for payment of such amounts of back pay as may be required to comply with such condition. (F)(i) The Secretary of Labor shall impose on a facility filing an attestation under subparagraph (A) a filing fee, in an amount prescribed by the Secretary based on the costs of carrying out the Secretary's duties under this subsection, but not exceeding $250. (ii) Fees collected under this subparagraph shall be deposited in a fund established for this purpose in the Treasury of the United States. (iii) The collected fees in the fund shall be available to the Secretary of Labor, to the extent and in such amounts as may be provided in appropriations Acts, to cover the costs described in clause (i), in addition to any other funds that are available to the Secretary to cover such costs. (3) The period of admission of an alien under section 101(a)(15)(H)(i)(c) shall be 3 years. (4) The total number of nonimmigrant visas issued pursuant to petitions granted under section 101(a)(15)(H)(i)(c) in each fiscal year shall not exceed 500. The number of such visas issued for employment in each State in each fiscal year shall not exceed the following: (A) For States with populations of less than 9,000,000, based upon the 1990 decennial census of population, 25 visas. (B) For States with populations of 9,000,000 or more, based upon the 1990 decennial census of population, 50 visas. (C) If the total number of visas available under this paragraph for a fiscal year quarter exceeds the number of qualified nonimmigrants who may be issued such visas during those quarters, the visas made available under this paragraph shall be issued without regard to the numerical limitation under subparagraph (A) or (B) of this paragraph during the last fiscal year quarter. (5) A facility that has filed a petition under section 101(a)(15)(H)(i)(c) to employ a nonimmigrant to perform nursing services for the facility-- (A) shall provide the nonimmigrant a wage rate and working conditions commensurate with those of nurses similarly employed by the facility; (B) shall require the nonimmigrant to work hours commensurate with those of nurses similarly employed by the facility; and (C) shall not interfere with the right of the nonimmigrant to join or organize a union. (6) For purposes of this subsection and section 101(a)(15)(H)(i)(c), the term ``facility'' means a subsection (d) hospital (as defined in section 1886(d)(1)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B))) that meets the following requirements: (A) As of March 31, 1997, the hospital was located in a health professional shortage area (as defined in section 332 of the Public Health Service Act (42 U.S.C. 254e)). (B) Based on its settled cost report filed under title XVIII of the Social Security Act for its cost reporting period beginning during fiscal year 1994-- (i) the hospital has not less than 190 licensed acute care beds; (ii) the number of the hospital's inpatient days for such period which were made up of patients who (for such days) were entitled to benefits under part A of such title is not less than 35 percent of the total number of such hospital's acute care inpatient days for such period; and (iii) the number of the hospital's inpatient days for such period which were made up of patients who (for such days) were eligible for medical assistance under a State plan approved under title XIX of the Social Security Act, is not less than 28 percent of the total number of such hospital's acute care inpatient days for such period. (7) For purposes of paragraph (2)(A)(v), the term ``lay off'', with respect to a worker-- (A) means to cause the worker's loss of employment, other than through a discharge for inadequate performance, violation of workplace rules, cause, voluntary departure, voluntary retirement, or the expiration of a grant or contract; but (B) does not include any situation in which the worker is offered, as an alternative to such loss of employment, a similar employment opportunity with the same employer at equivalent or higher compensation and benefits than the position from which the employee was discharged, regardless of whether or not the employee accepts the offer. Nothing in this paragraph is intended to limit an employee's or an employer's rights under a collective bargaining agreement or other employment contract. (n)(1) No alien may be admitted or provided status as an H-1B nonimmigrant in an occupational classification unless the employer has filed with the Secretary of Labor an application stating the following: (A) The employer-- (i) is offering and will offer during the period of authorized employment to aliens admitted or provided status as an H-1B nonimmigrant wages that are at least-- (I) the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question, or (II) the prevailing wage level for the occupational classification in the area of employment, whichever is greater, based on the best information available as of the time of filing the application, and (ii) will provide working conditions for such a nonimmigrant that will not adversely affect the working conditions of workers similarly employed. (B) There is not a strike or lockout in the course of a labor dispute in the occupational classification at the place of employment. (C) The employer, at the time of filing the application-- (i) has provided notice of the filing under this paragraph to the bargaining representative (if any) of the employer's employees in the occupational classification and area for which aliens are sought, or (ii) if there is no such bargaining representative, has provided notice of filing in the occupational classification through such methods as physical posting in conspicuous locations at the place of employment or electronic notification to employees in the occupational classification for which H-1B nonimmigrants are sought. (D) The application shall contain a specification of the number of workers sought, the occupational classification in which the workers will be employed, and wage rate and conditions under which they will be employed. (E)(i) In the case of an application described in clause (ii), the employer did not displace and will not displace a United States worker (as defined in paragraph (4)) employed by the employer within the period beginning 90 days before and ending 90 days after the date of filing of any visa petition supported by the application. (ii) An application described in this clause is an application filed on or after the date final regulations are first promulgated to carry out this subparagraph, and before by an H-1B-dependent employer (as defined in paragraph (3)) or by an employer that has been found, on or after the date of the enactment of the American Competitiveness and Workforce Improvement Act of 1998, under paragraph (2)(C) or (5) to have committed a willful failure or misrepresentation during the 5-year period preceding the filing of the application. An application is not described in this clause if the only H-1B nonimmigrants sought in the application are exempt H-1B nonimmigrants. (F) In the case of an application described in subparagraph (E)(ii), the employer will not place the nonimmigrant with another employer (regardless of whether or not such other employer is an H-1B-dependent employer) where-- (i) the nonimmigrant performs duties in whole or in part at one or more worksites owned, operated, or controlled by such other employer; and (ii) there are indicia of an employment relationship between the nonimmigrant and such other employer; unless the employer has inquired of the other employer as to whether, and has no knowledge that, within the period beginning 90 days before and ending 90 days after the date of the placement of the nonimmigrant with the other employer, the other employer has displaced or intends to displace a United States worker employed by the other employer. (G)(i) In the case of an application described in subparagraph (E)(ii), subject to clause (ii), the employer, prior to filing the application-- (I) has taken good faith steps to recruit, in the United States using procedures that meet industry-wide standards and offering compensation that is at least as great as that required to be offered to H-1B nonimmigrants under subparagraph (A), United States workers for the job for which the nonimmigrant or nonimmigrants is or are sought; and (II) has offered the job to any United States worker who applies and is equally or better qualified for the job for which the nonimmigrant or nonimmigrants is or are sought. (ii) The conditions described in clause (i) shall not apply to an application filed with respect to the employment of an H-1B nonimmigrant who is described in subparagraph (A), (B), or (C) of section 203(b)(1). The employer shall make available for public examination, within one working day after the date on which an application under this paragraph is filed, at the employer's principal place of business or worksite, a copy of each such application (and such accompanying documents as are necessary). The Secretary shall compile, on a current basis, a list (by employer and by occupational classification) of the applications filed under this subsection. Such list shall include the wage rate, number of aliens sought, period of intended employment, and date of need. The Secretary shall make such list available for public examination in Washington, D.C. The Secretary of Labor shall review such an application only for completeness and obvious inaccuracies. Unless the Secretary finds that the application is incomplete or obviously inaccurate, the Secretary shall provide the certification described in section 101(a)(15)(H)(i)(b) within 7 days of the date of the filing of the application. The application form shall include a clear statement explaining the liability under subparagraph (F) of a placing employer if the other employer described in such subparagraph displaces a United States worker as described in such subparagraph. Nothing in subparagraph (G) shall be construed to prohibit an employer from using legitimate selection criteria relevant to the job that are normal or customary to the type of job involved, so long as such criteria are not applied in a discriminatory manner. (2)(A) Subject to paragraph (5)(A), the Secretary shall establish a process for the receipt, investigation, and disposition of complaints respecting a petitioner's failure to meet a condition specified in an application submitted under paragraph (1) or a petitioner's misrepresentation of material facts in such an application. Complaints may be filed by any aggrieved person or organization (including bargaining representatives). No investigation or hearing shall be conducted on a complaint concerning such a failure or misrepresentation unless the complaint was filed not later than 12 months after the date of the failure or misrepresentation, respectively. The Secretary shall conduct an investigation under this paragraph if there is reasonable cause to believe that such a failure or misrepresentation has occurred. (B) Under such process, the Secretary shall provide, within 30 days after the date such a complaint is filed, for a determination as to whether or not a reasonable basis exists to make a finding described in subparagraph (C). If the Secretary determines that such a reasonable basis exists, the Secretary shall provide for notice of such determination to the interested parties and an opportunity for a hearing on the complaint, in accordance with section 556 of title 5, United States Code, within 60 days after the date of the determination. If such a hearing is requested, the Secretary shall make a finding concerning the matter by not later than 60 days after the date of the hearing. In the case of similar complaints respecting the same applicant, the Secretary may consolidate the hearings under this subparagraph on such complaints. (C)(i) If the Secretary finds, after notice and opportunity for a hearing, a failure to meet a condition of paragraph (1)(B), (1)(E), or (1)(F), a substantial failure to meet a condition of paragraph (1)(C), (1)(D), or (1)(G)(i)(I), or a misrepresentation of material fact in an application-- (I) the Secretary shall notify the Attorney General of such finding and may, in addition, impose such other administrative remedies (including civil monetary penalties in an amount not to exceed $1,000 per violation) as the Secretary determines to be appropriate; and (II) the Attorney General shall not approve petitions filed with respect to that employer under section 204 or 214(c) during a period of at least 1 year for aliens to be employed by the employer. (ii) If the Secretary finds, after notice and opportunity for a hearing, a willful failure to meet a condition of paragraph (1), a willful misrepresentation of material fact in an application, or a violation of clause (iv)-- (I) the Secretary shall notify the Attorney General of such finding and may, in addition, impose such other administrative remedies (including civil monetary penalties in an amount not to exceed $5,000 per violation) as the Secretary determines to be appropriate; and (II) the Attorney General shall not approve petitions filed with respect to that employer under section 204 or 214(c) during a period of at least 2 years for aliens to be employed by the employer. (iii) If the Secretary finds, after notice and opportunity for a hearing, a willful failure to meet a condition of paragraph (1) or a willful misrepresentation of material fact in an application, in the course of which failure or misrepresentation the employer displaced a United States worker employed by the employer within the period beginning 90 days before and ending 90 days after the date of filing of any visa petition supported by the application-- (I) the Secretary shall notify the Attorney General of such finding and may, in addition, impose such other administrative remedies (including civil monetary penalties in an amount not to exceed $35,000 per violation) as the Secretary determines to be appropriate; and (II) the Attorney General shall not approve petitions filed with respect to that employer under section 204 or 214(c) during a period of at least 3 years for aliens to be employed by the employer. (iv) It is a violation of this clause for an employer who has filed an application under this subsection to intimidate, threaten, restrain, coerce, blacklist, discharge, or in any other manner discriminate against an employee (which term, for purposes of this clause, includes a former employee and an applicant for employment) because the employee has disclosed information to the employer, or to any other person, that the employee reasonably believes evidences a violation of this subsection, or any rule or regulation pertaining to this subsection, or because the employee cooperates or seeks to cooperate in an investigation or other proceeding concerning the employer's compliance with the requirements of this subsection or any rule or regulation pertaining to this subsection. (v) The Secretary of Labor and the Attorney General shall devise a process under which an H-1B nonimmigrant who files a complaint regarding a violation of clause (iv) and is otherwise eligible to remain and work in the United States may be allowed to seek other appropriate employment in the United States for a period not to exceed the maximum period of stay authorized for such nonimmigrant classification. (vi)(I) It is a violation of this clause for an employer who has filed an application under this subsection to require an H- 1B nonimmigrant to pay a penalty for ceasing employment with the employer prior to a date agreed to by the nonimmigrant and the employer. The Secretary shall determine whether a required payment is a penalty (and not liquidated damages) pursuant to relevant State law. (II) It is a violation of this clause for an employer who has filed an application under this subsection to require an alien who is the subject of a petition filed under section 214(c)(1), for which a fee is imposed under section 214(c)(9), to reimburse, or otherwise compensate, the employer for part or all of the cost of such fee. It is a violation of this clause for such an employer otherwise to accept such reimbursement or compensation from such an alien. (III) If the Secretary finds, after notice and opportunity for a hearing, that an employer has committed a violation of this clause, the Secretary may impose a civil monetary penalty of $1,000 for each such violation and issue an administrative order requiring the return to the nonimmigrant of any amount paid in violation of this clause, or, if the nonimmigrant cannot be located, requiring payment of any such amount to the general fund of the Treasury. (vii)(I) It is a failure to meet a condition of paragraph (1)(A) for an employer, who has filed an application under this subsection and who places an H-1B nonimmigrant designated as a full-time employee on the petition filed under section 214(c)(1) by the employer with respect to the nonimmigrant, after the nonimmigrant has entered into employment with the employer, in nonproductive status due to a decision by the employer (based on factors such as lack of work), or due to the nonimmigrant's lack of a permit or license, to fail to pay the nonimmigrant full-time wages in accordance with paragraph (1)(A) for all such nonproductive time. (II) It is a failure to meet a condition of paragraph (1)(A) for an employer, who has filed an application under this subsection and who places an H-1B nonimmigrant designated as a part-time employee on the petition filed under section 214(c)(1) by the employer with respect to the nonimmigrant, after the nonimmigrant has entered into employment with the employer, in nonproductive status under circumstances described in subclause (I), to fail to pay such a nonimmigrant for such hours as are designated on such petition consistent with the rate of pay identified on such petition. (III) In the case of an H-1B nonimmigrant who has not yet entered into employment with an employer who has had approved an application under this subsection, and a petition under section 214(c)(1), with respect to the nonimmigrant, the provisions of subclauses (I) and (II) shall apply to the employer beginning 30 days after the date the nonimmigrant first is admitted into the United States pursuant to the petition, or 60 days after the date the nonimmigrant becomes eligible to work for the employer (in the case of a nonimmigrant who is present in the United States on the date of the approval of the petition). (IV) This clause does not apply to a failure to pay wages to an H-1B nonimmigrant for nonproductive time due to non-work- related factors, such as the voluntary request of the nonimmigrant for an absence or circumstances rendering the nonimmigrant unable to work. (V) This clause shall not be construed as prohibiting an employer that is a school or other educational institution from applying to an H-1B nonimmigrant an established salary practice of the employer, under which the employer pays to H-1B nonimmigrants and United States workers in the same occupational classification an annual salary in disbursements over fewer than 12 months, if-- (aa) the nonimmigrant agrees to the compressed annual salary payments prior to the commencement of the employment; and (bb) the application of the salary practice to the nonimmigrant does not otherwise cause the nonimmigrant to violate any condition of the nonimmigrant's authorization under this Act to remain in the United States. (VI) This clause shall not be construed as superseding clause (viii). (viii) It is a failure to meet a condition of paragraph (1)(A) for an employer who has filed an application under this subsection to fail to offer to an H-1B nonimmigrant, during the nonimmigrant's period of authorized employment, benefits and eligibility for benefits (including the opportunity to participate in health, life, disability, and other insurance plans; the opportunity to participate in retirement and savings plans; and cash bonuses and noncash compensation, such as stock options (whether or not based on performance)) on the same basis, and in accordance with the same criteria, as the employer offers to United States workers. (D) If the Secretary finds, after notice and opportunity for a hearing, that an employer has not paid wages at the wage level specified under the application and required under paragraph (1), the Secretary shall order the employer to provide for payment of such amounts of back pay as may be required to comply with the requirements of paragraph (1), whether or not a penalty under subparagraph (C) has been imposed. (E) If an H-1B-dependent employer places a nonexempt H-1B nonimmigrant with another employer as provided under paragraph (1)(F) and the other employer has displaced or displaces a United States worker employed by such other employer during the period described in such paragraph, such displacement shall be considered for purposes of this paragraph a failure, by the placing employer, to meet a condition specified in an application submitted under paragraph (1); except that the Attorney General may impose a sanction described in subclause (II) of subparagraph (C)(i), (C)(ii), or (C)(iii) only if the Secretary of Labor found that such placing employer-- (i) knew or had reason to know of such displacement at the time of the placement of the nonimmigrant with the other employer; or (ii) has been subject to a sanction under this subparagraph based upon a previous placement of an H-1B nonimmigrant with the same other employer. (F) The Secretary may, on a case-by-case basis, subject an employer to random investigations for a period of up to 5 years, beginning on the date (on or after the date of the enactment of the American Competitiveness and Workforce Improvement Act of 1998) on which the employer is found by the Secretary to have committed a willful failure to meet a condition of paragraph (1) (or has been found under paragraph (5) to have committed a willful failure to meet the condition of paragraph (1)(G)(i)(II)) or to have made a willful misrepresentation of material fact in an application. The preceding sentence shall apply to an employer regardless of whether or not the employer is an H-1B-dependent employer. The authority of the Secretary under this subparagraph shall not be construed to be subject to, or limited by, the requirements of subparagraph (A). (G)(i) The Secretary of Labor may initiate an investigation of any employer that employs nonimmigrants described in section 101(a)(15)(H)(i)(b) if the Secretary of Labor has reasonable cause to believe that the employer is not in compliance with this subsection. In the case of an investigation under this clause, the Secretary of Labor (or the acting Secretary in the case of the absence of disability of the Secretary of Labor) shall personally certify that reasonable cause exists and shall approve commencement of the investigation. The investigation may be initiated for reasons other than completeness and obvious inaccuracies by the employer in complying with this subsection. (ii) If the Secretary of Labor receives specific credible information from a source who is likely to have knowledge of an employer's practices or employment conditions, or an employer's compliance with the employer's labor condition application under paragraph (1), and whose identity is known to the Secretary of Labor, and such information provides reasonable cause to believe that the employer has committed a willful failure to meet a condition of paragraph (1)(A), (1)(B), (1)(C), (1)(E), (1)(F), or (1)(G)(i)(I), has engaged in a pattern or practice of failures to meet such a condition, or has committed a substantial failure to meet such a condition that affects multiple employees, the Secretary of Labor may conduct an investigation into the alleged failure or failures. The Secretary of Labor may withhold the identity of the source from the employer, and the source's identity shall not be subject to disclosure under section 552 of title 5, United States Code. (iii) The Secretary of Labor shall establish a procedure for any person desiring to provide to the Secretary of Labor information described in clause (ii) that may be used, in whole or in part, as the basis for the commencement of an investigation described in such clause, to provide the information in writing on a form developed and provided by the Secretary of Labor and completed by or on behalf of the person. The person may not be an officer or employee of the Department of Labor, unless the information satisfies the requirement of clause (iv)(II) (although an officer or employee of the Department of Labor may complete the form on behalf of the person). (iv) Any investigation initiated or approved by the Secretary of Labor under clause (ii) shall be based on information that satisfies the requirements of such clause and that-- (I) originates from a source other than an officer or employee of the Department of Labor; or (II) was lawfully obtained by the Secretary of Labor in the course of lawfully conducting another Department of Labor investigation under this Act of any other Act. (v) The receipt by the Secretary of Labor of information submitted by an employer to the Attorney General or the Secretary of Labor for purposes of securing the employment of a nonimmigrant described in section 101(a)(15)(H)(i)(b) shall not be considered a receipt of information for purposes of clause (ii). (vi) No investigation described in clause (ii) (or hearing described in clause (viii) based on such investigation) may be conducted with respect to information about a failure to meet a condition described in clause (ii), unless the Secretary of Labor receives the information not later than 12 months after the date of the alleged failure. (vii) The Secretary of Labor shall provide notice to an employer with respect to whom there is reasonable cause to initiate an investigation described in clauses (i) or (ii), prior to the commencement of an investigation under such clauses, of the intent to conduct an investigation. The notice shall be provided in such a manner, and shall contain sufficient detail, to permit the employer to respond to the allegations before an investigation is commenced. The Secretary of Labor is not required to comply with this clause if the Secretary of Labor determines that to do so would interfere with an effort by the Secretary of Labor to secure compliance by the employer with the requirements of this subsection. There shall be no judicial review of a determination by the Secretary of Labor under this clause. (viii) An investigation under clauses (i) or (ii) may be conducted for a period of up to 60 days. If the Secretary of Labor determines after such an investigation that a reasonable basis exists to make a finding that the employer has committed a willful failure to meet a condition of paragraph (1)(A), (1)(B), (1)(C), (1)(E), (1)(F), or (1)(G)(i)(I), has engaged in a pattern or practice of failures to meet such a condition, or has committed a substantial failure to meet such a condition that affects multiple employees, the Secretary of Labor shall provide for notice of such determination to the interested parties and an opportunity for a hearing in accordance with section 556 of title 5, United States Code, within 120 days after the date of the determination. If such a hearing is requested, the Secretary of Labor shall make a finding concerning the matter by not later than 120 days after the date of the hearing. (H)(i) Except as provided in clauses (ii) and (iii), a person or entity is considered to have complied with the requirements of this subsection, notwithstanding a technical or procedural failure to meet such requirements, if there was a good faith attempt to comply with the requirements. (ii) Clause (i) shall not apply if-- (I) the Department of Labor (or another enforcement agency) has explained to the person or entity the basis for the failure; (II) the person or entity has been provided a period of not less than 10 business days (beginning after the date of the explanation) within which to correct the failure; and (III) the person or entity has not corrected the failure voluntarily within such period. (iii) A person or entity that, in the course of an investigation, is found to have violated the prevailing wage requirements set forth in paragraph (1)(A), shall not be assessed fines or other penalties for such violation if the person or entity can establish that the manner in which the prevailing wage was calculated was consistent with recognized industry standards and practices. (iv) Clauses (i) and (iii) shall not apply to a person or entity that has engaged in or is engaging in a pattern or practice of willful violations of this subsection. (I) Nothing in this subsection shall be construed as superseding or preempting any other enforcement-related authority under this Act (such as the authorities under section 274B), or any other Act. (3)(A) For purposes of this subsection, the term ``H-1B- dependent employer'' means an employer that-- (i)(I) has 25 or fewer full-time equivalent employees who are employed in the United States; and (II) employs more than 7 H-1B nonimmigrants; (ii)(I) has at least 26 but not more than 50 full- time equivalent employees who are employed in the United States; and (II) employs more than 12 H-1B nonimmigrants; or (iii)(I) has at least 51 full-time equivalent employees who are employed in the United States; and (II) employs H-1B nonimmigrants in a number that is equal to at least 15 percent of the number of such full-time equivalent employees. (B) For purposes of this subsection-- (i) the term ``exempt H-1B nonimmigrant'' means an H- 1B nonimmigrant who-- (I) receives wages (including cash bonuses and similar compensation) at an annual rate equal to at least $60,000; or (II) has attained a master's or higher degree (or its equivalent) in a specialty related to the intended employment; and (ii) the term nonexempt H-1B nonimmigrant means an H- 1B nonimmigrant who is not an exempt H-1B nonimmigrant. (C) For purposes of subparagraph (A)-- (i) in computing the number of full-time equivalent employees and the number of H-1B nonimmigrants, exempt H-1B nonimmigrants shall not be taken into account during the longer of-- (I) the 6-month period beginning on the date of the enactment of the American Competitiveness and Workforce Improvement Act of 1998; or (II) the period beginning on the date of the enactment of the American Competitiveness and Workforce Improvement Act of 1998 and ending on the date final regulations are issued to carry out this paragraph; and (ii) any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as a single employer. (4) For purposes of this subsection: (A) The term ``area of employment'' means the area within normal commuting distance of the worksite or physical location where the work of the H-1B nonimmigrant is or will be performed. If such worksite or location is within a Metropolitan Statistical Area, any place within such area is deemed to be within the area of employment. (B) In the case of an application with respect to one or more H-1B nonimmigrants by an employer, the employer is considered to ``displace'' a United States worker from a job if the employer lays off the worker from a job that is essentially the equivalent of the job for which the nonimmigrant or nonimmigrants is or are sought. A job shall not be considered to be essentially equivalent of another job unless it involves essentially the same responsibilities, was held by a United States worker with substantially equivalent qualifications and experience, and is located in the same area of employment as the other job. (C) The term ``H-1B nonimmigrant'' means an alien admitted or provided status as a nonimmigrant described in section 101(a)(15)(H)(i)(b). (D)(i) The term ``lays off'', with respect to a worker-- (I) means to cause the worker's loss of employment, other than through a discharge for inadequate performance, violation of workplace rules, cause, voluntary departure, voluntary retirement, or the expiration of a grant or contract (other than a temporary employment contract entered into in order to evade a condition described in subparagraph (E) or (F) of paragraph (1)); but (II) does not include any situation in which the worker is offered, as an alternative to such loss of employment, a similar employment opportunity with the same employer (or, in the case of a placement of a worker with another employer under paragraph (1)(F), with either employer described in such paragraph) at equivalent or higher compensation and benefits than the position from which the employee was discharged, regardless of whether or not the employee accepts the offer. (ii) Nothing in this subparagraph is intended to limit an employee's rights under a collective bargaining agreement or other employment contract. (E) The term ``United States worker'' means an employee who-- (i) is a citizen or national of the United States; or (ii) is an alien who is lawfully admitted for permanent residence, is admitted as a refugee under section 207, is granted asylum under section 208, or is an immigrant otherwise authorized, by this Act or by the Attorney General, to be employed. (5)(A) This paragraph shall apply instead of subparagraphs (A) through (E) of paragraph (2) in the case of a violation described in subparagraph (B), but shall not be construed to limit or affect the authority of the Secretary or the Attorney General with respect to any other violation. (B) The Attorney General shall establish a process for the receipt, initial review, and disposition in accordance with this paragraph of complaints respecting an employer's failure to meet the condition of paragraph (1)(G)(i)(II) or a petitioner's misrepresentation of material facts with respect to such condition. Complaints may be filed by an aggrieved individual who has submitted a resume or otherwise applied in a reasonable manner for the job that is the subject of the condition. No proceeding shall be conducted under this paragraph on a complaint concerning such a failure or misrepresentation unless the Attorney General determines that the complaint was filed not later than 12 months after the date of the failure or misrepresentation, respectively. (C) If the Attorney General finds that a complaint has been filed in accordance with subparagraph (B) and there is reasonable cause to believe that such a failure or misrepresentation described in such complaint has occurred, the Attorney General shall initiate binding arbitration proceedings by requesting the Federal Mediation and Conciliation Service to appoint an arbitrator from the roster of arbitrators maintained by such Service. The procedure and rules of such Service shall be applicable to the selection of such arbitrator and to such arbitration proceedings. The Attorney General shall pay the fee and expenses of the arbitrator. (D)(i) The arbitrator shall make findings respecting whether a failure or misrepresentation described in subparagraph (B) occurred. If the arbitrator concludes that failure or misrepresentation was willful, the arbitrator shall make a finding to that effect. The arbitrator may not find such a failure or misrepresentation (or that such a failure or misrepresentation was willful) unless the complainant demonstrates such a failure or misrepresentation (or its willful character) by clear and convincing evidence. The arbitrator shall transmit the findings in the form of a written opinion to the parties to the arbitration and the Attorney General. Such findings shall be final and conclusive, and, except as provided in this subparagraph, no official or court of the United States shall have power or jurisdiction to review any such findings. (ii) The Attorney General may review and reverse or modify the findings of an arbitrator only on the same bases as an award of an arbitrator may be vacated or modified under section 10 or 11 of title 9, United States Code. (iii) With respect to the findings of an arbitrator, a court may review only the actions of the Attorney General under clause (ii) and may set aside such actions only on the grounds described in subparagraph (A), (B), or (C) of section 706(a)(2) of title 5, United States Code. Notwithstanding any other provision of law, such judicial review may only be brought in an appropriate United States court of appeals. (E) If the Attorney General receives a finding of an arbitrator under this paragraph that an employer has failed to meet the condition of paragraph (1)(G)(i)(II) or has misrepresented a material fact with respect to such condition, unless the Attorney General reverses or modifies the finding under subparagraph (D)(ii)-- (i) the Attorney General may impose administrative remedies (including civil monetary penalties in an amount not to exceed $1,000 per violation or $5,000 per violation in the case of a willful failure or misrepresentation) as the Attorney General determines to be appropriate; and (ii) the Attorney General is authorized to not approve petitions filed, with respect to that employer and for aliens to be employed by the employer, under section 204 or 214(c)-- (I) during a period of not more than 1 year; or (II) in the case of a willful failure or willful misrepresentation, during a period of not more than 2 years. (F) The Attorney General shall not delegate, to any other employee or official of the Department of Justice, any function of the Attorney General under this paragraph, until 60 days after the Attorney General has submitted a plan for such delegation to the Committees on the Judiciary of the United States House of Representatives and the Senate. (o) An alien who has been physically present in the United States shall not be eligible to receive an immigrant visa within ninety days following departure therefrom unless-- (1) the alien was maintaining a lawful nonimmigrant status at the time of such departure, or (2) the alien is the spouse or unmarried child of an individual who obtained temporary or permanent resident status under section 210 or 245A of the Immigration and Nationality Act or section 202 of the Immigration Reform and Control Act of 1986 at any date, who-- (A) as of May 5, 1988, was the unmarried child or spouse of the individual who obtained temporary or permanent resident status under section 210 or 245A of the Immigration and Nationality Act or section 202 of the Immigration Reform and Control Act of 1986; (B) entered the United States before May 5, 1988, resided in the United States on May 5, 1988, and is not a lawful permanent resident; and (C) applied for benefits under section 301(a) of the Immigration Act of 1990. (p)(1) In computing the prevailing wage level for an occupational classification in an area of employment for purposes of subsections (a)(5)(A), (n)(1)(A)(i)(II), and (t)(1)(A)(i)(II) in the case of an employee of-- (A) an institution of higher education (as defined in section 101(a) of the Higher Education Act of 1965), or a related or affiliated nonprofit entity; or (B) a nonprofit research organization or a Governmental research organization, the prevailing wage level shall only take into account employees at such institutions and organizations in the area of employment. (2) With respect to a professional athlete (as defined in subsection (a)(5)(A)(iii)(II)) when the job opportunity is covered by professional sports league rules or regulations, the wage set forth in those rules or regulations shall be considered as not adversely affecting the wages of United States workers similarly employed and be considered the prevailing wage. (3) The prevailing wage required to be paid pursuant to subsections (a)(5)(A), (n)(1)(A)(i)(II), and (t)(1)(A)(i)(II) shall be 100 percent of the wage determined pursuant to those sections. (4) Where the Secretary of Labor uses, or makes available to employers, a governmental survey to determine the prevailing wage, such survey shall provide at least 4 levels of wages commensurate with experience, education, and the level of supervision. Where an existing government survey has only 2 levels, 2 intermediate levels may be created by dividing by 3, the difference between the 2 levels offered, adding the quotient thus obtained to the first level and subtracting that quotient from the second level. (q) Any alien admitted under section 101(a)(15)(B) may accept an honorarium payment and associated incidental expenses for a usual academic activity or activities (lasting not longer than 9 days at any single institution), as defined by the Attorney General in consultation with the Secretary of Education, if such payment is offered by an institution or organization described in subsection (p)(1) and is made for services conducted for the benefit of that institution or entity and if the alien has not accepted such payment or expenses from more than 5 institutions or organizations in the previous 6-month period. (r) Subsection (a)(5)(C) shall not apply to an alien who seeks to enter the United States for the purpose of performing labor as a nurse who presents to the consular officer (or in the case of an adjustment of status, the Attorney General) a certified statement from the Commission on Graduates of Foreign Nursing Schools (or an equivalent independent credentialing organization approved for the certification of nurses under subsection (a)(5)(C) by the Attorney General in consultation with the Secretary of Health and Human Services) that-- (1) the alien has a valid and unrestricted license as a nurse in a State where the alien intends to be employed and such State verifies that the foreign licenses of alien nurses are authentic and unencumbered; (2) the alien has passed the National Council Licensure Examination (NCLEX); (3) the alien is a graduate of a nursing program-- (A) in which the language of instruction was English; (B) located in a country-- (i) designated by such commission not later than 30 days after the date of the enactment of the Nursing Relief for Disadvantaged Areas Act of 1999, based on such commission's assessment that the quality of nursing education in that country, and the English language proficiency of those who complete such programs in that country, justify the country's designation; or (ii) designated on the basis of such an assessment by unanimous agreement of such commission and any equivalent credentialing organizations which have been approved under subsection (a)(5)(C) for the certification of nurses under this subsection; and (C)(i) which was in operation on or before the date of the enactment of the Nursing Relief for Disadvantaged Areas Act of 1999; or (ii) has been approved by unanimous agreement of such commission and any equivalent credentialing organizations which have been approved under subsection (a)(5)(C) for the certification of nurses under this subsection. (s) In determining whether an alien described in subsection (a)(4)(C)(i) is inadmissible under subsection (a)(4) or ineligible to receive an immigrant visa or otherwise to adjust to the status of permanent resident by reason of subsection (a)(4), the consular officer or the Attorney General shall not consider any benefits the alien may have received that were authorized under section 501 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (8 U.S.C. 1641(c)). (t)(1) No alien may be admitted or provided status as a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) in an occupational classification unless the employer has filed with the Secretary of Labor an attestation stating the following: (A) The employer-- (i) is offering and will offer during the period of authorized employment to aliens admitted or provided status under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) wages that are at least-- (I) the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question; or (II) the prevailing wage level for the occupational classification in the area of employment, whichever is greater, based on the best information available as of the time of filing the attestation; and (ii) will provide working conditions for such a nonimmigrant that will not adversely affect the working conditions of workers similarly employed. (B) There is not a strike or lockout in the course of a labor dispute in the occupational classification at the place of employment. (C) The employer, at the time of filing the attestation-- (i) has provided notice of the filing under this paragraph to the bargaining representative (if any) of the employer's employees in the occupational classification and area for which aliens are sought; or (ii) if there is no such bargaining representative, has provided notice of filing in the occupational classification through such methods as physical posting in conspicuous locations at the place of employment or electronic notification to employees in the occupational classification for which nonimmigrants under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) are sought. (D) A specification of the number of workers sought, the occupational classification in which the workers will be employed, and wage rate and conditions under which they will be employed. (2)(A) The employer shall make available for public examination, within one working day after the date on which an attestation under this subsection is filed, at the employer's principal place of business or worksite, a copy of each such attestation (and such accompanying documents as are necessary). (B)(i) The Secretary of Labor shall compile, on a current basis, a list (by employer and by occupational classification) of the attestations filed under this subsection. Such list shall include, with respect to each attestation, the wage rate, number of aliens sought, period of intended employment, and date of need. (ii) The Secretary of Labor shall make such list available for public examination in Washington, D.C. (C) The Secretary of Labor shall review an attestation filed under this subsection only for completeness and obvious inaccuracies. Unless the Secretary of Labor finds that an attestation is incomplete or obviously inaccurate, the Secretary of Labor shall provide the certification described in section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) within 7 days of the date of the filing of the attestation. (3)(A) The Secretary of Labor shall establish a process for the receipt, investigation, and disposition of complaints respecting the failure of an employer to meet a condition specified in an attestation submitted under this subsection or misrepresentation by the employer of material facts in such an attestation. Complaints may be filed by any aggrieved person or organization (including bargaining representatives). No investigation or hearing shall be conducted on a complaint concerning such a failure or misrepresentation unless the complaint was filed not later than 12 months after the date of the failure or misrepresentation, respectively. The Secretary of Labor shall conduct an investigation under this paragraph if there is reasonable cause to believe that such a failure or misrepresentation has occurred. (B) Under the process described in subparagraph (A), the Secretary of Labor shall provide, within 30 days after the date a complaint is filed, for a determination as to whether or not a reasonable basis exists to make a finding described in subparagraph (C). If the Secretary of Labor determines that such a reasonable basis exists, the Secretary of Labor shall provide for notice of such determination to the interested parties and an opportunity for a hearing on the complaint, in accordance with section 556 of title 5, United States Code, within 60 days after the date of the determination. If such a hearing is requested, the Secretary of Labor shall make a finding concerning the matter by not later than 60 days after the date of the hearing. In the case of similar complaints respecting the same applicant, the Secretary of Labor may consolidate the hearings under this subparagraph on such complaints. (C)(i) If the Secretary of Labor finds, after notice and opportunity for a hearing, a failure to meet a condition of paragraph (1)(B), a substantial failure to meet a condition of paragraph (1)(C) or (1)(D), or a misrepresentation of material fact in an attestation-- (I) the Secretary of Labor shall notify the Secretary of State and the Secretary of Homeland Security of such finding and may, in addition, impose such other administrative remedies (including civil monetary penalties in an amount not to exceed $1,000 per violation) as the Secretary of Labor determines to be appropriate; and (II) the Secretary of State or the Secretary of Homeland Security, as appropriate, shall not approve petitions or applications filed with respect to that employer under section 204, 214(c), 101(a)(15)(H)(i)(b1), or 101(a)(15)(E)(iii) or section 101(a)(15)(E)(iii) during a period of at least 1 year for aliens to be employed by the employer. (ii) If the Secretary of Labor finds, after notice and opportunity for a hearing, a willful failure to meet a condition of paragraph (1), a willful misrepresentation of material fact in an attestation, or a violation of clause (iv)-- (I) the Secretary of Labor shall notify the Secretary of State and the Secretary of Homeland Security of such finding and may, in addition, impose such other administrative remedies (including civil monetary penalties in an amount not to exceed $5,000 per violation as the Secretary of Labor determines to be appropriate; and (II) the Secretary of State or the Secretary of Homeland Security, as appropriate, shall not approve petitions or applications filed with respect to that employer under section 204, 214(c), 101(a)(15)(H)(i)(b1), or 101(a)(15)(E)(iii) or section 101(a)(15)(E)(iii) during a period of at least 2 years for aliens to be employed by the employer. (iii) If the Secretary of Labor finds, after notice and opportunity for a hearing, a willful failure to meet a condition of paragraph (1) or a willful misrepresentation of material fact in an attestation, in the course of which failure or misrepresentation the employer displaced a United States worker employed by the employer within the period beginning 90 days before and ending 90 days after the date of filing of any visa petition or application supported by the attestation-- (I) the Secretary of Labor shall notify the Secretary of State and the Secretary of Homeland Security of such finding and may, in addition, impose such other administrative remedies (including civil monetary penalties in an amount not to exceed $35,000 per violation) as the Secretary of Labor determines to be appropriate; and (II) the Secretary of State or the Secretary of Homeland Security, as appropriate, shall not approve petitions or applications filed with respect to that employer under section 204, 214(c), 101(a)(15)(H)(i)(b1), or 101(a)(15)(E)(iii) or section 101(a)(15)(E)(iii) during a period of at least 3 years for aliens to be employed by the employer. (iv) It is a violation of this clause for an employer who has filed an attestation under this subsection to intimidate, threaten, restrain, coerce, blacklist, discharge, or in any other manner discriminate against an employee (which term, for purposes of this clause, includes a former employee and an applicant for employment) because the employee has disclosed information to the employer, or to any other person, that the employee reasonably believes evidences a violation of this subsection, or any rule or regulation pertaining to this subsection, or because the employee cooperates or seeks to cooperate in an investigation or other proceeding concerning the employer's compliance with the requirements of this subsection or any rule or regulation pertaining to this subsection. (v) The Secretary of Labor and the Secretary of Homeland Security shall devise a process under which a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) who files a complaint regarding a violation of clause (iv) and is otherwise eligible to remain and work in the United States may be allowed to seek other appropriate employment in the United States for a period not to exceed the maximum period of stay authorized for such nonimmigrant classification. (vi)(I) It is a violation of this clause for an employer who has filed an attestation under this subsection to require a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) to pay a penalty for ceasing employment with the employer prior to a date agreed to by the nonimmigrant and the employer. The Secretary of Labor shall determine whether a required payment is a penalty (and not liquidated damages) pursuant to relevant State law. (II) If the Secretary of Labor finds, after notice and opportunity for a hearing, that an employer has committed a violation of this clause, the Secretary of Labor may impose a civil monetary penalty of $1,000 for each such violation and issue an administrative order requiring the return to the nonimmigrant of any amount paid in violation of this clause, or, if the nonimmigrant cannot be located, requiring payment of any such amount to the general fund of the Treasury. (vii)(I) It is a failure to meet a condition of paragraph (1)(A) for an employer who has filed an attestation under this subsection and who places a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) designated as a full-time employee in the attestation, after the nonimmigrant has entered into employment with the employer, in nonproductive status due to a decision by the employer (based on factors such as lack of work), or due to the nonimmigrant's lack of a permit or license, to fail to pay the nonimmigrant full-time wages in accordance with paragraph (1)(A) for all such nonproductive time. (II) It is a failure to meet a condition of paragraph (1)(A) for an employer who has filed an attestation under this subsection and who places a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) designated as a part-time employee in the attestation, after the nonimmigrant has entered into employment with the employer, in nonproductive status under circumstances described in subclause (I), to fail to pay such a nonimmigrant for such hours as are designated on the attestation consistent with the rate of pay identified on the attestation. (III) In the case of a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) who has not yet entered into employment with an employer who has had approved an attestation under this subsection with respect to the nonimmigrant, the provisions of subclauses (I) and (II) shall apply to the employer beginning 30 days after the date the nonimmigrant first is admitted into the United States, or 60 days after the date the nonimmigrant becomes eligible to work for the employer in the case of a nonimmigrant who is present in the United States on the date of the approval of the attestation filed with the Secretary of Labor. (IV) This clause does not apply to a failure to pay wages to a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) for nonproductive time due to non-work- related factors, such as the voluntary request of the nonimmigrant for an absence or circumstances rendering the nonimmigrant unable to work. (V) This clause shall not be construed as prohibiting an employer that is a school or other educational institution from applying to a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) an established salary practice of the employer, under which the employer pays to nonimmigrants under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) and United States workers in the same occupational classification an annual salary in disbursements over fewer than 12 months, if-- (aa) the nonimmigrant agrees to the compressed annual salary payments prior to the commencement of the employment; and (bb) the application of the salary practice to the nonimmigrant does not otherwise cause the nonimmigrant to violate any condition of the nonimmigrant's authorization under this Act to remain in the United States. (VI) This clause shall not be construed as superseding clause (viii). (viii) It is a failure to meet a condition of paragraph (1)(A) for an employer who has filed an attestation under this subsection to fail to offer to a nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii), during the nonimmigrant's period of authorized employment, benefits and eligibility for benefits (including the opportunity to participate in health, life, disability, and other insurance plans; the opportunity to participate in retirement and savings plans; and cash bonuses and non-cash compensation, such as stock options (whether or not based on performance)) on the same basis, and in accordance with the same criteria, as the employer offers to United States workers. (D) If the Secretary of Labor finds, after notice and opportunity for a hearing, that an employer has not paid wages at the wage level specified in the attestation and required under paragraph (1), the Secretary of Labor shall order the employer to provide for payment of such amounts of back pay as may be required to comply with the requirements of paragraph (1), whether or not a penalty under subparagraph (C) has been imposed. (E) The Secretary of Labor may, on a case-by-case basis, subject an employer to random investigations for a period of up to 5 years, beginning on the date on which the employer is found by the Secretary of Labor to have committed a willful failure to meet a condition of paragraph (1) or to have made a willful misrepresentation of material fact in an attestation. The authority of the Secretary of Labor under this subparagraph shall not be construed to be subject to, or limited by, the requirements of subparagraph (A). (F) Nothing in this subsection shall be construed as superseding or preempting any other enforcement-related authority under this Act (such as the authorities under section 274B), or any other Act. (4) For purposes of this subsection: (A) The term ``area of employment'' means the area within normal commuting distance of the worksite or physical location where the work of the nonimmigrant under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) is or will be performed. If such worksite or location is within a Metropolitan Statistical Area, any place within such area is deemed to be within the area of employment. (B) In the case of an attestation with respect to one or more nonimmigrants under section 101(a)(15)(H)(i)(b1) or section 101(a)(15)(E)(iii) by an employer, the employer is considered to ``displace'' a United States worker from a job if the employer lays off the worker from a job that is essentially the equivalent of the job for which the nonimmigrant or nonimmigrants is or are sought. A job shall not be considered to be essentially equivalent of another job unless it involves essentially the same responsibilities, was held by a United States worker with substantially equivalent qualifications and experience, and is located in the same area of employment as the other job. (C)(i) The term ``lays off'', with respect to a worker-- (I) means to cause the worker's loss of employment, other than through a discharge for inadequate performance, violation of workplace rules, cause, voluntary departure, voluntary retirement, or the expiration of a grant or contract; but (II) does not include any situation in which the worker is offered, as an alternative to such loss of employment, a similar employment opportunity with the same employer at equivalent or higher compensation and benefits than the position from which the employee was discharged, regardless of whether or not the employee accepts the offer. (ii) Nothing in this subparagraph is intended to limit an employee's rights under a collective bargaining agreement or other employment contract. (D) The term ``United States worker'' means an employee who-- (i) is a citizen or national of the United States; or (ii) is an alien who is lawfully admitted for permanent residence, is admitted as a refugee under section 207 of this title, is granted asylum under section 208, or is an immigrant otherwise authorized, by this Act or by the Secretary of Homeland Security, to be employed. (t)(1) Except as provided in paragraph (2), no person admitted under section 101(a)(15)(Q)(ii)(I), or acquiring such status after admission, shall be eligible to apply for nonimmigrant status, an immigrant visa, or permanent residence under this Act until it is established that such person has resided and been physically present in the person's country of nationality or last residence for an aggregate of at least 2 years following departure from the United States. (2) The Secretary of Homeland Security may waive the requirement of such 2-year foreign residence abroad if the Secretary determines that-- (A) departure from the United States would impose exceptional hardship upon the alien's spouse or child (if such spouse or child is a citizen of the United States or an alien lawfully admitted for permanent residence); or (B) the admission of the alien is in the public interest or the national interest of the United States. * * * * * * * Chapter 4--Inspection, Apprehension, Examination, Exclusion, and Removal * * * * * * * general classes of deportable aliens Sec. 237. (a) Classes of Deportable Aliens.--Any alien (including an alien crewman) in and admitted to the United States shall, upon the order of the Attorney General, be removed if the alien is within one or more of the following classes of deportable aliens: (1) Inadmissible at time of entry or of adjustment of status or violates status.-- (A) Inadmissible aliens.--Any alien who at the time of entry or adjustment of status was within one or more of the classes of aliens inadmissible by the law existing at such time is deportable. (B) Present in violation of law.--Any alien who is present in the United States in violation of this Act or any other law of the United States, or whose nonimmigrant visa (or other documentation authorizing admission into the United States as a nonimmigrant) has been revoked under section 221(i), is deportable. (C) Violated nonimmigrant status or condition of entry.-- (i) Nonimmigrant status violators.-- Any alien who was admitted as a nonimmigrant and who has failed to maintain the nonimmigrant status in which the alien was admitted or to which it was changed under section 248, or to comply with the conditions of any such status, is deportable. (ii) Violators of conditions of entry.--Any alien whom the Secretary of Health and Human Services certifies has failed to comply with terms, conditions, and controls that were imposed under section 212(g) is deportable. (D) Termination of conditional permanent residence.-- (i) In general.--Any alien with permanent resident status on a conditional basis under section 216 (relating to conditional permanent resident status for certain alien spouses and sons and daughters) or under section 216A (relating to conditional permanent resident status for certain alien entrepreneurs, spouses, and children) who has had such status terminated under such respective section is deportable. (ii) Exception.--Clause (i) shall not apply in the cases described in section 216(c)(4) (relating to certain hardship waivers). (E) Smuggling.-- (i) In general.--Any alien who (prior to the date of entry, at the time of any entry, or within 5 years of the date of any entry) knowingly has encouraged, induced, assisted, abetted, or aided any other alien to enter or to try to enter the United States in violation of law is deportable. (ii) Special rule in the case of family reunification.--Clause (i) shall not apply in the case of alien who is an eligible immigrant (as defined in section 301(b)(1) of the Immigration Act of 1990), was physically present in the United States on May 5, 1988, and is seeking admission as an immediate relative or under section 203(a)(2) (including under section 112 of the Immigration Act of 1990) or benefits under section 301(a) of the Immigration Act of 1990 if the alien, before May 5, 1988, has encouraged, induced, assisted, abetted, or aided only the alien's spouse, parent, son, or daughter (and no other individual) to enter the United States in violation of law. (iii) Waiver authorized.--The Attorney General may, in his discretion for humanitarian purposes, to assure family unity, or when it is otherwise in the public interest, waive application of clause (i) in the case of any alien lawfully admitted for permanent residence if the alien has encouraged, induced, assisted, abetted, or aided only an individual who at the time of the offense was the alien's spouse, parent, son, or daughter (and no other individual) to enter the United States in violation of law. (F) (G) Marriage fraud.--An alien shall be considered to be deportable as having procured a visa or other documentation by fraud (within the meaning of section 212(a)(6)(C)(i)) and to be in the United States in violation of this Act (within the meaning of subparagraph (B)) if-- (i) the alien obtains any admission into the United States with an immigrant visa or other documentation procured on the basis of a marriage entered into less than 2 years prior to such admission of the alien and which, within 2 years subsequent to any admission of the alien in the United States, shall be judicially annulled or terminated, unless the alien establishes to the satisfaction of the Attorney General that such marriage was not contracted for the purpose of evading any provisions of the immigration laws, or (ii) it appears to the satisfaction of the Attorney General that the alien has failed or refused to fulfill the alien's marital agreement which in the opinion of the Attorney General was made for the purpose of procuring the alien's admission as an immigrant. (H) Waiver authorized for certain misrepresentations.--The provisions of this paragraph relating to the removal of aliens within the United States on the ground that they were inadmissible at the time of admission as aliens described in section 212(a)(6)(C)(i), whether willful or innocent, may, in the discretion of the Attorney General, be waived for any alien (other than an alien described in paragraph (4)(D)) who-- (i)(I) is the spouse, parent, son, or daughter of a citizen of the United States or of an alien lawfully admitted to the United States for permanent residence; and (II) was in possession of an immigrant visa or equivalent document and was otherwise admissible to the United States at the time of such admission except for those grounds of inadmissibility specified under paragraphs (5)(A) and (7)(A) of section 212(a) which were a direct result of that fraud or misrepresentation. (ii) is a VAWA self-petitioner. A waiver of removal for fraud or misrepresentation granted under this subparagraph shall also operate to waive removal based on the grounds of inadmissibility directly resulting from such fraud or misrepresentation. (2) Criminal offenses.-- (A) General crimes.-- (i) Crimes of moral turpitude.--Any alien who-- (I) is convicted of a crime involving moral turpitude committed within five years (or 10 years in the case of an alien provided lawful permanent resident status under section 245(j)) after the date of admission, and (II) is convicted of a crime for which a sentence of one year or longer may be imposed, is deportable. (ii) Multiple criminal convictions.-- Any alien who at any time after admission is convicted of two or more crimes involving moral turpitude, not arising out of a single scheme of criminal misconduct, regardless of whether confined therefor and regardless of whether the convictions were in a single trial, is deportable. (iii) Aggravated felony.--Any alien who is convicted of an aggravated felony at any time after admission is deportable. (iv) High speed flight.--Any alien who is convicted of a violation of section 758 of title 18, United States Code (relating to high speed flight from an immigration checkpoint), is deportable. (v) Failure to register as a sex offender.--Any alien who is convicted under section 2250 of title 18, United States Code, is deportable. (vi) Waiver authorized.--Clauses (i), (ii), and (iii) shall not apply in the case of an alien with respect to a criminal conviction if the alien subsequent to the criminal conviction has been granted a full and unconditional pardon by the President of the United States or by the Governor of any of the several States. (B) Controlled substances.-- (i) Conviction.--Any alien who at any time after admission has been convicted of a violation of (or a conspiracy or attempt to violate) any law or regulation of a State, the United States, or a foreign country relating to a controlled substance (as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802)), other than a single offense involving possession for one's own use of 30 grams or less of marijuana, is deportable. (ii) Drug abusers and addicts.--Any alien who is, or at any time after admission has been, a drug abuser or addict is deportable. (C) Certain firearm offenses.--Any alien who at any time after admission is convicted under any law of purchasing, selling, offering for sale, exchanging, using, owning, possessing, or carrying, or of attempting or conspiring to purchase, sell, offer for sale, exchange, use, own, possess, or carry, any weapon, part, or accessory which is a firearm or destructive device (as defined in section 921(a) of title 18, United States Code) in violation of any law is deportable. (D) Miscellaneous crimes.--Any alien who at any time has been convicted (the judgment on such conviction becoming final) of, or has been so convicted of a conspiracy or attempt to violate-- (i) any offense under chapter 37 (relating to espionage), chapter 105 (relating to sabotage), or chapter 115 (relating to treason and sedition) of title 18, United States Code, for which a term of imprisonment of five or more years may be imposed; (ii) any offense under section 871 or 960 of title 18, United States Code; (iii) a violation of any provision of the Military Selective Service Act (50 U.S.C. App. 451 et seq.) or the Trading With the Enemy Act (50 U.S.C. App. 1 et seq.); or (iv) a violation of section 215 or 278 of this Act, is deportable. (E) Crimes of domestic violence, stalking, or violation of protection order, [crimes against children and] and crimes against children.-- (i) Domestic violence, stalking, and child abuse.--Any alien who at any time after admission is convicted of a crime of domestic violence, a crime of stalking, or a crime of child abuse, child neglect, or child abandonment is deportable. For purposes of this clause, the term ``crime of domestic violence'' means any crime of violence (as defined in section 16 of title 18, United States Code) against a person committed by a current or former spouse of the person, by an individual with whom the person shares a child in common, by an individual who is cohabiting with or has cohabited with the person as a spouse, by an individual similarly situated to a spouse of the person under the domestic or family violence laws of the jurisdiction where the offense occurs, or by any other individual against a person who is protected from that individual's acts under the domestic or family violence laws of the United States or any State, Indian tribal government, or unit of local government, and includes any crime that constitutes domestic violence, as such term is defined in section 40002(a) of the Violent Crime Control and Law Enforcement Act of 1994 (34 U.S.C. 12291(a), regardless of whether the jurisdiction receives grant funding under that Act. (ii) Violators of protection orders.--Any alien who at any time after admission is enjoined under a protection order issued by a court and whom the court determines has engaged in conduct that violates the portion of a protection order that involves protection against credible threats of violence, repeated harassment, or bodily injury to the person or persons for whom the protection order was issued is deportable. For purposes of this clause, the term ``protection order'' means any injunction issued for the purpose of preventing violent or threatening acts of domestic violence, including temporary or final orders issued by civil or criminal courts (other than support or child custody orders or provisions) whether obtained by filing an independent action or as a pendente lite order in another proceeding. (F) Trafficking.--Any alien described in section 212(a)(2)(H) is deportable. (G) Sex offenses.--Any alien who has been convicted of a sex offense (as such term is defined in section 111(5) of the Adam Walsh Child Protection and Safety Act of 2006 (34 U.S.C. 20911(5))) or a conspiracy to commit such an offense, is deportable. (3) Failure to register and falsification of documents.-- (A) Change of address.--An alien who has failed to comply with the provisions of section 265 is deportable, unless the alien establishes to the satisfaction of the Attorney General that such failure was reasonably excusable or was not willful. (B) Failure to register or falsification of documents.--Any alien who at any time has been convicted-- (i) under section 266(c) of this Act or under section 36(c) of the Alien Registration Act, 1940, (ii) of a violation of, or an attempt or a conspiracy to violate, any provision of the Foreign Agents Registration Act of 1938 (22 U.S.C. 611 et seq.), or (iii) of a violation of, or an attempt or a conspiracy to violate, section 1546 of title 18, United States Code (relating to fraud and misuse of visas, permits, and other entry documents), is deportable. (C) Document fraud.-- (i) In general.--An alien who is the subject of a final order for violation of section 274C is deportable. (ii) Waiver authorized.--The Attorney General may waive clause (i) in the case of an alien lawfully admitted for permanent residence if no previous civil money penalty was imposed against the alien under section 274C and the offense was incurred solely to assist, aid, or support the alien's spouse or child (and no other individual). No court shall have jurisdiction to review a decision of the Attorney General to grant or deny a waiver under this clause. (D) Falsely claiming citizenship.-- (i) In general.--Any alien who falsely represents, or has falsely represented, himself to be a citizen of the United States for any purpose or benefit under this Act (including section 274A) or any Federal or State law is deportable. (ii) Exception.--In the case of an alien making a representation described in clause (i), if each natural parent of the alien (or, in the case of an adopted alien, each adoptive parent of the alien) is or was a citizen (whether by birth or naturalization), the alien permanently resided in the United States prior to attaining the age of 16, and the alien reasonably believed at the time of making such representation that he or she was a citizen, the alien shall not be considered to be deportable under any provision of this subsection based on such representation. (4) Security and related grounds.-- (A) In general.--Any alien who has engaged, is engaged, or at any time after admission engages in-- (i) any activity to violate any law of the United States relating to espionage or sabotage or to violate or evade any law prohibiting the export from the United States of goods, technology, or sensitive information, (ii) any other criminal activity which endangers public safety or national security, or (iii) any activity a purpose of which is the opposition to, or the control or overthrow of, the Government of the United States by force, violence, or other unlawful means, is deportable. (B) Terrorist activities.--Any alien who is described in subparagraph (B) or (F) of section 212(a)(3) is deportable. (C) Foreign policy.-- (i) In general.--An alien whose presence or activities in the United States the Secretary of State has reasonable ground to believe would have potentially serious adverse foreign policy consequences for the United States is deportable. (ii) Exceptions.--The exceptions described in clauses (ii) and (iii) of section 212(a)(3)(C) shall apply to deportability under clause (i) in the same manner as they apply to inadmissibility under section 212(a)(3)(C)(i). (D) Participated in nazi persecution, genocide, or the commission of any act of torture or extrajudicial killing.--Any alien described in clause (i), (ii), or (iii) of section 212(a)(3)(E) is deportable. (E) Participated in the commission of severe violations of religious freedom.--Any alien described in section 212(a)(2)(G) is deportable. (F) Recruitment or use of child soldiers.-- Any alien who has engaged in the recruitment or use of child soldiers in violation of section 2442 of title 18, United States Code, is deportable. (5) Public charge.--Any alien who, within five years after the date of entry, has become a public charge from causes not affirmatively shown to have arisen since entry is deportable. (6) Unlawful voters.-- (A) In general.--Any alien who has voted in violation of any Federal, State, or local constitutional provision, statute, ordinance, or regulation is deportable. (B) Exception.--In the case of an alien who voted in a Federal, State, or local election (including an initiative, recall, or referendum) in violation of a lawful restriction of voting to citizens, if each natural parent of the alien (or, in the case of an adopted alien, each adoptive parent of the alien) is or was a citizen (whether by birth or naturalization), the alien permanently resided in the United States prior to attaining the age of 16, and the alien reasonably believed at the time of such violation that he or she was a citizen, the alien shall not be considered to be deportable under any provision of this subsection based on such violation. (7) Waiver for victims of domestic violence.-- (A) In general.--The Attorney General is not limited by the criminal court record and may waive the application of paragraph (2)(E)(i) (with respect to crimes of domestic violence and crimes of stalking) and (ii) in the case of an alien who has been battered or subjected to extreme cruelty and who is not and was not the primary perpetrator of violence in the relationship-- (i) upon a determination that-- (I) the alien was acting is self-defense; (II) the alien was found to have violated a protection order intended to protect the alien; or (III) the alien committed, was arrested for, was convicted of, or pled guilty to committing a crime-- (aa) that did not result in serious bodily injury; and (bb) where there was a connection between the crime and the alien's having been battered or subjected to extreme cruelty. (B) Credible evidence considered.--In acting on applications under this paragraph, the Attorney General shall consider any credible evidence relevant to the application. The determination of what evidence is credible and the weight to be given that evidence shall be within the sole discretion of the Attorney General. (b) An alien, admitted as an nonimmigrant under the provisions of either section 101(a)(15)(A)(i) or 101(a)(15)(G)(i), and who fails to maintain a status under either of those provisions, shall not be required to depart from the United States without the approval of the Secretary of State, unless such alien is subject to deportation under paragraph (4) of subsection (a). (c) Paragraphs (1)(A), (1)(B), (1)(C), (1)(D), and (3)(A) of subsection (a) (other than so much of paragraph (1) as relates to a ground of inadmissibility described in paragraph (2) or (3) of section 212(a)) shall not apply to a special immigrant described in section 101(a)(27)(J) based upon circumstances that existed before the date the alien was provided such special immigrant status. (d)(1) If the Secretary of Homeland Security determines that an application for nonimmigrant status under subparagraph (T) or (U) of section 101(a)(15) filed for an alien in the United States sets forth a prima facie case for approval, the Secretary may grant the alien an administrative stay of a final order of removal under section 241(c)(2) until-- (A) the application for nonimmigrant status under such subparagraph (T) or (U) is approved; or (B) there is a final administrative denial of the application for such nonimmigrant status after the exhaustion of administrative appeals. (2) The denial of a request for an administrative stay of removal under this subsection shall not preclude the alien from applying for a stay of removal, deferred action, or a continuance or abeyance of removal proceedings under any other provision of the immigration laws of the United States. (3) During any period in which the administrative stay of removal is in effect, the alien shall not be removed. (4) Nothing in this subsection may be construed to limit the authority of the Secretary of Homeland Security or the Attorney General to grant a stay of removal or deportation in any case not described in this subsection. * * * * * * * Dissenting Views H.R. 7909 is an overly broad bill and so poorly drafted that it would result in extremely harsh consequences, including the deportation or removal of survivors of domestic violence. It solves no real problems with the immigration system. Sexual assault and domestic violence are serious offenses--and if this bill fixed some hole in current law, it might be worthy of support. Instead, this legislation is just another excuse for the Majority to engage in fearmongering and further its extreme anti-immigrant agenda. No additional dangerous offenders would face immigration consequences as a result of this bill because all serious sexual offenses already render someone deportable under current law. This bill renders deportable those convicted of ``sexual offenses'' (which is defined as ``a criminal offense that has an element involving a sexual act or sexual contact with another''). But under current law, someone who is convicted of an aggravated felony, which includes rape, sexual abuse of a minor or a crime of violence (any ``offense that has as an element the use, attempted use, or threatened use of physical force against the person'') is already deportable.\1\ --------------------------------------------------------------------------- \1\18 U.S.C Sec. 16. --------------------------------------------------------------------------- Additionally, under the Immigration and Nationality Act, a noncitizen who is convicted of a Crime Involving Moral Turpitude, or a ``CIMT,'' is already subject to removal. As a result, people who are convicted of any crime where there is intent to cause bodily harm like sexual assaults, are likewise already deportable. Additionally, the inadmissibility grounds for a CIMT are even broader, as one can be deemed inadmissible by either being convicted of, or admitting to, acts that constitute a CIMT. Thus, the sexual offenses in the inadmissibility and deportability sections of the bill are largely redundant. The more significant concerns with this bill arise with the sections related to domestic violence. Under current law, people can be deportable if they are convicted of domestic violence as defined under Title 18 of the U.S. Code and can be deemed inadmissible if they commit the acts or are convicted of a CIMT where the domestic violence offense has intent to cause bodily harm. The crime of domestic violence, therefore, is well covered by current law. However, this bill attempts to significantly expand the definition of domestic violence to include the Violence Against Women Act (VAWA) definition that is used for grants and funding. The definition for domestic violence under Title 18, which is what is currently used for deportability purposes, focuses on physical force. This broader VAWA-based definition will lead to more people being ineligible for immigration status or subject to deportation because it will sweep in a broader range of behaviors, including criminal charges where there might be any coercive actions, including economic coercion and coercive control. Unconscionably, this will likely implicate survivors who have used violence in self-defense, or who were accused by their abusers and were either unable to defend themselves or pled guilty to avoid having to go through the court process. The VAWA definition was never intended to be used as a criminal statute or to capture only criminal behavior. We know this because the statute specifically says it includes ``a pattern of any other coercive behavior committed, enabled, or solicited to gain or maintain power and control over a victim, including verbal, psychological, economic, or technological abuse that may or may not constitute criminal behavior.''\2\ The new immigration consequences will likely also create a chilling effect amongst immigrant communities with regard to the reporting of crimes of domestic violence. --------------------------------------------------------------------------- \2\34 U.S.C. Sec. 12291(a)(12). --------------------------------------------------------------------------- Further, this bill attempts to create a new specific ground of inadmissibility for domestic violence which does not require a conviction and does not have any of the exceptions that currently exist in the deportability grounds. Under current law, even if an individual is convicted of domestic violence, there are exceptions to deportation if the government finds that the individual is not the primary perpetrator and was acting in self-defense or if the crime did not result in serious bodily injury.\3\ While domestic violence advocates have concerns about the effectiveness of these waivers, such waivers are not even an option in the new inadmissibility grounds, which means it will certainly lead to survivors being deemed inadmissible, given the expansive definition and no conviction requirement. --------------------------------------------------------------------------- \3\INA Sec. 1227(a)(7); INA Sec. 1229b(b)(5). --------------------------------------------------------------------------- At markup, I offered an amendment to address these issues by removing the VAWA definition of domestic violence, and applying the waivers that exist in current law to the new grounds of inadmissibility created by this law. The amendment also ensured that the ill conceived expansion of current law in the bill did not apply retroactively. Unfortunately, Republicans defeated the amendment on a party line vote. This bill is a very serious and broad expansion of current law. It does not fix the problems in our immigration system and instead would result in extremely harsh consequences, including the deportation or removal of survivors of domestic violence. That is why nearly 180 National and State organizations that advocate on behalf of victims of domestic violence and sexual assault oppose this bill. For all of these reasons, I dissent, and I urge all of my colleagues to oppose this legislation. Jerrold Nadler, Ranking Member. [all]

usgpo

2024-10-08T13:26:16.012134

CHRG

CHRG-118hhrg53760

Cutting Corners at Whd: Examining the Cost to Workers, Small Businesses, and the Economy

United States Congress House of Representatives

[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] CUTTING CORNERS AT WHD: EXAMINING THE COST TO WORKERS, SMALL BUSINESSES, AND THE ECONOMY ======================================================================= HEARING Before The SUBCOMMITTEE ON WORKFORCE PROTECTIONS OF THE COMMITTEE ON EDUCATION AND THE WORKFORCE U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ HEARING HELD IN WASHINGTON, DC, JULY 18, 2023 __________ Serial No. 118-18 __________ Printed for the use of the Committee on Education and the Workforce [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via: edworkforce.house.gov or www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 53-760 PDF WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON EDUCATION AND THE WORKFORCE VIRGINIA FOXX, North Carolina, Chairwoman JOE WILSON, South Carolina ROBERT C. ``BOBBY'' SCOTT, GLENN THOMPSON, Pennsylvania Virginia, TIM WALBERG, Michigan Ranking Member GLENN GROTHMAN, Wisconsin RAUL M. GRIJALVA, Arizona ELISE M. STEFANIK, New York JOE COURTNEY, Connecticut RICK W. ALLEN, Georgia GREGORIO KILILI CAMACHO SABLAN, JIM BANKS, Indiana Northern Mariana Islands JAMES COMER, Kentucky FREDERICA S. WILSON, Florida LLOYD SMUCKER, Pennsylvania SUZANNE BONAMICI, Oregon BURGESS OWENS, Utah MARK TAKANO, California BOB GOOD, Virginia ALMA S. ADAMS, North Carolina LISA McCLAIN, Michigan MARK DeSAULNIER, California MARY MILLER, Illinois DONALD NORCROSS, New Jersey MICHELLE STEEL, California PRAMILA JAYAPAL, Washington RON ESTES, Kansas SUSAN WILD, Pennsylvania JULIA LETLOW, Louisiana LUCY McBATH, Georgia KEVIN KILEY, California JAHANA HAYES, Connecticut AARON BEAN, Florida ILHAN OMAR, Minnesota ERIC BURLISON, Missouri HALEY M. STEVENS, Michigan NATHANIEL MORAN, Texas TERESA LEGER FERNANDEZ, New Mexico JOHN JAMES, Michigan KATHY E. MANNING, North Carolina LORI CHAVEZ-DeREMER, Oregon FRANK J. MRVAN, Indiana BRANDON WILLIAMS, New York JAMAAL BOWMAN, New York ERIN HOUCHIN, Indiana Cyrus Artz, Staff Director Veronique Pluviose, Minority Staff Director ------ SUBCOMMITTEE ON WORKFORCE PROTECTIONS KEVIN KILEY, California, Chairman GLENN GROTHMAN, Wisconsin ALMA ADAMS, North Carolina, ELISE M. STEFANIK, New York Ranking Member JAMES COMER, Kentucky ILHAN OMAR, Minnesota MARY MILLER, Illinois HALEY M. STEVENS, Michigan ERIC BURLISON, Missouri MARK TAKANO, California C O N T E N T S ---------- Page Hearing held on July 18, 2023.................................... 1 OPENING STATEMENTS Kiley, Hon. Kevin, Chairman, Subcommittee on Workforce Protections................................................ 1 Prepared statement of.................................... 5 Adams, Hon. Alma, Ranking Member, Subcommittee on Workforce Protections................................................ 9 Prepared statement of.................................... 11 WITNESSES Wolfson, Jonathan, Chief Legal Officer and Policy Director, Cicero Institute........................................... 12 Prepared statement of.................................... 15 Milito, Elizabeth, Executive Director, National Federation of Independent Business (NFIB), Small Business Legal Center, Washington, D.C............................................ 21 Prepared statement of.................................... 23 Sojourner, Aaron, Senior Economist, W.E. Upjohn Institute for Employment Research, Kalamazoo, Michigan................... 29 Prepared statement of.................................... 31 Greszler, Rachel, Senior Research Fellow, The Heritage Foundation, Washington, D.C................................ 39 Prepared statement of.................................... 41 ADDITIONAL SUBMISSIONS Chairman Kiley: Letter dated July 18, 2023 from the National Restaurant Association............................................ 79 Letter dated July 18, 2023 from Flex..................... 81 Ranking Member Adams: Letter dated July 18, 2023, from the Construction Employers of America................................... 66 Foxx, Hon. Virginia, a Representative in Congress from the State of North Carolina: Memo dated April 21, 2023 from Tammy McCutchen........... 87 Scott, Hon. Robert C. ``Bobby'', a Representative in Congress from the State of Virginia: Wage Inequality and Labor Rights Violations dated February 2021 from the NBER Working Paper Series....... 89 Letter dated July 26, 2023 from Center for Progressive Reform................................................. 138 Letter dated July 27, 2023 from National Employment Law Project................................................ 143 Article published on May 2, 2019 from The Quarterly Journal of Economics................................... 145 Letter dated June 6, 2023 from The Coalition for Sensible Safeguards............................................. 195 CUTTING CORNERS AT WHD: EXAMINING THE COST TO WORKERS, SMALL BUSINESSES, AND THE ECONOMY ---------- Tuesday, July 18, 2023 House of Representatives, Subcommittee on Workforce Protections, Committee on Education and the Workforce, Washington, DC. The subcommittee met, pursuant to notice, at 10:15 a.m., 2175 Rayburn House Office Building, Washington, DC, Hon. Kevin Kiley [Chairman of the Subcommittee] presiding. Present: Representatives Kiley, Grothman, Burlison, Adams, Omar, Stevens, and Scott. Staff present: Cyrus Artz, Staff Director; Mindy Barry, General Counsel; Hans Bjontegard, Legislative Assistant; Michael Davis, Legislative Assistant; Isabel Foster, Press Assistant; Daniel Fuenzalida, Staff Assistant; Sheila Havenner, Director of Information Technology; Clair Houchin, Intern; Alex Knorr, Legislative Assistant; Trey Kovacs, Professional Staff Member; Andrew Kuzy, Press Assistant; Georgie Littlefair, Clerk; John Martin, Deputy Director of Workplace Policy/ Counsel; Hannah Matesic, Director of Member Services and Coalitions; Audra McGeorge, Communications Director; Kevin O'Keefe, Professional Staff; Mike Patterson, Oversight Counsel; Rebecca Powell, Staff Assistant; Kelly Tyroler, Professional Staff Member; Seth Waugh, Director of Workforce Policy; Joe Wheeler, Professional Staff Member; Jeanne Wilson, Retirement Counsel; Savoy Adams, Minority Intern; Brittany Alston, Minority Operations Assistant; Ilana Brunner, Minority General Counsel; Kristion Jackson, Minority Intern; Malak Kalasho, Minority Intern; Raiyana Malone, Minority Press Secretary; Kevin McDermott, Minority Director of Labor Policy; Veronique Pluviose, Minority Staff Director; Jessica Schieder, Minority Economic Policy Advisor; Bob Shull, Minority Senior Labor Policy Counsel; Banyon Vassar, Minority IT Administrator. Chairman Kiley. The Subcommittee on Workforce Protection will come to order. I note that a quorum is present. Without objection, the Chair is authorized to call a recess at any time. The Subcommittee is meeting today to hear testimony on the Department of Labor's Wage and Hour Division's rulemaking during the Biden Administration, including the division's failure to analyze the impact of its rules properly, and the costs and burdens imposed by regulation, by the regulations on workers and businesses, especially small businesses. Good morning, everyone, and welcome to today's hearing. There is broad agreement across all party lines that the American economy is on the wrong track. After two and a half years of unprecedented spending, and unconstrained regulation, 90 percent of Americans remain worried about high prices, and 88 percent are worried about the future of the economy. Fewer than 1 out of 3 Americans approves of President Biden's handling of the economy. Rather than correct course, this administration has decided to brand its record of failure with a new moniker, Bidenomics. The administration is engaged in an extensive public relations campaign asking Americans not to believe their eyes when they go to the grocery store or the gas pump, or their ears when they hear of small businesses closing, paychecks shrinking, young people dropping out of the workforce, supply chains in chaos and U.S. competitiveness on a steady decline. This exercise in delusion was captured in a recent tweet by the President which said that right now real wages for the average American worker is higher than it was before the pandemic with lower wage workers seeing the largest gains. That is Bidenomics, he said. Community notes commentators were quick to correct the record with a consensus stating real wages remain lower, not higher, than before the pandemic. In fact, workers have suffered a 3.16 percent decline in real earnings during the Biden Presidency. That is why 58 percent of Americans are living paycheck to paycheck, and 70 percent are stressed about their finances. The bottom 50 percent of households need to earn $5,000.00 more this year just to have the same purchasing power as they did in 2019. In a recent study by the Federal Reserve, the share of adults who said they were worse off financially than a year ago rose to 35 percent, the highest level since the question was asked. Wealth and equality meanwhile is at one of its highest levels since the Fed began measuring it 34 years ago. The failure of Bidenomics is not just the result of misconceived economic ideas. The administration has also aggressively availed itself of any and all available tools to impose its agenda, whether lawful or not. Indeed, a disturbing habit of this administration has been to do by undemocratic means that which it cannot accomplish by Democratic means. For example, on student loan forgiveness, President Biden originally said I do not think I have the authority to do it, and then went ahead and did it anyway, by executive order. The Supreme Court, of course, recently struck that order down. With the new Congress declining to pass further harmful economic policies, the administration has increasingly relied on aggressive agency rulemaking. One of the rules to be discussed today concerning independent contracting was offered by the administration after Congress chose not to enact a functionally similar proposal contained in the Pro Act. Perhaps worst of all, President Biden has kept his nominee for Labor Secretary, Julie Su at the helm of the Labor Department as Labor Secretary, even as the Senate has declined to confirm her for nearly 5 months. Today, I am again calling on the President to withdraw the nomination of Ms. Su and nominate a Labor Secretary who will be on the side of American workers. These then are the key features of Bidenomics, policies that increase the size, scale and intrusiveness of the Federal bureaucracy, that are implemented without regard to lawful authority, that diminish opportunity to the detriment of workers, small businesses and consumers, and that are justified based on delusions and misrepresentations. Today's hearing focuses on an agency that epitomizes these key features of Bidenomics and is doing substantial damages all on its own; the Department of Labor's Wage and Hour Division. As an initial matter, it should be noted that the WHD's rulemaking process has departed substantially from the legal obligations imposed by Congress. Repeatedly, WHD has refused to comply with the Regulatory Flexibility Act. That law requires Federal agencies to submit a report, called an initial regulatory flexibility analysis, upon making rules which impose significant economic costs on small businesses. The analysis must be comprehensive, including descriptions of who and what are impacted by the law, and why and how the agency is acting. Biden and Julie Su's WHD acts as though this law does not exist. In at least four rulemaking cases, it has neglected to produce the required analysis before imposing economic costs on American small businesses. Each of those rules, by the way, was repudiated by the Small Business Administration Office of Advocacy. President Biden also signed an executive order in April to redefine what constitutes a significant regulatory action. The President doubled the threshold from 100 million to 200 million with the stroke of a pen. The effect of this is to exempt potentially dozens of regulations from a meaningful economic impact review. Our witnesses today will be discussing four specific WHD rules that are characteristic of Bidenomics and will have its characteristically damaging economic effects. The first is the previously mentioned independent contractor standard, which nationalizes and mirrors my home State of California disastrous AB5 law. In previous hearings we have heard testimony from California freelancers about all of the livelihoods that have been destroyed by that law. Turning AB5 into national policy would multiply these losses. The Chamber of Progress published an economic analysis which shows that an AB5 like Federal policy would cost the full-time or part-time jobs of between 3.2 and 3.8 million independent contractors. WHD's delusional, legally deficient analysis fails to even consider these far-reaching horrors, even though the experience of California has already proven they will be the reality. The second WHD rule is an update to Davis-Bacon regulations that impermissibly expands coverage to new industries without the required analysis. The third rule regulates tipping, putting the burden on employers to determine when employees are doing tip producing work and when they are not, and then meticulously track their work minute by minute. The final rule increases to $15.00 the minimum wage for Federal contractors, or any business that contracts with the Federal Government, even, say, a small restaurant in a national park. Each of these regulations embodies the fundamental failings of Bidenomics. This Committee will continue to do everything in our power to mitigate the damage by providing robust oversight, insisting on adherence to the law, and advocating for a new economic direction, one that empowers workers, expands opportunity, supports small businesses, and unlocks the limitless potential of the American workforce. With that, I look forward to the hearing today and yield to the Ranking Member. [The prepared statement of Chairman Kiley follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Adams. Thank you, Chairman Kiley, and good morning. I do want to first of all thank our witnesses for their time. I look forward to your testimoneys this morning. Since President Biden took office, the administration and congressional Democrats have made great strides to grow our economy from the bottom up and the middle out. In January 2021, the unemployment rate stood at 6.3 percent. As of last month, it is 3.6 percent. The unemployment rate has now been below 4 percent for the longest stretch in 50 years. Between 2019 and 2022, some of our lowest wage workers experienced the fastest, real wage growth they had seen since 1979. The share of working age Americans who have jobs is at the highest level in over 20 years. For women between the ages of 25 and 54, the labor force participation rate has never been higher, reaching 77.8 percent in the latest jobs report. Black Americans are participating in the workforce at a higher rate than ever. In short, workers and families are experiencing historic wage growth, historically low unemployment rates, and a booming job market, 13.2 million jobs since President Biden took office, and counting. This historic economic growth is no accident. It is the result of congressional Democrats' and President Biden's smart policy choices to support both workers and businesses. My Republican colleagues do not want to hear this evidence of a strong economic recovery. Instead, they prefer to paint a bleak picture of the economy and argue that now is not the time for regulations to safeguard the economic security of working families. Our Republican colleagues may be quick to attack the Department of Labor's Wage and Hour Division, but the most dangerous proposals for our economy are the ones coming from extreme MAGA Republicans who want to turn back the clock and reinState failed Trump era policies. For instance, the prior administration gave unscrupulous employers a free pass to misclassify workers and deny them critical protections such as minimum wage, overtime, health and safety standards, unemployment workers' compensation, and the right to organize. It is time to face the facts. Without strong safeguards in place, workers will continue to be vulnerable to misclassification, to wage theft, and other violations of their rights that wind up costing working families and all taxpayers billions of dollars. We need a Wage and Hour Division that is stronger, not weaker, and has the resources it needs to fulfill its promise to working families and law-abiding businesses. Let us be clear, our Republican colleagues might not like the economic analysis being done by the Wage and Hour Division, but each of the rulemakings being discussed today were accompanied by pages of economic analysis, including impacts on small business. No corners were cut, period. If the Biden administration's rulemakings are so catastrophic for small business, then why have Americans filed record numbers of applications to start small business in 2021 and 2022. If the sky was really falling, as some might suggest today, would there be a chilling effect on those rushing to start small businesses? Last week, the House Appropriations Committee advanced its Fiscal Year 2024 Labor H Appropriations bill that proposed slashing the Wage and Hour Division's budget by 75 million dollars. My Democratic colleagues and I strongly oppose this cut to the Wage and Hour's Division's budget, and anyone who is legitimately concerned about Wage and Hour's ability to conduct their vital mission should be as well. My Democratic colleagues and I believe that we do not have to choose between a robust economy and one that affords workers basic dignity and respect. This is why we will continue to put people over politics that support an economic recovery that grows from the bottom up and the middle out. I want to thank our witnesses again for their time. Mr. Chairman, I yield back. [The prepared statement of Ranking Member Adams follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Kiley. Pursuant to Committee Rule 8(c), all Committee members who wish to insert written statements into the record may do so by submitting them to the Committee Clerk electronically in Microsoft Word format by 5 p.m. after 14 days from the date of this hearing, which is August 1, 2023. Without objection, the hearing record will remain open for 14 days after the date of this hearing to allow such statements and other extraneous material referenced during the hearing to be submitted to the official hearing record. I will now turn to the introduction of our distinguished witnesses. The first witness is Mr. Jonathan Wolfson, who is the Chief Legal Officer and Policy Director at the Cicero Institute, which is located in Austin, Texas. The second witness is Ms. Elizabeth Milito, who is the Executive Director of the National Federation of Independent Business Small Business Legal Center, which is located in Washington, DC. The third witness is Dr. Aaron Sojourner, who is a Senior Researcher at the W.E. Upjohn Institute for Employment Research, which is located in Kalamazoo, Michigan. The fourth witness is Ms. Rachel Greszler, who is a Senior Research Fellow at the Heritage Foundation, located here in Washington, DC. We thank all of the witnesses for being here today and look forward to your testimony. Pursuant to Committee rules, I would ask that you each limit your oral presentation to a 5-minute summary of your written statement. I would also like to remind the witnesses to be aware of their responsibility to provide accurate information to the Subcommittee. I will first recognize Mr. Wolfson. STATEMENT OF MR. JONATHAN WOLFSON, CHIEF LEGAL OFFICER AND POLICY DIRECTOR, CICERO INSTITUTE Mr. Wolfson. Thank you, Chairman Kiley, Ranking Member Adams, and members of the Subcommittee. Good morning and thank you for letting me testify today. It is an honor to testify before this Subcommittee on agency responsibility to fairly analyze the costs and benefits of potential regulations and Congress' role in scrutinizing those analyses. My name is Jonathan Wolfson, I am the Chief Legal Officer and Policy Director at the Cicero Institute. Previously, I had the honor of serving as the head of the Office of the Assistant Director of Policy at the U.S. Department of Labor. I will focus my remarks on four key points. First, we need transparent, accountable, regulatory processes. Second, DOL's Wage and Hour Division is not fully evaluating the likely outcomes of its newest rules. Third, DOL is improperly using past guidance as evidence that the public is already on notice of its new regulations. Finally, Congress has an ongoing role to play to reign in DOL and other agencies to ensure proper constitutional balances of power. Regulatory agencies hold a unique role in our constitutional republic. They implement and enforce legislation passed by Congress and signed by the President. They play a quasi-legislator role filling in the blanks where statutes leave things unclear, but unlike legislators, regulators can only act under the authority Congress has given them, and they are not accountable to voters if they write bad regulations. In light of these challenges, past Congresses and Presidents have created a robust scheme of regulatory processes that must be followed. These processes encourage transparent rulemaking. Transparency means clearly articulating the need for a proposed or final rule, providing the legal basis for the rule, the pros and cons of the rulemaking, including the estimated cost and real benefits expecting to be incurred. This allows the public to review the proposed regulations, submit comments, and fully participate in the rulemaking process. Even when the agency opts to make law with guidance that circumvents the real purpose of the rulemaking process. When they dismiss criticism or misconstrue research to paint a more favorable picture of the process, the entire process will breakdown. The regulatory process protects the public from a system that would let unaccountable bureaucrats make laws, and Congress should do everything in its power to maintain these protections, even if those protections wind up slowing regulator changes that Members of Congress or their constituents might prefer. The Wage and Hour Division has issued multiple proposed rules over the last year and a half. Generally, they argue that the costs of these regulations are low, and that the benefits would far exceed the cost. Unfortunately, DOL is failing to fully evaluate the costs and benefits of these rules, which limits the opportunity for the public and Congress to decide whether and how to comment. For example, in the independent contractor proposed rule, DOL claims a benefit because some current independent contractors will be reclassified as employees but fails to acknowledge that many other independent contractors will have their contracts canceled, as exactly what happened when California passed AB5. In the Federal contractor minimum wage final rule, DOL rejected a comment from Chairwoman Foxx and Representative Keller about the disemployment effects from a higher Federal contractor minimum wage, even though the Department admits that the result of their proposal would depend on the size of the increase in the minimum wage. If you take the Department's own calculation into account, you will see a reduction of between 39,000 and 210,000 jobs among Federal contractor employees. In sum, the Department's analysis to highlight the benefits and ignore the costs makes it more difficult for citizens to evaluate regulations, and it also greatly hinders Congress' oversight responsibility. Finally, Congress far too often is in a situation where agencies use guidance documents instead of going through a full rulemaking, but uniquely the Department of Labor is now claiming that current guidance documents are actually the law, and therefore they do not have to evaluate the costs and benefits of an agency implementing and finalizing those guidance documents as if they are the law. What can be done? In light of these challenges, Congress can and should take three steps. First, Congress should pursue oversight to ensure that agencies stay within their authority and follow every required regulatory process. Congress must intervene if the executive branch tries to alter the process and make it easier for a regulator to ignore costs or exaggerate benefits. Second, Congress should write clearer and more detailed laws, and add greater detail to statutes to leave less room for agency interpretations that can have a dramatic effect on the economy. Finally, Congress may want to consider its own regulatory analysis body to evaluate significant regulations before they become legally binding. Complaining about overly burdensome regulation written by unelected bureaucrats is easy, but the American people need good regulations that are put in the most cost-effective manner possible. They need the opportunity to participate in the process and need legislators who will write clear laws and step in when agencies exceed their authority. Thank you so much for having me. I look forward to any questions you might have. [The prepared statement of Mr. Wolfson follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Kiley. Thank you very much. I will next recognize Ms. Milito. STATEMENT OF MS. ELIZABETH MILITO, EXECUTIVE DIRECTOR, NATIONAL FEDERATION OF INDEPENDENT BUSINESS (NFIB) SMALL BUSINESS LEGAL CENTER, WASHINGTON, D.C. Ms. Milito. Thank you. Good morning, Chairman Kiley, Ranking Member Adams, and members of the Committee. Thank you for inviting me to participate on behalf of the National Federation of Independent Business. NFIB represents nearly 300,000 small and independent businesses nationwide. It goes without saying that regulations often impose heavier burdens on small organizations than on big ones. Small businesses struggle to decipher overlapping, and sometimes even conflicting Federal, State, and local employment and labor laws. Added to the stress of comprehending the laws is the cost of implementing the laws. Workplace regulatory compliance in particular costs small business much more per employee than it costs larger businesses. The Regulatory Flexibility Act, a bipartisan law passed in 1980 and signed by the President Jimmy Carter, recognizes that regulations need not be uniform to be effective, and it requires agencies when appropriate to tailor rules to the size and resources of those affected. The intent of the RFA is clear, when promulgating regulations, Federal agencies must consider and minimize the impact of rules on small businesses. However, in the 40 plus years since the RFA became law, agencies have found ways to disregard to bypass many of the RFA's requirements. In fact, NFIB's small business legal center recently analyzed the Small Business Administration Office of Advocacy's comments letters over a 2-year period to Federal agencies, and found significant non-compliance with the RFA. In these letters, the Office of Advocacy highlighted 28 instances where agencies failed to adequately examine the economic costs of regulations, and disregarded RFA requirements to examine alternatives to regulation, or the indirect costs of regulations. The Department of Labor has been called out by Advocacy as a perpetual RFA violator, for improperly considering the economic impact its rules will have on small businesses. For instance, in proposing the employer independent contractor rule, which Mr. Wolfson also just referenced in 2022, advocacy observed that, ``DOL's initial regulatory flexibility analysis is deficient for this rule. DOL significantly underestimates the economic impacts of this proposed rule on small entities at less than $25.00 annually per business. ``Small businesses told Advocacy that they are very confused on how to classify their workers and comply with DOL's regulations. DOL's proposed rule may be detrimental and disruptive to millions of small businesses that rely upon independent contractors as part of their workforce.'' Congress should take steps to ensure that DOL considers small businesses more seriously during the regulatory process, as required by the RFA. In my written testimony, I outlined a handful of policy changes that NFIB believes would improve Federal rulemaking to better account for the needs of small businesses. While these recommendations will not fix all that is wrong with DOL's regulatory process, they are a good starting point, and will encourage regulators to at least pause and think about the real-world impact of their regulations. Small businesses are under incredible pressure to ensure that they provide safe and fair workplaces for their employees. They are competing with big businesses for the best workers out there. The small business owners who NFIB represents, work hard to do what is right, but their informal and unstructured nature and more limited financial resources means that they sometimes require greater flexibility in creating policies and solutions. Our members concerns are captured in five principles that NFIB frequently asks lawmakers and regulators to remember. One, small businesses are half of the U.S. economy. Two, one size rulemaking does not fit all. Three, small businesses largely do it yourself with compliance. Four, assistance with compliance is more valuable than punishment and enforcement. Finally, five, listen to small businesses before issuing commands. Adherence to requirements of the Regulatory Flexibility Act would go a long way to addressing NFIB's five principles, thereby allowing small business owners to expand, contribute to the national economy, provide fair faith, and fair workplaces, and remain employers of choice in their community. I appreciate your time and attention to these concerns. Thank you again for providing me the opportunity to testify on behalf of small businesses. [The prepared statement of Ms. Milito follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Kiley. Thank you for your testimony. I will now recognize Dr. Sojourner. STATEMENT OF DR. AARON SOJOURNER, SENIOR ECONOMIST, W.E. UPJOHN INSTITUTE FOR EMPLOYMENT RESEARCH, KALAMAZOO, MICHIGAN Mr. Sojourner. Thank you, Chairman Kiley, Ranking Member Adams, and members of the subcommittee for the invitation. I am a senior economist at the Upjohn Institute for Employment Research and a former senior economist at the Council of Economic Advisors during the Trump and Obama administrations. Improving workers job quality enough to attract potential workers from out of the labor force is a key challenge and strategy for continuing to grow our economy. Vigorous, even- handed enforcement of labor standards by the Wage and Hour Division can help. The US has enjoyed the strongest economic growth of any major G7 economy coming out of the pandemic recession with the fastest real GDP growth. Our core inflation rate is now lower than any other G7 economy's rate, so inflation is falling, even as we add jobs quickly. The employment rate of Americans in our prime working years is at its highest level in over two decades. Employment rates are now about the same, or higher, for every age group of Americans than before the pandemic, except for senior citizens. Adjusting for inflation, average hourly wages are higher than before the pandemic, and wages are growing faster than prices. Employers are seeing a lot of profitable production opportunities out there, and workers are seeing a lot of improved earnings opportunities. Well-functioning rules for the labor market will cement the improvements we have made and deprive law breaking employers of unfair competitive advantages they use to prosper at the expense of workers, law abiding employers, and all taxpayers. Violating wage and hour law currently pays, and employers do it because enforcement is too weak, narrow, and unreliable. Economist Anna Stansbury of MIT's Sloan School of Management analyzed the extent to which employers have an incentive to comply with wage and hour laws. She compared the extra profits they can make through noncompliance against the expected costs they face from potential sanctions. Given typical penalties, cheating would be profitable unless the probability of violation detection exceeds 78 percent. The expected probability is likely much, much lower than that because there are well over 100,000 workers for every enforcement staff for the Wage and Hour Division. Many firms avoid paying overtime wages by exploiting an exemption in Federal law for employees classified as executives, who have a salary above a prespecified threshold. Studying millions of job listings, a team of economists found that salaried positions with managerial titles increased almost fivefold when you crossed that threshold. An employer might call a front desk assistant a manager of first impressions, and then not pay them overtime for instance. On each strategic manager hired, employers are avoiding an average of 14 percent of their overtime expenses. Many employers, large and small, are doing this, and it is just one example of a larger pattern. Another example comes when employers misclassify employees as independent contractors. A firm can save 15 percent to 30 percent of their labor costs by doing this. An analysis I did for the DC Attorney General's Office found that when construction employers misclassify their employees as independent contractors, they stop paying into the workers' comp system. That gives them a 5 percent cost advantage. They stop paying into the unemployment system that gives them another 5 percent cost advantage. They stop paying the employer's contribution to social security, to Medicare, to Medicaid systems. That is another 7 percent cost advantage. They stop paying overtime after 40 hours of work, another couple percentage points. They stop ensuring they pay an hourly wage above the minimum. That is a big deal for some employers. All those advantages add up, and to a big, unfair competitive advantage, the losses for workers, for increased financial burdens on other taxpayers who have to make up the difference. When law-abiding employers are squeezed out of business opportunities by competitors that illegally misclassify employees, they feel pressure to cut corners, and may start misclassifying themselves. It can spread from a few bad apples to the become a sector standard practice. Attempts to misclassify employees as contractors undermine the fundamental right of American workers. Congress granted these rights to employees. Denying employees that status attempts to push them outside the circle of labor standards, and DOL's current proposal to move back to the Supreme Court- approved, six factor economic realities test that was used for decades to distinguish who is in business from who is an employee will strengthen the labor market and the economy. It will improve job quality and shared prosperity by reducing incentives to excluding workers from employment rights and engage in a race to the bottom. Thank you. [The prepared statement of Mr. Sojourner follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Kiley. Thank you very much. Our final witness is Ms. Greszler. THE STATEMENT OF MS. RACHEL GRESZLER, SENIOR RESEARCH FELLOW, THE HERITAGE FOUNDATION, WASHINGTON, D.C. Ms. Greszler. Good morning and thank you for the opportunity to testify today. I would like to discuss four rules of the Department of Labor's Wage and Hour Division, each of which relies on flawed economic analysis, and will likely impose significant consequences. My written testimony provides greater detail as these rules exceed over 300 pages in total. First, the Division's analysis of the tip to minimum wage rule appears oblivious to how small businesses operate, and it is unreasonably dismissive of stakeholder's legitimate concerns. The tipped rule requires employers to track a minutia of employee's actions, and to classify those into three indistinct buckets. For example, a server making a salad must be paid the regular minimum wage, while a server putting dressing on a salad can be paid a tipped wage. A server who wipes up a spill would be paid different rates depending on the timing and location of that spill. Short of employers purchasing sophisticated payroll systems to classify hundreds of different actions, and then installing AI monitoring system to track employees' actions, compliance is likely impossible. The second rule increase the minimum wage for Federal contractors to $16.20 per hour as of this year. In its analysis the Division acknowledged, and then it ignored something called spillover effects, claiming that it could not estimate such effects, yet the Division cited CBO analysis that provided an easy way for the Division to calculate those effects. Then the Division effectively refuted the purpose of a regulatory analysis, claiming that it did not need to include spillover effects because the rule did not mandate those to occur. The Division also failed to consider how its minimum wage rule will disproportionately hurt workers and employers and lower cost workers because $16.00 per hour in Mississippi is like $37.00 an hour minimum wage in D.C. Minimum wage increases also have consequences for workers that the Division failed to recognize, such as lost jobs, lost health insurance, fewer hours, and irregular scheduling. Third, is the rule regarding Davis-Bacon Act, or DBA wage rates. Both the GAO and the Inspector General have criticized the Division's calculation of DBA rates for relying on unscientific methods, and the proposed rule exacerbates those problems. For example, a scientifically sound sample size has at least 30 observations. The DBA's proposed rule would cut the minimum sample size down from only six today to a mere three observations. When assessing the costs, the Division estimated that just one component of the DBA rule would increase compensation by $7,300.00 for each affected worker, but then it claimed it could not extrapolate that figure. It could have. For example, if just 10 percent of construction workers were affected, employer costs would have increased by $876 million. The DBA rule also fails to acknowledge how it will further exclude small businesses, and 83 percent of construction workers who are not unionized from participating in Federal construction projects. Moreover, the DBA rule would further drive-up taxpayer costs, add to inflation, and exacerbate labor shortages, none of which the Division acknowledged. Finally, in redefining how independent contractors and employees are classified, the Division's IC rule would create tremendous confusion and uncertainty for millions of businesses and upwards of 50 million Americans who perform independent contract work. For example, while most employers currently consider just two factors when determining a worker's status, the rule requires that the consider at least six factors, and a number of possible combinations that can lead to a determination would jump from 18 today, to 256. That math is irreconcilable with the Division's claim that the IC rule provides more consistent and clear guidance. On costs, the Division estimated only $25.00 in costs for small businesses, and $5.00 in costs for workers to familiarize themselves with the 58-page proposed rule. It provided no consideration and no estimate of at least seven other significant costs that would almost certainly total billions of dollars. Consequently, the proposed IC rule will hurt workers, employers, and consumers. It will take away income opportunities from parents, caregivers, and individuals with disabilities who rely on independent contracting for the flexibility that it provides. It will hurt small businesses that rely on contractors to compete with bigger companies, and it will hurt lower income families who do not own cars, and rely on contractor-based apps for transportation, and for grocery and diaper delivery. To prevent the Division from enacting economically destructive rules based on their flawed regulatory analysis, Congress should consider passing legislation to further specify its intent under the Davis-Bacon Act, and the Fair Labor Standards Act. Thank you. [The prepared statement of Ms. Greszler follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Kiley. I thank the witnesses for their testimony, and under Committee Rule 9, we will now question witnesses under the 5-minute rule. Mr. Grothman is recognized for 5 minutes. Mr. Grothman. We will start out with Ms. Milito and the independent contractor changes. Could you give me some examples of ways in which people work as independent contractors right now, and will not be able to if this rule goes into effect? Ms. Milito. Yes. Thank you for that question. I am coming at it from the perspective first, if I can, with my hat on representing small businesses that use independent contractors, and rely very much on them for finite projects, like for instance, take a small law firm that uses an IT person coming in maybe once a month to maintain their website and use their IT. On the flip side, you have the IT person who has their own business, and who services maybe a lot of law firms and accounting firms in the town there, who under the DOL's proposed rule would now question whether or not they would be able to continue as an independent contractor. The confusion over the classification, I mean, it hits both sides. The business owners that rely very much on independent contractors, and just cannot afford to take on a full-time employee, another employee on their payroll, but at the same time you have the business owners, the small one shop person who wants to go out and continue to work and do their own thing, and be their own boss, and have their own business there. It cuts both ways and would be very challenging for small businesses. Mr. Grothman. Can you give me examples in which people who want to work more and make more money benefit from being independent contractors? Ms. Milito. Where they benefit from being independent contractors? Yes. When they can go out and work extra hours, work on weekends, take on added work, and some of them may start out as an employee at a firm, and then you know, they decide you know what, I do not want to just work for one law firm. I want to go out and work for a lot of different law firms. I can make more money. I can do more, I can be more creative. I can be my own boss. I do not have to--I can work the hours I want to work. Mr. Grothman. If my goal is to make $100,000.00 a year, I may benefit by the independent contractor designation. It may give me more freedom to achieve my economic goals. Is that right? Ms. Milito. That is correct, and you can do it on your own time with more flexibility too. Mr. Grothman. OK. Ms. Greszler, let us talk about minimum wage a little bit. If we raise the minimum wage to $15.00 an hour what type of person is going to be hurt? By that I mean which type of person will be less likely to be employed? Ms. Greszler. Minimum wage is not meant to be a career wage. The reason that we have minimum wages, or lower wages, is it is a steppingstone. Who do you hurt? You hurt the people who are just starting out in their careers. You hurt individuals who have disabilities, somebody who might have a criminal record, somebody who has come here and doesn't yet have strong English-speaking skills. The problem with the minimum wages is it hurts the workers at the bottom end of the career ladder who are trying to get that experience to climb up. Mr. Grothman. OK. In other words, if I had a criminal record, and in some states, including Wisconsin, it is against the law to discriminate on the basis of a criminal record, but people do. We know that. If I have a record and I want to get back in the workforce, it is important for me to find an employer who will take a chance on me. You are saying going to $15.00 on minimum wage will specifically harm the type of people with a spotty record? Ms. Greszler. That is one of the groups it will harm. Mr. Grothman. Right. How about older people? I always kind of wonder, you know, if you are 70 years old and want to get back in the workforce, a lot of people, they balk at hiring somebody who is 70 years old. Will raising the minimum wage to $15.00 an hour, do you think that will say specifically harm older people? Our seniors, kind of targeting them, making it more difficult for them to find jobs? When you are dealing with seniors, of course, you are dealing with people who already get social security, so they do not have to make 40 grand a year on the job. Ms. Greszler. Yes. I think it would harm them because there might be some discrimination in thinking they would not be as capable as a younger worker, and even more so the independent contractor role would hurt those older Americans who might not want to be participating in a 9 to 5 job anymore, and might not be able to, but are able to work if it is on their own terms, and if they can be their own bosses. Mr. Grothman. They are a little bit slower, right? Let us face it, if you are 72, 73 years old and want to work, you are a little bit slower. Ms. Greszler. They might be physically slower, but they might be sharper as well. Mr. Grothman. OK. OK. I will ask Ms. Milito one more time on the independent contractor thing. Can you give examples in businesses in which somebody by being an independent contractor, say in the sales area, financial services. Is that an area where people right now are independent contractors and enjoy the freedoms of that, and quite frankly are sometimes very financially successful? Would you comment on the independent contractor and the people in financial services? Ms. Milito. Yes. That is a great point. In some industries, like for instance, in the insurance industry where some insurance agents are independent contractors, so you know, they are affiliated with---- Mr. Grothman. Some of them are making over--are making six figures. A lot of them are making six figures. Chairman Kiley. The gentleman's time has expired. The witness can answer. Ms. Milito. Yes, yes, very much. Mr. Grothman. They are going to lose that opportunity. Well, that is too bad. OK. Thank you. Chairman Kiley. The Ranking Member, Ms. Adams, is recognized for 5 minutes. Ms. Adams. Thank you, Mr. Chairman, and again thank you to the witnesses. You know, Republicans talk a lot about the market, but it is really important that we have healthy competition in the labor market. Mr. Sojourner, you published a paper recently that found higher labor market concentration led to lower wages. Why are competitive markets so crucial to ensure that workers are paid fairly for their labor? Can you respond? Mr. Sojourner. Yes. Thank you. That is a great question. Yes, competition between employers is crucial for a healthy labor market, and for workers to have strong earning opportunities. The labor market by its nature, a lot of things push it against competition because where you go, you have to work, in a physical place often. Labor markets can be very local, and you might have a lot of skill in a particular area, and there might not be a lot of employers who need that skill in that local area. We think about the labor market as one big market, but actually it is a lot of little markets. They can be quite thin and noncompetitive. More competition gives workers power to achieve improvements in their job quality either by negotiating improvements with a credible threat to take a better job outside, or by actually taking one of those better jobs outside, and leaving them. Ms. Adams. Let me move on. I have got a series of questions for you. Mr. Sojourner. Sure. Ms. Adams. It is really not enough to just have folks with bachelor's degrees doing well in the economy, but in the same paper you found that employees were posting job vacancies for higher skills, but lower wages in less competitive local job markets. Why do these employers in more concentrated labor markets think that they can get away with hiring higher skilled workers for less, and how do we make sure that all workers have access to good paying jobs? Mr. Sojourner. Thank you. Yes. Again, the employers in thin labor markets where there is not a lot of competition, where there are maybe a few big employers who are the only place you can work with those set of skills. There is not enough competition. There are not enough potential employers to counteroffer, and so those employers have some wage setting power. It is not a very competitive market, and they can underpay workers below what they produce, and we should try to get more competition in labor markets, and you know, restrict non-compete agreements, do more antitrust enforcement, encourage more entrepreneurship, all these things contribute. Ms. Adams. The competition would increase availability then. Let me ask you--before I do that, let me just say that an analysis of the construction industry revealed that 12.4 percent, or 20.5 percent of the workforce on an average month of 2017 were misclassified as independent contractors, or working off the books, and putting law abiding employers at a disadvantage. Mr. Chairman, I would like to enter a letter from the Construction Employers of America supporting actions taken by the Wage and Hour Division to level the playing field if I may do that. Chairman Kiley. Without objection. [The information of Ms. Adams follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Ms. Adams. Thank you. Dr. Sojourner, you participated as a working group member for the job quality measurement initiative in which the Department of Labor solicited input from external partners. When you think of what it means to have a good job, what principles do you think are important, and how does that inform how you think of the health of today's labor market? Mr. Sojourner. We have to pay attention to what workers value, and measure it, monitor it, and try to make sure they are getting it. They care about wages. They also care about fringe benefits, health and safety at work, control over how they do their work, their schedule, their location, their pace. These things tend to move together, but they are not always the same, and these administrative actions can help promote fair competition that make sure workers get the things they value, and they are entitled to. Ms. Adams. Thank you, sir. What do you say about the implications of deregulation for our workers, and how does not enforcing the law impact workers' loss in pay? You have got 10 seconds. Mr. Sojourner. When the rules do not get enforced and are ignored, competition gets rough and people get hurt, and it is not fair. Thank you. Ms. Adams. Thank you, Mr. Chairman. I yield back. Chairman Kiley. Ms. Stevens is recognized for 5 minutes. Ms. Stevens. Thank you, Mr. Chair. I find this hearing very interesting in part because we are on the heels of a pretty historic, sweeping set of legislative victories. One was the bipartisan Infrastructure Act, and Dr. Sojourner, is it true that the bipartisan Infrastructure Law that was signed in 2021 has yielded dividends to our economy and created jobs? Would you agree with that, Dr. Sojourner? Mr. Sojourner. I would. Yes. Ms. Stevens. Yes. Mr. Sojourner. Yes. Ms. Stevens. We have prioritized unionized labor work at the Davis-Bacon wage, right? Mr. Sojourner. Yes. Ms. Stevens. Is it true that we are in a very tight labor market right now? Mr. Sojourner. Yes, that is true. Ms. Stevens. What do you suppose is the reason for that tight labor market? Mr. Sojourner. We have a lot of strong investment by the Federal Government in recent years that have said we are going to lower the cost of doing business by lowering transportation costs, making energy more affordable, and you know, subsidized investment in local manufacturing and American manufacturing. Ms. Stevens. Manufacturing is on the rise. Mr. Sojourner. It is. Ms. Stevens. In fact, we have more manufacturing job growth than any other time in a President's service, which is great to see. We know that 13.2 million jobs are being created, but for some reason we are having a hearing about cutting corners at the Department of Labor, and its costs to workers. I am just very confused about that as somebody who has regular townhalls, and I do this program called Manufacturing Monday. I regularly sit down with small businesses. I think I am one of the only Members of Congress that goes and visits the small businesses in my district. The No. 1 thing I hear, I do not hear anything about the Department of Labor, but I hear about the need for skilled job training. I hear the push for STEM education, and increasing our skilled trade workforce. The other thing I wanted to ask you about, Dr. Sojourner, is what do we know about the data that we have about the prevalence of worker misclassification? I know that data has been spotty over the years. Mr. Sojourner. Yes. It is difficult to measure. This is an illegal behavior, and so it is hidden. Unemployment insurance agencies in different states have done audits of random representative employers, which is kind of the best way to get a sense of the prevalence, so they invest in actually going carefully through and assessing it. You can find estimates of 20 percent in construction, and you know, things of that magnitude, but we do need better data. Ms. Stevens. How would more current and comprehensive national data help us combat employee misclassification, which we do know is contributing to wage theft? Mr. Sojourner. Yes. I think investing in systematic random audits, just to make sure that they do not have to be large, they can be quite small, and employers can be compensated for going through them to alleviate that burden, but that gives us a sense of how prevalent these things are, and in different parts of the economy. Ms. Stevens. Any other points that you can address about the consequences for workers when they are misclassified? Mr. Sojourner. I think a lot of workers do not appreciate the value of social insurances until they need them. Appreciate the value of workers' comp system. Young workers think they are invincible until you need it. Until you get laid off, you do not need unemployment insurance. People tend to undervalue insurances. Ms. Stevens. What role does the Wage and Hour Division play in helping workers by reducing instances of misclassification? Mr. Sojourner. They have inspectors who engage with employers and workers, and followup on complaints, when workers think their rights are being violated, who actively monitor the economy and look for evidence that the laws are being violated, and help get workers paid the wages that they earned. Ms. Stevens. We are helping workers get paid. Thank you. Mr. Sojourner. That is it, that is it. Ms. Stevens. Thank you, Dr. Sojourner. With that, Mr. Chair, I yield back. Mr. Sojourner. Thank you. Chairman Kiley. Chair Foxx is recognized for 5 minutes. Mrs. Foxx. Thank you, Mr. Chairman. I thank our witnesses for being here today. Ms. Milito, in March 2022, the Wage and Hour Division, WHD, published a proposed rule to update the Davis-Bacon and related acts regulations. The proposed rule is more than 100 pages long, contains more than 50 significant changes, and by DOL's own admission is one of the most sweeping overhauls to the Davis-Bacon program in decades. WHD, absurdly estimates that its proposed rule will cost businesses $78.97 to comply annually, including 1 hour to read the regulations, and one-half hour to implement the regulation. Do you think this estimate accurately captures the amount of time and resources necessary for a small business to comply with the sweeping overhaul of the Davis-Bacon regulations? If not, would you agree that DOL has an obligation to assess the cost of compliance accurately for small businesses before issuing a final rule? Ms. Milito. Thank you, Chair Fox, for that question, and I think in response it would be a yes and a yes, but I will go on a little bit. Absurd is a great way to characterize DOL's regulatory analysis of this, and I have got some numbers here too. The whole MPRM, including the appendixes, was actually 432 pages, or 118,450 words. As you, I think said, they estimated regulatory familiarization would take 1 hour. I think if you are reading 118,000 plus words would probably take over 8 hours at most. The other thing too, with regards to Davis-Bacon, this is going to hit small businesses the most. 82 percent of all construction firms employ under 10 employees. Construction companies that employ fewer than 100 employees comprise 99 percent of construction firms in the U.S. I think DOL should withdraw the rule because their analysis was so flawed. Thank you. Mrs. Foxx. Well, thank you very much. Ms. Greszler, DOL's tipped minimum wage regulation imposes an extremely complicated and cumbersome timekeeping mandate on employers that requires them to track their workers tasks minute by minute. With such onerous requirements, is it feasible for a small business owner who runs a restaurant to comply with such unreasonable timekeeping requirements? Ms. Greszler. No. I do not think it is reasonable at all, and I think that the Division did not consider the stakeholders who were giving them examples. For all of us here today, you are members, you run offices. Consider what it would be like if each of your staffers had to be classified into the work that they are doing to be direct constituent services, constituent services supporting, and not related to constituent services down to every minute they are doing that. That is impossible for an employer to know what each individual is doing, and so the ways that they will respond will directly hurt workers. Just one of those could be to automate more jobs so that you do not have to deal with tracking actual people. Mrs. Foxx. Well, thank you again. Mr. Wolfson, numerous independent workers have raised concerns that the net effect of DOL's independent contractor proposed rule will be to jeopardize their ability to continue operating their own businesses. In contrast, DOL provides an extremely low estimate of the cost of regulatory compliance, and completely fails to provide an analysis of the economic impact of the proposed rule on the small businesses. Can you discuss some of the flaws in DOL's economic analysis of the independent contractor proposed rule? Mr. Wolfson. Thank you, Chairwoman Foxx, it is a great question. I think what is interesting is the Department of Labor tries to have it both ways. They try to say that misclassification is a huge problem, but there is not going to be a lot of change in people's status, so there really will not be a lot of cost. You cannot have it both ways. Either the data that Dr. Sojourner is citing is accurate and there are millions of workers who are misclassified, who under the new Department of Labor rule would suddenly either lose their opportunities to work in the job they're working, or would be reclassified as employees, which would have massive costs for the businesses. Whether those workers would keep their job becomes a big question. Most of these workers are properly classified and there is not a big change, in which case there would not be a big cost. If there would not be a big cost, then why do we need to go through a process of changing the regulation? I think you are exactly right. The Department of Labor needs to decide to admit that there are going to be significant costs. They are going to need to look at the data from California with AB5 where millions of workers were told--tens of thousands of workers were told by companies from all ends of the political spectrum, the New York Times told freelance photographers and writers in California that they were no longer going to work with them unless they left the State of California. That was not a bunch of far-right extremists who said we are not going to work with you. These were people who had very similar ideology to the people in California who were coming up with those rules, saying we cannot work with you because we are not willing to live under those rules. These are the things the Department of Labor should have considered when they put their rule together. Now the Department of Labor can evaluate this if they decide to try and finalize the rule, but they should have, and they had an obligation to provide this information in the proposed rule, and their failure to do that, as I mentioned in my written testimony, really breaks down the required transparent process that is supposed to exist, so everybody could evaluate whether it is a good or a bad proposed rule. Mrs. Foxx. Thank you very much. I yield back. Chairman Kiley. Mr. Scott is recognized for 5 minutes. Actually, we will go to Mr. Burlison first, then Mr. Scott. Mr. Burlison. Thank you, Mr. Chairman. Mr. Wolfson, I want to continue on that line of discussion about the transparency in that rulemaking process. In your testimony, you said that the Department of Labor evaded transparent rulemaking and public scrutiny for its regulatory actions. Can you elaborate how exactly did they evade that? Mr. Wolfson. Yes. There are two different ways that the Department of Labor, or any Federal agency can go about doing it. One, is to call something guidance that is actually a regulatory change. You claim that you are just putting out some assistance to companies on here is how you are supposed to comply with regulations that exist. If that guidance actually creates new obligations then that should go through the full notice and comment process. There was a big fight about this. President Trump signed an executive order that President Biden got rid of. The Department of Labor was required under that executive order to post all of its guidance documents online, the Wage and Hour Division hasn't posted a single document on that guidance portal in 2023. Mr. Burlison. For anybody that might be a nerd and watching C-Span, the distinction between a guidance document, and the rulemaking process is significant because of what has to be done to actually pass a rule or law, versus what is done in guidance. Correct? Mr. Wolfson. That is exactly right. A guidance document can be written literally in 5 minutes on an email sent out to the whole world. There is no obligation that that go through the Administrative Procedures Act process. To get that struck down by a court is really challenging. Mr. Burlison. The assumption is that these are harmless, that they are essentially creating best practices, but the actual outcome is you have State agencies who are charged with enforcing some of these guidance documents, and so it ends up becoming, in effect, law. Mr. Wolfson. Absolutely. Unfortunately, some of these guidance documents we found when we were evaluating the guidance documents at the Labor Department, existed in one place and one place only. They were in hard copy in the U.S. Department of Labor's library. That would mean that if you are a small business in Wisconsin or in Tennessee, you would have to send a lawyer to Washington, DC, read through hundreds of pages of paper documents to figure out whether you are, or are not in compliance with this kind of hidden set of laws. Mr. Burlison. Thank you, Mr. Wolfson. Ms. Greszler, is that right? In your testimony you explained in the proposed rulemaking for the Davis-Bacon Act, they significantly underestimated the costs to businesses, and it appears that it is because we now have new businesses that are being lumped into the Davis-Bacon Act, correct? These are suppliers, manufacturers, so if you are building a building, and the truss company, the company that makes trusses is supplying those, they suddenly have to now comply with the rules of the Davis-Bacon Act? Ms. Greszler. Correct. It is including anything associated with that construction into it, and so they are saying we know that this will drive up costs, maybe by as much as $7,300.00 per worker, from one small component, maybe by a couple thousand for another of the 50 components, b ut we are not going to extrapolate that because we do not know how many workers it will affect. They do know that already it is affecting 1.2 million workers that are governed by these wage rates, so they could have at least provided analysis to say here is a range of how many it could affect, and they failed to do that. Mr. Burlison. The increased costs, who pays that increased cost? Ms. Greszler. Well, the Division does point out that a lot of these costs will just be passed on to the Federal Government. Mr. Burlison. To the taxpayer. Ms. Greszler. The taxpayers, who are behind this, but it also is going to result in reduced quality of service and quantity of service because you have more money that is having to be paid when Congress has allocated a certain amount of spending. A prior Heritage Foundation analysis is estimated that the DBA Act as it stands today, without these increased costs, is already driving up Federal construction costs by 10 percent. Mr. Burlison. Sadly, it benefits some areas more than others. I come from a deeply red district, where labor union prevalence is very small, and yet if you talk to employers they sometimes will turn down contracts because it completely disrupts their normal business operations with their employees, throws them into situations where employees get paid dramatically more. Then what happens is those employees then take a few, a couple months off, right? Ms. Greszler. Yes. This is a deterrent. Over 80 percent of construction companies are not unionized. 83 percent of construction workers are not unionized. To have to comply with those laws. It is difficult, and then further---- Mr. Burlison. Is it safe to say that the taxpayers get less for their money under Davis-Bacon? Ms. Greszler. Exactly, yes. Mr. Burlison. They get less schools, less post offices, less roads under this? Mrs. Greszler. Correct. Mr. Burlison. Thank you. Chairman Kiley. Mr. Scott is now recognized for 5 minutes. Mr. Scott. Thank you, Mr. Chairman. Dr. Sojourner, we have heard a lot of complaints about this economy and how bad it is. Do you know the No. 1 and No. 2 best job creating years in the history of the United States? Mr. Sojourner. I am going to go with 2021 and 2022 maybe? Mr. Scott. The first year of the Biden administration, and the second year of the Biden administration, No. 1, and No. 2, best job creating years in the history of the United States, and that the unemployment rate has not been under 4 percent as long as it has in about 50 years? Mr. Sojourner. That is correct. Mr. Scott. Um-hmm. Is that a bad economy? Mr. Sojourner. It is a very strong economy. Mr. Scott. Thank you. When we considered the minimum wage about 2 years ago, we found out that there is no county in the United States where a full-time minimum wage worker could afford a modest two-bedroom apartment. Ms. Greszler, you indicated people who would be hurt by an increase in the minimum wage. congressional Research Service had issued a report at that time that showed there would be no job loss. Do you have studies that show job losses as a result of the increase in the minimum wage? Ms. Greszler. Yes. The overwhelming economic literature suggests that increases in the minimum wage reduce the number of jobs. A recent CBO study in 2019 that looked at a $15.00 minimum wage estimated that it would cost millions of jobs. That is just the direct impacts. There are also impacts for the workers. Mr. Scott. The most recent studies in that analysis showed no loss in wages. Is that right? Ms. Greszler. Some studies have shown that actually the people who do also receive a higher wage end up having less income. There was a study that looked at California and Texas and compared similar jobs. One experienced an increase in the minimum wage, and actually found that their net income for the year went down by almost 12 percent because employers reduced their hours so much, and also cut back on health insurance, retirement benefits, and led to more irregular schedules. Mr. Scott. Dr. Sojourner, are you familiar with the most recent studies on job loss and minimum wage? Mr. Sojourner. Generally. Yes. My sense of the literature is that there is evidence around zero effects on employment. There is strong evidence that on average low-wage workers gain income on net from increases. They are making more per hour. If they are losing hours. They are getting other things they can do in that time, but the disemployment effects are very small, if at all. Mr. Scott. Thank you. I think you implied, Dr. Sojourner, about the incentives for employers to misclassify employees. It is my understanding that employees are entitled to certain benefits, but independent contractors are not, like minimum wage, overtime, health and pension benefits provided by the employer, OSHA coverage, workers comp, and unemployment compensation. Is that right? Mr. Sojourner. That is exactly right. EEOC, antidiscrimination, there is a long list. Mr. Scott. Does the Wage and Hour Division have enough staff to track people down who are being misclassified, and employers saving money by misclassifying? Mr. Sojourner. They have for each, there is about 1,000 Wage and Hour enforcement officers to cover the whole economy, which is about 156 million workers. It is well over 100,000 workers per inspector. That is very heavy odds against finding all the violations, and in fact we have a lot of evidence they cannot find all the violations. There are a lot of violations that happen every day that cheat workers out of earned income. Mr. Scott. You also mentioned violations and wage theft? Mr. Sojourner. Yes. Exactly. Mr. Scott. We need more Wage and Hour inspectors, not fewer? Mr. Sojourner. That is for you, Congress, to decide, but it is very thin, yes. I would support that. Mr. Scott. Regrettably, the budget now is contemplating cuts in inspectors, so I think we are going in the wrong direction. Mr. Sojourner. Yes. Mr. Scott. Thank you, Mr. Chairman. Chairman Kiley. The testimony from the witnesses today has been very illuminating as to the real-world impact of these rules and regulations, and how the Department of Labor is defying the will of Congress and not properly accounting for the costs of the regulations in the rulemaking process. When I hear about what has been proposed, and what has already been implemented, for me coming from California, it is like deja vu because a lot of these very harmful policies already exist in our State. That raises the question how has California fared under this regime of labor law that the Biden administration appears intent on copying? The answer is not very well. California has the second highest unemployment rate of any State, has the lowest level of wage growth of any State, has the highest level of real poverty in the entire country, some of the highest levels of inequality. I really find it difficult to understand why that is the model for this administration. Another thing that we have learned in California is that the text of a statute or regulation is one thing, but then the identity of its enforcer is another still. As bad as AB5 was, as a matter of policy, it became even more devastating in the hands of a labor secretary who is intent on enforcing it as aggressively and ruthlessly as possible, even exploiting the COVID shutdowns to enforce it even more, put more independent contractors out of work, shut down more small businesses. Of course, I have not chosen that example at random, because right now we have a policy being proposed at the Department of Labor that copies that very law, AB5, and the individual that the Biden administration wants to enforce it, is the very same person who was the Labor Secretary in California, that of course being Julie Su. Mr. Wolfson, can you shed a little light on how the identity of the enforcer matters so much in these circumstances, and what the ultimate impact of these rules is going to be? Mr. Wolfson. That is a great question, Mr. Chairman. I think that if you look at an agency that, you know, to Dr. Sojourner's point, there are a number of enforcement agents, and every one of those agents is going to look at a situation slightly differently. The problem then becomes if you have regulations that are not clear, you have guidance that is making law, that is not just providing clarity so that businesses know what they can and cannot do. Then each individual enforcement agent is empowered to decide that they do or do not like particular behaviors. So that is not helpful when you go down to the lowest level of each individual enforcement agent. It goes all the way up to the top of a department or an agency because those people have sufficient flexibility to enforce or not enforce laws that they like or don not like, or enforce it in ways that they do or do not like, then that makes it even harder for businesses to know whether they are in compliance. As Ms. Milito said, the businesses really just want to know what the rules are. When I was at the Department of Labor, we did not hear various businesses say to us, ``hey, you know, this rule is impossible to comply with.'' That was not usually the concern. It was, ``we keep getting different stories from different enforcement agents when they walk in. Can you tell us what the standard is, and then we're happy to follow it,'' because they do not want to misclassify. They do not want to steal wages from their workers, they just do not necessarily know how to keep track of all the people who are tipped and deciding whether or not at salad dressing or making the salad. Chairman Kiley. That uncertainty is a really key point. Ms. Milito, you represent small businesses and can tell us how damaging uncertainty is. Right now, we have a potentially enormous cloud of uncertainty that is going to be cast over all of the rules and regulations coming out of the Department of Labor. As the Biden administration appears intent on keeping Acting Secretary Su in that role, perhaps indefinitely, even as the Senate has not confirmed her, and her nomination has been pending for nearly 5 months. Indeed, her top supporter in the Senate, Senator Bernie Sanders, recently said she should stay in that role whether she has the votes or not. Now we have a number of stakeholders who are watching this, and I believe are prepared to challenge the rules and regulations that are issued in that situation. Could you tell us a little bit about the effect that would have on small businesses having that cloud of uncertainty? Ms. Milito. Thank you, Chair, for that question. Yes. DOL seems intent on creating more rules under the misguided thinking that more rules are going to make everything better, and that is certainly in the workplaces, and that is certainly not the case. I mean we have had a lot of conversation today about how the unemployment rate now is under 4 percent. How small businesses are competing for workers. There is no benefit in treating your workers and your employees unfairly and not having a safe workplace. More rules, however, are a wet blanket on innovation and expansion, and they add costs and anxiety in a business. They only make it harder for small businesses to comply with existing, local, State, and Federal law. It does seem, unfortunately, that we are going to have California policies transferred here to D.C., and that is very unfortunately for small business owners. Chairman Kiley. Thank you very much. Without objection, I enter into the record letters from the National Restaurant Association, and the Flex Association. [The information Mr. Kiley follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Kiley. I would now like to recognize the Ranking Member of the--oh, we have actually one more new arrival. Representative Omar, you are recognized for 5 minutes. Ms. Omar. Thank you so much. I am so proud to see a constituent testifying here today, who has dedicated his career to building a fairer, worker centered economy. It is also very refreshing to hear from the perspective of an economist with roots in the labor movement. Dr. Sojourner, thank you so much for joining us and sharing your important research. You recently conducted a study using enforcement data on workplace violations across OSHA, WHD, and NLRP that found workers with lower wages were more likely to experience labor rights violation. Why did you choose to look at workplace violations compared with wages, and what should policymakers take away from this research? Mr. Sojourner. Thank you, Representative. We looked at this because you know employers have power in the labor market, and sometimes they use that power to push down wages, and sometimes they use it to violate other kinds of rights, like health and safety violations, or violations of workers' rights to organize. What we see is that when wages rise within the labor market, violations tend to decrease. When workers have more bargaining power in the economy, they are able to push up wages, and push down rights violations. When employers have more bargaining power, they are able to extract more value from the relationship through lower wages and other kinds of changes that sometimes violate workers' rights. We just wanted to enrich our understanding of the economy. Too often we focus just on wages because they are easy to measure relatively, but other aspects of workers' experiences, like healthy and safe jobs, or you now, right to speak out freely about working conditions, are also important in their lives and in their work to try to improve their work. Ms. Omar. In that same study you also found that unions were found to decrease labor rights violations. Can you tell us how unions help in protecting workers in the workplace? Mr. Sojourner. Yes. Unions are a way for workers to have an independent voice where they do not fear retaliation because they are not alone when they are speaking up about issues that they are confronting in the workplace, and issues that they share with their coworkers often involving bad management decisions, or things like this. Instead of being alone, you have somebody standing beside you, and workers are more free, feel more empowered to speak up, to speak out publicly, to speak up to management, to speak up to enforcement agencies and they have less fear of retaliation. Yes, we can see that. If we compare companies that where in all the companies the workers wanted to unionize, but in some of them the union just lost the election compared to in other ones the union just won the election. There is nothing really that different. They all wanted to unionize. Some did successfully, and some failed. Years later, you can see that workers in those unionized work places are more likely to speak up and file complaints. Ms. Omar. I have worked in places where we had a union, and places where we did not. I could definitely see that. Dr. Sojourner, you also conducted an interesting study looking into the availability of early childhood education in Minnesota. Mr. Sojourner. Yes. Ms. Omar. You found that the average family in Minnesota lives in a location where there are nearly two children for every nearby slot of licensed capacity. Can you talk a little bit about what families had lower levels of access, and how this impacted them? Mr. Sojourner. Yes. Thank you. This is an important workforce issue too, in terms of especially equitable access to earnings opportunities for women and mothers and parents generally in the economy, having access to affordable, high- quality care is a huge barrier to work and earning for a lot of them. In Minnesota, what we found was yes, Minnesotans living in low-income communities had less access, communities of color had less access, and you know, there are moves to try to address those inequities, yes. Ms. Omar. Yes. I am sure there is a policy recommendation for us to close that gap, so thank you so much for being here today and for your work. Mr. Sojourner. Thank you. Ms. Omar. I yield back, Chairman. Chairman Kiley. I now recognize Mr. Scott for a brief closing statement. Mr. Scott. Thank you, very much Mr. Chairman, and thank you again to our witnesses for joining us in this discussion. Today's hearing reaffirms the historic progress that congressional Democrats and President Biden have made to strengthen our economy. Complaints about the economy cannot diminish the historic job growth that we've experienced in the last 2 years. When we invest in our economy and workforce, we help ensure that businesses, and working families see a return on the work they do each day. Workers should be able to go home confident that they have a government that works for them, and helps them focus on their families, instead of worrying about whether they can put food on the table, and whether they will be cared for if they are injured on the job, which they are not cared for if they are injured on the job as an independent contractor, as opposed to an employee. Moreover, our discussion reminds us that we still have more work to do, so instead of weakening protections for working families, I hope my colleagues will join us in continuing to grow our economy from the bottom up and the middle out, and continue to build on our historic job growth. Thank you, Mr. Chairman. I yield back. Chairman Kiley. Thank you very much. We have heard a lot today about how the Biden administration has exceeded its authority and neglected its legal obligations at the Department of Labor. It is only fitting, in sort of a perverse sense, that they are now doing the very same thing with the leadership of the Department. We have a nominee whose nomination has been pending for nearly 5 months. There is opposition in the Senate across party lines, Democrat, Republican, and independent, and yet the administration seems intent now on keeping the Acting Secretary there indefinitely, and is now resuming the rulemaking process. Allies of Ms. Su have tried to claim that somehow there is legal authority for this, given the interplay of the Federal Reform Vacancy Act, and the statute that created the position of Deputy of Labor Secretary. However, neither statute contemplates a situation like this. They refer to a temporary appointment, not someone who is nominated and then keeps the job even though they are not confirmed. I am again today calling upon the President to withdraw the nomination of Ms. Su, and to appoint a new Labor Secretary who will be on the side of American workers, who will take us down the path that states with the good economic growth they have had, not down the path of California; who will listen very carefully to the analysis that we have received today about these proposed rules, will take it to heart, and will come up with different rules that actually fulfill the mission of the Department of Labor to protect the rights of workers, and to be a steward of economic prosperity. If we do that then we can hopefully turn things around. Americans will see their wages rise. We will see a turn in the record levels of dissatisfaction we have right now with the economy, and we can get things back on track. Without objection, there being no further business, the Subcommittee stands adjourned. [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [Whereupon, at 11:35 a.m., the Subcommittee was adjourned at 11:35 a.m.] [all]

usgpo

2024-10-08T13:26:24.754359

BILLS

BILLS-118hr9028rh

Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2025

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9028 Reported in House (RH)] <DOC> Union Calendar No. 484 118th CONGRESS 2D Session H. R. 9028 [Report No. 118-584] Making appropriations for the Departments of Transportation, and Housing and Urban Development, and related agencies for the fiscal year ending September 30, 2025, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES July 12, 2024 Mr. Womack, from the Committee on Appropriations, reported the following bill; which was committed to the Committee of the Whole House on the State of the Union and ordered to be printed _______________________________________________________________________ A BILL Making appropriations for the Departments of Transportation, and Housing and Urban Development, and related agencies for the fiscal year ending September 30, 2025, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the following sums are appropriated, out of any money in the Treasury not otherwise appropriated, for the Departments of Transportation, and Housing and Urban Development, and related agencies for the fiscal year ending September 30, 2025, and for other purposes, namely: TITLE I DEPARTMENT OF TRANSPORTATION Office of the Secretary salaries and expenses For necessary expenses of the Office of the Secretary, $199,152,000, to remain available until September 30, 2026: Provided, That of the sums appropriated under this heading-- (1) $3,955,000 shall be available for the immediate Office of the Secretary; (2) $1,419,000 shall be available for the immediate Office of the Deputy Secretary; (3) $30,065,000 shall be available for the Office of the General Counsel; (4) $25,363,000 shall be available for the Office of the Under Secretary of Transportation for Policy, of which $7,000,000 is for the Office for Multimodal Freight Infrastructure and Policy; (5) $22,857,000 shall be available for the Office of the Assistant Secretary for Budget and Programs; (6) $5,391,000 shall be available for the Office of the Assistant Secretary for Governmental Affairs; (7) $47,188,000 shall be available for the Office of the Assistant Secretary for Administration; (8) $6,293,000 shall be available for the Office of Public Affairs and Public Engagement; (9) $2,504,000 shall be available for the Office of the Executive Secretariat; (10) $16,748,000 shall be available for the Office of Intelligence, Security, and Emergency Response; (11) $29,405,000 shall be available for the Office of the Chief Information Officer; and (12) $1,531,000 shall be available for the Office of Tribal Government Affairs; (13) $6,433,000 shall be available for information technology development, modernization, and enhancement, in addition to amounts otherwise available for such purposes. Provided further, That the Secretary of Transportation (referred to in this title as the ``Secretary'') is authorized to transfer funds appropriated for any office of the Office of the Secretary to any other office of the Office of the Secretary: Provided further, That no appropriation for any office shall be increased or decreased by more than 7 percent by all such transfers: Provided further, That notice of any change in funding greater than 7 percent shall be submitted for approval to the House and Senate Committees on Appropriations: Provided further, That not to exceed $70,000 shall be for allocation within the Department for official reception and representation expenses as the Secretary may determine: Provided further, That notwithstanding any other provision of law, there may be credited to this appropriation up to $2,500,000 in funds received in user fees. research and technology For necessary expenses related to the Office of the Assistant Secretary for Research and Technology, $50,203,000, of which $30,736,000 shall remain available until expended: Provided, That of the amounts made available under this heading, $10,000,000 shall be for the Drone Infrastructure Inspection Grant Program authorized in section 912 of Public Law 118-63: Provided further, That, notwithstanding subsection (g)(2) of such section 912, amounts made available under section 106(k) of title 49, United States Code, shall not be available to carry out such program: Provided further, That of amounts made available for the drone infrastructure inspection grant program, $1,000,000 shall be available for administrative expenses: Provided further, That there may be credited to this appropriation, to be available until expended, funds received from States, counties, municipalities, other public authorities, and private sources for expenses incurred for training: Provided further, That any reference in law, regulation, judicial proceedings, or elsewhere to the Research and Innovative Technology Administration shall continue to be deemed to be a reference to the Office of the Assistant Secretary for Research and Technology of the Department of Transportation. national surface transportation and innovative finance bureau For necessary expenses of the National Surface Transportation and Innovative Finance Bureau as authorized by 49 U.S.C. 116, $10,555,000, to remain available until expended: Provided, That the Secretary may collect and spend fees, as authorized by title 23, United States Code, to cover the costs of services of expert firms, including counsel, in the field of municipal and project finance to assist in the underwriting and servicing of Federal credit instruments and all or a portion of the costs to the Federal Government of servicing such credit instruments: Provided further, That such fees are available until expended to pay for such costs: Provided further, That such amounts are in addition to other amounts made available for such purposes and are not subject to any obligation limitation or the limitation on administrative expenses under section 608 of title 23, United States Code. railroad rehabilitation and improvement financing program The Secretary is authorized to issue direct loans and loan guarantees pursuant to chapter 224 of title 49, United States Code, and such authority shall exist as long as any such direct loan or loan guarantee is outstanding. financial management capital For necessary expenses for upgrading and enhancing the Department of Transportation's financial systems and re-engineering business processes, $5,000,000, to remain available through September 30, 2026. cyber security initiatives For necessary expenses for cyber security initiatives, including necessary upgrades to network and information technology infrastructure, improvement of identity management and authentication capabilities, securing and protecting data, implementation of Federal cyber security initiatives, and implementation of enhanced security controls on agency computers and mobile devices, $74,600,000, to remain available until September 30, 2026. office of civil rights For necessary expenses of the Office of Civil Rights, $17,662,000. transportation planning, research, and development (including transfer of funds) For necessary expenses for conducting transportation planning, research, systems development, development activities, and making grants, $21,074,000, to remain available until expended: Provided, That of such amount, $7,758,000 shall be for necessary expenses of the Interagency Infrastructure Permitting Improvement Center (IIPIC): Provided further, That there may be transferred to this appropriation, to remain available until expended, amounts transferred from other Federal agencies for expenses incurred under this heading for IIPIC activities not related to transportation infrastructure: Provided further, That the tools and analysis developed by the IIPIC shall be available to other Federal agencies for the permitting and review of major infrastructure projects not related to transportation only to the extent that other Federal agencies provide funding to the Department in accordance with the preceding proviso. working capital fund (including transfer of funds) For necessary expenses for operating costs and capital outlays of the Working Capital Fund, not to exceed $495,645,000, shall be paid from appropriations made available to the Department of Transportation: Provided, That such services shall be provided on a competitive basis to entities within the Department of Transportation: Provided further, That the limitation in the preceding proviso on operating expenses shall not apply to entities external to the Department of Transportation or for funds provided in Public Law 117-58: Provided further, That no funds made available by this Act to an agency of the Department shall be transferred to the Working Capital Fund without majority approval of the Working Capital Fund Steering Committee and approval of the Secretary: Provided further, That no assessments may be levied against any program, budget activity, subactivity, or project funded by this Act unless notice of such assessments and the basis therefor are presented to the House and Senate Committees on Appropriations and are approved by such Committees. small and disadvantaged business utilization and outreach For necessary expenses for small and disadvantaged business utilization and outreach activities, $5,967,000, to remain available until September 30, 2026: Provided, That notwithstanding section 332 of title 49, United States Code, such amounts may be used for business opportunities related to any mode of transportation: Provided further, That appropriations made available under this heading shall be available for any purpose consistent with prior year appropriations that were made available under the heading ``Office of the Secretary-- Minority Business Resource Center Program''. payments to air carriers (airport and airway trust fund) In addition to funds made available from any other source to carry out the essential air service program under sections 41731 through 41742 of title 49, United States Code, $423,000,000, to be derived from the Airport and Airway Trust Fund, to remain available until expended: Provided, That in determining between or among carriers competing to provide service to a community, the Secretary may consider the relative subsidy requirements of the carriers: Provided further, That basic essential air service minimum requirements shall not include the 15- passenger capacity requirement under section 41732(b)(3) of title 49, United States Code: Provided further, That amounts authorized to be distributed for the essential air service program under section 41742(b) of title 49, United States Code, shall be made available immediately from amounts otherwise provided to the Administrator of the Federal Aviation Administration: Provided further, That the Administrator may reimburse such amounts from fees credited to the account established under section 45303 of title 49, United States Code: Provided further, That, notwithstanding section 41733 of title 49, United States Code, for fiscal year 2025, the requirements established under subparagraphs (B) and (C) of section 41731(a)(1) of title 49, United States Code, and the subsidy cap established by section 332 of the Department of Transportation and Related Agencies Appropriations Act, 2000, shall not apply to maintain eligibility under section 41731 of title 49, United States Code. administrative provisions--office of the secretary of transportation (including transfer of funds) Sec. 101. None of the funds made available by this Act to the Department of Transportation may be obligated for the Office of the Secretary of Transportation to approve assessments or reimbursable agreements pertaining to funds appropriated to the operating administrations in this Act, except for activities underway on the date of enactment of this Act, unless such assessments or agreements have completed the normal reprogramming process for congressional notification. Sec. 102. The Secretary shall post on the web site of the Department of Transportation a schedule of all meetings of the Council on Credit and Finance, including the agenda for each meeting, and require the Council on Credit and Finance to record the decisions and actions of each meeting. Sec. 103. In addition to authority provided by section 327 of title 49, United States Code, the Department's Working Capital Fund is authorized to provide partial or full payments in advance and accept subsequent reimbursements from all Federal agencies from available funds for transit benefit distribution services that are necessary to carry out the Federal transit pass transportation fringe benefit program under Executive Order No. 13150 and section 3049 of SAFETEA-LU (5 U.S.C. 7905 note): Provided, That the Department shall maintain a reasonable operating reserve in the Working Capital Fund, to be expended in advance to provide uninterrupted transit benefits to Government employees: Provided further, That such reserve shall not exceed 1 month of benefits payable and may be used only for the purpose of providing for the continuation of transit benefits: Provided further, That the Working Capital Fund shall be fully reimbursed by each customer agency from available funds for the actual cost of the transit benefit. Sec. 104. Receipts collected in the Department's Working Capital Fund, as authorized by section 327 of title 49, United States Code, for unused transit and van pool benefits, in an amount not to exceed 10 percent of fiscal year 2025 collections, shall be available until expended in the Department's Working Capital Fund to provide contractual services in support of section 189 of this Act: Provided, That obligations in fiscal year 2025 of such collections shall not exceed $1,000,000. Sec. 105. None of the funds in this title may be obligated or expended for retention or senior executive bonuses for an employee of the Department of Transportation without the prior written approval of the Assistant Secretary for Administration. Sec. 106. In addition to authority provided by section 327 of title 49, United States Code, the Department's Administrative Working Capital Fund is hereby authorized to transfer information technology equipment, software, and systems from departmental sources or other entities and collect and maintain a reserve at rates which will return full cost of transferred assets. Sec. 107. None of the funds provided in this Act to the Department of Transportation may be used to provide credit assistance unless not less than 3 days before any application approval to provide credit assistance under sections 603 and 604 of title 23, United States Code, the Secretary provides notification in writing to the following committees: the House and Senate Committees on Appropriations; the Committee on Environment and Public Works and the Committee on Banking, Housing and Urban Affairs of the Senate; and the Committee on Transportation and Infrastructure of the House of Representatives: Provided, That such notification shall include, but not be limited to, the name of the project sponsor; a description of the project; whether credit assistance will be provided as a direct loan, loan guarantee, or line of credit; and the amount of credit assistance. Sec. 108. (a) Amounts made available to the Secretary of Transportation or the Department of Transportation's Operating Administrations in this Act for the costs of award, administration, or oversight of financial assistance under the programs identified in subsection (c) may be transferred to the account identified in section 801 of division J of Public Law 117-58, as amended by section 425 of title IV of division K of Public Law 117-103, to remain available until expended, for the necessary expenses of award, administration, or oversight of any financial assistance programs in the Department of Transportation. (b) Amounts transferred under the authority in this section are available in addition to amounts otherwise available for such purpose. (c) The programs from which funds made available under this Act may be transferred under subsection (a) are: (1) the university transportation centers program under section 5505 of title 49, United States Code; and (2) the drone infrastructure inspection grant program as authorized by section 912 of title IX of Public Law 118-63. Sec. 109. The Secretary of Transportation may transfer amounts awarded to a federally recognized Tribe under a funding agreement entered into under part 29 of title 49, Code of Federal Regulations, from the Department of Transportation's Operating Administrations to the Office of Tribal Government Affairs: Provided, That any amounts retroceded or reassumed under such part may be transferred back to the appropriate Operating Administration. Sec. 109A. (a) For amounts made available under the heading ``National Infrastructure Investments'' in title VIII of division J of the Infrastructure Investments and Jobs Act (Public Law 117-58) to carry out section 6702 of title 49, United States Code, the Secretary shall consider and award projects based solely on the selection criteria as identified under 6702(d)(3) and (d)(4) of title 49, United States Code. (b) Amounts repurposed pursuant to subsection (a) shall continue to be treated as amounts specified in section 103(b) of division A of Public Law 118-5. Sec. 109B. The Secretary of Transportation may transfer up to $1,641,000 from the ``Office of the Secretary--Salaries and Expenses'' to the Department of Transportation's Operating Administrations for rent payments: Provided, That such amounts are in addition to amounts otherwise available for such purposes: Provided further, That any amounts transferred for rent payments that are no longer needed may be transferred back to the original account. Federal Aviation Administration operations (airport and airway trust fund) For necessary expenses of the Federal Aviation Administration, not otherwise provided for, including operations and research activities related to commercial space transportation, administrative expenses for research and development, establishment of air navigation facilities, the operation (including leasing) and maintenance of aircraft, subsidizing the cost of aeronautical charts and maps sold to the public, the lease or purchase of passenger motor vehicles for replacement only, $13,587,949,000, to remain available until September 30, 2026, of which $11,771,321,000 to be derived from the Airport and Airway Trust Fund: Provided, That of the amounts made available under this heading-- (1) not less than $1,832,078,000 shall be available for aviation safety activities; (2) $10,105,678,000 shall be available for air traffic organization activities; (3) $57,130,000 shall be available for commercial space transportation activities; (4) $1,004,787,000 shall be available for finance and management activities; (5) $73,556,000 shall be available for NextGen and operations planning activities; (6) $176,988,000 shall be available for security and hazardous materials safety activities; and (7) $337,732,000 shall be available for staff offices: Provided further, That not to exceed 5 percent of any budget activity, except for aviation safety budget activity, may be transferred to any budget activity under this heading: Provided further, That no transfer may increase or decrease any appropriation under this heading by more than 5 percent: Provided further, That any transfer in excess of 5 percent shall be treated as a reprogramming of funds under section 405 of this Act and shall not be available for obligation or expenditure except in compliance with the procedures set forth in that section: Provided further, That not later than 60 days after the submission of the budget request, the Administrator of the Federal Aviation Administration shall transmit to Congress an annual update to the report submitted to Congress in December 2004 pursuant to section 221 of the Vision 100-Century of Aviation Reauthorization Act (49 U.S.C. 44506 note): Provided further, That the amounts made available under this heading shall be reduced by $100,000 for each day after 60 days after the submission of the budget request that such report has not been transmitted to Congress: Provided further, That not later than 60 days after the submission of the budget request, the Administrator shall transmit to Congress a companion report that describes a comprehensive strategy for staffing, hiring, and training flight standards and aircraft certification staff in a format similar to the one utilized for the controller staffing plan, including stated attrition estimates and numerical hiring goals by fiscal year: Provided further, That the amounts made available under this heading shall be reduced by $100,000 for each day after the date that is 60 days after the submission of the budget request that such report has not been submitted to Congress: Provided further, That funds may be used to enter into a grant agreement with a nonprofit standard-setting organization to assist in the development of aviation safety standards: Provided further, That none of the funds made available by this Act shall be available for new applicants for the second career training program: Provided further, That none of the funds made available by this Act shall be available for the Federal Aviation Administration to finalize or implement any regulation that would promulgate new aviation user fees not specifically authorized by law after the date of the enactment of this Act: Provided further, That there may be credited to this appropriation, as offsetting collections, funds received from States, counties, municipalities, foreign authorities, other public authorities, and private sources for expenses incurred in the provision of agency services, including receipts for the maintenance and operation of air navigation facilities, and for issuance, renewal or modification of certificates, including airman, aircraft, and repair station certificates, or for tests related thereto, or for processing major repair or alteration forms: Provided further, That of the amounts made available under this heading, not less than $256,000,000 shall be used to fund direct operations of the current air traffic control towers in the contract tower program, including the contract tower cost share program, and any airport that is currently qualified or that will qualify for the program during the fiscal year: Provided further, That none of the funds made available by this Act for aeronautical charting and cartography are available for activities conducted by, or coordinated through, the Working Capital Fund. facilities and equipment (airport and airway trust fund) For necessary expenses, not otherwise provided for, for acquisition, establishment, technical support services, improvement by contract or purchase, and hire of national airspace systems and experimental facilities and equipment, as authorized under part A of subtitle VII of title 49, United States Code, including initial acquisition of necessary sites by lease or grant; engineering and service testing, including construction of test facilities and acquisition of necessary sites by lease or grant; construction and furnishing of quarters and related accommodations for officers and employees of the Federal Aviation Administration stationed at remote localities where such accommodations are not available; and the purchase, lease, or transfer of aircraft from funds made available under this heading, including aircraft for aviation regulation and certification; to be derived from the Airport and Airway Trust Fund, $3,549,200,000, of which $690,000,000 is for personnel and related expenses and shall remain available until September 30, 2026, $2,751,650,000 shall remain available until September 30, 2027, and $107,550,000 is for terminal facilities and shall remain available until September 30, 2029: Provided, That there may be credited to this appropriation funds received from States, counties, municipalities, other public authorities, and private sources, for expenses incurred in the establishment, improvement, and modernization of national airspace systems: Provided further, That not later than 60 days after submission of the budget request, the Secretary of Transportation shall transmit to the Congress an investment plan for the Federal Aviation Administration which includes funding for each budget line item for fiscal years 2026 through 2030, with total funding for each year of the plan constrained to the funding targets for those years as estimated and approved by the Office of Management and Budget: Provided further, That section 405 of this Act shall apply to amounts made available under this heading in title VIII of the Infrastructure Investments and Jobs Appropriations Act (division J of Public Law 117-58): Provided further, That the amounts in the table entitled ``Allocation of Funds for FAA Facilities and Equipment from the Infrastructure Investment and Jobs Act--Fiscal Year 2025'' in the Report accompanying this Act shall be the baseline for application of reprogramming and transfer authorities for the current fiscal year pursuant to paragraph (7) of such section 405 for amounts referred to in the preceding proviso: Provided further, That, notwithstanding paragraphs (5) and (6) of such section 405, unless prior approval is received from the House and Senate Committees on Appropriations, not to exceed 10 percent of any funding level specified for projects and activities in the table referred to in the preceding proviso may be transferred to any other funding level specified for projects and activities in such table and no transfer of such funding levels may increase or decrease any funding level in such table by more than 10 percent. research, engineering, and development (airport and airway trust fund) For necessary expenses, not otherwise provided for, for research, engineering, and development, as authorized under part A of subtitle VII of title 49, United States Code, including construction of experimental facilities and acquisition of necessary sites by lease or grant, $259,787,000, to be derived from the Airport and Airway Trust Fund and to remain available until September 30, 2027: Provided, That there may be credited to this appropriation as offsetting collections, funds received from States, counties, municipalities, other public authorities, and private sources, which shall be available for expenses incurred for research, engineering, and development: Provided further, That amounts made available under this heading shall be used in accordance with the Report accompanying this Act: Provided further, That not to exceed 10 percent of any funding level specified under this heading in the Report accompanying this Act may be transferred to any other funding level specified under this heading in the Report accompanying this Act: Provided further, That no transfer may increase or decrease any funding level by more than 10 percent: Provided further, That any transfer in excess of 10 percent shall be treated as a reprogramming of funds under section 405 of this Act and shall not be available for obligation or expenditure except in compliance with the procedures set forth in that section. grants-in-aid for airports (liquidation of contract authorization) (limitation on obligations) (airport and airway trust fund) (including transfer of funds) For liquidation of obligations incurred for grants-in-aid for airport planning and development, and noise compatibility planning and programs as authorized under subchapter I of chapter 471 and subchapter I of chapter 475 of title 49, United States Code, and under other law authorizing such obligations; for procurement, installation, and commissioning of runway incursion prevention devices and systems at airports of such title; for grants authorized under section 41743 of title 49, United States Code; and for inspection activities and administration of airport safety programs, including those related to airport operating certificates under section 44706 of title 49, United States Code, $4,000,000,000, to be derived from the Airport and Airway Trust Fund and to remain available until expended: Provided, That none of the amounts made available under this heading shall be available for the planning or execution of programs the obligations for which are in excess of $4,000,000,000, in fiscal year 2025, notwithstanding section 47117(g) of title 49, United States Code: Provided further, That none of the amounts made available under this heading shall be available for the replacement of baggage conveyor systems, reconfiguration of terminal baggage areas, or other airport improvements that are necessary to install bulk explosive detection systems: Provided further, That notwithstanding section 47109(a) of title 49, United States Code, the Government's share of allowable project costs under paragraph (2) of such section for subgrants or paragraph (3) of such section shall be 95 percent for a project at other than a large or medium hub airport that is a successive phase of a multi-phased construction project for which the project sponsor received a grant in fiscal year 2011 for the construction project: Provided further, That notwithstanding any other provision of law, of amounts limited under this heading, not less than $163,624,000 shall be available for administration, $15,000,000 shall be available for the airport cooperative research program, $43,360,000 shall be available for airport technology research, and $10,000,000, to remain available until expended, shall be available and transferred to ``Office of the Secretary, Salaries and Expenses'' to carry out the small community air service development program: Provided further, That in addition to airports eligible under section 41743 of title 49, United States Code, such program may include the participation of an airport that serves a community or consortium that is not larger than a small hub airport, according to FAA hub classifications effective at the time the Office of the Secretary issues a request for proposals. grants-in-aid for airports For an additional amount for ``Grants-In-Aid for Airports'', to enable the Secretary of Transportation to make grants for projects as authorized by subchapter 1 of chapter 471 and subchapter 1 of chapter 475 of title 49, United States Code, $260,926,876, to remain available through September 30, 2027: Provided, That amounts made available under this heading shall be derived from the general fund, and such funds shall not be subject to apportionment formulas, special apportionment categories, or minimum percentages under chapter 471 of title 49, United States Code: Provided further, That of the sums appropriated under this heading -- (1) $257,926,876 shall be made available for the purposes, and in amounts, specified for Community Project Funding in the table entitled ``Community Project Funding'' included in the Report accompanying this Act: Provided, That funds made available under this heading shall not be subject to or considered under section 47115(j)(3)(B) of title 49, United States Code. (2) not less than $3,000,000, to remain available until expended, shall be made available to an airport notwithstanding subsection (c)(4)(B) of section 41743 of title 49 of the United States Code: Provided further, that amounts available shall be transferred to ``Office of the Secretary, Salaries and Expenses'' to carry out the small community air service development program: Provided,That the community or consortium of communities is a priority of the Secretary under subsection(c)(5)(F) of section 41743 of title 49 of the United States Code: Provided further, That the air service was terminated from October 1, 2021 through at least January 1, 2024 and resulted in a 100% loss of air service. administrative provisions--federal aviation administration Sec. 110. None of the funds made available by this Act may be used to compensate in excess of 600 technical staff-years under the federally funded research and development center contract between the Federal Aviation Administration and the Center for Advanced Aviation Systems Development during fiscal year 2025. Sec. 111. None of the funds made available by this Act shall be used to pursue or adopt guidelines or regulations requiring airport sponsors to provide to the Federal Aviation Administration without cost building construction, maintenance, utilities and expenses, or space in airport sponsor-owned buildings for services relating to air traffic control, air navigation, or weather reporting: Provided, That the prohibition on the use of funds in this section does not apply to negotiations between the agency and airport sponsors to achieve agreement on ``below-market'' rates for these items or to grant assurances that require airport sponsors to provide land without cost to the Federal Aviation Administration for air traffic control facilities. Sec. 112. The Administrator of the Federal Aviation Administration may reimburse amounts made available to satisfy section 41742(a)(1) of title 49, United States Code, from fees credited under section 45303 of title 49, United States Code, and any amount remaining in such account at the close of any fiscal year may be made available to satisfy section 41742(a)(1) of title 49, United States Code, for the subsequent fiscal year. Sec. 113. Amounts collected under section 40113(e) of title 49, United States Code, shall be credited to the appropriation current at the time of collection, to be merged with and available for the same purposes as such appropriation. Sec. 114. None of the funds made available by this Act shall be available for paying premium pay under section 5546(a) of title 5, United States Code, to any Federal Aviation Administration employee unless such employee actually performed work during the time corresponding to such premium pay. Sec. 115. None of the funds made available by this Act may be obligated or expended for an employee of the Federal Aviation Administration to purchase a store gift card or gift certificate through use of a Government-issued credit card. Sec. 116. Notwithstanding any other provision of law, none of the funds made available under this Act or any prior Act may be used to implement or to continue to implement any limitation on the ability of any owner or operator of a private aircraft to obtain, upon a request to the Administrator of the Federal Aviation Administration, a blocking of that owner's or operator's aircraft registration number, Mode S transponder code, flight identification, call sign, or similar identifying information from any ground based display to the public that would allow the real-time or near real-time flight tracking of that aircraft's movements, except data made available to a Government agency, for the noncommercial flights of that owner or operator. Sec. 117. None of the funds made available by this Act shall be available for salaries and expenses of more than nine political and Presidential appointees in the Federal Aviation Administration. Sec. 118. None of the funds made available by this Act may be used to increase fees pursuant to section 44721 of title 49, United States Code, until the Federal Aviation Administration provides to the House and Senate Committees on Appropriations a report that justifies all fees related to aeronautical navigation products and explains how such fees are consistent with Executive Order No. 13642. Sec. 119. None of the funds made available by this Act may be used to close a regional operations center of the Federal Aviation Administration or reduce its services unless the Administrator notifies the House and Senate Committees on Appropriations not less than 90 full business days in advance. Sec. 119A. None of the funds made available by or limited by this Act may be used to change weight restrictions or prior permission rules at Teterboro airport in Teterboro, New Jersey. Sec. 119B. None of the funds made available by this Act may be used by the Administrator of the Federal Aviation Administration to withhold from consideration and approval any new application for participation in the contract tower program, or for reevaluation of cost-share program participants so long as the Federal Aviation Administration has received an application from the airport, and so long as the Administrator determines such tower is eligible using the factors set forth in Federal Aviation Administration published establishment criteria. Sec. 119C. None of the funds made available by this Act may be used to open, close, redesignate as a lesser office, or reorganize a regional office, the aeronautical center, or the technical center unless the Administrator submits a request for the reprogramming of funds under section 405 of this Act. Sec. 119D. Section 44502(e) of title 49, United States Code, shall be applied by inserting the following after paragraph (4): ``(5) LIMITATIONS.-- ``(A) SYSTEMS or equipment.--Eligible air traffic systems or equipment identified in subparagraphs (A) through (C) of paragraph (3) of this subsection to be transferred to the Administrator under this subsection must have been purchased by the transferor airport on or after October 5, 2018; and ``(B) OTHER systems or equipment.--Eligible air traffic systems or equipment identified in subparagraph (D) of paragraph (3) of this subsection to be transferred to the Administrator under this subsection must have been purchased by the transferor airport on or after October 1, 2024. ``(6) AIRPORTS IN THE CONTIGUOUS UNITED STATES.--Notwithstanding the limitation to airports in non-contiguous States in paragraph (1) of this subsection, an airport in the contiguous United States may transfer, without consideration, to the Administrator of the Federal Aviation Administration, an eligible air traffic system or equipment identified in subparagraphs (A) through (C) of paragraph (3) of this subsection that conforms to performance specifications of the Administrator if a Government airport aid program, airport development aid program, or airport improvement project grant was used to assist in purchasing the system or equipment and such eligible air traffic system or equipment was purchased by the transferor airport during the period of time beginning on October 5, 2018, and ending on December 31, 2021.'' Sec. 119E. Of the funds provided under the heading ``Grants-in-aid for Airports'', up to $3,500,000 shall be for necessary expenses, including an independent verification regime, to provide reimbursement to airport sponsors that do not provide gateway operations and providers of general aviation ground support services, or other aviation tenants, located at those airports closed during a temporary flight restriction (TFR) for any residence of the President that is designated or identified to be secured by the United States Secret Service, and for direct and incremental financial losses incurred while such airports are closed solely due to the actions of the Federal Government: Provided, That no funds shall be obligated or distributed to airport sponsors that do not provide gateway operations and providers of general aviation ground support services until an independent audit is completed: Provided further, That losses incurred as a result of violations of law, or through fault or negligence, of such operators and service providers or of third parties (including airports) are not eligible for reimbursements: Provided further, That obligation and expenditure of funds are conditional upon full release of the United States Government for all claims for financial losses resulting from such actions. Federal Highway Administration limitation on administrative expenses (highway trust fund) (including transfer of funds) Not to exceed $493,767,664 together with advances and reimbursements received by the Federal Highway Administration, shall be obligated for necessary expenses for administration and operation of the Federal Highway Administration: Provided, That in addition, $3,248,000 shall be transferred to the Appalachian Regional Commission in accordance with section 104(a) of title 23, United States Code. federal-aid highways (limitation on obligations) (highway trust fund) Funds available for the implementation or execution of authorized Federal-aid highway and highway safety construction programs shall not exceed total obligations of $61,314,170,545 for fiscal year 2025: Provided, That the limitation on obligations under this heading shall only apply to contract authority authorized from the Highway Trust Fund (other than the Mass Transit Account), unless otherwise specified in law. (liquidation of contract authorization) (highway trust fund) For the payment of obligations incurred in carrying out authorized Federal-aid highway and highway safety construction programs, $62,053,170,545 shall be derived from the Highway Trust Fund (other than the Mass Transit Account), to remain available until expended. highway infrastructure programs (including transfer of funds) There is hereby appropriated to the Secretary $1,490,176,742: Provided, That the funds made available under this heading shall be derived from the general fund, shall be in addition to any funds provided for fiscal year 2025 in this or any other Act for: (1) ``Federal-aid Highways'' under chapter 1 of title 23, United States Code; (2) activities eligible under the Tribal transportation program under section 202 of title 23, United States Code; or (3) activities eligible under the Nationally Significant Multimodal Freight and Highway Projects program under Section 117 of title 23, United States Code, and shall not affect the distribution or amount of funds provided in any other Act: Provided further, That section 11101(e) of Public Law 117-58 shall apply to funds made available under this heading: Provided further, That unless otherwise specified, amounts made available under this heading shall be available until September 30, 2028, and shall not be subject to any limitation on obligations for Federal-aid highways or highway safety construction programs set forth in any Act making annual appropriations: Provided further, That of the sums appropriated under this heading-- (1) $1,085,176,742 shall be for the purposes, and in the amounts, specified for Community Project Funding in the table entitled ``Community Project Funding'' included in the Report accompanying this Act: Provided, That, except as otherwise provided under this heading, the funds made available under this paragraph shall be administered as if apportioned under chapter 1 of title 23, United States Code: Provided further, That funds made available under this paragraph that are used for Tribal projects shall be administered as if allocated under chapter 2 of title 23, United States Code, except that the set- asides described in subparagraph (C) of section 202(b)(3) of title 23, United States Code, and subsections (a)(6), (c), and (e) of section 202 of such title, and section 1123(h)(1) of MAP-21 (as amended by Public Law 117-58), shall not apply to such funds; (2) $200,000,000 shall be for activities eligible under the Tribal transportation program, as described in section 202 of title 23, United States Code: Provided, That, except as otherwise provided under this heading, the funds made available under this paragraph shall be administered as if allocated under chapter 2 of title 23, United States Code: Provided further, That the set-asides described in subparagraph (C) of section 202(b)(3) of title 23, United States Code, and subsections (a)(6), (c), and (e) of section 202 of such title shall not apply to funds made available under this paragraph: Provided further, That the set-aside described in section 1123(h)(1) of MAP-21 (as amended by Public Law 117-58), shall not apply to such funds; (3) $200,000,000 shall be for the Nationally Significant Multimodal Freight and Highway Projects program as authorized by 23 U.S.C. 117, for truck parking projects: Provided, That such funds shall be available until expended: Provided further, That the set aside under subsection (e)(1) of such section shall be treated as not less than 50 percent: Provided further, That an entity that receives a grant under this section may partner with a private entity to carry out an eligible project under such section: Provided further, That, in making grants under such section, the Secretary shall prioritize applicants proposing projects located in rural areas and near Federal-aid highways: Provided further, That no fees may be charged by an entity receiving a grant under this section to a commercial motor vehicle driver to gain access to parking constructed, opened, maintained, or improved with a grant under such section: Provided further, That, except as otherwise provided under such section or this heading, the funds made available under this paragraph shall be administered as if apportioned under chapter 1 of title 23, United States Code; and (4) $5,000,000 shall be to carry out section 11502 of the Infrastructure Investment and Jobs Act (23 U.S.C. 148 note): Provided, That, except as otherwise provided under such section or this heading, the funds made available under this paragraph shall be administered as if apportioned under chapter 1 of title 23, United States Code. administrative provisions--federal highway administration Sec. 120. (a) For fiscal year 2025, the Secretary of Transportation shall-- (1) not distribute from the obligation limitation for Federal-aid highways-- (A) amounts authorized for administrative expenses and programs by section 104(a) of title 23, United States Code; and (B) amounts authorized for the Bureau of Transportation Statistics; (2) not distribute an amount from the obligation limitation for Federal-aid highways that is equal to the unobligated balance of amounts-- (A) made available from the Highway Trust Fund (other than the Mass Transit Account) for Federal-aid highway and highway safety construction programs for previous fiscal years the funds for which are allocated by the Secretary (or apportioned by the Secretary under section 202 or 204 of title 23, United States Code); and (B) for which obligation limitation was provided in a previous fiscal year; (3) determine the proportion that-- (A) the obligation limitation for Federal-aid highways, less the aggregate of amounts not distributed under paragraphs (1) and (2) of this subsection; bears to (B) the total of the sums authorized to be appropriated for the Federal-aid highway and highway safety construction programs (other than sums authorized to be appropriated for provisions of law described in paragraphs (1) through (11) of subsection (b) and sums authorized to be appropriated for section 119 of title 23, United States Code, equal to the amount referred to in subsection (b)(12) for such fiscal year), less the aggregate of the amounts not distributed under paragraphs (1) and (2) of this subsection; (4) distribute the obligation limitation for Federal-aid highways, less the aggregate amounts not distributed under paragraphs (1) and (2), for each of the programs (other than programs to which paragraph (1) applies) that are allocated by the Secretary under authorized Federal-aid highway and highway safety construction programs, or apportioned by the Secretary under section 202 or 204 of title 23, United States Code, by multiplying-- (A) the proportion determined under paragraph (3); by (B) the amounts authorized to be appropriated for each such program for such fiscal year; and (5) distribute the obligation limitation for Federal-aid highways, less the aggregate amounts not distributed under paragraphs (1) and (2) and the amounts distributed under paragraph (4), for Federal-aid highway and highway safety construction programs that are apportioned by the Secretary under title 23, United States Code (other than the amounts apportioned for the national highway performance program in section 119 of title 23, United States Code, that are exempt from the limitation under subsection (b)(12) and the amounts apportioned under sections 202 and 204 of that title) in the proportion that-- (A) amounts authorized to be appropriated for the programs that are apportioned under title 23, United States Code, to each State for such fiscal year; bears to (B) the total of the amounts authorized to be appropriated for the programs that are apportioned under title 23, United States Code, to all States for such fiscal year. (b) Exceptions From Obligation Limitation.--The obligation limitation for Federal-aid highways shall not apply to obligations under or for-- (1) section 125 of title 23, United States Code; (2) section 147 of the Surface Transportation Assistance Act of 1978 (23 U.S.C. 144 note; 92 Stat. 2714); (3) section 9 of the Federal-Aid Highway Act of 1981 (95 Stat. 1701); (4) subsections (b) and (j) of section 131 of the Surface Transportation Assistance Act of 1982 (96 Stat. 2119); (5) subsections (b) and (c) of section 149 of the Surface Transportation and Uniform Relocation Assistance Act of 1987 (101 Stat. 198); (6) sections 1103 through 1108 of the Intermodal Surface Transportation Efficiency Act of 1991 (105 Stat. 2027); (7) section 157 of title 23, United States Code (as in effect on June 8, 1998); (8) section 105 of title 23, United States Code (as in effect for fiscal years 1998 through 2004, but only in an amount equal to $639,000,000 for each of those fiscal years); (9) Federal-aid highway programs for which obligation authority was made available under the Transportation Equity Act for the 21st Century (112 Stat. 107) or subsequent Acts for multiple years or to remain available until expended, but only to the extent that the obligation authority has not lapsed or been used; (10) section 105 of title 23, United States Code (as in effect for fiscal years 2005 through 2012, but only in an amount equal to $639,000,000 for each of those fiscal years); (11) section 1603 of SAFETEA-LU (23 U.S.C. 118 note; 119 Stat. 1248), to the extent that funds obligated in accordance with that section were not subject to a limitation on obligations at the time at which the funds were initially made available for obligation; and (12) section 119 of title 23, United States Code (but, for each of fiscal years 2013 through 2025, only in an amount equal to $639,000,000). (c) Redistribution of Unused Obligation Authority.--Notwithstanding subsection (a), the Secretary shall, after August 1 of such fiscal year-- (1) revise a distribution of the obligation limitation made available under subsection (a) if an amount distributed cannot be obligated during that fiscal year; and (2) redistribute sufficient amounts to those States able to obligate amounts in addition to those previously distributed during that fiscal year, giving priority to those States having large unobligated balances of funds apportioned under sections 144 (as in effect on the day before the date of enactment of Public Law 112-141) and 104 of title 23, United States Code. (d) Applicability of Obligation Limitations to Transportation Research Programs.-- (1) In general.--Except as provided in paragraph (2), the obligation limitation for Federal-aid highways shall apply to contract authority for transportation research programs carried out under-- (A) chapter 5 of title 23, United States Code; (B) title VI of the Fixing America's Surface Transportation Act; and (C) title III of division A of the Infrastructure Investment and Jobs Act (Public Law 117-58). (2) Exception.--Obligation authority made available under paragraph (1) shall-- (A) remain available for a period of 4 fiscal years; and (B) be in addition to the amount of any limitation imposed on obligations for Federal-aid highway and highway safety construction programs for future fiscal years. (e) Redistribution of Certain Authorized Funds.-- (1) In general.--Not later than 30 days after the date of distribution of obligation limitation under subsection (a), the Secretary shall distribute to the States any funds (excluding funds authorized for the program under section 202 of title 23, United States Code) that-- (A) are authorized to be appropriated for such fiscal year for Federal-aid highway programs; and (B) the Secretary determines will not be allocated to the States (or will not be apportioned to the States under section 204 of title 23, United States Code), and will not be available for obligation, for such fiscal year because of the imposition of any obligation limitation for such fiscal year. (2) Ratio.--Funds shall be distributed under paragraph (1) in the same proportion as the distribution of obligation authority under subsection (a)(5). (3) Availability.--Funds distributed to each State under paragraph (1) shall be available for any purpose described in section 133(b) of title 23, United States Code. Sec. 121. Notwithstanding 31 U.S.C. 3302, funds received by the Bureau of Transportation Statistics from the sale of data products, for necessary expenses incurred pursuant to chapter 63 of title 49, United States Code, may be credited to the Federal-aid highways account for the purpose of reimbursing the Bureau for such expenses. Sec. 122. Not less than 15 days prior to waiving, under his or her statutory authority, any Buy America requirement for Federal-aid highways projects, the Secretary of Transportation shall make an informal public notice and comment opportunity on the intent to issue such waiver and the reasons therefor: Provided, That the Secretary shall post on a website any waivers granted under the Buy America requirements. Sec. 123. None of the funds made available in this Act may be used to make a grant for a project under section 117 of title 23, United States Code, unless the Secretary, at least 60 days before making a grant under that section, provides written notification to the House and Senate Committees on Appropriations of the proposed grant, including an evaluation and justification for the project and the amount of the proposed grant award. Sec. 124. (a) A State or territory, as defined in section 165 of title 23, United States Code, may use for any project eligible under section 133(b) of title 23 or section 165 of title 23 and located within the boundary of the State or territory any earmarked amount, and any associated obligation limitation: Provided, That the Department of Transportation for the State or territory for which the earmarked amount was originally designated or directed notifies the Secretary of its intent to use its authority under this section and submits an annual report to the Secretary identifying the projects to which the funding would be applied. Notwithstanding the original period of availability of funds to be obligated under this section, such funds and associated obligation limitation shall remain available for obligation for a period of 3 fiscal years after the fiscal year in which the Secretary is notified. The Federal share of the cost of a project carried out with funds made available under this section shall be the same as associated with the earmark. (b) In this section, the term ``earmarked amount'' means-- (1) congressionally directed spending, as defined in rule XLIV of the Standing Rules of the Senate, identified in a prior law, report, or joint explanatory statement, which was authorized to be appropriated or appropriated more than 10 fiscal years prior to the current fiscal year, and administered by the Federal Highway Administration; or (2) a congressional earmark, as defined in rule XXI of the Rules of the House of Representatives, identified in a prior law, report, or joint explanatory statement, which was authorized to be appropriated or appropriated more than 10 fiscal years prior to the current fiscal year, and administered by the Federal Highway Administration. (c) The authority under subsection (a) may be exercised only for those projects or activities that have obligated less than 10 percent of the amount made available for obligation as of October 1 of the current fiscal year, and shall be applied to projects within the same general geographic area within 25 miles for which the funding was designated, except that a State or territory may apply such authority to unexpended balances of funds from projects or activities the State or territory certifies have been closed and for which payments have been made under a final voucher. (d) The Secretary shall submit consolidated reports of the information provided by the States and territories annually to the House and Senate Committees on Appropriations. Sec. 125. None of the funds made available in this Act or any other Act may be used for any activities related to the implementation of Priced Zones (Cordon Pricing) under the Value Pricing Pilot Program or New York City's Central Business District Tolling Program. Sec. 126. None of the funds made available by this Act or any other Act may be used to implement, administer, or enforce the final rule entitled ``National Performance Management Measures; Assessing Performance of the National Highway System, Greenhouse Gas Emissions Measure'' published by the Federal Highway Administration in the Federal Register on December 7, 2023 (88 Fed. Reg. 85364), or any substantially similar rule. Federal Motor Carrier Safety Administration motor carrier safety operations and programs (liquidation of contract authorization) (limitation on obligations) (highway trust fund) For payment of obligations incurred in the implementation, execution and administration of motor carrier safety operations and programs pursuant to section 31110 of title 49, United States Code, as amended by the Infrastructure Investment and Jobs Act (Public Law 117- 58), $382,500,000, to be derived from the Highway Trust Fund (other than the Mass Transit Account), together with advances and reimbursements received by the Federal Motor Carrier Safety Administration, the sum of which shall remain available until expended: Provided, That funds available for implementation, execution, or administration of motor carrier safety operations and programs authorized under title 49, United States Code, shall not exceed total obligations of $382,500,000, for ``Motor Carrier Safety Operations and Programs'' for fiscal year 2025, of which $14,073,000, to remain available for obligation until September 30, 2027, is for the research and technology program, and of which not less than $63,098,000, to remain available for obligation until September 30, 2027, is for development, modernization, enhancement, and continued operation and maintenance of information technology and information management. motor carrier safety grants (liquidation of contract authorization) (limitation on obligations) (highway trust fund) For payment of obligations incurred in carrying out sections 31102, 31103, 31104, and 31313 of title 49, United States Code, $526,450,000, to be derived from the Highway Trust Fund (other than the Mass Transit Account) and to remain available until expended: Provided, That funds available for the implementation or execution of motor carrier safety programs shall not exceed total obligations of $526,450,000 in fiscal year 2025 for ``Motor Carrier Safety Grants'': Provided further, That of the amounts made available under this heading-- (1) $414,500,000, to remain available for obligation until September 30, 2026, shall be for the motor carrier safety assistance program; (2) $44,350,000, to remain available for obligation until September 30, 2026, shall be for the commercial driver's license program implementation program; (3) $61,200,000, to remain available for obligation until September 30, 2026, shall be for the high priority program; (4) $1,400,000, to remain available for obligation until September 30, 2026, shall be for the commercial motor vehicle operators grant program; and (5) $5,000,000, to remain available for obligation until September 30, 2026, shall be for the commercial motor vehicle enforcement training and support grant program. administrative provisions--federal motor carrier safety administration Sec. 130. The Federal Motor Carrier Safety Administration shall send notice of section 385.308 of title 49, Code of Federal Regulations, violations by certified mail, registered mail, or another manner of delivery, which records the receipt of the notice by the persons responsible for the violations. Sec. 131. None of the funds appropriated or otherwise made available to the Department of Transportation by this Act or any other Act may be obligated or expended to implement, administer, or enforce the requirements of section 31137 of title 49, United States Code, or any regulation issued by the Secretary pursuant to such section, with respect to the use of electronic logging devices by operators of commercial motor vehicles, as defined in section 31132(1) of such title, transporting livestock as defined in section 602 of the Emergency Livestock Feed Assistance Act of 1988 (7 U.S.C. 1471) or insects. Sec. 132. None of the funds made available by this or any other Act may be used to require the use of inward facing cameras or require a motor carrier to register an apprenticeship program with the Department of Labor as a condition for participation in the safe driver apprenticeship pilot program. Sec. 133. None of the funds appropriated or otherwise made available by this Act or any other Act may be used to promulgate any rule or regulation to require vehicles with a gross vehicle weight of more than 26,000 pounds operating in interstate commerce to be equipped with a speed limiting device set to a maximum speed. Sec. 134. (a) None of the funds made available by this or any other Act may be used to modify, rescind, or grant waivers from the preemption determinations published by FMCSA at 83 FR 67470 (Dec. 28, 2018) and 85 FR 73335 (Nov. 17, 2020). (b) Notwithstanding 49 U.S.C. 31141(d)(2), the Secretary shall deny, without a hearing on the record, any petitions for waiver of the aforementioned preemption determinations pending on the date of enactment or received after the date of enactment. (c) Nothing in the Act shall be construed to prohibit the Secretary from modifying, rescinding, or granting a waiver from the preemption determination published by FMCSA at 85 FR 3469 (Jan. 21, 2020). National Highway Traffic Safety Administration operations and research For expenses necessary to discharge the functions of the Secretary, with respect to traffic and highway safety, authorized under chapter 301 and part C of subtitle VI of title 49, United States Code, $235,000,000, to remain available through September 30, 2026. operations and research (liquidation of contract authorization) (limitation on obligations) (highway trust fund) For payment of obligations incurred in carrying out the provisions of section 403 of title 23, United States Code, including behavioral research on automated driving systems and advanced driver assistance systems and improving consumer responses to safety recalls, section 25024 of the Infrastructure Investment and Jobs Act (Public Law 117- 58), and chapter 303 of title 49, United States Code, $205,400,000, to be derived from the Highway Trust Fund (other than the Mass Transit Account) and to remain available until expended: Provided, That none of the funds in this Act shall be available for the planning or execution of programs the total obligations for which, in fiscal year 2025, are in excess of $205,400,000: Provided further, That of the sums appropriated under this heading-- (1) $198,000,000 shall be for programs authorized under section 403 of title 23, United States Code, including behavioral research on automated driving systems and advanced driver assistance systems and improving consumer responses to safety recalls, and section 25024 of the Infrastructure Investment and Jobs Act (Public Law 117-58); and (2) $7,400,000 shall be for the national driver register authorized under chapter 303 of title 49, United States Code: Provided further, That within the $205,400,000 obligation limitation for operations and research, $57,500,000 shall remain available until September 30, 2026, and shall be in addition to the amount of any limitation imposed on obligations for future years: Provided further, That amounts for behavioral research on automated driving systems and advanced driver assistance systems and improving consumer responses to safety recalls are in addition to any other funds provided for those purposes for fiscal year 2025 in this Act. highway traffic safety grants (liquidation of contract authorization) (limitation on obligations) (highway trust fund) For payment of obligations incurred in carrying out provisions of sections 402, 404, and 405 of title 23, United States Code, and grant administration expenses under chapter 4 of title 23, United States Code, to remain available until expended, $831,444,832, to be derived from the Highway Trust Fund (other than the Mass Transit Account): Provided, That none of the funds in this Act shall be available for the planning or execution of programs for which the total obligations in fiscal year 2025 are in excess of $831,444,832 for programs authorized under sections 402, 404, and 405 of title 23, United States Code, and grant administration expenses under chapter 4 of title 23, United States Code: Provided further, That of the sums appropriated under this heading-- (1) $385,900,000 shall be for highway safety programs under section 402 of title 23, United States Code; (2) $360,500,000 shall be for national priority safety programs under section 405 of title 23, United States Code; (3) $42,300,000 shall be for the high visibility enforcement program under section 404 of title 23, United States Code; and (4) $42,744,832 shall be for grant administrative expenses under chapter 4 of title 23, United States Code: Provided further, That none of these funds shall be used for construction, rehabilitation, or remodeling costs, or for office furnishings and fixtures for State, local or private buildings or structures: Provided further, That not to exceed $500,000 of the funds made available for national priority safety programs under section 405 of title 23, United States Code, for impaired driving countermeasures (as described in subsection (d) of that section) shall be available for technical assistance to the States: Provided further, That with respect to the ``Transfers'' provision under section 405(a)(10) of title 23, United States Code, any amounts transferred to increase the amounts made available under section 402 shall include the obligation authority for such amounts: Provided further, That the Administrator shall notify the House and Senate Committees on Appropriations of any exercise of the authority granted under the preceding proviso or under section 405(a)(10) of title 23, United States Code, within 5 days. administrative provisions--national highway traffic safety administration Sec. 140. The limitations on obligations for the programs of the National Highway Traffic Safety Administration set in this Act shall not apply to obligations for which obligation authority was made available in previous public laws but only to the extent that the obligation authority has not lapsed or been used. Sec. 141. The amounts made available or subject to an obligation limitation in this Act or in division J of the Infrastructure Investment and Jobs Act (Public Law 117--58) for grant administrative expenses under chapter 4 of title 23, United States Code, may be used to provide technical assistance to grantees implementing highway traffic safety grants. Federal Railroad Administration safety and operations For necessary expenses of the Federal Railroad Administration, not otherwise provided for, $288,203,000, of which $25,000,000 shall remain available until expended. railroad research and development For necessary expenses for railroad research and development, $45,879,000, to remain available until expended: Provided, That of the amounts provided under this heading, up to $3,000,000 shall be available pursuant to section 20108(d) of title 49, United States Code, for the construction, alteration, and repair of buildings and improvements at the Transportation Technology Center. consolidated rail infrastructure and safety improvements (including transfer of funds) For necessary expenses related to consolidated rail infrastructure and safety improvements grants, as authorized by section 22907 of title 49, United States Code, $298,525,000, to remain available until expended: Provided, That of the amounts made available under this heading in this Act, $38,525,000 shall be made available for the purposes, and in amounts, specified for Community Project Funding in the table entitled ``Community Project Funding'' included in the Report accompanying this Act: Provided further, That requirements under subsections (g) and (l) of section 22907 of title 49, United States Code, shall not apply to the preceding proviso: Provided further, That any remaining funds available after the distribution of the Community Project Funding described in this paragraph shall be available to the Secretary to distribute as discretionary grants under this heading: Provided further, That for amounts made available under this heading in this Act, eligible projects under section 22907(c)(8) of title 49, United States Code, shall also include railroad systems planning (including the preparation of regional intercity passenger rail plans and state rail plans) and railroad project development activities (including railroad project planning, preliminary engineering, design, environmental analysis, feasibility studies, and the development and analysis of project alternatives): Provided further, That amounts made available under this heading in this Act for projects selected for commuter rail passenger transportation may be transferred by the Secretary, after selection, to the appropriate agencies to be administered in accordance with chapter 53 of title 49, United States Code: Provided further, That for amounts made available under this heading in this Act, eligible recipients under section 22907(b)(7) of title 49, United States Code, shall include any holding company of a Class II railroad or Class III railroad (as those terms are defined in section 20102 of title 49, United States Code): Provided further, That section 22907(e)(1)(A) of title 49, United States Code, shall not apply to amounts made available under this heading in this Act: Provided further, That section 22907(e)(1)(A) of title 49, United States Code, shall not apply to amounts made available under this heading in previous fiscal years if such funds are announced in a notice of funding opportunity that includes funds made available under this heading in this Act: Provided further, That the preceding proviso shall not apply to funds made available under this heading in the Infrastructure Investment and Jobs Act (division J of Public Law 117- 58): Provided further, That unobligated balances remaining after 6 years from the date of enactment of this Act may be used for any eligible project under section 22907(c) of title 49, United States Code: Provided further, That the Secretary may withhold up to 2 percent of the amounts made available under this heading in this Act for the costs of award and project management oversight of grants carried out under title 49, United States Code. northeast corridor grants to the national railroad passenger corporation To enable the Secretary of Transportation to make grants to the National Railroad Passenger Corporation for activities associated with the Northeast Corridor as authorized by section 22101(a) of the Infrastructure Investment and Jobs Act (Public Law 117-58), $1,002,115,000, to remain available until expended: Provided, That the Secretary may retain up to one-half of 1 percent of the amounts made available under both this heading in this Act and the ``National Network Grants to the National Railroad Passenger Corporation'' heading in this Act to fund the costs of project management and oversight of activities authorized by section 22101(c) of the Infrastructure Investment and Jobs Act (Public Law 117-58): Provided further, That in addition to the project management oversight funds authorized under section 22101(c) of the Infrastructure Investment and Jobs Act (Public Law 117-58), the Secretary may retain up to an additional $5,000,000 of the amounts made available under this heading in this Act to fund expenses associated with the Northeast Corridor Commission established under section 24905 of title 49, United States Code. national network grants to the national railroad passenger corporation To enable the Secretary of Transportation to make grants to the National Railroad Passenger Corporation for activities associated with the National Network as authorized by section 22101(b) of the Infrastructure Investment and Jobs Act (division B of Public Law 117- 58), $1,123,111,000, to remain available until expended: Provided, That the Secretary may retain up to an additional $3,000,000 of the funds provided under this heading in this Act to fund expenses associated with the State-Supported Route Committee established under section 24712 of title 49, United States Code. administrative provisions--federal railroad administration (including transfer of funds) Sec. 150. The amounts made available to the Secretary or to the Federal Railroad Administration for the costs of award, administration, and project management oversight of financial assistance which are administered by the Federal Railroad Administration, in this and prior Acts, may be transferred to the Federal Railroad Administration's ``Financial Assistance Oversight and Technical Assistance'' account for the necessary expenses to support the award, administration, project management oversight, and technical assistance of financial assistance administered by the Federal Railroad Administration, in the same manner as appropriated for in this and prior Acts: Provided, That this section shall not apply to amounts that were previously designated by the Congress as an emergency requirement pursuant to a concurrent resolution on the budget or the Balanced Budget and Emergency Deficit Control Act of 1985. Sec. 151. None of the funds made available to the National Railroad Passenger Corporation may be used to fund any overtime costs in excess of $35,000 for any individual employee: Provided, That the President of Amtrak may waive the cap set in the preceding proviso for specific employees when the President of Amtrak determines such a cap poses a risk to the safety and operational efficiency of the system: Provided further, That the President of Amtrak shall report to the House and Senate Committees on Appropriations no later than 60 days after the date of enactment of this Act, a summary of all overtime payments incurred by Amtrak for 2024 and the three prior calendar years: Provided further, That such summary shall include the total number of employees that received waivers and the total overtime payments Amtrak paid to employees receiving waivers for each month for 2024 and for the three prior calendar years. Sec. 152. None of the funds made available to the National Railroad Passenger Corporation under the headings ``Northeast Corridor Grants to the National Railroad Passenger Corporation'' and ``National Network Grants to the National Railroad Passenger Corporation'' may be used to reduce the total number of Amtrak Police Department uniformed officers patrolling on board passenger trains or at stations, facilities or rights-of-way below the staffing level on May 1, 2019. Sec. 153. (a) Amounts made available under the heading ``Federal- State Partnership for Intercity Passenger Rail Grants'' in title VIII of division J of the Infrastructure Investment and Jobs Act (Public Law 117-58) shall not be available for activities authorized under section 24911(g) of title 49, United States Code. (b) Amounts repurposed pursuant to subsection (a) shall continue to be treated as amounts specified in section 103(b) of division A of Public Law 118-5. Sec. 154. None of the funds appropriated or otherwise made available under this Act or any other Act may be provided to the State of California for a high-speed rail corridor development project that is the same of substantially similar to the project that is the subject of Cooperative Agreement No. FR-HSR-0118-12-01-01 entered into between the California High-Speed Rail Authority and the Federal Railroad Administration. Sec. 155. (a) Of the funds made available under the heading ``Federal-State Partnership for Intercity Passenger Rail'' in division J of Public Law 117-58 for fiscal year 2025, not less than $15,000,000 shall be for a grant to Union Station Redevelopment Corporation to rehabilitate and repair the Washington Union Station complex. (b) Amounts repurposed pursuant to subsection (a) shall continue to be treated as amounts specified in section 103(b) of division A of Public Law 118-5. (c) The Union Station Redevelopment Corporation Board of Directors shall include designees from the Commonwealth of Virginia and the State of Maryland. (d) The Union Station Redevelopment Corporation and the National Railroad Passenger Corporation shall adhere to Public Law 97-125 and ensure the historic preservation and improvements to Washington Union Station are achieved with maximum reliance on the private sector and minimum requirement for Federal assistance. Sec. 156. Section 22908(e) of title 49, United States Code, is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2). Federal Transit Administration transit formula grants (liquidation of contract authorization) (limitation on obligations) (highway trust fund) For payment of obligations incurred in the Federal public transportation assistance program in this account, and for payment of obligations incurred in carrying out the provisions of 49 U.S.C. 5305, 5307, 5310, 5311, 5312, 5314, 5318, 5329(e)(6), 5334, 5335, 5337, 5339, and 5340, section 20005(b) of Public Law 112-141, and section 3006(b) of Public Law 114-94, $14,279,000,000, to be derived from the Mass Transit Account of the Highway Trust Fund and to remain available until expended: Provided, That funds available for the implementation or execution of programs authorized under 49 U.S.C. 5305, 5307, 5310, 5311, 5312, 5314, 5318, 5329(e)(6), 5334, 5335, 5337, 5339, and 5340, section 20005(b) of Public Law 112-141, and section 3006(b) of Public Law 114-94, shall not exceed total obligations of $14,279,000,000 in fiscal year 2025. transit infrastructure grants For an additional amount for Community Project Funding for projects and activities eligible under chapter 53 of such title, $115,638,210, to remain available until expended for the purposes, and in amounts, specified for Community Project Funding in the table entitled ``Community Project Funding'' included in the Report accompanying this Act: Provided, That unless otherwise specified, applicable requirements under chapter 53 of title 49, United States Code, shall apply to amounts made available in this paragraph, except that the Federal share of the costs for a project in this paragraph shall be in an amount equal to 80 percent of the net costs of the project, unless the Secretary approves a higher maximum Federal share of the net costs of the project consistent with administration of similar projects funded under chapter 53 of title 49, United States Code: Provided further, That amounts made available under this heading in this Act shall be derived from the general fund: Provided further, That amounts made available under this heading in this Act shall not be subject to any limitation on obligations for transit programs set forth in this or any other Act. technical assistance and training For necessary expenses to carry out section 5314 of title 49, United States Code, $7,500,000, to remain available until September 30, 2026: Provided, That the assistance provided under this heading does not duplicate the activities of section 5311(b) or section 5312 of title 49, United States Code: Provided further, That amounts made available under this heading are in addition to any other amounts made available for such purposes: Provided further, That amounts made available under this heading shall not be subject to any limitation on obligations set forth in this or any other Act. capital investment grants For necessary expenses to carry out fixed guideway capital investment grants under section 5309 of title 49, United States Code, and section 3005(b) of the Fixing America's Surface Transportation Act (Public Law 114-94), $754,733,000, to remain available until expended: Provided, That of the sums appropriated under this heading in this Act-- (1) $282,628,000 shall be available for projects authorized under section 5309(d) of title 49, United States Code; and (2) up to $464,632,000 shall be available for projects authorized under section 5309(h) of title 49, United States Code: Provided further, That the amounts made available under this heading shall be made available for the purposes, and in amounts, specified for Capital Investment Grants in the tables under the heading ``Capital Investment Grants'' in the Report accompanying this Act: Provided further, That not to exceed 10 percent of any funding level specified under this heading in the Report may be transferred to any other funding level specified under this heading in the Report: Provided further, That no transfer may increase or decrease any funding level by more than 10 percent: Provided further, That any transfer in excess of 10 percent shall be treated as a reprogramming of funds under section 405 of this Act and shall not be available for obligation or expenditure except in compliance with the procedures set forth in that section: Provided further, That for funds made available under this heading in division J of Public Law 117-58 the second through sixth provisos shall be treated as inapplicable for fiscal year 2025: Provided further, That for funds made available under this heading in division J of Public Law 117-58 for fiscal year 2025, $1,449,000,000 may be available for projects authorized under section 5309(d) of title 49, United States Code: Provided further, That for funds made available under this heading in division J of Public Law 117-58 for fiscal year 2025, $135,000,000 may be available for projects authorized under section 5309(h) of title 49, United States Code: Provided further, That amounts repurposed pursuant to the preceding provisos shall continue to be treated as amounts specified in section 103(b) of division A of Public Law 118-5. grants to the washington metropolitan area transit authority For grants to the Washington Metropolitan Area Transit Authority as authorized under section 601 of division B of the Passenger Rail Investment and Improvement Act of 2008 (Public Law 110-432), $150,000,000, to remain available until expended: Provided, That the Secretary of Transportation shall approve grants for capital and preventive maintenance expenditures for the Washington Metropolitan Area Transit Authority only after receiving and reviewing a request for each specific project: Provided further, That the Secretary shall determine that the Washington Metropolitan Area Transit Authority has placed the highest priority on those investments that will improve the safety of the system before approving such grants. administrative provisions--federal transit administration (including transfer of funds) Sec. 160. The limitations on obligations for the programs of the Federal Transit Administration shall not apply to any authority under 49 U.S.C. 5338, previously made available for obligation, or to any other authority previously made available for obligation. Sec. 161. Notwithstanding any other provision of law, funds appropriated or limited by this Act under the heading ``Capital Investment Grants'' of the Federal Transit Administration for projects specified in this Act not obligated by September 30, 2028, and other recoveries, shall be directed to projects eligible to use the funds for the purposes for which they were originally provided. Sec. 162. Notwithstanding any other provision of law, any funds appropriated before October 1, 2024, under any section of chapter 53 of title 49, United States Code, that remain available for expenditure, may be transferred to and administered under the most recent appropriation heading for any such section. Sec. 163. None of the funds made available by this Act or any other Act shall be used to adjust apportionments or withhold funds from apportionments pursuant to section 9503(e)(4) of the Internal Revenue Code of 1986 (26 U.S.C. 9503(e)(4)). Great Lakes St. Lawrence Seaway Development Corporation The Great Lakes St. Lawrence Seaway Development Corporation is hereby authorized to make such expenditures, within the limits of funds and borrowing authority available to the Corporation, and in accord with law, and to make such contracts and commitments without regard to fiscal year limitations, as provided by section 9104 of title 31, United States Code, as may be necessary in carrying out the programs set forth in the Corporation's budget for the current fiscal year. operations and maintenance (harbor maintenance trust fund) For necessary expenses to conduct the operations, maintenance, and capital infrastructure activities on portions of the St. Lawrence Seaway owned, operated, and maintained by the Great Lakes St. Lawrence Seaway Development Corporation, $40,605,000, to be derived from the Harbor Maintenance Trust Fund, pursuant to section 210 of the Water Resources Development Act of 1986 (33 U.S.C. 2238): Provided, That of the amounts made available under this heading, not less than $16,400,000 shall be for the seaway infrastructure program. Maritime Administration maritime security program For necessary expenses to maintain and preserve a U.S.-flag merchant fleet as authorized under chapter 531 of title 46, United States Code, to serve the national security needs of the United States, $318,000,000, to remain available until expended. cable security fleet (including rescission) For the cable security fleet program, as authorized under chapter 532 of title 46, United States Code, $10,000,000, to remain available until expended: Provided, That of the unobligated balances from prior year appropriations available under this heading, $10,000,000 are hereby permanently rescinded. tanker security program (including rescission) For Tanker Security Fleet payments, as authorized under section 53406 of title 46, United States Code, $120,000,000, to remain available until expended: Provided, That of the unobligated balances from prior year appropriations available under this heading, $60,000,000 are hereby permanently rescinded. operations and training For necessary expenses of operations and training activities authorized by law, $262,275,000: Provided, That of the sums appropriated under this heading-- (1) $94,729,000 shall remain available until September 30, 2026, for the operations of the United States Merchant Marine Academy; (2) $22,000,000 shall remain available until expended for facilities maintenance and repair, and equipment, at the United States Merchant Marine Academy; (3) $64,000,000 shall remain available until expended for capital improvements at the United States Merchant Marine Academy; (4) $6,000,000 shall remain available until September 30, 2026, for the maritime environmental and technical assistance program authorized under section 50307 of title 46, United States Code; and (5) $5,000,000 shall remain available until expended for the United States marine highway program to make grants for the purposes authorized under section 55601 of title 46, United States Code: Provided further, That the Administrator of the Maritime Administration shall transmit to the House and Senate Committees on Appropriations the annual report on sexual assault and sexual harassment at the United States Merchant Marine Academy as required pursuant to section 3510 of the National Defense Authorization Act for fiscal year 2017 (46 U.S.C. 51318): Provided further, That available balances under this heading for the short sea transportation program or America's marine highway program (now known as the United States marine highway program) from prior year recoveries shall be available to carry out activities authorized under section 55601 of title 46, United States Code. state maritime academy operations For necessary expenses of operations, support, and training activities for State Maritime Academies, $117,600,000: Provided, That of the sums appropriated under this heading-- (1) $22,000,000 shall remain available until expended for maintenance, repair, and life extension of training ships at the State Maritime Academies; (2) $75,000,000 shall remain available until expended for the national security multi-mission vessel program, including funds for expenses related to the operation, oversight, and management of school ships constructed with funds provided for the National Security Multi-Mission Vessel Program, including insurance, maintenance, repair and equipment costs; and, as determined by the Secretary, necessary expenses to design, plan, construct infrastructure, and purchase equipment necessary to berth such ships: Provided, That such funds may be used to reimburse State Maritime Academies for costs incurred prior to the date of enactment of this Act; (3) $4,800,000 shall remain available until September 30, 2029, for the student incentive program; (4) $8,800,000 shall remain available until expended for training ship fuel assistance; and (5) $7,000,000 shall remain available until September 30, 2026, for direct payments for State Maritime Academies: Provided, That each institution eligible for such payments receives no more than $1,000,000. assistance to small shipyards To make grants to qualified shipyards as authorized under section 54101 of title 46, United States Code, $8,750,000, to remain available until expended. ship disposal For necessary expenses related to the disposal of obsolete vessels in the National Defense Reserve Fleet of the Maritime Administration, $6,000,000, to remain available until expended. maritime guaranteed loan (title xi) program account (including transfer of funds) For administrative expenses to carry out the guaranteed loan program, $3,700,000, which shall be transferred to and merged with the appropriations for ``Maritime Administration--Operations and Training''. port infrastructure development program To make grants to improve port facilities as authorized under section 54301 of title 46, United States Code, and section 3501(a)(9) of the National Defense Authorization Act for fiscal year 2024 (Public Law 118-31), $72,400,000, to remain available until expended: Provided, That of the sums appropriated under this heading in this Act-- (1) $50,000,000 shall be for projects for coastal seaports, inland river ports, or Great Lakes ports: Provided, That for grants awarded under this paragraph in this Act, the minimum grant size shall be $1,000,000; and (2) $22,400,000 shall be for the purposes, and in the amounts, specified for Community Project Funding included in the table entitled ``Community Project Funding'' included in the Report accompanying this Act. administrative provision--maritime administration Sec. 170. Notwithstanding any other provision of this Act, in addition to any existing authority, the Maritime Administration is authorized to furnish utilities and services and make necessary repairs in connection with any lease, contract, or occupancy involving Government property under control of the Maritime Administration: Provided, That payments received therefor shall be credited to the appropriation charged with the cost thereof and shall remain available until expended: Provided further, That rental payments under any such lease, contract, or occupancy for items other than such utilities, services, or repairs shall be deposited into the Treasury as miscellaneous receipts. Pipeline and Hazardous Materials Safety Administration operational expenses For necessary operational expenses of the Pipeline and Hazardous Materials Safety Administration, $31,996,000, of which $4,500,000 shall remain available until September 30, 2027. hazardous materials safety For expenses necessary to discharge the hazardous materials safety functions of the Pipeline and Hazardous Materials Safety Administration, $81,226,000, of which $10,570,000 shall remain available until September 30, 2027: Provided, That up to $800,000 in fees collected under section 5108(g) of title 49, United States Code, shall be deposited in the general fund of the Treasury as offsetting receipts: Provided further, That there may be credited to this appropriation, to be available until expended, funds received from States, counties, municipalities, other public authorities, and private sources for expenses incurred for training, for reports publication and dissemination, and for travel expenses incurred in performance of hazardous materials exemptions and approvals functions. pipeline safety (pipeline safety fund) (oil spill liability trust fund) For expenses necessary to carry out a pipeline safety program, as authorized by section 60107 of title 49, United States Code, and to discharge the pipeline program responsibilities of the Oil Pollution Act of 1990 (Public Law 101-380), $224,422,000, to remain available until September 30, 2027, of which $31,000,000 shall be derived from the Oil Spill Liability Trust Fund; of which $186,022,000 shall be derived from the Pipeline Safety Fund; of which $400,000 shall be derived from the fees collected under section 60303 of title 49, United States Code, and deposited in the Liquefied Natural Gas Siting Account for compliance reviews of liquefied natural gas facilities; and of which $7,000,000 shall be derived from fees collected under section 60302 of title 49, United States Code, and deposited in the Underground Natural Gas Storage Facility Safety Account for the purpose of carrying out section 60141 of title 49, United States Code: Provided, That not less than $1,058,000 of the amounts made available under this heading shall be for the one-call state grant program: Provided further, That any amounts made available under this heading in this Act or in prior Acts for research contracts, grants, cooperative agreements or research other transactions agreements (OTAs) shall require written notification to the House and Senate Committees on Appropriations not less than 3 full business days before such research contracts, grants, cooperative agreements, or research OTAs are announced by the Department of Transportation: Provided further, That the Secretary shall transmit to the House and Senate Committees on Appropriations the report on pipeline safety testing enhancement as required pursuant to section 105 of the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020 (division R of Public Law 116-260): Provided further, That the Secretary may obligate amounts made available under this heading to engineer, erect, alter, and repair buildings or make any other public improvements for research facilities at the Transportation Technology Center after the Secretary submits an updated research plan and the report in the preceding proviso to the House and Senate Committees on Appropriations and after such plan and report in the preceding proviso are approved by the House and Senate Committees on Appropriations. emergency preparedness grants (limitation on obligations) (emergency preparedness fund) For expenses necessary to carry out the Emergency Preparedness Grants program, not more than $46,825,000 shall remain available until September 30, 2027, from amounts made available by section 5116(h) and subsections (b) and (c) of section 5128 of title 49, United States Code: Provided, That notwithstanding section 5116(h)(4) of title 49, United States Code, not more than 4 percent of the amounts made available from this account shall be available to pay the administrative costs of carrying out sections 5116, 5107(e), and 5108(g)(2) of title 49, United States Code: Provided further, That notwithstanding subsections (b) and (c) of section 5128 of title 49, United States Code, and the limitation on obligations provided under this heading, prior year recoveries recognized in the current year shall be available to develop and deliver hazardous materials emergency response training for emergency responders, including response activities for the transportation of crude oil, ethanol, flammable liquids, and other hazardous commodities by rail, consistent with National Fire Protection Association standards, and to make such training available through an electronic format: Provided further, That the prior year recoveries made available under this heading shall also be available to carry out sections 5116(a)(1)(C), 5116(h), 5116(i), 5116(j), and 5107(e) of title 49, United States Code. Office of Inspector General salaries and expenses For necessary expenses of the Office of Inspector General to carry out the provisions of the Inspector General Act of 1978, as amended, $122,176,000: Provided, That the Inspector General shall have all necessary authority, in carrying out the duties specified in the Inspector General Act, as amended (5 U.S.C. App.), to investigate allegations of fraud, including false statements to the government (18 U.S.C. 1001), by any person or entity that is subject to regulation by the Department of Transportation. General Provisions--Department of Transportation Sec. 180. (a) During the current fiscal year, applicable appropriations to the Department of Transportation shall be available for maintenance and operation of aircraft; hire of passenger motor vehicles and aircraft; purchase of liability insurance for motor vehicles operating in foreign countries on official department business; and uniforms or allowances therefor, as authorized by sections 5901 and 5902 of title 5, United States Code. (b) During the current fiscal year, applicable appropriations to the Department and its operating administrations shall be available for the purchase, maintenance, operation, and deployment of unmanned aircraft systems that advance the missions of the Department of Transportation or an operating administration of the Department of Transportation. (c) Any unmanned aircraft system purchased, procured, or contracted for by the Department prior to the date of enactment of this Act shall be deemed authorized by Congress as if this provision was in effect when the system was purchased, procured, or contracted for. Sec. 181. Appropriations contained in this Act for the Department of Transportation shall be available for services as authorized by section 3109 of title 5, United States Code, but at rates for individuals not to exceed the per diem rate equivalent to the rate for an Executive Level IV. Sec. 182. (a) No recipient of amounts made available by this Act shall disseminate personal information (as defined in section 2725(3) of title 18, United States Code) obtained by a State department of motor vehicles in connection with a motor vehicle record as defined in section 2725(1) of title 18, United States Code, except as provided in section 2721 of title 18, United States Code, for a use permitted under section 2721 of title 18, United States Code. (b) Notwithstanding subsection (a), the Secretary shall not withhold amounts made available by this Act for any grantee if a State is in noncompliance with this provision. Sec. 183. None of the funds made available by this Act shall be available for salaries and expenses of more than 125 political and Presidential appointees in the Department of Transportation: Provided, That none of the personnel covered by this provision may be assigned on temporary detail outside the Department of Transportation. Sec. 184. Funds received by the Federal Highway Administration and Federal Railroad Administration from States, counties, municipalities, other public authorities, and private sources for expenses incurred for training may be credited respectively to the Federal Highway Administration's ``Federal-Aid Highways'' account and to the Federal Railroad Administration's ``Safety and Operations'' account, except for State rail safety inspectors participating in training pursuant to section 20105 of title 49, United States Code. Sec. 185. None of the funds made available by this Act or in title VIII of division J of Public Law 117-58 to the Department of Transportation may be used to make a loan, loan guarantee, line of credit, letter of intent, federally funded cooperative agreement, full funding grant agreement, or discretionary grant unless the Secretary of Transportation notifies the House and Senate Committees on Appropriations not less than 3 full business days before any project competitively selected to receive any discretionary grant award, letter of intent, loan commitment, loan guarantee commitment, line of credit commitment, federally funded cooperative agreement, or full funding grant agreement is announced by the Department or its operating administrations: Provided, That the Secretary of Transportation shall provide the House and Senate Committees on Appropriations with a comprehensive list of all such loans, loan guarantees, lines of credit, letters of intent, federally funded cooperative agreements, full funding grant agreements, and discretionary grants prior to the notification required under the preceding proviso: Provided further, That the Secretary gives concurrent notification to the House and Senate Committees on Appropriations for any ``quick release'' of funds from the emergency relief program: Provided further, That no notification shall involve funds that are not available for obligation. Sec. 186. Rebates, refunds, incentive payments, minor fees, and other funds received by the Department of Transportation from travel management centers, charge card programs, the subleasing of building space, and miscellaneous sources are to be credited to appropriations of the Department of Transportation and allocated to organizational units of the Department of Transportation using fair and equitable criteria and such funds shall be available until expended. Sec. 187. Notwithstanding any other provision of law, if any funds provided by or limited by this Act are subject to a reprogramming action that requires notice to be provided to the House and Senate Committees on Appropriations, transmission of such reprogramming notice shall be provided solely to the House and Senate Committees on Appropriations, and such reprogramming action shall be approved or denied solely by the House and Senate Committees on Appropriations: Provided, That the Secretary of Transportation may provide notice to other congressional committees of the action of the House and Senate Committees on Appropriations on such reprogramming but not sooner than 30 days after the date on which the reprogramming action has been approved or denied by the House and Senate Committees on Appropriations. Sec. 188. Funds appropriated by this Act to the operating administrations may be obligated for the Office of the Secretary for the costs related to assessments or reimbursable agreements only when such amounts are for the costs of goods and services that are purchased to provide a direct benefit to the applicable operating administration or administrations. Sec. 189. The Secretary of Transportation is authorized to carry out a program that establishes uniform standards for developing and supporting agency transit pass and transit benefits authorized under section 7905 of title 5, United States Code, including distribution of transit benefits by various paper and electronic media. Sec. 190. The Department of Transportation may use funds provided by this Act, or any other Act, to assist a contract under title 49 or 23 of the United States Code utilizing geographic, economic, or any other hiring preference not otherwise authorized by law, or to amend a rule, regulation, policy or other measure that forbids a recipient of a Federal Highway Administration or Federal Transit Administration grant from imposing such hiring preference on a contract or construction project with which the Department of Transportation is assisting, only if the grant recipient certifies the following: (1) that except with respect to apprentices or trainees, a pool of readily available but unemployed individuals possessing the knowledge, skill, and ability to perform the work that the contract requires resides in the jurisdiction; (2) that the grant recipient will include appropriate provisions in its bid document ensuring that the contractor does not displace any of its existing employees in order to satisfy such hiring preference; and (3) that any increase in the cost of labor, training, or delays resulting from the use of such hiring preference does not delay or displace any transportation project in the applicable statewide transportation improvement program or transportation improvement program. Sec. 191. The Secretary of Transportation shall coordinate with the Secretary of Homeland Security to ensure that best practices for Industrial Control Systems Procurement are up-to-date and shall ensure that systems procured with funds provided under this title were procured using such practices. Sec. 192. None of the funds made available in this Act may be used in contravention of the American Security Drone Act of 2023 (subtitle B of title XVIII of division A of Public Law 118-31). Sec. 193. None of the funds made available by this Act may be used to implement, administer, or enforce the final rule issued on June 24, 2024 by the Administrator of the National Highway Traffic Safety Administration titled ``Corporate Average Fuel Economy Standards for Passenger Cars and Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 and Beyond'' (89 Fed. Reg. 52540 (June 24, 2024)) or any substantially similar rule. Sec. 194. None of the funds appropriated or made available by this Act shall be used to enforce a mask mandate in response to the COVID-19 virus. Sec. 195. (a) None of the funds appropriated or otherwise made available by this or any other Act may be used to license, facilitate, coordinate, or otherwise allow officials of a country designated as a state sponsor of terrorism within the past 3 fiscal years, to, in the official capacity of such official, observe, tour, visit, or confer with the employees of the Department of Transportation, including the Federal Aviation Administration. (b) In this section, the term ``state sponsor of terrorism'' means a country the government of which the Secretary of State determines has repeatedly provided support for international terrorism pursuant to-- (1) section 1754(c)(1)(A) of the Export Control Reform Act of 2018 (50 U.S.C. 4318(c)(1)(A)); (2) section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371); (3) section 40 of the Arms Export Control Act (22 U.S.C. 2780); or (4) any other provision of law. This title may be cited as the ``Department of Transportation Appropriations Act, 2025''. TITLE II DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Management and Administration executive offices For necessary salaries and expenses for Executive Offices, which shall be comprised of the offices of the Secretary, Deputy Secretary, Adjudicatory Services, Congressional and Intergovernmental Relations, Public Affairs, Small and Disadvantaged Business Utilization, and the Center for Faith-Based and Neighborhood Partnerships, $19,400,000, to remain available until September 30, 2026: Provided, That not to exceed $25,000 of the amount made available under this heading shall be available to the Secretary of Housing and Urban Development (referred to in this title as ``the Secretary'') for official reception and representation expenses as the Secretary may determine. administrative support offices For necessary salaries and expenses for Administrative Support Offices, $686,400,000, to remain available until September 30, 2026: Provided, That of the sums appropriated under this heading-- (1) $91,000,000 shall be available for the Office of the Chief Financial Officer; (2) $129,700,000 shall be available for the Office of the General Counsel, of which not less than $21,700,000 shall be for the Departmental Enforcement Center; (3) $239,000,000 shall be available for the Office of Administration; (4) $52,000,000 shall be available for the Office of the Chief Human Capital Officer; (5) $32,000,000 shall be available for the Office of the Chief Procurement Officer; (6) $68,000,000 shall be available for the Office of Field Policy and Management; (7) $4,700,000 shall be available for the Office of Departmental Equal Employment Opportunity; and (8) $70,000,000 shall be available for the Office of the Chief Information Officer: Provided further, That funds made available under this heading may be used for necessary administrative and non-administrative expenses of the Department, not otherwise provided for, including purchase of uniforms, or allowances therefor, as authorized by sections 5901 and 5902 of title 5, United States Code; hire of passenger motor vehicles; and services as authorized by section 3109 of title 5, United States Code: Provided further, That notwithstanding any other provision of law, funds appropriated under this heading may be used for advertising and promotional activities that directly support program activities funded in this title. program offices For necessary salaries and expenses for Program Offices, $1,097,164,130, to remain available until September 30, 2026: Provided, That of the sums appropriated under this heading-- (1) $286,000,000 shall be available for the Office of Public and Indian Housing; (2) $168,514,130 shall be available for the Office of Community Planning and Development; (3) $487,550,000 shall be available for the Office of Housing; (4) $41,000,000 shall be available for the Office of Policy Development and Research; (5) $102,900,000 shall be available for the Office of Fair Housing and Equal Opportunity; and (6) $11,200,000 shall be available for the Office of Lead Hazard Control and Healthy Homes. working capital fund (including transfer of funds) For the working capital fund for the Department of Housing and Urban Development (referred to in this paragraph as the ``Fund''), pursuant, in part, to section 7(f) of the Department of Housing and Urban Development Act (42 U.S.C. 3535(f)), amounts transferred, including reimbursements pursuant to section 7(f), to the Fund under this heading shall be available only for Federal shared services used by offices and agencies of the Department, for services the Secretary has determined shall be provided through the Fund, and for the operational expenses of the Fund: Provided, That upon a determination by the Secretary that any other service (or portion thereof) authorized under this heading shall be provided through the Fund, amounts made available in this title for salaries and expenses under the headings ``Executive Offices'', ``Administrative Support Offices'', ``Program Offices'', and ``Government National Mortgage Association'', for such services shall be transferred to the Fund, to remain available until expended: Provided further, That the Secretary shall notify the House and Senate Committees on Appropriations of its plans for executing such transfers at least 15 days in advance of such transfers. Public and Indian Housing tenant-based rental assistance For activities and assistance for the provision of tenant-based rental assistance authorized under the United States Housing Act of 1937, as amended (42 U.S.C. 1437 et seq.) (in this title ``the Act''), not otherwise provided for, $28,271,935,000 to remain available until expended, which shall be available on October 1, 2024 (in addition to the $4,000,000,000 previously appropriated under this heading that shall be available on October 1, 2024), and $4,000,000,000, to remain available until expended, which shall be available on October 1, 2025: Provided, That of the sums appropriated under this heading-- (1) $28,499,700,000 shall be available for renewals of expiring section 8 tenant-based annual contributions contracts (including renewals of enhanced vouchers under any provision of law authorizing such assistance under section 8(t) of the Act) and including renewal of other special purpose incremental vouchers: Provided, That notwithstanding any other provision of law, from amounts provided under this paragraph and any carryover, the Secretary for the calendar year 2025 funding cycle shall provide renewal funding for each public housing agency based on validated voucher management system (VMS) or successor system leasing and cost data for the prior calendar year and by applying an inflation factor as established by the Secretary, by notice published in the Federal Register, and by making any necessary adjustments for the costs associated with the first-time renewal of vouchers under this paragraph including tenant protection and Choice Neighborhoods vouchers: Provided further, That none of the funds provided under this paragraph may be used to fund a total number of unit months under lease which exceeds a public housing agency's authorized level of units under contract, except for public housing agencies participating in the Moving to Work (MTW) demonstration, which are instead governed in accordance with the requirements of the MTW demonstration program or their MTW agreements, if any: Provided further, That the Secretary shall, to the extent necessary to stay within the amount specified under this paragraph (except as otherwise modified under this paragraph), prorate each public housing agency's allocation otherwise established pursuant to this paragraph: Provided further, That except as provided in the following provisos, the entire amount specified under this paragraph (except as otherwise modified under this paragraph) shall be obligated to the public housing agencies based on the allocation and pro rata method described above, and the Secretary shall notify public housing agencies of their annual budget by the latter of 60 days after enactment of this Act or March 1, 2025: Provided further, That the Secretary may extend the notification period with the prior written approval of the House and Senate Committees on Appropriations: Provided further, That public housing agencies participating in the MTW demonstration shall be funded in accordance with the requirements of the MTW demonstration program or their MTW agreements, if any, and shall be subject to the same pro rata adjustments under the preceding provisos: Provided further, That the Secretary may perform a statutory offset of public housing agencies' calendar year 2025 allocations based on the excess amounts of public housing agencies' net restricted assets accounts, including HUD-held programmatic reserves (in accordance with VMS or successor system data in calendar year 2024 that is verifiable and complete), as determined by the Secretary: Provided further, That public housing agencies participating in the MTW demonstration shall also be subject to the statutory offset, as determined by the Secretary, from the agencies' calendar year 2025 MTW funding allocation: Provided further, That the Secretary shall use any offset referred to in the preceding two provisos throughout the calendar year to prevent the termination of rental assistance for families as the result of insufficient funding, as determined by the Secretary, and to avoid or reduce the proration of renewal funding allocations: Provided further, That up to $200,000,000 shall be available only: (A) for adjustments in the allocations for public housing agencies, after application for an adjustment by a public housing agency that experienced a significant increase, as determined by the Secretary, in renewal costs of vouchers resulting from unforeseen circumstances or from portability under section 8(r) of the Act; (B) for vouchers that were not in use during the previous 12-month period in order to be available to meet a commitment pursuant to section 8(o)(13) of the Act, or an adjustment for a funding obligation not yet expended in the previous calendar year for a MTW- eligible activity to develop affordable housing for an agency added to the MTW demonstration under the expansion authority provided in section 239 of the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2016 (division L of Public Law 114-113); (C) for adjustments for costs associated with HUD- Veterans Affairs Supportive Housing (HUD-VASH) vouchers; (D) for public housing agencies that despite taking reasonable cost savings measures, as determined by the Secretary, would otherwise be required to terminate rental assistance for families as a result of insufficient funding; (E) for adjustments in the allocations for public housing agencies that-- (i) are leasing a lower-than-average percentage of their authorized vouchers, (ii) have low amounts of budget authority in their net restricted assets accounts and HUD-held programmatic reserves, relative to other agencies, and (iii) are not participating in the Moving to Work demonstration, to enable such agencies to lease more vouchers; (F) for withheld payments in accordance with section 8(o)(8)(A)(ii) of the Act for months in the previous calendar year that were subsequently paid by the public housing agency after the agency's actual costs were validated; and (G) for public housing agencies that have experienced increased costs or loss of units in an area for which the President declared a disaster under title IV of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170 et seq.): Provided further, That the Secretary shall allocate amounts under the preceding proviso based on need, as determined by the Secretary; (2) $300,000,000 shall be available for section 8 rental assistance for relocation and replacement of housing units that are demolished or disposed of pursuant to section 18 of the Act, conversion of section 23 projects to assistance under section 8, relocation of witnesses (including victims of violent crimes) in connection with efforts to combat crime in public and assisted housing pursuant to a request from a law enforcement or prosecution agency, enhanced vouchers under any provision of law authorizing such assistance under section 8(t) of the Act, Choice Neighborhood vouchers, mandatory and voluntary conversions, and tenant protection assistance including replacement and relocation assistance or for project- based assistance to prevent the displacement of unassisted elderly tenants currently residing in section 202 properties financed between 1959 and 1974 that are refinanced pursuant to Public Law 106-569, as amended, or under the authority as provided under this Act: Provided, That the Secretary may, not less than 3 days after providing notice to the House and Senate Committees on Appropriations, reprogram amounts made available under this paragraph to utilize such amounts to avoid or reduce the proration of renewal funding allocations under paragraph (1) under this heading: Provided further, That when a public housing development is submitted for demolition or disposition under section 18 of the Act, the Secretary may provide section 8 rental assistance when the units pose an imminent health and safety risk to residents: Provided further, That the Secretary may provide section 8 rental assistance from amounts made available under this paragraph for units assisted under a project-based subsidy contract funded under the ``Project-Based Rental Assistance'' heading under this title where the owner has received a Notice of Default and the units pose an imminent health and safety risk to residents: Provided further, That of the amounts made available under this paragraph, no less than $5,000,000 may be available to provide tenant protection assistance, not otherwise provided under this paragraph, to residents residing in low vacancy areas and who may have to pay rents greater than 30 percent of household income, as the result of: (A) the maturity of a HUD-insured, HUD-held or section 202 loan that requires the permission of the Secretary prior to loan prepayment; (B) the expiration of a rental assistance contract for which the tenants are not eligible for enhanced voucher or tenant protection assistance under existing law; or (C) the expiration of affordability restrictions accompanying a mortgage or preservation program administered by the Secretary: Provided further, That such tenant protection assistance made available under the preceding proviso may be provided under the authority of section 8(t) or section 8(o)(13) of the Act: Provided further, That any tenant protection voucher made available from amounts under this paragraph shall not be reissued by any public housing agency, except the replacement vouchers as defined by the Secretary by notice, when the initial family that received any such voucher no longer receives such voucher, and the authority for any public housing agency to issue any such voucher shall cease to exist: Provided further, That the Secretary may only provide replacement vouchers for units that were occupied within the previous 24 months that cease to be available as assisted housing, subject only to the availability of funds; (3) $2,770,935,000 shall be available for administrative and other expenses of public housing agencies in administering the section 8 tenant-based rental assistance program, of which up to $30,000,000 shall be available to the Secretary to allocate to public housing agencies that need additional funds to administer their section 8 programs, including fees associated with section 8 tenant protection rental assistance, the administration of disaster related vouchers, HUD-VASH vouchers, and other special purpose incremental vouchers: Provided, That no less than $2,740,935,000 of the amount provided in this paragraph shall be allocated to public housing agencies for the calendar year 2025 funding cycle based on section 8(q) of the Act (and related appropriation Act provisions) as in effect immediately before the enactment of the Quality Housing and Work Responsibility Act of 1998 (Public Law 105-276): Provided further, That if the amounts made available under this paragraph are insufficient to pay the amounts determined under the preceding proviso, the Secretary may decrease the amounts allocated to agencies by a uniform percentage applicable to all agencies receiving funding under this paragraph or may, to the extent necessary to provide full payment of amounts determined under the preceding proviso, utilize unobligated balances, including recaptures and carryover, remaining from funds appropriated under this heading from prior fiscal years, excluding special purpose vouchers, notwithstanding the purposes for which such amounts were appropriated: Provided further, That all public housing agencies participating in the MTW demonstration shall be funded in accordance with the requirements of the MTW demonstration program or their MTW agreements, if any, and shall be subject to the same uniform percentage decrease as under the preceding proviso: Provided further, That amounts provided under this paragraph shall be only for activities related to the provision of tenant-based rental assistance authorized under section 8, including related development activities; (4) $701,300,000 shall be available for the renewal of tenant-based assistance contracts under section 811 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013), including necessary administrative expenses: Provided, That administrative and other expenses of public housing agencies in administering the special purpose vouchers in this paragraph shall be funded under the same terms and be subject to the same pro rata reduction as the percent decrease for administrative and other expenses to public housing agencies under paragraph (3) of this heading: Provided further, That up to $10,000,000 shall be available only-- (A) for adjustments in the allocation for public housing agencies, after applications for an adjustment by a public housing agency that experienced a significant increase, as determined by the Secretary, in Mainstream renewal costs resulting from unforeseen circumstances; and (B) for public housing agencies that despite taking reasonable cost savings measures, as determined by the Secretary, would otherwise be required to terminate the rental assistance for Mainstream families as a result of insufficient funding: Provided further, That the Secretary shall allocate amounts under the preceding proviso based on need, as determined by the Secretary: Provided further, That upon turnover, section 811 special purpose vouchers funded under this heading in this or prior Acts, or under any other heading in prior Acts, shall be provided to non-elderly persons with disabilities; (5) of the amounts provided under paragraph (1), up to $8,000,000 shall be available for rental assistance and associated administrative fees for Tribal HUD-VASH to serve Native American veterans that are homeless or at-risk of homelessness living on or near a reservation or other Indian areas: Provided, That such amount shall be made available for renewal grants to recipients that received assistance under prior Acts under the Tribal HUD-VASH program: Provided further, That the Secretary shall be authorized to specify criteria for renewal grants, including data on the utilization of assistance reported by grant recipients: Provided further, That such assistance shall be administered in accordance with program requirements under the Native American Housing Assistance and Self-Determination Act of 1996 and modeled after the HUD-VASH program: Provided further, That the Secretary shall be authorized to waive, or specify alternative requirements for any provision of any statute or regulation that the Secretary administers in connection with the use of funds made available under this paragraph (except for requirements related to fair housing, nondiscrimination, labor standards, and the environment), upon a finding by the Secretary that any such waivers or alternative requirements are necessary for the effective delivery and administration of such assistance: Provided further, That grant recipients shall report to the Secretary on utilization of such rental assistance and other program data, as prescribed by the Secretary: Provided further, That the Secretary may reallocate, as determined by the Secretary, amounts returned or recaptured from awards under the Tribal HUD-VASH program under prior Acts to existing recipients under the Tribal HUD-VASH program; and (6) the Secretary shall separately track all special purpose vouchers funded under this heading. housing certificate fund (including rescissions) Unobligated balances, including recaptures and carryover, remaining from funds appropriated to the Department of Housing and Urban Development under this heading, the heading ``Annual Contributions for Assisted Housing'' and the heading ``Project-Based Rental Assistance'', for fiscal year 2025 and prior years may be used for renewal of or amendments to section 8 project-based contracts and for performance- based contract administrators, notwithstanding the purposes for which such funds were appropriated: Provided, That any obligated balances of contract authority from fiscal year 1974 and prior fiscal years that have been terminated shall be rescinded: Provided further, That amounts heretofore recaptured, or recaptured during the current fiscal year, from section 8 project-based contracts from source years fiscal year 1975 through fiscal year 1987 are hereby rescinded, and an amount of additional new budget authority, equivalent to the amount rescinded is hereby appropriated, to remain available until expended, for the purposes set forth under this heading, in addition to amounts otherwise available. public housing fund For 2025 payments to public housing agencies for the operation and management of public housing, as authorized by section 9(e) of the United States Housing Act of 1937 (42 U.S.C. 1437g(e)) (the ``Act''), and to carry out capital and management activities for public housing agencies, as authorized under section 9(d) of the Act (42 U.S.C. 1437g(d)), $8,213,713,000, to remain available until September 30, 2028: Provided, That of the sums appropriated under this heading-- (1) $5,096,713,000 shall be available for the Secretary to allocate pursuant to the Operating Fund formula at part 990 of title 24, Code of Federal Regulations, for 2025 payments; (2) $25,000,000 shall be available for the Secretary to allocate pursuant to a need-based application process notwithstanding section 203 of this title and not subject to such Operating Fund formula to public housing agencies that experience, or are at risk of, financial shortfalls, as determined by the Secretary: Provided, That after all such shortfall needs are met, the Secretary may distribute any remaining funds to all public housing agencies on a pro-rata basis pursuant to such Operating Fund formula; (3) $3,047,000,000 shall be available for the Secretary to allocate pursuant to the Capital Fund formula at section 905.400 of title 24, Code of Federal Regulations: Provided, That for funds provided under this paragraph, the limitation in section 9(g)(1) of the Act shall be 25 percent: Provided further, That the Secretary may waive the limitation in the preceding proviso to allow public housing agencies to fund activities authorized under section 9(e)(1)(C) of the Act: Provided further, That the Secretary shall notify public housing agencies requesting waivers under the preceding proviso if the request is approved or denied within 14 calendar days of submitting the request: Provided further, That from the funds made available under this paragraph, the Secretary shall provide bonus awards in fiscal year 2025 to public housing agencies that are designated high performers: Provided further, That the Department shall notify public housing agencies of their formula allocation within 60 days of enactment of this Act; (4) $30,000,000 shall be available for the Secretary to make grants, notwithstanding section 203 of this title, to public housing agencies for emergency capital needs, including safety and security measures necessary to address crime and drug-related activity, as well as needs resulting from unforeseen or unpreventable emergencies and natural disasters excluding Presidentially declared emergencies and natural disasters under the Robert T. Stafford Disaster Relief and Emergency Act (42 U.S.C. 5121 et seq.) occurring in fiscal year 2025: Provided, That of the amount made available under this paragraph, not less than $10,000,000 shall be for safety and security measures: Provided further, That in addition to the amount in the preceding proviso for such safety and security measures, any amounts that remain available, after all applications received on or before September 30, 2026, for emergency capital needs have been processed, shall be allocated to public housing agencies for such safety and security measures; and (5) $15,000,000 shall be available to support the costs of administrative and judicial receiverships and for competitive grants to PHAs in receivership, designated troubled or substandard, or otherwise at risk, as determined by the Secretary, for costs associated with public housing asset improvement, in addition to other amounts for that purpose provided under any heading under this title: Provided further, That notwithstanding any other provision of law or regulation, during fiscal year 2025, the Secretary of Housing and Urban Development may not delegate to any Department official other than the Deputy Secretary and the Assistant Secretary for Public and Indian Housing any authority under paragraph (2) of section 9(j) of the Act regarding the extension of the time periods under such section: Provided further, That for purposes of such section 9(j), the term ``obligate'' means, with respect to amounts, that the amounts are subject to a binding agreement that will result in outlays, immediately or in the future. assisted housing inspections and risk assessments For the Department's inspection and assessment programs, including travel, training, and program support contracts, $50,000,000 to remain available until September 30, 2026: Provided, That unobligated balances, including recaptures and carryover, remaining from funds appropriated under the heading ``Public Housing Fund'' to support ongoing public housing financial and physical assessment activities shall be available for the purposes authorized under this heading in addition to the purposes for which such funds originally were appropriated. self-sufficiency programs For activities and assistance related to self-sufficiency programs, to remain available until September 30, 2028, $175,000,000: Provided, That of the sums appropriated under this heading-- (1) $125,000,000 shall be available for the family self- sufficiency program to support family self-sufficiency coordinators under section 23 of the United States Housing Act of 1937 (42 U.S.C. 1437u), to promote the development of local strategies to coordinate the use of assistance under sections 8 and 9 of such Act with public and private resources, and enable eligible families to achieve economic independence and self- sufficiency; (2) $35,000,000 shall be available for the resident opportunity and self-sufficiency program to provide for supportive services, service coordinators, and congregate services as authorized by section 34 of the United States Housing Act of 1937 (42 U.S.C. 1437z-6) and the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.): Provided, That amounts made available under this paragraph may be used to renew resident opportunity and self-sufficiency program grants to allow the public housing agency, or a new owner, to continue to serve (or restart service to) residents of a project with assistance converted from public housing to project-based rental assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) or assistance under section 8(o)(13) of such Act under the heading ``Rental Assistance Demonstration'' in the Department of Housing and Urban Development Appropriations Act, 2012 (Public Law 112-55), as amended (42 U.S.C. 1437f note); and (3) $15,000,000 shall be available for a jobs-plus initiative, modeled after the jobs-plus demonstration: Provided, That funding provided under this paragraph shall be available for competitive grants to partnerships between public housing authorities, local workforce investment boards established under section 107 of the Workforce Innovation and Opportunity Act of 2014 (29 U.S.C. 3122), and other agencies and organizations that provide support to help public housing residents obtain employment and increase earnings: Provided further, That applicants must demonstrate the ability to provide services to residents, partner with workforce investment boards, and leverage service dollars: Provided further, That the Secretary may allow public housing agencies to request exemptions from rent and income limitation requirements under sections 3 and 6 of the United States Housing Act of 1937 (42 U.S.C. 1437a, 1437d), as necessary to implement the jobs-plus program, on such terms and conditions as the Secretary may approve upon a finding by the Secretary that any such waivers or alternative requirements are necessary for the effective implementation of the jobs-plus initiative as a voluntary program for residents: Provided further, That the Secretary shall publish by notice in the Federal Register any waivers or alternative requirements pursuant to the preceding proviso no later than 10 days before the effective date of such notice. native american programs For activities and assistance authorized under title I of the Native American Housing Assistance and Self-Determination Act of 1996 (in this heading ``NAHASDA'') (25 U.S.C. 4111 et seq.), title I of the Housing and Community Development Act of 1974 (42 U.S.C. 5301 et seq.) with respect to Indian tribes, and related training and technical assistance, $1,455,100,000, to remain available until September 30, 2029: Provided, That of the sums appropriated under this heading-- (1) $1,222,100,000 shall be available for the Native American housing block grants program, as authorized under title I of NAHASDA: Provided, That, notwithstanding NAHASDA, to determine the amount of the allocation under title I of such Act for each Indian tribe, the Secretary shall apply the formula under section 302 of such Act with the need component based on single-race census data and with the need component based on multi-race census data, and the amount of the allocation for each Indian tribe shall be the greater of the two resulting allocation amounts: Provided further, That the Secretary shall notify grantees of their formula allocation not later than 60 days after the date of enactment of this Act; (2) $150,000,000 shall be available for competitive grants under the Native American housing block grants program, as authorized under title I of NAHASDA: Provided, That the Secretary shall obligate such amount for competitive grants to eligible recipients authorized under NAHASDA that apply for funds: Provided further, That in awarding amounts made available in this paragraph, the Secretary shall consider need and administrative capacity, and shall give priority to projects that will spur construction and rehabilitation of housing: Provided further, That any amounts transferred for the necessary costs of administering and overseeing the obligation and expenditure of such additional amounts in prior Acts may also be used for the necessary costs of administering and overseeing such additional amount; (3) $1,000,000 shall be available for the cost of guaranteed notes and other obligations, as authorized by title VI of NAHASDA: Provided, That such costs, including the cost of modifying such notes and other obligations, shall be as defined in section 502 of the Congressional Budget Act of 1974 (2 U.S.C. 661a): Provided further, That amounts made available in this and prior Acts for the cost of such guaranteed notes and other obligations that are unobligated, including recaptures and carryover, may be available to subsidize the total principal amount of any notes and other obligations, any part of which is to be guaranteed, not to exceed $50,000,000, to remain available until September 30, 2026: Provided further, That upon a determination that the budget authority made available for this program under this paragraph in this or prior Acts exceeds the projected demand for the current fiscal year, the Secretary may reprogram such excess amounts as necessary to provide additional awards under paragraphs (1), (2), or (4) of this heading, if the Secretary provides notice to the House and Senate Committees on Appropriations not less than 3 business days before any such reprogramming; (4) $75,000,000 shall be available for grants to Indian tribes for carrying out the Indian community development block grant program under title I of the Housing and Community Development Act of 1974, notwithstanding section 106(a)(1) of such Act, of which, notwithstanding any other provision of law (including section 203 of this Act), not more than $5,000,000 may be used for emergencies that constitute imminent threats to health and safety: Provided, That not to exceed 20 percent of any grant made with amounts made available in this paragraph shall be expended for planning and management development and administration; and (5) $7,000,000, in addition to amounts otherwise available for such purpose, shall be available for providing training and technical assistance to Indian tribes, Indian housing authorities, and tribally designated housing entities, to support the inspection of Indian housing units, for contract expertise, and for training and technical assistance related to amounts made available under this heading and other headings in this Act for the needs of Native American families and Indian country: Provided, That of the amounts made available in this paragraph, not less than $2,000,000 shall be for a national organization as authorized under section 703 of NAHASDA (25 U.S.C. 4212): Provided further, That amounts made available in this paragraph may be used, contracted, or competed as determined by the Secretary: Provided further, That notwithstanding chapter 63 of title 31, United States Code (commonly known as the Federal Grant and Cooperative Agreements Act of 1977), the amounts made available in this paragraph may be used by the Secretary to enter into cooperative agreements with public and private organizations, agencies, institutions, and other technical assistance providers to support the administration of negotiated rulemaking under section 106 of NAHASDA (25 U.S.C. 4116), the administration of the allocation formula under section 302 of NAHASDA (25 U.S.C. 4152), and the administration of performance tracking and reporting under section 407 of NAHASDA (25 U.S.C. 4167). indian housing loan guarantee fund program account For the cost of guaranteed loans, as authorized by section 184 of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z- 13a), $1,600,000, to remain available until expended: Provided, That such costs, including the cost of modifying such loans, shall be as defined in section 502 of the Congressional Budget Act of 1974 (2 U.S.C. 661a): Provided further, That an additional $400,000, to remain available until expended, shall be available for administrative contract expenses including management processes to carry out the loan guarantee program: Provided further, That amounts made available in this and prior Acts for the cost of guaranteed loans, as authorized by section 184 of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13a), that are unobligated, including recaptures and carryover, may be made available to subsidize total loan principal, any part of which is to be guaranteed, not to exceed $1,800,000,000, to remain available until September 30, 2026. native hawaiian housing loan guarantee fund program account New commitments to guarantee loans, as authorized by section 184A of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z- 13b), any part of which is to be guaranteed, shall not exceed $28,000,000 in total loan principal, to remain available until September 30, 2026: Provided, That the Secretary may enter into commitments to guarantee loans used for refinancing. Community Planning and Development housing opportunities for persons with aids For carrying out the housing opportunities for persons with AIDS program, as authorized by the AIDS Housing Opportunity Act (42 U.S.C. 12901 et seq.), $505,000,000, to remain available until September 30, 2028: Provided, That the Secretary shall renew or replace all expiring contracts for permanent supportive housing that initially were funded under section 854(c)(5) of such Act from funds made available under this heading in fiscal year 2010 and prior fiscal years that meet all program requirements before awarding funds for new contracts under such section: Provided further, That the process for submitting amendments and approving replacement contracts shall be established by the Secretary in a notice: Provided further, That the Department shall notify grantees of their formula allocation within 60 days of enactment of this Act. community development fund For assistance to States and units of general local government, and other entities, for economic and community development activities, and other purposes, $5,506,157,732, to remain available until September 30, 2028: Provided, That of the sums appropriated under this heading-- (1) $3,300,000,000 shall be available for carrying out the community development block grant program under title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq.) (in this heading ``the Act''): Provided, That not to exceed 20 percent of any grant made with funds made available under this paragraph shall be expended for planning and management development and administration: Provided further, That a metropolitan city, urban county, unit of general local government, or insular area that directly or indirectly receives funds under this paragraph may not sell, trade, or otherwise transfer all or any portion of such funds to another such entity in exchange for any other funds, credits, or non-Federal considerations, but shall use such funds for activities eligible under title I of the Act: Provided further, That notwithstanding section 105(e)(1) of the Act, no funds made available under this paragraph may be provided to a for-profit entity for an economic development project under section 105(a)(17) unless such project has been evaluated and selected in accordance with guidelines required under subsection (e)(2) of section 105; (2) $30,000,000 shall be available for activities authorized under section 8071 of the SUPPORT for Patients and Communities Act (Public Law 115-271): Provided, That funds allocated pursuant to this paragraph shall not adversely affect the amount of any formula assistance received by a State under paragraph (1) of this heading: Provided further, That the Secretary shall allocate the funds for such activities based on the notice establishing the funding formula published in 84 FR 16027 (April 17, 2019) except that the formula shall use age- adjusted rates of drug overdose deaths for 2022 based on data from the Centers for Disease Control and Prevention: Provided further, That if such age-adjusted rate is unavailable for a jurisdiction, the Secretary shall use the best available data to determine eligibility and to allocate to such jurisdiction; (3) $2,176,157,732 shall be available for grants for the Economic Development Initiative (EDI) for the purposes, and in amounts, specified for Community Project Funding in the table entitled ``Community Project Funding'' included in the Report accompanying this Act: Provided, That eligible expenses of such grants in this and prior Acts may include administrative, planning, operations and maintenance, and other costs: Provided further, That such grants for the EDI shall be available for reimbursement of otherwise eligible expenses incurred on or after the date of enactment of this Act and prior to the date of grant execution: Provided further, That none of the amounts made available under this paragraph for grants for the EDI shall be used for reimbursement of expenses incurred prior to the date of enactment of this Act: Provided further, That grants for the EDI authorized under this heading in the Department of Housing and Urban Development Appropriations Act, 2022 (Public Law 117-103) shall also be available hereafter for reimbursement of otherwise eligible expenses (including those eligible expenses identified in the first proviso of this paragraph) incurred on or after the date of enactment of such Act and prior to the date of grant execution, and shall hereafter not be subject to the second proviso under such heading in such Act: Provided further, That for amounts made available under paragraphs (1) and (2), the Secretary shall notify grantees of their formula allocation within 60 days of enactment of this Act. community development loan guarantees program account Subject to section 502 of the Congressional Budget Act of 1974 (2 U.S.C. 661a), during fiscal year 2025, commitments to guarantee loans under section 108 of the Housing and Community Development Act of 1974 (42 U.S.C. 5308), any part of which is guaranteed, shall not exceed a total principal amount of $400,000,000, notwithstanding any aggregate limitation on outstanding obligations guaranteed in subsection (k) of such section 108: Provided, That the Secretary shall collect fees from borrowers, notwithstanding subsection (m) of such section 108, to result in a credit subsidy cost of zero for guaranteeing such loans, and any such fees shall be collected in accordance with section 502(7) of the Congressional Budget Act of 1974: Provided further, That such commitment authority funded by fees may be used to guarantee, or make commitments to guarantee, notes or other obligations issued by any State on behalf of non-entitlement communities in the State in accordance with the requirements of such section 108: Provided further, That any State receiving such a guarantee or commitment under the preceding proviso shall distribute all funds subject to such guarantee to the units of general local government in non-entitlement areas that received the commitment. home investment partnerships program For the HOME investment partnerships program, as authorized under title II of the Cranston-Gonzalez National Affordable Housing Act, as amended (42 U.S.C. 12721 et seq.), $500,000,000, to remain available until September 30, 2028: Provided, That the Department shall notify grantees of their formula allocations within 60 days after enactment of this Act: Provided further, That section 218(g) of such Act (42 U.S.C. 12748(g)) shall not apply with respect to the right of a jurisdiction to draw funds from its HOME Investment Trust Fund that otherwise expired or would expire in any calendar year from 2019 through 2027 under that section: Provided further, That section 231(b) of such Act (42 U.S.C. 12771(b)) shall not apply to any uninvested funds that otherwise were deducted or would be deducted from the line of credit in the participating jurisdiction's HOME Investment Trust Fund in any calendar year from 2019 through 2027 under that section. preservation and reinvestment initiative for community enhancement For competitive grants to preserve and revitalize manufactured housing and eligible manufactured housing communities (including pre- 1976 mobile homes) under title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq.), $10,000,000, to remain available until September 30, 2029: Provided, That recipients of grants provided with amounts made available under this heading shall be States, units of general local government, resident-owned manufactured housing communities, cooperatives, nonprofit entities including consortia of nonprofit entities, community development financial institutions, Indian Tribes (as such term is defined in section 4 of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) (25 U.S.C. 4103)), or other entities approved by the Secretary: Provided further, That the Secretary shall reserve an amount for Indian Tribes within such competition: Provided further, That the Secretary may approve entities for selection that partner with one or several residents of such eligible communities or that propose to implement a grant program that would assist residents of such eligible communities: Provided further, That eligible uses of such grants may include infrastructure, planning, resident and community services (including relocation assistance and eviction prevention), resiliency activities, and providing other assistance to residents or owners of manufactured homes, which may include providing assistance for manufactured housing land and site acquisition: Provided further, That, except as determined by the Secretary, participation in this program shall not encumber the future transfer of title or use of property by the residents, owners, or communities: Provided further, That when selecting recipients, the Secretary shall prioritize applications that primarily benefit low- or moderately low-income residents and preserve long-term housing affordability for residents of manufactured housing or a manufactured housing community: Provided further, That eligible manufactured housing communities may include those that are-- (1) owned by the residents of the manufactured housing community through a resident-controlled entity, as defined by the Secretary; or (2) determined by the Secretary to be subject to binding agreements that will preserve the community and maintain affordability on a long-term basis: Provided further, That resiliency activities means the reconstruction, repair, or replacement of manufactured housing and manufactured housing communities to protect the health and safety of manufactured housing residents and to address weatherization and energy efficiency needs, except that for pre-1976 mobile homes, funds made available under this heading may be used only for replacement: Provided further, That the Secretary may waive or specify alternative requirements for any provision of any statute or regulation that the Secretary administers in connection with the use of amounts made available under this heading (except for requirements related to fair housing, nondiscrimination, labor standards, and the environment), upon a finding that such waiver or alternative requirement is necessary to facilitate the use of such amounts. self-help and assisted homeownership opportunity program For the self-help and assisted homeownership opportunity program, as authorized under section 11 of the Housing Opportunity Program Extension Act of 1996 (42 U.S.C. 12805 note), and for related activities and assistance, $56,000,000, to remain available until September 30, 2027: Provided, That of the sums appropriated under this heading-- (1) $9,000,000 shall be available for the self-help homeownership opportunity program as authorized under such section 11; (2) $42,000,000 shall be available for the second, third, and fourth capacity building entities specified in section 4(a) of the HUD Demonstration Act of 1993 (42 U.S.C. 9816 note), of which not less than $5,000,000 shall be for rural capacity building activities: Provided, That for purposes of awarding grants from amounts made available in this paragraph, the Secretary may enter into multiyear agreements, as appropriate, subject to the availability of annual appropriations; and (3) $5,000,000 shall be available for capacity building by national rural housing organizations having experience assessing national rural conditions and providing financing, training, technical assistance, information, and research to local nonprofit organizations, local governments, and Indian Tribes serving high need rural communities. homeless assistance grants For assistance under title IV of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11360 et seq.), and for related activities and assistance, $4,060,000,000, to remain available until September 30, 2027: Provided, That of the sums appropriated under this heading-- (1) $290,000,000 shall be available for the emergency solutions grants program authorized under subtitle B of such title IV (42 U.S.C. 11371 et seq.): Provided, That the Department shall notify grantees of their formula allocation from amounts allocated (which may represent initial or final amounts allocated) for the emergency solutions grant program not later than 60 days after enactment of this Act; (2) $3,678,000,000 shall be available for the continuum of care program authorized under subtitle C of such title IV (42 U.S.C. 11381 et seq.) and the rural housing stability assistance programs authorized under subtitle D of such title IV (42 U.S.C. 11408): Provided, That the Secretary shall prioritize funding under the continuum of care program to continuums of care that have demonstrated a capacity to reallocate funding from lower performing projects to higher performing projects: Provided further, That the Secretary may establish by notice an alternative maximum amount for administrative costs related to the requirements described in sections 402(f)(1) and 402(f)(2) of subtitle A of such title IV of no more than 5 percent or $50,000, whichever is greater, notwithstanding the 3 percent limitation in section 423(a)(10) of such subtitle C: Provided further, That of the amounts made available for the continuum of care program under this paragraph, $52,000,000 shall be for grants for new rapid re- housing projects and supportive service projects providing coordinated entry, and for eligible activities that the Secretary determines to be critical in order to assist survivors of domestic violence, dating violence, sexual assault, or stalking, except that the Secretary may make additional grants for such projects and purposes from amounts made available for such continuum of care program: Provided further, That amounts made available for the continuum of care program under this paragraph and any remaining unobligated balances under this heading in prior Acts may be used to competitively or non-competitively renew or replace grants for youth homeless demonstration projects under the continuum of care program, notwithstanding any conflict with the requirements of the continuum of care program; (3) $10,000,000 shall be available for the national homeless data analysis project: Provided, That notwithstanding the provisions of the Federal Grant and Cooperative Agreements Act of 1977 (31 U.S.C. 6301-6308), the amounts made available under this paragraph and any remaining unobligated balances under this heading for such purposes in prior Acts may be used by the Secretary to enter into cooperative agreements with such entities as may be determined by the Secretary, including public and private organizations, agencies, and institutions; and (4) $82,000,000 shall be available to implement projects to demonstrate how a comprehensive approach to serving homeless youth, age 24 and under, in up to 25 communities with a priority for communities with substantial rural populations in up to eight locations, can dramatically reduce youth homelessness: Provided, That of the amount made available under this paragraph, not less than $25,000,000 shall be for youth homelessness system improvement grants to support communities, including but not limited to the communities assisted under the matter preceding this proviso, in establishing and implementing a response system for youth homelessness, or for improving their existing system: Provided further, That of the amount made available under this paragraph, up to $10,000,000 shall be to provide technical assistance to communities, including but not limited to the communities assisted in the preceding proviso and the matter preceding such proviso, on improving system responses to youth homelessness, and collection, analysis, use, and reporting of data and performance measures under the comprehensive approaches to serve homeless youth, in addition to and in coordination with other technical assistance funds provided under this title: Provided further, That the Secretary may use up to 10 percent of the amount made available under the preceding proviso to build the capacity of current technical assistance providers or to train new technical assistance providers with verifiable prior experience with systems and programs for youth experiencing homelessness: Provided further, That youth aged 24 and under seeking assistance under this heading shall not be required to provide third party documentation to establish their eligibility under subsection (a) or (b) of section 103 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11302) to receive services: Provided further, That unaccompanied youth aged 24 and under or families headed by youth aged 24 and under who are living in unsafe situations may be served by youth-serving providers funded under this heading: Provided further, That persons eligible under section 103(a)(5) of the McKinney-Vento Homeless Assistance Act may be served by any project funded under this heading to provide both transitional housing and rapid re-housing: Provided further, That for all matching funds requirements applicable to funds made available under this heading for this fiscal year and prior fiscal years, a grantee may use (or could have used) as a source of match funds other funds administered by the Secretary and other Federal agencies unless there is (or was) a specific statutory prohibition on any such use of any such funds: Provided further, That none of the funds made available under this heading shall be available to provide funding for new projects, except for projects created through reallocation, unless the Secretary determines that the continuum of care has demonstrated that projects are evaluated and ranked based on the degree to which they improve the continuum of care's system performance: Provided further, That any unobligated amounts remaining from funds made available under this heading in fiscal year 2012 and prior years for project-based rental assistance for rehabilitation projects with 10-year grant terms may be used for purposes under this heading, notwithstanding the purposes for which such funds were appropriated: Provided further, That unobligated balances, including recaptures and carryover, remaining from funds transferred to or appropriated under this heading in fiscal year 2019 or prior years, except for rental assistance amounts that were recaptured and made available until expended, shall be available for the current purposes authorized under this heading in addition to the purposes for which such funds originally were appropriated. Housing Programs project-based rental assistance For activities and assistance for the provision of project-based subsidy contracts under the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.) (``the Act''), not otherwise provided for, $16,195,000,000, to remain available until expended, shall be available on October 1, 2024 (in addition to the $400,000,000 previously appropriated under this heading that became available October 1, 2024), and $400,000,000, to remain available until expended, shall be available on October 1, 2025: Provided, That the amounts made available under this heading shall be available for expiring or terminating section 8 project-based subsidy contracts (including section 8 moderate rehabilitation contracts), for amendments to section 8 project-based subsidy contracts (including section 8 moderate rehabilitation contracts), for contracts entered into pursuant to section 441 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11401), for renewal of section 8 contracts for units in projects that are subject to approved plans of action under the Emergency Low Income Housing Preservation Act of 1987 or the Low-Income Housing Preservation and Resident Homeownership Act of 1990, and for administrative and other expenses associated with project-based activities and assistance funded under this heading: Provided further, That of the total amounts provided under this heading, not to exceed $468,000,000 shall be available for performance-based contract administrators for section 8 project-based assistance, for carrying out 42 U.S.C. 1437(f): Provided further, That the Secretary may also use such amounts in the preceding proviso for performance-based contract administrators for the administration of: interest reduction payments pursuant to section 236(a) of the National Housing Act (12 U.S.C. 1715z-1(a)); rent supplement payments pursuant to section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s); section 236(f)(2) rental assistance payments (12 U.S.C. 1715z-1(f)(2)); project rental assistance contracts for the elderly under section 202(c)(2) of the Housing Act of 1959 (12 U.S.C. 1701q); project rental assistance contracts for supportive housing for persons with disabilities under section 811(d)(2) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013(d)(2)); project assistance contracts pursuant to section 202(h) of the Housing Act of 1959 (Public Law 86-372; 73 Stat. 667); and loans under section 202 of the Housing Act of 1959 (Public Law 86-372; 73 Stat. 667): Provided further, That amounts recaptured under this heading, the heading ``Annual Contributions for Assisted Housing'', or the heading ``Housing Certificate Fund'', may be used for renewals of or amendments to section 8 project-based contracts or for performance-based contract administrators, notwithstanding the purposes for which such amounts were appropriated: Provided further, That, notwithstanding any other provision of law, upon the request of the Secretary, project funds that are held in residual receipts accounts for any project subject to a section 8 project-based housing assistance payments contract that authorizes the Department or a housing finance agency to require that surplus project funds be deposited in an interest-bearing residual receipts account and that are in excess of an amount to be determined by the Secretary, shall be remitted to the Department and deposited in this account, to be available until expended: Provided further, That amounts deposited pursuant to the preceding proviso shall be available in addition to the amount otherwise provided by this heading for uses authorized under this heading. housing for the elderly For amendments to capital advance contracts, for housing for the elderly, as authorized by section 202 of the Housing Act of 1959 (12 U.S.C. 1701q), for project rental assistance for the elderly under section 202(c)(2) of such Act, including amendments to contracts for such assistance and renewal of expiring contracts for such assistance for up to a 5-year term, for senior preservation rental assistance contracts, including renewals, as authorized by section 811(e) of the American Homeownership and Economic Opportunity Act of 2000 (12 U.S.C. 1701q note), for supportive services associated with the housing, and for administrative and other expenses associated with assistance funded under this heading, $931,400,000 to remain available until September 30, 2028: Provided, That of the amount made available under this heading, up to $115,000,000 shall be for service coordinators and the continuation of existing congregate service grants for residents of assisted housing projects: Provided further, That any funding for existing service coordinators under the preceding proviso shall be provided within 120 days of enactment of this Act: Provided further, That the Secretary may waive the provisions of section 202 governing the terms and conditions of project rental assistance, except that the initial contract term for such assistance shall not exceed 5 years in duration: Provided further, That upon request of the Secretary, project funds that are held in residual receipts accounts for any project subject to a section 202 project rental assistance contract, and that upon termination of such contract are in excess of an amount to be determined by the Secretary, shall be remitted to the Department and deposited in this account, to remain available until September 30, 2028: Provided further, That amounts deposited in this account pursuant to the preceding proviso shall be available, in addition to the amounts otherwise provided by this heading, for the purposes authorized under this heading: Provided further, That unobligated balances, including recaptures and carryover, remaining from funds transferred to or appropriated under this heading shall be available for the current purposes authorized under this heading in addition to the purposes for which such funds originally were appropriated. housing for persons with disabilities For amendments to capital advance contracts, for supportive housing for persons with disabilities, as authorized by section 811 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013), for project rental assistance for supportive housing for persons with disabilities under section 811(d)(2) of such Act, for project assistance contracts pursuant to subsection (h) of section 202 of the Housing Act of 1959, as added by section 205(a) of the Housing and Community Development Amendments of 1978 (Public Law 95-557; 92 Stat. 2090), including amendments to contracts for such assistance and renewal of expiring contracts for such assistance for up to a 5-year term, for project rental assistance to State housing finance agencies and other appropriate entities as authorized under section 811(b)(3) of the Cranston-Gonzalez National Affordable Housing Act, for supportive services associated with the housing for persons with disabilities as authorized by section 811(b)(1) of such Act, and for administrative and other expenses associated with assistance funded under this heading, $256,700,000, to remain available until September 30, 2028: Provided, That, upon the request of the Secretary, project funds that are held in residual receipts accounts for any project subject to a section 811 project rental assistance contract, and that upon termination of such contract are in excess of an amount to be determined by the Secretary, shall be remitted to the Department and deposited in this account, to remain available until September 30, 2028: Provided further, That amounts deposited in this account pursuant to the preceding proviso shall be available in addition to the amounts otherwise provided by this heading for the purposes authorized under this heading: Provided further, That unobligated balances, including recaptures and carryover, remaining from funds transferred to or appropriated under this heading shall be used for the current purposes authorized under this heading in addition to the purposes for which such funds originally were appropriated. housing counseling assistance For contracts, grants, and other assistance excluding loans, as authorized under section 106 of the Housing and Urban Development Act of 1968, as amended, $57,500,000, to remain available until September 30, 2026, including up to $4,500,000 for administrative contract services: Provided, That funds shall be used for providing counseling and advice to tenants and homeowners, both current and prospective, with respect to property maintenance, financial management or literacy, and such other matters as may be appropriate to assist them in improving their housing conditions, meeting their financial needs, and fulfilling the responsibilities of tenancy or homeownership; for program administration; and for housing counselor training: Provided further, That for purposes of awarding grants from amounts provided under this heading, the Secretary may enter into multiyear agreements, as appropriate, subject to the availability of annual appropriations. payment to manufactured housing fees trust fund For necessary expenses as authorized by the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5401 et seq.), up to $14,000,000, to remain available until expended, of which $14,000,000 shall be derived from the Manufactured Housing Fees Trust Fund (established under section 620(e) of such Act (42 U.S.C. 5419(e)): Provided, That not to exceed the total amount appropriated under this heading shall be available from the general fund of the Treasury to the extent necessary to incur obligations and make expenditures pending the receipt of collections to the Fund pursuant to section 620 of such Act: Provided further, That the amount made available under this heading from the general fund shall be reduced as such collections are received during fiscal year 2025 so as to result in a final fiscal year 2025 appropriation from the general fund estimated at zero, and fees pursuant to such section 620 shall be modified as necessary to ensure such a final fiscal year 2025 appropriation: Provided further, That for the dispute resolution and installation programs, the Secretary may assess and collect fees from any program participant: Provided further, That such collections shall be deposited into the Trust Fund, and the Secretary, as provided herein, may use such collections, as well as fees collected under section 620 of such Act, for necessary expenses of such Act: Provided further, That, notwithstanding the requirements of section 620 of such Act, the Secretary may carry out responsibilities of the Secretary under such Act through the use of approved service providers that are paid directly by the recipients of their services. Federal Housing Administration mutual mortgage insurance program account New commitments to guarantee single family loans insured under the Mutual Mortgage Insurance Fund shall not exceed $400,000,000,000, to remain available until September 30, 2026: Provided, That during fiscal year 2025, obligations to make direct loans to carry out the purposes of section 204(g) of the National Housing Act, as amended, shall not exceed $1,000,000: Provided further, That the foregoing amount in the preceding proviso shall be for loans to nonprofit and governmental entities in connection with sales of single family real properties owned by the Secretary and formerly insured under the Mutual Mortgage Insurance Fund: Provided further, That for administrative contract expenses of the Federal Housing Administration, $150,000,000, to remain available until September 30, 2026: Provided further,That to the extent guaranteed loan commitments exceed $200,000,000,000 on or before April 1, 2025, an additional $1,400 for administrative contract expenses shall be available for each $1,000,000 in additional guaranteed loan commitments (including a pro rata amount for any amount below $1,000,000), but in no case shall funds made available by this proviso exceed $30,000,000: Provided further, That notwithstanding the limitation in the first sentence of section 255(g) of the National Housing Act (12 U.S.C. 1715z-20(g)), during fiscal year 2025 the Secretary may insure and enter into new commitments to insure mortgages under section 255 of the National Housing Act only to the extent that the net credit subsidy cost for such insurance does not exceed zero. general and special risk program account New commitments to guarantee loans insured under the General and Special Risk Insurance Funds, as authorized by sections 238 and 519 of the National Housing Act (12 U.S.C. 1715z-3 and 1735c), shall not exceed $35,000,000,000 in total loan principal, any part of which is to be guaranteed, to remain available until September 30, 2026: Provided, That during fiscal year 2025, gross obligations for the principal amount of direct loans, as authorized by sections 204(g), 207(l), 238, and 519(a) of the National Housing Act, shall not exceed $1,000,000, which shall be for loans to nonprofit and governmental entities in connection with the sale of single family real properties owned by the Secretary and formerly insured under such Act. Government National Mortgage Association guarantees of mortgage-backed securities loan guarantee program account New commitments to issue guarantees to carry out the purposes of section 306 of the National Housing Act, as amended (12 U.S.C. 1721(g)), shall not exceed $550,000,000,000, to remain available until September 30, 2026: Provided, That $54,000,000, to remain available until September 30, 2026, shall be for necessary salaries and expenses of the Government National Mortgage Association: Provided further, That to the extent that guaranteed loan commitments exceed $155,000,000,000 on or before April 1, 2025, an additional $100 for necessary salaries and expenses shall be available until expended for each $1,000,000 in additional guaranteed loan commitments (including a pro rata amount for any amount below $1,000,000), but in no case shall funds made available by this proviso exceed $3,000,000: Provided further, That receipts from Commitment and Multiclass fees collected pursuant to title III of the National Housing Act (12 U.S.C. 1716 et seq.) shall be credited as offsetting collections to this account. Policy Development and Research research and technology For contracts, grants, and necessary expenses of programs of research and studies relating to housing and urban problems, not otherwise provided for, as authorized by title V of the Housing and Urban Development Act of 1970 (12 U.S.C. 1701z-1 et seq.), including carrying out the functions of the Secretary of Housing and Urban Development under section 1(a)(1)(i) of Reorganization Plan No. 2 of 1968, and for technical assistance, $119,000,000, to remain available until September 30, 2026: Provided, That with respect to amounts made available under this heading, notwithstanding section 203 of this title, the Secretary may enter into cooperative agreements with philanthropic entities, other Federal agencies, State or local governments and their agencies, Indian Tribes, tribally designated housing entities, or colleges or universities for research projects: Provided further, That with respect to the preceding proviso, such partners to the cooperative agreements shall contribute at least a 50 percent match toward the cost of the project: Provided further, That for non-competitive agreements entered into in accordance with the preceding two provisos, the Secretary shall comply with section 2(b) of the Federal Funding Accountability and Transparency Act of 2006 (Public Law 109-282; 31 U.S.C. note) in lieu of compliance with section 102(a)(4)(C) of the Department of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3545(a)(4)(C)) with respect to documentation of award decisions: Provided further, That prior to obligation of technical assistance funding, the Secretary shall submit a plan to the House and Senate Committees on Appropriations on how the Secretary will allocate funding for this activity at least 30 days prior to obligation: Provided further, That none of the funds provided under this heading may be available for the doctoral dissertation research grant program. Fair Housing and Equal Opportunity fair housing activities For contracts, grants, and other assistance, not otherwise provided for, as authorized by title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601 et seq.), and section 561 of the Housing and Community Development Act of 1987 (42 U.S.C. 3616a), $85,000,000, to remain available until September 30, 2026: Provided, That notwithstanding section 3302 of title 31, United States Code, the Secretary may assess and collect fees to cover the costs of the Fair Housing Training Academy, and may use such funds to develop online courses and provide such training: Provided further, That none of the funds made available under this heading may be used to lobby the executive or legislative branches of the Federal Government in connection with a specific contract, grant, or loan: Provided further, That of the funds made available under this heading, $1,000,000 may be available to the Secretary for the creation and promotion of translated materials and other programs that support the assistance of persons with limited English proficiency in utilizing the services provided by the Department of Housing and Urban Development. Office of Lead Hazard Control and Healthy Homes lead hazard reduction (including transfer of funds) For the lead hazard reduction program, as authorized by section 1011 of the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4852), the healthy homes initiative, pursuant to sections 501 and 502 of the Housing and Urban Development Act of 1970 (12 U.S.C. 1701z-1 and 1701z-2), and for related activities and assistance, $335,000,000, to remain available until September 30, 2027: Provided, That the amounts made available under this heading are provided as follows: (1) $200,000,000 shall be for the award of grants pursuant to such section 1011, of which not less than $100,000,000 shall be provided to areas with the highest lead-based paint abatement need; (2) $130,000,000 shall be for the healthy homes initiative, pursuant to sections 501 and 502 of the Housing and Urban Development Act of 1970, which shall include research, studies, testing, and demonstration efforts, including education and outreach concerning lead-based paint poisoning and other housing-related diseases and hazards, and mitigating housing- related health and safety hazards in housing of low-income families, of which $10,000,000 shall be for the establishment and implementation of a national pilot program to facilitate new financing mechanisms to address lead and other residential environmental stressors in low-income communities; (3) $5,000,000 shall be for the award of grants and contracts for research pursuant to sections 1051 and 1052 of the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4854, 4854a); and (4) up to $2,000,000 in total of the amounts made available under paragraphs (2) and (3) may be transferred to the heading ``Research and Technology'' for the purposes of conducting research and studies and for use in accordance with the provisos under that heading for non-competitive agreements: Provided further, That for purposes of environmental review, pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and other provisions of law that further the purposes of such Act, a grant under the healthy homes initiative, or the lead technical studies program, or other demonstrations or programs under this heading or under prior appropriations Acts for such purposes under this heading, or under the heading ``Housing for the Elderly'' under prior appropriations Acts, shall be considered to be funds for a special project for purposes of section 305(c) of the Multifamily Housing Property Disposition Reform Act of 1994: Provided further, That each applicant for a grant or cooperative agreement under this heading shall certify adequate capacity that is acceptable to the Secretary to carry out the proposed use of funds pursuant to a notice of funding opportunity: Provided further, That amounts made available under this heading, in this or prior appropriations Acts, still remaining available, may be used for any purpose under this heading notwithstanding the purpose for which such amounts were appropriated if a program competition is undersubscribed and there are other program competitions under this heading that are oversubscribed. Information Technology Fund For Department-wide and program-specific information technology systems and infrastructure, $384,706,000, to remain available until September 30, 2027. Office of Inspector General For necessary salaries and expenses of the Office of Inspector General in carrying out the Inspector General Act of 1978, as amended, $160,000,000, of which $1,150,000 shall remain available until September 30, 2026: Provided, That the Inspector General shall have independent authority over all personnel issues within this office. General Provisions--Department of Housing and Urban Development (including rescissions) (including transfer of funds) Sec. 201. Fifty percent of the amounts of budget authority, or in lieu thereof 50 percent of the cash amounts associated with such budget authority, that are recaptured from projects described in section 1012(a) of the Stewart B. McKinney Homeless Assistance Amendments Act of 1988 (42 U.S.C. 1437f note) shall be rescinded or in the case of cash, shall be remitted to the Treasury, and such amounts of budget authority or cash recaptured and not rescinded or remitted to the Treasury shall be used by State housing finance agencies or local governments or local housing agencies with projects approved by the Secretary of Housing and Urban Development for which settlement occurred after January 1, 1992, in accordance with such section. Notwithstanding the previous sentence, the Secretary may award up to 15 percent of the budget authority or cash recaptured and not rescinded or remitted to the Treasury to provide project owners with incentives to refinance their project at a lower interest rate. Sec. 202. None of the funds made available by this Act may be used to investigate or prosecute under the Fair Housing Act any otherwise lawful activity engaged in by one or more persons, including the filing or maintaining of a nonfrivolous legal action, that is engaged in solely for the purpose of achieving or preventing action by a Government official or entity, or a court of competent jurisdiction. Sec. 203. Except as explicitly provided in law, any grant, cooperative agreement or other assistance made pursuant to title II of this Act shall be made on a competitive basis and in accordance with section 102 of the Department of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3545). Sec. 204. Funds of the Department of Housing and Urban Development subject to the Government Corporation Control Act or section 402 of the Housing Act of 1950 shall be available, without regard to the limitations on administrative expenses, for legal services on a contract or fee basis, and for utilizing and making payment for services and facilities of the Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Financing Bank, Federal Reserve banks or any member thereof, Federal Home Loan banks, and any insured bank within the meaning of the Federal Deposit Insurance Corporation Act, as amended (12 U.S.C. 1811-1). Sec. 205. Unless otherwise provided for in this Act or through a reprogramming of funds, no part of any appropriation for the Department of Housing and Urban Development shall be available for any program, project or activity in excess of amounts set forth in the budget estimates submitted to Congress. Sec. 206. Corporations and agencies of the Department of Housing and Urban Development which are subject to the Government Corporation Control Act are hereby authorized to make such expenditures, within the limits of funds and borrowing authority available to each such corporation or agency and in accordance with law, and to make such contracts and commitments without regard to fiscal year limitations as provided by section 104 of such Act as may be necessary in carrying out the programs set forth in the budget for 2025 for such corporation or agency except as hereinafter provided: Provided, That collections of these corporations and agencies may be used for new loan or mortgage purchase commitments only to the extent expressly provided for in this Act (unless such loans are in support of other forms of assistance provided for in this or prior appropriations Acts), except that this proviso shall not apply to the mortgage insurance or guaranty operations of these corporations, or where loans or mortgage purchases are necessary to protect the financial interest of the United States Government. Sec. 207. The Secretary shall provide quarterly reports to the House and Senate Committees on Appropriations regarding all uncommitted, unobligated, recaptured and excess funds in each program and activity within the jurisdiction of the Department and shall submit additional, updated budget information to these Committees upon request. Sec. 208. None of the funds made available by this title may be used for an audit of the Government National Mortgage Association that makes applicable requirements under the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.). Sec. 209. (a) Notwithstanding any other provision of law, subject to the conditions listed under this section, for fiscal years 2025 and 2026, the Secretary of Housing and Urban Development may authorize the transfer of some or all project-based assistance, debt held or insured by the Secretary and statutorily required low-income and very low- income use restrictions if any, associated with one or more multifamily housing project or projects to another multifamily housing project or projects. (b) Phased Transfers.--Transfers of project-based assistance under this section may be done in phases to accommodate the financing and other requirements related to rehabilitating or constructing the project or projects to which the assistance is transferred, to ensure that such project or projects meet the standards under subsection (c). (c) The transfer authorized in subsection (a) is subject to the following conditions: (1) Number and bedroom size of units.-- (A) For occupied units in the transferring project: The number of low-income and very low-income units and the configuration (i.e., bedroom size) provided by the transferring project shall be no less than when transferred to the receiving project or projects and the net dollar amount of Federal assistance provided to the transferring project shall remain the same in the receiving project or projects. (B) For unoccupied units in the transferring project: The Secretary may authorize a reduction in the number of dwelling units in the receiving project or projects to allow for a reconfiguration of bedroom sizes to meet current market demands, as determined by the Secretary and provided there is no increase in the project-based assistance budget authority. (2) The transferring project shall, as determined by the Secretary, be either physically obsolete or economically nonviable, or be reasonably expected to become economically nonviable when complying with State or Federal requirements for community integration and reduced concentration of individuals with disabilities. (3) The receiving project or projects shall meet or exceed applicable physical standards established by the Secretary. (4) The owner or mortgagor of the transferring project shall notify and consult with the tenants residing in the transferring project and provide a certification of approval by all appropriate local governmental officials. (5) The tenants of the transferring project who remain eligible for assistance to be provided by the receiving project or projects shall not be required to vacate their units in the transferring project or projects until new units in the receiving project are available for occupancy. (6) The Secretary determines that this transfer is in the best interest of the tenants. (7) If either the transferring project or the receiving project or projects meets the condition specified in subsection (d)(2)(A), any lien on the receiving project resulting from additional financing obtained by the owner shall be subordinate to any FHA-insured mortgage lien transferred to, or placed on, such project by the Secretary, except that the Secretary may waive this requirement upon determination that such a waiver is necessary to facilitate the financing of acquisition, construction, and/or rehabilitation of the receiving project or projects. (8) If the transferring project meets the requirements of subsection (d)(2), the owner or mortgagor of the receiving project or projects shall execute and record either a continuation of the existing use agreement or a new use agreement for the project where, in either case, any use restrictions in such agreement are of no lesser duration than the existing use restrictions. (9) The transfer does not increase the cost (as defined in section 502 of the Congressional Budget Act of 1974 (2 U.S.C. 661a)) of any FHA-insured mortgage, except to the extent that appropriations are provided in advance for the amount of any such increased cost. (d) For purposes of this section-- (1) the terms ``low-income'' and ``very low-income'' shall have the meanings provided by the statute and/or regulations governing the program under which the project is insured or assisted; (2) the term ``multifamily housing project'' means housing that meets one of the following conditions-- (A) housing that is subject to a mortgage insured under the National Housing Act; (B) housing that has project-based assistance attached to the structure including projects undergoing mark to market debt restructuring under the Multifamily Assisted Housing Reform and Affordability Housing Act; (C) housing that is assisted under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q); (D) housing that is assisted under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q), as such section existed before the enactment of the Cranston- Gonzales National Affordable Housing Act; (E) housing that is assisted under section 811 of the Cranston-Gonzales National Affordable Housing Act (42 U.S.C. 8013); or (F) housing or vacant land that is subject to a use agreement; (3) the term ``project-based assistance'' means-- (A) assistance provided under section 8(b) of the United States Housing Act of 1937 (42 U.S.C. 1437f(b)); (B) assistance for housing constructed or substantially rehabilitated pursuant to assistance provided under section 8(b)(2) of such Act (as such section existed immediately before October 1, 1983); (C) rent supplement payments under section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s); (D) interest reduction payments under section 236 and/or additional assistance payments under section 236(f)(2) of the National Housing Act (12 U.S.C. 1715z- 1); (E) assistance payments made under section 202(c)(2) of the Housing Act of 1959 (12 U.S.C. 1701q(c)(2)); and (F) assistance payments made under section 811(d)(2) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013(d)(2)); (4) the term ``receiving project or projects'' means the multifamily housing project or projects to which some or all of the project-based assistance, debt, and statutorily required low-income and very low-income use restrictions are to be transferred; (5) the term ``transferring project'' means the multifamily housing project which is transferring some or all of the project-based assistance, debt, and the statutorily required low-income and very low-income use restrictions to the receiving project or projects; and (6) the term ``Secretary'' means the Secretary of Housing and Urban Development. (e) Research Report.--The Secretary shall conduct an evaluation of the transfer authority under this section, including the effect of such transfers on the operational efficiency, contract rents, physical and financial conditions, and long-term preservation of the affected properties. Sec. 210. (a) No assistance shall be provided under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) to any individual who-- (1) is enrolled as a student at an institution of higher education (as defined under section 102 of the Higher Education Act of 1965 (20 U.S.C. 1002)); (2) is under 24 years of age; (3) is not a veteran; (4) is unmarried; (5) does not have a dependent child; (6) is not a person with disabilities, as such term is defined in section 3(b)(3)(E) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)(3)(E)) and was not receiving assistance under such section 8 as of November 30, 2005; (7) is not a youth who left foster care at age 14 or older and is at risk of becoming homeless; and (8) is not otherwise individually eligible, or has parents who, individually or jointly, are not eligible, to receive assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). (b) For purposes of determining the eligibility of a person to receive assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), any financial assistance (in excess of amounts received for tuition and any other required fees and charges) that an individual receives under the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), from private sources, or from an institution of higher education (as defined under section 102 of the Higher Education Act of 1965 (20 U.S.C. 1002)), shall be considered income to that individual, except for a person over the age of 23 with dependent children. Sec. 211. The funds made available for Native Alaskans under paragraph (1) under the heading ``Native American Programs'' in title II of this Act shall be allocated to the same Native Alaskan housing block grant recipients that received funds in fiscal year 2005, and only such recipients shall be eligible to apply for funds made available under paragraph (2) of such heading. Sec. 212. Notwithstanding any other provision of law, in fiscal year 2025, in managing and disposing of any multifamily property that is owned or has a mortgage held by the Secretary of Housing and Urban Development, and during the process of foreclosure on any property with a contract for rental assistance payments under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) or any other Federal programs, the Secretary shall maintain any rental assistance payments under section 8 of the United States Housing Act of 1937 and other programs that are attached to any dwelling units in the property. To the extent the Secretary determines, in consultation with the tenants and the local government that such a multifamily property owned or having a mortgage held by the Secretary is not feasible for continued rental assistance payments under such section 8 or other programs, based on consideration of (1) the costs of rehabilitating and operating the property and all available Federal, State, and local resources, including rent adjustments under section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (in this section ``MAHRAA'') (42 U.S.C. 1437f note), and (2) environmental conditions that cannot be remedied in a cost-effective fashion, the Secretary may, in consultation with the tenants of that property, contract for project-based rental assistance payments with an owner or owners of other existing housing properties, or provide other rental assistance. The Secretary shall also take appropriate steps to ensure that project- based contracts remain in effect prior to foreclosure, subject to the exercise of contractual abatement remedies to assist relocation of tenants for imminent major threats to health and safety after written notice to and informed consent of the affected tenants and use of other available remedies, such as partial abatements or receivership. After disposition of any multifamily property described in this section, the contract and allowable rent levels on such properties shall be subject to the requirements under section 524 of MAHRAA. Sec. 213. Public housing agencies that own and operate 400 or fewer public housing units may elect to be exempt from any asset management requirement imposed by the Secretary in connection with the operating fund rule: Provided, That an agency seeking a discontinuance of a reduction of subsidy under the operating fund formula shall not be exempt from asset management requirements. Sec. 214. With respect to the use of amounts provided in this Act and in future Acts for the operation, capital improvement, and management of public housing as authorized by sections 9(d) and 9(e) of the United States Housing Act of 1937 (42 U.S.C. 1437g(d), (e)), the Secretary shall not impose any requirement or guideline relating to asset management that restricts or limits in any way the use of capital funds for central office costs pursuant to paragraph (1) or (2) of section 9(g) of the United States Housing Act of 1937 (42 U.S.C. 1437g(g)(1), (2)): Provided, That a public housing agency may not use capital funds authorized under section 9(d) for activities that are eligible under section 9(e) for assistance with amounts from the operating fund in excess of the amounts permitted under paragraph (1) or (2) of section 9(g). Sec. 215. No official or employee of the Department of Housing and Urban Development shall be designated as an allotment holder unless the Office of the Chief Financial Officer has determined that such allotment holder has implemented an adequate system of funds control and has received training in funds control procedures and directives. The Chief Financial Officer shall ensure that there is a trained allotment holder for each HUD appropriation under the accounts ``Executive Offices'', ``Administrative Support Offices'', ``Program Offices'', ``Government National Mortgage Association--Guarantees of Mortgage-Backed Securities Loan Guarantee Program Account'', and ``Office of Inspector General'' within the Department of Housing and Urban Development. Sec. 216. The Secretary shall, for fiscal year 2025, notify the public through the Federal Register and other means, as determined appropriate, of the issuance of a notice of the availability of assistance or notice of funding opportunity (NOFO) for any program or discretionary fund administered by the Secretary that is to be competitively awarded. Notwithstanding any other provision of law, for fiscal year 2025, the Secretary may make the NOFO available only on the Internet at the appropriate Government website or through other electronic media, as determined by the Secretary. Sec. 217. Payment of attorney fees in program-related litigation shall be paid from the individual program office and Office of General Counsel salaries and expenses appropriations. Sec. 218. The Secretary is authorized to transfer up to 10 percent or $5,000,000, whichever is less, of funds appropriated for any office under the headings ``Administrative Support Offices'' or ``Program Offices'' to any other such office under such headings: Provided, That no appropriation for any such office under such headings shall be increased or decreased by more than 10 percent or $5,000,000, whichever is less, without prior written approval of the House and Senate Committees on Appropriations: Provided further, That the Secretary shall provide notification to such Committees 3 business days in advance of any such transfers under this section up to 10 percent or $5,000,000, whichever is less. Sec. 219. (a) Any entity receiving housing assistance payments shall maintain decent, safe, and sanitary conditions, as determined by the Secretary, and comply with any standards under applicable State or local laws, rules, ordinances, or regulations relating to the physical condition of any property covered under a housing assistance payment contract. (b) The Secretary shall take action under subsection (c) when a multifamily housing project with a contract under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) or a contract for similar project-based assistance-- (1) receives a failing score under the Uniform Physical Condition Standards (UPCS) or successor standard; or (2) fails to certify in writing to the Secretary within 3 days that all Exigent Health and Safety deficiencies, or those deficiencies requiring correction within 24 hours, identified by the inspector at the project have been corrected. Such requirements shall apply to insured and noninsured projects with assistance attached to the units under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), but shall not apply to such units assisted under section 8(o)(13) of such Act (42 U.S.C. 1437f(o)(13)) or to public housing units assisted with capital or operating funds under section 9 of the United States Housing Act of 1937 (42 U.S.C. 1437g). (c)(1) Within 15 days of the issuance of the Real Estate Assessment Center (``REAC'') inspection, the Secretary shall provide the owner with a Notice of Default with a specified timetable, determined by the Secretary, for correcting all deficiencies. The Secretary shall provide a copy of the Notice of Default to the tenants, the local government, any mortgagees, and any contract administrator. If the owner's appeal results in a passing score, the Secretary may withdraw the Notice of Default. (2) At the end of the time period for correcting all deficiencies specified in the Notice of Default, if the owner fails to fully correct such deficiencies, the Secretary may-- (A) require immediate replacement of project management with a management agent approved by the Secretary; (B) impose civil money penalties, which shall be used solely for the purpose of supporting safe and sanitary conditions at applicable properties, as designated by the Secretary, with priority given to the tenants of the property affected by the penalty; (C) abate the section 8 contract, including partial abatement, as determined by the Secretary, until all deficiencies have been corrected; (D) pursue transfer of the project to an owner, approved by the Secretary under established procedures, who will be obligated to promptly make all required repairs and to accept renewal of the assistance contract if such renewal is offered; (E) transfer the existing section 8 contract to another project or projects and owner or owners; (F) pursue exclusionary sanctions, including suspensions or debarments from Federal programs; (G) seek judicial appointment of a receiver to manage the property and cure all project deficiencies or seek a judicial order of specific performance requiring the owner to cure all project deficiencies; (H) work with the owner, lender, or other related party to stabilize the property in an attempt to preserve the property through compliance, transfer of ownership, or an infusion of capital provided by a third-party that requires time to effectuate; or (I) take any other regulatory or contractual remedies available as deemed necessary and appropriate by the Secretary. (d) The Secretary shall take appropriate steps to ensure that project-based contracts remain in effect, subject to the exercise of contractual abatement remedies to assist relocation of tenants for major threats to health and safety after written notice to the affected tenants. To the extent the Secretary determines, in consultation with the tenants and the local government, that the property is not feasible for continued rental assistance payments under such section 8 or other programs, based on consideration of-- (1) the costs of rehabilitating and operating the property and all available Federal, State, and local resources, including rent adjustments under section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (``MAHRAA''); and (2) environmental conditions that cannot be remedied in a cost-effective fashion, the Secretary may contract for project- based rental assistance payments with an owner or owners of other existing housing properties, or provide other rental assistance. (e) The Secretary shall report semi-annually on all properties covered by this section that are assessed through the Real Estate Assessment Center and have failing physical inspection scores or have received an unsatisfactory management and occupancy review within the past 36 months. The report shall include-- (1) identification of the enforcement actions being taken to address such conditions, including imposition of civil money penalties and termination of subsidies, and identification of properties that have such conditions multiple times; (2) identification of actions that the Department of Housing and Urban Development is taking to protect tenants of such identified properties; and (3) any administrative or legislative recommendations to further improve the living conditions at properties covered under a housing assistance payment contract. The first report shall be submitted to the Senate and House Committees on Appropriations not later than 30 days after the enactment of this Act, and the second report shall be submitted within 180 days of the transmittal of the first report. Sec. 220. None of the funds made available by this Act, or any other Act, for purposes authorized under section 8 (only with respect to the tenant-based rental assistance program) and section 9 of the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.), may be used by any public housing agency for any amount of salary, including bonuses, for the chief executive officer of which, or any other official or employee of which, that exceeds the annual rate of basic pay payable for a position at level IV of the Executive Schedule at any time during any public housing agency fiscal year 2025. Sec. 221. None of the funds made available by this Act and provided to the Department of Housing and Urban Development may be used to make a grant award unless the Secretary notifies the House and Senate Committees on Appropriations not less than 3 full business days before any project, State, locality, housing authority, Tribe, nonprofit organization, or other entity selected to receive a grant award is announced by the Department or its offices: Provided, That such notification shall list each grant award by State and current congressional district. Sec. 222. None of the funds made available in this Act shall be used by the Federal Housing Administration, the Government National Mortgage Association, or the Department of Housing and Urban Development to insure, securitize, or establish a Federal guarantee of any mortgage or mortgage backed security that refinances or otherwise replaces a mortgage that has been subject to eminent domain condemnation or seizure, by a State, municipality, or any other political subdivision of a State. Sec. 223. None of the funds made available by this Act may be used to terminate the status of a unit of general local government as a metropolitan city (as defined in section 102 of the Housing and Community Development Act of 1974 (42 U.S.C. 5302)) with respect to grants under section 106 of such Act (42 U.S.C. 5306). Sec. 224. Amounts made available by this Act that are appropriated, allocated, advanced on a reimbursable basis, or transferred to the Office of Policy Development and Research of the Department of Housing and Urban Development and functions thereof, for research, evaluation, or statistical purposes, and that are unexpended at the time of completion of a contract, grant, or cooperative agreement, may be deobligated and shall immediately become available and may be reobligated in that fiscal year or the subsequent fiscal year for the research, evaluation, or statistical purposes for which the amounts are made available to that Office subject to reprogramming requirements in section 405 of this Act. Sec. 225. None of the funds provided in this Act or any other Act may be used for awards, including performance, special act, or spot, for any employee of the Department of Housing and Urban Development subject to administrative discipline (including suspension from work), in this fiscal year, but this prohibition shall not be effective prior to the effective date of any such administrative discipline or after any final decision over-turning such discipline. Sec. 226. With respect to grant amounts awarded under the heading ``Homeless Assistance Grants'' for fiscal years 2015 through 2025 for the continuum of care (CoC) program as authorized under subtitle C of title IV of the McKinney-Vento Homeless Assistance Act, costs paid by program income of grant recipients may count toward meeting the recipient's matching requirements, provided the costs are eligible CoC costs that supplement the recipient's CoC program. Sec. 227. (a) From amounts made available under this title under the heading ``Homeless Assistance Grants'', the Secretary may award 1- year transition grants to recipients of funds for activities under subtitle C of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11381 et seq.) to transition from one continuum of care program component to another. (b) In order to be eligible to receive a transition grant, the funding recipient must have the consent of the continuum of care and meet standards determined by the Secretary. Sec. 228. The promise zone designations and promise zone designation agreements entered into pursuant to such designations, made by the Secretary in prior fiscal years, shall remain in effect in accordance with the terms and conditions of such agreements. Sec. 229. Any public housing agency designated as a Moving to Work agency pursuant to section 239 of division L of Public Law 114-113 (42 U.S.C. 1437f note; 129 Stat. 2897) may, upon such designation, use funds (except for special purpose funding, including special purpose vouchers) previously allocated to any such public housing agency under section 8 or 9 of the United States Housing Act of 1937, including any reserve funds held by the public housing agency or funds held by the Department of Housing and Urban Development, pursuant to the authority for use of section 8 or 9 funding provided under such section and section 204 of title II of the Departments of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act, 1996 (Public Law 104-134; 110 Stat. 1321-28), notwithstanding the purposes for which such funds were appropriated. Sec. 230. None of the amounts made available by this Act may be used to prohibit any public housing agency under receivership or the direction of a Federal monitor from applying for, receiving, or using funds made available under the heading ``Public Housing Fund'' for competitive grants to evaluate and reduce lead-based paint hazards in this Act or that remain available and not awarded from prior Acts, or be used to prohibit a public housing agency from using such funds to carry out any required work pursuant to a settlement agreement, consent decree, voluntary agreement, or similar document for a violation of the lead safe housing or lead disclosure rules. Sec. 231. For fiscal year 2025, if the Secretary determines or has determined, for any prior formula grant allocation administered by the Secretary through the Offices of Public and Indian Housing, Community Planning and Development, or Housing, that a recipient received an allocation greater than the amount such recipient should have received for a formula allocation cycle pursuant to applicable statutes and regulations, the Secretary may adjust for any such funding error in the next applicable formula allocation cycle by (a) offsetting each such recipient's formula allocation (if eligible for a formula allocation in the next applicable formula allocation cycle) by the amount of any such funding error, and (b) reallocating any available balances that are attributable to the offset to the recipient or recipients that would have been allocated additional funds in the formula allocation cycle in which any such error occurred (if such recipient or recipients are eligible for a formula allocation in the next applicable formula allocation cycle) in an amount proportionate to such recipient's eligibility under the next applicable formula allocation cycle: Provided, That all offsets and reallocations from such available balances shall be recorded against funds available for the next applicable formula allocation cycle: Provided further, That the term ``next applicable formula allocation cycle'' means the first formula allocation cycle for a program that is reasonably available for correction following such a Secretarial determination: Provided further, That if, upon request by a recipient and giving consideration to all Federal resources available to the recipient for the same grant purposes, the Secretary determines that the offset in the next applicable formula allocation cycle would critically impair the recipient's ability to accomplish the purpose of the formula grant, the Secretary may adjust for the funding error across two or more formula allocation cycles. Sec. 232. The Secretary may transfer from amounts made available for salaries and expenses under this title (excluding amounts made available under the heading ``Office of Inspector General'') to the heading ``Information Technology Fund'' for information technology needs, including for additional development, modernization, and enhancement, to remain available until September 30, 2027: Provided, That the total amount of such transfers shall not exceed $5,000,000: Provided further, That this transfer authority shall not be used to fund information technology projects or activities that have known out- year development, modernization, or enhancement costs in excess of $500,000: Provided further, That the Secretary shall provide notification to the House and Senate Committees on Appropriations no fewer than 3 business days in advance of any such transfer. Sec. 233. The Secretary shall comply with all process requirements, including public notice and comment, when seeking to revise any annual contributions contract. Sec. 234. There is hereby established in the Treasury of the United States a fund to be known as the ``Department of Housing and Urban Development Nonrecurring Expenses Fund'' (the Fund): Provided, That unobligated balances of expired discretionary funds appropriated for this or any succeeding fiscal year from the General Fund of the Treasury to the Department of Housing and Urban Development by this or any other Act may be transferred (not later than the end of the fifth fiscal year after the last fiscal year for which such funds are available for the purposes for which they were appropriated) into the Fund: Provided further, That amounts deposited in the Fund shall be available until expended, in addition to such other funds as may be available for such purposes, for capital needs of the Department, including facilities infrastructure and information technology infrastructure, subject to approval by the Office of Management and Budget: Provided further, That amounts in the Fund may be obligated only after the House and Senate Committees on Appropriations are notified at least 15 days in advance of the planned use of funds. Sec. 235. For the fiscal year 2025 allocation of amounts under the Native American Housing Block Grants program, as authorized under title I of Native American Housing and Self-Determination Act of 1996 (25 U.S.C. 4111 et seq.), the number of qualifying low-income housing dwelling units under section 302(b)(1) of such Act (25 U.S.C. 4152(b)(1)) shall not be reduced due to the placement of a Native American veteran assisted with amounts provided under the Tribal HUD- VASH Program within any such qualifying unit. Sec. 236. (a) Subsection (a) of section 184 of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13a(a)) is amended to read as follows: ``(a) Authority.--To provide access to sources of private financing to Indian families, Indian housing authorities, and Indian tribes, who otherwise could not acquire housing financing because of the unique legal status of Indian lands and the unique nature of tribal economies; and to expand homeownership opportunities to Indian families, Indian housing authorities and Indian tribes on fee simple lands, the Secretary may guarantee not to exceed 100 percent of the unpaid principal and interest due on any loan eligible under subsection (b) made to an Indian family, Indian housing authority, or Indian tribe on trust land and fee simple land.''. (b) Paragraph (2) of section 184(b) of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13a(b)(2)) is amended to read as follows: ``(2) ELIGIBLE housing.--The loan shall be used to construct, acquire, refinance, or rehabilitate 1- to 4-family dwellings that are standard housing.''. Sec. 237. Section 105 of the Housing and Community Development Act of 1974 (42 U.S.C. 5305) is amended by adding at the end the following new subsection: ``(i) Special Activities By Indian Tribes.--Indian tribes receiving grants under section 106(a)(1) of this Act are authorized to carry out activities described in subsection (a)(15) of this section directly.''. Sec. 238. $553,600,000 of unobligated balances of amounts made available under the heading ``Office of Lead Hazard Control and Healthy Homes'' from prior Acts making appropriations for the Department of Housing and Urban Development are hereby permanently rescinded. Sec. 239. Notwithstanding chapter 63 of title 31 of the United States Code, section 513 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by adding the following to section 513 after subsection (b): ``(c) PERFORMANCE BASED CONTRACT ADMINISTRATION.--Subject to the authority granted to the Secretary pursuant to section 1437f(b)(1) of title 42 of the United States Code, the Secretary shall undertake a competition and award annual contribution contracts as set forth in section 8(b)(1) of the United States Housing Act of 1937 (the Act) (42 USC 1437f(b)(1)) to public housing agencies qualified to act as participating administrative entities under this section: Provided, That the Secretary shall-- ``(1) conduct such a competition and award contracts on or by September 30, 2026; ``(2) thereafter conduct a competition and award contracts consistent with the provisions hereunder not less frequently than every seven (7) years after the date of the last award of an annual contribution contract is made by the Secretary to a participating administrative entity under the prior competition in compliance with this subsection; ``(3) award such contracts with the Department to participating administrative entities that are also public housing agencies; ``(4) award one contract for each State or territory, except that the Secretary may award more than one contract for a State or territory if the population of such State or territory exceeds 35,000,000; ``(5) specifically include within the definition of participating administrative entities all public housing agencies that-- ``(A) are housing finance agencies, housing authorities, and their non-profit instrumentalities organized under the laws of the respective states and territories; ``(B) otherwise comply with the requirements of 42 U.S.C. Sec. 1437a(b)(6); and ``(C) are recognized as public housing agencies by the Department's Office of Public and Indian Housing and are otherwise required to comply with 24 CFR Part 903 as of the date that the Secretary publishes the invitation to submit in connection with any competition; ``(6) otherwise undertake a competition that awards contracts under this subsection based upon the criteria set forth in subsection 513(b(1)); ``(7) provide a preference in scoring to participating administrative entity applicants under this subsection that have demonstrated experience with-- ``(A) properties receiving project-based rental assistance; ``(B) multi-family housing preservation; ``(C) addressing the concerns of low-income tenants; ``(D) making assistance payments to owners; and ``(E) performing other functions assigned to a public housing agency under section 8(b) of the Act; ``(8) provide for incentive-based fees as part of such awards; and ``(9) specifically disclose the evaluation score value for each of the preferences set forth in paragraph (7) in this subsection: Provided further, That should no public housing agency submit a proposal under this subsection hereunder for a state or territory, the Secretary shall undertake a competition among non-profit or for profit corporations and business entities that seek to act as a performance based contract administrator under a contract for any one of those states and territories.''. Sec. 240. None of the funds made available by this Act may be to implement, administer, or enforce the proposed rule entitled ``Affirmatively Furthering Fair Housing'' published by the Department of Housing and Urban Development in the Federal Register on February 9, 2023 (88 Fed. Reg. 8516), or to direct a grantee to undertake specific changes to existing zoning laws as a part of carrying out the interim final rule entitled ``Restoring Affirmatively Furthering Fair Housing Definitions and Certifications'' published by such Department in the Federal Register on June 10, 2021 (86 Fed. Reg. 30779). Sec. 241. None of the funds made available by this Act may be used to provide Federal funds to a local jurisdiction that refuses to comply with a request from the Department of Homeland Security to provide advance notice of the scheduled release date and time for a particular illegal alien in local custody. Sec. 242. None of the funds made available by this Act may be used by the Department of Housing and Urban Development to update minimum energy efficiency standards for new housing financed by the Department, as part of carrying out the notice entitled ``Adoption of Energy Efficiency Standards for New Construction of HUD- and USDA- Financed Housing'', or otherwise. Sec. 243. Section 4024 of the CARES Act (15 U.S.C. 9058) is amended by striking subsection (c). This title may be cited as the ``Department of Housing and Urban Development Appropriations Act, 2025''. TITLE III RELATED AGENCIES Access Board salaries and expenses For expenses necessary for the Access Board, as authorized by section 502 of the Rehabilitation Act of 1973 (29 U.S.C. 792), $9,955,000: Provided, That, notwithstanding any other provision of law, there may be credited to this appropriation funds received for publications and training expenses. Federal Maritime Commission salaries and expenses For necessary expenses of the Federal Maritime Commission as authorized by section 46107 of title 46, United States Code, including services as authorized by section 3109 of title 5, United States Code; hire of passenger motor vehicles as authorized by section 1343(b) of title 31, United States Code; and uniforms or allowances therefor, as authorized by sections 5901 and 5902 of title 5, United States Code, $43,000,000, of which $2,000,000 shall remain available until September 30, 2026: Provided, That not to exceed $3,500 shall be for official reception and representation expenses. National Railroad Passenger Corporation Office of Inspector General salaries and expenses For necessary expenses of the Office of Inspector General for the National Railroad Passenger Corporation to carry out the provisions of the Inspector General Act of 1978 (5 U.S.C. App. 3), $32,100,000: Provided, That the Inspector General shall have all necessary authority, in carrying out the duties specified in such Act, to investigate allegations of fraud, including false statements to the Government under section 1001 of title 18, United States Code, by any person or entity that is subject to regulation by the National Railroad Passenger Corporation: Provided further, That the Inspector General may enter into contracts and other arrangements for audits, studies, analyses, and other services with public agencies and with private persons, subject to the applicable laws and regulations that govern the obtaining of such services within the National Railroad Passenger Corporation: Provided further, That the Inspector General may select, appoint, and employ such officers and employees as may be necessary for carrying out the functions, powers, and duties of the Office of Inspector General, subject to the applicable laws and regulations that govern such selections, appointments, and employment within the National Railroad Passenger Corporation: Provided further, That concurrent with the President's budget request for fiscal year 2026, the Inspector General shall submit to the House and Senate Committees on Appropriations a budget request for fiscal year 2026 in similar format and substance to budget requests submitted by executive agencies of the Federal Government. National Transportation Safety Board salaries and expenses For necessary expenses of the National Transportation Safety Board, including hire of passenger motor vehicles and aircraft; services as authorized by section 3109 of title 5, United States Code, but at rates for individuals not to exceed the per diem rate equivalent to the rate for a GS-15; uniforms, or allowances therefor, as authorized by sections 5901 and 5902 of title 5, United States Code, $145,000,000, of which not to exceed $1,000 may be used for official reception and representation expenses. Neighborhood Reinvestment Corporation payment to the neighborhood reinvestment corporation For payment to the Neighborhood Reinvestment Corporation for use in neighborhood reinvestment activities, as authorized by the Neighborhood Reinvestment Corporation Act (42 U.S.C. 8101-8107), $158,000,000. Surface Transportation Board salaries and expenses For necessary expenses of the Surface Transportation Board, including services authorized by section 3109 of title 5, United States Code, $50,646,000: Provided, That, notwithstanding any other provision of law, not to exceed $1,250,000 from fees established by the Surface Transportation Board shall be credited to this appropriation as offsetting collections and used for necessary and authorized expenses under this heading: Provided further, That the amounts made available under this heading from the general fund shall be reduced on a dollar- for-dollar basis as such offsetting collections are received during fiscal year 2025, to result in a final appropriation from the general fund estimated at not more than $49,396,000. United States Interagency Council on Homelessness operating expenses For necessary expenses, including payment of salaries, authorized travel, hire of passenger motor vehicles, the rental of conference rooms, and the employment of experts and consultants under section 3109 of title 5, United States Code, of the United States Interagency Council on Homelessness in carrying out the functions pursuant to title II of the McKinney-Vento Homeless Assistance Act, as amended, $4,288,000. TITLE IV GENERAL PROVISIONS--THIS ACT Sec. 401. None of the funds in this Act shall be used for the planning or execution of any program to pay the expenses of, or otherwise compensate, non-Federal parties intervening in regulatory or adjudicatory proceedings funded in this Act. Sec. 402. None of the funds appropriated in this Act shall remain available for obligation beyond the current fiscal year, nor may any be transferred to other appropriations, unless expressly so provided herein. Sec. 403. The expenditure of any appropriation under this Act for any consulting service through a procurement contract pursuant to section 3109 of title 5, United States Code, shall be limited to those contracts where such expenditures are a matter of public record and available for public inspection, except where otherwise provided under existing law, or under existing Executive Order issued pursuant to existing law. Sec. 404. (a) None of the funds made available in this Act may be obligated or expended for any employee training that-- (1) does not meet identified needs for knowledge, skills, and abilities bearing directly upon the performance of official duties; (2) contains elements likely to induce high levels of emotional response or psychological stress in some participants; (3) does not require prior employee notification of the content and methods to be used in the training and written end of course evaluation; (4) contains any methods or content associated with religious or quasi-religious belief systems or ``new age'' belief systems as defined in Equal Employment Opportunity Commission Notice N-915.022, dated September 2, 1988; or (5) is offensive to, or designed to change, participants' personal values or lifestyle outside the workplace. (b) Nothing in this section shall prohibit, restrict, or otherwise preclude an agency from conducting training bearing directly upon the performance of official duties. Sec. 405. Except as otherwise provided in this Act, none of the funds provided in this Act, provided by previous appropriations Acts to the agencies or entities funded in this Act that remain available for obligation or expenditure in fiscal year 2025, or provided from any accounts in the Treasury derived by the collection of fees and available to the agencies funded by this Act, shall be available for obligation or expenditure through a reprogramming of funds that-- (1) creates a new program; (2) eliminates a program, project, or activity; (3) increases funds or personnel for any program, project, or activity for which funds have been denied or restricted by the Congress; (4) proposes to use funds directed for a specific activity by either the House or Senate Committees on Appropriations for a different purpose; (5) augments existing programs, projects, or activities in excess of $5,000,000 or 10 percent, whichever is less; (6) reduces existing programs, projects, or activities by $5,000,000 or 10 percent, whichever is less; or (7) creates, reorganizes, or restructures a branch, division, office, bureau, board, commission, agency, administration, or department different from the budget justifications submitted to the Committees on Appropriations or the table accompanying the Report accompanying this Act, whichever is more detailed, unless prior approval is received from the House and Senate Committees on Appropriations: Provided, That not later than 60 days after the date of enactment of this Act, each agency funded by this Act shall submit a report to the Committees on Appropriations of the Senate and of the House of Representatives to establish the baseline for application of reprogramming and transfer authorities for the current fiscal year: Provided further, That the report shall include-- (A) a table for each appropriation with a separate column to display the prior year enacted level, the President's budget request, adjustments made by Congress, adjustments due to enacted rescissions, if appropriate, and the fiscal year enacted level; (B) a delineation in the table for each appropriation and its respective prior year enacted level by object class and program, project, and activity as detailed in this Act, the table accompanying the Report accompanying this Act, or in the budget appendix for the respective appropriations, whichever is more detailed, and shall apply to all items for which a dollar amount is specified and to all programs for which new budget (obligational) authority is provided, as well as to discretionary grants and discretionary grant allocations; and (C) an identification of items of special congressional interest. Sec. 406. Except as otherwise specifically provided by law, not to exceed 50 percent of unobligated balances remaining available at the end of fiscal year 2025 from appropriations made available for salaries and expenses for fiscal year 2025 in this Act, shall remain available through September 30, 2026, for each such account for the purposes authorized: Provided, That a request shall be submitted to the House and Senate Committees on Appropriations for approval prior to the expenditure of such funds: Provided further, That these requests shall be made in compliance with reprogramming guidelines under section 405 of this Act. Sec. 407. No funds in this Act may be used to support any Federal, State, or local projects that seek to use the power of eminent domain, unless eminent domain is employed only for a public use: Provided, That for purposes of this section, public use shall not be construed to include economic development that primarily benefits private entities: Provided further, That any use of funds for mass transit, railroad, airport, seaport or highway projects, as well as utility projects which benefit or serve the general public (including energy-related, communication-related, water-related and wastewater-related infrastructure), other structures designated for use by the general public or which have other common-carrier or public-utility functions that serve the general public and are subject to regulation and oversight by the government, and projects for the removal of an immediate threat to public health and safety or brownfields as defined in the Small Business Liability Relief and Brownfields Revitalization Act (Public Law 107-118) shall be considered a public use for purposes of eminent domain. Sec. 408. None of the funds made available in this Act may be transferred to any department, agency, or instrumentality of the United States Government, except pursuant to a transfer made by, or transfer authority provided in, this Act or any other appropriations Act. Sec. 409. No funds appropriated pursuant to this Act may be expended by an entity unless the entity agrees that in expending the assistance the entity will comply with sections 2 through 4 of the Act of March 3, 1933 (41 U.S.C. 8301-8305, popularly known as the ``Buy American Act''). Sec. 410. No funds appropriated or otherwise made available under this Act shall be made available to any person or entity that has been convicted of violating the Buy American Act (41 U.S.C. 8301-8305). Sec. 411. None of the funds made available in this Act may be used for first-class airline accommodations in contravention of sections 301-10.122 and 301-10.123 of title 41, Code of Federal Regulations. Sec. 412. None of the funds made available in this Act may be used to send or otherwise pay for the attendance of more than 50 employees of a single agency or department of the United States Government, who are stationed in the United States, at any single international conference unless the relevant Secretary reports to the House and Senate Committees on Appropriations at least 5 days in advance that such attendance is important to the national interest: Provided, That for purposes of this section the term ``international conference'' shall mean a conference occurring outside of the United States attended by representatives of the United States Government and of foreign governments, international organizations, or nongovernmental organizations. Sec. 413. None of the funds appropriated or otherwise made available under this Act may be used by the Surface Transportation Board to charge or collect any filing fee for rate or practice complaints filed with the Board in an amount in excess of the amount authorized for district court civil suit filing fees under section 1914 of title 28, United States Code. Sec. 414. (a) None of the funds made available in this Act may be used to maintain or establish a computer network unless such network blocks the viewing, downloading, and exchanging of pornography. (b) Nothing in subsection (a) shall limit the use of funds necessary for any Federal, State, tribal, or local law enforcement agency or any other entity carrying out criminal investigations, prosecution, or adjudication activities. Sec. 415. (a) None of the funds made available in this Act may be used to deny an Inspector General funded under this Act timely access to any records, documents, or other materials available to the department or agency over which that Inspector General has responsibilities under the Inspector General Act of 1978 (5 U.S.C. App.), or to prevent or impede that Inspector General's access to such records, documents, or other materials, under any provision of law, except a provision of law that expressly refers to the Inspector General and expressly limits the Inspector General's right of access. (b) A department or agency covered by this section shall provide its Inspector General with access to all such records, documents, and other materials in a timely manner. (c) Each Inspector General shall ensure compliance with statutory limitations on disclosure relevant to the information provided by the establishment over which that Inspector General has responsibilities under the Inspector General Act of 1978 (5 U.S.C. App.). (d) Each Inspector General covered by this section shall report to the Committees on Appropriations of the House of Representatives and the Senate within 5 calendar days any failures to comply with this requirement. Sec. 416. None of the funds appropriated or otherwise made available by this Act may be used to pay award or incentive fees for contractors whose performance has been judged to be below satisfactory, behind schedule, over budget, or has failed to meet the basic requirements of a contract, unless the Agency determines that any such deviations are due to unforeseeable events, government-driven scope changes, or are not significant within the overall scope of the project and/or program unless such awards or incentive fees are consistent with 16.401(e)(2) of the Federal Acquisition Regulations. Sec. 417. No part of any appropriation contained in this Act shall be available to pay the salary for any person filling a position, other than a temporary position, formerly held by an employee who has left to enter the Armed Forces of the United States and has satisfactorily completed his or her period of active military or naval service, and has within 90 days after his or her release from such service or from hospitalization continuing after discharge for a period of not more than 1 year, made application for restoration to his or her former position and has been certified by the Office of Personnel Management as still qualified to perform the duties of his or her former position and has not been restored thereto. Sec. 418. (a) None of the funds made available by this Act may be used to approve a new foreign air carrier permit under sections 41301 through 41305 of title 49, United States Code, or exemption application under section 40109 of that title of an air carrier already holding an air operators certificate issued by a country that is party to the U.S.-E.U.-Iceland-Norway Air Transport Agreement where such approval would contravene United States law or Article 17 bis of the U.S.-E.U.- Iceland-Norway Air Transport Agreement. (b) Nothing in this section shall prohibit, restrict or otherwise preclude the Secretary of Transportation from granting a foreign air carrier permit or an exemption to such an air carrier where such authorization is consistent with the U.S.-E.U.-Iceland-Norway Air Transport Agreement and United States law. Sec. 419. None of the funds made available by this Act may be used by the Secretary of Housing and Urban Development in contravention of section 312 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5155). Sec. 420. None of the funds made available by this Act may be used in contravention of existing Federal law regarding non-citizen eligibility and ineligibility for occupancy in federally assisted housing or for participation in and assistance under Federal housing programs, including section 214 of the Housing and Community Development Act of 1980 (42 U.S.C. 1436a) and title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1601 et seq.). Sec. 421. None of the funds made available by this Act may be used to provide any education, training, or professional development that utilizes, promotes, or teaches Critical Race Theory, any concept associated with Critical Race Theory, or that teaches or trains any idea or concept that condones an individual being discriminated against or receiving adverse or beneficial treatment based on race or sex, that condones an individual feeling discomfort, guilt, anguish, or any other form of psychological distress on account of that individual's race or sex, as well as any idea or concept that regards one race as inherently superior to another race, the United States or its institutions as being systemically racist or sexist, an individual as being inherently racist, sexist, or oppressive by virtue of that individual's race or sex, an individual's moral character as being necessarily determined by race or sex, an individual as bearing responsibility for actions committed in the past by other members of the same race or sex, or meritocracy being racist, sexist, or having been created by a particular race to oppress another race. Sec. 422. (a) No part of any appropriation contained in this Act or division J of Public Law 117-58, including funds for the National Passenger Railroad Corporation, shall be used, other than for normal and recognized executive legislative relationships, for the preparation, distribution, or use of any kit, pamphlet, booklet, publication, electronic communication, radio, television, or video presentation designed to support or defeat the enactment of legislation before the Congress, except in presentation to the Congress. (b) No part of any appropriation contained in this Act or division J of Public Law 117-58, including funds for the National Passenger Railroad Corporation, shall be used to pay the salary or expenses of any grant or contract recipient, or agent acting for such recipient, related to any activity designed to influence the enactment of legislation or appropriations proposed or pending before the Congress, other than for normal and recognized executive-legislative relationships. (c) Amounts repurposed pursuant to subsections (a) and (b) shall continue to be treated as amounts specified in section 103(b) of division A of Public Law 118-5. Sec. 423. None of the funds appropriated or otherwise made available by this Act may be made available to implement, administer, apply, enforce, or carry out equity action plans of the Department of Transportation, the Department of Housing and Urban Development, or any other Federal agency diversity, equity, or inclusion initiative, as well as Executive Order 13985 of January 20, 2021 (86 Fed. Reg. 7009, relating to advancing racial equity and support for underserved communities through the Federal Government), Executive Order 14035 of June 21, 2021 (86 Fed. Reg. 34596, relating to diversity, equity, inclusion, and accessibility in the Federal workforce), or Executive Order 14091 of February 16, 2023 (88 Fed. Reg. 10825, relating to further advancing racial equity and support for underserved communities through the Federal Government). Sec. 424. None of the funds made available by this Act may be used to implement, enforce, or otherwise carry out the following: (1) Executive Order 14037, relating to strengthening American leadership in clean cars and trucks; (2) Executive Order 14057, relating to catalyzing clean energy industries and jobs through federal sustainability; (3) Executive Order 14096, relating to revitalizing our Nation's commitment to environmental justice for all; (4) Executive Order 13990, relating to Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis; (5) Executive Order 14008, relating to Tackling the Climate Crisis at Home and Abroad; (6) Section 6 of Executive Order 14013, relating to Rebuilding and Enhancing Programs To Resettle Refugees and Planning for the Impact of Climate Change on Migration; (7) Executive Order 14030, relating to Climate-Related Financial Risk; and (8) Executive Order 14082, relating to Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act of 2022. Sec. 425. (a) IN GENERAL.--Notwithstanding section 7 of title 1, United States Code, section 1738C of title 28, United States Code, or any other provision of law, none of the funds provided by this Act, or previous appropriations Acts, shall be used in whole or in part to take any discriminatory action against a person, wholly or partially, on the basis that such person speaks, or acts, in accordance with a sincerely held religious belief, or moral conviction, that marriage is, or should be recognized as, a union of one man and one woman. (b) DISCRIMINATORY ACTION DEFINED.--As used in subsection (a), a discriminatory action means any action taken by the Federal Government to-- (1) alter in any way the Federal tax treatment of, or cause any tax, penalty, or payment to be assessed against, or deny, delay, or revoke an exemption from taxation under section 501(a) of the Internal Revenue Code of 1986 of, any person referred to in subsection (a); (2) disallow a deduction for Federal tax purposes of any charitable contribution made to or by such person; (3) withhold, reduce the amount or funding for, exclude, terminate, or otherwise make unavailable or deny, any Federal grant, contract, subcontract, cooperative agreement, guarantee, loan, scholarship, license, certification, accreditation, employment, or other similar position or status from or to such person; (4) withhold, reduce, exclude, terminate, or otherwise make unavailable or deny, any entitlement or benefit under a Federal benefit program, including admission to, equal treatment in, or eligibility for a degree from an educational program, from or to such person; or (5) withhold, reduce, exclude, terminate, or otherwise make unavailable or deny access or an entitlement to Federal property, facilities, educational institutions, speech fora (including traditional, limited, and nonpublic fora), or charitable fundraising campaigns from or to such person. (c) ACCREDITATION; LICENSURE; CERTIFICATION.--The Federal Government shall consider accredited, licensed, or certified for purposes of Federal law any person that would be accredited, licensed, or certified, respectively, for such purposes but for a determination against such person wholly or partially on the basis that the person speaks, or acts, in accordance with a sincerely held religious belief or moral conviction described in subsection (a). Sec. 426. None of the funds made available by this Act may be obligated or expended to fly or display a flag over a facility of a Department or agency funded by this Act other than the flag of the United States; the flag of a State, insular area, or the District of Columbia; the flag of a Federally recognized Tribal entity; the official flag of the Secretary of Transportation or the Secretary of Housing and Urban Development; the official flag of a U.S. Department or agency; or the POW/MIA flag. Sec. 427. None of the funds made available in this Act may be used to facilitate new scheduled air transportation originating from the United States if such flights would land on, or pass through, property confiscated by the Cuban Government, including property in which a minority interest was confiscated, as the terms confiscated, by the Cuban Government, and property are defined in paragraphs (4), (5), and (12)(A), respectively, of section 4 of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (22 U.S.C. 6023 (4), (5), and 7 (12)(A)): Provided, That for this section, new scheduled air transportation shall include any flights not already regularly scheduled prior to May 2022. Sec. 428. (a) In the table of projects in the explanatory statement referenced in section 417 of the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2022 (division L of Public Law 117-103)-- (1) the item relating to ``Acquisition of new commercial space'' is deemed to be amended by striking project ``Acquisition of new commercial space'' and inserting ``Renovation of commercial space''; (2) the item relating to ``Electric school bus and associated electric vehicle (EV) charging infrastructure'' is deemed to be amended by striking recipient ``Falls Church City Public Schools'' and inserting ``City of Falls Church''; (3) the item relating to ``North Commons Regional Vision'' is deemed to be amended by striking recipient ``Minneapolis Park and Recreation Board'' and inserting ``City of Minneapolis''; (4) the item relating to ``Orangewood Parkette'' is deemed to be amended by striking project ``Orangewood Parkette'' and inserting ``Orangewood Complete Streets''; (5) the item relating to ``Replacing Five Elevators in a Public Housing Development'' is deemed to be amended by striking project ``Replacing Five Elevators in a Public Housing Development'' and inserting ``Replacing Elevators in a Public Housing Development''; (6) the item relating to ``Long Branch Stream Valley Park Pedestrian Bridge Replacements and ADA Improvements'' is deemed to be amended by striking recipient ``Montgomery County Government'' and inserting ``Maryland National Capital Park and Planning Commission''; and (7) the item relating to "Washington Gorge Action Programs-- Goldendale Childcare and Early Learning Center" is deemed to be amended by striking ``Goldendale''. (b) In the table of projects entitled ``Community Project Funding/ Congressionally Directed Spending'' included in the explanatory statement that accompanied the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2023 (division L of Public Law 117-328)-- (1) the item relating to ``Supportive Living, Community Day Services, and Housing Site Project for Adults with Intellectual and Developmental Disabilities'' is deemed to be amended by striking project ``Supportive Living, Community Day Services, and Housing Site Project for Adults with Intellectual and Developmental Disabilities'' and inserting ``Community Day Services and Housing Expansion for Adults with Intellectual and Developmental Disabilities''; (2) the item relating to ``Public Library Addition'' is deemed to be amended by striking project ``Public Library Addition'' and inserting ``Public Library Renovations''; (3) the item relating to ``Renovation of Snelling Motel to Affordable Housing for Veterans'' is deemed to be amended by striking project ``Renovation of Snelling Motel to Affordable Housing for Veterans'' and inserting ``Acquisition for Affordable Housing for Veterans''; (4) the item relating to ``El Centro de la Raza-Pattison's West Community Campus Property Acquisition'' is deemed to be amended by striking project ``El Centro de la Raza-Pattison's West Community Campus Property Acquisition'' and inserting ``Pattison's West Community Campus''; (5) the item relating to ``Riverbrook Regional YMCA'' is deemed to be amended by striking recipient ``Riverbrook Regional Young Men's Christian Association, Inc.'' and inserting ``City of Norwalk''; (6) the item relating to ``The SE1 Rehab'' is deemed to be amended by striking recipient ``The Skid Row Housing Trust'' and inserting ``PATH Ventures'' and striking project ``The SE1 Rehab'' and inserting ``Skid Row Permanent Supportive Housing Rehabilitation''; (7) the item relating to ``Community Aging & Retirement Services, Inc.'' is deemed to be amended by striking recipient ``Community Aging & Retirement Services, Inc.'' and inserting ``Pasco County,'' and striking project ``CARES One Stop Senior Center Acquisition and Construction'' and inserting ``Senior Center Acquisition and Construction''; (8) the item relating to ``Western Flyer Coast Guard Pier Repair and Classroom Design'' is deemed to be amended by striking project ``Western Flyer Coast Guard Pier Repair and Classroom Design'' and inserting ``Western Flyer Pier and Classroom Repair''; and (9) the item relating to ``NYCHA ADA Accessibility and Security Lighting Project'' is deemed to be amended by striking project ``NYCHA ADA Accessibility and Security Lighting Project'' and inserting ``Installation of Exterior Lighting at Borinquen Plaza II''. (c) In the table of projects entitled ``Community Project Funding/ Congressionally Directed Spending'' included in the explanatory statement that accompanied the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2024 (division F of Public Law 118-42)-- (1) the item relating to ``Pawtucket Library, Sayles Building Re- Pointing'' is deemed to be amended by striking project ``Pawtucket Library, Sayles Building Re-Pointing'' and inserting ``Pawtucket Library, Sayles Building Renovation''; (2) the item relating to ``Germany Road Relocation Project'' is deemed to be amended by striking project ``Germany Road Relocation Project'' and inserting ``Sewer Improvements''; (3) the item relating to ``Community Center Expansion and Land Acquisition'' is deemed to be amended by striking ``Expansion and Land Acquisition'' and inserting ``Planning and Design''; (4) the item relating to ``Laconia, NH Hill Street Pedestrian Bridge Replacement'' is deemed to be amended by striking ``Hill Street'' and inserting ``Mill Street''; (5) the item relating to ``Sunnyside Community Reinvestment as Cultura & Traditions: Tucson, AZ'' is deemed to be amended by striking recipient ``Sunnyside Foundation'' and inserting ``Sunnyside Unified School District''; and (6) the item relating to ``Boys and Girls Clubs of Puerto Rico Arecibo Clubhouse Construction Project'' is deemed to be amended by striking ``Boys and Girls Clubs of Puerto Rico Arecibo Clubhouse Construction Project'' and inserting ``Rehabilitation of San Lorenzo Community Facility of the Boys and Girls Clubs of Puerto Rico''. Sec. 429. (a) IN GENERAL.--None of the funds made available, limited, or otherwise affected by this Act shall be used to approve or otherwise authorize the imposition of any toll on any segment of highway or bridge located on the Federal-aid system in the Commonwealth of Pennsylvania that-- (1) as of the date of enactment of this Act, is not tolled; (2) is constructed with Federal assistance provided under title 23, United States Code; (3) is constructed with Federal assistance provided under section 141 of the Internal Revenue Code of 1986; and (4) is in actual operation as of the date of enactment of this Act. (b) EXCEPTIONS.-- (1) NUMBER OF TOLL LANES.--Subsection (a) shall not apply to any segment of highway on the Federal-aid system described in that subsection that, as of the date on which a toll is imposed on the segment, will have the same number of non-toll lanes as were in existence prior to that date. (2) HIGH-OCCUPANCY VEHICLE LANES.--A high-occupancy vehicle lane that is converted to a toll lane shall not be subject to this section, and shall not be considered to be a non-toll lane for purposes of determining whether a highway will have fewer non-toll lanes than prior to the date of imposition of the toll, if-- (A) high-occupancy vehicles occupied by the number of passengers specified by the entity operating the toll lane may use the toll lane without paying a toll, unless otherwise specified by the appropriate county, town, municipal or other local government entity, or public toll road or transit authority; or (B) each high-occupancy vehicle lane that was converted to a toll lane was constructed as a temporary lane to be replaced by a toll lane under a plan approved by the appropriate county, town, municipal, or other local government entity or public toll road or transit authority. Sec. 430. None of the funds made available by this Act or any other Act may be used to consider or incorporate the social cost of carbon or greenhouse gases (1) as part of any cost-benefit analysis required or performed pursuant to (A) any law; (B) Executive Order No. 13990 (86 Fed. Reg. 7037; relating to protecting public health and the environment and restoring science to tackle the climate crisis); (C) Executive Order No. 14094 (88 Fed. Reg. 21879; relating to modernizing regulatory review); (D) the Presidential memorandum entitled ``Modernizing Regulatory Review'' issued by the President on January 20, 2021; (E) any revisions to Office of Management and Budget Circular A-4 proposed or finalized under Executive Order No. 14094; or (F) ``Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990,'' published under the Interagency Working Group on the Social Cost of Greenhouse Gases, in February of 2021; (2) in any rulemaking; (3) in the issuance of guidance; (4) in taking any other agency action; or (5) as justification for any rulemaking, guidance document, or agency action. Sec. 431. None of the funds made available by this Act may be used for air travel by the Secretary of Transportation other than in economy class on a commercial flight. Sec. 432. None of the funds made available by this Act may be used to purchase, install, maintain, or operate automated traffic enforcement cameras for purposes of red-light enforcement, speed enforcement, or stop sign enforcement. spending reduction account Sec. 433. $0. This Act may be cited as the ``Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2025''. Union Calendar No. 484 118th CONGRESS 2D Session H. R. 9028 [Report No. 118-584] _______________________________________________________________________ A BILL Making appropriations for the Departments of Transportation, and Housing and Urban Development, and related agencies for the fiscal year ending September 30, 2025, and for other purposes. _______________________________________________________________________ July 12, 2024 Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

usgpo

2024-10-08T13:27:14.685562

BILLS

BILLS-118s5007is

Protecting American Agriculture from Foreign Adversaries Act of 2024

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 5007 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 5007 To amend the Defense Production Act of 1950 with respect to foreign investments in United States agriculture, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES September 10, 2024 Mr. Braun (for himself, Mr. Cotton, Mr. Marshall, Mr. Grassley, Mr. Tuberville, Mrs. Blackburn, Mr. Ricketts, Mr. Barrasso, Mr. Tester, Mr. Fetterman, Mr. Manchin, Mrs. Fischer, Mrs. Britt, Ms. Baldwin, Mr. Young, Ms. Ernst, and Ms. Lummis) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs _______________________________________________________________________ A BILL To amend the Defense Production Act of 1950 with respect to foreign investments in United States agriculture, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Protecting American Agriculture from Foreign Adversaries Act of 2024''. SEC. 2. INCLUSION OF SECRETARY OF AGRICULTURE ON COMMITTEE ON FOREIGN INVESTMENT IN UNITED STATES AND CONSIDERATION OF CERTAIN AGRICULTURAL LAND TRANSACTIONS. (a) Inclusion on the Committee.--Section 721(k) of the Defense Production Act of 1950 (50 U.S.C. 4565(k)) is amended by adding at the end the following: ``(8) Inclusion of the secretary of agriculture.--The Secretary of Agriculture shall be a member of the Committee with respect to a covered transaction that involves-- ``(A) agricultural land; ``(B) agriculture biotechnology; or ``(C) the agriculture industry, including agricultural-- ``(i) transportation; ``(ii) storage; and ``(iii) processing.''. (b) Consideration of Certain Agricultural Land Transactions.-- Section 721(b)(1) of the Defense Production Act of 1950 (50 U.S.C. 4565(b)(1)) is amended by adding at the end the following: ``(I) Consideration of certain agricultural land transactions.-- ``(i) In general.--After receiving notification from the Secretary of Agriculture of a reportable agricultural land transaction, the Committee shall determine-- ``(I) whether the transaction is a covered transaction; and ``(II) if the Committee determines that the transaction is a covered transaction, whether the Committee should initiate a review pursuant to subparagraph (D), or take another action authorized under this section, with respect to the reportable agricultural land transaction. ``(ii) Sunset.--The requirements under this subparagraph shall terminate, with respect to a foreign person of a covered country, on the date on which that country is removed from the list of foreign adversaries set forth in section 791.4 of title 15, Code of Federal Regulations. ``(iii) Definitions.--In this subparagraph: ``(I) Covered country.--The term `covered country' means the People's Republic of China, the Democratic People's Republic of Korea, the Russian Federation, or the Islamic Republic of Iran. ``(II) Reportable agricultural land transaction.--The term `reportable agricultural land transaction' means a transaction-- ``(aa) that the Secretary of Agriculture has reason to believe is a covered transaction; ``(bb) that involves the acquisition of an interest in agricultural land by a foreign person of a covered country; and ``(cc) with respect to which a person is required to submit a report to the Secretary of Agriculture under section 2(a) of the Agricultural Foreign Investment Disclosure Act of 1978 (7 U.S.C. 3501(a)).''. <all>

usgpo

2024-10-08T13:26:15.930149

BILLS

BILLS-118s4830is

Combatting Money Laundering in Cyber Crime Act of 2024

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4830 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 4830 To strengthen the authority of the United States Secret Service to investigate various crimes related to digital asset transactions and to counter transnational cyber criminal activity, including unlicensed money transmitting businesses, structured transactions, and fraud against financial institutions, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES July 29, 2024 Ms. Cortez Masto (for herself, Mr. Grassley, and Ms. Klobuchar) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs _______________________________________________________________________ A BILL To strengthen the authority of the United States Secret Service to investigate various crimes related to digital asset transactions and to counter transnational cyber criminal activity, including unlicensed money transmitting businesses, structured transactions, and fraud against financial institutions, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Combatting Money Laundering in Cyber Crime Act of 2024''. SEC. 2. EXPANSION OF UNITED STATES SECRET SERVICE INVESTIGATIVE AUTHORITIES. Section 3056(b) of title 18, United States Code, is amended-- (1) in paragraph (1), by striking ``or'' after ``871'' and inserting ``, or 1960'' after ``879''; and (2) in paragraph (3)-- (A) by inserting ``structured transactions,'' after ``devices,''; (B) by striking ``federally insured''; and (C) by inserting ``, as defined in section 5312 of title 31'' after ``institution''. SEC. 3. FINCEN EXCHANGE. Section 310(d)(3)(A) of title 31, United States Code, is amended, in the matter preceding clause (i), by striking ``5 years'' and inserting ``10 years''. SEC. 4. INTERNATIONAL FINANCIAL INSTITUTIONS. Section 7125(b) of the Otto Warmbier North Korea Nuclear Sanctions and Enforcement Act of 2019 (22 U.S.C. 262p-13 note) is amended by striking ``6'' and inserting ``10''. SEC. 5. REPORT. (a) In General.--Not later than 1 year after the date of enactment of this Act, the Government Accountability Office shall conduct a study and submit to the appropriate committees of Congress a report on the implementation of section 6102 of the Anti-Money Laundering Act of 2020 (title LXI of division F of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116-283; 134 Stat. 4552)). (b) Focus.--In conducting the study under subsection (a), the Government Accountability Office shall focus on evaluating the ability of law enforcement to identify and deter money laundering in cyber crimes. <all>

usgpo

2024-10-08T13:26:23.195743

BILLS

BILLS-118hr9106ih

Enhanced Presidential Security Act of 2024

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9106 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9106 To direct the Director of the United States Secret Service to apply the same standards for determining the number of agents required to protect Presidents, Vice Presidents, and major Presidential and Vice Presidential candidates, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES July 23, 2024 Mr. Lawler (for himself, Mr. Torres of New York, Mr. Molinaro, Mr. Williams of New York, and Mr. Kean of New Jersey) introduced the following bill; which was referred to the Committee on the Judiciary _______________________________________________________________________ A BILL To direct the Director of the United States Secret Service to apply the same standards for determining the number of agents required to protect Presidents, Vice Presidents, and major Presidential and Vice Presidential candidates, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Enhanced Presidential Security Act of 2024''. SEC. 2. UNIFORM STANDARDS FOR SECRET SERVICE PROTECTION OF PRESIDENTS, VICE PRESIDENTS, AND MAJOR PRESIDENTIAL AND VICE PRESIDENTIAL CANDIDATES. The Director of the United States Secret Service shall apply the same standards for determining the number of agents required to protect Presidents, Vice Presidents, and major Presidential and Vice Presidential candidates. SEC. 3. REPORT. Not later than 180 days after the date of enactment of this Act, the Director of the United States Secret Service shall conduct a comprehensive review of the provision of protection by the Secret Service for Presidents, Vice Presidents, former Presidents, and major Presidential and Vice Presidential candidates, and submit to the Committee on Homeland Security of the House of Representatives and the Committee on Homeland Security and Governmental Affairs of the Senate a report that includes the findings from such review, along with any recommendations for improving the provision of protection. SEC. 4. AUTHORIZATION OF APPROPRIATIONS. There is authorized to be appropriated such sums as may be necessary to carry out this Act. SEC. 5. DEFINITION. In this Act, the term ``major Presidential and Vice Presidential candidates'' has the meaning given such term in section 3056 of title 18, United States Code, and includes any other Presidential or Vice Presidential candidate for whom the President has otherwise authorized the Secret Service to protect. <all>

usgpo

2024-10-08T13:26:29.625309

CHRG

CHRG-118hhrg55967

Examining the Root Causes of Drug Shortages: Challenges in Pharma- Ceutical Drug Supply Chains

United States Congress House of Representatives

[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] EXAMINING THE ROOT CAUSES OF DRUG SHORT- AGES: CHALLENGES IN PHARMACEUTICAL DRUG SUPPLY CHAINS ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ MAY 11, 2023 __________ Serial No. 118-35 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Published for the use of the Committee on Energy and Commerce govinfo.gov/committee/house-energy energycommerce.house.gov ______ U.S. GOVERNMENT PUBLISHING OFFICE 55-967 PDF WASHINGTON : 2024 COMMITTEE ON ENERGY AND COMMERCE CATHY McMORRIS RODGERS, Washington Chair MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey ROBERT E. LATTA, Ohio Ranking Member BRETT GUTHRIE, Kentucky ANNA G. ESHOO, California H. MORGAN GRIFFITH, Virginia DIANA DeGETTE, Colorado GUS M. BILIRAKIS, Florida JAN SCHAKOWSKY, Illinois BILL JOHNSON, Ohio DORIS O. MATSUI, California LARRY BUCSHON, Indiana KATHY CASTOR, Florida RICHARD HUDSON, North Carolina JOHN P. SARBANES, Maryland TIM WALBERG, Michigan PAUL TONKO, New York EARL L. ``BUDDY'' CARTER, Georgia YVETTE D. CLARKE, New York JEFF DUNCAN, South Carolina TONY CARDENAS, California GARY J. PALMER, Alabama RAUL RUIZ, California NEAL P. DUNN, Florida SCOTT H. PETERS, California JOHN R. CURTIS, Utah DEBBIE DINGELL, Michigan DEBBBIE LESKO, Arizona MARC A. VEASEY, Texas GREG PENCE, Indiana ANN M. KUSTER, New Hampshire DAN CRENSHAW, Texas ROBIN L. KELLY, Illinois JOHN JOYCE, Pennsylvania NANETTE DIAZ BARRAGAN, California KELLY ARMSTRONG, North Dakota, Vice LISA BLUNT ROCHESTER, Delaware Chair DARREN SOTO, Florida RANDY K. WEBER, Sr., Texas ANGIE CRAIG, Minnesota RICK W. ALLEN, Georgia KIM SCHRIER, Washington TROY BALDERSON, Ohio LORI TRAHAN, Massachusetts RUSS FULCHER, Idaho LIZZIE FLETCHER, Texas AUGUST PFLUGER, Texas DIANA HARSHBARGER, Tennessee MARIANNETTE MILLER-MEEKS, Iowa KAT CAMMACK, Florida JAY OBERNOLTE, California ------ Professional Staff NATE HODSON, Staff Director SARAH BURKE, Deputy Staff Director TIFFANY GUARASCIO, Minority Staff Director Subcommittee on Oversight and Investigations H. MORGAN GRIFFITH, Virginia Chairman MICHAEL C. BURGESS, Texas KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky Ranking Member JEFF DUNCAN, South Carolina DIANA DeGETTE, Colorado GARY J. PALMER, Alabama JAN SCHAKOWSKY, Illinois DEBBIE LESKO, Arizona, Vice Chair PAUL TONKO, New York DAN CRENSHAW, Texas RAUL RUIZ, California KELLY ARMSTRONG, North Dakota SCOTT H. PETERS, California KAT CAMMACK, Florida FRANK PALLONE, Jr., New Jersey (ex CATHY McMORRIS RODGERS, Washington officio) (ex officio) C O N T E N T S ---------- Page Hon. H. Morgan Griffith, a Representative in Congress from the Commonwealth of Virginia, opening statement.................... 1 Prepared statement........................................... 4 Hon. Kathy Castor, a Representative in Congress from the State of Florida, opening statement..................................... 10 Prepared statement........................................... 12 Hon. Cathy McMorris Rodgers, a Representative in Congress from the State of Washington, opening statement..................... 14 Prepared statement........................................... 16 Hon. Frank Pallone, Jr., a Representative in Congress from the State of New Jersey, opening statement......................... 19 Prepared statement........................................... 21 Witnesses Alex Oshmyansky, M.D., Ph.D., Chief Executive Officer/Founder, Mark Cuban Cost Plus Drug Company.............................. 24 Prepared statement........................................... 26 Anthony Sardella, Chair, API Innovation Center, and Adjunct Professor and Senior Research Advisor, Center for Analytics and Business Insights, Washington University in St. Louis.......... 35 Prepared statement........................................... 37 Laura Bray, Founder and Chief Change Maker, Angels for Change.... 44 Prepared statement........................................... 46 Fernando J. Muzzio, Ph.D., Distinguished Professor of Chemical and Biochemical Engineering and Director, NSF Engineering Research Center on Structured Organic Particulate Systems, Rutgers University............................................. 58 Prepared statement........................................... 60 EXAMINING THE ROOT CAUSES OF DRUG SHORTAGES: CHALLENGES IN PHARMA- CEUTICAL DRUG SUPPLY CHAINS ---------- THURSDAY, MAY 11, 2023 House of Representatives, Subcommittee on Oversight and Investigations, Committee on Energy and Commerce, Washington, DC. The subcommittee met, pursuant to call, at 10:30 a.m. in the John D. Dingell Room 2123, Rayburn House Office Building, Hon. Morgan Griffith (chairman of the subcommittee) presiding. Members present: Representatives Griffith, Duncan, Palmer, Lesko, Crenshaw, Rodgers (ex officio), Castor (subcommittee ranking member), Schakowsky, Tonko, Ruiz, Peters, and Pallone (ex officio). Staff present: Kate Arey, Digital Director; Sean Brebbia, Chief Counsel, Oversight and Investigations; Lauren Eriksen, Clerk, Oversight and Investigations; Peter Kielty, General Counsel; Emily King, Member Services Director; Karli Plucker, Director of Operations (shared staff); Gavin Proffitt, Professional Staff Member; John Strom, Counsel, Oversight and Investigations; Michael Taggart, Policy Director; Joanne Thomas, Counsel, Oversight and Investigations; Austin Flack, Minority Junior Professional Staff Member; Waverly Gordon, Minority Deputy Staff Director and General Counsel; Tiffany Guarascio, Minority Staff Director; Liz Johns, Minority GAO Detailee; Will McAuliffe, Minority Chief Counsel, Oversight and Investigations; Christina Parisi, Minority Professional Staff Member; Greg Pugh, Minority Staff Assistant; Harry Samuels, Minority Oversight Counsel; Andrew Souvall, Minority Director of Communications, Outreach, and Member Services; and Caroline Wood, Minority Research Analyst. Mr. Griffith. The Subcommittee on Oversight and Investigations will now come to order. The Chair recognizes himself for 5 minutes for an opening statement. OPENING STATEMENT OF HON. H. MORGAN GRIFFITH, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF VIRGINIA Good morning, and welcome to today's hearing. This morning's hearing will examine the very serious and growing problem of prescription drug shortages. Americans need more reliable access to lifesaving drugs. According to the American Society of Health-System Pharmacists, we currently have over 247 active drug shortages. Between 2021 and 2022, drug shortages increased by almost 30 percent. It is unbelievable that in our great country there is a shortage of drugs to treat childhood cancer, and that is just one example. It is even more galling when you consider that most shortages are in the generic drug space, where there should be competition. The median price of a drug in shortage between 2013 and 2017 was less than $9 per treatment dose. Generic drugs account for 90 percent of all prescriptions but only 17 percent of drug spending. Generics are perhaps the only significant segment of our healthcare industry where costs have not increased faster than inflation. The generic pharmaceutical industry is plagued with a myriad of issues leading to drug shortages. We have an economic environment so unappealing to manufacturers that lifesaving drugs are produced by one or, at most, two companies worldwide, often at unsustainably, artificially low prices. There is a broad consensus that the root cause of drug shortages is a profound market failure caused by economic forces unique to the drug market. Middlemen such as Pharmaceutical Benefit Managers, PBMs, or group purchasing organizations, GPOs, do not care to look for ways to mitigate shortages. By one count, for every $100 spent on a generic prescription drug, $44 goes not to the manufacturer, not to the producer, but to a middleman. The three largest Pharmaceutical Benefit Managers control around 80 percent of the commercial drug sales. The 4 largest group purchasing organizations control 90 percent of the medical supply market and have massive market power. They could help end drug shortages by prioritizing generic drugs' availability and quality. Instead, they use their market power to force a race-to-the-bottom pricing without consideration for quality or availability. Their contracts with generic drug manufacturers consist of a take-it- or-leave-it approach, leaving the generic manufacturer with the option of either complying or losing access to the market. Many of them choose to lose that access and just go out of business. Over the past 10 years, the United States has seen dozens of generic drug manufacturing facilities close, and this shortage problem isn't limited to just closings. The typical generic drug has just two manufacturing facilities. We currently do not fully utilize the factories that we have. As Professor Sardella notes, we only use about half of our current generic manufacturing capabilities. We now have fewer manufacturing facilities both in the U.S. and globally, and our supply chain has proven to be fragile and vulnerable to disruption. Forty percent of generic drugs are made at a single facility, thus even a temporary shutdown of a single facility triggers a shortage. We are also far too dependent on foreign countries for generic drugs and active pharmaceutical ingredients, or API, especially China and India. Our dependance on China represents a serious national security risk. China's new interpretation of its national security law may actually make FDA's already anemic inspection program in that country a crime. As we are holding this hearing, FDA Commissioner Califf is appearing before our Health Subcommittee. All too often his agency has made drug shortages worse and left us more vulnerable. The FDA's response to shortages is to allow for foreign-made generics and API to come unfettered to the U.S. market. The FDA claims to be focused on collecting information, but it does not effectively use the information that it already has. We need an FDA that prioritizes applications from U.S. manufacturers and gives companies the flexibility to address shortages with resources based here. Solving drug shortages is going to require an all-of-the-above approach. Purchasers of generic drugs must incentivize quality and reliability in generic drugs, and we must always keep in mind the human toll of drug shortages. I look forward to hearing from our witnesses today, who are working in innovative ways to help solve drug shortages. I thank you all for being here, and I yield back. [The prepared statement of Mr. Griffith follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Griffith. I now recognize the gentlelady from Florida, Ms. Castor, ranking member of the subcommittee, for her 5- minute opening statement. OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA Ms. Castor. Well, thank you, Mr. Chairman, and thank you for calling this critical hearing on the root causes of drug shortages. These drug shortages are becoming more prevalent due to a warped marketplace. And as a witness, Professor Laura Bray, in her testimony stated, no patient should have to hear the words, ``We do not have medicine to treat you.'' Drug shortages in America are at a 5-year high. In 2022 we experienced a 30 percent jump in the number of drugs in shortage. FDA has documented 136 drugs on its shortage list, and healthcare providers suspect the actual number is far higher. These shortages can last years, and some critical drugs have been in shortage for over a decade. The impacts of these shortages on our neighbors receiving cancer care, children and their caregivers, are incredibly upsetting because when drugs are in short supply lifesaving care can be delayed, can be canceled, patients may be placed on medication that is less effective or more expensive. The cascading impacts of not receiving appropriate medicine can impair a person's ability to live a full life, to attend school, to work. Plus, it can lead to increased costs of care and more serious health complications like adverse drug reactions, increased hospitalizations, or even death. Children and their providers can be hit particularly hard by drug shortages. Children's hospitals often frantically respond to these shortages by scrambling for necessary and appropriate drugs. They have to devote additional staff time and resources to finding appropriate replacement drugs and determine the appropriate dosage for the replacement drug. Is it safe for children? It takes children's hospitals 50 percent longer to address shortages than other hospitals because of the time needed to compound replacement products into pediatric dosage forms. And it is so costly. One drug in shortage alone can cost a children's hospital north of $50,000 in labor and substitute products. So we have got to get ahead of these shortages before they happen so that our neighbors and providers are not blindsided and left scrambling to find workarounds. This past winter's triple epidemic of the flu, RSV, and COVID-19 were exceedingly difficult because shortages of basic medicine like Tylenol and ibuprofen ultimately got so severe that retailers began imposing purchase limits at the counter, sending parents searching multiple locations for medication to take care of their families. FDA took the action it could within its limited authority to ensure that more products were available for consumers, but the current haphazard approach of addressing crisis episode by episode is not working to give American families the certainty and the quality of care they need and deserve. So together we need to require greater transparency from manufacturers about where they source raw materials for drugs. We know that 72 percent of manufacturers supplying the U.S. market with active pharmaceutical ingredients, or API, are overseas, mostly in India and China, and the percentage of APIs manufactured in those countries by volume may be higher. I sit on the Select Committee on the Strategic Competition between the U.S. and the Chinese Communist Party, and API manufacturing is another example how overreliance on raw materials from China creates real-life risks to the well-being of Americans. Greater transparency will help us better understand where we need to shore up the domestic production and invest in new technologies. But the need to address shortages doesn't end with manufacturers. We need to make sure that the anticonsumer behavior by intermediaries like PBMs and GPOs does not create affordability barriers for patients that magnify the effects of drug shortages for families in need. And we have a model, Mr. Chairman, for action, for bipartisan action. When faced with a semiconductor shortage, Congress acted to adopt the CHIPS and Science Act and invest in Americans and our supply chains. Drug shortages will also require a coordinated approach across government but with manufacturers, providers, and payers to create domestic production, to shore up supply chains, and revitalize scientific research that hopefully will strengthen our economy and our healthcare system. I hope that our witnesses today can help us better understand the reasons why shortages occur and persist and how better and smarter tools would improve insight into the supply chain to better guide strategies to strengthen it. By better understanding the root causes of these shortages, Congress and our public health institutions can enact policies to address them. I am really looking forward to our witnesses today and covering this topic. So thank you all for being here. [The prepared statement of Ms. Castor follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Ms. Castor. And I yield back my time. Mr. Griffith. I thank the gentlelady for yielding back and now recognize the chairwoman of the full committee, Mrs. McMorris Rodgers, for her 5 minutes of opening statement. OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON Mrs. Rodgers. Good morning. Our goal today is to examine the complex challenges and root causes that lead to drug shortages. Just last November, in September--in Spokane parents were shocked that Amoxicillin, a common antibiotic, wasn't readily available at pharmacies. Parents had to contact multiple pharmacies and talk to the doctor to get alternatives, which is no small effort when your child is sick. Our committee has exposed the harmful consequences of consolidation, Federal programs, and malincentives that distort the market and make it more difficult for patients to get lower-cost medication. Sometimes it is because these medications are not on pharmacy or hospital shelves or because they are not covered by insurance. These market distortions hinder the adoption of quality generic drugs and weaken the drug supply chain. The FDA has not been an effective partner in combating drug shortages. Even after Congress provided FDA new authority in 2020 to get more information regarding where American prescription drugs are made, we still do not have good data on where either finished medications or active pharmaceutical ingredients, or APIs, are sourced. FDA last testified that around 80 percent of API facilities and 60 percent of finished dosage facilities are overseas, including India and adversarial countries like China. These are countries who limit our foreign drug inspection program's ability to operate adequately. It is an enormous problem if we cannot properly inspect the quality of the ingredients in common drugs Americans rely on. This situation not only raises concerns over drug quality, but it also poses a significant threat to national security. If adversarial countries were to cut off the supply of necessary APIs to manufacturers, American patients' lives could hang in the balance. Further, the COVID-19 pandemic taught us that we cannot rely on the Chinese Communist Party, which blocked the export of PPE and other critical supplies, lied about positive case numbers, and has refused to cooperate into any meaningful investigation into the origins of COVID-19. As we strive to strengthen our supply chain, we must encourage American innovation, increase domestic manufacturing capabilities, and promote the adoption of quality generic drugs. And we need a system that acknowledges and rewards such innovation. In 2019 HHS programs accounted for 40 percent--41 percent of all prescription drug spending. Yet those programs may have unintended consequences leading to unsustainably low prices or incentivizing middlemen to get the best deal at the expense of a secure supply chain. We should look at all Federal programs this committee oversees to help create a more secure and reliable drug supply chain for our Nation. We have gathered a diverse group of witnesses with expertise into the pharmaceutical drug supply chain to help us start to dig into these complex programs and challenges and what potential solutions there are, whether in American manufacturing or in trying to innovate around middlemen in the system. We will also hear from Laura Bray on why this work to stop shortages is so important. Laura has heard many times what no parent wants to hear, that there is a shortage of medicine needed to treat her doctor's--or her daughter's cancer. As I close, I want to note that I am encouraged by the bipartisan approach to this hearing. This is a critical issue that transcends political party lines, and I am confident that by working together we can help ensure more people like Laura's daughter get the lifesaving care and medicines that they need when they need it. Thank you. [The prepared statement of Mrs. Rodgers follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Griffith. I thank the gentlelady for yielding back. I now recognize the ranking member of the full committee, Mr. Pallone, for his 5-minute opening statement. OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY Mr. Pallone. Thank you, Mr. Chairman. Today we are examining the root causes of drug shortages, which negatively impact the health and well-being of so many Americans. Drug shortages are not a new issue, but unfortunately, they are currently at a five-year high. Shortages can last anywhere from a year to over a decade, with 15 critical drugs in shortage for over 10 years. This past year alone, we have seen harmful disruptions in the availability of children's pain medication and medication to create--or to treat conditions like ADHD. And these shortages can result in delayed care, ineffective treatment, increased hospitalizations, and even death. So we need to do more to prevent these drug shortages, including building a robust and resilient drug supply chain. This is not only critical to the health and well-being of Americans, but also to our national security. However, we cannot effectively tackle the challenges associated with drug shortages without more information about the current supply chain. Key gaps remain in our understanding of how drugs are manufactured and brought to market. The Administration for Strategic Preparedness and Response has shared that there can be up to 20 key materials per pharmaceutical. However, our public health agencies currently do not know which materials are used in the production of each drug and in what quantity. We also do not know the quantity of active pharmaceutical ingredients used in drugs for the U.S. market that is manufactured overseas. And while we know that 72 percent of active pharmaceutical ingredient manufacturers serving the U.S. market are overseas, we do not know the actual volume of the ingredients that they manufacture, and that number is likely much higher than the 72 percent. So FDA has some limited tools to examine the supply chain. Recently, as part of the CARES Act, Congress took bipartisan action to start addressing drug supply chain information gaps. The law included a requirement that manufacturers develop risk management plans and annually report to FDA on the amount of each drug they make available for commercial distribution. This is a step in the right direction, providing us more information than we had before. And while it has been useful, it is not enough to fully address drug shortages caused by supply chain issues. FDA has repeatedly told us that, with its limited tools, it is simply not capable of using its existing authorities to directly prevent or mitigate a shortage. For example, FDA's current reporting requirements don't allow the agency to determine which suppliers of active pharmaceutical ingredients manufacturers rely on. This makes it difficult to predict how a disruption with one supplier would affect a manufacturer's ability to produce their drugs. FDA's tools are even more limited when it comes to forecasting and anticipating changes in demand. We have seen how sudden spikes in demand for certain drugs can cause a shortage, most recently in the market for Adderall and children's pain medication. However, manufacturers are not required to report those demand surges to FDA, which means FDA may lack the information it needs to foresee a shortage. Without that information, FDA can't take the necessary action to identify new manufacturers, expedite additional inspections, or review new products that can fill gaps. So giving FDA these tools will allow the agency to understand why these shortages occur so that we can take action to predict and address them. I would like to hear from our witnesses how greater visibility into the supply chain will help alleviate challenges that drive disruptions in drug availability. And most importantly, I look forward to discussing how more reliable access to important drugs would improve the lives of patients and their families. So I am pleased the subcommittee is also hearing from experts about what we can do to increase pharmaceutical manufacturing efficiency for greater domestic production. I especially want to thank Professor Muzzio from Rutgers University in my congressional district for being here today. Dr. Muzzio directs Rutgers' Center for Structured Organic Particulate Systems, and he is a national leader in the development of continuous manufacturing methods and technologies, which will help us improve drug manufacturing efficiency and quality. Dr. Muzzio was also instrumental in supporting passage of my legislation, the National Centers of Excellence in Advanced and Continuous Pharmaceutical Manufacturing Act, which President Biden signed into law last year. And that law empowers the FDA to partner with universities around the country to further develop continuous manufacturing technology, which will, hopefully, strengthen domestic pharmaceutical manufacturing and help prevent future drug supply chain shortages. So thank you for being here today, Dr. Muzzio. Thank you to all the witnesses. [The prepared statement of Mr. Pallone follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Pallone. And with that, Mr. Chairman, I yield back. Mr. Griffith. I thank the gentleman for yielding back. That concludes the Members' opening statements. I remind all Members that, pursuant to committee rules, the Members' opening statements will be made a part of the record. We want to thank all of our witnesses for being here today and take the time to testify before our subcommittee. Each witness will have the opportunity to give an opening statement, followed by a round of questions from Members. Our witnesses today are Dr. Alex Oshmyansky, CEO/founder of the Mark Cuban Cost Plus Drug Company; Anthony Sardella, chair, API Innovation Center; Laura Bray, founder, Angels for Change; and Fernando Muzzio, distinguished professor of chemical and biochemical engineering at Rutgers University, which I learned is in Mr. Pallone's district. We do appreciate you all being here today, and we look forward to hearing from you on this important issue. And thank you so much for taking your time. As you know, and as you are aware, this committee is holding an oversight hearing, and when doing so we have the practice of taking our testimony under oath. Do any of you have an objection to testifying under oath? Seeing that no one has objected, we will proceed. Further, you are advised that you are entitled by counsel-- you are entitled to have counsel present with you, pursuant to House rules. Do any of you wish to have your counsel present with you today? All right, seeing that none have desired to have their counsel with them, would you all rise and raise your right hand, please? [Witnesses sworn.] Mr. Griffith. Recognizing that all responded in the affirmative--and you all can be seated, thank you--recognizing that all have responded in the affirmative, I would say that you are now sworn in and under oath, subject to the penalties set forth in title 18, section 1001 of the United States Code. All right. We got through all the legal mumbo jumbo that we needed to get through. We will now recognize Alex Oshmyansky for his 5-minute opening statement. Dr. Oshmyansky. Alex is fine. Mr. Griffith. All right. Dr. Oshmyansky. First, thank you so much to the subcommittee. Mr. Griffith. Yes, we need you to turn on the mike and---- Dr. Oshmyansky. Hear me? Mr. Griffith. Yes, maybe pull it up a little bit so you are loud enough. We could hear you, but then nobody at home---- Dr. Oshmyansky. Oh, but no one else. Got you. Mr. Griffith [continuing]. Or on C-SPAN can hear you. Dr. Oshmyansky. OK. STATEMENTS OF ALEX OSHMYANSKY, M.D., Ph.D., CHIEF EXECUTIVE OFFICER/FOUNDER, MARK CUBAN COST PLUS DRUG COMPANY; ANTHONY SARDELLA, CHAIR, API INNOVATION CENTER, AND ADJUNCT PROFESSOR AND SENIOR RESEARCH ADVISOR, CENTER FOR ANALYTICS AND BUSINESS INSIGHTS, WASHINGTON UNIVERSITY IN ST. LOUIS; LAURA BRAY, FOUNDER AND CHIEF CHANGE MAKER, ANGELS FOR CHANGE; AND FERNANDO J. MUZZIO, Ph.D., DISTINGUISHED PROFESSOR OF CHEMICAL AND BIOCHEMICAL ENGINEERING AND DIRECTOR, NSF ENGINEERING RESEARCH CENTER ON STRUCTURED ORGANIC PARTICULATE SYSTEMS, RUTGERS UNIVERSITY STATEMENT OF ALEX OSHMYANSKY, M.D., Ph.D. Dr. Oshmyansky. Well, first off, thank you so much to the committee and the subcommittee for inviting me to speak today. It's an honor and a privilege. As I speak here today, there are approximately 200 drug products listed as in shortage on the U.S. FDA shortage database. Many of these medicines are critical lifesaving medications such as albuterol, the treatment for an acute asthma attack. Several chemotherapeutic drugs for cancer are in shortage. The rates of morbidity and mortality for pediatric cancers in the U.S. have gone up in recent years, as the medications necessary to treat them are increasingly unavailable. The majority of these medications are relatively simple to make and have been available for decades. How is it that they are unavailable in the United States, the wealthiest country in the history of human civilization? The root underlying causes are complex and multifactorial. However, Mark Cuban Cost Plus Drug Company is working diligently in the background to try to address drug shortages through a combination of innovative technologies and business model innovation. We have constructed an advanced pharmaceutical manufacturing plant in Dallas, Texas. The facility utilizes robotic fill finish technology optimized by AI machine vision systems that are designed to incorporate single-use disposable components. The robotic manufacturing systems installed at our manufacturing facility can transition between making batches of different types of medication within hours, rather than months, with full FDA cGMP compliance. This allows us to very rapidly pivot from making one drug type to another in order to address pharmaceutical drug shortages as they arrive. In principle, we can have a new manufacturing line up in 4 hours. In combination with a regulatory strategy as a 503(b) compounding site, we are very rapidly able to pivot from making a shortage drug product with full compliance with FDA regulations. In addition, within the next few months, we will be launching Mark Cuban Cost Plus wholesale, which will enable independent pharmacies, clinics, and hospitals to get access not just to our products, but products from any pharmaceutical manufacturer at a true, transparent price. This will enable us to ensure distribution of products outside of the conventional distribution oligopolies. Our pilot manufacturing facility is currently completing its validation process and is expected to begin commercial sales later this year. It has an estimated capacity of between 1 and 2 million sterile doses of medication a year, either prefilled vials or syringes. Initial products will include pediatric chemotherapy agents, lidocaine, and essential ICU medications. However, we will be nowhere near meeting the national demand for these products. Mark Cuban Cost Plus has also drafted preliminary designs for a much larger facility, based on similar technologies that would hopefully be able to alleviate the majority of acute drug shortage issues in the United States. We believe such a facility would cost approximately $300 million to construct, based on current estimates. We believe that through a private- public partnership or otherwise, through government investment, we will be able to build the infrastructure necessary to ensure pharmaceutical drug shortages no longer affect the health of Americans. Thank you so much. [The prepared statement of Dr. Oshmyansky follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Griffith. Thank you. And we now recognize Mr. Sardella for his 5-minute opening statement. STATEMENT OF ANTHONY SARDELLA Mr. Sardella. Good morning. I'd like to thank Chairman Griffith, Ranking Member Castor, and the distinguished members of the committee for holding this meeting. And it's a privilege to speak with you. My name is Tony Anthony Sardella. I'm an adjunct professor at the Olin Business School at Washington University. I'm also the university's senior analyst for their Center for Analytics and Business Insights, and also chair a new nonprofit that is dedicated to the reshoring of API to the United States, the API Innovation Center. The economic viability of the generic pharmaceutical industry, which represents over 90 percent of the medications prescribed in the United States, is diminishing and contributing to supply disruptions, drug shortages, with significant negative implications for U.S. health security. Economic conditions indicate that this environment will only worsen, further jeopardizing the quality and the stability of our Nation's pharmaceutical supply chain. COVID-19 revealed the country's overreliance on foreign production of essential drugs. My research revealed that the United States has no domestic-based supply for approximately 83 percent of the top 100 generic medicines prescribed in America. These are highly prescribed medicines such as cardiovascular, atorvastatin, and lisinopril that many patients leverage and rely on every single day. The principal driver to strengthen our health security and keep our Nation's drug supply chain secure is economics, not just logistics. We must address the economic instability of the generic pharmaceutical market. We must expand public and private partnerships and incentivize domestic drug manufacturing. Generic drugs are commodity products, and because they are substitutable, price becomes the dominant factor in any type of market competition. Since 2016, the generic industry has experienced price erosion greater than 50 percent. An average high-volume 30-count bottle of medicine is now less than $1.50, the equivalent of 5 cents per tablet. But there is a high cost to low prices. The implications are significant. Reduced earnings lead to cost cutting and reduced ability to invest in new product development, factory maintenance, and innovation. The economic pressures facing generic manufacturers are contributing to increased quality and compliance risks, as they are unable to expend capital to address FDA warning letters, evidenced by greater than 1 in 4 prescriptions in the U.S. are filled by a company that has received an FDA warning letter in the last 26 months. No single entity can solve this complex problem and challenge to strengthen our domestic manufacturing. It requires a coordinated approach between the public and private sector. It involves, first, the derisking of the adoption of advanced manufacturing technologies that will make the U.S. manufacturing globally competitive. Second, it involves leveraging existing available generic manufacturing infrastructure. In September last year I published a study that revealed that, of the 37 U.S. generic manufacturing sites surveyed in my research, they were producing at just half of their annual production capacity. And by repurposing the existing auto manufacturing base, 57 percent of the U.S. manufacturing sites could be operational in 1 year, and 86 within 2 years, which equates to 30 billion capsules and doses of essential and critical medicines within a 2-year period. Third, several market-based solutions exist to foster industry investment in domestic manufacturing and ensure a long-term, sustainable U.S.-based supply. The driver of price erosion for generics is the inability to differentiate on product quality, a dimension of market competition in virtually every other market. Quality price trade-offs can be addressed by creating transparent quality scores that enables competition on a dimension beyond only price while incentivizing manufacturers with strong quality. Leveraging the buying power of the Federal Government, which accounts for approximately 34 percent of total healthcare spending in the United States, with sourcing policies that favor and incentivize domestic manufacturing or manufacturers with strong compliance records--which is a practice already employed in Germany, Brazil, India, and China--is another important instrument to incentivize U.S.-based manufacturing. Improving provider reimbursements for U.S.-made generics and realigning preferred drug list formularies can also drive incentives. I'd like to thank the committee for your time and the opportunity to share my research, data, and perspective pertaining to the pharmaceutical supply chain and drug shortages. [The prepared statement of Mr. Sardella follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Griffith. Thank you for yielding back. I now recognize Ms. Bray for her 5-minute opening statement. STATEMENT OF LAURA BRAY Ms. Bray. Good morning. I'm Laura Bray, chief change maker at Angels for Change, a volunteer-supported organization on a mission to end drug shortages. I appreciate the opportunity to speak here today and represent the patient voice. Thank you for your leadership and bipartisan work to prevent and end drug shortages. Four years ago my husband Mike and I were sitting in a hospital room when our child, Abby, was diagnosed with leukemia. At that moment we became caretakers while our child began to fight for her life. We were told we were lucky that this leukemia, unlike many other pediatric cancers, has a cure: a miracle protocol, a cocktail of drugs given in certain timeframes but leading to very successful treatment. The doctors used these success numbers--above 90 percent-- to provide assurances but also to alert us that compliance was the single most effective thing, as her parents, we could do every day for her survival. With our trusted physicians, nurses, care team, and child life specialists, we became a team using every tool available to ensure our child's compliance of this cocktail. When a child doesn't want to take her meds anymore, when they can't take the pain of being poked and prodded again, when they lose their hair, when it's just too much, we all focus on the importance of the medicine for their survival. I was sitting in a hospital room with Abby when I first heard the words, ``We don't have the drug needed today. It's on shortage.'' My Abby, our fierce middle child, caught it right away, and said, ``I thought I needed this. Does this mean I die?'' Before that moment, I didn't know our pharmaceutical supply chain was broken. I had the same questions she had. I told her the only thing I could: ``We're going to try to find it.'' With no experience, using my background as a business professor, the help of friends and family and Google, we successfully found the medicine. But it didn't end there. Abby's protocol was impacted by a drug shortage again and then again--three lifesaving shortages in nine months, different drugs, different root causes. It wasn't enough that my 9-year- old had to consider her mortality because of cancer. She also had to consider it again because our supply chain was not making enough medicines of the drugs I told her would save her. This experience haunted me, and I began to ask questions about how common it was for patients to experience something like this. I was surprised by how easy it was to find the answers. Twenty years of research outlining this drug shortage crisis. There had been calls to actions. There had been hearings like this going back many, many years. If we had these answers, why did my child and our family have to go through this? It was such a cruel place to find ourselves. I knew no patient should have to go through a search again alone. So with my friends and family joined in the mission, we launched Angels for Change in 2019, becoming the only patient advocacy organization with a mission to end drug shortages in the United States. And almost immediately, patients began to call. Eventually, hospitals began to call too. I connected with members of the supply team, the supply chain. We learned from each other. I asked the members to become change makers with me. The patients stuck in the drug shortage, they are our purpose. But it was the people that make up the supply chain that stepped up and took on collaborative, patient-focused work with us that gave me hope. To date, we have helped patients and hospitals find hundreds of courses of medicine stuck in this broken supply chain during three dozen different drug shortages. Proactively, we foster stakeholder collaboration to build resiliency, convening members at our summit and helping to launch the End Drug Shortages Alliance, which now has 162 supply chain members ready to do this work. These collaborative spaces have led to innovative pilot programs like our Project Protect. Through prediction, a small manufacturing incentive grant of $100,000, we created gap supply of 2 essential medicines. Those medicines went short, and it was accessed 650,000 times last year for patients in need. This type of multistakeholder resiliency work must be supported and scaled. Building a resilient supply chain will take more transparency, redundancy, and connectivity. Our pathway forward is built on six principles. I've outlined them in our written testimony. Every stakeholder will need to do their part, but together we can ensure no child will ask their parent, ``Will I die if I don't get my medicine?'' Thank you. [The prepared statement of Ms. Bray follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Griffith. Wow, thank you. Dr. Muzzio, your 5-minute opening statement. Thank you. Dr. Muzzio. Thank you. Can you hear me? STATEMENT OF FERNANDO J. MUZZIO, Ph.D. Dr. Muzzio. So, Chairwoman Rodgers, Chairman Griffith, Ranking Member Pallone, Ranking Member Castor, members of the subcommittee, my name is Fernando Muzzio. I'm a distinguished professor of chemical and biochemical engineering at Rutgers University, and I'm the director of CSOPS, which is an NSF engineering research center focused on developing pharmaceutical products and processes. I greatly appreciate the opportunity to appear in this hearing to talk about the root causes of drug shortages, and also share some views on how advanced manufacturing could help mitigate this problem. I want to make two facts, and I appreciate that my testimony may be a little different than the other witnesses'. The first fact is that we know that the proximate cause of more than 60 percent of shortages is quality issues, whether those quality issues are caused by economic reasons or something else, but quality issues cause the majority of the shortages. The second fact is that advanced manufacturing methods can improve quality and quality control and therefore may help reduce the incidence of some of these issues. Let me explain why. In the traditional batch manufacturing approach, a manufacturer takes a large amount of ingredients, say 500 kilograms, puts that into a process unit, implements the process, then the material moves to another piece of equipment, and another piece of equipment, and after several steps over many hours to make a large number of product units, let's say a million tablets or a million vials. And then they take 10 to 30 samples from that million tablet batch, send them to the lab, get results, assume that those results are representative of the whole batch, and make the decision to release the product based on those results. The process is time-dependent. Things are changing as you are going through this particular traditional process, and that can affect the quality of the product over time. And this provides also a very limited opportunity to observe product quality. In contrast, continuous manufacturing is capable of much better quality control. First of all, the ingredients come into the process at a fixed ratio. They move gradually but continuously from process unit to process unit, but we keep the process very close to steady conditions so that every portion of material experiences the same process. There is only a small amount of materials in the process at any time, but for every small portion of material, we monitor quality in real time. And this allows us to diagnose quality issues in real time, exclude faulty material from what's going to be dispensed to patients, and minimize quality failures. Where are we in implementing this? Well, we started 17 years ago in our center. There were other efforts at the same time. We established a full ecosystem of industry, government, and academia, attracted over $120 million in funding for this work, and we built and demonstrated the first continuous manufacturing line that operated in a full state of control, and then supported Johnson & Johnson and other companies in commercially implementing these technologies. In more recent developments--and I want to give credit to the FDA for this--the FDA emerging technology teams has accepted 42 proposals for continuous manufacturing review. They have actually, as of March, approved 13 continuous manufacturing applications. Direct compression, which is the most common type of continuous manufacturing, has now graduated as an emerging technology. They led the approval by the International Conference on Harmonization of what is called Q13, the global guidance in continuous manufacturing, and we have collectively built widespread consensus, including the U.S. Government through multiple administrations, that advanced and continuous manufacturing could be part of the solution. Now, this also produces an important opportunity for our country. Given the advantages of continuous manufacturing, we expect that there will be hundreds of billions of dollars manufactured by continuous manufacturing. We can agree that we would like that manufacturing to happen in the U.S. Now this is feasible, and it can be done in a sustainable manner because continuous manufacturing requires less unskilled labor, which, because that kind of labor is cheaper in other countries, has been one of the reasons why manufacturing moved to those other countries. However, it's important to recognize that implementation of these technologies requires knowledge, requires training, and requires access to infrastructure. We expect other developments in the next few years. For example, we expect that we will be able to implement what we would call advanced batch manufacturing, where we will use many of the techniques developed for continuous manufacturing, now adapted for batch, to be able to inspect 100 percent of the product stream so that every single product unit is analyzed in real time, and faulty product is sent to scrap. We also expect that we're going to expand continuous manufacturing to generics, over-the-counter products, manufacture of active pharmaceutical ingredients and intermediates, as well as injectables, including biologics, and that we will use similar methods to create other advanced technologies such as distributed manufacturing. All of this is possible, but to achieve this we really need centers of excellence that will work in a sustained manner in reenergizing the partnership between government, regulators, and academia so that we can create places where all of the workforce can be trained, the know-how is available, and we can support industry, continue to move forward. As in Public Law 117-328, these centers would also make possible to implement a national strategy in workforce development that is needed to facilitate this. So in concluding, I would request please that my full written testimony be included in the record, and I will be happy to answer any questions that I may. Thank you. [The prepared statement of Dr. Muzzio follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Griffith. Thank you very much for your testimony. Thank you to all the witnesses. At this point, we will begin the questioning process, and I will begin with 5 minutes of questioning. Dr. Sardella, can you repeat for us--I think this was in your testimony--what percentage of the generic drugs are manufactured in facilities that have received an FDA warning letter? Yes, turn your mike on. Mr. Sardella. One out of four prescriptions in the United States over the last 26 months. Mr. Griffith. So roughly 25 percent. Mr. Sardella. Correct. Mr. Griffith. In over how many months? Mr. Sardella. Twenty-six, the last 26 months. Mr. Griffith. And some of those FDA warning letters stay open for years, do they not? Mr. Sardella. That is correct. And the industry is less able, due to low margins, to be able to address them. And so their options are shutter, not comply, or continue to operate. And---- Mr. Griffith. Let's talk about noncompliance, because while some of these warning letters may be on things that folks back home might think are trivial and so forth, but there was an open warning letter on the New England Compounding Company at the time that they produced a sterile injection which cost--I believe it was 38, 40 lives, several of whom were in my area. My district was impacted by that outbreak. And that was a warning letter because people were trying to cut costs. And so I want folks back home--and I think you would agree with me that when you have 25 percent of your generic medicines being manufactured under a warning letter, most of it is not going to be a big deal, but some of it might be a big deal, and this is a concern that we need to take, as a nation. Would you agree? Mr. Sardella. I agree, Chairman. In that spectrum there are very much warning letters that don't imply any type of safety issue, but there's also those that do, and those are significant and have dire consequences. Mr. Griffith. Yes, and that is my concern here, is that, you know, in our race to save a few pennies here and there, we are sacrificing both availability that Ms. Bray talked about and quality. All right, back to my real questions, the ones that I had prepared in advance. In your white paper, Dr. Sardella, you wrote that it is unrealistic to fully move our API sourcing and manufacturing onshore. Instead, you propose the U.S. API industry should achieve a minimum level of self-sustainability. Explain that for me. Mr. Sardella. We've done some research that estimates the cost to bringing the top 40 prescribed medicines and the top 40 essential medicines. We feel this would begin to stabilize the U.S. supply chain, reshoring those productions to the United States. Our estimates are that that would cost less than $2 billion, which is less than 1 percent of our total spend on pharmaceuticals for those generics, and allow us to have greater certainty and control of our drugs, knowing that the APIs are the clinical part of the drug that allows it to be a great therapeutic. So---- Mr. Griffith. And would you agree with me that it is likely, if we were to do something like that, that then that would also encourage other folks to maybe make some APIs that weren't in the top 40? Mr. Sardella. That's exactly correct. If we can think of them--we use at the API Innovation Center the construct of critical and essential. If one--critical being ones that are critical to our national security. Those cardiovasculars that we take, patients take every single day, they're not in shortage, but they're core to our national security. The ability to incentivize production of those drugs here in the United States will allow for capability to produce the essentials in the United States, and therefore solving two of the issues: national security and our drug shortage for our essential medicines. Mr. Griffith. All right. You also talked about supply chain challenges and how that is exacerbated by inflexible regulations. Could you expand on that? And are there lessons we can learn from our experience in moving up the speed on COVID-19 that we should look to extend? Mr. Sardella. Yes. Well, I think on COVID-19 there are some efforts to allow for greater inspections of different facilities to allow for better quality to be produced. I think a couple of the key things that we've learned is any type of expedited approvals or processing allow for faster time to market, allowing companies to have a quicker return on their investment on their capital. Mr. Griffith. I have got one more question for you--and I had some for the others, so I apologize, but I am running out of time. Group purchasing organizations are considered the price setters for generic medications in our pharmacy supply chain, and they seem to create marketing efficiencies. What role have they played in creating current--the current environment where we have shortages, and what accountability is there for GPOs when shortages occur? Mr. Sardella. The GPOs are contributing significantly to the aggregation of profits to them versus the manufacturers. They're putting the manufacturers out of business, first. The second--I would caution--as we develop policy to address GPOs, recognize that any redistribution of those profits would go to foreign manufacturers, not U.S., because that's where they're getting their supply. If the goal is to create a sustainable, strong economic, U.S.-based supply, that--those incentives have to be established before the-- addressing the GPOs concentration of profits. Mr. Griffith. All right. I appreciate it. My time is up, and so I will now recognize the ranking member of the subcommittee, Ms. Castor, for her 5 minutes of questioning. Ms. Castor. Well, thank you, Mr. Chairman. Professor Bray, I am so proud that a working mother from the Tampa Bay area of three children who grappled with a pediatric cancer diagnosis for her young daughter used her business acumen to start a nonprofit to help solve the drug supply shortage. It's a remarkable story, and your voice is very important in this discussion. So you explained your daughter went to one of the premier children's hospitals in America, St. Joseph's Children's Hospital in Tampa, and yet they are grappling constantly with shortages of lifesaving drugs. What did you learn as you dug into it as to the root causes of the drug shortages, and why is it impacting children especially? Ms. Bray. Thank you. Thank you for addressing me, and thank you for having this meeting today. So first, pediatrics are uniquely vulnerable to drug shortage because we're a smaller patient population. And when you have a broken marketplace, the smaller samples will always fall out. And then pediatric cancer is even a smaller niche of that small, broken place. And what we found is that, actually, pediatric cancer is 90 percent more likely to go into shortage, their drugs, and they stay short 30 percent longer. But it's-- compounds because their treatment is multilayered and relies on many different drugs and very specific protocols. So one or two drugs, in short, can have drastic problems to their--to a pediatric cancer diagnosis. What we have found, both, you know, initially, when we navigated the supply chain for my own child, but then as chief change maker at Angels for Change, we navigate this crisis for patients and hospitals all the time. I like to say, you know, the four P's, we're stuck here at the bottom: That's the physician, the pharmacist, the purchaser, and the patient. We're the consumer of these goods, and we do not have a lot of power during a time of disruption. And so together we can navigate this crisis a little bit better and be a unified voice. And so one thing we have found is that collaboration during a time of drug shortage would really help. This marketplace is deeply fragmented. Everyone, I think, talked about transparency today. We do need transparency. There's gaps in knowledge. And until we have a clear picture, we can't address the right solutions for the right problems. And those are the redundant solutions that are--my other wonderful panelists have talked about. No one solution is going to fix this. It will be multilayered and redundant. But to do that we have to be connected as an entire supply chain. All members must be at the table. There is a space for all of us, especially the patient. Ms. Castor. So you did this. You mentioned in your testimony you actually initiated something called Project Protect, where you just dived in and tried to actually create a certain supply chain for certain drugs and shortages. How did that work? Why did--why was it left to you, without much help from government agencies that should be helping? Ms. Bray. Well, I think there's a role for scalability of innovative programs that have been working already, for sure. So Project Protect, it was--there's a lot of discussion about whether prediction can ever fix this, and I believe it can. Any healthy supply chain--we're in the world of blockchain and AI, that's the stuff I talk about in my business classes and, you know, why wasn't this supply chain, you know, in the new millennia of supply chain management? And so I was like, we've got to start with prediction. So we got to--we got to prove that. So we used prediction and said, what drugs do we think might go short? We picked two. There's a lot of work underway on prediction. I encourage that work to be scaled. And we then went to a small onshore manufacturer, a 503(b), like Alex talked about, and said, ``What would it cost you and how much time would it take to ensure this for the American people if it did go short?'' They surprised me by saying about 60 days and $100,000. I said, ``Each?'' And they said no, for both. So I wrote a grant and signed an agreement with them and told them be ready to supply if this--if it goes short. It did go short, and---- Ms. Castor. And these drugs were? Ms. Bray. Pardon? Ms. Castor. Name the drugs. Ms. Bray. It was potassium chloride and sodium chloride, and it was accessed 650,000 times last year during a time of shortage. So it didn't stop the disruption. What it was was gap supply, efficient, flexible gap supply that was incentivized by the marketplace and a private--public-private partnership. I think this is a model that can be duplicated over and over and over again to protect the American people during a time of disruption. And then we do need to do all the work to help eliminate some of this disruption that the rest of my colleagues have talked about. Ms. Castor. Thank you, Professor. Ms. Bray. Thank you. Mr. Griffith. The gentlelady yields back. I now recognize the chairwoman of the full committee, Mrs. McMorris Rodgers of Washington, for her 5 minutes of questioning. Mrs. Rodgers. Thank you, Mr. Chairman. I wanted to start with Dr. Alex. In your written testimony you describe how a PBM will negotiate rebates and then keep a percentage of the rebate negotiated. How do these negotiated rebates distort the drug market? And specifically, can you explain how rebates negotiated by PBMs contribute to high drug prices, shortages of essential medicines, or the race-to-the-bottom pricing that undermines our drug supply chain, and the impact that this has on patients, providers, and pharmacies? Dr. Oshmyansky. Sure thing. So, you know, the PBMs, I kind of think of them in my head as payment processors, sort of similar to Visa or MasterCard. And many years ago they realized, ``Hey, we're processing all the payments, we can negotiate for drug prices on behalf of the people we're processing payments for.'' And the way they decided to go about it was to negotiate a rebate. They wouldn't charge you for this service of negotiation, they would just take a cut of the rebate back off of a list price. And it soon became very readily apparent that the biggest way to make this cut of the rebate as big as possible was to make the rebate as big as possible. So the standard rebate on a generic drug product now is between 85 and 88 percent. And where else in life do you get an 88 percent discount? Like, something's a little off. So--and they capture, you know, let's say 10 percent for the sake of talking, percent of that rebate. That serves to, you know, increase the cost of the actual drug by 60 to 100 percent, with none of that actually going to the manufacturer itself. One of the big misconceptions we have at Cost Plus is that we're able to somehow better negotiate the price of these medications, or we get a better price. We don't. We actually pay more. Manufacturers like working with us because we're a small entity as opposed to one of these big purchasing conglomerates. So they--we actually pay them marginally more than the competition, and yet we're able to still save patients significant amounts of money. And that 88 percent discount, let's say, that can be just an average. We've seen much more extreme discounts--or rebates, rather. Imatinib, the chemotherapy agent, has a list average wholesale price, the generic, of $10,000 for a month's supply. Meanwhile, we sell it at our website with--and again, paying more than other suppliers--for $30, about $30, for that same month supply. And the actual adjudicated cost, so the actual price patients pay, we see at the counter at, like, CVS or Walgreens is 2,000, $3,000 for a month supply. And that's not going to the manufacturer. So it's just extreme distortions in the way drugs are paid for. Mrs. Rodgers. Thank you. Thank you for that. And I don't think that there is a single, all-encompassing solution for shortage problems. Would you speak to how transparency, additional transparency, might help? Dr. Oshmyansky. Oh, sure. You know, I think if patients, providers, payers just know what these medications actually cost and what percentage are going to intermediaries in the supply chain, you know, I think if patients learned that most of the money they were spending on insulin went not to the insulin manufacturer but to the intermediaries in the supply chain, you know, I think that would incentivize, you know, a change in the way the supply chains work to have, you know, as my colleagues have been saying, more of the revenue going to the people that do the actual hard work of the manufacturing itself. And forgive me, I didn't answer your last question entirely as to, you know, what are the dynamics that lead to only a few manufacturers getting contracts. Because of the oligopolies at the levels of the purchasers, the sourcing programs, rebate aggregators, GPOs, all of these subsidiary entities of the big purchasing conglomerates, only a couple companies can win that battle for the contract. And say there's 12 manufacturers. If only two or three win the contracts, you know, the others have no incentive to keep their supply chains open. Mrs. Rodgers. Thank you. Dr. Oshmyansky. So if we just create an open marketplace where, you know, the manufacturers themselves can compete on quality---- Mrs. Rodgers. Thank you. I am going to--I am running out of time here. I had--and I wanted Dr. Sardella--I am going to have to ask others--to address you. I wanted to give--Ms. Bray, you started talking about the potential of public-private partnerships, and I just wanted to give you my remaining time to talk--just hear some more about the potential to help meet--solve this problem. Ms. Bray. Thank you. And I just realized I never mentioned Abby is doing great. She's thriving. She's 13 today, and entered survivorship this spring. Mrs. Rodgers. Oh, that is great to hear. Ms. Bray. So just--since I never mentioned that. You know, any healthy, you know, important supply chain relies on partnership, and every member will need to have a place at this table, especially when we talk about incentivizing the right motives. The FDA's 2019 ``Root Causes, Possible Solutions'' report stated in the executive summary, ``Enduring solutions will take multistakeholder efforts and rethinking business practices.'' That's basically all I've been doing since we founded. How do I collaborate with as many people as possible in the supply chain? It includes the FDA, it includes the supply chain members, it includes the manufacturers and the hospitals. How do we align our incentives to get as many patients the needed drugs that they deserve? And that's, you know, the one message I want to say: We need to be connected and collaborate, but then there needs to be tools of connectivity so we can scale. Mrs. Rodgers. Thank you. Ms. Bray. Thank you. Mrs. Rodgers. Thank you very much, thanks for being here. I yield back. Mr. Griffith. The gentlelady yields back. I now recognize the ranking member of the full committee, Mr. Pallone, for his 5 minutes of questions. Mr. Pallone. Thank you, Mr. Chairman. I am still concerned that FDA lacks the information it needs about how pharmaceutical products are produced and real-time data regarding changes in supply and demand for drugs and their key ingredients, so let me ask Dr. Muzzio: What gaps remain when it comes to our knowledge of the pharmaceutical supply chain, in your opinion? Dr. Muzzio. I'm sorry, I didn't hear you. Mr. Pallone. Let me get closer to the mike here. Dr. Muzzio, what gaps remain when it comes to our knowledge of the pharmaceutical supply chain? Dr. Muzzio. Well, there are many. In addition to the ones I have mentioned, I want to point out that there is an additional factor that I'm very concerned about, which is in reading all the government reports on this issue, you know, on the last couple of years, there is only barely a mention of the chemical building blocks that are needed to make the drug substances. So the discussion is, you know, who makes the finished product, or who makes the drug substance, but then it turns out that, to make the drug substance, you need to have access to pieces of that molecule. And there is very, very limited knowledge of where those pieces come from, except to say that, for many APIs made in India, which we consider a friendly nation, in many cases the building blocks also come from China. So we might have to go earlier upstream the supply chain to ensure that we are able to actually make things in friendly shores, including our shore. So I think that's a big gap in our understanding of how--you know, where shortages come from. There's been instances where key starting materials were found to be contaminated and that triggered a whole sequence of events, then bringing other problems as we go--as we went down the supply chain. So I think that those are important issues. I am aware of efforts at USB, for example, to create a substantial map of the entire supply chain. I don't think they are unique. There is another organization doing something similar. I don't recall their name right now. I think that's a very important effort that also needs to be supported and strengthened and, you know, completed. And we need tools that will allow us to update the model of the supply chain dynamically. One important thing is to realize that it's not a static object, that once you describe it, it remains like that forever. It changes all the time. So we need not only to inventory the pathways, we also need to create methods to update the model of the supply chain very rapidly every time the conditions change. Otherwise, we would be fighting last year's war, so to speak. Mr. Pallone. All right, thank you. So let me go to Professor Bray. Where have you seen FDA work most effectively in its response to drug shortages, and how could additional visibility into the supply chain strengthen that work? Ms. Bray. Thank you for asking. I believe the Office of Drug Shortage at CDER is doing a lot of great, patient-focused work, and it's actually led by people who were our healthcare providers. And I think they're doing great work, we work together often. They're open to communication and feedback, and I'm very appreciative for the work that they do during a time of crisis. Where we could get better is a lot of the approaches are reactive, and there's missing gaps of information, just like everybody has said. So I would like to do a mindset shift on drug shortages as a crisis, and that mindset shift is to change from a focus of mitigation to ending. And so, when you think about the fact that our current strategy for drug shortages is a word called ``mitigation,'' mitigate means what do we do with available supply? And when you ask that question, the answers and next questions are, ``Who gets it?'' and ``Who doesn't?'' And all you get is disparity and plays for mistrust and power. The question we need to be asking, it's a full dynamic shift, and it is, how do we end drug shortages? When we ask that question, it's how much supply do we need for the American people? How do we ensure that we have access to that supply, and how do we make sure that supply gets to the people when there's disruption? And you can see how quickly that mindset shift gets to very different solutions. One is potentially reactive that is repeated over and over again for 20 years, and one is proactive that can work to secure the supply chain for all patients and make a more resilient supply chain. Thank you. Mr. Pallone. Well, thank you both, and thank you, Mr. Chairman. Mr. Griffith. The gentleman yields back. I now recognizes the gentleman from South Carolina, Chair of our Energy Subcommittee, Mr. Duncan, for his 5 minutes of questioning. Mr. Duncan. Thank you, Mr. Chair. Dr. Sardella, your white paper does a great job in outlining the current state of U.S. API infrastructure and its potential effects on national security. Your paper discusses the vulnerabilities of U.S. pharmaceutical supply chain. In particular, you highlight our reliance on foreign sources for the active ingredients in our pharmaceutical drugs. Can you please share with the committee the potential risk or consequences that such a dependency poses to U.S. healthcare system? Mr. Sardella. Two real risks that we experienced during COVID. The overreliance on foreign manufacturers leave us vulnerable not just to demand shocks like COVID but also supply shocks due to geopolitical tensions. During COVID, India had to stop any export in order to ensure the safety of their own population, which--and, in fact, cut off supplies to the United States for critical medicines that we required. Second, the chief economist in Beijing--we don't have to think it might happen--intimated that our drug supply chain was, in fact, a lever to ensure that we cooperated as a country on geopolitical issues ranging from trade to Taiwan. So we've experienced the risks of being overreliant already, from a geopolitical perspective as well as from a supply to citizens. Mr. Duncan. It points to the need to onshore both pharmaceuticals, microchips, energy sources, because in a time of war or a pandemic like we saw, when the United States of America is reliant on sources for any of those things from overseas, then systems stop and the ability to provide the medication that our constituents need is important. So the need to onshore that is important. But when we talk about drug shortages, you have got to keep in mind that in many instances making generic drugs is simply not profitable. So let's shift to generic. In those situations, the manufacture does not have the resources or economic incentive to invest in the manufacturing of those products to keep them on the market, especially if it's a loss leader. So could you speak--with the passage of the Inflation Reduction Act, which is a misnomer, is it possible that brand products selected for negotiation have generics in development? And if a drug selected for negotiation makes it harder or less profitable for generics to come to market, could we see an increase in the shortages? Mr. Sardella. Well, first, in regards to the shortages from overreliance, the strategy should not be to just move the same type of manufacturing to the United States to produce them at economic low profitability or losses. It should be to leverage the advanced technologies, technologies that Fernando mentioned such as continuous flow, that allow for significant cost reductions. The API Innovation Center is focused on a series of oncology drugs. We took a crisis in oncology, the drug called lomustine, built a consortium of innovators who had developed new, novel techniques to produce it using continuous flow, existing manufacturers with capacity to produce it here in the United States on behalf of the Glioblastoma Foundation. It also engaged with critical entities such as Emerson that makes the control systems. It took numerous stakeholders. The impact of that is a 90 percent cost reduction on a drug that now, all of a sudden, becomes feasible to manufacture in the United States for the Glioblastoma Foundation. So it requires very much technology to do that, to compete long term. It also requires changing to incentivize that U.S.- based manufacturer, allowing for changes in formularies and preferred drug lists to, in fact, allow for that manufacturer with advance technologies that are more environmentally favorable, less footprint, as well as economically more favorable, to be chosen in the formulary. Mr. Duncan. Is the hangup to do that the FDA? Mr. Sardella. There's numerous instruments that can be brought to bear that wouldn't require significant legislative change in regards to allowing it. So there's an ability to designate on those formularies what the requirements are for preferred drug. And it could be U.S.-made, made from a facility that has no warning letter. And third, using even advanced technologies, which would allow for more energy efficiency, lower environmental footprint, and as well, higher quality standards, as Fernando had indicated. This is within our grasp, very reasonable grasp. Mr. Duncan. Thank you so much. Chairman, I yield back. Mr. Griffith. The gentleman yields back. I now recognize the gentleman from New York, Mr. Tonko, for his 5 minutes of questioning. Mr. Tonko. Well, I thank the Chair and ranking member for the opportunity today and welcome the witnesses. Getting ahead of drug shortages will allow us to increase access to lifesaving medications for patients when they need them most. As we have seen this past year, shortages can happen because of unanticipated spikes in demand for drugs. I am thinking today about parents of sick children who couldn't obtain children's Tylenol during this year's confluence of RSV, COVID-19, and influenza, or people with ADHD who could not consistently obtain important medications because of an anticipated surge in demand due to a sharp increase in prescriptions through the pandemic. One of my constituents from Saratoga Springs shared how she could no longer find her daughter's medication. And she said, ``As a mother, I can't believe this, that a child that needs medication can't get it.'' It is a sentiment of both shock and outrage I share along with many of my constituents. My understanding is that, without more drug information about the demand for drugs, we don't know how much production is required to meet that need. For example, a study in 2022 from Brandeis University found that there was a shortage of naloxone, a critical drug used to reverse overdose in nearly every U.S. State. The study found that the shortage was in part created because there was no comprehensive data on how much naloxone was needed and who was using it. So I want to be sure our agencies have all the tools they need to be able to accurately gauge demand fluctuations so that we know where we need to fill in gaps. You noted in your testimony, Professor Bray, that FDA currently has limited visibility into spikes in demand for pharmaceutical drugs. Why is having greater visibility into that demand for prescription drugs so important, and what would having that information allow FDA to do? Ms. Bray. Thank you for asking. Well, I think we've spent a lot of time talking about the supply-side issues of this crisis, but there are demand-side issues. And just because we fix the supply-side issues doesn't mean patients are going to get equal and disparity-free access. So we at Angels for Change spend a lot of time making sure available supply onshore is in the right place at the right time, instead of stuck somewhere in the supply chain. So it does--we are blind a lot when we don't know what's happening with spikes of demand. The entire supply chain is. And so when we throw in a potential solution based on old information, what happens is that solution actually works, but then a spike of demand makes it fail, and then it builds additional distrust in the entire supply chain. So I do think--I often am flying blind about what's going on with the demand, and where the actual drug is, and it is a very laborious noneconomies-of-scale process built on a painstaking network of American people who care. Like, emails and phone calls, ``What are we doing? Where is it?'' This is unnecessary. We could have, you know, not--but it's not just the information, it's what are we going to do with it? What's the tool we're going to do to make sure people have access? And then you got to the beginning--the beginning part of your question was actually about Adderall and amoxicillin. You know, it's the information before then. Those were predictable. There were people who are subject matter experts who knew those things were happening, who tried to ring those bells well ahead. And some of us put in some safeguards because of them. And so we need data that leads to prediction so that we don't have disruption, and that's the key. And just like my colleague said, there is amazing work being done. We have many times worked with USP and their medicines supply map. They are doing unbelievable work mapping the entire global supply chain. It isn't effective until it's used to solve it for the American people. Mr. Tonko. Thank you. And Dr. Oshmyansky, you, in your testimony, share that the manufacturing systems used in your facility can transition between making batches of different medications within hours, when it usually takes months. How would collecting greater insights into unanticipated demand allow facilities like yours to respond in a nimble and agile way to a shortage? Dr. Oshmyansky. Oh, sure. So the longest lead time item for our manufacturing is not really switching over to supply lines. It's sourcing the active ingredient. So our plan is to have a portfolio of active ingredient of the drugs we anticipate will go into shortage, send them to independent laboratories for quality and safety testing. That process takes a few months. Once we've done that process, we don't need to repeat it. But if we can anticipate what the drug shortages are predicted to be ahead of time, we can have that API in our portfolio ready to go. Mr. Tonko. Thank you so much. And with that, Mr. Chair, I yield back. Mr. Griffith. I thank the gentleman for yielding back. I now recognize the gentleman from Texas, Mr. Crenshaw, for his 5 minutes of questioning. Mr. Crenshaw. Thank you, Mr. Chairman. Thank you for this hearing, and thank you to our witnesses for being here today. It is an important subject. You know, in the Houston area, just outside my district, Texas Children's Hospital, 80 percent of their patients are impacted by drug shortages. That is the whole hospital. They currently have 101 medications on back order, 350 medications on allocation, where they are limited in the quantity that they can produce. Eight of these are chemotherapy agents that are used in first-line treatment of pediatric cancer. So I want to, in as little time as possible--because this is a much longer conversation--but Mr. Sardella, I want to figure out how this supply chain looks with active pharmaceutical ingredients to the--in the best way that we can. Eighty-five percent of APIs are from foreign countries. Sixty percent of our finished dose forms are from foreign countries. And, you know, a lot of people wonder why. So what is in an API? Just a variety of other chemicals? Is there--are there--is there, like, a top three chemicals that are in APIs? Can you describe that really quickly? Mr. Sardella. Yes, and you bring up an excellent point. The API itself is the chemical that produces the medicinal effect. It is the most important element in that capsule tablet, in that drug. Mr. Crenshaw. But the---- Mr. Sardella. The remaining elements are elements that allow for either the transport through your digestive system or other type of elements to allow it to survive and be effective. And quite interesting, what you bring up is something that we've seen. It's API, even we've heard capsules or the caps of a bottle will be in shortage and have a supply chain challenge which may prevent--we always think of just the active--but all these other areas, the excipients, et cetera. Mr. Crenshaw. But I want to focus on APIs for a second. So an API is a chemical, but it is a chemical made up of other chemicals. Mr. Sardella. Correct. Mr. Crenshaw. Right? And where do those other chemicals come from? Mr. Sardella. Oh, yes. Mr. Crenshaw. You know, and---- Mr. Sardella. So---- Mr. Crenshaw. Go ahead. Mr. Sardella. Yes. So we are reliant on what would be called starter materials. And these are the original chemicals that allow us to make those APIs. The majority of them are carbon-carbon, carbon-nitrogen, carbon-oxygen bonds. They're the foundational elements. To build a sustainable API, we need to also allow for the creation of starter materials here in the United States. Mr. Crenshaw. And this is--I do have a point to this. So those starter materials are widely available in the United States. Mr. Sardella. Mm-hmm. Mr. Crenshaw. Right? They are generally derived from petrochemicals. So, like, benzene, which is like a natural gas- derived chemical, is used to make ibuprofen. Mr. Sardella. Mm-hmm. Mr. Crenshaw. I didn't know that. We have a lot of natural gas and benzene. Like, these are easy base chemicals to get. So we are exporting these base chemicals to other countries so they can make the APIs, so they can send back those APIs to us to make the more advanced drugs, the final product, and then we complain about our supply chains. What is stopping us from cutting out that middleman? Is it a policy issue? Is it a market issue? What is happening there? Mr. Sardella. It would be having economically viable domestic API manufacturers that can be the purchasers of those starter materials. Mr. Crenshaw. OK. Mr. Sardella. That would be the key to its consumption and use here in the United States. Mr. Crenshaw. Nobody just--nobody has had that business idea? Mr. Sardella. Well, the APIs, a majority of the generic ones, are not economically viable to produce in the United States. And so they've been offshored. And so that demand, that U.S. domestic demand---- Mr. Crenshaw. Why aren't they economically viable? What do they state as their reasons for not opening up shop? Mr. Sardella. Yes, they'll cite lower labor costs as one reason. They'll cite economies of scale, government incentives that these other countries have received to build their facilities. Even right now, India is subsidizing new facilities being built so that they wouldn't be reliant on China---- Mr. Crenshaw. Well, in a very short amount of time we did-- we did get a lot out of you, so I appreciate it, but I want to--I want to move on, please, to Laura Bray. Thank you for being here with Mother's Day coming up, and the problem we have with especially cancer drugs for kids. So real quick, what roadblocks are currently in place at the FDA that really create the problem you are trying to solve? What would be your top three? Or one. Ms. Bray. So, I mean, I think part of the problem here is this is a very, very large risk solution for any one member to take on, right? So there are a lot of barriers everywhere. There's not just barriers in one member, there is a lot of risk of any one member taking---- Mr. Crenshaw. I totally get that. But I--you know, we have to focus on one thing, and I like to focus on the FDA. So, like, from your perspective, what would change at the--what would be a better way the FDA would do business that would help what you are trying to accomplish? [No response.] Mr. Crenshaw. It is OK if you are not--if it is---- Ms. Bray. I--you know, I think we all have--every member needs to come to this table because it is so multifaceted, and there are true and real reasons for every single policy that has been put in place. But we're--keep putting policies on top of policies of broken marketplace. And so I think we all need to be at the table saying, here's the solution, here's what my part can do, here's what my part can do. And so to pick one thing from one member to do, as my colleague said, it's such a dynamic marketplace, it would quickly become extinct, right? Mr. Crenshaw. Yes. Ms. Bray. We need to all be at the table. Mr. Crenshaw. We need solutions. You know, and---- Ms. Bray. So the---- Mr. Crenshaw [continuing]. So, you know, one of the things I would point out---- Ms. Bray. So the solutions are we've got a six-point plan. It's first, align the incentives and motives. Everybody needs to be at the table, aligning those motives. It's employing prediction and forecasting, followed by being ready to supply the American people. Then we have to empower the collaboration of this multifaceted supply chain. Patients need to be at the center of the solution, so we're ending shortages instead of mitigating them. And we need to establish an entrance and exit ramp so that the marketplace can evolve without patients getting left behind. That's the steps. And it's multilayered. Mr. Griffith. The gentleman---- Mr. Crenshaw. I appreciate it, I yield back. Mr. Griffith [continuing]. Yields back, but we may very well have some what we call QFRs, questions after the hearing, and we will get an opportunity to answer at that time. I now recognize the gentlelady from Arizona, Mrs. Lesko, for her 5 minutes of questioning. Mrs. Lesko. Thank you, Mr. Chair, and thank you for all of you being here. I apologize, I had to go to another committee hearing and come back here. Mr. Sardella, a key role of the FDA's mission to ensure drug safety, effectiveness, and ultimately, availability includes its foreign and domestic drug manufacturing facility inspections program. While the COVID-19 pandemic effectively halted nearly all overseas inspections for 2020 and part of 2021, the number of inspections conducted both in the U.S. and overseas has been precipitously declining since 2016. In 2019, in its 2019 report of FDA inspection data, the GAO identified FDA's inability to oversee the global supply chain as a high-risk issue and concluded with recommendations to the agency to increase the number of inspections of foreign drug establishments. Unfortunately, GAO's 2022 followup report on FDA's inspection capabilities did not conclude that the agency is in any better off--is any better off in conducting timely and reliable foreign inspections. In fact, GAO found that the share of foreign facilities that have not been inspected in over 5 years has increased from 30 percent in 2020 to nearly 80 percent in 2022. Furthermore, GAO shared that the FDA inspected just 6 percent of facilities overseas in 2022. Given that most U.S. drugs and APIs are manufactured in foreign facilities, this raises serious concerns with FDA's ability to ensure the quality and availability of human medical products manufactured overseas. So my question to you is, how critical are timely and effective inspections of both domestic and foreign manufacturing facilities for ensuring the security of our drug supply chain? Mr. Sardella. They're absolutely essential for us ensuring the quality and the safety of the medicines that U.S. citizens consume. They're also extremely important in ensuring the stability of the market because, through those inspections, the ability to understand which manufacturers are complying, which manufacturers are delivering on quality manufacturing processes. And then the next element there is incentivizing that, rewarding those that don't have any warning letters for decades and decades, as opposed to those who, in fact, would. The ability to make that distinction on quality is to have a robust inspection, auditing process that allows us to make those distinctions, both to ensure the market is stable and to allow for safety of the medicines. Mrs. Lesko. I agree, and I think most U.S. people would be surprised at the low number of inspections that are going on for the drugs that they are taking each and every day, and foreign drug makers. This past December the President authorized $10 million for a pilot program to increase the number of foreign inspections at the FDA. However, the agency has cited challenges in the agency's ability to recruit and retain investigators as a major factor in the delay or dereliction of timely foreign inspections. Again, Mr. Sardella, how confident are you that this pilot program will close the gap in the share of overseas establishments that remain uninspected, while there remains a fundamental challenge within FDA to retain investigators and prioritize foreign inspections? Mr. Sardella. Yes, I feel FDA is no dissimilar to any organization in its struggles to develop talent, recruit talent to conduct its efforts. I feel they, like all organizations, will be challenged to be able to allow for the right workforce that enables them to go overseas as well as globally to do their inspections. I also feel that there's other opportunities to allow for understanding the quality of medicines that are more technical in nature versus only inspection in nature. Modernizing the monitoring systems. Fernando had talked about the new emerging advanced manufacturing technologies, control systems that monitor the productions every second as these medicines are produced. Those will allow inspection and observation without being at the facility, only through data transport in real time, every second. Those will be very transformational capabilities that we should look into and enable the FDA to utilize and leverage. Mrs. Lesko. Thank you, and I yield back. Mr. Griffith. I appreciate the gentlelady yielding back. I now recognize Dr. Ruiz of California for his 5 minutes of questioning. Mr. Ruiz. Thank you, and thank you all for your testimony today. Drug shortages have serious impacts on quality and safety of patient care in this country. Before Congress I practiced as an emergency physician at Eisenhower Medical Center in California. I have seen firsthand the effects that drug shortages can have on patients, their providers, and their families by causing delayed care or second-choices treatments, especially when I want to intubate a patient and we don't have succinylcholine, and I have to use another paralytic that is not used very often, OK? Professor Bray, how have you seen shortages play out for patients seeking emergency care? Ms. Bray. Thank you for asking. There is severe patient impact happening every day, and not just in missing, skipping, or changing doses. Ninety percent of oncologists state that drug shortages have led to patient harm, up to death. We also can't forget the emotional trauma that you're putting on a family in a medical crisis. Patients deserve access to these medicines. The patient--the physicians and nurses and care team who are trying to solve these crises and save them deserve easy and equal access to these medicines. Mr. Ruiz. Thank you. Generic drugs are particularly vulnerable to shortages: 40 percent of drugs--40 percent of drugs--have only one manufacturer, and most generic drugs have only one competitor per drug. Having limited sources for essential drugs or medical supplies is dangerous, particularly when an emergency strikes. So, for example, when Hurricane Maria devastated Puerto Rico in 2017, a major saline manufacturer was damaged. This caused a shortage for hospitals throughout the country of this very basic and critical lifesaving medical supply. Dr. Muzzio, can you--how can the Government support more diversified drug manufacturing that is less susceptible to supply chain disruptions? Dr. Muzzio. Thank you for the question. We've been looking at this very carefully because, as my colleagues mentioned, there are a number of economic constraints. And we have also a 30-year history now of offshoring and losing manufacturing shares. So the reversal of that process is going to take sustained plan over many years with, you know, a lot of insight into not only how to make it profitable again but also how to regain the know-how that we have lost and how to build better systems that are more nimble, able to do more flexible manufacturing of a larger number of products. I'm very encouraged by some of the things that I've been hearing. One way the Government can do it is by recognizing the following. There are reasons why the generic manufacturers are having trouble implementing the newer technologies, right? They cost a lot of money, they take a long time, and they don't have access in-house to people with the knowledge. So this is the perfect opportunity to create, again, centers of excellence, places where we have the knowledge, we have the people, and we have the equipment needed to implement the solutions, working closely with contract manufacturers that can then very rapidly pick up the required manufacturing tasks---- Mr. Ruiz. Thank you. Dr. Muzzio [continuing]. Like 503(b)s or other manufacturers. It will take a network---- Mr. Ruiz. Thank you. Dr. Muzzio [continuing]. To solve the problem. Mr. Ruiz. Center of excellences. Mr. Sardella, in its July 2021 Report on Supply Chain Resiliency, the White House proposed several recommendations to strengthen the generic market. The report recommended providing greater predictability in production costs, pricing, and volume sold to manufacturers, as well as increasing government and private-sector flexibility in contracting and sourcing. How would enacting these recommendations help strengthen the generic market and help prevent future shortages? Mr. Sardella. The ability to have certainty in your demand, from a business perspective, would drive economic investment and production of these. A common instrument of contracting in the United States Government is what's called the IDIQ--Indefinite Demand, Indefinite Quantity. There's no ability to have certainty in your investments if you have an indefinite demand or an indefinite quantity. Solidifying those quantities, the years of demand, will allow for businesses to make investments and understand their return to their shareholders or to their owners. Mr. Ruiz. Thank you. So drug shortages cause severe adverse health outcomes and are an urgent problem. We need to support policy and resources that help address supply chain vulnerabilities so that shortages are less frequent and can be quickly addressed, stat. I yield back. Mr. Griffith. I thank the gentleman for yielding back. I now recognize Mr. Palmer of Alabama for his 5 minutes of questions. Mr. Palmer. Thank you, Mr. Chairman. Thank you for holding the hearing, and for the witnesses' testimony today. Dr. Sardella, one of the things that I am concerned about is the FDA's role in the shortages. And in your testimony you mentioned the expensive and complex compliance challenges that so many drug companies face. In a previous Congress, we had had a number of hearings related to drug manufacturers and the massive increase in cost, and one of the things that we discovered was how regulations had forced a lot of companies either out of business or into being sold to other companies so that the company that bought them basically became the sole manufacturer. We saw that with drugs like insulin and EpiPens, things like that. I just want your thoughts, a little more clarity from what you said in your testimony about how this is impacting the cost and availability of these drugs. Mr. Sardella. Yes. So, as a manufacturer, if we start with the understanding that their profitability is already low, when they have a warning letter from the FDA there is therefore an expense that they have to incur to bring the facility up to standards to meet that. Sometimes the businesses cannot afford--their return on their capital is so low already, less than 5 percent--I mean, in business school we teach if you're anywhere below 20 percent you should be out of business. So then when you couple the request to have to comply, the facility will shutter. They will not make the investment. Only 4 percent in recent data--from numbers in the 2020s, only 4 percent of the FDA warning letters are now being addressed, a drastic drop, and that's a result of their inability economically to resolve them. So the facilities shut down. Akorn, a facility, just recently shut down. Mr. Palmer. Right, I saw that. Mr. Sardella. Nesher, as well. Mr. Palmer. Yes. And then, when you combine that with the need to upgrade the manufacturing processes with newer equipment and things like that, and the stranded cost that's involved in that, plus for newer drugs the stranded costs involved in that, it really becomes an economic issue in many respects that we have to address. And again, listening to your testimony and reading your testimony, you make excellent points about the order of magnitude increases in drug production if we--if the companies had the ability to upgrade their equipment. Would you think that incentives or tax credits, things like that, would be helpful to companies? Mr. Sardella. Incentives, very much. One we are--we have an example. The API Innovation Center is working with the State of Missouri. The State of Missouri is funding the derisking of their adoption of new technology. So what we've done, as a nonprofit, we've procured the new advanced manufacturing technology, developed it, and are placing it in existing Missouri manufacturing, manufacturers that have been there, some for 100 years, some new ones for 30 years, and some for just 10 years. And that now is being able to bring supply for cancer drugs like lomustine and a suite of an additional six. In some respect, those incentives derisk the adoption, very effective. The one element of the tax incentive is when you have an industry with such low profitability, tax incentives are less effective than creating certainty of demand by changing formularies. Mr. Palmer. Well, you set me up perfectly for where I want to go with this. And this is a little different direction, Mr. Chairman, because in 1996 the Clinton administration repealed section 936 of the U.S. Internal Revenue Code, which provided tax incentives for drug manufacturers, and it had a devastating impact on the pharmaceutical industry in Puerto Rico. And what people don't realize is that, of U.S. territories, including the States, Puerto Rico even today still manufactures more pharmaceutical products than any State, including Indiana. But after the repeal of 936 we saw an exodus of drug manufacturers to other countries. In a number of respects I remember Horizon Pharma out of Chicago moved enough of their production and headquarters to Ireland because if they reached a certain percentage of foreign ownership they were not subject to U.S. taxes, and their tax went down to 12\1/2\ percent. So what do you think about reinstating section 936, and particularly in how it would impact our ability to produce the drugs that we need? Mr. Sardella. Yes, I don't know the regulation or legislation well enough to comment, but I do believe tax in that case would be a strong instrument to incentivize manufacturing in the U.S. Mr. Palmer. Well, it was a huge industry in Puerto Rico. It was--obviously, the problems were compounded with Hurricane Maria years later. I think it was 8 years later, that. Mr. Chairman, I think that is something that we need to explore. We might not be the right committee for that since it is a tax issue, but I do think it is part of the solution. I yield back. Mr. Griffith. I thank the gentleman for yielding back. Seeing no further Members wishing to ask questions, I would like to thank each of our witnesses for being here today. Thank you all so much. In pursuance of committee rules, I remind Members they have 10 business days to submit additional questions for the record--that is the QFR, questions for the record--and I ask that witnesses submit their responses within 10 business days upon receipt of those questions. Without objection, this committee is adjourned. [Whereupon, at 12:15 p.m., the subcommittee was adjourned.] [all]

usgpo

2024-10-08T13:26:23.455039

BILLS

BILLS-118hres1442ih

Expressing support for the designation of the week beginning on September 8, 2024, as Celebrate Community Week.

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H. Res. 1442 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. RES. 1442 Expressing support for the designation of the week beginning on September 8, 2024, as ``Celebrate Community Week''. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES September 11, 2024 Mr. Thompson of Pennsylvania (for himself and Mr. Panetta) submitted the following resolution; which was referred to the Committee on Oversight and Accountability _______________________________________________________________________ RESOLUTION Expressing support for the designation of the week beginning on September 8, 2024, as ``Celebrate Community Week''. Whereas ``Celebrate Community'' is a weeklong initiative to promote joint community service among members of Lions Clubs International, Rotary International, Kiwanis International, and Optimist International, and the purpose is to elevate the collective social impact of the organizations and promote a spirit of worldwide volunteer collaboration; Whereas, from September 8 through September 14, thousands of local area Kiwanis, Lions, Optimist International, and Rotary clubs will take part in service to address the needs of their communities during their second annual Celebrate Community initiative; Whereas Kiwanis clubs change children's lives by conducting service projects in their local communities focused on health and nutrition, education and literacy, and youth development; Whereas Kiwanis clubs conduct more than 1.3 million service projects globally and raise nearly $390,000,000 annually; Whereas Lions clubs encourage service-minded individuals to serve their communities without personal financial reward; Whereas, since 1917, Lions 1,400,000 members have strengthened local communities through hands-on service and humanitarian projects, focused on the environment and addressing childhood cancer, hunger, diabetes, vision, and other pressing humanitarian needs presenting some of the biggest challenges facing humanity; Whereas, carrying the motto ``Bringing Out the Best in Youth, in our Communities, and in Ourselves'', Optimist International clubs conduct positive service projects that reach more than 6,000,000 young people each year; Whereas Optimist International clubs conduct 65,000 community service projects each year, spending $78,000,000 in their communities and impacting over 6,000,000 youth; Whereas Rotary's more than 1.2 million members believe we have a shared responsibility to take action on the world's most persistent issues with sustainable, community-based solutions; and Whereas more than 45,000 Rotary clubs invest hundreds of millions of dollars and countless volunteer hours to provide clean water, sanitation, and hygiene, support basic literacy and education, prevent and treat disease, support maternal and child health, support community economic development, support peacebuilding and conflict prevention, protect the environment, and end polio worldwide: Now, therefore, be it Resolved, That the House of Representatives-- (1) supports the designation of Celebrate Community Week; (2) recognizes Kiwanis International, Lions Clubs International, Optimist International, and Rotary International for promoting community service and humanitarian assistance; (3) encourages Kiwanis International, Lions Clubs International, Optimist International, and Rotary International to continue to emphasize the values of community service and improving the community for all individuals, especially our youth; (4) applauds Kiwanis International, Lions Clubs International, Optimist International, and Rotary International for instilling in young people the value of community service; and (5) appreciates Kiwanis International, Lions Clubs International, Optimist International, and Rotary International for the work of their members to continue to strengthen our communities through service. <all>

usgpo

2024-10-08T13:26:28.314956

BILLS

BILLS-118hr9454ih

Protecting Military Bases from Connected Vehicles of Concern Act of 2024

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9454 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9454 To prohibit the operation on Department of Defense property of certain vehicles designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction of a foreign entity of concern, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES September 3, 2024 Ms. Slotkin introduced the following bill; which was referred to the Committee on Armed Services _______________________________________________________________________ A BILL To prohibit the operation on Department of Defense property of certain vehicles designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction of a foreign entity of concern, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Protecting Military Bases from Connected Vehicles of Concern Act of 2024''. SEC. 2. PROHIBITION ON OPERATION OF CONNECTED VEHICLES DESIGNED, DEVELOPED, MANUFACTURED, OR SUPPLIED BY PERSONS OWNED BY, CONTROLLED BY, OR SUBJECT TO THE JURISDICTION OF A FOREIGN ENTITY OF CONCERN ON DEPARTMENT OF DEFENSE PROPERTY. (a) In General.--No connected vehicle on the list required under subsection (b) may be operated on a military installation or on any other property of the Department of Defense. (b) List Required.-- (1) In general.--The Secretary of Defense shall establish a list of prohibited connected vehicles that-- (A) are designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction of a foreign entity of concern; and (B) pose an undue or unacceptable risk to national security, as determined by the Secretary. (2) Annual review.--The Secretary shall review the list required under paragraph (1) not less frequently than once each year and shall make such additions, subtractions, supplements, or amendments to the list as the Secretary determines appropriate. (c) Definitions.--In this section: (1) The term ``connected vehicle''-- (A) means an automotive vehicle that integrates onboard networked hardware with automotive software systems to communicate via dedicated short-range communication, cellular telecommunications connectivity, satellite communication, or other wireless spectrum connectivity with any other network or device; and (B) includes automotive vehicles, whether personal or commercial, capable of-- (i) global navigation satellite system communication for geolocation; (ii) communication with intelligent transportation systems; (iii) remote access or control; (iv) wireless software or firmware updates; or (v) on-device roadside assistance. (2) The term ``covered undue or unacceptable risk'' means-- (A) an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of information and communications technology and services in the United States; (B) an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the digital economy of the United States; or (C) an unacceptable risk to the national security of the United States or the security and safety of United States persons. (3) The term ``foreign entity of concern'' has the meaning given such term in section 9901 of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116-283; 15 U.S.C. 4651). (4) The term ``military installation'' has the meaning given such term in section 2801(4) of title 10, United States Code. <all>

usgpo

2024-10-08T13:26:21.594538

BILLS

BILLS-118hr9329ih

To posthumously award a Congressional Gold Medal to Prince Hall, in recognition of his service to the Black Community as the founder of the first Black Masonic lodge.

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 9329 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 9329 To posthumously award a Congressional Gold Medal to Prince Hall, in recognition of his service to the Black Community as the founder of the first Black Masonic lodge. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES August 9, 2024 Mr. Green of Texas introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on House Administration, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned _______________________________________________________________________ A BILL To posthumously award a Congressional Gold Medal to Prince Hall, in recognition of his service to the Black Community as the founder of the first Black Masonic lodge. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. FINDINGS. Congress finds the following: (1) This Act is original legislation to posthumously award a Congressional Gold Medal to Prince Hall. (2) Prince Hall was a free Black man who lived in colonial Boston, Massachusetts circa 1735 to 1807. (3) Prince Hall was an ardent abolitionist and prolific activist in Boston, Massachusetts during the American Revolutionary period. (4) In 1775, after being denied by an all-White Masonic lodge, Hall and 14 other free Black men formed their own lodge. (5) Prince Hall was elected as the leader, or ``Worshipful Master'', within the newly formed African Lodge #1, later renamed African Lodge No. 459. (6) Because of this action Prince Hall is known as the ``Father of Black Freemasonry''. (7) Prince Hall Freemasonry is recognized by many as the oldest continuously active organization founded by African Americans in the United States. (8) The Prince Hall Freemasons employed advocacy and community work to assist Blacks seeking citizenship, education, and economic advancement. (9) In 1777, Prince Hall petitioned the Massachusetts government to abolish slavery and is considered by some to be the first to publicly proclaim that Black people should be granted the rights laid out in the Declaration of Independence. (10) In 1787, a committee of 12 from the African Lodge, headed by Worshipful Master Hall, drafted, ``The Boston Plan--a detailed plan for African Americans to return to Africa--to free themselves from their hostile living conditions in the United States''. (11) The resettlement plan requested the Massachusetts General Court to provide passage for families with the necessary provisions, utensils, and articles, as well as money to procure lands to settle upon. (12) In 1788, Prince Hall petitioned the Massachusetts legislature to protect Black sailors from being kidnapped and sold into slavery. (13) Prince Hall's influence remains within the 5,000 lodges and 47 grand lodges who trace their lineage to the original lodge he founded. SEC. 2. CONGRESSIONAL GOLD MEDAL. (a) Award Authorized.--The Speaker of the House of Representatives and the President pro tempore of the Senate shall make appropriate arrangements for the award, on behalf of the Congress, of a gold medal of appropriate design dedicated to Prince Hall, in recognition of his service to the Black Community as the founder of the first Black Masonic lodge. (b) Design and Striking.--For the purposes of the award referred to in subsection (a), the Secretary of the Treasury (referred to in this Act as the ``Secretary'') shall strike the gold medal with suitable emblems, devices, and inscriptions, to be determined by the Secretary. (c) Smithsonian Institution.-- (1) In general.--Following the award of the gold medal described in subsection (a), the gold medal shall be given to the Smithsonian Institution, where it shall be displayed at the National Museum of African American History and Culture and made available for research. (2) Sense of congress.--It is the sense of Congress that the Smithsonian Institution should make the gold medal received under paragraph (1) available for display elsewhere, particularly at other appropriate locations associated with Prince Hall. SEC. 3. DUPLICATE MEDALS. The Secretary may strike and sell duplicates in bronze of the gold medals struck under section 2, at a price sufficient to cover the costs thereof, including labor, materials, dies, use of machinery, and overhead expenses. SEC. 4. STATUS OF MEDALS. (a) National Medals.--The medals struck under this Act are national medals for purposes of chapter 51 of title 31, United States Code. (b) Numismatic Items.--For purposes of sections 5134 and 5136 of title 31, United States Code, all medals struck under this Act shall be considered to be numismatic items. SEC. 5. AUTHORITY TO USE FUND AMOUNTS; PROCEEDS OF SALE. (a) Authority To Use Fund Amounts.--There is authorized to be charged against the United States Mint Public Enterprise Fund such amounts as may be necessary to pay for the costs of the medals struck under this Act. (b) Proceeds of Sale.--Amounts received from the sale of duplicate bronze medals authorized under section 3 shall be deposited into the United States Mint Public Enterprise Fund. <all>

usgpo

2024-10-08T13:26:19.342208

BILLS

BILLS-118s4995is

Water Project Navigators Act

United States Congress Senate

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [S. 4995 Introduced in Senate (IS)] <DOC> 118th CONGRESS 2d Session S. 4995 To provide for the establishment of a Water Project Navigators Program, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES September 9, 2024 Mr. Hickenlooper (for himself and Mr. Moran) introduced the following bill; which was read twice and referred to the Committee on Environment and Public Works _______________________________________________________________________ A BILL To provide for the establishment of a Water Project Navigators Program, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Water Project Navigators Act''. SEC. 2. DEFINITIONS. In this Act: (1) Disadvantaged community.--Except as otherwise defined by the Secretary based on current methodologies, the term ``disadvantaged community'' means a community (including a city, town, county, or reasonably isolated and divisible segment of a larger municipality) with an annual median income that is less than the statewide annual median income for the State in which the community is located, according to the most recent decennial census. (2) Eligible entity.--The term ``eligible entity'' means-- (A) a State, Indian Tribe, acequia, land grant- merced, local government, water supplier, or municipal water district located in an eligible State; (B) any State, regional, or local authority located in an eligible State, the members of which include 1 or more organizations with water or power delivery authority; (C) a nonprofit conservation organization located in an eligible State; (D) an agency located in an eligible State that is established under State or Tribal law for the joint exercise of powers; or (E) a combination of entities described in subparagraphs (A) through (D). (3) Eligible state.--The term ``eligible State'' means-- (A) a State or territory described in the first section of the Act of June 17, 1902 (43 U.S.C. 391; 32 Stat. 388, chapter 1093); (B) the State of Alaska; (C) the State of Hawaii; and (D) the Commonwealth of Puerto Rico. (4) Indian tribe.--The term ``Indian Tribe'' has the meaning given the term in section 4 of the Indian Self- Determination and Education Assistance Act (25 U.S.C. 5304). (5) Multi-benefit water project.--The term ``multi-benefit water project'' means any project in an eligible State that-- (A) enhances the overall resilience of water supplies to climate-related impacts, including through activities-- (i) to increase water use efficiency; (ii) to reduce consumptive use of water; (iii) to promote system conservation; (iv) to reduce water supply-demand imbalances; (v) to promote water recycling and other advanced water treatments to augment water supplies; (vi) to improve management or delivery of water resources; or (vii) to encourage sustainable surface water or groundwater management; and (B) provides benefits to communities and ecosystems, including through activities-- (i) to conserve or enhance fish and wildlife habitat; (ii) to improve water quality; (iii) to improve watershed health and function; (iv) to enhance recreational opportunities; (v) to promote rural economic development; or (vi) to address risks to communities and infrastructure from climate change. (6) Natural feature.--The term ``natural feature'' means a feature that is created through the action of physical, geological, biological, and chemical processes over time. (7) Nature-based feature.--The term ``nature-based feature'' means a feature that is created by human design, engineering, and construction to provide a means to reduce water supply and demand imbalances or drought or flood risk by acting in concert with natural processes. (8) Program.--The term ``Program'' means the Water Project Navigators Program established under section 3(a). (9) Secretary.--The term ``Secretary'' means the Secretary of the Interior. SEC. 3. WATER PROJECT NAVIGATORS PROGRAM. (a) Establishment.--Not later than 180 days after the date of enactment of this Act, the Secretary shall establish a program to support the development and implementation of multi-benefit water projects within eligible States, to be known as the ``Water Project Navigators Program''. (b) Authority.--In carrying out the Program, the Secretary may award grants or cooperative agreements to eligible entities to support the creation or continuation of multi-benefit water project navigator positions. (c) Criteria and Guidelines.-- (1) In general.--The Secretary shall develop criteria and guidelines for awarding grants and cooperative agreements under the Program that consider-- (A) the potential of the eligible entity to accelerate development and implementation of multi- benefit water projects within-- (i) the jurisdiction or service area of the eligible entity; or (ii) in the case of an eligible entity that is a nongovernmental applicant, an area in which the eligible entity has a demonstrated history of productive engagement with the community and stakeholders; (B) any history of development of multi-benefit water projects by the eligible entity; and (C) any potential multi-benefit water projects the eligible entity has not yet implemented due to lack of capacity. (2) Prioritization.--The criteria and guidelines developed under paragraph (1) shall include prioritization criteria for awarding grants or cooperative agreements, which shall include prioritizing applications from eligible entities-- (A) that would provide benefits for Indian Tribes, disadvantaged communities, and other eligible entities with limited project development resources and capacity; (B) that would provide support for local job creation and retention; (C) with a demonstrated intent and ability to incorporate improvements to the condition of a natural feature or nature-based feature in multi-benefit water projects designed under the Program; (D) with demonstrated support from multiple stakeholders, including Indian Tribes, representatives of irrigated agricultural production, hydroelectric production, municipal and industrial water users, local governments, community-based organizations, and nonprofit conservation organizations; (E) that would provide benefits for areas experiencing severe long-term drought; and (F) with the capability to work in coordination with other projects that have been funded under, or help advance the objectives of, other Department of Interior programs, including a program authorized under-- (i) section 9504 of the Omnibus Public Land Management Act of 2009 (42 U.S.C. 10364); (ii) section 6002 of the Omnibus Public Land Management Act of 2009 (16 U.S.C. 1015a); (iii) section 1109 of the Consolidated Appropriations Act, 2021 (33 U.S.C. 2330c); (iv) title IX of division D of the Infrastructure Investment and Jobs Act (43 U.S.C. 3201 et seq.); or (v) section 50233 of Public Law 117-169 (commonly known as the ``Inflation Reduction Act of 2022'') (136 Stat. 2053). (3) Public comment.--Before finalizing the criteria and guidelines developed under paragraph (1), the Secretary shall make the criteria and guidelines available for public comment. (4) Prohibition.--The Secretary may not award a grant or cooperative agreement under the Program that would fund activities to meet existing environmental mitigation or compliance obligations under Federal or State law. (d) Duties of Navigators.--A multi-benefit water project navigator funded under the Program shall assist the eligible entity in planning, developing, and implementing multi-benefit water projects, including-- (1) grant writing; (2) project management; (3) technical assistance, such as feasibility, design, preliminary environmental review, and engineering; and (4) any other necessary activities. (e) Duration of Grants and Cooperative Agreements.-- (1) Limitation.--Subject to paragraph (2), a grant or cooperative agreement under the Program shall be limited to a period of not more than 3 years. (2) Continuation and extension.--At the discretion of the Secretary, the Secretary may issue a continuation grant or extend a cooperative agreement awarded under the Program for not more than 2 additional years, with additional funding to be awarded, as determined to be appropriate by the Secretary, if the recipient of the grant or cooperative agreement has demonstrated satisfactory performance with implementation of the proposal under the initial grant or cooperative agreement, as determined by the Secretary. (f) Continuous Enrollment.--The Secretary shall-- (1) make funding opportunities for the Program available on a regular basis; and (2) allow applications for grants or cooperative agreements under the Program to be submitted and evaluated multiple times per year. (g) Cost Share.-- (1) In general.--Except as provided in paragraph (3), the Federal share of the cost of any activity awarded a grant or cooperative agreement under the Program shall not exceed 75 percent of the cost of the activity carried out under the grant or cooperative agreement. (2) Form of non-federal cost share.--The non-Federal share of the cost of an activity awarded a grant or cooperative agreement under the Program may be in the form of cash or in- kind contributions. (3) Reduction; waiver.--With respect to a grant or cooperative agreement awarded to an Indian Tribe, acequia, land grant-merced, disadvantaged community, or any other eligible entity working in partnership with or on behalf of those entities, the Secretary may reduce or waive the non-Federal share of the cost of any activity that is the subject of the grant or cooperative agreement if the reduction or waiver would further a compelling Federal interest, as determined by the Secretary. (h) Coordination.--In administering the Program, the Secretary shall coordinate with other Federal, Tribal, State, and local government technical assistance programs to enhance multi-benefit water project development. (i) Compliance.--A multi-benefit water project navigator funded under the Program shall comply with all applicable Federal and State laws in carrying out the duties of the multi-benefit water project navigator under the Program. (j) Report to Congress.--Not later than 5 years after the date of enactment of this Act, the Secretary shall submit to the Committee on Energy and Natural Resources of the Senate and the Committee on Natural Resources of the House of Representatives a report that describes-- (1) the ways in which the Program assists the Secretary in-- (A) reducing basin-wide water supply-demand imbalances; and (B) enhancing drought and ecosystem resilience; and (2) the benefits that the Program provides, including, to the maximum extent practicable, a quantitative analysis of the multiple benefits advanced under the Program. SEC. 4. AUTHORIZATION OF APPROPRIATIONS. There is authorized to be appropriated to carry out this Act $15,000,000 for each of fiscal years 2024 through 2029, to remain available until expended. <all>

usgpo

2024-10-08T13:26:16.356317

BILLS

BILLS-118hr8987ih

Lowest Price for Patients Act of 2024

United States Congress House of Representatives

[Congressional Bills 118th Congress] [From the U.S. Government Publishing Office] [H.R. 8987 Introduced in House (IH)] <DOC> 118th CONGRESS 2d Session H. R. 8987 To amend title XXVII of the Public Health Service Act, the Employee Retirement Income Security Act of 1974, and the Internal Revenue Code of 1986 to ensure cost sharing for a drug does not exceed the nationwide average of consumer purchase prices for such drug. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES July 10, 2024 Ms. Porter (for herself, Ms. DeLauro, Mr. Grijalva, Mr. Cohen, and Ms. Omar) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, and Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned _______________________________________________________________________ A BILL To amend title XXVII of the Public Health Service Act, the Employee Retirement Income Security Act of 1974, and the Internal Revenue Code of 1986 to ensure cost sharing for a drug does not exceed the nationwide average of consumer purchase prices for such drug. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Lowest Price for Patients Act of 2024''. SEC. 2. ENSURING COST SHARING FOR A DRUG DOES NOT EXCEED THE NATIONWIDE AVERAGE OF CONSUMER PURCHASE PRICES FOR SUCH DRUG. (a) PHSA.--Subpart II of part A of title XXVII of the Public Health Service Act (42 U.S.C. 300gg-11 et seq.) is amended by adding at the end the following new section: ``SEC. 2730. LIMITATION ON COST SHARING FOR DRUGS. ``(a) In General.--For plan years beginning on or after the date of the enactment of this section, a group health plan, and a health insurance issuer offering group or individual health insurance coverage, may not impose cost sharing (including deductibles, coinsurance, and copayments) with respect to a covered outpatient drug for which benefits are available under such plan or coverage dispensed by an in-network pharmacy in an amount that exceeds the nationwide average of consumer purchase prices for such drug for the 1-year period ending on the first day of such plan year (as determined using information from the survey described in section 1927(f)(1)(A)(i) of the Social Security Act). ``(b) Clarification on Application to Pharmacy Benefit Managers.--A group health plan, and a health insurance issuer offering group or individual health insurance coverage, shall ensure that any pharmacy benefit manager providing services under the plan or coverage complies with subsection (a) in the same manner as such subsection applies with respect to such plan or issuer. ``(c) Definitions.--In this section: ``(1) Covered outpatient drug.--The term `covered outpatient drug' has the meaning given such term in section 1927(k) of the Social Security Act. ``(2) In-network pharmacy.--The term `in-network pharmacy' means, with respect to a group health plan or group or individual health insurance coverage and a drug, a pharmacy with a contractual relationship in effect for dispensing such drug under such plan or coverage.''. (b) ERISA.-- (1) In general.--Subpart B of part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1185 et seq.) is amended by adding at the end the following new section: ``SEC. 726. LIMITATION ON COST SHARING FOR DRUGS. ``(a) In General.--For plan years beginning on or after the date of the enactment of this section, a group health plan, and a health insurance issuer offering group coverage, may not impose cost sharing (including deductibles, coinsurance, and copayments) with respect to a covered outpatient drug for which benefits are available under such plan or coverage dispensed by an in-network pharmacy in an amount that exceeds the nationwide average of consumer purchase prices for such drug for the 1-year period ending on the first day of such plan year (as determined using information from the survey described in section 1927(f)(1)(A)(i) of the Social Security Act). ``(b) Clarification on Application to Pharmacy Benefit Managers.--A group health plan, and a health insurance issuer offering group health insurance coverage, shall ensure that any pharmacy benefit manager providing services under the plan or coverage complies with subsection (a) in the same manner as such subsection applies with respect to such plan or issuer. ``(c) Definitions.--In this section: ``(1) Covered outpatient drug.--The term `covered outpatient drug' has the meaning given such term in section 1927(k) of the Social Security Act. ``(2) In-network pharmacy.--The term `in-network pharmacy' means, with respect to a group health plan or group health insurance coverage and a drug, a pharmacy with a contractual relationship in effect for dispensing such drug under such plan or coverage.''. (2) Clerical amendment.--The table of contents in section 1 of such Act is amended by inserting after the item relating to section 715 the following new item: ``Sec. 726. Limitation on cost sharing for drugs.''. (c) IRC.-- (1) In general.--Subchapter B of chapter 100 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: ``SEC. 9826. LIMITATION ON COST SHARING FOR DRUGS. ``(a) In General.--For plan years beginning on or after the date of the enactment of this section, a group health plan may not impose cost sharing (including deductibles, coinsurance, and copayments) with respect to a covered outpatient drug for which benefits are available under such plan dispensed by an in-network pharmacy in an amount that exceeds the nationwide average of consumer purchase prices for such drug for the 1-year period ending on the first day of such plan year (as determined using information from the survey described in section 1927(f)(1)(A)(i) of the Social Security Act). ``(b) Clarification on Application to Pharmacy Benefit Managers.--A group health plan shall ensure that any pharmacy benefit manager providing services under the plan complies with subsection (a) in the same manner as such subsection applies with respect to such plan. ``(c) Definitions.--In this section: ``(1) Covered outpatient drug.--The term `covered outpatient drug' has the meaning given such term in section 1927(k) of the Social Security Act. ``(2) In-network pharmacy.--The term `in-network pharmacy' means, with respect to a group health plan and a drug, a pharmacy with a contractual relationship in effect for dispensing such drug under such plan.''. (2) Clerical amendment.--The table of sections for such subchapter is amended by adding at the end the following new item: ``Sec. 9826. Limitation on cost sharing for drugs.''. <all>

usgpo

2024-10-08T13:26:16.020112

CFR

CFR-2023-title7-vol3

Agriculture

United States National Archives and Records Administration Office of the Federal Register

[Title 7 CFR ] [Code of Federal Regulations (annual edition) - January 1, 2023 Edition] [From the U.S. Government Publishing Office] [[Page i]] Title 7 Agriculture ________________________ Parts 53 to 209 Revised as of January 1, 2023 Containing a codification of documents of general applicability and future effect As of January 1, 2023 Published by the Office of the Federal Register National Archives and Records Administration as a Special Edition of the Federal Register [[Page ii]] U.S. GOVERNMENT OFFICIAL EDITION NOTICE Legal Status and Use of Seals and Logos The seal of the National Archives and Records Administration (NARA) authenticates the Code of Federal Regulations (CFR) as the official codification of Federal regulations established under the Federal Register Act. Under the provisions of 44 U.S.C. 1507, the contents of the CFR, a special edition of the Federal Register, shall be judicially noticed. The CFR is prima facie evidence of the original documents published in the Federal Register (44 U.S.C. 1510). It is prohibited to use NARA's official seal and the stylized Code of Federal Regulations logo on any republication of this material without the express, written permission of the Archivist of the United States or the Archivist's designee. Any person using NARA's official seals and logos in a manner inconsistent with the provisions of 36 CFR part 1200 is subject to the penalties specified in 18 U.S.C. 506, 701, and 1017. Use of ISBN Prefix This is the Official U.S. Government edition of this publication and is herein identified to certify its authenticity. Use of the 0--16 ISBN prefix is for U.S. Government Publishing Office Official Editions only. The Superintendent of Documents of the U.S. Government Publishing Office requests that any reprinted edition clearly be labeled as a copy of the authentic work with a new ISBN. U . S . G O V E R N M E N T P U B L I S H I N G O F F I C E ------------------------------------------------------------------ U.S. Superintendent of Documents Washington, DC 20402-0001 http://bookstore.gpo.gov Phone: toll-free (866) 512-1800; DC area (202) 512-1800 [[Page iii]] Table of Contents Page Explanation................................................. v Title 7: SUBTITLE B--Regulations of the Department of Agriculture (Continued) Chapter I--Agricultural Marketing Service (Standards, Inspections, Marketing Practices), Department of Agriculture (Continued) 5 Finding Aids: Table of CFR Titles and Chapters........................ 455 Alphabetical List of Agencies Appearing in the CFR...... 475 List of CFR Sections Affected........................... 485 [[Page iv]] ---------------------------- Cite this Code: CFR To cite the regulations in this volume use title, part and section number. Thus, 7 CFR 53.1 refers to title 7, part 53, section 1. ---------------------------- [[Page v]] EXPLANATION The Code of Federal Regulations is a codification of the general and permanent rules published in the Federal Register by the Executive departments and agencies of the Federal Government. The Code is divided into 50 titles which represent broad areas subject to Federal regulation. Each title is divided into chapters which usually bear the name of the issuing agency. Each chapter is further subdivided into parts covering specific regulatory areas. Each volume of the Code is revised at least once each calendar year and issued on a quarterly basis approximately as follows: Title 1 through Title 16.................................as of January 1 Title 17 through Title 27..................................as of April 1 Title 28 through Title 41...................................as of July 1 Title 42 through Title 50................................as of October 1 The appropriate revision date is printed on the cover of each volume. LEGAL STATUS The contents of the Federal Register are required to be judicially noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie evidence of the text of the original documents (44 U.S.C. 1510). HOW TO USE THE CODE OF FEDERAL REGULATIONS The Code of Federal Regulations is kept up to date by the individual issues of the Federal Register. These two publications must be used together to determine the latest version of any given rule. To determine whether a Code volume has been amended since its revision date (in this case, January 1, 2023), consult the ``List of CFR Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative List of Parts Affected,'' which appears in the Reader Aids section of the daily Federal Register. These two lists will identify the Federal Register page number of the latest amendment of any given rule. EFFECTIVE AND EXPIRATION DATES Each volume of the Code contains amendments published in the Federal Register since the last revision of that volume of the Code. Source citations for the regulations are referred to by volume number and page number of the Federal Register and date of publication. Publication dates and effective dates are usually not the same and care must be exercised by the user in determining the actual effective date. In instances where the effective date is beyond the cut-off date for the Code a note has been inserted to reflect the future effective date. In those instances where a regulation published in the Federal Register states a date certain for expiration, an appropriate note will be inserted following the text. OMB CONTROL NUMBERS The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires Federal agencies to display an OMB control number with their information collection request. [[Page vi]] Many agencies have begun publishing numerous OMB control numbers as amendments to existing regulations in the CFR. These OMB numbers are placed as close as possible to the applicable recordkeeping or reporting requirements. PAST PROVISIONS OF THE CODE Provisions of the Code that are no longer in force and effect as of the revision date stated on the cover of each volume are not carried. Code users may find the text of provisions in effect on any given date in the past by using the appropriate List of CFR Sections Affected (LSA). For the convenience of the reader, a ``List of CFR Sections Affected'' is published at the end of each CFR volume. For changes to the Code prior to the LSA listings at the end of the volume, consult previous annual editions of the LSA. For changes to the Code prior to 2001, consult the List of CFR Sections Affected compilations, published for 1949-1963, 1964-1972, 1973-1985, and 1986-2000. ``[RESERVED]'' TERMINOLOGY The term ``[Reserved]'' is used as a place holder within the Code of Federal Regulations. An agency may add regulatory information at a ``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used editorially to indicate that a portion of the CFR was left vacant and not dropped in error. INCORPORATION BY REFERENCE What is incorporation by reference? Incorporation by reference was established by statute and allows Federal agencies to meet the requirement to publish regulations in the Federal Register by referring to materials already published elsewhere. For an incorporation to be valid, the Director of the Federal Register must approve it. The legal effect of incorporation by reference is that the material is treated as if it were published in full in the Federal Register (5 U.S.C. 552(a)). This material, like any other properly issued regulation, has the force of law. What is a proper incorporation by reference? The Director of the Federal Register will approve an incorporation by reference only when the requirements of 1 CFR part 51 are met. Some of the elements on which approval is based are: (a) The incorporation will substantially reduce the volume of material published in the Federal Register. (b) The matter incorporated is in fact available to the extent necessary to afford fairness and uniformity in the administrative process. (c) The incorporating document is drafted and submitted for publication in accordance with 1 CFR part 51. What if the material incorporated by reference cannot be found? If you have any problem locating or obtaining a copy of material listed as an approved incorporation by reference, please contact the agency that issued the regulation containing that incorporation. If, after contacting the agency, you find the material is not available, please notify the Director of the Federal Register, National Archives and Records Administration, 8601 Adelphi Road, College Park, MD 20740-6001, or call 202-741-6010. CFR INDEXES AND TABULAR GUIDES A subject index to the Code of Federal Regulations is contained in a separate volume, revised annually as of January 1, entitled CFR Index and Finding Aids. This volume contains the Parallel Table of Authorities and Rules. A list of CFR titles, chapters, subchapters, and parts and an alphabetical list of agencies publishing in the CFR are also included in this volume. An index to the text of ``Title 3--The President'' is carried within that volume. [[Page vii]] The Federal Register Index is issued monthly in cumulative form. This index is based on a consolidation of the ``Contents'' entries in the daily Federal Register. A List of CFR Sections Affected (LSA) is published monthly, keyed to the revision dates of the 50 CFR titles. REPUBLICATION OF MATERIAL There are no restrictions on the republication of material appearing in the Code of Federal Regulations. INQUIRIES For a legal interpretation or explanation of any regulation in this volume, contact the issuing agency. The issuing agency's name appears at the top of odd-numbered pages. For inquiries concerning CFR reference assistance, call 202-741-6000 or write to the Director, Office of the Federal Register, National Archives and Records Administration, 8601 Adelphi Road, College Park, MD 20740-6001 or e-mail [email protected]. SALES The Government Publishing Office (GPO) processes all sales and distribution of the CFR. For payment by credit card, call toll-free, 866-512-1800, or DC area, 202-512-1800, M-F 8 a.m. to 4 p.m. e.s.t. or fax your order to 202-512-2104, 24 hours a day. For payment by check, write to: US Government Publishing Office - New Orders, P.O. Box 979050, St. Louis, MO 63197-9000. ELECTRONIC SERVICES The full text of the Code of Federal Regulations, the LSA (List of CFR Sections Affected), The United States Government Manual, the Federal Register, Public Laws, Public Papers of the Presidents of the United States, Compilation of Presidential Documents and the Privacy Act Compilation are available in electronic format via www.govinfo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll- free). E-mail, [email protected]. The Office of the Federal Register also offers a free service on the National Archives and Records Administration's (NARA) website for public law numbers, Federal Register finding aids, and related information. Connect to NARA's website at www.archives.gov/federal-register. The eCFR is a regularly updated, unofficial editorial compilation of CFR material and Federal Register amendments, produced by the Office of the Federal Register and the Government Publishing Office. It is available at www.ecfr.gov. Oliver A. Potts, Director, Office of the Federal Register January 1, 2023 [[Page ix]] THIS TITLE Title 7--Agriculture is composed of fifteen volumes. The parts in these volumes are arranged in the following order: Parts 1-26, 27-52, 53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200- 1599, 1600-1759, 1760-1939, 1940-1949, 1950-1999, and part 2000 to end. The contents of these volumes represent all current regulations codified under this title of the CFR as of January 1, 2023. The Food and Nutrition Service current regulations in the volume containing parts 210-299, include the Child Nutrition Programs and the Food Stamp Program. The regulations of the Federal Crop Insurance Corporation are found in the volume containing parts 400-699. All marketing agreements and orders for fruits, vegetables and nuts appear in the one volume containing parts 900-999. All marketing agreements and orders for milk appear in the volume containing parts 1000-1199. For this volume, Robert J. Sheehan, III was Chief Editor. The Code of Federal Regulations publication program is under the direction of John Hyrum Martinez, assisted by Stephen J. Frattini. [[Page 1]] TITLE 7--AGRICULTURE (This book contains parts 53 to 209) -------------------------------------------------------------------- SUBTITLE B--Regulations of the Department of Agriculture (Continued) Part chapter i--Agricultural Marketing Service (Standards, Inspections, Marketing Practices), Department of Agriculture (Continued)................................... 53 [[Page 3]] Subtitle B--Regulations of the Department of Agriculture (Continued) [[Page 5]] CHAPTER I--AGRICULTURAL MARKETING SERVICE (STANDARDS, INSPECTIONS, MARKETING PRACTICES), DEPARTMENT OF AGRICULTURE (CONTINUED) -------------------------------------------------------------------- SUBCHAPTER C--REGULATIONS AND STANDARDS UNDER THE AGRICULTURAL MARKETING ACT OF 1946 AND THE EGG PRODUCTS INSPECTION ACT (CONTINUED) Part Page 53 Livestock (grading, certification, and standards).............................. 7 54 Meats, prepared meats, and meat products (grading, certification, and standards). 13 56 Voluntary grading of shell eggs............. 37 57 Inspection of eggs (Egg Products Inspection Act).................................... 58 58 Grading and inspection, general specifications for approved plants and standards for grades of dairy products.. 74 59 Livestock mandatory reporting............... 151 60 Country of origin labeling for fish and shellfish............................... 166 61 Cottonseed sold or offered for sale for crushing purposes (inspection, sampling and certification)...................... 171 62 Agricultural Marketing Service Audit Verification and Accreditation Programs (AVAAP)................................. 178 63 National Sheep Industry Improvement Center.. 185 65 Country of origin labeling of lamb, chicken, and goat meat, perishable agricultural commodities, macadamia nuts, pecans, peanuts, and ginseng.................... 191 66 National bioengineered food disclosure standard................................ 197 70 Voluntary grading of poultry products and rabbit products......................... 207 75 Provisions for inspection and certification of quality of agricultural and vegetable seeds................................... 226 SUBCHAPTER D--EXPORT AND DOMESTIC CONSUMPTION PROGRAMS 80 Fresh Russet Potato Diversion Program....... 234 81 Prune/Dried Plum Diversion Program.......... 234 [[Page 6]] 82 Clingstone Peach Diversion Program.......... 238 SUBCHAPTER E--COMMODITY LABORATORY TESTING PROGRAMS 90 [Reserved] 91 Services and general information............ 243 93 Processed fruits and vegetables............. 256 94 Poultry and egg products.................... 260 95-96 [Reserved] 97 Plant variety and protection................ 264 98 Meals, Ready-to-Eat (MRE's), meats, and meat products................................ 283 99-109 [Reserved] 110 Recordkeeping on restricted use pesticides by certified applicators; surveys and reports................................. 286 111-159 [Reserved] SUBCHAPTER F--NAVAL STORES 160 Regulations and standards for naval stores.. 297 SUBCHAPTER G--MISCELLANEOUS MARKETING PRACTICES UNDER THE AGRICULTURAL MARKETING ACT OF 1946 170 USDA Farmers Market......................... 315 180 Cattle Contracts Library Pilot Program (Eff. 1-6-23)................................. 318 SUBCHAPTER H [RESERVED] SUBCHAPTER K--FEDERAL SEED ACT 201 Federal Seeded Act requirements............. 321 202 Federal Seed Act administrative procedures.. 394 203-204 [Reserved] SUBCHAPTER L--REQUIREMENTS RELATING TO PURCHASES [RESERVED] SUBCHAPTER M--ORGANIC FOODS PRODUCTION ACT PROVISIONS 205 National Organic Program.................... 398 206-209 [Reserved] [[Page 7]] SUBCHAPTER C_REGULATIONS AND STANDARDS UNDER THE AGRICULTURAL MARKETING ACT OF 1946 AND THE EGG PRODUCTS INSPECTION ACT (CONTINUED) PART 53_LIVESTOCK (GRADING, CERTIFICATION, AND STANDARDS)- -Table of Contents Subpart A_Regulations Definitions Sec. 53.1 Meaning of words. 53.2 Designation of official certificates, memoranda, marks, other identifications, for purposes of the Agricultural Marketing Act. Administration 53.3 Authority. Service 53.4 Kind of service. 53.5 Availability of service. 53.8 How to obtain service. 53.9 Order of furnishing service. 53.10 When request for service deemed made. 53.11 Withdrawal of application or request for service. 53.12 Authority of agent. 53.13 Denial or withdrawal of service. 53.14 Financial interest of official grader. 53.15 Accessibility to livestock. 53.16 Official certificates. 53.17 Advance information concerning service rendered. Charges for Service 53.18 Fees and other charges for service. 53.19 Payment of fees and other charges. Miscellaneous 53.20 Identification. 53.21 Errors in service. Subpart B [Reserved] Authority: 7 U.S.C. 1621-1627. Source: 42 FR 53902, Oct. 4, 1977, unless otherwise noted. Subpart A_Regulations Definitions Sec. 53.1 Meaning of words. Words used in this subpart in the singular form shall be deemed to import the plural, and vice versa, as the case may demand. For the purposes of such regulations, unless the context otherwise requires, the following terms shall be construed, respectively, to mean: Acceptance service. The service established and conducted under the regulations for the determination and certification or other identification of the compliance of livestock with specifications. Act. The Agricultural Marketing Act of 1946 (Title II of the act of Congress approved August 14, 1946, 60 Stat. 1087, as amended by Pub. L. 272, 84th Cong., 69 Stat. 553, 7 U.S.C. 1621-1627). Administrator. The Administrator of the Agricultural Marketing Service, or any officer or employee of the Agricultural Marketing Service to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. Agricultural Marketing Service. The Agricultural Marketing Service of the Department. Applicant. Any person who has applied for service under the regulations. Branch. The Livestock Market News Branch of the Division. Chief. The Chief of the Branch, or any officer or employee of the Branch to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. Class. A subdivision of livestock based on essential physical characteristics that differentiate between major groups of the same kind of species. Compliance. Conformity of livestock to the specifications under which the livestock was purchased or sold, with particular reference to the weight, quality or other characterics of livestock. Cooperative agreement. A cooperative agreement between the Agricultural Marketing Service and another Federal agency or a State agency, or other agency, organization or person as specified in the Agricultural Marketing Act of 1946, as amended, for conducting the service. [[Page 8]] Department. The United States Department of Agriculture. Director. The Director of the Division or any officer or employee of the Division to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. Division. Livestock, Poultry, Grain and Seed Division. Financially interested person. Any person having a financial interest in the livestock involved, including but not limited to the shipper, receiver, producer, seller, buyer, or carrier of the livestock or products. Grade. (1) As a noun, this term means an important commercial subdivision of livestock based on certain definite and preference determining factors, such as, but not limited to, conformation, finish, and muscling in livestock. (2) As a verb, this term means to determine the class, grade, or other quality of livestock according to applicable standards for such livestock. Grading service. The service established and conducted under the regulations for the determination and certification or other identification of the class, grade, or other quality of livestock under standards. Legal holiday. Those days designated as legal public holidays in title 5, United States Code, section 6103(a). Livestock. Cattle, sheep, swine, or goats. Official grader. An employee of the Department or other person authorized by the Department to determine and certify or otherwise identify the class, grade, other quality, or compliance of livestock under the regulations. Person. Any individual, partnership, corporation, or other legal entity, or Government agency. Regulations. The regulations in this subpart. Service. Grading service or acceptance service. Specifications. Description with respect to the class, grade, other quality, quantity or condition of livestock approved by the Administrator, and available for use by the industry regardless of the origin of the descriptions. Standards. The standards of the Department contained in Official United States Standards for Grades of: Carcass Beef; Veal and Calf Carcasses; Lamb, Yearling Mutton, and Mutton Carcasses; and, Pork Carcasses. Supervisor. An official person designated by the Director or Chief to supervise and maintain uniformity and accuracy of service under the regulations. [42 FR 53902, Oct. 4, 1977, as amended at 63 FR 72101, Dec. 31, 1998] Sec. 53.2 Designation of official certificates, memoranda, marks, other identifications, for purposes of the Agricultural Marketing Act. Subsection 203(h) of the Agricultural Marketing Act of 1946, as amended by Pub. L. 272, 84th Congress, provides criminal penalties for various specified offenses relating to official certificates, memoranda, marks or other identifications, and devices for making such marks or identifications, issued or authorized under section 203 of said act, and certain misrepresentations concerning the inspection or grading of agricultural products under said section. For the purposes of said subsection and the provisions in this part, the terms listed below shall have the respective meanings specified: (a) Official certificate means any form of certification, either written or printed, including that prescribed in Sec. 53.16, used under the regulations to certify with respect to the inspection, class, grade, quality, size, quantity, or condition of livestock with applicable specifications. (b) Official memorandum means any initial record of findings made by an authorized person in the process of grading, determining compliance, or inspecting, pursuant to the regulations, any processing or plant- operation report made by an authorized person in connection with grading, determining compliance, inspecting, or sampling under the regulations, and any report made by an authorized person of services performed pursuant to the regulations. (c) Official mark or other official identification means any form of mark or other identification, used under the regulations in marking livestock thereof, to show inspection, class, [[Page 9]] grade, quality, size, quantity, or condition of the livestock (including the compliance of livestock with applicable specifications), or to maintain the identity of livestock for which service is provided under the regulations. Administration Sec. 53.3 Authority. The Director is charged with the administration of the regulations and the Act insofar as they relate to livestock. Service Sec. 53.4 Kind of service. Grading service under the regulations shall consist of the determination and certification and other identification, upon request by the applicant, of the class, grade, or other quality of livestock under applicable standards. Class, grade and other quality may be determined under said standards for livestock. Acceptance service under the regulations shall consist of the determination of the conformity of livestock to specifications approved by the Director or Chief and the certification and other identification of such livestock in accordance with specifications, upon request by the applicant. [42 FR 53902, Oct. 4, 1977, as amended at 63 FR 72101, Dec. 31, 1998] Sec. 53.5 Availability of service. Service under these regulations may be made available with respect to livestock shipped or received in interstate commerce, and with respect to the livestock not so shipped or received if the Director or Chief determines that the furnishing of service for such livestock would facilitate the marketing, distribution, processing, or utilization of agricultural products through commercial channels. Also, such service may be made available under a cooperative agreement. Service under these regulations shall be provided without discrimination as to race, color, sex, creed, or national origin. Sec. 53.8 How to obtain service. (a) Application. Any person may apply to the Director or Chief for service under the regulations with respect to livestock in which the applicant is financially interested. The application shall be made on a form approved by the Director. (b) Notice of eligibility for service. The applicant for service will be notified whether his application is approved. (c) Request by applicant for service--(1) Noncommitment. Upon notification of the approval on an application for service, the applicant may, from time to time as desired, make oral or written requests for service under the regulations with respect to specific livestock for which the service is to be furnished under such application. Such requests shall be made at a market news office either directly or through any employee of the Agricultural Marketing Service who may be designated for such purposes. Sec. 53.9 Order of furnishing service. Service under the regulations shall be furnished to applicants in the order in which requests therefor are received, insofar as consistent with good management, efficiency and economy. Precedence will be given, when necessary, to requests made by any government agency or any regular user of the service. Sec. 53.10 When request for service deemed made. A request for service under the regulations shall be deemed to be made when received by a market news office. Records showing the date and time of the request shall be made and kept in such office. Sec. 53.11 Withdrawal of application or request for service. An application or a request for service under the regulations may be withdrawn by the applicant at any time before the application is approved or prior to performance of service, upon payment, in accordance with Sec. Sec. 53.18 and 53.19, of any expenses already incurred by the Agricultural Marketing Service in connection therewith. Sec. 53.12 Authority of agent. Proof of the authority of any person making an application or a request for service under the regulations on behalf of any other person may be required at the discretion of the Director or Chief [[Page 10]] or the official in charge of the market news office or other employee receiving the application or request under Sec. 53.8. Sec. 53.13 Denial or withdrawal of service. (a) For misconduct--(1) Bases for denial or withdrawal. An application or a request for service may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, any person who, or whose employee or agent in the scope of his employment or agency: (i) Has willfully made any misrepresentation or has committed any other fraudulent or deceptive practice in connection with any application or request for service under the regulations; (ii) has given or attempted to give, as a loan or for any other purpose, any money, favor, or other thing of value, to any employee of the Department authorized to perform any function under the regulations; (iii) has interfered with or obstructed, or attempted to interfere with or to obstruct, any employee of the Department in the performance of his duties under the regulations by intimidation, threats, assaults, abuse, or any other improper means; (iv) has knowingly falsely made, issued, altered, forged, or counterfeited any official certificate, memorandum, mark, or other identification; (v) has knowingly uttered, published, or used as true any such falsely made, issued, altered, forged, or counterfeited certificate, memorandum, mark, identification, or device; (vi) has knowingly obtained or retained possession of any such falsely made, issued, altered, forged, or counterfeited certificate, memorandum, mark, identification, or device, or of any livestock bearing any such falsely made, issued, altered, forged, or counterfeited mark or identification; or (vii) has in any manner not specified in this paragraph violated subsection 203(h) of the Act: Provided, That paragraph (a)(1)(vi) of this section shall not be deemed to be violated if the person in possession of any item mentioned therein notifies the Director or Chief without delay that he has possession of such item and, surrenders it to the Director or Chief or destroys it or brings it into compliance with the regulations by obliterating or removing the violative features under supervision of the Director or Chief: And provided, further, That paragraph (a)(1)(ii) through (vi) of this section shall not be deemed to be violated by any act committed by any person prior to the making of an application for service under the regulations by the principal person. An application or a request for service may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, any person who, or whose employee or agent in the scope of his employment or agency, has committed any of the offenses specified in paragraph (a)(1) (i) through (vii) of this section after such application was made. Moreover, an application or a request for service made in the name of a person otherwise eligible for service under the regulations may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, such a person (a) in case the service is or would be performed at an establishment operated (1) by a corporation, partnership, or other person from whom the benefits of the service are currently being withheld under this paragraph, or (2) by a corporation, partnership, or other person having an officer, director, partner, or substantial investor from whom the benefits of the service are currently being withheld and who has any authority with respect to the establishment where service is or would be performed, or (b) in case the service is or would be performed with respect to any livestock in which any corporation, partnership, or other person within paragraph (a)(1)(vii)(a)(1) of this section has a contract or other financial interest. (2) Procedure. All cases arising under this paragraph shall be conducted in accordance with the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statutes set forth in Sec. Sec. 1.130 through 1.151 of this title and the Supplemental Rules of Practice in part 50 of this chapter. (b) For miscellaneous reasons. An application or a request for service may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, any person, without a hearing, by the official in charge of the appropriate market news office with [[Page 11]] the concurrence of the Director or Chief: (1) For administrative reasons such as the nonavailability of personnel to perform the service; (2) for the failure to pay for service; (3) for other noncompliance with the conditions on which service is available as provided in the regulations, except matters covered by paragraph (a) of this section; or (4) in case the person is a partnership, corporation, or other person from whom the benefits of the service are currently being withheld under paragraph (a) of this section. Notice of such denial or withdrawal, and the reasons therefor, shall promptly be given to the person involved. (c) Filing of records. The final orders in formal proceedings under paragraph (a) of this section to deny or withdraw the service under the regulations (except orders required for good cause to be held confidential and not cited as precedents) and other records in such proceedings (except those required for good cause to be held confidential) shall be filed with the Hearing Clerk and shall be available for inspection by persons having a proper interest therein. [42 FR 53902, Oct. 4, 1977, as amended at 60 FR 8464, Feb. 14, 1995] Sec. 53.14 Financial interest of official grader. No official grader shall grade or determine compliance of any livestock in which he or any of his relatives by blood or marriage is directly or indirectly financially interested. Sec. 53.15 Accessibility to livestock. (a) The applicant shall cause livestock, with respect to which service is requested, to be made easily accessible for examination and to be so placed, with adequate illuminating facilities, as to disclose their class, grade, other quality, and compliance. Supervisors and other employees of the Department responsible for maintaining uniformity and accuracy of service under the regulations shall have access to all parts of establishments covered by approved applications for service under the regulations, for the purpose of examining all livestock in the establishments which have been or are to be graded or examined for compliance with specifications. (b) [Reserved] Sec. 53.16 Official certificates. (a) Required; exception. The official grader shall prepare, sign, and issue a livestock acceptance certificate covering livestock for which compliance has been determined. (b) Where weight is certified, the word ``Not'' shall be deleted from the phrases ``Weights Not Verified.'' (c) Distribution. The original certificate, and not to exceed two copies, shall be delivered or mailed to the applicant or other person designated by him. The remaining copies shall be forwarded as required by agency, division, and branch instructions. Additional copies will be furnished to any person financially interested in livestock involved with the concurrence of the applicant and upon payment of fees, as provided in Sec. 53.18(d). Sec. 53.17 Advance information concerning service rendered. Upon request of any applicant, all or any part of the contents of any certificate issued to him under the regulations, or other notification concerning the determination of class, grade, other quality, or compliance of livestock for such applicant may be transmitted by telegraph or telephone to him, or to any person designated by him, at his expense. Charges for Service Sec. 53.18 Fees and other charges for service. Fees and other charges equal as nearly as may be to the cost of the services rendered shall be assessed and collected from applicants in accordance with the following provisions unless otherwise provided in the cooperative agreement under which the services are furnished, or as provided in Sec. 53.8. (a) Fees based on hourly rates. Except as otherwise provided in this section, fees for service shall be based on the time required to render the service, calculated to the nearest 15-minute period, including time required for the preparation of certificates and travel of the official grader in connection [[Page 12]] with the performance of service. A minimum charge for 1 hour shall be made for service pursuant to each request notwithstanding that the time required to perform service may be less than 60 minutes. The base hourly rate shall be $29.40 per hour for work performed between the hours of 6 a.m. and 6 p.m., Monday through Friday, except on legal holidays; $32.80 per hour for work performed before 6 a.m. or after 6 p.m., Monday through Friday, and anytime Saturday or Sunday except on legal holidays; and $58.80 per hour for all work performed on legal holidays. (b) Travel charges. When service is requested at a place so distant from an official grader's headquarters, or place of prior assignment on a circuitous routing that a total of one-half hour or more is required for the grader to travel to such place and back to the headquarters, or to the next place of assignment on a circuitous routing, the charge for such service shall include a mileage charge administratively determined by the Chief, and travel tolls, if applicable, for such travel prorated against all the applicants furnished the service involved on an equitable basis, or where the travel is made by public transportation (including hired vehicle), a fee equal to the actual cost thereof. However, the applicant will not be charged a new mileage rate without notification before the service is rendered. (c) Per diem charges. When service is requested at a place away from the official grader's headquarters, the fee for such service shall include a per diem charge if the employee performing the service is paid per diem in accordance with existing travel regulations. Per diem charges to applicants will cover the same period of time for which the grader receives per diem reimbursement. The per diem rate will be administratively determined by the Chief. However, the applicant will not be charged a new per diem rate without notification before the service is rendered. (d) Fees for extra copies of certificates. In addition to copies of certificates furnished under Sec. 53.16, any financially interested person may obtain not to exceed three copies of any such certificate within 1 year from its date of issuance upon payment of a fee of $1.00, and not to exceed three copies of any such certificate at any time thereafter, while a copy of such certificate is on file in the Department, upon payment of a fee of $5.00. (e) Other charges. When costs, other than costs specified in paragraphs (a), (b), (c), and (d) of this section, are involved in providing the services, the applicant will be charged for these costs. The amount of these charges will be determined administratively by the Chief. However, the applicant will not be charged for such cost without notification before the service is rendered of the charge for such item of expense. [42 FR 53902, Oct. 4, 1977, as amended at 47 FR 54927, Dec. 7, 1982; 48 FR 16874, Apr. 20, 1983] Sec. 53.19 Payment of fees and other charges. Fees and other charges for service shall be paid in accordance with the following provisions unless otherwise provided in the cooperative agreement under which the service is furnished. Upon receipt of billing for fees and other charges for service the applicant shall remit by check, draft, or money order, made payable to the Agricultural Marketing Service, U.S.D.A., payment for the service in accordance with directions on the billing, and such fees and charges shall be paid in advance if required by the official grader or other authorized official. Miscellaneous Sec. 53.20 Identification. All official graders and supervisors shall have their Agricultural Marketing Service identification cards in their possession at all times while they are performing any function under the regulations and shall identify themselves by such cards upon request. Sec. 53.21 Errors in service. When an official grader, supervisor, or other responsible employee of the Branch has evidence of misgrading, or of incorrect certification or other incorrect determination or identification as to the class, grade, other quality, or compliance of livestock, he shall report the matter to his immediate supervisor. The supervisor will investigate [[Page 13]] the matter and, if he deems advisable, will report it to the owner or his agent. The supervisor shall take appropriate action to correct errors found in the determination or identification of class, grade or other quality or compliance of livestock if the livestock is still owned by the person who owned them when, and are still located at the establishment where, the incorrect service was rendered and if such service was rendered by a grader under the jurisdiction of such supervisor, and the supervisor shall take adequate measures to prevent the recurrence of such errors. Subpart B [Reserved] PART 54_MEATS, PREPARED MEATS, AND MEAT PRODUCTS (GRADING, CERTIFICATION, AND STANDARDS)--Table of Contents Subpart A_Grading of Meats, Prepared Meats, and Meat Products Definitions Sec. 54.1 Meaning of words and terms defined. 54.2 Designation of official certificates, memoranda, marks, other identifications, and devices for purposes of the Agricultural Marketing Act. Administration 54.3 Authority. Service 54.4 Kind of service. 54.5 Availability of service. 54.6 How to obtain service. 54.7 Order of furnishing service. 54.8 When request for service deemed made. 54.9 Withdrawal of application or request for service. 54.10 Authority of agent. 54.11 Denial, conditional withdrawal, or suspension of service. 54.12 [Reserved] 54.13 Accessibility and refrigeration of products; access to establishments; suitable work environment; and access to records. 54.14 [Reserved] 54.15 Instrument grading. 54.16 Marking of products. 54.17 Official identifications. 54.18 Custody of identification devices. 54.19 Appeal of a grading service decision. 54.20 Exemptions. 54.21-54.26 [Reserved] Charges for Service 54.27 Fees and other charges for service. 54.28 Payment of fees and other charges. Miscellaneous 54.29 Identification. 54.30 [Reserved] 54.31 OMB control number. Subpart B [Reserved] Subpart C_Provisions Governing the Certification of Sanitary Design and Fabrication of Equipment Used in the Slaughter, Processing, and Packaging of Livestock and Poultry Products 54.1001 Meaning of words. 54.1002 Terms defined. 54.1003 Designation of official certificates, memoranda, marks, and other identifications for purposes of the Agricultural Marketing Act. 54.1004 Administration and implementation. 54.1005 Basis of service. 54.1006 Kind of service. 54.1007 Availability of service. 54.1008 How to obtain service. 54.1009 Order of furnishing service. 54.1010 When request for service deemed made. 54.1011 Withdrawal of application or request for service. 54.1012 Authority of agent. 54.1013 When an application may be rejected. 54.1014 Accessibility of equipment and utensils; access to establishments. 54.1015 Official reports, forms, and certificates. 54.1016 Advance information concerning service rendered. 54.1017 Authority to use official identification. 54.1018 Form of official identification and approval for use. 54.1019 Renewal of Acceptance Certification. 54.1020 Appeal service; marking equipment or utensils on appeal; requirements for appeal; certain determinations not appealable. 54.1021 Request for appeal service. 54.1022 When request for appeal service may be withdrawn. 54.1023 Denial or withdrawal of appeal service. 54.1024 Who shall perform appeal service. 54.1025 Appeal reports. 54.1026 Superseded reports. 54.1027 Application of other regulations to appeal service. 54.1028 Fees and other charges for service. 54.1029 Payment of fees and other charges. 54.1030 Identification. 54.1031 Errors in service. [[Page 14]] 54.1032 Denial or withdrawal of service. 54.1033 Confidential treatment. 54.1034 OMB control numbers assigned pursuant to the Paperwork Reduction Act. Authority: 7 U.S.C. 1621-1627. Source: 42 FR 53921, Oct. 4, 1977, unless otherwise noted. Redesignated at 46 FR 63203, Dec. 31, 1981. Subpart A_Grading of Meats, Prepared Meats, and Meat Products Definitions Sec. 54.1 Meaning of words and terms defined. Words used in this subpart in the singular form shall be deemed to import the plural, and vice versa, as the case may demand. For the purposes of such regulations, unless the context otherwise requires, the following terms shall be construed, respectively, to mean: Administrator. The Administrator of the Agricultural Marketing Service (AMS), or any officer or employee of the AMS to whom authority has been or may be delegated to act in the Administrator's stead. Agricultural Marketing Service. The Agricultural Marketing Service of the Department. Animals. Bison, cattle, goats, sheep, swine, or other species identified by the Administrator. Appeal service. Appeal service is a redetermination of the class, grade, other quality, or compliance of product when the applicant for the appeal service formally challenges the correctness of the original determination. Applicant. Any person who has applied for service under the regulations. Branch. The Grading Services Branch of the Division. Carcass. The commercially prepared or dressed body of any animal intended for human food. Carcass Data Service. The service established and conducted under the regulations to provide producers and other interested persons with data on carcass characteristics. Certification service. The service established and conducted under the regulations for the determination and certification or other identification of the compliance of products with specifications. Chief. The Chief of the Grading Services Branch, or any officer or employee of the Branch to whom authority has been or may be delegated to act in the Chief's stead. Class. A subdivision of a product based on essential physical characteristics that differentiate between major groups of the same kind of species. Compliance. Conformity of a product to the specifications under which the product was purchased or sold, with particular reference to the quality, cleanliness, state of refrigeration, method of processing, and trim of products. Cooperative agreement. A cooperative agreement between the Agricultural Marketing Service and another Federal agency or a State agency, or other agency, organization or person as specified in the Agricultural Marketing Act of 1946, as amended, for conducting the service. Department. The United States Department of Agriculture. Deputy Administrator. The Deputy Administrator of the Program, or any other officer or employee of the Program to whom authority has been or may be delegated to act in the Deputy Administrator's stead. Director. The Director of the Division, or any officer or employee of the Division to whom authority has been or may be delegated to act in the Director's stead. Division. The Quality Assessment Division of the Livestock and Poultry Program. Fabricating. Cutting into wholesale or retail cuts, dicing or grinding. Federal Meat Inspection. The meat inspection system conducted under the Federal Meat Inspection Act as amended by the Wholesome Meat Act (21 U.S.C. 601 et seq.) and the regulations thereunder (9 CFR chapter III, subchapter A). Financially interested person. Any person having a financial interest in the products involved, including but not limited to the shipper, receiver, producer, seller, buyer, or carrier of the products. Grade. (1) As a noun, this term means an important commercial subdivision [[Page 15]] of a product based on certain definite and preference determining factors, such as, but not limited to, conformation, finish, and quality in meats. (2) As a verb, this term means to determine the class, grade, or other quality of a product according to applicable standards for such product. Grading Service. The service established and conducted under the regulations for the determination and certification or other identification of the class, grade, or other quality of products under standards. Immediate container. The carton, can, pot, tin, casing, wrapper, or other receptacle or covering constituting the basic unit in which products are directly contained or wrapped when packed in the customary manner for delivery to the meat trade or to consumers. Institutional Meat Purchase Specifications. Specifications describing various meat cuts, meat products, and meat food products derived from species covered in the definition of Animals above, commonly abbreviated ``IMPS,'' and intended for use by any meat procuring activity. For labeling purposes, only product certified by the Grading Services Branch may contain the letters ``IMPS'' on the product label. Legal Holiday. Those days designated as legal public holidays in title 5, United States Code, section 6103(a). Meat. The edible part of the muscle of an animal, which is skeletal, or which is found in the tongue, in the diaphragm, in the heart, or in the esophagus, and which is intended for human food, with or without the accompanying and overlying fat and the portions of bone, skin, sinew, nerve, and blood vessels which normally accompany the muscle tissue and which are not separated from it in the process of dressing. This term does not include the muscle found in the lips, snout, or ears. Meat by-products. Any part capable of use as human food, other than meat, which has been derived from one or more cattle, sheep, swine, or goats. Meat food products. Any articles intended for human food (other than meat, prepared meats, and meat by-products) which are derived or prepared in whole or in substantial and definite part, from any portion of any animal, except such articles as organotherapeutic substances, meat juice, meat extract, and the like, which are only for medicinal purposes and are advertised only to the medical profession. Observed legal holiday. When a holiday falls on a weekend--Saturday or Sunday--the holiday usually is observed on Monday (if the holiday falls on Sunday) or Friday (if the holiday falls on Saturday). Office of grading. The office of an official grader. Official grader. An employee of the Department or other person authorized by the Department to determine and certify or otherwise identify the class, grade, other quality, or compliance of products under the regulations. Official standards. Official standards refer to the United States Standards for Grades of Carcass Beef; the United States Standards for Grades of Veal and Calf Carcasses; the United States Standards for Grades of Lamb, Yearling Mutton, and Mutton Carcasses; and/or the United States Standards for Grades of Pork Carcasses. Person. Any individual, partnership, corporation, or other legal entity, or Government agency. Prepared meats. The products intended for human food which are obtained by subjecting meat to drying, curing, smoking, cooking, grinding, seasoning, or flavoring, or to any combination of such procedures, and to which no considerable quantity of any substance other than meat or meat byproducts has been added. Processing. Drying, curing, smoking, cooking, seasoning, or flavoring or any combination of such processes, with or without fabricating. Products. Meats, prepared meats, meat by-products, or meat food products. Program. The Livestock and Poultry Program of the Agricultural Marketing Service. Quality. A combination of the inherent properties of a product which determines its relative degree of excellence. Quality grade. A designation based on those characteristics of meat which [[Page 16]] predict the palatability characteristics of the lean. Quality Systems Certification Program. A multifaceted program allowing all aspects of the livestock industry to have quality systems, or processes within quality systems, verified by AMS agent(s) to effectuate use of such quality systems to meet contractual requirements, or as a marketing tool. Service. Services offered by the Grading Services Branch such as Grading Service, Certification Service, and Carcass Data Service. Shipping container. The receptacle or covering in which one or more immediate containers of products are packed for transportation. Specifications. Descriptions with respect to the class, grade, other quality, quantity or condition of products, approved by the Administrator, and available for use by the industry regardless of the origin of the descriptions. Supervisor of grading. An official grader or other person designated by the Director or Chief to supervise and maintain uniformity and accuracy of service under the regulations. The Act. The Agricultural Marketing Act of 1946 (Title II of the act of Congress approved August 14, 1946, 60 Stat. 1087, as amended by Pub. L. 272, 84th Cong., 69 Stat. 553, 7 U.S.C. 1621-1627). The regulations. The regulations in this subpart. Yield grade. A designation which reflects the estimated yield of retail cuts that may be obtained from a beef, lamb, yearling mutton, or mutton carcass. [42 FR 53921, Oct. 4, 1977, as amended at 45 FR 51762, Aug. 5, 1980. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 61 FR 11505, Mar. 21, 1996; 63 FR 72102, Dec. 31, 1998; 84 FR 48554, Sept. 16, 2019; 84 FR 49640, Sept. 23, 2019] Sec. 54.2 Designation of official certificates, memoranda, marks, other identifications, and devices for purposes of the Agricultural Marketing Act. Subsection 203(h) of the Agricultural Marketing Act of 1946, as amended by Pub. L. 272, 84th Congress, provides criminal penalties for various specified offenses relating to official certificates, memoranda, marks or other identifications, and devices for making such marks or identifications, issued or authorized under section 203 of said act, and certain misrepresentations concerning the inspection or grading of agricultural products under said section. For the purposes of said subsection and the provisions in this part, the terms listed below shall have the respective meanings specified: (a) Official certificate means any form of certification, either written or printed, used under the regulations to certify with respect to the inspection, class, grade, quality, size, quantity, or condition of products (including the compliance of products with applicable specifications). (b) Official memorandum means any initial record of findings made by an authorized person in the process of grading, determining compliance, inspecting, or sampling pursuant to the regulations, any processing or plant-operation report made by an authorized person in connection with grading, determining compliance, inspecting, or sampling under the regulations, and any report made by an authorized person of services performed pursuant to the regulations. (c) Official mark or other official identification means any form of mark or other identification, including those prescribed in Sec. 54.17; used under the regulations in marking any products, or the immediate or shipping containers thereof, to show inspection class, grade quality, size quantity, or condition of the products (including the compliance of products with applicable specifications), or to maintain the identity of products for which service is provided under the regulations. (d) Official device means any roller, stamp, brand or other device used under the regulations to mark any products or the immediate or shipping containers, thereof, with any official mark or other official identification. Administration Sec. 54.3 Authority. The Chief is charged with the administration, under the general supervision and direction of the Director, of the regulations and the Act insofar as they relate to products. [[Page 17]] Service Sec. 54.4 Kind of service. (a) Grading Service consists of the determination, certification, and identification of the class, grade, or other quality attributes of products under applicable official standards. (b) Certification Service consists of the determination, certification, and identification of products to an approved specification. Determination of product compliance with specifications for ingredient content or method of preparation may be based upon information received from the inspection system having jurisdiction over the products involved. (c) Carcass Data Service consists of the evaluation of carcass characteristics of animals identified with an approved ear tag to applicable official standards or specifications, and the recording and transmitting of the associated data to the applicant or a party designated by the applicant. [84 FR 48555, Sept. 16, 2019] Sec. 54.5 Availability of service. Service under these regulations may be made available to products shipped or received in interstate commerce. It also may be made available to the products not shipped or received if the Director or Chief determines that the furnishing of service for such products will facilitate the marketing, distribution, processing, or utilization of agricultural products through commercial channels. Service will be furnished for products only if they were derived from animals slaughtered in federally inspected establishments or establishments operated under state meat inspection in a state other than one designated in 9 CFR 331.2. Service may be furnished for imported carcasses only if an exemption to do so is granted by the Director as described in Sec. 54.20. [84 FR 48555, Sept. 16, 2019] Sec. 54.6 How to obtain service. (a) Application. (1) Any person may apply for service with respect to products in which he or she has a financial interest by completing the required application for service. In any case in which the service is intended to be furnished at an establishment not operated by the applicant, the application must be approved by the operator of such establishment and such approval shall constitute an authorization for any employee of the Department to enter the establishment for the purpose of performing his or her functions under the regulations in this part. The application must include: (i) Name and address of the establishment at which service is desired; (ii) Name and mailing address of the applicant; (iii) Financial interest of the applicant in the products, except where application is made by a representative of a Government agency in the representative's official capacity; (iv) Signature of the applicant (or the signature and title of the applicant's representative); (v) Indication of the legal status of the applicant as an individual, partnership, corporation, or other form of legal entity; and (vi) The legal designation of the applicant's business as a small or large business, as defined by the U.S. Small Business Administration's North American Industry Classification System (NAICS) Codes. (2) In making application, the applicant agrees to comply with the terms and conditions of the regulations in this part (including, but not being limited to, such instructions governing grading of products as may be issued from time to time by the Administrator). No member of or Delegate to Congress or Resident Commissioner shall be admitted to any benefit that may arise from such service unless derived through service rendered a corporation for its general benefit. Any change in such status, at any time while service is being received, shall be promptly reported by the person receiving the service to the grading office designated by the Director or Chief to process such requests. (b) Notice of eligibility for service. The applicant will be notified whether the application is approved or denied. (c) Termination of service. If an applicant who terminates scheduled grading service requests service again within a 2-year period from the date of the initial termination, the applicant will be [[Page 18]] responsible for all relocation costs associated with the grader assigned to fulfill the new service agreement. If more than one applicant is involved, expenses will be prorated according to each applicant's committed portion of the official grader's services. [84 FR 49640, Sept. 23, 2019] Sec. 54.7 Order of furnishing service. Service shall be furnished to applicants in the order in which requests are received. Preference will be given, when necessary, to requests made by any government agency or any regular user of the service, and to requests for appeal service under Sec. 54.19. [84 FR 48555, Sept. 16, 2019] Sec. 54.8 When request for service deemed made. A request for service is considered made when received by the designated office as identified on the Application for Service form. Records showing the date and time of the request shall be made and maintained in the designated office. [84 FR 48556, Sept. 16, 2019] Sec. 54.9 Withdrawal of application or request for service. An application or a request for service may be withdrawn by the applicant at any time before the application is approved or prior to performance of service. In accordance with Sec. Sec. 54.27 and 54.28, any expenses already incurred by AMS in connection with the review of an application or fulfilling a request for service are the responsibility of the applicant. [84 FR 48556, Sept. 16, 2019] Sec. 54.10 Authority of agent. Proof that any person making an application or a request for service on behalf of any other person has the authority to do so may be required at the discretion of the Director or Chief. [84 FR 48556, Sept. 16, 2019] Sec. 54.11 Denial, conditional withdrawal, or suspension of service. (a) For misconduct--(1) Basis for denial or withdrawal. An application or a request for service may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, any person who, or whose employee or agent in the scope of the individual's employment or agency: (i) Has willfully made any misrepresentation or has committed any other fraudulent or deceptive practice in connection with any application or request for service; (ii) Has given or attempted to give, as a loan or for any other purpose, any money, favor, or other thing of value, to any employee of the Department authorized to perform any function; (iii) Has interfered with or obstructed, or attempted to interfere with or to obstruct, any employee of the Department in the performance of his or her duties under the regulations by intimidation, threats, assaults, abuse, or any other improper means; (iv) Has knowingly falsely made, issued, altered, forged, or counterfeited any official certificate, memorandum, mark, or other identification, or device for making any such mark or identification; (v) Has knowingly uttered, published, or used as true any such falsely made, issued, altered, forged, or counterfeited certificate, memorandum, mark, identification, or device; (vi) Has knowingly obtained or retained possession of any such falsely made, issued, altered, forged, or counterfeited certificate, memorandum, mark, identification, or device, or of any such official device, or of any product bearing any such falsely made, issued, altered, forged, or counterfeited mark or identification, or of any carcass or wholesale or retail cut bearing any designation specified in paragraph (a)(1)(vii) of this section which has not been federally graded or derived from a carcass graded as being of the indicated grade; (vii) Has applied the designation ``US'' or ``USDA'' and ``Prime,'' ``Choice,'' ``Select,'' ``Good,'' ``Standard,'' ``Commercial,'' ``Utility,'' ``Cutter,'' ``Canner,'' ``Cull,'' ``No. 1,'' ``No. 2,'' ``No. 3,'' ``No. 4,'' ``Yield Grade 1,'' ``Yield Grade 2,'' ``Yield Grade 3,'' ``Yield Grade 4,'' ``Yield Grade 5,'' and ``USDA Accepted as Specified,'' by stamp or text enclosed within a shield, or brand directly on any carcass, [[Page 19]] wholesale cut, or retail cut of any carcass, or has applied the aforementioned designations including ``USDA Certified,'' and ``USDA Further Processing Certification Program'' on the marketing material associated with any such product as part of a grade designation or product specification; (viii) Has applied to immediate containers or shipping containers of carcasses, wholesale cuts, or retail cuts, grade designations specified in paragraph (a)(1)(vii) of this section, when such carcasses, wholesale cuts, or retail cuts contained therein have not been federally graded; (ix) Has knowingly used, moved, or otherwise altered, in any manner, meat or meat products identified by an official product control device, mark, or other identification as specified in Sec. 54.17, or has removed such official device, mark, or identification from the meat or meat products so identified without the express permission of an authorized representative of the USDA; or (x) Has in any manner not specified in this paragraph violated subsection 203(h) of the Act: Provided, that paragraph (a)(1)(vi) of this section shall not be deemed to be violated if the person in possession of any item mentioned therein notifies the Director or Chief without delay that the person has possession of such item and, in the case of an official device, surrenders it to the Chief, and, in the case of any other item, surrenders it to the Director or Chief or destroys it or brings it into compliance with the regulations by obliterating or removing the violative features under supervision of the Director or Chief: And provided further, that paragraphs (a)(1) (ii) through (ix) of this section shall not be deemed to be violated by any act committed by any person prior to the making of an application of service under the regulations by the principal person. An application or a request for service may be rejected or the benefits of the service may be otherwise denied to, or withdrawn from, any person who operates an establishment for which that person has made application for service if, with the knowledge of such operator, any other person conducting any operations in such establishment has committed any of the offenses specified in paragraphs (a)(1)(i) through (x) of this section after such application was made. Moreover, an application or a request for service made in the name of a person otherwise eligible for service under the regulations may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, such a person: (A) In case the service is or would be performed at an establishment operated: (1) By a corporation, partnership, or other person from whom the benefits of the service are currently being withheld under this paragraph; or (2) By a corporation, partnership, or other person having an officer, director, partner, or substantial investor from whom the benefits of the service are currently being withheld and who has any authority with respect to the establishment where service is or would be performed; or (B) In case the service is or would be performed with respect to any product with which any corporation, partnership, or other person within paragraph (a)(1)(x)(A)(1) of this section has a contract or other financial interest. (2) Procedure. All cases arising under this paragraph shall be initially conducted in accordance with the Supplemental Rules of Practice in part 50 of this chapter. Any issue unable to be resolved under part 50 of this chapter shall be resolved or handled in accordance with the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statutes set forth in Sec. Sec. 1.130 through 1.151 of this title. (b) For miscellaneous reasons. An application or a request for service may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, any person, without a hearing by the official in charge of the appropriate office of grading, with the concurrence of the Director or Chief (1) for administrative reasons such as the nonavailability of personnel to perform the service; (2) for the failure to pay for service; (3) in case the application or request relates to products which are not eligible for service under Sec. 54.5 or which are unclean or are in an unclean establishment; (4) for other noncompliance with the conditions on which [[Page 20]] service is available as provided in the regulations, except matters covered by paragraph (a) of this section; or (5) in case the person is a partnership, corporation, or other person from whom the benefits of the service are currently being withheld under paragraph (a) of this section. Notice of such denial or withdrawal, and the reasons therefor, shall promptly be given to the person involved. (c) Filing of records. The final orders in formal proceedings under paragraph (a) of this section to deny or withdraw the service under the regulations (except orders required for good cause to be held confidential and not cited as precedents) and other records in such proceedings (except those required for good cause to be held confidential) shall be filed with the Hearing Clerk and shall be available for inspection by persons having a proper interest therein. [42 FR 53921, Oct. 4, 1977. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 50 FR 14366, Apr. 12, 1985; 52 FR 35683, Sept. 23, 1987; 60 FR 8464, Feb. 14, 1995; 84 FR 48556, Sept. 16, 2019] Sec. 54.12 [Reserved] Sec. 54.13 Accessibility and refrigeration of products; access to establishments; suitable work environment; and access to records. (a) The applicant shall make products easily accessible for examination, with appropriate and adequate illuminating facilities, in order to disclose their class, grade, other quality characteristics, and compliance with official standards or other contractual requirements for which service is being provided. Supervisors of grading and other employees of the Department responsible for maintaining uniformity and accuracy of service shall have access to all parts of establishments covered by approved applications for service under the regulations, for the purpose of examining all products in the establishments that have been or are to be graded or examined for compliance with specifications or which bear any marks of grade or compliance. (b) Grading service will be furnished only for meat that an official grader determines is chilled so that grade factors are developed to the extent that a proper grade determination can be made in accordance with the official standards. Meat that is presented in a frozen condition is not eligible for a grade determination. Meat of all eligible species shall be graded only in the establishment where the animal was slaughtered or initially chilled (except for veal and calf carcasses, which will be graded only after the hide is removed and only in the establishment where such removal occurs). (c) Applicants are responsible for providing a work environment where official graders are not subjected to physical and/or verbal abuse, or other elements that could have a negative effect on providing an unbiased, third-party evaluation. Applicants shall designate primary company representatives to discuss grade placements and certification determinations with official graders. (d) Applicants will make products and related records (approved labeling, technical proposals, quality plans, specifications, end product data schedules, grade volume information, etc.) easily accessible and provide assistance and any equipment necessary to accomplish the requested services. Equipment may include storage lockers/cabinets, branding ink, certified scales, food blenders, processors, grinders, sampling containers, sanitation equipment, thermometers, adequate lighting, weight tags, display monitors, video equipment for monitoring live animal schedules, etc. When offering product for grading or certification, applicants must ensure a minimum of 90 percent acceptable product. (e) Applicants will provide a metal cabinet(s) or locker(s) for the secure storage of official meat grading equipment and identification devices for each official meat grader assigned to their establishment. Such cabinet(s) or locker(s) must be capable of being locked with a Government-owned lock and be located in an easily accessible and secure location within the applicant's establishment. [84 FR 48556, Sept. 16, 2019] [[Page 21]] Sec. 54.14 [Reserved] Sec. 54.15 Instrument grading. (a) Applicants may use USDA-approved technologies to augment the official USDA grading process for approved species presented for official grading. This voluntary program may be utilized by a plant at its discretion but must comply with QAD procedures to be recognized and relied upon by the official grader in conducting official duties. (b) Applicants have the option to augment quality and yield grading services through the use of vision-based instrument technology. Instrument grading may be used as an option for determining degrees of marbling and yield factors for meat carcasses. AMS approves the grading instrument itself and its use within individual applicant facilities. Applicants may contact grading supervision to initiate the process for in-plant approval. The process for instrument grading approval at an applicant's facility is dictated through internal procedures. Final determination of quality and yield grades is made by the official grader. [84 FR 48557, Sept. 16, 2019] Sec. 54.16 Marking of products. All products examined for class and grade under the official standards, or the immediate containers and the shipping containers, shall be stamped, branded, or otherwise marked with an appropriate official identification. Except as otherwise directed by the Director, such markings will not be required when an applicant desires only an official memorandum. The marking of products, or their containers, as required by this section shall be done by official graders or under their immediate supervision. [84 FR 48557, Sept. 16, 2019] Sec. 54.17 Official identifications. (a) A shield enclosing the letters ``USDA'' and identification letters assigned to the grader performing the service, as shown in Figure 1 to paragraph (a) of this section, constitutes a form of official identification under the regulations for preliminary grade of carcasses. This form of official identification may also be used to determine the final quality grade of carcasses; one stamp equates to ``USDA Select'' or ``USDA Good''; two stamps placed together vertically equates to ``USDA Choice''; and three stamps placed together vertically equates to ``USDA Prime.'' [GRAPHIC] [TIFF OMITTED] TR16SE19.002 (b) A shield enclosing the letters ``USDA,'' as shown in Figure 2 to paragraph (b) of this section, with the appropriate quality grade designation ``Prime,'' ``Choice,'' ``Select,'' ``Good,'' ``Standard,'' ``Commercial,'' ``Utility,'' ``Cutter,'' ``Canner,'' or ``Cull,'' as provided in the United States Standards for Grades of Carcass Beef, the United States Standards for Grades of Veal and Calf Carcasses, and the United States Standards for Grades of Lamb, Yearling Mutton, and Mutton Carcasses; and accompanied by the class designation ``Bullock,'' ``Veal,'' ``Calf,'' ``Lamb,'' ``Yearling Mutton,'' or ``Mutton,'' constitutes a form of official identification under the regulations to show the quality grade, and where necessary, the class, under said standards, of steer, heifer, and cow beef, veal, calf, lamb, yearling mutton, and mutton. The identification letters assigned to the grader performing the service will appear underneath and outside of the shield. [GRAPHIC] [TIFF OMITTED] TR16SE19.003 (c) A shield enclosing the letters ``USDA'' and the words ``Yield Grade,'' as in Figure 3 to paragraph (c) of this section, with the appropriate yield grade designation ``1,'' ``2,'' ``3,'' ``4,'' or ``5'' as provided in the United States [[Page 22]] Standards for Grades of Carcass Beef and the United States Standards for Grades of Lamb, Yearling Mutton, and Mutton Carcasses, constitutes a form of official identification under the regulations to show the yield grade under said standards. When yield graded, bull and bullock carcasses will be identified with the class designation ``Bull'' and ``Bullock,'' respectively. The identification letters assigned to the grader performing the service will appear underneath and outside of the shield. [GRAPHIC] [TIFF OMITTED] TR16SE19.004 (d) For combined quality and yield grade identification purposes only, a shield enclosing the letters ``US'' on one side and ``DA'' on the other, with the appropriate yield grade designation number ``1,'' ``2,'' ``3,'' ``4,'' or ``5,'' and with the appropriate quality grade designation of ``Prime,'' ``Choice,'' ``Select,'' ``Good,'' ``Standard,'' ``Commercial,'' ``Utility,'' ``Cutter,'' ``Canner,'' or ``Cull,'' as shown in Figure 4 to paragraph (d) of this section, constitutes a form of official identification under the regulations to show the quality and yield grade under said standards. The identification letters assigned to the grader performing the service will appear underneath and outside of the shield. [GRAPHIC] [TIFF OMITTED] TR16SE19.005 (e) Under the regulations, for yield grade identification purposes only, a shield enclosing the letters ``US'' on one side and ``DA'' on the other, and with the appropriate yield grade designation number ``1,'' ``2,'' ``3,'' ``4,'' or ``5,'' as shown in Figure 5 to paragraph (e) of this section, constitutes a form of official identification under the regulations to show the yield grade under said standards. The identification letters assigned to the grader performing the service will appear underneath and outside of the shield. [[Page 23]] [GRAPHIC] [TIFF OMITTED] TR16SE19.006 (f) For quality grade identification only, a shield enclosing the letters ``US'' on one side and ``DA'' on the other with the appropriate quality grade designation of ``Prime,'' ``Choice,'' ``Select,'' ``Good,'' ``Standard,'' ``Commercial,'' ``Utility,'' ``Cutter,'' ``Canner,'' or ``Cull,'' as shown in Figure 6 to paragraph (f) of this section, constitutes a form of official identification under the regulations to show the yield grade under said standards. The identification letters assigned to the grader performing the service will appear underneath and outside of the shield. [GRAPHIC] [TIFF OMITTED] TR16SE19.007 (g) As shown in Figure 7 to paragraph (g) of this section, a shield enclosing the letters ``USDA'' with the appropriate grade designation ``1,'' ``2,'' ``3,'' ``4,'' or ``Utility,'' as provided in the Official United States Standards for Grades of Pork Carcasses, constitutes a form of official identification under the regulations to show the grade under said standards of barrow, gilt, and sow pork carcasses. [GRAPHIC] [TIFF OMITTED] TR16SE19.008 (h) The following constitute forms of official identification under the regulations to show compliance of products: [GRAPHIC] [TIFF OMITTED] TR16SE19.009 [GRAPHIC] [TIFF OMITTED] TR16SE19.010 (i) [Reserved] (j) Figure 11 to paragraph (j) of this section, constitutes official identification to show that products produced under USDA AMS supervision that meet specified requirements may carry the ``USDA Certified'' statement and/or ``USDA Certified'' shield, so long as each is used in direct association with a clear description of the standard or other requirement(s) to which the product claims to be certified. (1) The ``USDA Certified'' shield must replicate the form and design of the example in Figure 11 and must be printed legibly and conspicuously: (i) On a white background, with the term ``USDA'' in white overlaying a blue upper third of the shield and the term ``Certified'' in black overlaying a white middle third of the shield, with no terms in the red lower third of the shield; or (ii) On a white or transparent background with a black trimmed shield, with the term ``USDA'' in white overlaying a black upper third of the shield and the term ``Certified'' in black overlaying the white or transparent remaining two-thirds of the shield. (2) Use of the ``USDA Certified'' statement and the ``USDA Certified'' shield shall be approved in writing by the Director prior to use by an applicant. [GRAPHIC] [TIFF OMITTED] TR16SE19.012 [[Page 24]] (k) Figure 12 to paragraph (k) of this section, constitutes official identification to show product or services produced under an approved USDA Further Processing Certification Program (FPCP): (1) Products produced under an approved USDA FPCP may use the ``USDA Further Processing Certification Program'' statement and the ``USDA Further Processing Certification Program'' shield; and (2) The USDA Further Processing Certification Program shield must replicate the form and design of the example in Figure 12 to paragraph (k) of this section and must be printed legibly and conspicuously: (i) On a white background, with the term ``USDA'' in white overlaying a blue upper third of the shield and the terms ``USDA Further Processing Certification Program'' in black overlaying a white middle third of the shield, with no terms in the red lower third of the shield; or (ii) On a white or transparent background with a black trimmed shield, with the term ``USDA'' in white overlaying a black upper third of the shield and the terms ``USDA Further Processing Certification Program'' in black overlaying the white or transparent remaining two- thirds of the shield. (3) Use of the ``USDA Further Processing Certification Program'' statement and the ``USDA Further Processing Certification Program'' shield shall be approved in writing by the Director prior to use by an applicant. [GRAPHIC] [TIFF OMITTED] TR16SE19.013 (l)(1) One device used by official graders is the LP-36 Form, a rectangular, serially numbered, red tag on which a shield encloses the words ``USDA Hold.'' This device constitutes a form of official identification under the regulations for meat and meat products. (2) Official graders and supervisors of grading may use ``USDA Hold'' tags or other methods and devices as approved by the Administrator for the identification and control of meat and meat products that are not in compliance with the regulations or are held pending the results of an examination. Any such meat or meat product identified shall not be used, moved, or altered in any manner; nor shall official control identification be removed, without the expressed permission of an authorized representative of the USDA. [84 FR 48557, Sept. 16, 2019, as amended at 85 FR 62937, Oct. 6, 2020] Sec. 54.18 Custody of identification devices. (a) All identification devices used in marking products or their containers, including those indicating compliance with approved specifications, shall be kept in the custody of the Branch, and accurate records shall be kept by the Branch of all such devices. Such devices shall be distributed only to persons authorized by the Department, who will keep the devices in their possession or control at all times. (b) [Reserved] [84 FR 48562, Sept. 16, 2019] Sec. 54.19 Appeal of a grading service decision. Appeal service is a redetermination of the class, grade, other quality, or compliance of product when the applicant for the appeal service formally challenges the correctness of the original determination. (a) Authority to request appeal service. A request for appeal service with respect to any product may be made by any person who is financially interested in the product when that person disagrees with the original determination as to class, grade, other quality, or compliance of the product as shown by the markings on the product or its containers, or as stated in the applicable official memorandum. (b) Requesting appeal service. A request for appeal service shall be filed with the Chief. The request shall state the reasons for appeal and may be accompanied by a copy of any previous official report, or any other information that the applicant may have received regarding the product at the time of the original service. Such request may be made orally (including by [[Page 25]] telephone) or in writing (including by email). If made orally, the person receiving the request may require that it be confirmed in writing. (c) Determining original service from appeal service. Examination requested to determine the class, grade, other quality, or compliance of a product that has been altered or has undergone a material change since the original service, or examination of product requested for the purpose of obtaining an official memorandum and not involving any question as to the correctness of the original service for the product involved, shall be considered equivalent to original service and not appeal service. (d) Not eligible for appeal service. Grade determinations cannot be appealed for any lot or product consisting of less than 10 similar units or carcasses. Moreover, appeal service will not be furnished with respect to product that has been altered or has undergone any material change since the original service. (e) Withdrawal of appeal service. A request for appeal service may be withdrawn by the applicant at any time before the appeal service has been performed; however, the applicant is responsible for payment of any expenses incurred by the Branch towards providing the appeal service prior to withdrawal. (f) Denial or withdrawal of appeal service. A request for appeal service may be rejected or such service may be otherwise denied to or withdrawn from any person, without a hearing, in accordance with the procedure set forth in Sec. 54.11(b), if it appears that the person or product involved is not eligible for appeal service under Sec. 54.19(a) and (b), or that the identity of the product has been lost; or for any of the causes set forth in Sec. 54.11(b). Appeal service may also be denied to, or withdrawn from, any person in any case under Sec. 54.11(a). (g) Who performs appeal service. Appeal service shall be performed by the National Meat Supervisor or his or her designee. (h) Appeal service report. Immediately after appeal service has been performed for any products, a report shall be prepared and issued referring specifically to the original findings and stating the class, grade, other quality, or compliance of the products as shown by the appeal service. [84 FR 48562, Sept. 16, 2019] Sec. 54.20 Exemptions. Any exemption to the regulations must be approved by the Director. Exemptions may include but are not limited to: (a) Grading the meat of animals in other than carcass form if the class, grade, and other quality attributes may be determined under the applicable official standards. (b) Grading in an establishment other than where the animal was slaughtered or initially chilled if the class, grade, and other quality attributes can be determined under the applicable official standards, and if the identity of the carcasses can be maintained. (c) If the Branch is unable to provide grading service in a timely manner and the meat can be identified in conformance with the official standards. (d) Grading in the establishment other than where the hide is removed, provided the meat can be identified in conformance with the official standards. (e) Grading imported carcasses, provided: (1) The imported carcass is marked so that the name of the country of origin is conspicuous to the USDA grader. The mark of foreign origin shall be imprinted by roller brand, handstamp, tag, or other approved method. (2) The imprints of the mark of foreign origin have been submitted to the Chief for the determination of compliance with these regulations prior to use on meats offered for Federal grading. (3) The applicant notifies the official grader performing the service whenever imported carcasses are offered for grading. (f) For good cause and provided that the meat can be identified in conformance with the official standards and procedures. [84 FR 48563, Sept. 16, 2019] [[Page 26]] Sec. Sec. 54.21-54.26 [Reserved] Charges for Service Sec. 54.27 Fees and other charges for service. (a) Fees and other charges equal as nearly as may be to the cost of the services rendered shall be assessed and collected from applicants in accordance with the following provisions unless otherwise provided in the cooperative agreement under which the services are furnished, or as provided in Sec. 54.6. For each calendar year, AMS will calculate the rate for inspection, grading, or certification services, per hour per program employee using the following formulas: (1) Regular rate. The total AMS grading, inspection, or certification program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service. (2) Overtime rate. The total AMS grading, inspection, or certification program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5 plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (3) Holiday rate. The total AMS grading, inspection, or certification program personnel direct pay divided by direct hours which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (b)(1) For each calendar year, based on previous fiscal year/ historical actual costs, AMS will calculate the benefits, operating, and allowance for bad debt components of the regular, overtime and holiday rates as follows: (i) Benefits rate. The total AMS grading, inspection, or certification program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions. (ii) Operating rate. The total AMS grading, inspection, or certification program operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation. (iii) Allowance for bad debt rate. Total AMS grading, inspection, or certification program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked. (2) The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on the most recent Office of Management and Budget's Presidential Economic Assumptions. (c) Fees for service--(1) On a scheduled basis. Minimum fees for service performed under a scheduled agreement or an agreement by memorandum will be based on 8 hours per day, Monday through Friday, excluding observed Federal legal holidays occurring Monday through Friday on which no grading and certification services are performed. The Agency reserves the right to use any grader assigned to the plant under a scheduled agreement to perform service for other applicants and no charge will be assessed to the scheduled applicant for the number of hours charged to the other applicant. Charges to plants are as follows: (i) The regular hourly rate will be charged for hours worked in accordance with the approved tour of duty on the application for service between the hours of 6 a.m. and 6 p.m. (ii) The overtime rate will be charged for hours worked in excess of the approved tour of duty on the application for service. (iii) The holiday hourly rate will be charged for hours worked on observed legal holidays. (iv) The night differential rate (for regular or overtime hours) will be [[Page 27]] charged for hours worked between 6 p.m. and 6 a.m. (v) The Sunday differential rate (for regular or overtime hours) will be charged for hours worked on a Sunday. (2) On an unscheduled basis. Minimum fees for service performed under an unscheduled basis agreement will be based on the time required to render the service, calculated to the nearest 15-minute period, including official grader's travel and certificate, memorandum, and/or report preparation time performed in connection with the performance of service. A minimum charge of one-half hour shall be made for service pursuant to each request notwithstanding that the time required to perform service may be less than 30 minutes. Charges to plants are as follows: (i) The regular hourly rate will be charged for the first 8 hours worked per grader per day for all days except observed legal holidays. (ii) The overtime rate will be charged for hours worked in excess of 8 hours per grader per day for all days except observed legal holidays. (iii) The holiday hourly rate will be charged for hours worked on observed legal holidays. (d) Fees for appeal service. Fees for appeal service shall be determined on the basis of the time of two official graders required to render the service, including the time required for the preparation of certificates and travel of such graders in connection with the performance of the service. Provided, that when on appeal it is found that there was error in the original determination equal to or exceeding ten percent of the total number of similar units of the products involved, no charge will be made for the appeal service unless a special agreement therefor was made with the applicant in advance. (e) Fees for extra copies of certificates. In addition to copies of certificates furnished under Sec. 54.14, any financially interested person may obtain not to exceed three copies of any such certificate within one year from its date of issuance upon payment of a fee, and not to exceed three copies of any such certificate at any time thereafter, while a copy of such certificate is on file in the Department. The fee for copies of certificates will be determined using the formulas in this section. [79 FR 67321, Nov. 13, 2014, as amended at 84 FR 49641, Sept. 23, 2019] Sec. 54.28 Payment of fees and other charges. Fees and other charges for service must be paid in accordance with the following provisions unless otherwise provided in the cooperative agreement under which the service is furnished. Upon receipt of billing for fees and other charges for service, the applicant will remit by check, electronic funds transfer, draft, or money order made payable to the National Finance Center. Payment for the service must be made in accordance with directions on the billing statement, and such fees and charges must be paid in advance if required by the official grader or other authorized official. [84 FR 49641, Sept. 23, 2019] Miscellaneous Sec. 54.29 Identification. All official graders and supervisors of grading shall have their Agricultural Marketing Service identification cards in their possession at all times while they are performing any function under the regulations and shall identify themselves by such cards upon request. Sec. 54.30 [Reserved] Sec. 54.31 OMB control number. The information collection and recordkeeping requirements of this part have been approved by OMB under 44 U.S.C. Chapter 35 and have been assigned OMB Control Number 0581-0128. [84 FR 48563, Sept. 16, 2019] Subpart B [Reserved] [[Page 28]] Subpart C_Provisions Governing the Certification of Sanitary Design and Fabrication of Equipment Used in the Slaughter, Processing, and Packaging of Livestock and Poultry Products Source: 66 FR 1198, Jan. 5, 2001, unless otherwise noted. Sec. 54.1001 Meaning of words. For the purposes of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Sec. 54.1002 Terms defined. Act. The Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et seq.). Administrator. The Administrator of the Agricultural Marketing Service (AMS), United States Department of Agriculture, or the representative to whom authority has been delegated to act in the stead of the Administrator. Agricultural Marketing Service (AMS). The Agricultural Marketing Service of the United States Department of Agriculture. Applicant. Any person who applies for service under the regulations in this subpart. Branch. The Dairy Grading Branch, Dairy Programs, Agricultural Marketing Service. Chief. The Chief of the Dairy Grading Branch, Dairy Programs, Agricultural Marketing Service, or the representative to whom authority has been delegated to act in the stead of the Chief. Compliance. Conformity of a processing system, piece of processing equipment, or a utensil to identified standards. Department. The United States Department of Agriculture. Deputy Administrator. The Deputy Administrator of the Dairy Programs of the Agricultural Marketing Service or any officer or employee of the Dairy Programs to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated to act in the stead of the Deputy Administrator. Design Review Specialist. An employee of the Branch who determines and certifies or otherwise evaluates the compliance of equipment or utensils under the regulations. Design Evaluation and Certification Service. The service established and conducted under the regulations for the evaluation and certification or other identification of the compliance of equipment or utensils used for the slaughter, processing or packaging of livestock and poultry products (Referred to hereinafter as ``equipment'' or ``utensils'') with sanitary specifications or standards. Fabricator. Commercial entity engaged in the manufacture or assembly of equipment or utensils. Financially interested person. Any person having a financial interest in the equipment or utensils involved, including but not limited to the designer, fabricator, or user of the equipment or utensils. Legal Holiday. Those days designated as legal public holidays in Title 5, United States Code, section 6103(a). Person. Any individual, partnership, corporation, or other legal entity, or Government agency. Processing. Cooking, baking, curing, heating, drying, mixing, grinding, churning, separating, extracting, cutting, fermenting, eviscerating, preserving, dehydrating, freezing, or otherwise manufacturing, and includes the packaging, canning, jarring, or otherwise enclosing in a container. Program. The Dairy Programs of the Agricultural Marketing Service. Standards. The most recent version of standards for equipment and utensils formulated by the NSF/3-A Joint Committee on Food Processing Equipment (Referred to hereinafter as ``NSF/3-A''). The regulations. The regulations in this Subpart. Sec. 54.1003 Designation of official certificates, memoranda, marks, and other identifications, for purposes of the Agricultural Marketing Act. Subsection 203(h) of the Agricultural Marketing Act of 1946, as amended provides criminal penalties for various specified offenses relating to official certificates, memoranda, and marks or [[Page 29]] other identifications, issued or authorized under section 203 of said Act, and certain misrepresentations concerning the inspection or grading of agricultural products under said section. For the purposes of said subsection and the provisions in this subpart, the terms listed in paragraphs (a) through (c) of this section shall have the respective meanings specified: (a) ``Official certificate'' means any form of certification, either written or printed, used under the regulations to certify with respect to the evaluation, review, condition, or acceptance of equipment or utensils (including the compliance of equipment or utensils with applicable standards). (b) ``Official memorandum'' means any initial record of findings made by an authorized employee of the Dairy Grading Branch in the process of determining compliance, evaluating, or reviewing equipment or utensils pursuant to the regulations, any processing or in plant- operation report made by an authorized Dairy Grading Branch employee in connection with determining compliance, evaluating, or reviewing equipment or utensils under the regulations, and any report made by an authorized employee of the Dairy Grading Branch of any other services performed pursuant to the regulations. (c) ``Official mark'' or ``other official identification'' means any form of mark or other identification, including those prescribed in Sec. 54.1018; used under the regulations in marking any equipment or utensils or displayed as an indication that the equipment or utensils has been evaluated by AMS (including the compliance of the equipment or utensils with applicable standards). Sec. 54.1004 Administration and implementation. The Administrator designates the administration and implementation of the Certification of Sanitary Design and Fabrication of Equipment Used in the Processing of Livestock and Poultry Products service to the Dairy Grading Branch, Dairy Programs, Agricultural Marketing Service. The Chief is charged with the administration, under the general supervision and direction of the Deputy Administrator, of the regulations and the Act insofar as they relate to equipment or utensils used to process livestock and poultry products. Sec. 54.1005 Basis of service. (a) Certification of Sanitary Design and Fabrication of Equipment Used in the Slaughter, Processing, and Packaging of Livestock and Poultry Products service shall be performed in accordance with the provisions of this subpart, the instructions and guidelines issued or approved by the Chief and the applicable standards developed by the NSF/ 3-A. (b) Copies of standards developed by NSF/3-A that AMS will inspect and certify to are available, for a nominal fee, from NSF International at www.nsf.org or contact Techstreet, 310 Miller Avenue, Ann Arbor, MI 48103; Phone (800) 699-9277. Copies of all other instructions and guidelines can be obtained from, and copies of standards developed by NSF/3-A may be inspected at, the U.S. Department of Agriculture, Agricultural Marketing Service, Dairy Programs, Dairy Grading Branch; Room 2746-S; 1400 Independence Ave., SW., Washington, DC 20250-6456. (c) All services provided in accordance with the regulations shall be rendered without discrimination on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital or family status. Sec. 54.1006 Kind of service. Certification of Sanitary Design and Fabrication of Equipment Used in the Slaughter, Processing, and Packaging of Livestock and Poultry Products service under the regulations shall consist of the evaluation, certification and/or identification, upon request by the applicant, of the adherence of the design and fabrication of equipment and utensils to sanitary principles and criteria under applicable standards identified in this subpart. Equipment or utensils having an identical design, materials of construction, and fabrication, except for scaling up or down in size, may be submitted for evaluation as a model line or series. Determination as to equipment or utensils compliance with standards for materials of fabrication or method of fabrication [[Page 30]] may be based upon information received from the fabricator. Sec. 54.1007 Availability of service. Service under these regulations may be made available to the designers, fabricators, users, or other interested person or party, of the equipment or utensils. Subject to the provisions of this subpart, services shall be performed only when a qualified design review specialist is available, and when the location of the equipment or utensils, evaluation facilities and conditions, as determined by the Chief, are suitable for conducting such service. Sec. 54.1008 How to obtain service. (a) Application. Any person may apply to the Chief for service under the regulations with respect to equipment or utensils in which the applicant is financially interested. The application shall be made on a form approved by the Chief. In any case in which the service is intended to be furnished at an establishment not operated by the applicant, the applicant shall be responsible for obtaining approval for accessability of the equipment or utensil from the operator of such establishment and such approval shall constitute an authorization for any employees of the Department to enter the establishment for the purpose of performing their functions under the regulations. The application shall state: (1) The name and address of the establishment at which service is desired; (2) The name and post office address of the applicant; (3) Identification of the party that will be responsible for payment of all services rendered in response to the request; (4) The type of equipment or utensil presented for evaluation; (5) The date(s) on which service is requested to be performed; and (6) The signature of the applicant (or the signature and title of the applicant's representative) and date of the request. (b) Notice of eligibility for service. The applicant for service will be notified whether the applicant's application is approved. Sec. 54.1009 Order of furnishing service. Service under the regulations shall be furnished to applicants, insofar as practicable and subject to the availability of a qualified design review specialist, in the order in which requests therefor are received, insofar as consistent with good management, efficiency and economy. Precedence will be given, when necessary, to requests made by any government agency and to requests for appeal service under Sec. 54.1021. Sec. 54.1010 When request for service deemed made. A request for service under the regulations shall be deemed to be made when received by the Branch. Records showing the date and time of the request shall be maintained. Sec. 54.1011 Withdrawal of application or request for service. An application or a request for service under the regulations may be withdrawn by the applicant at any time before the application is approved or prior to performance of service. The applicant shall be responsible for payment, in accordance with Sec. 54.1028 and Sec. 54.1029, of any expenses already incurred by the Agricultural Marketing Service in connection therewith. Sec. 54.1012 Authority of agent. Proof of the authority of any person making an application or a request for service under the regulations on behalf of any other person may be required at the discretion of the Deputy Administrator or Chief or other employee receiving the application or request under Sec. 54.1008. Sec. 54.1013 When an application may be rejected. (a) An application or a request for service may be denied by the design review specialist, with the concurrence of the Deputy Administrator or Chief when: (1) For administrative reasons such as the non-availability of personnel to perform the service; (2) The application or request relates to equipment or utensils which are not eligible for service under Sec. 54.1006; [[Page 31]] (3) The applicant fails to meet either the application requirements prescribed in this subpart or the conditions for receiving such service; (4) The equipment or utensil is owned by, or located on the premises of, a person currently denied the benefits of the Act; (5) The applicant has substantial financial ties to a person who is currently denied the benefits of the Act, or who has been adjudged, in an administrative or judicial proceeding, responsible in any way for a current denial of benefits of the Act to any other person. (6) The applicant is currently denied services under the Act. (7) Any fees billed to the applicant are not paid within 30 days; or (8) The applicant has failed to comply with the Act or this subpart or with the instructions or guidelines issued hereunder. (b) The Chief shall provide notice to an applicant whose application is rejected, and shall explain the reason(s) for the rejection. If such notification is made verbally, written confirmation may be provided. Sec. 54.1014 Accessibility of equipment and utensils; access to establishments. (a) The applicant shall cause equipment and utensils to be made easily accessible for examination and to be so placed, with adequate illumination to facilitate evaluation for compliance. The applicant shall furnish or make available any necessary tools; such as boroscope, profilometer, disassembly tools, ladders, radius gauges, and the like; necessary to complete the evaluation. (b) Supervisors of USDA design review specialists responsible for maintaining uniformity and accuracy of service under the regulations shall have access to all parts of establishments covered by approved applications for service under the regulations, for the purpose of examining all equipment or utensils in the establishments which have been or are to be evaluated for compliance with standards or which bear any marks of compliance. Sec. 54.1015 Official reports, forms, and certificates. (a) Report. The design review specialist shall prepare, sign, and issue a narrative report covering the observations, comments and recommendations based on the evaluation for conformance with standards of equipment and utensils as provided for in Sec. 54.1005 and indicate the fees and other charges incurred for the services rendered. (b) Forms. Form DA-161 is the official certificate for equipment or utensils evaluated and is accepted under the regulations. Issuance of this certificate is optional at the request of the applicant. (c) Distribution. The original report and official certificate (if requested) shall be delivered or mailed to the applicant or other persons designated by the applicant. Other copies shall be forwarded as required by agency, program, and branch instructions. Additional copies will be furnished to any person financially interested in the equipment or utensil involved with the concurrence of the applicant and upon payment of fees, as provided in Sec. 54.1028 and Sec. 54.1029. Sec. 54.1016 Advance information concerning service rendered. Upon request of any applicant, all or any part of the contents of any report issued to the applicant under the regulations, or other notification concerning the determination of compliance of equipment or utensils for such applicant may be transmitted by facsimile transmission to the applicant, or to any person designated by the applicant at the applicant's expense. Sec. 54.1017 Authority to use official identification. The Chief may authorize an applicant or any persons designated by the applicant to use the official identification symbol to mark equipment or utensils, or for display in descriptive or promotional materials providing the equipment or utensils is evaluated pursuant to this subpart and found to be in compliance. [[Page 32]] Sec. 54.1018 Form of official identification and approval for use. (a) The official identification symbol approved for use on equipment, utensils, or descriptive or promotional materials shall appear in the form and design shown in Figure 1. (b) The official identification symbol on equipment or utensils shall be displayed by etching or the placement of a non-removable sticker located in close proximity to the equipment identification plate. (c) The official identification symbol is recommended to be at least \3/4\ inch by \3/4\ inch in size. Symbols which are smaller in size will be considered provided they are sufficiently large to be identifiable and legible. (d) The official identification symbol shall not be used in descriptive and promotional materials without prior approval by the Chief. The official identification symbol, if used, on the descriptive or promotional materials shall be printed as part of the text or format. (e) An applicant shall submit to the Chief of the Dairy Grading Branch, Dairy Programs, Agricultural Marketing Service, U.S. Department of Agriculture, P.O. Box 96456, Washington, D.C. 20090-6456, an application, if one is not on file, requesting approval to use the official identification symbol on officially accepted equipment and in descriptive or promotional materials. [[Page 33]] [GRAPHIC] [TIFF OMITTED] TR05JA01.000 Sec. 54.1019 Renewal of acceptance certification. The manufacturer of any equipment or utensil which has been issued a report or certification stating acceptance of compliance shall resubmit the design and fabrication details of any change in materials of construction, design, or fabrication which may impair the cleanability or hygienic design of the equipment or utensil. If no change in materials of construction, design, or fabrication which may impair the cleanability or hygienic design of the equipment or utensil has occurred during the period of four years after the date of the most recent report stating acceptance of compliance or if no design or fabrication changes have been made, the applicant may submit a certificate of conformance signed by the chief engineering officer and the chief executive officer of the company stating that no design changes have been made to the specified equipment or utensil. [[Page 34]] Sec. 54.1020 Appeal service; marking equipment or utensils on appeal; requirements for appeal; certain determinations not appealable. (a) Appeal service is a re-evaluation of the compliance of a piece of equipment, portion of a piece of equipment, or utensil to design or fabrication criteria according to the standards prescribed by this subpart. (b) Only the original applicant or their representative may request appeal service requesting a reevaluation of the original determination of the design and fabrication of the equipment or utensil for compliance with the standards specified in this subpart. (c) Appeal service will not be furnished for: (1) A piece of equipment, portion of a piece of equipment, or utensil which has been altered or has undergone a material change since the original service. (2) For the purpose of obtaining an up-to-date report or certificate which does not involve a question as to the correctness of the original service for the piece of equipment, portion of a piece of equipment, or utensil. Sec. 54.1021 Request for appeal service. (a) Except as otherwise provided in Sec. 54.1020, an applicant or their representative may request appeal service when the applicant or their representative disagree with the determination as to compliance with the standard of the piece of equipment, portion of a piece of equipment, or utensil as documented in the applicable report. (b) A request for appeal service shall be filed with the Chief, directly or through the design review specialist who performed the original service. The request shall state the reasons for the disagreement with the original determination and may be accompanied by a copy of any previous certificate or report, or any other information which the applicant may have received regarding the piece of equipment, portion of a piece of equipment, or utensil at the time of the original service. Such request may be made orally (including by telephone) or in writing (including by facsimile transmission). If made orally, the Dairy Grading Branch employee receiving the request may require that it be confirmed in writing. Sec. 54.1022 When request for appeal service may be withdrawn. A request for appeal service may be withdrawn by the applicant at any time before the appeal service has been performed, upon payment of any expenses already incurred under the regulations by the Branch in connection therewith. Sec. 54.1023 Denial or withdrawal of appeal service. A request for appeal service may be rejected or such service may be otherwise denied to or withdrawn from any person in accordance with the procedure set forth in Sec. 54.1013(a), if it appears that the person or product involved is not eligible for appeal service under Sec. 54.1020, or that the identity of the piece of equipment, portion of a piece of equipment, or utensil has been lost; or for any of the causes set forth in Sec. 54.1032. Sec. 54.1024 Who shall perform appeal service. Appeal service for equipment or utensils shall be performed by the Chief or a design review specialist designated by the Chief. No design review specialist may perform appeal service for any piece of equipment, portion of a piece of equipment or utensil for which the original design review specialist performed the initial evaluation service. Sec. 54.1025 Appeal reports. After appeal service has been performed for any piece of equipment, portion of a piece of equipment or utensils, an official report shall be prepared, signed, and issued referring specifically to the original report and stating the determination of the re-evaluation of compliance of the piece of equipment, portion of a piece of equipment or utensil. Sec. 54.1026 Superseded reports. The appeal report shall supersede the original report which, thereupon, shall become null and void for all or a portion of the report pertaining to the appeal service and shall not thereafter be [[Page 35]] deemed to show the compliance of the equipment or utensils described therein. However, the fees charged for the original service shall not be remitted to the applicant who filed the appeal. Sec. 54.1027 Application of other regulations to appeal service. The regulations in this subpart shall apply to appeal service except insofar as they are inapplicable. Sec. 54.1028 Fees and other charges for service. Fees and other charges equal as nearly as may be to the cost of the services rendered shall be assessed and collected from applicants in accordance with the provisions for Fees and Charges set forth in 7 CFR part 58, Subpart A, Regulations Governing the Inspection and Grading Services of Manufactured or Processed Dairy Products, sections Sec. Sec. 58.38, 58.39, 58.41, 58.42, and 58.43, as appropriate. Sec. 54.1029 Payment of fees and other charges. Fees and other charges for service shall be paid upon receipt of billing for fees and other charges for service. The applicant shall remit by check, draft, or money order, made payable to the Agricultural Marketing Service, USDA, payment for the service in accordance with directions on the billing, and such fees and charges shall be paid in advance if required by the official design review specialist or other authorized official. Sec. 54.1030 Identification. All official design review specialists and supervisors shall have their Agricultural Marketing Service identification cards in their possession at all times while they are performing any function under the regulations and shall identify themselves by such cards upon request. Sec. 54.1031 Errors in service. When a design review specialist, supervisor, or other responsible employee of the Branch has evidence of inaccurate evaluation, or of incorrect certification or other incorrect determination or identification as to the compliance of a piece of equipment or utensil, such person shall report the matter to the Chief. The Chief will investigate the matter and, if deemed advisable, will report any material errors to the owner or the owner's agent. The Chief shall take appropriate action to correct errors found in the determination of compliance of equipment or utensils, and the Chief shall take adequate measures to prevent the recurrence of such errors. Sec. 54.1032 Denial or withdrawal of service. (a)(1) Bases for denial or withdrawal. An application or a request for service may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, any person who, or whose employee or agent in the scope of the person's employment or agency: (i) Has wilfully made any misrepresentation or has committed any other fraudulent or deceptive practice in connection with any application or request for service under the regulations; (ii) Has given or attempted to give, as a loan or for any other purpose, any money, favor, or other thing of value, to any employee of the Department authorized to perform any function under the regulations; (iii) Has interfered with or obstructed, or attempted to interfere with or to obstruct, any employee of the Department in the performance of duties under the regulations by intimidation, threats, assaults, abuse, or any other improper means; (iv) Has knowingly falsely made, issued, altered, forged, or counterfeited any official certificate, memorandum, mark, or other identification; (v) Has knowingly uttered, published, or used as true any such falsely made, issued, altered, forged, or counterfeited certificate, memorandum, mark or identification; (vi) Has knowingly obtained or retained possession of any such falsely made, issued, altered, forged, or counterfeited certificate, memorandum, mark or identification, or of any equipment or utensil bearing any such falsely made, issued, altered, forged, or counterfeited mark or identification; (vii) Has applied the designation ``USDA Accepted Equipment'', ``AMS [[Page 36]] Accepted Equipment'', ``USDA Approved Equipment'', ``AMS Approved Equipment'', ``Approved By USDA'', ``Approved By AMS'', ``Accepted By USDA'', ``Accepted By AMS'', ``USDA Approved'', ``USDA Accepted'', ``AMS Approved'', ``AMS Accepted'', or any other variation of wording which states or implies official sanction by the United States Department of Agriculture by stamp, or brand directly on any equipment or utensil, or used as part of any promotional materials which has not been inspected and deemed in compliance with this subpart; or, (viii) Has in any manner not specified in this paragraph violated subsection 203(h) of the AMA: Provided, That paragraph (a)(1)(vi) of this section shall not be deemed to be violated if the person in possession of any item mentioned therein notifies the Deputy Administrator or Chief without such delay that such person has possession of such item and, in the case of an official identification, surrenders it to the Chief, and, in the case of any other item, surrenders it to the Deputy Administrator or Chief or destroys it or brings it into compliance with the regulations by obliterating or removing the violative features under supervision of the Deputy Administrator or Chief: And provided further, That paragraphs (a)(1) (ii) through (vii) of this section shall not be deemed to be violated by any act committed by any person prior to the making of an application of service under the regulations by the principal person. An application or a request for service may be rejected or the benefits of the service may be otherwise denied to, or withdrawn from, any person who operates an establishment for which such person has made application for service if, with the knowledge of such operator, any other person conducting any operations in such establishment has committed any of the offenses specified in paragraphs (a)(1) (i) through (vii) of this section after such application was made. Moreover, an application or a request for service made in the name of a person otherwise eligible for service under the regulations may be rejected, or the benefits of the service may be otherwise denied to, or withdrawn from, such a person: (A) In case the service is or would be performed at an establishment operated: (1) By a corporation, partnership, or other person from whom the benefits of the service are currently being withheld under this paragraph; or (2) By a corporation, partnership, or other person having an officer, director, partner, or substantial investor from whom the benefits of the service are currently being withheld and who has any authority with respect to the establishment where service is or would be performed; or (B) In case the service is or would be performed with respect to any product in which any corporation, partnership, or other person within paragraph (a)(1)(viii)(A)(1) of this section has a contract or other financial interest. (2) Procedure. All cases arising under this paragraph shall be conducted in accordance with the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statutes set forth in 7 CFR Sec. Sec. 1.130 through 1.151 and the Supplemental Rules of Practice in part 50, 7 CFR Sec. 50.1 et seq. (b) Filing of records. The final orders in formal proceedings under paragraph (a) of this section to deny or withdraw the service under the regulations (except orders required for good cause to be held confidential and not cited as precedents) and other records in such proceedings (except those required for good cause to be held confidential) shall be filed with the Hearing Clerk and shall be available for inspection by persons having a proper interest therein. Sec. 54.1033 Confidential treatment. Every design review specialist providing service under these regulations shall keep confidential all information secured and not disclose such information to any person except an authorized representative of the Department. Sec. 54.1034 OMB control numbers assigned pursuant to the Paperwork Reduction Act. The following control number has been assigned to the information collection requirements in 7 CFR part 54, subpart C, by the Office of Management [[Page 37]] and Budget pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). ------------------------------------------------------------------------ Current OMB 7 CFR section where requirements are described control No. ------------------------------------------------------------------------ 54.1008(a)................................................. 0581-0126 54.1017.................................................... 0581-0126 54.1018(e)................................................. 0581-0126 54.1019.................................................... 0581-0126 54.1020.................................................... 0581-0126 54.1021.................................................... 0581-0126 ------------------------------------------------------------------------ PART 56_VOLUNTARY GRADING OF SHELL EGGS--Table of Contents Subpart A_Grading of Shell Eggs Definitions Sec. 56.1 Meaning of words and terms defined. 56.2 Designation of official certificates, memoranda, marks, other identifications, and devices for purposes of the Agricultural Marketing Act. General 56.3 Administration. 56.4 Basis of grading service. 56.5 Accessibility of product. 56.6 Supervision. 56.7 Nondiscrimination. 56.8 Other applicable regulations. 56.9 OMB control number. Licensed and Authorized Graders 56.10 Who may be licensed and authorized. 56.11 Financial interest of graders. 56.12 Suspension of license; revocation. 56.13 Cancellation of license. 56.14 Surrender of license. 56.15 Political activity. 56.16 Identification. 56.17 Equipment and facilities for graders. 56.18 Schedule of operation of official plants. 56.19 Prerequisites to grading. Application for Grading Service 56.20 Who may obtain grading service. 56.21 How application for service may be made; conditions of service. 56.22 Filing of application. 56.23 Form of application. 56.24 Rejection of application. 56.25 Withdrawal of application. 56.26 Authority of applicant. 56.27 Order of service. 56.28 Types of service. 56.29 Suspension or withdrawal of plant approval for correctable cause. 56.30 Application for grading service in official plants; approval. Reports 56.31 Report of grading work. 56.32 Information to be furnished to graders. 56.33 Report of violations Identifying and Marking Products 56.35 Authority to use, and approval of official identification. 56.36 Form of grademark and information required. 56.37 Lot marking of officially identified shell eggs. 56.38 Retention authorities. Prerequisites to Packaging Shell Eggs Identified With Grademarks 56.39 Quality assurance inspector required. 56.40 Grading requirements of shell eggs identified with grademarks. 56.41 Check grading officially identified product. 56.42-56.43 [Reserved] Fees and Charges 56.45 Payment of fees and charges. 56.46 Charges for service on an unscheduled basis. 56.47 Fees for appeal grading or review of a grader's decision. 56.49 Travel expenses and other charges. 56.52 Charges for services on a scheduled basis. 56.53 Fees or charges for grading service performed under cooperative agreement. 56.54 [Reserved] Grading Certificates 56.55 Forms. 56.56 Issuance. 56.57 Disposition. 56.58 Advance information. Appeal of a Grading or Decision 56.60 Who may request an appeal grading or review of a grader's decision. 56.61 Where to file an appeal. 56.62 How to file an appeal. 56.63 When an application for an appeal grading may be refused. 56.64 Who shall perform the appeal. 56.65 Procedures for appeal gradings. 56.66 Appeal grading certificates. Denial of Service 56.68 Debarment. 56.69 Misrepresentation, deceptive, or fraudulent act or practice. 56.70 Use of facsimile forms. 56.71 Willful violation of the regulations. 56.72 Interfering with a grader or employee of the AMS. 56.73 Misleading labeling. 56.74 Miscellaneous. [[Page 38]] Facility Requirements 56.75 Applicability of facility and operating requirements. 56.76 Minimum facility and operating requirements for shell egg grading and packing plants. 56.77 Health and hygiene of personnel. Subpart B [Reserved] Authority: 7 U.S.C. 1621-1627. Subpart A_Grading of Shell Eggs Definitions Sec. 56.1 Meaning of words and terms defined. For the purpose of the regulations in this part, words in the singular shall be deemed to import the plural and vice versa, as the case may demand. Unless the context otherwise requires, the terms shall have the following meaning: Acceptable means suitable for the purpose intended by the AMS. Act means the applicable provisions of the Agricultural Marketing Act of 1946 (60 Stat. 1087, as amended; 7 U.S.C. 1621 et seq.), or any other act of Congress conferring like authority. Administrator means the Administrator of the AMS or any other officer or employee of the Department to whom there has heretofore been delegated, or to whom there may hereafter be delegated the authority to act in the Administrator's stead. Agricultural Marketing Service or AMS means the Agricultural Marketing Service of the Department. Ambient temperature means the air temperature maintained in an egg storage facility or transport vehicle. Applicant means any interested person who requests any grading service. Cage mark means any stain-type mark caused by an egg coming in contact with a material that imparts a rusty or blackish appearance to the shell. Case means, when referring to containers, an egg case, as used in commercial practice in the United States, holding 30 dozens of shell eggs. Chief of the Grading Branch means the Chief of the Grading Branch, Poultry Programs, AMS. Class means any subdivision of a product based on essential physical characteristics that differentiate between major groups of the same kind, species, or method of processing. Condition means any characteristic detected by sensory examination (visual, touch, or odor), including the state of preservation, cleanliness, soundness, or fitness for human food that affects the marketing of the product. Consumer grades means U.S. Grade AA, A, and B. Department means the United States Department of Agriculture (USDA). Eggs of current production means shell eggs that are no more than 21 days old. Grademark means the official identification symbol (shield) used to identify eggs officially graded according to U.S. consumer grade standards. Grader means any Federal or State employee or the employee of a local jurisdiction or cooperating agency to whom a license has been issued by the Secretary to investigate and certify in accordance with the regulations in this part, the class, quality, quantity, or condition of products. Grading or grading service means: (1) The act whereby a grader determines, according to the regulations in this part, the class, quality, quantity, or condition of any product by examining each unit thereof or each unit of the representative sample thereof drawn by a grader and issues a grading certificate with respect thereto, except that with respect to grading service performed on a resident basis the issuance of a grading certificate shall be pursuant to a request therefor by the applicant or the AMS; (2) the act whereby the grader identifies, according to the regulations in this part, the graded product; (3) continuous supervision, in an official plant, of the handling or packaging of any product; and (4) any regrading or any appeal grading of a previously graded product. Grading certificate means a statement, either written or printed, issued by a grader pursuant to the Act and the regulations in this part, relative to the class, quantity, quality, or condition of products. Holiday or legal holiday means the legal public holidays specified by the [[Page 39]] Congress in paragraph (a) of section 6103, title 5, of the United States Code. Identify means to apply official identification to products or the containers thereof. Interested party means any person financially interested in a transaction involving any grading, appeal grading, or regrading of any product. National supervisor means (a) the officer in charge of the shell egg grading service of the AMS, and (b) other employees of the Department designated by the national supervisor. Nest run eggs means eggs which are packed as they come from the production facilities without having been washed, sized and/or candled for quality, with the exception that some Checks, Dirties, or other obvious undergrades may have been removed. Observed legal holiday. When a holiday falls on a weekend--Saturday or Sunday--the holiday usually is observed on Monday (if the holiday falls on Sunday) or Friday (if the holiday falls on Saturday). Office of grading means the office of any grader. Official plant or official establishment means one or more buildings or parts thereof comprising a single plant in which the facilities and methods of operation therein have been approved by the Administrator as suitable and adequate for grading service and in which grading is carried on in accordance with the regulations in this part. Official standards means the official U.S. standards grades, and weight classes for shell eggs maintained by and available from Poultry Programs, AMS. Officially identified means eggs that have official marks applied to the product under the authority of the AMS in accordance with the act and its regulations. Origin grading means a grading made on a lot of eggs at a plant where the eggs are graded and packed. Packaging means the primary or immediate container in which eggs are packaged and which serves to protect, preserve, and maintain the condition of the eggs. Packing means the secondary container in which the primary or immediate container is placed to protect, preserve, and maintain the condition of the eggs during transit or storage. Person means any individual, partnership, association, business trust, corporation, or any organized group of persons, whether incorporated or not. Potable water means water that has been approved by the State health authority or agency or laboratory acceptable to the Administrator as safe for drinking and suitable for food processing. Product or products means shell eggs of the domesticated chicken. Quality means the inherent properties of any product which determine its relative degree of excellence. Quality assurance inspector means any designated company employee other than the plant owner, manager, foreman, or supervisor, authorized by the Secretary to examine product and to supervise the labeling, dating, and lotting of officially graded shell eggs and to assure that such product is packaged under sanitary conditions, graded by authorized personnel, and maintained under proper inventory control until released by an employee of the Department. Regional director means any employee of the Department in charge of the shell egg grading service in a designated geographical area. Regulations means the provisions in this entire part and such United States standards, grades, and weight classes as may be in effect at the time grading is performed. Sampling means the act of taking samples of any product for grading or certification. Secretary means the Secretary of the Department or any other officer or employee of the Department to whom there has heretofore been delegated, or to whom there may hereafter be delegated, the authority to act in the Secretary's stead. Shell egg grading service means the personnel who are actively engaged in the administration, application, and direction of shell egg grading programs and services pursuant to the regulations in this part. Shell eggs means shell eggs of domesticated chickens. Shell protected means eggs which have had a protective covering such as oil [[Page 40]] applied to the shell surface. The product used shall be acceptable to the Food and Drug Administration. Shipped for retail sale means shell eggs that are forwarded from the processing facility for distribution to the ultimate consumer. State supervisor or Federal-State supervisor means any authorized and designated individual who is in charge of the shell egg grading service in a State. United States Standards for Quality of Individual Shell Eggs means the official U.S. Standards, Grades, and Weight Classes for Shell Eggs (AMS 56) that are maintained by and available from Poultry Programs, AMS. United States Standards, Grades, and Weight Classes for Shell Eggs (AMS 56) means the official U.S. standards, grades, and weight classes for shell eggs that are maintained by and available from Poultry Programs, AMS. Washed ungraded eggs means eggs which have been washed and that are either sized or unsized, but not segregated for quality. [20 FR 669, Feb. 1, 1955] Editorial Note: For Federal Register citations affecting Sec. 56.1, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. Sec. 56.2 Designation of official certificates, memoranda, marks, other identifications, and devices for purposes of the Agricultural Marketing Act. Subsection 203(h) of the Agricultural Marketing Act of 1946, as amended by Pub. L. 272, 84th Congress, provides criminal penalties for various specified offenses relating to official certificates, memoranda, marks or other identifications, and devices for making such marks or identifications, issued or authorized under section 203 of said act, and certain misrepresentations concerning the grading of agricultural products under said section. For the purposes of said subsection and the provisions in this part, the terms listed in this section shall have the respective meanings specified: (a) Official certificate means any form of certification, either written or printed, used under this part to certify with respect to the sampling, class, grade, quality, size, quantity, or condition of products (including the compliance of products with applicable specifications). (b) Official memorandum means any initial record of findings made by an authorized person in the process of grading or sampling pursuant to this part, any processing or plant-operation report made by an authorized person in connection with grading or sampling under this part, and any report made by an authorized person of services performed pursuant to this part. (c) Official mark means the grademark and any other mark, or any variations in such marks approved by the Administrator and authorized to be affixed to any product, or affixed to or printed on the packaging material of any product, stating that the product was graded, or indicating the appropriate U.S. grade or condition of the product, or for the purpose of maintaining the identity of products graded under this part, including but not limited to, those set forth in Sec. 56.36. (d) Official identification means any United States (U.S.) standard designation of class, grade, quality, size, quantity, or condition specified in this part or any symbol, stamp, label or seal indicating that the product has been officially graded and/or indicating the class, grade, quality, size, quantity, or condition of the product approved by the Administrator and authorized to be affixed to any product, or affixed to or printed on the packaging material of any product. (e) Official device means a stamping appliance, branding device, stencil, printed label, or any other mechanically or manually operated tool that is approved by the Administrator for the purpose of applying any official mark or other identification to any product or the packaging material thereof. [28 FR 6341, June 20, 1963. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] General Sec. 56.3 Administration. The Administrator shall perform, for and under the supervision of the Secretary, such duties as the Secretary [[Page 41]] may require in the enforcement or administration of the provisions of the Act and the regulations in this part. The Administrator is authorized to waive for limited periods any particular provisions of the regulations in this part to permit experimentation so that new procedures, equipment, and processing techniques may be tested to facilitate definite improvements and at the same time to determine full compliance with the spirit and intent of the regulations in this part. The AMS and its officers and employees shall not be liable in damages through acts of commission or omission in the administration of this part. [20 FR 670, Feb. 1, 1955, as amended at 38 FR 26798, Sept. 26, 1973; 42 FR 2970, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 60 FR 12402, Mar. 7, 1995; 71 FR 42007, July 24, 2006] Sec. 56.4 Basis of grading service. (a) Any grading service in accordance with the regulations in this part shall be for class, quality, quantity, or condition or any combination thereof. Grading service with respect to the determination of the quality of products shall be on the basis of the ``United States Standards, Grades, and Weight Classes for Egg Shells.'' However, grading service may be rendered with respect to products which are bought and sold on the basis of institutional contract specifications or specifications of the applicant and such service, when approved by the Administrator, shall be rendered on the basis of such specifications. The supervision of packaging shall be in accordance with such instructions as may be approved or issued by the Administrator. (b) Whenever grading service is performed on a representative sample basis, such sample shall be drawn and consist of not less than the minimum number of cases as indicated in the following table. A minimum of one hundred eggs shall be examined per sample case. For lots which consist of less than 1 case, a minimum of 50 eggs shall be examined. If the lot consists of less than 50 eggs, all eggs will be examined. Minimum Number of Cases Comprising a Representative Sample ------------------------------------------------------------------------ Cases in Cases in lot sample ------------------------------------------------------------------------ 1 case....................................................... 1 2 to 10, inclusive........................................... 2 11 to 25, inclusive.......................................... 3 26 to 50, inclusive.......................................... 4 51 to 100, inclusive......................................... 5 101 to 200, inclusive........................................ 8 201 to 300, inclusive........................................ 11 301 to 400, inclusive........................................ 13 401 to 500, inclusive........................................ 14 501 to 600, inclusive........................................ 16 ------------------------------------------------------------------------ For each additional 50 cases, or fraction thereof, in excess of 600 cases, one additional case shall be included in the sample. [20 FR 670, Feb. 1, 1955, as amended at 22 FR 8167, Oct. 16, 1957; 28 FR 6342, June 20, 1963; 42 FR 2970, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42007, July 24, 2006] Sec. 56.5 Accessibility of product. Each product for which grading service is requested shall be so conditioned and placed as to permit a proper determination of the class, quality, quantity, or condition of such product. [20 FR 670, Feb. 1, 1955, as amended at 27 FR 10317, Oct. 23, 1962. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 56.6 Supervision. All grading service shall be subject to supervision at all times by the responsible State supervisor, regional director and national supervisor. Such service shall be rendered in accordance with instructions issued by the Administrator where the facilities and conditions are satisfactory for the conduct of the service and the requisite graders are available. Whenever the supervisor of a grader has evidence that such grader incorrectly graded a product, such supervisor shall take such action as is necessary to correct the grading and to cause any improper grademarks which appear on the product or the containers thereof to be corrected prior [[Page 42]] to shipment of the product from the place of initial grading. [40 FR 20055, May 8, 1975. Redesignated at 42 FR 32514, June 27, 1977, as amended at 43 FR 60138, Dec. 26, 1978. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42008, July 24, 2006] Sec. 56.7 Nondiscrimination. The conduct of all services and the licensing of graders under these regulations shall be accomplished without discrimination as to race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, or marital or family status. [71 FR 42008, July 24, 2006] Sec. 56.8 Other applicable regulations. Compliance with the regulations in this part shall not excuse failure to comply with any other Federal, or any State, or municipal applicable laws or regulations. [20 FR 670, Feb. 1, 1955. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 56.9 OMB control number. (a) Purpose. The collecting of information requirements in this part has been approved by the Office of Management and Budget (OMB) and assigned OMB control number 0581-0128. (b) Display. Sections Where Information Collection Requirements Are Identified and Described ------------------------------------------------------------------------ ------------------------------------------------------------------------ 56.3(a) 56.24 56.52(b)(3)(ii) 56.4(a) 56.25 56.54(b)(1) 56.10(a) 56.26 56.54(b)(3)(ii) 56.11 56.30 56.56(a) 56.12 56.31(a) 56.57 56.17(b) 56.35(b) 56.58 56.18 56.35(c) 56.60 56.21(a) 56.37 56.62 56.21(b) 56.52(a)(1) 56.76(f)(7) 56.21(c) 56.52(a)(4) 56.76(h) 56.23 56.52(b)(1) ------------------------------------------------------------------------ [71 FR 42008, July 24, 2006; 71 FR 47564, Aug. 17, 2006] Licensed and Authorized Graders Sec. 56.10 Who may be licensed and authorized. (a) Any person who is a Federal or State employee, the employee of a local jurisdiction, or the employee of a cooperating agency possessing proper qualifications as determined by an examination for competency and who is to perform grading service under this part, may be licensed by the Secretary as a grader. (b) All licenses issued by the Secretary shall be countersigned by the officer in charge of the shell egg grading service of the AMS or any other designated officer. (c) Any person, who is employed at any official plant and possesses proper qualifications, as determined by the Administrator, may be authorized to candle and grade eggs on the basis of the ``U.S. Standards for Quality of Individual Shell Eggs,'' with respect to eggs purchased from producers or eggs to be packaged with official identification. In addition, such authorization may be granted to any qualified person to act as a ``quality assurance inspector'' in the packaging and grade labeling of products. No person to whom such authorization is granted shall have authority to issue any grading certificates, grading memoranda, or other official documents; and all eggs which are graded by any such person shall thereafter be check graded by a grader. [71 FR 42008, July 24, 2006] Sec. 56.11 Financial interest of graders. Graders shall not render service on any product in which they are financially interested. [71 FR 42008, July 24, 2006] Sec. 56.12 Suspension of license; revocation. Pending final action by the Secretary, any person authorized to countersign a license to perform grading service may, whenever such action is deemed necessary to assure that any grading service is properly performed, suspend any license to perform grading service issued pursuant to this part, by [[Page 43]] giving notice of such suspension or revocation to the respective licensee, accompanied by a statement of the reasons therefor. Within 7 days after the receipt of the aforesaid notice and statement of reasons, the licensee may file an appeal in writing with the Secretary, supported by any argument or evidence that the licensee may wish to offer as to why their license should not be further suspended or revoked. After the expiration of the aforesaid 7-day period and consideration of such argument and evidence, the Secretary will take such action as deemed appropriate with respect to such suspension or revocation. When no appeal is filed within the prescribed 7 days, the license to perform grading service is revoked. [71 FR 42008, July 24, 2006] Sec. 56.13 Cancellation of license. Upon termination of the services of a licensed grader, the grader's license shall be immediately surrendered for cancellation. [71 FR 42008, July 24, 2006] Sec. 56.14 Surrender of license. Each license which is canceled, suspended, or has expired shall immediately be surrendered by the licensee to the office of grading serving the area in which the licensee is located. [31 FR 2773, Feb. 16, 1966. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42008, July 24, 2006] Sec. 56.15 Political activity. Federal graders may participate in certain political activities, including management of and participation in political campaigns, in accordance with AMS policy. Graders are subject to these rules while they are on leave with or without pay, including furlough; however the rules do not apply to cooperative employees not under Federal supervision and intermittent employees on the days they perform no service. Willful violations of the political activity rules will constitute grounds for removal from the AMS. [71 FR 42008, July 24, 2006] Sec. 56.16 Identification. Graders shall have in their possession at all times, and present upon request while on duty, the means of identification furnished to them by the Department. [71 FR 42008, July 24, 2006] Sec. 56.17 Equipment and facilities for graders. Equipment and facilities to be furnished by the applicant for use of graders in performing service on a resident basis shall include, but not be limited to, the following: (a)(1) An accurate metal stem thermometer; (2) Electronic digital-display scales graduated in increments of \1/ 10\-ounce or less for weighing individual eggs and test weights for calibrating such scales. Plants packing product based on metric weight must provide scales graduated in increments of 1-gram or less; (3) Electronic digital-display scales graduated in increments of \1/ 4\-ounce or less for weighing the lightest and heaviest consumer packages packed in the plant and test weights for calibrating such scales; (4) Scales graduated in increments of \1/4\-pound or less for weighing shipping containers and test weights for calibrating such scales; (5) Two candling lights that provide a sufficient combined illumination through both the aperture and downward through the bottom to facilitate accurate interior and exterior quality determinations. (6) A candling booth adequately darkened and located in close proximity to the work area that is reasonably free of excessive noise. The booth must be sufficient in size to accommodate two graders, two candling lights, and other necessary grading equipment. (b) Furnished office space, a desk, and file or storage cabinets (equipped with a satisfactory locking device) suitable for the security and storage of official supplies, and other facilities and equipment as may otherwise be required. Such space and equipment must [[Page 44]] meet the approval of the national supervisor. [32 FR 8230, June 8, 1967. Redesignated at 42 FR 32514, June 27, 1977, as amended at 46 FR 39570, Aug. 4, 1981. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 60 FR 12402, Mar. 7, 1995; 63 FR 13330, Mar. 19, 1998; 69 FR 76375, Dec. 21, 2004; 71 FR 42008, July 24, 2006] Sec. 56.18 Schedule of operation of official plants. Grading operating schedules for services performed pursuant to Sec. Sec. 56.52 and 56.54 shall be requested in writing and be approved by the Administrator. Normal operating schedules for a full week consist of a continuous 8-hour period per day (excluding not to exceed 1 hour for lunch), 5 consecutive days per week, within the administrative workweek, Sunday through Saturday, for each shift required. Less than 8- hour schedules may be requested and will be approved if a grader is available. Clock hours of daily operations need not be specified in the request, although as a condition of continued approval, the hours of operation shall be reasonably uniform from day to day. Graders are to be notified by management 1 day in advance of any change in the hours grading service is requested. [48 FR 20683, May 9, 1983] Sec. 56.19 Prerequisites to grading. Grading of products shall be rendered pursuant to the regulations in this part and under such conditions and in accordance with such methods as may be prescribed or approved by the Administrator. [71 FR 42008, July 24, 2006] Application for Grading Service Sec. 56.20 Who may obtain grading service. An application for grading service may be made by any interested person, including, but not being limited to any authorized agent of the United States, any State, county, municipality, or common carrier. [71 FR 42009, July 24, 2006] Sec. 56.21 How application for service may be made; conditions of service. (a) Application. (1) Any person may apply for service with respect to products in which he or she has a financial interest by completing the required application for service. In any case in which the service is intended to be furnished at an establishment not operated by the applicant, the application must be approved by the operator of such establishment and such approval shall constitute an authorization for any employee of the Department to enter the establishment for the purpose of performing his or her functions under the regulations in this part. The application must include: (i) Name and address of the establishment at which service is desired; (ii) Name and mailing address of the applicant; (iii) Financial interest of the applicant in the products, except where application is made by a representative of a Government agency in the representative's official capacity; (iv) Signature of the applicant (or the signature and title of the applicant's representative); (v) Indication of the legal status of the applicant as an individual, partnership, corporation, or other form of legal entity; and (vi) The legal designation of the applicant's business as a small or large business, as defined by the U.S. Small Business Administration's North American Industry Classification System (NAICS) Codes. (2) In making application, the applicant agrees to comply with the terms and conditions of the regulations in this part (including, but not being limited to, such instructions governing grading of products as may be issued from time to time by the Administrator). No member of or Delegate to Congress or Resident Commissioner shall be admitted to any benefit that may arise from such service unless derived through service rendered a corporation for its general benefit. Any change in such status, at any time while service is being received, shall be promptly reported by the person receiving the service to the grading office designated by the Director or Chief to process such requests. [[Page 45]] (b) Notice of eligibility for service. The applicant will be notified whether the application is approved or denied. [84 FR 49641, Sept. 23, 2019] Sec. 56.22 Filing of application. An application for grading service shall be regarded as filed only when made pursuant to the regulations in this part. [71 FR 42009, July 24, 2006] Sec. 56.23 Form of application. Each application for grading or sampling a specified lot of any product shall include such information as may be required by the Administrator in regard to the product and the premises where such product is to be graded or sampled. [28 FR 6342, June 20, 1963. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 56.24 Rejection of application. (a) An application for grading service may be rejected by the Administrator: (1) Whenever the applicant fails to meet the requirements of the regulations prescribing the conditions under which the service is made available; (2) Whenever the product is owned by or located on the premises of a person currently denied the benefits of the Act; (3) Where any individual holding office or a responsible position with or having a substantial financial interest or share in the applicant is currently denied the benefits of the Act or was responsible in whole or in part for the current denial of the benefits of the Act to any person; (4) Where the Administrator determines that the application is an attempt on the part of a person currently denied the benefits of the Act to obtain grading services; (5) Whenever the applicant, after an initial survey has been made in accordance with the regulations, fails to bring the grading facilities and equipment into compliance with the regulations within a reasonable period of time; (6) Notwithstanding any prior approval whenever, before inauguration of service, the applicant fails to fulfill commitments concerning the inauguration of the service; (7) When it appears that to perform the services specified in this part would not be to the best interests of the public welfare or of the Government; or (8) When it appears to the Administrator that prior commitments of the Department necessitate rejection of the application. (b) Each such applicant shall be promptly notified by registered mail of the reasons for the rejection. A written petition for reconsideration of such rejection may be filed by the applicant with the Administrator if postmarked or delivered within 10 days after the receipt of notice of the rejection. Such petition shall state specifically the errors alleged to have been made by the Administrator in rejecting the application. Within 20 days following the receipt of such a petition for reconsideration, the Administrator shall approve the application or notify the applicant by registered mail of the reasons for the rejection thereof. [71 FR 42009, July 24, 2006] Sec. 56.25 Withdrawal of Application. An application for grading service may be withdrawn by the applicant at any time before the service is performed upon payment by the applicant, of all expenses incurred by the AMS in connection with such application. [71 FR 42009, July 24, 2006] Sec. 56.26 Authority of applicant. Proof of the authority of any person applying for any grading service may be required at the discretion of the Administrator. [20 FR 671, Feb. 1, 1955. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 56.27 Order of service. Grading service shall be performed, insofar as practicable and subject to the availability of qualified graders, in the order in which applications therefore are made except that precedence [[Page 46]] may be given to any application for an appeal grading. [20 FR 671, Feb. 1, 1955; 20 FR 757, Feb. 4, 1955, as amended at 42 FR 2970, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42009, July 24, 2006] Sec. 56.28 Types of service. (a) Noncontinuous grading service. Service is performed on an unscheduled basis, with no scheduled tour of duty, and when an applicant requests grading of a particular lot of shell eggs. Charges or fees are based on the time, travel, and expenses needed to perform the work. This service may be referred to as unscheduled grading service. Shell eggs graded under unscheduled grading service are not eligible to be identified with the official grademarks shown in Sec. 56.36. (b) Continuous grading service on a scheduled basis. Service on a scheduled basis has a scheduled tour of duty and is performed when an applicant requests that a USDA licensed grader be stationed in the applicant's processing plant and grade shell eggs in accordance with U.S. Standards. The applicant agrees to comply with the facility, operating, and sanitary requirements of scheduled service. Minimum fees for service performed under a scheduled agreement will be based on the hours of the regular tour of duty. Shell eggs graded under scheduled grading service are eligible to be identified with the official grademarks shown in Sec. 56.36 only when processed and graded under the supervision of a grader or quality assurance inspector as provided in Sec. 56.39. (c) Temporary grading service. Service is performed when an applicant requests an official plant number with service provided on an unscheduled basis. The applicant must meet all facility, operating, and sanitary requirements of continuous service. Charges or fees are based on the time and expenses needed to perform the work. Shell eggs graded under temporary grading service are eligible to be identified with the official grademarks only when they are processed and graded under the supervision of a grader or quality assurance inspector as provided in Sec. 56.39. [84 FR 49642, Sept. 23, 2019] Sec. 56.29 Suspension or withdrawal of plant approval for correctable cause. (a) Any plant approval given pursuant to the regulations in this part may be suspended by the Administrator for: (1) Failure to maintain grading facilities and equipment in a satisfactory state of repair, sanitation, or cleanliness; (2) The use of operating procedures which are not in accordance with the regulations in this part; or (3) Alterations of grading facilities or equipment which have not been approved in accordance with the regulations in this part. (b) Whenever it is feasible to do so, written notice in advance of a suspension shall be given to the person concerned and shall specify a reasonable period of time in which corrective action must be taken. If advance written notice is not given, the suspension action shall be promptly confirmed in writing and the reasons therefor shall be stated, except in instances where the person has already corrected the deficiency. Such service, after appropriate corrective action is taken, will be restored immediately, or as soon thereafter as a grader can be made available. During such period of suspension, grading service shall not be rendered. However, the other provisions of the regulations pertaining to providing grading service on a resident basis will remain in effect unless such service is terminated in accordance with the provisions of this part. (c) If the grading facilities or methods of operation are not brought into compliance within a reasonable period of time as specified by the Administrator, the Administrator shall initiate withdrawal action pursuant to the Rules of Practice Governing Formal Adjudicatory Proceedings (7 CFR part 1, subpart H), and the operator shall be afforded an opportunity for an oral hearing upon written request in accordance with such Rules of Practice, with respect to the merits or validity [[Page 47]] of the withdrawal action, but any suspension shall continue in effect pending the outcome of such hearing unless otherwise ordered by the Administrator. Upon withdrawal of grading service in an official plant, the plant approval shall also become terminated and all labels, seals, tags, or packaging material bearing official identification shall, under the supervision of a person designated by the AMS, either be destroyed or the official identification completely obliterated or sealed in a manner acceptable to the AMS. (d) In any case where grading service is withdrawn under this section, the person concerned may thereafter apply for grading service as provided in Sec. Sec. 56.20 through 56.29 of these regulations. [71 FR 42009, July 24, 2006] Sec. 56.30 Application for grading service in official plants; approval. Any person desiring to process and pack products in a plant under grading service must receive approval of such plant and facilities as an official plant prior to the rendition of such service. An application for grading service to be rendered in an official plant shall be approved according to the following procedure: When application has been filed for grading service, as aforesaid, the State supervisor or the supervisor's assistant shall examine the grading office, facilities, and equipment and specify any facility or equipment modifications needed for the service. When the plant survey has been completed and approved in accordance with the regulations in this part, service may be installed. [71 FR 42009, July 24, 2006] Reports Sec. 56.31 Report of grading work. Reports of grading work performed within official plants shall be forwarded to the Administrator by the grader in a manner as may be specified by the Administrator. [71 FR 42010, July 24, 2006] Sec. 56.32 Information to be furnished to graders. The applicant for grading service shall furnish to the grader rendering such service such information as may be required for the purposes of this part. [71 FR 42010, July 24, 2006] Sec. 56.33 Report of violations. Each grader shall report, in the manner prescribed by the Administrator, all violations of and noncompliance with the Act and the regulations in this part of which such grader has knowledge. [71 FR 42010, July 24, 2006] Identifying and Marking Products Sec. 56.35 Authority to use, and approval of official identification. (a) Authority to use official identification. Authority to officially identify product graded pursuant to this part is granted only to applicants who make the services of a grader or quality assurance inspector available for use in accordance with this part. Packaging materials bearing official identification marks shall be approved pursuant to Sec. Sec. 56.35 to 56.37, inclusive, and shall be used only for the purpose for which approved and prescribed by the Administrator. Any unauthorized use or disposition of approved labels or packaging materials which bear any official identification may result in cancellation of the approval and denial of the use of labels or packaging materials bearing official identification or denial of the benefits of the Act pursuant to the provisions of Sec. 56.31. (b) Approval of official identification. No label, container, or packaging material which bears official identification may contain any statement that is false or misleading. No label, container, or packaging material bearing official identification may be printed or prepared for use until the printers' or other final proof has been approved by the Administrator in accordance with the regulations in this part, the Federal Food, Drug, and Cosmetic Act, the Fair Packaging and Labeling Act, and the regulations promulgated under these acts. The use of finished labels [[Page 48]] must be approved as prescribed by the Administrator. A grader may apply official identification stamps to shipping containers if they do not bear any statement that is false or misleading. If the label is printed or otherwise applied directly to the container, the principal display panels of such container shall for this purpose be considered as the label. The label shall contain the name, address, and ZIP Code of the packer or distributor of the product, the name of the product, a statement of the net contents of the container, and the U.S. grademark. (c) Nutritional labeling. Nutrition information must be included on the labeling of each unit container of consumer packaged shell eggs in accordance with the provisions of title 21, chapter I, part 101, Regulations for the Enforcement of the Federal Food, Drug, and Cosmetic Act and the Fair Packaging and Labeling Act. The nutrition information included on labels is subject to review by the Food and Drug Administration prior to approval by the Department. (d) Refrigeration labeling. All containers bearing official U.S. Grade AA, A, or B identification shall be labeled to indicate that refrigeration is required, e.g., ``Keep Refrigerated,'' or words of similar meaning. [40 FR 20055, May 8, 1975, as amended at 42 FR 2970, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 60 FR 12402, Mar. 7, 1995; 64 FR 56947, Oct. 22, 1999; 71 FR 42010, July 24, 2006] Sec. 56.36 Form of grademark and information required. (a) Form of official identification symbol and grademark. (1) The shield set forth in Figure 1 of this section shall be the official identification symbol for purposes of this part and when used, imitated, or simulated in any manner in connection with shell eggs, shall be deemed prima facia to constitute a representation that the product has been officially graded for the purposes of Sec. 56.2. (2) Except as otherwise authorized, the grademark permitted to be used to officially identify USDA consumer-graded shell eggs shall be of the form and design indicated in Figures 2 through 4 of this section. The shield shall be of sufficient size so that the printing and other information contained therein is legible and in approximately the same proportion as shown in these figures. (3) The ``Produced From'' grademark in Figure 5 of this section may be used to identify products for which there are no official U.S. grade standards (e.g., pasteurized shell eggs), provided that these products are approved by the Agency and are prepared from U.S. Consumer Grade AA or A shell eggs. (b) Information required on grademark. (1) Except as otherwise authorized by the Administrator, each grademark used shall include the letters ``USDA'' and the U.S. grade of the product it identifies, such as ``A Grade,'' as shown in Figure 2 of this section. Such information shall be printed with the shield and the wording within the shield in contrasting colors in a manner such that the design is legible and conspicuous on the material upon which it is printed. (2) The size or weight class of the product, such as ``Large,'' may appear within the grademark as shown in Figure 3 of this section. If the size or weight class is omitted from the grademark, it must appear prominently on the main panel of the carton. (3) Except as otherwise authorized, the bands of the shield in Figure 4 of this section shall be displayed in three colors, with the color of the top, middle, and bottom bands being blue, white, and red, respectively. (4) The ``Produced From'' grademark in Figure 5 of this section may be any one of the designs shown in Figures 2 through 4 of this section. The text outside the shield shall be conspicuous, legible, and in approximately the same proportion and close proximity to the shield as shown in Figure 5 of this section. (5) The plant number of the official plant preceded by the letter ``P'' must be shown on each carton or packaging material. [[Page 49]] [GRAPHIC] [TIFF OMITTED] TR19MR98.011 [GRAPHIC] [TIFF OMITTED] TR19MR98.012 [GRAPHIC] [TIFF OMITTED] TR19MR98.013 [GRAPHIC] [TIFF OMITTED] TR19MR98.014 [GRAPHIC] [TIFF OMITTED] TR19MR98.015 [63 FR 13330, Mar. 19, 1998, as amended at 68 FR 25485, May 13, 2003] Sec. 56.37 Lot marking of officially identified shell eggs. Shell eggs identified with the grademarks shown in Sec. 56.36 shall be legibly lot numbered on either the individual egg, the carton, or the consumer package. The lot number shall be the consecutive day of the year on which the eggs were packed (e.g., 132), except other lot numbering systems may be used when submitted in writing and approved by the Administrator. [35 FR 5664, Apr. 8, 1970. Redesignated at 42 FR 32514, June 27, 1977, as amended at 46 FR 39570, Aug. 4, 1981. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 60 FR 12402, Mar. 7, 1995; 63 FR 13331, Mar. 19, 1998; 69 FR 76376, Dec. 21, 2004] Sec. 56.38 Retention authorities. A grader may use retention tags or other devices and methods as approved by the Administrator for the identification and control of shell eggs which are not in compliance with the regulations or are held for further examination and for any equipment, utensils, rooms or compartments which are found unclean or otherwise in violation of the regulations. Any such item shall not be released until in compliance with the regulations and retention identification shall not be removed by anyone other than a grader. [35 FR 5664, Apr. 8, 1970. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981. Redesignated at 71 FR 42010, July 24, 2006] [[Page 50]] Prerequisites to Packaging Shell Eggs Identified With Grademarks Sec. 56.39 Quality assurance inspector required. The official identification with the grademark of any product as provided in Sec. Sec. 56.35 to 56.41, inclusive, shall be done only under the supervision of a grader or quality assurance inspector. The grader or quality assurance inspector shall have supervision over the use and handling of all material bearing any official identification. [42 FR 2971, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, as amended at 46 FR 39570, Aug. 4, 1981. Redesignated at 46 FR 63203, Dec. 31, 1981; 69 FR 76376, Dec. 21, 2004] Sec. 56.40 Grading requirements of shell eggs identified with grademarks. (a) Shell eggs to be identified with the grademarks illustrated in Sec. 56.36 must be individually graded by a grader or by authorized personnel pursuant to Sec. 56.11 and thereafter check graded by a grader. (b) Shell eggs not graded in accordance with paragraph (a) of this section may be officially graded on a sample basis and the shipping containers may be identified with grademarks which contain the words ``Sample Graded'' and which are approved by the Administrator. (c) In order to be officially identified with a USDA consumer grademark, shell eggs shall: (1) Be eggs of current production; (2) Not possess any undesirable odors or flavors; (3) Not have previously been shipped for retail sale; (4) Not originate from a layer house environment determined positive for the presence of Salmonella Enteritidis (SE), unless the eggs from the layer house have been sampled and have tested negative for the presence of SE in the eggs; and (5) Not originate from eggs testing positive for SE, or not have been subject to a product recall. [32 FR 8231, June 8, 1967. Redesignated at 42 FR 32514, June 27, 1977, as amended at 46 FR 39571, Aug. 4, 1981. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 63 FR 13331, Mar. 19, 1998; 69 FR 76376, Dec. 21, 2004; 71 FR 20292, Apr. 19, 2006; 81 FR 63676, Sept. 16, 2016] Sec. 56.41 Check grading officially identified product. Officially identified shell eggs packed or received in an official plant may be subject to final check grading prior to their shipment. Such product found not to be in compliance with the assigned official grade shall be placed under a retention tag until it is regraded to comply with the grade assigned or until the official identification is removed. [35 FR 5664, Apr. 8, 1970. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. Sec. 56.42-56.43 [Reserved] Fees and Charges Sec. 56.45 Payment of fees and charges. (a) Fees and charges for any grading service must be paid by the interested party making the application for such grading service, in accordance with the applicable provisions of this section and Sec. Sec. 56.46 through 56.53, inclusive. (b) Fees and charges for any grading service shall, unless otherwise required pursuant to paragraph (c) of this section, be paid by check, electronic funds transfer, draft, or money order made payable to the National Finance Center. Payment for the service must be made in accordance with directions on the billing statement, and such fees and charges must be paid in advance if required by the official grader or other authorized official. (c) Fees and charges for any grading service under a cooperative agreement with any State or person shall be paid in accordance with the terms of such cooperative agreement. [33 FR 20004, Dec. 31, 1968 and 42 FR 2971, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42010, July 24, 2006; 84 FR 49642, Sept. 23, 2019] [[Page 51]] Sec. 56.46 Charges for service on an unscheduled basis. (a) Unless otherwise provided in this part, the fees to be charged and collected for any service performed, in accordance with this part, on an unscheduled basis shall be based on the applicable formulas specified in this section. For each calendar year or crop year, AMS will calculate the rate for grading services, per hour per program employee using the following formulas: (1) Regular rate. The total AMS grading program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service. (2) Overtime rate. The total AMS grading program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5 plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (3) Holiday rate. The total AMS grading program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (b)(1) For each calendar year, based on previous fiscal year/ historical actual costs, AMS will calculate the benefits, operating, and allowance for bad debt components of the regular, overtime and holiday rates as follows: (i) Benefits rate. The total AMS grading program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions. (ii) Operating rate. The total AMS grading program operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation. (iii) Allowance for bad debt rate. Total AMS grading program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked. (2) The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on the most recent Office of Management and Budget's Presidential Economic Assumptions. (c) Fees for unscheduled grading services will be based on the time required to perform the services. The hourly charges shall include the time actually required to perform the grading, waiting time, travel time, and any clerical costs involved in issuing a certificate. Charges to plants are as follows: (1) The regular hourly rate shall be charged for the first 8 hours worked per grader per day for all days except observed legal holidays. (2) The overtime rate shall be charged for hours worked in excess of 8 hours per grader per day for all days except observed legal holidays. (3) The holiday hourly rate will be charged for hours worked on observed legal holidays. [79 FR 67322, Nov. 13, 2014, as amended at 84 FR 49642, Sept. 23, 2019; 85 FR 62937, Oct. 6, 2020] Sec. 56.47 Fees for appeal grading or review of a grader's decision. The costs of an appeal grading or review of a grader's decision shall be borne by the appellant on an unscheduled basis at rates set forth in Sec. 56.46, plus any travel and additional expenses. If the appeal grading or review of a grader's decision discloses that a material error was made in the original determination, no fee or expenses will be charged. [84 FR 49642, Sept. 23, 2019] Sec. 56.49 Travel expenses and other charges. Charges are to be made to cover the cost of travel and other expenses incurred by the AMS in connection with rendering grading service. Such [[Page 52]] charges shall include the cost of transportation, per diem, and any other expenses. [42 FR 2971, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, as amended at 46 FR 8, Jan. 2, 1981. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42010, July 24, 2006] Sec. 56.52 Charges for services on a scheduled basis. Fees to be charged and collected for any grading service, other than for an appeal grading, on a scheduled grading basis, will be determined based on the formulas in this part. The fees to be charged for any appeal grading shall be as provided in Sec. 56.47. (a) Charges. The charges for the grading of shell eggs shall be paid by the applicant for the service and shall include items listed in this section as are applicable. Payment for the full cost of the grading service rendered to the applicant shall be made by the applicant to the National Finance Center. Such full costs shall comprise such of the items listed in this section as are due and included in the bill or bills covering the period or periods during which the grading service was rendered. Bills are payable upon receipt. (1) When a signed application for service has been received, the State supervisor or his designee will complete a plant survey pursuant to Sec. 56.30. The costs for completing the plant survey will be charged to the applicant on an unscheduled basis as described in Sec. 56.46. No charges will be assessed when the application is required because of a change in name or ownership. If service is not installed within 6 months from the date the application is filed, or if service is inactive due to an approved request for removal of a grader or graders(s) for a period of 6 months, the application will be considered terminated. A new application may be filed at any time. In addition, there will be a charge of $300 if the application is terminated at the request of the applicant for reasons other than for a change in location within 12 months from the date of the inauguration of service. (2) Charges for the cost of each grader assigned to a plant will be calculated as described in Sec. 56.46. Minimum fees for service performed under a scheduled agreement shall be based on the hours of the regular tour of duty. The Agency reserves the right to use any grader assigned to the plant under a scheduled agreement to perform service for other applicants except that no charge will be assessed to the scheduled applicant for the number of hours charged to the other applicant. Charges to plants are as follows: (i) The regular hourly rate shall be charged for hours worked in accordance with the approved tour of duty on the application for service between the hours of 6 a.m. and 6 p.m. (ii) The overtime rate shall be charged for hours worked in excess of the approved tour of duty on the application for service. (iii) The holiday hourly rate will be charged for hours worked on observed legal holidays. (iv) The night differential rate (for regular or overtime hours) will be charged for hours worked between 6 p.m. and 6 a.m. (v) The Sunday differential rate (for regular or overtime hours) will be charged for hours worked on a Sunday. (vi) For all hours of work performed in a plant without an approved tour of duty, the charge will be one of the applicable hourly rates in Sec. 56.46, plus actual travel expenses incurred by AMS. (3) A charge at the hourly rates specified in Sec. 56.46, plus actual travel expenses incurred by AMS for intermediate surveys to firms without grading service in effect. (b) Other provisions. (1) The applicant shall designate in writing the employees of the applicant who will be required and authorized to furnish each grader with such information as may be necessary for the performance of the grading service. (2) AMS will provide, as available, an adequate number of graders to perform the grading service. The number of graders required will be determined by AMS based on the expected demand for service. (3) The grading service shall be provided at the designated plant and shall be continued until the service is suspended, withdrawn, or terminated by: (i) Mutual consent; [[Page 53]] (ii) Thirty (30) days' written notice, by either the applicant or AMS specifying the date of suspension, withdrawal, or termination; (iii) One (1) day's written notice by AMS to the applicant if the applicant fails to honor any invoice within thirty (30) days after date of invoice covering the cost of the grading service; or (iv) Action taken by AMS pursuant to the provisions of Sec. 56.31. (4) Graders will be required to confine their activities to those duties necessary in the rendering of grading service and such closely related activities as may be approved by AMS: Provided, That in no instance may the graders assume the duties of management. [34 FR 8232, May 28, 1969] Editorial Note: For Federal Register citations affecting Sec. 56.52, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. Sec. 56.53 Fees or charges for grading service performed under cooperative agreement. Fees or charges to be made to an applicant for grading service which differ from those listed in Sec. Sec. 56.45 through 56.54 shall be provided for by a cooperative agreement. [36 FR 7894, Apr. 28, 1971. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 56.54 [Reserved] Grading Certificates Sec. 56.55 Forms. Grading certificates and sampling report forms (including appeal grading certificates and regrading certificates) shall be issued on forms approved by the Administrator. [71 FR 42010, July 24, 2006] Sec. 56.56 Issuance. (a) Resident grading basis. Certificates will be issued only upon request therefor by the applicant or the AMS. When requested, a grader shall issue a certificate covering product graded by such grader. In addition, a grader may issue a grading certificate covering product graded in whole or in part by another grader when the grader has knowledge that the product is eligible for certification based on personal examination of the product or official grading records. (b) Other than resident grading. Each grader shall, in person or by the grader's authorized agent, issue a grading certificate covering each product graded by such grader. A grader's name may be signed on a grading certificate by a person other than the grader, if such person has been designated as the authorized agent of such grader by the national supervisor: Provided, That the certificate is prepared from an official memorandum of grading signed by the grader: And provided further, That a notarized power of attorney authorizing such signature has been issued to such person by the grader and is on file in the office of grading. In such case, the authorized agent shall sign both the agent's name and the grader's name, e.g., ``John Doe by Mary Roe.'' [71 FR 42010, July 24, 2006] Sec. 56.57 Disposition. The original and a copy of each grading certificate, issued pursuant to Sec. 56.56, and not to exceed two additional copies thereof if requested by the applicant prior to issuance, shall, immediately upon issuance, be delivered or mailed to the applicant or the applicant's designee. Other copies shall be filed and retained in accordance with the disposition schedule for grading program records. [36 FR 9842, May 29, 1971. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 47 FR 46070, Oct. 15, 1982; 47 FR 54421, Dec. 3, 1982; 71 FR 42010, July 24, 2006] Sec. 56.58 Advance information. Upon request of an applicant, all or part of the contents of any grading certificate issued to such applicant may be telephoned or electronically transmitted to the applicant, or to the applicant's designee, at the applicant's expense. [69 FR 76376, Dec. 21, 2004] Appeal of a Grading or Decision Source: Sections 56.60 through 56.66 appear at 35 FR 9918, June 17, 1970, unless otherwise noted. Redesignated at 42 FR 32514, June 27, [[Page 54]] 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981. Sec. 56.60 Who may request an appeal grading or review of a grader's decision. An appeal grading may be requested by any interested party who is dissatisfied with the determination by a grader of the class, quality, quantity, or condition of any product as evidenced by the USDA grademark and accompanying label, or as stated on a grading certificate and a review may be requested by the operator of an official plant with respect to a grader's decision or on any other matter related to grading in the official plant. Sec. 56.61 Where to file an appeal. (a) Appeal from resident grader's grading or decision in an official plant. Any interested party who is not satisfied with the determination of the class, quality, quantity, or condition of product which was graded by a grader in an official plant and has not left such plant, and the operator of any official plant who is not satisfied with a decision by a grader on any other matter related to grading in such plant may request an appeal grading or review of the decision by the grader by filing such request with the grader's immediate supervisor. (b) All other appeal requests. Any interested party who is not satisfied with the determination of the class, quality, quantity, or condition of product which has left the official plant where it was graded or which was graded other than in an official plant may request an appeal grading by filing such request with the regional director in the area where the product is located or with the Chief of the Grading Branch. [35 FR 9918, June 17, 1970. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42010, July 24, 2006] Sec. 56.62 How to file an appeal. Any request for an appeal grading or review of a grader's decision may be made orally or in writing. If made orally, written confirmation may be required. The applicant shall clearly state the reasons for requesting the appeal service and a description of the product, or the decision which is questioned. If such appeal request is based on the results stated on an official certificate, the original and all available copies of the certificate shall be returned to the appeal grader assigned to make the appeal grading. Sec. 56.63 When an application for an appeal grading may be refused. When it appears to the official with whom an appeal request is filed that the reasons given in the request are frivolous or not substantial, or that the quality or condition of the product has undergone a material change since the original grading, or that the original lot has changed in some manner, or the Act or the regulations in this part have not been complied with, the applicant's request for the appeal grading may be refused. In such case, the applicant shall be promptly notified of the reason(s) for such refusal. Sec. 56.64 Who shall perform the appeal. (a) An appeal grading or review of a decision requested under Sec. 56.61(a) shall be made by the grader's immediate supervisor, or by one or more licensed graders assigned by the immediate supervisor. (b) Appeal gradings requested under Sec. 56.61(b) shall be performed by a grader other than the grader who originally graded the product. (c) Whenever practical, an appeal grading shall be conducted jointly by two graders. The assignment of the grader(s) who will make the appeal grading requested under Sec. 56.61(b) shall be made by the regional director or the Chief of the Grading Branch. [35 FR 9918, June 17, 1970, as amended at 40 FR 20056, May 8, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981; 71 FR 42010, July 24, 2006] Sec. 56.65 Procedures for appeal gradings. (a) The appeal sample shall consist of product taken from the original sample container plus an equal number of samples selected at random. (b) When the original samples are not available or have been altered, such as the removal of undergrades, the appeal [[Page 55]] sample size for the lot shall consist of double the samples required in Sec. 56.4(b). (c) Shell eggs shall not have been moved from the original place of grading and must have been maintained under adequate refrigeration and humidity conditions. [35 FR 9918, June 17, 1970. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 47 FR 46070, Oct. 15, 1982; 47 FR 54421, Dec. 3, 1982; 69 FR 76376, Dec. 21, 2004; 71 FR 42010, July 24, 2006] Sec. 56.66 Appeal grading certificates. Immediately after an appeal grading is completed, an appeal certificate shall be issued to show that the original grading was sustained or was not sustained. Such certificate shall supersede any previously issued certificate for the product involved and shall clearly identify the number and date of the superseded certificate. The issuance of the appeal certificate may be withheld until any previously issued certificate and all copies have been returned when such action is deemed necessary to protect the interest of the Government. When the appeal grader assigns a different grade to the lot, the existing grademark shall be changed or obliterated as necessary. When the appeal grader assigns a different class or quantity designation to the lot, the labeling shall be corrected. [35 FR 9918, June 17, 1970. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42010, July 24, 2006] Denial of Service Sec. 56.68 Debarment. The acts or practices set forth in Sec. Sec. 56.69 through 56.74, or the causing thereof, may be deemed sufficient cause for the debarment by the Administrator of any person, including any agents, officers, subsidiaries, or affiliates of such person, from all benefits of the act for a specified period. The Rules of Practice Governing Formal Adjudicatory Proceedings (7 CFR part 1, subpart H) shall be applicable to such debarment action. [71 FR 42011, July 24, 2006] Sec. 56.69 Misrepresentation, deceptive, or fraudulent act or practice. Any willful misrepresentation or any deceptive or fraudulent act or practice found to be made or committed by any person in connection with: (a) The making or filing of an application for any grading service, appeal, or regrading service; (b) The making of the product accessible for sampling or grading; (c) The making, issuing, or using or attempting to issue or use any grading certificate, symbol, stamp, label, seal, or identification authorized pursuant to the regulations in this part; (d) The use of the terms ``United States'' or ``U.S.'' in conjunction with the grade of the product; (e) The use of any of the aforesaid terms or any official stamp, symbol, label, seal, or identification in the labeling or advertising of any product. [71 FR 42011, July 24, 2006] Sec. 56.70 Use of facsimile forms. Using or attempting to use a form which simulates in whole or in part any certificate, symbol, stamp, label, seal or identification authorized to be issued or used under the regulations in this part. [71 FR 42011, July 24, 2006] Sec. 56.71 Willful violation of the regulations. Any willful violation of the regulations in this part or the Act. [71 FR 42011, July 24, 2006] Sec. 56.72 Interfering with a grader or employee of the AMS. Any interference with or obstruction or any attempted interference or obstruction of or assault upon any graders, licensees, or employees of the AMS in the performance of their duties. The giving or offering, directly or indirectly, of any money, loan, gift, or anything of value to an employee of the AMS or the making or offering of any contribution to or in any way supplementing the salary, compensation or expenses of an employee of the AMS or the offering or entering into a private contract or agreement with an employee of the AMS for any services [[Page 56]] to be rendered while employed by the AMS. [71 FR 42011, July 24, 2006] Sec. 56.73 Misleading labeling. The use of the terms ``Government Graded'', ``Federal-State Graded'', or terms of similar import in the labeling or advertising of any product without stating in the label or advertisement the U.S. grade of the product as determined by an authorized grader. [71 FR 42011, July 24, 2006] Sec. 56.74 Miscellaneous. The existence of any of the conditions set forth in Sec. 56.24 constituting the basis for the rejection of an application for grading service. [71 FR 42011, July 24, 2006] Facility Requirements Sec. 56.75 Applicability of facility and operating requirements. The provisions of Sec. 56.76 shall be applicable to any grading service that is provided on a resident or temporary basis. [69 FR 76376, Dec. 21, 2004] Sec. 56.76 Minimum facility and operating requirements for shell egg grading and packing plants. (a) Applicants must comply with all applicable Federal, State and local government occupational safety and health regulations. (b) General requirements for premises, buildings and plant facilities. (1) The outside premises shall be free from refuse, rubbish, waste, unused equipment, and other materials and conditions which constitute a source of odors or a harbor for insects, rodents, and other vermin. (2) The outside premises adjacent to grading, packing, cooler, and storage rooms must be properly graded and well drained to prevent conditions that may constitute a source of odors or propagate insects or rodents. (3) Buildings shall be of sound construction so as to prevent, insofar as practicable, the entrance or harboring of vermin. (4) Grading and packing rooms shall be of sufficient size to permit installation of necessary equipment and conduct grading and packing in a sanitary manner. These rooms shall be kept reasonably clean during grading and packing operations and shall be thoroughly cleaned at the end of each operating day. (5) The floors, walls, ceilings, partitions, and other parts of the grading and packing rooms including benches and platforms shall be constructed of materials that are readily cleanable, maintained in a sanitary condition, and impervious to moisture in areas exposed to cleaning solutions or moist conditions. The floors shall be constructed as to provide proper drainage. (6) Adequate toilet accommodations which are conveniently located and separated from the grading and packing rooms are to be provided. Handwashing facilities shall be provided with hot and cold running water, an acceptable handwashing detergent, and a sanitary method for drying hands. Toilet rooms shall be ventilated to the outside of the building and be maintained in a clean and sanitary condition. Signs shall be posted in the toilet rooms instructing employees to wash their hands before returning to work. In new or remodeled construction, toilet rooms shall be located in areas that do not open directly into processing rooms. (7) A separate refuse room or a designated area for the accumulation of trash must be provided in plants which do not have a system for the daily removal or destruction of such trash. (8) Adequate packing and packaging storage areas are to be provided that protect packaging materials and are dry and maintained in a clean and sanitary condition. (c) Grading and packing room requirements. (1) The egg grading or candling area shall be adequately darkened to make possible the accurate quality determination of the candled appearance of eggs. There shall be no other light source or reflection of light that interfere with, or prohibit the accurate quality determination of eggs in the grading or candling areas. (2) The grading and candling equipment shall provide adequate light to facilitate quality determinations. When needed, other light sources and [[Page 57]] equipment or facilities shall be provided to permit the detection and removal of stained and dirty eggs or other undergrade eggs. (3) The grading and candling equipment must be sanitarily designed and constructed to facilitate cleaning. Such equipment shall be kept reasonably clean during grading and packing operations and be thoroughly cleaned at the end of each operating day. (4) Egg weighing equipment shall be constructed of materials to permit cleaning; operated in a clean, sanitary manner; and shall be capable of ready adjustment. (5) Adequate ventilation, heating, and cooling shall be provided where needed. (d) Cooler room requirements. (1) Cooler rooms holding shell eggs that are identified with a consumer grade shall be refrigerated and capable of maintaining an ambient temperature no greater than 45 [deg]F (7.2 [deg]C) and equipped with humidifying equipment capable of maintaining a relative humidity which will minimize shrinkage. (2) Accurate thermometers and hygrometers shall be provided for monitoring cooler room temperatures and relative humidity. (3) Cooler rooms shall be free from objectionable odors and from mold, and shall be maintained in a sanitary condition. (e) Shell egg protecting operations. (1) Shell egg protecting (oil application) operations shall be conducted in a manner to avoid contamination of the product and maximize conservation of its quality. (2) Component equipment within the shell egg protecting system, including holding tanks and containers, must be sanitarily designed and maintained in a clean and sanitary manner, and the application equipment must provide an adequate amount of oil for shell coverage of the volume of eggs processed. (3) Eggs with excess moisture on the shell shall not be shell protected. (4) Oil having any off odor, or that is obviously contaminated, shall not be used in shell egg protection operations. Oil is to be filtered prior to application. (5) The component equipment of the application system shall be washed, rinsed, and treated with a bactericidal agent each time the oil is removed. (6) Adequate coverage and protection against dust and dirt shall be provided when the equipment is not in use. (f) Shell egg cleaning operations. (1) Shell egg washing equipment must be sanitarily designed, maintained in a clean and sanitary manner, and thoroughly cleaned at the end of each operating day. (2) Shell egg drying equipment must be sanitarily designed and maintained in a clean and sanitary manner. Air used for drying purposes must be filtered. These filters shall be cleaned or replaced as needed to maintain a sanitary process. (3) The temperature of the wash water shall be maintained at 90 [deg]F (32.2 [deg]C) or higher, and shall be at least 20 [deg]F (6.7 [deg]C) warmer than the internal temperature of the eggs to be washed. These temperatures shall be maintained throughout the cleaning cycle. Accurate thermometers shall be provided for monitoring wash water temperatures. (4) Approved cleaning compounds shall be used in the wash water. (5) Wash water shall be changed approximately every 4 hours or more often if needed to maintain sanitary conditions, and at the end of each shift. Remedial measures shall be taken to prevent excess foaming during the egg washing operation. (6) Replacement water shall be added continuously to the wash water of washers. Chlorine or quaternary sanitizing rinse water may be used as part of the replacement water, provided, they are compatible with the washing compound. Iodine sanitizing rinse water may not be used as part of the replacement water. (7) Only potable water may be used to wash eggs. Each official plant shall submit certification to the national office stating that their water supply is potable. An analysis of the iron content of the water supply, stated in parts per million, is also required. When the iron content exceeds 2 parts per million, equipment shall be provided to reduce the iron content below the maximum allowed level. Frequency [[Page 58]] of testing for potability and iron content shall be determined by the Administrator. When the water source is changed, new tests are required. (8) Waste water from the egg washing operation shall be piped directly to drains. (9) The washing, rinsing, and drying operations shall be continuous and shall be completed as rapidly as possible to maximize conservation of the egg's quality and to prevent sweating of eggs. Eggs shall not be allowed to stand or soak in water. Immersion-type washers shall not be used. (10) Prewetting shell eggs prior to washing may be accomplished by spraying a continuous flow of water over the eggs in a manner which permits the water to drain away or other methods which may be approved by the Administrator. The temperature of the water shall be the same as prescribed in this section. (11) Washed eggs shall be spray-rinsed with water having a temperature equal to, or warmer than, the temperature of the wash water. The spray-rinse water shall contain a sanitizer that has been determined acceptable for the intended use by the national supervisor and of not less than 100 p/m nor more than 200 p/m of available chlorine or its equivalent. Alternate procedures, in lieu of a sanitizer rinse, may be approved by the national supervisor. (12) Test kits shall be provided and used to determine the strength of the sanitizing solution. (13) During non-processing periods, eggs shall be removed from the washing and rinsing area of the egg washer and from the scanning area whenever there is a buildup of heat that may diminish the quality of the egg. (14) Washed eggs shall be reasonably dry before packaging and packing. (15) Steam, vapors, or odors originating from the washing and rinsing operation shall be continuously and directly exhausted to the outside of the building. (g) Requirements for eggs officially identified with a grademark. (1) Shell eggs that are officially identified with a grademark shall be placed under refrigeration at an ambient temperature no greater than 45 [deg]F (7.2 [deg]C) promptly after packaging. (2) Eggs that are to be officially identified with the grademark shall be packed only in new or good used packing material and new packaging materials that are clean, free of mold, mustiness and off odors, and must be of sufficient strength and durability to adequately protect the eggs during normal distribution. When packed in other than fiber packing material, the containers must be of sound construction and maintained in a reasonably clean manner. (h) Use of approved chemicals and compounds. (1) All egg washing and equipment cleaning compounds, defoamers, destainers, sanitizers, inks, oils, lubricants, or any other compound that comes into contact with the shell eggs shall be approved by the national supervisor for their specified use and handled in accordance with the manufacturer's instructions. (2) All pesticides, insecticides, and rodenticides shall be approved for their specified use and handled in accordance with the manufacturer's instructions. [69 FR 76376, Dec. 21, 2004] Sec. 56.77 Health and hygiene of personnel. (a) No person known to be affected by a communicable or infectious disease shall be permitted to come in contact with the product. (b) Plant personnel coming into contact with the product shall wear clean clothing. [32 FR 8232, June 8, 1967. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Subpart B [Reserved] PART 57_INSPECTION OF EGGS (EGG PRODUCTS INSPECTION ACT)--Table of Contents Subpart A_Provisions Governing the Inspection of Eggs General Sec. 57.1 Definitions. 57.10 Administration. 57.13 Federal and State cooperation. 57.17 Nondiscrimination. 57.18 OMB control number. [[Page 59]] Scope of Inspection 57.20 Inspection in accordance with methods prescribed or approved. 57.22 Basis of service. 57.28 Inspections. Relation to Other Authorities 57.35 Eggs in commerce. Eggs Not Intended for Human Food 57.45 Prohibition on eggs not intended for use as human food. Exemptions 57.100 Specific exemptions. 57.105 Suspension or termination of exemptions. Performance of Services 57.110 Licensed inspectors. 57.112 Suspension of license or authority; revocation. 57.114 Surrender of license. 57.119 Political activity. 57.120 Financial interest of inspectors. 57.130 Identification. 57.132 Access to plants. 57.134 Accessibility of product. Records and Related Requirements for Egg Handlers and Related Industries 57.200 Records and related requirements. 57.220 Information and assistance to be furnished to inspectors. Administrative Detention 57.240 Detaining product. Appeal of an Inspection 57.300 Who may request an appeal inspection. 57.310 Where to file an appeal. 57.320 How to file an appeal. 57.330 When an application for an appeal inspection may be refused. 57.340 Who shall perform the appeal. 57.350 Procedures for selecting appeal samples. 57.360 Appeal inspection certificates. 57.370 Cost of appeals. Retention 57.426 Retention. Registration of Shell Egg Handlers 57.690 Persons required to register. Inspection and Disposition of Restricted Eggs 57.700 Prohibition on disposition of restricted eggs. 57.720 Disposition of restricted eggs. Identification of Restricted Eggs or Egg Products Not Intended for Human Consumption 57.800 Identification of restricted eggs. 57.801 Nest run or washed ungraded eggs. 57.840 Identification of inedible, unwholesome, or adulterated egg products. 57.860 Identification wording. Imports 57.900 Requirements for importation of restricted eggs into the United States. 57.905 Importation of restricted eggs or eggs containing more restricted eggs than permitted in the official standards for U.S. Consumer Grade B. 57.915 Foreign inspection certification required. 57.920 Importer to make application for inspection of imported eggs. 57.925 Inspection of imported eggs. 57.930 Imported eggs; retention in customs custody; delivery under bond; movement prior to inspection; sealing; handling; facilities, and assistance. 57.935 Means of conveyance and equipment used in handling eggs to be maintained in sanitary condition. 57.945 Foreign eggs offered for importation; reporting of findings to customs; handling of products refused entry. 57.950 Labeling of containers of eggs for importation. 57.955 Labeling of shipping containers of eggs for importation. 57.960 Small importations for consignee's personal use, display, or laboratory analysis. 57.965 Returned U.S. inspected and marked products; not importations. 57.970 Charges for storage, cartage, and labor with respect to products imported contrary to the Act. Subpart B_Administrative Provisions Governing Proceedings Under the Egg Products Inspection Act Scope and Applicability of Administrative Provisions 57.1000 Administrative proceedings. Authority: 21 U.S.C. 1031-1056. Source: 63 FR 69968, Dec. 17, 1998, unless otherwise noted. Editorial Note: 1. At 63 FR 69969, Dec. 17, 1998, part 57 was added by duplicating portions of part 59. At 63 FR 72353, Dec. 31, 1998, part 59 was redesignated as part 590 of 9 CFR. 2. Nomenclature changes to part 57 appear at 63 FR 69971, Dec. 17, 1998. [[Page 60]] Subpart A_Provisions Governing the Inspection of Eggs General Sec. 57.1 Definitions. For the purpose of the regulations in this part, words in the singular shall be deemed to import the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: Acceptable means suitable for the purpose intended by the Agricultural Marketing Service. Act means the applicable provisions of the Egg Products Inspection Act, as amended, (Pub. L. 91-597, 84 Stat. 1620 et seq.). Administrator means the Administrator of AMS of the Department or any other officer or employee of the Department to whom there has heretofore been delegated, or to whom there may hereafter be delegated the authority to act in the Administrator's stead. Adulterated means any egg under one or more of the following circumstances: (a) If it bears or contains any poisonous or deleterious substance which may render it injurious to health; but in case the substance is not an added substance, such article shall not be considered adulterated under this clause if the quantity of such substance in or on such article does not ordinarily render it injurious to health; (b)(1) If it bears or contains any added poisonous or added deleterious substance (other than one which is a pesticide chemical in or on a raw agricultural commodity; a food additive; or a color additive) which may in the judgment of the Secretary, make such article unfit for human food; (2) If it is, in whole or in part, a raw agricultural commodity and such commodity bears or contains a pesticide chemical which is unsafe within the meaning of section 408 of the Federal Food, Drug, and Cosmetic Act; (3) If it bears or contains any food additive which is unsafe within the meaning of section 409 of the Federal Food, Drug, and Cosmetic Act; (4) If it bears or contains any color additive which is unsafe within the meaning of section 706 of the Federal Food, Drug, and Cosmetic Act: Provided, that an article which is not otherwise deemed adulterated under paragraph (b)(2), (3), or (4) of this definition shall nevertheless be deemed adulterated if use of the pesticide chemical, food additive, or color additive, in or on such article, is prohibited by regulations of the Secretary in official plants; (c) If it consists, in whole or in part, of any filthy, putrid, or decomposed substance, or if it is otherwise unfit for human food; (d) If it has been prepared, packaged, or held under insanitary conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health; (e) If it is an egg which has been subjected to incubation or the product of any egg which has been subjected to incubation; (f) If its container is composed, in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health; (g) If it has been intentionally subjected to radiation, unless the use of the radiation was in conformity with a regulation or exemption in effect pursuant to section 409 of the Federal Food, Drug, and Cosmetic Act; or (h) If any valuable constituent has been, in whole or in part, omitted or abstracted therefrom; or if any substance has been substituted, wholly or in part therefor; or if damage or inferiority has been concealed in any manner; or if any substance has been added thereto or mixed or packed therewith so as to increase its bulk or weight, or reduce its quality or strength, or make it appear better or of greater value than it is. Agricultural Marketing Service or AMS mean the Agricultural Marketing Service of the Department. Applicant means any interested party who requests any inspection service. Capable of use as human food means any egg, unless it is denatured, or otherwise identified, as required by these regulations to deter its use as human food. [[Page 61]] Chief of the Grading Branch means Chief of the Grading Branch, Poultry Programs, AMS. Class means any subdivision of a product based on essential physical characteristics that differentiate between major groups of the same kind, species, or method of processing. Commerce means interstate, foreign, or intrastate commerce. Condition means any characteristic affecting a products merchantability including, but not being limited to, the following: The state of preservation, cleanliness, soundness, wholesomeness, or fitness for human food of any product; or the processing, handling, or packaging which affects such product. Container or Package mean for shell eggs, any carton, basket, case, cart, pallet, or other receptacle. (a) Immediate container means any package or other container in which shell eggs are packed for household or other ultimate consumers. (b) Shipping container means any container used in packing an immediate container. Department means the United States Department of Agriculture. Egg means the shell egg of the domesticated chicken, turkey, duck, goose, or guinea. Some of the terms applicable to shell eggs are as follows: (a) Check means an egg that has a broken shell or crack in the shell but has its shell membranes intact and contents not leaking. (b) Clean and sound shell egg means any egg whose shell is free of adhering dirt or foreign material and is not cracked or broken. (c) Dirty egg or Dirties means an egg(s) that has an unbroken shell with adhering dirt, or foreign material. (d) Incubator reject means an egg that has been subjected to incubation and has been removed from incubation during the hatching operations as infertile or otherwise unhatchable. (e) Inedible means eggs of the following descriptions: Black rots, yellow rots, white rots, mixed rots, sour eggs, eggs with green whites, eggs with stuck yolks, moldy eggs, musty eggs, eggs showing blood rings, and eggs containing embryo chicks (at or beyond the blood ring stage). (f) Leaker means an egg that has a crack or break in the shell and shell membranes to the extent that the egg contents are exposed or are exuding or free to exude through the shell. (g) Loss means an egg that is unfit for human food because it is smashed or broken so that its contents are leaking; or overheated, frozen, or contaminated; or an incubator reject; or because it contains a bloody white, large meat or blood spot, a large quantity of blood, or other foreign material. (h) Restricted egg means any check, dirty egg, incubator reject, inedible, leaker, or loss. Egg handler means any person, excluding the household consumer, who engages in any business in commerce that involves buying or selling any eggs or processing any egg products, or otherwise using any eggs in the preparation of human food. Federal Food, Drug, and Cosmetic Act means the Act so entitled, approved June 25, 1938 (52 Stat. 1040), and Acts amendatory thereof or supplementary thereto. Inedible egg products means dried, frozen, or liquid inedible egg products that are unfit for human consumption. Inspection means the application of such inspection methods and techniques as are deemed necessary by the responsible Secretary to carry out the provisions of the Egg Products Inspection Act and the regulations under this part. Interested party means any person financially interested in a transaction involving any surveillance inspection service. Label means a display of any printed, graphic, or other method of identification upon the shipping container, if any, or upon the immediate container, including but not limited to, an individual consumer package of eggs, or accompanying such product. National supervisor means: (a) The officer-in-charge of the surveillance inspection service; and (b) Other employee of the Department designated by the national supervisor. Nest-run eggs means eggs that have been packed as they come from the production facilities without having been washed, sized and/or candled for [[Page 62]] quality, with the exception that some checks, dirties, or other obvious undergrades may have been removed. Office of inspection means the office of any inspector. Official certificate means any certificate prescribed by regulations of the Administrator for issuance by an inspector or other person performing official functions under this part. Official device means any device prescribed or authorized by the Secretary for use in applying any official mark. Official egg products processing plant means one or more buildings or parts thereof comprising a single plant in which the plant facilities and methods of operation therein have been approved by the Administrator of the Food Safety Inspection Service as suitable and adequate for the continuous inspection of egg products and in which inspection service is carried on. Official standards means the official U.S. standards of quality, grades, and weight classes for shell eggs maintained by and available from Poultry Programs, AMS. Person means any individual, partnership, association, business trust, corporation, or any organized group of persons, whether incorporated or not. Pesticide chemical, Food additive, Color additive, and Raw agricultural commodity mean the same for purposes of this part as under the Federal Food, Drug, and Cosmetic Act. Plant means any place of business where eggs are processed. Quality means the inherent properties of any product which determine its relative degree of excellence. Regional director means any employee of the Department in charge of the surveillance inspection service in a designated geographical area. Regulations means the provisions in this entire part and such U.S. Standards, Grades, and Weight Classes for Shell Eggs as may be in effect at the time grading is performed. Regulatory inspector or Inspector means any Federal employee or the employee of a cooperating agency to whom a license has been issued by the Secretary to make such inspections as required in Sec. 57.28 of these regulations. Regulatory officer or staff officer means staff assistants to regional directors who assist the regional director in administering the surveillance inspection service. Sampling means the act of taking samples of any product for inspection. Secretary means the Secretary of Agriculture or any other officer or employee of the Department to whom the authority to act in the Secretary's stead has been delegated. Service means the personnel who are actively engaged in the administration, application, and direction of the surveillance inspection service pursuant to the regulations in this part. Shell egg packer means any person engaged in the sorting of eggs into their various qualities. (a) Producer-packer means any person engaged in the sorting of eggs from their own production into their various qualities, either mechanically or by other means. (b) Grading station means any person engaged in the sorting of eggs from their own production and sources other than their own production into their various qualities, either mechanically or by other means. State means any State of the United States of America, the Commonwealth of Puerto Rico, the Virgin Islands of the United States, and the District of Columbia. State supervisor or Federal-State supervisor means any authorized and delegated individual who is in charge of the surveillance inspection program in a state. Surveillance inspection service means the official service within the Department having the responsibility for carrying out the provisions of the Egg Products Inspection Act under this part. Ultimate consumer means any household consumer, restaurant, institution, or any other party who has purchased or received shell eggs for consumption. Unclassified eggs means eggs that have been washed or are unwashed and show evidence of segregating or sizing. United States Standards, Grades, and Weight Classes for Shell Eggs (AMS 56) means the official U.S. standards, grades, and weight classes for shell eggs that are maintained by and available from Poultry Programs, AMS. [[Page 63]] Washed ungraded eggs means eggs which have been washed and that are either sized or unsized, but not segregated for quality. [69 FR 57164, Sept. 24, 2004, as amended at 71 FR 12614, Mar. 13, 2006] Sec. 57.10 Administration. The Administrator shall perform, for and under the supervision of the Secretary such duties as the Secretary may require in the enforcement or administration of the provisions of the act and the regulations in this part. The Administrator is authorized to waive for limited periods any particular provisions of the regulations in this part to permit experimentation so that new procedures, equipment, grading, inspection, and processing techniques may be tested to facilitate definite improvements and at the same time to determine full compliance with the spirit and intent of the regulations in this part. The AMS and its officers and employees shall not be liable in damages through acts of commission or omission in the administration of this part. [69 FR 57166, Sept. 24, 2004] Sec. 57.13 Federal and State cooperation. The Secretary shall, whenever determined necessary to effectuate the purposes of the Act, authorize the Administrator to cooperate with appropriate State and other governmental agencies in carrying out any provisions of the Egg Products Inspection Act and this part. In carrying out the provisions of the Act and the regulations in this part, the Secretary may conduct such examinations, investigations, and inspections as the Secretary determines practicable through any officer or employee of any such agency commissioned by the Secretary for such purpose. The Secretary shall reimburse the States and other agencies for the services rendered by them stated in the cooperative agreements signed by the Administrator and the duly authorized agent of the State or other agency. [69 FR 57166, Sept. 24, 2004] Sec. 57.17 Nondiscrimination. The conduct of all services and the licensing of inspectors under these regulations shall be accomplished without discrimination as to race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, or marital or family status. [69 FR 57166, Sept. 24, 2004] Sec. 57.18 OMB control number. The information collection requirements in this part have been approved by the Office of Management and Budget and assigned OMB control number 0581-0113. [63 FR 69970, Dec. 17, 1998] Scope of Inspection Sec. 57.20 Inspection in accordance with methods prescribed or approved. Inspection of eggs shall be rendered pursuant to these regulations and under such conditions and in accordance with such methods as may be prescribed or approved by the Administrator. [63 FR 69968, 69970, Dec. 17, 1998] Sec. 57.22 Basis of service. This part provides for inspection services pursuant to the Egg Products Inspection Act, as amended. Eggs shall be inspected in accordance with such standards, methods, and instructions as may be issued or approved by the Administrator. Inspection services shall be subject to supervision at all times by the applicable Federal-State supervisor, staff officer, regulatory officer, regional director, and national supervisor. [69 FR 57166, Sept. 24, 2004] Sec. 57.28 Inspections. (a) Periodic inspections shall be made of business premises, facilities, inventories, operations, transport vehicles, and records of egg handlers, and the records of all persons engaged in the business of transporting, shipping, or receiving any eggs. In the case of shell egg packers packing eggs for the ultimate consumer, such inspections shall be made a minimum of once each calendar quarter. Hatcheries are to be inspected a minimum of once each fiscal year. (2) [Reserved] [[Page 64]] (b) Inspections shall be made of imported eggs as required in this part. [63 FR 69968, 69970, Dec. 17, 1998, as amended at 69 FR 57166, Sept. 24, 2004] Relation to Other Authorities Sec. 57.35 Eggs in commerce. (a)(1) For eggs that moved or are moving in interstate or foreign commerce, no State or local jurisdiction: (i) May require the use of standards of quality, condition, grade, or weight classes which are in addition to or different than the official standards; or (ii) Other than states in noncontiguous areas of the United States, may require labeling to show the State or other geographical area of production or origin. (2) This shall not preclude a State from requiring the name, address, and license number of the person processing or packaging eggs to be shown on each container. (b) Any State or local jurisdiction may exercise jurisdiction for the purpose of preventing the distribution of eggs for human food purposes that are in violation of this part or any other Federal acts or State or local laws consistent therewith. [69 FR 57166, Sept. 24, 2004] Eggs Not Intended for Human Food Sec. 57.45 Prohibition on eggs not intended for use as human food. (a) No person shall buy, sell, or transport, or offer to buy or sell, or offer or receive for transportation in commerce, any eggs that are not intended for use as human food, unless they are denatured or decharacterized, unless shipped under seal as authorized in Sec. 57.720(a) and identified as required by the regulations in this part. (b) No person shall import or export shell eggs classified as loss, inedible, or incubator rejects unless they are denatured or decharacterized and identified as required by the regulations in this part. [63 FR 69968, 69970, Dec. 17, 1998, as amended at 69 FR 57166, Sept. 24, 2004] Exemptions Sec. 57.100 Specific exemptions. The following are exempt to the extent prescribed as to the provisions for control of restricted eggs in section 8(a)(1) and (2) of the Act: Provided, That as to paragraphs (c) through (f) of this section, the exemptions do not apply to restricted eggs when prohibited by State or local law: And provided further, That the sale of ``hard- cooked shell eggs'' or ``peeled hard-cooked shell eggs'' prepared from checks is subject to the conditions for exemption in paragraphs (c), (d), and (f) of this section: And provided further, That the conditions for exemption and provisions of these regulations are met: (a) The sale, transportation, possession, or use of eggs that contain no more restricted eggs than are allowed by the tolerances in the official standards for U.S. Consumer Grade B shell eggs; (b) [Reserved] (c) The sale at the site of production, on a door-to-door retail route, or at an established place of business away from the site of production, by a poultry producer of eggs from his own flock's production directly to a household consumer exclusively for use by such consumer and members of his household and his nonpaying guests and employees, and the transportation, possession, and use of such eggs: Provided, That each such sale of restricted eggs shall be limited to no more than 30 dozen eggs; And provided further, (1) That eggs sold directly to consumers at an established place of business away from the site of production be moved directly from the producer to such place of business; (2) That such business away from the site of production be owned and managed by the producer; and (3) That such eggs which are sold on a door-to-door route or at an established place of business away from the site of production shall contain no more loss and/or leakers than allowed in the official standards for U.S. Consumer Grade B shell eggs. (d) The sale of eggs by any producer with an annual egg production from a flock of 3,000 hens or less and the record requirements of Sec. 57.200; [[Page 65]] (e) The processing and sale of egg products by any producer from eggs of the producer's own flock when sold directly to a household consumer exclusively for use by such consumer and members of the consumer's household and the consumer's nonpaying guests and employees; (f) The sale of eggs by shell egg packers on the premises where the grading station is located, directly to household consumers for use by such consumer and members of the consumer's household and the consumer's nonpaying guests and employees, and the transportation, possession, and use of such eggs. Each such sale of ``restricted eggs'' shall be limited to no more than 30 dozen eggs; (g) The processing in nonofficial plants, including but not limited to bakeries, restaurants, and other food processors, without continuous inspection, of certain categories of food products which contain eggs or egg products as an ingredient, and the sale and possession of such products: Provided, That such products are manufactured from inspected egg products processed in accordance with this part or from eggs containing no more restricted eggs than are allowed in the official standards for U.S. Consumer Grade B shell eggs; (h) The purchase, sale, possession, or transportation of shell eggs containing more restricted eggs than allowed in the tolerances for U.S. Consumer Grade B shell eggs: Provided, That such eggs are handled in accordance with Sec. Sec. 57.200 and 57.700 through 57.860 to assure that only eggs fit for human food are used for such purpose. This exemption applies to the following: (1) Egg producers, assemblers, wholesalers, and grading operations; (2) Hatcheries; (3) Transporters; (4) Laboratories, pharmaceutical companies; and (5) Processors of products not intended for use as human food. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57166, Sept. 24, 2004] Sec. 57.105 Suspension or termination of exemptions. (a) The Administrator may modify or revoke any regulation of this part, granting exemptions whenever he determines such action appropriate to effectuate the purposes of the Act. (b) Failure to comply with the condition of the exemptions contained in Sec. 57.100 shall subject such person to the penalties provided for in the Act and in this part. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57166, Sept. 24, 2004] Performance of Services Sec. 57.110 Licensed inspectors. (a) Any person who is a Federal employee or the employee of a cooperating agency who possesses proper qualifications as determined by an examination for competency, and who is to perform surveillance inspection services, may be licensed by the Secretary as an inspector. (b) All licenses issued by the Secretary shall be countersigned by the Administrator or by any other designated official of the service. [69 FR 67166, Sept. 24, 2004] Sec. 57.112 Suspension of license or authority; revocation. Pending final action by the Secretary, any person authorized to countersign a license to perform surveillance inspection services may, whenever such action is necessary to assure that any inspection service is properly performed, suspend or revoke any license to perform inspection services issued pursuant to this part by giving notice of such action to the respective licensee, accompanied by a statement of the reasons. Within 7 days after the receipt of the suspension or revocation notice and statement of reasons, the licensee may file an appeal in writing to the Secretary, supported by any argument or evidence that the licensee may wish to offer as to why the license should not be suspended or revoked. After the expiration of the 7-day period and consideration of such argument and evidence, the Secretary will take appropriate action regarding the suspension or revocation. When no appeal is filed within the prescribed 7 days, the license is revoked or suspended. [69 FR 57166, Sept. 24, 2004] [[Page 66]] Sec. 57.114 Surrender of license. Each license that is canceled, suspended, revoked, or expired shall immediately be surrendered by the licensee to the office of inspection serving the area in which the licensee is located. [69 FR 57167, Sept. 24, 2004] Sec. 57.119 Political activity. Federal inspectors may participate in certain political activities, including management and participation in political campaigns as allowed by Federal regulation and AMS directives. Inspectors are subject to these rules while they are on leave with or without pay, including furlough; however the rules do not apply to cooperative employees not under Federal supervision and intermittent employees on the days they perform no service. Willfull violations of the political activity rules constitute grounds for removal from the service. [69 FR 57167, Sept. 24, 2004] Sec. 57.120 Financial interest of inspectors. An inspector shall not inspect any product in which the inspector is financially interested. [69 FR 57167, Sept. 24, 2004] Sec. 57.130 Identification. Each inspector shall have in their possession at all times, and present while on duty upon request, the means of identification furnished by the Department. [69 FR 57167, Sept. 24, 2004] Sec. 57.132 Access to plants. Access shall not be refused to any representative of the Secretary to any plant, place of business, or transport vehicle subject to inspection under the provisions of this part upon presentation of identification furnished by the Department. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57166, Sept. 24, 2004] Sec. 57.134 Accessibility of product. Each product for which inspection service is required shall be so placed as to disclose fully its class, quality, quantity, and condition as the circumstances may warrant. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57167, Sept. 24, 2004] Records and Related Requirements for Egg Handlers and Related Industries Sec. 57.200 Records and related requirements. (a) Persons engaged in the business of transporting, shipping, or receiving any eggs in commerce, or holding such articles so received, and all egg handlers, including hatcheries, shall maintain for 2 years records showing the receipt, delivery, sale, movement, and disposition of all eggs handled by them, and upon the request of an authorized representative of the Secretary, shall permit the representative, at reasonable times, to have access to and to copy all such records. (b) All egg handlers shall maintain production records as approved by the Administrator. The records (bills of sale, inventories, receipts) shall show the name and address of the shipper and receiver, the date of the transaction, the quality of the eggs (graded eggs, nest-run eggs, dirties, checks, leakers, loss, inedible eggs), and the quantity of the eggs (amount). Producers who ship all of their production as nest-run eggs without segregation need only to maintain records indicating the amount of shell eggs shipped, date of shipment, and the receivers' name and address. [69 FR 57167, Sept. 24, 2004] Sec. 57.220 Information and assistance to be furnished to inspectors. When surveillance inspection service is performed at any plant, the plant operator shall furnish the inspector such information and assistance as may be required for the performance of inspection functions, preparing certificates, reports, and for other official duties. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57167, Sept. 24, 2004] [[Page 67]] Administrative Detention Sec. 57.240 Detaining product. Whenever any eggs subject to the Act are found by any authorized representative of the Secretary upon any premises, and there is reason to believe that they are or have been processed, bought, sold, possessed, used, transported, or offered or received for sale or transportation in violation of the Act or the regulations in this part, or that they are in any other way in violation of the Act, or whenever any restricted eggs capable of use as human food are found by such a representative in the possession of any person not authorized to acquire such eggs under the regulations in this part, such articles may be detained by such representative for a period not to exceed 20 days, as more fully provided in section 19 of the Act. A detention tag or other similar device shall be used to identify detained product, and the custodian or owner shall be given a written notice of such detention. Only authorized representatives of the Secretary shall affix or remove detention identification. The provisions of this section shall in no way derogate from authority for condemnation or seizure conferred by other provisions of the Act, the regulations in this part, or other laws. [63 FR 69968, 69971, Dec. 17, 1998] Appeal of an Inspection Sec. 57.300 Who may request an appeal inspection. An appeal inspection may be requested by any interested party who is dissatisfied with the determination by an inspector of the class, quality, quantity, or condition of any product. [69 FR 57167, Sept. 24, 2004] Sec. 57.310 Where to file an appeal. Any interested party that is not satisfied with the determination of the class, quality, quantity, or condition of product which was inspected may request an appeal inspection by filing such request with the Regional Director in the region where the product is located or with the Chief of the Grading Branch. [63 FR 69971, Dec. 17, 1998, as amended at 69 FR 57167, Sept. 24, 2004] Sec. 57.320 How to file an appeal. The request for an appeal inspection may be made orally or in writing. If made orally, written confirmation may be required. The applicant shall clearly state the identity of the product, the decision that is questioned, and the reason(s) for requesting the appeal service. [69 FR 57167, Sept. 24, 2004] Sec. 57.330 When an application for an appeal inspection may be refused. When it appears to the official with whom an appeal request is filed that the reasons given in the request are frivolous or not substantial, or that the condition of the product has undergone a material change since the original inspection, or that the original lot has changed in some manner, or the Act or the regulations in this part have not been complied with, the applicant's request for the appeal inspection may be refused. In such case, the applicant shall be promptly notified of the reason(s) for such refusal. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57167, Sept. 24, 2004] Sec. 57.340 Who shall perform the appeal. The assignment of the inspector(s) who will make the appeal inspection under Sec. 57.310 shall be made by the Regional Director or the Chief of the Grading Branch. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57167, Sept. 24, 2004] Sec. 57.350 Procedures for selecting appeal samples. (a) Products shall not have been moved from the place where the inspection being appealed was performed and must have been maintained under adequate refrigeration when applicable. (b) The appeal sample shall consist of product taken from the original sample containers plus an equal number of containers selected at random. When the original samples are not available or have been altered, such as removing the undergrades, the sample size shall [[Page 68]] be double the number of samples required in 7 CFR 56.4. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57167, Sept. 24, 2004] Sec. 57.360 Appeal inspection certificates. Immediately after an appeal inspection is completed, an appeal certificate shall be issued to show that the original inspection was sustained or was not sustained. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57167, Sept. 24, 2004] Sec. 57.370 Cost of appeals. The costs of an appeal inspection shall be borne by the appellant on a fee basis at rates set forth in 7 CFR 56.46, plus any travel and additional expenses. If the appeal inspection or review of an inspector's decision discloses that a material error was made in the original determination, no fee or expense will be charged. [69 FR 57157, Sept. 24, 2004] Retention Sec. 57.426 Retention. Retention tags or other devices and methods as may be approved by the Administrator shall be used for the identification and control of products which are not in compliance with the regulations or are held for further examination. No product, shall be released for use until it has been made acceptable. Such identification shall not be removed by anyone other than an inspector. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Registration of Shell Egg Handlers Sec. 57.690 Person required to register. Egg handlers, except for producer-packers with an annual egg production from a flock of 3,000 hens or less, who grade and pack eggs for the ultimate consumer, and hatcheries, are required to register with the Department by furnishing their name, place of business, and such other information requested on the registration form available from the Department. Completed forms shall be sent to the addressee indicated on the form. Persons above who are establishing a business will be required to register before they start operations. [69 FR 571688, Sept. 24, 2004] Inspection and Disposition of Restricted Eggs Sec. 57.700 Prohibition on disposition of restricted eggs. (a) No person shall buy, sell, or transport, or offer to buy or sell, or offer or receive for transportation in any business in commerce any restricted eggs, except as authorized in Sec. Sec. 57.100 and 57.720. (b) No egg handler shall possess any restricted eggs, except as authorized in Sec. Sec. 57.100 and 57.720. (c) No egg handler shall use any restricted eggs in the preparation of human food, except as provided in Sec. Sec. 57.100 and 57.720. [36 FR 9814, May 28, 1971. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 63 FR 69970, Dec. 17, 1998] Sec. 57.720 Disposition of restricted eggs. (a) Eggs classified as checks, dirties, incubator rejects, inedibles, leakers, or loss shall be disposed of by one of the following methods at point and time of segregation: (1) By shipping directly or indirectly to an official egg products processing plant for segregation and processing, if a check or dirty and if labeled in accordance with Sec. 57.800. Inedible and loss eggs shall not be intermingled in the same container with checks and dirties. (2) By destruction and identification in a manner approved by the Administrator. (i) Loss and inedible eggs shall be crushed and shall be placed in a container containing a sufficient amount of approved denaturant or decharacterant, such as FD&C brown, blue, black, or green colors, meat and fish by-products, grain and milling by-products, or any other substance, as approved by the Administrator, that will accomplish the purposes of this section. The approved denaturant or decharacterant substance shall be dispersed through the product in amounts sufficient to give the product a distinctive appearance or odor. [[Page 69]] (ii) The denatured and decharacterized product shall be labeled as required in Sec. Sec. 57.840 and 57.860. (3) By processing for industrial use or for animal food. Such product shall be denatured or decharacterized in accordance with Sec. 57.720(a)(2) and identified as provided in Sec. Sec. 57.840 and 57.860, or handled in accordance with other procedures approved by the Administrator. Notwithstanding the foregoing, product which was produced under official supervision and transported for industrial use or animal food need not be denatured or decharacterized if it is shipped under Government seal and received by an inspector or grader as defined in this part. (4) By coloring the shells of loss and inedible eggs with a sufficient amount of FD&C color to give a distinct appearance, or applying a substance that will penetrate the shell and decharacterize the egg meat. Except that, lots of eggs containing significant percentages of blood spots or meat spots, but no other types of loss or inedible eggs may be shipped directly to official egg products processing plants, provided they are conspicuously labeled with the name and address of the shipper and the wording ``Spots--For Processing Only In Official Egg Products Processing Plants.'' (b) Eggs which are packed for the ultimate consumer and which have been found to exceed the tolerance for restricted eggs permitted in the official standards for U.S. Consumer Grade B shall be identified as required in Sec. Sec. 57.800 and 57.860 and shall be shipped directly or indirectly: (1) To an official egg products processing plant for proper segregation and processing; or (2) Be regraded so that they comply with the official standards; or (3) Used as other than human food. (c) Records shall be maintained as provided in Sec. 57.200 to assure proper disposition. [36 FR 9814, May 28, 1971; 36 FR 10841, June 4, 1971; 37 FR 6659, Apr. 1, 1972; 40 FR 20059, May 8, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 47 FR 745, Jan. 7, 1982; 60 FR 49170, Sept. 21, 1995. Redesignated at 63 FR 69970, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Identification of Restricted Eggs or Egg Products Not Intended for Human Consumption Sec. 57.800 Identification of restricted eggs. The shipping container of restricted eggs shall be determined to be satisfactorily identified if such container bears the packer's name and address, the quality of the eggs in the container (e.g., dirties, checks, inedibles, or loss), or the statement ``Restricted Eggs--For Processing Only In An Official USDA Egg Products Processing Plant,'' for checks or dirties, or ``Restricted Eggs--Not To Be Used As Human Food,'' for inedibles, loss, and incubator rejects, or ``Unclassified Eggs--To Be Regraded'' for graded eggs which contain more restricted eggs than are allowed in the official standards for U.S. Consumer Grade B shell eggs. The size of the letters of the identification wording shall be as required in Sec. 57.860. When eggs are packed in immediate containers, e.g., cartons, sleeve packs, overwrapped 2\1/2\- or 3-dozen packs, etc., for sale to household consumers under the exemptions provided for in section 57.100 (c), or (f), they shall be deemed to be satisfactorily identified in accordance with the requirements of this part if such immediate containers bear the packer's name and address and the quality of the eggs. Alternatively, a point of sale sign may be displayed showing the above information. [63 FR 69968, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.801 Nest run or washed ungraded eggs. Nest run or washed ungraded eggs are exempt from the labeling provisions in Sec. 57.800. However, when such eggs are packed and sold to consumers, they may not exceed the tolerance for restricted eggs permitted in the official standards for U.S. Consumer Grade B shell eggs. [60 FR 49171, Sept. 21, 1995. Redesignated at 63 FR 69970, Dec. 17, 1998] Sec. 57.840 Identification of inedible, unwholesome, or adulterated egg products. All inedible, unwholesome, or adulterated egg products shall be identified [[Page 70]] with the name and address of the processor, the words ``Inedible Egg Products--Not To Be Used as Human Food.'' Sec. 57.860 Identification wording. The letters of the identification wording shall be legible and conspicuous. Imports Sec. 57.900 Requirements for importation of restricted eggs into the United States. (a) Restricted eggs may be imported into the United States from any foreign country only in accordance with these regulations. The importation of any egg in violation of the regulations of this part is prohibited. The importation of any egg in violation of the regulations of this part is prohibited. (b) All such imported articles shall upon entry into the United States be deemed and treated as domestic articles and be subject to the other provisions of the Act, these regulations, and other Federal or State requirements. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.905 Importation of restricted eggs or eggs containing more restricted eggs than permitted in the official standards for U.S. Consumer Grade B. (a) No containers of restricted egg(s) other than checks or dirties shall be imported into the United States. The shipping containers of such eggs shall be identified with the name, address, and country of origin of the exporter, and the date of pack and quality of the eggs (e.g., checks, or dirties) preceded by the word ``Imported'' or the statement ``Imported Restricted Eggs--For Processing Only In An Official USDA Processing Plant,'' or ``Restricted Eggs--Not To Be Used As Human Food.'' Such identification shall be legible and conspicuous. Alternatively, for properly sealed and certified shipments of shell eggs imported for breaking at an official egg products processing plant, the shipping containers need not be labeled, provided that the shipment is segregated and controlled upon arrival at the destination breaking plant. (b) Eggs which are imported for use as human food and upon entry are found to contain more restricted eggs than permitted in the official standards for U.S. Consumer Grade B, shall be refused entry and returned to the importing country or be conspicuously and legibly identified as ``Imported Restricted Eggs'' and be sent directly under official seal: (1) To a place where they may be regraded to comply with the official U.S. standards for consumer grades; (2) to an official USDA egg products processing plant; or (3) to be used as other than human food. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.915 Foreign inspection certification required. (a) [Reserved] (b) Except as otherwise provided in Sec. 57.960, each consignment of shell eggs shall be accompanied by a foreign inspection certificate, that, unless otherwise approved by the Administrator contains the following information: (1) Name of Country exporting product; (2) City and date where issued; (3) Quality or description of eggs; (4) Number of cases and total quantity; (5) Identification marks on containers; (6) Name and address of exporter; (7) Name and address of importer; (8) A certification that the quality or description of the shell eggs, including date of pack, is true and accurate; (9) A certification that shell eggs which have been packed into containers destined for the ultimate consumer have, at all times after packing, been stored and transported under refrigeration at an ambient temperature of no greater than 45 [deg]F (7.2 [deg]C); and (10) Name (including signature) and title of person authorized to issue inspection certificates for shell eggs exported to the United States. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] [[Page 71]] Sec. 57.920 Importer to make application for inspection of imported eggs. Each person importing any eggs as defined in these regulations, unless exempted by Sec. 57.960 shall make application for inspection upon LPS Form 222- Import Request. The application may be submitted to the address located on LPS Form 222, filed through electronic submission via [email protected], or by accessing the U.S. Customs and Border Protection's International Trade Data System. Application shall be made as far in advance as possible prior to the arrival of the product. Each application shall state the approximate date of product arrival in the United States, the name of the ship or other carrier, the country from which the product was shipped, the destination, the quantity and class of product, and the point of first arrival in the United States. [81 FR 1482, Jan. 13, 2016] Sec. 57.925 Inspection of imported eggs. (a) Except as provided in Sec. 57.960, eggs offered for importation from any foreign country shall be subject to inspection in accordance with established inspection procedures, including the examination of the labeling information on the containers, by an inspector before the product shall be admitted into the United States. Importers will be advised of the point where inspection will be made, and in case of small shipments (less than carload lots), the importer may be required to move the product to the location of the nearest inspector. (b) Inspectors may take samples, without cost to the United States, of any product offered for importation that is subject to quality determination, except that samples shall not be taken of any products offered for importation under Sec. 57.960, unless there is reason for suspecting the presence therein of a substance in violation of that section. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.930 Imported eggs; retention in customs custody; delivery under bond; movement prior to inspection; sealing; handling; facilities, and assistance. (a) No eggs required by this part to be inspected shall be released from customs custody prior to required inspections, but such product may be delivered to the consignee, or his agent, prior to inspection if the consignee shall furnish a bond, in the form prescribed by the Secretary of the Treasury, conditioned that the product shall be returned, if demanded, to the collector of the port where the same is offered for clearance through customs. (b) Notwithstanding paragraph (a) of this section, no product required by this part to be inspected shall be moved prior to inspection from the port of arrival where first unloaded, and if arriving by water from the wharf where first unloaded at such port, to any place other than the place designated in accordance with this part as the place where the same shall be inspected; and no product shall be conveyed in any manner other than in compliance with this part. (c) Means of conveyance or packages in which any product is moved in accordance with this part, prior to inspection, from the port or wharf where first unloaded in the United States, shall be sealed with special import seals of the Department or otherwise identified as provided herein, unless already sealed with customs or consular seals in accordance with the customs regulations. Such special seals shall be affixed by an inspector or, if there is no inspector at such port, by a customs officer. In lieu of sealing packages, the carrier or importer may furnish and attach to each package of product a warning notice on bright yellow paper, not less than 5 x 8 inches in size, containing the following legend in black type of a conspicuous size: (Name of Truck Line or Carrier) Notice This package of _____ must be delivered intact to an inspector of the Poultry Programs, U.S. Department of Agriculture. [[Page 72]] Warning Failure to comply with these instructions will result in penalty action being taken against the holder of the customs entry bond. If the product is found to be acceptable upon inspection, the product may be released to the consignee, or his agent, and this warning notice defaced. (d) No person shall affix, break, alter, deface, mutilate, remove, or destroy any special import seal of the Department, except customs officers or inspectors, or as provided in paragraph (f) of this section. (e) No product shall be removed from any means of conveyance or package sealed with a special import seal of the Department, except under the supervision of an inspector or a customs officer, or as provided in paragraph (f) of this section. (f) In case of a wreck or similar extraordinary emergency, the special import seal of the Department on a car, truck, or other means of conveyance may be broken by the carrier and, if necessary, the articles may be reloaded into another means of conveyance for transportation to destination. In all such cases, the carrier shall immediately report the facts to the Chief of the Grading Branch. (g) The consignee or his agent shall provide such facilities and assistance as the inspector may require for the inspection and handling and marking of products offered for importation. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.935 Means of conveyance and equipment used in handling eggs to be maintained in sanitary condition. Compartments of boats, railroad cars, and other means of conveyance transporting any product to the United States, and all chutes, platforms, racks, tables, tools, utensils, and all other devices used in moving and handling such product offered for importation, shall be maintained in a sanitary condition. Sec. 57.945 Foreign eggs offered for importation; reporting of findings to customs; handling of products refused entry. (a) Inspectors shall report their findings to the collector of customs at the port where products are offered for entry, and shall request the collector to refuse entry to eggs that are marked or designated ``U.S. Refused Entry'' or otherwise are not in compliance with the regulations in this part. Unless such products are exported by the consignee within a time specified by the collector of customs (usually 30 days), the consignee shall cause the destruction of such products for human food purposes under the supervision of an inspector. If products are destroyed for human food purposes under the supervision of an inspector, he shall give prompt notice thereof to the District Director of Customs. (b) Consignees shall, at their own expense, return immediately to the collector of customs, in means of conveyance or packages sealed by the Department, any eggs received by them under this part which in any respect do not comply with this part. (c) Except as provided in Sec. 57.930(a), no person shall remove or cause to be removed from any place designated as the place of inspection, any eggs that the regulations require to be marked in any way, unless the same has been clearly and legibly marked in compliance with this part. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.950 Labeling of containers of eggs for importation. (a) Immediate containers of product offered for importation shall bear a label, printed in English, showing: (1) The name of product; (2) The name of the country of origin of the product, and for consumer packaged products, preceded by the words ``Product of,'' which statement shall appear immediately under the name of the product; (3) The quality or description of shell eggs, including date of pack; (4) For shell eggs, the words, ``Keep Refrigerated,'' or words of similar meaning; (5) [Reserved] [[Page 73]] (6) The name and place of business of manufacturer, packer, or distributor, qualified by a phrase which reveals the connection that such person has with the product; (7) An accurate statement of the quantity; (b) For properly sealed and certified shipments of shell eggs imported for breaking at an official egg products processing plant, the immediate containers need not be labeled, provided that the shipment is segregated and controlled upon arrival at the destination breaking plant. (c) The labels shall not be false or misleading in any respect. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.955 Labeling of shipping containers of eggs for importation. (a) Shipping containers of foreign product offered for importation shall bear a label, printed in English, showing: (1) The common or usual name of the product; (2) The name of the country of origin; (3)-(4) [Reserved] (5) The quality or description of the eggs, except as required in Sec. 57.905; (6) The words ``Keep refrigerated'' or words of similar meaning. (b) Labeling on shipping containers examined at the time of inspection in the United States, if found to be false or misleading, shall be cause for the product to be refused entry. (c) For properly sealed and certified shipments of shell eggs imported for breaking at an official egg products plant, the shipping containers need not be labeled, provided that the shipment is segregated and controlled upon arrival at the destination breaking plant. (d) In the case of products which are not in compliance solely because of misbranding, such products may be brought into compliance with the regulations only under the supervision of an authorized representative of the Administrator. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.960 Small importations for consignee's personal use, display, or laboratory analysis. Any eggs that are offered for importation, exclusively for the consignee's personal use, display, or laboratory analysis, and not for sale or distribution; which is sound, healthful, wholesome, and fit for human food; and which is not adulterated and does not contain any substance not permitted by the Act or regulations, may be admitted into the United States without a foreign inspection certificate. Such product is not required to be inspected upon arrival in the United States and may be shipped to the consignee without further restriction under this part: Provided, That the Department may, with respect to any specific importation, require that the consignee certify that such product is exclusively for the consignee's personal use, display, or laboratory analysis and not for sale or distribution. The amount of such product imported shall not exceed 30-dozen shell eggs, unless otherwise authorized by the Administrator. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.965 Returned U.S. inspected and marked products; not importations. Products that have been inspected by the Department and so marked, and which are returned from foreign countries are not importations within the meaning of this part. Such returned shipments shall be reported to the Administrator by letter. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] Sec. 57.970 Charges for storage, cartage, and labor with respect to products imported contrary to the Act. All charges for storage, cartage, and labor with respect to any product that is imported contrary to this part shall be paid by the owner or consignee, and in default of such payment shall constitute a lien against such product and any other product thereafter imported under the Act by or for such owner or consignee. [63 FR 69968, 69971, Dec. 17, 1998, as amended at 69 FR 57168, Sept. 24, 2004] [[Page 74]] Subpart B_Administrative Provisions Governing Proceedings Under the Egg Products Inspection Act Source: 64 FR 40738, July 28, 1999, unless otherwise noted. Scope and Applicability of Administrative Provisions Sec. 57.1000 Administrative proceedings. (a) The Uniform Rules of Practice for the Department of Agriculture promulgated in subpart H of part 1, subtitle A, title 7, Code of Federal Regulations, are the Rules of Practice applicable to adjudicating administrative proceedings under section 12(c) of the Egg Products Inspection Act (21 U.S.C. 1041). (b) In addition to the proceedings set forth in paragraph (a) of this section, the Administrator, at any time prior to the issuance of a complaint seeking a civil penalty under the Act may enter into a stipulation with any person, in accordance with the following prescribed conditions: (1) The Administrator gives notice of an apparent violation of the Act or the regulations issued thereunder by such person and affords such person an opportunity for a hearing regarding the matter as provided by the Act; (2) Such person expressly waives hearing and agrees to a specified order including an agreement to pay a specified civil penalty within a designated time; and (3) The Administrator agrees to accept the specified civil penalty in settlement of the particular matter involved if it is paid within the designated time. (4) If the specified penalty is not paid within the time designated in such stipulation, the amount of the stipulated penalty shall not be relevant in any respect to the penalty that may be assessed after the institution of a formal administrative proceeding pursuant to the Uniform Rules of Practice, Subpart H, Part 1, Title 7, Code of Federal Regulations. [64 FR 40738, July 28, 1999, as amended at 69 FR 57168, Sept. 24, 2004] PART 58_GRADING AND INSPECTION, GENERAL SPECIFICATIONS FOR APPROVED PLANTS AND STANDARDS FOR GRADES OF DAIRY PRODUCTS--Table of Contents Subpart A_Provisions Governing the Inspection and Grading Services of Manufactured or Processed Dairy Products Definitions --------------------------------------------------------------------------- \1\ Compliance with these standards does not excuse failure to comply with the provisions of the Federal Food, Drug and Cosmetic Act. --------------------------------------------------------------------------- Sec. 58.1 Meaning of words. 58.2 Designation of official certificates, memoranda, marks, identifications, and devices for purpose of the Agricultural Marketing Act. Administration 58.3 Authority. Inspection or Grading Service 58.4 Basis of service. 58.5 Where service is offered. 58.6 Supervision of service. 58.7 Who may obtain service. 58.8 How to make application. 58.9 Form of application. 58.10 Filing of application. 58.11 Approval of application. 58.12 When application may be rejected. 58.13 When application may be withdrawn. 58.14 Authority of applicant. 58.15 Accessibility and condition of product. 58.16 Disposition of samples. 58.17 Order of service. 58.18 Inspection or grading certificates, memoranda, or reports. 58.19 Issuance of inspection or grading certificates. 58.20 Disposition of inspection or grading certificates or reports. 58.21 Advance information. Appeal Inspection or Grading and Reinstatement of Regrading 58.22 When appeal inspection or grading may be requested. 58.23 How to obtain appeal inspection or grading. 58.24 Record of filing time. 58.25 When an application for appeal inspection or grading may be refused. 58.26 When an application for an appeal inspection or grading may be withdrawn. 58.27 Order in which appeal inspections or gradings are performed. 58.28 Who shall make appeal inspections or gradings. [[Page 75]] 58.29 Appeal inspection or grading certificate or report. 58.30 Application for reinspection or regrading. 58.31 Reinspection or regrading certificate or report. 58.32 Superseded certificates or reports. Licensing of Inspectors or Graders 58.33 Who may be licensed. 58.34 Suspension or revocation of license. 58.35 Surrender of license. 58.36 Identification. 58.37 Financial interest of licensees. Fees and Charges 58.38 Payment of fees and charges. 58.39 Fees for holiday or other nonworktime. 58.40 Fees for appeal inspection or grading. 58.41 Fees for additional copies of certificates. 58.42 Travel expenses and other charges. 58.43 Fees for inspection, grading, sampling, and certification. 58.45 Fees for continuous resident services. 58.46 Fees for service performed under cooperative agreement. Marking, Branding, and Identifying Product 58.49 Authority to use official identification. 58.50 Approval and form of official identification. 58.51 Information required on official identification. 58.52 Time limit for packaging inspected or graded products with official identification. Prerequisites to Packaging Products With Official Identification 58.53 Supervisor of packaging required. 58.54 Packing and packaging room and equipment. 58.55 Facilities for keeping quality samples. 58.56 Incubation of product samples. 58.57 Product not eligible for packaging with official identification. Violations 58.58 Debarment of service. Miscellaneous 58.61 Political activity. 58.62 Report of violations. 58.63 Other applicable regulations. 58.64 OMB control numbers assigned pursuant to the Paperwork Reduction Act. Subpart B_General Specifications for Dairy Plants Approved for USDA Inspection and Grading Service Definitions 58.100 OMB control numbers assigned pursuant to the Paperwork Reduction Act. 58.101 Meaning of words. Purpose 58.122 Approved plants under USDA inspection and grading service. Approved Plants 58.123 Survey and approval. 58.124 Denial or suspension of plant approval. Premises, Buildings, Facilities, Equipment and Utensils 58.125 Premises. 58.126 Buildings. 58.127 Facilities. 58.128 Equipment and utensils. Personnel, Cleanliness and Health 58.129 Cleanliness. 58.130 Health. Protection and Transport of Raw Milk and Cream 58.131 Equipment and facilities. Quality Specifications for Raw Milk 58.132 Basis for classification. 58.133 Methods for quality and wholesomeness determination. 58.134 Sediment content for milk in cans. 58.135 Bacterial estimate. 58.136 Rejected milk. 58.137 Excluded milk. 58.138 Quality testing of milk from new producers. 58.139 Record of tests. 58.140 Field service. 58.141 Alternate quality control program. Operations and Operating Procedures 58.142 Product quality and stability. 58.143 Raw product storage. 58.144 Pasteurization or ultra-pasteurization. 58.145 Composition and wholesomeness. 58.146 Cleaning and sanitizing treatment. 58.147 Insect and rodent control program. 58.148 Plant records. 58.149 Alternate quality control programs for dairy products. Packaging and General Identification 58.150 Containers. [[Page 76]] 58.151 Packaging and repackaging. 58.152 General identification. Storage of Finished Product 58.153 Dry storage. 58.154 Refrigerated storage. Inspection, Grading and Official Identification 58.155 Grading. 58.156 Inspection. 58.157 Inspection or grading certificates. 58.158 Official identification. Explanation of Terms 58.159 Terms. Supplemental Specifications for Plants Manufacturing, Processing and Packaging Nonfat Dry Milk, Instant Nonfat Dry Milk, Dry Whole Milk, and Dry Buttermilk Definitions 58.205 Meaning of words. Rooms and Compartments 58.210 Dry storage of product. 58.211 Packaging room for bulk products. 58.212 Hopper or dump room. 58.213 Repackaging room. Equipment and Utensils 58.214 General construction, repair and installation. 58.215 Pre-heaters. 58.216 Hotwells. 58.217 Evaporators and/or vacuum pans. 58.218 Surge tanks. 58.219 High pressure pumps and lines. 58.220 Drying systems. 58.221 Collectors and conveyors. 58.222 Dry dairy product cooling equipment. 58.223 Special treatment equipment. 58.224 Sifters. 58.225 Clothing and shoe covers. 58.226 Portable and stationary bulk bins. 58.227 Sampling device. 58.228 Dump hoppers, screens, mixers and conveyors. 58.229 Filler and packaging equipment. 58.230 Heavy duty vacuum cleaners. Quality Specifications for Raw Materials 58.231 General. 58.232 Milk. 58.233 Skim milk. 58.234 Buttermilk. 58.235 Modified dry milk products. Operations and Operating Procedures 58.236 Pasteurization and heat treatment. 58.237 Condensed surge supply. 58.238 Condensed storage tanks. 58.239 Drying. 58.240 Cooling dry products. 58.241 Packaging, repackaging and storage. 58.242 Product adulteration. 58.243 Checking quality. 58.244 Number of samples. 58.245 Method of sample analysis. 58.246 Cleaning of dryers, collectors, conveyors, ducts, sifters and storage bins. 58.247 Insect and rodent control program. Requirements for Finished Products Bearing USDA Official Identification 58.248 Nonfat dry milk. 58.249 Instant nonfat dry milk. 58.250 Dry whole milk. 58.251 Dry buttermilk and dry buttermilk product. Supplemental Specifications for Plants Manufacturing, Processing and Packaging Butter and Related Products Definitions 58.305 Meaning of words. Rooms and Compartments 58.311 Coolers and freezers. 58.312 Churn rooms. 58.313 Print and bulk packaging rooms. Equipment and Utensils 58.314 General construction, repair and installation. 58.315 Continuous churns. 58.316 Conventional churns. 58.317 Bulk butter trucks, boats, texturizers, and packers. 58.318 Butter, frozen or plastic cream melting machines. 58.319 Printing equipment. 58.320 Brine tanks. 58.321 Cream storage tanks. Quality Specifications for Raw Material 58.322 Cream. 58.323 [Reserved] 58.324 Butteroil. 58.325 Anhydrous milkfat. 58.326 Plastic cream. 58.327 Frozen cream. 58.328 Salt. 58.329 Color. 58.330 Butter starter cultures. 58.331 Starter distillate. Operations and Operating Procedures 58.332 Segregation of raw material. 58.334 Pasteurization. 58.335 Quality control tests. 58.336 Frequency of sampling for quality control of cream, butter and related products. 58.337 Official test methods. 58.338 Composition and wholesomeness. 58.339 Containers. 58.340 Printing and packaging. [[Page 77]] 58.341 Repackaging. 58.342 General identification. 58.343 Storage of finished product in coolers. 58.344 Storage of finished product in freezer. Requirements for Finished Products Bearing USDA Official Identification 58.345 Butter. 58.346 Whipped butter. 58.347 Butteroil or anhydrous milkfat. 58.348 Plastic cream. 58.349 Frozen cream. Supplemental Specifications for Plants Manufacturing and Packaging Cheese Definitions 58.405 Meaning of words. Rooms and Compartments 58.406 Starter facility. 58.407 Make room. 58.408 Brine room. 58.409 Drying room. 58.410 Paraffining room. 58.411 Rindless cheese wrapping area. 58.412 Coolers or curing rooms. 58.413 Cutting and packaging rooms. Equipment and Utensils 58.414 General construction, repair and installation. 58.415 Starter vats. 58.416 Cheese vats, tanks and drain tables. 58.417 Mechanical agitators. 58.418 Automatic cheese making equipment. 58.419 Curd mill and miscellaneous equipment. 58.420 Hoops, forms and followers. 58.421 Press. 58.422 Brine tank. 58.423 Cheese vacuumizing chamber. 58.424 Monorail. 58.425 Conveyor for moving and draining block or barrel cheese. 58.426 Rindless cheese wrapping equipment. 58.427 Paraffin tanks. 58.428 Specialty equipment. 58.429 Washing machine. Quality Specifications for Raw Material 58.430 Milk. 58.431 Hydrogen peroxide. 58.432 Catalase. 58.433 Cheese cultures. 58.434 Calcium chloride. 58.435 Color. 58.436 Rennet, pepsin, or other milk clotting enzymes and flavor enzymes. 58.437 Salt. Operations and Operating Procedures 58.438 Cheese from pasteurized milk. 58.439 Cheese from unpasteurized milk. 58.440 Make schedule. 58.441 Records. 58.442 Laboratory and quality control tests. 58.443 Whey handling. 58.444 Packaging and repackaging. 58.445 General identification. Requirements for Finished Products Bearing USDA Official Identification 58.446 Quality requirements. Supplemental Specifications for Plants Manufacturing and Packaging Cottage Cheese Definitions 58.505 Meaning of words. Rooms and Compartments 58.510 Rooms and compartments. Equipment and Utensils 58.511 General construction, repair and installation. 58.512 Cheese vats or tanks. 58.513 Agitators. 58.514 Container fillers. 58.515 Mixers. 58.516 Starter vats. Quality Specifications for Raw Material 58.517 General. 58.518 Milk. 58.519 Dairy products. 58.520 Nondairy ingredients. Operations and Operating Procedures 58.521 Pasteurization and product flow. 58.522 Reconstituting nonfat dry milk. 58.523 Laboratory and quality control tests. 58.524 Packaging and general identification. 58.525 Storage of finished product. Requirements for Cottage Cheese Bearing USDA Official Identification 58.526 Official identification. 58.527 Physical requirements. 58.528 Microbiological requirements. 58.529 Chemical requirements. 58.530 Keeping quality requirements. Supplemental Specifications for Plants Manufacturing, Processing, and Packaging Frozen Desserts Definitions 58.605 Meaning of words. Rooms and Compartments 58.619 Mix processing room. 58.620 Freezing and packaging rooms. 58.621 Freezing tunnels. 58.622 Hardening and storage rooms. Equipment and Utensils 58.623 Homogenizer. [[Page 78]] 58.624 Freezers. 58.625 Fruit or syrup feeders. 58.626 Packaging equipment. Quality Specifications for Raw Material 58.627 Milk and dairy products. 58.628 Sweetening agents. 58.629 Flavoring agents. 58.630 Stabilizers. 58.631 Emulsifiers. 58.632 Acid. 58.633 Color. Operations and Operating Procedures 58.634 Assembling and combining mix ingredients. 58.635 Pasteurization of the mix. 58.636 Homogenization. 58.637 Cooling the mix. 58.638 Freezing the mix. 58.639 Addition of flavor. 58.640 Packaging. 58.641 Hardening and storage. 58.642 Quality control tests. 58.643 Frequency of sampling. 58.644 Test methods. 58.645 General identification. Requirements for Finished Products Bearing USDA Official Identification 58.646 Official identification. 58.647 Composition requirements for ice cream. 58.648 Microbiological requirements for ice cream. 58.649 Physical requirements for ice cream. 58.650 Requirements for frozen custard. 58.651 [Reserved] 58.652 Composition requirements for sherbet. 58.653 Microbiological requirements for sherbet. 58.654 Physical requirements for sherbet. Supplemental Specifications for Plants Manufacturing, Processing and Packaging Pasteurized Process Cheese and Related Products Definitions 58.705 Meaning of words. Equipment and Utensils 58.706 General construction, repair and installation. 58.707 Conveyors. 58.708 Grinders or shredders. 58.709 Cookers. 58.710 Fillers. Quality Specifications for Raw Material 58.711 Cheddar, colby, washed or soaked curd, granular or stirred curd cheese. 58.712 Swiss. 58.713 Gruyere. 58.714 Cream cheese, Neufchatel cheese. 58.715 Cream, plastic cream and anhydrous milkfat. 58.716 Nonfat dry milk. 58.717 Whey. 58.718 Flavor ingredients. 58.719 Coloring. 58.720 Acidifying agents. 58.721 Salt. 58.722 Emulsifying agents. Operations and Operating Procedures 58.723 Basis for selecting cheese for processing. 58.724 Blending. 58.725 Trimming and cleaning. 58.726 Cutting and grinding. 58.727 Adding optional ingredients. 58.728 Cooking the batch. 58.729 Forming containers. 58.730 Filling containers. 58.731 Closing and sealing containers. 58.732 Cooling the packaged cheese. 58.733 Quality control tests. Requirements for Processed Cheese Products Bearing USDA Official Identification 58.734 Official identification. 58.735 Quality specifications for raw materials. Quality Specifications For Finished Products 58.736 Pasteurized process cheese. 58.737 Pasteurized process cheese food. 58.738 Pasteurized process cheese spread and related products. Supplemental Specifications for Plants Manufacturing, Processing, and Packaging Whey, Whey Products and Lactose Definitions 58.805 Meaning of words. Rooms and Compartments 58.806 General. Equipment and Utensils 58.807 General construction, repair and installation. Quality Specifications for Raw Materials 58.808 Whey. Operations and Operating Procedures 58.809 Pasteurization. 58.810 Temperature requirements. 58.811 General. 58.812 Methods of sample analysis. Requirements for Finished Products Bearing USDA Official Identification 58.813 Dry whey. [[Page 79]] Supplemental Specifications for Plants Manufacturing, Processing and Packaging Evaporated and Condensed Milk or Ultra-Pasteurized Products Definitions 58.905 Meaning of words. Equipment and Utensils 58.912 General construction, repair and installation. 58.913 Evaporators and vacuum pans. 58.914 Fillers. 58.915 Batch or continuous in-container thermal processing equipment. 58.916 Homogenizer. Operations and Operating Procedures 58.917 General. 58.918 Standardization. 58.919 Pre-heat, pasteurization. 58.920 Homogenization. 58.921 Concentration. 58.922 Thermal processing. 58.923 Filling containers. 58.924 Aseptic filling. 58.925 Sweetened condensed. 58.926 Heat stability. 58.927 Storage. 58.928 Quality control tests. 58.929 Frequency of sampling for quality control. 58.930 Official test methods. 58.931 General identification. Quality Specifications for Raw Materials 58.932 Milk. 58.933 Stabilizers. 58.934 Sugars. 58.935 Chocolate and cocoa. Requirements for Finished Products Bearing USDA Official Identification 58.936 Milk. 58.937 Physical requirements for evaporated milk. 58.938 Physical requirements and microbiological limits for sweetened condensed milk. Subparts C-V [Reserved] Subpart W_United States Department of Agriculture Standard for Ice Cream 58.2825 United States Standard for ice cream. 58.2826 General identification. 58.2827 Official identification. Authority: 7 U.S.C. 1621-1627. Source: 23 FR 9410, Dec. 5, 1958, unless otherwise noted. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981. Note: Compliance with these standards does not excuse failure to comply with the provisions of the Federal Food, Drug, and Cosmetic Act. Subpart A_Provisions Governing the Inspection and Grading Services of Manufactured or Processed Dairy Products Source: 37 FR 22363, Oct. 19, 1972, unless otherwise noted. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981. Definitions Sec. 58.1 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to import the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: Act means the applicable provisions of the Agricultural Marketing Act of 1946 (60 Stat. 1087, as amended; 7 U.S.C. 1621-1627) or any other act of Congress conferring like authority. Administrator means the Administrator of the Agricultural Marketing Service or any other officer or employee of the Agricultural Marketing Service to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. Agricultural Marketing Service or AMS means the Agricultural Marketing Service of the Department. Applicant means any interested party who has applied for inspection or grading service. Approved laboratory means a laboratory in which the facilities and equipment used for official testing have been adequate to perform the necessary official tests in accordance with this part. Approved plant means one or more adjacent buildings, or parts thereof, comprising a single plant at one location in which the facilities and methods of operation therein have been surveyed and approved by the Administrator as suitable and adequate for inspection or grading service in accordance with this part. [[Page 80]] Area Supervisor means any employee of the Branch in charge of dairy inspection or grading service in a designated geographical area. Branch means the Dairy Inspection Branch of the Poultry and Dairy Quality Division. Chief means the Chief of the Branch, or any officer or employee of the Branch to whom authority has been heretofore delegated, or to whom authority may hereafter be delegated, to act in his stead. Class means any subdivision of a product based on essential physical characteristics that differentiate between major groups of the same kind or method of processing. Condition of container means the degree of acceptability of the container with respect to freedom from defects which affect its serviceability, including appearance as well as usability, of the container for its intended purpose. Condition of product or condition is an expression of the extent to which a product is free from defects which affect its usability, including but not limited to, the state of preservation, cleanliness, soundness, wholesomeness, or fitness for human food. Continuous resident service or resident service is inspection or grading service performed at a dairy manufacturing plant or grading station by an inspector or grader assigned to the plant or station on a continuous, year-round, resident basis. Department or USDA means the U.S. Department of Agriculture. Director means the Director of the Poultry and Dairy Quality Division, or any other officer or employee of the Division to whom authority has heretofore been delegated or to whom authority may hereafter be delegated, to act in his stead. Division means the Poultry and Dairy Quality Division of the Agricultural Marketing Service. Inspection or grading service or service means in accordance with this part, the act of (a) drawing samples of any product; (b) determining the class, grade, quality, composition, size, quantity, or condition of any product by examining each unit or representative samples; (c) determining condition of product containers; (d) identifying any product or packaging material by means of official identification; (e) regrading or appeal grading of a previously graded product; (f) inspecting dairy plant facilities, equipment, and operations; such as, processing, manufacturing, packaging, repackaging, and quality control; (g) supervision of packaging inspected or graded product; (h) reinspection or appeal inspection; and (i) issuing an inspection or grading certificate or sampling, inspection, or other report related to any of the foregoing. Inspector or grader means any Federal or State employee to whom a license has been issued by the Administrator to perform one or more types of inspection or grading services. Inspection or grading office means the office of any inspector or grader. Interested party means any person financially interested in a transaction involving any inspection or grading service. Licensed plant employee means an employee of an approved plant to whom a license is issued by the Administrator to supervise packaging of officially inspected or graded product, perform laboratory tests, or perform other duties as assigned by the Administrator. A licensed plant employee is not authorized to issue any inspection or grading certificate. Product means butter, cheese (whether natural or processed), milk, cream, milk products (whether dried, frozen, evaporated, stabilized, or condensed), ice cream, dry whey, dry buttermilk, and any other food product, which is prepared or manufactured in whole or in part from any of the aforesaid products, as the Administrator may hereafter designate. Person means any individual, partnership, association, business, trust, corporation, or any organized group of persons, whether incorporated or not. Plant survey means an appraisal of the plant to determine extent to which facilities, equipment, method of operation, and raw material being received are in accordance with the provisions of this part. The survey shall be used to determine suitability of the plant for inspection or grading service. [[Page 81]] Quality means the inherent properties of any product which determine its relative degree of excellence. Regulations means the provisions of this subpart. Sampling report means a statement issued by an inspector or grader identifying samples taken by him for inspection or grading service. Supervisor of packaging means an employee of the Department or other person licensed by the Administrator to supervise the packaging and official identification of product or any repackaging of bulk product. (60 Stat. 1087, 7 U.S.C. 1621 et seq.; 84 Stat. 1620, 21 U.S.C. 1031 et seq.) [37 FR 22363, Oct. 19, 1972, as amended at 38 FR 4381, Feb. 14, 1973. Redesignated at 42 FR 32514, June 27, 1977, as amended at 43 FR 60138, Dec. 26, 1978. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 54 FR 15167, Apr. 17, 1989] Sec. 58.2 Designation of official certificates, memoranda, marks, identifications, and devices for purpose of the Agricultural Marketing Act. Subsection 203(h) of the Agricultural Marketing Act of 1946, as amended by Pub. L. 272, 84th Congress, provides criminal penalties for various specified offenses relating to official certificates, memoranda, marks or identifications, and devices for making such marks or identifications, issued or authorized under section 203 of said Act, and certain misrepresentations concerning the inspection or grading of agricultural products under said section. For the purposes of said subsection and the provisions in this part, the terms listed below shall have the respective meanings specified: (a) Official certificate means any form of certification, either written or printed (including that prescribed in Sec. 58.18) used under the regulations in this subpart to certify with respect to the inspection of dairy processing plants and the inspection, class, grade, quality, size, quantity, or condition of products (including the compliance of products and packaging material with applicable specifications). (b) Official memorandum means any initial record of findings made by an authorized person in the process of inspecting, grading, determining compliance, or sampling pursuant to the regulations in this subpart, any processing or plant-operation report made by an authorized person in connection with inspecting, grading, determining compliance, or sampling under the regulations in this subpart, and any report made by an authorized person of services performed pursuant to the regulations in this subpart. (c) Official identification or other official marks means any form of identification or mark (including, but not limited to, those in Sec. Sec. 58.49 through 58.51) approved by the Administrator and authorized to be affixed to any product, or affixed to or printed on the packaging material of any product certifying the inspection, class, grade, quality, size, quantity, or condition of the products (including the compliance of products with applicable specifications) or to maintain the identity of the product for which service is provided under the regulations in this subpart. (d) Official device means a stamping appliance, branding device, stencil, printed label, or any other mechanically or manually operated tool that is approved by the Administrator for the purpose of applying any official mark or other identification to any product or the packaging material thereof. Administration Sec. 58.3 Authority. The Administrator shall perform such duties as may be required in the enforcement and administration of the provisions of the Act and this part. Inspection or Grading Service Sec. 58.4 Basis of service. Inspection or grading service shall be performed in accordance with the provisions of this part, the instructions and procedures issued or approved by the Administrator, U.S. standards for grades, Federal specifications, and specifications as defined in a specific [[Page 82]] purchase contract. All services provided in accordance with these regulations shall be rendered without discrimination on the basis of race, color, creed, or national origin. [39 FR 986, Jan. 4, 1974. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 58.5 Where service is offered. Subject to the provisions of this part, inspection or grading service may be performed when a qualified inspector or grader is available, and when the facilities and conditions are satisfactory for the conduct of the service. Sec. 58.6 Supervision of service. All inspection or grading service shall be subject to supervision by a supervisory inspector or grader, Area Supervisor, or by the Chief, or such other person of the Branch as may be designated by the Chief. Whenever there is evidence that inspection or grading service has been incorrectly performed, a supervisor shall immediately make a reinspection or regrading, and he shall supersede the previous inspection or grading certificate or report with a new certificate or report showing the corrected information. Sec. 58.7 Who may obtain service. An application for inspection or grading service may be made by any interested person, including, but not limited to, the United States, any State, county, municipality, or common carrier, or any authorized agent of the foregoing. Sec. 58.8 How to make application. (a) On a fee basis. An application for inspection or grading service may be made in any inspection or grading office or with any inspector or grader. Such application may be made orally (in person or by telephone), in writing, or by telegraph. If made orally, written confirmation may be required. (b) On a continuous basis. Application for inspection or grading service on a continuous basis as provided in Sec. 58.45 shall be made in writing on application forms as approved by the Administrator and filed with the Administrator. Sec. 58.9 Form of application. Each application for inspection or grading service shall include such information as may be required by the Administrator in regard to the type of service; kind of products and place of manufacture, processing, or packaging: and location where service is desired. Sec. 58.10 Filing of application. An application for inspection or grading service shall be regarded as filed only when made pursuant to this subpart. Sec. 58.11 Approval of application. An application for inspection or grading service may be approved when (a) a qualified inspector or grader is available, (b) facilities and conditions are satisfactory for the conduct of the service, and (c) the product has been manufactured or processed in a plant approved for inspection or grading service in accordance with the provisions of this part and instructions issued thereunder. Sec. 58.12 When application may be rejected. An application for inspection or grading service may be rejected by the Administrator (a) when the applicant fails to meet the requirements of the regulations in this subpart prescribing the conditions under which the service is made available; (b) when the product is owned by, or located on the premises of, a person currently denied the benefits of the Act; (c) when an individual holding office or a responsible position with or having a substantial financial interest or share with the applicant is currently denied the benefits of the Act or was responsible in whole or in part for the current denial of the benefits of the Act to any person; (d) when the application is an attempt on the part of a person currently denied the benefits of the Act to obtain inspection or grading service; (e) when the product was produced from unwholesome raw material or was produced under insanitary or otherwise unsatisfactory conditions; (f) when the product is of illegal composition or is lacking satisfactory keeping quality; (g) when the product has been produced in a plant which has not been surveyed and approved for inspection [[Page 83]] or grading service; (h) when fees billed are not paid within 30 days; or (i) when there is noncompliance with the Act or this part or instructions issued hereunder. When an application is rejected, the applicant shall be notified in writing by the Area Supervisor or his designated representative, the reason or reasons for the rejection. [37 FR 22363, Oct. 19, 1972, as amended at 53 FR 20278, June 3, 1988] Sec. 58.13 When application may be withdrawn. An application for inspection or grading service may be withdrawn by the applicant at any time before the service is performed upon payment, by the applicant, of all expenses incurred by AMS in connection with such application. Sec. 58.14 Authority of applicant. Proof of the authority of any person applying for any inspection or grading service may be required in the discretion of the Administrator. Sec. 58.15 Accessibility and condition of product. Each lot of product for which inspection or grading service is requested shall be so conditioned and placed as to permit selection of representative samples and proper determination of the class, grade, quality, quantity, or condition of such product. In addition, if sample packages are furnished by the applicant, such samples shall be representative of the lot to be inspected or graded and additional samples shall be made available for verification. The room or area where the service is to be performed shall be clean and sanitary, free from foreign odors, and shall be provided with adequate lighting, ventilation, and temperature control. Sec. 58.16 Disposition of samples. Any sample of product used for inspection or grading may be returned to the applicant at his request and at his expense if such request was made at the time of the application for the service. In the event the aforesaid request was not made at the time of application for the service, the sample of product may be destroyed, disposed of to a charitable organization, or disposed of by any other method prescribed by the Administrator. Sec. 58.17 Order of service. Inspection or grading service shall be performed, insofar as practicable and subject to the availability of qualified inspectors or graders, in the order in which applications are made except that precedence may be given to any application for an appeal inspection or grading. Sec. 58.18 Inspection or grading certificates, memoranda, or reports. Inspection or grading certificates and sampling, plant survey, and other memoranda or reports shall be issued on forms approved by the Administrator. Sec. 58.19 Issuance of inspection or grading certificates. An inspection or grading certificate shall be issued to cover a product inspected or graded in accordance with Instructions issued by the Administrator and shall be signed by an inspector or grader. This does not preclude an inspector or grader from granting a power of attorney to another person to sign in his stead, if such grant of power of attorney has been approved by the Administrator: Provided, That in all cases any such certificate shall be prepared in accordance with the facts set forth in the official memorandum defined in Sec. 58.2(b): And provided further, that whenever a certificate is signed by a person under a power of attorney the certificate should so indicate. The signature of the holder of the power shall appear in conjunction with the name of the grader or inspector who personally graded or inspected the product. [39 FR 986, Jan. 4, 1974. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 58.20 Disposition of inspection or grading certificates or reports. The original of any inspection or grading certificate or report issued pursuant to Sec. 58.19, and not to exceed four copies thereof, shall immediately upon issuance be delivered or mailed to the applicant or person designated by him. One copy shall be filed in the inspection and grading office serving the [[Page 84]] area in which the service was performed and all other copies shall be filed in such manner as the Administrator may approve. Additional copies of any such certificate or report may be supplied to any interested party as provided in Sec. 58.41. Sec. 58.21 Advance information. Upon request of an applicant, all or part of the contents of any inspection or grading certificate or report issued to such applicant may be telephoned or telegraphed to him, or to any person designed by him, at applicant's expense. Appeal Inspection or Grading and Reinstatement of Regrading Sec. 58.22 When appeal inspection or grading may be requested. (a) An application for an appeal inspection or grading may be made by any interested party who is dissatisfied with any determination stated in any inspection or grading certificate or report if the identity of the samples or the product has not been lost; or the conditions under which inspection service was performed have not changed. Such application for appeal inspection or grading shall be made within 2 days following the day on which the service was performed. Upon approval by the Administrator, the time within which an application for an appeal grading may be made may be extended. (b) An appeal inspection shall be limited to a review of the sampling procedure and in analysis of the official sample used, when, as a result of the original inspection, the commodity was found to be contaminated with filthy, putrid, and decomposed material. If it is determined that the sampling procedures were improper, a new sample shall be obtained. Sec. 58.23 How to obtain appeal inspection or grading. Appeal inspection or grading may be obtained by filing a request therefore, (a) with the Administrator, (b) with the inspector or grader who issued the inspection or grading certificate or report with respect to which the appeal service is requested, or (c) with the supervisor of such inspector or grader. The application for appeal inspection or grading shall state the reasons therefore, and may be accompanied by a copy of the aforesaid inspection or grading certificate or report or any other information the applicant may have secured regarding the product or the service from which the appeal is requested. Such application may be made orally (in person or by telephone), in writing, or by telegraph. If made orally, written confirmation may be required. Sec. 58.24 Record of filing time. A record showing the date and hour when each such application for appeal inspection or grading is received shall be maintained in such manner as the Administrator may prescribe. Sec. 58.25 When an application for appeal inspection or grading may be refused. The Administrator may refuse an application for an appeal inspection or grading when (a) the quality or condition of the products has undergone a material change since the time of original service, (b) the identical products inspected or graded cannot be made accessible for reinspection or regrading, (c) the conditions under which inspection service was performed have changed, (d) it appears that the reasons for an appeal inspection or grading are frivolous or not substantial, or (e) the Act or this part have not been complied with. The applicant shall be promptly notified of the reason for such refusal. Sec. 58.26 When an application for an appeal inspection or grading may be withdrawn. An application for appeal inspection or grading may be withdrawn by the applicant at any time before the appeal inspection or grading is made upon payment, by the applicant, of all expenses incurred by AMS in connection with such application. Sec. 58.27 Order in which appeal inspections or gradings are performed. Appeal inspections or gradings shall be performed, insofar as practicable, in [[Page 85]] the order in which applications therefor are received; and any such application may be given precedence pursuant to Sec. 58.17. Sec. 58.28 Who shall make appeal inspections or gradings. An appeal inspection or grading of any product or service shall be made by any inspector or grader (other than the one from whose service the appeal is made) designated for this purpose by the Administrator; and, whenever practical, such appeal inspection or grading shall be conducted jointly by two such inspectors or graders. Sec. 58.29 Appeal inspection or grading certificate or report. Immediately after an appeal inspection or grading has been completed, an appeal inspection or grading certificate or report shall be issued showing the results of the inspection or grading. Such certificate or report shall thereupon supersede the previous certificate or report and will be effective retroactive to the date of the previous certificate or report. Each appeal certificate or report shall clearly set forth the number and the date of the previous certificate or report which it supersedes. The provisions of Sec. Sec. 58.18 through 58.21 shall, whenever applicable, also apply to appeal certificates or reports except that copies shall be furnished each interested party of record. Sec. 58.30 Application for reinspection or regrading. An application for the reinspection or regrading of any previously inspected or graded product may be made at any time by any interested party; and such application shall clearly indicate the reasons for requesting the reinspection or regrading. The provisions of the regulations in this subpart relative to inspection or grading service shall apply to reinspection or regrading service. Sec. 58.31 Reinspection or regrading certificate or report. Immediately after a reinspection or regrading has been completed, a reinspection or a regrading certificate or report shall be issued showing the results of such reinspection or regrading; and such certificate or report shall thereupon supersede, as of the time of issuance, the inspection or grading certificate or report previously issued. Each reinspection or regrading certificate or report shall clearly set forth the number and date of the inspection or grading certificate or report that it supersedes. The provisions of Sec. Sec. 58.18 through 58.21 shall, whenever applicable, also apply to reinspection or regrading certificates or reports except that copies shall be furnished each interested party of record. Sec. 58.32 Superseded certificates or reports. When any inspection or grading certificate or report is superseded in accordance with this part, such certificate or report shall become null and void and, after the effective time of the supersedure, shall no longer represent the class, grade, quality, quantity, or condition described therein. If the original and all copies of such superseded certificate or report are not returned to the inspector or grader issuing the reinspection or regrading or appeal inspection or grading certificate or report, the inspector or grader shall notify such persons as he considers necessary to prevent fraudulent use of the superseded certificate or report. Licensing of Inspectors or Graders Sec. 58.33 Who may be licensed. Any person processing proper qualifications, as determined by an examination for competency, held at such time and in such manner as may be prescribed by the Administrator, may be licensed to perform specified inspection or grading service. Each license issued shall be signed by the Administrator. [53 FR 20278, June 3, 1988] Sec. 58.34 Suspension or revocation of license. For good cause and in instances of willful wrongdoing, the Administrator may suspend any license issued under the regulations in this subpart by giving notice of such suspension to the respective individual involved, accompanied by a statement of reasons therefor. Within 10 days after receipt of the [[Page 86]] aforesaid notice and statement of reasons by such individual, he may file an appeal in writing with the Administrator supported by any argument or evidence that he may wish to offer as to why his license should not be suspended or revoked. In conjunction therewith, he may request and, in such event, shall be accorded an oral hearing. After consideration of such argument and evidence, the Administrator will take such action as warranted with respect to such suspension or revocation. When no appeal is filed within the prescribed 10 days, the license is revoked. Sec. 58.35 Surrender of license. Each license which is suspended or revoked shall be surrendered promptly by the licensee to his supervisor. Upon termination of the services of a licensee, the license shall be surrendered promptly by the licensee to his supervisor. Sec. 58.36 Identification. Each licensee shall have his license card in his possession at all times while performing any function under the regulations in this subpart and shall identify himself by such card upon request. Sec. 58.37 Financial interest of licensees. No licensee shall render service on any product in which he is financially interested. Fees and Charges Sec. 58.38 Payment of fees and charges. (a) Fees and charges for any inspection or grading service shall be paid by the interested party, making the application for such service, in accordance with the applicable provisions of this section and Sec. Sec. 58.39 through 58.46 and, if so required by the inspector or grader, such fees and charges shall be paid in advance. (b) Fees and charges for any inspection or grading service performed by any inspector or grader who is a salaried employee of the Department shall, unless otherwise required pursuant to paragraph (c) of this section, be paid by the interested party making application for such inspection or grading service by check, draft, or money order payable to the Agricultural Marketing Service and remitted promptly to the office indicated on the bill. (c) Fees and charges for any inspection or grading service under a cooperative agreement with any State or person shall be paid in accordance with the terms of the cooperative agreement by the interested party making application for the service. Sec. 58.39 Fees for holiday or other nonworktime. If an applicant requests that inspection or grading service be performed on a holiday, Saturday, or Sunday or in excess of each 8-hour shift Monday through Friday, the applicant shall be charged for such service at a rate determined using the formulas in Sec. 58.43. [79 FR 67323, Nov. 13, 2014] Sec. 58.40 Fees for appeal inspection or grading. The fees to be charged for any appeal inspection or grading shall be double the fees specified on the inspection or grading certificate from which the appeal is taken: Provided, That the fee for any appeal grading requested by any agency of the U.S. Government shall be the same as set forth in the certificate from which the appeal is taken. If the result of any appeal inspection or grading discloses that a material error was made in the inspection or grading appealed from, no fee shall be required. Sec. 58.41 Fees for additional copies of certificates. Additional copies of any inspection or grading certificates (including takeoff certificates), other than those provided for in Sec. 58.20 may be supplied to any interested party upon payment of a fee based on time required to prepare such copies at the hourly rate specified in Sec. 58.43. [54 FR 15167, Apr. 17, 1989] Sec. 58.42 Travel expenses and other charges. Charges shall be made to cover the cost of travel and other expenses incurred by AMS in connection with the [[Page 87]] performance of any inspection or grading service. [53 FR 20278, June 3, 1988] Sec. 58.43 Fees for inspection, grading, sampling, and certification. (a) Unless otherwise provided in this part, the fees to be charged and collected for any service performed, in accordance with this part, on a fee basis shall be based on the applicable formulas specified in this section. For each calendar year, AMS will calculate the rate for grading, certification, or inspection services, per hour per program employee using the following formulas: (1) Regular rate. The total AMS grading, certification, or inspection program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service. (2) Overtime rate. The total AMS grading, certification, or inspection program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5 plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (3) Holiday rate. The total AMS grading, certification, or inspection program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (b) For each calendar year, based on previous fiscal year/historical actual costs, AMS will calculate the benefits, operating, and allowance for bad debt components of the regular, overtime and holiday rates as follows: (1) Benefits rate. The total AMS grading, certification, or inspection program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions. (2) Operating rate. The total AMS grading, certification, or inspection program operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation. (3) Allowance for bad debt rate. Total AMS grading, certification, or inspection program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked. (c) The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on the most recent Office of Management and Budget's Presidential Economic Assumptions. [79 FR 67323, Nov. 13, 2014] Sec. 58.45 Fees for continuous resident services. Charges for the inspector(s) and grader(s) assigned to a continuous resident program shall be calculated using the formulas in Sec. 58.43. [79 FR 67323, Nov. 13, 2014] Sec. 58.46 Fees for service performed under cooperative agreement. The fees to be charged and collected for any service performed under cooperative agreement shall be those provided for by such agreement. Marking, Branding, and Identifying Product Sec. 58.49 Authority to use official identification. Whenever the Administrator determines that the granting of authority to any person to package any product, inspected or graded pursuant to this part, and to use official identification, pursuant to Sec. Sec. 58.49 through 58.57, will not be inconsistent with the Act and this part, he may authorize such use of official identification. Any application for such authority shall be submitted to the Administrator in such form as he may require. [[Page 88]] Sec. 58.50 Approval and form of official identification. (a) Any package label or packaging material which bears any official identification shall be used only in such manner as the Administrator may prescribe, and such official identification shall be of such form and contain such information as the Administrator may require. No label or packaging material bearing official identification shall be used unless finished copies or samples thereof have been approved by the Administrator. (b) Inspection or grade mark permitted to be used to officially identify packages containing dairy products which are inspected or graded pursuant to this part shall be contained in a shield in the form and design indicated in Figures 1, 2, and 3 of this section or such other form, design, or wording as may be approved by the Administrator. [GRAPHIC] [TIFF OMITTED] TC25SE91.014 [GRAPHIC] [TIFF OMITTED] TC25SE91.015 [GRAPHIC] [TIFF OMITTED] TC25SE91.016 The official identification illustrated in Figure 1 is designed for use on graded product packed under USDA inspection. Figure 2 is designed for graded product processed and packed under USDA inspection. Figure 3 is designated for inspected product (when U.S. standards for grades are not established) processed and packed under USDA quality control service. The official identification shall be printed on the package label, on the carton or on the wrapper and, preferably, on one of the main panels of the carton or wrapper. The shield identification shall be not less than \3/4\ inch by \3/4\ inch in size, and preferably 1 inch by 1 inch on 1-pound cartons or wrappers. Consideration will be given by the Administrator of a smaller shield on special packages where the size of the label does not permit use of the \3/4\ inch by \3/4\ inch shield. (c) Official identification under this subpart shall be limited to U.S. Grade B or higher or to an equivalent standard of quality for U.S. name grades or numerical score grades when U.S. standards for grades of a product have not been established. (d) A sketch, proof, or photocopy of each proposed label or packaging material bearing official identification shall be submitted to the Chief of the Dairy Inspection Branch, Poultry and Dairy Quality Division, Agricultural Marketing Service, U.S. Department of Agriculture, Washington, DC 20250, for review and tentative approval prior to acquisition of a supply of material. (e) The firm packaging the product shall furnish to the Chief four copies of the printed labels and packaging materials bearing official identification for final approval prior to use. (60 Stat. 1087, 7 U.S.C. 1621 et seq.; 84 Stat. 1620, 21 U.S.C. 1031 et seq.) [37 FR 22363, Oct. 19, 1972, as amended at 39 FR 987, Jan. 4, 1974. Redesignated at 42 FR 32514, June 27, 1977, as amended at 43 FR 60138, Dec. 26, 1978. Redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 58.51 Information required on official identification. Each official identification shall conspicuously indicate the U.S. grade of the product it identifies, if there be a grade, or such other appropriate terminology as may be approved by the Administrator. Also, it shall include the [[Page 89]] appropriate phrase: ``Officially graded,'' ``Officially Inspected,'' or ``Federal-State graded.'' When required by the Administrator, the package label, carton, or wrapper bearing official identification for dairy products shall be stamped or perforated with the date packed and the certificate number or a code number to indicate lot and date packed. Such coding shall be made available to and approved by the Administrator. Sec. 58.52 Time limit for packaging inspected or graded products with official identification. Any lot of butter which is graded for packaging with official grade identification shall be packaged within 10 days immediately following the date of grading, and any lot of natural cheese or dry milk shall be packaged within 30 days immediately following date of grading provided the product is properly stored during the 10- or 30-day period. Time limit for packaging other inspected or graded products shall be as approved by the Administrator. If inspected or graded product is moved to another location, a reinspection or regrading shall be required. Prerequisites to Packaging Products With Official Identification Sec. 58.53 Supervisor of packaging required. The official identification of any inspected or graded product, as provided in Sec. Sec. 58.50 through 58.52, this section, and Sec. Sec. 58.54 through 58.57, shall be done only under the supervision of a supervisor of packaging. The authority to use official identification may be granted by the Administrator only to applicants who utilize the services of a supervisor of packaging in accordance with this subpart. The supervisor of packaging shall have jurisdiction over the use and handling of all packaging material bearing any official identification. Sec. 58.54 Packing and packaging room and equipment. Each applicant who is granted authority to package any product with official identification and who operates, for such purpose, a packaging room shall maintain the room and the equipment therein in accordance with this part. Sec. 58.55 Facilities for keeping quality samples. Each applicant granted authority, as aforesaid, to package product with official identification shall provide and maintain suitable equipment for the purpose of incubating samples of product. Sec. 58.56 Incubation of product samples. (a) Samples of product may be taken from any lot of product which is submitted for inspection or grading and packaging with official identification, or sample may be taken after packaging for the purpose of determining in accordance with provisions of this part if such product possesses satisfactory keeping quality. (b) Samples of product may be taken for keeping quality tests in accordance with provisions of this part from any lot of product submitted for inspection or grading. Issuance of the inspection or grading certificate may be withheld pending completion of the tests. Sec. 58.57 Product not eligible for packaging with official identification. (a) When a lot of inspected or graded product shows unsatisfactory keeping quality, other lots from the same manufacturing plant shall not be packaged with official identification. Packaging with official identification may be resumed only when it is determined that product from such plant possesses satisfactory keeping quality. (b) Any manufacturing or processing plant supplying product, directly or indirectly, for packaging with official identification shall be surveyed and approved for inspection or grading service. Violations Sec. 58.58 Debarment of service. (a) The following acts or practices, or the causing thereof, may be deemed sufficient cause for the debarment, by the Administrator, of any person, including any agents, officers, subsidiaries, or affiliates of such person, from any or all benefits of the Act for a specified period. The rules of practice [[Page 90]] governing withdrawal of inspection and grading services in formal adjudicatory proceedings instituted by the Secretary (7 CFR, part 1, subpart H) shall be applicable to such debarment action. (1) Fraud or misrepresentation. Any willful misrepresentation or deceptive or fraudulent practice or act found to be made or committed by any person in connection with: (i) The making or filing of any application for any inspection or grading service, appeal reinspection, or regrading service; (ii) The making of the product accessible for inspection or grading service; (iii) The making, issuing, or using or attempting to issue or use any inspection or grading certificate issued pursuant to the regulations in this subpart or the use of any official stamp, label, or identification; (iv) The use of the terms ``United States,'' ``U.S.,'' ``Officially graded,'' ``Officially Inspected,'' ``Federal-State graded,'' or ``Government graded,'' or terms of similar import in the labeling or advertising of any product without stating in conjunction therewith the official U.S. grade of the product; or (v) The use of any of the aforesaid terms or an official stamp, label, or identification in the labeling or advertising of any product that has not been inspected or graded pursuant to this part. (2) Use of facsimile form. Using or attempting to use a form which simulates in whole or in part any official identification for the purpose of purporting to evidence the U.S. grade of any product; or the unauthorized use of a facsimile form which simulates in whole or in part any official inspection or grading certificate, stamp, label, or other official inspection mark; and (3) Mislabeling. The use of any words, numerals, letters, or facsimile form which simulates in whole or in part any identification purporting to be a grade when such product does not comply with any recognized standards in general use for such grade, and such activity may be deemed sufficient cause for debarring such person from any or all benefits of the Act. (4) Willful violation of the regulations in this subpart. Willful violation of the provisions in this part or the Act, or the instructions or specifications issued thereunder. (5) Interfering with an inspector or grader. Any interference with or obstruction or any attempted interference or obstruction of any inspector or grader in the performance of his duties by intimidation, threat, bribery, assault, or other improper means. (b) [Reserved] (60 Stat. 1087, 7 U.S.C. 1621 et seq.; 84 Stat. 1620, 21 U.S.C. 1031 et seq.) [37 FR 22363, Oct. 19, 1972. Redesignated at 42 FR 32514, June 27, 1977, as amended at 43 FR 60138, Dec. 26, 1978. Redesignated at 46 FR 63203, Dec. 31, 1981] Miscellaneous Sec. 58.61 Political activity. All inspectors or graders are forbidden during the period of their respective appointments or licenses to take an active part in political management or in political campaigns. Political activities in city, county, State, or national elections, whether primary or regular, or in behalf of any party or candidate, or any measure to be voted upon, is prohibited. This applies to all appointees, including, but not being limited to, temporary and cooperative employees and employees on leave of absence with or without pay. Willful violation of this section will constitute grounds for dismissal in the case of appointees and revocation of licenses in the case of licensees. Sec. 58.62 Report of violations. Each inspector, grader, and supervisor of packaging shall report, in the manner prescribed by the Administrator, all violations and noncompliances under the Act and this part of which such inspector, grader, or supervisor of packaging has knowledge. Sec. 58.63 Other applicable regulations. Compliance with the provisions in this part shall not excuse failure to comply with any other Federal, or any State, or municipal applicable laws or regulations. [[Page 91]] Sec. 58.64 OMB control numbers assigned pursuant to the Paperwork Reduction Act. The following control number has been assigned to the information collection requirements in 7 CFR part 58, subpart A, by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1980, Pub. L. 96-511. ------------------------------------------------------------------------ Current OMB 7 CFR section where requirements are described control No. ------------------------------------------------------------------------ 58.8(a)(b)................................................. 0581-0126 58.9....................................................... 0581-0126 58.14...................................................... 0581-0126 58.23...................................................... 0581-0126 58.30...................................................... 0581-0126 58.33...................................................... 0581-0126 58.49...................................................... 0581-0126 58.50(d)(e)................................................ 0581-0126 58.51...................................................... 0581-0126 58.122(b).................................................. 0581-0126 ------------------------------------------------------------------------ [49 FR 6881, Feb. 24, 1984] Subpart B_General Specifications for Dairy Plants Approved for USDA Inspection and Grading Service \1\ --------------------------------------------------------------------------- \1\ Compliance with these standards does not excuse failure to comply with the provisions of the Federal Food, Drug, and Cosmetic Act, Environmental Protection Act, or applicable laws and regulations of any State or Municipality. Source: 40 FR 47911, Oct. 10, 1975, unless otherwise noted. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981. Definitions Sec. 58.100 OMB control numbers assigned pursuant to the Paperwork Reduction Act. The following control number has been assigned to the information collection requirements in 7 CFR part 58, subpart B, by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1980, Pub. L. 96-511. ------------------------------------------------------------------------ Current OMB 7 CFR section where requirements are described control No. ------------------------------------------------------------------------ 58.139..................................................... 0581-0110 58.148..................................................... 0581-0110 58.441..................................................... 0581-0110 ------------------------------------------------------------------------ [49 FR 6881, Feb. 24, 1984, as amended at 61 FR 67448, Dec. 23, 1996] Sec. 58.101 Meaning of words. For the purpose of the regulations of this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: (a) Act. The applicable provisions of the Agricultural Marketing Act of 1946 (60 Stat. 1087, as amended; (7 U.S.C. 1621-1627)), or any other Act of Congress conferring like authority. (b) Administrator. The Administrator of the Agricultural Marketing Service or any other officer or employee of the Agricultural Marketing Service of the Department to whom there has heretofore been delegated, or to whom there may hereafter be delegated the authority to act in his stead. (c) Approved laboratory. A laboratory in which the facilities and equipment used for official testing have been approved by the Administrator as being adequate to perform the necessary official tests in accordance with this part, and operates under a USDA surveillance program as set forth by the Administrator. (d) Approved plant. One or more adjacent buildings, or parts thereof, comprising a single plant at one location in which the facilities and methods of operation therein have been surveyed and approved by the Administrator as suitable and adequate for inspection or grading service in accordance with the following: (1) Shall satisfactorily meet the specifications of this subpart as determined by the Administrator. (2) Receive dairy products only from plants, transfer stations, receiving stations and cream buying stations which satisfactorily comply with the applicable requirements of this subpart as determined by the Administrator. (Occasional shipments may be received from [[Page 92]] nonapproved plants provided the product is tested and meets the quality requirements for No. 2 milk.) (e) Sanitizing treatment. Subjection of a clean product contact surface to steam, hot water, hot air, or an acceptable sanitizing solution for the destruction of most human pathogens and other vegetative microorganisms to a level considered safe for product production. Such treatment shall not adversely affect the equipment, the milk or the milk product, or the health of consumers. Sanitizing solutions shall comply with 21 CFR 178.1010. (f) Resident service. Inspection or grading service performed at a dairy manufacturing plant or grading station by an inspector or grader assigned to the plant or station on a continuous basis. (g) Dairy products. Butter, cheese (whether natural or processed), skim milk, cream, whey or buttermilk (whether dry, evaporated, stabilized or condensed), frozen desserts and any other food product which is prepared or manufactured in whole or in part from any of the aforesaid products, as the Administrator may hereafter designate. (h) Grader. Any employee of the Department authorized by the Administrator or any other person to whom a license has been issued by the Administrator to investigate and certify, in accordance with the Act and this part, to shippers of products and other interested parties, the class, quality, quantity, and condition of such products. (i) Inspector. Any employee of the Department authorized by the Administrator or any other person to whom a license has been issued by the Administrator to inspect and certify quality, quantity and condition of products, observe the manufacturing, processing, packaging and handling of dairy products, and to perform dairy plant surveys in accordance with the regulations of this part. (j) Inspection or grading service. Means in accordance with this part, the act of (1) drawing samples of any product; (2) determining the class, grade, quality, composition, size, quantity, condition, or wholesomeness of any product by examining each unit or representative samples; (3) determining condition of product containers; (4) identifying any product or packaging material by means of official identification; (5) regrading or appeal grading of a previously graded product; (6) inspecting dairy plant facilities, equipment, and operations; such as, processing, manufacturing, packaging, repackaging, and quality control; (7) supervision of packaging inspected or graded product; (8) reinspection or appeal inspection; and (9) issuing an inspection or grading certificate or sampling, inspection, or other report related to any of the foregoing. (k) Milk. The term milk shall include the following: (1) Milk is the lacteal secretion, practically free from colostrum, obtained by the complete milking of one or more healthy cows. The cows shall be located in a Modified Accredited Area, an Accredited Free State, or an Accredited Free Herd for tuberculosis as determined by the Department. In addition, the cows shall be located in States meeting Class B status or Certified-Free Herds or shall be involved in a milk ring testing program or blood testing program under the current USDA Brucellosis Eradication Uniform Methods and Rules. (2) Goat milk is the lacteal secretion, practically free from colostrum, obtained by the complete milking of one or more healthy goats. The goats shall be located in States meeting the current USDA Uniform Methods and Rules for Bovine Tuberculosis Eradication or an Accredited Free Goat Herd. Goat milk shall only be used to manufacture dairy products that are legally provided for in 21 CFR or recognized as non-standardized traditional products normally manufactured from goats milk. (l) Official identification. Official identification is provided for use on product packed under USDA inspection. Any package label or packaging material which bears any official identification shall be used only in such manner as the Administrator may prescribe, and such official identification shall be of such form and contain such information as the Administrator may require. (m) Official Methods of Analysis of the Association of Official Analytical Chemists. ``Official Methods of Analysis of [[Page 93]] the Association of Official Analytical Chemists,'' a publication of the Association of Official Analytical Chemists International, 481 North Frederick Avenue, Suite 500, Gaithersburg, MD 20877-2417. (n) Pasteurization (Pasteurized). Pasteurization shall mean that every particle of product shall have been heated in properly operated equipment to one of the temperatures specified in the table and held continuously at or above that temperature for at least the specified time (or other time/temperature relationship equivalent thereto in microbial destruction): Fluid Products ------------------------------------------------------------------------ Temperature Time ------------------------------------------------------------------------ 145 [deg]F (vat pasteurization).......... 30 minutes. 161 [deg]F (high temperature short time 15 seconds. pasteurization). 191 [deg]F (higher heat shorter time 1.0 second. pasteurization). 194 [deg]F (higher heat shorter time 0.5 second. pasteurization). 201 [deg]F (higher heat shorter time 0.1 second. pasteurization). 204 [deg]F (higher heat shorter time .05 second. pasteurization). 212 [deg]F (higher heat shorter time .01 second. pasteurization). ------------------------------------------------------------------------ Products Having Dairy Ingredients With a Fat Content of 10 Percent or More, or Contain Added Sweeteners 150 [deg]F............................... 30 minutes. 166 [deg]F............................... 15 seconds. Frozen Dessert Mix 155 [deg]F............................... 30 minutes. 175 [deg]F............................... 25 seconds. Condensed Milk To Be Repasteurized 166 [deg]F............................... 15 seconds. (o) Plant survey. An appraisal of a plant to determine the extent to which facilities, equipment, method of operation, and raw material being received are in accordance with the provisions of this part. The survey shall be used to determine suitability of the plant for USDA inspection or grading service. (p) Plant status. The extent to which a plant complies with this subpart shall be determined under procedures as set forth by the Administrator. (q) Producer. The person or persons who exercise control over the production of the milk delivered to a processing plant or receiving station and who receive payment for this product. (r) Quality control. The inspection of the quality of the raw material and the conditions relative to the preparation of the product from its raw state through each step in the entire process. It includes the inspection of conditions under which the product is prepared, processed, manufactured, packed and stored. In addition, assistance and guidance is offered to improve the raw milk quality, processing methods, quality, stability, and packaging and handling of the finished product. (s) Regulations. The term ``regulations'' means the provisions contained in this part. (t) Shall. Expresses a provision that is mandatory. (u) Should. Expresses recommended nonmandatory provisions which when followed would significantly aid in a quality improvement program. (v) Standard Methods for the Examination of Dairy Products. ``Standard Methods for the Examination of Dairy Products,'' a publication of the American Public Health Association, 1015 Fifteenth Street, NW Washington, D.C. 20005. (w) 3-A Sanitary Standards and Accepted Practice. The latest standards for dairy equipment and accepted practices formulated by the 3-A Sanitary Standards Committees representing the International Association for Food Protection, the Food and Drug Administration, and the Dairy Industry Committee. Published by the International Association for Food Protection, 6200 Aurora Avenue, Suite 200 W, Des Moines, Iowa 50322-2863. (x) USDA or Department. Means the United States Department of Agriculture. (y) Receiving Station. Any place, premise, or establishment where milk or dairy products are received, collected or handled for transfer to a processing or manufacturing plant. (z) Transfer station. Any place, premise, or establishment where milk or dairy products are transferred directly from one transport tank to another. (aa) Corrosion-resistant. Those materials that maintain their original surface characteristics under prolonged [[Page 94]] influence of the product to be contacted, cleaning compounds and sanitizing solutions, and other conditions of the environment in which used. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 50 FR 34672, Aug. 27, 1985; 58 FR 42413, Aug. 9, 1993; 59 FR 24321, May 10, 1994; 59 FR 50121, Sept. 30, 1994; 67 FR 48974, July 29, 2002] Purpose Sec. 58.122 Approved plants under USDA inspection and grading service. (a) Adoption of certain sound practices at dairy plants will significantly aid the operators to manufacture more consistently, uniform high-quality stable dairy products. Only dairy products manufactured, processed and packaged in an approved plant may be graded or inspected and identified with official identification. The specifications established herein provide the basis for a quality maintenance program which may be effectively carried forward through official inspection, grading, and quality control service. (b) USDA inspection and grading service is provided to dairy product manufacturing plants on a voluntary basis. The operator of any dairy plant desiring to have such a plant qualified as an approved plant under USDA inspection and grading service may request surveys of such plant, premises, equipment, facilities, methods of operation, and raw material to determine whether they are adequate to permit inspection and grading service. The cost of this survey shall be borne by the applicant. Approved Plants Sec. 58.123 Survey and approval. Prior to the approval of a plant, a designated representative of the Administrator shall make a survey of the plant, premises, storage facilities, equipment and raw material, volume of raw material processed daily, and facilities for handling the products at the plant. The survey shall be made at least twice a year to determine whether the facilities, equipment, method of operation, and raw material being received are adequate and suitable for USDA inspection and grading service in accordance with the provisions of this part. To be eligible for approval a plant shall satisfactorily meet the specifications of this subpart as determined by the Administrator. Sec. 58.124 Denial or suspension of plant approval. Plant approval may be denied or suspended if a determination is made by a designated representative of the Administrator that the plant is not performing satisfactorily in regard to; (a) The classification of milk, (b) Proper segregation and disposal of unwholesome raw materials or finished product, (c) Adequate facilities and condition of processing equipment, (d) Sanitary conditions of plant and equipment, (e) Control of insects, rodents and other vermin, (f) Use of non-toxic product contact surfaces and prevention of adulteration of raw materials and products with chemicals or other foreign material, (g) Proper operating procedures, (h) The maintenance of legal composition of finished products, (i) The manufacture of stable dairy products, of desirable keeping quality characteristics, (j) Proper storage conditions for ingredients and dairy products, or (k) Suitable and effective packaging methods and material. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48974, July 29, 2002] Premises, Buildings, Facilities, Equipment and Utensils Sec. 58.125 Premises. (a) The premises shall be kept in a clean and orderly condition, and shall be free from strong or foul odors, smoke, or excessive air pollution. Construction and maintenance of driveways and adjacent plant traffic areas should be of cement, asphalt, or similar material to keep dust and mud to a minimum. (b) Surroundings. The immediate surroundings shall be free from refuse, rubbish, overgrown vegetation, and [[Page 95]] waste materials to prevent harborage of rodents, insects and other vermin. (c) Drainage. A suitable drainage system shall be provided which will allow rapid drainage of all water from plant buildings and driveways, including surface water around the plant and on the premises, and all such water shall be disposed of in such a manner as to prevent an environmental or health hazard. Sec. 58.126 Buildings. The building or buildings shall be of sound construction and shall be kept in good repair to prevent the entrance or harboring of rodents, birds, insects, vermin, dogs, and cats. All service pipe openings through outside walls shall be effectively sealed around the opening or provided with tight metal collars. (a) Outside doors, windows, openings, etc. All openings to the outer air including doors, windows, skylights and transoms shall be effectively protected or screened against the entrance of flies and other insects, rodents, birds, dust and dirt. All outside doors opening into processing rooms shall be in good condition and fit propperly. All hinged, outside screen doors shall open outward. All doors and windows should be kept clean and in good repair. Outside conveyor openings and other special-type outside openings shall be effectively protected to prevent the entrance of flies and rodents, by the use of doors, screens, flaps, fans or tunnels. Outside openings for sanitary pipelines shall be covered when not in use. On new construction window sills should be slanted downward at approximately a 45[deg] angle. (b) Walls, ceilings, partitions and posts. The walls, ceilings, partitions, and posts of rooms in which milk, or dairy products are processed, manufactured, handled, packaged or stored (except dry storage of packaged finished products and supplies) or in which utensils are washed and stored, shall be smoothly finished with a suitable material of light color, which is substantially impervious to moisture and kept clean. They shall be refinished as often as necessary to maintain a neat, clean surface. For easier cleaning new construction should have rounded cove at the juncture of the wall and floor in all receiving, pasteurizing, manufacturing, packaging and storage rooms. (c) Floors. The floors of all rooms in which milk, or dairy products are processed, manufactured, packaged or stored or in which utensils are washed shall be constructed of tile properly laid with impervious joint material, concrete, or other equally impervious material. The floors shall be smooth, kept in good repair, graded so that there will be no pools of standing water or milk products after flushing, and all openings to the drains shall be equipped with traps properly constructed and kept in good repair. On new construction, bell and standpipe type traps shall not be used. The plumbing shall be so installed as to prevent the back-up of sewage into the drain lines and to the floor of the plant. Cold storage rooms used for storage of product and starter rooms need not be provided with floor drains if the floor is sloped to drain to an exit. Sound, smooth, wood floors which can be kept clean, may be used in rooms where new containers and supplies and certain packaged finished products are stored. (d) Lighting and ventilation. (1) Light shall be ample, natural or artificial, or both, of good quality and well distributed. All rooms in which dairy products are manufactured or packaged or where utensils are washed shall have at least 30 foot-candles of light intensity on all working surfaces. Rooms where dairy products are graded or examined for condition and quality shall have at least 50 foot-candles of light intensity on the working surface. Restrooms and locker rooms should have at least 30 foot-candles of light intensity. In all other rooms there shall be provided at least 5 foot-candles of light intensity when measured at a distance of 30 inches from the floor. Where contamination of product by broken glass is possible, light bulbs and fluorescent tubes shall be protected against breakage. (2) There shall be adequate heating, ventilation or air conditioning for all rooms and compartments to permit maintenance of sanitary conditions. Exhaust or inlet fans, vents, hoods or temperature and humidity control equipment shall be provided where and [[Page 96]] when needed, to minimize or control room temperatures, eliminate objectionable odors, and aid in prevention of moisture condensation and mold. Inlet fans should be provided with an adequate air filtering device to eliminate dirt and dust from the incoming air. Ventilation systems shall be cleaned periodically as needed and maintained in good repair. Exhaust outlets shall be screened or provided with self closing louvers to prevent the entrance of insects when not in use. (e) Rooms and compartments. Rooms and compartments in which any raw material, packaging, ingredient supplies or dairy products are handled, manufactured, packaged or stored shall be so designed, constructed and maintained as to assure desirable room temperatures and clean and orderly operating conditions free from objectionable odors and vapors. Enclosed bulk milk receiving rooms, when present, shall be separated from the processing rooms by a wall. Rooms for receiving can milk shall be separated from the processing rooms by a partition or by suitable arrangement of equipment. Processing rooms shall be kept free from equipment and materials not regularly used. (1) Coolers and freezers. Coolers and freezers where dairy products are stored shall be clean, reasonably dry and maintained at the proper uniform temperature and humidity to adequately protect the product, and minimize the growth of mold. Adequate circulation of air shall be maintained at all times. They shall be free from rodents, insects, and pests. Shelves shall be kept clean and dry. Refrigeration units shall have provisions for collecting and disposing of condensate. (2) Supply room. The supply rooms or areas used for the storing of packaging materials; containers, and miscellaneous ingredients shall be kept clean, dry, orderly, free from insects, rodents, and mold, and maintained in good repair. Such items stored therein shall be adequately protected from dust, dirt, or other extraneous material and so arranged on racks, shelves or pallets to permit access to the supplies and cleaning and inspection of the room. Insecticides, rodenticides, cleaning compounds and other nonfood products shall be properly labeled and segregated, and stored in a separate room or cabinet away from milk, dairy products, ingredients or packaging supplies. (3) Boiler rooms, shop rooms and shop areas. The boiler, and shop rooms shall be separated from other rooms where milk, and dairy products are processed, manufactured, packaged, handled or stored. Shop rooms or areas should be kept orderly and reasonably free from dust and dirt. (4) Toilet and dressing rooms. Adequate toilet and dressing room facilities shall be conveniently located. (i) Toilet rooms shall not open directly into any room in which milk or dairy products are processed, manufactured, packaged or stored; doors shall be self-closing; ventilation shall be provided by mechanical means to the outer air; fixtures shall be kept clean and in good repair. (ii) All employees shall be furnished with a locker or other suitable facility and the lockers and dressing rooms shall be kept clean and orderly. Adequate handwashing facilities shall be provided. Legible signs shall be posted conspicuously in each toilet or dressing room directing employees to wash their hands before returning to work. (5) Laboratory. (i) Consistent with the size and type of plant and the volume of dairy products manufactured, an adequately equipped laboratory shall be maintained and properly staffed with qualified and trained personnel for quality control and analytical testing. The laboratory should be located reasonably close to the processing activity and be of sufficient size to perform tests necessary in evaluating the quality of raw and finished products. (ii) Approved laboratories shall be supervised by the USDA resident inspector in all aspects of official testing and in reporting results. Plant laboratory personnel in such plants may be authorized by USDA to perform official duties. The AMS Science and Technology Programs will provide independent auditing of laboratory analysis functions. (iii) An approved central control laboratory serving more than one plant [[Page 97]] may be acceptable, if conveniently located to the dairy plants, and if samples and results can be transmitted without undue delay. (6) Starter facilities. Adequate facilities shall be provided for the handling of starter cultures. The facilities shall not be located near areas where contamination is likely to occur. (7) Grading and inspection room. When grading or inspection of product is performed the plants shall furnish a room or designated area specifically for this purpose. The room or area shall be suitably located, sufficient in size, well lighted (see Sec. 58.126d), ventilated and the temperature shall be not less than 60 [deg]F. It shall be kept clean and dry, free from foreign odors and reasonably free from disturbing elements which would interfere with proper concentration by the grader or inspector. The grading or inspection room or area shall be equipped with a table or desk and convenient facilities for washing hands. (8) Resident inspector's facilities. In resident plants, an office or space shall be provided for official purposes. The room or space should be conveniently located in or near the approved laboratory, adequate in size, and equipped with desk and a lockable storage supply cabinet, and clothes locker. It shall be well lighted, ventilated or air conditioned, and heated. Custodial service shall be furnished on a regular basis. (9) Lunch rooms and eating areas. When these areas are provided, they (i) shall be kept clean and orderly, (ii) should not open directly into any room in which milk or dairy products are processed, manufactured or packaged, and (iii) signs shall be posted directing employees to wash their hands before returning to work. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 58 FR 42413, Aug. 9, 1993; 59 FR 24321, May 10, 1994; 59 FR 50121, Sept. 30, 1994; 67 FR 48974, July 29, 2002] Sec. 58.127 Facilities. (a) Water supply. There shall be an ample supply of both hot and cold water of safe and sanitary quality, with adequate facilities for its proper distribution throughout the plant, and protected against contamination. Water from other facilities, when officially approved, may be used for boiler feed water and condenser water provided that such water lines are completely separated from the water lines carrying the sanitary water supply, and the equipment is so constructed and controlled as to preclude contamination of product contact surfaces. There shall be no cross connection between potable water lines and non- potable water lines or between public and private water supplies. Bacteriological examinations shall be made of the plant's sanitary water supply taken at the plant at least twice a year, or as often as necessary to determine safety and suitability as related to product keeping quality for use in manufactured products shall be made by a USDA or State agency laboratory except for supplies that are regularly tested for purity and bacteriological quality, and approved by the local health officer. The results of all water tests shall be kept on file at the plant for which the test was performed. The location, construction, and operation of any well shall comply with regulations of the appropriate agency. (b) Drinking-water facilities. Drinking-water facilities of a sanitary type shall be provided in the plant and should be conveniently located. (c) Hand-washing facilities. Convenient hand-washing facilities shall be provided, including hot and cold running water, soap or other detergents, and sanitary single service towels or air driers. Such accommodations shall be located in or adjacent to toilet and dressing rooms and also at such other places in the plant as may be essential to the cleanliness of all personnel handling products. Vats for washing equipment or utensils shall not be used as hand-washing facilities. Containers shall be provided for used towels and other wastes. The containers may be metal or plastic, disposable or reuseable and should have self-closing covers. (d) Steam. Steam shall be supplied in sufficient volume and pressure for satisfactory operation of each applicable piece of equipment. Culinary steam used in direct contact with milk or [[Page 98]] dairy products shall be free from harmful substances or extraneous material and only those boiler water additives that meet the requirements of 21 CFR 173.310 shall be used, or a secondary steam generator shall be used in which soft water is converted to steam and no boiler compounds are used. Steam traps, strainers, and condensate traps shall be used wherever applicable to insure a satisfactory and safe steam supply. Culinary steam shall comply with the 3-A Accepted Practices for a Method of Producing Steam of Culinary Quality, number 609. This document is available from the International Association for Food Protection, 6200 Aurora Avenue, Suite 200 W, Des Moines, Iowa 50322-2863. (e) Air under pressure. The method for supplying air under pressure, which comes in contact with milk or dairy products or any product contact surface shall comply with the 3-A Accepted Practices for Supplying Air Under Pressure. (f) Disposal of wastes. Dairy wastes shall be properly disposed of from the plant and premises consistent with requirements imposed by the Environmental Protection Act. The sewer system shall have sufficient slope and capacity to readily remove all waste from the various processing operations. Where a public sewer is not available, all wastes shall be properly disposed of so as not to contaminate milk equipment or to create a nuisance or public health hazard. Containers used for the collection and holding of wastes shall be constructed of metal, plastic, or other equally impervious material and kept covered with tight fitting lids. Waste shall be stored in an area or room in a manner to protect it from flies and vermin. Solid wastes shall be disposed of regularly and the containers cleaned before reuse. Accumulation of dry waste paper and cardboard shall be kept to a minimum and disposed of in a manner that is environmentally acceptable. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48974, July 29, 2002] Sec. 58.128 Equipment and utensils. (a) General construction, repair and installation. The equipment and utensils used for the processing of milk and manufacture of dairy products shall be constructed to be readily demountable where necessary for cleaning and sanitizing. The product contact surfaces of all utensils and equipment such as holding tanks, pasteurizers, coolers, vats, agitators, pumps, sanitary piping and fittings or any specialized equipment shall be constructed of stainless steel, or other materials which under conditions of intended use are as equally corrosion resistant. Non-metallic parts other than glass having product contact surfaces shall comply with 3-A Sanitary Standards for Plastic or Rubber and Rubber-Like Materials. Equipment and utensils used for cleaning shall be in an acceptable condition, such as not rusty, pitted or corroded. All equipment and piping shall be designed and installed so as to be easily accessible for cleaning, and shall be kept in good repair, free from cracks and corroded surfaces. New or rearranged equipment, shall be set away from any wall or spaced in such a manner as to facilitate proper cleaning and to maintain good housekeeping. All parts or interior surfaces of equipment, pipes (except certain piping cleaned- in-place) or fittings, including valves and connections shall be accessible for inspection. Milk and dairy product pumps shall be of a sanitary type and easily dismantled for cleaning or shall be of specially approved construction to allow effective cleaning in place. All C.I.P. systems shall comply with the 3-A Accepted Practices for Permanently Installed Sanitary Product, Pipelines and Cleaning Systems. (b) Weigh cans and receiving tanks. Weigh cans and receiving tanks shall comply with the 3-A Sanitary Standards for Weigh Cans and Receiving Tanks for Raw Milk and shall be easily accessible for cleaning both inside and outside and shall be elevated above the floor and protected sufficiently with the necessary covers or baffles to prevent contamination from splash, condensate and drippage. Where necessary to provide easy access for cleaning of [[Page 99]] floors and adjacent wall areas, the receiving tank shall be equipped with wheels or casters to allow easy removal. (c) Can washers. Can washers shall have sufficient capacity and ability to discharge a clean dry can and cover and shall be kept properly timed in accordance with the instructions of the manufacturer. They should be equipped with proper temperature controls on the wash and rinse tanks and the following additional devices: Prerinse jet, wash tank solution feeder, can sanitizing attachment, forced air vapor exhaust, and removable air filter on drying chamber. The water and steam lines supplying the washer shall maintain a reasonably uniform pressure and if necessary be equipped with pressure regulating valves. The steam pressure to the can washer should be not less than 80 pounds, and the temperature of the wash and final rinse solution should be automatically controlled and not exceed 140 [deg]F. (d) Product storage tanks or vats. Storage tanks or vats shall be fully enclosed or tightly covered and well insulated. The entire interior surface, agitator and all appurtenances shall be accessible for thorough cleaning and inspection. Any opening at the top of the tank or vat including the entrance of the shaft shall be suitably protected against the entrance of dust, moisture, insects, oil or grease. The sight glasses, if used, shall be sound, clear, and in good repair. Vats which have hinged covers shall be easily cleaned and shall be so designed that moisture, or dust on the surface cannot enter the vat when the covers are raised. If the storage tanks or vats are equipped with air agitation, the system shall be of an approved type and properly installed in accordance with the 3-A Accepted Practices for Supplying Air Under Pressure. Storage tanks or vats intended to hold product for longer than approximately 8 hours shall be equipped with adequate refrigeration and/or have adequate insulation. New or replacement storage tanks or vats shall comply with the appropriate 3-A Sanitary Standards for Storage Tanks for Milk and Milk Products or Sanitary Standards for Silo-Type Storage Tanks for Milk and Milk Products and shall be equipped with thermometers in good operating order. (e) Separators. All product contact surfaces of separators shall be free from rust and pits and insofar as practicable shall be of stainless steel or other equally noncorrosive metals. (f) Coil or dome type batch pasteurizers. Coil or dome type batch pasteurizers shall be stainless steel lined and if the coil is not stainless steel or other equally noncorrosive metal it shall be properly tinned over the entire surface. Sanitary seal assemblies at the shaft ends of coil vats shall be of the removable type, except that existing equipment not provided with this type gland will be acceptable if the packing glands are maintained and operated without adverse effects. New or replacement units shall be provided with removable packing glands. Dome type pasteurizer agitators shall be stainless steel except that any non-metallic parts shall comply with 3-A Sanitary Standards for Plastic or Rubber and Rubberlike Materials, as applicable. Each pasteurizer used for heating product at a temperature of 5 [deg]F. or more above the minimum pasteurization temperature need not have the airspace heater. It shall be equipped with an airspace thermometer to insure a temperature at least 5 [deg]F. above that required for pasteurization of the product. There shall be adequate means of controlling the temperature of the heating medium, Batch pasteurizers shall have temperature indicating and recording devices. (g) Short time pasteurizing systems. When pasteurization is intended or required, an approved timing pump or device, recorder-controller, automatic flow diversion valve and holding tube or its equivalent, if not a part of the existing equipment, shall be installed on all such equipment used for pasteurization, to assure complete pasteurization. The entire facility shall comply with the 3-A Accepted Practices for the Sanitary Construction, Installation, Testing and Operation of High Temperature Short Time Pasteurizers. After the unit has been tested according to the 3-A Accepted Practices, the timing pump or device and the recorder controller shall be sealed at the correct setting to assure pasteurization. The [[Page 100]] system should be rechecked semi-annually to assure continued compliance with the 3-A Accepted Practices. Sealing and rechecking of the unit shall be performed by the control authority having jurisdiction. When direct steam pasteurizers are used, the steam, prior to entering the product, shall be conducted through a steam strainer and a steam purifier equipped with a steam trap and only steam meeting the requirements for culinary steam shall be used. (h) Thermometers and recorders--(1) Indicating thermometers. (i) Long stem indicating thermometers which are accurate within 0.5 [deg]F., plus or minus, for the applicable temperature range, shall be provided for checking the temperature of pasteurization and cooling of products in vats and checking the accuracy of recording thermometers. (ii) Short stem indicating thermometers, which are accurate within 0.5 [deg]F., plus or minus, for the applicable temperature range, shall be installed in the proper stationary position in all pasteurizers. Storage tanks where temperature readings are required shall have thermometers which are accurate within 2.0 [deg]F., plus or minus. (iii) Air space indicating thermometers, where applicable, which are accurate within 1.0 [deg]F., plus or minus, for the proper temperature range shall also be installed above the surface of the products pasteurized in vats, to make certain that the temperature of the foam and/or air above the products pasteurized also received the required minimum temperature treatment. (2) Recording thermometers. (i) Recording thermometers that are accurate within 1 [deg]F., plus or minus, for the applicable temperature range, shall be used on each heat treating, pasteurizing or thermal processing unit to record the heating process. (ii) Additional use of recording thermometers accurate within 2 [deg]F., plus or minus may be required where a record of temperature or time of cooling and holding is of significant importance. (iii) Recorder charts shall be marked to show date and plant identification, reading of the indicating thermometer at a particular referenced reading point on the recording chart, amount and name of product, product temperature at which the ``cut-in'' and ``cut-out'' function, record of the period in which flow diversion valve is in forward-flow position, signature or initials of operator. (i) Surface coolers. Surface coolers shall be equipped with hinged or removable covers for the protection of the product. The edges of the fins shall be so designed as to divert condensate on nonproduct contact surfaces away from product contact surfaces. All gaskets or swivel connections shall be leak proof. (j) Plate type heat exchangers. Plate type heat exchanger shall comply with the 3-A Sanitary Standards Plate Type Heat Exchangers for Milk and Milk Products. All gaskets shall be tight and kept in good operating order. Plates shall be opened for inspection by the operator at sufficiently frequent intervals to determine if the equipment is clean and in satisfactory condition. A cleaning regimen should be posted to insure proper cleaning procedures between inspection periods. (k) Internal return tubular heat exchangers. Internal return tubular heat exchangers shall comply with the 3-A Sanitary Standards for Internal Return Tubular Heat Exchangers for Use with Milk and Milk Products. (l) Pumps. Pumps used for milk, and dairy products shall be of the sanitary type and constructed to comply with 3-A Sanitary Standards for Pumps for Milk and Milk Products. Unless pumps are specifically designed for effective cleaning-in-place they shall be disassembled and thoroughly cleaned after use. (m) Scales. All scales shall comply with National Bureau of Standards Handbook 44. (Latest revision). (1) Small capacity scales shall be capable of the following accuracy, and shall be graduated in no higher than one ounce graduations. (This table taken from the presently effective 1973 revision.) ------------------------------------------------------------------------ Minimum tolerance --------------------- Ounces Pounds ------------------------------------------------------------------------ Load in pounds: 0 to 4 inclusive................................ \1/32\ 0.002 5 to 10 inclusive............................... \1/16\ .004 11 to 20 inclusive.............................. \1/8\ .008 21 to 30 inclusive.............................. \3/16\ .012 31 to 50 inclusive.............................. \1/2\ .031 [[Page 101]] 51 to 500 inclusive............................. \3/4\ .047 ------------------------------------------------------------------------ (2) Large capacity scales shall be capable of the following accuracy, and shall be graduated in no higher than \1/4\ pound graduations for scales of capacity of up to 250 pounds; \1/2\ pound graduations for scales above 250 pounds capacity. (This table taken from the presently effective 1973 revision.) ------------------------------------------------------------------------ Minimum tolerance --------------------- Ounces Pounds ------------------------------------------------------------------------ Load in pounds: 101 to 150 inclusive............................ 1\1/4\ 0.078 151 to 250 inclusive............................ 2 .125 251 to 500 inclusive............................ 4 .250 501 to 1000 inclusive........................... 8 .500 1001 to 2500 inclusive.......................... ......... 1.0 ------------------------------------------------------------------------ Compliance shall be determined by the appropriate regulatory authority. (n) Homogenizers. Homogenizers and high pressure pumps of the plunger type shall comply with the 3-A Sanitary Standards for Homogenizers and Pumps of the Plunger Type and shall be disassembled and thoroughly cleaned after use. (o) New replacement or modified equipment, processing system, or utensils. All new, replacement, or modified equipment and all processing systems, cleaning systems, utensils, or replacement parts shall comply with the most current, appropriate 3-A Sanitary Standards or 3-A Accepted Practices. If 3-A Sanitary Standards or 3-A Accepted Practices are not available, such equipment and replacements shall meet the general criteria of this section and the USDA Guidelines for the Sanitary Design and Fabrication of Dairy Processing Equipment available from USDA, Agricultural Marketing Service, Dairy Programs, Dairy Grading Branch, or by accessing the Internet at www.ams.gov/dairy/grade.htm. (p) Vacuumizing equipment. The vacuum chamber, as used for flavor control, shall be made of stainless steel or other equally corrosion resistant metal. The unit shall be constructed to facilitate cleaning and all product contact surfaces shall be accessible for inspection. Vacuum chambers located on the pasteurized side of the unit shall be isolated by means of a vacuum breaker and a positive activated check valve on the product inlet side and a vacuum breaker and a positive activated check valve on the discharge side. If direct steam is used, it should also be equipped with a ratio controller to regulate the composition when applicable to the finished product. Only steam which meets the requirements for culinary steam shall be used. The incoming steam supply shall be regulated by an automatic solenoid valve which will cut off the steam supply in the event the flow diversion valve of the pasteurizer is not in the forward flow position. Condensers when used shall be equipped with a water level control and an automatic safety shutoff valve. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48974, July 29, 2002] Personnel, Cleanliness and Health Sec. 58.129 Cleanliness. All employees shall wash their hands before beginning work and upon returning to work after using toilet facilities, eating, smoking or otherwise soiling their hands. They shall keep their hands clean and follow good hygienic practices while on duty. Expectorating or use of tobacco in any form shall be prohibited in each room and compartment where any milk, dairy products, or supplies are prepared, stored or otherwise handled. Clean white or light-colored washable or disposable outer garments and caps (paper caps, hard hats, or hair nets acceptable) shall be worn to adequately protect the hair and beards when grown by all persons engaged in receiving, testing, processing milk, manufacturing, packaging or handling dairy products. Sec. 58.130 Health. No person afflicted with a communicable disease shall be permitted in any room or compartment where milk and dairy products are prepared, manufactured or otherwise handled. No person who has a discharging or infected wound, sore or lesion on hands, arms or other exposed portion of the body shall work in any dairy processing rooms or [[Page 102]] in any capacity resulting in contact with milk, or dairy products. Each employee whose work brings him in contact with the processing or handling of dairy products, containers or equipment should have a medical and physical examination by a registered physician or by the local department of health at the time of employment. An employee returning to work following illness from a communicable disease shall have a certificate from the attending physician to establish proof of complete recovery. Protection and Transport of Raw Milk and Cream Sec. 58.131 Equipment and facilities. (a)(1) Milk cans. Cans used in transporting milk from dairy farm to plant shall be of such construction (preferably seamless with umbrella lids) as to be easily cleaned, and shall be inspected, repaired, and replaced as necessary to exclude substantially the use of cans and lids with open seams, cracks, rust, milkstone, or any unsanitary condition. Adequate provisions should be made so that milk in cans will be cooled immediately after milking to 50 [deg]F. or lower unless delivered to the plant within two hours after milking. (2) Farm bulk tanks. Farm bulk tanks shall comply with 3-A Sanitary Standards for Farm Cooling and Holding Tanks or 3-A Sanitary Standards for Farm Milk Storage Tanks, as applicable. They shall be installed in a milk house in accordance with the requirements of the regulatory agency in jurisdiction. The bulk cooling tanks shall be designed and equipped with refrigeration to permit the cooling of the milk to 40 [deg]F. or lower within two hours after milking, and maintain it at 45 [deg]F. or below until picked up. (b)(1) Receiving stations. Receiving stations shall comply with the applicable sections of this subpart covering premises, buildings, facilities, equipment, utensils, personnel, cleanliness and health. (2) Transfer stations. Transfer stations shall comply with the applicable sections of this subpart covering premises, floors, lighting, water supply, hand-washing facilities, disposal of wastes, general construction, repair and installation of equipment, piping and utensils and personnel--cleanliness and health. As climatic and operating conditions require the transfer station shall comply with the applicable sections for walls, ceilings, doors and windows. (3) Cream stations. Cream stations shall provide adequate protection and facilities for the handling, transferring and cooling of farm separated cream. The area shall be large enough to avoid undue crowding with a normal volume of business and shall be separated from other areas and the outside by self closing, tight fitting doors. All openings shall be screened during fly season. The floor, walls and ceiling shall be of satisfactory construction, in good repair and kept clean. Lighting and ventilation shall meet the requirements of Sec. 58.126(d). Cooling facilities shall be provided to cool the cream to 50 [deg]F. or lower unless shipped within 8 hours after receipt. Facilities shall be provided to wash, sanitize and store cans and equipment used in the operation. The cream should not be more than 4 days old when picked up for delivery to the processing plant. (c)(1) Transporting milk or cream. Vehicles used for the transportation of can milk or cream shall be of the enclosed type, constructed and operated to protect the product from extreme temperature, dust, or other adverse conditions and they shall be kept clean. Decking boards or racks shall be provided where more than one tier of cans is carried. Cans or vehicles used for the transportation of milk from the farm to the plant shall not be used for transporting skim milk, buttermilk, or whey to producers. (2) Transport tanks. The exterior shell shall be clean and free from open seams or cracks which would permit liquid to enter the jacket. The interior shell shall be stainless steel and so constructed that it will not buckle, sag or prevent complete drainage. All product contact surfaces shall be smooth, easily cleaned and maintained in good repair. The pump and hose cabinet shall be fully enclosed with tight fitting doors and the inlet and outlet shall be provided with dust covers to give adequate protection from road dust. Tank [[Page 103]] manholes should be equipped with an adequate filtering system during loading and unloading. New and replacement transport tanks shall comply with 3-A Sanitary Standards for Stainless Steel Automotive Milk and Milk Products Transportation Tanks for Bulk Delivery and/or Farm Pick-up Service. (3) Facilities for cleaning and sanitizing. Enclosed or covered facilities (as climatic conditions require) shall be available for washing and sanitizing of transport tanks, piping, and accessories, at central locations or at all plants that receive or ship milk or milk products in transport tanks. (d) Transfer of milk to transport tank. Milk shall be transferred under sanitary conditions from farm bulk tanks through stainless steel piping or approved tubing. The sanitary piping and tubing shall be capped when not in use. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48975, July 29, 2002] Quality Specifications for Raw Milk Sec. 58.132 Basis for classification. The quality classification of raw milk for manufacturing purposes from each producer shall be based on an organoleptic examination for appearance and odor, a drug residue test, and quality control tests for sediment content, bacterial estimate and somatic cell count. All milk received from producers shall not exceed the Food and Drug Administration's established limits for pesticide, herbicide and drug residues. Producers shall be promptly notified of any shipment or portion thereof of their milk that fails to meet any of these quality specifications. [58 FR 26912, May 6, 1993] Sec. 58.133 Methods for quality and wholesomeness determination. (a) Appearance and odor. The appearance of acceptable raw milk shall be normal and free of excessive coarse sediment when examined visually or by an acceptable test procedure. The milk shall not show any abnormal condition (including, but not limited to, curdled, ropy, bloody or mastitic condition), as indicated by sight or other test procedures. The odor shall be fresh and sweet. The milk shall be free from objectionable feed and other off-odors that adversely affect the finished product. (b) Somatic cell count. (1) A laboratory examination to determine the level of somatic cells shall be made at least four times in each 6- month period at irregular intervals on milk received from each patron. (2) A screening test may be conducted on goat herd milk. When a goat herd screening sample test exceeds either of the following results, a confirmatory test identified in paragraph (b)(3) of this section shall be conducted. (3) Milk shall be tested for somatic cell content by using one of the following procedures or by any other method approved by Standard Methods for the Examination of Dairy Products (confirmatory test for somatic cells in goat milk): (i) Direct Microscopic Somatic Cell Count (Single Strip Procedure). Pyronin Y-methyl green stain or ``New York'' modification shall be used as the confirmatory test for goat's milk. (ii) Electronic Somatic Cell Count (particle counter). (iii) Electronic Somatic Cell Count (fluorescent dye). (4) The somatic cell test identified in paragraph (b)(3) of this section shall be considered as the official results. (5) Whenever the official test indicates the presence of more than 750,000 somatic cells per ml. (1,500,000 per ml. for goat milk), the following procedures shall be applied: (i) The producer shall be notified with a warning of the excessive somatic cell count. (ii) Whenever two out of the last four consecutive somatic cell counts exceed 750,000 per ml. (1,500,000 per ml. for goat milk), the appropriate State regulatory authority shall be notified and a written notice given to the producer. This notice shall be in effect as long as two of the last four consecutive samples exceed 750,000 per ml. (1,500,000 per ml. for goat milk). (6) An additional sample shall be taken after a lapse of 3 days but within 21 days of the notice required in paragraph (b)(5)(ii) of this section. If this sample also exceeds 750,000 per ml. [[Page 104]] (1,500,000 per ml. for goat milk), subsequent milkings shall not be accepted for market until satisfactory compliance is obtained. Shipment may be resumed and a temporary status assigned to the producer by the appropriate State regulatory agency when an additional sample of herd milk is tested and found satisfactory. The producer may be assigned a full reinstatement status when three out of four consecutive somatic cell count tests do not exceed 750,000 per ml. (1,500,000 per ml. for goat milk). The samples shall be taken at a rate of not more than two per week on separate days within a 3-week period. (c) Drug residue level. (1) USDA-approved plants shall not accept for processing any milk testing positive for drug residue. All milk received at USDA-approved plants shall be sampled and tested prior to processing for beta lactam drug residue. When directed by the regulatory agency, additional testing for other drug residues shall be performed. Samples shall be analyzed for beta lactams and other drug residues by methods that have been independently evaluated or evaluated by the Food and Drug Administration (FDA) and that have been accepted by the (FDA) as effective to detect drug residues at current safe or tolerance levels. Safe and tolerance levels for particular drugs are established by the FDA and can be obtained from the U.S. Food and Drug Administration Center for Food Safety and Applied Nutrition, 200 C Street SW., Washington, DC 20204. (2) Individual producer milk samples for beta lactam drug residue testing shall be obtained from each milk shipment as follows: (i) Milk in farm bulk tanks. A sample shall be taken at each farm and shall include milk from each farm bulk tank. (ii) Milk in cans. A sample shall be formed separately at the receiving plant for each can milk producer included in a delivery, and shall be representative of all milk received from the producer. (3) Load milk samples for beta lactam drug residue testing shall be obtained from each milk shipment as follows: (i) Milk in bulk milk pickup tankers. A sample shall be taken from the bulk milk pickup tanker after its arrival at the plant and prior to further commingling. (ii) Milk in cans. A sample representing all of the milk received on a shipment shall be formed at the plant, using a sampling procedure that includes milk from every can on the vehicle. (4) Follow-up to positive-testing samples. (i) When a load sample tests positive for drug residue, the appropriate State regulatory agency shall be notified immediately of the positive test result and of the intended disposition of the shipment of milk containing the drug residue. (ii) Each individual producer sample represented in the positive- testing load sample shall be singly tested to determine the producer of the milk sample testing positive for drug residue. Identification of the producer responsible for producing the milk testing positive for drug residue, and details of the final disposition of the shipment of milk containing the drug residue, shall be reported immediately to the appropriate agency. (iii) Milk shipment from the producer identified as the source of milk testing positive for drug residue shall cease immediately and may resume only after a sample from a subsequent milking does not test positive for drug residue. [50 FR 34672, Aug. 27, 1985, as amended at 58 FR 26912, May 6, 1993; 67 FR 48975, July 29, 2002; 77 FR 31720, May 30, 2012] Sec. 58.134 Sediment content for milk in cans. (a) Method of testing. Methods for determining the sediment content of the milk of individual producers shall be those described in the latest edition of Standard Methods for the Examination of Dairy Products. Sediment content shall be based on comparison with applicable charts of the United States Sediment Standards for Milk and Milk Products, available from USDA, AMS, Dairy Programs, Dairy Standardization Branch. (b) Sediment content classification. Milk in cans shall be classified for sediment content, regardless of the results [[Page 105]] of the appearance and odor examination required in Sec. 58.133(a), as follows: USDA SEDIMENT STANDARD No. 1 (acceptable)--not to exceed 0.50 mg. or equivalent. No. 2 (acceptable)--not to exceed 1.50 mg. or equivalent. No. 3 (probational, not over 10 days)--not to exceed 2.50 mg. or equivalent. No. 4 (reject)--over 2.50 mg. or equivalent. (c) Frequency of tests. At least once each month, at irregular intervals, one or more cans of milk selected at random from each producer shall be tested. (d) Acceptance or rejection of milk. If the sediment disc is classified as No. 1, No. 2, or No. 3, the producer's milk may be accepted. If the sediment disc is classified No. 4 the milk shall be rejected: Provided that, If the shipment of milk is commingled with other milk in a transport tank the next shipment shall not be accepted until its quality has been determined before being picked up; however, if the person making the test is unable to get to the farm before the next shipment it may be accepted but no further shipments shall be accepted unless the milk meets the requirements of No. 3 or better. In the case of milk classified as No. 3 or No. 4, all cans shall be tested. Producers of No. 3 or No. 4 milk shall be notified immediately and shall be furnished applicable sediment discs and the next shipment shall be tested. (e) Retests. On test of the next shipment all cans shall be tested. Milk classified as No. 1, No. 2, or No. 3 may be accepted, but No. 4 milk shall be rejected. The producers of No. 3 or No. 4 milk shall be notified immediately, furnished applicable sediment discs and the next shipment tested. This procedure of retesting successive shipments and accepting probational (No. 3) milk and rejecting No. 4 milk may be continued for not more than 10 calendar days. If at the end of this time all of the producer's milk does not meet the acceptable sediment content classification (No. 1 or No. 2), it shall be rejected. This procedure of retesting successive shipments and accepting probational (No. 3) milk and rejecting No. 4 milk may be continued for not more than 10 calendar days. If at the end of this time all of the producer's milk does not meet the acceptable sediment content classification (No. 1 or No. 2), it shall be rejected. [40 FR 47911, Oct. 10, 1975, Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 50 FR 34673, Aug. 27, 1985; 67 FR 48975, July 29, 2002; 77 FR 31720, May 30, 2012] Sec. 58.135 Bacterial estimate. (a) Methods of Testing. Milk shall be tested for bacterial estimate by using one of the following methods or by any other method approved by Standard Methods for the Examination of Dairy Products. (1) Direct Microscopic clump count; (2) Standard plate count; (3) Plate loop count; (4) Pectin gel plate count; (5) Petrifilm aerobic count; (6) Spiral plate count; (7) Hydrophobic grid membrane filter count; (8) Impedance/conductance count; (9) Reflectance calorimetry. (b) Frequency of Testing. A laboratory examination to determine the bacterial estimate shall be made on a representative sample of each producer's milk at least once each month at irregular intervals. Samples shall be analyzed at a laboratory in accordance with State regulations. (c) Acceptance of milk. The following procedures shall be applied with respect to bacterial estimates: (1) Whenever the bacterial estimate indicates the presence of more than 500,000 bacteria per ml., the producer shall be notified with a warning of the excessive bacterial estimate. (2) Whenever two of the last four consecutive bacterial estimates exceed 500,000 per ml., the appropriate regulatory authority shall be notified and a written warning notice given to the producer. The notice shall be in effect so long as two out of the last four consecutive samples exceed 500,000 per ml. (3) An additional sample shall be taken after a lapse of 3 days but within 21 days of the notice required in paragraph (c) (2) of this section. If this sample also exceeds 500,000 per ml., subsequent milkings shall be excluded from [[Page 106]] the market until satisfactory compliance is obtained. Shipment may be resumed when an additional sample of herd milk is tested and found satisfactory. [67 FR 48975, July 29, 2002] Sec. 58.136 Rejected milk. A plant shall reject specific milk from a producer if the milk fails to meet the requirements for appearance and odor (Sec. 58.133(a)), if it is classified No. 4 for sediment content (Sec. 58.134), or if it tests positive for drug residue (Sec. 58.133(c)). [58 FR 26913, May 6, 1993] Sec. 58.137 Excluded milk. A plant shall not accept milk from a producer if: (a) The milk has been in a probational (No. 3) sediment content classification for more than 10 calendar days (Sec. 58.134); (b) Three of the last five milk samples have exceeded the maximum bacterial estimate of 500,000 per ml. (Sec. 58.135 (c)(3)). (c) Three of the last five milk samples have exceeded the maximum somatic cell count level of 750,000 per ml. (1,000,000 per ml. for goat milk) (Sec. 58.133 (b)(6)); or (d) The producer's milk shipments to either the Grade A or the manufacturing grade milk market currently are not permitted due to a positive drug residue test (Sec. 58.133(c)(4)). [58 FR 26913, May 6, 1993, as amended at 67 FR 48975, July 29, 2002] Sec. 58.138 Quality testing of milk from new producers. A quality examination and tests shall be made on the first shipment of milk from a producer shipping milk to a plant for the first time or resuming shipment to a plant after a period of non-shipment. The milk shall meet the requirements for acceptable milk, somatic cell count and drug residue level (Sec. Sec. 58.133, 58.134 and 58.135). The buyer shall also confirm that the producer's milk is currently not excluded from the market (Sec. 58.137). Thereafter, the milk shall be tested in accordance with the provisions in Sec. Sec. 58.133, 58.134 and 58.135. [58 FR 26913, May 6, 1993] Sec. 58.139 Record of tests. Accurate records listing the results of quality and drug residue tests for each producer shall be kept on file at the plant. Additionally, the plant shall obtain the quality and drug residue test records (Sec. 58.148(a), (e) and (g)) for any producer transferring milk shipment from another plant. These records shall be available for examination by the inspector. [58 FR 26913, May 6, 1993] Sec. 58.140 Field service. A representative of the plant shall arrange to promptly visit the farm of each producer whose milk tests positive for drug residue, exceeds the maximum somatic cell count level, or does not meet the requirements for acceptable milk. The purpose of the visit shall be to inspect the milking equipment and facilities and to offer assistance to improve the quality of the producer's milk and eliminate any potential causes of drug residues. A representative of the plant should routinely visit each producer as often as necessary to assist and encourage the production of high quality milk. [58 FR 26913, May 6, 1993] Sec. 58.141 Alternate quality control program. When a plant has in operation an acceptable quality program, at the producer level, which is approved by the Administrator as being effective in obtaining results comparable to or higher than the quality program as outlined above for milk or cream, then such a program may be accepted in lieu of the program herein prescribed. Operations and Operating Procedures Sec. 58.142 Product quality and stability. The receiving, holding and processing of milk and cream and the manufacturing, handling, packaging, storing and delivery of dairy products shall be in accordance with clean and sanitary [[Page 107]] methods, consistent with good commercial practices to promote the production of the highest quality of finished product and improve product stability. Milk should not be more than three days old when picked up from the producer and delivered to the plant, receiving station or transfer station. Sec. 58.143 Raw product storage. (a) All milk shall be held and processed under conditions and at temperatures that will avoid contamination and rapid deterioration. Drip milk from can washers and any other source shall not be used for the manufacture of dairy products. Bulk milk in storage tanks within the dairy plant shall be handled in such a manner as to minimize bacterial increase and shall be maintained at 45 [deg]F. or lower until processing begins. This does not preclude holding milk at higher temperatures for a period of time, where applicable to particular manufacturing or processing practices. (b) The bacteriological quality of commingled milk in storage tanks shall not exceed 1,000,000/ml. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48976, July 29, 2002] Sec. 58.144 Pasteurization or ultra-pasteurization. When pasteurization or ultra-pasteurization is intended or required, or when a product is designated ``pasteurized'' or ``ultra-pasteurized'' every particle of the product shall be subjected to such temperatures and holding periods in approved systems as will assure proper pasteurization or ultra-pasteurization of the product. The heat treatment by either process shall be sufficient to insure public health safety and to assure adequate keeping quality, yet retaining the most desirable flavor and body characteristics of the finished product. Sec. 58.145 Composition and wholesomeness. All necessary precautions shall be taken to prevent contamination or adulteration of the milk or dairy products during manufacturing. All substances and ingredients used in the processing or manufacturing of any dairy product shall be subject to inspection and shall be wholesome and practically free from impurities. The finished products shall comply with the requirements of the Federal Food, Drug, and Cosmetic Act as to their composition and wholesomeness. Sec. 58.146 Cleaning and sanitizing treatment. (a) Equipment and utensils. The equipment, sanitary piping and utensils used in receiving and processing of the milk, and manufacturing and handling of the product shall be maintained in a sanitary condition. Sanitary seal assemblies shall be removable on all agitators, pumps, and vats and shall be inspected at regular intervals and kept clean. Unless other provisions are recommended in the following supplement sections, all equipment not designed for C.I.P. cleaning or mechanical cleaning shall be disassembled after each day's use for thorough cleaning. Dairy cleaners, detergents, wetting agents or sanitizing agents, or other similar materials which will not contaminate or adversely affect the products may be used. Steel wool or metal sponges shall not be used in the cleaning of any dairy equipment or utensils. (1) Product contact surfaces shall be subjected to an effective sanitizing treatment prior to use, except where dry cleaning is permitted. Utensils and portable equipment used in processing and manufacturing operations shall be stored above the floor in clean, dry locations and in a self draining position on racks constructed of impervious corrosion-resistant material. (2) C.I.P. cleaning or mechanical cleaning systems shall be used only on equipment and pipeline systems which have been designed, engineered and installed for that purpose. When such cleaning is used, careful attention shall be given to the proper procedures to assure satisfactory cleaning. All C.I.P. installations and cleaning procedures shall be in accordance with 3-A Suggested Method for the Installation and Cleaning of Cleaned-In-Place Sanitary Milk Pipelines for Milk and Milk Products Plants. Because of the possibilities of corrosion, the recommendations [[Page 108]] of the cleaning compound manufacturer should be followed with respect to time, temperature and concentration of specific acid or alkaline solutions and bactericides. Such cleaning operation should be preceded by a thorough rinse at approximately 110-115 [deg]F. continuously discarding the water. Following the circulation of the cleaning solution the equipment and lines shall be thoroughly rinsed with lukewarm water and checks should be made for effectiveness of cleaning. All caps, plugs, special fittings, valve seats, cross ends, pumps, and tee ends shall be opened or removed and brushed clean. All non-pasteurized product contact surfaces should be sanitized. Immediately prior to starting the product flow, the pasteurized product contact surfaces shall be given sanitizing treatment. (b) Milk cans and can washers. Milk cans and lids shall be cleaned, sanitized and dried before returning to producers. Inspection, repair or replacement of cans and lids shall be adequate to substantially exclude from use cans and lids showing open seams, cracks, rust condition, milkstone or any unsanitary condition. Washers shall be maintained in a clean and satisfactory operating condition and kept free from accumulation of scale or debris which will adversely affect the efficiency of the washer. Only washing compounds which are compatible with the water for effective cleaning, should be used. The can washer should be checked regularly during the run for proper operation. At the end of the day, the wash and rinse tanks should be drained and cleaned, jets and strainers cleaned, air filters checked and changed or cleaned if needed, and checks should be made for proper adjustment and condition of mechanical parts. (c) Milk transport tanks. A covered or enclosed wash dock and cleaning and sanitizing facilities shall be available to all plants that receive or ship milk in tanks. Milk transport tanks, sanitary piping, fittings, and pumps shall be cleaned and sanitized at least once each day after use: Provided that, if they are not to be used immediately after emptying a load of milk, they shall be washed promptly after use and given bactericidal treatment immediately before use. After being washed and sanitized, each tank should be identified by a tag attached to the outlet valve, bearing the following information: Plant and specific location where cleaned, date and time of day of washing and sanitizing, and name of person who washed and name of person who sanitized the tank. The tag shall not be removed until the tank is again washed and sanitized. (d) Building. All windows, glass, partitions, and skylights should be washed as often as necessary to keep them clean. Cracked or broken glass shall be replaced promptly. The walls, ceilings and doors should be washed periodically and kept free from soil and unsightly conditions. The shelves and ledges should be wiped or vacuumed as often as necessary to keep them free from dust and debris. The material picked up by the vacuum cleaners shall be disposed of in sealed containers which will prevent contamination or insect infestation from the waste material. Sec. 58.147 Insect and rodent control program. In addition to any commercial pest control service, if one is utilized, a specially designated employee should be made responsible for the performance of a regularly scheduled insect and rodent control program. Poisonous substances shall be properly labeled, and shall be handled, stored and used in such a manner as considered satisfactory by the Environmental Protection Agency. Sec. 58.148 Plant records. Adequate plant records shall be maintained of all required tests and analyses performed in the laboratory or throughout the plant during storage, processing and manufacturing, on all raw milk receipts and dairy products. Such records shall be available for examination at all reasonable times by the inspector. The following are the records which shall be maintained for examination at the plant or receiving station where performed. (a) Sediment and bacterial test results on raw milk from each producer. Retain for 12 months. [[Page 109]] (1) Routine tests and monthly summary of all producers showing number and percent of total in each class. (2) Retests, if initial test places milk in probationary status. (3) Rejections of raw milk over No. 3 in quality. (b) Pasteurization recorder charts. Retain for 3 months. (c) Water supply test certificate. Retain current copy for 6 months. (d) Cooling and heating recorder charts. Retain for 3 months. (e) Load and individual drug residue test results. Retain for 12 months. (f) Notifications to appropriate State regulatory agencies of positive drug residue tests and intended and final dispositions of milk testing positive for drug residue. Retain for 12 months. (g) Somatic cell count test results on raw milk from each producer. Retain for 12 months. (Approved by the Office of Management and Budget under OMB control number 0583-0047) \1\ --------------------------------------------------------------------------- \1\ Editorial Note: See table appearing in Sec. 58.100 for correct OMB control number. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 47 FR 745, Jan. 7, 1982; 58 FR 26913, May 6, 1993] Sec. 58.149 Alternate quality control programs for dairy products. (a) When a plant has in operation an acceptable quality control program which is approved by the Administrator as being effective in obtaining results comparable to or higher than the quality control program as outlined in this subpart, then such a program may be accepted in lieu of the program herein prescribed. (b) Where a minimum number of samples per batch of product, or per unit of time on continuous production runs are not specified, the phrase ``as many samples shall be taken as is necessary to assure compliance to specific quality requirements'' is used. Acceptable performance of this would be any method approved by the Administrator as meeting sound statistical methods of selecting samples and determining the number of samples to be taken. Packaging and General Identification Sec. 58.150 Containers. (a) The size, style, and type of packaging used for dairy products shall be commercially acceptable containers and packaging materials which will satisfactorily cover and protect the quality of the contents during storage and regular channels of trade and under normal conditions of handling. (b) Packaging materials for dairy products shall be selected which will provide sufficiently low permeability to air and vapor to prevent the formation of mold growth and surface oxidation. In addition, the wrapper should be resistant to puncturing, tearing, cracking or breaking under normal conditions of handling, shipping and storage. When special type packaging is used, the instructions of the manufacturer shall be followed closely as to its application and methods of closure. Sec. 58.151 Packaging and repackaging. (a) Packaging dairy products or cutting and repackaging all styles of dairy products shall be conducted under rigid sanitary conditions. The atmosphere of the packaging rooms, the equipment and packaging materials shall be practically free from mold and bacterial contamination. Methods for checking the level of contamination shall be as prescribed by the latest edition of Standard Methods or by other satisfactory methods approved by the Administrator. (b) When officially graded bulk dairy products are to be repackaged into consumer type packages with official grade labels or other official identification, a supervisor of packaging shall be required, see subpart A of this part. (title 7, Sec. Sec. 58.2 and 58.53 of the Code of Federal Regulations). If the packaging or repackaging is done in a plant other than the one in which the dairy product is manufactured, the plant, equipment, facilities and personnel shall meet the same requirements as outlined in this subpart. Sec. 58.152 General identification. All commercial bulk packages or consumer packaged product containing dairy products manufactured under the [[Page 110]] provisions of this subpart shall comply with the applicable regulation of the Food and Drug Administration. Storage of Finished Product Sec. 58.153 Dry storage. The product should be stored at least 18 inches from the wall in aisles, rows, or sections and lots, in such a manner as to be orderly and easily accessible for inspection. Rooms should be cleaned regularly. It is recommended that dunnage or pallets be used when practical. Care shall be taken in the storage of any other product foreign to dairy products in the same room, in order to prevent impairment or damage to the dairy product from mold, absorbed odors, or vermin or insect infestation. Control of humidity and temperature shall be maintained at all times, consistent with good commercial practices, to prevent conditions detrimental to the product and container. Sec. 58.154 Refrigerated storage. Finished product in containers subject to such conditions that will affect its useability shall be placed on shelves, dunnage or pallets and properly identified. It shall be stored under temperatures that will best maintain the initial quality. The product shall not be exposed to anything from which it might absorb any foreign odors or be contaminated by drippage or condensation. Inspection, Grading and Official Identification Sec. 58.155 Grading. Dairy products which have been processed or manufactured in accordance with the provisions of this subpart may be graded by the grader in accordance with the U.S. Standards for Grades. Laboratory analyses, when required in determining the final grade shall be conducted in an approved laboratory. Sec. 58.156 Inspection. Dairy products, which have been processed or manufactured in an approved plant, and for which there are no official U.S. Standards for Grades, shall be inspected for quality by the inspector in accordance with contract requirements or product specifications established by the U.S. Department of Agriculture or other Federal agency or buyer and seller. Laboratory analysis when required shall be conducted in an approved laboratory. Sec. 58.157 Inspection or grading certificates. All dairy products which have been processed or manufactured, packaged and inspected or graded in accordance with the provision of this part may be covered by an inspection or grading certificate issued by the inspector or grader. Sec. 58.158 Official identification. (a) Application for authority to apply official identification to packaging material or containers shall be made in accordance with the provisions of subpart A of this part. (title 7, Sec. Sec. 58.49 through 58.57 of the Code of Federal Regulations.) (b) Only dairy products received, processed, or manufactured in accordance with the specifications contained in this subpart and inspected and/or graded in accordance with the provisions of this part may be identified with official identification. Explanation of Terms Sec. 58.159 Terms. (a) Fresh and sweet. Free from ``old milk'' flavor of developed acidity or other off-flavors. (b) Normal feed. Regional feed flavors, such as alfalfa, clover, silage, or similar feeds or grasses (weed flavors, such as peppergrass, French weed, onion, garlic, or other obnoxious weeds, excluded). (c) Off-flavors. Tastes or odors, such as utensil, bitter, barny, or other associated defects when present to a degree readily detectable. (d) Developed acidity. An apparent increase from the normal acidity of the milk to a degree of taste and odor which is detectable. (e) Extraneous matter. Foreign substances, such as filth, hair, insects and fragments thereof, and rodents, and materials, such as metal, fiber, wood and glass. [[Page 111]] (f) Sediment. Fine particles of material other than the foreign substances and materials defined in paragraph (e) of this section. (g) C.I.P. The abbreviation of an approved system of cleaning pipelines called ``Cleaned-in-Place.'' (h) Mechanical cleaning. Denotes cleaning solely by circulation and/ or flowing chemical detergent solution and water rinses onto and over the surfaces to be cleaned, by mechanical means. Supplemental Specifications for Plants Manufacturing, Processing, and Packaging Nonfat Dry Milk, Instant Nonfat Dry Milk, Dry Whole Milk, and Dry Buttermilk Definitions Sec. 58.205 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: (a) Nonfat dry milk. The product obtained by the removal of only water from pasteurized skim milk. It contains not more than 5 percent by weight of moisture and not more than 1\1/2\ percent by weight of milkfat and it conforms to the applicable provisions of 21 CFR 131 ``Milk and Cream'' as issued by the Food and Drug Administration. Nonfat dry milk shall not contain nor be derived from dry buttermilk, dry whey, or products other than skim milk, and shall not contain any added preservative, neutralizing agent, or other chemical. (b) Instant nonfat dry milk. Instant nonfat dry milk is nonfat dry milk which has been produced in such a manner as to substantially improve its dispersing and reconstitution characteristics over that produced by the conventional process. Instant nonfat dry milk shall not contain dry buttermilk, dry whey, or products other than nonfat dry milk, except that lactose may be added as a processing aid during instantizing. The instant nonfat dry milk shall not contain any added preservatives, neutralizing agent, or other chemical. If lactose is used, the amount of lactose shall be the minimum required to produce the desired effect, but in no case shall the amount exceed 2.0 percent of the weight of the nonfat dry milk. If instant nonfat dry milk is fortified with vitamin A, and the product is reconstituted in accordance with the label directions, each quart of the reconstituted product shall contain 2000 International Units thereof. If instant nonfat dry milk is fortified with vitamin D, and the product is reconstituted in accordance with the label directions, each quart of the reconstituted product shall contain 400 International Units thereof. (c) Dry whole milk. The pasteurized product resulting from the removal of water from milk and contains the lactose, milk proteins, milk fat, and milk minerals in the same relative proportions as in the fresh milk from which made. The milk may be standardized but shall not contain buttermilk, or any added preservative, neutralizing agent or other chemicals. (d) Dry buttermilk. The product resulting from drying liquid buttermilk that was derived from the churning of butter and pasteurized prior to condensing at a temperature of 161 [deg]F for 15 seconds or its equivalent in bacterial destruction. Dry buttermilk shall have a protein content of not less than 30.0 percent. Dry buttermilk shall not contain nor be derived from nonfat dry milk, dry whey, or products other than buttermilk, and shall not contain any added preservative, neutralizing agent, or other chemical. (e) Dry buttermilk product. The product resulting from drying liquid buttermilk that was derived from the churning of butter and pasteurized prior to condensing at a temperature of 161 [deg]F for 15 seconds or its equivalent in bacterial destruction. Dry buttermilk product has a protein content less than 30.0 percent. Dry buttermilk product shall not contain nor be derived from nonfat dry milk, dry whey, or products other than buttermilk, and shall not contain any added preservative, neutralizing agent, or other chemical. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 56 FR 33855, July 24, 1991; 61 FR 17548, Apr. 22, 1996; 61 FR 35590, July 8, 1996] [[Page 112]] Rooms and Compartments Sec. 58.210 Dry storage of product. Storage rooms for the dry storage of product shall be adequate in size, kept clean, orderly, free from rodents, insects, and mold, and maintained in good repair. They shall be adequately lighted and ventilated. The ceilings, walls, beams and floors should be free from structural defects and inaccessible false areas which may harbor insects. Sec. 58.211 Packaging room for bulk products. A separate room or area shall be provided for filling bulk containers, and shall be constructed in accordance with Sec. 58.126. The number of control panels and switch boxes in this area should be kept to a minimum. Control panels shall be mounted a sufficient distance from the walls to facilitate cleaning or satisfactorily sealed to the wall, or shall be mounted in the wall and provided with tight fitting removable doors to facilitate cleaning. An adequate exhaust system shall be provided to minimize the accumulation of product dust within the packaging room and where needed, a dust collector shall be provided and properly maintained to keep roofs and outside areas free of dry product. Only packaging materials that are used within a day's operation may be kept in the packaging area. These materials shall be kept on metal racks or tables at least six inches off the floor. Unnecessary fixtures, equipment, or false areas which may collect dust and harbor insects, should not be allowed in the packaging room. Sec. 58.212 Hopper or dump room. A separate room shall be provided for the transfer of bulk dry dairy products to the hoppers and conveyors which lead to the fillers. This room shall meet the same requirements for construction and facilities as the bulk packaging operation. Areas and facilities provided for the transfer of dry dairy products from portable bulk bins will be accepted if gasketed surfaces or direct connections are used that appreciably eliminate the escape of product into the area. Sec. 58.213 Repackaging room. A separate room shall be provided for the filling of small packages and shall meet the same requirements for construction and facilities as the bulk packaging operation. Equipment and Utensils Sec. 58.214 General construction, repair and installation. All equipment and utensils necessary to the manufacture of dry milk products, including pasteurizer, timing-pump or device, flow diversion valve and recorder controller, shall meet the same general requirements as outlined in Sec. 58.128 of this subpart. In addition, for certain other equipment the following requirements shall be met. Sec. 58.215 Pre-heaters. The pre-heaters shall be of stainless steel or other equally corrosion resistant material, cleanable, accessible for inspection and shall be equipped with suitable automatic temperature controls. Sec. 58.216 Hotwells. The hotwells shall be enclosed or covered and should be equipped with indicating thermometers either in the hotwell or in the hot milk inlet line to the hotwell. If used for holding high heat products, they should also have recorders. Sec. 58.217 Evaporators and/or vacuum pans. Evaporators or vacuum pans or both, with open type condensers shall be equipped with an automatic condenser water level control, barometric leg, or so constructed so as to prevent water from entering the product. New or replacement units shall comply with the 3-A Sanitary Standards for Milk and Milk Products Evaporators and Vacuum Pans. When enclosed type condensers are used, no special controls are needed to prevent water from entering the product. Water collected from the condensing of product (cow water) in this equipment may be utilized for prerinsing and cleaning solution make-up; provided it is equipped with proper controls that will automatically divert water with entrained [[Page 113]] solids to the waste water system. ``Cow water'' shall not be used for acidified or final equipment rinse. Sec. 58.218 Surge tanks. If surge tanks are used for hot milk, and temperatures of product including foam being held in the surge tank during processing, is not maintained at a minimum of 150 [deg]F, then two or more surge tanks shall be installed with cross connections to permit flushing and cleaning during operation. Covers easily removable for cleaning shall be provided and used at all times. Sec. 58.219 High pressure pumps and lines. High pressure lines may be cleaned-in-place and shall be of such construction that dead ends, valves and the high pressure pumps can be disassembled for hand cleaning. The high pressure pump shall comply with the 3-A Sanitary Standard for Homogenizers and Pumps of the Plunger Type. Sec. 58.220 Drying systems. (a) Spray dryers. Spray dryers shall be of a continuous discharge type and all product contact surfaces shall be of stainless steel or other equally corrosion resistant material. All joints and seams in the product contact surfaces shall be welded and ground smooth. All dryers shall be constructed so as to facilitate ease in cleaning and inspection. Sight glasses or ports of sufficient size shall be located at strategic positions. Dryers shall be equipped with suitable air intake filters. The filter system shall comply with the applicable requirements of the 3-A Accepted Practices for Milk and Milk Products Spray Drying Systems. The filtering system shall be cleaned or component parts replaced as often as necessary to maintain a clean and adequate air supply. In gas fired dryers, precautions should be taken to assure complete combustion. Air shall be drawn into the dryer from sources free from objectionable odors and smoke, dust or dirt. New systems, replacement systems, or portions of systems replaced shall comply with the requirements of the 3-A Accepted Practices for Milk and Milk Products Spray Drying Systems. (b) Roller dryers. (1) The drums of a roller dryer shall be smooth, readily cleanable and free of pits and rust. The knives shall be maintained in such condition so as not to cause scoring of the drums. (2) The end boards shall have an impervious surface and be readily cleanable. They shall be provided with a means of adjustment to prevent leakage and accumulation of milk solids. The stack, hood, the drip pan inside of the hood and related shields shall be constructed of stainless steel and be readily cleanable. The lower edge of the hood shall be constructed so as to prevent condensate from entering the product zone. The hood shall be properly located and the stack of adequate capacity to remove the vapors. The stack shall be closed when the dryer is not in operation. The augers shall be stainless steel or properly plated, and readily cleanable. The auger troughs and related shields shall be of stainless steel and be readily cleanable. All air entering the dryer room shall be filtered to eliminate dust and dirt. The filter system shall consist of filtering media or device that will effectively, and in accordance with good commercial practices, prevent the entrance of foreign substances into the drying room. The filtering system shall be cleaned or component parts replaced as often as necessary to maintain a clean and adequate air supply. All dryer adjustments shall be made and the dryer operating normally before food grade product is collected from the dryer. (c) Other drying systems. These systems shall be constructed following the applicable principles of the 3-A Accepted Practices for Milk and Milk Products Spray Drying Systems. Sec. 58.221 Collectors and conveyors. Collectors shall be made of stainless steel or equally noncorrosive material and should be constructed to facilitate cleaning and inspection. Filter sack collectors, if used, shall be in good condition and the system shall be of such construction that all parts are accessible for cleaning and inspection. Conveyors shall be of stainless steel or equally corrosion resistant material and should be constructed to facilitate thorough cleaning and inspection. [[Page 114]] Sec. 58.222 Dry dairy product cooling equipment. Cooling equipment shall be provided with sufficient capacity to cool the product as specified in Sec. 58.240. A suitable dry air supply with an effective filtering system meeting the requirements of Sec. 58.220(a) shall be provided where air cooling and conveying is used. Sec. 58.223 Special treatment equipment. Any special equipment (instantizers, hammer mills, etc.) used to treat dry milk products shall be of sanitary construction and all parts shall be accessible for cleaning and inspection. New or replacement instantizing systems shall comply with the 3-A Accepted Practices for Instantizing Systems for Dry Milk and Dry Milk Products. Sec. 58.224 Sifters. All newly installed sifters used for dry milk and dry milk products shall comply with the 3-A Sanitary Standards for Sifters for Dry Milk and Dry Milk Products. All other sifters shall be constructed of stainless steel or other equally noncorrosive material and shall be of sanitary construction and accessible for cleaning and inspection. The mesh size of sifter screen used for various dry dairy products shall be those recommended in the appendix of the 3-A Standard for sifters. Sec. 58.225 Clothing and shoe covers. Clean clothing and shoe covers shall be provided exclusively for the purpose of cleaning the interior of the dryer when it is necessary to enter the dryer to perform the cleaning operation. Sec. 58.226 Portable and stationary bulk bins. Bulk bins shall be constructed of stainless steel, aluminum or other equally corrosion resistant materials, free from cracks, seams and must have an interior surface that is relatively smooth and easily cleanable. All product contact surfaces shall be easily accessible for cleaning. The capacity of each portable and bulk bin shall be limited to permit proper operating procedures such as sampling and daily removal of all product to preclude commingling of different days production. Sec. 58.227 Sampling device. If automatic sampling devices are used, they shall be constructed in such a manner as to prevent contamination of the product, and all parts must be readily accessible for cleaning. The type of sampler and the sampling procedure shall be as approved by the Administrator. Sec. 58.228 Dump hoppers, screens, mixers and conveyors. The product contact surfaces of dump hoppers, screens, mixers and conveyors which are used in the process of transferring dry products from bulk containers to fillers for small packages or containers, shall be of stainless or equally corrosion resistant material and designed to prevent contamination. All parts should be accessible for cleaning. The dump hoppers shall be of such height above floor level as to prevent foreign material or spilled product from entering the hopper. Sec. 58.229 Filler and packaging equipment. All filling and packaging equipment shall be of sanitary construction and all parts, including valves and filler heads accessible for cleaning. New or replacement equipment should comply with the 3-A Sanitary Standards for equipment for Packaging Dry Milk and Dry Milk Products. Sec. 58.230 Heavy duty vacuum cleaners. Each plant handling dry milk products shall be equipped with a heavy duty industrial vacuum cleaner. The vacuum cleaner shall be of a type that has a collector or disposable bag which will not recontaminate the atmosphere of the processing and packaging areas. Regular scheduling shall be established for its use in vacuuming applicable areas. Quality Specifications for Raw Materials Sec. 58.231 General. All raw materials received at the drying plant shall meet the following quality specifications. [[Page 115]] Sec. 58.232 Milk. Raw milk shall meet the requirements as outlined in Sec. Sec. 58.132 through 58.138 and, unless processed within two hours after being received, it shall be cooled to and held at a temperature of 45 [deg]F. or lower until processed. Sec. 58.233 Skim milk. The skim milk shall be separated from whole milk meeting the requirements as outlined in Sec. Sec. 58.132 through 58.138, and unless processed immediately, it shall be cooled to and maintained at a temperature of 45 [deg]F. or lower from the time of separating until the time of processing. Sec. 58.234 Buttermilk. Buttermilk for drying as dry buttermilk or dry buttermilk product shall be fresh and derived from the churning of butter, with or without the addition of harmless lactic culture. No preservative, neutralizing agent or other chemical may be added. Fluid buttermilk, unless cultured, shall be held at 45 [deg]F or lower unless processed within 2 hours. [56 FR 33855, July 24, 1991] Sec. 58.235 Modified dry milk products. Dry milk products to which approved neutralizing agents or chemicals have been added or constituents removed to alter their original characteristics for processing or usage shall come from products meeting the requirements of Sec. Sec. 58.232, 58.233, or 58.234. These products shall meet the applicable labeling requirements. Operations and Operating Procedures Sec. 58.236 Pasteurization and heat treatment. All milk and buttermilk used in the manufacture of dry milk products and modified dry milk products shall be pasteurized at the plant where dried, except that acidified buttermilk containing 40 percent or more solids may be transported to another plant for drying without repasteurization. Provided the condensed product is handled according to sanitary conditions approved by the Administrator. (a) Pasteurization. (1) All milk or skim milk to be used in the manufacture of nonfat dry milk shall be pasteurized prior to condensing at a minimum temperature of 161 [deg]F. for at least 15 seconds or its equivalent in bacterial destruction. Condensed milk products made from pasteurized milk may be transported to a drying plant, provided that it shall be effectively repasteurized at the drying plant, prior to drying, at no less than 166 [deg]F. for 15 seconds or its equivalent in bacterial destruction. (2) All buttermilk to be used in the manufacture of dry buttermilk or dry buttermilk product shall be pasteurized prior to condensing at a temperature of 161 [deg]F for 15 seconds or its equivalent in bacterial destruction. (b) Heat treatment--(1) High-heat. The finished product shall not exceed 1.5 mg. undenatured whey protein nitrogen per gram of nonfat dry milk as classified in the U.S. Standards for Grades of Nonfat Dry Milk (Spray Process). (2) Medium-heat. The finished product shall show undenatured whey protein nitrogen between the levels of ``high-heat'' and ``low-heat'' (1.51 to 5.99 mg.). (3) Low-heat. The finished product shall show not less than 6.0 undenatured whey protein nitrogen per gram of non-fat dry milk as classified in the U.S. Standards for Grades of Nonfat Dry Milk (Spray Process). [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 56 FR 33855, July 24, 1991] Sec. 58.237 Condensed surge supply. Surge tanks or balance tanks if used between the evaporators and dryer shall be used to hold only the minimum amount of condensed product necessary for a uniform flow to the dryers. Such tanks holding product at temperatures below 150 [deg]F. shall be completely emptied and washed after each 4 hours of operation or less. Alternate tanks shall be provided to permit continuous operation during washing of tanks. Sec. 58.238 Condensed storage tanks. (a) Excess production of condensed product over that which the dryer will [[Page 116]] take continuously from the pans should be bypassed through a cooler into a storage tank at 50 [deg]F. or lower and held at this temperature until used. (b) Product cut-off points shall be made at least every 24 hours and the tank completely emptied, washed, and sanitized before reuse. Sec. 58.239 Drying. Each dryer should be operated to produce the highest quality dry product consistent with the most efficient operation. The dry products shall be removed from the drying chamber continuously during the drying process. Sec. 58.240 Cooling dry products. Prior to packaging and immediately following removal from the drying chamber the dry product shall be cooled to a temperature not exceeding 110 [deg]F, however, if the product is to be held in a bulk bin the temperature should be reduced to approximately 90 [deg]F but shall be not more than 110 [deg]F. Sec. 58.241 Packaging, repackaging and storage. (a) Containers. Packages or containers used for the packaging of nonfat dry milk or other dry milk products shall be any clean, sound commercially accepted container or packaging material which will satisfactorily protect the contents through the regular channels of trade, without significant impairment of quality with respect to flavor, wholesomeness or moisture content under the normal conditions of handling. In no instance will containers which have previously been used for nonfood items, or food items which would be deleterious to the dairy product be allowed to be used for the bulk handling of dairy products. (b) Filling. Empty containers shall be protected at all times from possible contamination and containers which are to be lined shall not be prepared more than one hour in advance of filling. Every precaution shall be taken during the filling operation to minimize product dust and spillage. When necessary a mechanical shaker shall be provided; the tapping or pounding of containers should be prohibited. The containers shall be closed immediately after filling and the exteriors shall be vacuumed or brushed when necessary to render them practically free of residual product before being transferred from the filling room to the palleting or dry storage areas. (c) Repackaging. The entire repackaging operation shall be conducted in a sanitary manner with all precautions taken to prevent contamination and to minimize dust. All exterior surfaces of individual containers shall be practically free of product before overwrapping or packing in shipping containers. The room shall be kept free of dust accumulation, waste, cartons, liners, or other refuse. Conveyors, packaging and carton making equipment shall be vacuumed frequently during the operating day to prevent the accumulation of dust. No bottles or glass materials of any kind shall be permitted in the repackaging or hopper room. The inlet openings of all hoppers and bins shall be of minimum size, screened and placed well above the floor level. The room and all packaging equipment shall be cleaned as often as necessary to maintain a sanitary operation. Close attention shall be given to cleaning equipment where residues of the dry product may accumulate. A thorough clean-up including windows, doors, walls, light fixtures and ledges, should be performed as frequently as is necessary to maintain a high standard of cleanliness and sanitation. All waste dry dairy products including dribble product at the fillers, shall be properly identified and disposed of as animal feed. (d) Storage--(1) Product. The packaged dry milk product shall be stored or so arranged in aisles, rows, or sections and lots at least 18 inches from any wall and in such a manner as to be orderly, easily accessible for inspection or for cleaning of the room. All bags and small containers of products shall be placed on pallets elevated from the floor. Products in small containers may be stored by methods preventing direct contact with the floor when the condition of the container is satisfactorily maintained. The storage room shall be kept clean and dry and all openings protected against entrance of insects and rodents. [[Page 117]] (2) Supplies. All supplies shall be placed on dunnage or pallets and arranged in an orderly manner for accessibility and cleaning of the room. It is preferable that supplies be stored in an area separate from that used for storing the dry products. Supplies shall be kept enclosed in their original wrapping material until used. After removal of supplies from their original containers, they shall be kept in an enclosed metal cabinet, bins or on shelving and if not enclosed shall be protected from powder, and dust or other contamination. The room should be vacuumed as often as necessary and kept clean and orderly. Sec. 58.242 Product adulteration. All necessary precautions shall be taken throughout the entire operation to prevent the adulteration of one product with another. The commingling of one type of liquid or dry product with another shall be considered as an adulteration of that product. This does not prohibit the normal standardization of like products in accordance with good commercial practices or the production of specific products for special uses, provided applicable labeling requirements are met. Sec. 58.243 Checking quality. All milk, milk products and dry milk products shall be subject to inspection and analysis by the dairy plant for quality and condition throughout each processing operation. Periodically samples of product and environmental material shall be tested for salmonella. Test results shall be negative when samples are tested for salmonella. Line samples should be taken periodically as an aid to quality control in addition to the regular routine analysis made on the finished products. Sec. 58.244 Number of samples. As many samples shall be taken from each dryer production lot as is necessary to assure proper composition and quality control. A sufficient number of representative samples from the lot shall be taken to assure compliance with the stated net weight on the container. Sec. 58.245 Method of sample analysis. Samples shall be tested according to the applicable methods of laboratory analysis contained in either DA Instruction 918-RL as issued by the USDA, Agricultural Marketing Service, Dairy Programs, or Official Methods of Analysis of the Association of Analytical Chemists or Standard Methods for the Examination of Dairy Products. [67 FR 48976, July 29, 2002] Sec. 58.246 Cleaning of dryers, collectors, conveyors, ducts, sifters and storage bins. This equipment shall be cleaned as often as is necessary to maintain such equipment in a clean and sanitary condition. The kind of cleaning procedure either wet or dry and the frequency of cleaning shall be based upon observation of actual operating results and conditions. Sec. 58.247 Insect and rodent control program. In addition to any commercial pest control service, if one is utilized, a specially designated employee should be made responsible for the performance of a regularly scheduled insect and rodent control program as outlined in University of Wisconsin Extension Bulletin A2518 or subsequent revisions thereof, or one equivalent thereto. Requirements for Finished Products Bearing USDA Official Identification Sec. 58.248 Nonfat dry milk. (a) Nonfat dry milk in commercial bulk containers bearing an official identification shall meet the requirements of U.S. Extra Grade or U.S. Standard Grade. (b) Regular nonfat dry milk in consumer size packages which bears an official identification shall meet the requirements of U.S. Extra Grade. In addition, the nonfat dry milk shall be sampled and tested in accordance with Sec. Sec. 58.244 and 58.245. [[Page 118]] Sec. 58.249 Instant nonfat dry milk. (a) Only instant nonfat dry milk manufactured and packaged in accordance with the requirements of this part and with the applicable requirements in subpart A of this part which has been officially inspected in process and found to be in compliance with these requirements may be identified with the official USDA U.S. Extra Grade, processed and packed inspection shield. (b) Instant nonfat dry milk shall meet the applicable standard for U.S. Extra Grade. Sec. 58.250 Dry whole milk. Dry whole milk in commercial bulk containers which bears an official identification shall meet the requirements for the U.S. Standards for Grades of Dry Whole Milk. Quality requirements for dry whole milk in consumer packages shall be for U.S. Extra Grade and shall be gas packed with an oxygen content of not more than 2.0 percent. Sec. 58.251 Dry buttermilk and dry buttermilk product. The quality requirements for dry buttermilk or dry buttermilk product bearing an official identification shall be in accordance with the U.S. Standards for Grades of Dry Buttermilk and Dry Buttermilk Product. [56 FR 33855, July 24, 1991] Supplemental Specifications for Plants Manufacturing, Processing and Packaging Butter and Related Products Definitions Sec. 58.305 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning. (a) Butter. The food product usually known as butter, and which is made exclusively from milk or cream, or both, with or without common salt, with or without additional coloring matter, and containing not less than 80 percent by weight of milkfat, all tolerances having been allowed for. (b) Butteroil. The food product resulting from the removal of practically all of the moisture and solids-not-fat from butter. It contains not less than 99.6 percent fat and not more than 0.3 percent moisture and not more than 0.1 percent other butter constituents, of which the salt shall be not more than 0.05 percent. Antioxidants permitted to be used are as follows: ------------------------------------------------------------------------ Antioxidant Maximum level ------------------------------------------------------------------------ Propyl gallate......................... 0.02% of fat. Butylated hydroxytoluene (BHT)......... 0.02% of fat. Butylated hydroxyanisole (BHA)......... 0.02% of fat. Tocopherols............................ Limit by GMP. Ascorbyl palmitate..................... Limit by GMP. Dilauryl thiodipropionate.............. 0.02% of fat. Antioxidant synergists Citric acid............................ Limit by GMP. Sodium citrate......................... Limit by GMP. Isopropyl citrate...................... 0.02% of food. Phosphoric acid........................ Limit by GMP. Monoglyceride citrate.................. 200 ppm of fat. ------------------------------------------------------------------------ An inert gas may be used to flush air-tight containers before, during, and after filling. Carbon dioxide may not be used for this purpose. (c) Anhydrous milkfat. The food product resulting from the removal of practically all of the moisture and solids-not-fat from pasteurized cream or butter. It contains not less than 99.8 percent fat and not more than 0.1 percent moisture and, when produced from butter, not more than 0.1 percent other butter constituents, of which the salt shall be not more than 0.05 percent. An inert gas may be used to flush air-tight containers before, during, and after filling. Carbon dioxide may not be used for this purpose. (d) Frozen cream. Sweet cream which has been pasteurized and frozen. It contains approximately 40 percent milkfat. (e) Plastic cream. Sweet cream which has been pasteurized and contains approximately 80 percent milkfat. (f) Whipped butter. The food product is made by the uniform incorporation of air or inert gas into butter. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 59 FR 1264, Jan. 10, 1994; 60 FR 4825, Jan. 24, 1995] [[Page 119]] Rooms and Compartments Sec. 58.311 Coolers and freezers. The coolers and freezers shall be equipped with facilities for maintaining proper temperature and humidity conditions, consistent with good commercial practices for the applicable product, to protect the equality and condition of the products during storage or during tempering prior to further processing. Coolers and freezers shall be kept clean, orderly, free from insects, rodents, and mold, and maintained in good repair. They shall be adequately lighted and proper circulation of air shall be maintained at all times. The floors, walls, and ceilings shall be of such construction as to permit thorough cleaning. Sec. 58.312 Churn rooms. Churn rooms in addition to proper construction and sanitation shall be so equipped that the air is kept free from objectionable odors and vapors and extreme temperatures by means of adequate ventilation and exhaust systems or air conditioning and heating facilities. Sec. 58.313 Print and bulk packaging rooms. Rooms used for packaging print or bulk butter and related products should, in addition to proper construction and sanitation, provide an atmosphere relatively free from mold (not more than 15 colonies per plate during a 15 min. exposure), dust, or other air-borne contamination and maintain a reasonable room temperature in accordance with good commercial practices. Equipment and Utensils Sec. 58.314 General construction, repair and installation. All equipment and utensils necessary to the manufacture of butter and related products shall meet the same general requirements as outlined in Sec. 58.128. In addition for certain other equipment, the following requirements shall be met. Sec. 58.315 Continuous churns. All product contact surfaces of the churn and related equipment shall be of noncorrosive material. All non-metallic product contact surfaces shall comply with 3-A Standards for Plastic, Rubber, and Rubber-Like Materials. All product contact surfaces of the churn and related equipment shall be readily accessible for cleaning and inspection. Construction shall follow the applicable principles of the 3-A Sanitary Standards. Sec. 58.316 Conventional churns. Churns shall be constructed of aluminum, stainless steel or equally corrosion resistant metal, free from cracks, and in good repair. All gasket material shall be fat resistant, nontoxic and reasonably durable. Seals around the doors shall be tight. Sec. 58.317 Bulk butter trucks, boats, texturizers, and packers. Bulk butter trucks, boats, texturizers, and packers shall be constructed of aluminum, stainless steel, or equally corrosion resistant metal free from cracks, seams and must have a surface that is relatively smooth and easily cleanable. All non-metallic product surfaces shall comply with 3-A Standards for Plastic, Rubber, and Rubber-Like Material. Sec. 58.318 Butter, frozen or plastic cream melting machines. Shavers, shredders or melting machines used for rapid melting of butter, frozen or plastic cream shall be of stainless steel or equally corrosion resistant metal, free from cracks and of sanitary construction, and readily cleanable. Sec. 58.319 Printing equipment. All printing equipment shall be designed so as to adequately protect the product and be readily demountable for cleaning of product contact surfaces. All product contact surfaces shall be aluminum, stainless steel or equally corrosion resistant metal, or plastic, rubber and rubber like material which comply with 3-A standards, except that conveyors may be constructed of material which can be properly cleaned and maintained in a satisfactory manner. [[Page 120]] Sec. 58.320 Brine tanks. Brine tanks used for the treating of parchment liners shall be constructed of noncorrosive material and have an adequate and safe means of heating the salt solution for the treatment of the liners. The tank should also be provided with a satisfactory drainage outlet. Sec. 58.321 Cream storage tanks. Cream storage tanks shall meet the requirements of Sec. 58.128(d). Cream storage tanks for continuous churns should be equipped with effective temperature controls and recording devices. Quality Specifications for Raw Material Sec. 58.322 Cream. Cream separated at an approved plant and used for the manufacture of butter shall have been derived from raw material meeting the requirements as listed under Sec. Sec. 58.132 through 58.138 of this subpart. [50 FR 34673, Aug. 27, 1985] Sec. 58.323 [Reserved] Sec. 58.324 Butteroil. To produce butteroil eligible for official certification, the butter used shall conform to the flavor requirements of U.S. Grade AA, U.S. Grade A, or U.S. Grade B, and shall have been manufactured in an approved plant. Sec. 58.325 Anhydrous milkfat. If cream is used in the production of anhydrous milkfat that is eligible for official certification, the anhydrous milkfat shall be made by a continuous separation process directly from milk or cream. The cream used shall be comparable to the flavor quality specified above for U.S. Grade AA or U.S. Grade A butter. The milkfat from cream may then be further concentrated into oil. The cream or oil shall be pasteurized in accordance with the procedures for cream for buttermaking (Sec. 58.334a). If butter is used in the production of anhydrous milkfat that is eligible for official certification, the butter used shall conform to the flavor requirements of U.S. Grade AA or U.S. Grade A butter and shall have been manufactured in an approved plant. The appearance of anhydrous milkfat should be fairly smooth and uniform in consistency. [60 FR 4826, Jan. 24, 1995] Sec. 58.326 Plastic cream. To produce plastic cream eligible for official certification, the quality of the cream used shall meet the requirements of cream acceptable for the manufacture of U.S. Grade AA or U.S. Grade A butter. Sec. 58.327 Frozen cream. To produce frozen cream eligible for official certification, the quality of the cream used shall meet the requirements of cream acceptable for the manufacture of U.S. Grade AA or U.S. Grade A butter. Sec. 58.328 Salt. The salt shall be free-flowing, white refined sodium chloride and shall meet the requirements of The Food Chemical Codex. Sec. 58.329 Color. Coloring, when used shall be Annatto or any color which is approved by the U.S. Food and Drug Administration. Sec. 58.330 Butter starter cultures. Harmless bacterial cultures when used in the development of flavor components in butter and related products shall have a pleasing and desirable flavor and shall have the ability to transmit these qualities to the finished product. Sec. 58.331 Starter distillate. The refined flavor components when used to flavor butter and related products. It shall be of food grade quality, free of extraneous material and prepared in accordance with good commercial practice. Operations and Operating Procedures Sec. 58.332 Segregation of raw material. The milk and cream received at the dairy plant shall meet the quality specifications as indicated under Sec. 58.322. [[Page 121]] The milk and cream should be segregated by quality and processed separately in such a manner that the finished product will fully meet the requirements of a particular U.S. Grade or other specification, whichever is applicable. Sec. 58.334 Pasteurization. The milk or cream shall be pasteurized at the plant where the milk or cream is processed into the finished product or by procedures as set forth by the Administrator. (a) Cream for butter making. The cream for butter making shall be pasteurized at a temperature of not less than 165 [deg]F. and held continuously in a vat at such temperature for not less than 30 minutes; or pasteurized by HTST method at a minimum temperature of not less than 185 [deg]F. for not less than 15 seconds; or it shall be pasteurized by any other equivalent temperature and holding time which will assure adequate pasteurization. Additional heat treatment above the minimum pasteurization requirement is advisable to insure improved keeping- quality characteristics. Adequate pasteurization control shall be used and the diversion valve shall be set to divert at no less than 185 [deg]F. with a 15 second holding time or its equivalent in time and temperature to assure pasteurization. If the vat or holding method of pasteurization is used, vat covers shall be closed prior to holding period to assure temperature of air space reaching 5 [deg]F. higher than the minimum temperature during the holding time. Covers shall also be kept closed during the holding and cooling period. (b) Cream for plastic or frozen cream. The pasteurization of cream for plastic or frozen cream shall be accomplished in the same manner as in paragraph (a) of this section, except, that the temperature for the vat method shall be not less than 170 [deg]F. for not less than 30 minutes, or not less than 190 [deg]F. for not less than 15 seconds or by any other temperature and holding time which will assure adequate pasteurization and comparable keeping-quality characteristics. Sec. 58.335 Quality control tests. All milk, cream and related products are subject to inspection for quality and condition throughout each processing operation. Quality control tests shall be made on flow samples as often as necessary to check the effectiveness of processing and manufacturing and as an aid in correcting deficiencies in processing and manufacturing. Routine analysis shall be made on raw materials and finished products to assure adequate microbiological, composition and chemical control. Sec. 58.336 Frequency of sampling for quality control of cream, butter and related products. (a) Microbiological. Samples shall be taken from churnings or batches and should be taken as often as is necessary to insure microbiological control. (b) Composition. Sampling and testing for product composition shall be made on churns or batches as often as is necessary to insure adequate composition control. For in-plant control, the Kohman or modified Kohman test may be used. (c) Chemical--(1) Acid degree value. This test should be made on churnings or batches from samples taken from the cream as often as is necessary to aid in the control of lipase activity. (2) Free fatty acid. This test should be made on churnings or batches from samples taken from the butter as often as is necessary to aid in the control of lipase activity. (d) Other analysis. Other chemical analysis or physical measurements shall be performed as often as is necessary to insure meeting grade standards and contract specifications. (e) Weight or volume control. Representative samples of the packaged product should be checked using procedures prescribed by the Administrator during the packaging operation to assure compliance with the stated net weight or volume on the container. (f) Keeping quality and stability. Samples from churnings shall be subjected to a seven day keeping quality test at a temperature of 72 [deg]F. to establish and maintain a satisfactory keeping quality history. Optionally 98 [deg]F. for 48 hours may be used, however, in case of [[Page 122]] a dispute, the results of the seven days at 72 [deg]F. will prevail. Sec. 58.337 Official test methods. (a) Chemical. Chemical analyses except where otherwise prescribed herein, shall be made in accordance with the methods described in the latest edition of Official Methods of Analysis of the Association of Official Analytical Chemists, published by the Association of Official Analytical Chemists, the Official and Tentative Methods of the American Oil Chemists Society or any other methods giving equivalent results. (b) Microbiological. Microbiological determinations shall be made in accordance with the methods described or suggested in the latest edition of Standard Methods for the Examination of Dairy Products, published by the American Public Health Association. Sec. 58.338 Composition and wholesomeness. All ingredients used in the manufacture of butter and related products shall be subject to inspection and shall be wholesome and practically free from impurities. Chlorinating facilities shall be provided for butter wash water if needed and all other necessary precautions shall be taken to prevent contamination of products. All finished products shall comply with the requirements of the Federal Food, Drug and Cosmetic Act, as to composition and wholesomeness. Sec. 58.339 Containers. (a) Containers used for the packaging of butter and related products shall be commercially acceptable containers or packaging material that will satisfactorily protect the quality of the contents in regular channels of trade. Caps or covers which extend over the lip of the container shall be used on all cups or tubs containing two pounds or less, to protect the product from contamination during subsequent handling. (b) Liners and wrappers. Supplies of parchment liners, wrappers and other packaging material shall be protected against dust, mold and other possible contamination. (1) Prior to use, parchment liners for bulk butter packages shall be completely immersed in a boiling salt solution in a suitable container constructed of stainless steel or other equally non-corrosive material. The liners shall be maintained in the solution for not less than 30 minutes. The liners shall be effectively treated with a solution consisting of at least 15 pounds of salt for every 85 pounds of water and shall be strengthened or changed as frequently as necessary to keep the solution full strength and in good condition. (2) Other liners such as polyethylene shall be treated or handled in such a manner as to prevent contamination of the liner prior to filling. (c) Filling bulk butter containers. The lined butter containers shall be protected from possible contamination prior to filling. Use of parchment liners may be accomplished by alternately inverting one container over the other or stacking the lined boxes on their sides in a rack, until ready for use. When using polyethylene liners the boxes should be lined immediately prior to use. When packing butter into the bulk containers, care shall be taken to fill the corners leaving as few holes or openings as possible. The surface of the butter as well as the covering liner shall be smoothed evenly over the top surface before closing and sealing the container. Containers should be stacked only as high as the firmness of the product will support weight, so as not to crush or distort the container. Sec. 58.340 Printing and packaging. Printing and packaging of consumer size containers of butter shall be conducted under sanitary conditions. Separate rooms equipped with automatic filling and packaging equipment should be provided. The outside cartons should be removed from bulk butter in a room outside of the printing operation but the parchment removal and cutting of the butter may be done in the print room. Sec. 58.341 Repackaging. When officially graded or inspected bulk product is to be repackaged into consumer type packages for official grade labeling or other official identification, a supervisor of packaging [[Page 123]] shall be required and the plant, equipment, facilities and personnel shall meet the same specifications as outlined in this part, including such markings or identification as may be required. Sec. 58.342 General identification. Commercial bulk shipping containers shall be legibly marked with the name of the product, net weight, name and address of manufacturer, processor or distributor or other assigned plant identification (manufacturer's lot number, churn number, etc.) and any other identification that may be required. Packages of plastic or frozen cream shall be marked with the percent of milkfat. Sec. 58.343 Storage of finished product in coolers. All products shall be kept under refrigeration at temperatures of 40 [deg]F. or lower after packaging and until ready for distribution or shipment. The products shall not be placed directly on floors or exposed to foreign odors or conditions such as drippage due to condensation which might cause package or product damage. Sec. 58.344 Storage of finished product in freezer. (a) Sharp freezers. Plastic cream or frozen cream intended for storage shall be placed in quick freezer rooms immediately after packaging, for rapid and complete freezing within 24 hours. The packages shall be piled or spaced in such a manner that air can freely circulate between and around the packages. The rooms shall be maintained at -10 [deg]F. or lower and shall be equipped to provide sufficient high velocity, air circulation for rapid freezing. After the products have been completely frozen, they may be transferred to a freezer storage room for continued storage. (b) Freezer storage. The room shall be maintained at a temperature of 0 [deg]F. or lower. Adequate air circulation is desirable. Butter intended to be held more than 30 days shall be placed in a freezer room as soon as possible after packaging. If not frozen before being placed in the freezer, the packages shall be spaced in such a manner as to permit rapid freezing and repiled, if necessary, at a later time. Requirements for Finished Products Bearing USDA Official Identification Sec. 58.345 Butter. The quality requirements for butter shall be in accordance with the U.S. Standards for Grades of Butter for U.S. Grade AA, U.S. Grade A, or U.S. Grade B, respectively. (a) In addition, the butter is subject to the following specifications when sampled and tested in accordance with Sec. Sec. 58.336 and 58.337. (b) Proteolytic count, not more than 100 per gram; yeast and mold count, not more than 20 per gram; coliform count, not more than 10 per gram. (c) Optional except when required or requested: Copper content, not more than 0.3 ppm; iron content, not more than 1.0 ppm; enterococci, not more than 10 per gram. Sec. 58.346 Whipped butter. (a) The quality requirements for whipped butter shall be in accordance with the U.S. Standards for Grades of Whipped Butter for U.S. Grade AA and U.S. Grade A, respectively. (b) Whipped butter shall also be subject to the following specifications when sampled and tested in accordance with Sec. 58.336 and Sec. 58.337, respectively: (1) Proteolytic count, not more than 50 per gram; yeast and mold count, not more than 10 per gram; coliform count, not more than 10 per gram; and keeping-quality test, satisfactory after 7 days at 72 [deg]F. (2) Optional except when required or requested: Copper content, not more than 0.3 ppm; iron content, not more than 1.0 ppm; enterococci, not more than 10 per gram. [59 FR 1264, Jan. 10, 1994, as amended at 67 FR 48976, July 29, 2002] Sec. 58.347 Butteroil or anhydrous milkfat. The flavor shall be bland and free from rancid, oxidized, or other objectionable flavors. (a) In addition, the finished products shall meet the following specifications [[Page 124]] when sampled and tested in accordance with Sec. Sec. 58.336 and 58.337: ------------------------------------------------------------------------ Butteroil Anhydrous milkfat ------------------------------------------------------------------------ Milkfat......................... Not less than 99.6 Not less than 99.8 percent. percent. Moisture........................ Not more than 0.3 Not more than 0.1 percent. percent. Other butter constituents Not more than 0.1 Not more than 0.1 including salt. percent. percent. Salt............................ Not more than 0.05 Not more than 0.05 percent. percent. Antioxidants.................... Those permitted by Those permitted by standards of the standards of the Codex Codex Alimentarius Alimentarius Commission and Commission and authorized for authorized for use by the Food use by the Food and Drug and Drug Administration. Administration. Free fatty acids................ Not more than 0.5 Not more than 0.3 percent percent (calculated as (calculated as oleic acid). oleic acid). Peroxide value.................. Not more than 0.1 Not more than 0.1 milliequivalent milliequivalent per kilogram of per kilogram of fat. fat. Iron content.................... Not more than 0.2 Not more than 0.2 ppm. ppm. Copper content.................. Not more than 0.05 Not more than 0.05 ppm. ppm. ------------------------------------------------------------------------ (b) [Reserved] [60 FR 4826, Jan. 24, 1995] Sec. 58.348 Plastic cream. The flavor shall be sweet, pleasing and desirable but may possess the following flavors to a slight degree; aged, bitter, flat, smothered and storage; and cooked and feed flavors to a definite degree. It shall be free from rancid, oxidized or other objectionable flavors. (a) In addition, the finished product shall meet the following specifications when sampled and tested in accordance with Sec. Sec. 58.336 and 58.337. (b) Standard plate count, not more than 30,000 per gram; coliform count, not more than 10 per gram; yeast and mold, not more than 20 per gram; (c) Optional except when required or requested: Copper content not more than 0.3 ppm; iron content not more than 1.0 ppm. Sec. 58.349 Frozen cream. The flavor shall be sweet, pleasing and desirable, but may possess the following flavors to a slight degree: Aged, bitter, flat, smothered, storage; and cooked and feed flavors to a definite degree. It shall be free from rancid, oxidized or other objectionable flavors. (a) In addition, the product shall meet the following specifications when sampled and tested in accordance with Sec. Sec. 58.336 and 58.337. Samples for analysis should be taken prior to freezing of the product. (b) Standard plate count, not more than 30,000 per ml.; coliform count, not more than 10 per ml.; yeast and mold, not more than 20 per ml. (c) Optional except when required or requested: Copper content, not more than 0.3 ppm; iron content not more than 1.0 ppm. Supplemental Specifications for Plants Manufacturing and Packaging Cheese Definitions Sec. 58.405 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: (a) Cheese. The fresh or matured product obtained by draining after coagulation of milk, cream, skimmed, or partly skimmed milk or a combination of some or all of these products and including any cheese that conforms to the requirements of the Food and Drug Administration for cheeses and related cheese products (21 CFR part 133). (b) Milkfat from whey. The fat obtained from the separation of cheese whey. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48976, July 29, 2002] [[Page 125]] Rooms and Compartments Sec. 58.406 Starter facility. A separate starter room or properly designed starter tanks and satisfactory air movement techniques shall be provided for the propagation and handling of starter cultures. All necessary precaution shall be taken to prevent contamination of the facility, equipment and the air therein. A filtered air supply with a minimum average efficiency of 90 percent when tested in accordance with the ASHRAE Synthetic Dust Arrestance Test should be provided so as to obtain outward movement of air from the room to minimize contamination. Sec. 58.407 Make room. The rooms in which the cheese is manufactured shall be of adequate size, and the equipment adequately spaced to permit movement around the equipment for proper cleaning and satisfactory working conditions. Adequate filtered air ventilation should be provided. When applicable, the mold count should be not more than 15 colonies per plate during a 15 minute exposure. Sec. 58.408 Brine room. A brine room, when applicable, should be a separate room constructed so it can be readily cleanable. The brine room equipment shall be maintained in good repair and corrosion kept at a minimum. Sec. 58.409 Drying room. When applicable, a drying room of adequate size shall be provided to accommodate the maximum production of cheese during the flush period. Adequate shelving and air circulation shall be provided for proper drying. Temperature and humidity control facilities should be provided which will promote the development of a sound, dry surface of the cheese. Sec. 58.410 Paraffining room. When applicable for rind cheese, a separate room or compartment should be provided for paraffining and boxing the cheese. The room shall be of adequate size and the temperature maintained near the temperature of the drying room to avoid sweating of the cheese prior to paraffining. Sec. 58.411 Rindless cheese wrapping area. For rindless cheese a suitable space shall be provided for proper wrapping and boxing of the cheese. The area shall be free from dust, condensation, mold or other conditions which may contaminate the surface of the cheese or contribute to unsatisfactory packaging of the cheese. Sec. 58.412 Coolers or curing rooms. Coolers or curing rooms where cheese is held for curing or storage shall be clean and maintained at the proper uniform temperature and humidity to adequately protect the cheese, and minimize the undesirable growth of mold. Proper circulation of air shall be maintained at all times. The shelves shall be kept clean and dry. This does not preclude the maintenance of suitable conditions for the curing of mold and surface ripened varieties. Sec. 58.413 Cutting and packaging rooms. When small packages of cheese are cut and wrapped, separate rooms shall be provided for the cleaning and preparation of the bulk cheese and for the cutting and wrapping operation. The rooms shall be well lighted, ventilated and provided with filtered air. Air movement shall be outward to minimize the entrance of unfiltered air into the cutting and packaging room. The waste materials and waste cheese shall be disposed of in an environmentally and/or sanitary approved manner. Equipment and Utensils Sec. 58.414 General construction, repair and installation. All equipment and utensils necessary to the manufacture of cheese and related products shall meet the same general requirements as outlined in Sec. 58.128. In addition, for certain other equipment the following requirements shall be met. Sec. 58.415 Starter vats. Bulk starter vats shall be of stainless steel or equally corrosion resistant [[Page 126]] metal and should be constructed according to the applicable 3-A Sanitary Standards. New or replacement vats shall be constructed according to the applicable 3-A Sanitary Standards. The vats shall be in good repair, equipped with tight fitting lids and have adequate temperature controls such as valves, indicating and/or recording thermometers. Sec. 58.416 Cheese vats, tanks and drain tables. (a) The vats, tanks and drain tables used for making cheese should be of metal construction with adequate jacket capacity for uniform heating. The inner liner shall be minimum 16 gauge stainless steel or other equally corrosion resistant metal, properly pitched from side to center and from rear to front for adequate drainage. The liner shall be smooth, free from excessive dents or creases and shall extend over the edge of the outer jacket. The outer jacket shall be constructed of stainless steel or other metal which can be kept clean and sanitary. The junction of the liner and outer jackets shall be constructed so as to prevent milk or cheese from entering the inner jacket. (b) The vat, tank and/or drain table shall be equipped with a suitable sanitary outlet valve. Effective valves shall be provided and properly maintained to control the application of heat to this equipment. If this equipment is provided with removable cloth covers, they shall be clean. Sec. 58.417 Mechanical agitators. The mechanical agitators shall be of sanitary construction. The carriages shall be of the enclosed type and all product contact surfaces, shields, shafts, and hubs shall be constructed of stainless steel or other equally corrosion resistant metal. Metal blades, forks, or stirrers shall be constructed of stainless steel and of material approved in the 3-A Sanitary Standards for Plastic, and Rubber and Rubber-Like Materials and shall be free from rough or sharp edges which might scratch the equipment or remove metal particles. Sec. 58.418 Automatic cheese making equipment. (a) Automatic Curd Maker. The automatic curd making system shall be constructed of stainless steel or of material approved in the 3-A Sanitary Standards for Plastic, and Rubber and Rubber-Like Material. All areas shall be free from cracks and rough surfaces and constructed so that they can be easily cleaned. (b) Curd conveying systems. The curd conveying system, conveying lines and cyclone separator shall be constructed of stainless steel or other equally corrosion resistant metal and in such manner that it can be satisfactorily cleaned. The system shall be of sufficient size to handle the volume of curd and be provided with filtered air of the quality satisfactory for the intended use. Air compressors or vacuum pumps shall not be located in the processing or packaging areas. (c) Automatic salter. The automatic salter shall be constructed of stainless steel or other equally corrosion resistant metal. This equipment shall be constructed to equally distribute the salt throughout the curd. It shall be designed to accurately weigh the amount of salt added. The automatic salter shall be constructed so that it can be satisfactorily cleaned. The salting system shall provide for adequate absorption of the salt in the curd. Water and steam used to moisten the curd prior to salting shall be potable water or culinary steam. (d) Automatic curd filler. The automatic curd filler shall be constructed of stainless steel or other equally corrosion resistant metal. This equipment shall be of sufficient size to handle the volume of curd and constructed and controlled so as to accurately weigh the amount of curd as it fills. The curd filler shall be constructed so that it can be satisfactorily cleaned. (e) Hoop and barrel washer. The washer shall be constructed so that it can be satisfactorily cleaned. It shall also be equipped with temperature and pressure controls to ensure satisfactory cleaning of the hoops or barrels. It should be adequately vented to the outside. [[Page 127]] Sec. 58.419 Curd mill and miscellaneous equipment. Knives, hand rakes, shovels, scoops, paddles, strainers, and miscellaneous equipment shall be stainless steel or of material approved in the 3-A Sanitary Standards for Plastic and Rubber-like Material. The product contact surfaces of the curd mill should be of stainless steel. All pieces of equipment shall be so constructed that they can be kept clean and free from rough or sharp edges which might scratch the equipment or remove metal particles. The wires in the curd knives shall be stainless steel, kept tight and replaced when necessary. Sec. 58.420 Hoops, forms and followers. The hoops, forms, and followers shall be constructed of stainless steel, heavy tinned steel or other approved materials. If tinned, they shall be kept tinned and free from rust. All hoops, forms, and followers shall be kept in good repair. Drums or other special forms used to press and store cheese shall be clean and sanitary. Sec. 58.421 Press. The cheese press should be constructed of stainless steel and all joints welded and all surfaces, seams and openings readily cleanable. The pressure device shall be the continuous type. Press cloths shall be maintained in good repair and in a sanitary condition. Single service press cloths shall be used only once. Sec. 58.422 Brine tank. The brine tank shall be constructed of suitable non-toxic material and should be resistant to corrosion, pitting or flaking. The brine tank shall be operated so as to assure the brine is clean, well circulated, and of the proper strength and temperature for the variety of cheese being made. Sec. 58.423 Cheese vacuumizing chamber. The vacuum chamber shall be satisfactorily constructed and maintained so that the product is not contaminated with rust or flaking paint. An inner liner of stainless steel or other corrosion resistant material should be provided. Sec. 58.424 Monorail. The monorail shall be constructed so as to prevent foreign material from falling on the cheese or cheese containers. Sec. 58.425 Conveyor for moving and draining block or barrel cheese. The conveyor shall be constructed so that it will not contaminate the cheese and be easily cleaned. It shall be installed so that the press drippings will not cause an environmental problem. Sec. 58.426 Rindless cheese wrapping equipment. The equipment used to heat seal the wrapper applied to rindless cheese shall have square interior corners, reasonably smooth interior surface and have controls that shall provide uniform pressure and heat equally to all surfaces. The equipment used to apply shrinkable wrapping material to rindless cheese shall operate to maintain the natural intended shape of the cheese in an acceptable manner, reasonably smooth surfaces on the cheese and tightly adhere the wrapper to the surface of the cheese. Sec. 58.427 Paraffin tanks. The metal tank should be adequate in size, have wood rather than metal racks to support the cheese, have heat controls and an indicating thermometer. The cheese wax shall be kept clean. Sec. 58.428 Speciality equipment. All product contact areas of speciality equipment shall be constructed of stainless steel or of material approved in the 3-A Sanitary Standards for Plastic and Rubber and Rubber-Like Material, and constructed following 3-A Sanitary Standards principles. Sec. 58.429 Washing machine. When used, the washing machine for cheese cloths and bandages shall be of commercial quality and size; or of sufficient size to handle the applicable load. It should be equipped with temperature and water level controls. [[Page 128]] Quality Specifications for Raw Material Sec. 58.430 Milk. The milk shall be fresh, sweet, pleasing and desirable in flavor and shall meet the requirements as outlined under Sec. Sec. 58.132 through 58.138. The milk may be adjusted by separating part of the fat from the milk or by adding one or more of the following dairy products: Cream, skim milk, concentrated skim milk, nonfat dry milk, and water in a quantity sufficient to reconstitute any concentrated or dry milk used. Such dairy products shall have originated from raw milk meeting the same requirements as outlined under Sec. Sec. 58.132 through 58.138. Sec. 58.431 Hydrogen peroxide. The solution shall comply with the specification of the U.S. Pharmacopeia, except that it may exceed the concentration specified therein and it does not contain added preservative. Application and usage shall be as specified in the ``Definitions and Standards of Identity for Cheese and Cheese Products'', Food and Drug Administration. Sec. 58.432 Catalase. The catalase preparation shall be a stable, buffered solution, neutral in pH, having a potency of not less than 100 Keil units per milliliter. The source of the catalase, its application and usage shall be as specified in the ``Definitions and Standards of Identity for Cheese and Cheese Products,'' Food and Drug Administration. Sec. 58.433 Cheese cultures. Harmless microbial cultures used in the development of acid and flavor components in cheese shall have a pleasing and desirable taste and odor and shall have the ability to actively produce the desired results in the cheese during the manufacturing process. Sec. 58.434 Calcium chloride. Calcium chloride, when used, shall meet the requirements of the Food Chemical Codex. Sec. 58.435 Color. Coloring when used, shall be Annatto or any cheese or butter color which meet the requirements of the Food and Drug Administration. Sec. 58.436 Rennet, pepsin, other milk clotting enzymes and flavor enzymes. Enzyme preparations used in the manufacture of cheese shall be safe and suitable. Sec. 58.437 Salt. The salt shall be free-flowing, white refined sodium chloride and shall meet the requirements of the Food Chemical Codex. Operations and Operating Procedures Sec. 58.438 Cheese from pasteurized milk. If the cheese is labeled as pasteurized, the milk shall be pasteurized by subjecting every particle of milk to a minimum temperature of 161 [deg]F. for not less than 15 seconds or by any other acceptable combination of temperature and time treatment approved by the Administrator. HTST pasteurization units shall be equipped with the proper controls and equipment to assure pasteurization. If the milk is held more than 2 hours between the time of pasteurization and setting, it shall be cooled to 45 [deg]F. or lower until time of setting. Sec. 58.439 Cheese from unpasteurized milk. If the cheese is labeled as ``heat treated'', ``unpasteurized,'' ``raw milk'', or ``for manufacturing'' the milk may be raw or heated at temperatures below pasteurization. Cheese made from unpasteurized milk shall be cured for a period of 60 days at a temperature not less than 35 [deg]F. If the milk is held more than 2 hours between time of receipt or heat treatment and setting, it shall be cooled to 45 [deg]F. or lower until time of setting. Sec. 58.440 Make schedule. A uniform schedule should be established and followed as closely as possible for the various steps of setting, cutting, cooking, draining the whey [[Page 129]] and milling the curd, to promote a uniform quality of cheese. Sec. 58.441 Records. Starter and make records should be kept at least three months. (Approved by the Office of Management and Budget under OMB control number 0583-0047) \1\ --------------------------------------------------------------------------- \1\ Editorial Note: See table appearing in Sec. 58.100 for correct OMB control number. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 47 FR 745, Jan. 7, 1982] Sec. 58.442 Laboratory and quality control tests. (a) Chemical analyses--(1) Milkfat and moisture. One sample shall be tested from each vat of the finished cheese to assure compliance with composition requirements. (2) Test method. Chemical analysis shall be made in accordance with the methods described in Official Methods of Analysis of the Association of Official Analytical Chemists as specified in the appropriate standards of identity, the latest edition of Standard Methods or by other methods giving equivalent results. (b) Weight or volume control. Representative samples of the finished product shall be checked during the packaging operation to assure compliance with the stated net weight on the container of consumer size packages. Sec. 58.443 Whey handling. (a) Adequate sanitary facilities shall be provided for the handling of whey. If outside, necessary precautions shall be taken to minimize flies, insects and development of objectionable odors. (b) Whey or whey products intended for human food shall at all times be handled in a sanitary manner in accordance with the procedures of this subpart as specified for handling milk and dairy products. (c) Milkfat from whey should not be more than four days old when shipped. Sec. 58.444 Packaging and repackaging. (a) Packaging rindless cheese or cutting and repackaging all styles of bulk cheese shall be conducted under rigid sanitary conditions. The atmosphere of the packaging rooms, the equipment and the packaging material shall be practically free from mold and bacterial contamination. (b) When officially graded bulk cheese is to be repackaged into consumer type packages with official grade labels or other official identification, a supervisor of packaging shall be required. If the repackaging is performed in a plant other than the one in which the cheese is manufactured and the product is officially identified, the plant, equipment, facilities and personnel shall meet the same requirements as outlined in this part. Sec. 58.445 General identification. Bulk cheese for cutting and the container for cheese for manufacturing shall be legibly marked with the name of the product, code or date of manufacture, vat number, officially designated code number or name and address of manufacturer. Each consumer sized container shall meet the applicable regulations of the Food and Drug Administration. Requirements for Finished Products Bearing USDA Official Identification Sec. 58.446 Quality requirements. (a) Cheddar cheese. The quality requirements for Cheddar cheese shall be in accordance with the U.S. Standards for Grades of Cheddar Cheese. (b) Colby cheese. The quality requirements for Colby cheese shall be in accordance with the U.S. Standards for Grades of Colby Cheese. (c) Monterey (Monterey Jack) cheese. The quality requirements for Monterey (Monterey Jack) cheese shall be in accordance with the U.S. Standards for Grades of Monterey (Monterey Jack) Cheese. (d) Swiss cheese, Emmentaler cheese. The quality requirements for Swiss cheese, Emmentaler cheese shall be in accordance with the U.S. Standards for Grades for Swiss Cheese, Emmentaler Cheese. (e) Bulk American cheese for manufacturing. The quality requirements for bulk American cheese for manufacturing shall be in accordance with the [[Page 130]] U.S. Standards for Grades of Bulk American Cheese for Manufacturing. Supplemental Specifications for Plants Manufacturing and Packaging Cottage Cheese Definitions Sec. 58.505 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: (a) Condensed skim. Skim milk which has been condensed to approximately one-third the original volume in accordance with standard commercial practice. (b) Cottage cheese. (1) The soft uncured cheese meeting the requirements of the Food and Drug Administration for dry curd cottage cheese (21 CFR 133.129). (2) Cottage Cheese. The soft uncured cheese meeting the requirements of the Food and Drug Administration for cottage cheese (21 CFR 133.128). (3) Reduced Fat, Light, and Fat Free Cottage Cheese. The products conforming to all applicable Federal Regulations including ``Cottage cheese,'' Food and Drug Administration (21 CFR 133.128), ``Dry curd cottage cheese,'' Food and Drug Administration (21 CFR 133.129), ``Nutrient content claims for fat, fatty acid, and cholesterol content of foods,'' Food and Drug Administration (21 CFR 101.62), and ``Requirements for foods named by use of a nutrient content claim and a standardized term,'' Food and Drug Administration (21 CFR 130.10). (c) Direct acidification. The production of cottage cheese, without the use of bacterial starter cultures, through the use of approved food grade acids. This product shall be labeled according to the requirements of the Food and Drug Administration, 21 CFR 133.128 or 133.129, as appropriate. (d) Cottage Cheese with fruits, nuts, chives, or other vegetables. Shall consist of cottage cheese to which has been added fruits, nuts, chives, and other vegetables. The finished cheese shall comply with the requirements of the Food and Drug Administration for cottage cheese (21 CFR 133.128). (e) Cream. The milkfat portion of milk which rises to the surface of milk on standing or is separated from it by centrifugal force and contains not less than 18.0 percent of milkfat. (f) Creaming mixture. The creaming mixture consists of cream or a mixture of cream with milk or skim milk or both. To adjust the solids content, nonfat dry milk or concentrated skim milk may be added but not to exceed 3.0 percent by weight of the creaming mixture. It may or may not contain a culture of harmless lactic acid and flavor producing bacteria, food grade acid, salt, and stabilizers with or without carriers. The creaming mixture in its final form may or may not be homogenized and shall conform to the requirements of the Food and Drug Administration (21 CFR 133.128(b)). [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48976, July 29, 2002] Rooms and Compartments Sec. 58.510 Rooms and compartments. (a) Processing operations with open cheese vats should be separated from other rooms or areas. Excessive personnel traffic or other possible contaminating conditions should be avoided. Rooms, compartments, coolers, and dry storage space in which any raw material, packaging or ingredients supplies or finished products are handled, processed, packaged or stored shall be designed and constructed to assure clean and orderly operations. (b) Ventilation. Processing and packaging rooms or compartments shall be ventilated to maintain sanitary conditions, preclude the growth of mold and air borne bacterial contaminants, prevent undue condensation of water vapor and minimize or eliminate objectionable odors. To minimize air borne contamination in processing and packaging rooms a filtered air supply meeting the requirements of Sec. 58.510(c) shall be provided. The incoming air shall exert an outward pressure so that the movement of air will be outward and prevent the movement of unfiltered air inward. [[Page 131]] (c) Starter facility. A separate starter room or properly designed starter tanks and satisfactory air movement techniques shall be provided for the propagation and handling of starter cultures. All necessary precautions shall be taken to prevent contamination of the room, equipment and the air therein. A filtered air supply with a minimum average efficiency of 90% when tested in accordance with the ASHRAE Synthetic Dust Arrestance Test should be provided so as to obtain an outward movement of air from the room to minimize contamination. (d) Coolers. Coolers shall be equipped with facilities for maintaining proper temperature and humidity conditions, consistent with good commercial practices for the applicable product, to protect the quality and condition of the products. Coolers shall be kept clean, orderly and free from mold, and maintained in good repair. They shall be adequately lighted and proper circulation of air shall be maintained at all times. The floors, walls, and ceilings shall be of such construction as to permit thorough cleaning. Equipment and Utensils Sec. 58.511 General construction, repair and installation. The equipment and utensils used for the manufacture and handling of cottage cheese shall be as specified in Sec. 58.128. In addition for certain other equipment the following requirements shall be met. Sec. 58.512 Cheese vats or tanks. (a) Cheese vats or tanks shall meet the requirements of Sec. 58.416. When direct steam injection is used for heating the milk, the vat or tank may be of single shell construction. The steam shall be culinary steam. (b) Vats shall be equipped with valves to control the heating and cooling medium and a suitable sanitary outlet valve. Vats used for creaming curd should be equipped with a refrigerated cooling medium. A circulating pump for the heating and cooling medium is recommended. Sec. 58.513 Agitators. Mechanical agitators shall meet the requirements of Sec. 58.417. Sec. 58.514 Container fillers. Shall comply with the 3-A Sanitary Standards for Equipment for Packaging Frozen Desserts and Cottage Cheese. Sec. 58.515 Mixers. Only mixers shall be used which will mix the cheese carefully and keep shattering of the curd particles to a minimum. They shall be constructed in such a manner as to be readily cleanable. If shafts extend through the wall of the tank below the level of the product, they shall be equipped with proper seals which are readily removable for cleaning and sanitizing. The mixer shall be enclosed or equipped with tight fitting covers. Sec. 58.516 Starter vats. Bulk starter vats shall meet the requirements of Sec. 58.415. Quality Specifications for Raw Material Sec. 58.517 General. Raw materials used for manufacturing cottage cheese shall meet the following quality specifications. Sec. 58.518 Milk. The selection of raw milk for cottage cheese shall be in accordance with Sec. Sec. 58.132 through 58.138. Sec. 58.519 Dairy products. (a) Raw skim milk. All raw skim milk obtained from a secondary source shall be separated from milk meeting the same quality requirements for milk as outlined in Sec. 58.518 above. Skim milk after being pasteurized and separated shall be cooled to 45 [deg]F. or lower unless the skim milk is to be set for cheese within two hours after pasteurizing. The skim milk should not be more than 48 hours old from the time the milk was received at the plant and the skim milk is set for cheese. (b) Nonfat dry milk. Nonfat dry milk, when used, shall be obtained from milk meeting the same quality requirements [[Page 132]] as outlined in Sec. 58.518 above. It shall be processed according to the requirements of this Subpart, and should meet the requirements of Sec. 58.236(b)(3). (c) Condensed skim milk. Condensed skim milk, if used, shall be prepared from raw milk or skim milk that meets the same quality requirements outlined above for raw milk or skim milk. It shall be cooled promptly after drawing from the vacuum pan or evaporator and shall have been pasteurized before concentrating or during the manufacture. The standard plate count of the concentrated milk shall not exceed 30,000 per ml. at time of use. (d) Cream. Any cream used for preparing the dressing for creamed cottage cheese shall be separated from milk meeting at least the same quality requirements as the skim milk used for making the curd. The flavor of the cream shall be fresh and sweet. Cream obtained from a secondary source shall meet the same requirements. The creaming mixture prepared from this cream, after pasteurization, shall have a standard plate count of no more than 30,000 per ml. Sec. 58.520 Nondairy ingredients. (a) Calcium chloride. Calcium chloride, when used, shall be of food grade quality and free from extraneous material. (b) Salt. Salt shall be free flowing, white refined sodium chloride and shall meet the requirements of The Food Chemical Codex. (c) Other ingredients. Other ingredients such as fruits, nuts, chives or other vegetables used or blended with cottage cheese shall be reasonably free of bacteria so as not to appreciably increase the bacterial count of the finished product. The various ingredients in kind shall be consistent in size and color so as to produce the desired appearance and appeal of the finished product. The flavor of the ingredients used shall be natural and represent the intended flavor and intensity desired in the finished product. Such ingredients shall be clean, wholesome, of uniformly good quality, free from mold, rancid or decomposed particles. Vegetables used in cottage cheese may first be soaked for 15 to 20 minutes in a cold 25 to 50 ppm chlorine solution to appreciably reduce the bacterial population. After soaking, the vegetables shall be drained and used soon thereafter. Operations and Operating Procedures Sec. 58.521 Pasteurization and product flow. (a) The skim milk used for the manufacture of cottage cheese shall be pasteurized not more than 24 hours prior to the time of setting by heating every particle of skim milk to a temperature of 161 [deg]F. for not less than 15 seconds or by any other combination of temperature and time giving equivalent results. All skim milk must be cooled promptly to setting temperature. If held more than two hours between pasteurization and time of setting, the skim milk shall be cooled and held at 45 [deg]F. or lower until set. (b) Cream or cheese dressing shall be pasteurized at not less than 150 [deg]F. for not less than 30 minutes or at not less than 166 [deg]F. for not less than 15 seconds or by any other combination of temperature and time treatment giving equivalent results. Cream and cheese dressing shall be cooled promptly to 40 [deg]F. or lower after pasteurization to aid in further cooling of cottage cheese curd for improved keeping quality. (c) Reconstituted nonfat dry milk for cottage cheese manufacture need not be re-pasteurized provided it is reconstituted within two hours prior to the time of setting using water which is free from viable pathogenic or otherwise harmful microorganisms as well as microorganisms which may cause spoilage of cottage cheese. Skim milk separated from pasteurized whole milk need not be re-pasteurized provided it is separated in equipment from which all traces of raw milk from previous operations have been removed by proper cleaning and sanitizing. Sec. 58.522 Reconstituting nonfat dry milk. Nonfat dry milk shall be reconstituted in a sanitary manner. Sec. 58.523 Laboratory and quality control tests. (a) Quality control tests shall be made on samples as often as necessary [[Page 133]] to determine the shelf-life and stability of the finished product. Routine analyses shall be made on raw materials and finished product to assure satisfactory composition, shelf-life and stability. (b) Frequency of sampling--(1) Microbiological. Samples of raw milk for testing shall be taken as prescribed in Sec. 58.135. Representative samples shall be taken of finished cottage cheese and from each lot or batch of product used as an ingredient. For keeping quality tests representative samples shall be taken of finished cottage cheese; (2) Chemical--(i) Milkfat and Moisture. Representative samples shall be taken of cottage cheese; dry cottage cheese shall be tested for moisture only. (ii) pH. Representative samples shall be taken of finished cottage cheese. (c) Test methods--(1) Microbiological. Microbiological determinations shall be made for coliform, psychrotrophic and yeasts and molds. These tests shall be made in accordance with the methods described in the latest edition of Standard Methods for the Examination of Dairy Products, published by the American Public Health Association. (2) Chemical. Chemical analysis shall be made in accordance with the methods described in the latest edition of Official Methods of Analysis of the Association of Official Analytical Chemists, published by the Association of Official Analytical Chemists, the latest edition of Standard Methods for the Examination of Dairy Products, or by other methods giving equivalent results. Sec. 58.524 Packaging and general identification. (a) Containers. Containers used for packaging cottage cheese shall be any commercially acceptable multiple use or single service container or packaging material which will satisfactorily protect the contents through the regular channels of trade without significant impairment of quality with respect to flavor, or contamination under normal conditions of handling. Caps or covers which extend over the lip of the container shall be used on all cups or tubs containing two pounds or less, to protect the product from contamination during subsequent handling. (b) Packaging. The cheese shall be packaged in a sanitary manner and automatic filling and capping equipment shall be used on all small sizes. The containers shall be checked weighed during the filling operation to assure they are filled uniformly to not less than the stated net weight on the container. Also care shall be taken that the cottage cheese be of uniform consistency at the time of packaging to assure legal composition in all packages. (c) General identification. Bulk packages containing cottage cheese shall be adequately and legibly marked with the name of the product, net weight, name and address of the manufacturer, lot number, code or date of packaging and any other identification as may be required. Consumer size packaged products shall meet the applicable regulations of the Food and Drug Administration. Sec. 58.525 Storage of finished product. Cottage cheese after packaging shall be promptly stored at a temperature of 45 [deg]F. or lower to maintain quality and condition until loaded for distribution. During distribution and storage prior to sale the product should be maintained at a temperature of 45 [deg]F. or lower. The product shall not be exposed to foreign odors or conditions such as drippage or condensation that might cause package or product damage. Packaged cottage cheese shall not be placed directly on floors. Requirements for Cottage Cheese Bearing USDA Official Identification Sec. 58.526 Official identification. (a) Only cottage cheese manufactured and packaged in accordance with the requirements of this part and with the applicable requirements in subpart A of this part which has been officially inspected in process and found to be in compliance with these requirements may be identified with the official USDA Quality Approved Inspection Shield. (b) Nonfat dry milk. Nonfat dry milk, when used in cottage cheese bearing official identification, shall meet the requirements for U.S. Extra Grade [[Page 134]] (Spray Process), at time of use, and should be of U.S. Low Heat Classification (not less than 6.0 mg. undenatured whey protein nitrogen per gram of nonfat dry milk). In addition, the nonfat dry milk shall have a direct microscopic count not exceeding 75 million per gram. The age of the nonfat dry milk shall be covered by a USDA grading certificate, evidencing compliance with quality requirements, dated not more than 6 months prior to use of the dry milk. In the interim between manufacture and use, the nonfat dry milk shall be stored in a clean, dry, vermin-free space. In any case, if the nonfat dry milk is more than 120 days old, at time of use, it shall be examined for flavor to make certain that it meets the requirements for U.S. Extra Grade. Sec. 58.527 Physical requirements. (a) Flavor. The cottage cheese shall possess a mild pleasing flavor, similar to fresh whole milk or light cream and may possess the delicate flavor and aroma of a good lactic starter. The product may possess to a slight degree a feed, acid, or salty flavor but shall be free from chalky, bitter, utensil, fruity, yeasty, or other objectionable flavors. (b) Body and texture. The curd particles shall have a meaty texture, but sufficiently tender to permit proper absorption of cream or cheese dressing. The texture shall be smooth and velvety and shall not be mealy, crumbly, pasty, sticky, mushy, watery, rubbery or slimy or possess any other objectionable characteristics of body and texture. Small curd style (cut with \1/4\ inch knives) should have curd particles approximately \1/4\ inch or less in size. Large curd style (cut with knives over \1/4\ inch) should have curd particles approximately \3/8\ inch or more in size. (c) Color and appearance. The finished cottage cheese, creamed or plain curd, shall have an attractive natural color and appearance with curd particles of reasonably uniform size. The creamed cottage cheese shall be uniformly mixed with the cream or dressing properly absorbed or adhering to the curd so as to prevent excessive drainage. Sec. 58.528 Microbiological requirements. Compliance shall be based on 3 out of 5 consecutive samples taken at the time of packaging. (a) Coliform. Not more than 10 per gram. (b) Psychrotrophic. No more than 100 per gram. (c) Yeasts and molds. Not more than 10 per gram. Sec. 58.529 Chemical requirements. (a) Moisture. See Sec. 58.505(b). (b) Milkfat. See Sec. 58.505(b). (c) pH. Not higher than 5.2. (d) Phosphatase. Not more than 4 micrograms of phenol equivalent per gram of cheese. Sec. 58.530 Keeping quality requirements. Keeping quality samples taken from the packaging line shall be held at 45 [deg]F. for 10 days. At the end of the 10 day period the samples shall possess a satisfactory flavor and appearance, and shall be free from bitter, sour, fruity, or other objectionable tastes and odors. The surface shall not be discolored, translucent, slimy or show any other objectionable condition. Supplemental Specifications for Plants Manufacturing, Processing and Packaging Frozen Desserts Definitions Sec. 58.605 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning as applied to frozen desserts meeting FDA requirements and briefly defined as follows: (a) Ice cream. The product conforming to the requirements of the Food and Drug Administration for ice cream (21 CFR 135.110). (b) Frozen custard. The product conforming to the requirements of the Food and Drug Administration for frozen custard (21 CFR 135.110). (c) Reduced Fat, Light, or Fat free Ice Cream. The products conforming to all [[Page 135]] applicable Federal Regulations including ``Ice cream and frozen custard,'' Food and Drug Administration (21 CFR 135.110), ``Nutrient content claims for fat, fatty acid, and cholesterol content of foods,'' Food and Drug Administration (21 CFR 101.62), and ``Requirements for foods named by use of a nutrient content claim and a standardized term,'' Food and Drug Administration (21 CFR 130.10). (d) Sherbet. The product conforming to the requirements of the Food and Drug Administration for sherbet (21 CFR 135.140). (e) Mellorine. The product conforming to the requirements of the Food and Drug Administration for mellorine (21 CFR 135.130). (f) Overrun. The trade expression used to reference the increase in volume of the frozen product over the volume of the mix. This increase in volume is due to air being whipped into the product during the freezing process. It is expressed as percent of the volume of the mix. (g) Mix. The trade name for the combined and processed ingredients which after freezing become a frozen dessert. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48976, July 29, 2002] Rooms and Compartments Sec. 58.619 Mix processing room. The rooms used for combining mix ingredients and processing the mix shall meet the applicable requirements for rooms specified in Sec. 58.126. The room shall be ventilated to remove moisture and prevent condensation from forming on walls and ceiling. The room shall be well lighted. Sec. 58.620 Freezing and packaging rooms. The rooms used for freezing and packaging frozen desserts shall be adequate in size to permit satisfactory air circulation and maintained in a clean and sanitary condition. The rooms shall be constructed in the same manner as prescribed above for mix rooms. Sec. 58.621 Freezing tunnels. Freezing tunnels for quick freezing at extremely low temperatures shall be designed and constructed as to insure ease in cleaning and satisfactory conditions of operation. Sec. 58.622 Hardening and storage rooms. Hardening and storage rooms for frozen desserts shall be constructed of satisfactory material for this purpose. The rooms shall be maintained in a clean and orderly manner. Adequate shelves, bins, or pallets shall be provided to keep the packages of finished products off the floor and to prevent damage to the containers. Sufficient refrigeration should be provided to insure adequate storage temperature (-10[deg] or lower). Air shall be circulated to maintain uniform temperature throughout the rooms. A vestibule or double entry way should be provided to minimize heat shock of the frozen products. Equipment and Utensils Sec. 58.623 Homogenizer. Homogenizer shall comply with 3-A Sanitary Standards. Sec. 58.624 Freezers. Product contact surfaces of freezers used to lower the temperature of the liquid mix to a semi-frozen mass by a stirring action shall be constructed of a stainless steel or equally corrosion resistant metal and all parts easily accessible for cleaning and sanitizing. Batch and continuous freezers should comply with the applicable 3-A Standards. Sec. 58.625 Fruit or syrup feeders. Fruit or syrup feeders inject flavoring material into the semi- frozen product. Product contact surfaces shall be constructed of stainless steel or equally corrosion resistant metal and all pumps shall be in accordance to 3-A Sanitary Standards for dairy equipment. The feeder shall be constructed to enable complete disassembly for cleaning and sanitizing. [[Page 136]] Sec. 58.626 Packaging equipment. Packaging equipment designed to mechanically fill and close single service containers with frozen desserts shall be constructed so that all product contact surfaces shall be of stainless steel or equally corrosion-resistant metal. All product contact surfaces shall be easily accessible for cleaning. The design and operation of the machine shall in no way contaminate the container of the finished product placed therein. New or replacement equipment shall comply with the 3A Sanitary Standards for Equipment for Packaging Frozen Desserts and Cottage Cheese. Quality Specifications for Raw Material Sec. 58.627 Milk and dairy products. To produce ice cream and related products the raw milk and cream shall meet the quality requirements as prescribed in Sec. Sec. 58.132 through 58.138, except that only commingled milk and cream meeting the bacteriological requirements of No. 1 shall be used. Sec. 58.628 Sweetening agents. Sweetening agents shall be clean and wholesome and consist of one or more of the approved sweeteners listed in Sec. 58.605. Sec. 58.629 Flavoring agents. Flavoring agents either natural or artificial shall be wholesome and free from undesirable flavors. They must impart the desired characteristic to the finished product. Flavoring agents shall be one or more of those approved in Sec. 58.605. Sec. 58.630 Stabilizers. Stabilizers shall be clean and wholesome and consist of one or more of those approved in Sec. 58.605. Sec. 58.631 Emulsifiers. Emulsifiers shall be clean and wholesome and consist of one or more of those approved in Sec. 58.605. Sec. 58.632 Acid. Acids used in sherbet shall be wholesome and of food grade quality and consist of one or more of those approved in Sec. 58.605. Sec. 58.633 Color. Coloring used for ice cream and related products shall be those certified by the U.S. Food and Drug Administration as safe for human consumption. Operations and Operating Procedures Sec. 58.634 Assembling and combining mix ingredients. The assembling and combining of mix ingredients for processing shall be in accordance with clean and sanitary methods and shall be consistent with good commercial practices. All raw materials shall be subjected to inspection for quality and condition prior to being combined and processed into the finished mix. All necessary precautions shall be taken to prevent the contamination of any raw material or the finished mix with any foreign substance. Sec. 58.635 Pasteurization of the mix. Every particle of the mix, except added flavoring ingredients, shall be pasteurized at not less than 155 [deg]F. and held at that temperature for 30 minutes or for 175 [deg]F. for 25 seconds; or it may be pasteurized by any other equivalent temperature and holding time which will assure adequate pasteurization. Sec. 58.636 Homogenization. Homogenization of the pasteurized mix shall be accomplished to effectively reduce the size of the milkfat globules and evenly disperse them throughout the mix. Sec. 58.637 Cooling the mix. The mix shall be immediately cooled to a temperature of 45 [deg]F. or lower, and stored at this temperature until further processing begins. Sec. 58.638 Freezing the mix. After the mix enters the freezer, it shall be frozen as rapidly as possible to assure the formation of minute crystals. Proper adjustment of rate of flow, refrigerant and air pressure controls shall be achieved to assure correct [[Page 137]] overrun and consistency of the product for packaging and further freezing. Sec. 58.639 Addition of flavor. The addition of flavoring ingredients to semi-frozen mix just prior to packaging shall be performed in a clean and sanitary manner. Care shall be taken to insure the flavor injection equipment has been properly cleaned and sanitized prior to use and that the flavor ingredients are of good quality and wholesome. Sec. 58.640 Packaging. The packaging of the semifrozen product shall be done by means which will in no way contaminate the container or the product. When single service containers and lids are used, they shall be of good construction and protect the finished product. Containers used for frozen products shall be stored and handled in a sanitary manner so as to protect them from dust and bacterial contamination. Sec. 58.641 Hardening and storage. Immediately after the semifrozen product is placed in its intended container it shall be placed in a hardening tunnel or hardening room to continue the freezing process. Rapid freezing to 0[deg] to -15 [deg]F is desirable to produce a good textured product. Sec. 58.642 Quality control tests. All mix ingredients shall be subject to inspection for quality and condition throughout each processing operation. Quality control tests shall be made on flow line samples as often as necessary to check the effectiveness of processing and sanitation and as an aid in correcting deficiencies. Routine analysis shall be made on raw materials and finished products to assure adequate composition, weight or volume control. Sec. 58.643 Frequency of sampling. (a) Microbiological. Representative samples shall be taken from each type of mix, and for the finished frozen product one sample from each flavor made. (b) Composition. Representative samples shall be tested for fat and solids-not-fat on each type of mix manufactured. Spot checks shall be made on the finished products as often as is necessary to assure compliance with composition standards. (c) Weight or volume control. Representative samples of the packaged products shall be checked during the packaging operation to assure compliance with the stated volume on the container as well as weight and overrun requirements. Sec. 58.644 Test methods. (a) Microbiological. Microbiological determinations shall be made in accordance with the methods described in the latest edition of Standard Methods for the Examination of Dairy Products. (b) Chemical. Chemical analysis shall be made in accordance with the methods described in the latest edition of Official Methods of Analysis of the Association of Official Analytical Chemists, the latest edition of Standard Methods, or by other methods giving equivalent results. Sec. 58.645 General identification. The various types of frozen desserts shall be packaged and labeled in accordance with the applicable regulations of the Food and Drug Administration. Requirements for Finished Products Bearing USDA Official Identification Sec. 58.646 Official identification. (a) Only ice cream and related products manufactured and packaged in accordance with the requirements of this part and with the applicable requirements in subpart A of this part which have been officially inspected in process and found to be in compliance with these requirements may be identified with the official USDA Quality Approved Inspection Shield. (b) Dairy products used in the manufacture of frozen desserts for which there are U.S. grades established (nonfat dry milk, whole milk, buttermilk and whey) shall be U.S. Extra Grade or better, and in the case of unsalted butter, shall be no lower than U.S. Grade A. Dairy products for which there are not USDA grade shall meet the applicable requirements of this part which permit such product to bear the USDA Quality Approved Inspection Shield. [[Page 138]] Sec. 58.647 Composition requirements for ice cream. See Sec. 58.605(a). Sec. 58.648 Microbiological requirements for ice cream. The finished product shall contain not more than 50,000 bacteria per gram as determined by the standard plate count, and shall contain not more than 10 coliform organisms per gram for plain and not more than 20 coliform per gram in chocolate, fruit, nut or other flavors in three out of five samples. Sec. 58.649 Physical requirements for ice cream. (a) Flavor. The flavor of the finished ice cream shall be pleasing and desirable, and characteristic of the fresh milk and cream and the particular flavoring used. (b) Body and texture. The body shall be firm, have substance and readily melt to a creamy consistency when exposed to room temperatures; the texture shall be fine, smooth, and have the appearance of creaminess throughout. (c) Color. The color shall be attractive, pleasing, uniform and characteristic of the flavor represented. Sec. 58.650 Requirements for frozen custard. The same requirements apply as for ice cream except plain frozen custard shall have a minimum egg yolk solids content of 1.4 percent, and 1.12 percent when fruits, nuts and other such ingredients are used for flavoring. Sec. 58.651 [Reserved] Sec. 58.652 Composition requirements for sherbet. See Sec. 58.605(d). Sec. 58.653 Microbiological requirements for sherbet. The finished product shall contain not more than 50,000 bacteria per gram as determined by the standard plate count and shall contain not more than 10 coliform organisms per gram in three out of five samples. Sec. 58.654 Physical requirements for sherbet. (a) Flavor. The flavor of the finished sherbet shall be pleasing and desirable and characteristic of the particular flavoring used and shall impart a sweet yet tart sensation. (b) Body and texture. The body shall be firm, compact, somwhat chewy and readily melt to an even syrupy consistency at room temperatures; the texture shall be smooth but not as fine as in ice cream and shall be even throughout. (c) Color. The color shall be attractive, pleasing, uniform and characteristic of the flavor represented. Supplemental Specifications for Plants Manufacturing, Processing and Packaging Pasteurized Process Cheese and Related Products Definitions Sec. 58.705 Meaning of words. (a) Pasteurized process cheese and related products. Pasteurized process cheese and related products are the foods which conform to the applicable requirements of the Food and Drug Administration for cheeses and related cheese products (21 CFR part 133). (b) Blend set up. The trade term for a particular group of vat lots of cheese selected to form a blend based upon their combined ability to impart the desired characteristics to a pasteurized process cheese product. (c) Cooker batch. The amount of cheese and added optional ingredients placed into a cooker at one time, heated to pasteurization temperature, and held for the required length of time. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48976, July 29, 2002] Equipment and Utensils Sec. 58.706 General construction, repair and installation. The equipment and utensils used for the handling and processing of cheese products shall be as specified in Sec. 58.128 of this subpart. In addition, for certain other equipment the following requirements shall be met. [[Page 139]] Sec. 58.707 Conveyors. Conveyors shall be constructed of material which can be properly cleaned, will not rust, or otherwise contaminate the cheese, and shall be maintained in good repair. Sec. 58.708 Grinders or shredders. The grinders or shredders used in the preparation of the trimmed and cleaned cheese shall be of corrosion-resistant material, and of such construction as to prevent contamination of the cheese and to allow thorough cleaning of all parts and product contact surfaces. Sec. 58.709 Cookers. The cookers shall be the steam jacketed or direct steam type. They shall be constructed of stainless steel or other equally corrosion- resistant material. All product contact surfaces shall be readily accessible for cleaning. Each cooker shall be equipped with an indicating thermometer, and shall be equipped with a temperature recording device. The recording thermometer stem may be placed in the cooker if satisfactory time charts are obtained, if not, the stem shall be placed in the hotwell or filler hopper. Steam check valves on direct steam type cookers shall be mounted flush with cooker wall, be constructed of stainless steel and designed to prevent the backup of product into the steam line, or the steam line shall be constructed of stainless steel pipes and fittings which can be readily cleaned. If direct steam is applied to the product only culinary steam shall be used (see Sec. 58.127(d)). Sec. 58.710 Fillers. A strainer should be installed between the cooker and the filler. The hoppers of all filters shall be covered but the cover may have sight ports. If necessary, the hopper may have an agitator to prevent buildup on side wall. The filler valves and head shall be kept in good repair and capable of accurate measurements. Product contact surfaces shall be of stainless steel or other corrosion resistant material. Quality Specifications for Raw Material Sec. 58.711 Cheddar, colby, washed or soaked curd, granular or stirred curd cheese. Cheese, used in the manufacture of pasteurized process cheese products should possess a pleasing and desirable taste and odor consistent with the age of the cheese; should have body and texture characteristics which will impart the desired body and texture characteristics in the finished product; and should possess finish and appearance characteristics which will permit removal of all packaging material and surface defects. The cheese should at least meet the requirements equivalent to U.S. Standard Grade for Bulk American Cheese for Manufacturing provided the quantity of the cheese with any one defect as listed for U.S. Standard Grade is limited to assure a satisfactory finished product. Sec. 58.712 Swiss. Swiss cheese used in the manufacture of pasteurized process cheese and related products should be equivalent to U.S. Grade B or better, except that the cheese may be blind or possess finish characteristics which do not impair the interior quality. Sec. 58.713 Gruyere. Gruyere cheese used in the manufacture of process cheese and related products should be of good wholesome quality and except for smaller eyes and sharper flavor shall meet the same requirements as for Swiss cheese. Sec. 58.714 Cream cheese, Neufchatel cheese. These cheeses when mixed with other foods, or used for spreads and dips should possess a fresh, pleasing and desirable flavor. Sec. 58.715 Cream, plastic cream and anhydrous milkfat. These food products shall be pasteurized, sweet, have a pleasing and desirable flavor and be free from objectionable flavors, and shall be obtained from milk which complies with the quality requirements as specified in Sec. Sec. 58.132 through 58.138 of this subpart. [[Page 140]] Sec. 58.716 Nonfat dry milk. Nonfat dry milk used in cheese products should meet the requirements equivalent to U.S. Extra Grade except that the moisture content may be in excess of that specified for the particular grade. Sec. 58.717 Whey. Whey used in cheese products should meet the requirements equivalent to USDA Extra Grade except that the moisture requirement for dry whey may be waived. Sec. 58.718 Flavor ingredients. Flavor ingredients used in process cheese and related products shall be those permitted by the Food and Drug Standards of Identity, and in no way deleterious to the quality or flavor of the finished product. In the case of bulky flavoring ingredients such as pimento, the particles should be, to at least a reasonable degree, uniform in size, shape and consistency. The individual types of flavoring materials should be uniform in color and should impart the characteristic flavor desired in the finished product. Sec. 58.719 Coloring. Coloring shall be Annatto or any other cheese or butter color which is approved by the Food and Drug Administration. Sec. 58.720 Acidifying agents. Acidifying agents if used shall be those permitted by the Food and Drug Administration for the specific pasteurized process cheese product. Sec. 58.721 Salt. Salt shall be free flowing, white refined sodium chloride and shall meet the requirements of The Food Chemical Codex. Sec. 58.722 Emulsifying agents. Emulsifying agents shall be those permitted by the Food and Drug Administration for the specific pasteurized process cheese product, and shall be free from extraneous material. Operations and Operating Procedures Sec. 58.723 Basis for selecting cheese for processing. A representative sample shall have been examined to determine fat and moisture content. One sample unit from each vat of cheese shall have been examined to determine the suitability of the vat for use in process cheese products in accordance with the flavor, body and texture characteristics permitted in Sec. Sec. 58.711 through 58.714 as applicable, and to determine the characteristics it will contribute to the finished product when blended with other cheese. The cheese included in each blend shall be selected on the basis of the desirable qualities which will result in the desired finished product. Recook from equivalent blends may be used in an amount that will not adversely affect the finished product. Hot cheese from the filler may be added to the cooker in amounts which will not adversely affect the finished product. Sec. 58.724 Blending. To as great an extent as is practical, each vat of cheese should be divided and distributed throughout numerous cooker batches. The purpose being to minimize the preponderance and consequent influence of any one vat on the characteristics of the finished product, and to promote as much uniformity as is practical. In blending also consider the final composition requirements for fat and moisture. Quantities of salt, color, emulsifier and other allowable ingredients to be added shall be calculated and predetermined for each cooker batch. Sec. 58.725 Trimming and cleaning. The natural cheese shall be cleaned free of all non-edible portions. Paraffin and bandages as well as rind surface, mold or unclean areas or any other part which is unwholesome or unappetizing shall be removed. Sec. 58.726 Cutting and grinding. The trimmed and cleaned cheese should be cut into sections of convenient size to be handled by the grinder or shredder. The grinding and mixing of the blended lots of cheese should be [[Page 141]] done in such a manner as to insure a homogeneous mixture throughout the batch. Sec. 58.727 Adding optional ingredients. As each batch is added to the cooker, the predetermined amounts of salt, emulsifiers, color, or other allowable optional ingredients shall be added. However, a special blending vat may be used to mix the ground cheese and other ingredients before they enter the cooker to provide composition control. Sec. 58.728 Cooking the batch. Each batch of cheese within the cooker, including the optional ingredients, shall be thoroughly commingled and the contents pasteurized at a temperature of at least 158 [deg]F. and held at that temperature for not less than 30 seconds or any other equally effective combination of time and temperature approved by the Administrator. Care shall be taken to prevent the entrance of cheese particles or ingredients after the cooker batch of cheese has reached the final heating temperature. After holding for the required period of time, the hot cheese shall be emptied from the cooker as quickly as possible. Sec. 58.729 Forming containers. Containers either lined or unlined shall be assembled and stored in a sanitary manner to prevent contamination. The handling of containers by filler crews should be done with extreme care and observance of personal cleanliness. Preforming and assembling of pouch liners and containers shall be kept to a minimum and the supply rotated to limit the length of time exposed to possible contamination prior to filling. Sec. 58.730 Filling containers. Hot fluid cheese from the cookers may be held in hotwells or hoppers to assure a constant and even supply of processed cheese to the filler or slice former. Filler valves shall effectively measure the desired amount of product into the pouch or container in a sanitary manner and shall cut off sharply without drip or drag of cheese across the opening. An effective system shall be used to maintain accurate and precise weight control. Damaged or unsatisfactory packages shall be removed from production, and the cheese may be salvaged into sanitary containers, and added back to cookers. Sec. 58.731 Closing and sealing containers. Pouches, liners, or containers having product contact surfaces, after filling shall be folded or closed and sealed in a sanitary manner, preferably by mechanical means, so as to assure against contamination. Each container in addition to other required labeling shall be coded in such a manner as to be easily identified as to date of manufacture by lot or sublot number. Sec. 58.732 Cooling the packaged cheese. After the containers are filled they shall be stacked, or cased and stacked in such a manner as to prevent breaking of seals due to excessive bulging and to allow immediate progressive cooling of the individual containers of cheese. As a minimum the cheese should be cooled to a temperature of 100 [deg]F. or lower within 24 hours after filling. The temperature of the cheese should be reduced further, before being shipped or if storage is intended. Sec. 58.733 Quality control tests. (a) Chemical analyses. The following chemical analyses shall be performed in accordance with the appropriate edition of the Official Methods of Analysis of the AOAC as specified in the appropriate Standards of Identity or in accordance with methods that give equivalent results. (1) Cheese. A representative sample of cheese used in the manufacture of pasteurized process cheese products shall have been tested prior to usage to determine its moisture and fat content. (2) Pasteurized process cheese products. As many samples shall be taken of the finished product direct from the cooker, hopper, filler, or other location as is necessary to assure compliance with composition requirements. Spot checks should be made on samples from the cooker as frequently as is necessary to indicate pasteurization by means of the phosphatase test, as well as any other tests necessary to assure good quality control. (b) Examination of physical characteristics. As many samples shall be taken as [[Page 142]] is necessary to assure meeting the required physical characteristics of the products. Representative samples shall be taken from production for examination of physical characteristics. The samples shall be examined at approximately 70 [deg]F. the first day of operation after the date of processing for the following characteristics: (1) Finish and appearance, (2) flavor, (3) color, (4) body and texture, and (5) slicing or spreading properties. (c) Keeping quality. During processing or preferably from the cooled stock select sufficient samples at random from the production run. The samples should be stored at approximately 50 [deg]F. for 3 months for evaluation of physical characteristics as in paragraph (b) of this section. Additional samples may be selected and held at different temperatures or time. (d) Weight control. During the filling operation as many samples shall be randomly selected and weighed from each production run as is necessary to assure accuracy of the net weight established for the finished products. Requirements for Processed Cheese Products Bearing USDA Official Identification Sec. 58.734 Official identification. Only process cheese products manufactured and packaged in accordance with the requirements of this part and with the applicable requirements in subpart A of this part which have been officially inspected in process and found to be in compliance with these requirements may be identified with official USDA Quality Approved Inspection Shield. Sec. 58.735 Quality specifications for raw materials. (a) Cheddar colby, washed or soaked curd, granular or stirred curd cheese. Cheese, used in the manufacture of pasteurized process cheese products which are identified with the USDA official identification shall possess a pleasing and desirable taste and odor consistent with the age of the cheese; shall have body and texture characteristics which will impart the desired body and texture characteristics in the finished product; and shall possess finish and appearance characteristics which will permit removal of all packaging material and surface defects. The cheese shall at least meet the requirements of U.S. Standard Grade for Bulk American Cheese for Manufacturing provided the quantity of the cheese with any one defect as listed for U.S. Standard Grade is limited, to assure compliance with the specifications of the finished product. (b) Swiss. Swiss cheese used in the manufacture of pasteurized process cheese and related products bearing official identification shall be U.S. Grade B or better, except that the cheese may be blind or possess finish characteristics which do not impair the interior quality. (c) Gruyere. Gruyere cheese used in the manufacture of process cheese and related products shall be of good wholesome quality and except for smaller eyes and sharper flavor shall meet the same requirements as for Swiss cheese. (d) Cream cheese, Neufchatel cheese. Mixed with other foods, or used for spreads and dips shall possess a fresh, pleasing and desirable flavor. (e) Cream, plastic cream and anhydrous milkfat. These food products shall be pasteurized, sweet, have a pleasing and desirable flavor and be free from objectionable flavors, and shall be obtained from milk which complies with the quality requirements as specified in Sec. 58.132 of this subpart. (f) Nonfat dry milk. Nonfat dry milk used in officially identified cheese products shall meet the requirements of U.S. Extra Grade except that the moisture content may be in excess of that specified for the particular grade. (g) Whey. Condensed or dry whey used in officially identified cheese products shall meet the requirements for USDA Extra Grade except that the moisture requirement for dry whey may be waived. (h) Flavor ingredients. Flavor ingredients used in process cheese and related products shall be those permitted by the Food and Drug Standards of Identity, and in no way deleterious to the quality or flavor of the finished product. In the case of bulky flavoring ingredients such as pimento, the particles shall be, to at least a reasonable [[Page 143]] degree, uniform in size, shape and consistency. The individual types of flavoring materials shall be uniform in color and shall impart the characteristic flavor desired in the finished product. (i) Other ingredients. For coloring, acidifying agents, salt, and emulsifying agents see Sec. Sec. 58.719, 58.720, 58.721 and 58.722. Quality Specifications for Finished Products Sec. 58.736 Pasteurized process cheese. Shall conform to the provisions of the Definitions and Standards of Identity for Pasteurized Process Cheese and Related Products, Food and Drug Administration. The average age of the cheese in the blend shall be such that the desired flavor, body and texture will be achieved in the finished product. The quality of pasteurized process cheese shall be determined on the basis of flavor, body and texture, color, and finish and appearance. (a) Flavor. Has a pleasing and desirable mild cheese taste and odor characteristic of the variety or varieties of cheese ingredients used. If additional optional ingredients are used they shall be incorporated in accordance with good commercial practices and the flavor imparted shall be pleasing and desirable. May have a slight cooked or very slight acid or emulsifier flavor; is free from any undesirable tastes and odors. (b) Body and texture. Shall have a medium-firm, smooth and velvety body free from uncooked cheese particles. Is resilient and not tough, brittle, short, weak, or sticky. It shall be free from pin holes or openings except those caused by trapped steam. The cheese shall slice freely, and shall not stick to the knife or break when cut into approximately \1/8\ inch slices. If in sliced form, the slices shall separate readily. (c) Color. May be colored or uncolored but shall be uniform throughout. If colored it shall be bright and not be dull or faded. To promote uniformity and a common reference to describe color use the color designations as depicted by the National Cheese Institute standard color guide for cheese. (d) Finish and appearance. The wrapper may be slightly wrinkled but shall envelop the cheese, adhere closely to the surface, and be completely sealed and not broken or soiled. Sec. 58.737 Pasteurized process cheese food. Shall conform to the provisions of the Definitions and Standards of Identity for Pasteurized Process Cheese Food and Related Products, Food and Drug Administration. The average age of the cheese in the blend shall be such that the desired flavor, body and texture will be achieved in the finished product. The quality of pasteurized process cheese food shall be determined on the basis of flavor, body and texture, color, and finish and appearance. (a) Flavor. Has a pleasing and desirable mild cheese taste and odor characteristic of the variety or varieties of cheese ingredients used. If additional optional ingredients are used they shall be incorporated in accordance with good commercial practices and the flavor imparted shall be pleasing and desirable. May have a slight cooked or very slight acid or emulsifier flavors; is free from any undesirable tastes and odors. (b) Body and texture. Shall have a reasonably medium-firm smooth and velvety body and free from uncooked cheese particles. Is resilient and not tough, brittle, short or sticky. It shall be free from pin holes or openings except those caused by trapped steam. The product shall slice freely with only a slight amount of sticking and shall not break when cut into approximately \1/8\ inch slices. If in sliced form, the slices shall separate readily. (c) Color. May be colored or uncolored but shall be uniform throughout. If colored it shall be bright and not be dull or faded. To promote uniformity and a common reference to describe color use the color designations as depicted by the National Cheese Institute standard color guide for cheese. (d) Finish and appearance. The wrapper may be slightly wrinkled but shall envelop the cheese, adhere closely to the surface, and be completely sealed and not broken or soiled. [[Page 144]] Sec. 58.738 Pasteurized process cheese spread and related products. Shall conform to the applicable provisions of the Definitions and Standards of Identity for Pasteurized Process Cheese Spreads, Food and Drug Administration. The pH of pasteurized process cheese spreads shall not be below 4.0. The quality of pasteurized process cheese spreads shall be determined on the basis of flavor, body and texture, color, and finish and appearance. (a) Flavor. Has a pleasing and desirable cheese taste and odor characteristic of the variety or varieties of cheese ingredients used. If additional optional ingredients are used they shall be incorporated in accordance with good commercial practices and the flavor imparted shall be pleasing and desirable. May have a slight cooked, acid, or emulsifier flavor; is free from any undesirable tastes and odors. (b) Body and texture. Shall have a smooth body free from uncooked cheese particles and when packaged shall form into a homogeneous plastic mass, and be free from pin holes or openings except those caused by trapped steam. Product made for slicing shall slice freely when cut into approximately \1/8\ inch slices with only a slight amount of sticking. Product made for spreading shall be spreadable at approximately 70 [deg]F. (c) Color. May be colored or uncolored but shall be uniform throughout. If colored it shall be bright and not be dull or faded. To promote uniformity and a common reference to describe color the color designations as depicted by the National Cheese Institute standard color guide for cheese may be used. (d) Finish and appearance. Wrappers, if used, may be slightly wrinkled but shall envelop the cheese, adhere closely to the surface, and be completely sealed and not broken or soiled. Other containers made of suitable materials shall be completely filled, sealed and not broken or soiled. Supplemental Specifications for Plants Manufacturing, Processing, and Packaging Whey, Whey Products and Lactose Definitions Sec. 58.805 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: (a) Whey. ``Whey'' is the fluid obtained by separating the coagulum from milk, cream, and/or skim milk in cheesemaking. The acidity of the whey may be adjusted by the addition of safe and suitable pH adjusting ingredients. Moisture removed from cheese curd as a result of salting may be collected for further processing as whey if the collection of the moisture and the removal of the salt from the moisture are conducted in accordance with procedures approved by the Administrator. (b) Dry Whey. ``Dry Whey'' is the product resulting from drying fresh whey which has been pasteurized and to which nothing has been added as a preservative. It contains all constituents, except moisture, in the same relative proportions as in the whey. (c) Dry Sweet Whey. Dry whey not over 0.16 percent titratable acidity on a reconstituted basis. (d) Dry Whey--% Titratable Acidity. Dry whey over 0.16 percent, but below 0.35 percent titratable acidity on a reconstituted basis. The blank being filled with the actual acidity. (e) Dry Acid Whey. Dry whey with 0.35 percent or higher titratable acidity on a reconstituted basis. (f) Modified Whey Products: (1) Partially demineralized whey, (2) Partially delactosed whey, (3) Demineralized whey, and (4) Whey protein concentrate-products defined by regulations of the Food and Drug Administration. [[Page 145]] (g) Lactose (milk sugar). That food product defined by regulations of the Food and Drug Administration. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, as amended at 46 FR 1257, Jan. 6, 1981. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 55 FR 39912, Oct. 1, 1990] Rooms and Compartments Sec. 58.806 General. Dry storage of product, packaging room for bulk product, and hopper or dump room shall meet the requirements of Sec. Sec. 58.210 through 58.212 as applicable. Equipment and Utensils Sec. 58.807 General construction, repair and installation. All equipment and utensils necessary for the manufacture of whey, whey products and lactose shall meet the same general requirements for materials and construction as outlined in Sec. Sec. 58.128 and 58.215 through 58.230 as applicable, except for the following: (a) Modified Whey Products. Equipment for whey fractionation, such as ultrafiltration, reverse osmosis, gel filtration, and electrodialysis shall be constructed in accordance with 3-A sanitary design principles, except where engineering requirements preclude strict adherence to such standards. Materials used for product contact surfaces shall meet applicable 3-A Sanitary Standards or Food and Drug Administration requirements. All equipment shall be of sanitary construction and readily cleanable. (b) Lactose. Equipment used in the further processing of lactose following its separation from whey shall have smooth surfaces, be cleanable, free from cracks or crevices, readily accessible for inspection and shall be constructed of non-toxic material meeting applicable Food and Drug Administration requirements and under conditions of use shall be resistant to corrosion, pitting or flaking. [The use of stainless steel is optional.] Quality Specifications for Raw Materials Sec. 58.808 Whey. Whey for processing shall be fresh and originate from the processing of products made from milk meeting the requirements as outlined in Sec. Sec. 58.132 through 58.138. Only those ingredients approved by the Food and Drug Administration may be added to the whey for processing, except when restricted by this subpart. Whey products to which approved ingredients have been added or constituents removed to alter original characteristics for processing or usage shall be labeled to meet the applicable requirements. Operations and Operating Procedures Sec. 58.809 Pasteurization. (a) All fluid whey used in the manufacture of dry whey, dry whey products, modified whey products, and lactose shall be pasteurized prior to condensing. When the condensing and drying operations for dry whey take place at the same plant, the pasteurization may be located at a different point in the operation provided it will protect the quality of the finished product and not adversely affect the processing procedure. (b) Pasteurized products transported to another plant for final processing shall be repasteurized, except that condensed whey containing 40 percent or more solids may be transported to another plant for further processing into dry whey, dry whey products or lactose without repasteurization. (c) If whey is transferred to another plant for further processing, or if during the processing procedure unpasteurized ingredients are added (except those necessary for lactose crystallization), or processing procedures permit contamination or bacterial growth, the whey shall be repasteurized as close to the final drying operations as possible. Sec. 58.810 Temperature requirements. (a) Unless processed within 2 hours, all whey or condensed whey, except acid type whey with a titratable acidity of 0.40 percent or above, or a pH of [[Page 146]] 4.6 or below, shall be cooled to 45 [deg]F or less, or heated to 145 [deg]F or higher. Other temperatures may be used when essential for the technology of the process, such as lactose crystallization and membrane whey separation processes, when the quality and wholesomeness of the product is not impaired. (b) Recording thermometers shall be required and so located to assure that the cooling or heating requirements in paragraph (a) of this section are met. Sec. 58.811 General. The operating procedures as contained in Sec. Sec. 58.237 through 58.244, 58.246, 58.247, and 58.443 (a) and (b) shall be followed as applicable. Sec. 58.812 Methods of sample analysis. Samples shall be tested according to the applicable methods of laboratory analysis contained in either DA Instruction 918-RL, as issued by the USDA, Agricultural Marketing Service, Dairy Programs, or the Official Methods of Analysis of the Association of Official Analytical Chemists, or Standard Methods for the Examination of Dairy Products. [67 FR 48976, July 29, 2002] Requirements for Finished Products Bearing USDA Official Identification Sec. 58.813 Dry whey. The quality requirements for dry whey shall be in accordance with the U.S. Standards for Dry Whey. Supplemental Specifications for Plants Manufacturing, Processing, and Packaging Evaporated and Condensed Milk or Ultra-Pasteurized Products definitions Sec. 58.905 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa as the case may demand. Unless the context otherwise requires, the following terms shall have the following meaning: (a) Evaporated milk. The liquid food made by evaporating sweet milk to such point that it contains not less than 6.5 percent of milkfat and not less than 16.5 percent of the total milk solids. The finished product shall conform to the requirements of the Food and Drug Administration for evaporated milk (21 CFR 131.130). (b) Concentrated milk, plain condensed milk. The product which conforms to the standard of identity for evaporated milk except that it is not processed by heat to prevent spoilage. The container may be unsealed, and stabilizing ingredients are not used. The finished product shall conform to the requirements of the Food and Drug Administration for concentrated milk (21 CFR 131.115). (c) Sweetened condensed milk. The liquid or semi-liquid food made by evaporating a mixture of sweet milk and refined sugar (sucrose) or any combination of refined sugar (sucrose) and refined corn sugar (dextrose) to such point that the finished sweetened condensed milk contains not less than 28.0 percent of total milk solids and not less than 8.0 percent of milkfat. The quantity of sugar used is sufficient to prevent spoilage. The finished product shall conform to the requirements of the Food and Drug Administration for sweetened condensed milk (21 CFR 131.120). (d) Ultra-pasteurized. The product shall have been thermally processed at or above 280 [deg]F for at least 2 seconds, either before or after packaging, so as to produce a product which has an extended shelf life under refrigerated conditions. [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48976, July 29, 2002] Equipment and Utensils Sec. 58.912 General construction, repair and installation. The equipment and utensils used for processing and packaging evaporated, condensed or ultra pasteurized dairy products shall be as specified in Sec. 58.128. In addition for certain other equipment, the following requirements shall be met. [[Page 147]] Sec. 58.913 Evaporators and vacuum pans. All equipment used in the removal of moisture from milk or milk products for the purpose of concentrating the solids should comply with the requirements of the 3-A Sanitary Standards for Milk and Milk Products Evaporators and Vacuum Pans. Sec. 58.914 Fillers. Both gravity and vacuum type fillers shall be of sanitary design and all product contact surfaces, if metal, shall be made of stainless steel or equally corrosion-resistant material; except that, certain evaporated milk fillers having brass parts may be approved if free from corroded surfaces and kept in good repair. Nonmetallic product contact surfaces shall comply with the requirements for 3-A Sanitary Standards for Plastic, and Rubber and Rubber-Like Materials. Fillers shall be designed so that they in no way will contaminate or detract from the quality of the product being packaged. Sec. 58.915 Batch or continuous in-container thermal processing equipment. Batch or continuous in-container thermal processing equipment shall meet the requirements of the Food and Drug Administration for thermally processed low-acid foods packaged in hermetically sealed containers (21 CFR part 113). The equipment shall be maintained in such a manner as to assure control of the length of processing and to minimize the number of damaged containers. [67 FR 48977, July 29, 2002] Sec. 58.916 Homogenizer. Homogenizers where applicable shall be used to reduce the size of the fat particles and to evenly disperse them in the product. Homogenizers shall comply with the applicable 3-A Sanitary Standards. Operations and Operating Procedures Sec. 58.917 General. There are many operations and procedures used in the preparation of evaporated, condensed and ultra pasteurized dairy products that are similar, therefore, the following general requirements will apply when such operations or procedures are used. Sec. 58.918 Standardization. The standardization of the product to obtain a finished product of a given composition shall be accomplished by the addition or removal of milkfat, milk solids-not-fat and/or water. The ingredients added to accomplish the desired composition shall be of the same hygenic quality as the product being standardized. Sec. 58.919 Pre-heat, pasteurization. When pasteurization is intended or required by either the vat method, HTST method, or by the HHST method it shall be accomplished by systems and equipment meeting the requirements outlined in Sec. 58.128. Pre-heat temperatures prior to ultra pasteurization will be those that have the most favorable effect on the finished product. Sec. 58.920 Homogenization. Where applicable concentrated products shall be homogenized for the purpose of dispersing the fat throughout the product. The temperature of the product at time of homogenization and the pressure at which homogenization is accomplished will be that which accomplishes the most desired results in the finished products. Sec. 58.921 Concentration. Concentrating by evaporation shall be accomplished with a minimum of chemical change in the product. The equipment and systems used shall in no way contaminate or adversely affect the desirability of the finished product. Sec. 58.922 Thermal processing. The destruction of living organisms shall be performed in one of the following methods: (a) The complete in-container method, by heating the container and contents to a range of 212 [deg]F to 280 [deg]F for a sufficient time; (b) By a continuous flow process at or above 280 [deg]F for at least 2 seconds, then packaged aseptically; [[Page 148]] (c) The product is first processed according to methods as in paragraph (b) of this section, then packaged and given further heat treatment to complete the process. Sec. 58.923 Filling containers. (a) The filling of small containers with product shall be done in a sanitary manner. The containers shall not contaminate or detract from the quality of the product in any way. After filling, the container shall be hermetically sealed. (b) Bulk containers for the product shall be suitable and adequate to protect the product in storage or transit. The bulk container (including bulk tankers) shall be cleaned and sanitized before filling, and filled and closed in a sanitary manner. Sec. 58.924 Aseptic filling. A previously ultra pasteurized product shall be filled under conditions which prevent contamination of the product by living organisms or spores. The containers prior to being filled shall be sterilized and maintained, in a sterile condition. The containers shall be sealed in a manner that prevents contamination of the product. Sec. 58.925 Sweetened condensed. After condensing, the sweetened condensed product should be cooled rapidly to about 85 [deg]F to induce crystallization of the oversaturated lactose. When the desired crystallization is reached further cooling is resumed to 68[deg]-70 [deg]F. Sec. 58.926 Heat stability. Prior to thermal processing of concentrated products and where stabilizers are allowed, tests should be made on the heat stability of the product to determine necessity for, and the amount of stabilizer needed. Based on the stability tests, safe and suitable stabilizers and emulsifiers may be added. Sec. 58.927 Storage. Finished products which are to be held more than 30 days should be stored at temperatures below 72 [deg]F Precautions shall be taken to prevent freezing of the product. Sec. 58.928 Quality control tests. All dairy products and other ingredients shall be subject to inspection for quality and condition throughout each processing operation. Quality control tests shall be made on flow samples as often as is necessary to check the effectiveness of processing and manufacturing and as an aid in correcting deficiencies. Routine analyses shall be made on raw materials and finished products to assure adequate composition control. For each batch or production run a keeping quality test shall be made to determine product stability. Sec. 58.929 Frequency of sampling for quality control. (a) Composition. Sampling and testing for composition shall be made on batches of product as often as is necessary to control composition. On continuous production runs, enough samples shall be taken throughout the run to adequately assure composition requirements. (b) Other chemical analysis or physical analysis. Such tests shall be performed as often as is necessary to assure compliance with standards, specifications or contract requirements. (c) Weight or volume control. Representative samples of the packaged products shall be checked during the filling operation to assure compliance with the stated net weight or volume on the container. (d) Keeping quality and stability. A minimum of one sample from each batch of product or one representative sample per hour from a continuous production run shall be taken. For continuous runs, samples shall be taken at the start, each hour, and at the end of the run. Samples should also be taken after resumption of processing following an interruption in continuous operation. Each sample shall be incubated at 90 [deg]F to 100 [deg]F for seven days. Sec. 58.930 Official test methods. (a) Chemical. Chemical analysis, except where otherwise prescribed herein, shall be made in accordance with the methods described in the latest edition of Official Methods of Analysis of the AOAC or by the latest edition of Standard Methods for the Examination of Dairy Products. [[Page 149]] (b) Microbiological. Microbiological determinations shall be made in accordance with the methods described in the latest edition of Standard Methods for the Examination of Dairy Products. Sec. 58.931 General identification. Bulk shipping containers shall be legibly marked with the name of the product, net weight, name and address of manufacturer, processor or distributor, a lot number and coded date of manufacture. Consumer sized containers shall meet the applicable regulations of the Food and Drug Administration. Quality Specifications for Raw Materials Sec. 58.932 Milk. The raw milk shall meet the requirements as outlined in Sec. Sec. 58.132 through 58.138. Unless processed within two hours after being received, it shall be cooled to, and held at a temperature of 45 [deg]F or lower until processed. Sec. 58.933 Stabilizers. Shall be those permitted by the Food and Drug Administration's ``Standards of Identity'' as optional ingredients for specific products. Stabilizers shall be free from extraneous material, be of food grade quality and not be in violation of the Federal Food, Drug and Cosmetic Act. Sec. 58.934 Sugars. Any sugar used in the manufacture of sweetened condensed or sterilized milk products shall be refined, and of food grade quality. Sec. 58.935 Chocolate and cocoa. Such products used as flavor ingredients shall meet the requirements of the Food and Drug Administration, ``Definitions and Standards of Identity for Cocoa Products.'' Requirements for Finished Products Bearing USDA Official Identification Sec. 58.936 Milk. To process and package evaporated and condensed milk of ultra- pasteurized dairy products eligible for official identification with the USDA Quality Approved Inspection Shield the raw incoming milk shall meet the requirements as outlined in Sec. Sec. 58.132 through 58.136. Unless processed within two hours after being received, it shall be cooled to, and held at a temperature of 45 [deg]F or lower until processed. Sec. 58.937 Physical requirements for evaporated milk. (a) Flavor. The product shall possess a sweet, pleasing and desirable flavor with not more than a definite cooked flavor. It shall be free from scorched, oxidized or other objectionable tastes and odors. (b) Body and texture. The product shall be of uniform consistency and appearance. It shall be smooth and free from fat separation, lumps, clots, gel formation, coarse milk solids precipitate or sedimentation and extraneous material. (c) Color. The color shall be of a natural white or light cream. (d) Degree of burn-on. The interior walls of the container shall not show excessive burn-on of product (product fused to more than 75 percent of the inner surface of the can). (e) Keeping quality. Samples incubated at 90-100 [deg]F shall show no sensory, chemical or microbiological deterioration after seven days. Sec. 58.938 Physical requirements and microbiological limits for sweetened condensed milk. (a) Flavor. Shall be sweet, clean, and free from rancid, oxidized, scorched, fermented, stale or other objectionable tastes and odors. (b) Color. Shall be white to light cream. (c) Texture. Shall be smooth and uniform, free from lumps or coarse graininess. There shall not be sufficient settling of the lactose to cause a deposit on the bottom of the container. (d) Body. Shall be sufficiently viscous so that the product upon being poured at room temperature piles up above the surface of that previously poured, but does not retain a definite form. (e) Microbiological limits. (1) Coliforms, less than 10 per gram; (2) yeasts, less than 5 per gram; (3) molds, less than 5 per gram; (4) total plate count, less than 1,000 per gram. [[Page 150]] (f) Keeping quality. Samples incubated at 90-100 [deg]F shall show no physical evidence of deterioration after seven days. (g) Composition. Shall meet the minimum requirements of the Food and Drug Administration for sweetened condensed milk (21 CFR 131.120). In addition, the quantity of refined sugar used shall be sufficient to give a sugar-in-water ratio of not less than 61.5 percent. (h) Sediment. The amount of sediment retained on a lintine disc after a sample composed of 225 grams of product dissolved in 500 ml. of 140 [deg]F water has passed through it, shall not exceed 0.10 mg. as indicated by the USDA Sediment Standard for Milk and Milk Products (7 CFR 58.2726). [40 FR 47911, Oct. 10, 1975. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 67 FR 48977, July 29, 2002] Subparts C-V [Reserved] Subpart W_United States Department of Agriculture Standard for Ice Cream Source: 42 FR 56717, Oct. 28, 1977, unless otherwise noted. Redesignated at 46 FR 63203, Dec. 31, 1981. Sec. 58.2825 United States Standard for ice cream. (a) Ice cream shall contain at least 1.6 pounds of total solids to the gallon, weigh not less than 4.5 pounds to the gallon, and contain not less than 20 percent total milk solids, constitued of not less than 10 percent milkfat. In no case shall the content of milk solids not fat be less than 6 percent. Whey shall not, by weight, be more than 25 percent of the milk solids not fat. (b) When one or more of the bulky optional ingredients, as approved by the Food and Drug Administration, are used, the weights of milk fat and total milk solids (excusive of such fat and solids in any malted milk used) are not less than 10 percent and 20 percent, respectively, of the remainder obtained by subtracting the weight of such optional ingredients, from the weight of the finished ice cream; but in no case is the weight of milk fat or total milk solids less than 8 percent and 16 percent, respectively, of the weight of the finished ice cream. In calculating the reduction of milk fat and total milk solids from the use of bulky optional ingredients, chocolate and cocoa solids used shall be considered the bulky ingredients. In order to make allowance for additional sweetening ingredients needed when bulky ingredients are used, the weight of chocolate or cocoa solids may be multiplied by 2.5; the weight of fruit or nuts used may be multiplied by 1.4; and the weight of partially or wholly dried fruits or fruit juices may be multiplied by appropriate factors to obtain the original weights before drying and this weight multiplied by 1.4 The finished ice cream contains not less than 1.6 pounds to the gallon; except that when the optional ingredient microcrystalline cellulose is used, the finished ice cream contains not less than 1.6 pounds of total solids to the gallon and weighs not less than 4.5 pounds to the gallon exclusive, in both cases, of the weight of the microcrystalline cellulose. (c) Optional characterizing ingredients, optional sweetening ingredients, stabilizers, and emulsifiers as approved by the Food and Drug Administration may be used. Sec. 58.2826 General identification. Consumer packaged product shall comply with the applicable labeling regulations of the Food and Drug Administration. Sec. 58.2827 Official identification. (a) The official symbol to be used to identify product meeting the USDA standard for ice cream shall be as follows: [GRAPHIC] [TIFF OMITTED] TC25SE91.017 (b) Ice cream manufacturing plants using this symbol shall be USDA approved as set forth in subpart B of this [[Page 151]] regulation, and the ice cream bearing the symbol shall be manufactured under continuous resident or continuous nonresident USDA inspection service in accordance with subpart A of this regulation. The dairy ingredients used in such ice cream shall come from USDA approved plants. PART 59_LIVESTOCK MANDATORY REPORTING--Table of Contents Subpart A_General Provisions Sec. 59.10 General administrative provisions. 59.20 Recordkeeping. 59.30 Definitions. Subpart B_Cattle Reporting 59.100 Definitions. 59.101 Mandatory daily reporting for steers and heifers. 59.102 Mandatory daily reporting for cows and bulls. 59.103 Mandatory weekly reporting for steers and heifers. 59.104 Mandatory reporting of boxed beef sales. Subpart C_Swine Reporting 59.200 Definitions. 59.201 General reporting provisions. 59.202 Mandatory daily reporting for barrows and gilts. 59.203 Mandatory daily reporting for sows and boars. 59.204 Mandatory weekly reporting for swine. 59.205 Mandatory reporting of wholesale pork sales. Subpart D_Lamb Reporting 59.300 Definitions. 59.301 Mandatory daily reporting for lambs. 59.302 Mandatory weekly reporting for lambs. 59.303 Mandatory reporting of lamb carcasses and boxed lamb. Subpart E_OMB Control Number 59.400 OMB control number assigned pursuant to the Paperwork Reduction Act. Authority: 7 U.S.C. 1635-1636i. Source: 73 FR 28633, May 16, 2008, unless otherwise noted. Subpart A_General Provisions Sec. 59.10 General administrative provisions. (a) Reporting by packers and importers. A packer or importer shall report all information required under this part on an individual lot basis. (b) Reporting schedule. Whenever a packer or importer is required to report information on transactions of livestock and livestock products under this part by a set time, all covered transactions up to within one half hour of the reporting deadline shall be reported. Transactions completed during the one half hour prior to the previous reporting time, but not reported in the previous report, shall be reported at the next scheduled reporting time. (c) Regional reporting and aggregation. The Secretary shall make information obtained under this part available to the public only in a manner that: (1) Ensures that the information is published on a national and a regional or statewide basis as the Secretary determines to be appropriate; (2) Ensures that the identity of a reporting person or the entity which they represent is not disclosed; and (3) Market information reported to the Secretary by packers and importers shall be aggregated in such a manner that the market reports issued will not disclose the identity of persons, packers and importers, including parties to a contract and packer's and importer's proprietary information. (d) Adjustments. Prior to the publication of any information required under this part, the Secretary may make reasonable adjustments in information reported by packers and importers to reflect price aberrations or other unusual or unique occurrences that the Secretary determines would distort the published information to the detriment of producers, packers, or other market participants. (e) Reporting of activities on weekends and holidays. Livestock and livestock products committed to a packer, or importer, or purchased, sold, or slaughtered by a packer or importer on a weekend day or holiday shall be reported to the Secretary in accordance [[Page 152]] with the provisions of this Part and reported by the Secretary on the immediately following reporting day. A packer shall not be required to report such actions more than once on the immediately following reporting day. (f) Reporting methods. Whenever information is required to be reported under this part, it shall be reported by electronic means and shall adhere to a standardized format established by the Secretary to achieve the objectives of this part, except in emergencies or in cases when an alternative method is agreeable to the entity required to report and AMS. Sec. 59.20 Recordkeeping. (a) In general. Each packer or importer required to report information to the Secretary under the Act and this Part shall maintain for 2 years and make available to the Secretary the following information on request: (1) The original contracts, agreements, receipts, and other records associated with any transaction relating to the purchase, sale, pricing, transportation, delivery, weighing, slaughter, or carcass characteristics of all livestock or livestock products; and (2) Such records or other information as is necessary or appropriate to verify the accuracy of the information required to be reported under the Act and this Part. (b) Purchases of cattle and swine and sales of boxed beef cuts. A record of a purchase of a lot of cattle or swine, or a sale of a unit of boxed beef cuts, by a packer shall evidence whether the purchase or sale occurred: (1) Before 10 a.m. central time; (2) Between 10 a.m. and 2 p.m. central time; or (3) After 2 p.m. central time. (c) Purchases of lambs. A record of a purchase of a lot of lambs by a packer shall evidence whether the purchase occurred: (1) Before 2 p.m. central time; or (2) After 2 p.m. central time. (d) Sales of lamb carcasses and sales of boxed lamb cuts. A record of a sale by a packer of lamb carcasses and cuts, shall evidence time and date the sale occurred: (1) Before 2 p.m. central time; or (2) After 2 p.m. central time. A record of sale by an importer of lamb cuts shall evidence the date the sale occurred. (e) Reporting sales of boxed beef cuts and sales of boxed lamb cuts. (1) Beef packers must report all sales of boxed beef items by the applicable Institutional Meat Purchase Specifications (IMPS) item number or the boxed beef items' cutting and trimming specifications. (2) Lamb packers and importers must report all sales of boxed lamb items by the applicable Institutional Meat Purchase Specifications (IMPS) item number or the boxed lamb items' cutting and trimming specifications. (f) Reporting sales of wholesale pork. A record of a sale of wholesale pork by a packer shall evidence whether the sale occurred: (1) Before 10:00 a.m. central time; (2) Between 10:00 a.m. and 2:00 p.m. central time; or (3) After 2:00 p.m. central time. [73 FR 28633, May 16, 2008, as amended at 77 FR 50573, Aug. 22, 2012] Sec. 59.30 Definitions. The following definitions apply to this part. Act. The term ``Act'' means Subtitle B of the Agricultural Marketing Act of 1946, as amended; 7 U.S.C. 1635-1636h. Base price. The term ``base price'' means the price paid for livestock, delivered at the packing plant, before application of any premiums or discounts, expressed in dollars per hundred pounds of hot carcass weight. Basis level. The term ``basis level'' means the agreed on adjustment to a future price to establish the final price paid for livestock. Current slaughter week. The term ``current slaughter week'' means the period beginning Monday, and ending Sunday, of the week in which a reporting day occurs. Discount. The term ``discount'' means the adjustment, expressed in dollars per one hundred pounds, subtracted from the base price due to weight, quality characteristics, yield characteristics, livestock class, dark cutting, breed, dressing percentage, or other characteristic. Exported. The term ``exported'' means livestock or livestock products that [[Page 153]] are physically shipped to locations outside of the 50 States. F.O.B. The term ``F.O.B.'' means free on board, regardless of the mode of transportation, at the point of direct shipment by the seller to the buyer (e.g., F.O.B. Plant, F.O.B. Feedlot) or from a common basis point to the buyer (e.g., F.O.B. Omaha). Imported. The term ``imported'' means livestock that are raised to slaughter weight outside of the 50 States or livestock products produced outside of the 50 States. Institutional Meat Purchase Specifications. Specifications describing various meat cuts, meat products, and meat food products derived from all livestock species, commonly abbreviated ``IMPS'', and intended for use by any meat procuring activity. Copies of the IMPS may be obtained from the U.S. Department of Agriculture, Agricultural Marketing Service, Livestock and Seed Program located at Room 2603 South Building, 1400 Independence Ave., SW., Washington, DC 20250. Phone (202) 260-8295 or Fax (202) 720-1112. Copies may also be obtained over the Internet at http://www.ams.usda.gov/AMSv1.0/ LivestockStandardizationIMPS. Livestock. The term ``livestock'' means cattle, swine, and lambs. Lot. (1) When used in reference to livestock, the term ``lot'' means a group of one or more livestock that is identified for the purpose of a single transaction between a buyer and a seller; (2) When used in reference to lamb carcasses, the term ``lot'' means a group of one or more lamb carcasses sharing a similar weight range category and comprising a single transaction between a buyer and seller; or (3) When used in reference to boxed beef, wholesale pork, and lamb, the term `lot' means a group of one or more boxes of beef, wholesale pork, or lamb items sharing cutting and trimming specifications and comprising a single transaction between a buyer and seller. Marketing. The term ``marketing'' means the sale or other disposition of livestock, livestock products, or meat or meat food products in commerce. Negotiated purchase. The term ``negotiated purchase'' means a cash or spot market purchase by a packer of livestock from a producer under which the base price for the livestock is determined by seller-buyer interaction and agreement on a delivery day. The livestock are scheduled for delivery to the packer not more than 14 days after the date on which the livestock are committed to the packer. Negotiated grid purchase. The term ``negotiated grid purchase'' in reference to cattle means the negotiation of a base price, from which premiums are added and discounts are subtracted, determined by seller- buyer interaction and agreement on a delivery day. The livestock are scheduled for delivery to the packer not more than 14 days after the date on which the livestock are committed to the packer. Negotiated sale. The term ``negotiated sale'' means a cash or spot market sale by a producer of livestock to a packer under which the base price for the livestock is determined by seller-buyer interaction and agreement on a delivery day. The livestock are scheduled for delivery to the packer not later than 14 days after the date on which the livestock are committed to the packer. When used in reference to sales of boxed beef or lamb cuts or lamb carcasses the term ``negotiated sale'' means a sale by a packer selling boxed beef or lamb cuts or lamb carcasses to a buyer of boxed beef or lamb cuts or lamb carcasses under which the price for the boxed beef or lamb cuts or lamb carcasses is determined by seller-buyer interaction and agreement on a day. Origin. The term ``origin'' means the State where the livestock were fed to slaughter weight. Percent lean. The term ``percent lean'' means the value equal to the average percentage of the carcass weight comprised of lean meat. Person. The term ``person'' means any individual, group of individuals, partnership, corporation, association, or other entity. Premium. The term ``premium'' means the adjustment, expressed in dollars per one hundred pounds, added to the base price due to weight, quality characteristics, yield characteristics, livestock class, and breed. Priced. The term ``priced'' means the time when the final price is determined [[Page 154]] either through buyer-seller interaction and agreement or as a result of some other price determining method. Prior slaughter week. The term prior ``slaughter week'' means the Monday through Sunday prior to a reporting day. Producer. The term ``producer'' means any person engaged in the business of selling livestock to a packer for slaughter (including the sale of livestock from a packer to another packer). Purchased. The term ``purchased'' means the agreement on a price, or the method for calculating a price, determined through buyer-seller interaction and agreement. Reporting day. The term ``reporting day'' means a day on which a packer conducts business regarding livestock committed to the packer, or livestock purchased, sold, or slaughtered by the packer; the Secretary is required to make such information available to the public; and the Department of Agriculture is open to conduct business. Secretary. The term ``Secretary'' means the Secretary of Agriculture of the United States or any other officer or employee of the Department of Agriculture to whom authority has been delegated or may hereafter be delegated to act in the Secretary's stead. State. The term ``State'' means each of the 50 States. [73 FR 28633, May 16, 2008, as amended at 77 FR 50573, Aug. 22, 2012] Subpart B_Cattle Reporting Sec. 59.100 Definitions. The following definitions apply to this subpart. Boxed beef. The term ``boxed beef'' means those carlot-based portions of a beef carcass including fresh and frozen primals, subprimals, cuts fabricated from subprimals (excluding portion-control cuts such as chops and steaks similar to those portion cut items described in the Institutional Meat Purchase Specifications (IMPS) for Fresh Beef Products Series 100), thin meats (e.g. inside and outside skirts, pectoral meat, cap and wedge meat, and blade meat), and fresh and frozen ground beef, beef trimmings, and boneless processing beef. Branded. The term ``branded'' means boxed beef cuts produced and marketed under a corporate trademark (for example, products that are marketed on their quality, yield, or breed characteristics), or boxed beef cuts produced and marketed under one of USDA's Meat Grading and Certification Branch, Certified Beef programs. Carcass characteristics. The term ``carcass characteristics'' means the range and average carcass weight in pounds, the quality grade and yield grade (if applicable), and the average cattle dressing percentage. Carlot-based. The term ``carlot-based'' means any transaction between a buyer and a seller destined for two or less delivery stops consisting of one or more individual boxed beef items. When used in reference to cow and bull boxed beef items, the term ``carlot-based'' means any transaction between a buyer and seller consisting of 2,000 pounds or more of one or more individual items. Cattle committed. The term ``cattle committed'' means cattle that are scheduled to be delivered to a packer within the 7-day period beginning on the date of an agreement to sell the cattle. Cattle type. The term ``cattle type'' means the following types of cattle purchased for slaughter: (1) Fed steers; (2) Fed heifers; (3) Fed Holsteins and other fed dairy steers and heifers; (4) Cows; and (5) Bulls. Established. The term ``established'', when used in connection with prices, means that point in time when the buyer and seller agree upon a net price. Formula marketing arrangement. (1) When used in reference to live cattle, the term ``formula marketing arrangement'' means the advance commitment of cattle for slaughter by any means other than through a negotiated purchase or a forward contract, using a method for calculating price in which the price is determined at a future date. (2) When used in reference to boxed beef, the term ``formula marketing arrangement'' means the advance commitment of boxed beef by any means [[Page 155]] other than through a negotiated purchase or a forward contract, using a method for calculating price in which the price is determined at a future date. Forward contract. (1) When used in reference to live cattle, the term ``forward contract'' means an agreement for the purchase of cattle, executed in advance of slaughter, under which the base price is established by reference to prices quoted on the Chicago Mercantile Exchange, or other comparable publicly available prices. (2) When used in reference to boxed beef, the term ``forward contract'' means an agreement for the sale of boxed beef, executed in advance of manufacture, under which the base price is established by reference to publicly available quoted prices. Packer. The term ``packer'' means any person engaged in the business of buying cattle in commerce for purposes of slaughter, of manufacturing or preparing meats or meat food products from cattle for sale or shipment in commerce, or of marketing meats or meat food products from cattle in an unmanufactured form acting as a wholesale broker, dealer, or distributor in commerce. For any calendar year, the term ``packer'' includes only a federally inspected cattle processing plant that slaughtered an average of 125,000 head of cattle per year during the immediately preceding 5 calendar years. Additionally, in the case of a cattle processing plant that did not slaughter cattle during the immediately preceding 5 calendar years, it shall be considered a packer if the Secretary determines the processing plant should be considered a packer under this subpart after considering its capacity. Packer-owned cattle. The term ``packer-owned cattle'' means cattle that a packer owns for at least 14 days immediately before slaughter. Prices for cattle. The term ``prices for cattle'' includes the price per hundredweight; the purchase type; the quantity on a live and a dressed weight basis; the estimated live weight range; the average live weight; the estimated percentage of cattle of a USDA quality grade Choice or better; beef carcass classification; any premiums or discounts associated with weight, quality grade, yield grade, or type of purchase; cattle State of origin; estimated cattle dressing percentage; and price basis as F.O.B. feedlot or delivered at the plant. Terms of trade. The term ``terms of trade'' means, with respect to the purchase of steers and heifers for slaughter: (1) Whether a packer provided any financing agreement or arrangement with regard to the steers and heifers; (2) Whether the delivery terms specified the location of the producer or the location of the packer's plant; (3) Whether the producer is able to unilaterally specify the date and time during the business day of the packer that the cattle are to be delivered for slaughter; and (4) The percentage of steers and heifers purchased by a packer as a negotiated purchase that are scheduled to be delivered to the plant for slaughter not later than 14 days and the percentage of slaughter steers and heifers purchased by a packer as a negotiated purchase that are scheduled to be delivered to the plant for slaughter more than 14 days, but fewer than 30 days. Type of purchase. The term ``type of purchase'' with respect to cattle, means a negotiated purchase, negotiated grid purchase, a formula market arrangement, and a forward contract. Type of sale. The term ``type of sale'' with respect to boxed beef, means a negotiated sale, a formula market arrangement, and a forward contract. White cow. Cow on a ration that tends to produce white fat. Sec. 59.101 Mandatory daily reporting for steers and heifers. (a) In general. The corporate officers or officially designated representatives of each steer and heifer packer processing plant shall report to the Secretary at least two times each reporting day not later than 10 a.m. central time and not later than 2 p.m. central time the following information, inclusive since the last reporting, categorized to clearly delineate domestic from imported market purchases as described in Sec. 59.10(b). (1) The prices for cattle (per hundredweight) established on that day, categorized by: (i) The type of purchase; [[Page 156]] (ii) The quantity of cattle purchased on a live weight basis; (iii) The quantity of cattle purchased on a dressed weight basis; (iv) The estimated weights of cattle purchased; (v) An estimate of the percentage of the cattle purchased that were of a quality grade of Choice or better; and (vi) Any premiums or discounts associated with weight, quality grade, yield grade, or other characteristic expressed in dollars per hundredweight on a dressed basis. (2) The quantity of cattle delivered to the packer (quoted in numbers of head) on that day, categorized by: (i) The type of purchase; (ii) The quantity of cattle delivered on a live weight basis; and (iii) The quantity of cattle delivered on a dressed weight basis. (3) The quantity of cattle committed to the packer (quoted in numbers of head) as of that day, categorized by: (i) The type of purchase; (ii) The quantity of cattle committed on a live weight basis; and (iii) The quantity of cattle committed on a dressed weight basis. (4) The terms of trade regarding the cattle, as applicable. (b) Publication. The Secretary shall make the information available to the public not less frequently than three times each reporting day. Sec. 59.102 Mandatory daily reporting for cows and bulls. (a) In General. The corporate officers or officially designated representatives of each cow and bull packer processing plant shall report to the Secretary each reporting day the following information for each cattle type, inclusive since the last reporting, categorized to clearly delineate domestic from imported market purchases as described in Sec. 59.10(b). (1) The base bid price (per hundredweight) intended to be paid for slaughter cow and bull carcasses on that day not later than 10 a.m. central time categorized by: (i) Weight; and (ii) For slaughter cows, percent lean (e.g., breaker, boner, cutter (lean)). (2) The prices for cattle (per hundredweight) purchased during the previous day not later than 2 p.m. central time categorized by: (i) The type of purchase; (ii) The quantity of cattle purchased on a live weight basis; (iii) The quantity of cattle purchased on a dressed weight basis; (iv) The estimated weight of the cattle purchased; (v) The quality classification; and (vi) Any premiums or discounts associated with weight or quality expressed in dollars per hundredweight on a dressed basis. (3) The volume of cows and bulls slaughtered the previous day. (b) Publication. The Secretary shall make the information available to the public within one hour of the required reporting time on the reporting day on which the information is received from the packer. Sec. 59.103 Mandatory weekly reporting for steers and heifers. (a) In general. The corporate officers or officially designated representatives of each steer and heifer packer processing plant shall report to the Secretary on the first reporting day of each week, not later than 9 a.m. central time, the following information applicable to the prior slaughter week, categorized to clearly delineate domestic from imported market purchases: (1) The quantity of cattle purchased through a negotiated basis that were slaughtered; (2) The quantity of cattle purchased through a negotiated grid basis that were slaughtered; (3) The quantity of cattle purchased through forward contracts that were slaughtered; (4) The quantity of cattle delivered under a formula marketing arrangement that were slaughtered; (5) The quantity and carcass characteristics of packer-owned cattle that were slaughtered; (6) The quantity, basis level, basis level month, and delivery month and year for all cattle purchased through forward contracts; (7) The range and average of intended premiums and discounts (including those associated with weight, quality grade, yield grade, or type of cattle) [[Page 157]] that are expected to be in effect for the current slaughter week. (b) Publication. The Secretary shall make available to the public the information obtained under paragraph (a) of this section on the first reporting day of the current slaughter week by 10 a.m. central time. Sec. 59.104 Mandatory reporting of boxed beef sales. (a) Daily reporting. The corporate officers or officially designated representatives of each packer processing plant shall report to the Secretary at least twice each reporting day (once by 10 a.m. central time, and once by 2 p.m. central time) the following information on total boxed beef domestic and export sales established on that day inclusive since the last reporting as described in Sec. 59.10(b): (1) The price for each lot of each boxed beef sale, quoted in dollars per hundredweight on a F.O.B. plant basis; (2) The quantity for each lot of each sale, quoted by number of pounds sold; and (3) The information regarding the characteristics of each sale is as follows: (i) The type of sale; (ii) The branded product characteristics, if applicable; (iii) The grade for steer and heifer beef (e.g., USDA Prime, USDA Choice or better, USDA Choice, USDA Select, ungraded no-roll product); (iv) The grade for cow beef or packer yield and/or quality sort for cow beef (e.g., Breakers, Boners, White Cow, Cutters (lean)); (v) The cut of beef, referencing the most recent version of the Institutional Meat Purchase Specifications (IMPS), when applicable; (vi) The trim specification; (vii) The weight range of the cut; (viii) The product delivery period; and (ix) The beef type (steer/heifer, dairy steer/heifer, or cow). (b) Publication. The Secretary shall make available to the public the information obtained under paragraph (a) of this section not less frequently than twice each reporting day. Subpart C_Swine Reporting Sec. 59.200 Definitions. The following definitions apply to this subpart. Affiliate. The term ``affiliate'', with respect to a packer, means: (1) A person that directly or indirectly owns, controls, or holds with power to vote, 5 percent or more of the outstanding voting securities of the packer; (2) A person 5 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the packer; and (3) A person that directly or indirectly controls, or is controlled by or under common control with, the packer. Applicable reporting period. The term ``applicable reporting period'' means the period of time prescribed by the prior day report, the morning report, and the afternoon report, as provided in Sec. 59.202. Average carcass weight. The term ``average carcass weight'' means the weight obtained by dividing the total carcass weight of the swine slaughtered at the packing plant during the applicable reporting period by the number of these same swine. Average lean percentage. The term ``average lean percentage'' means the value equal to the average percentage of the carcass weight comprised of lean meat for the swine slaughtered during the applicable reporting period. Whenever the packer changes the manner in which the average lean percentage is calculated, the packer shall make available to the Secretary the underlying data, applicable methodology and formulae, and supporting materials used to determine the average lean percentage, which the Secretary may convert either to the carcass measurements or lean percentage of the swine of the individual packer to correlate to a common percent lean measurement. Average net price. The term ``average net price'' means the quotient (stated per hundred pounds of carcass weight of swine) obtained by dividing the total amount paid for the swine slaughtered [[Page 158]] at a packing plant during the applicable reporting period (including all premiums and less all discounts) by the total carcass weight of the swine (in hundred pound increments). Average sort loss. The term ``average sort loss'' means the average discount (in dollars per hundred pounds carcass weight) for swine slaughtered during the applicable reporting period, resulting from the fact that the swine did not fall within the individual packer's established carcass weight range or lot variation range. Backfat. The term ``backfat'' means the fat thickness (in inches) measured between the third and fourth rib from the last rib, 7 centimeters from the carcass split (or adjusted from the individual packer's measurement to that reference point using an adjustment made by the Secretary) of the swine slaughtered during the applicable reporting period. Barrow. The term ``barrow'' means a neutered male swine, with the neutering performed before the swine reached sexual maturity. Base market hog. The term ``base market hog'' means a barrow or gilt for which no discounts are subtracted from and no premiums are added to the base price. Base price. The term ``base price'' means the price from which no discounts are subtracted and no premiums are added. Boars. The term ``boar'' means a sexually-intact male swine. Bred female swine. The term ``bred female swine'' means any female swine, whether a sow or gilt, that has been mated or inseminated, or has been confirmed, to be pregnant. Formula marketing arrangement. When used in reference to wholesale pork, the term `formula marketing arrangement' means an agreement for the sale of pork under which the price is established in reference to publicly-available quoted prices. Formula price. The term ``formula price'' means a price determined by a mathematical formula under which the price established for a specified market serves as the basis for the formula. Forward sale. When used in reference to wholesale pork, the term `forward sale' means an agreement for the sale of pork where the delivery is beyond the timeframe of a ``negotiated sale'' and means a sale by a packer selling wholesale pork to a buyer of wholesale pork under which the price is determined by seller-buyer interaction and agreement. Gilt. The term ``gilt'' means a young female swine that has not produced a litter. Hog Class. The term ``hog class'' means, as applicable, barrows or gilts; sows; or boars or stags. Inferior swine. The term ``inferior swine'' means swine that are discounted in the market place due to light-weight, health, or physical conditions that affects their value. Loin depth. The term ``loin depth'' means the muscle depth (in inches) measured between the third and fourth ribs from the last rib, 7 centimeters from the carcass split (or adjusted from the individual packer's measurement to that reference point using an adjustment made by the Secretary) of the swine slaughtered during the applicable reporting period. Negotiated formula purchase. The term ``negotiated formula purchase'' means a swine or pork market formula purchase under which: (1) The formula is determined by negotiation on a lot-by-lot basis; and (2) The swine are scheduled for delivery to the packer not later than 14 days after the date on which the formula is negotiated and swine are committed to the packer. Negotiated sale. The term `negotiated sale' means a sale by a packer selling wholesale pork to a buyer of wholesale pork under which the price is determined by seller-buyer interaction and agreement, and scheduled for delivery not later than 14 days for boxed product and 10 days for combo product after the date of agreement. The day after the seller-buyer agreement shall be considered day one for reporting delivery periods. Net price. The term ``net price'' means the total amount paid by a packer to a producer (including all premiums, less all discounts) per hundred pounds of carcass weight of swine delivered at the plant. The total amount paid shall include any sum deducted from the price (per hundredweight) [[Page 159]] paid to a producer that reflects the repayment of a balance owed by the producer to the packer or the accumulation of a balance to later be repaid by the packer to the producer. The total amount paid shall exclude any sum earlier paid to a producer that must be repaid to the packer. Noncarcass merit premium. The term ``noncarcass merit premium'' means an increase in the base price of the swine offered by an individual packer or packing plant, based on any factor other than the characteristics of the carcass, if the actual amount of the premium is known before the sale and delivery of the swine. Other market formula purchase. The term ``other market formula purchase'' means a purchase of swine by a packer in which the pricing mechanism is a formula price based on any market other than the market for swine, pork, or a pork product. The term ``other market formula purchase'' includes a formula purchase in a case which the price formula is based on 1 or more futures or options contracts. Other purchase arrangement. The term ``other purchase arrangement'' means a purchase of swine by a packer that is not a negotiated purchase, swine or pork market formula purchase, negotiated formula purchase, or other market formula purchase; and does not involve packer-owned swine. Packer. The term ``packer'' means any person engaged in the business of buying swine in commerce for purposes of slaughter, of manufacturing or preparing meats or meat food products from swine for sale or shipment in commerce, or of marketing meats or meat food products from swine in an unmanufactured form acting as a wholesale broker, dealer, or distributor in commerce. For any calendar year, the term ``packer'' includes only a federally inspected swine processing plant that slaughtered an average of 100,000 head of swine per year during the immediately preceding 5 calendar years and a person that slaughtered an average of 200,000 head of sows, boars, or combination thereof per year during the immediately preceding 5 calendar years. Additionally, in the case of a swine processing plant or person that did not slaughter swine during the immediately preceding 5 calendar years, it shall be considered a packer if the Secretary determines the processing plant or person should be considered a packer under this subpart after considering its capacity. Packer-owned swine. The term ``packer-owned swine'' means swine that a packer (including a subsidiary or affiliate of the packer) owns for at least 14 days immediately before slaughter. Packer-sold swine. The term ``packer-sold swine'' means the swine that are owned by a packer (including a subsidiary or affiliate of the packer) for more than 14 days immediately before sale for slaughter; and sold for slaughter to another packer. Pork. The term ``pork'' means the meat of a porcine animal. Pork class. The term ``pork class'' means the following types of swine purchased for slaughter: (1) Barrow/gilt; (2) Sow; (3) Boar. Pork product. The term ``pork product'' means a product or byproduct produced or processed in whole or in part from pork. Purchase data. The term ``purchase data'' means all of the applicable data, including base price and weight (if purchased live), for all swine purchased during the applicable reporting period, regardless of the expected delivery date of the swine, reported by: (1) Hog class; (2) Type of purchase; and (3) Packer-owned swine. Slaughter data. The term ``slaughter data'' means all of the applicable data for all swine slaughtered by a packer during the applicable reporting period, regardless of whether the price of the swine was negotiated or otherwise determined, reported by: (1) Hog class; (2) Type of purchase; and (3) Packer-owned swine. Sow. The term ``sow'' means an adult female swine that has produced 1 or more litters. Specialty pork product. The term `specialty pork product' means wholesale pork produced and marketed under any specialty program such as, but not limited to, genetically-selected pork, certified programs, or specialty selection [[Page 160]] programs for quality or breed characteristics. Stag. The term ``stag'' means a male swine that was neutered after reaching sexual maturity. Swine. The term ``swine'' means a porcine animal raised to be a feeder pig, raised for seedstock, or raised for slaughter. Swine committed. The term ``swine committed'' means swine scheduled and delivered to a packer within the 14-day period beginning on the date of an agreement to sell the swine. Swine or pork market formula purchase. The term ``swine or pork market formula purchase'' means a purchase of swine by a packer in which the pricing mechanism is a formula price based on a market for swine, pork, or a pork product, other than a future or option for swine, pork, or a pork product. Type of purchase. The term ``type of purchase'', with respect to swine, means: (1) A negotiated purchase; (2) Other market formula purchase; (3) A swine or pork market formula purchase; (4) Other purchase arrangement; and (5) A negotiated formula purchase. Type of sale. The term ``type of sale'' with respect to wholesale pork means a negotiated sale, forward sale, or formula marketing arrangement. Variety meats. The term `variety meats' with respect to wholesale pork means cut/processing floor items, such as neck bones, tails, skins, feet, hocks, jowls, and backfat. Wholesale pork. The term `wholesale pork' means fresh and frozen primals, sub-primals, cuts fabricated from sub-primals, pork trimmings, pork for processing, and variety meats (excluding portion-control cuts, cuts flavored above and beyond normal added ingredients that are used to enhance products, cured, smoked, cooked, and tray packed products). When referring to wholesale pork, added ingredients are used to enhance the product's performance (e.g. tenderness, juiciness) through adding a solution or emulsion via an injection or immersion process. The ingredients shall be limited to water, salt, sodium phosphate, antimicrobials, or any other similar combination of foresaid or similar ingredients and in accordance with established USDA regulations. [73 FR 28633, May 16, 2008, as amended at 77 FR 50573, Aug. 22, 2012; 81 FR 52973, Aug. 11, 2016] Sec. 59.201 General reporting provisions. (a) Packer-owned swine. Information required under this section for packer-owned swine shall include quantity and carcass characteristics, but not price. (b) Type of purchase. If information regarding the type of purchase is required under this section, the information shall be reported according to the numbers and percentages of each type of purchase comprising: (1) Packer-sold swine; and (2) All other swine. Sec. 59.202 Mandatory daily reporting for barrows and gilts. (a) Prior day report. The corporate officers or officially designated representatives of each packer that processes barrows and gilts shall report to the Secretary for each business day of the packer not later than 7 a.m. central time on each reporting day information regarding all barrows and gilts purchased or priced, during the prior business day of the packer, and not later than 9 a.m. central time on each reporting day information regarding all barrows and gilts slaughtered, excluding inferior swine, as specified in Sec. 59.10(b): (1) All purchase data, reported by lot, including: (i) The total number of barrows and gilts purchased; (ii) The total number of barrows and gilts scheduled for delivery to a packer for slaughter; (iii) The base price and weight for all barrows and gilts purchased on a live weight basis; and (iv) The base price and premiums and discounts paid for carcass characteristics for all barrows and gilts purchased on a carcass basis for which a price has been established. For barrows and gilts that were not priced, this information shall be reported on the next prior day report after the price is established. (2) The following slaughter data for the total number of barrows and gilts slaughtered: (i) The average net price; [[Page 161]] (ii) The average carcass weight; (iii) The average sort loss; (iv) The average backfat; (v) The average loin depth; (vi) The average lean percentage; and (vii) Total quantity slaughtered. (3) Packer purchase commitments, which shall be equal to the number of barrows and gilts scheduled for delivery to a packer for slaughter for each of the next 14 calendar days. (4) The Secretary shall publish the information obtained in paragraph (a) of this section in a prior day report not later than 8 a.m. central time for all barrows and gilts purchased and 10 a.m. central time for all barrows and gilts slaughtered on the reporting day on which the information is received from the packer. In addition, the Secretary shall publish a net price distribution for all barrows and gilts slaughtered on the previous day not later than 3 p.m. central time. (b) Morning report. The corporate officers or officially designated representatives of each packer processing plant that processes barrows and gilts shall report to the Secretary not later than 10 a.m. central time each reporting day as described in Sec. 59.10(b): (1) The packer's best estimate of the total number of barrows and gilts, and barrows and gilts that qualify as packer-owned swine, expected to be purchased throughout the reporting day through each type of purchase; (2) The total number of barrows and gilts, and barrows and gilts that qualify as packer-owned swine, purchased since 1:30 p.m. central time of the previous reporting day and up to that time of the reporting day through each type of purchase; (3) All purchase data for base market hogs purchased since 1:30 p.m. central time of the previous reporting day and up to that time of the reporting day through negotiated purchases; (4) All purchase data for base market hogs purchased through each type of purchase other than negotiated purchase since 1:30 p.m. central time of the previous reporting day and up to that time of the reporting day, unless such information is unavailable due to pricing that is determined on a delayed basis. The packer shall report information on such purchases on the first reporting day or scheduled reporting time on a reporting day after the price has been determined. (5) The Secretary shall publish the information obtained in paragraph (b) of this section in the morning report as soon as practicable, but not later than 11 a.m. central time, on each reporting day. (c) Afternoon report. The corporate officers or officially designated representatives of each packer processing plant that processes barrows and gilts shall report to the Secretary not later than 2 p.m. central time each reporting day as described in Sec. 59.10(b): (1) The packer's best estimate of the total number of barrows and gilts, and barrows and gilts that qualify as packer-owned swine expected to be purchased throughout the reporting day through each type of purchase; (2) The total number of barrows and gilts, and barrows and gilts that qualify as packer-owned swine, purchased up to that time of the reporting day through each type of purchase; (3) The base price paid for all base market hogs purchased up to that time of the reporting day through negotiated purchases; and (4) The base price paid for all base market hogs purchased through each type of purchase other than negotiated purchase up to that time of the reporting day, unless such information is unavailable due to pricing that is determined on a delayed basis. The packer shall report information on such purchases on the first reporting day or scheduled reporting time on a reporting day after the price has been determined. (5) The Secretary shall publish the information obtained in paragraph (c) of this section in the afternoon report as soon as practicable, but not later than 3 p.m. central time, on each reporting day. [73 FR 28633, May 16, 2008, as amended at 81 FR 52974, Aug. 11, 2016] Sec. 59.203 Mandatory daily reporting for sows and boars. (a) Prior day report. The corporate officers or officially designated representatives of each packer of sows and boars shall report to the Secretary for each business day of the packer not [[Page 162]] later than 7 a.m. central time on each reporting day information regarding all sows and boars purchased or priced, excluding inferior swine, during the prior business day of the packer all purchase data, reported by lot, including: (1) The total number of sows and boars purchased divided into at least three weight groups as specified by the Secretary; (2) The average price paid by each purchase type for all sows in each weight class specified by the Secretary; and (3) The average price paid by each purchase type for all boars in each weight class specified by the Secretary. (4) The packer is required to report only the volume of sows and boars that qualify as packer owned swine and shall omit packer owned sows and boars from all average price calculations. (b) Publication. The Secretary shall publish the information obtained in paragraph (a) of this section as soon as practicable, but not later than 8 a.m. central time, on the reporting day on which the information is received from the packer. Sec. 59.204 Mandatory weekly reporting for swine. (a) Weekly noncarcass merit premium report. Not later than 4 p.m. central time in accordance with Sec. 59.10(b) on the first reporting day of each week, the corporate officers or officially designated representatives of each packer processing plant shall report to the Secretary a noncarcass merit premium report that lists: (1) Each category of standard noncarcass merit premiums used by the packer in the prior slaughter week; and (2) The dollar value (in dollars per hundred pounds of carcass weight) paid to producers by the packer, by category. (b) Premium list. A packer shall maintain and make available to a producer, on request, a current listing of the dollar values (per hundred pounds of carcass weight) of each noncarcass merit premium used by the packer during the current or the prior slaughter week. (c) Publication. The Secretary shall publish the information obtained under this subsection as soon as practicable, but not later than 5 p.m. central time, on the first reporting day of each week. Sec. 59.205 Mandatory reporting of wholesale pork sales. (a) Daily reporting. The corporate officers or officially designated representatives of each packer processing plant shall report to the Secretary at least twice each reporting day for barrows and gilts (once by 10 a.m. central time, and once by 2 p.m. central time) and once each reporting day for sows and boars (by 2 p.m. central time) the following information on total pork sales established on that day inclusive since the last reporting as described in Sec. 59.10(b): (1) The price for each wholesale pork sale, as defined herein, quoted in dollars per hundredweight on an F.O.B. Plant and an F.O.B. Omaha basis as outlined in Sec. 59.205(d). The price shall include brokerage fees, if applicable. All direct, specific, and identifiable marketing costs (such as point of purchase material, marketing funds, accruals, rebates, and export costs) shall be deducted from the net price if applicable and known at the time of sale; (2) The quantity for each pork sale, quoted by number of pounds sold; and (3) The information regarding the characteristics of each sale is as follows: (i) The type of sale; (ii) Pork item description; (iii) Pork item product code; (iv) The product delivery period, in calendar days; (v) The pork class (barrow/gilt, sow, boar); (vi) Destination (Domestic, Export/Overseas, NAFTA); (vii) Type of Refrigeration (Fresh, Frozen, age range of fresh product); and (viii) Specialty pork product, if applicable (b) Publication. The Secretary shall make available to the public the information obtained under paragraph (a) of this section not less frequently than twice each reporting day for gilt and barrow product and once each reporting day for sow and boar product. (c) The Secretary shall obtain product specifications upon request. [[Page 163]] (d) The Secretary shall provide freight information for the purpose of calculating prices on an F.O.B. Omaha basis. The Secretary shall provide this information periodically, but not less than quarterly. [77 FR 50574, Aug. 22, 2012] Subpart D_Lamb Reporting Sec. 59.300 Definitions. The following definitions apply to this subpart. Boxed lamb. The term ``boxed lamb'' means those carlot-based portions of a lamb carcass including fresh primals, subprimals, cuts fabricated from subprimals excluding portion-control cuts such as chops and steaks similar to those portion cut items described in the Institutional Meat Purchase Specifications (IMPS) for Fresh Lamb and Mutton Series 200, and thin meats (e.g., inside and outside skirts, pectoral meat, cap and wedge meat, and blade meat) not older than 14 days from date of manufacture; fresh ground lamb, lamb trimmings, and boneless processing lamb not older than 7 days from date of manufacture; frozen primals, subprimals, cuts fabricated from subprimals, and thin meats not older than 180 days from date of manufacture; and frozen ground lamb, lamb trimmings, and boneless processing lamb not older than 90 days from date of manufacture. Branded. The term ``branded'' means boxed lamb cuts produced and marketed under a corporate trademark (for example, products that are marketed on their quality, yield, or breed characteristics), or boxed lamb cuts produced and marketed under one of USDA's Meat Grading and Certification Branch, Certified programs. Carcass characteristics. The term ``carcass characteristics'' means the range and average carcass weight in pounds, the quality grade and yield grade (if applicable), and the lamb average dressing percentage. Carlot-based. The term ``carlot-based'' means any transaction between a buyer and a seller destined for three or less delivery stops consisting of any combination of carcass weights. When used in reference to boxed lamb cuts the term ``carlot-based'' means any transaction between a buyer and seller consisting of 1,000 pounds or more of one or more individual boxed lamb items. Established. The term ``established'', when used in connection with prices, means that point in time when the buyer and seller agree upon a net price. Formula marketing arrangement. (1) When used in reference to live lambs, the term ``formula marketing arrangement'' means the advance commitment of lambs for slaughter by any means other than through a negotiated purchase or a forward contract, using a method for calculating price in which the price is determined at a future date. (2) When used in reference to boxed lamb, the term ``formula marketing arrangement'' means the advance commitment of boxed lamb by any means other than through a negotiated purchase or a forward contract, using a method for calculating price in which the price is determined at a future date. Forward contract. (1) When used in reference to live lambs, the term ``forward contact'' means an agreement for the purchase of lambs, executed in advance of slaughter, under which the base price is established by reference to publicly available prices. (2) When used in reference to boxed lamb, the term ``forward contract'' means an agreement for the sale of boxed lamb, executed in advance of manufacture, under which the base price is established by reference to publicly available quoted prices. Importer. The term ``importer'' means any person engaged in the business of importing lamb meat products with the intent to sell or ship in U.S. commerce. For any calendar year, the term includes only those that imported an average of 1,000 metric tons of lamb meat products per year during the immediately preceding 4 calendar years. Additionally, the term includes those that did not import an average 1,000 [[Page 164]] metric tons of lamb meat products during the immediately preceding 4 calendar years, if the Secretary determines that the person should be considered an importer based on their volume of lamb imports. Packer. The term ``packer'' means any person with 50 percent or more ownership in a facility engaged in the business of buying lambs in commerce for purposes of slaughter, of manufacturing or preparing meat products from lambs for sale or shipment in commerce, or of marketing meats or meat products from lambs in an unmanufactured form acting as a wholesale broker, dealer, or distributor in commerce. For any calendar year, the term includes only a federally inspected lamb processing plant which slaughtered or processed the equivalent of an average of 35,000 head of lambs per year during the immediately preceding 5 calendar years. Additionally, the term includes a lamb processing plant that did not slaughter or process an average of 35,000 lambs during the immediately preceding 5 calendar years if the Secretary determines that the processing plant should be considered a packer after considering its capacity. Packer-owned lambs. The term ``packer-owned lambs'' means lambs that a packer owns for at least 28 days immediately before slaughter. Type of purchase. The term ``type of purchase'' means a negotiated purchase, a formula market arrangement, and a forward contract. Type of sale. The term ``type of sale'' with respect to boxed lamb, means a negotiated sale, a formula market arrangement, and a forward contract. Yield grade lamb carcass reporting. The term ``yield grade lamb carcass reporting'' means if the lot includes 80 percent or more of one yield grade, the lot will be considered a single yield grade lot. If the lot contains less than 80 percent of one yield grade, the lot will be considered a mixed grade lot and all yield grades comprising 10 percent or more will be used to describe the lot. [73 FR 28633, May 16, 2008, as amended at 81 FR 10062, Feb. 29, 2016; 81 FR 52974, Aug. 11, 2016] Sec. 59.301 Mandatory Daily Reporting for Lambs. (a) In general. The corporate officers or officially designated representatives of each packer processing plant shall report to the Secretary at least once each reporting day not later than 2 p.m. central time the prices for lambs (per hundredweight) established on that day as F.O.B. feedlot or delivered at the plant, categorized to clearly delineate domestic from imported market purchases as described in Sec. 59.10(b) and categorized by: (1) The type of purchase; (2) The class of lamb; (3) The quantity of lambs purchased on a live weight basis; (4) The quantity of lambs purchased on a dressed weight basis; (5) A range and average of estimated live weights of lambs purchased; (6) An estimate of the percentage of the lambs purchased that were of a quality grade of Choice or better; (7) Any premiums or discounts associated with weight, quality grade, yield grade, or any type of purchase; (8) Lamb state of origin; (9) The pelt type; and (10) The estimated lamb dressing percentage. (b) Publication. The Secretary shall make the information available to the public not less than once each reporting day. Sec. 59.302 Mandatory weekly reporting for lambs. (a) In general. The corporate officers or officially designated representatives of each packer processing plant shall report to the Secretary the following information applicable to the prior slaughter week contained in paragraphs (a)(1) through (a)(5) and (a)(7) of this section not later than 9 a.m. central time on the second reporting day of the current slaughter week, and the following information applicable to the prior slaughter week contained in paragraph (a)(6) of this section not later than 9 a.m. central time on the first reporting day of the current slaughter week categorized to clearly delineate domestic from imported market purchases: [[Page 165]] (1) The quantity of lambs purchased through a negotiated purchase that were slaughtered; (2) The quantity of lambs purchased through forward contracts that were slaughtered; (3) The quantity of lambs delivered under a formula marketing arrangement that were slaughtered; (4) The quantity and carcass characteristics of packer-owned lambs that were slaughtered; (5) The quantity, basis level, and delivery month for all lambs purchased through forward contracts; (6) The following information applicable to the current slaughter week. The range and average of intended premiums and discounts (including those associated with weight, quality grade, yield grade, or type of lamb) that are expected to be in effect for the current slaughter week; and (7) The following information for lambs purchased through a formula marketing arrangement and slaughtered during the prior slaughter week, categorized to clearly delineate domestic from imported market purchases: (i) The quantity (quoted in both numbers of head and pounds) of lambs; (ii) The weighted average price paid for a carcass, including applicable premiums and discounts; (iii) The range of premiums and discounts paid; (iv) The weighted average of premiums and discounts paid; and (v) The range of prices paid. (b) Publication. The Secretary shall make available to the public the information obtained in paragraphs (a)(1) through (a)(5) and (a)(7) of this section on the second reporting day of the current slaughter week and information obtained in paragraph (a)(6) of this section on the first reporting day of the current slaughter week. Sec. 59.303 Mandatory reporting of lamb carcasses and boxed lamb. (a) Daily reporting of lamb carcass transactions. The corporate officers or officially designated representatives of each packer shall report to the Secretary each reporting day the following information on total carlot-based lamb carcass transactions not later than 3 p.m. central time in accordance with Sec. 59.10(b): (1) The price for each lot of each lamb carcass transaction, quoted in dollars per hundredweight on an F.O.B. plant basis; (2) The quantity for each lot of each transaction, quoted by number of carcasses sold and purchased; and (3) The following information regarding the characteristics of each transaction: (i) The type of transaction; (ii) The USDA quality grade of lamb; (iii) The USDA yield grade; (iv) The estimated weight range of the carcasses; and (v) The product delivery period. (b) Daily reporting of domestic boxed lamb sales. The corporate officers or officially designated representatives of each packer shall report to the Secretary each reporting day the following information on total domestic boxed lamb cut sales not later than 2:30 p.m. central time as described in Sec. 59.10(b): (1) The price for each lot of each boxed lamb cut sale, quoted in dollars per hundredweight on a F.O.B. plant basis; (2) The quantity for each lot of each sale, quoted by product weight sold; and (3) The following information regarding the characteristics of each transaction: (i) The type of sale; (ii) The branded product characteristics, if applicable; (iii) The USDA quality grade of lamb; (iv) The cut of lamb, referencing the most recent version of the Institutional Meat Purchase Specifications (IMPS), when applicable; (v) USDA yield grade, if applicable; (vi) The product state of refrigeration; (vii) The weight range of the cut; and (viii) The product delivery period. (c) Weekly Reporting of Imported Boxed Lamb Sales. The corporate officers or officially designated representatives of each lamb importer shall report to the Secretary on the first reporting day of each week the following information applicable to the prior week for imported boxed lamb cut sales not later than 10 a.m. central time: [[Page 166]] (1) The price for each lot of a boxed lamb cut sale, quoted in dollars per hundredweight on a F.O.B. plant basis; (2) The quantity for each lot of a transaction, quoted by product weight sold; and (3) The following information regarding the characteristics of each transaction: (i) The type of sale; (ii) The branded product characteristics, if applicable; (iii) The cut of lamb, referencing the most recent version of the Institutional Meat Purchase Specifications (IMPS), when applicable; (iv) The product state of refrigeration; (v) The weight range of the cut; and (vi) The product delivery period. (d) Publication. The Secretary shall make available to the public the information required to be reported in paragraphs (a) and (b) of this section not less frequently than once each reporting day and the information required to be reported in paragraph (c) of this section on the first reporting day of the current slaughter week. Subpart E_OMB Control Number Sec. 59.400 OMB control number assigned pursuant to the Paperwork Reduction Act. The information collection and recordkeeping requirements of this part have been approved by the Office of Management and Budget (OMB) under the provisions of 44 U.S.C. Chapter 35 and have been assigned OMB Control Number 0581-0186. PART 60_COUNTRY OF ORIGIN LABELING FOR FISH AND SHELLFISH- -Table of Contents Subpart A_General Provisions Definitions Sec. 60.101 Act. 60.102 AMS. 60.103 Commingled covered commodities. 60.104 Consumer package. 60.105 Covered commodity. 60.106 Farm-raised fish. 60.107 Food service establishment. 60.108-60.110 [Reserved] 60.111 Hatched. 60.112 Ingredient. 60.113 [Reserved] 60.114 Legible. 60.115 [Reserved] 60.116 Person. 60.117 [Reserved] 60.118 Pre-labeled. 60.119 Processed food item. 60.120-60.121 [Reserved] 60.122 Production step. 60.123 Raised. 60.124 Retailer. 60.125 Secretary. 60.126 [Reserved] 60.127 United States. 60.128 United States country of origin. 60.129 USDA. 60.130 U.S. flagged vessel. 60.131 Vessel flag. 60.132 Waters of the United States. 60.133 Wild fish and shellfish. Country of Origin Notification 60.200 Country of origin notification. 60.300 Labeling. Recordkeeping 60.400 Recordkeeping requirements. Subpart B [Reserved] Authority: 7 U.S.C. 1621 et seq. Source: 74 FR 2701, Jan. 15, 2009, unless otherwise noted. Subpart A_General Provisions Definitions Sec. 60.101 Act. Act means the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et seq.). Sec. 60.102 AMS. AMS means the Agricultural Marketing Service, United States Department of Agriculture. Sec. 60.103 Commingled covered commodities. Commingled covered commodities means covered commodities (of the same type) presented for retail sale in a consumer package that have been prepared from raw material sources having different origins. Sec. 60.104 Consumer package. Consumer package means any container or wrapping in which a covered commodity is enclosed for the delivery and/or display of such commodity to retail purchasers. [[Page 167]] Sec. 60.105 Covered commodity. (a) Covered commodity means: (1)-(2) [Reserved] (3) Farm-raised fish and shellfish (including fillets, steaks, nuggets, and any other flesh); (4) Wild fish and shellfish (including fillets, steaks, nuggets, and any other flesh); (5)-(6) [Reserved] (b) Covered commodities are excluded from this part if the commodity is an ingredient in a processed food item as defined in Sec. 60.119. Sec. 60.106 Farm-raised fish. Farm-raised fish means fish or shellfish that have been harvested in controlled environments, including ocean-ranched (e.g., penned) fish and including shellfish harvested from leased beds that have been subjected to production enhancements such as providing protection from predators, the addition of artificial structures, or providing nutrients; and fillets, steaks, nuggets, and any other flesh from a farm-raised fish or shellfish. Sec. 60.107 Food service establishment. Food service establishment means a restaurant, cafeteria, lunch room, food stand, saloon, tavern, bar, lounge, or other similar facility operated as an enterprise engaged in the business of selling food to the public. Similar food service facilities include salad bars, delicatessens, and other food enterprises located within retail establishments that provide ready-to-eat foods that are consumed either on or outside of the retailer's premises. Sec. Sec. 60.108-60.110 [Reserved] Sec. 60.111 Hatched. Hatched means emerged from the egg. Sec. 60.112 Ingredient. Ingredient means a component either in part or in full, of a finished retail food product. Sec. 60.113 [Reserved] Sec. 60.114 Legible. Legible means text that can be easily read. Sec. 60.115 [Reserved] Sec. 60.116 Person. Person means any individual, partnership, corporation, association, or other legal entity. Sec. 60.117 [Reserved] Sec. 60.118 Pre-labeled. Pre-labeled means a covered commodity that has the commodity's country of origin and method of production and the name and place of business of the manufacturer, packer, or distributor on the covered commodity itself, on the package in which it is sold to the consumer, or on the master shipping container. The place of business information must include at a minimum the city and state or other acceptable locale designation. Sec. 60.119 Processed food item. Processed food item means a retail item derived from fish or shellfish that has undergone specific processing resulting in a change in the character of the covered commodity, or that has been combined with at least one other covered commodity or other substantive food component (e.g., breading, tomato sauce), except that the addition of a component (such as water, salt, or sugar) that enhances or represents a further step in the preparation of the product for consumption, would not in itself result in a processed food item. Specific processing that results in a change in the character of the covered commodity includes cooking (e.g., frying, broiling, grilling, boiling, steaming, baking, roasting), curing (e.g., salt curing, sugar curing, drying), smoking (hot or cold), and restructuring (e.g., emulsifying and extruding, compressing into blocks and cutting into portions). Examples of items excluded include fish sticks, surimi, mussels in tomato sauce, seafood medley, coconut shrimp, soups, stews, and chowders, sauces, pates, smoked salmon, marinated fish fillets, canned tuna, canned sardines, canned salmon, crab salad, shrimp cocktail, gefilte fish, sushi, and breaded shrimp. [[Page 168]] Sec. Sec. 60.120-60.121 [Reserved] Sec. 60.122 Production step. Production step means in the case of: (a) [Reserved] (b) Farm-raised Fish and Shellfish: Hatched, raised, harvested, and processed. (c) Wild Fish and Shellfish: Harvested and processed. Sec. 60.123 Raised. Raised means in the case of: (a) [Reserved] (b) Farm-raised fish and shellfish as it relates to the production steps defined in Sec. 60.122: The period of time from hatched to harvested. Sec. 60.124 Retailer. Retailer means any person subject to be licensed as a retailer under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)). [78 FR 31385, May 24, 2013] Sec. 60.125 Secretary. Secretary means the Secretary of Agriculture of the United States or any person to whom the Secretary's authority has been delegated. Sec. 60.126 [Reserved] Sec. 60.127 United States. United States means the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, the Northern Mariana Islands, and any other Commonwealth, territory, or possession of the United States, and the waters of the United States as defined in Sec. 60.132. Sec. 60.128 United States country of origin. United States country of origin means in the case of: (a)-(b) [Reserved] (c) Farm-raised Fish and Shellfish: From fish or shellfish hatched, raised, harvested, and processed in the United States, and that has not undergone a substantial transformation (as established by U.S. Customs and Border Protection) outside of the United States. (d) Wild-fish and Shellfish: From fish or shellfish harvested in the waters of the United States or by a U.S. flagged vessel and processed in the United States or aboard a U.S. flagged vessel, and that has not undergone a substantial transformation (as established by U.S. Customs and Border Protection) outside of the United States. (e)-(f) [Reserved] Sec. 60.129 USDA. USDA means the United States Department of Agriculture. Sec. 60.130 U.S. flagged vessel. U.S. flagged vessel means: (a) Any vessel documented under chapter 121 of title 46, United States Code; or (b) Any vessel numbered in accordance with chapter 123 of title 46, United States Code. Sec. 60.131 Vessel flag. Vessel flag means the country of registry for a vessel, ship, or boat. Sec. 60.132 Waters of the United States. Waters of the United States means those fresh and ocean waters contained within the outer limit of the Exclusive Economic Zone (EEZ) of the United States as described by the Department of State Public Notice 2237 published in the Federal Register volume 60, No. 163, August 23, 1995, pages 43825-43829. The Department of State notice is republished in appendix A to this subpart. Sec. 60.133 Wild fish and shellfish. Wild fish and shellfish means naturally-born or hatchery-originated fish or shellfish released in the wild, and caught, taken, or harvested from non-controlled waters or beds; and fillets, steaks, nuggets, and any other flesh from a wild fish or shellfish. Country of Origin Notification Sec. 60.200 Country of origin notification. In providing notice of the country of origin as required by the Act, the following requirements shall be followed by retailers: [[Page 169]] (a) General. Labeling of covered commodities offered for sale whether individually, in a bulk bin, display case, carton, crate, barrel, cluster, or consumer package must contain country of origin and method of production information (wild and/or farm-raised) as set forth in this regulation. (b) Exemptions. Food service establishments as defined in Sec. 60.107 are exempt from labeling under this subpart. (c) Exclusions. A covered commodity is excluded from this subpart if it is an ingredient in a processed food item as defined in Sec. 60.119. (d) Designation of Method of Production (Wild and/or Farm-Raised). Fish and shellfish covered commodities shall also be labeled to indicate whether they are wild and/or farm-raised as those terms are defined in this regulation. (e) Labeling Covered Commodities of United States Origin. A covered commodity may only bear the declaration of ``Product of the U.S.'' at retail if it meets the definition of United States Country of Origin as defined in Sec. 60.128. (f) Labeling Imported Products That Have Not Undergone Substantial Transformation in the United States. An imported covered commodity shall retain its origin as declared to U.S. Customs and Border Protection at the time the product entered the United States, through retail sale, provided that it has not undergone a substantial transformation (as established by U.S. Customs and Border Protection) in the United States. (g) Labeling Imported Products That Have Subsequently Been Substantially Transformed in the United States. (1) [Reserved] (2) Wild and Farm-Raised Fish and Shellfish: If a covered commodity was imported from country X and subsequently substantially transformed (as established by U.S. Customs and Border Protection) in the United States or aboard a U.S. flagged vessel, such product shall be labeled at retail as ``From country X, processed in the United States.'' Alternatively, the product may be labeled as ``Product of country X and the United States''. (h) Labeling Commingled Covered Commodities. (1) For imported covered commodities that have not subsequently been substantially transformed in the United States that are commingled with other imported covered commodities that have not been substantially transformed in the United States, and/or covered commodities of U.S. origin and/or covered commodities as described in Sec. 60.200(g), the declaration shall indicate the countries of origin for covered commodities in accordance with existing Federal legal requirements. (2) For imported covered commodities that have subsequently undergone substantial transformation in the United States that are commingled with other imported covered commodities that have subsequently undergone substantial transformation in the United States (either prior to or following substantial transformation in the United States) and/or U.S. origin covered commodities, the declaration shall indicate the countries of origin contained therein or that may be contained therein. (i) Remotely Purchased Products. For sales of a covered commodity in which the customer purchases a covered commodity prior to having an opportunity to observe the final package (e.g., Internet sales, home delivery sales, etc.), the retailer may provide the country of origin notification and method of production (wild and/or farm-raised) designation either on the sales vehicle or at the time the product is delivered to the consumer. Sec. 60.300 Labeling. (a) Country of origin declarations and method of production (wild and/or farm-raised) designations can either be in the form of a placard, sign, label, sticker, band, twist tie, pin tag, or other format that provides country of origin and method of production information. The country of origin declaration and method of production (wild and/or farm-raised) designation may be combined or made separately. Except as provided in Sec. 60.200(g) and 60.200(h) of this regulation, the declaration of the country(ies) of origin of a product shall be listed according to applicable Federal legal requirements. Country of origin declarations may be in the form of [[Page 170]] a check box provided it is in conformance with other Federal legal requirements. Various forms of the production designation are acceptable, including ``wild caught'', ``wild'', ``farm-raised'', ``farmed'', or a combination of these terms for blended products that contain both wild and farm-raised fish or shellfish, provided it can be readily understood by the consumer and is in conformance with other Federal labeling laws. Designations such as ``ocean caught'', ``caught at sea'', ``line caught'', ``cultivated'', or ``cultured'' are not acceptable substitutes. Alternatively, method of production (wild and/or farm-raised) designations may be in the form of a check box. (b) The declaration of the country(ies) of origin and method(s) of production (wild and/or farm-raised) (e.g., placard, sign, label, sticker, band, twist tie, pin tag, or other display) must be placed in a conspicuous location, so as to render it likely to be read and understood by a customer under normal conditions of purchase. (c) The declaration of the country(ies) of origin and the method(s) of production (wild and/or farm-raised) may be typed, printed, or handwritten provided it is in conformance with other Federal labeling laws and does not obscure other labeling information required by other Federal regulations. (d) A bulk container (e.g., display case, shipper, bin, carton, and barrel), used at the retail level to present product to consumers, may contain a covered commodity from more than one country of origin and/or more than one method of production (wild and farm-raised) provided all possible origins and/or methods of production are listed. (e) In general, country abbreviations are not acceptable. Only those abbreviations approved for use under CBP rules, regulations, and policies, such as ``U.K.'' for ``The United Kingdom of Great Britain and Northern Ireland'', ``Luxemb'' for Luxembourg, and ``U.S. or USA'' for the ``United States'' are acceptable. The adjectival form of the name of a country may be used as proper notification of the country(ies) of origin of imported commodities provided the adjectival form of the name does not appear with other words so as to refer to a kind or species of product. Symbols or flags alone may not be used to denote country of origin. (f) State or regional label designations are not acceptable in lieu of country of origin labeling. Recordkeeping Sec. 60.400 Recordkeeping requirements. (a) General. (1) All records must be legible and may be maintained in either electronic or hard copy formats. Due to the variation in inventory and accounting documentary systems, various forms of documentation and records will be acceptable. (2) Upon request by USDA representatives, suppliers and retailers subject to this subpart shall make available to USDA representatives, records maintained in the normal course of business that verify an origin claim and method of production (wild and/or farm-raised). Such records shall be provided within 5 business days of the request and may be maintained in any location. (b) Responsibilities of suppliers. (1) Any person engaged in the business of supplying a covered commodity to a retailer, whether directly or indirectly, must make available information to the buyer about the country(ies) of origin and method(s) of production (wild and/ or farm-raised), of the covered commodity. This information may be provided either on the product itself, on the master shipping container, or in a document that accompanies the product through retail sale provided that it identifies the product and its country(ies) of origin and method(s) of production. In addition, the supplier of a covered commodity that is responsible for initiating a country(ies) of origin and method(s) of production (wild and/or farm-raised) claim must possess records that are necessary to substantiate that claim for a period of 1 year from the date of the transaction. Producer affidavits shall also be considered acceptable records that suppliers may utilize to initiate origin claims, provided it is made by someone having first-hand knowledge of the origin of the covered commodity and identifies the covered commodity unique to the transaction. [[Page 171]] (2) Any intermediary supplier handling a covered commodity that is found to be designated incorrectly as to the country of origin and/or method of production (wild and/or farm-raised) shall not be held liable for a violation of the Act by reason of the conduct of another if the intermediary supplier relied on the designation provided by the initiating supplier or other intermediary supplier, unless the intermediary supplier willfully disregarded information establishing that the country of origin and/or method of production (wild and/or farm-raised) declaration was false. (3) Any person engaged in the business of supplying a covered commodity to a retailer, whether directly or indirectly (i.e., including but not limited to harvesters, producers, distributors, handlers, and processors), must maintain records to establish and identify the immediate previous source (if applicable) and immediate subsequent recipient of a covered commodity for a period of 1 year from the date of the transaction. (4) For an imported covered commodity (as defined in Sec. 60.200(f)), the importer of record as determined by U.S. Customs and Border Protection, must ensure that records: provide clear product tracking from the port of entry into the United States to the immediate subsequent recipient and accurately reflect the country of origin and method of production (wild and/or farm-raised) of the item as identified in relevant CBP entry documents and information systems; and must maintain such records for a period of 1 year from the date of the transaction. (c) Responsibilities of retailers. (1) In providing the country of origin and method of production (wild and/or farm-raised) notification for a covered commodity, in general, retailers are to convey the origin and method of production information provided to them by their suppliers. Only if the retailer physically commingles a covered commodity of different origins and/or methods of production in preparation for retail sale, whether in a consumer-ready package or in a bulk display (and not discretely packaged) (i.e., full service fish case), can the retailer initiate a multiple country of origin and/or method of production designation that reflects the actual countries of origin and method of production for the resulting covered commodity. (2) Records and other documentary evidence relied upon at the point of sale to establish a covered commodity's country(ies) of origin and designation of wild and/or farm-raised must either be maintained at the retail facility or at another location for as long as the product is on hand and provided to any duly authorized representative of USDA in accordance with Sec. 60.400(a)(2). For pre-labeled products, the label itself is sufficient information on which the retailer may rely to establish the product's origin and method(s) of production (wild and/or farm-raised) and no additional records documenting origin and method of production information are necessary. (3) Records that identify the covered commodity, the retail supplier, and for products that are not pre-labeled, the country of origin information and the method(s) of production (wild and/or farm- raised) must be maintained for a period of 1 year from the date the declaration is made at retail. (4) Any retailer handling a covered commodity that is found to be designated incorrectly as to the country of origin and/or the method of production (wild and/or farm-raised) shall not be held liable for a violation of the Act by reason of the conduct of another if the retailer relied on the designation provided by the supplier, unless the retailer willfully disregarded information establishing that the country of origin and/or method of production declaration was false. Subpart B [Reserved] PART 61_COTTONSEED SOLD OR OFFERED FOR SALE FOR CRUSHING PURPOSES (INSPECTION, SAMPLING AND CERTIFICATION)--Table of Contents Subpart A_Requirements Definitions Sec. 61.1 Words in singular form. 61.2 Terms defined. [[Page 172]] 61.2a Designation of official certificates, memoranda, marks, other identifications, and devices for purpose of the Agricultural Marketing Act. Administrative and General 61.3 Director. 61.4 Supervisor of cottonseed inspection. 61.5 Provisions to govern. 61.6 Denial of further services. 61.7 Misrepresentation. 61.8 Application for review. 61.9 Cost of review. Licensed Cottonseed Samplers 61.25 Application for license as sampler; form. 61.27 Period of license; renewals. 61.30 Examination of sampler. 61.31 License must be posted. 61.32 No discrimination in sampling. 61.33 Equipment of sampler; contents of certificate. 61.34 Drawing and preparation of sample. 61.36 Cause for suspension or revocation. 61.37 License may be suspended. 61.38 Suspended license to be returned to Division. 61.39 Duplicate license. 61.40 Reports of licensed samplers. 61.41 Unlicensed persons must not represent themselves as licensed samplers. 61.42 Information on sampling to be kept confidential. Subpart B_Standards for Grades of Cottonseed Sold or Offered for Sale for Crushing Purposes Within the United States 61.101 Determination of grade. 61.102 Determination of quantity index. 61.103 Determination of quality index. 61.104 Sampling and certification of samples and grades. Source: 22 FR 10948, Dec. 28, 1957, unless otherwise noted. Subpart A_Requirements Authority: Sec. 205, 60 Stat. 1090, as amended, (7 U.S.C. 1624). Definitions Sec. 61.1 Words in singular form. Words used in the regulations in this subpart in the singular form shall be deemed to import the plural, and vice-versa, as the case may demand. Sec. 61.2 Terms defined. As used throughout the regulations in this part, unless the context otherwise requires, the following terms shall be construed, respectively to mean: (a) The act. The applicable provisions of the Agricultural Marketing Act of 1946 (60 Stat. 1087; 7 U.S.C. 1621 et seq.) or any other act of Congress conferring like authority. (b) Regulations. Regulations mean the provisions in this subpart. (c) Department. The United States Department of Agriculture. (d) Secretary. The Secretary of Agriculture of the United States, or any officer or employee of the Department to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. (e) Service. The Agricultural Marketing Service of the United States Department of Agriculture. (f) Administrator. The Administrator of the Agricultural Marketing Service, or any officer or employee of the Service, to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. (g) Division. The Cotton Division of the Agricultural Marketing Service. (h) Director. The Director of the Cotton Division, or any officer or employee of the Division to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. (i) Custodian. Person who has possession or control of cottonseed or of samples of cottonseed as agent, controller, broker, or factor, as the case may be. (j) Owner. Person who through financial interest owns or controls, or has the disposition of either cottonseed or of samples of cottonseed. (k) Official cottonseed standards. The official standards of the United States for the grading, sampling, and analyzing of cottonseed sold or offered for sale for crushing purposes. (l) Supervisor of cottonseed inspection. An officer of the Division designated as such by the Director. (m) License. A license issued under the act by the Secretary. [[Page 173]] (n) Licensed cottonseed chemist. A person licensed under the act by the Secretary to make quantitative and qualitative chemical analyses of samples of cottonseed according to the methods prescribed by the Science Division Director of the Agricultural Marketing Service and to certificate the grade according to the official cottonseed standards of the United States. (o) Licensed cottonseed sampler. A person licensed by the Secretary to draw and to certificate the authenticity of samples of cottonseed in accordance with the regulations in this subpart. (p) Dispute. A disagreement as to the true grade of a sample of cottonseed analyzed and graded by a licensed chemist. (q) Party. A party to a dispute. (r) Commercial laboratory. A chemical laboratory operated by an individual, firm, or corporation in which one or more persons are engaged in the chemical analysis of materials for the public. (s) Cottonseed. The word ``cottonseed'' as used in this part means the seed, after having been put through the usual and customary process known as cotton ginning, of any cotton produced within the continental United States. (t) Lot. That parcel or quantity of cottonseed offered for sale or tendered for delivery or delivered on a sale or contract of sale, in freight cars, trucks, wagons, or otherwise in the quantities and within the time limits prescribed from time to time by the Director for the drawing and preparation of official samples by licensed cottonseed samplers. (u) Official sample. A specimen of cottonseed drawn and prepared by a licensed cottonseed sampler and certified by him as representative of a certain identified lot, in accordance with the regulations in this subpart. [22 FR 10948, Dec. 28, 1957, as amended at 58 FR 42413, Aug. 9, 1993] Sec. 61.2a Designation of official certificates, memoranda, marks, other identifications, and devices for purpose of the Agricultural Marketing Act. Subsection 203(h) of the Agricultural Marketing Act of 1946, as amended by Pub. L. 272, 84th Congress, provides criminal penalties for various specified offenses relating to official certificates, memoranda, marks, or other identifications, and devices for making such marks or identifications, issued or authorized under section 203 of said act, and certain misrepresentations concerning the inspection or grading of agricultural products under said section. For the purposes of said subsection and the provisions in this part, the terms listed below shall have the respective meanings specified: (a) Official certificate means any form of certification, either written or printed, used under this part to certify with respect to the inspection, sampling, class, grade, quality, quantity, or condition of products (including the compliance of products with applicable specifications). (b) Official memorandum means any initial record of findings made by an authorized person in the process of grading, inspecting, or sampling, pursuant to this part, any processing or plant-operation report made by an authorized person in connection with grading, inspecting, or sampling under this part, and any report made by an authorized person of services performed pursuant to this part. (c) Official mark means the grade mark, inspection mark, and any other mark, approved by the Administrator and authorized to be affixed to any product, or affixed to or printed on the packaging material of any product, stating that the product was graded or inspected or both, or indicating the appropriate U.S. grade or condition of the product, or for the purpose or maintaining the identity of products graded or inspected or both under this part. (d) Official identification means any United States (U.S.) standard designation of class, grade, quality, quantity, or condition specified in this part, or any symbol, stamp, label, or seal indicating that the product has been officially graded or inspected and/or indicating the class, grade, quality, quantity, or condition of the product, approved by the Administrator and authorized to be affixed to any product, or affixed to or printed on the packaging material of any product. (e) Official device means a stamping appliance, branding device, stencil, [[Page 174]] printed label, or any other mechanically or manually operated tool that is approved by the Administrator for the purpose of applying any official mark or other identification to any product or the packaging material thereof. Administrative and General Sec. 61.3 Director. The Director shall perform for and under the supervision of the Secretary and the Administrator, such duties as the Secretary or the Administrator may require in enforcing the provisions of the act and the regulations. Sec. 61.4 Supervisor of cottonseed inspection. The Director, whenever he deems necessary, may designate an officer of the Division as supervisor of cottonseed inspection who shall supervise the inspection and sampling of cottonseed and perform such other duties as may be required of him in administering the act and the regulations. Sec. 61.5 Provisions to govern. The inspection, sampling, analyzing, and grading of cottonseed in the United States pursuant to the act shall be performed as prescribed in methods approved from time to time by the Director. Sec. 61.6 Denial of further services. Any person, partnership, or corporation that shall have undertaken to utilize the services of licensed cottonseed samplers under these regulations who shall not make available for official sampling and analysis each lot of cottonseed purchased or sold on grade and received by such person or partnership or corporation, may be denied further services under the act and these regulations: Provided, That in cases of persons, partnerships, or corporations operating two or more cottonseed crushing units under separate local managements, such penalty shall apply only to the offending unit, unless it shall be shown that the actions of such unit were at the direction or with the knowledge, approval, or acquiescence of the general management. [22 FR 10948, Dec. 28, 1957, as amended at 58 FR 42413, Aug. 9, 1993] Sec. 61.7 Misrepresentation. Any willful misrepresentation or any deceptive or fradulent practice made or committed by an applicant for a cottonseed sampler's certificate or for a cottonseed chemist's certificate or for an appeal grade certificate in connection with the sampling or grading of cottonseed by persons licensed under the act and the regulations or the issuance or use of a certificate not issued by a person licensed under the regulations in imitation of or that might mislead anyone to believe that such certificate was in fact issued by a person licensed under the act, or that might be otherwise false, misleading, or deceptive, may be deemed sufficient cause for debarring such applicant from any further benefits of the act. Sec. 61.8 Application for review. In case of dispute in which a review is desired of the grading of any official sample of cottonseed covered by a valid certificate issued by a licensed cottonseed chemist, application therefor shall be filed with or mailed to a supervisor of cottonseed inspection within ten days after the date of the original certificate, whereupon the licensed chemist issuing the certificate shall immediately surrender to such supervisor the retained portion of the original sample, together with such records as may be required, for the determination of the true grade. The supervisor shall assign to such retained portion an identification number, shall divide such retained portion into two parts and submit the parts to two other licensed cottonseed chemists for reanalysis. Should the supervisor determine that such reanalyses indicate a grade differing from the original by not more than plus or minus one full grade, the original grade shall be considered the true grade. Should he find that such reanalyses indicate a grade differing more than plus or minus one full grade from the original, he shall determine the true grade. In any case, the supervisor shall issue over his name an appeal cottonseed grade certificate showing the true grade as determined in accordance with this section, which shall supersede the licensed chemists' certificates relating to the grade of such seed. Where due solely to errors in [[Page 175]] calculation or clerical error a grade certificated by a licensed cottonseed chemist is not the true grade, the supervisor shall direct the licensee to cancel the original and to issue a correct certificate. Should such error be found after an application for review has been filed, the supervisor shall nevertheless issue an appeal cottonseed grade certificate showing the true grade of the cottonseed involved. [22 FR 10948, Dec. 28, 1957, Dec. 28, 1957, as amended at 58 FR 42413, Aug. 9, 1993] Sec. 61.9 Cost of review. In cases of review of the grade of any official sample of cottonseed, payment covering the costs of re-analysis shall accompany the application. Licensed Cottonseed Samplers Sec. 61.25 Application for license as sampler; form. (a) Applications for licenses to sample cottonseed shall be made to the Director on forms furnished for the purpose by him. (b) Each such application shall be in English, shall be signed by the applicant, and shall contain or be accompanied by (1) satisfactory evidence that he is an actual resident of the United States, (2) satisfactory evidence of his experience in the handling and sampling of cottonseed, (3) a statement by the applicant that he agrees to comply with and abide by the terms of the act and these regulations so far as they relate to him, and with instructions issued from time to time governing the sampling of cottonseed, and (4) such other information as may be required. Sec. 61.27 Period of license; renewals. The period for which a license may be issued under the regulations in Sec. Sec. 61.25 through 61.42 shall be from the first day of August following receipt of the application, and shall continue for 5 years, ending on the 31st of July in the fifth year. Renewals shall be for 5 years also, beginning with the first day of August and ending on the 31st day of July in the fifth year: Provided, That licenses or renewals issued on and after June 1 of any year shall be for the period ending July 31 of the fifth year following. [59 FR 26411, May 20, 1994] Sec. 61.30 Examination of sampler. Each applicant for a license as a sampler and each licensed sampler whenever requested by an authorized representative of the Director, shall submit to an examination or test to show his ability properly to perform the duties for which he is applying for a license or for which he has been licensed, and each such applicant or licensee shall furnish the Division any information requested at any time in regard to his sampling of cottonseed. Sec. 61.31 License must be posted. Each licensed sampler shall keep his license conspicuously posted at the place where he functions as a sampler or in such other place as may be approved by the Director. Sec. 61.32 No discrimination in sampling. Each licensed sampler, when requested, shall without discrimination, as soon as practicable and upon reasonable terms, sample any cottonseed if the same be made available to him at his place of business, under conditions that will permit proper sampling. Each such licensee shall give preference to those who request his services as such over persons who request his services in any other capacity. Sec. 61.33 Equipment of sampler; contents of certificate. Each licensed sampler shall have available suitable triers or sampling tools, sample containers, scales, seed cleaners, seed mixers, and air-tight containers for enclosing and forwarding the official samples to licensed chemist, and with tags and samplers' certificates approved or furnished by the Director or his representative for identifying the samples of cottonseed and for certificating the condition of the cottonseed represented by such samples. There shall be clearly written or printed on the face of such certificate-- (a) A suitable caption; (b) The location of the cottonseed involved and its point of origin; [[Page 176]] (c) The identification of the lot from which the sample was drawn; (d) The date on which the sample was drawn; (e) The gross weight of the original sample, and the net weight of the cleaned sample; (f) A statement indicating that the sample was drawn in accordance with sampling methods prescribed by the Director of the Cotton Division; and (g) The signature of the licensed sampler as such. The use of such tags and certificates shall be in conformity with instructions issued from time to time by the Division. Sec. 61.34 Drawing and preparation of sample. Each licensed cottonseed sampler shall draw, prepare, and identify one official sample of cottonseed and a duplicate thereof from each lot made available to him in such manner as may be required by the Director, and shall promptly prepare it for forwarding to a licensed cottonseed chemist for analysis and grading. The duplicate shall be sealed and retained by the sampler until the original official sample shall have been analyzed by a licensed chemist. If the original official sample shall become lost or destroyed before having been analyzed the duplicate shall become the official sample; otherwise the licensed sampler shall immediately remove the identification marks from the duplicate and discard it. In no case shall the duplicate be offered for analysis unless the original shall have been lost or destroyed before analysis. Sec. 61.36 Cause for suspension or revocation. The failure or refusal of any cottonseed sampled, duly licensed as such under the regulations in this subpart, to draw, prepare, identify, and to forward an official sample of every lot of cottonseed made available to him for the purpose, in accordance with these regulations, shall be cause for the suspension or revocation of his license. A sampler's license may also be suspended when the sampler (a) has ceased to perform services as a licensed cottonseed sampler, (b) has knowingly or carelessly sampled cottonseed improperly, (c) has violated or evaded any provision of the Act, these regulations, or the sampling methods prescribed by the Director, (d) has used his license or allowed it to be used for any fraudulent or improper purposes, or (e) has in any manner become incompetent or incapacitated to perform the duties of a licensed sampler. Sec. 61.37 License may be suspended. The Director may, without a hearing, suspend or revoke the license issued to a licensed sampler upon written request and a satisfactory statement of reasons therefor submitted by such licensed sampler. Pending final action by the Secretary, the Director may, whenever he deems such action necessary, suspend the license of any licensed sampler by giving notice of such suspension to the licensee, accompanied by a statement of the reasons therefor. Within 10 days after the receipt of the aforesaid notice and statement of reasons by such licensee, he may file an appeal, in writing, with the Secretary, supported by any argument or evidence that he may wish to offer as to why his license should not be suspended or revoked. After the expiration of the aforesaid 10-day period and consideration of such argument and evidence, the Secretary will take such action as he deems appropriate with respect to such suspension or revocation. When no appeal is filed within the prescribed 10 days, the license shall be automatically revoked. Sec. 61.38 Suspended license to be returned to Division. In case a license issued to a sampler is suspended or revoked such license shall be returned to the Division. At the expiration of any period of suspension of such license, unless in the meantime it be revoked, the dates of beginning and termination of such suspension shall be endorsed thereon, it shall be returned to the person to whom it was originally issued, and its shall be posted as prescribed in Sec. 61.31. Sec. 61.39 Duplicate license. Upon satisfactory proof of the loss or destruction of a license issued to a sampler hereunder, a new license may [[Page 177]] be issued under the same or a new number. Sec. 61.40 Reports of licensed samplers. Each licensed sampler, when requested, shall make reports on forms furnished for the purpose by the Division bearing upon his activity as such licensee. Sec. 61.41 Unlicensed persons must not represent themselves as licensed samplers. No person shall in any way represent himself to be a sampler licensed under the act unless he holds an unsuspended and unrevoked license issued thereunder. Sec. 61.42 Information on sampling to be kept confidential. Every person licensed under the act as a sampler of cottonseed shall keep confidential all information secured by him relative to shipments of cottonseed sampled by him. He shall not disclose such information to any person except an authorized representative of the Department. Subpart B_Standards for Grades of Cottonseed Sold or Offered for Sale for Crushing Purposes Within the United States Authority: Secs. 203, 205, 60 Stat. 1087, 1090, as amended; 7 U.S.C. 1622, 1624. Sec. 61.101 Determination of grade. The grade of cottonseed shall be determined from the analysis of samples by licensed chemists, and it shall be the result, stated in the nearest whole or half numbers, obtained by multiplying a quantity index by a quality index and dividing the result by 100. The quantity index and the quality index shall be determined as hereinafter provided. (a) The basis grade of cottonseed shall be grade 100. (b) High grades of cottonseed shall be those grades above 100. (c) Low grades of cottonseed shall be those grades below 100. (d) Grades for American Pima cottonseed shall be suffixed by the designation ``American Pima'' or by the symbol ``AP.'' [22 FR 10948, Dec. 28, 1957, as amended at 37 FR 20157, Sept. 27, 1972; 58 FR 42413, Aug. 9, 1993] Sec. 61.102 Determination of quantity index. The quantity index of cottonseed shall be determined as follows: (a) For upland cottonseed the quantity index shall equal four times percentage of oil plus six times percentage of ammonia, plus 5. (b) For American Pima cottonseed the quantity index shall equal four times percentage of oil, plus six times percentage of ammonia, minus 10. [37 FR 20157, Sept. 27, 1972] Sec. 61.103 Determination of quality index. The quality index of cottonseed shall be an index of purity and soundness, and shall be determined as follows: (a) Prime quality cottonseed. Cottonseed that by analysis contains not more than 1.0 percent of foreign matter, not more than 12.0 percent of moisture, and not more than 1.8 percent of free fatty acids in the oil in the seed, shall be known as prime quality cottonseed and shall have a quality index of 100. (b) Below prime quality cottonseed. The quality index of cottonseed that, by analysis, contain foreign matter, moisture, or free fatty acids in the oil in the seed, in excess of the percentages prescribed in paragraph (a) of this section shall be found by reducing the quality index of prime quality cottonseed as follows: (1) Four-tenths of a unit for each 0.1 percent of free fatty acids in the oil in the seed in excess of 1.8 percent. (2) One-tenth of a unit for each 0.1 percent of foreign matter in excess of 1.0 percent. (3) One-tenth of a unit for each 0.1 percent of moisture in excess of 12.0 percent. (c) Off quality cottonseed. Cottonseed that has been treated by either mechanical or chemical process other than the usual cleaning, drying, and ginning (except sterilization required by the United States Department of Agriculture for quarantine purposes) or [[Page 178]] that are fermented or hot, or that upon analysis are found to contain 12.5 percent or more of free fatty acids in the oil in the seed, or more than 10.0 percent of foreign matter, or more than 20.0 percent of moisture, or more than 25.0 percent of moisture and foreign matter combined, shall be designated as ``off quality cottonseed.'' (d) Below grade cottonseed. Cottonseed the grade of which when calculated according to Sec. 61.101 is below grade 40.0 shall be designated as ``below grade cottonseed,'' and a numerical grade shall not be indicated. Sec. 61.104 Sampling and certification of samples and grades. The drawing, preparation, and certification of samples of cottonseed, and certification of grades of cottonseed shall be performed in accordance with methods approved from time to time for the purposes by the Director, or his representatives. [22 FR 10948, Dec. 28, 1957, as amended at 58 FR 42413, Aug. 9, 1993] PART 62_AGRICULTURAL MARKETING SERVICE AUDIT VERIFICATION AND ACCREDITATION PROGRAMS (AVAAP)--Table of Contents Subpart A_Definitions Sec. 62.000 Meaning of terms. Subpart B_Administration 62.100 Administrator. Subpart C_Audit and Accreditation Services 62.200 Services. Subpart D_Administrative Provisions 62.201 Availability of service. 62.202 How to apply for service. 62.203 How to withdraw service. 62.204 Authority to request service. 62.205 [Reserved] 62.206 Access to program documents and activities. 62.207 Official assessment. 62.208 Publication of assessment status. 62.209 [Reserved] 62.210 Denial, suspension, cancellation or rejection of service. 62.211 Appeals. 62.212 [Reserved] 62.213 Official identification. 62.214 Voluntary participation. Subpart E_Fees 62.300 Fees and other costs of service. 62.301 Payment of fees and other charges. Subpart F_OMB control number 62.400 OMB control number assigned pursuant to the Paperwork Reduction Act. Authority: 7 U.S.C. 1621-1627. Source: 85 FR 62937, Oct. 6, 2020, unless otherwise noted. Subpart A_Definitions Sec. 62.000 Meaning of terms. Words used in this subpart in the singular form shall be deemed to impart the plural, and vice versa, as the case may demand. For the purposes of such regulations, unless the context otherwise requires, the following terms shall be construed, respectively, to mean: Accreditation. The action or process of officially recognizing an entity as being qualified to perform a specific activity(ies). Act. The Agricultural Marketing Act of 1946, as amended (AMA) (7 U.S.C. 1621-1627). Administrator. The Administrator of the Agricultural Marketing Service, or any officer or employee of AMS to whom authority has heretofore been delegated or to whom authority may hereafter be delegated, to act in the Administrator's stead. Agricultural Marketing Service. The Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture. Applicant. Any individual, commodity board, trade association, marketing order or agreement administrative body and its program signatories, or business with a financial interest in audit verification and accreditation services who has applied for service under this part. Assessment. A systematic review of the adequacy and implementation of a documented program or system. Audit. A systematic, independent, and documented process for obtaining evidence andevaluating it objectively to determine the extent to which criteria are fulfilled. [[Page 179]] Auditor. Person authorized by AMS to conduct official audits or assessments. Conformance. The condition or fact of an applicant meeting the requirements of a standard,contract, specification, or other documented service requirements. Export certificate. An official paper or electronic document issued as part of an export certification program, which describes and attests to attributes of consignments of commodities or food destined for international trade. Nonconformance. The condition or fact of an applicant not meeting the requirements of a standard, contract, specification, or other documented service program requirements. Official mark of conformance. Any form of mark or other identification used under the regulations to show the conformance of products with applicable service requirements, or to maintain the identity of products for which service is provided under the regulations. Products. All agricultural commodities and services within the scope of Agricultural Marketing Act of 1946. This includes the processes involving the production, handling, processing, packaging, and transportation of these products, agricultural product data storage, and product traceability and identification. Program. Any and all individual auditing or accrediting procedures, systems, or instructions developed and administered under the services authorized under Sec. 62.200. Service. The AMS auditing and accreditation functions authorized under the Act and the provisions of this part. Service documentation. All requirements, guidelines, manuals, forms, and supporting documentation needed to effectuate the administration and operation of services authorized under this part. USDA. The U.S. Department of Agriculture. Subpart B_Administration Sec. 62.100 Administrator. The Administrator is charged with the administration of official assessments conducted according to the regulations in this part and approved program procedures. Subpart C_Audit and Accreditation Services Sec. 62.200 Services. Services shall be based upon the authorities under the Act and applicable standards prescribed by USDA, the laws of the State where the particular product was produced, specifications of any governmental agency, voluntary audit program requirements in effect under federal marketing orders and/or agreements, written buyer and seller contract specifications, service documentation, or any written specification by an applicant. Services are administered through voluntary, fee-for- service, audit-based programs by AMS auditor(s) and other USDA officials under this part. Services authorized under this part, and programs administered under such, shall include: (a) Quality Systems Verification Programs. Quality Systems Verification Programs (QSVP) assess an applicant's business (quality) management system of program documentation and program processes regarding quality of products. Such programs include, but are not limited to: (1) Food Safety Management Systems. A formalized system of documents, processes, procedures, and responsibilities for preventing foodborne illnesses. (i) Good Agricultural Practices (GAP). A formalized system of documents, processes, and procedures used by primary producers to minimize the risk of contamination during the production, harvesting, and handling of crops. (ii) GroupGAP. A quality management system approach to GAP certification undertaken by a group of producers. (iii) Good Manufacturing Practices. A formalized system of documents, processes, and procedures used to ensure that products are consistently produced and controlled according to quality standards and regulatory requirements. (2) Export Certification Program. A formalized system of documents, processes, and procedures used to validate that a given product meets the specific requirements of a foreign country, in [[Page 180]] addition to applicable Federal requirements. (3) USDA Process Verified Program (PVP). A comprehensive quality management system verification program whereby applicants establish their own standards to describe products or processes. (4) USDA Quality Assessment Program. A quality management system verification service that is designed to aid in the marketing of products that have undergone specific processes and is limited in scope to those specific items associated with the product or process. (i) Export Verification Programs. A formalized system of documents, processes and procedures used to validate specific requirements of a foreign country are being met, in addition to applicable Federal requirements. (ii) [Reserved]. (5) USDA Accredited Seed Program. A specialized quality management system verification service for the seed industry that offers applicants a way to market their product using industry-recognized processes, rules, and standards. (b) Audit Verification Programs. Audit verification programs assess an applicant's documentation of its business management system with regard to the production or handling of products. Such programs include, but are not limited to: (1) Food Defense Verification Program. A service that evaluates operators of food establishments that maintain documented and operational food defense measures to minimize the risk of tampering or other malicious criminal actions against the food under their control. (2) Domestic Origin Verification. A service that evaluates a farm's and/or a facility's ability to maintain processes, procedures, and records to demonstrate products are grown in the United States of America, its territories, or possessions. (3) Plant System Audit. A service that evaluates the ability of operators of food establishments to implement a sanitation program and/ or requirement outlined in good manufacturing practices regulations. (4) Audits performed for other government agencies. A service that provides quality-based audit services to, and performs audits for, other government agencies, such as the Department of Defense or the U.S. Aid Agency for International Development, under the Economy Act (31 U.S.C. 1535). (5) Export Audit Programs. An audit intended to ensure that information submitted for an export certificate request is complete, accurate, and in compliance with the export certification program. In some cases, these requirements may include compliance with country- specific attestations or product requirements. (6) Child Nutrition Labeling Program. An audit intended to ensure manufacturers properly apply and document effective procedures to monitor and control the production of their Child Nutrition products. (c) Accreditation Programs. Accreditation programs include voluntary, user-fee accreditation services performed by a USDA evaluator or accreditation body to conduct assessments of applicant programs, services, facilities or equipment, and their ability to achieve planned results. Such programs include, but are not limited to: (1) USDA ISO Guide 17065 Program. A service that assesses certification bodies to determine conformance to the International Organization for Standardization (ISO) Guide 17065. These assessments are available to U.S. and international certification bodies operating a third-party certification system that perform conformity assessment activities. (2) Laboratory Approval Programs. Laboratories are approved, or accredited, to perform testing services in support of domestic and international trade. At the request of industry, other Federal Agencies, or foreign governments, USDA administers programs to verify that the analysis of food and agricultural products meets country and customer- specific requirements and that the testing of marketed products is conducted by qualified and approved laboratories. [[Page 181]] Subpart D_Administrative Provisions Sec. 62.201 Availability of service. Services under this part are available to applicants, including international and domestic government agencies, private agricultural businesses, and any financially interested person. Sec. 62.202 How to apply for service. Applicants may apply for services authorized under this part by contacting the Administrator's office and requesting specific service or program information at USDA, AMS, 1400 Independence Avenue SW, Room 3069-S, Washington, DC 20250-0294; by fax to: (202) 720-5115, or email to: [email protected]. Applicants may also visit: https:// www.ams.usda.gov. Sec. 62.203 How to withdraw application for service. An application for service may be withdrawn, all or in part, by the applicant at any time; Provided, That the applicant notifies the USDA service office in writing of its desire to withdraw the application for service and pays any expenses USDA has incurred in connection with such application. Sec. 62.204 Authority to request service. Any person requesting service may be required to prove his/her financial interest in the product or service at the discretion of USDA. Sec. 62.205 [Reserved] Sec. 62.206 Access to program documents and activities. (a) The applicant shall make its products, records, and documentation available and easily accessible for assessment, with respect to the requested service. Auditors and other USDA officials responsible for maintaining uniformity and accuracy of service authorized under this part shall have access to all areas of facilities covered by approved applications for service under the regulations, during normal business hours or during periods of production, for the purpose of evaluating products or processes. This includes products in facilities which have been or are to be examined for program conformance or which bear any USDA official marks of conformance. This further includes any facilities or operations that are part of an approved program. (b) Documentation and records relating to an applicant's program must be retained as prescribed under each service program authorized under this part. Sec. 62.207 Official assessment. Official assessment of an applicant's program shall include: (a) Documentation assessment. Auditors and other USDA officials shall review the applicant's program documentation and issue the finding of the review to the applicant. (b) Program assessment. Auditors and USDA officials shall conduct an onsite assessment of the applicant's program to ensure provisions of the applicant's program documentation have been implemented and conform to program procedures. (c) Program determination. Applicants determined to meet or not meet program procedures or requirements shall be notified of their approval or disapproval. (d) Corrective and/or preventative actions. Applicants may be required to implement corrective and/or preventative actions upon completion of an assessment. After implementation of the corrective and/ or preventative actions, the applicant may request another assessment. Sec. 62.208 Publication of assessment status. Approved programs shall be posted for public reference on: https:// www.ams.usda.gov. Such postings shall include: (a) Program name and contact information; (b) Products or services covered under the scope of approval; (c) Effective dates of approval; (d) Control numbers of official assessments, as appropriate; and (e) Any other information deemed necessary by the Administrator. [[Page 182]] Sec. 62.209 [Reserved] Sec. 62.210 Denial, suspension, cancellation or rejection of service. (a) Denial of services. Services authorized under this part may be denied if an applicant fails to meet or conform to a program's requirements including, but not limited to, a failure to: (1) Adequately address any program requirement resulting in a nonconformance for the program. (2) Demonstrate capability to meet any program requirement, thereby resulting in a major nonconformance. (3) Present truthful and accurate information to any auditor or other USDA official; or (4) Allow any auditor or other USDA official access to facilities and records within the scope of the program. (b) Suspension of services. Services may be suspended if the applicant fails to meet or conform to a program's requirements including, but not limited to, a failure to: (1) Adequately address any program's requirement, thereby resulting in a major nonconformance; (2) Demonstrate capability to meet any program requirement, thereby resulting in a major nonconformance; (3) Follow and maintain its approved program or procedures; (4) Provide corrections and take corrective actions as applicable in the timeframe specified; (5) Submit significant changes to an approved program and seek approval from USDA prior to implementation of the significant changes to the program; (6) Allow any auditor or other USDA official access to facilities and records within the scope of the approved program; (7) Accurately represent the eligibility of agricultural products or services distributed under an approved program; (8) Remit payment for services; (9) Abstain from any fraudulent or deceptive practice in connection with any application or request for service; or (10) Allow any auditor or other USDA official to perform his or her duties under the provisions of this part or program requirements established under one of the authorized services of this part. (c) Cancellation of services. Services may be cancelled, an application may be rejected, or program assessment may be terminated if the Administrator or his/her designee determines that a nonconformance has remained uncorrected beyond a reasonable amount of time. (d) Rejection of services. Services may be rejected when it appears that to perform audit and accreditation services would not be in the best interests of the USDA. The applicant shall be promptly notified of the reason for such rejection. Sec. 62.211 Appeals. (a) Appeals of adverse decisions. Appeals of adverse decisions under this part may be made in writing to the AMS Administrator, Rm. 3069-S, 1400 Independence Avenue SW, Washington, DC 20250-0249 or to the director of the applicable service office. Appeals must be made within the timeframe specified by each program or within 30 calendar days of receipt of an adverse decision, whichever is sooner. (b) Procedure for Appeals. Actions under this subparagraph concerning appeals of adverse decisions to the Administrator shall be conducted in accordance with the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statutes set forth at 7 CFR 1.130 through 1.151 and the Administrative Procedures Governing Withdrawal of Inspection and Grading Services in 7 CFR part 50. The procedure for appeals is specified by each program and/ or by an overarching USDA AMS administrative procedure. Sec. 62.212 [Reserved] Sec. 62.213 Official identification. Some programs offered under this subpart allow for the use of official identification or marks of conformance. A program's specific documented procedure will indicate whether official marks of conformance apply. (a) Products or services produced under a program authorized under this part may use an official identification mark of approval for that program, [[Page 183]] such as the ``USDA Process Verified'' statement and the ``USDA Process Verified'' shield. Use of program official identification must be in accordance with program requirements. (b) Use of a program's official identification mark must be approved in writing by USDA prior to use by an applicant. (c) USDA Process Verified Program shield. Products or services produced under an approved USDA PVP may use the ``USDA Process Verified'' statement and the ``USDA Process Verified Program'' shield (Figure 1 to paragraph (c)), so long as each is used in direct association with a clear description of the process verified points approved by USDA. [GRAPHIC] [TIFF OMITTED] TR06OC20.001 (1) The USDA Process Verified shield must replicate the form and design of the example in Figure 1 and must be printed legibly and conspicuously: (i) On a white background with a gold trimmed shield, with the term ``USDA'' in white overlaying a blue upper third of the shield, the term ``PROCESS'' in black overlaying a white middle third of the shield, and term ``VERIFIED'' in white overlaying a red lower third of the shield; or (ii) On a white or transparent background with a black trimmed shield, with the term ``USDA'' in white overlaying a black upper third of the shield, the term ``PROCESS'' in black overlaying a white middle third of the shield, and the term ``VERIFIED'' in white overlaying a black lower third of the shield. Sec. 62.214 Voluntary participation. Applying for services, or enrollment in any serviceprogram, is voluntary. Once an applicant receives a service or is accepted into a program, compliance with that service or program's terms is mandatory unless the applicant withdraws its application as provided in Sec. 62.203 or participation is denied, suspended, cancelled, or rejected subject to the terms of Sec. 62.210. Subpart E_Fees Sec. 62.300 Fees and other costs of service. (a) For each calendar year, AMS will calculate the rate for services per hour per program employee using the following formulas: (1) Regular rate. The total AMS service program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service. [[Page 184]] (2) Overtime rate. The total AMS service program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5 plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (3) Holiday rate. The total AMS service program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (b)(1) For each calendar year, based on previous fiscal year/ historical actual costs, AMS will calculate the benefits rate, operating rate, and allowance for bad debt rate components of the regular, overtime, and holiday rates as follows: (i) Benefits rate. The total AMS service program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions. (ii) Operating rate. The total AMS service program operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation. (iii) Allowance for bad debt rate. Total AMS service program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked. (2) The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on OMB's most recent Presidential Economic Assumptions. (c) Applicants are responsible for paying actual travel costs incurred to provide services, including but not limited to: Mileage charges for use of privately owned vehicles, rental vehicles and gas, parking, tolls, and public transportation costs such as airfare, train, and taxi service. (d) The applicant is responsible for paying per diem costs incurred to provide services away from the auditor's or USDA official's official duty station(s). Per diem costs shall be calculated in accordance with existing travel regulations (41 CFR, subtitle F--Federal Travel Regulation System, chapter 301). (e) When costs other than those costs specified in paragraphs (a) through (c) of this section are involved in providing the services, the applicant shall be responsible for these costs. The amount of these costs shall be determined administratively by AMS. However, the applicant will be notified of these costs before the service is rendered. Sec. 62.301 Payment of fees and other charges. Fees and other charges for services shall be paid in accordance with each service or program's policy(ies) and documentation. The applicant shall remit payment by the date indicated on the invoice. Payment may be made by automated clearing house transactions; credit card, debit card, or direct debit via Pay.gov or PayPal; electronic funds transfer; check; or money order. Remittance must be to USDA, AMS and include the customer number (i.e., account number) from the invoice. Check or money orders must be mailed to the remit address indicated on the invoice. Wire transfers are exclusive to foreign customers. Fees and charges shall be paid in advance if required by the service or program's authorized USDA official. Failure to pay fees can result in denial, suspension, or cancellation of service. Subpart F_OMB Control Number Sec. 62.400 OMB control number assigned pursuant to the Paperwork Reduction Act. The information collection and recordkeeping requirements of this part have been approved by OMB under 44 U.S.C. Chapter 35 and have been assigned OMB Control Numbers: 0581-0125, 0581-0128, 0581-0251, and 0581- 0283. [[Page 185]] PART 63_NATIONAL SHEEP INDUSTRY IMPROVEMENT CENTER--Table of Contents Subpart A_General Provisions Definitions Sec. 63.1 Act. 63.2 Board. 63.3 Department or USDA. 63.4 Eligible entity. 63.5 Eligible organization. 63.6 Fiscal year. 63.7 Fund. 63.8 NSIIC. 63.9 Part. 63.10 Secretary. 63.11 Under Secretary for Rural Development. 63.12 Under Secretary for Research, Education, and Economics. 63.13 United States. Board of Directors 63.100 Establishment and membership. 63.101 Nominations. 63.102 Nominee's agreement to serve. 63.103 Appointment. 63.104 Vacancies. 63.105 Nominating organizations. 63.106 Term of office. 63.107 Compensation. 63.108 Removal. 63.109 Procedure. 63.110 Powers and duties of the Board. 63.111 Prohibited activities. 63.112 Conflict of interest. National Sheep Industry Improvement Center 63.200 NSIIC establishment and purpose. Revolving Fund 63.300 Establishment. 63.301 Use of fund. Reports, Books, and Records 63.400 Books and records. 63.401 Use of information. 63.402 Confidentiality. Miscellaneous 63.500 Compliance. 63.501 Patents, copyrights, inventions, trademarks, information, publications, and product formulations. 63.502 Personal liability. 63.503 Separability. 63.504 Amendments. 63.505 OMB control number. Subpart B [Reserved] Authority: 7 U.S.C. 1621-1627. Source: 75 FR 43034, July 23, 2010, unless otherwise noted. Subpart A_General Provisions Definitions Sec. 63.1 Act. Act means the Agricultural Marketing Act of 1946 (7 U.S.C. 1621- 1627). [79 FR 31845, June 3, 2014] Sec. 63.2 Board. Board means National Sheep Industry Improvement Center Board of Directors established under Sec. 63.100. Sec. 63.3 Department or USDA. Department or USDA means the United States Department of Agriculture. Sec. 63.4 Eligible entity. Eligible entity means an entity that promotes the betterment of the United States sheep or goat industries and that is a public, private, or cooperative organization; an association, including a corporation not operated for profit; a federally recognized Indian Tribe; or a public or quasi-public agency. Sec. 63.5 Eligible organization. Eligible organization means any national organization that meets the criteria provided for in Sec. 63.105 as being eligible to submit nominations for membership on the Board. Sec. 63.6 Fiscal year. Fiscal year means a calendar year or any other 12 month period as determined by the Board. Sec. 63.7 Fund. Fund means the NSIIC Revolving Fund established in the United States Department of the Treasury that is available to the NSIIC without fiscal year limitation, to carry out the programs and activities authorized under the Act. Sec. 63.8 NSIIC. NSIIC or Center means the National Sheep Industry Improvement Center established under Sec. 63.200. [[Page 186]] Sec. 63.9 Part. Part means the rules and regulations issued pursuant to the Act that appear in part 63 of title 7 of the Code of Federal Regulations. Sec. 63.10 Secretary. Secretary means the Secretary of Agriculture of the United States or any other officer or employee of the Department to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in the Secretary's stead. Sec. 63.11 Under Secretary for Rural Development. Under Secretary for Rural Development means the Under Secretary for Rural Development of the U.S. Department of Agriculture, or any other officer or employee of the Department designated by the Under Secretary to act in the Under Secretary's stead. Sec. 63.12 Under Secretary for Research, Education, and Economics. Under Secretary for Research, Education, and Economics means the Under Secretary for Research, Education, and Economics of the U.S. Department of Agriculture, or any other officer or employee of the Department designated by the Under Secretary to act in the Under Secretary's stead. Sec. 63.13 United States. United States means collectively the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, and the territories and possessions of the United States. Board of Directors Sec. 63.100 Establishment and membership. There is hereby established a National Sheep Industry Improvement Center Board. The Board is composed of seven voting members and two non- voting members. Voting members of the Board shall be appointed by the Secretary from nominations submitted in accordance with this part. The Board shall consist of the following: (a) Voting members. (1) Four members shall be active producers of sheep or goats in the United States; (2) Two members shall have expertise in finance and management; and (3) One member shall have expertise in lamb, wool, goat, or goat product marketing. (b) Non-voting members. (1) One member shall be the Under Secretary of Agriculture for Rural Development, USDA; and (2) One member shall be the Under Secretary for Research, Education, and Economics, USDA. Sec. 63.101 Nominations. All nominations authorized under this section shall be made in the following manner: (a) Nominations shall be obtained by the Secretary from national organizations eligible under Sec. 63.105. An eligible organization shall submit to the Secretary for consideration at least two nominations for one or more voting member seats on the Board. If two nominations for each voting member seat are not submitted by such organization(s), then the Secretary may solicit nominations from other sources. (b) After the establishment of the initial Board, USDA shall announce when a vacancy does or will exist. Nomination for subsequent Board members shall be submitted to the Secretary not less than sixty (60) days prior to the expiration of the terms of the members whose terms are expiring, in the manner as described in this section. In the case of vacancies due to reasons other than the expiration of a term of office, successor Board members shall be appointed pursuant to Sec. 63.104. (c) If more than one eligible organization exists, they may caucus and jointly nominate at least two qualified persons for each position. If joint agreement is not reached with respect to any such nominations, or if no caucus is held, each eligible organization may submit to the Secretary at least two nominees for each appointment to be made. Sec. 63.102 Nominee's agreement to serve. Any person nominated to serve on the Board shall file with the Secretary at the time of the nomination a written agreement to: (a) Serve on the Board if appointed; [[Page 187]] (b) Disclose any relationship that may create a conflict of interest under Sec. 63.112; and (c) Withdraw from participation in deliberations, decision-making, or voting on matters which concern any relationship disclosed under paragraph (b) of this section. Sec. 63.103 Appointment. From the nominations made pursuant to Sec. 63.101, the Secretary shall appoint the members of the Board. Sec. 63.104 Vacancies. To fill any vacancy occasioned by the death, removal, resignation, or disqualification of any member of the Board, the Secretary shall appoint a successor from the most recent list of nominations for the position or the Secretary shall request nominations for a successor pursuant to Sec. 63.101 and such successor shall be appointed pursuant to Sec. 63.103. Sec. 63.105 Nominating organizations. (a) In general. Nominations for voting members of the Board may be submitted by any national organization that the Secretary determines meets the eligibility criteria established under paragraph (b) of this section. (b) Basis for eligibility. A national organization is eligible to submit nominations for voting members on the Board if: (1) The membership of the organization consists primarily of active sheep or goat producers in the United States; and (2) The primary interest of the organization is the production of sheep or goats in the United States. Sec. 63.106 Term of office. (a) The voting members of the Board shall serve for a term of three years; except that persons (other than the chairperson) appointed to the initial Board shall serve staggered terms of one, two, and three years, as determined by the Secretary. (b) No member may serve more than two consecutive full terms. Sec. 63.107 Compensation. Board members shall serve without compensation, but shall be reimbursed for their reasonable travel, subsistence, and other necessary expenses incurred in performing their duties as members of the Board. Sec. 63.108 Removal. If the Secretary determines that any person appointed under this part fails or refuses to perform his or her duties properly or engages in acts of dishonesty or willful misconduct, the Secretary shall remove the person from office. A person appointed under this part or any employee of the Board may be removed by the Secretary if the Secretary determines that the person's continued service would be detrimental to the purposes of the Act. Sec. 63.109 Procedure. (a) At a Board meeting, it will be considered a quorum when a simple majority of the voting representatives are present. (b) A decision of the Board shall be made by a majority of the voting members of the board. (c) The Board shall meet not less than once each fiscal year at the call of the chairperson or at the request of the executive director. (d) The location of the meeting shall be established by the Board. (e) A chairperson shall be selected from among the voting members of the Board and all serve a term of office of two years. (f) All Board members and the Secretary will be notified at least 30 days in advance of all Board meetings, unless an emergency meeting is declared. (g) In lieu of voting at a properly convened meeting and, when in the opinion of the chairperson of the Board such action is necessary, the Board may take action if supported by a simple majority of the Board representatives by mail, telephone, electronic mail, facsimile, or any other means of communication. In that event, all representatives must be notified and provided the opportunity to vote. Any action so taken shall have the same force and effect as though such action had been taken at a properly convened meeting of the Board. All telephone votes shall be confirmed promptly in writing. All votes shall be recorded in Board minutes. [[Page 188]] (h) There shall be no voting by proxy. (i) The organization of the Board and the procedures for conducting meetings of the Board shall be in accordance with its bylaws, which shall be established by the Board and approved by the Secretary. Sec. 63.110 Powers and duties of the Board. The management of the NSIIC shall be vested in the Board of Directors. The Board shall have the following powers and duties: (a) Be responsible for the general supervision of the NSIIC; (b) Review any grant or contract agreement to be made or entered into by the NSIIC and any financial assistance provided to the NSIIC; (c) Make the final decision, by majority vote, on whether or not to provide grants to an eligible entity in accordance with the strategic plan; (d) Develop and establish a budget plan and long-term operating plan to carry out the goals of the NSIIC; (e) Adopt, and amend as appropriate, bylaws as necessary for the proper management and functioning of the NSIIC; (f) Provide a system of organization to fix responsibility and promote efficiency in carrying out the functions of the NSIIC; (g) Appoint and establish compensation for an executive director, who will serve at the pleasure of the Board, to be the chief executive officer of the NSIIC; (h) Appoint other officers, attorneys, employees, and agents as necessary and set forth their respective duties and powers; (i) Delegate, by resolution, to the chairperson, the executive director, or any other officer or employee any function, power, or duty of the Board--other than voting on a grant, contract, agreement, budget, or annual strategic plan; and (j) Consult with the following entities to carry out this part: (1) State departments of agriculture; (2) Federal departments and agencies; (3) Nonprofit development corporations; (4) Colleges and universities; (5) Banking and other credit-related agencies; (6) Agriculture and agribusiness organizations, and (7) Regional planning and development organizations. Sec. 63.111 Prohibited activities. The Board may not engage in, and shall prohibit the employees and agents of the Board from engaging in: (a) Any action that is a conflict of interest under Sec. 63.112; (b) Using funds to undertake any action for the purpose of influencing legislation or governmental action or policy, by local, State, national, and foreign governments, other than recommending to the Secretary amendments to the Order; and (c) Any activity that is false, misleading, or disparaging to another agricultural commodity. Sec. 63.112 Conflict of interest. (a) In general. Members of the Board shall not vote on any particular matter pending before the Board in which, to the knowledge of the member, an interest is held by the member, any spouse of the member, any child of the member, any partner of the member, any organization in which the member is serving as an officer, director, trustee, partner, or employee; or any person with whom the member is negotiating or has any arrangement concerning prospective employment or with whom the member has a financial interest, except as provided in paragraph (c) of this section. (b) Validity of action. An action by a member of the Board that violates Sec. 63.112 (a) shall not impair or otherwise affect the validity of any otherwise lawful action by the Board. (c) Disclosure. If a member of the Board makes full disclosure of an interest and, prior to any participation by the member, the Board determines, by majority vote, that the interest is too remote or too inconsequential to affect the integrity of any participation by the member, the member may participate in the matter relating to the interest, except as provided in paragraph (d) of this section. A member that discloses an interest under section [[Page 189]] Sec. 63.112(a) shall not vote on a determination of whether the member may participate in the matter relating to the interest. (d) Remands. The Secretary may vacate and remand to the Board for reconsideration any decision made if the Secretary determines that there has been a violation of this section or any conflict of interest provision of the bylaws of the Board with respect to the decision. (1) In the case of any violation and remand of a funding decision to the Board, the Secretary shall inform the Board of the reasons for the remand. (2) If a decision with respect to the matter is remanded to the Board by reason of a conflict of interest faced by a Board member, the member may not participate in any subsequent decision with respect to the matter. National Sheep Industry Improvement Center Sec. 63.200 NSIIC establishment and purpose. (a) There is hereby established a National Sheep Industry Improvement Center. The purpose of the Center shall be to: (1) Promote strategic development activities and collaborative efforts by private and State entities to maximize the impact of Federal assistance to strengthen and enhance production and marketing of sheep or goat products in the United States; (2) Optimize the use of available human capital and resources within the sheep or goat industries; (3) Provide assistance to meet the needs of the sheep or goat industry for infrastructure development, business development, production, resource development, and market and environmental research; (4) Advance activities that empower and build the capacity of the U.S. sheep or goat industry to design unique responses to the special needs of the sheep or goat industries on both a regional and national basis; and (5) Adopt flexible and innovative approaches to solving the long- term needs of the United States sheep and goat industry. (b) The NSIIC shall submit to the Secretary an annual strategic plan for the delivery of financial assistance provided by the NSIIC. A strategic plan shall identify: (1) Goals, methods, and a benchmark for measuring the success of carrying out the plan and how the plan relates to the national and regional goals of the NSIIC; (2) The amount and sources of Federal and non-Federal funds that are available for carrying out the plan; (3) Funding priorities; (4) Selection criteria for funding; and (5) A method of distributing funding. Revolving Fund Sec. 63.300 Establishment. The NSIIC Revolving Fund established in the Treasury shall be available to the NSIIC, without fiscal year limitation, to carry out the authorized programs and activities of the NSIIC under this part. There shall be deposited in the Fund: (a) Such amounts as may be appropriated, transferred, or otherwise made available to support programs and activities of the NSIIC; (b) Payments received from any source for products, services, or property furnished in connection with the activities of the NSIIC; (c) Fees and royalties collected by the NSIIC from licensing or other arrangements relating to commercialization of products developed through projects funded, in whole or part, by grants or contracts executed by the NSIIC; (d) Donations or contributions accepted by the NSIIC to support authorized programs and activities. Such contributions shall be free from any encumbrance by the donor and the NSIIC shall retain complete control of their use; and (e) Any other funds acquired by the NSIIC. Sec. 63.301 Use of fund. The NSIIC shall use the Fund to: (a) Make grants to eligible entities in accordance with a strategic plan submitted under Sec. 63.310 of this part. Specifically, amounts in the Fund may be used to: [[Page 190]] (1) Participate with Federal and State agencies in financing activities that are in accordance with the strategic plan, including participation with several States in a regional effort; (2) Participate with other public and private funding sources in financing activities that are in accordance with the strategic plan, including participation in a regional effort; (3) Accrue interest; (4) Serve broad geographic areas and regions of diverse production, to the maximum extent practicable; (5) Only to supplement and not supplant Federal, State, and private funds expended for rural development; (6) For administration purposes, with a maximum 10 percent of the NSIIC Fund balance at the beginning of each fiscal year for the administration of the NSIIC; (b) Provide funds to eligible entities contingent upon that entity agreeing to account for the amounts using generally accepted accounting principles and to provide access to the Secretary for inspection and audit of such records. [75 FR 43034, July 23, 2010, as amended at 79 FR 31845, June 3, 2014] Reports, Books, and Records Sec. 63.400 Books and records. The Board and NSIIC shall: (a) Maintain such books and records, which shall be made available to the Secretary for inspection and audit as is appropriate for the administration or enforcement of the Act or rules and regulations issued thereunder; (b) Prepare and submit to the Secretary, from time to time, such reports as the Secretary may prescribe; and (c) Account for the receipt and disbursement of all funds entrusted to it. The NSIIC shall cause its books and records to be audited by an independent auditor at the end of each fiscal year, and a report of such audit to be submitted to the Secretary. Sec. 63.401 Use of information. Information from records or reports required pursuant to this part shall be made available to the Secretary as is appropriate for the administration or enforcement of the Act or rules and regulation issued thereunder. Sec. 63.402 Confidentiality. All information obtained from books, records, reports, or any other material obtained under the Act and this part, shall be kept confidential by all persons, including employees and former employees of the NSIIC. Nothing in this section shall be deemed to prohibit the issuance of general statements based upon the reports or the statistical data, which statements do not identify the information furnished by any entity. Miscellaneous Sec. 63.500 Compliance. The Secretary shall review and monitor compliance by the Board and the NSIIC with the Act and this part. Sec. 63.501 Patents, copyrights, inventions, trademarks, information, publications, and product formulations. Any patents, copyrights, inventions, trademarks, information, publications, or product formulations developed through the use of funds collected by the Board under the provisions of this subpart shall be the property of the U.S. Government, as represented by the Board, and shall, along with any rents, royalties, residual payments, or other income from the rental, sales, leasing, franchising, or other uses of such patents, copyrights, inventions, trademarks, information, publications, or product formulations, inure to the benefit of the Board; shall be considered income subject to the same fiscal, budget, and audit controls as other funds of the Board; and may be licensed subject to approval by the Secretary. Should patents, copyrights, inventions, trademarks, information, publications, or product formulations be developed through the use of funds collected by the Board under this part and funds contributed by another organization or person, ownership and related rights to such patents, copyrights, inventions, trademarks, information, publications, or product formulations shall be determined by agreement between the Board [[Page 191]] and the party contributing funds towards the development of such patents, copyrights, inventions, trademarks, information, publications, or product formulations in a manner consistent with this paragraph. Sec. 63.502 Personal liability. No member or employee of the Board shall be held personally responsible, either individually or jointly, in any way whatsoever to any person for errors in judgment, mistakes, or other acts, either of commission or omission, as such member or employee, except for acts of dishonesty or willful misconduct. Sec. 63.503 Separability. If any provision of the part is declared invalid or the applicability thereof to any person or circumstance is held invalid, the validity of the remainder of this subpart, or the applicability thereof to other persons or circumstances shall not be affected thereby. Sec. 63.504 Amendments. Amendments to this part may be proposed, from time to time, by the Board or by any interested persons affected by the provisions of the Act, including the Secretary. Sec. 63.505 OMB control number. The control number assigned to the information collection requirements of this part by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35, is OMB control number 0505-new. Subpart B [Reserved] PART 65_COUNTRY OF ORIGIN LABELING OF LAMB, CHICKEN, AND GOAT MEAT, PERISHABLE AGRICULTURAL COMMODITIES, MACADAMIA NUTS, PECANS, PEANUTS, AND GINSENG--Table of Contents Subpart A_General Provisions Definitions Sec. 65.100 Act. 65.105 AMS. 65.115 Born. 65.120 Chicken. 65.125 Commingled covered commodities. 65.130 Consumer package. 65.135 Covered commodity. 65.140 Food service establishment. 65.145 Ginseng. 65.150 Goat. 65.160 Ground chicken. 65.165 Ground goat. 65.170 Ground lamb. 65.180 Imported for immediate slaughter. 65.185 Ingredient. 65.190 Lamb. 65.195 Legible. 65.205 Perishable agricultural commodity. 65.210 Person. 65.218 Pre-labeled. 65.220 Processed food item. 65.225 Produced. 65.230 Production step. 65.235 Raised. 65.240 Retailer. 65.245 Secretary. 65.250 Slaughter. 65.255 United States. 65.260 United States country of origin. 65.265 USDA. Country of Origin Notification 65.300 Country of origin notification. 65.400 Labeling. Recordkeeping 65.500 Recordkeeping requirements. Subpart B [Reserved] Authority: 7 U.S.C. 1621 et seq. Source: 74 FR 2704, Jan. 15, 2009, unless otherwise noted. Subpart A_General Provisions Definitions Sec. 65.100 Act. Act means the Agricultural Marketing Act of 1946, (7 U.S.C. 1621 et seq.). Sec. 65.105 AMS. AMS means the Agricultural Marketing Service, United States Department of Agriculture. Sec. 65.115 Born. Born in the case of chicken means hatched from the egg. Sec. 65.120 Chicken. Chicken has the meaning given the term in 9 CFR 381.170(a)(1). [[Page 192]] Sec. 65.125 Commingled covered commodities. Commingled covered commodities means covered commodities (of the same type) presented for retail sale in a consumer package that have been prepared from raw material sources having different origins. Sec. 65.130 Consumer package. Consumer package means any container or wrapping in which a covered commodity is enclosed for the delivery and/or display of such commodity to retail purchasers. Sec. 65.135 Covered commodity. (a) Covered commodity means: (1) Muscle cuts of lamb, chicken, and goat; (2) Ground lamb, ground chicken, and ground goat; (3) Perishable agricultural commodities; (4) Peanuts; (5) Macadamia nuts; (6) Pecans; and (7) Ginseng. (b) Covered commodities are excluded from this part if the commodity is an ingredient in a processed food item as defined in Sec. 65.220. [74 FR 2704, Jan. 15, 2009, as amended at 81 FR 10761, Mar. 2, 2016] Sec. 65.140 Food service establishment. Food service establishment means a restaurant, cafeteria, lunch room, food stand, saloon, tavern, bar, lounge, or other similar facility operated as an enterprise engaged in the business of selling food to the public. Similar food service facilities include salad bars, delicatessens, and other food enterprises located within retail establishments that provide ready-to-eat foods that are consumed either on or outside of the retailer's premises. Sec. 65.145 Ginseng. Ginseng means ginseng root of the genus Panax. Sec. 65.150 Goat. Goat means meat produced from goats. Sec. 65.160 Ground chicken. Ground chicken means comminuted chicken of skeletal origin that is produced in conformance with all applicable Food Safety and Inspection Service labeling guidelines. Sec. 65.165 Ground goat. Ground goat means comminuted goat of skeletal origin that is produced in conformance with all applicable Food Safety and Inspection Service labeling guidelines. Sec. 65.170 Ground lamb. Ground lamb means comminuted lamb of skeletal origin that is produced in conformance with all applicable Food Safety and Inspection Service labeling guidelines. Sec. 65.180 Imported for immediate slaughter. Imported for immediate slaughter means imported into the United States for ``immediate slaughter'' as that term is defined in 9 CFR 93.400, i.e., consignment directly from the port of entry to a recognized slaughtering establishment and slaughtered within 2 weeks from the date of entry. Sec. 65.185 Ingredient. Ingredient means a component either in part or in full, of a finished retail food product. Sec. 65.190 Lamb. Lamb means meat produced from sheep. Sec. 65.195 Legible. Legible means text that can be easily read. Sec. 65.205 Perishable agricultural commodity. Perishable agricultural commodity means fresh and frozen fruits and vegetables of every kind and character that have not been manufactured into articles of a different kind or character and includes cherries in brine as defined by the Secretary in accordance with trade usages. [[Page 193]] Sec. 65.210 Person. Person means any individual, partnership, corporation, association, or other legal entity. Sec. 65.218 Pre-labeled. Pre-labeled means a covered commodity that has the commodity's country of origin and the name and place of business of the manufacturer, packer, or distributor on the covered commodity itself, on the package in which it is sold to the consumer, or on the master shipping container. The place of business information must include at a minimum the city and state or other acceptable locale designation. Sec. 65.220 Processed food item. Processed food item means a retail item derived from a covered commodity that has undergone specific processing resulting in a change in the character of the covered commodity, or that has been combined with at least one other covered commodity or other substantive food component (e.g., chocolate, breading, tomato sauce), except that the addition of a component (such as water, salt, or sugar) that enhances or represents a further step in the preparation of the product for consumption, would not in itself result in a processed food item. Specific processing that results in a change in the character of the covered commodity includes cooking (e.g., frying, broiling, grilling, boiling, steaming, baking, roasting), curing (e.g., salt curing, sugar curing, drying), smoking (hot or cold), and restructuring (e.g., emulsifying and extruding). Examples of items excluded include roasted peanuts, breaded chicken tenders, and fruit medley. [81 FR 10761, Mar. 2, 2016] Sec. 65.225 Produced. Produced in the case of a perishable agricultural commodity, peanuts, ginseng, pecans, and macadamia nuts means harvested. Sec. 65.230 Production step. Production step means, in the case of beef, pork, goat, chicken, and lamb, born, raised, or slaughtered. Sec. 65.235 Raised. Raised means, in the case of beef, pork, chicken, goat, and lamb, the period of time from birth until slaughter or in the case of animals imported for immediate slaughter as defined in Sec. 65.180, the period of time from birth until date of entry into the United States. Sec. 65.240 Retailer. Retailer means any person subject to be licensed as a retailer under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)). [78 FR 31385, May 24, 2013] Sec. 65.245 Secretary. Secretary means the Secretary of Agriculture of the United States or any person to whom the Secretary's authority has been delegated. Sec. 65.250 Slaughter. Slaughter means the point in which a livestock animal (including chicken) is prepared into meat products (covered commodities) for human consumption. For purposes of labeling under this part, the word harvested may be used in lieu of slaughtered. Sec. 65.255 United States. United States means the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, the Northern Mariana Islands, and any other Commonwealth, territory, or possession of the United States. Sec. 65.260 United States country of origin. United States country of origin means in the case of: (a) Beef, pork, lamb, chicken, and goat: (1) From animals exclusively born, raised, and slaughtered in the United States; (2) From animals born and raised in Alaska or Hawaii and transported for a period of not more than 60 days through Canada to the United States and slaughtered in the United States; or (3) From animals present in the United States on or before July 15, 2008, [[Page 194]] and once present in the United States, remained continuously in the United States. (b) Perishable agricultural commodities, peanuts, ginseng, pecans, and macadamia nuts: from products produced in the United States. Sec. 65.265 USDA. USDA means the United States Department of Agriculture. Country of Origin Notification Sec. 65.300 Country of origin notification. In providing notice of the country of origin as required by the Act, the following requirements shall be followed by retailers: (a) General. Labeling of covered commodities offered for sale whether individually, in a bulk bin, carton, crate, barrel, cluster, or consumer package must contain country of origin as set forth in this regulation. (b) Exemptions. Food service establishments as defined in Sec. 65.135 are exempt from labeling under this subpart. (c) Exclusions. A covered commodity is excluded from this subpart if it is an ingredient in a processed food item as defined in Sec. 65.220. (d) Labeling Covered Commodities of United States Origin. A covered commodity may bear a declaration that identifies the United States as the sole country of origin at retail only if it meets the definition of United States country of origin as defined in Sec. 65.260. The United States country of origin designation for muscle cut covered commodities shall include all of the production steps (i.e., ``Born, Raised, and Slaughtered in the United States''). (e) Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin from Animals Slaughtered in the United States. If an animal was born and/or raised in Country X and/or (as applicable) Country Y, and slaughtered in the United States, the resulting muscle cut covered commodities shall be labeled to specifically identify the production steps occurring in each country (e.g., ``Born and Raised in Country X, Slaughtered in the United States''). If an animal is raised in the United States as well as another country (or multiple countries), the raising occurring in the other country (or countries) may be omitted from the origin designation except if the animal was imported for immediate slaughter as defined in Sec. 65.180 or where by doing so the muscle cut covered commodity would be designated as having a United States country of origin (e.g., ``Born in Country X, Raised and Slaughtered in the United States'' in lieu of ``Born and Raised in Country X, Raised in Country Y, Raised and Slaughtered in the United States''). (f) Labeling Imported Covered Commodities. (1) Perishable agricultural commodities, peanuts, pecans, ginseng, macadamia nuts and ground meat covered commodities that have been produced in another country shall retain their origin, as declared to U.S. Customs and Border Protection at the time the product entered the United States, through retail sale. (2) Muscle cut covered commodities derived from an animal that was slaughtered in another country shall retain their origin, as declared to U.S. Customs and Border Protection at the time the product entered the United States, through retail sale (e.g., ``Product of Country X''), including muscle cut covered commodities derived from an animal that was born and/or raised in the United States and slaughtered in another country. In addition, the origin declaration may include more specific location information related to production steps (i.e., born, raised, and slaughtered) provided records to substantiate the claims are maintained and the claim is consistent with other applicable Federal legal requirements. (g) Labeling Commingled Covered Commodities. In the case of perishable agricultural commodities; peanuts; pecans; ginseng; and macadamia nuts: For imported covered commodities that have not subsequently been substantially transformed in the United States that are commingled with covered commodities sourced from a different origin that have not been substantially transformed (as established by CBP) in the United States, and/or covered commodities of United States origin, the declaration shall indicate the countries of [[Page 195]] origin in accordance with existing Federal legal requirements. (h) Labeling ground lamb, ground goat, and ground chicken. The declaration for ground lamb, ground goat, and ground chicken covered commodities shall list all countries of origin contained therein or that may be reasonably contained therein. In determining what is considered reasonable, when a raw material from a specific origin is not in a processor's inventory for more than 60 days, that country shall no longer be included as a possible country of origin. (i) Remotely Purchased Products. For sales of a covered commodity in which the customer purchases a covered commodity prior to having an opportunity to observe the final package (e.g., Internet sales, home delivery sales, etc.), the retailer may provide the country of origin notification either on the sales vehicle or at the time the product is delivered to the consumer. [74 FR 2704, Jan. 15, 2009, as amended at 78 FR 31385, May 24, 2013; 81 FR 10761, Mar. 2, 2016] Sec. 65.400 Labeling. (a) Country of origin declarations can either be in the form of a placard, sign, label, sticker, band, twist tie, pin tag, or other format that allows consumers to identify the country of origin. The declaration of the country of origin of a product may be in the form of a statement such as ``Product of USA,'' ``Produce of the USA'', or ``Grown in Mexico,'' may only contain the name of the country such as ``USA'' or ``Mexico,'' or may be in the form of a check box provided it is in conformance with other Federal labeling laws. (b) The declaration of the country of origin (e.g., placard, sign, label, sticker, band, twist tie, pin tag, or other display) must be legible and placed in a conspicuous location, so as to render it likely to be read and understood by a customer under normal conditions of purchase. (c) The declaration of country of origin may be typed, printed, or handwritten provided it is in conformance with other Federal labeling laws and does not obscure other labeling information required by other Federal regulations. (d) A bulk container (e.g., display case, shipper, bin, carton, and barrel) used at the retail level to present product to consumers, may contain a covered commodity from more than one country of origin provided all possible origins are listed. (e) In general, country abbreviations are not acceptable. Only those abbreviations approved for use under Customs and Border Protection rules, regulations, and policies, such as ``U.K.'' for ``The United Kingdom of Great Britain and Northern Ireland'', ``Luxemb'' for Luxembourg, and ``U.S. or USA'' for the ``United States of America'' are acceptable. The adjectival form of the name of a country may be used as proper notification of the country of origin of imported commodities provided the adjectival form of the name does not appear with other words so as to refer to a kind or species of product. Symbols or flags alone may not be used to denote country of origin. (f) Domestic and imported perishable agricultural commodities, peanuts, pecans, macadamia nuts, and ginseng may use State, regional, or locality label designations in lieu of country of origin labeling. Abbreviations may be used for state, regional, or locality label designations for these commodities whether domestically harvested or imported using official United States Postal Service abbreviations or other abbreviations approved by CBP. Recordkeeping Sec. 65.500 Recordkeeping requirements. (a) General. (1) All records must be legible and may be maintained in either electronic or hard copy formats. Due to the variation in inventory and accounting documentary systems, various forms of documentation and records will be acceptable. (2) Upon request by USDA representatives, suppliers and retailers subject to this subpart shall make available to USDA representatives, records maintained in the normal course of business that verify an origin claim. Such records shall be provided within 5 business days of the request and may be maintained in any location. [[Page 196]] (b) Responsibilities of suppliers. (1) Any person engaged in the business of supplying a covered commodity to a retailer, whether directly or indirectly, must make available information to the buyer about the country(ies) of origin of the covered commodity. This information may be provided either on the product itself, on the master shipping container, or in a document that accompanies the product through retail sale. In addition, the supplier of a covered commodity that is responsible for initiating a country(ies) of origin claim, which in the case of lamb, chicken, and goat, is the slaughter facility, must possess records that are necessary to substantiate that claim for a period of 1 year from the date of the transaction. For that purpose, packers that slaughter animals that are tagged with an 840 Animal Identification Number device without the presence of any additional accompanying marking (i.e., ``CAN'' or ``M'') may use that information as a basis for a U.S. origin claim. Packers that slaughter animals that are part of another country's recognized official system (e.g. Canadian official system, Mexico official system) may also rely on the presence of an official ear tag or other approved device on which to base their origin claims. Producer affidavits shall also be considered acceptable records that suppliers may utilize to initiate origin claims, provided it is made by someone having first-hand knowledge of the origin of the covered commodity and identifies the covered commodity unique to the transaction. (2) Any intermediary supplier handling a covered commodity that is found to be designated incorrectly as to the country of origin shall not be held liable for a violation of the Act by reason of the conduct of another if the intermediary supplier relied on the designation provided by the initiating supplier or other intermediary supplier, unless the intermediary supplier willfully disregarded information establishing that the country of origin declaration was false. (3) Any person engaged in the business of supplying a covered commodity to a retailer, whether directly or indirectly (i.e., including but not limited to growers, distributors, handlers, packers, and processors), must maintain records to establish and identify the immediate previous source (if applicable) and immediate subsequent recipient of a covered commodity for a period of 1 year from the date of the transaction. (4) For an imported covered commodity (as defined in Sec. 65.300(f)), the importer of record as determined by CBP, must ensure that records: provide clear product tracking from the port of entry into the United States to the immediate subsequent recipient and accurately reflect the country of origin of the item as identified in relevant CBP entry documents and information systems; and must maintain such records for a period of 1 year from the date of the transaction. (c) Responsibilities of retailers. (1) In providing the country of origin notification for a covered commodity, in general, retailers are to convey the origin information provided by their suppliers. Only if the retailer physically commingles a covered commodity of different origins in preparation for retail sale, whether in a consumer-ready package or in a bulk display (and not discretely packaged) (i.e., full service meat case), can the retailer initiate a multiple country of origin designation that reflects the actual countries of origin for the resulting covered commodity. (2) Records and other documentary evidence relied upon at the point of sale to establish a covered commodity's country(ies) of origin must either be maintained at the retail facility or at another location for as long as the product is on hand and provided to any duly authorized representative of USDA in accordance with Sec. 65.500(a)(2). For pre- labeled products, the label itself is sufficient information on which the retailer may rely to establish the product's origin and no additional records documenting origin information are necessary. (3) Any retailer handling a covered commodity that is found to be designated incorrectly as to the country of origin shall not be held liable for a violation of the Act by reason of the conduct of another if the retailer relied [[Page 197]] on the designation provided by the supplier, unless the retailer willfully disregarded information establishing that the country of origin declaration was false. (4) Records that identify the covered commodity, the retail supplier, and for products that are not pre-labeled, the country of origin information must be maintained for a period of 1 year from the date the origin declaration is made at retail. [74 FR 2704, Jan. 15, 2009, as amended at 81 FR 10761, Mar. 2, 2016] Subpart B [Reserved] PART 66_NATIONAL BIOENGINEERED FOOD DISCLOSURE STANDARD--Table of Contents Subpart A_General Provisions Sec. 66.1 Definitions. 66.3 Disclosure requirement and applicability. 66.5 Exemptions. 66.6 List of Bioengineered Foods. 66.7 Updates to the List of Bioengineered Foods. 66.9 Detectability. 66.11 Severability. 66.13 Implementation and compliance. Subpart B_Bioengineered Food Disclosure 66.100 General. 66.102 Text disclosure. 66.104 Symbol disclosure. 66.106 Electronic or digital link disclosure. 66.108 Text message disclosure. 66.109 Required disclosure with actual knowledge. 66.110 Small food manufacturers. 66.112 Small and very small packages. 66.114 Food sold in bulk containers. 66.116 Voluntary disclosure. 66.118 Other claims. Subpart C_Other Factors and Conditions for Bioengineered Food 66.200 Request or petition for determination. 66.202 Standards for consideration. 66.204 Submission of request or petition. Subpart D_Recordkeeping 66.300 Scope. 66.302 Recordkeeping requirements. 66.304 Access to records. Subpart E_Enforcement 66.400 Prohibited act. 66.402 Audit or examination of records. 66.404 Hearing. 66.406 Summary of results. Authority: 7 U.S.C. 1621 et seq. Source: 83 FR 65871, Dec. 21, 2018, unless otherwise noted. Subpart A_General Provisions Sec. 66.1 Definitions. Act means the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et seq.), as amended to include Subtitle E--National Bioengineered Food Disclosure Standard and Subtitle F--Labeling of Certain Food. Administrator means the Administrator of the Agricultural Marketing Service, United States Department of Agriculture, or the representative to whom authority has been delegated to act in the stead of the Administrator. AMS means the Agricultural Marketing Service of the United States Department of Agriculture. Bioengineered food means-- (1) Subject to the factors, conditions, and limitations in paragraph (2) of this definition: (i) A food that contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (rDNA) techniques and for which the modification could not otherwise be obtained through conventional breeding or found in nature; provided that (ii) Such a food does not contain modified genetic material if the genetic material is not detectable pursuant to Sec. 66.9. (2) A food that meets one of the following factors and conditions is not a bioengineered food. (i) An incidental additive present in food at an insignificant level and that does not have any technical or functional effect in the food, as described in 21 CFR 101.100(a)(3). (ii) [Reserved] Bioengineered substance means substance that contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (rDNA) techniques and for which the modification could not otherwise be [[Page 198]] obtained through conventional breeding or found in nature. Compliance date means-- (1) Mandatory compliance date. Entities responsible for bioengineered food disclosure must comply with the requirements of this part by January 1, 2022. (2) Updates to the List of Bioengineered Foods. When AMS updates the List of Bioengineered Foods pursuant to Sec. 66.7, entities responsible for bioengineered food disclosures must comply with the updates no later than 18 months after the effective date of the update. Food means a food (as defined in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321)) that is intended for human consumption. Food manufacturer means an entity that manufactures, processes, or packs human food and labels the food or food product for U.S. retail sale. Importer means the importer of record, as determined by U.S. Customs and Border Protection (19 U.S.C. 1484(a)(2)(B)), who engages in the importation of food or food products labeled for retail sale into the United States. Information panel means that part of the label of a packaged product that is immediately contiguous to and to the right of the principal display panel as observed by an individual facing the principal display panel, unless another section of the label is designated as the information panel because of package size or other package attributes (e.g. irregular shape with one usable surface). Label means a display of written, printed, or graphic matter upon the immediate container or outside wrapper of any retail package or article that is easily legible on or through the outside container or wrapper. Labeling means all labels and other written, printed, or graphic matter: (1) Upon any article or any of its containers or wrappers; or (2) Accompanying such article. List of Bioengineered Foods means a list, maintained and updated by AMS and provided in Sec. 66.6, of foods for which bioengineered versions have been developed. Marketing and promotional information means any written, printed, audiovisual, or graphic information, including advertising, pamphlets, flyers, catalogues, posters, and signs that are distributed, broadcast, or made available to assist in the sale or promotion of a product. Predominance means an ingredient's position in the ingredient list on a product's label. Predominant ingredients are those most abundant by weight in the product, as required under 21 CFR 101.4(a)(1). Principal display panel means that part of a label that is most likely to be displayed, presented, shown, or examined under customary conditions of display for retail sale. Processed food means any food other than a raw agricultural commodity, and includes any raw agricultural commodity that has been subject to processing, such as canning, cooking, freezing, dehydration, or milling. Raw agricultural commodity means any agricultural commodity in its raw or natural state, including all fruits that are washed, colored, or otherwise treated in their unpeeled natural form prior to marketing. Regulated entity means the food manufacturer, importer, or retailer that is responsible for making bioengineered food disclosures under Sec. 66.100(a). Secretary means the United States Secretary of Agriculture or a representative to whom authority has been delegated to act in the Secretary's stead. Similar retail food establishment means a cafeteria, lunch room, food stand, food truck, transportation carrier (such as a train or airplane), saloon, tavern, bar, lounge, other similar establishment operated as an enterprise engaged in the business of selling prepared food to the public, or salad bars, delicatessens, and other food enterprises located within retail establishments that provide ready-to- eat foods that are consumed either on or outside of the retailer's premises. Small food manufacturer means any food manufacturer with annual receipts of at least $2,500,000, but less than $10,000,000. Small package means food packages that have a total surface area of less than 40 square inches. [[Page 199]] Very small food manufacturer means any food manufacturer with annual receipts of less than $2,500,000. Very small package means food packages that have a total surface area of less than 12 square inches. Sec. 66.3 Disclosure requirement and applicability. (a) General. (1) A label for a bioengineered food must bear a disclosure indicating that the food is a bioengineered food or contains a bioengineered food ingredient consistent with this part. (2) Except as provided in Sec. 66.116 for voluntary disclosure, a label shall not bear a disclosure that a food is a bioengineered food or contains a bioengineered food ingredient if the records maintained in accordance with Sec. 66.302 demonstrate that the food is not a bioengineered food or does not contain a bioengineered food ingredient. (b) Application to food. This part applies only to a food subject to: (1) The labeling requirements under the Federal Food, Drug, and Cosmetic Act (``FDCA''); or (2) The labeling requirements under the Federal Meat Inspection Act, the Poultry Products Inspection Act, or the Egg Products Inspection Act only if: (i) The most predominant ingredient of the food would independently be subject to the labeling requirements under the FDCA; or (ii) The most predominant ingredient of the food is broth, stock, water, or a similar solution and the second-most predominant ingredient of the food would independently be subject to the labeling requirements under the FDCA. Sec. 66.5 Exemptions. This part shall not apply to the food and entities described in this section. (a) Food served in a restaurant or similar retail food establishment. (b) Very small food manufacturers. (c) A food in which no ingredient intentionally contains a bioengineered (BE) substance, with an allowance for inadvertent or technically unavoidable BE presence of up to five percent (5%) for each ingredient. (d) A food derived from an animal shall not be considered a bioengineered food solely because the animal consumed feed produced from, containing, or consisting of a bioengineered substance. (e) Food certified under the National Organic Program. Sec. 66.6 List of Bioengineered Foods. The List of Bioengineered Foods consists of the following: Alfalfa, apple (Arctic\TM\ varieties), canola, corn, cotton, eggplant (BARI Bt Begun varieties), papaya (ringspot virus-resistant varieties), pineapple (pink flesh varieties), potato, salmon (AquAdvantage[supreg]), soybean, squash (summer), and sugarbeet. Sec. 66.7 Updates to the List of Bioengineered Foods. (a) Updates to the List. AMS will review and consider updates to the List on an annual basis and will solicit recommendations regarding updates to the List through notification in the Federal Register and on the AMS website. (1) Recommendations regarding additions to and subtractions from the List may be submitted to AMS at any time or as part of the annual review process. (2) Recommendations should be accompanied by data and other information to support the recommended action. (3) AMS will post public recommendations on its website, along with information about other revisions to the List that the agency may be considering, including input based on consultation with the government agencies responsible for oversight of the products of biotechnology: USDA's Animal and Plant Health Inspection Service (USDA-APHIS), the U.S. Environmental Protection Agency (EPA), and the Department of Health and Human Services' Food and Drug Administration (FDA), and appropriate members of the Coordinated Framework for the Regulation of Biotechnology or a similar successor. (4) AMS will consider whether foods proposed for inclusion on the List have been authorized for commercial production somewhere in the world, and whether the food is currently in legal commercial production for human food somewhere in the world. [[Page 200]] (5) If AMS determines that an update to the List is appropriate following its review of all relevant information provided, AMS will modify the List. (b) Compliance period. Regulated entities will have 18 months following the effective date of the updated List of Bioengineered Foods to revise food labels to reflect changes to the List in accordance with the disclosure requirements of this part. Sec. 66.9 Detectability. (a) Recordkeeping requirements. Modified genetic material is not detectable if, pursuant to the recordkeeping requirements of Sec. 66.302, the entity responsible for making a BE food disclosure maintains: (1) Records to verify that the food is sourced from a non- bioengineered crop or source; or (2) Records to verify that the food has been subjected to a refinement process validated to make the modified genetic material in the food undetectable; or (3) Certificates of analysis or other records of testing appropriate to the specific food that confirm the absence of modified genetic material. (b) Validated refining process. (1) Analytical testing that meets the standards described in paragraph (c) of this section must be used to validate that a refining process renders modified genetic material in a food undetectable. (2) Once a refining process has been so validated, additional testing is not necessary to confirm the absence of detectable modified genetic material in food subsequently refined through that process, provided that no significant changes are made to the validated process and provided that records are maintained to demonstrate that the refining process has been validated and that the validated refining process is followed. (c) Standards of performance for detectability testing. Analytical testing for purposes of detecting the presence of modified genetic material in refined foods pursuant to paragraph (a) of this section shall meet the following standard: (1) Laboratory quality assurance must ensure the validity and reliability of test results; (2) Analytical method selection, validation, and verification must ensure that the testing method used is appropriate (fit for purpose) and that the laboratory can successfully perform the testing; (3) The demonstration of testing validity must ensure consistent accurate analytical performance; and (4) Method performance specifications must ensure analytical tests are sufficiently sensitive for the purposes of the detectability requirements of this part. Sec. 66.11 Severability. If any provision of this part is declared invalid or the applicability thereof to any person or circumstances is held invalid, the validity of the remainder of this part or the applicability thereof to other persons or circumstances shall not be affected thereby. Sec. 66.13 Implementation and compliance. (a) Implementation. Except for small food manufacturers, the implementation date for this part is January 1, 2020. For small food manufacturers, the implementation date is January 1, 2021. (b) Voluntary compliance. (1) Regulated entities may voluntarily comply with the requirements in this part until December 31, 2021. (2) During this period, regulated entities may use labels that meet requirements of preempted State labeling regulations for genetically engineered food. Stickers or ink stamps may be applied to existing labels to provide appropriate bioengineered food disclosures provided that the stickers or ink stamps do not obscure other required label information. (c) Mandatory compliance. All regulated entities must comply with the requirements of this part beginning on January 1, 2022. Subpart B_Bioengineered Food Disclosure Sec. 66.100 General. (a) Responsibility for disclosure. (1) For a food that is packaged prior to receipt by a retailer, the food manufacturer or importer is responsible for ensuring [[Page 201]] that the food label bears a bioengineered food disclosure in accordance with this part. (2) If a retailer packages a food or sells a food in bulk, that retailer is responsible for ensuring that the food bears a bioengineered food disclosure in accordance with this part. (b) Type of disclosure. If a food must bear a bioengineered food disclosure under this part, the disclosure must be in one of the forms described in this paragraph (b), except as provided in Sec. Sec. 66.110 and 66.112. (1) A text disclosure in accordance with Sec. 66.102. (2) A symbol disclosure in accordance with Sec. 66.104. (3) An electronic or digital link disclosure in accordance with Sec. 66.106. (4) A text message disclosure in accordance with Sec. 66.108. (c) Appearance of disclosure. The required disclosure must be of sufficient size and clarity to appear prominently and conspicuously on the label, making it likely to be read and understood by the consumer under ordinary shopping conditions. (d) Placement of the disclosure. Except as provided in Sec. 66.114 for bulk food, the disclosure must be placed on the label in one of the manners described in this paragraph (d). (1) The disclosure is placed in the information panel directly adjacent to the statement identifying the name and location of the handler, distributor, packer, manufacturer, importer, or any statement disclosing similar information. (2) The disclosure is placed in the principal display panel. (3) The disclosure is placed in an alternate panel likely to be seen by a consumer under ordinary shopping conditions if there is insufficient space to place the disclosure on the information panel or the principal display panel. (e) Uniform Resource Locator (URL). Except for disclosures made by small manufacturers and for disclosures on very small packages, a bioengineered food disclosure may not include an internet website URL that is not embedded in an electronic or digital link. Sec. 66.102 Text disclosure. A text disclosure must bear the text as described in this section. A text disclosure may use a plural form if applicable, e.g. if a food product includes more than one bioengineered food, then ``bioengineered foods'' or ``bioengineered food ingredients'' may be used. (a) Bioengineered foods. If a food (including any ingredient produced from such food) is on the List of Bioengineered Foods, and records maintained by a regulated entity demonstrate that the food is bioengineered, the text disclosure must be one of the following, as applicable: (1) ``Bioengineered food'' for bioengineered food that is a raw agricultural commodity or processed food that contains only bioengineered food ingredients; or (2) ``Contains a bioengineered food ingredient'' for multi- ingredient food that is not described in paragraph (a)(1) of this section but contains one or more bioengineered food ingredients. (b) Predominant language in U.S. Food subject to disclosure that is distributed solely in a U.S. territory may be labeled with statements equivalent to those required in this part, using the predominant language used in that territory. Sec. 66.104 Symbol disclosure. A symbol disclosure must replicate the form and design of Figure 1 to this section. (a) The symbol is a circle with a green circumference, and a white outer band. The bottom portion of the circle contains an arch, filled in green to the bottom of the circle. The arch contains two light green terrace lines, sloping downward from left to right. On the left side of the arch is a stem arching towards the center of the circle, ending in a four-pointed starburst. The stem contains two leaves originating on the upper side of the stem and pointing towards the top of the circle. In the background of the leaves, at the top of the circle and to the left of center, is approximately one-half of a circle filled in yellow. The remainder of the circle is filled in light blue. The symbol must contain the words ``BIOENGINEERED.'' [[Page 202]] (b) If a food (including any ingredient produced from such food) is on the List of Bioengineered Foods, and records maintained by a regulated entity demonstrate that the food is bioengineered, or do not demonstrate whether the food is bioengineered, the symbol disclosure must be the following: [GRAPHIC] [TIFF OMITTED] TR21DE18.000 (c) The symbol may be printed in black and white. (d) Nothing can be added to or removed from the bioengineered food symbol design except as allowed in this part. Sec. 66.106 Electronic or digital link disclosure. If a required bioengineered food disclosure is made through an electronic or digital link printed on the label, the disclosure must comply with the requirements described in this section. (a) Accompanying statement. (1) An electronic or digital disclosure must be accompanied by, and be placed directly above or below, this statement: ``Scan here for more food information'' or equivalent language that only reflects technological changes (e.g., ``Scan anywhere on package for more food information'' or ``Scan icon for more food information''). (2) The electronic or digital disclosure must also be accompanied by a telephone number that will provide the bioengineered food disclosure to the consumer, regardless of the time of day. The telephone number instructions must be in close proximity to the digital link and the accompanying statement described in paragraph (a)(1) of this section, must indicate that calling the telephone number will provide more food information, and must be accompanied by the statement ``Call [1-000-000- 0000] for more food information.'' (b) Product information page. When the electronic or digital link is accessed, the link must go directly to the product information page for display on the electronic or digital device. The product information page must comply with the requirements described in this paragraph (b). (1) The product information page must be the first screen to appear on an electronic or digital device after the link is accessed as directed. (2) The product information page must include a bioengineered food disclosure that is consistent with Sec. 66.102 or Sec. 66.104. (3) The product information page must exclude marketing and promotional information. (4) The electronic or digital link disclosure may not collect, analyze, or sell any personally identifiable information about consumers or the devices of consumers; however, if this information must be collected to carry out the purposes of this part, the information must be deleted immediately and not used for any other purpose. Sec. 66.108 Text message disclosure. The regulated entity must not charge a person any fee to access the bioengineered food information through text message and must comply with the requirements described in this section. (a) The label must include this statement ``Text [command word] to [number] for bioengineered food information.'' The number must be a number, including a short code, that sends an immediate response to the consumer's mobile device. [[Page 203]] (b) The response must be a one-time response and the only information in the response must be the appropriate bioengineered food disclosure described in Sec. 66.102 or Sec. 66.116. (c) The response must exclude marketing and promotional information. (d) A regulated entity that selects the text message option must comply with the requirements of this paragraph (d). (1) The regulated entity must not collect, analyze, or sell any personally identifiable information about consumers or the devices of consumers. (2) The regulated entity must not use any information related to the text message option for any marketing purposes. (3) If any information must be collected to carry out the purposes of this part, the information must be deleted as soon as possible and not be used for any other purpose. Sec. 66.109 Required disclosure with actual knowledge. Notwithstanding any provision in this subpart, if a food manufacturer (other than a very small food manufacturer), a retailer, or an importer has actual knowledge that the food is a bioengineered food or contains a bioengineered food ingredient, it must disclose that the food is bioengineered or contains a bioengineered food ingredient, as applicable, using appropriate text, symbol, electronic or digital link disclosure, or text message. Sec. 66.110 Small food manufacturers. A small food manufacturer must make the required bioengineered food disclosure using one of the bioengineered food disclosure options permitted under Sec. Sec. 66.102, 66.104, 66.106, and 66.108 or as described in this section. (a) The label bears the statement: ``Call for more food information,'' which accompanies a telephone number that will provide the bioengineered food disclosure to the consumer, regardless of the time of day. Disclosure via telephone number must include a bioengineered food disclosure that is consistent with Sec. 66.102 in audio form and may be pre-recorded. (b) The label bears the statement: ``Visit [URL of the website] for more food information,'' which accompanies a website that meets the requirements of Sec. 66.106(b). Disclosure via website must include a bioengineered food disclosure that is consistent with Sec. 66.102 or Sec. 66.104 in written form. Sec. 66.112 Small and very small packages. In addition to the disclosures described in this subpart, for food in small and very small packages, the required disclosure may be in the form described in paragraph (a), (b), or (c) of this section. (a) The label bears the electronic or digital disclosure described in Sec. 66.106, and replaces the statement and phone number required in Sec. 66.106(a) with the statement ``Scan for info.'' (b) The label bears a number or short code as described in Sec. 66.108(a), and replaces the statement with ``Text for info.'' (c) The label bears a phone number as described in Sec. 66.110(a), and replaces the statement with ``Call for info.'' (d) For very small packages only, if the label includes a preexisting Uniform Resource Locator for a website or a telephone number that a consumer can use to obtain food information, that website or telephone number may also be used for the required bioengineered food disclosure, provided that the disclosure is consistent with Sec. 66.102 or Sec. 66.104 in written or audio form, as applicable. Sec. 66.114 Food sold in bulk containers. (a) Bioengineered food sold in bulk containers (e.g., display case, bin, carton, and barrel), used at the retail level to present product to consumers, including a display at a fresh seafood counter, must use one of the disclosure options described in Sec. 66.102, Sec. 66.104, Sec. 66.106, or Sec. 66.108. (b) The disclosure must appear on signage or other materials (e.g., placard, sign, label, sticker, band, twist tie, or other similar format) that allows consumers to easily identify and understand the bioengineered status of the food. Sec. 66.116 Voluntary disclosure. (a) Disclosure of bioengineered food by exempt entities. If a food on the List of [[Page 204]] Bioengineered Foods is subject to disclosure, a very small food manufacturer, restaurant, or similar retail food establishment may voluntarily provide that disclosure. The disclosure must be in one or more of the forms described in this paragraph (a). (1) A text disclosure, in accordance with Sec. 66.102. (2) A symbol disclosure, in accordance with Sec. 66.104. (3) An electronic or digital link disclosure, in accordance with Sec. 66.106. (4) A text message disclosure, in accordance with Sec. 66.108. (5) Appropriate small manufacturer and small and very small package disclosure options, in accordance with Sec. Sec. 66.110 and 66.112. (b) Disclosure of foods derived from bioengineering. For foods or food ingredients that do not meet paragraph (1) of the definition of bioengineered food in Sec. 66.1, that do not qualify as a factor or condition under paragraph (2) of the definition of bioengineered food in Sec. 66.1, that are not exempt from disclosure under Sec. 66.5, and that are derived from a food on the List of Bioengineered Foods, regulated entities may disclose such foods with one of the disclosures described in this paragraph (b). (1) A text disclosure with the following statement: ``derived from bioengineering'' or ``ingredient(s) derived from a bioengineered source.'' The word ``ingredient(s)'' may be replaced with the name of the specific crop(s) or food ingredient(s). (2) A symbol disclosure using the following symbol: [GRAPHIC] [TIFF OMITTED] TR21DE18.001 (3) An electronic or digital link disclosure, in accordance with Sec. 66.106, provided that the disclosure is the text described in paragraph (b)(1) of this section or the symbol in Figure 1 to this section. (4) A text message disclosure, in accordance with Sec. 66.108, provided that the response is the text described in paragraph (b)(1) of this section or the symbol in Figure 1 to this section. (5) Appropriate small manufacturer and small and very small package disclosure options, in accordance with Sec. Sec. 66.110 and 66.112, provided that the disclosure is the text described in paragraph (b)(1) of this section or the symbol in Figure 1 to this section. (c) Appearance of disclosure. The disclosure should be of sufficient size and clarity to appear prominently and conspicuously on the label, making it likely to be read and understood by the consumer under ordinary shopping conditions. (d) Recordkeeping. Reasonable and customary records should be maintained to verify disclosures made under this section, in accordance with Sec. 66.302. Sec. 66.118 Other claims. Nothing in this subpart will prohibit regulated entities from making other claims regarding bioengineered foods, provided that such claims are consistent with applicable Federal law. Subpart C_Other Factors and Conditions for Bioengineered Food Sec. 66.200 Request or petition for determination. (a) Any person may submit a request or petition for a determination by the Administrator regarding other factors [[Page 205]] and conditions under which a food is considered a bioengineered food. A request or petition must be submitted in accordance with Sec. 66.204. (b) The request or petition may be supplemented, amended, or withdrawn in writing at any time without prior approval of the Administrator, and without affecting resubmission, except when the Administrator has responded to the request or petition. (c) If the Administrator determines that the request or petition satisfies the standards for consideration in Sec. 66.202, AMS will initiate a rulemaking that would amend the definition of ``bioengineered food'' in Sec. 66.1 to include the requested factor or condition. (d) The Administrator's determination that the request or petition does not satisfy the standards for consideration in Sec. 66.202 constitutes final agency action for purposes of judicial review. Sec. 66.202 Standards for consideration. In evaluating a request or petition, the Administrator must apply the applicable standards described in this section. (a) The requested factor or condition is within the scope of the definition of ``bioengineering'' in 7 U.S.C. 1639(1). (b) The Administrator must evaluate the difficulty and cost of implementation and compliance related to the requested factor or condition. (c) The Administrator may consider other relevant information, including whether the requested factor or condition is compatible with the food labeling requirements of other agencies or countries, as part of the evaluation. Sec. 66.204 Submission of request or petition. (a) Submission procedures and format. A person must submit the request to the Agricultural Marketing Service in the form and manner established by AMS. (b) Required information. The request or petition must include the information described in this paragraph (b). (1) Description of the requested factor or condition. (2) Analysis of why the requested factor or condition should be included in considering whether a food is a bioengineered food, including any relevant information, publications, and/or data. The analysis should include how the Administrator should apply the standards for consideration in Sec. 66.202. (3) If the request or petition contains Confidential Business Information (CBI), the submission must comply with the requirements of this paragraph (b)(3). (i) The requester or petitioner must submit one copy that is marked as ``CBI Copy'' on the first page and on each page containing CBI. (ii) The requester or petitioner must submit a second copy with the CBI deleted. This copy must be marked as ``CBI Redacted'' on the first page and on each page where the CBI was deleted. (iii) The submission must include an explanation as to why the redacted information is CBI. Subpart D_Recordkeeping Sec. 66.300 Scope. This subpart applies to records regarding mandatory and voluntary disclosures under this part for foods offered for retail sale in the United States. Sec. 66.302 Recordkeeping requirements. (a) General. (1) Regulated entities must maintain records that are customary or reasonable to demonstrate compliance with the disclosure requirements of this part. (2) The records must be in electronic or paper formats and must contain sufficient detail as to be readily understood and audited by AMS. (3) Records must be maintained for at least two years beyond the date the food or food product is sold or distributed for retail sale. (4) Examples of customary or reasonable records that could be used to demonstrate compliance with the disclosure requirements of this part include, but are not limited to: Supply chain records, bills of lading, invoices, supplier attestations, labels, contracts, brokers' statements, third party certifications, laboratory testing results, validated process verifications, and other records generated or maintained [[Page 206]] by the regulated entity in the normal course of business. (b) Recordkeeping requirements. (1) If a food (including an ingredient produced from such food) is on the List of Bioengineered Foods, the regulated entity must maintain records regarding that food or food ingredient. (2) If a food (including an ingredient produced from such food) bears a bioengineered food disclosure based on actual knowledge and is not on the List of Bioengineered Foods, regulated entities must maintain records for such food or food ingredient. Sec. 66.304 Access to records. (a) Request for records. When AMS makes a request for records, the entity must provide the records to AMS within five (5) business days, unless AMS extends the deadline. (b) On-site access. If AMS needs to access the records at the entity's place of business, AMS will provide prior notice of at least three (3) business days. AMS will examine the records during normal business hours, and the records will be made available during those times. Access to any necessary facilities for an examination of the records must be extended to AMS. (c) Failure to provide access. If the entity fails to provide access to the records as required under this section, the result of the audit or examination of records will be that the entity did not comply with the requirement to provide access to records and that AMS could not confirm whether the entity is in compliance with the bioengineered food disclosure standard for purposes of Sec. 66.402. Subpart E_Enforcement Sec. 66.400 Prohibited act. It is a violation of 7 U.S.C. 1639b for any person to knowingly fail to make a bioengineered food disclosure in accordance with this part. Sec. 66.402 Audit or examination of records. (a) Any interested person who has knowledge of or information regarding a possible violation of this part may file a written statement or complaint with the Administrator. (1) Written statements or complaints filed with the Administrator must include the following: (i) Complete identifying information about the product in question; (ii) A detailed explanation of the alleged regulatory violation; and (iii) Name and contact information of the person filing the statement or complaint. (2) Written statements or complaints should be addressed to Director, Food Disclosure and Labeling Division, AMS Fair Trade Practices Program, 1400 Independence Avenue SW, Washington, DC 20250; or submitted through the NBFDS Compliance Portal on the AMS website at https://www.ams.usda.gov/be. (3) The Administrator will determine whether reasonable grounds exist for an investigation of such complaint. (b) If the Administrator determines that further investigation of a complaint is warranted, an audit, examination, or similar activity may be conducted with respect to the records of the entity responsible for the disclosures. (c) Notice regarding records audits or examinations or similar activities will be provided in accordance with Sec. 66.304(a) and (b). (d) At the conclusion of the audit or examination of records or similar activity, AMS will make the findings available to the entity that was the subject of the investigation. (e) If the entity that is the subject of the audit or examination of records or similar activity objects to any findings, it may request a hearing in accordance with Sec. 66.404. Sec. 66.404 Hearing. (a) Within 30 days of receiving the results of an audit or examination of records or similar activity to which the entity that was the subject of the investigation objects, the entity may request a hearing by filing a request, along with the entity's response to the findings and any supporting documents, with AMS. (b) The response to the findings of the audit or examination of records or similar activity must identify any objection to the findings and the basis for the objection. [[Page 207]] (c) The AMS Administrator or designee will review the findings of the audit or examination of records or similar activity, the response, and any supporting documents, and may allow the entity that was the subject of the investigation to make an oral presentation. (d) At the conclusion of the hearing, the AMS Administrator or designee may revise the findings of the audit or examination of records or similar activity. Sec. 66.406 Summary of results. (a) If the entity that was the subject of the audit or examination of records or similar activity does not request a hearing in accordance with Sec. 66.404, or at the conclusion of a hearing, AMS will make public the summary of the final results of the investigation. (b) AMS's decision to make public the summary of the final results constitutes final agency action for purposes of judicial review. PART 70_VOLUNTARY GRADING OF POULTRY PRODUCTS AND RABBIT PRODUCTS- -Table of Contents Subpart A_Grading of Poultry Products and Rabbit Products Definitions Sec. 70.1 Definitions. 70.2 Designation of official certificates, memoranda, marks, other identifications, and devices for purposes of the Agricultural Marketing Act. General 70.3 Administration. 70.4 Services available. 70.5 Nondiscrimination. 70.6 OMB control number. 70.8 Other applicable regulations. 70.10 Basis of grading service. 70.11 [Reserved] 70.12 Supervision. 70.13 Ready-to-cook poultry and rabbits and specified poultry food products. 70.14 Squabs and domesticated game birds; eligibility. 70.15 Equipment and facilities for graders. 70.16 Prerequisites to grading. 70.17 Accessibility of products. 70.18 Schedule of operation of official plants. Licensed and Authorized Graders 70.20 Who may be licensed and authorized. 70.21 Suspension of license; revocation. 70.22 Surrender of license. 70.23 Identification. 70.24 Financial interest of graders. 70.25 Political activity. 70.26 Cancellation of license. Application for Grading Service 70.29 Who may obtain grading service. 70.30 How application for service may be made; conditions of service. 70.31 Filing of application. 70.32 Authority of applicant. 70.33 Application for grading service in official plants; approval. 70.34 Rejection of application. 70.35 Withdrawal of application. 70.36 Order of service. 70.37 Types of service. 70.38 Suspension or withdrawal of plant approval for correctable cause. 70.39 Form of application. Denial of Service 70.40 Debarment. 70.41 Misrepresentation, deceptive, or fraudulent act or practice. 70.42 Use of facsimile forms. 70.43 Willful violation of the regulations. 70.44 Interfering with a grader or employee of Service. 70.45 Misleading labeling. 70.46 Miscellaneous. Identifying and Marking Products 70.50 Approval of official identification and wording on labels. 70.51 Form of grademark and information required. 70.52 Prerequisites to packaging ready-to-cook poultry or rabbits identified with consumer grademarks. 70.54 Retention authorities. 70.55 Check grading officially identified product. 70.56 Grading requirements of poultry and rabbits identified with official identification. Reports 70.60 Report of grading work. 70.61 Information to be furnished to graders. 70.62 Reports of violations. Fees and Charges 70.70 Payment of fees and charges. 70.71 Charges for services on an unscheduled basis. 70.72 Fees for appeal grading or review of a grader's decision. 70.75 Travel expenses and other charges. 70.76 [Reserved] [[Page 208]] 70.77 Charges for services on a scheduled basis. 70.78 Fees or charges for grading service performed under cooperative agreement. Grading Certificates 70.90 Forms. 70.91 Issuance. 70.92 Disposition. 70.93 Advance information. Appeal of a Grading or Decision 70.100 Who may request an appeal grading or review of a grader's decision. 70.101 Where to file an appeal. 70.102 How to file an appeal. 70.103 When an application for an appeal grading may be refused. 70.104 Who shall perform the appeal. 70.105 Procedures for appeal gradings. 70.106 Appeal grading certificates. Sanitary Requirements, Facilities, and Operating Procedures 70.110 Requirements for sanitation, facilities, and operating procedures in official plants. Subparts B-C [Reserved] Authority: 7 U.S.C. 1621-1627. Source: 41 FR 23681, June 11, 1976, unless otherwise noted. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981. Subpart A_Grading of Poultry Products and Rabbit Products Definitions Sec. 70.1 Definitions. For the purpose of the regulations in this part, words in the singular shall be deemed to import the plural and vice versa, as the case may demand. Unless the context otherwise requires, the terms shall have the following meaning: Acceptable means suitable for the purpose intended by the AMS. Act means the applicable provisions of the Agricultural Marketing Act of 1946 (60 Stat. 1087, as amended; 7 U.S.C. 1621 et seq.) or any other act of Congress conferring like authority. Administrator means the Administrator of the AMS or any other officer or employee of the Department to whom there has heretofore been delegated or to whom there may hereafter be delegated the authority to act in the Administrator's stead. Agricultural Marketing Service or AMS means the Agricultural Marketing Service of the Department. Applicant means any interested person who requests any grading service. Carcass means any poultry or rabbit carcass. Chief of the Grading Branch means Chief of the Grading Branch, Poultry Programs, AMS. Class means any subdivision of a product based on essential physical characteristics that differentiate between major groups of the same kind or species. Condition means any condition, including but not being limited to, the state of preservation, cleanliness, or soundness of any product; or any condition, including but not limited to the processing, handling, or packaging which affects such product. Condition and wholesomeness means the condition of any product and its healthfulness and fitness for human food. Department means the United States Department of Agriculture (USDA). Free from protruding feathers or hairs means that a poultry carcass, part, or poultry product with the skin on is free from protruding feathers or hairs which are visible to a grader during an examination at normal operating speeds. However, a poultry carcass, part, or poultry product may be considered as being free from protruding feathers or hairs if it has a generally clean appearance and if not more than an occasional protruding feather or hair is evidenced during a more careful examination. Giblets means the following poultry organs when properly trimmed and washed: The liver from which the bile sac has been removed, the heart from which the pericardial sac has been removed, and the gizzard from which the lining and contents have been removed. With respect to rabbits ``giblets'' means the liver from which the bile sac has been removed and the heart from which the pericardial sac has been removed. Grader means any Federal or State employee or the employee of a local jurisdiction or cooperating agency to [[Page 209]] whom a license has been issued by the Secretary to investigate and certify in accordance with the regulations in this part the class, quality, quantity, or condition of products. Grading or grading service means: (a) The act whereby a grader determines, according to the regulations in this part the class, quality, quantity, or condition of any product by examining each unit thereof or each unit of the representative sample thereof drawn by a grader, and issues a grading certificate with respect thereto, except that with respect to grading service performed on a resident basis, the issuance of a grading certificate shall be pursuant to a request therefor by the applicant or the Service; (b) the act whereby the grader identifies, according to the regulations in this part, the graded product; (c) with respect to any official plant, the act whereby a grader determines that the product in such plant was processed, handled, and packaged in accordance with Sec. 70.110, or (d) any regrading or any appeal grading of a previously graded product. Grading certificate means a statement, either written or printed, issued by a grader, pursuant to the Act and the regulations in this part, relative to the class, quality, quantity, or condition of a product. Holiday or legal holiday means the legal public holidays specified by the Congress in paragraph (a) of section 6103, title 5, of the United States Code. Identify means to apply official identification to products or the containers thereof. Interested party means any person financially interested in a transaction involving any grading service. Lightly shaded discolorations on poultry are generally reddish in color and are usually confined to areas of the skin or the surface of the flesh. Moderately shaded discolorations on poultry skin or flesh are areas that are generally dark red or bluish, or are areas of flesh bruising. Moderately shaded discolorations are free from blood clots that are visible to a grader during an examination of the carcass, part, or poultry product at normal grading speeds. National supervisor means the officer in charge of the poultry grading service of the AMS, and other employees of the Department as may be designated by the national supervisor. Observed legal holiday. When a holiday falls on a weekend--Saturday or Sunday--the holiday usually is observed on Monday (if the holiday falls on Sunday) or Friday (if the holiday falls on Saturday). Office of grading means the office of any grader. Official plant or official establishment means one or more buildings or parts thereof comprising a single plant in which the facilities and methods of operation therein have been approved by the Administrator as suitable and adequate for grading service and in which grading is carried on in accordance with the regulations in this part. Person means any individual, partnership, association, business trust, corporation, or any organized group of persons, whether incorporated or not. Poultry means any kind of domesticated bird, including, but not being limited to, chickens, turkeys, ducks, geese, pigeons, and guineas. Poultry food product means any article of human food or any article intended for or capable of being so used, which is prepared or derived in whole or in substantial part, from any edible part or parts of poultry. Poultry product means any ready-to-cook poultry carcass or part therefrom or any specified poultry food product. Poultry grading service means the personnel who are actively engaged in the administration, application, and direction of poultry and rabbit grading programs and services pursuant to the regulations in this part. Quality means the inherent properties of any product which determine its relative degree of excellence. Rabbit means any domesticated rabbit whether live or dead. Rabbit product means any ready-to-cook rabbit carcass or part therefrom. Ready-to-cook poultry means any slaughtered poultry free from protruding feathers, vestigial feathers (hair or down as the case may be) and from which the head, feet, crop, oil gland, trachea, esophagus, entrails, mature reproductive organs, and lungs have been removed, and the kidneys [[Page 210]] have been removed from certain mature poultry as defined in 9 CFR part 381, and with or without the giblets, and which is suitable for cooking without need of further processing. Ready-to-cook poultry also means any cut-up or disjointed portion of poultry or other parts of poultry as defined in 9 CFR part 381 that are suitable for cooking without need of further processing. Ready-to-cook rabbit means any rabbit which has been slaughtered for human food, from which the head, blood, skin, feet, and inedible viscera have been removed, that is ready to cook without need of further processing. Ready-to-cook rabbit also means any cut-up or disjointed portion of rabbit or any edible part thereof. Regional director means any employee of the Department in charge of poultry grading service in a designated geographical area. Regulations means the provisions of this entire part and such United States classes, standards, and grades for products as may be in effect at the time grading is performed. Sampling means the act of taking samples of any product for grading or certification. Secretary means the Secretary of the Department, or any other officer or employee of the Department to whom there has heretofore been delegated, or to whom there may hereafter be delegated, the authority to act in the Secretary's stead. Slight discolorations on poultry skin or flesh are areas of discoloration that are generally pinkish in color and do not detract from the appearance of the carcass, part, or poultry product. Soundness means freedom from external evidence of any disease or condition which may render a carcass or product unfit for food. State supervisor or Federal-State supervisor means any authorized and designated individual who is in charge of the poultry grading service in a State. United States Classes, Standards, and Grades for Poultry means the official U.S. Classes, Standards, and Grades for Poultry (AMS 70.200 et seq.) that are maintained by and available from Poultry Programs, AMS. United States Classes, Standards, and Grades for Rabbits means the official U.S. Classes, Standards, and Grades for Rabbits (AMS 70.300 et seq.) that are maintained by and available from Poultry Programs, AMS. [41 FR 23681, June 11, 1976; 41 FR 24693, June 18, 1976. Redesignated at 42 FR 32514, June 27, 1977, as amended at 43 FR 60138, Dec. 26, 1978. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 47 FR 46071, Oct. 15, 1982; 47 FR 54421, Dec. 3, 1982; 51 FR 17280, May 9, 1986; 60 FR 6639, Feb. 2, 1995; 63 FR 40628, July 30, 1998; 71 FR 42011, July 24, 2006; 72 FR 11775, Mar. 14, 2007; 84 FR 49643, Sept. 23, 2019; 85 FR 62941, Oct. 6, 2020] Sec. 70.2 Designation of official certificates, memoranda, marks, other identifications, and devices for purposes of the Agricultural Marketing Act. Subsection 203(h) of the Agricultural Marketing Act of 1946, as amended by Pub. L. 272, 84th Congress, provides criminal penalties for various specified offenses relating to official certificates, memoranda, marks, or other identification and devices for making such marks or identifications, issued or authorized under section 203 of said Act, and certain misrepresentations concerning the grading of agricultural products under said section. For the purposes of said subsection and the provisions in this part, the terms listed in this section shall have the respective meaning specified: (a) Official certificate means any form of certification, either written or printed, used under this part to certify with respect to the sampling, class, grade, quality, size, quantity, or condition of products (including the compliance of products with applicable specifications). (b) Official memorandum means any initial record of findings made by an authorized person in the process of grading or sampling pursuant to this part, any processing or plant-operation report made by an authorized person in connection with grading or sampling under this part, and any report made by an authorized person of services performed pursuant to this part. (c) Official mark means the grade-mark and any other mark, or any variations in such marks, approved by the [[Page 211]] Administrator and authorized to be affixed to any product or affixed to or printed on the packaging material of any product, stating that the product was graded or indicating the appropriate U.S. grade or condition of the product, or for maintaining the identity of products graded under this part, including but not limited to, those marks set forth in Sec. 70.51. (d) Official identification means any United States (U.S.) standard designation of class, grade, quality, size, quantity, or condition specified in this part or any symbol, stamp, label, or seal indicating that the product has been officially graded and/or indicating the class, grade, quality, size, quantity, or condition of the product approved by the Administrator and authorized to be affixed to any product, or affixed to or printed on the packaging material of any product. (e) Official device means a stamping 0, branding device, stencil, printed label, or any other mechanically or manually operated tool that is approved by the Administrator for the purpose of applying any official mark or other identification to any product or the packaging material thereof. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42011, July 24, 2006] General Sec. 70.3 Administration. The Administrator shall perform, for and under the supervision of the Secretary, such duties as the Secretary may require in the enforcement or administration of the provisions of the Act and the regulations in this part. The Administrator is authorized to waive for limited periods any particular provisions of the regulations in this part to permit experimentation so that new procedures, equipment, grading, and processing techniques may be tested to facilitate definite improvements and at the same time to determine full compliance with the spirit and intent of the regulations in this part. The AMS and its officers and employees shall not be liable in damages through acts of commission or omission in the administration of this part. [71 FR 42011, July 24, 2006] Sec. 70.4 Services available. The regulations in this part provide for the following kinds of service; and any one or more of the different services applicable to official plants may be rendered in an official plant: (a) Grading of ready-to-cook poultry and rabbits in an official plant or at other locations with adequate facilities. (b) Grading of specified poultry food products in official plants. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 72 FR 11775, Mar. 14, 2007; 85 FR 62941, Oct. 6, 2020] Sec. 70.5 Nondiscrimination. The conduct of all services and the licensing of graders under these regulations shall be accomplished without regard to race, color, national origin, religion, age, sex, disability, political beliefs, sexual orientation, or marital or family status. [71 FR 42012, July 24, 2006] Sec. 70.6 OMB control number. (a) Purpose. The collecting of information requirements in this part has been approved by the Office of Management and Budget (OMB) and assigned OMB control number 0581-0127. (b) Display. Sections Where Information Collection Requirements Are Identified and Described ------------------------------------------------------------------------ ------------------------------------------------------------------------ 70.3 70.36 70.76(b)(3)(ii) 70.4(a) 70.38(c) 70.77(a)(1) 70.5 70.38(d) 70.77(a)(4) 70.18 70.39 70.77(b)(1) 70.20(a) 70.40 70.77(b)(3)(ii) 70.22 70.50 70.91(a) 70.31(a) 70.61 70.91(c) 70.31(b) 70.62 70.92 70.34 70.73 70.101 70.35 70.76(b)(1) 70.102 ------------------------------------------------------------------------ [71 FR 42012, July 24, 2006] Sec. 70.8 Other applicable regulations. Compliance with the regulations in this part shall not excuse failure to comply with any other Federal, or any [[Page 212]] State, or municipal applicable laws or regulations. [71 FR 42012, July 24, 2006] Sec. 70.10 Basis of grading service. (a) Any grading service in accordance with the regulations in this part shall be for class, quality, quantity, or condition or any combination thereof. Grading service with respect to determination of quality of products shall be on the basis of United States Classes, Standards, and Grades for Poultry and Rabbits. However, grading service may be rendered with respect to products which are bought and sold on the basis of institutional contract specifications or specifications of the applicant, and such service, when approved by the Administrator, shall be rendered on the basis of such specifications. (b) Whenever grading service is provided for examination of quality, condition, or for test weighing on a representative sample basis, such sample shall be drawn and consist of not less than the minimum number of containers indicated in the following table. The number of representative samples for large bulk containers (combo bins, tanks, etc.) may be reduced by one-half. For quality or condition, all of the poultry and rabbits in each representative sample shall be examined except for individual ready-to-cook carcasses weighing under 6 pounds in large bulk containers. For individual carcasses weighing under 6 pounds in large bulk containers, 100 carcasses shall be examined for quality or condition. Procedures for test weighing shall be in accordance with those prescribed by the Administrator. ------------------------------------------------------------------------ Containers in lot Containers in sample ------------------------------------------------------------------------ 1-4....................................... All. 5-50...................................... 4. 51-100.................................... 5. 101-200................................... 6. 201-400................................... 7. 401-600................................... 8. For each additional 100 containers, or Include one additional fraction thereof, in excess of 600 container. containers. ------------------------------------------------------------------------ [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42012, 42014, July 24, 2006] Sec. 70.11 [Reserved] Sec. 70.12 Supervision. All grading service shall be subject to supervision at all times by the responsible State supervisor, regional director, and national supervisor. Such service shall be rendered in accordance with instructions issued by the Administrator where the facilities and conditions are satisfactory for the conduct of the service and the requisite graders are available. Whenever the supervisor of a grader has evidence that such grader incorrectly graded a product, such supervisor shall take such action as is necessary to correct the grading and to cause any improper grademarks which appear on the product or containers thereof to be corrected prior to shipment of the product from the place of initial grading. Sec. 70.13 Ready-to-cook poultry and rabbits and specified poultry food products. (a) Ready-to-cook poultry or rabbit carcasses or parts or specified poultry food products may be graded only if they have been inspected and certified by the poultry inspection service of the Department, or inspected and passed by any other inspection system which is acceptable to the Department. (b) Only when ready-to-cook poultry carcasses, parts, poultry food products, including those used in preparing raw poultry food products, have been graded on an individual basis by a grader or by an authorized person pursuant to Sec. 70.20(c) and thereafter checkgraded by a grader, and when poultry food products have been prepared under the supervision of a grader, when necessary the individual container, carcass, part, or poultry food product be identified with the appropriate official letter grademark. Checkgrading shall be accomplished in accordance with a statistical sampling plan prescribed by the Administrator. Grading with respect to quality factors for freezing defects and appearance of the finished products, when necessary, shall be done on a sample basis in accordance with a plan prescribed by the Administrator. (c) Only when ready-to-cook rabbit carcasses or parts have been graded on an individual basis by a grader or by an [[Page 213]] authorized person pursuant to Sec. 70.20(c) and thereafter checkgraded by a grader, may the container or the individual carcass or part be identified with the appropriate official letter grademark. Checkgrading shall be accomplished in accordance with a statistical sampling plan prescribed by the Administrator. Grading with respect to quality factors for freezing defects and appearance of the finished products may be done on a sample basis in accordance with a plan prescribed by the Administrator. [71 FR 42012, July 24, 2006] Sec. 70.14 Squabs and domesticated game birds; eligibility. Squabs and domesticated game birds (including, but not being limited to, quail, pheasants, and wild species of ducks and geese raised in captivity) may be graded under the regulations in this part, only if they have been inspected and passed by the poultry inspection service of the Department or have been inspected by any other official inspection system acceptable to the Department. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42012, July 24, 2006] Sec. 70.15 Equipment and facilities for graders. Equipment and facilities to be furnished by the applicant for use of graders in performing service on a resident basis shall include, but not be limited to, the following: (a)(1) An accurate metal stem thermometer. (2) A drill with a steel bit to drill holes in frozen product for inserting the metal thermometer stem to determine temperature. (3) Scales graduated in tenths of a pound or less for weighing carcasses, parts, or products individually in containers up to 100 pounds, and test weights for such scales. (4) Scales graduated in one-pound graduation or less for weighing bulk containers of poultry and test weights for such scales. (b) Furnished office space, a desk, and file or storage cabinets (equipped with a satisfactory locking device) suitable for the security and storage of official supplies, and other facilities and equipment as may otherwise be required. Such space and equipment must meet the approval of the national supervisor. [71 FR 42012, July 24, 2006] Sec. 70.16 Prerequisites to grading. Grading of products shall be rendered pursuant to the regulations in this part and under such conditions and in accordance with such methods as may be prescribed or approved by the Administrator. Sec. 70.17 Accessibility of products. Each product for which grading service is requested shall be so placed as to disclose fully its class, quality, quantity, and condition as the circumstances may warrant. Sec. 70.18 Schedule of operation of official plants. Grading operation schedules for services performed pursuant to Sec. Sec. 70.76 and 70.77 shall be requested in writing and be approved by the Administrator. Normal operating schedules for a full week consist of a continuous 8-hour period per day (excluding not to exceed 1 hour for lunch), 5 consecutive days per week, within the administrative workweek, Sunday through Saturday, for each shift required. Less than 8- hour schedules may be requested and will be approved if a grader is available. Clock hours of daily operations need not be specified in the request, although as a condition of continued approval, the hours of operation shall be reasonably uniform from day to day. Graders are to be notified by management 1 day in advance of any change in the hours grading service is requested. [48 FR 20683, May 9, 1983] Licensed and Authorized Graders Sec. 70.20 Who may be licensed and authorized. (a) Any person who is a Federal or State employee, the employee of a local jurisdiction, or the employee of a cooperating agency possessing proper qualifications as determined by an examination for competency and who is to perform grading service under this [[Page 214]] part may be licensed by the Secretary as a grader. (b) All licenses issued by the Secretary shall be countersigned by the officer in charge of the poultry grading service of the AMS or any other designated officer of such Service. (c) Any person who is employed by any official plant and possesses proper qualifications as determined by the Administrator may be authorized to grade poultry and/or rabbits on the basis of the U.S. classes, standards, and grades under the supervision of a grader. No person to whom such authorization is granted shall have authority to issue any grading certificates, grading memoranda, or other official documents; and all products graded by any such person shall thereafter be check graded by a grader. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42012, July 24, 2006] Sec. 70.21 Suspension of license; revocation. Pending final action by the Secretary, any person authorized to countersign a license to perform grading service may, whenever such action is deemed necessary to assure that any grading services are properly performed, suspend any license to perform grading service issued pursuant to this part, by giving notice of such suspension to the respective licensee, accompanied by a statement of the reasons therefor. Within 7 days after the receipt of the aforesaid notice and statement of reasons, the licensee may file an appeal in writing, with the Secretary, supported by any argument or evidence that the licensee may wish to offer as to why the license should not be further suspended or revoked. After the expiration of the aforesaid 7-day period and consideration of such argument and evidence, the Secretary will take such action as deemed appropriate with respect to such suspension or revocation. When no appeal is filed within the prescribed 7 days, the license to perform grading service is revoked. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42012, July 24, 2006] Sec. 70.22 Surrender of license. Each license which is suspended or revoked shall immediately be surrendered by the licensee to the office of grading servicing the area in which the license is located. [71 FR 42012, July 24, 2006] Sec. 70.23 Identification. Graders shall have in their possession at all times, and present upon request while on duty, the means of identification furnished to them by the Department. [71 FR 42013, July 24, 2006] Sec. 70.24 Financial interest of graders. Graders shall not render service on any product in which they are financially interested. [71 FR 42013, July 24, 2006] Sec. 70.25 Political activity. Federal graders may participate in certain political activities, including management and participation in political campaigns in accordance with AMS policy. Graders are subject to these rules while they are on leave with or without pay, including furlough; however, the rules do not apply to cooperative employees not under Federal supervision and intermittent employees on the days they perform no service. Willful violations of the political activity rules will constitute grounds for removal from the AMS. [71 FR 42013, July 24, 2006] Sec. 70.26 Cancellation of license. Upon termination of the services of a licensed grader, the grader's license shall be immediately surrendered for cancellation. [71 FR 42013, July 24, 2006] Application for Grading Service Sec. 70.29 Who may obtain grading service. An application for grading service may be made by any interested person, including, but not being limited to any authorized agent of the United States, [[Page 215]] 3any State, county, municipality, or common carrier. [71 FR 42013, July 24, 2006. Redesignated at 84 FR 49643, Sept. 23, 2019] Sec. 70.30 How application for service may be made; conditions of service. (a) Application. (1) Any person may apply for service with respect to products in which he or she has a financial interest by completing the required application for service. In any case in which the service is intended to be furnished at an establishment not operated by the applicant, the application must be approved by the operator of such establishment and such approval constitutes an authorization for any employee of the Department to enter the establishment for the purpose of performing his or her functions under the regulations in this part. The application shall include: (i) Name and address of the establishment at which service is desired; (ii) Name and mailing address of the applicant; (iii) Financial interest of the applicant in the products, except where application is made by a representative of a Government agency in the representative's official capacity; (iv) Signature of the applicant (or the signature and title of the applicant's representative); (v) Indication of the legal status of the applicant as an individual, partnership, corporation, or other form of legal entity; and (vi) The legal designation of the applicant's business as a small or large business, as defined by the U.S. Small Business Administration's North American Industry Classification System (NAICS) Codes. (2) In making application, the applicant agrees to comply with the terms and conditions of the regulations in this part (including, but not being limited to, such instructions governing grading of products as may be issued from time to time by the Administrator). No member of or Delegate to Congress or Resident Commissioner shall be admitted to any benefit that may arise from such service unless derived through service rendered a corporation for its general benefit. Any change in such status, at any time while service is being received, shall be promptly reported by the person receiving the service to the grading office designated by the Director or Chief to process such requests. (b) Notice of eligibility for service. The applicant will be notified whether the application is approved or denied. [84 FR 49643, Sept. 23, 2019] Sec. 70.31 Filing of application. An application for grading service shall be regarded as filed only when made pursuant to the regulations in this part. [41 FR 23681, June 11, 1976, unless otherwise noted. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, and further redesignated at 84 FR 49643, Sept. 23, 2019] Sec. 70.32 Authority of applicant. Proof of the authority of any person applying for grading service may be required at the discretion of the Administrator. [41 FR 23681, June 11, 1976, unless otherwise noted. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, and further redesignated at 84 FR 49643, Sept. 23, 2019] Sec. 70.33 Application for grading service in official plants; approval. Any person desiring to process and pack products in a plant under grading service must receive approval of such plant and facilities as an official plant prior to the rendition of such service. An application for grading service to be rendered in an official plant shall be approved according to the following procedure: Survey. When application has been filed for grading service, as aforesaid, the State supervisor or the supervisor's assistant shall examine the grading office, facilities, and equipment and specify any additional facilities or equipment needed for the service. When the plant survey for poultry or rabbit grading has been completed and approved in accordance with the regulations in this part, service may be installed. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42013, July 24, 2006. Further redesignated at 84 FR 49643, Sept. 23, 2019] [[Page 216]] Sec. 70.34 Rejection of application. (a) Any application for grading service may be rejected by the Administrator: (1) Whenever the applicant fails to meet the requirements of the regulations prescribing the conditions under which the service is made available; (2) Whenever the product is owned by or located on the premises of a person currently denied the benefits of the Act; (3) Where any individual holding office or a responsible position with or having a substantial financial interest or share in the applicant, is currently denied the benefits of the Act, or was responsible in whole or in part for the current denial of the benefits of the Act to any person; (4) Where the Administrator determines that the application is an attempt on the part of a person currently denied the benefits of the Act to obtain grading service; (5) Whenever the applicant, after an initial survey has been made in accordance with Sec. 70.34, fails to bring the grading facilities and equipment into compliance with the regulations within a reasonable period of time; or (6) Notwithstanding any prior approval whenever, before inauguration of service, the applicant fails to fulfill commitments concerning the inauguration of the service. (7) When it appears that to perform the services specified in this part would not be to the best interests of the public welfare or of the Government; (8) When it appears to the Administrator that prior commitments of the Department necessitate rejection of the application. (b) Each such applicant shall be promptly notified by registered mail of the reasons for the rejection. A written petition for reconsideration of such rejection may be filed by the applicant with the Administrator if postmarked or delivered within 10 days after receipt of notice of the rejection. Such petition shall state specifically the errors alleged to have been made by the Administrator in rejecting the application. Within 20 days following the receipt of such a petition for reconsideration, the Administrator shall approve the application or notify the applicant by registered mail of the reasons for the rejection thereof. [71 FR 42013, July 24, 2006. Redesignated as 84 FR 49643, Sept. 23, 2019] Sec. 70.35 Withdrawal of application. An application for grading service may be withdrawn by the applicant at any time before the service is performed upon payment by the applicant, of all expenses incurred by the AMS in connection with such application. [71 FR 42013, July 24, 2006. Redesignated as 84 FR 49643, Sept. 23, 2019] Sec. 70.36 Order of service. Grading service shall be performed, insofar as practicable and subject to the availability of qualified graders, in the order in which applications therefor are made, except that precedence may be given to any application for an appeal grading. [41 FR 23681, June 11, 1976, unless otherwise noted. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, and further redesignated at 84 FR 49643, Sept. 23, 2019] Sec. 70.37 Types of Service. (a) Noncontinuous grading service. Service is performed on an unscheduled basis, with no scheduled tour of duty, and when an applicant requests grading of a particular lot of poultry or rabbit product. Charges or fees are based on the time, travel, and expenses needed to perform the work. This service may be referred to as unscheduled grading service. Poultry and rabbit products graded under unscheduled grading service are not eligible to be identified with the official grademarks shown in Sec. 70.51. (b) Continuous grading service on a scheduled basis. Service on a scheduled basis has a scheduled tour of duty and is performed when an applicant requests that a USDA licensed grader be stationed in the applicant's plant or warehouse and grade poultry and rabbit products in accordance with U.S. Standards. The applicant agrees to comply with the facility, operating, and sanitary requirements of scheduled service. Minimum fees for service performed under a scheduled agreement [[Page 217]] shall be based on the hours of the regular tour of duty. Poultry and rabbit products graded under scheduled grading service are eligible to be identified with the official grademarks shown in Sec. 70.51 only when processed and graded under the supervision of a grader. (c) Temporary grading service. Service is performed when an applicant requests an official plant number with service provided on an unscheduled basis. The applicant must meet facility, operating, and sanitary requirements of continuous service. Charges or fees are based on the time and expenses needed to perform the work. Poultry and rabbit products graded under temporary grading service are eligible to be identified with the official grademarks only when they are processed and graded under the supervision of a grader. [84 FR 49643, Sept. 23, 2019] Sec. 70.38 Suspension or withdrawal of plant approval for correctable cause. (a) Any plant approval given pursuant to the regulations in this part may be suspended by the Administrator for (1) failure to maintain grading facilities and equipment in a satisfactory state of repair, sanitation, or cleanliness; (2) the use of operating procedures which are not in accordance with the regulations in this part; or (3) alterations of grading facilities or equipment which have not been approved in accordance with the regulations in this part. (b) Whenever it is feasible to do so, written notice in advance of a suspension shall be given to the person concerned and shall specify a reasonable period of time in which corrective action must be taken. If advance written notice is not given, the suspension action shall be promptly confirmed in writing and the reasons therefor shall be stated, except in instances where the person has already corrected the deficiency. Such service, after appropriate corrective action is taken, will be restored immediately, or as soon thereafter as a grader can be made available. During such period of suspension, grading service shall not be rendered. However, the other provisions of the regulations pertaining to providing service on a resident basis will remain in effect unless such service is terminated in accordance with the provisions of this part. (c) If the grading facilities or methods of operation are not brought into compliance within a reasonable period of time as specified by the Administrator, the Administrator shall initiate withdrawal action pursuant to the Rules of Practice Governing Formal Adjudicatory Proceedings and Grading Service (7 CFR part 1, subpart H), and the operator shall be afforded an opportunity for an oral hearing upon the operator's written request in accordance with such Rules of Practice, with respect to the merits or validity of the withdrawal action, but any suspension shall continue in effect pending the outcome of such hearing unless otherwise ordered by the Administrator. Upon withdrawal of grading service in an official plant, the plant approval shall also become terminated, and all labels, seals, tags, or packaging material bearing official identification shall, under the supervision of a person designated by the AMS, either be destroyed, or the official identification completely obliterated, or sealed in a manner acceptable to the AMS. (d) In any case where grading service is withdrawn under this Sec. 70.38, the person concerned may thereafter apply for grading service as provided in Sec. Sec. 70.30 through 70.37 of these regulations. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, as amended at 43 FR 60139, Dec. 26, 1978. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42013, July 24, 2006] Sec. 70.39 Form of application. Each application for grading or sampling a specified lot of any product shall include such information as may be required by the Administrator in regard to the product and the premises where such product is to be graded or sampled. [71 FR 42013, July 24, 2006] Denial of Service Sec. 70.40 Debarment. The acts or practices set forth in Sec. Sec. 70.41 through 70.46, or the causing thereof, may be deemed sufficient [[Page 218]] cause for the debarment by the Administrator of any person, including any agents, officers, subsidiaries, or affiliates of such person, from all benefits of the act for a specified period. The Rules of Practice Governing Formal Adjudicatory Proceedings (7 CFR part 1, subpart H) shall be applicable to such debarment action. [71 FR 42013, July 24, 2006] Sec. 70.41 Misrepresentation, deceptive, or fraudulent act or practice. Any willful misrepresentation or any deceptive or fraudulent act or practice found to be made or committed by any person in connection with: (a) The making or filing of any application for any grading service, appeal or regrading service; (b) The making of the product accessible for sampling or grading; (c) The making, issuing, or using, or attempting to issue or use any grading certificate, symbol, stamp, label, seal, or identification, authorized pursuant to the regulations in this part; (d) The use of the terms ``United States'' or ``U.S.'' in conjunction with the grade of the product; (e) The use of any of the aforesaid terms or any official stamp, symbol, label, seal, or identification in the labeling or advertising of any product. [41 FR 23681, June 11, 1976; 41 FR 24693, June 18, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42014, July 24, 2006] Sec. 70.42 Use of facsimile forms. Using or attempting to use a form which simulates in whole or in part any certificate, symbol, stamp, label, seal, or identification authorized to be issued or used under the regulations in this part. Sec. 70.43 Willful violation of the regulations. Any willful violation of the regulations in this part or the Act. Sec. 70.44 Interfering with a grader or employee of Service. Any interference with or obstruction or any attempted interference or obstruction of, or assault upon any grader, licensee, or employee of the Service in the performance of such employee's duties. The giving or offering, directly or indirectly, of any money, loan, gift, or anything of value to an employee of the Service, or the making or offering of any contribution to or in any way supplementing the salary, compensation, or expenses of an employee of the Service, or the offering or entering into a private contract or agreement with an employee of the Service for any services to be rendered while employed by the Service. [41 FR 23681, June 11, 1976; 41 FR 24693, June 18, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42014, July 24, 2006] Sec. 70.45 Misleading labeling. The use of the terms ``Government Graded'' and ``Federal-State Graded'' or terms of similar import in the labeling or advertising of any product without stating in the labeling or advertisement the U.S. grade of the product as determined by an authorized grader. Sec. 70.46 Miscellaneous. The existence of any of the conditions set forth in Sec. 70.35 constituting a basis for the rejection of an application for grading service. Identifying and Marking Products Sec. 70.50 Approval of official identification and wording on labels. Any label or packaging material which bears any official grade identification shall be used only in such a manner as the Administrator may prescribe, and such labeling or packaging materials, including the wording used on such materials, shall be approved in accordance with and conform with the provisions of this part 70 and the applicable provisions of Sec. Sec. 381.115 through 381.141 of 9 CFR part 381. Poultry Products Inspection Regulations. Labeling requirements for ready-to-cook rabbits, except for the product name, shall be the same as for ready-to-cook poultry. For ready-to-cook rabbits the class name shall be shown on the label. The appropriate designation, ``young,'' ``mature,'' or ``old,'' may be used as a [[Page 219]] prefix to the word ``rabbit'' in lieu of the class name. [41 FR 23681, June 11, 1976; 41 FR 24694, June 18, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981] Sec. 70.51 Form of grademark and information required. (a) Form of official identification symbol and grademark. (1) The shield set forth in Figure 1 of this section shall be the official identification symbol for purposes of this part and when used, imitated, or simulated in any manner in connection with poultry or rabbits, shall be deemed prima facia to constitute a representation that the product has been officially graded for the purposes of Sec. 70.2. (2) Except as otherwise authorized, the grademark permitted to be used to officially identify USDA consumer-graded poultry and rabbit products shall be of the form and design indicated in Figures 2 through 4 of this section. The shield shall be of sufficient size so that the printing and other information contained therein is legible and in approximately the same proportion as shown in these figures. (3) The ``Prepared From'' grademark in Figure 5 of this section may be used to identify specialized poultry products for which there are no official U.S. grade standards, provided that these products are approved by the Agency and are prepared from U.S. Consumer Grade A poultry carcasses, parts, or other products that comply with the requirements of AMS Sec. 70.220. All poultry products shall be processed and labeled in accordance with 9 CFR part 381. (b) Information required on grademark. (1) Except as otherwise authorized by the Administrator, each grademark used shall include the letters ``USDA'' and the U.S. grade of the product it identifies, such as ``A Grade,'' as shown in Figure 2 of this section. Such information shall be printed with the shield and the wording within the shield in contrasting colors in a manner such that the design is legible and conspicuous on the material upon which it is printed. (2) Except as otherwise authorized, the bands of the shield in Figure 4 of this section shall be displayed in three colors, with the color of the top, middle, and bottom bands being blue, white, and red, respectively. (3) The ``Prepared From'' grademark in Figure 5 of this section may be any one of the designs shown in Figures 2 through 4 of this section. The text outside the shield shall be conspicuous, legible, and in approximately the same proportion and close proximity to the shield as shown in Figure 5 of this section. (c) Products that may be individually grademarked. The grademarks set forth in Figures 2 through 4 of this section may be applied individually to ready-to-cook poultry, rabbits, and specified poultry food products for which consumer grades are provided in the U.S. Classes, Standards, and Grades for Poultry and Rabbits, AMS 70.200 and 70.300 et seq., respectively, or to the containers in which such products are enclosed for the purpose of display and sale to household consumers, only when such products qualify for the particular grade indicated in accordance with the consumer grades. [[Page 220]] [GRAPHIC] [TIFF OMITTED] TR30JY98.000 [[Page 221]] [63 FR 40628, July 30, 1998] Sec. 70.52 Prerequisites to packaging ready-to-cook poultry or rabbits identified with consumer grademarks. The official identification of any graded product as provided in Sec. Sec. 70.50 and 70.51 shall be done only under the supervision of a grader. The grader shall have supervision over the use and handling of all material bearing any official identification. Sec. 70.54 Retention authorities. A grader may use retention tags or other devices and methods as approved by the Administrator for the identification and control of poultry or rabbit products which are not in compliance with the regulations or are held for further examination. Any such item shall not be released until in compliance with the regulations and retention identification shall not be removed by anyone other than a grader. Sec. 70.55 Check grading officially identified product. Officially identified poultry or rabbit products may be subject to final check grading prior to their shipment. Such product found not to be in compliance with the assigned official grade shall be placed under a retention tag until it is regraded to comply with the grade assigned or until the official identification is removed. Sec. 70.56 Grading requirements of poultry and rabbits identified with official identification. (a) Poultry and rabbit products to be identified with the grademarks illustrated in Sec. 70.51 must be individually graded by a grader or by authorized personnel pursuant to Sec. 70.20 and thereafter checkgraded by a grader. (b) Poultry and rabbit products not graded in accordance with paragraph (a) of this section may be officially graded on a sample basis and the shipping containers may be identified with grademarks which contain the words ``Sample Graded'' and which are approved by the Administrator. [71 FR 42014, July 24, 2006] Reports Sec. 70.60 Report of grading work. Reports of grading work performed within official plants shall be forwarded to the Administrator by the grader in a manner as may be specified by the Administrator. [71 FR 42014, July 24, 2006] Sec. 70.61 Information to be furnished to graders. The applicant for grading service shall furnish to the grader rendering such service such information as may be required for the purposes of this part. [47 FR 46071, Oct. 15, 1982; 47 FR 54421, Dec. 3, 1982] Sec. 70.62 Report of violations. Each grader shall report, in the manner prescribed by the Administrator, all violations and noncompliances under the Act and the regulations in this part of which such grader has knowledge. [71 FR 42014, July 24, 2006] Fees and Charges Sec. 70.70 Payment of fees and charges. (a) Fees and charges for any grading service shall be paid by the interested party making the application for such grading service, in accordance with the applicable provisions of this section and Sec. Sec. 70.71 through 70.78, inclusive. (b) Fees and charges for any grading service shall, unless otherwise required pursuant to paragraph (c) of this section, be paid by check, electronic funds transfer, draft, or money order made payable to the National Finance Center. Payment for the service must be made in accordance with directions on the billing statement, and such fees and charges must be paid in advance if required by the official grader or other authorized official. (c) Fees and charges for any grading under a cooperative agreement with [[Page 222]] any State or person shall be paid in accordance with the terms of such cooperative agreement. [41 FR 23681, June 11, 1976; 41 FR 24693, June 18, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42014, July 24, 2006; 84 FR 49644, Sept. 23, 2019] Sec. 70.71 Charges for services on an unscheduled basis. Unless otherwise provided in this part, the fees to be charged and collected for any service performed, in accordance with this part, on an unscheduled basis shall be based on the applicable formulas specified in this section. (a) For each calendar year, AMS will calculate the rate for grading services, per hour per program employee using the following formulas: (1) Regular rate. The total AMS grading program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service. (2) Overtime rate. The total AMS grading program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5, plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (3) Holiday rate. The total AMS grading program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (b)(1) For each calendar year, based on previous fiscal year/ historical actual costs, AMS will calculate the benefits rate, operating rate, and allowance for bad debt rate components of the regular, overtime and holiday rates as follows: (i) Benefits rate. The total AMS grading program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions. (ii) Operating rate. AMS' grading program total operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation. (iii) Allowance for bad debt rate. Total AMS grading program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked. (2) The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on OMB's most recent Presidential Economic Assumptions. (c) Fees for unscheduled grading services will be based on the time required to perform the services. The hourly charges will include the time actually required to perform the grading, waiting time, travel time, and any clerical costs involved in issuing a certificate. Charges to plants are as follows: (1) The regular hourly rate will be charged for the first 8 hours worked per grader per day for all days except observed legal holidays. (2) The overtime rate will be charged for hours worked in excess of 8 hours per grader per day for all days except observed legal holidays. (3) The holiday hourly rate will be charged for hours worked on observed legal holidays. [85 FR 62941, Oct. 6, 2020] Sec. 70.72 Fees for appeal grading or review of a grader's decision. The costs of an appeal grading or review of a grader's decision, shall be borne by the appellant on an unscheduled basis at rates set forth in Sec. 70.71, plus any travel and additional expenses. If the appeal grading or review of a grader's decision discloses that a material error was made in the original [[Page 223]] determination, no fee or expenses will be charged. [84 FR 49644, Sept. 23, 2019] Sec. 70.75 Travel expenses and other charges. Charges are to be made to cover the cost of travel and other expenses incurred by the AMS in connection with rendering grading service. Such charges shall include the cost of transportation, per diem, and any other expenses. [42 FR 2971, Jan. 14, 1977. Redesignated at 42 FR 32514, June 27, 1977, as amended at 46 FR 9, Jan. 2, 1981. Redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42014, July 24, 2006] Sec. 70.76 [Reserved] Sec. 70.77 Charges for services on a scheduled basis. Fees to be charged and collected for any grading service, other than for an appeal grading, on a scheduled grading basis, will be determined based on the formulas in this part. The fees to be charged for any appeal grading will be as provided in Sec. 70.71. (a) Charges. The charges for the grading of poultry and rabbits and edible products thereof must be paid by the applicant for the service and will include items listed in this section as are applicable. Payment for the full cost of the grading service rendered to the applicant shall be made by the applicant to the National Finance Center. Such full costs shall comprise such of the items listed in this section as are due and included in the bill or bills covering the period or periods during which the grading service was rendered. Bills are payable upon receipt. (1) When a signed application for service has been received, the State supervisor or his designee will complete a plant survey pursuant to Sec. 70.34. The costs for completing the plant survey will be borne by the applicant on an unscheduled basis as described in Sec. 70.71. No charges will be assessed when the application is required because of a change in name or ownership. If service is not installed within 6 months from the date the application is filed, or if service is inactive due to an approved request for removal of a grader or graders for a period of 6 months, the application will be considered terminated. A new application may be filed at any time. In addition, there will be a charge of $300 if the application is terminated at the request of the applicant for reasons other than for a change in location within 12 months from the date of the inauguration of service. (2) Charges for the cost of each grader assigned to a plant will be calculated as described in Sec. 70.71. Minimum fees for service performed under a scheduled agreement will be based on the hours of the regular tour of duty. The Agency reserves the right to use any grader assigned to the plant under a scheduled agreement to perform service for other applicants and no charge will be assessed to the scheduled applicant for the number of hours charged to the other applicant. Charges to plants are as follows: (i) The regular hourly rate will be charged for hours worked in accordance with the approved tour of duty on the application for service between the hours of 6 a.m. and 6 p.m. (ii) The overtime rate will be charged for hours worked in excess of the approved tour of duty on the application for service. (iii) The holiday hourly rate will be charged for hours worked on observed legal holidays. (iv) The night differential rate (for regular or overtime hours) will be charged for hours worked between 6 p.m. and 6 a.m. (v) The Sunday differential rate (for regular or overtime hours) will be charged for hours worked on a Sunday. (vi) For all hours of work performed in a plant without an approved tour of duty, the charge will be one of the applicable hourly rates in Sec. 70.71 plus actual travel expenses incurred by AMS. (3) A charge at the hourly rates specified in Sec. 70.71, plus actual travel expenses incurred by AMS for intermediate surveys to firms without grading service in effect. (b) Other provisions. (1) The applicant shall designate in writing the employees of the applicant who will be required and authorized to furnish each grader with such information as may [[Page 224]] be necessary for the performance of the grading service. (2) AMS will provide, as available, an adequate number of graders to perform the grading service. The number of graders required will be determined by AMS based on the expected demand for service. (3) The grading service shall be provided at the designated plant and shall be continued until the service is suspended, withdrawn, or terminated by: (i) Mutual consent; (ii) Thirty (30) days' written notice by either the applicant or AMS specifying the date of suspension, withdrawal, or termination; (iii) One (1) day's written notice by AMS to the applicant if the applicant fails to honor any invoice within thirty (30) days after date of invoice covering the cost of the grading service; or (iv) Action taken by AMS pursuant to the provisions of Sec. 70.38 through Sec. 70.40. (4) Graders will be required to confine their activities to those duties necessary in the rendering of grading service and such closely related activities as may be approved by AMS: Provided, That in no instance may the graders assume the duties of management. [41 FR 23681, June 11, 1976] Editorial Note: For Federal Register citations affecting Sec. 70.77, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. Sec. 70.78 Fees or charges for grading service performed under cooperative agreement. Fees or charges to be made to an applicant for any grading service which differ from those listed in Sec. Sec. 70.70 through 70.77, shall be provided for by a cooperative agreement. Grading Certificates Sec. 70.90 Forms. Grading certificates and sampling report forms (including appeal grading certificates and regrading certificates) shall be issued on forms approved by the Administrator. [71 FR 42014, July 24, 2006] Sec. 70.91 Issuance. (a) Resident grading basis. Certificates will be issued only upon a request therefor by the applicant or the AMS. When requested, a grader shall issue a certificate covering product graded by such grader. In addition, a grader may issue a grading certificate covering product graded in whole or in part by another grader when the grader has knowledge that the product is eligible for certification based on personal examination of the product or official grading records. (b) Other than resident grading. Each grader shall, in person or by an authorized agent, issue a grading certificate covering each product graded by such grader. A grader's name may be signed on a grading certificate by a person other than the grader if such person has been designated as the authorized agent of such grader by the national supervisor: Provided, That the certificate is prepared from an official memorandum of grading signed by the grader: And provided further, That a notarized power of attorney authorizing such signature has been issued to such person by the grader and is on file in the office of grading. In such case, the authorized agent shall sign both the agents name and the grader's name, e.g., ``John Doe by Mary Roe.'' [71 FR 42014, July 24, 2006] Sec. 70.92 Disposition. The original and a copy of each grading certificate, issued pursuant to Sec. Sec. 70.90 through 70.93, and not to exceed two additional copies thereof if requested by the applicant prior to issuance shall, immediately upon issuance, be delivered or mailed to the applicant or the applicant's designee. Other copies shall be filed and retained in accordance with the disposition schedule for grading program records. [71 FR 42014, July 24, 2006] Sec. 70.93 Advance information. Upon request of an applicant, all or part of the contents of any grading certificate issued to such applicant may be telephoned or transmitted by any electronic means to the applicant, or [[Page 225]] to the applicant's designee, at the applicant's expense. [71 FR 42014, July 24, 2006] Appeal of a Grading or Decision Sec. 70.100 Who may request an appeal grading or review of a grader's decision. An appeal grading may be requested by any interested party who is dissatisfied with the determination by a grader of the class, quality, quantity, or condition of any product as evidenced by the USDA grademark and accompanying label, or as stated on a grading certificate, and a review may be requested by the operator of an official plant with respect to a grader's decision on any other matter relating to grading in an official plant. Sec. 70.101 Where to file an appeal. (a) Appeal from resident grader's grading or decision in an official plant. Any interested party who is not satisfied with the determination of the class, quality, quantity, or condition of product which was graded by a grader in an official plant and has not left such plant, and the operator of any official plant who is not satisfied with a decision made by a grader or any other matter relating to grading in such plant, may request an appeal grading or review of the decision by filing such request with the grader's immediate supervisor. (b) All other appeal requests. Any interested party who is not satisfied with the determination of the class, quality, quantity, or condition of product which has left the official plant where it was graded, or which was graded other than in an official plant, may request an appeal grading by filing such request with the regional director in the area where the product is located or with the Chief of the Grading Branch. Sec. 70.102 How to file an appeal. Any request for an appeal grading or review of a grader's decision may be made orally or in writing. If made orally, written confirmation may be required. The applicant shall clearly state the reasons for requesting the appeal service, and a description of the product or the decision which is questioned. If such appeal request is based on the results stated on an official certificate, the original and all available copies of the certificate shall be returned to the appeal grader assigned to make the appeal grading. Sec. 70.103 When an application for an appeal grading may be refused. When it appears to the official with whom an appeal request is filed that the reasons given in the request for an appeal grading are frivolous or not substantial, or that the quality or condition of the product has undergone a material change since the original grading, or that the original lot has changed in some manner, or the Act or the regulations in this part have not been complied with, the applicant's request for the appeal grading may be refused. In such case, the applicant shall be promptly notified of the reason(s) for such refusal. Sec. 70.104 Who shall perform the appeal. (a) An appeal grading or review of a decision requested under Sec. 70.101(a) shall be made by the grader's immediate supervisor or by one or more licensed graders assigned by the immediate supervisor. (b) Appeal gradings requested under Sec. 70.101(b) shall be performed by a grader other than the grader who originally graded the product. (c) Whenever practical, an appeal grading shall be conducted jointly by two graders. The assignment of the grader(s) who will make the appeal grading requested under Sec. 70.101(b) shall be made by the regional director or the Chief of the Grading Branch. [41 FR 23681, June 11, 1976; 41 FR 24693, June 18, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42014, July 24, 2006] Sec. 70.105 Procedures for appeal gradings. (a) The appeal sample shall consist of product taken from the original sample container plus an equal number of containers selected at random. (b) When the original samples are not available or have been altered, such as the removal of undergrades, the appeal [[Page 226]] sample size for the lot shall consist of double the samples required in Sec. 70.80. (c) Poultry or rabbits in an unfrozen state must be adequately protected and kept in good condition until the appeal grading is performed. (d) Overwraps on frozen poultry or rabbits shall be removed from all birds or rabbits in the sample prior to appeal grading for quality or to determine the class. (e) When the appeal is based on grading or class determination factors, each frozen carcass shall be defrosted prior to conducting the appeal grading. Whether defrosting poultry or rabbit carcasses for other types of appeals will be required by the appeal grader, will depend upon the reason for the appeal. [41 FR 23681, June 11, 1976; 41 FR 24693, June 18, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 71 FR 42014, July 24, 2006] Sec. 70.106 Appeal grading certificates. Immediately after an appeal grading is completed, an appeal certificate shall be issued to show that the original grading was sustained or was not sustained. Such certificate shall supersede any previously issued certificate for the product involved and shall clearly identify the number and date of the superseded certificate. The issuance of the appeal certificate may be withheld until any previously issued certificate and all copies have been returned when such action is deemed necessary to protect the interest of the Government. When the appeal grader assigns a different grade to the lot, the existing grademark shall be changed or obliterated as necessary. When the appeal grader assigns a different class or quantity designation to the lot, the labeling shall be corrected. Sanitary Requirements, Facilities, and Operating Procedures Sec. 70.110 Requirements for sanitation, facilities, and operating procedures in official plants. (a) The requirements for sanitation, facilities, and operating procedures in official plants shall be the applicable provisions stated in 9 CFR part 381 for poultry, and for rabbits the requirements shall be the applicable provisions stated in 9 CFR part 354. (b) With respect to grading services, there shall be a minimum of 100-foot candles of light intensity at grading stations; and acceptable means, when necessary, of maintaining control and identity of products segregated for quality, class, condition, weight, lot, or any other factor which may be used to distinguish one type of product from another. [41 FR 23681, June 11, 1976. Redesignated at 42 FR 32514, June 27, 1977, and further redesignated at 46 FR 63203, Dec. 31, 1981, as amended at 51 FR 17281, May 9, 1986; 63 FR 40630, July 30, 1998] Subparts B-C [Reserved] PART 75_PROVISIONS FOR INSPECTION AND CERTIFICATION OF QUALITY OF AGRICULTURAL AND VEGETABLE SEEDS--Table of Contents Definitions Sec. 75.1 Meaning of words. 75.2 Terms defined. Administration 75.3 Authority. 75.4 Federal and State cooperation. 75.5 Exceptions. 75.6 Nondiscrimination. Inspection 75.7 Inspection in accordance with methods prescribed or approved. 75.8 Basis of service. 75.9 Who may obtain service. 75.10 How to make application. 75.11 Content of application. 75.12 When application deemed filed. 75.13 When application may be rejected. 75.14 When application may be withdrawn. 75.15 Authority of agent. 75.16 Accessibility of seeds. 75.17 Testing. 75.18 Sampling. 75.19 Seed lot inspection. 75.20 Submitted sample inspection. 75.21 Grain sample inspection. 75.22 Form of inspection certificate. 75.23 Issuance of inspection certificate. 75.24 Disposition of inspection certificate. 75.25 Issuance of corrected certificate. Appeal Inspection 75.26 When appeal inspection may be requested. [[Page 227]] 75.27 How to file an appeal. 75.28 When a request for an appeal inspection may be withdrawn. 75.29 When an appeal may be refused. 75.30 Who shall perform appeal inspection. 75.31 Appeal inspection certificate. Licensing of Inspectors 75.32 Who may become licensed inspector. 75.33 Suspension or revocation of license of inspector. 75.34 Surrender of license. Sampling Provisions and Requirements 75.35 Obtaining samples for lot inspections. 75.36 Representative sample. 75.37 Submitted samples. 75.38 Lot inspections. 75.39 Use of file samples. 75.40 Protecting samples. Fees and Charges 75.41 General. 75.42 Sampling and sealing. 75.43 Laboratory testing. 75.44 When application rejected or withdrawn. 75.45 Charge for appeals. 75.46 When appeal refused or withdrawn. 75.47 For certificates. Miscellaneous 75.48 Identification number. 75.49 OMB control numbers. Authority: 7 U.S.C. 1622 and 1624. Source: 49 FR 18724, May 2, 1984, unless otherwise noted. Definitions Sec. 75.1 Meaning of words. Words used in the regulations in this part in the singular form shall be deemed to import the plural and vice versa, as the case may demand. Sec. 75.2 Terms defined. For the purpose of these regulations unless the context otherwise requires, the following terms shall be construed, respectively, as follows: (a) Act means the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et seq.). (b) Regulations means the regulations in this part. (c) Department means the United States Department of Agriculture (USDA). (d) Secretary means the Secretary of the United States Department of Agriculture, or any officer or employee of the Department to whom authority has been delegated to act in the Secretary's stead. (e) Administrator means the Administrator of the Agricultural Marketing Service (AMS) of the Department, or any other officer or employee of AMS to whom authority has been delegated to act in the Administrator's stead. (f) Division means the Warehouse and Seed Division (WSD), AMS. (g) Director means the Director of the Division or any other officer or employee of the Division to whom authority has been delegated to act in the Director's stead. (h) Person means any individual, partnership, association, business trust, corporation, entity, or any other organized group of persons, whether incorporated or not. (i) Seed means any agricultural or vegetable seed. (j) Interested Party means any person financially interested in a transaction involving seed. (k) Applicant means an interested party who requests any inspection service with respect to seed. (l) Authorized agent means an agent to whom authority to represent a person or government agency has been given by that person or government agency through delegation, contract or cooperative agreement, or other means. (m) Memorandum of Understanding means a written plan between AMS and a State for carrying out their separate activities in a project of mutual interest to the parties involved. (n) Inspector means a licensed employee of a State authorized pursuant to a Memorandum of Understanding or an employee of the Department authorized by the Director, to draw samples of seeds, seal containers, inspect records, test seeds for quality, issue certificates and reports, and bill for services. (o) Inspection means sampling seeds, sealing containers, testing seeds for quality and reviewing records. (p) Appeal inspector means an inspector or other person designated or authorized by the Division to perform appeal inspections under the Act and regulations in this subpart. [[Page 228]] (q) Certificate means a certificate issued under the Act and the regulations in this subpart. Administration Sec. 75.3 Authority. The Director is charged with the administration of the provisions of the regulations and the Act insofar as they relate to the subject matter of the regulations, under the supervision of the Secretary and the Administrator. Sec. 75.4 Federal and State cooperation. Pursuant to the Act, the Administrator is authorized to cooperate with the appropriate State agencies in carrying out provisions of the Act and these regulations through Memoranda of Understanding. The Memorandum of Understanding shall specify the duties to be performed by the parties concerned with each party directing its own activities and utilizing its own resources. Sec. 75.5 Exceptions. The regulations do not apply to the inspection of grain in the United States under the U.S. Grain Standards Act, as amended (7 U.S.C. 71 et seq.), except to the extent that official grain samples received from the Federal Grain Inspection Service (FGIS) shall be examined for the presence of specified weed and crop seeds upon the request of FGIS. Sec. 75.6 Nondiscrimination. The conduct of all services under these regulations shall be accomplished without discrimination as to race, color, religion, sex, or national origin. Inspection Sec. 75.7 Inspection in accordance with methods prescribed or approved. Inspection of seed shall be rendered pursuant to these regulations and under such conditions and in accordance with the methods of either the Association of Official Seed Analysts (AOSA) or the International Seed Testing Association (ISTA). Sec. 75.8 Basis of service. The regulations provide for inspection services pursuant to the Act. Seeds shall be inspected in accordance with the methods of either the Association of Official Seed Analysts (AOSA) or the International Seed Testing Association (ISTA); provided, that limitations in these rules respecting maximum lot size will not be observed and, provided further, that certification as to origin may be based on examination of records and certification of other seed certifying agencies. Sec. 75.9 Who may obtain service. An application for inspection service may be made by any interested party or his authorized agent. Sec. 75.10 How to make application. An application for service shall be confirmed in writing and addressed to the Federal Seed Laboratory, WSD, AMS, USDA, Beltsville, Maryland 20705. Sec. 75.11 Content of application. An application for service shall include the following information; (a) The date of application; (b) the kind and quantity of seed, and test(s) to be performed; (c) the methods and instructions for the inspection of the seed (either Association of Official Seed Analysts (AOSA) or International Seed Testing Association (ISTA) rules); (d) the name and address of the applicant and, if made by an authorized agent; and (e) such further information relating to the inspection as may be required. Sec. 75.12 When application deemed filed. An application shall be deemed filed when received by the Division or the Federal Seed Laboratory. Sec. 75.13 When application may be rejected. Any application for service may be rejected by the Director (a) for noncompliance with the Act or the regulations relating to applications for service in this subpart, or (b) when it is not practicable to provide the service. Each such applicant shall be promptly notified in writing. [[Page 229]] Sec. 75.14 When application may be withdrawn. An application may be withdrawn at any time before the requested service is rendered. The applicant will remain responsible for payment of expenses incurred in connection therewith as provided in Sec. 75.44. Sec. 75.15 Authority of agent. Proof of authority of any person making an application as an agent may be required in the discretion of the official receiving the application. Sec. 75.16 Accessibility of seeds. Each lot of seed for which a lot inspection is requested shall be placed by the applicant so as to permit the entire lot to be sampled and a representative sample to be obtained as required. Sec. 75.17 Testing. Upon request by the applicant, tests may be made for kind, variety, germination, purity, weed seeds, disease pathogens, treatment, moisture, and other special tests, or any combination thereof for which prescribed methods of testing are established. The tests shall be in accordance with the methods of either the Association of Official Seed Analysts (AOSA) or the International Seed Testing Association (ISTA) as requested by the applicant. Sec. 75.18 Sampling. Sampling, when requested by the applicant, shall be in accordance with the methods of either the Association of Official Seed Analysts (AOSA) or the International Seed Testing Association (ISTA), depending upon the test method requested by the applicant. Sec. 75.19 Seed lot inspection. A lot inspection shall be made by obtaining a representative sample from a specified quantity of seed identified with a distinguishing mark or number to appear on all containers in the lot, and performing such test(s) as may be requested by the applicant. The identification mark or number must be approved by the inspector and will appear on the certificate to be issued. Sec. 75.20 Submitted sample inspection. A sample inspection shall be made by testing a sample of seed submitted by an applicant for inspection. Sec. 75.21 Grain sample inspection. A sample inspection shall be performed by examining official grain samples received from FGIS to identify specified weed and crop seeds upon the request of FGIS. Sec. 75.22 Form of inspection certificate. Inspection certificates shall be approved by the Director as to their form. No correction, erasure, or other change shall be made in the information on a certificate. Sec. 75.23 Issuance of inspection certificate. After an inspection has been completed, an inspection certificate shall be issued showing the results of the inspection in accordance with paragraph (a) or (b) of this section. (a) Lot inspection certificate. A lot inspection certificate shall be issued to include the name of the inspector sampling and sealing the seed lot, the analysis results from testing the sample, the identifying mark or number which has been approved by the inspector to appear on each container in the seed lot, and any other factual information pertinent to the inspection. (b) Sample inspection certificate. A sample inspection certificate shall be issued to show the results of the inspection of a sample of seed or grain submitted by an interested party. Each sample inspection certificate shall state the results of the inspection that applies only to the sample described in the certificate. (c) General authorization to issue certificates. Certificates for inspections may be issued by any inspector authorized by the Director to perform the inspection covered by the certificate. (d) Name requirements. The name and signature of the person who issued the inspection certificate shall be shown on the certificate. The original certificate must be signed, and the signature or a stamped facsimile shall be shown on each copy. [[Page 230]] Sec. 75.24 Disposition of inspection certificate. Upon issuance, the original and one copy of each inspection certificate shall be delivered or mailed to the applicant or otherwise delivered or mailed in accordance with the applicant's instructions. One copy of each inspection certificate shall be filed in the Federal Seed Laboratory. In case of a lost or destroyed certificate, a duplicate thereof labeled as such may be issued under the same number, date, and name. Sec. 75.25 Issuance of corrected certificate. (a) If any error is made in an inspection, a corrected inspection certificate may be issued. (b) The original and copies of the corrected certificate shall be issued as promptly as possible to the same interested persons who received the incorrect certificate. (c) The corrected certificate shall supersede the incorrect inspection certificate previously issued. The corrected certificate shall clearly identify, by certificate number and date, the incorrect certificate which it supersedes. (d) The original and all copies of the superseded incorrect certificate shall be obtained by the Director, if possible. If it is not possible to obtain the original and all copies of the superseded certificate, to the extent possible, all parties involved will be notified to prevent misuse of the superseded certificate and the corrected certificate so marked as to the outstanding certificate. Appeal Inspection Sec. 75.26 When appeal inspection may be requested. A request for an appeal inspection may be made by any interested party regarding the results of an inspection as stated on an inspection certificate. Such request shall be made within thirty (30) days following the day on which an inspection certificate was issued. Sec. 75.27 How to file an appeal. Any request for an appeal inspection may be made orally or in writing to the Federal Seed Laboratory. If made orally, written confirmation is required. The applicant shall clearly state the reasons for requesting the appeal service. The original and all available copies of the certificate shall be returned to the appeal inspector assigned to make the appeal inspection. Sec. 75.28 When a request for an appeal inspection may be withdrawn. A request for an appeal inspection may be withdrawn by the applicant at any time before the appeal inspection is performed: Provided, that, the appellant shall pay any expenses incurred in connection with the appeal as provided in Sec. 75.46. Sec. 75.29 When an appeal may be refused. A request for an appeal inspection may be refused if: (a) The reasons for an appeal inspection are frivolous or not substantial; (b) The quality or condition of the seed has been altered since the inspection covering the seed on which the appeal inspection is requested; (c) The lot in question in a lot inspection is not or cannot be made accessible for sampling; (d) The lot relative to which appeal inspection is requested cannot be positively identified by the inspection as the lot from which drawn samples were previously inspected in a lot inspection; or (e) The application is not in compliance with the regulations; and (f) Such applicant shall be notified promptly of the reason for such refusal. Sec. 75.30 Who shall perform appeal inspection. An appeal inspection shall be performed by an inspector (other than the one from whose inspection the appeal is requested) authorized for this purpose by the Director. Sec. 75.31 Appeal inspection certificate. After an appeal inspection has been completed, an appeal inspection certificate shall be issued showing the results of such appeal inspection; and such certificate shall supersede the inspection certificate previously issued for the seed involved. Each appeal inspection certificate shall clearly identify the [[Page 231]] number and date of the inspection certificate which it supersedes. The superseded certificate shall become null and void upon the issuance of the appeal inspection certificate and shall no longer represent the quality or condition of the seed described therein. The inspector issuing an appeal inspection certificate shall forward notice of such issuance to such persons as considered necessary to prevent misuse of the superseded certificate if the original and all copies of such superseded certificate have not previously been delivered to the inspector issuing the appeal inspection certificate. The appeal inspection certificate shall be marked as to the existence of the outstanding certificate. The provisions in the regulations concerning forms of certificates and disposition of certificates shall apply to appeal inspection certificates, except that copies of such appeal inspection certificates shall be furnished to all interested parties who received copies of the superseded certificate. Licensing of Inspectors Sec. 75.32 Who may become licensed inspector. Any person nominated by a cooperating State and who is found to have the necessary qualifications may be licensed by the Director as an inspector to perform such duties of inspection as specified by the Memorandum of Understanding. Such a license shall bear the signature of an authorized employee of the Department. A licensed inspector shall perform duties pursuant to the regulations in accordance with instructions issued or approved by the Director. Sec. 75.33 Suspension or revocation of license of inspector. Pending final action by the Administrator, the Director may suspend, whenever it is deemed that such action is necessary to assure that any service provided is performed properly, the license of any inspector, issued pursuant to the regulations by giving notice of such suspension to the respective licensee, accompanied by a statement of the reasons therefore. Within 7 days after receipt of notice and statement of reasons by a licensee, an appeal may be filed in writing with the Administrator supported by any argument or evidence as to why the license should not be suspended. After expiration of the 7-day period and consideration of such argument and evidence, the Administrator shall take such action as deemed appropriate with respect to a suspension or revocation. Sec. 75.34 Surrender of license. Upon termination of service as an inspector or suspension or revocation of such license, such licensee shall surrender the license immediately to the Federal Seed Laboratory. Sampling Provisions and Requirements Sec. 75.35 Obtaining samples for lot inspections. Samples of seed for lot inspections may be obtained by licensed inspectors or authorized employees of the Department. Sec. 75.36 Representative sample. No lot inspection sample shall be deemed representative of a lot of seed unless the sample (a) has been obtained by a licensed inspector or an authorized employee of the Department; (b) is of the size prescribed in the instructions; and (c) has been obtained, handled, and submitted in accordance with the Association of Official Seed Analysts (AOSA) or the International Seed Testing Association (ISTA) procedures. Sec. 75.37 Submitted samples. Submitted samples may be obtained by or for any interested person. (Instructions for sampling seed may be obtained upon request to the Director or the Federal Seed Laboratory.) Sec. 75.38 Lot inspections. Each lot inspection shall be made on the basis of a representative sample obtained from that lot of seed by a licensed inspector or an authorized employee of the Department. Each lot of seed which is offered for lot inspection shall be sealed at the time of sampling in accordance with methods and procedures of the Association of Official [[Page 232]] Seed Analysts (AOSA) or the International Seed Testing Association (ISTA). Sec. 75.39 Use of file samples. (a) File samples which are retained by inspection personnel in accordance with the regulations may be deemed representative for appeal inspections: Provided, that (1) the samples have remained in the custody of the inspection personnel who certificated the inspection; and (2) the inspection personnel who performed the inspection and the inspection personnel who are to perform the appeal inspection determine that the sample was representative of the seed at the time of the inspection and that the quality or condition of the seed in the sample and in the lot has not changed since the time of the inspection. (b) Upon request of the applicant, and if practicable, a new sample may be obtained and examined as a part of an appeal inspection. Sec. 75.40 Protecting samples. Inspection personnel shall protect each sample from manipulation, substitution, and improper or careless handling which would deprive the sample of its representative character from the time of collection until the inspection is completed and the file sample has been discarded. Fees and Charges Sec. 75.41 General. Fees and charges for inspection or certification services performed by Federal employees shall cover the cost of performing the service. Fees shall be for actual time required to render the service. (a) For each calendar year, AMS will calculate the rate for inspection or certification services, per hour per program employee using the following formulas: (1) Regular rate. The total AMS inspection or certification program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service. (2) Overtime rate. The total AMS inspection or certification program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5 plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (3) Holiday rate. The total AMS inspection or certification program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (b) For each calendar year, based on previous fiscal year/historical actual costs, AMS will calculate the benefits, operating, and allowance for bad debt components of the regular, overtime and holiday rates as follows: (1) Benefits rate. The total AMS inspection or certification program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions. (2) Operating rate. The total AMS inspection or certification program operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation. (3) Allowance for bad debt rate. Total AMS inspection or certification program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked. (c) The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on the most recent Office of Management and Budget's Presidential Economic Assumptions. [79 FR 67325, Nov. 13, 2014] [[Page 233]] Sec. 75.42 Sampling and sealing. (a) Fees for inspection services provided by licensed inspectors may be charged by States participating in the program at rates established by the individual States. (b) When onsite inspection services are performed by Federal employees at the request of the applicant, charges will be based on the formulas in Sec. 75.41. [49 FR 18724, May 2, 1984, as amended at 79 FR 67325, Nov. 13, 2014] Sec. 75.43 Laboratory testing. Fees for testing each sample shall include the time required for actual testing, preparation of test records, issuing the certificate, and filing of samples and documents, with: (a) Fees assessed based on the formulas in Sec. 75.41. (b) A minimum fee of 1 hour per sample for testing shall be charged. (c) The fee for a preliminary report issued prior to completion of testing shall be assessed in accordance with paragraph (a) of this section. [49 FR 18724, May 2, 1984, as amended at 67 FR 11384, Mar. 14, 2002; 79 FR 67325, Nov. 13, 2014] Sec. 75.44 When application rejected or withdrawn. When an application for inspection is rejected in accordance with Sec. 75.13 or withdrawn in accordance with Sec. 75.14, the applicant will be required to pay applicable fees for the time used by an inspector and other expenses incurred in connection with such application prior to its rejection or withdrawal. Sec. 75.45 Charge for appeals. A charge of 1 hour shall be made for each appeal filed under Sec. 75.26, and the fee for an appeal inspection shall equal the fee for the original inspection from which the appeal is taken, plus any charges for travel or other expenses incurred in performing the appeal: Provided, That when a material error in the certificate or sample from which the appeal is taken is found by the appeal inspector the charge and fee shall be waived. Sec. 75.46 When appeal refused or withdrawn. When an appeal is refused in accordance with Sec. 75.29 or withdrawn in accordance with Sec. 75.28, the applicant will be required to pay for the time used by the appeal inspector and other expenses incurred in connection with such appeal prior to its denial, dismissal, or withdrawal. Sec. 75.47 For certificates. A charge of $13.00 per certificate will be made for copies of certificates other than those required to be distributed in Sec. 75.23 and for the issuance of a duplicate certificate in accordance with Sec. 75.24 and an appeal certificate in Sec. 75.31. [49 FR 18724, May 2, 1984, as amended at 56 FR 51320, Oct. 11, 1991; 58 FR 64101, Dec. 6, 1993; 60 FR 21035, May 1, 1995; 65 FR 15832, Mar. 24, 2000; 67 FR 11384, Mar. 14, 2002] Miscellaneous Sec. 75.48 Identification number. The Director may require the use of official identification numbers in connection with seed certificated or sampled under the Act. When identification numbers are required, they shall be specified by the Director and shall be attached to, or stamped, printed, or stenciled on the lot of seed certificated or sampled in a manner specified by the Director. Sec. 75.49 OMB control numbers. The control number assigned to the information collection requirements by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1980 is as follows: OMB Control No. 0581- 0140. [56 FR 51320, Oct. 11, 1991] [[Page 234]] SUBCHAPTER D_EXPORT AND DOMESTIC CONSUMPTION PROGRAMS PART 80_FRESH RUSSET POTATO DIVERSION PROGRAM--Table of Contents Subpart A_Fresh Russet Potato Diversion Program Sec. 80.1 Applicability and payments. 80.2 Administration and disputes. Subpart B [Reserved] Authority: 7 U.S.C. 612c. Source: 66 FR 58349, Nov. 21, 2001, unless otherwise noted. Subpart A_Fresh Russet Potato Diversion Program Sec. 80.1 Applicability and payments. Payment be received or retained with respect to diversions of 2001 Fresh Russet potatoes as allowed by the Administrator of the Agricultural Marketing Service (AMS), of the Department of Agriculture (USDA) using standards set out for consideration in the relevant Federal Register notice published on April 13, 2001 (66 FR 19099) except that total funding for the program may be an amount up to $12 million. If a person has or will receive such a payment and there is a failure to comply with the conditions for payment or any condition for payment set out in the application, or that otherwise applies, all sums received by a person shall be returned with interest. No other claims for payment by producers or other persons under this part based upon their diversion of potatoes, shall be allowed except as approved by the Administrator of the Agricultural Marketing Service (AMS), of the Department of Agriculture (USDA). In all cases, the Administrator may set such other conditions for payment as may be allowable and serve the accomplishment of the goals of the program. Sec. 80.2 Administration and disputes. Administration of this part shall be under the supervision of the Deputy Administrator, Fruit and Vegetable Programs, AMS, and implemented for AMS through the Farm Service Agency (FSA) of USDA. Disputes shall be resolved by FSA by using regulations found in 7 CFR part 780. Subpart B [Reserved] PART 81_PRUNE/DRIED PLUM DIVERSION PROGRAM--Table of Contents Sec. 81.1 Applicability. 81.2 Administration. 81.3 Definitions. 81.4 Length of program. 81.5 General requirements. 81.6 Rate of payment; total payments. 81.7 Eligibility for payment. 81.8 Application and approval for participation. 81.9 Inspection and certification of diversion. 81.10 Claim for payment. 81.11 Compliance with program provisions. 81.12 Inspection of premises. 81.13 Records and accounts. 81.14 Offset, assignment, and prompt payment. 81.15 Appeals. 81.16 Refunds; joint and several liability. 81.17 Death, incompetency, or disappearance. Authority: 7 U.S.C. 612c. Source: 67 FR 11391, Mar. 14, 2002, unless otherwise noted. Sec. 81.1 Applicability. Pursuant to the authority conferred by Section 32 of the Act of August 24, 1935, as amended (7 U.S.C. 612c) (Section 32), the Secretary of Agriculture will make payment to California producers who divert prune/plums by removing trees on which the fruit is produced in accordance with the terms and conditions set forth herein. Sec. 81.2 Administration. The program will be administered under the direction and supervision of the Deputy Administrator, Fruit and Vegetable Programs, Agricultural Marketing Service (AMS), United States Department of Agriculture (USDA), and will be implemented by the Prune [[Page 235]] Marketing Committee (Committee). The Committee, or its authorized representatives, does not have authority to modify or waive any of the provisions of this subpart. Such power shall rest solely with the Administrator of AMS, or delegatee. The Administator or delegatee, in the Administrator's or delegatee's sole discretion can modify deadlines or other conditions, as needed or appropriate to serve the goals of the program. In all cases, payments under this part are subject to the availability of funds. Sec. 81.3 Definitions. (a) Administrator means the Administrator of AMS. (b) AMS means the Agricultural Marketing Service of the U.S. Department of Agriculture. (c) Application means ``Application for Prune Tree Removal Program.'' (d) Committee means the Prune Marketing Committee established by the Secretary of Agriculture to locally administer Federal Marketing Order No. 993 (7 CFR Part 993), regulating the handling of dried prunes produced in California. (e) Diversion means the removal of prune-plum trees after approval of applications by the Committee through June 30, 2002. (f) Producer means an individual, partnership, association, or corporation in the State of California who grows prune/plums that are dehydrated into dried plums for market. (g) Removal means that the prune-plum trees are no longer standing and capable of producing a crop, and the roots of the trees have been removed. The producer can accomplish removal by any means the producer desires. Grafting another type of tree to the rootstock remaining after removing the prune/plum tree would not qualify as removal under this program. Sec. 81.4 Length of program. Producers diverting prune/plums by removing prune-plum trees must complete the diversion no later than June 30, 2002. Sec. 81.5 General requirements. (a) To be eligible for this program, the trees to be removed must have yielded at least 1.5 tons of dried prune/plums per net-planted acre during the 1999 or 2000 crop year. A net-planted acre is the actual acreage planted with prune-plum trees. Abandoned orchards and dead trees will not qualify. In new orchards diverted, qualifying trees must be at least 5 years of age (6th leaf), contain at least two scaffolds, and be capable of producing at least 1.5 tons per net-planted acre. The block of trees for removal must be easily definable by separations from other blocks and contain at least 1,000 eligible trees or comprise an entire orchard. (b) Any grower participating in this program must agree not to replant prune-plum trees on the land cleared under this program through June 30, 2004. Participants bear responsibility for ensuring that trees are not replanted, whether by themselves, or by successors to the land, or by others, until after June 30, 2004. If trees are replanted before June 30, 2004, by any persons, participants must refund any USDA payment, with interest, made in connection with this tree removal program. Sec. 81.6 Rate of payment; total payments. (a) The rate of payment for each eligible prune-plum tree removed will be $8.50 per tree. (b) Payment under paragraph (a) of this section will be made after tree removal has been verified by the staff of the Committee. (c) The $8.50 per tree payment shall be the total payment. USDA will make no other payment with respect to such removals. The producer will be responsible for arranging, requesting, and paying for the tree removal in the specified orchard blocks or orchard(s), as the case may be. (d) Total payments under this program are limited to no more than $17,000,000. No additional expenditures shall be made, unless the Administrator or delegatee in their sole and exclusive discretion shall, in writing, declare otherwise. Sec. 81.7 Eligibility for payment. (a) If total applications for payment do not exceed $17,000,000, less administration costs, payments will be made [[Page 236]] under this program to any eligible producer of prune/plums who complies with the requirements in Sec. 81.8 and all other terms and conditions in this part. (b) If applications for participation in the program authorized by this part exceed $17,000,000, less administration costs, the Committee will approve the applications (subject to the requirements in Sec. 81.8) in the order in which the completed applications are received in the Committee office up to the funding limit of $17,000,000, less administration costs, for the program. Any additional applications will be denied. (c) The Administrator or his delegatee may set other conditions for payment, in addition to those provided for in this part, to the extent necessary to accomplish the goals of the program. Sec. 81.8 Application and approval for participation. (a) Applications will be reviewed for program compliance and approved or disapproved by Committee office personnel. (b) Applications for participation in the Prune-Plum Diversion Program can be obtained from the Committee office at 3841 North Freeway Boulevard, Suite 120, Sacramento, California 95834; telephone (916) 565- 6235. (c) Any producer desiring to participate in the prune-plum diversion program must have filed an application with the Committee by January 31, 2002. The application shall be accompanied by a copy of any two of the following four documents: Plat Map from the County Hall of Records; Irrigation Tax Bill; County Property Tax Bill; or any other documents containing an Assessor's Parcel Number. Such application shall include at least the following information: (1) The name, address, telephone number and tax identification number/social security number of the producer; (2) The location and size of the production unit to be diverted; (3) The prune/plum production from the orchard or portion of the orchard to be diverted during the 1999-2000 and 2000-2001 seasons; (4) A statement that all persons with an equity interest in the prune/plums in the production unit to be diverted consent to the filing of the application. That is, the statement must show that the applicant has clear title to the property in question, and/or as needed, the statement must show an agreement to participate in the tree removal program from all lien or mortgage holders, and/or land owners, lessors, or similar parties with an interest in the property to the extent demanded by AMS or to the extent that such persons could object to the tree removal. However, obtaining such assent shall be the responsibility of the applicant who shall alone bear any responsibilities which may extend to third parties; (5) A statement that the applicant agrees to comply with all of the regulations established for the prune/plum diversion program; (6) A certification that the information contained in the application is true and correct; (7) The year that the unit of prune/plums was planted; (8) An identification of the handler(s) who received the prune/plums from the producer in the last two years. (d) After the Committee receives the producer applications, it shall review them to determine whether all the required information has been provided and that the information appears reliable. (e) As previously indicated, if the number of trees to be removed in such applications, multiplied by $8.50 per tree, exceeds the amount of funds available for the diversion program, each grower's application will be considered in the order in which they are received at the Committee office. AMS may reject any application for any reason, and its decisions are final. (f) After the application reviews and confirmation of eligible trees are completed, the Committee shall notify the applicant, in writing, as to whether or not the application has been approved and the number of trees approved for payment after removal. If an application is not approved, the notification [[Page 237]] shall specify the reason(s) for disapproval. AMS shall be the final arbiter of which applications may be approved or rejected, and the final arbiter of any appeal. Sec. 81.9 Inspection and certification of diversion. When the removal of the prune-plum trees is complete, the producer(s) will notify the Committee on a form provided by the Committee. The Committee will certify that the trees approved for removal from the block or orchard, as the case may be, have been removed, and notify AMS. Sec. 81.10 Claim for payment. (a) To obtain payment for the trees removed, the producer must submit to the Committee by June 30, 2002, a completed form provided by the Committee. Such form shall include the Committee's certification that the qualifying trees from the blocks or orchards have been removed. If all other conditions for payment are met, AMS will then issue a check to the producer in the amount of $8.50 per eligible tree removed. (b) [Reserved] Sec. 81.11 Compliance with program provisions. If USDA on its own, or on the advice of the Committee, determines that any provision of this part have not been complied with by the producer, the producer will not be entitled to diversion payments in connection with tree removal. If a producer does not comply with the terms of this part, including the requirement specified in Sec. 81.5(b), the producer must refund, with interest, any USDA payment made in connection with such tree removal, and will also be liable to USDA for any other damages incurred as a result of such failure. The Committee or USDA may deny any producer the right to participate in this program or the right to receive or retain payments in connection with any diversion previously made under this program, or both, if the Committee or USDA determines that: (a) The producer has failed to properly remove the prune/plum trees from the applicable block or the whole orchard regardless of whether such failure was caused directly by the producer or by any other person or persons; (b) The producer has not acted in good faith in connection with any activity under this program; or (c) The producer has failed to discharge fully any obligation assumed by, or charged to, him or her under this program. Sec. 81.12 Inspection of premises. The producer must permit authorized representatives of USDA or the Committee, at any reasonable time, to have access to their premises to inspect and examine the orchard block where trees were removed and records pertaining to the orchard to determine compliance with the provisions of this part. Sec. 81.13 Records and accounts. (a) The producers participating in this program must keep accurate records and accounts showing the details relative to the prune/plum tree removal, including the contract entered into with the firm or person removing the trees, as well as the invoices. (b) The producers must permit authorized representatives of USDA, the Committee, and the General Accounting Office, or their delegatees, at any reasonable time to inspect, examine, and make copies of such records and accounts to determine compliance with provisions of this part. Such records and accounts must be retained for two years after the date of payment to the producer under the program, or for two years after the date of any audit of records by USDA, whichever is later. Any destruction of records by the producer at any time will be at the risk of the producer when there is reason to know, believe, or suspect that matters may be or could be in dispute or remain in dispute. Sec. 81.14 Offset, assignment, and prompt payment. (a) Any payment or portion thereof due any person under this part shall be allowed without regard to questions of title under State law, and without regard to any claim or lien against the crop proceeds thereof in favor of the [[Page 238]] producer or any other creditors except agencies of the U.S. Government. (b) Payments which are earned by a producer under this program may be assigned in the same manner as allowed under the provisions of 7 CFR part 1404. (c) Prompt payment interest from AMS will not be applicable. Sec. 81.15 Appeals. Any producer who is dissatisfied with a determination made pursuant to this part may make a request for reconsideration or appeal of such determination. The Deputy Administrator of Fruit and Vegetable Programs shall establish the procedure for such appeals. Sec. 81.16 Refunds; joint and several liability. (a) In the event there is a failure to comply with any term, requirement, or condition for payment arising under the application of this part, and if any refund of a payment to AMS shall otherwise become due in connection with the application of this part, all payments made under this part to any producer shall be refunded to AMS together with interest. (b) All producers signing an application for payment as having an interest in such payment shall be jointly and severally liable for any refund, including related charges, that is determined to be due for any reason under the terms and conditions of the application of this part. (c) Interest shall be applicable to refunds required of any producer under this part if AMS determines that payments or other assistance were provided to a producer who was not eligible for such assistance. Such interest shall be charged at the rate of interest that the United States Treasury charges the Commodity Credit Corporation (CCC) for funds, as of the date AMS made benefits available. Such interest shall accrue from the date of repayment or the date interest increases as determined in accordance with applicable regulations. AMS may waive the accrual of interest if AMS was at fault for the overpayment. (d) Interest allowable in favor of AMS in accordance with paragraph (c) of this section may be waived when there was no intentional noncompliance on the part of the producer, as determined by AMS. Such decision to waive or not waive the interest shall be at the discretion of the Administrator or delegatee. (e) Late payment interest shall be assessed on all refunds in accordance with the provisions of, and subject to the rates prescribed for those claims which are addressed in 7 CFR part 792. (f) Producers must refund to AMS any excess payments, as determined by AMS, with respect to such application. (g) In the event that a benefit under this part was provided as the result of erroneous information provided by the producer, or was erroneously or improperly paid for any other reason, the benefit must be repaid with any applicable interest. Sec. 81.17 Death, incompetency, or disappearance. In the case of death, incompetency, disappearance, or dissolution of a prune/plum producer that is eligible to receive benefits in accordance with this part, such person or persons who would, under 7 CFR part 707 be eligible for payments and benefits covered by that part, may receive the tree-removal benefits otherwise due the actual producer. PART 82_CLINGSTONE PEACH DIVERSION PROGRAM--Table of Contents Sec. 82.1 Applicability. 82.2 Administration. 82.3 Definitions. 82.4 Length of program. 82.5 General requirements. 82.6 Rate of payment; total payments. 82.7 Eligibility for payment. 82.8 Application and approval for participation. 82.9 Inspection and certification of diversion. 82.10 Claim for payment. 82.11 Compliance with program provisions. 82.12 Inspection of premises. 82.13 Records and accounts. 82.14 Offset, assignment, and prompt payment. 82.15 Appeals. 82.16 Refunds; joint and several liability. 82.17 Death, incompetency or disappearance. Authority: 7 U.S.C. 612c. [[Page 239]] Source: 70 FR 67312, Nov. 4, 2005, unless otherwise noted. Sec. 82.1 Applicability. Pursuant to the authority conferred by Section 32 of the Act of August 24, 1935, as amended (7 U.S.C. 612c) (Section 32), the Agricultural Marketing Service (AMS) will make payment to California growers who divert clingstone peaches by removing trees on which the fruit is produced in accordance with the terms and conditions set forth herein. Sec. 82.2 Administration. The program will be administered under the general direction and supervision of the Deputy Administrator, Fruit and Vegetable Programs, AMS, United States Department of Agriculture (USDA), and will be implemented by the California Canning Peach Association (CCPA). The CCPA, or its authorized representatives, does not have authority to modify or waive any of the provisions of this subpart. The Administrator or delegatee, in the Administrator's or delegatee's sole discretion can modify deadlines to serve the goals of the program. In all cases, payments under this part are subject to the availability of funds. Sec. 82.3 Definitions. (a) Administrator means the Administrator of AMS. (b) AMS means the Agricultural Marketing Service of the U.S. Department of Agriculture. (c) Application means ``Application for Clingstone Peach Tree Removal Program.'' (d) Calendar year means the 12-month period beginning January 1 and ending the following December 31. (e) CCPA means the California Canning Peach Association, a grower- owned marketing and bargaining cooperative representing the clingstone peach industry in California. (f) Diversion means the removal of clingstone peach trees after approval of applications by the CCPA. (g) Grower means an individual, partnership, association, or corporation in the State of California who grows clingstone peaches for canning. (h) Removal or removed means that the clingstone peach trees are no longer standing and capable of producing a crop, and the roots of the trees have been removed. The grower can accomplish removal by any means the grower desires. Grafting another type of tree to the rootstock remaining after removing the clingstone peach tree will not qualify as removal under this program. Sec. 82.4 Length of program. This program is effective November 5, 2005, through November 9, 2015. Growers diverting clingstone peaches by removing clingstone peach trees must complete the diversion no later than June 1, 2006. Sec. 82.5 General requirements. (a) To be eligible for this program, the trees to be removed must be fruit-bearing and have been planted after the 1987 and before the 2003 calendar years. Abandoned orchards and dead trees will not qualify. The block of trees for removal must be easily definable by separations from other blocks of eligible trees and contain at least 1,000 eligible trees or an entire orchard. Clingstone peach tree removal shall not take place until the grower has been informed in writing that the grower's application has been approved. (b) Any grower participating in this program must agree not to replant clingstone peach trees on the land cleared under this program through June 1, 2016. Participants bear responsibility for ensuring that trees are not replanted, whether by themselves, by successors to the land, or by any other person, until after June 1, 2016. If trees are replanted before June 1, 2016, by any persons, participants must refund all USDA payments, with interest, made in connection with this tree removal program. Sec. 82.6 Rate of payment; total payments. (a) Applications will be processed on a first-come, first-served basis. Growers will be paid $100 per ton based on their actual 2005 deliveries of clingstone peaches to processors from those acres of clingstone peach trees removed under this program, except [[Page 240]] that, regardless of actual 2005 deliveries, growers will receive a minimum of $500 per acre and a maximum of $1,700 per acre. (b) Payment under paragraph (a) of this section will only be made after tree removal has been verified by the staff of the CCPA. (c) The $100 per ton payment is intended to cover the costs of tree removal. USDA will not make any other payment with respect to such removals. The grower will be responsible for arranging, requesting, and paying for the tree removal in the specified acreage. (d) Total payments under this program are limited to not more than $5,000,000 of Section 32 funds. No additional expenditures shall be made unless the Administrator or delegatee in their sole and exclusive discretion shall, in writing, declare otherwise. Sec. 82.7 Eligibility for payment. (a) If total applications for payment do not exceed $5,000,000, less administration costs, payments, as set forth in Sec. 82.6, will be made under this program to any grower of clingstone peaches who complies with the requirements in Sec. 82.8 and all other terms and conditions in this part. (b) If applications for participation in the program authorized by this part exceed $5,000,000, less administration costs, the CCPA will approve the applications (subject to the requirements in Sec. 82.8) in the order in which the completed applications are received in the CCPA office to the extent that funds are available. Applications received after total outlays exceed the amount of money available will be denied. Sec. 82.8 Application and approval for participation. (a) Applications will be reviewed for program compliance and approved or disapproved by CCPA office personnel. (b) Applications for participation in the Clingstone Peach Diversion Program can be obtained from the CCPA office at 2300 River Plaza Drive, Suite 110, Sacramento, CA 95833; Telephone: (916) 925-9131; Fax: (916) 925-9030; at 335 Teegarden Avenue, Suite A, Yuba City, CA 95991; Telephone: (530) 673-8526; Fax: (530) 673-2673; or at 1704 Herndon Road, Ceres, CA 95307; Telephone: (209) 537-0715; Fax: (209) 537-1043. (c) Any grower desiring to participate in the Clingstone Peach Diversion Program must file an application with the CCPA prior to November 30, 2005. The application shall be accompanied by a copy of any two of the following four documents: Plot Map from the County Hall of Records; Irrigation Tax Bill; County Property Tax Bill; or any other documents containing an Assessor's Parcel Number. Such application shall include at least the following information: (1) The name, address, telephone number, and tax identification number or social security number of the grower; (2) The location and amount of acreage to be diverted; (3) The 2005 clingstone peach production from the acreage to be diverted; (4) If the land with respect to which the clingstone peach trees will be destroyed is subject to a mortgage, statutory lien, or other equity interest, the grower must obtain from the holder of such interest a written statement that such party agrees to the enrollment of such land in this program to the extent determined necessary by AMS. Obtaining such assent shall be the responsibility of the applicant who shall alone bear any responsibilities which may extend to such third parties; (5) A statement that the applicant agrees to comply with all of the regulations established for the clingstone peach diversion program; (6) The applicant shall sign the application certifying that the information contained in the application is true and correct; (7) The year that the clingstone peach acreage to be diverted was planted; (8) The names of the processors who received the clingstone peaches from the grower in 2005. (d) After the CCPA receives the applications, it shall review them to determine whether all the required information has been provided and that the information is correct. (e) If the deliveries off the acreage to be removed in such applications, multiplied by $100 per ton (for actual 2005 deliveries on these acres, but within the [[Page 241]] constraints of a minimum payment of $500 per acre and a maximum payment of $1,700 per acre), exceed the amount of funds available for the diversion program, each grower's application will be considered in the order in which they are received at the CCPA offices. (f) After the application reviews and confirmation of eligible trees are completed, the CCPA shall notify the applicant, in writing, as to whether or not the application has been approved and the tonnage approved for payment after removal. If an application is not approved, the notification shall specify the reason(s) for disapproval. Sec. 82.9 Inspection and certification of diversion. When the removal of the clingstone peach trees is complete, the grower will notify the CCPA on a form provided by the CCPA. The CCPA will certify that the trees approved for removal from the acreage have been removed, and notify AMS. Sec. 82.10 Claim for payment. To obtain payment for the trees removed, the grower must submit to the CCPA by July 31, 2006, a completed form provided by the CCPA. Such form shall include the CCPA's certification that the qualifying trees from the acreage have been removed. AMS will then issue a check to the grower in the amount of $100 per eligible ton removed consistent with the minimum and maximum payments per acre earlier specified in this part. Sec. 82.11 Compliance with program provisions. If USDA or the CCPA determines that any provision of this part have not been complied with by the grower, the grower will not be entitled to diversion payments in connection with tree removal. If a grower does not comply with all the terms of this part, including the requirement specified in Sec. 82.5(b), the grower must refund any payment made in connection with this program, and will also be liable for any other damages incurred as a result of such failure. The USDA may deny any grower the right to participate in this program or the right to receive payments in connection with any diversion previously made under this program, or both, if the USDA determines that: (a) The grower has failed to properly remove the clingstone peach trees from the applicable acreage, regardless of whether such failure was caused directly by the grower or by any other person or persons; (b) The grower has not acted in good faith, or has engaged in a scheme, fraud, or device, in connection with any activity under this program; or (c) The grower has failed to discharge fully any obligation assumed by him or her under this program. Sec. 82.12 Inspection of premises. The grower must permit authorized representatives of USDA or the CCPA, at any reasonable time, to have access to their premises to inspect and examine the acreage where the trees were removed as well as any records pertaining to that acreage to determine compliance with the provisions of this part. Sec. 82.13 Records and accounts. (a) The growers participating in this program must keep accurate records and accounts showing the details relative to the clingstone peach tree removal, including the contract entered into with any firm removing the trees, as well as the invoices. (b) The growers must permit authorized representatives of USDA, the CCPA, and the Government Accountability Office at any reasonable time to inspect, examine, and make copies of such records and accounts to determine compliance with provisions of this part. Such records and accounts must be retained for ten years after the date of payment to the grower under the program, or for ten years after the date of any audit of records by USDA, whichever is later. Any destruction of records by the grower at any time will be at the risk of the grower when there is reason to know, believe, or suspect that matters may be or could be in dispute or remain in dispute. Sec. 82.14 Offset, assignment, and prompt payment. (a) Any payment or portion thereof due any person under this part shall be allowed without regard to questions of [[Page 242]] title under State law, and without regard to any claim or lien against the crop proceeds thereof in favor of the grower or any other creditors except agencies of the U.S. Government. (b) Payments which are earned by a grower under this program may be assigned in the same manner as allowed under the provisions of 7 CFR part 1404. Sec. 82.15 Appeals. Any grower who is dissatisfied with a determination made pursuant to this part may make a request for reconsideration or appeal of such determination. The Deputy Administrator of Fruit and Vegetable Programs shall establish the procedure for such appeals. Sec. 82.16 Refunds; joint and several liability. (a) In the event there is a failure to comply with any term, requirement, or condition for payment arising under the application of this part, and if any refund of a payment to AMS shall otherwise become due in connection with the application of this part, all payments made under this part to any grower shall be refunded to AMS together with interest. (b) All growers signing an application for payment as having an interest in such payment shall be jointly and severally liable for any refund, including related charges, that is determined to be due for any reason under the terms and conditions of the application of this part. (c) Interest shall be applicable to refunds required of any grower under this part if AMS determines that payments or other assistance were provided to a grower who was not eligible for such assistance. Such interest shall be charged at the rate of interest that the United States Treasury charges the Commodity Credit Corporation (CCC) for funds, as of the date AMS made benefits available to such grower. Such interest shall accrue from the date of repayment or the date interest increases as determined in accordance with applicable regulations. AMS may waive the accrual of interest if AMS determines that the cause of the erroneous determination was not due to any action of the grower. (d) Interest determined in accordance with paragraph (c) of this section may be waived on refunds required of the grower when there was no intentional noncompliance on the part of the grower, as determined by AMS. Such decision to waive or not waive the interest shall be at the discretion of the Administrator or delegatee. (e) Late payment interest shall be assessed on all refunds in accordance with the provisions of, and subject to the rates prescribed for, those claims which are addressed in 14 CFR part 1403. (f) Growers must refund to AMS any excess payments, as determined by AMS, with respect to such application. Such determinations shall be made by the Administrator or delegatee. (g) In the event that a benefit under this part was provided as the result of erroneous information provided by the grower, or was erroneously or improperly paid for any other reason, the benefit must be repaid with any applicable interest, subject to paragraphs (c) and (d) of Sec. 82.6. Sec. 82.17 Death, incompetency, or disappearance. In the case of death, incompetency, disappearance, or dissolution of a clingstone peach grower that is eligible to receive benefits in accordance with this part, any person or persons who will, under 7 CFR part 707 of this title, be eligible for payments and benefits covered by this part, may receive such benefits otherwise due the actual producer, as determined appropriate by AMS. [[Page 243]] SUBCHAPTER E_COMMODITY LABORATORY TESTING PROGRAMS PART 90 [RESERVED] PART 91_SERVICES AND GENERAL INFORMATION--Table of Contents Subpart A_Administration Sec. 91.1 General. 91.2 Definitions. 91.3 Authority. Subpart B_General Services 91.4 Kinds of services. 91.5 Where services are offered. 91.6 Availability of services. Subpart C_Application for Services 91.7 Nondiscrimination. 91.8 Who may apply. 91.9 How to make an application. 91.10 Information required in connection with an application. 91.11 Filing of an application. 91.12 Record of filing time and laboratory tests. 91.13 When an application may be rejected. 91.14 When an application may be withdrawn. Subpart D_Laboratory Service 91.15 Basis of a laboratory service. 91.16 Order of a laboratory service. 91.17 Postponing a laboratory service. 91.18 Financial interest of a scientist. Subpart E_Samples 91.19 General requirements of suitable samples. 91.20 Shipping. 91.21 Protecting samples. 91.22 Disposition of analyzed sample. Subpart F_Method Manuals 91.23 Analytical methods. Subpart G_Reporting 91.24 Reports of test results. 91.25 Certificate requirements. 91.26 Issuance of certificates. 91.27 Corrections to certificates prior to issuance. 91.28 Issuance of corrected certificates or amendments for analysis reports. 91.29 Issuance of duplicate certificates or reissuance of an analysis report. 91.30 Maintenance and retention of copies of certificates or analysis reports. Subpart H_Appeal of Laboratory Services 91.31 When an appeal of a laboratory service may be requested. 91.32 Where to file for an appeal of a laboratory service and information required. 91.33 When an application for an appeal of a laboratory service may be withdrawn. 91.34 When an appeal of a laboratory service may be refused. 91.35 Who shall perform an appealed laboratory service. 91.36 Appeal laboratory certificate. Subpart I_Fees and Charges 91.37 Standard hourly fee rate for laboratory testing, analysis, and other services. 91.38 Additional fees for appeal of analysis. 91.39 Premium hourly fee rates for overtime and legal holiday service. 91.40 Fees for courier service and facsimile of the analysis report. 91.41 Charges for demonstrations and courses of instruction. 91.42 Billing. 91.43 Payment of fees and charges. 91.44 Charges on overdue accounts and issuance of delinquency notices. 91.45 Charges for laboratory services on a contract basis. Subpart J_Designation of Approved Symbols for Identification of Commodities Officially Tested By AMS 91.100 Scope. 91.101 Definitions. 91.102 Form of official identification symbols. Authority: 7 U.S.C. 1622, 1624. Source: 58 FR 42415, Aug. 9, 1993, unless otherwise noted. Editorial Note: Nomenclature changes to part 91 appear at 61 FR 51350, Oct. 2 1996. Subpart A_Administration Sec. 91.1 General. This part consolidates the procedural and administrative rules of the Science and Technology Program of the Agricultural Marketing Service for conducting the analytical testing and laboratory audit verification and accreditation services. It also contains the [[Page 244]] fees and charges applicable to such services. [85 FR 62942, Oct. 6, 2020] Sec. 91.2 Definitions. Words used in the regulations in this part in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this part, unless the context requires otherwise, the following terms will be construed to mean: Agency. The Agricultural Marketing Service agency of the United States Department of Agriculture. Analyses. Microbiological, chemical, or physical tests performed on a commodity. Applicant. Any individual or business requesting services provided by the Science and Technology (S&T) programs. Legal holidays. Those days designated as legal public holidays specified by Congress in paragraph (a) of section 6103, title 5 of the United States Code and any other day declared to be a holiday by Federal Statute or Executive Order. Under section 6103 and Executive Order 10357, as amended, if the specified legal public holiday falls on a Saturday, the preceding Friday shall be considered the holiday, or if the specified legal holiday falls on a Sunday, the following Monday shall be considered to be the holiday. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64309, Oct. 26, 2000; 85 FR 62942, Oct. 6, 2020] Sec. 91.3 Authority. The Deputy Administrator is charged with the administration of this subchapter. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64309, Oct. 26, 2000] Subpart B_General Services Sec. 91.4 Kinds of services. (a) Analytical tests. Analytical laboratory testing services under the regulations in this subchapter consist of microbiological, chemical, and certain other analyses, requested by the applicant and performed on tobacco, seed, dairy, egg, fruit and vegetable, meat and poultry products, and related processed products. Analyses are performed to determine if products meet Federal specifications or specifications defined in purchase contracts and cooperative agreements. Laboratory analyses are also performed on egg products as part of the mandatory Egg Products Inspection Program under the management of USDA's Food Safety and Inspection Service (FSIS) as detailed in 9 CFR 590.580. (b) Examination and licensure. The manager of a particular Science and Technology program administers examinations and licenses analysts in laboratories for competency in performing commodity testing services. (c) Agricultural Marketing Service Audit Verification and Accreditation Programs as described in 7 CFR 62.200. (d) Consultation. Technical advice, statistical science consultation, and quality assurance program assistance are provided by the representatives for the Science and Technology programs for domestic and foreign laboratories. [65 FR 64309, Oct. 26, 2000, as amended at 68 FR 69946, Dec. 16, 2003; 85 FR 62942, Oct. 6, 2020] Sec. 91.5 Where services are offered. (a) Services are offered to applicants at the Science and Technology laboratories and facilities as listed below. (1) Science and Technology Programs National Science Laboratory. A variety of proximate for composition, chemical, physical, microbiological and biomolecular (DNA-based) tests and laboratory analyses performed on fruits and vegetables, poultry, dairy and dairy products, juices, fish, vegetative seed and oilseed, honey, meat and meat products, fiber products and processed foods are performed at the Science and Technology Programs (S&T) laboratory located at: USDA, AMS, Science and Technology Programs, National Science Laboratory (NSL), 801 Summit Crossing Place, Suite B, Gastonia, North Carolina 28054-2193. (2) Science and Technology (S&T) Programs Science Specialty Laboratories. The Science specialty laboratories performing aflatoxin and other testing on peanuts, peanut products, dried fruits, grains, edible seeds, tree nuts, shelled corn products, oilseed products, olive [[Page 245]] oil, vegetable oils, juices, citrus products, and other commodities are located as follows: (i) USDA, AMS, Science & Technology, Citrus Laboratory, 98 Third Street, SW., Winter Haven, Florida 33880-2905. (ii) USDA, AMS, Science & Technology, Science Specialty Laboratory, 6567 Chancey Mill Road, Blakely, Georgia 39823-2785. (3) Program laboratories. Laboratory services are available in all areas covered by cooperative agreements providing for this laboratory work and entered on behalf of the Department with cooperating Federal or State laboratory agencies pursuant to authority contained in Act(s) of Congress. Also, services may be provided in other areas not covered by a cooperative agreement if the Administrator determines that it is possible to provide such laboratory services. (4) Other alternative laboratories. Laboratory analyses may be conducted at alternative Science and Technology Programs laboratories and can be reached from any commodity market in which a laboratory facility is located to the extent laboratory personnel are available. (5) The Plant Variety Protection (PVP) Office. The PVP office and plant examination facility of the Science and Technology programs issues certificates of protection to developers of novel varieties of plants which reproduce sexually. The PVP office is located as follows: USDA, AMS, Science & Technology Programs, Plant Variety Protection Office, National Agricultural Library Building, Room 401, 10301 Baltimore Boulevard, Beltsville, MD 20705-2351. (6) [Reserved] (7) Statistics Branch Office. The Statistics Branch office of Science and Technology Programs (S&T) provides statistical services to the Agency and other agencies within the USDA. In addition, the Statistics Branch office generates sample plans and performs consulting services for research studies in joint efforts with or in a leading role with other program areas of AMS or of the USDA. The Statistics Branch office is located as follows: USDA, AMS, S&T Statistics Branch, Room 0603 South Agriculture Bldg., Mail Stop 0223, 1400 Independence Ave., SW., Washington, DC 20250-0223. (8) Laboratory Approval Service. The Laboratory Approval Service (LAS) provides technical, scientific, and quality assurance support services to Agency programs, other agencies within the USDA, and private entities. In addition, the LAS provides audit verification and approval or accreditation services, including laboratory approval and accreditation programs of Federal and State government laboratories and private/commercial laboratories in support of domestic and international trade. The programs administered by LAS verify analyses of food and agricultural products showing that said food and products meet country or customer-specific requirements and that the testing of marketed products is conducted by qualified and approved laboratories. The LAS is located and can be reached by mail at: USDA, AMS, S&T, Laboratory Approval Service, 1400 Independence Ave. SW, South Building, Mail Stop 0272, Washington, DC 20250-0272. (9) Monitoring Programs Office. Services afforded by the Pesticide Data Program (PDP) and Microbiological Data Program (MDP) are provided by USDA, AMS, Science and Technology Monitoring Programs Office, 8609 Sudley Road, Suite 206, Manassas, VA 20110-8411. (10) Pesticide Records Branch Office. Services afforded by the Federal Pesticide Record Keeping Program for restricted-use pesticides by private certified applicators are provided by USDA, AMS, Science and Technology, Pesticide Records Branch, 8609 Sudley Road, Suite 203, Manassas, VA 20110-8411. (b) The addresses of the various laboratories and offices appear in the pertinent parts of this subchapter. A prospective applicant may obtain a current listing of addresses and telephone numbers of Science and Technology Programs laboratories, offices, and facilities by addressing an inquiry to the Administrative Officer, Science and Technology Programs, Agricultural Marketing Service, United States Department of Agriculture (USDA), 1400 Independence Ave., SW., Room 0725 [[Page 246]] South Agriculture Building, Mail Stop 0271, Washington, DC 20250-0271. [75 FR 17287, Apr. 6, 2010, as amended at 85 FR 62942, Oct. 6, 2020] Sec. 91.6 Availability of services. (a) Services may be furnished whenever a Science and Technology staff is available and the facilities and conditions are satisfactory for the conduct of such service. (b) Laboratories may provide limited service on Saturdays and Sundays at a premium fee. Weekend service may be obtained by contacting the laboratory director or supervisor. (c) Holiday and overtime laboratory service may be obtained with a minimum 24 hour advance notice, at a premium fee, by any prospective applicant through the laboratory director or supervisor. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64310, Oct. 26, 2000] Subpart C_Application for Services Sec. 91.7 Nondiscrimination. All services under these regulations are provided to applicants without discrimination as to race, color, handicapped or disabled condition, religion, sex, age, or national origin. Sec. 91.8 Who may apply. An application for service may be made by any individual or interested party including, but not limited to, the United States and any instrumentality or agency thereof, any State, county, municipality, or common carrier, and any authorized agent on behalf of the foregoing. Sec. 91.9 How to make an application. (a) Voluntary. An application for analysis and testing may be made by contacting the director or supervisor of the Science and Technology laboratory where the service is provided, or by contacting the Technical Services Branch Chief at Science and Technology Headquarters, Washington, DC. A list of the Science and Technology laboratories is included in Sec. 91.5. (b) Mandatory. In the case of mandatory analyses, such as those required to be performed on eggs and egg products, application for services may be submitted to the office or USDA agency which administers the program, or by contacting an inspector or grader who is involved with the program. [65 FR 64310, Oct. 26, 2000] Sec. 91.10 Information required in connection with an application. (a) An application for laboratory service shall be made in the English language and may be made orally (in person or by telephone), in writing, or by facsimile. If an application for laboratory service is made orally, written confirmation may be required by the laboratory involved. (b) In connection with each application for a laboratory service, information that may be necessary to perform analyses on the processed product(s) shall also be furnished. The information shall include, but is not limited to, the name of the product, name and address of the packer or plant where such product was packed, the location of the product, its lot or load number, codes or other identification marks, the number of containers, the type and size of the containers, the analytical test requested, and the size of the sample. In addition, information regarding analysis of the lot by any federal agency previous to the application and the purpose of the desired laboratory service may be requested. Sec. 91.11 Filing of an application. An application for a laboratory service shall be regarded as filed only when made in accordance with the regulations in this part. Sec. 91.12 Record of filing time and laboratory tests. A record showing the date of receipt for each application for a laboratory service or an appeal of a laboratory service shall be maintained. In addition, the requested laboratory analyses shall be recorded at the time of sample receipt. [[Page 247]] Sec. 91.13 When an application may be rejected. (a) An application for a laboratory service may be rejected by the Administrator when deemed appropriate as follows: (1) For non-compliance by the applicant with the regulations in this part, (2) For non-payment of previous laboratory services rendered, (3) When the sample is not properly identified by a code or other marks, (4) When the samples are received in an unsatisfactory condition and are rejected for analysis, (5) When there is evidence or knowledge of tampering with the sample, (6) When it appears that to perform the analytical testing or laboratory service specified in this part would not be to the best interests of the public welfare or of the Government, or (7) When it appears to the Administrator that prior commitments of the Department necessitate rejection of the application. (b) Each such applicant shall be promptly notified by registered mail of the reasons for the rejection. (c) A written petition for reconsideration of such rejection may be filed by the applicant with the Administrator if postmarked or delivered within 10 days after the receipt of notice of the rejection. Such petition shall state specifically the errors alleged to have been made by the Administrator in rejecting the application. Within 20 days following the receipt of such a petition for reconsideration, the Administrator shall approve the application or notify the applicant by registered mail of the reasons for the rejection thereof. Sec. 91.14 When an application may be withdrawn. An application for a laboratory service may be withdrawn by the applicant at any time before the analytical testing is performed; Provided, That, the applicant shall pay, at the hourly rate prescribed in Sec. 91.37, for the time incurred by the scientist or laboratory technician, in connection with such application and any travel expenses, telephone, facsimile, mailing, telegraph or other expenses, which have been incurred by the laboratory servicing office, in connection with such application. Subpart D_Laboratory Service Sec. 91.15 Basis of a laboratory service. Analytical testing and laboratory determination for analyte or quality constituent shall be based upon the appropriate standards promulgated by the U.S. Department of Agriculture, applicable standards prescribed by the laws of the State where the particular product was produced, specifications of any governmental agency, written buyer and seller contract specifications, or any written specifications by an applicant which is approved by the Administrator; Provided, That, if such product is regulated pursuant to the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601 et seq.), or the comparable laws of any State, such testing and determination shall be on the basis of the standards, if any, prescribed in, or pursuant to, the marketing order and/or agreement effective thereunder. Sec. 91.16 Order of a laboratory service. Laboratory service shall be performed, insofar as possible, in the order in which applications are made except that precedence may be given to any such applications which are made by the United States (including, but not being limited to, any instrumentality or agency thereof) and to any application for an appeal inspection. Sec. 91.17 Postponing a laboratory service. If the scientist determines that it is not possible to accurately analyze or make a laboratory determination of a sample immediately after receipt because standard materials, laboratory equipment and supplies need replacement, or for any other substantial reason, the scientist may postpone laboratory service for such period as may be necessary. Sec. 91.18 Financial interest of a scientist. No scientist shall perform a laboratory analysis on any product in which he is directly or indirectly financially interested. [[Page 248]] Subpart E_Samples Sec. 91.19 General requirements of suitable samples. (a) Samples must be representative of the product tested and provided in sufficient quantity for the analyses requested. (b) Each sample must be identified with the following information: (1) Product type (specific description); (2) Lot number or production date; (3) Analyses desired; (4) Date/time collected; (5) Storage conditions prior to shipping; (6) Name of applicant; (7) Name of sampler; (8) Any other information which is required by the specific program under which analysis or test is performed. Sec. 91.20 Shipping. (a) Samples must be submitted to the laboratory in a condition (including temperature) that does not compromise the quality and validity of analytical results. (b) All samples must be submitted in sealed, leakproof containers. (c) Containers for perishable refrigerated samples should contain ice or ice packs to maintain temperatures of 0[deg] to 5 [deg]C, unless a different temperature is required for the sample to be tested. (d) Containers for frozen samples should contain dry ice or other effective methods of maintaining samples in a frozen state. (e) The applicant is responsible for providing shipping containers and paying shipping costs for fee basis tests. (f) A courier charge may apply for the shipment of some samples. Sec. 91.21 Protecting samples. Laboratory personnel shall protect each sample from manipulation, substitution, and improper or careless handling which would deprive the sample of its representative character from the time of receipt in the laboratory until the analysis is completed and the sample has been discarded. Sec. 91.22 Disposition of analyzed sample. (a) Excess samples not used in analyses will be placed in proper storage for a maximum period of 30 days after reporting results of tests. (b) Any sample of a processed commodity that has been used for a laboratory service may be returned to the applicant at his or her request and expense; otherwise, it shall be destroyed or disposed of to a charitable institution. Subpart F_Method Manuals Sec. 91.23 Analytical methods. Most analyses are performed according to approved procedures described in manuals of standardized methodology. These standard methods are the specific methods used. Alternatively, equivalent methods prescribed in cooperative agreements are used. The manuals of standard methods most often used by the Science and Technology laboratories are listed as follows: (a) Approved Methods of the American Association of Cereal Chemists (AACC), American Association of Cereal Chemists/Eagan Press, 3340 Pilot Knob Road, St. Paul, Minnesota 55121-2097. (b) ASTA's Analytical Methods Manual, American Spice Trade Association (ASTA), 560 Sylvan Avenue, P.O. Box 1267, Englewood Cliffs, New Jersey 07632. (c) Compendium Methods for the Microbiological Examination of Foods, Carl Vanderzant and Don Splittstoesser (Editors), American Public Health Association, 1015 Fifteenth Street, NW., Washington, DC 20005. (d) Edwards, P.R. and W.H. Ewing, Edwards and Ewing's Identification of Enterobacteriaceae, Elsevier Science, Inc., Regional Sales Office, 655 Avenue of the Americas, P.O. Box 945, New York, NY 10159-0945. (e) FDA Bacteriological Analytical Manual (BAM), AOAC INTERNATIONAL, 481 North Frederick Avenue, Suite 500, Gaithersburg, MD 20877-2417. (f) Manual of Analytical Methods for the Analysis of Pesticide Residues in Human and Environmental Samples, [[Page 249]] EPA 600/9-80-038, U.S. Environmental Protection Agency (EPA) Chemical Exposure Research Branch, EPA Office of Research and Development (ORD), 26 West Martin Luther King Drive, Cincinnati, Ohio 45268. (g) Official Methods and Recommended Practices of the American Oil Chemists' Society (AOCS), American Oil Chemists' Society, P.O. Box 3489, 2211 West Bradley Avenue, Champaign, Illinois 61821-1827. (h) Official Methods of Analysis of AOAC INTERNATIONAL, Volumes I & II, AOAC INTERNATIONAL, 481 North Frederick Avenue, Suite 500, Gaithersburg, MD 20877-2417. (i) Standard Analytical Methods of the Member Companies of Corn Industries Research Foundation, Corn Refiners Association (CRA), 1701 Pennsylvania Avenue, NW., Washington, DC 20006. (j) Standard Methods for the Examination of Dairy Products, American Public Health Association, 1015 Fifteenth Street, NW., Washington, DC 20005. (k) Standard Methods for the Examination of Water and Wastewater, American Public Health Association (APHA), the American Water Works Association (AWWA) and the Water Pollution Control Federation, AWWA Bookstore, 6666 West Quincy Avenue, Denver, CO 80235. (l) Test Methods for Evaluating Solid Waste Physical/Chemical Methods, Environmental Protection Agency, Office of Solid Waste, SW-846 Integrated Manual (available from National Technical Information Service (NTIS), U.S. Department of Commerce, 5285 Port Royal Road, Springfield, VA 22161). (m) U.S. Army Natick Research, Development and Engineering Center's Military Specifications, approved analytical test methods noted therein, Code NPP-9, Department of Defense Single Stock Point (DODSSP) for Military Specifications, Standards, Building 4/D, 700 Robbins Avenue, Philadelphia, PA 19111-5094. (n) U.S. Food and Drug Administration, Pesticide Analytical Manuals (PAM), Volumes I and II, Food and Drug Administration, Center for Food Safety and Applied Nutrition (CFSAN), 200 C Street, SW., Washington, DC 20204 (available from National Technical Information Service (NTIS), U.S. Department of Commerce, 5285 Port Royal Road, Springfield, VA 22161). [65 FR 64310, Oct. 26, 2000] Subpart G_Reporting Sec. 91.24 Reports of test results. (a) Results of analyses are provided, in writing, by facsimile, by e-mail or other electronic means to the applicant. (b) Results of test analyses and laboratory determinations provided by AMS laboratory services only apply to the submitted samples and do not represent the quality, condition or disposition of the lot from which each sample was taken. (c) Applicants may call the appropriate Science and Technology laboratory for interim or final results prior to issuance of the formal report. The advance results may be telegraphed, e-mailed, telephoned, or sent by facsimile to the applicant. Any additional expense for advance information shall be borne by the requesting party. (d) A letter report in lieu of an official certificate of analysis may be issued by a laboratory representative when such action appears to be more suitable than a certificate: Provided, that, issuance of such report is approved by the Deputy Administrator. [75 FR 17288, Apr. 6, 2010] Sec. 91.25 Certificate requirements. Certificates of analysis and other memoranda concerning laboratory service and the reporting of results should have the following requirements: (a) Certificates of analysis shall be on standard printed forms approved by the Deputy Administrator; (b) Shall be printed in English; (c) Shall have results typewritten, computer generated, or handwritten in ink and shall be clearly legible; (d) Shall show the results of laboratory tests in a uniform, accurate, and concise manner with abbreviations identified on the form; (e) Shall show the information required by Sec. Sec. 91.26 through 91.29; and [[Page 250]] (f) Show only such other information and statements of fact as are provided in the instructions authorized by the Deputy Administrator. [75 FR 17288, Apr. 6, 2010] Sec. 91.26 Issuance of certificates. (a) The person signing and issuing the certificate of analysis shall be one of the following: (1) The scientist who performed the analysis; (2) Another technician of the laboratory facility, who has been given power of attorney by the scientist who performed the analytical testing and been authorized by the Deputy Administrator to affix the scientist's signature to a certificate. The power of attorney shall be on file with the employing office or laboratory of the Science and Technology program; (3) A person designated as the ``laboratory director in charge,'' when the certificate represents composite analyses by several technicians. (b) The laboratory certificate shall be prepared in accordance with the facts set forth in the official memoranda made by the scientist or technicians in connection with the analysis. (c) Whenever a certificate is signed by a person under a power of attorney, the certificate should so indicate. The signature of the holder of power shall appear under the name of the scientist who personally analyzed the sample, and whenever a certificate issued is signed by a scientist in charge, that title must appear in connection with the signature. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64311, Oct. 26, 2000] Sec. 91.27 Corrections to certificates prior to issuance. (a) The accuracy of the statements and information shown on certificates of analysis must be verified by the individual whose name or signature, or both, is shown on the certificate or by the authorized agent who affixed the name or signature, or both. When a name or signature, or both, is affixed by an authorized agent, the initials of the agent shall appear directly below or following the name, or signature of the person. Errors found during this process shall be corrected according to this section. (b) Only official personnel or their authorized agents may make corrections, additions, or other changes to certificates. (c) No corrections, additions, or other changes shall be made which involve identification, quality, or quantity. If such errors are found, a new certificate shall be prepared and issued and the incorrect certificate marked ``Void.'' Otherwise, errors may be corrected, provided there is evidence of satisfactory correction procedures as follows: (1) The corrections are neat and legible; (2) Each correction is initialed by the individual who corrects the certificate; and (3) The corrections and initials are shown on the original and all copies. Sec. 91.28 Issuance of corrected certificates or amendments for analysis reports. (a) A corrected certificate of analysis or an amended letter report may be issued by the laboratory representative who issued the original certificate or report after distribution of the form if errors, such as incorrect dates, analytical results, or test determination statements, lot numbers, or errors in any other pertinent information require the issuance of a corrected certificate or an amended report. (b) Whenever a corrected certificate or amended report is issued, such certificate or report shall supersede the original form which was issued in error. The superseded certificate or incorrect report shall become null and void after the issuance of the corrected certificate or the amended analysis report. (c) The corrected certificates or amended reports shall show the following: (1) The terms ``Corrected Original'' and ``Corrected Copy;'' (2) A statement identifying the superseded certificate or incorrect letter report and the corrections; (3) A new serial number or new date of issuance; and [[Page 251]] (4) The same statements and information, including permissive statements, that were shown on the incorrect certificate or the incorrect report, along with the correct statement or information, shall be shown on the corrected form. (d) If all copies of the incorrect certificate or incorrect report can be obtained, then the superseded form shall be marked ``Void'' when submitted. (e) Corrected certificates or amended letter reports cannot be issued for a certificate that has been superseded by another certificate, or superseded on the basis of a subsequent analysis or an additional laboratory test determination. Sec. 91.29 Issuance of duplicate certificates or reissuance of an analysis report. (a) Upon request by an applicant, a duplicate certificate or an additional report may be issued for a lost, destroyed, or otherwise not obtainable original form. (b) The duplicate certificate or the reissuance of an analysis report shall be at the expense of the applicant. (c) Requests for duplicate certificates or additional analysis reports shall be filed as follows: (1) In writing; (2) By the applicant who requested the service covered by the lost, destroyed, or otherwise not obtainable original form; and (3) With the office that issued the initial certificate or original laboratory analysis report. (d) The duplicate certificates or reissued analysis reports shall show the following: (1) The terms ``Duplicate Original,'' and the copies shall show ``Duplicate Copy,'' (2) A statement that the certificate or letter report was issued in lieu of a lost or destroyed or otherwise not obtainable certificate or laboratory analysis report; and (3) The same statements and information, including permissive statements, that were shown on the original certificate or the initial analysis report shall be shown on the duplicate form. (e) Duplicate certificates or duplicate analysis reports shall be issued as promptly as possible and distributed as the original certificates or original analysis reports and their copies. (f) Duplicate certificates shall not be issued for certificates that have been superseded. Sec. 91.30 Maintenance and retention of copies of certificates or analysis reports. (a) At least one copy of each certificate or analysis report shall be filed in the laboratory for a period of not less than 3 years either from the date of issuance of the document, from the date of voiding a certificate, or from the date last payment is made by the applicant for a reported laboratory determination, whichever is later. (b) Whenever any document, because of its condition, becomes unsuitable for its intended or continued use, the laboratory personnel shall make a copy of the original document. (c) True copies shall be retained as photocopies, microfilm, microfiche, or other accurate reproductions and durable forms of the original document. Where reduction techniques, such as microfilming are used, suitable reader and photocopying equipment shall be readily available. Such reproductions shall be treated and considered for all purposes as though they were the original documents. (d) All documents required to be maintained under this part shall be kept confidential and shall be disclosed only to the applicants or other persons with the applicants' knowledge and permission. Only such information as the Administrator deems relevant shall be disclosed to the public without the applicants' permission, and then, only in a suit or administrative hearing brought at the direction, or on the request, of the Administrator, or to which the Administrator or any other officer of the United States is a party. Subpart H_Appeal of Laboratory Services Sec. 91.31 When an appeal of a laboratory service may be requested. (a) An application for an appeal of a laboratory service may be made by any [[Page 252]] interested party who is dissatisfied with the results of an analysis as stated in a certificate or laboratory report, if the lot of the commodity can be positively identified by the laboratory service as the lot from which originally drawn samples were previously analyzed. (b) An application for an appeal of a laboratory service shall be made within thirty (30) days following the day on which the previous analysis was performed. However, upon approval by the Deputy Administrator, the filing time for an appeal application may be extended. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64311, Oct. 26, 2000] Sec. 91.32 Where to file for an appeal of a laboratory service and information required. (a) Application for an appeal of a laboratory service may be filed with the supervisor in the office or the director of the laboratory facility that issued the certificate or laboratory report on which the appeal analysis covering the commodity product is requested. (b) The application for an appeal of a laboratory service shall state the location of the lot of the commodity product and the reasons for the appeal; and date and serial number of the certificate covering the laboratory service of the commodity product on which the appeal is requested. In addition, such application shall be accompanied by the original and all available copies of the certificate or laboratory report. (c) Application for an appeal of a laboratory service may be made orally (in person or by telephone), in writing, by e-mail, by facsimile, or by telegraph. If made orally, written confirmation shall be made promptly. [65 FR 64311, Oct. 26, 2000] Sec. 91.33 When an application for an appeal of a laboratory service may be withdrawn. An application for an appeal of a laboratory service may be withdrawn by the applicant at any time before the appealed laboratory service is performed; Provided, That, the applicant shall pay, at the hourly rate prescribed in Sec. 91.37, for the time incurred by the laboratory personnel, any travel, telephone, telegraph, or other expenses which have been incurred by the laboratory service in connection with such application. Sec. 91.34 When an appeal of a laboratory service may be refused. An application for an appeal of a laboratory service may be refused if: (a) The reasons for the appealed laboratory service are frivolous or not substantial; (b) The quality or condition of the commodity product has undergone a material change since the laboratory service covering the commodity product on which the appealed laboratory service is requested; (c) The lot in question is not, or cannot be made accessible for sampling; (d) The lot relative to which the appealed laboratory service is requested cannot be positively identified as the lot from which samples were previously drawn and originally analyzed; or (e) There is noncompliance with the regulations in this part. Such applicant shall be notified promptly of the reason for such refusal. Sec. 91.35 Who shall perform an appealed laboratory service. An appealed laboratory service shall be performed, whenever possible, by another individual or other individuals than the scientist(s) or the technician(s) that performed the original analytical determination. Sec. 91.36 Appeal laboratory certificate. (a) An appeal laboratory certificate shall be issued showing the results of such appealed analysis. This certificate shall supersede the laboratory certificate previously issued for the commodity product involved. (b) Each appeal laboratory certificate shall clearly identify the number and date of the laboratory certificate which it supersedes. The superseded certificate shall become null and void upon the issuance of the appealed laboratory certificate and shall no longer represent the analytical results of the commodity product. (c) The individual issuing an appeal laboratory certificate shall forward notice of such issuance to such persons as [[Page 253]] he or she considers necessary to prevent misuse of the superseded certificate if the original and all copies of such superseded certificate have not previously been delivered to the individual issuing the appeal certificate. (d) The provisions in the regulations in this part concerning forms and certificates, issuance of certificates, and retention and disposition of certificates shall apply to appeal laboratory certificates, except that copies of such appeal certificates shall be furnished to all interested parties who received copies of the superseded certificate. Subpart I_Fees and Charges Sec. 91.37 Standard hourly fee rate for laboratory testing, analysis, and other services. (a) For each fiscal year, AMS will calculate the rate for laboratory testing, analysis, and other services, per hour per program employee using the following formulas: (1) Regular rate. The total AMS laboratory service program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service. (2) Overtime rate. The total AMS laboratory service program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5 plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (3) Holiday rate. The total AMS laboratory service program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service. (b)(1) For each calendar year, based on previous fiscal year/ historical actual costs, AMS will calculate the benefits, operating, and allowance for bad debt components of the regular, overtime and holiday rates as follows: (i) Benefits rate. The total AMS laboratory service program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions. (ii) Operating rate. The total AMS laboratory service program operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation. (iii) Allowance for bad debt rate. Total AMS laboratory service program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked. (2) The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on the most recent Office of Management and Budget's Presidential Economic Assumptions. (c) When a laboratory test service is provided for AMS by a commercial or State government laboratory, the applicant will be assessed a fee which covers the costs to the Science and Technology program for the service provided. (d) When Science and Technology staff provides applied and developmental research and training activities for microbiological, physical, chemical, and biomolecular analyses on agricultural commodities the applicant will be charged a fee on a reimbursable cost to AMS basis. [75 FR 17288, Apr. 6, 2010, as amended at 79 FR 67325, Nov. 13, 2014] Sec. 91.38 Additional fees for appeal of analysis. (a) The applicant for appeal sample testing will be charged a fee based on the formulas in Sec. 91.37. (b) The appeal fee will not be waived for any reason if analytical testing was [[Page 254]] completed in addition to the original analysis. [75 FR 17288, Apr. 6, 2010, as amended at 79 FR 67326, Nov. 13, 2014] Sec. 91.39 Premium hourly fee rates for overtime and legal holiday service. (a) When analytical testing in a Science and Technology facility requires the services of laboratory personnel beyond their regularly assigned tour of duty on any day or on a day outside the established schedule, such services are considered as overtime work. When analytical testing in a Science and Technology facility requires the services of laboratory personnel on a Federal holiday or a day designated in lieu of such a holiday, such services are considered holiday work. Laboratory analyses initiated at the request of the applicant to be rendered on Federal holidays, and on an overtime basis will be charged fees based on the formulas in Sec. 91.37. (b) Information on legal holidays or what constitutes overtime service at a particular Science and Technology laboratory is available from the Laboratory Director or facility manager. [75 FR 17288, Apr. 6, 2010, as amended at 79 FR 67326, Nov. 13, 2014] Sec. 91.40 Fees for courier service and facsimile of the analysis report. (a) The Science and Technology laboratories have a courier charge per trip to retrieve the sample package. The courier service charge is determined from the established single standard mileage rate and from the total authorized distance based on the shortest round trip route from laboratory to sample retrieval site. Pursuant to the requirements of paragraph (a) (1) of Sec. 5704 of Title 5, United States Code (U.S.C.), the automobile reimbursement rate cannot exceed the single standard mileage rate established by the Internal Revenue Service (IRS). (b) The faxing of laboratory analysis reports or certificates is an optional service for each S&T facility offered at a fee specified in table 8 in Sec. 91.37. [65 FR 64314, Oct. 26, 2000] Sec. 91.41 Charges for demonstrations and courses of instruction. Charges, not in excess of the cost thereof and as approved by the Deputy Administrator, may be made for demonstrations, samples, or courses of instruction when such are furnished upon request. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64314, Oct. 26, 2000] Sec. 91.42 Billing. (a) Each billing cycle will end on the 25th of the month. The applicant will be billed by the National Finance Center (NFC) using the Foundation Financial Information System (FFIS) on the 1st day, following the end of the billing cycle in which voluntary laboratory services and other services were rendered at a particular Science and Technology laboratory or office. (b) The total charge or fee shall normally be stated directly on the analysis report or on a standardized official certificate form for the laboratory analysis of a specific agricultural commodity and related commodity products. (c) The actual bill for collection will be issued by the USDA, National Finance Center Billings and Collection Branch, (Mail: P.O. Box 60075), 13800 Old Gentilly Road, New Orleans, Louisiana 70160-0001. [72 FR 15021, Mar. 30, 2007] Sec. 91.43 Payment of fees and charges. (a) Fees and charges for services shall be paid by the applicant, by check or money order payable, to the ``Agricultural Marketing Service, USDA'' and sent to the office indicated on the bill. (b) Fees and charges for services under a cooperative agreement with a State or other AMS programs or other governmental agency will be paid in accordance with the terms of the cooperative agreement. (c) As necessary, the Deputy Administrator may require that fees shall be paid in advance of the performance of the requested service. Any fees paid in excess of the amount due shall be used to offset future billings, unless a request for a refund is made by applicant. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64315, Oct. 26, 2000] [[Page 255]] Sec. 91.44 Charges on overdue accounts and issuance of delinquency notices. (a) Accounts are considered overdue if payment is late with the National Finance Center (NFC). The timeliness of a payment will be based on the postmark date of the payment or the date of receipt by the NFC if no postmark date is present or legible. Bills are payable upon receipt and become delinquent 30 days from date of billing. (b) Any amount due not paid by the due date will be increased by a late payment charge. The actual assessed rate applied to overdue accounts is set quarterly by the Department of the Treasury. This amount is one-twelfth of one year's late penalty interest rate computed at the prescribed rate. (c) Overtime or holiday laboratory service will not be performed for any applicant with a notice of delinquency. (d) Applicants with three notices of delinquency will be reviewed for possible termination of services. A deposit in advance sufficient to cover the fees and expenses for any subsequent service may be required of any person failing to pay in claim after issuance of such notice of delinquency. (e) The Deputy Administrator of S&T program and personnel of the USDA, NFC Billings and Collections Branch (address as listed in Sec. 91.42) will take such actions as may be necessary to collect any delinquent amounts due for accounts in claim status. [58 FR 42415, Aug. 9, 1993, as amended at 65 FR 64315, Oct. 26, 2000] Sec. 91.45 Charges for laboratory services on a contract basis. (a) Irrespective of hourly fee rates and charges prescribed in Sec. 91.37, or in other sections of this subchapter E, the Deputy Administrator may enter into contracts with applicants to perform continuous laboratory services or other types of laboratory services pursuant to the regulations in this part and other requirements, as prescribed by the Deputy Administrator in such contract. In addition, the charges for such laboratory services, provided in such contracts, shall be on such basis as will reimburse the Agricultural Marketing Service of the Department for the full cost of rendering such laboratory services, including an appropriate overhead charge to cover administrative overhead expenses as may be determined by the Administrator. (b) Irrespective of hourly fee rates and charges prescribed in this subpart I, or in other parts of this subchapter E, the Deputy Administrator may enter into a written Memorandum of Understanding (MOU) or agreement with any administrative agency or governing party for the performance of laboratory services pursuant to said agreement or order on a basis that will reimburse the Agricultural Marketing Service of the Department for the full cost of rendering such laboratory service, including an appropriate overhead administrative overhead charge. (c) The conditions and terms for renewal of such Memorandum of Understanding or agreement shall be specified in the contract. [65 FR 64315, Oct. 26, 2000] Subpart J_Designation of Approved Symbols for Identification of Commodities Officially Tested By AMS Source: 68 FR 69946, Dec. 16, 2003, unless otherwise noted. Sec. 91.100 Scope. Two approved information symbols in the form of AMS shields are available to indicate official testing by an AMS laboratory. The two approved AMS shields with the words ``USDA AMS TESTED'' and ``USDA LABORATORY TESTED FOR EXPORT'' are added to the USDA symbol inventory to enhance the acceptance of AMS tested agricultural commodities on a national or international basis. Sec. 91.101 Definitions. Words used in the regulations in this part in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this part, unless the context requires otherwise, the following terms will be construed to mean: AMS. The abbreviation for the Agricultural Marketing Service (AMS) agency of the United States Department of Agriculture. [[Page 256]] Export. To send or transport a product originally created or manufactured in the United States of America to another country in the course of trade. Laboratory. An AMS Science and Technology (S&T) laboratory listed in Sec. 91.5 that performs the official analyses. Test. To perform chemical, microbiological, or physical analyses on a sample to determine presence and levels or amounts of a substance or living organism of interest. USDA. The abbreviation for the United States Department of Agriculture. Sec. 91.102 Form of official identification symbols. Two information symbols in the form of AMS shields indicate commodity testing at an AMS laboratory listed in Sec. 91.5 of this part. The AMS shield set forth in figure 1 of this section, containing the words ``USDA AMS TESTED'', and the shield set forth in figure 2, containing the words ``USDA LABORATORY TESTED FOR EXPORT'' have been approved by the USDA Office of Communications to be added to the USDA/ AMS inventory of symbols. Each example of an AMS shield has a black and white background; however the standard red, white and blue colors are approved for the shields. They are approved for use with AMS materials. Shields with the same wording that are similar in form and design to the examples in figures 1 and 2 of this section may also be used. [GRAPHIC] [TIFF OMITTED] TR16DE03.000 PART 93_PROCESSED FRUITS AND VEGETABLES--Table of Contents Subpart A_Citrus Juices and Certain Citrus Products Sec. 93.1 General. 93.2 Definitions. 93.3 Analyses available and location of laboratory. 93.4 Analytical methods. 93.5 Fees for citrus product analyses set by cooperative agreement. [[Page 257]] Subpart B_Peanuts, Tree Nuts, Corn and Other Oilseeds 93.10 General. 93.11 Definitions. 93.12 Analyses available and locations of laboratories. 93.13 Analytical methods. 93.14 Fees for aflatoxin analysis and fees for testing of other mycotoxins. 93.15 Fees for analytical testing of oilseeds. Authority: 7 U.S.C. 1622, 1624. Source: 61 FR 51351, Oct. 2, 1996, unless otherwise noted. Subpart A_Citrus Juices and Certain Citrus Products Sec. 93.1 General. Domestic and imported citrus products are tested to determine whether quality and grade standards are satisfied as set forth in the Florida Citrus Code. Sec. 93.2 Definitions. Words used in the regulations in this subpart in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this subpart, unless the context requires otherwise, the following terms will be construed to mean: Acid. The grams of total acidity, calculated as anhydrous citric acid, per 100 grams of juice or citrus product. Total acidity is determined by titration with standard sodium hydroxide solution, using phenolphthalein as indicator. Brix or degrees Brix. The percent by weight concentration of the total soluble solids of the juice or citrus product when tested with a Brix hydrometer calibrated at 20 [deg]C (68 [deg]F) and to which any applicable temperature correction has been made. The Brix or degrees Brix may be determined by any other method which gives equivalent results. Brix value. The pure sucrose or soluble solids value of the juice or citrus product determined by using the refractometer along with the ``International Scale of Refractive Indices of Sucrose Solutions'' and to which the applicable correction for acidity is added. The Brix value is determined in accordance with the refractometer method outlined in the Official Methods of Analysis of AOAC INTERNATIONAL, Volumes I & II. Brix value/acid ratio. The ratio of the Brix value of the juice or citrus product, in degrees Brix, to the grams of anhydrous citric acid per 100 grams of juice or citrus product. Brix/acid ratio. The ratio of the degrees Brix of the juice to the grams of anhydrous citric acid per 100 grams of the juice. Citrus. All plants, edible parts and commodity products thereof, including pulp and juice of any orange, lemon, lime, grapefruit, mandarin, tangerine, kumquat or other tree or shrub in the genera Citrus, Fortunella, or Poncirus of the plant family Rutaceae. Recoverable oil. The percent of oil by volume, determined by the bromate titration method after distillation and acidification as described in the current edition of the Official Methods of Analysis of AOAC INTERNATIONAL, Volumes I & II. [61 FR 51351, Oct. 2, 1996, as amended at 65 FR 64316, Oct. 26, 2000] Sec. 93.3 Analyses available and location of laboratory. (a) Laboratory analyses of citrus juice and other citrus products are being performed at the following Science and Technology location: USDA, AMS, S&T Eastern Laboratory (Citrus), 98 Third Street, SW., Winter Haven, FL 33880. (b) Laboratory analyses of citrus fruit and products in Florida are available in order to determine if such commodities satisfy the quality and grade standards set forth in the Florida Citrus Code (Florida Statutes Pursuant to Chapter 601). Such analyses include tests for acid as anhydrous citric acid, Brix, Brix/acid ratio, recoverable oil, and artificial coloring matter additive, as turmeric. The Fruit and Vegetable Inspectors of the Division of Fruit and Vegetable of the Florida Department of Agriculture and Consumer Services may also request analyses for arsenic metal, pulp wash (ultraviolet and fluorescence), standard plate count, yeast with mold count, and nutritive sweetening ingredients as sugars. (c) There are additional laboratory tests available upon request at the [[Page 258]] Science and Technology Eastern (Citrus) Laboratory at Winter Haven, Florida. Such analyses include tests for vitamins, naringin, sodium benzoate, Salmonella, protein, salt, pesticide residues, sodium metal, ash, potassium metal, and coliforms for citrus products. [65 FR 64316, Oct. 26, 2000] Sec. 93.4 Analytical methods. (a) The majority of analytical methods for citrus products are found in the Official Methods of Analysis of AOAC INTERNATIONAL, Volumes I & II, AOAC INTERNATIONAL, 481 North Frederick Avenue, Suite 500, Gaithersburg, MD 20877-2417. (b) Other analytical methods for citrus products may be used as approved by the AMS Deputy Administrator, Science and Technology (S&T). [65 FR 64317, Oct. 26, 2000] Sec. 93.5 Fees for citrus product analyses set by cooperative agreement. The fees for the analyses of fresh citrus juices and other citrus products shall be set by mutual agreement between the applicant, the State of Florida, and the AMS Deputy Administrator, Science and Technology programs. A Memorandum of Understanding (MOU) or cooperative agreement exists presently with the AMS Science and Technology and the State of Florida, regarding the set hourly rate and the costs to perform individual analytical tests on Florida citrus products, for the State. [65 FR 64317, Oct. 26, 2000] Subpart B_Peanuts, Tree Nuts, Corn and Other Oilseeds Sec. 93.10 General. Chemical analyses are performed to detect the presence of aflatoxin in lots of shelled peanuts and peanut products, as well as in other nuts and agricultural products. In addition, proximate chemical analyses for quality determination are performed on oilseeds. Sec. 93.11 Definitions. Words used in the regulations in this subpart in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this subpart, unless the context requires otherwise, the following terms will be construed to mean: Aflatoxin. A toxic metabolite produced by the molds Aspergillus flavus, Aspergillus parasiticus, and Aspergillus nomius. The aflatoxin compounds fluoresce when viewed under UV light as follows: aflatoxin B1 and derivatives with a blue fluorescence, aflatoxin B2 with a blue-violet fluorescence, aflatoxin G1 with a green fluorescence, aflatoxin G2 with a green-blue fluorescence, aflatoxin M1 with a blue-violet fluorescence, and aflatoxin M2 with a violet fluorescence. These closely related molecular structures are referred to as aflatoxin B1, B2, G1, G2, M1, M2, GM1, B2a, G2a, R0, B3, 1-OCH3B2, and 1- CH3G2. Peanut Administrative Committee (PAC). The committee established under the United States Department of Agriculture Marketing Agreement for Peanuts, 7 CFR part 998, which administers the terms and provisions of this Agreement, including the aflatoxin control program for domestically produced raw peanuts, for peanut shellers. The Peanut Administrative Committee (PAC) headquarters are at 2537 Lafayette Plaza Drive Suite A; Albany, Georgia 31707. Peanut Marketing Agreement. The agreement concerning the regulations and instructions set forth since July 12, 1965, by the Peanut Administrative Committee for the marketing of peanuts entered into by handlers of domestically produced peanuts under the authority of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601 et seq.). Peanuts. The seeds of the legume Arachis hypogaea, and includes both inshell and shelled nuts. Seed. Any vegetable or other agricultural plant ovule having an embryo that is capable of germinating to produce a plant. [61 FR 51351, Oct. 2, 1996, as amended at 63 FR 16375, Apr. 2, 1998; 65 FR 64317, Oct. 26, 2000] [[Page 259]] Sec. 93.12 Analyses available and locations of laboratories. (a) Aflatoxin testing services. The aflatoxin analyses for peanuts, peanut products, dried fruits, grains, edible seeds, tree nuts, shelled corn products, cottonseed, oilseed products and other commodities are performed at the following 6 locations for AMS Science and Technology (S&T) Aflatoxin Laboratories: (1) USDA, AMS, S&T 1211 Schley Avenue, Albany, GA 31707. (2) USDA, AMS, S&T c/o Golden Peanut Company, Mail: P.O. Box 279, 301 West Pearl Street, Aulander, NC 27805. (3) USDA, AMS, S&T 610 North Main Street, Blakely, GA 31723. (4) USDA, AMS, S&T 107 South Fourth Street, Madill, OK 73446. (5) USDA, AMS, S&T c/o Cargill Peanut Products, Mail: P.O. Box 272, 715 North Main Street, Dawson, GA 31742-0272. (6) USDA, AMS, S&T Mail: P.O. Box 1130, 308 Culloden Street, Suffolk, VA 23434. (b) Peanuts, peanut products, and oilseed testing services. (1) The Science and Technology (S&T) Aflatoxin Laboratories at Madill, Oklahoma and Blakely, Georgia will perform other analyses for peanuts, peanut products, and a variety of oilseeds. The analyses for oilseeds include testing for free fatty acids, ammonia, nitrogen or protein, moisture and volatile matter, foreign matter, and oil (fat) content. (2) All of the analyses described in paragraph (b)(1) of this section performed on a single seed sample are billed at the rate of one hour per sample. Any single seed analysis performed on a single sample is billed at the rate of one-half hour per sample. The standard hourly rate shall be as specified in Sec. 91.37(a) of this subchapter. (c) Vegetable oil testing services. The analyses for vegetable oils are performed at the USDA, AMS, Science and Technology (S&T) Midwestern Laboratory, 3570 North Avondale Avenue, Chicago, IL 60618-5391. The analyses for vegetable oils will include the flash point test, smoke point test, acid value, peroxide value, phosphorus in oil, and specific gravity. The fee charged for any single laboratory analysis for vegetable oils shall be obtained from the Midwestern Laboratory Director and it is based on the hourly fee rates and charges as specified in 7 CFR part 91, subpart I. [65 FR 64317, Oct. 26, 2000] Sec. 93.13 Analytical methods. Official analyses for peanuts, nuts, corn, oilseeds, and related vegetable oils are found in the following manuals: (a) Approved Methods of the American Association of Cereal Chemists (AACC), American Association of Cereal Chemists/Eagan Press, 3340 Pilot Knob Road, St. Paul, Minnesota 55121-2097. (b) ASTA's Analytical Methods Manual, American Spice Trade Association (ASTA), 560 Sylvan Avenue, P.O. Box 1267, Englewood Cliffs, New Jersey 07632. (c) Analyst's Instruction for Aflatoxin (August 1994), S&T Instruction No. 1, USDA, Agricultural Marketing Service, Science and Technology, 3521 South Agriculture Building, 1400 Independence Avenue, SW., P.O. Box 96456, Washington, DC 20090-6456. (d) Official Methods and Recommended Practices of the American Oil Chemists' Society (AOCS), American Oil Chemists' Society, P.O. Box 3489, 2211 West Bradley Avenue, Champaign, Illinois 61821-1827. (e) Official Methods of Analysis of AOAC INTERNATIONAL, Volumes I & II, AOAC INTERNATIONAL, 481 North Frederick Avenue, Suite 500, Gaithersburg, MD 20877-2417. (f) Standard Analytical Methods of the Member Companies of Corn Industries Research Foundation, Corn Refiners Association (CRA), 1701 Pennsylvania Avenue, NW., Washington, DC 20006. (g) U.S. Army Natick Research, Development and Engineering Center's Military Specifications, approved analytical test methods noted therein, Code NPP-9, Department of Defense [[Page 260]] Single Stock Point (DODSSP) for Military Specifications, Standards, Building 4/D, 700 Robbins Avenue, Philadelphia, PA 19111-5094. [65 FR 64317, Oct. 26, 2000] Sec. 93.14 Fees for aflatoxin analysis and fees for testing of other mycotoxins. (a) The fee charged for any laboratory analysis for aflatoxins and other mycotoxins shall be obtained from the Laboratory Director for aflatoxin laboratories at the Dothan administrative office as follows: USDA, AMS, Science & Technology, 3119 Wesley Way, Suite 6, Dothan, Alabama 36305, Voice Phone: 334-794-5070, Facsimile: 334-792-1432. (b) The charge for the aflatoxin testing of raw peanuts under the Peanut Marketing Agreement for subsamples 1-AB, 2-AB, 3-AB, and 1-CD is a set cost per pair of analyses and shall be set by cooperative agreement between the Peanut Administrative Committee and AMS Science and Technology program. [65 FR 64317, Oct. 26, 2000] Sec. 93.15 Fees for analytical testing of oilseeds. The fee charged for any laboratory analysis for oilseeds shall be obtained from the Laboratory Director for aflatoxin laboratories at the Dothan administrative office as listed in 7 CFR 93.14(a). [65 FR 64318, Oct. 26, 2000] PART 94_POULTRY AND EGG PRODUCTS--Table of Contents Subpart A_Mandatory Analyses of Egg Products Sec. 94.1 General. 94.2 Definitions. 94.3 Analyses performed and locations of laboratories. 94.4 Analytical methods. 94.5 Charges for laboratory service. Subpart B_Voluntary Analyses of Egg Products 94.100 General. 94.101 Definitions. 94.102 Analyses available. 94.103 Analytical methods. 94.104 Fees and charges. Subpart C_Salmonella Laboratory Recognition Program 94.200 [Reserved] Subpart D_Processed Poultry Products 94.300 General. 94.301 Definitions. 94.302 Analyses available and locations of laboratories. 94.303 Analytical methods. 94.304 Fees and charges. Authority: Secs. 2-28 of the Egg Products Inspection Act (84 Stat. 1620-1635; 21 U.S.C. 1031-1056), Agricultural Marketing Act of 1946, Secs. 202-208 as amended (60 Stat. 1087-1091; 7 U.S.C. 1621-1627). Source: 58 FR 42428, Aug. 9, 1993, unless otherwise noted. Editorial Note: Nomenclature changes to part 94 appear at 61 FR 51352, Oct. 2 1996. Subpart A_Mandatory Analyses of Egg Products Sec. 94.1 General. Microbiological, chemical, and physical analysis of liquid, frozen, and dried egg products is performed under authority of the Egg Products Inspection Act (21 U.S.C. 1031-1056). Sec. 94.2 Definitions. Words used in the regulations in this subpart in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this subpart, unless the context requires otherwise, the following terms will be construed to mean: Egg. The shell egg of the domesticated chicken, turkey, duck, goose, or guinea. Some of the terms applicable to shell eggs are defined by the AMS Poultry Programs in 7 CFR 57.5. Egg product. Any dried, frozen, or liquid eggs, with or without added ingredients. However, products which contain eggs only in a relatively small proportion or historically have not been, in the judgment of the Secretary, considered by consumers as products of the egg food industry may be exempted by the Secretary under such conditions as may be prescribed to assure that the egg ingredients are not adulterated and such products are not represented as [[Page 261]] egg products. Some of the products exempted as not being egg products are specified by the AMS Poultry Programs in 7 CFR 57.5. Mandatory sample. An official sample of egg product(s) taken for testing under authority of the Egg Products Inspection Act (21 U.S.C. 1031-1056) for analysis by a United States Department of Agriculture, Agricultural Marketing Service, Science and Technology laboratory at government expense. A mandatory sample shall include an egg product sample to be analyzed for microbiological, chemical, or physical attributes. A mandatory egg product sample analyzed for the presence of Salmonella is also referred to as a confirmation sample as specified by the Food Safety and Inspection Service agency of USDA in 9 CFR 590.580, paragraph (d). Official plant. Any plant, as determined by the Secretary, at which the U.S. Department of Agriculture maintains inspection of the processing of egg products under the authority of the Egg Products Inspection Act. Pasteurize. The subjecting of each particle of egg products to heat or other treatments to destroy harmful viable microorganisms by such processes as may be prescribed by the regulations in the EPIA. Pesticide chemical, food additive, color additive, and raw agricultural commodity. These terms shall have the same meaning for purposes of this subpart as under sections 408, 409, and 706 of the Federal Food, Drug, and Cosmetic Act. Plant. Any place of business where egg products are processed. Processing. Manufacturing of egg products, including breaking eggs or filtering, mixing, blending, pasteurizing, stabilizing, cooling, freezing, drying, or packaging egg products at official plants. [58 FR 42428, Aug. 9, 1993, as amended at 65 FR 64318, Oct. 26, 2000] Sec. 94.3 Analyses performed and locations of laboratories. (a) Samples drawn by a USDA egg products inspector will be analyzed by AMS Science and Technology (S&T) personnel for microbiological, chemical, and physical attributes. The analytical results of these samples will be reported to the resident egg products inspector at the applicable plant on the official certificate. (b) Mandatory egg product samples for Salmonella are required and are analyzed in S&T laboratories to spot check and confirm the adequacy of USDA approved and recognized laboratories for analyzing routine egg product samples for Salmonella. (c) Mandatory egg product samples for chlorinated hydrocarbons are required and are submitted by the plant inspectors on a random basis. These samples screen for pesticide residues and industrial chemical contaminants in egg products. (d) Samples are drawn by a USDA egg products inspector to determine potential adulteration. These egg product samples may be analyzed for extraneous material, color, color additive, pesticide, heavy metal, microorganism, dextrin, or other substance. (e) The AMS Science and Technology's Eastern Laboratory shall conduct the majority of laboratory analyses for egg products. The analyses for mandatory egg product samples are performed at the following USDA location: USDA, AMS, Science & Technology, Eastern Laboratory (Microbiology), 2311-B Aberdeen Boulevard, Gastonia, NC 28054-0614. [58 FR 42428, Aug. 9, 1993, as amended at 59 FR 24325, May 10, 1994; 59 FR 50121, Sept. 30, 1994; 65 FR 64318, Oct. 26, 2000] Sec. 94.4 Analytical methods. The majority of analytical methods used by the USDA laboratories to perform mandatory analyses for egg products are listed as follows: (a) Compendium Methods for the Microbiological Examination of Foods, Carl Vanderzant and Don Splittstoesser (Editors), American Public Health Association, 1015 Fifteenth Street, NW, Washington, DC 20005. (b) Edwards, P.R. and W.H. Ewing, Edwards and Ewing's Identification of Enterobacteriaceae, Elsevier Science, Inc., Regional Sales Office, 655 Avenue of the Americas, P.O. Box 945, New York, NY 10159-0945. [[Page 262]] (c) FDA Bacteriological Analytical Manual (BAM), AOAC INTERNATIONAL, 481 North Frederick Avenue, Suite 500, Gaithersburg, MD 20877-2417. (d) Manual of Analytical Methods for the Analysis of Pesticide Residues in Human and Environmental Samples, EPA 600/9-80-038, U.S. Environmental Protection Agency (EPA) Chemical Exposure Research Branch, EPA Office of Research and Development (ORD), 26 West Martin Luther King Drive, Cincinnati, Ohio 45268. (e) Official Methods of Analysis of AOAC INTERNATIONAL, Volumes I & II, AOAC INTERNATIONAL, 481 North Frederick Avenue, Suite 500, Gaithersburg, MD 20877-2417. (f) Standard Methods for the Examination of Dairy Products, American Public Health Association, 1015 Fifteenth Street, NW, Washington, DC 20005. (g) Standard Methods for the Examination of Water and Wastewater, American Public Health Association (APHA), the American Water Works Association (AWWA) and the Water Pollution Control Federation, AWWA Bookstore, 6666 West Quincy Avenue, Denver, CO 80235. (h) Test Methods for Evaluating Solid Waste Physical/Chemical Methods, Environmental Protection Agency, Office of Solid Waste, SW-846 Integrated Manual (available from National Technical Information Service (NTIS), U.S. Department of Commerce, 5285 Port Royal Road, Springfield, VA 22161). (i) U.S. Food and Drug Administration, Pesticide Analytical Manuals (PAM), Volumes I and II, Food and Drug Administration, Center for Food Safety and Applied Nutrition (CFSAN), 200 C Street, SW, Washington, DC 20204 (available from National Technical Information Service (NTIS), U.S. Department of Commerce, 5285 Port Royal Road, Springfield, VA 22161). [65 FR 64318, Oct. 26, 2000] Sec. 94.5 Charges for laboratory service. The costs for analysis of mandatory egg product samples at Science and Technology Division laboratories shall be paid by annually appropriated and designated funds allocated to the egg products inspection program. The costs for any other mandatory laboratory analyses and testing of an egg product's identity and condition, necessitated by the Egg Products Inspection Act, shall also be paid by such program funding. Subpart B_Voluntary Analyses of Egg Products Sec. 94.100 General. Analyses for voluntary egg product samples may be requested to certify that specifications regarding stated identity, quality, and wholesomeness are met; to test routinely for the presence of Salmonella; and to ensure laboratory quality control with testing activities. Sec. 94.101 Definitions. Words used in the regulations in this subpart in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this part, unless the context requires otherwise, the following terms will be construed to mean: Certification sample. An egg product sample submitted by an applicant for chemical, physical, or microbiological analyses and tests at a Science and Technology Division laboratory. This voluntary sample is analyzed or tested by the Division's analyst or scientist to certify that an egg product lot meets applicable specifications for identity, quality, and wholesomeness. Surveillance sample. This is a 100 gram sample for Salmonella analysis that is drawn by the USDA egg product inspector from each lot of egg product processed at an official plant. This sample may be analyzed by a Science and Technology Division laboratory, or by a laboratory approved and recognized by the Division to analyze for Salmonella in egg products. Unofficial sample. These samples of egg products are drawn by plant personnel upon the request of plant management. Analyses of these samples are usually conducted for the plant's refractometer correlation, bacteriological evaluation of production techniques, or quality control of procedures. Official plant or Science and [[Page 263]] Technology Division laboratories can analyze these samples. Sec. 94.102 Analyses available. A wide array of analyses for voluntary egg product samples is available. Voluntary egg product samples include surveillance, certification, and unofficial samples. The physical and chemical tests for voluntary egg products include analyses for total ash, fat by acid hydrolysis, moisture, salt, protein, beta-carotene, catalase, cholesterol, NEPA color, density, total solids, aflatoxin, daminozide and amitraz residues, BHA, BHT, alcohol, chlorinated hydrocarbon and fumigant residues, dextrin, heavy and light filth, glucose, glycerol and gums. In addition, egg products can be analyzed for high sucrose content, pH, heavy metals and minerals, monosodium dihydrogen phosphate, monosodium glutamate, nitrites, oxygen, palatability and odor, phosphorus, propylene glycol, SLS, and zeolex. There are also be tests for starch, total sugars, sugar profile, whey, standard plate count, direct microscopic count, Campylobacter, coliforms, presumptive Escherichia coli, Listeria monocytogenes, proteolytic count, psychrotrophic bacteria, Salmonella, Staphylococcus, thermoduric bacteria, and yeast with mold count. Sec. 94.103 Analytical methods. The analytical methods used by the Science and Technology Division laboratories to perform voluntary analyses for egg products shall be the same as listed in Sec. 94.4. Sec. 94.104 Fees and charges. (a) The fee charged for any single laboratory analysis of voluntary egg product samples shall be obtained from the schedules of charges in paragraph (a) of Sec. 91.37 of this subchapter. (b) The charge for any requested laboratory analysis not listed shall be based on the standard hourly rate specified in Sec. 91.37, paragraph (b). Subpart C_Salmonella Laboratory Recognition Program Sec. 94.200 [Reserved] Subpart D_Processed Poultry Products Sec. 94.300 General. Laboratory services of processed poultry products are conducted to derive their analytical attributes used to determine the compliance of the product with applicable specifications. Sec. 94.301 Definitions. Words used in the regulations in this subpart in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this subpart, unless the context requires otherwise, the following terms will be construed to mean: Dark meat. Refers to the skinless and deboned drumstick, thigh, and back portions of poultry. Light meat. Refers to the skinless and deboned breast and wing portions of poultry. Poultry. Any kind of domesticated bird, including, but not limited to, chicken, turkey, duck, goose, pigeon, and guinea. Poultry product. Any ready-to-cook poultry carcass or part therefrom or any specified poultry food product. Sec. 94.302 Analyses available and locations of laboratories. (a) The Science and Technology Division laboratories will analyze processed poultry products for moisture, fat, salt, protein, nitrites, and added citric acid. (b) Deboned poultry for roasting will have the individual dark meat, light meat, and skin portions tumbled separately in the natural juices prior to grinding. The skin, light meat, and dark meat portion weight percentages of the total product are determined. The ground skin, ground dark meat, and ground light meat portions will be analyzed separately for moisture, protein, salt, and fat. Moisture to protein ratios will be reported also for the individual portions of poultry. [[Page 264]] (c) Canned boned poultry for a variety of USDA programs will be tested as a total can composite of the canned product for moisture, fat, salt, and protein analyses. Additional poultry commodities and related products for specific USDA sponsored programs will be tested for different chemical and physical attributes. (d) Microbiological analyses, as the Salmonella determination, are available for poultry products. (e) The majority of analyses for processed poultry products shall be performed at the Science and technology Division Eastern Laboratory, as indicated in paragraph (e) of Sec. 94.3. Sec. 94.303 Analytical methods. The analytical methods used by the USDA laboratories to perform analyses for processed poultry products are found in the latest edition of the Official Methods of Analysis of AOAC INTERNATIONAL, Suite 500, 481 North Frederick Avenue, Gaithersburg, MD 20877-2417. [61 FR 51352, Oct. 2, 1996] Sec. 94.304 Fees and charges. (a) The fee charged for any single laboratory analysis of processed poultry products shall be obtained from the schedules of charges in paragraph (a) of Sec. 91.37 of this subchapter. (b) The laboratory analyses for processed poultry products shall result in an additional fee, found in Table 7 of Sec. 91.37 of this subchapter, for sample preparation or grinding. (c) The charge for any requested laboratory analysis of processed poultry products not listed shall be based on the standard hourly rate specified in Sec. 91.37 (b) of this subchapter. PARTS 95 96 [RESERVED] PART 97_PLANT VARIETY AND PROTECTION--Table of Contents Scope Sec. 97.1 General. Definitions 97.2 Meaning of words. Administration 97.3 Plant Variety Protection Board. The Application 97.5 General requirements. 97.6 Application for certificate. 97.7 Deposit of Voucher Specimen. 97.8 Specimen requirements. 97.9 Drawings and photographs. 97.10 Parts of an application to be filed together. 97.11 Application accepted and filed when received. 97.12 Number and filing date of an application. 97.13 When the owner is deceased or legally incapacitated. 97.14 Joint applicants. 97.15 Assigned varieties and certificates. 97.16 Amendment by applicant. 97.17 Papers of completed application to be retained. 97.18 Applications handled in confidence. 97.19 Publication of pending applications. 97.20 Abandonment for failure to respond within the time limit. 97.21 Extension of time for a reply. 97.22 Revival of an application abandoned for failure to reply. 97.23 Voluntary withdrawal and abandonment of an application. 97.24 Assignee. Examinations, Allowances, and Denials 97.100 Examination of applications. 97.101 Notice of allowance. 97.102 Amendments after allowance. 97.103 Issuance of a certificate. 97.104 Application or certificate abandoned. 97.105 Denial of an application. 97.106 Reply by applicant; request for reconsideration. 97.107 Reconsideration and final action. 97.108 Amendments after final action. Correction of Errors in Certificate 97.120 Corrected certificate--office mistake. 97.121 Corrected certificate--applicant's mistake. Reissuance of Certificate 97.122 Certified seed only election. Assignments and Recording 97.130 Recording of assignments. 97.131 Conditional assignments. 97.132 Assignment records open to public inspection. Marking or Labeling Provisions 97.140 After filing. 97.141 After issuance. 97.142 For testing or increase. 97.143 Certified seed only. 97.144 Additional marking or labeling. [[Page 265]] Attorneys and Agents 97.150 Right to be represented. 97.151 Authorization. 97.152 Revocation of authorization; withdrawal. 97.153 Persons recognized. 97.154 Government employees. 97.155 Signatures. 97.156 Addresses. 97.157 Professional conduct. Fees and charges 97.175 Fees and charges. 97.176 Fees payable in advance. 97.177 Method of payment. 97.178 Refunds. 97.179 Copies and certified copies. Availability of Office Records 97.190 When open records are available. Protest Proceedings 97.200 Protests to the grant of a certificate. 97.201 Protest proceedings. Appeal to the Secretary 97.300 Petition to the Secretary. 97.301 Commissioner's answer. 97.302 Decision by the Secretary. 97.303 Action following the decision. General Procedures in Priority, Protest, or Appeal Proceedings 97.400 Extensions of time. 97.401 Miscellaneous provisions. 97.402 Service of papers. 97.403 Manner of service. Review of Decisions by Court 97.500 Appeal to U.S. Courts. Cease and Desist Proceedings 97.600 Administrative provisions. Public Use Declaration 97.700 Public interest in wide usage. Publication 97.800 Publication of public variety descriptions. 97.900 Form of official identification symbol. Authority: Plant Variety Protection Act, as amended, 7 U.S.C. 2321 et seq. Source: 58 FR 42435, Aug. 9, 1993, unless otherwise noted. Scope Sec. 97.1 General. Certificates of protection are issued by the Plant Variety Protection office for new, distinct, uniform, and stable varieties of sexually reproduced, tuber propagated, or asexually reproduced plants. Each certificate of plant variety protection certifies that the breeder has the right, during the term of the protection, to prevent others from selling the variety, offering it for sale, reproducing it, importing or exporting it, conditioning it, stocking it, or using it in producing a hybrid or different variety from it, as provided by the Act. [85 FR 430, Jan. 6, 2020] Definitions Sec. 97.2 Meaning of words. Words used in the regulations in this part in the singular form will import the plural, and vice versa, as the case may demand. The definitions of terms contained in the Act shall apply to such terms when used in this part. As used throughout the regulations in this part, unless the context requires otherwise, the following terms will be construed to mean: Abandoned application. An application which has not been pursued to completion within the time allowed by the Office or has been voluntarily abandoned. Act. The Plant Variety Protection Act (7 U.S.C. 2321 et seq.). Administrator. The Administrator of the Agricultural Marketing Service of the U.S. Department of Agriculture, or any other officer or employee of the Department of Agriculture to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his or her stead. Applicant. The person who applied for a certificate of plant variety protection. Application. An application for plant variety protection under the Act. Assignee. A person to whom an owner assigns his/her rights in whole or in part. Board. The Plant Variety Protection Board appointed by the Secretary. Certificate. A certificate of plant variety protection issued under the Act by the Office. Certified seed. Seed which has been determined by an official seed certifying agency to conform to standards of genetic purity and identity as to variety, [[Page 266]] which standards have been approved by the Secretary. Commissioner. The Examiner in Chief of the Office. Decision and order. Includes the Secretary's findings of fact; conclusions with respect to all material issues of fact and law, as well as the reasons or basis therefor; and order. Examiner. An employee of the Plant Variety Protection Office who determines whether a certificate is entitled to be issued. The term shall, in all cases, include the Commissioner. Foreign application. An application for plant variety protection filed in a foreign country. Hearing Clerk. The Hearing Clerk, U.S. Department of Agriculture, Washington, DC. Hearing Officer. An Administrative Law Judge, U.S. Department of Agriculture, or other officer or employee of the Department of Agriculture, duly assigned to preside at a hearing held pursuant to the rules of this part. Office or Plant Variety Protection Office. The Plant Variety Protection Office, Science and Technology Programs, AMS, USDA. Owner. A breeder who developed or discovered and developed a variety for which plant variety protection may be applied for under the Act, or a person to whom the rights to such variety have been assigned or transferred. Person. An individual, partnership, corporation, association, government agency, or other business or governmental entity. Sale for other than seed or propagating purposes. The transfer of title to and possession of the seed or propagating material by the owner to a grower or other person, for reproduction for the owner, for testing, or for experimental use, and not for commercial sale of the seed, reproduced seed, propagating material, or reproduced propagating material for planting purposes. Secretary. The Secretary of Agriculture of the United States or any other officer or employee of the U.S. Department of Agriculture, to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated to act in his or her stead. Seed certifying agency. It shall be defined as set forth in the Federal Seed Act (53 Stat. 1275). [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995; 61 FR 248, Jan. 4, 1996; 70 FR 28785, May 19, 2005; 85 FR 430, Jan. 6, 2020] Administration Sec. 97.3 Plant Variety Protection Board. (a) The Plant Variety Protection Board shall consist of 14 members appointed for a 2-year term. The Board shall be appointed every 2 years and shall consist of individuals who are experts in various areas of varietal development. The membership of the Board, which shall include farmer representation, shall be drawn approximately equally from the private or seed industry sector and from the government or public sector. No member shall be eligible to act on any matter involving any appeal or questions under section 44 of the Act, in which the member or his or her employer has a direct financial interest. (b) The functions of the Board are to: (1) Advise the Secretary concerning adoption of rules and regulations to facilitate the proper administration of the Act; (2) Make advisory decisions on all appeals from the examiner or Commissioner; (3) Advise the Secretary on the declaration of a protected variety open to use in the public interest; and (4) Advise the Secretary on any other matters under the regulations in this part. (c) The proceedings of the Board shall be conducted in accordance with the Federal Advisory Committee Act, Administrative Regulations of the U.S. Department of Agriculture (7 CFR part 25), and such additional operating procedures as are adopted by members of the Board. [58 FR 42435, Aug. 9, 1993, as amended at 61 FR 248, Jan. 4, 1996] The Application Sec. 97.5 General requirements. (a) Protection under the Act shall be afforded only as follows: [[Page 267]] (1) Nationals and residents of the United States shall be eligible to receive all of the protection under the Act. (2) Nationals and residents of Member States of the International Union for the Protection of New Varieties of Plants (including states which are members of an intergovernmental organization which is a UPOV member) shall be eligible to receive the same protection under the Act as is provided to nationals of the United States. (3) Persons who are not entitled to protection under paragraph (a)(1) or (2) of this section, and who are nationals of a foreign state which is not a member of the International Union for the Protection of New Varieties of Plants, shall be entitled to only so much of the protection provided under the Act, as is afforded by such foreign state to nationals of the United States, for the same genus and species under the laws of such foreign state in effect at the time that the application for protection under the Act is filed, except where further protection under the Act must be provided in order to avoid the violation of a treaty to which the United States is a party. (b) Applications for certificates shall be made to the Plant Variety Protection Office. An application shall consist of: (1) A completed application form, except that the section specifying that seed of the variety shall be sold by variety name only, as a class of certified seed, need not be completed at the time of application. (2) A completed set of the exhibits, as specified in the application form, unless the examiner waives submission of certain exhibits as unnecessary, based on other claims and evidence presented in connection with the application. (3) Language and legibility: (i) Applications and exhibits must be in the English language and legibly written, typed or printed. (ii) Any interlineation, erasure, cancellation, or other alteration must be made in permanent ink before the application is signed and shall be clearly initialed and dated by the applicant to indicate knowledge of such fact at the time of signing. (4) To determine the extent of reciprocity of the protection to be provided under the Act, persons filing an application for plant variety protection in the United States under the provisions of paragraph (a)(3) of this section shall, upon request \1\, furnish the Plant Variety Protection Office with a copy of the current plant variety protection laws and regulations for the country of which the applicant is a national, and an accurate English translation of such laws and regulations. --------------------------------------------------------------------------- \1\ Copies and translations of foreign laws and regulations will be requested only if they are not in the files of the Plant Variety Protection Office. Applicants may learn whether such a request will be made by writing to the address given in paragraph (c) of this section. --------------------------------------------------------------------------- (c) Application and exhibit forms shall be issued by the Commissioner. (Copies of the forms may be obtained from the Plant Variety Protection Office by sending an email request to [email protected] or downloading forms from the PVPO website (https:// www.ams.usda.gov/PVPO). (d) Effective the date of these regulations and rules of practice, the signature of the applicant, or his or her agent or attorney on any affidavit or other statement filed pursuant to these regulations and rules constitutes a certification by the applicant. The signature certifies that all information relied on in any affidavit or statement filed in the course of the proceeding is knowingly correct and false claims have not been made to mislead. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995; 61 FR 248, Jan. 4, 1996; 70 FR 28785, May 19, 2005; 85 FR 430, Jan. 6, 2020] Sec. 97.6 Application for certificate. (a) An application for a plant variety protection certificate shall be signed by, or on behalf, of the applicant. (b) The application shall state the full name, including the full first name and the middle initial or name, if any, and the capacity of the person executing it. (c) The fees for filing an application, examination, and certificate issuance shall be submitted with the application in accordance with Sec. Sec. 97.175 through 97.178. [[Page 268]] (d) The applicant shall submit with the application: (1) A declaration that at least 3,000 seeds of the viable basic seed required to reproduce the variety will be deposited in a public depository approved by the Commissioner and will be maintained for the duration of the certificate; or (2) With the application for a tuber propagated variety, a declaration that a viable cell culture will be deposited in a public depository approved by the Commissioner and will be maintained for the duration of the certificate; or (3) With the application for a hybrid from self-incompatible parents, a declaration that a plot of vegetative material for each parent will be established in a public depository approved by the Commissioner and will be maintained for the duration of the certificate, or (4) Except as provided in Sec. 97.7(d)(3), with the application for an asexually propagated variety, a declaration that a deposit of propagating material in a public depository approved by the Commissioner will be made and maintained for the duration of the certificate. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995; 61 FR 248, Jan. 4, 1996; 70 FR 28785, May 19, 2005; 70 FR 54611, Sept. 19, 2005; 85 FR 430, Jan. 6, 2020] Sec. 97.7 Deposit of Voucher Specimen. (a) Voucher specimen types. As regards the deposit of voucher specimen material for purposes of plant variety protection applications under 7 U.S.C. 2321 et seq., the term voucher specimen shall include material that is capable of self-replication either directly or indirectly. Representative examples include seeds, plant tissue cells, cell lines, and plots of vegetative material of self-incompatible parental lines of hybrids. Seed samples should not be treated with chemicals or coatings. (b) Need to make a deposit. Except as provided in (d)(3), applications for plant variety protection require deposit of a voucher specimen of the variety. The deposit shall be acceptable if made in accordance with these regulations. Sample packages shall meet the packaging and deposit requirements of the depository. Samples and correspondence about samples shall be identified, minimally, by: (1) The application number assigned by the Office; (2) The crop kind, genus and species, and variety denomination; and (3) The name and address of the depositor. (c) Acceptable depository. A deposit shall be recognized for the purposes of these regulations if made in: (1) The National Center for Genetic Resources Preservation, ARS, USDA, 1111 South Mason Street, Fort Collins, CO 80521-4500, or (2) Any other depository recognized to be suitable by the Office. Suitability will be determined by the Commissioner on the basis of the administrative and technical competence, and agreement of the depository to comply with the terms and conditions applicable to deposits for plant variety protection purposes. The Commissioner may seek the advice of impartial consultants on the suitability of a depository. The depository must: (i) Have a continuous existence; (ii) Exist independent of the control of the depositor; (iii) Possess the staff and facilities sufficient to examine the viability and quantity of a deposit, and store the deposit in a manner which ensures that it is kept viable and uncontaminated; (iv) Provide for sufficient safety measures to minimize the risk of losing biological material deposited with it; (v) Be impartial and objective; (vi) Refrain from distributing samples while the application is being examined and during the term of protection but, after control of the sample is transferred by the Office to the depository, furnish samples of the deposited material in an expeditious and proper manner; (vii) Have the capability to destroy samples or return samples to the Office when requested by the Office; and (viii) Promptly notify the Office of low viability or low quantity of the sample. (3) A depository seeking status under paragraph (c)(2) of this section must direct a communication to the Commissioner which shall: (i) Indicate the name and address of the depository to which the communication relates; [[Page 269]] (ii) Contain detailed information as to the capacity of the depository to comply with the requirements of paragraph (c)(2) of this section, including information on its legal status, scientific standing, staff, and facilities; (iii) Indicate that the depository intends to be available, for the purposes of deposit, to any depositor under these same conditions; (iv) Where the depository intends to accept for deposit only certain kinds of biological material, specify such kinds; and (v) Indicate the amount of any fees that the depository will, upon acquiring the status of suitable depository under paragraph (c)(2) of this section, charge for storage, viability statements and furnishings of samples of the deposit. (4) A depository having status under paragraph (c)(2) of this section limited to certain kinds of biological material may extend such status to additional kinds of biological material by directing a communication to the Commissioner in accordance with paragraph (c)(3) of this section. If a previous communication under paragraph (c)(3) of this section is of record, items in common with the previous communication may be incorporated by reference. (5) Once a depository is recognized to be suitable by the Commissioner or has defaulted or discontinued its performance under this section, notice thereof will be published on the Plant Variety Protection Office website (https://www.ams.usda.gov/PVPO). (d) Time of making an original deposit. An original deposit of materials for seed-reproduced plants shall be made within three months of the filing date of the application or prior to issuance of the certificate, whichever occurs first. An original deposit of materials for tuber-propagated plants or asexually reproduced plants shall be made within three months from the notice of certificate issuance date. A waiver from these time requirements may be granted for good cause, such as delays in obtaining a phytosanitary certificate for the importation of voucher sample materials. A delay waiver may also be granted if the repository determines that it is technically infeasible to deposit propagating materials for certain asexually reproduced plants. (1) When the original deposit is made, the applicant must promptly submit a statement from a person in a position to corroborate the fact, stating that the voucher specimen material which is deposited is the variety specifically identified in the application as filed. Such statement must be filed in the application and must contain the identifying information listed in paragraph (b) of this section and: (i) The name and address of the depository; (ii) The date of deposit; (iii) The accession number given by the depository; and (iv) A statement that the deposit is capable of reproduction. (2) The following conditions apply to delay waivers granted due to technical difficulties with depositing propagating material for asexually reproduced plants: (i) The applicant is required to make a declaration that the propagating material will be maintained at a specific physical location, subject to Plant Variety Protection Office inspection when requested; and (ii) The applicant is required to make a declaration that propagating material will be provided within three months of a request by the Plant Variety Protection Office. Failure to provide propagating material as requested shall result in the certificate being regarded as abandoned. (iii) The delay waiver is effective until the Plant Variety Protection Office notifies the applicant that the technical infeasibility has been resolved. Upon that notification, the applicant must provide a deposit within three months. Failure to provide a deposit shall result in the certificate being regarded as abandoned. (3) Original deposits of propagating material for asexually reproduced varieties are not required for applications submitted between January 6, 2020, and January 6, 2023; provided: That the applicant is required to make the declarations described in paragraphs (d)(2)(i) and (ii) of this section. [[Page 270]] (e) Replacement or supplement of deposit. If the depository possessing a deposit determines either that the sample viability is low or that the sample quantity is low, and if this finding is made during the pendency of an application or during the term of protection of the certificate, the Office shall notify the depositor of the need for making a replacement or supplemental deposit. Such deposits will be governed by the same considerations governing the need for making an original deposit under the provisions set forth in Sec. 97.7(d). Notification to the Office concerning deposit of the replacement or supplemental sample shall contain a statement from a person in a position to corroborate the fact, stating that the replacement or supplemental deposit is of a biological material which is identical to that originally deposited. (f) Term of deposit. A voucher specimen deposit made in support of an application for plant variety protection shall be made for a term of at least twenty (20) years. In any case, samples must be stored under agreements that would make them available to the Office during the enforceable life of the certificate for which the deposit was made. (g) Viability of deposit. A deposit of biological material that is capable of self-replication either directly or indirectly must be viable at the time of deposit and during the term of deposit. Viability may be tested by the depository periodically. The test must conclude only that the deposited material is capable of reproduction. No evidence necessarily is required regarding the ability of the deposited material to perform any function described in the application. If a viability test indicates that the deposit is not viable upon receipt or that the quantity of material is insufficient, the examiner shall proceed as if no deposit was made. The examiner will accept the conclusion set forth in a viability statement issued by a depository recognized under paragraph 97.7(c). (h) Furnishing of samples. A deposit must be made under conditions that assure that: (1) Public access to the deposit will not be available during pendency of the application or during the term of protection, and (2) All restrictions on the availability to the public of the deposited material will be irrevocably removed upon the abandonment, cancellation, expiration, or withdrawal of the certificate. (i) Examination procedures. The examiner shall determine, prior to issuance of the certificate, in each application if a voucher sample deposit actually made is acceptable for plant variety protection purposes. [70 FR 54611, Sept. 16, 2005, as amended at 85 FR 430, Jan. 6, 2020] Sec. 97.8 Specimen requirements. (a) The applicant may be required by the examiner to furnish representative specimens of the variety, or its flower, fruit, or seeds, in a quantity and at a specified stage of growth, as may be necessary to verify the statements in the application. Such specimens shall be packed and forwarded in conformity with instructions furnished by the examiner. If the applicant requests the examiner to inspect plants in the field before a final decision is made, all such inspection costs shall be borne by the applicant by payment of fees sufficient to reimburse the Office for all costs, including travel, per diem or subsistence, and salary. (b) Plant specimens submitted in support of an application shall not be removed from the Office except by an employee of the Office or other person authorized by the Secretary. (c) Plant specimens submitted to the Office shall, except as provided below, and upon request, be returned to the applicant at his or her expense after the specimens have served their intended purpose. The Commissioner, upon a finding of good cause, may require that certain specimens be retained in the Office for indefinite periods of time. Specimens which are not returned or not retained as provided above shall be destroyed. Sec. 97.9 Drawings and photographs. (a) Drawings or photographs submitted with an application shall disclose the distinctive characteristics of the variety. (b) Drawings or photographs shall be in color when color is a distinguishing [[Page 271]] characteristic of the variety, and the color shall be described by use of Nickerson's color fan, the Munsell Book of Color, the Royal Horticultural Society Colour Chart, or other recognized color chart. (c) Drawings shall be sent flat, or may be sent in a suitable mailing tube or by email in high resolution format, in accordance with instructions furnished by the Commissioner. (d) Drawings or photographs submitted with an application shall be retained by the Office as part of the application file. [58 FR 42435, Aug. 9, 1993, as amended at 85 FR 431, Jan. 6, 2020] Sec. 97.10 Parts of an application to be filed together. All parts of an application, including exhibits, should be submitted to the Office together, otherwise, each part shall be accurately and clearly referenced to the application. Sec. 97.11 Application accepted and filed when received. (a) An application, if materially complete when initially submitted, shall be accepted and filed to await examination. (b) If any part of an application is so incomplete, or so defective that it cannot be handled as a completed application for examination, as determined by the Commissioner, the applicant will be notified. The application will be held a maximum of 3 months for completion. Applications not completed at the end of the prescribed period will be considered abandoned. The application fee in such cases will not be refunded. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995] Sec. 97.12 Number and filing date of an application. (a) Applications shall be numbered and dated in sequence in the order received by the Office. Applicants will be informed in writing, by mail or email, as soon as practicable of the number and effective filing date of the application. (b) An applicant may claim the benefit of the filing date of a prior foreign application in accordance with section 55 of the Act. A certified copy of the foreign application shall be filed upon request made by the examiner. If a foreign application is not in the English language, an English translation, certified as accurate by a sworn or official translator, shall be submitted with the application. [58 FR 42435, Aug. 9, 1993, as amended at 85 FR 431, Jan. 6, 2020] Sec. 97.13 When the owner is deceased or legally incapacitated. In case of the death of the owner or if the owner is legally incapacitated, the legal representative (executor, administrator, or guardian) or heir or assignee of the deceased owner may sign as the applicant. If an applicant dies between the filing of his or her application and the granting of a certificate thereon, the certificate may be issued to the legal representative, heir, or assignee, upon proper intervention. Sec. 97.14 Joint applicants. (a) Joint owners shall file a joint application by signing as joint applicants. (b) If an application for certificate is made by two or more persons as joint owners, when they were not in fact joint owners, the application shall be amended prior to issuance of a certificate by filing a corrected application, together with a written explanation signed by the original applicants. Such statement shall also be signed by the assignee, if any. (c) If an application has been made by less than all the actual joint owners, the application shall be amended by filing a corrected application, together with a written explanation, signed by all of the joint owners. Such statement shall also be signed by the assignee, if any. (d) If a joint owner refuses to join in an application or cannot be found after diligent effort, the remaining owner may file an application on behalf of him or herself and the missing owner. Such application shall be accompanied by a written explanation and shall state the last known address of the missing owner. Notice of the filing of the application shall be forwarded by the Office to the missing owner at the last known address. If such notice is returned to the Office undelivered, or if [[Page 272]] the address of the missing owner is unknown, notice of the filing of the application shall be published once on the Plant Variety Protection Office website (https://www.ams.usda.gov/PVPO). Prior to the issuance of the certificate, a missing owner may join in an application by filing a written explanation. A certificate obtained by fewer than all of the joint owners under this paragraph conveys the same rights and privileges to said owners as though all of the original owners had joined in an application. [58 FR 42435, Aug. 9, 1993, as amended at 85 FR 431, Jan. 6, 2020] Sec. 97.15 Assigned varieties and certificates. In case the whole or a part interest in a variety is assigned, the application shall be made by the owner or one of the persons identified in Sec. 97.13. However, the certificate may be issued to the assignee, or jointly to the owner and the assignee, when a part interest in a variety is assigned. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995] Sec. 97.16 Amendment by applicant. An application may be amended before or after the first examination and action by the Office, after the second or subsequent examination or reconsideration as specified in Sec. 97.107, or when and as specifically required by the examiner. Such amendment may include a specification that seed of the variety be sold by variety name only as a class of certified seed, if not previously specified or if previously declined. Once an affirmative specification is made, no amendment to reverse such a specification will be permitted unless the variety has not been sold and labeled or publication made in any manner that the variety is to be sold by variety name, only as a class of certified seed. Sec. 97.17 Papers of completed application to be retained. The papers submitted with a completed application shall be retained by the Office except as provided in Sec. 97.23(c). After issuance of a certificate of protection the Office will furnish copies of the application and related papers to any person upon payment of the specified fee. Sec. 97.18 Applications handled in confidence. (a) Pending applications shall be handled in confidence. Except as provided below, no information may be given by the Office respecting the filing of an application, the pendency of any particular application, or the subject matter of any particular application. Also, nor will access be given to or copies furnished of any pending application or papers relating thereto, without written authority of the applicant, or his or her assignee or attorney or agent. Exceptions to the above may be made by the Commissioner in accordance with 5 U.S.C. 552 and Sec. 1.4 of this title, and upon a finding that such action is necessary to the proper conduct of the affairs of the Office, or to carry out the provisions of any Act of Congress, or as provided in sections 56 or 57 of the Act and Sec. 97.19. (b) Abandoned applications shall not be open to public inspection. However, if an abandoned application is directly referred to in an issued certificate and is available, it may be inspected or copies obtained by any person on written request, and with written authority received from the applicant. Abandoned applications shall not be returned. (c) Decisions of the Commissioner on abandoned applications not otherwise open to public inspection (see paragraph (b) of this section) may be published or made available for publication at the Commissioner's discretion. When it is proposed to release such a decision, the applicant shall be notified directly or through the attorney or agent of record, and a time, not less than 30 days, shall be set for presenting objections. Sec. 97.19 Publication of pending applications. Information relating to pending applications shall be published periodically as determined by the Commissioner to be necessary in the public interest. With respect to each application, the Plant Variety Protection Office website (https://www.ams.usda.gov/PVPO) shall show: [[Page 273]] (a) Application number and date of filing; (b) The name of the variety or temporary designation; (c) The name of the crop; and (d) Whether the applicant specified that the variety is to be sold by variety name only as a class of certified seed, together with a limitation in the number of generations that it can be certified. Additional information, such as the name and address of the applicant or a brief description of the distinctive features of the variety, may be published only upon request or approval received from the applicant, at the time the application is filed or at any time before the notice of allowance of a certificate is issued. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995; 61 FR 248, Jan. 4, 1996; 85 FR 431, Jan. 6, 2020] Sec. 97.20 Abandonment for failure to respond within the time limit. (a) Except as otherwise provided in Sec. 97.104, if an applicant fails to advance actively his or her application within 30 days after the date when the last request for action was mailed to the applicant by the Office, or within such longer time as may be fixed by the Commissioner, the application shall be deemed abandoned. The filing and examination fees in such cases will not be refunded. (b) The submission of an amendment to the application, not responsive to the last request by the Office for action, and any proceedings relative thereto, shall not operate to save the application from abandonment. (c) When the applicant makes a bona fide attempt to advance the application, and is in substantial compliance with the request for action, but has inadvertently failed to comply with some procedural requirement, opportunity to comply with the procedural requirement shall be given to the applicant before the application shall be deemed abandoned. The Commissioner may set a period, not less than 30 days, to correct any deficiency in the application. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995; 85 FR 431, Jan. 6, 2020] Sec. 97.21 Extension of time for a reply. The time for reply by an applicant to a request by the Office for certain action, shall be extended by the Commissioner only for good and sufficient cause, and for a specified reasonable time. A request for extension and appropriate fee shall be filed on or before the specified time for reply. In no case shall the mere filing of a request for extension require the granting of an extension or state the time for reply. [58 FR 42435, Aug. 9, 1993, as amended at 61 FR 248, Jan. 4, 1996] Sec. 97.22 Revival of an application abandoned for failure to reply. An application abandoned for failure on the part of the applicant to advance actively his or her application to its completion, in accordance with the regulations in this part, may be revived as a pending application within 3 months of such abandonment, upon a finding by the Commissioner that the failure was inadvertent or unavoidable and without fraudulent intent. A request to revive an abandoned application shall be accompanied by a written statement showing the cause of the failure to respond, a response to the last request for action, and by the specified fee. Sec. 97.23 Voluntary withdrawal and abandonment of an application. (a) An application may be voluntarily withdrawn or abandoned by submitting to the Office a written request for withdrawal or abandonment, signed by the applicant or his or her attorney or agent of record, if any, or the assignee of record, if any. (b) An application which has been voluntarily abandoned may be revived within 3 months of such abandonment by the payment of the prescribed fee and a showing that the abandonment occurred without fraudulent intent. (c) An original application which has been voluntarily withdrawn shall be returned to the applicant and may be reconsidered only by refiling and payment of new filing and examination fees. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995; 85 FR 431, Jan. 6, 2020] [[Page 274]] Sec. 97.24 Assignee. The assignee of record of the entire interest in an application is entitled to advance actively or abandon the application to the exclusion of the applicant. Examinations, Allowances, and Denials Sec. 97.100 Examination of applications. (a) [Reserved] (b) Examinations of applications shall include a review of all available documents, publications, or other material relating to varieties of the species involved in the application, except that if there are fundamental defects in the application, as determined by the examiner, the examination may be limited to an identification of such defects and notification to the applicant of needed corrective action. However, matters of form or procedure need not, but may, be raised by an examiner until a variety is found to be new, distinct, uniform, and stable and entitled to protection. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995] Sec. 97.101 Notice of allowance. If, on examination, PVPO determines that the applicant is entitled to a certificate, a notice of allowance shall be sent to the applicant or his or her attorney or agent of record, if any, requesting verification of the variety name and of the name of the owner. The notice will also provide an opportunity for withdrawal of the application before certificate issuance. The applicant must respond within 30 days from the date of the notice of allowance. Thereafter, a fee for delayed response shall be charged as specified in Sec. 97.175(f). [85 FR 431, Jan. 6, 2020] Sec. 97.102 Amendments after allowance. Amendments to the application, after the notice of allowance is issued, may be made, if the certificate has not been issued. Sec. 97.103 Issuance of a certificate. (a) After the notice of allowance has been issued and the applicant has clearly specified whether or not the variety shall be sold by variety name only as a class of certified seed, the certificate shall be promptly issued. Once an election is made and a certificate issued specifying that seed of the variety shall be sold by variety name only as a class of certified seed, no waiver of such rights shall be permitted by amendment of the certificate. (b) The certificate shall be delivered or mailed to the owner. [58 FR 42435, Aug. 9, 1993, as amended at 85 FR 432, Jan. 6, 2020] Sec. 97.104 Application or certificate abandoned. (a) Upon request by the Office, the owner shall replenish the seed or propagating material of the variety and shall pay the handling fee for replenishment. Samples of seed or propagating material related to abandoned applications or certificates will be retained or destroyed by the depository. Failure to replenish seed or propagating material within 3 months from the date of request shall result in the certificate being regarded as abandoned. No sooner than 1 year after the date of such request, notices of abandoned certificates shall be published on the Plant Variety Protection Office website (https://www.ams.usda.gov/PVPO), indicating that the variety has become open for use by the public and, if previously specified to be sold by variety name as ``certified seed only,'' that such restriction no longer applies. (b) If the seed or propagating material is submitted within 9 months of the final due date, it may be accepted by the Commissioner as though no abandonment had occurred. For good cause, the Commissioner may extend for a reasonable time the period for submitting seed or propagating material before declaring the certificate abandoned. (c) A certificate may be voluntarily abandoned by the applicant or his or her attorney or agent of record or the assignee of record by notifying the Commissioner in writing. Upon receipt of such notice, the Commissioner shall publish a notice on the Plant Variety Protection Office website (https:// [[Page 275]] www.ams.usda.gov/PVPO) that the variety has become open for use by the public, and if previously specified to be sold by variety name as ``certified seed only,'' that such restriction no longer applies. [85 FR 432, Jan. 6, 2020] Sec. 97.105 Denial of an application. (a) If the variety is found by the examiner to be not new, distinct, uniform, and stable, the application shall be denied. (b) In denying an application, the examiner shall cite the reasons the application was denied. When a reason involves the citation of certain material which is complex, the particular part of the material relied on shall be designated as nearly as practicable. The pertinence of each reason, if not obvious, shall be clearly explained. (c) If prior domestic certificates are cited as a reason for denial, their numbers and dates and the names of the owners shall be stated. If prior foreign certificates or rights are cited, as a reason for denial, their nationality or country, numbers and dates, and the names of the owners shall be stated, and such other data shall be furnished, as may be necessary to enable the applicant to identify the cited certificates or rights. (d) If printed publications are cited as a reason for denial, the author (if any), title, date, pages or plates, and places of publication, or place where a copy can be found shall be given. (e) When a denial is based on facts known to the examiner, and upon request by the applicant, the denial shall be supported by the affidavit of the examiner. Such affidavit shall be subject to contradiction or explanation by the affidavits of the applicant and other persons. (f) Abandoned applications may not be cited as reasons for denial. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17189, Apr. 4, 1995] Sec. 97.106 Reply by applicant; request for reconsideration. (a) After an adverse action by the examiner, the applicant may respond to the denial and may request a reconsideration, with or without amendment of his or her application. Any amendment shall be responsive to the reason or reasons for denial specified by the examiner. (b) To obtain a reconsideration, the applicant shall submit a request for reconsideration in writing and shall specifically point out the alleged errors in the examiner's action. The applicant shall respond to each reason cited by the examiner as the basis for the adverse action. A request for reconsideration of a denial based on a faulty form or procedure may be held in abeyance by the Commissioner until the question of the variety being new, distinct, uniform, and stable is settled. (c) An applicant's request for a reconsideration must be a bona fide attempt to advance the case to final action. A general allegation by the applicant that certain language which he or she cites in the application or amendment thereto establishes the variety is new, distinct, uniform, and stable without specifically explaining how the language distinguishes the alleged new, distinct, uniform, and stable variety from the material cited by the examiner shall not be grounds for a reconsideration. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17190, Apr. 4, 1995] Sec. 97.107 Reconsideration and final action. If, upon reconsideration, the application is denied by the Commissioner, the applicant shall be notified by the Commissioner of the reason or reasons for denial in the same manner as after the first examination. Any such denial shall be final unless appealed by the applicant to the Secretary. If the denial is sustained by the Secretary on appeal, the denial shall be final subject to appeal to the courts, as provided in Sec. 97.500. [58 FR 42435, Aug. 9, 1993, as amended at 70 FR 28785, May 19, 2005] Sec. 97.108 Amendments after final action. (a) After a final denial by the Commissioner, amendments to the application may be made to overcome the reason or reasons for denial. The acceptance or refusal of any such amendment [[Page 276]] by the Office and any proceedings relative thereto shall not relieve the applicant from the time limit set for an appeal or an abandonment for failure to reply. (b) No amendment of the application can be made in an appeal proceeding. After decision on appeal, amendments can only be made in accordance with the decision. [58 FR 42435, Aug. 9, 1993, as amended at 70 FR 28785, May 19, 2005] Correction of Errors in Certificate Sec. 97.120 Corrected certificate--office mistake. When a certificate is incorrect because of a mistake in the Office, the Commissioner may issue a corrected certificate stating the fact and nature of such mistake, under seal, without charge, to be issued to the owner and recorded in the records at the Office. Sec. 97.121 Corrected certificate--applicant's mistake. When a certificate is incorrect because of a mistake by the applicant of a clerical or typographical nature, or of minor character, or in the description of the variety (including, but not limited to, the use of a misleading variety name or a name assigned to a different variety of the same species), and the mistake is found by the Commissioner to have occurred in good faith and does not require a further examination, the Commissioner may, upon payment of the required fee and return of the original certificate, correct the certificate by issuing a corrected certificate, in accordance with section 85 of the Act. If the mistake requires a reexamination, a correction of the certificate shall be dependent on the results of the reexamination. Reissuance of Certificate Sec. 97.122 Certified seed only election. When an owner elects after a certificate is issued to sell the protected variety by variety name only as a class of certified seed, a new certificate may be issued upon return of the original certificate to the Office and payment of the appropriate fee. Assignments and Recording Sec. 97.130 Recording of assignments. (a) Any assignment of an application for a certificate, or of a certificate of plant variety protection, or of any interest in a variety, or any license or grant and conveyance of any right to use of the variety, may be submitted for recording in the Office in accordance with section 101 of the Act (7 U.S.C. 2531). (b) No instrument shall be recorded which is not in the English language or which does not identify the certificate or application to which it relates. (c) An instrument relating to title of a certificate shall identify the certificate by number and date, the name of the owner, and the name of the variety as stated in the certificate. An instrument relating to title of an application shall identify an application by number and date of filing, the name of the owner, and the name of the variety as stated in the application. (d) If an assignment is executed concurrently or subsequent to the filing of an application, but before its number and filing date are ascertained, the assignment shall identify the application by the date of the application, the name of the owner, and the name of the variety. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17190, Apr. 4, 1995] Sec. 97.131 Conditional assignments. Assignments recorded in the Office are regarded as absolute assignments for Office purposes until canceled in writing by both parties to the assignment or by a decree of a court of competent jurisdiction. The Office shall not determine whether conditions precedent to the assignment, such as the payment of money, have been fulfilled. Sec. 97.132 Assignment records open to public inspection. (a) Assignment records relating to original or amended certificates shall be open to public inspection and copies of any recorded document may be obtained upon payment of the prescribed fee. (b) Assignment records relating to any pending or abandoned application [[Page 277]] shall not be available for inspection except to the extent that pending applications are published as provided in section 57 of the Act and Sec. 97.19, or where necessary to carry out the provisions of any Act of Congress. Copies of assignment records and information on pending or abandoned applications shall be obtainable only upon written authority of the applicant or his or her assignee, or attorney or agent of record, or where necessary to carry out the provisions of any Act of Congress. An order for a copy of an assignment shall give the proper identification of the assignment. Marking or Labeling Provisions Sec. 97.140 After filing. Upon filing an application for protection of a variety and payment of the prescribed fee, the owner, or his or her designee, may label the variety or containers of the seed of the variety or plants produced from such seed, substantially as follows: ``Unauthorized Propagation Prohibited--(Unauthorized Seed Multiplication Prohibited)--U.S. Variety Protection Applied For.'' Where applicable, ``PVPA 1994'' or ``PVPA 1994--Unauthorized Sales for Reproductive Purposes Prohibited'' may be added to the notice. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17190, Apr. 4, 1995; 61 FR 248, Jan. 4, 1996] Sec. 97.141 After issuance. Upon issuance of a certificate, the owner of the variety, or his or her designee, may label the variety, propagating material of the variety, or containers of the seed of the variety or plants produced from such seed or propagating material substantially as follows: ``Unauthorized Propagation Prohibited--(Unauthorized Seed or Propagating Material Multiplication Prohibited)--U.S. Protected Variety.'' Where applicable, ``PVPA 1994'' or ``PVPA 1994--Unauthorized Sales for Reproductive Purposes Prohibited'' may be added to the notice. [85 FR 432, Jan. 6, 2020] Sec. 97.142 For testing or increase. An owner who contemplates filing an application and releases for testing or increase seed of the variety or propagating material or reproducible plant material of the variety may label such plant material or containers of the seed or plant material substantially as follows: ``Unauthorized Propagation Prohibited--For Testing (or Increase) Only.'' [85 FR 432, Jan. 6, 2020] Sec. 97.143 Certified seed only. (a) Upon filing an application, or amendment thereto, specifying seed of the variety is to be sold by variety name only as a class of certified seed, the owner, or his or her designee, may label containers of seed of the variety substantially as follows: ``Unauthorized Propagation Prohibited--U.S. Variety Protection Applied for Specifying That Seed of This Variety Is To Be Sold By Variety Name Only as a Class of Certified Seed.'' (b) An owner who has received a certificate specifying that a variety is to be sold by variety name only, as a class of certified seed, may label containers of the seed of the variety substantially as follows: ``Unauthorized Propagation Prohibited--To Be Sold By Variety Name Only as a Class of Certified Seed--U.S. Protected Variety.'' Sec. 97.144 Additional marking or labeling. Additional clarifying information that is not false or misleading may be used by the owner, in addition to the above markings or labeling. Attorneys and Agents Sec. 97.150 Right to be represented. An applicant may actively advance an application or may be represented by an attorney or agent authorized in writing. Sec. 97.151 Authorization. Only attorneys or agents specified by the applicant shall be allowed to inspect papers or take action of any kind, on behalf of the applicant, in any pending application or proceedings. Sec. 97.152 Revocation of authorization; withdrawal. An authorization of an attorney or agent may be revoked by an applicant [[Page 278]] at any time, and an attorney or agent may withdraw, upon application to the Commissioner. When the authorization is so revoked, or the attorney or agent has so withdrawn, the Office shall inform the interested parties and shall thereafter communicate directly with the applicant, or with such other attorney or agent as the applicant may appoint. An assignment will not of itself operate as a revocation of authorization previously given, but the assignee of the entire interest may revoke previous authorizations and be represented by an attorney or agent of his or her own selection. Sec. 97.153 Persons recognized. Unless specifically authorized as provided in Sec. 97.151, no person shall be permitted to file or advance applications before the Office on behalf of another person. Sec. 97.154 Government employees. Officers and employees of the United States who are disqualified by statute (18 U.S.C. 203 and 205) from practicing as attorneys or agents in proceedings or other matters before government departments or agencies, shall not be eligible to represent applicants, except officers and employees whose official duties require the preparation and prosecution of applications for certificates of variety protection. Sec. 97.155 Signatures. Every document filed by an attorney or agent representing an applicant or party to a proceeding in the Office shall bear the signature of such attorney or agent, except documents which are required to be signed by the applicant or party. Sec. 97.156 Addresses. Attorneys and agents practicing before the Plant Variety Protection Office shall notify the Office in writing of any change of address. The Office shall address letters to any person at the last address received. Sec. 97.157 Professional conduct. Attorneys and agents appearing before the Office shall conform to the standards of ethical and professional conduct, generally applicable to attorneys appearing before the courts of the United States. Fees and Charges Sec. 97.175 Fees and charges. The following fees and charges apply to the services and actions specified in paragraphs (a) through (f) of this section: (a) Application: (1) Initial fee for filing, examination, and certificate issuance-- $5,150 (2) Submission of new application data prior to issuance of certificate--$432 (3) Granting extensions for responding to data requests--$89 (4) Refunds pursuant to Sec. 97.178 may be issued for portions of the initial application fee as follows: examination--$3,864, and certificate issuance--$768. (b) Reconsideration of application--$589 (c) Revival of an abandoned application--$518 (d) Appeals: (1) Filing a petition for protest to Commissioner--$4,118 (2) Appeal to Secretary (refundable if appeal overturns protest to Commissioner)--$4,942 (e) Field inspections or other services requiring travel by a representative of the Plant Variety Protection Office, made at the request of the applicant, shall be reimbursable in full (including travel, per diem or subsistence, salary, and administrative costs), in accordance with standardized government travel regulations. (f) Any other service not covered in this section, including, but not limited to, reproduction of records, authentication, correction, or reissuance of a certificate, recordation or revision of assignment, and late fees will be charged for at rates prescribed by the Commissioner, but in no event shall they exceed $97 per employee hour. Charges will also be made for materials, space, and administrative costs. [85 FR 432, Jan. 6, 2020] Sec. 97.176 Fees payable in advance. Fees and charges shall be paid at the time of making application or at the time of submitting a request for any action by the Office for which a fee or [[Page 279]] charge is payable and established in this part. Sec. 97.177 Method of payment. Payments can be submitted through the electronic Plant Variety Protection system or pay.gov. Checks or money orders shall be made payable to the Treasurer of the United States. Remittances from foreign countries must be payable and immediately negotiable in the United States for the full amount of the prescribed fee. Money sent by mail to the Office shall be sent at the sender's risk. [85 FR 432, Jan. 6, 2020] Sec. 97.178 Refunds. Money paid by mistake or excess payments shall be refunded, but a mere change of plans after the payment of money, as when a party decides to withdraw an application or to withdraw an appeal, shall not entitle a party to a refund. However, the examination fee shall be refunded if an application is voluntarily withdrawn or abandoned pursuant to Sec. 97.23(a) before the examination has begun. The certificate issuance fee shall be refunded if an application is voluntarily withdrawn or abandoned after an examination has been completed and before a certificate has been issued. Amounts of $1 or less shall not be refunded unless specifically demanded. [85 FR 432, Jan. 6, 2020] Sec. 97.179 Copies and certified copies. (a) Upon request, copies of applications, certificates, or of any records, books, papers, drawings, or photographs in the custody of the Office and which are open to the public, will be furnished to persons entitled thereto, upon payment of the prescribed fee. (b) Upon request, copies will be authenticated by imprint of the seal of the Office and certified by the official, authorized by the Commissioner upon payment of the prescribed fee. Availability of Office Records Sec. 97.190 When open records are available. Copies of records, which are open to the public and in the custody of the Office, may be examined in the Office during regular business hours upon approval by the Commissioner. Protest Proceedings Sec. 97.200 Protests to the grant of a certificate. Opposition on the part of any person to the granting of a certificate shall be permitted while an application is pending and for a period not to exceed 5 years following the issuance of a certificate. Sec. 97.201 Protest proceedings. (a) Opposition shall be made by submitting in writing a petition for protest proceedings, which petition shall be supported by affidavits and shall show the reason or reasons for opposing the application or certificate. The petition and accompanying papers shall be filed in duplicate. If it appears to an examiner that a variety involved in a pending application or covered by a certificate may not be or may not have been entitled to protection under the Act, a protest proceeding may be permitted by the Commissioner. (b) One copy of the petition and accompanying papers shall be served by the Office upon the applicant or owner, or his or her attorney or agent of record. (c) An answer, by the applicant or owner of the certificate, or his or her assignee, in response to the petition, may be filed with the Commissioner within 60 days after service of the petition, upon such person. If no answer is filed within said period, the Commissioner shall decide the matter on the basis of the allegations set forth in the petition. (d) If the petition and answer raise any issue of fact needing proof, the Commissioner shall afford each of the parties a period of 60 days in which to file sworn statements or affidavits in support of their respective positions. (e) As soon as practicable after the petition or the petition and answer are filed, or after the expiration of any period for filing sworn statements or affidavits, the Commissioner shall issue a decision as to whether the protests are upheld or denied. The Commissioner may, following the protest proceeding, [[Page 280]] cancel any certificate issued and may grant another certificate for the same variety to a person who proves to the satisfaction of the Commissioner, that he or she is the breeder or discoverer. The decision shall be served upon the parties in the manner provided in Sec. 97.403. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17190, Apr. 4, 1995] Appeal to the Secretary Sec. 97.300 Petition to the Secretary. (a) Petition may be made to the Secretary from any final action of the Commissioner denying an application or refusing to allow a certificate to be issued, or from any adverse decision of the Commissioner made under Sec. Sec. 97.18(c), 97.107, 97.201(e), and 97.220. (b) Any such petition shall contain a statement of the facts involved and the point or points to be reviewed, and the actions requested. (c) A petition to the Secretary shall be filed in duplicate and accompanied by the prescribed fee (see Sec. 97.175). (d) Upon request, an opportunity to present data, views, and arguments orally, in an informal manner or in a formal hearing, shall be given to interested persons. If a formal hearing is requested, the proceeding shall be conducted in accordance with the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statutes set forth in Sec. Sec. 1.130 through 1.151 of this title. (e) Except as otherwise provided in the rules in this part, any such petition not filed within 60 days from the action complained of shall be dismissed as untimely. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 8464, Feb. 14, 1995] Sec. 97.301 Commissioner's answer. (a) The Commissioner may, within such time as may be directed by the Secretary, furnish a written statement to the Secretary in answer to the appellant's petition, including such explanation of the reasons for the action as may be necessary and supplying a copy to the appellant. (b) Within 20 days from the date of such answer, the appellant may file a reply statement directed only to such new points of argument as may be raised in the Commissioner's answer. Sec. 97.302 Decision by the Secretary. (a) The Secretary, after receiving the advice of the Board, may affirm or reverse the decision of the Commissioner, in whole or in part. (b) Should the decision of the Secretary include an explicit statement that a certificate be allowed, based on an amended application, the applicant shall have the right to amend his or her application in conformity with such statement and such decision shall be binding on the Commissioner. Sec. 97.303 Action following the decision. (a) Copies of the decision of the Secretary shall be served upon the appellant and the Commissioner in the manner provided in Sec. 97.403. (b) When an appeal petition is dismissed, or when the time for appeal to the courts pursuant to the Act has expired and no such appeal or civil action has been filed, proceedings in the appeal shall be considered terminated as of the dismissal or expiration date, except in those cases in which the nature of the decision requires further action by the Commissioner. If the decision of the Secretary is appealed or a civil action has been filed pursuant to the Act, the decision of the Secretary will be stayed pending the outcome of the court appeal or civil action. [58 FR 42435, Aug. 9, 1993, as amended at 60 FR 17190, Apr. 4, 1995] General Procedures in Priority, Protest, or Appeal Proceedings Sec. 97.400 Extensions of time. Upon a showing of good cause, extensions of time not otherwise provided for may be granted by the Commissioner or, if an appeal has been filed by the Secretary for taking any action required in any priority, protest, or appeal proceeding. Sec. 97.401 Miscellaneous provisions. (a) Petitions for reconsideration or modification of the decision of the Commissioner in priority or protest proceedings shall be filed within 20 days after the date of the decision. [[Page 281]] (b) The Commissioner may consider on petition any matter involving abuse of discretion in the exercise of an examiner's authority, or such other matters as may be deemed proper to consider. Any such petition, if not filed within 20 days from the decision complained of, may be dismissed as untimely. Sec. 97.402 Service of papers. (a) Every paper required to be served on opposing parties and filed in the Office in any priority, protest, or appeal proceeding, must be served by the Secretary in the manner provided in Sec. 97.403. (b) The requirement in certain sections that a specified paper shall be served includes a requirement that all related supporting papers shall also be served. Proof of such service upon other parties to the proceeding must be made before the supporting papers will be considered by the Commissioner or Secretary. Sec. 97.403 Manner of service. Service of any paper under this part must be on the attorney or agent of the party if there be such, or on the party if there is no attorney or agent, and may be made in any of the following ways: (a) By mailing a copy of the paper to the person served by certified mail, with the date of the return receipt controlling the date of service; (b) By leaving a copy at the usual place of business of the person served with someone in his or her employ; (c) When the person served has no usual place of business, by leaving a copy at his or her home with a member of the family over 14 years of age and of discretion; and (d) Whenever it shall be found by the Commissioner or Secretary that none of the above modes of serving the paper is practicable, service may be by notice, published once on the Plant Variety Protection Office website (https://www.ams.usda.gov/PVPO). [58 FR 42435, Aug. 9, 1993, as amended at 85 FR 432, Jan. 6, 2020] Review of Decisions by Court Sec. 97.500 Appeal to U.S. Courts. Any applicant dissatisfied with the decision of the Secretary on appeal may appeal to the U.S. Courts of Appeals for the Federal Circuit or institute a civil action in the U.S. District Court for the District of Columbia, as set forth in the Act. In such cases, the appellant or plaintiff shall give notice to the Secretary, state the reasons for appeal or civil action, and obtain a certified copy of the record. The certified copy of the record shall be forwarded to the Court by the Plant Variety Protection Office on order of, and at the expense of the appellant or plaintiff. [85 FR 432, Jan. 6, 2020] Cease and Desist Proceedings Sec. 97.600 Administrative provisions. Any proceedings instituted under section 128 of the Act for false marking shall be conducted in accordance with Sec. Sec. 202.10 through 202.29 of this chapter (rules of practice under the Federal Seed Act) (7 U.S.C. 1551 et seq.), except that all references in those rules and regulations to ``Examiner'' shall be construed to be an Administrative Law Judge, U.S. Department of Agriculture, and not an ``Examiner'' as defined in the regulations under the Plant Variety Protection Act. Public Use Declaration Sec. 97.700 Public interest in wide usage. (a) If the Secretary has reason to believe that a protected variety should be declared open to use by the public in accordance with section 44 of the Act, the Secretary shall give the owner of the variety appropriate notice and an opportunity to present views orally or in writing, with regard to the necessity for such action to be taken in the public interest. (b) Upon the expiration of the period for the presentation of views by the owner, as provided in paragraph (a) of this section, the Secretary shall refer the matter to the Plant Variety Protection Board for advice, including advice on any limitations or rate of remuneration. [[Page 282]] (c) Upon receiving the advice of the Plant Variety Protection Board, the Secretary shall advise the owner of the variety, the members of the Plant Variety Protection Board, and the public, by issuance of a press release, of any decision based on the provisions of section 44 of the Act to declare a variety open to use by the public. Any decision not to declare a variety open to use by the public will be transmitted only to the owner of the variety and the members of the Plant Variety Protection Board. Publication Sec. 97.800 Publication of public variety descriptions. Voluntary submissions of varietal descriptions of ``public varieties'' on forms obtainable from the Office will be accepted for publication on the Plant Variety Protection Office website (https:// www.ams.usda.gov/PVPO). Such publication shall not constitute recognition that the variety is, in fact, distinct, uniform, and stable. [85 FR 433, Jan. 6, 2020] Sec. 97.900 Form of official identification symbol. The symbol set forth in Figure 1, containing the words ``Plant Variety Protection Office'' and ``U.S. Department of Agriculture,'' shall be the official identification symbol of the Plant Variety Protection Office. This information symbol, used by the Plant Variety Protection Office on the seal on certificates of Plant Variety Protection, has been approved by the Office of Communications to be added to the USDA/AMS inventory of symbols. It is approved for use with AMS materials. [GRAPHIC] [TIFF OMITTED] TR02AU00.006 [[Page 283]] [65 FR 47244, Aug. 2, 2000] PART 98_MEALS, READY-TO-EAT (MREs), MEATS, AND MEAT PRODUCTS- -Table of Contents Subpart A_MREs, Meats, and Related Meat Food Products Sec. 98.1 General. 98.2 Definitions. 98.3 Analyses performed and locations of laboratories. 98.4 Analytical methods. 98.5 Fees and charges. Subpart B_USDA Certification of Laboratories for the Testing of Trichinae in Horsemeat 98.100 General. 98.101 Definitions. 98.102-98.600 [Reserved] Authority: 7 U.S.C. 1622, 1624. Source: 58 FR 42445, Aug. 9, 1993, unless otherwise noted. Subpart A_MREs, Meats, and Related Meat Food Products Sec. 98.1 General. Analytical services of meat and meat food products are performed for fat, moisture, salt, protein, and other content specifications. Sec. 98.2 Definitions. Words used in the regulations in this subpart in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the regulations in this subpart, unless the context requires otherwise, the following terms will be construed to mean: Lard (Edible). The fat rendered from clean and sound edible tissues from swine. Meals, Ready-To-Eat (MRE). Meals, Ready-To-Eat are complete portions of one meal for one military person and are processed and packaged to destroy or retard the growth of spoilage-type microorganisms in order to extend product shelf life for 7 years. Composition analyses for MREs are covered by the reimbursable agreement in the Memorandums of Understanding (MOU's) between AMS, USDA and the Defense Personnel Support Center, Department of Defense (DOD). These DOD, Defense Personnel Support Center (DPSC) contracts state certain military specifications for an acceptable one meal serving, retorted pouched or 18-24 serving hermetically-sealed tray packed meat, or meal product regarding satisfactory analyses for fat, salt, protein, moisture content, added stabilizer ingredient, and sometimes microbiological composition. MREs are for use by the DOD, DPSC as a component of operational food rations, and as an item of general issue by the military. Meat. This includes the edible part of the muscle of any cattle, sheep, swine, or goats, which is skeletal or which is found in the tongue, in the diaphragm, in the heart, or in the esophagus, and which is intended for human food, with or without the accompanying and overlying fat, and the portions of bone, skin, tendon, nerve, and blood vessels which normally accompany the muscle tissue, and which are not separated from it in the process of dressing. It does not include the muscle found in the lips, snout, or ears. This term, as applied to products of equines, shall have a meaning comparable to that provided in this paragraph with respect to cattle, sheep, swine, and goats. Meat food product. Any article capable for use as human food (other than meat, prepared meat, or a meat by-product), which is derived or prepared wholly or in substantial part from meat or other portion of the carcass of any cattle, sheep, swine, or goats. An article exempted from definition as a meat food product by the Administrator, such as an organotherapeutic substance, meat juice, meat extract, and the like, which is used only for medicinal purposes and is advertised solely to the medical profession is not included. Ready-to-eat. The term means consumers are likely to apply little or no additional heat to the fully-cooked and the fully-prepared food product before consumption. Specifications. Descriptions with respect to the class, grade, other quality, quantity or condition of products, approved by the Administrator, and [[Page 284]] available for use by the industry regardless of the origin of the descriptions. Tallow (Edible). The hard fat derived from USDA inspected and passed cattle, sheep, or goats. Titer. The measure of the hardness or softness of the tested material as determined by the solidification point of fatty acids and expressed in degrees centigrade ([deg]C). Sec. 98.3 Analyses performed and locations of laboratories. (a) Tables 1 through 4 list the special laboratory analyses rendered by the Science and Technology as a result of an agreement with the Livestock and Seed Division. The payment for such laboratory services rendered at the request of an individual or third party served shall be reimbursed pursuant to the terms as specified in the cooperative agreement. Table 1--Schedule Analysis ------------------------------------------------------------------------ Samples Identity Analyses tested ------------------------------------------------------------------------ Schedule BC (Beef Chunks, Canned)..... Fat, salt............ 1 Schedule BJ (Beef with Natural Juices, Fat.................. 1 Canned). Schedule CS (Canned Meatball Stew).... Fat.................. 3 Schedule GP (Frozen Ground Pork)...... Fat.................. 4 Schedule PJ (Pork with Natural Juices, Fat.................. 1 Canned). Schedule RB (Beef for Reprocessing)... Fat.................. 4 Schedule RG (Beef Roasts and Ground Fat.................. 4 Beef). Schedule SB (Slab or Sliced Bacon).... Moisture, fat, salt.. 1 Schedule WS (Beef or Wafer Steaks).... Fat.................. 1 ------------------------------------------------------------------------ Table 2--Microbiological Analysis ------------------------------------------------------------------------ Number of Type of analysis samples tested ------------------------------------------------------------------------ Psychrotrophic Bacterial Plate Count....................... 1 ------------------------------------------------------------------------ Table 3--Nonschedule Analysis ------------------------------------------------------------------------ Samples Identity Analyses tested ------------------------------------------------------------------------ Fed Specification PP-B-2120B (Ground Fat.................. 4 Beef Products). Fed Specification PP-B-81J (Sliced Fat, salt, moisture.. 1 Bacon). Fed Specification PP-L-800E (Luncheon Fat, salt............ 1 Meat, Canned). Ground Beef or Ground Pork............ Fat.................. 4 Ground Beef or Ground Pork............ Fat.................. 1 Pork Sausage.......................... Fat, salt............ 4 Pork Sausage.......................... Fat, moisture........ 4 Pork Sausage.......................... Fat.................. 4 Mil-P-44131A (Pork Steaks, Flaked, Fat.................. 4 Formed, Breaded). Milwaukee Public Schools (Breaded/ Fat.................. 4 Unbreaded Meat). Chili Con Carne Without Beans......... Fat.................. 1 A-A-20047-B........................... Fat, protein......... 3 A-A-20136............................. salt................. 3 A-A-20148............................. Fat, salt............ 3 Mil-B-44133 (GL)...................... Fat, salt............ 3 Mil-B-44158A.......................... Water activity....... 6 Mil-C-44253........................... Fat, salt............ 3 Mil-H-44159B (GL)..................... Fat, salt............ 1 PP-F-02154 (Army GL).................. Fat, salt, moisture.. 1 ------------------------------------------------------------------------ Table 4--Lard and Tallow Analysis ------------------------------------------------------------------------ Number of Type of analysis samples tested ------------------------------------------------------------------------ Fat Analysis Committee (FAC) Color......................... 1 Free Fatty Acids........................................... 1 Insoluble Impurities....................................... 1 Moisture and Volatile Matter............................... 1 [[Page 285]] Specific Gravity........................................... 4 to 6 Titer Test................................................. 1 Unsaponifiable Material.................................... 1 ------------------------------------------------------------------------ (b) Meats, such as ground beef or ground pork, meat food products, and MREs, not covered by an agreement with Livestock and Seed Division, are analyzed for fat, moisture, salt, sulfur dioxide, nitrites, sulfites, ascorbates, citric acid, protein, standard plate counts, and coliform counts, among other analyses. These food product analyses are performed at any one of the Science and Technology (S&T) field laboratories as follows: (1) USDA, AMS, Science and Technology, Midwestern Laboratory, 3570 North Avondale Avenue, Chicago, IL 60618. (2) USDA, AMS, S&T Aflatoxin Laboratory, 107 South 4th Street, Madill, OK 73446. (3) USDA, AMS, S&T, Eastern Laboratory, 2311-B Aberdeen Boulevard, Gastonia, NC 28054. [58 FR 42445, Aug. 9, 1993, as amended at 59 FR 24325, May 10, 1994; 59 FR 50121, Sept. 30, 1994; 61 FR 51353, Oct. 2, 1996; 65 FR 64318, Oct. 26, 2000] Sec. 98.4 Analytical methods. (a) The majority of analytical methods used by the USDA laboratories to perform analyses of meat, meat food products and MREs are listed as follows: (1) Official Methods of Analysis of AOAC INTERNATIONAL, Suite 500, 481 North Frederick Avenue, Gaithersburg, MD 20877-2417. (2) U.S. Army Individual Protection Directorate's Military Specifications, approved analytical test methods noted therein, U.S. Army Natick Research, Development and Engineering Center, Kansas Street, Natick, MA 01760-5017. (b) Additional analytical methods for these foods will be used, from time to time, as approved by the Director. [58 FR 42445, Aug. 9, 1993, as amended at 61 FR 51353, Oct. 2, 1996] Sec. 98.5 Fees and charges. (a) The fee charged for any single laboratory analysis of meat, meat food products, and MREs, not covered by an agreement with Livestock and Seed Division, is specified in the schedules of charges in paragraph (a) of Sec. 91.37 of this subchapter. (b) The laboratory analyses of meat, meat food products, and MREs, not covered by a cooperative agreement, shall result in an additional fee, found in Table 7 of Sec. 91.37 of this subchapter, for sample preparation or grinding. (c) The charge for any requested laboratory analysis of meat, meat food products, and MREs not listed shall be based on the standard hourly rate specified in Sec. 91.37, paragraph (b). Subpart B_USDA Certification of Laboratories for the Testing of Trichinae in Horsemeat Sec. 98.100 General. A laboratory that has met the requirements for certification specified in this subpart shall receive an AMS Science and Technology certificate to approve its analysis for Trichinella spiralis in horsemeat. Certification would be granted to a qualified analyst or a laboratory based on having the proper training, facilities, and equipment. This AMS laboratory certification program will enable horsemeat exporters to comply with trichinae testing requirements of the European Community. [58 FR 42445, Aug. 9, 1993, as amended at 61 FR 51353, Oct. 2, 1996; 65 FR 64318, Oct. 26, 2000] Sec. 98.101 Definitions. Words used in the regulations in this part in the singular form will import the plural, and vice versa, as the case may demand. As used throughout the [[Page 286]] regulations in this part, unless the context requires otherwise, the following terms will be construed to mean: European Community. The European Community (EC) consists of the initial 12 European countries and the updated and expanded membership of nations. The original EC members are Belgium, Britain, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain. Horsemeat. That U.S. inspected and passed clean, wholesome muscle tissue of horses, which is skeletal or which is found in the tongue, in the diaphragm, in the heart, or in the esophagus, with or without the accompanying and overlying fat and the portions of sinews, nerves, and blood vessels, which normally accompany the muscle tissue and which are not separated from it in the process of dressing. Trichinae. Round worms or nematodes of the genus Trichinella, which live as parasites in man, horses, rats, and other animals. Trichinella spiralis. A small parasitic nematode worm which lives in the flesh of various animals, including the horse. When such infected meat is inadequately cooked and eaten by man, the live worm multiplies within the body and the larvae burrow their way into the muscles, causing a disease referred to as trichinosis. Sec. Sec. 98.102-98.600 [Reserved] PARTS 99 109 [RESERVED] PART 110_RECORDKEEPING ON RESTRICTED USE PESTICIDES BY CERTIFIED APPLICATORS; SURVEYS AND REPORTS--Table of Contents Sec. 110.1 Scope. 110.2 Definitions. 110.3 Records, retention, and access to records. 110.4 Demonstration of compliance. 110.5 Availability of records to facilitate medical treatment. 110.6 Federal cooperation with States. 110.7 Penalties. 110.8 Administrative procedures. 110.9 Miscellaneous. Authority: 7 U.S.C. 136a(d)(1)(c), 136i-1, and 450; 7 CFR 2.17, 2.50. Source: 58 FR 19022, Apr. 9, 1993, unless otherwise noted. Sec. 110.1 Scope. This part sets forth the requirements for recordkeeping on restricted use pesticides by all certified applicators, both private applicators and commercial applicators. Sec. 110.2 Definitions. As used in this part, the following terms shall be construed, respectively, to mean: Administrator. The Administrator of the Agricultural Marketing Service, United States Department of Agriculture, or any individual to whom the Administrator delegates authority to act in his or her behalf. Authorized representative. Any person who is authorized to act on behalf of the Secretary or a State lead agency for the purpose of surveying records required to be kept under this part and enforcing this part. Certification number. A number issued by EPA or a State to an individual who is authorized by EPA or the State to use or supervise the use of any restricted use pesticide. Certified applicator. Any individual who is certified by EPA or the State to use or supervise the use of any restricted use pesticide covered by that individual's certification. Commercial applicator. A certified applicator, whether or not the individual is a private applicator with respect to some uses, who uses or supervises the use of any restricted use pesticide for any purpose on any property other than as provided by the definition of private applicator. Comparable. With respect to the records required to be kept under this part, similar to those required under EPA-approved State certification programs. Complainant. The Administrator or an official of a cooperating State that deals with pesticide use or health or environmental issues related to the pesticide use, who institutes a proceeding pursuant to Sec. 110.8 of this part. EPA. The United States Environmental Protection Agency. EPA registration number. The number assigned to a product registered with [[Page 287]] EPA in accordance with sections 3 or 24c of the Federal Insecticide, Fungicide, and Rodenticide Act and implementing regulations, and borne on the label of the product. Indian governing body. The governing body of any tribe, band, or group of Indians subject to the jurisdiction of the United States and recognized by the United States as possessing power of self-government. Licensed health care professional. A physician, nurse, emergency medical technician, or other qualified individual, licensed or certified by a State to provide medical treatment. Medical emergency. A situation that requires immediate medical treatment or first aid to treat possible symptoms of pesticide poisoning or exposure. Parties. Includes the Administrator or cooperating State agencies who institute proceedings against whom such proceedings are instituted, under Sec. 110.8 of this part. Person. Any individual, corporation, company, association, firm, partnership, society, or other legal entity. Presiding officer. Any individual designated in writing by the Administrator to preside at a proceeding conducted pursuant to Sec. 110.8 of this part. Private applicator. A certified applicator who uses or supervises the use of any restricted use pesticide for purposes of producing any agricultural commodity: (1) On property owned or rented by the applicator or the employer of the applicator; or (2) If applied without compensation, other than trading of personal services between producers of agricultural commodities, on the property of another person. Record. The legible recording of all required elements under section 110.3(a) (1) through (6) for the application of a federally restricted use pesticide. \1\ --------------------------------------------------------------------------- \1\ Records can be handwritten on individual notes or forms, consist of invoices, be computerized, and or be maintained in recordkeeping books. --------------------------------------------------------------------------- Recordkeeping. The recording by the certified applicator, or the agent of the certified applicator, of the information required by Sec. 110.3(a) and (b) concerning each restricted use pesticide application, either electronically or manually in writing, and the maintenance of such records in a manner accessible to authorized representatives. Respondent. The party proceeded against pursuant to Sec. 110.8 of this part, restricted use pesticide. A pesticide that is federally classified for restricted use under section 3(d)(1)(c) of the Federal Insecticide, Fungicide, and Rodenticide Act. Secretary. The Secretary of Agriculture, United States Department of Agriculture, or any individual to whom the Secretary delegates authority to act in his or her behalf. State. A State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, and any other territory or possession of the United States, or an Indian governing body. State lead agency. The agency designated by a State to have access to the records required to be maintained under this part. Supervise. To provide instruction and guidance in the application of restricted use pesticides and exercise control over an applicator of restricted use pesticides in accordance with standards prescribed by the EPA in 40 CFR part 171. [58 FR 19022, Apr. 9, 1993, as amended at 60 FR 8123, Feb. 10, 1995] Sec. 110.3 Records, retention, and access to records. (a) Certified applicators of restricted use pesticides shall maintain records of the application of restricted use pesticides. Except as provided in paragraph (b) of this section, these records shall include the following information for each application: (1) The brand or product name, and the EPA registration number of the restricted use pesticide that was applied; (2) The total amount of the restricted use pesticide applied; (3) The location of the application, the size of area treated, and the crop, commodity, stored product, or site to which a restricted use pesticide was applied. The location of the application may be recorded using any of the following designations: [[Page 288]] (i) County, range, township, and section; (ii) An identification system utilizing maps and/or written descriptions which accurately identify location; (iii) An identification system established by a United States Department of Agriculture agency which utilizes maps and numbering system to identify field locations; or (iv) The legal property description. (4) The month, day, and year on which the restricted use pesticide application occurred; and (5) The name and certification number (if applicable) of the certified applicator who applied or who supervised the application of the restricted use pesticide. (b) Certified applicators shall maintain records of the application of restricted use pesticides made on the same day in a total area of less than one-tenth (\1/10\) of an acre. Except for applications of restricted use pesticides in greenhouses and nurseries, to which the requirements of paragraph (a) of this section apply, these records shall include the following information for the application: (1) The brand or product name, and the EPA registration number of the restricted use pesticide that was applied; (2) The total amount of the restricted use pesticide applied; (3) The location of the application, designated as ``spot application,'' followed by a concise description of location and treatment; and (4) The month, day, and year on which the restricted use pesticide application occurred. (c) The information required in this section shall be recorded within 14 days following the pesticide application. However, whether or not the written record has been completed, the certified applicator shall provide the information to be recorded in accordance with Sec. 110.5(a). (d) The records required in this section shall be retained for a period of 2 years from the date of the restricted use pesticide application and be maintained in a manner that is accessible by authorized representatives. (e) A commercial applicator shall, within 30 days of a restricted use pesticide application, provide a copy of records required under this section or under State or Federal regulations (whichever is applicable) under which the commercial applicator is holding certification, to the person for whom the restricted use pesticide was applied. (f) A certified applicator shall, upon oral request and presentation of credentials by an authorized representative, make available to the authorized representative the records required to be maintained under this section and permit the authorized representative to copy any of the records. The original of the records required to be maintained under this section shall be retained by the certified pesticide applicators. (g) No Federal or State agency shall release information obtained under this part that would directly or indirectly reveal the identity of producers of commodities to which restricted use pesticides have been applied. (h) Certified applicators who apply restricted use pesticides in States where they are required to maintain records on applications of restricted use pesticides, comparable to those for commercial applicators in that State, and such records are maintained in accordance with State requirements, are not subject to paragraphs (a), (b), and (c) of this section. [58 FR 19022, Apr. 9, 1993, as amended at 60 FR 8123, Feb. 10, 1995] Sec. 110.4 Demonstration of compliance. The Secretary is authorized to inspect and copy any record required to be maintained by this part in order to determine whether a certified applicator is complying with this part. Sec. 110.5 Availability of records to facilitate medical treatment. (a) When the attending licensed health care professional, or an individual acting under the direction of the attending licensed health care professional, determines that any record of the application of any restricted use pesticide required to be maintained under Sec. 110.3 is necessary to provide medical treatment or first aid to an individual who may have been exposed to the restricted use pesticide for which the record is or will be maintained, the [[Page 289]] certified applicator required to maintain the record shall promptly provide the record information and any available label information. If it is determined by the attending licensed health care professional, or an individual acting under the direction of the attending licensed health care professional, to be a medical emergency, the record information of the restricted use pesticide, relating to the medical emergency, shall be provided immediately. (b)(1) The attending licensed health care professional, or an individual acting under the direction of the attending licensed health care professional, may utilize and release the record or record information obtained under paragraph (a) of this section when necessary to provide medical treatment or first aid to an individual who may have been exposed to the restricted use pesticide for which the record is or will be maintained. (2) The attending licensed health care professional may release the record or record information to appropriate federal or state agencies that deal with pesticide use or any health issue related to the use of pesticides when necessary to prevent further injury or illness. (3) A licensed health care professional may release the record or record information to submit pesticide poisoning incident reports to appropriate state or federal agencies. [60 FR 8123, Feb. 10, 1995] Sec. 110.6 Federal cooperation with States. (a) For the purpose of carrying out this part, the Administrator may enter into agreements with States. (b) The Administrator may, after entering a State-Federal cooperative agreement with a State, utilize employees and facilities of the State to carry out any provisions of this part in that State. This State-Federal cooperative agreement shall specify: (1) The agency of the State that is designated as the State lead agency; (2) The responsibilities of State agencies for the enforcement of this part and the imposition of penalties under this part; (3) The qualifications required of the State employees administering and enforcing this part; (4) That the State-Federal cooperative agreement may be terminated at any time by the mutual agreement of the parties to the agreement; (5) That the State-Federal cooperative agreement may be terminated by either party by giving written notice to the other party at least 90 days before a specified date of termination; and (6) The provisions for liaison between the State and the Administrator concerning the administration and enforcement of this part as may be agreed by the Administrator and the State. (c) If at any time the Administrator shall determine that the State lead agency or other State agencies charged with carrying out the terms of the State-Federal cooperative agreement are unable or unwilling to carry out the terms of the agreement, or, if for any reason the Administrator or State shall determine that the agreement is no longer in effect, the Administrator shall administer and enforce this part in the State. (d) If a State shall notify the Administrator of its readiness to enter into a State-Federal cooperative agreement prior to passage of State legislation and regulations governing recordkeeping by certified applicators of restricted use pesticides, the Administrator may enter into a State-Federal cooperative agreement with the State on an annual basis. (e) For a State to be eligible for Federal technical or financial assistance under a State-Federal cooperative agreement, the State requirements for recordkeeping by all certified applicators of restricted use pesticides must be comparable to the recordkeeping requirements under this part. Sec. 110.7 Penalties. Any certified applicator who violates 7 U.S.C. 136i-1(a), (b), or (c) or this part shall be subject to a civil penalty of not more than the amount specified in section Sec. 3.91(b)(1)(i)(A) of this title in the case of the first offense, and in the case of subsequent offenses, be subject to a civil penalty of not less than the [[Page 290]] amount specified in Sec. 3.91(b)(1)(i)(B) of this title for each violation, except that the civil penalty shall be less than the amount specified in Sec. 3.91(b)(1)(i)(B) of this title if the Administrator determines that the certified applicator made a good faith effort to comply with 7 U.S.C. 136i-1(a), (b), and (c) and this part. [70 FR 29579, May 24, 2005] Sec. 110.8 Administrative procedures. (a) Notice of violation. If there is reason to believe that a person has violated or is violating any provision of this part, the complainant may file with the Presiding Officer a notice of violation signed by the complainant. The notice of violation shall state: (1) The date of issuance of the notice of violation; (2) The nature of the proceeding; (3) The identification of the complainant and respondent; (4) The legal authority under which the proceeding is instituted; (5) The allegations of fact and provisions of law which constitute the basis for the proceeding; (6) The amount of the proposed civil penalty; and (7) The name, mailing address, and telephone number of the Presiding Officer. (b) Answer. Within 30 days after the service of the notice of violation, the respondent shall file with the Presiding Officer an answer signed by the respondent or by the attorney of record in the proceeding. The answer shall: (1) Admit, deny, or explain each of the allegations in the notice of violation and set forth any defense asserted by the respondent; or (2) State that the respondent admits all the facts alleged in the notice of violation; or (3) State that the respondent admits the jurisdictional allegations in the notice of violation and neither admits nor denies the remaining allegations and consents to the issuance of an order without further procedure. (c) Default. Failure to file an answer within 30 days after service of the notice of violation shall be deemed, for purposes of the proceeding, an admission of the allegations in the notice of violation, and failure to deny or otherwise respond to an allegation in the notice of violation shall be deemed, for purposes of the proceeding, an admission of the allegation, unless the complainant and respondent have agreed to a consent decision pursuant to paragraph (e) of this section. (d) Amendment of notice of violation or answer. At any time prior to the filing of a motion for a hearing, the notice of violation or answer may be amended with the consent of the complainant and respondent or as authorized by the Presiding Officer upon a showing of good cause. (e) Consent decision. At any time before the Presiding Officer files the decision, the complainant and respondent may agree to the entry of a consent decision. The agreement shall be in the form of a decision signed by the complainant and respondent with appropriate space for signature by the Presiding Officer, and shall contain an admission of at least the jurisdictional facts, consent to the issuance of the agreed decision without further procedure, and such other admissions or statements as may be agreed to by the complainant and respondent. The Presiding Officer shall enter such decision without further procedure, unless an error is apparent on the face of the document. The consent decision shall have the same force and effect as a decision issued after a full hearing, shall become final upon issuance, and shall become effective in accordance with the terms of the decision. (f) Procedure upon failure to file an answer or admission of facts. The failure to file an answer with the Presiding Officer, or the admission by the answer of all the material allegations of fact contained in the notice of violation, shall constitute a waiver of hearing. Upon such admission or failure to submit an answer, complainant shall file with the Presiding Officer a proposed decision, along with a motion for the adoption of the proposed decision both of which shall be served upon the respondent by the Presiding Officer. Within 20 days after service of the motion and proposed decision, the respondent may file with the Presiding Officer objections to the motion and proposed decision. If the Presiding Officer finds that meritorious objections have been filed, [[Page 291]] complainant's motion shall be denied with supporting reasons. If meritorious objections are not filed, the Presiding Officer shall issue a decision without further procedure or hearing. Copies of the decision or denial of complainant's motion shall be served by the Presiding Officer upon the respondent and the complainant and may be appealed pursuant to paragraph (l) of this section. Where the decision as proposed by complainant is entered, such decision shall become final and effective without further proceedings 35 days after the date of service of the decision upon the respondent, unless there is an appeal to the Administrator by the complainant or respondent, pursuant to paragraph (l) of this section. (g) Conferences. (1) Upon motion of the complainant or respondent, the Presiding Officer may direct the complainant and respondent or their counsel to attend a conference at any reasonable time, prior to or during the course of the hearing, when the Presiding Officer finds that the proceeding would be expedited by a conference. Reasonable notice of the time and place of the conference shall be given. The Presiding Officer may order the complainant or respondent to furnish at or subsequent to the conference any or all of the following: (i) An outline of the case or defense; (ii) The legal theories upon which the party will rely; (iii) A list of documents which the party anticipates introducing at the hearing; and (iv) A list of anticipated witnesses who will testify on behalf of the party. At the discretion of the party furnishing such list of witnesses, the names of the witnesses need not be furnished if they are otherwise identified in some meaningful way such as a short statement of the type of evidence they will offer. (2) The Presiding Officer shall not order a party to furnish the information or documents listed in paragraph (g)(1) (i) through (iv) of this section if the party can show that providing the particular information or document is inappropriate or unwarranted under the circumstances of the particular case. (3) At the conference, the following matters may be considered: (i) The simplification of issues; (ii) The necessity of amendments to the notice of violation or answer; (iii) The possibility of obtaining stipulations of facts and of the authenticity, accuracy, and admissibility of documents, which will avoid unnecessary proof; (iv) The limitation of the number of expert or other witnesses; (v) Negotiation, compromise, or settlement of issues; (vi) The exchange of copies of proposed exhibits; (vii) The identification of documents or matters of which official notice may be requested; (viii) A schedule to be followed by the parties for completion of the actions decided at the conference; and (ix) Such other matters as may expedite and aid in the disposition of the proceeding. (4) A conference will not be stenographically reported unless so directed by the Presiding Officer. (5) In the event the Presiding Officer concludes that personal attendance by the Presiding Officer and the parties or counsel at a conference is unwarranted or impractical, but determines that a conference would expedite the proceeding, the Presiding Officer may conduct the conference by telephone or correspondence. (6) Actions taken as a result of a conference shall be reduced to a written appropriate order, unless the Presiding Officer concludes that a stenographic report shall suffice, or, the Presiding Officer elects to make a statement on the record at the hearing summarizing the actions taken. (h) Procedure for hearing--(1) Request for hearing. The complainant or respondent may request a hearing on the facts by including such a request in the notice of violation or answer, or by a separate request, in writing, filed with the Presiding Officer within the time in which an answer may be filed. Failure to request a hearing within the time allowed for the filing of the answer shall constitute a waiver of a hearing. In the event the respondent denies any material fact and fails to file a timely request for a hearing, the [[Page 292]] matter may be set down for hearing on motion of the complainant filed with the Presiding Officer or upon the Presiding Officer's own motion. (2) Time and place. If any material issue of fact is joined by the pleading, the Presiding Officer, upon motion of any of the parties stating that the matter is at issue and is ready for hearing, shall set a time and place for hearing as soon as feasible with due regard for the public interest and the convenience and necessity of the parties. The Presiding Officer shall issue a notice stating the time and place of hearing. If any change in the time or place of the hearing is made, the Presiding Officer shall issue a notice of this change, which notice shall be served upon the complainant and respondent, unless it is made during the course of an oral hearing and made a part of the transcript, or actual notice is given to the parties. (3) Appearances. The parties may appear in person or by attorney of record in the proceeding. Any individual who appears as an attorney must conform to the standard of ethical conduct required of practitioners before the courts of the United States. (4) Debarment of attorney. Whenever a Presiding Officer finds that an individual acting as attorney for any party to the proceeding is guilty of unethical or contumacious conduct, in or in connection with a proceeding, the Presiding Officer may order that the individual be precluded from further acting as attorney in the proceeding. An appeal to the Administrator may be taken from any such order, but no proceeding shall be delayed or suspended pending disposition of the appeal: Provided, That the Presiding Officer shall suspend the proceeding for a reasonable time for the purpose of enabling the party to obtain another attorney. (5) Failure to appear. A respondent who, after being duly notified, fails to appear at the hearing without good cause, shall be deemed to have waived the right to an oral hearing in the proceeding and to have admitted any facts which may be presented at the hearing. The failure by the respondent to appear at the hearing shall also constitute an admission of all the material allegations of fact contained in the notice of violation. The complainant shall have an election whether to follow the procedure set forth in paragraph (f) of this section or whether to present evidence, in whole or in part, in the form of affidavits, exhibits, or by oral testimony before the Presiding Officer. Failure to appear at a hearing shall not be deemed to be a waiver of the right to be served with a copy of the Presiding Officer's decision and to appeal to the Administrator pursuant to paragraph (l) of this section. (6) Order of proceeding. Except as may be determined otherwise by the Presiding Officer, the complainant shall proceed first at the hearing. (7) Evidence. (i) The testimony of witnesses at a hearing shall be on oath or affirmation and subject to cross-examination. (ii) Upon a finding of good cause, the Presiding Officer may order that any witness be examined separately and apart from all other witnesses except those who are parties to the proceeding. (iii) Evidence which is immaterial, irrelevant, or unduly repetitious, or which is not of the sort upon which responsible persons are accustomed to rely, shall be excluded insofar as practicable. (8) Objections. (i) If a party objects to the admission of any evidence or to the limitation of the scope of any examination or cross- examination or to any other ruling of the Presiding Officer, the party shall state briefly the grounds of such objection, whereupon an automatic exception will follow if the objection is overruled by the Presiding Officer. (ii) Only objections made before the Presiding Officer may subsequently be relied upon in the proceeding. (9) Exhibits. Unless the Presiding Officer finds that the furnishing of copies is impracticable, four copies of each exhibit shall be filed with the Presiding Officer: Provided, That, where there are more than two parties in the proceeding, an additional copy shall be filed for each additional party. A true copy of an exhibit may be substituted for the original. [[Page 293]] (10) Official records or documents. An official government record or document or entry in such a record or document, if admissible for any purpose, shall be admissible in evidence without the production of the individual who made or prepared the same, and shall be prima facie evidence of the relevant facts stated in the record or document. Such record or document shall be evidenced by an official publication of the record or document or by a copy certified by an individual having legal authority to make such certification. (11) Official notice. Official notice shall be taken of such matters as are judicially noticed by the courts of the United States and of any other matter of technical, scientific, or commercial fact of established character: Provided, That the parties shall be given adequate notice of matters so noticed, and shall be given adequate opportunity to show that such facts are erroneously noticed. (12) Offer of proof. Whenever evidence is excluded by the Presiding Officer, the party offering such evidence may make an offer of proof, which shall be included in the transcript. The offer of proof shall consist of a brief statement describing the evidence excluded. If the evidence consists of a brief oral statement, the statement shall be included in the transcript in its entirety. If the evidence consists of an exhibit, it shall be marked for identification and inserted in the hearing record. In either event, the evidence shall be considered a part of the transcript and hearing record if the Administrator, upon appeal, decides the Presiding Officer's ruling excluding the evidence was erroneous and prejudicial. If the Administrator, upon appeal, decides the Presiding Officer's ruling excluding the evidence was erroneous and prejudicial and that it would be appropriate to have such evidence considered a part of the hearing record, the Administrator may direct that the hearing be reopened to permit the taking of such evidence or for any purpose in connection with the excluded evidence. (13) Transcript. Hearings shall be recorded and transcribed verbatim. (i) Post-hearing procedure--(1) Corrections to transcript. (i) Within the period of time fixed by the Presiding Officer, any party may file a motion proposing corrections to the transcript. (ii) Unless a party files a motion proposing corrections to the transcript in the time fixed by the Presiding Officer, the transcript shall be presumed, except for obvious typographical errors, to be a true, correct, and complete transcript of the testimony given at the hearing and to contain an accurate description or reference to all exhibits received in evidence and made part of the hearing record and shall be deemed to be certified without further action by the Presiding Officer. (iii) As soon as practicable after the close of the hearing and after consideration of any timely objection filed as to the transcript, the Presiding Officer shall issue an order making any corrections to the transcript which the Presiding Officer finds are warranted, which corrections shall be entered on to the original transcript by the Presiding Officer without obscuring the original text. (2) Proposed finding of fact, conclusions, order, and briefs. Prior to the Presiding Officer's decision, each party shall be afforded a reasonable opportunity to submit for consideration proposed findings of fact, conclusions, order, and brief in support of the proposed findings of fact, conclusions and order. A copy of each such document filed by a party shall be served upon each of the other parties. (3) Presiding Officer's decision. (i) The Presiding Officer shall issue a decision within 30 days after the hearing, or, if any party submits proposed findings of fact, conclusions, order, and a brief in support thereof in accordance with paragraph (i)(2) of this section, 30 days after the last such submission. The Presiding Officer's decision shall include the Presiding Officer's findings of the fact, conclusions of law, and the reasons or basis for the findings of fact and conclusions of law. (ii) The Presiding Officer's decision shall become effective without further proceedings 35 days after the date of service of the decision upon the respondent, unless there is an appeal to the Administrator by a party to the proceeding pursuant to paragraph (l) of this section. [[Page 294]] (j) Motions and requests--(1) General. All motions and requests shall be filed with the Presiding Officer, and served upon all the parties, except: (i) requests for extensions of time pursuant to paragraph (m)(3) of this section; and (ii) motions and requests made on the record during the oral hearing. The Presiding Officer shall rule upon all motions and requests filed or made prior to the filing of an appeal of the Presiding Officer's decision pursuant to paragraph (l) of this section except motions directly relating to the appeal. Thereafter, the Administrator will rule on any motions and requests, as well as the motions directly relating to the appeal. (2) Motions entertained. (i) Any motion will be entertained other than a motion to dismiss on the pleading. (A motion by the complainant seeking the voluntary dismissal of the notice of violation may be entertained by the Presiding Officer or the Administrator.) (ii) All motions and requests concerning the notice of violation must be made within the time allowed for filing an answer, except motions by the complainant seeking voluntary dismissal of the notice of violation. (3) Contents. All written motions and requests shall state the particular order, ruling, or action desired and the grounds for the order, ruling, or action desired. (4) Response to motions and requests. Within 10 days after service of any written motion or request, or within a shorter or longer period as may be fixed by the Presiding Officer or the Administrator, an opposing party may file a response to the motion or request. The other party shall have no right to reply to the response; however, the Presiding Officer or the Administrator, in their discretion, may order that a reply be filed. (k) Presiding Officer--(1) Assignment. No Presiding Officer shall be assigned to serve in any proceeding who: (i) Has any pecuniary interest in any matter or business involved in the proceeding; (ii) Is related within the third degree by blood or marriage to any party to the proceeding; or (iii) Has any conflict of interest which might impair the Presiding Officer's objectivity in the proceeding. (2) Disqualification of Presiding Officer. (i) Any party to the proceeding may, by motion made to the Presiding Officer, request that the Presiding Officer withdraw from the proceeding because of an alleged disqualifying reason. Such motion shall set forth with particularity the grounds of alleged disqualification. The Presiding Officer may then either rule upon or certify the motion to the Administrator, but not both. (ii) A Presiding Officer shall withdraw from any proceeding for any reason deemed by the Presiding Officer to be disqualifying. (3) Powers. The Presiding Officer, in any assigned proceeding, shall have power to: (i) Rule upon motions and requests; (ii) Set the time and place of a conference and the hearing, adjourn the hearing from time to time, and change the time and place of hearing; (iii) Administer oaths and affirmations; (iv) Summon and examine witnesses and receive evidence at the hearing; (v) Admit or exclude evidence; (vi) Hear oral argument on facts or law; (vii) Do all acts and take all measures necessary for maintenance or order, including the exclusion of contumacious counsel or other persons; and (viii) Take all other actions authorized under this section. (l) Appeal to the Administrator--(1) Filing of petition. Within 30 days after receiving notice of the Presiding Officer's decision, a party who disagrees with the decision, or any part of the Presiding Officer's decision, or any ruling by the Presiding Officer or a party who alleges a deprivation of rights, may appeal the Presiding Officer's decision or rulings to the Administrator by filing an appeal petition with the Administrator. As provided in paragraph (h)(8) of this section, objections regarding evidence or a limitation regarding examination or cross examination or other ruling made before the Presiding Officer may be relied upon in an appeal. The appeal petition shall state [[Page 295]] the name and address of the person filing the appeal petition. Each issue set forth in the appeal petition, and the arguments on each issue, shall be separately numbered; shall be plainly and concisely stated; and shall contain detailed citations of the record, statutes, regulations, or authorities being relied upon in support of the argument. A brief may be filed in support of the appeal simultaneously with the appeal petition. (2) Response to appeal petition. Within 20 days after the service of a copy of an appeal petition and any brief in support of the appeal petition, filed by a party to the proceeding, any other party may file with the Administrator a response in support of or in opposition to the appeal petition and, in such response any relevant issue, not presented in the appeal petition, may be raised. (3) Transmittal of record. Whenever an appeal to the Presiding Officer's decision is filed and a response to the appeal has been filed or time for filing a response has expired, the Presiding Officer shall transmit to the Administrator the record of the proceeding. The record shall include: the pleading; motions and requests filed and rulings on such motions and requests; the transcript of the testimony taken at the hearing, together with the exhibits filed in connection with the hearing; any documents or papers filed in connection with a conference; such proposed findings of fact, conclusions, and orders, and briefs in support thereof, as may have been filed in connection with the proceeding; the Presiding Officer's decision; and such exceptions, statements of objections and briefs in support thereof as may have been filed in the proceeding. (4) Decision of the Administrator on appeal. As soon as practicable after the receipt of the record from the Presiding Officer, the Administrator, upon the basis of and after due consideration of the record and any matter of which official notice is taken, shall rule on the appeal. If the Administrator decides that no change or modification of the Presiding Officer's decision is warranted, the Administrator may adopt the Presiding Officer's decision as the final order in the proceeding, preserving any right of the party bringing the appeal to seek judicial review of such decision in the proper forum. (m) Filing; service; extensions of time; and computation of time-- (1) Filing; number of copies. Except as otherwise provided in this section, all documents or papers required or authorized by this section to be filed with the Presiding Officer or Administrator shall be filed in quadruplicate: Provided, That where there are more than two parties in the proceeding, an additional copy shall be filed for each additional party. (2) Service; proof of service. Copies of all documents or papers required or authorized by this section to be filed with the Presiding Officer or Administrator shall be served upon the parties by the person with whom such documents or papers are filed. Service shall be made either: (i) By delivering a copy of the document or paper to the individual to be served or to a member of the partnership to be served, or to the president, secretary, or other executive officer or any director of the corporation or association to be served, or to the attorney of record representing such person; or (ii) By leaving a copy of the document or paper at the principal office or place of business or residence of such individual, partnership, corporation, organization, or association, or of the attorney of record representing such person and mailing by regular mail another copy to such person at such address; or (iii) By registering or certifying and mailing a copy of the document or paper, addressed to such individual, partnership, corporation, organization, or association, or to the attorney of record representing such person, at the last known residence or principal office or place of business of such person: Provided, That if the registered or certified document or paper is returned undelivered because the addressee refused or failed to accept delivery, the document or paper shall be served by remailing it by regular mail. Proof of service under this paragraph shall be made by the certificate of the person who actually made the service: Provided, That if the service be made by mail, under paragraph (m)(2)(iii) of this section, proof of service shall be made by the return [[Page 296]] post-office receipt, in the case of registered or certified mail, or by the certificate of the person who mailed the matter by regular mail. Any certificate or post-office receipt returned to the Presiding Officer or Administrator shall be filed by the Presiding Officer or Administrator, and made a part of the record of the proceeding. (3) Extensions of time. The time for the filing of any document or paper required or authorized under this section to be filed may be extended by the Presiding Officer or the Administrator as provided in paragraph (j) of this section, if in the judgment of the Presiding Officer or the Administrator, as the case may be, there is good reason for the extension. In all instances in which time permits, notice of the request for extension of the time shall be given to the other party with opportunity to submit views concerning the request. (4) Effective date of filing. Any document or paper required or authorized under this section to be filed shall be deemed to be filed at the time when it reaches the person with whom the document or paper must be filed. (5) Computation of time. Saturdays, Sundays, and holidays shall be included in computing the time allowed for the filing of any document or paper: Provided, That, when such time expires on a Saturday, Sunday, or holiday, such period shall be extended to include the next following business day. (n) Ex parte communications. (1) At no stage of the proceeding between its institution and the issuance of the final decision shall the Presiding Officer or Administrator discuss ex parte the merits of the proceeding with any person who is connected with the proceeding in an advocative or in an investigative capacity, or with any representative of such person: Provided, That the Presiding Officer or Administrator may discuss the merits of the case with such a person if all parties to the proceeding, or their attorneys have been given notice and an opportunity to participate. A memorandum of such discussion shall be included in the record. (2) No interested person shall make or knowingly cause to be made to the Presiding Officer or Administrator an ex parte communication relevant to the merits of the proceeding. (3) If the Presiding Officer of the Administrator receives an ex parte communication in violation of this paragraph (n), the individual who receives the communication shall place in the public record of the proceeding: (i) Any such written communication; (ii) Memoranda stating the substance of such oral communication; and (iii) Any written response, and memoranda stating the substance of any oral response to the ex parte communication. (4) For purposes of this section ex parte communication means an oral or written communication not on the public record with respect to which reasonable prior notice to all parties is not given, but it shall not include requests for status reports on any matter or the proceeding. Sec. 110.9 Miscellaneous. In accordance with Section 3507 of the Paperwork Reduction Act of 1980 (44 U.S.C. 3507), the recordkeeping provisions in this rule have been approved by the Office of Management and Budget (OMB) and there are no new requirements. The assigned OMB control number is 0581-AA39. PARTS 111 159 [RESERVED] [[Page 297]] SUBCHAPTER F_NAVAL STORES PART 160_REGULATIONS AND STANDARDS FOR NAVAL STORES--Table of Contents General Sec. 160.1 Definitions of general terms. 160.2 Spirits of turpentine defined. 160.3 Rosin defined. 160.4 Reclaimed rosin. 160.5 Standards for naval stores. 160.6 Standard designations for turpentine. 160.7 Gum spirits of turpentine. 160.8 Steam distilled wood turpentine. 160.9 Destructively distilled wood turpentine. 160.10 Sulphate wood turpentine. 160.11 Quality requirements. 160.12 Standard designations for rosin. 160.13 Grade designations for rosin. 160.14 Opaque rosin. Establishment of New and Modified Standards 160.15 New standards. 160.16 Modification of existing standards. Methods of Analysis, Inspection, Sampling and Grading 160.17 Laboratory analysis. 160.18 Determining the grade of rosin. 160.19 Samples of rosin for grading. 160.20 More than one grade in a container. 160.21 Rosin not fit for grading. 160.22 Collecting samples; issuing certificates. 160.23 Disposition of samples. Analysis, Inspection, and Grading on Request 160.24 Inspection on request. 160.24a Inspection as to condition of drums containing rosin and the quality and condition of the rosin therein upon request. 160.25 How requests shall be made. 160.26 Withdrawal of request. 160.27 Containers to be made ready. 160.28 Tank cars of turpentine. 160.29 Containers to remain intact. 160.30 Contents of containers to be designated. 160.31 Time and manner of sampling. 160.32 Marking containers. 160.33 Containers not acceptable for inspection. 160.34 Responsibility of interested person. 160.35 Illegible inspection marks. 160.36 Authority for changing marks. 160.37 Prior marks to be removed. Request Inspection by Licensed Inspectors 160.38 Permit to use licensed inspector. 160.39 Form of application for license or permit. 160.40 Applicant for license to be examined. 160.41 Issuance of temporary license. 160.42 Limitation of license. 160.43 Licensed inspector to be disinterested. 160.44 Other duties of licensed inspectors. 160.45 Conditions governing licensed inspection. 160.46 Identification of containers. 160.47 Periodic re-inspection. 160.48 Form of certificate. 160.49 Responsibility for inspection certificates and forms. 160.50 Reports to be made by accredited processors. 160.51 Report of non-conformance. 160.52 Suspension or revocation of licenses. 160.53 Stopping inspection by suspended inspector. 160.54 Suspension or revocation of permits. 160.55 Voluntary discontinuance of licensed inspection. 160.56 Compensation of licensed inspectors. 160.57 Fees for licensed inspection permits. 160.58 Fees for inspection and certification by licensed inspectors. 160.59 Appeal inspections. 160.60 Charge for appeal inspection. Certificates and Reports 160.61 Kinds of certificates issued. 160.62 When a certificate may be issued. 160.63 When a certificate may not be issued. 160.64 Issuance of loan and sale certificate. 160.65 Prior certification required. Fees and Charges for Services Rendered 160.66 Fees for inspection services. 160.67 Fees under cooperative agreements. 160.68 Collection of fees. 160.69 Expenses to be borne by person requesting service. 160.70 Rendition of claims. 160.71 Delinquent claims. Loan and Care of United States Standards 160.73 Availability of standards. 160.74 Loan of standards without security. 160.75 Loan of standards under security deposit. 160.76 Annual charge for use of standards. 160.77 Reporting on use of standards. 160.78 Loss or damage of standards. 160.79 Request for additional standards. 160.80 Denial of loan of additional standards. 160.81 Surrender of standards. 160.82 Return of security. 160.83 Miscellaneous receipts. [[Page 298]] Sales and Shipments 160.84 Identification of shipments. 160.85 Sale of mixed turpentine not lawful. 160.86 Prohibited use of United States Standards. 160.87 Prohibited use of word ``turpentine'' or derivatives thereof. 160.88 Permitted use of words ``turpentine'' and ``rosin.'' 160.89 Medicinal preparations. Labeling, Advertising and Packing 160.90 False, misleading, or deceitful practices. 160.91 Meaning of words ``pine'' and ``pine tree.'' 160.92 Meaning of word ``gallon.'' 160.93 Powdered rosin. 160.94 Spirits of turpentine for medicinal use. Proceedings in Case of Violation 160.95 Proceedings prior to reporting violations of the act. 160.96 Report of violations for prosecution. 160.97 Publication. Specific Fees Payable for Services Rendered 160.201 Fees generally for field inspection and certification of naval stores and drum containers of rosin. 160.202 Fees generally for laboratory analysis and testing. 160.203 Fees for inspection and certification of other naval stores material. 160.204 Fees for extra cost and hourly rate service. 160.205 Permit fees for eligible processing plants under licensed inspection. Authority: 7 U.S.C. 94, 1624. Source: 11 FR 14665, Dec. 27, 1946; 17 FR 221, Jan. 9, 1952; 20 FR 6433, Sept. 1, 1955, unless otherwise noted. General Sec. 160.1 Definitions of general terms. The terms as defined in section 2 of the Naval Stores Act shall apply with equal force and effect when used in the provisions in this part. In addition, unless the context requires otherwise, the terms hereinafter set forth shall be defined respectively as follows: (a) Act. The Naval Stores Act of March 3, 1923 (42 Stat. 1435; 7 U.S.C. 91-99). (b) Department. The United States Department of Agriculture. (c) Administrator. The Administrator of the Agricultural Marketing Service of the Department, or any officer or employee of the Department to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. (d) Official inspector. Any person designated or licensed by the Secretary to sample, examine, analyze, classify or grade naval stores. (e) Licensed inspector. A person licensed by the Administrator upon recommendation of an accredited processor to act as an official inspector with respect to naval stores produced at an eligible processing plant of such processor. (f) Eligible processing plant. A plant which on examination by the Administrator has been found to be designed, operated, and staffed so as to permit proper samplings and inspections of the naval stores produced thereat, and where a substantial proportion of the output comes from oleoresin obtained from trees growing on land not owned or leased by the processor himself, or from oleoresin contained within felled trees or stumps removed from such land. (g) Accredited processor. Any person owning or having charge of or jurisdiction over the operation of an eligible processing plant, to whom a permit has been issued under these regulations to have inspections of naval stores made by a licensed inspector. (h) Interested person. Any person who is a party to a factual or prospective transaction in a specific lot of naval stores, whether as producer, seller, shipper, dealer, or purchaser thereof; or any person who in the opinion of the Administrator has sufficient and proper interest in the analysis, classification, grading, or sale of naval stores to merit the loan and use of duplicates of the United States Standards. (i) Dealer. Any person who sells or ships in commerce any naval stores produced by a person other than himself. (j) Cooperative agreement. A written agreement between the Department and any person specifying the conditions under which special inspection [[Page 299]] personnel may be designated and procedures established, not otherwise available under existing inspection programs, in order to make possible a continuous, day-by-day inspection of naval stores for such person, or to provide facilities for carrying out experimental studies on authentic naval stores related to the inspection and marketing thereof. (k) Standards. The official Naval Stores Standards of the United States for classification and grading of spirits of turpentine and rosin. (l) Analysis. Any examination by physical, chemical, or sensory methods. (m) Classification. Designation as to kind of spirits of turpentine or rosin. (n) Grading. Determination of the grade of turpentine or rosin by comparison with the standards. (o) Certificate. The official certificate issued under the provisions of the act and the provisions in this part to show the results of any examination, analysis, classification, or grading of naval stores by an official inspector. (p) Label. Any word, combination of words, coined or trade name, picturization of any natural scene or article, or any limitation thereof, applied to, superimposed upon, impressed into, or in any other manner attached to a container of naval stores or other article coming within the scope of the act, by which the nature, kind, quality, or quantity of the contents of such container may be indicated. (q) Container. Any receptacle in which naval stores are placed for inspection or distribution in commerce; includes barrel, drum, tank, tank car, bag, bottle, can, or other receptacle. [11 FR 14665, Dec. 27, 1946, as amended at 17 FR 221, Jan. 9, 1952; 20 FR 6433, Sept. 1, 1955; 46 FR 47055, Sept. 24, 1981; 47 FR 3344, Jan. 25, 1982] Sec. 160.2 Spirits of turpentine defined. Spirits of turpentine, also commonly known as turpentine, is the colorless or faintly colored volatile oil consisting principally of terpene hydrocarbons of the general empirical formula C10 H16 and having a characteristic odor and taste. It occurs naturally in and may be recovered by distillation from the oleoresinous secretions obtained from living trees of the family Pinaceae, or present in the cellular structure, or wood, of species thereof. Sec. 160.3 Rosin defined. Except as provided in Sec. 160.15, rosin is the vitreous, well- strained, transparent, solid resin which (a) remains after the volatile terpene oils are distilled from (1) the oleoresin collected from living trees or (2) the oleoresin extracted from wood; or (b) remains after distillation of the fatty acids from tall oil recovered from wood in the course of its chemical disintegration to produce cellulose. In addition to the free resin acids, rosin may contain relatively small proportions of fatty acids, resin esters and other esters, unsaponifiable resenes, and non-resinous foreign matter naturally occurring therein. Sec. 160.4 Reclaimed rosin. Reclaimed rosin is rosin that has been recovered or reclaimed by any means from waste or deteriorated material: Provided, That such reclaimed product may be graded as rosin under the act and the provisions in this part only if the concentration of rosin acids therein has not been reduced below the concentration normal for rosin, and any residual or contaminating component remaining from the waste material itself or from any article used in the recovery process is not sufficient to cause the physical or chemical properties of the reclaimed product to differ substantially from the normal properties of rosin. Sec. 160.5 Standards for naval stores. In addition to the standards of identity for spirits of turpentine and rosin and the grade designations for rosin specified in the act, certain standards for naval stores have been promulgated by the Administrator pursuant to the act as indicated in Sec. 160.301 et seq. Sec. 160.6 Standard designations for turpentine. Spirits of turpentine within the meaning of the act and the provisions in this part shall be designated as ``gum spirits of turpentine,'' ``steam distilled wood turpentine,'' ``destructively distilled wood turpentine,'' or [[Page 300]] ``sulphate wood turpentine,'' as the case may be. Sec. 160.7 Gum spirits of turpentine. The designation ``gum spirits of turpentine'' shall refer to the kind of spirits of turpentine obtained by distillation of the oleoresin (gum) from living trees, and commonly known prior to the passage of the act as gum spirits, gum turpentine, spirits of turpentine, or oil of turpentine. Sec. 160.8 Steam distilled wood turpentine. The designation ``steam distilled wood turpentine'' shall refer to the kind of spirits of turpentine obtained by steam distillation from the oleoresinous component of wood whether in the presence of the wood or after extraction from the wood, and commonly known prior to the passage of the act as wood turpentine, steam distilled turpentine, steam distilled wood turpentine, or S. D. wood turpentine. Sec. 160.9 Destructively distilled wood turpentine. The designation ``destructively distilled wood turpentine'' shall refer to the kind of spirits of turpentine prepared from the distillate obtained in the destructive distillation (carbonization) of wood, and commonly known prior to the passage of the act as destructively distilled wood turpentine or D.D. wood turpentine. Sec. 160.10 Sulphate wood turpentine. The designation ``sulphate wood turpentine'' shall refer to the kind of spirits of turpentine prepared from the condensates that are recovered in the sulphate process of cooking wood pulp, and commonly known as sulphate turpentine or sulphate wood turpentine. Sec. 160.11 Quality requirements. The several standards for spirits of turpentine, as defined in Sec. Sec. 160.8 to 160.10, inclusive, shall be deemed to mean the respective kinds of spirits of turpentine having properties that conform with the standard specifications adopted therefor by the American Society for Testing Materials, contained in appendix A to this part. Sec. 160.12 Standard designations for rosin. (a) Rosin within the meaning of the act and the provisions in this part shall be designated as ``gum rosin,'' ``wood rosin,'' or ``tall oil rosin,'' as the case may be. (b) The designation ``gum rosin'' shall refer to the kind of rosin remaining after the distillation of gum spirits of turpentine from the oleoresin (gum) obtained from living pine trees. (c) The designation ``wood rosin'' shall refer to the kind of rosin recovered after the distillation of the volatile oil from the oleoresin within or extracted from pine wood by any suitable process, followed by any necessary further refinement. (d) The designation ``tall oil rosin'' shall refer to the kind of rosin remaining after the removal of the fatty acids from tall oil by fractional distillation, and having the characteristic form and appearance and other physical and chemical properties normal for other kinds of rosin. Sec. 160.13 Grade designations for rosin. The grades of rosin shall be designated, from highest to lowest, by the following letters, respectively: XC, XB, XA, X, WW, WG, N, M, K, I, H, G, F, E, D, B. In addition, the letters OP shall be used to designate the grade of opaque rosin, and the letters FF shall be used to designate the grade of normal wood rosin: Provided, That the product recovered in the refining of wood rosin, that is darker in color than the standard for FF grade, and that contains rosin acids in lesser quantity than is normal for such rosin, shall be graded and designated as B wood resin. [11 FR 14665, Dec. 27, 1946, as amended at 17 FR 221, Jan. 9, 1952; 33 FR 8722, June 14, 1968] Sec. 160.14 Opaque rosin. The term ``opaque rosin'' shall apply to the article resulting when rosin undergoes internal modification indicated by a turbid, clouded, or opaque appearance, that is, loss of transparency, brought about by the occlusion of moisture or the formation of an excessive quantity of resin acid crystals in the rosin. [[Page 301]] Establishment of New and Modified Standards Sec. 160.15 New standards. Whenever in the opinion of the Administrator a new standard for any naval stores is necessary in the interest of the trade, he shall announce a hearing thereon, to be held not less than 3 months subsequent to such announcement. Notice of the hearing stating the terms or description of the proposed new standard, or a summary thereof, shall be given by publication in the Federal Register and by such other means as may be practicable. The hearing shall be conducted by an official designated by the Administrator, and reasonable opportunity shall be afforded at the hearing to all interested persons to present their views, arguments and data, verbally or in writing, in favor of or in opposition to the proposed new standard. All relevant material presented at said hearing, or a summary thereof, and a recommendation as to adoption or rejection of the proposed new standard shall be transmitted to the Administrator for his consideration. A new standard established and promulgated by the Administrator shall become effective not less than 3 months after the promulgation thereof. Sec. 160.16 Modification of existing standards. Whenever in the opinion of the Administrator a modification of an existing standard for naval stores is necessary in the interest of the trade, he shall announce a hearing thereon, to be held not less than 6 months subsequent to such announcement. Notice of the hearing stating the terms or description of the proposed modification of any standard, or a summary thereof, shall be given by publication in the Federal Register and by such other means as may be practicable. The hearing shall be conducted by an official designated by the Administrator, and reasonable opportunity shall be afforded to all interested persons to present their views, arguments and data, verbally or in writing, in favor of or in opposition to the proposed modification. All relevant material presented at said hearing, or a summary thereof, and a recommendation as to adoption or rejection of the proposed modification shall be transmitted to the Administrator for his consideration. A modified standard established and promulgated by the Administrator shall become effective not less than 6 months after the promulgation thereof. Methods of Analysis, Inspection, Sampling and Grading Sec. 160.17 Laboratory analysis. The analysis and laboratory testing of naval stores shall be conducted, so far as is practicable, according to methods of the American Society for Testing Materials. When any such method is deemed to be insufficient or unsuitable or when no method has been so presented, the analysis shall be made according to any method deemed appropriate by the Administrator. Sec. 160.18 Determining the grade of rosin. The grade of rosin shall be determined by comparing a representative sample, taken and prepared in accordance with the provisions in this part, with the appropriate standard types. The grade shall be the grade designation of the standard type which the sample equals or excels in color, but below the next higher grade. Sec. 160.19 Samples of rosin for grading. Samples of rosin for grading shall be approximately cubical in shape, and shall be seven-eighths inch thick in the direction through which they are viewed or graded. Samples may be taken by any of the following methods: (a) By cutting or cleaving the same from a lump of the rosin removed from the solid mass in the barrel or drum, the top side of which lump shall come from not less than 4 inches below the surface of the rosin. (b) By placing a tin mold of suitable design inside the barrel or drum through an opening in the side, the center of which opening is approximately 9 inches from the top or 12 inches from the bottom so that when the container is filled, the rosin within the mold will have come from a position not less than 4 inches below the surface of the rosin. The mold thus [[Page 302]] placed must be entirely within the barrel or drum and completely encased in the rosin. (c) By suspending in the barrel or drum of molten rosin a clean tinplate mold, \7/8\ inch square (inside) and 1\1/2\ inches or more in length, in such a manner that it will be in a horizontal position at least 2 inches below the surface of the rosin after it has thoroughly cooled. Such sample shall not be spiked from the barrel or drum until it is completely cooled. (d) By withdrawing a quantity of molten rosin from a full container of 150 pounds content or less, pouring the rosin into a suitable mold, and allowing it to cool and solidify slowly: Provided, That samples taken to represent a single batch or charge made by intermittent distillation of oleoresin shall be taken from not less than two containers, one of which shall be selected when one fourth of the batch has been placed in the containers, and the other shall be from the last container filled. (e) By withdrawing a quantity of molten rosin from a full drum that has been filled after a preliminary cooling period, pouring the rosin into a suitable mold, and allowing it to cool and solidify slowly: Provided, That such sample shall not be taken until at least one hour has elapsed after the drum was filled: And provided further, That the selection of drums to be sampled shall be in accordance with the method of selecting small containers as set forth in paragraph (d) of this section. Rosin in drums sampled in this manner will be graded and certified only when the sampling is performed by an official inspector. Rosin in open head barrels shall not be sampled by this method. (f) By collecting in a suitable vessel a quantity of molten rosin from each successive batch or charge as it is delivered into a tank car, pouring the respective quantities of rosin into suitable molds, and allowing them to cool and solidify: Provided, That any darkening of the rosin subsequent to such sampling will not be recognized as affecting the correctness of the grades assigned to the rosin at the time it was loaded in the car. Rosin so sampled while in process of being placed in a tank car will be graded and certified only when the sampling is performed by an official inspector. Sec. 160.20 More than one grade in a container. When a sample from the bottom of a barrel or drum shows not more than one grade lower than that of a top sample taken in accordance with Sec. 160.19, the grade of the rosin shall be that of such top sample: Provided, That if such ``bottom head'' sample shows more than one grade lower than the top sample, the grade assigned to the rosin shall be that of the darkest or lowest grade of rosin in the container. Sec. 160.21 Rosin not fit for grading. An article consisting of rosin with an excessive amount of trash or other visible extraneous foreign material, or an article that is of such color or appearance as not to permit its accurate classification and grading in accordance with the standards provided for rosin, shall not be classified, graded, marked, sold, or offered for sale in commerce as rosin. Sec. 160.22 Collecting samples; issuing certificates. The collection of official samples for the purpose of putting into effect any of the provisions of the act, and the issuance of certificates reporting the results of any analysis, classification, or grading shall be limited to official inspectors and to such other personnel of the Department as may be authorized. Sec. 160.23 Disposition of samples. All samples taken by an official inspector or submitted by an interested person shall become and remain the property of the Department, to be disposed of as the Administrator may determine. Analysis, Inspection, and Grading on Request Sec. 160.24 Inspection on request. Insofar as it may be practicable, official inspectors shall sample, analyze, classify, or grade any naval stores at the request of any interested person, as provided for by the act and in accordance with the provisions in this part. [[Page 303]] Sec. 160.24a Inspection as to condition of drums containing rosin and the quality and condition of the rosin therein upon request. Before or after the shipment in commerce of any lot of rosin in drums from a processing or storage point, and upon request by an interested person, an inspection may be made by an official inspector of the external appearance of the drums, and a report may be made by such inspector, on the basis of such inspection, of the condition, including soundness, of the drums with reference to the effect thereof upon the quality, and preservation of the quality, of the rosin in the drums. In conjunction with such service, when practicable, the inspector may upon similar request determine and certify the grade, class, other quality, or condition of the rosin within the drums, and report the internal condition of the drums, under any applicable standards and procedural instructions issued to such inspector by the Administrator. Certificates and reports issued under this section will be furnished only to the interested person requesting the service. Fees and charges for service under this section shall be paid by such interested person in accordance with Sec. Sec. 160.201, 160.202, and 160.204. [20 FR 6433, Sept. 1, 1955] Sec. 160.25 How requests shall be made. An interested person desiring the analysis, classification, or grading of any naval stores, or of samples thereof, shall submit to the nearest official inspector a written request, in which he shall state the number and kind of containers of rosin, or the number and kind of containers and the number of gallons of turpentine, as the case may be, together with the name of the interested person for whose account such service is requested, his interest in the naval stores, and other information by which the identity of the naval stores in question and the propriety of its examination may be determined. Requests for seasonal or recurrent services shall so indicate, and the approximate quantity of naval stores to be graded and the duration of the desired service shall be stated. Fees for such service shall be paid in accordance with the provisions in this part. Sec. 160.26 Withdrawal of request. A request for service under the provisions in this part may be withdrawn at any time before the service has been completed, on notice to the official inspector: Provided, however, That the interested person shall reimburse the United States for the time spent and any expenses incurred prior to receipt of such withdrawal notice. Sec. 160.27 Containers to be made ready. The interested person shall cause the naval stores to be made available, and shall provide any held required to remove the bungs or heads, or otherwise open the containers for sampling, to spike the rosin or extract the sampler devices from the barrels or drums, to rebung or otherwise close the containers, to handle the commodity for weighing, and to mark the containers at the direction of the official inspector. Sec. 160.28 Tank cars of turpentine. A tank car loaded for shipment with spirits of turpentine shall, after the same has been sampled for analysis, classification, and certification, be sealed by the official inspector. Any certificate issued thereon prior to shipment shall be valid only for a reasonable time to permit arrival at destination, and only so long as the seals placed thereon by the inspector remain unbroken. Sec. 160.29 Containers to remain intact. The results of any analysis, classification, or grading of naval stores will be certifiable only if the containers holding such naval stores remain intact as sampled until the analysis, classification, or grading has been completed and the results reported, except when the container is a tank car subject to demurrage. Sec. 160.30 Contents of containers to be designated. Prior to inspection at the request of the producer, containers of naval stores, other than tank cars, shall have marked thereon a designation by such producer of the kind or identity of the [[Page 304]] product in accordance with the standard of identity provided therefor by or under the act. Sec. 160.31 Time and manner of sampling. Except when batch sampling is authorized at an eligible processing plant using licensed inspectors, samples of naval stores to be used for official inspection and certification shall be taken direct from the commercial containers holding such naval stores by or under the immediate supervision of the inspector at the time of inspection. Sec. 160.32 Marking containers. The interested person shall provide any labor necessary for marking the containers, after the contents have been sampled and graded, at the direction of the official inspector. The container of an article which does not conform with any United States Standard for naval stores as to kind or grade, shall not be marked or certified, and any unauthorized marks appearing on the container shall be removed. Sec. 160.33 Containers not acceptable for inspection. Any container so filled or packed as to conceal the fact that it contains anything other than naval stores within the meaning of the act or the provisions in this part, and any naval stores in a container deemed by an official inspector to be unsuitable for use as a container of naval stores in commerce, shall not be accepted for classification or grading. Sec. 160.34 Responsibility of interested person. The sampling or acceptance of any sample of naval stores by an official inspector for use in grading and certifying the same at the request of an interested person, or the placing of any incorrect classification or grade marks upon the container thereof, or the issue of any incorrect certificate inadvertently to cover the contents, because of inability of the inspector to observe the true condition of the naval stores, shall not prevent the correction or recall of any such certificate, nor relieve the interested person from responsibility for the condition of the article or its container. Sec. 160.35 Illegible inspection marks. In case any mark placed on a container of rosin by or under the direction of an official inspector has become illegible, he will make such examination before remarking as may be necessary to establish the proper grade or identity of the rosin. No fee will be charged for this service, but the cost of handling, opening, spiking, and closing the container shall be borne by the interested person. Sec. 160.36 Authority for changing marks. No mark placed upon any container of naval stores by or at the direction of an official inspector shall be obliterated, covered up, defaced, or otherwise made illegible, except under authority of an official inspector. Sec. 160.37 Prior marks to be removed. Any marking appearing on a container to be used for naval stores, relating to the kind, classification, grade, certification, or method of inspection of naval stores shall be removed by the user whenever such marking does not in all respects describe the kind, classification, grade, certification, and method of inspection of the naval stores to be placed therein. Request Inspection by Licensed Inspectors Sec. 160.38 Permit to use licensed inspector. Any naval stores produced at an eligible processing plant, as herein defined, may be inspected, classified, graded, and certified by a licensed inspector, after the accredited processor has applied to and has been granted a permit by the Administrator to use a licensed inspector. Sec. 160.39 Form of application for license or permit. Applications for licenses to inspect and permits to have inspections made by licensed inspectors shall be made to the Administrator upon forms provided for the purposes. Each such application shall fully and truly state the information therein required and shall be signed by the applicant. [[Page 305]] Sec. 160.40 Applicant for license to be examined. Each applicant for a license shall be required to demonstrate his qualifications and competency to perform the duties of an official inspector at such time and place and in such manner as may be determined by the Administrator. Sec. 160.41 Issuance of temporary license. In a case of special urgency, and in the discretion of the Administrator, a temporary license may be issued without reference to Sec. 160.40 upon presentation of satisfactory evidence by the accredited processor of the need therefor and the competency of the applicant for such temporary license. Such processor shall receive prompt notice of the issuance of any such temporary license. A temporary licensee shall be subject to all the provisions in this part. A temporary license shall be valid for a specified period not to exceed 30 days, except that if application is made for a permanent license by a person at the same time he applies for a temporary license, any temporary license issued to him shall not expire until a permanent license has been denied or granted. Sec. 160.42 Limitation of license. The license issued by the Administrator to a licensed inspector of naval stores shall state the name of the processing plant or plants at which the licensee may perform the duties of an official inspector, and shall be countersigned by such official as may be designated and authorized. Sec. 160.43 Licensed inspector to be disinterested. No person who determines or controls sales policies or methods of distribution of an eligible processing plant, or the selling prices of the naval stores processed at such plant, shall be licensed as an inspector. Sec. 160.44 Other duties of licensed inspectors. A licensed inspector may perform duties other than those of an official inspector, to the extent indicated by the accredited processor and not disapproved in writing by the Administrator: Provided, That such additional duties not pertaining to the official inspection work shall not be permitted to interfere with the proper performance of the duties of the licensee as an official inspector. Sec. 160.45 Conditions governing licensed inspection. The work performed by licensed inspectors under the provisions in this part shall be supervised and reviewed by authorized representatives of the Administrator, who shall issue to such licensed inspectors instructions for taking, preserving, and identifying samples; marking and maintaining the identity of containers when filled; preparing, issuing, and disposing of certificates; the keeping of adequate inspection records; and such other procedures as may be necessary in carrying out the licensed inspection. The handling, sampling, grading, marking, and certification of naval stores at an eligible processing plant by a licensed inspector shall be conducted in accordance with such instructions and the provisions in this part. Sec. 160.46 Identification of containers. Containers packed with naval stores which have been inspected, classified, graded, and certified by a licensed inspector at an eligible processing plant shall be marked to show the name and location or other acceptable identification of the plant, and the legend ``U.S. Graded'' or ``U.S. Inspected'', and, in the case of rosin, the batch number indicating the date of production. Sec. 160.47 Periodic re-inspection. Any eligible processing plant may from time to time be re-inspected and any rosin produced by such plant may be graded or re-graded by any official inspector authorized to make such examinations. The results of such examinations shall be made known only to the affected processor, the licensed inspector, and to such employees of the Department officially authorized to receive such information. Sec. 160.48 Form of certificate. The certificates issued under this part by licensed inspectors shall be on forms approved by the Administrator. [[Page 306]] Sec. 160.49 Responsibility for inspection certificates and forms. Certificate forms and other inspection record forms may be issued to an accredited processor, and the said processor shall be responsible for and accountable to the Department for all such material supplied to him. He shall require the licensed inspector to submit or otherwise make disposition of issued certificates in accordance with instructions received from the Administrator. Sec. 160.50 Reports to be made by accredited processors. Each accredited processor shall furnish the Administrator such reports and other information relative to the operation and output of his eligible processing plant as the Administrator may deem necessary or appropriate for the administration of the provisions in this part applicable to licensed inspection, subject to the approval of the Bureau of the Budget. Failure by an accredited processor to keep such records as may be necessary for him to submit correct reports, or failure by the processor to supply correct information to the Administrator shall be deemed a violation of the provisions in this part, and cause for suspension or revocation of his inspection permit. Sec. 160.51 Report of non-conformance. Each licensed inspector shall promptly report to his supervising inspector and to the accredited processor, any evidence of which he has knowledge indicating non-conformance with the provisions in this part, and shall also so report any attempt or effort to influence him to sample, grade, or certify any naval stores incorrectly or contrary to the provisions in this part. Sec. 160.52 Suspension or revocation of licenses. (a) Any license to inspect, grade, and certify naval stores may be suspended or revoked for repeated failure by the licensee correctly to inspect, grade, classify, or certify naval stores, or upon the persistence of any condition which renders him unfit to perform the duties of a licensed inspector, or for other continued non-conformance with any provision of the act or the provisions in this part. A license may be suspended for similar failures, conditions or non-conformance of shorter duration or less serious nature. (b) A license to inspect, grade and certify naval stores may be summarily suspended or revoked by any official authorized to issue or countersign such licenses where the public health, interest, or safety so requires or for willful acts or omissions by the licensee which constitute grounds for suspension or revocation of his license under paragraph (a) of this section. In all other cases, prior to the institution of proceedings for the suspension or revocation of a license, such authorized official shall cause to be served upon the licensee, in person or by registered mail, a statement of the facts which appear to warrant such suspension or revocation, specifying a reasonable time, depending upon the circumstances in each case, within which the licensee may demonstrate or achieve compliance with the act, and the provisions in this part. The licensee may demonstrate compliance by the presentation of evidence in writing or, in the discretion of such authorized official, at an oral hearing. If, at the end of the time allowed for the licensee to demonstrate or achieve compliance, such authorized official finds he is in compliance, his license shall not be suspended or revoked. If such authorized official finds the licensee is not in compliance, the license may be suspended or revoked after service upon the licensee, in person or by registered mail, of a notice that such action is under consideration for reasons specified in the statement of facts previously served upon him and after reasonable opportunity is given the licensee to present further evidence in his behalf. Within 7 days after receipt of notice of the suspension or revocation of his license, the inspector by letter may appeal to the Administrator for its reinstatement and may attach to such letter any evidence he may wish to submit. Sec. 160.53 Stopping inspection by suspended inspector. An accredited processor upon receipt of notice of the suspension or revocation of a license shall discontinue the [[Page 307]] use of the licensee as an official inspector, and the marking of his products to indicate official inspection, until the suspension is lifted, or another inspector is licensed or assigned. Sec. 160.54 Suspension or revocation of permits. (a) Any permit issued to an accredited processor to have naval stores inspected, graded, and certified by a licensed inspector may be suspended or revoked for the failure of the processor, after official notice, to correct any condition which renders his plant unqualified for licensed inspection service, or for repeated or continued non- conformance with any other provision of the act or the provisions in this part. A permit may be suspended for similar non-conformance or failure of shorter duration or less serious nature. (b) A permit for licensed inspection may be summarily suspended or revoked by any official authorized to issue or countersign such permits where the public health, interest, or safety so requires or for willful acts or omissions by the permittee which constitute grounds for suspension or revocation of his permit under paragraph (a) of this section. In all other cases, prior to the institution of proceedings for the suspension or revocation of a permit, such authorized official shall cause to be served upon the permittee, in person or by registered mail, a statement of the facts which appear to warrant such suspension or revocation, specifying a reasonable time, depending upon the circumstances in each case, within which the permittee may demonstrate or achieve compliance with the act and the provisions in this part. The permittee may demonstrate compliance by the presentation of evidence in writing or, in the discretion of such authorized official, at an oral hearing. If, at the end of the time allowed for the permittee to demonstrate or achieve compliance, such authorized official finds he is in compliance, his permit shall not be suspended or revoked. If such authorized official finds the permittee is not in compliance, the permit may be suspended or revoked after service upon the permittee, in person or by registered mail, of a notice that such action is under consideration for reasons specified in the statement of facts previously served upon him after reasonable opportunity is given the permittee to present further evidence in his behalf. Within 7 days after receipt of notice of the suspension or revocation of his permit, the processor by letter may appeal to the Administrator for its reinstatement, and may attach to such letter any evidence he may wish to submit. Sec. 160.55 Voluntary discontinuance of licensed inspection. An accredited processor desiring to discontinue the use of licensed inspectors for making official inspections, gradings, and certifications of naval stores, shall give not less than 30 days notice in writing to the Administrator of the intention to discontinue such service. At the termination of the service such processor shall surrender to the authorized representative of the Administrator the permit for licensed inspection, together with all unused certificates, forms, or other supplies and equipment furnished by the Department and held by the processor for the use of his licensed inspectors, other than standards or such other material as may be covered by a separate loan application or agreement. Sec. 160.56 Compensation of licensed inspectors. Each licensed inspector shall be paid directly by the accredited processor for his services as an official inspector and for such other services or duties to which he may be assigned in accordance with Sec. 160.44: Provided, That whenever the Administrator shall deem it to be in the best interest of the Federal inspection service, he may require such processor to report to him the terms and amounts of compensation paid to a licensed inspector during any specified period. Sec. 160.57 Fees for licensed inspection permits. Each accredited processor shall pay to the Department annually such permit fee for each eligible processing plant for which a permit has been issued, as may be prescribed by the Administrator. [[Page 308]] Sec. 160.58 Fees for inspection and certification by licensed inspectors. Each accredited processor for whom naval stores have been inspected and certified hereunder by a licensed inspector during any calendar month shall on receipt of invoice pay to the Department the fee for each container of naval stores so inspected and certified as may be prescribed by the Administrator. Sec. 160.59 Appeal inspections. Any inspection certificate issued by a licensed inspector may be appealed in writing to the Administrator, such appeal to state the circumstances, the certificate number, and the quantity and certified grade of the naval stores covered thereby. A prompt regrade inspection shall be made by an official inspector other than the original inspector. Sec. 160.60 Charge for appeal inspection. If the findings in an appeal inspection confirm the original inspection, the accredited processor shall pay for such reinspection in accordance with the fees established for original inspections made by inspectors who are paid employees of the Department. If the findings do not confirm the original inspection, a corrected certificate will be issued and no charge will be made for re-inspection. Certificates and Reports Sec. 160.61 Kinds of certificates issued. A certificate as provided for by section 4 of the act shall be issued to the interested person in duplicate covering naval stores examined at his request, and additional copies, if desired, may be obtained from the inspector. The kind of certificates issued are as follows: (a) Turpentine analysis and classification certificate. (b) Turpentine field classification certificate. (c) Rosin classification and grade certificate. (d) Rosin grade and weight certificate. (e) Loan and sale certificate for United States graded rosin. (f) Classification and grade certificate for rosin in small containers. Sec. 160.62 When a certificate may be issued. A certificate showing the results of any analysis, classification, or grading shall be issued on any naval stores which conform with a United States Standard as to kind and grade and which have been sampled by or under the direction and supervision of an official inspector in accordance with the provisions in this part. The certificate shall be valid only so long as the naval stores described therein shall remain under seal or in the identical condition obtaining at the time of their examination. Sec. 160.63 When a certificate may not be issued. No certificate shall be issued for naval stores unless the naval stores have been packed, sampled, marked, and identified as required by the provisions in this part, and otherwise conform with the act and such provisions. The results of the examination of such naval stores or anything offered as such may be covered by a written report, which in no case shall be construed as a certificate. Sec. 160.64 Issuance of loan and sale certificate. On request of the owner, a ``Loan and Sale Certificate for United States Graded Rosin'' (designated ``L. S. Certificate'' in this part) may be issued to cover any rosin for which a Rosin Classification and Grade Certificate has previously been issued by an official inspector, and which remains in the original container. No inspector shall issue and L. S. Certificate until he has made certain that the rosin had previously been officially inspected and certified. The request for such certificate may be made to the nearest inspector. Sec. 160.65 Prior certification required. If an L. S. Certificate is desired for a quantity of rosin, a part of which has not been previously classified and graded by an official inspector and covered by a certificate, such part shall be so inspected, classified, graded, marked, [[Page 309]] and certified, as provided by the provisions in this part. Fees and Charges for Services Rendered Sec. 160.66 Fees for inspection services. The Administrator shall from time to time establish fees and charges for examination, sampling, classification, grading, analysis and certification of naval stores as he may deem fair and reasonable, and commensurate with the cost of the service rendered. Such fees and charges may be announced to the trade in such manner as the Administrator considers practicable. Sec. 160.67 Fees under cooperative agreements. Fees and charges for any inspection and grading service covered by the terms of any cooperative agreement with any interested person may be established by and incorporated into such agreement. Sec. 160.68 Collection of fees. Beginning October 1, 1981, all fees and charges assessed to interested parties for services rendered under the Naval Stores Act shall be collected by the Director, Tobacco Division, Agricultural Marketing Service, to cover insofar as practicable, all costs of providing such services. Such fees shall be credited to the Division in accordance with fiscal regulations of the Department. [47 FR 3345, Jan. 25, 1982] Sec. 160.69 Expenses to be borne by person requesting service. All expenses incurred by the United States in connection with the sampling, analysis, classification, or grading of naval stores on request, not otherwise provided for by suitable regulation, shall be borne by the person making the request. [11 FR 14665, Dec. 27, 1946, as amended at 17 FR 221, Jan. 9, 1952; 20 FR 6433, Sept. 1, 1955. Redesignated at 46 FR 47055, Sept. 24, 1981, as amended at 47 FR 3345, Jan. 25, 1982] Sec. 160.70 Rendition of claims. As soon as practicable after the end of each month, or sooner if deemed advisable, there shall be mailed to each interested person at whose request any services have been performed, a claim for payment of moneys due the United States for the services rendered or for the loan or repair of any standards. [11 FR 14665, Dec. 27, 1946, as amended at 17 FR 221, Jan. 9, 1952; 20 FR 6433, Sept. 1, 1955. Redesignated at 46 FR 47055, Sept. 24, 1981, as amended at 47 FR 3345, Jan. 25, 1982] Sec. 160.71 Delinquent claims. Any claim remaining unpaid after 30 days from the date of its rendition shall be considered as delinquent, and notice thereof shall be brought to the attention of the interested person. After a claim becomes delinquent, the Administrator shall suspend or deny inspection and related services to any interested party who has failed to make timely payment of the fees and charges assessed, as well as any claims which have been rendered, and shall take such action as may be necessary to collect any amounts due. A deposit in advance sufficient to cover the fees and expenses for any subsequent service may be required of any person failing to pay his claim after issuance of such notice of delinquency. [11 FR 14665, Dec. 27, 1946, as amended at 17 FR 221, Jan. 9, 1952; 20 FR 6433, Sept. 1, 1955. Redesignated and amended at 46 FR 47055, Sept. 24, 1981; 47 FR 3345, Jan. 25, 1982] Loan and Care of United States Standards Sec. 160.73 Availability of standards. (a) Standards available on loan. Duplicates of the United States Standards provided by the Department for classifying and grading rosin in commerce, shall remain the property of the Department, and may be loaned, but not sold, to such interested persons as may be approved by the Administrator. Any interested person desiring the loan of duplicates of the United States Standards for rosin shall submit to the Administrator a form application, properly signed, which will show his interest in naval stores and his eligibility to receive and use such duplicates, in accordance with the provisions in this part. Standards so loaned shall be returned promptly on request. (b) Standards available for purchase. Duplicate cubes for rosin standard [[Page 310]] grades XA, XB, and XC are not available from the Department but may be obtained commercially. [11 FR 14665, Dec. 27, 1946, as amended at 17 FR 221, Jan. 9, 1952; 20 FR 6433, Sept. 1, 1955; 33 FR 8722, June 14, 1968] Sec. 160.74 Loan of standards without security. Duplicates of the United States Standards for rosin may be loaned without deposit of security, insofar as the supply in the possession of the Department will permit, to: (a) Any State, County, or Municipal official duly authorized to inspect and grade rosin, who is actually engaged in inspection and grading work, and who shall have been approved by the Administrator to act as custodian of such standards. (b) Any bona fide dealer or distributor of rosin who shall have been approved by the Administrator to act as depositary for such standards, and who shall maintain and operate a regular naval stores yard which is available to and is regularly used by other persons for the purpose of having rosin inspected, graded, stored, or sold thereon: Provided, however, That a person whose principal use of such standards is the grading of rosin of his own production shall not be deemed to come within the scope of this paragraph, but shall be required to post the security provided for in Sec. 160.75: And provided, further, That no person shall receive more than two sets of duplicates under this paragraph. (c) Any trade organization or institution of higher learning having a direct relationship to the production or marketing of naval stores other than by reason of the private interests or operations of its individual members, when in the opinion of the Administrator such standards are necessary to the normal functioning of the organization or institution. Sec. 160.75 Loan of standards under security deposit. Duplicates of the United States Standards for rosin may be loaned to interested persons other than those specified in Sec. 160.74, on deposit with the Department of security in the sum of $100, by remittance payable to the Treasurer of the United States. Sec. 160.76 Annual charge for use of standards. The cost of providing duplicates of the United States Standards for rosin, and of maintaining such duplicates in accurate and proper condition for use in grading rosin, and of keeping necessary records thereof, shall be borne by the interested persons to whom the duplicates have been issued under Sec. 160.74 (a) or (b) or Sec. 160.75, and shall be defrayed by an annual charge of $20.00 for each set of duplicates, payable at the end of each Government fiscal year, or on surrender of the duplicates, computed pro-rata for the number of quarters of the fiscal year during which the duplicates were held: Provided, That when any set of standards issued on loan shall need servicing more often than once in any fiscal year, in order to maintain them in accurate condition for grading, and the need for such extra servicing is deemed by the Administrator to be the result of improper handling and use of the standards by the interested person or his agent, such person shall pay an additional amount of $30.00 for each such additional servicing, plus the cost of any parts or components of the standards replaced in such servicing, and any postage charges incurred by the Department in connection therewith. [11 FR 14665, Dec. 27, 1946, as amended at 17 FR 221, Jan. 9, 1952; 20 FR 6433, Sept. 1, 1955; 46 FR 47055, Sept. 24, 1981; 47 FR 3345, Jan. 25, 1982] Sec. 160.77 Reporting on use of standards. Each person to whom any duplicates of the United States Standards for rosin have been loaned under any provision in this part shall, from time to time, submit such reports on the use and condition thereof as may be required by the Administrator. Sec. 160.78 Loss or damage of standards. In case any duplicates become damaged or are missing, the person to whom they were loaned shall promptly inform the Administrator in writing, stating what damage or loss was sustained and how the same occurred. The cost of making necessary repairs to [[Page 311]] any duplicates, or of replacing those damaged beyond repair, or missing, shall be paid promptly by the person to whom they were originally loaned. Sec. 160.79 Request for additional standards. Any person to whom any duplicates have been loaned without security deposit, who shall request and be granted the loan of additional duplicates to replace the original ones, shall be required to deposit the security provided for in Sec. 160.75 prior to the loan of such additional duplicates. If the set of duplicates first loaned to such person, or any part thereof, is recovered, it shall be returned for inspection or repair. The cost of any repairs or replacements shall be paid, whereupon such original set may be returned to such person, and he shall surrender the second set, on receipt of which the security posted therefor shall be returned. Sec. 160.80 Denial of loan of additional standards. It shall be deemed impracticable under the act to loan additional duplicates to any person who has permitted duplicates previously loaned to him, without security, to become lost, damaged, or destroyed, if in the opinion of the Administrator, such loss, damage, or destruction resulted from any failure on the part of the interested person or his agent to take suitable precaution to prevent the loss, damage, or destruction, or when the available supply of duplicates is deemed insufficient to warrant the loan of additional duplicates to such person. Sec. 160.81 Surrender of standards. On the death of any person, or the dissolution or reorganization of any partnership, firm, or corporation, holding any duplicates of the United States Standards for rosin, they shall be promptly returned to the Administrator by the holder thereof. Sec. 160.82 Return of security. The security deposit received from any person to whom duplicates of the United States Standards for rosin have been loaned will be held in the special deposit account of the Department, and the same will be returned to the person from whom received, or his legal representative, on surrender of the duplicates secured thereby: Provided, That before refund is made the cost of any repairs or replacement shall be deducted. Sec. 160.83 Miscellaneous receipts. All moneys received or withheld to cover the cost of repairs, or of replacing any missing parts of duplicates, or as rental for duplicates, shall be paid into the United States Treasury as Miscellaneous Receipts. Sales and Shipments Sec. 160.84 Identification of shipments. The invoice or contract of sale of any naval stores in commerce shall identify and describe the article in accordance with the classification and the standard of kind and grade provided by the act or established by the Administrator. Sec. 160.85 Sale of mixed turpentine not lawful. Since no standard has been provided for a mixture of two or more kinds of spirits of turpentine, the sale in commerce of any such mixture is prohibited under any designation. Sec. 160.86 Prohibited use of United States Standards. It shall be deemed unlawful under any condition to sell, under or by reference to any United States Standard for naval stores, as provided by the act and defined in the regulations in this part, any article which fails to conform with such standard in all respects: Provided, That the phrase ``under or by reference to United States Standards'' as it appears in the act and the regulations in this part, shall include the use of any words, letters, brands, labels, or marks constituting any of the United States Standards for naval stores on any container of naval stores, on anything attached to or supplied therewith on delivery, or on any inspection, sale, or shipping record or invoice, in describing the kind, classification, or grade of the naval stores covered thereby. [[Page 312]] Sec. 160.87 Prohibited use of word ``turpentine'' or derivatives thereof. It shall be deemed unlawful to use in commerce the word ``turpentine'' or a compound, derivative or imitation thereof, or any word or combination of words which are a part of a United States Standard for any kind of spirits of turpentine, to describe in any manner a mixture of spirits of turpentine with any other oil or solvent. Sec. 160.88 Permitted use of words ``turpentine'' and ``rosin.'' The use of the word ``turpentine'' or the word ``rosin'' is not prohibited in the name of an article made, prepared, or processed from spirits of turpentine or rosin, or to indicate the process whereby such article was made or prepared: Provided, That this section shall not apply to any article covered by Sec. 160.87. Sec. 160.89 Medicinal preparations. A compound or mixture containing spirits of turpentine or rosin, or both, with other drugs, when sold for medicinal purposes, is not subject to the provisions of the Naval Stores Act or of the provisions in this part. Labeling, Advertising and Packing Sec. 160.90 False, misleading, or deceitful practices. No label or other means or practice used in connection with the sale of naval stores in commerce or of anything offered as such shall be false, misleading, or deceitful in any manner. Sec. 160.91 Meaning of words ``pine'' and ``pine tree.'' The words ``pine'' or ``pine tree,'' when used to designate the source of spirits of turpentine, shall be deemed to mean a living, growing plant of the genus Pinus, family Pinaceae, unless the words ``wood of'' are used in connection therewith. The terms ``oleoresin of the southern pine'' or ``oleoresin from the southern pine'' shall be deemed to mean the gum or oleoresin exuded by such living, growing trees, the source of gum spirits of turpentine. Sec. 160.92 Meaning of word ``gallon.'' The word ``gallon,'' when used on or impressed into any container of spirits of turpentine, or when used in an invoice referring to spirits of turpentine in containers of 10 gallons content or less, shall mean a United States standard gallon of 231 cubic inches of turpentine, regardless of any other definitive terms used therewith: Provided, That this shall not apply to the meaning of the words ``imperial gallon'', when placed on containers intended for foreign shipment. For the purpose of these regulations a measured gallon of turpentine, or any indicated multiple or fractional part thereof, shall be such quantity when measured at a temperature of not more than 75 [deg]Fahrenheit, and a weighed gallon shall be construed to mean 7.2 pounds of turpentine. Sec. 160.93 Powdered rosin. The classification and grade of any rosin sold in commerce in a powdered or finely broken condition shall be stated in the invoice or contract of sale in accordance with the kind and grade of the rosin before it was powdered or broken. For the purpose of preventing coalescence there may be incorporated in such article a limited and necessary quantity of inert, nonresinous foreign material: Provided, That the nature and quantity of such inert material shall be stated on the label. Sec. 160.94 Spirits of turpentine for medicinal use. Spirits of turpentine so packed, described, labeled, or sold as to indicate that it is offered as a medicament shall nevertheless be subject to the requirements of the Naval Stores Act and of the provisions in this part, as well as any requirements under any other statute. Proceedings in Case of Violation Sec. 160.95 Proceedings prior to reporting violations of the act. Whenever it shall appear to the Administrator that any violation of the act should be reported to the United States Department of Justice for appropriate action, he shall serve notice in writing upon the person apparently responsible for the alleged violation [[Page 313]] and shall give such person an opportunity to show in duplicate to the Administrator within 20 days after the receipt of such notice why the alleged violation should not be reported to the Department of Justice. The person so notified may within the period stated apply for an opportunity to present his views in person, or by his attorney. If the Administrator deems the request appropriate he will designate a time and place for hearing the applicant. Sec. 160.96 Report of violations for prosecution. In the event of failure of the person notified of an apparent violation of the act to submit to the Administrator a written answer as provided in Sec. 160.95, or if, after such person has filed his answer or in addition, been given an opportunity to present his views orally, no sufficient reason has been shown why the alleged violation should not be reported for prosecution, the General Counsel of the Department, acting for and on behalf of the Administrator, shall report the alleged violation to the Department of Justice for appropriate action. Sec. 160.97 Publication. Composite data regarding inspections, analyses, classifications, and grading of naval stores made under any provision of the act or the provisions in this part may be published from time to time in such mediums as the Administrator may designate for the purpose. Specific Fees Payable for Services Rendered Sec. 160.201 Fees generally for field inspection and certification of naval stores and drum containers of rosin. Except as provided in Sec. 160.204, the following fees shall be paid to the United States for the field inspection and certification of naval stores and drum containers of rosin, not conducted under a cooperative agreement and where laboratory analysis or testing is not required: (a) Inspections by licensed inspectors at eligible processing plants. (1) Rosin (grading and incidental certification as to class, condition and weight). (i) In drums (see Note 1) per drum--$1.24. (ii) In 100 pound bags (see Note 1) per bag--$.23. (iii) In tank cars, per car--$67.50. (iv) In tank trucks, per truck--$34.00. (2) Turpentine (Grading and incidental certification as to class, condition and volume). (i) In 55 gallon drums, per drum--$2.25. (ii) In tank cars or trucks, per unit of 100 gallons--$1.41. (iii) In bulk for delivery to tank steamer, per unit of 100 gallons--$2.25. (b) Inspections by regularly employed, salaried Federal inspectors. (1) Rosin. (i) Grading and weighing at concentration and storage yards, per drum--$4.05. (ii) Irregular inspection and grading at distillation or processing plants, up to 400 drums, per drum--$3.60; all over 400 drums, per drum-- $2.25. (iii) Weighing at concentration and storage yards, subsequent to grading, per drum--$2.25. (iv) Examination of the external or internal appearance and condition of filled rosin drums, and of the rosin contained therein--See Note 2 and Sec. 160.204. (v) Re-certification under L.S. Certificate of rosin moving in commerce, per drum--$.23. (2) Turpentine (inspection and certification as to kind, condition, volume, etc.). (i) In drums of 55 gallons, per drum--$3.38. (ii) In tank cars or trucks, per unit of 100 gallons--$2.81. (iii) For bulk delivery to tank steamer, per unit of 100 gallons-- $2.25. Note 1: When the number of drums and bags inspected and certified at any plant during any calendar month is equivalent to a total of 2,400 or more drums (counting five bags as equivalent to one drum), the fee shall be computed at the rate of $1.01 per drum and $.18 per bag certified. For quantities less than the equivalent of 2,400 drums, the fee shall be computed at the prescribed rate of $1.24 per drum and $.23 per bag. Note 2: The inspection or related examination of containers of rosin and their contents under Section B(1)(iv) shall be performed only after the inspector or the Chief of the Marketing Programs Branch has been advised regarding the location, nature, scope, and purpose of the service desired, and the [[Page 314]] charge to be made therefore has been submitted to and accepted by the requesting person. [47 FR 3345, Jan. 25, 1982] Sec. 160.202 Fees generally for laboratory analysis and testing. Except as provided in Sec. 160.204, the following fees shall be paid to the United States for laboratory analysis and testing of naval stores, when not performed in the conduct of a cooperative agreement with respect to such products: (a) Rosin and turpentine. (See Note 3). (1) Comprehensive analysis to determine purity, specification compliance, or other chemical and physical properties related thereto: (i) Single Sample--$40.00. (ii) Two or more samples analyzed at same time per sample--$35.00. (2) Limited testing to determine kind, grade, or other factors related to quality of utility. (i) Single Sample: (A) Rosin--$14.00. (B) Turpentine--$10.00. (ii) Two or more samples tested at same time: (A) Rosin--per sample--$10.00. (B) Turpentine--per sample--$8.00. Note 3: The analysis and testing of rosin involves many different types of laboratory procedures, requiring variable time for performance, and including other cost factors. The charge for such analysis and testing will depend on the type and extent of the work required to supply the information desired by the interested person requesting the service. When it appears that the charges indicated in this section will not defray the costs of making the tests required, the interested person shall be informed before any work is performed and will be supplied with a cost estimate of the actual charges to be made. See also Sec. 160.204. [47 FR 3345, Jan. 25, 1982] Sec. 160.203 Fees for inspection and certification of other naval stores material. Whenever it shall be deemed practical and in the interest of the naval stores trade to sample, inspect, analyze and certify any naval stores material other than spirits of turpentine or rosin, at the request of an interested person, the fees for such inspection shall be the same as the fees prescribed for spirits of turpentine. [17 FR 189, Jan. 8, 1952] Sec. 160.204 Fees for extra cost and hourly rate service. The fees specified in Sec. Sec. 160.201 and 160.202 apply to the routine field inspection and usual laboratory work incident to the certification of commodities covered by those sections. Should additional work be required to provide special information desired by the person requesting service, or should it be necessary for an inspector to make a special trip or to deviate from his regular schedule of travel, or should the fees prescribed in Sec. Sec. 160.201 and 160.202 otherwise be insufficient to defray the cost to the Government for rendering such service, then the person requesting the service shall pay, in lieu of the prescribed fees, an amount computed by the Department as sufficient to defray the total cost thereof, including allowances for time spent in collecting and preparing samples obtaining identification records, traveling, performing laboratory tests or other necessary work, and also any expense incurred for authorized transportation and subsistence of the inspector or analyst while in travel status. The charge for time so spent shall be computed at the rate of $17.80 per hour for laboratory and field inspection work. The overtime rate for services performed outside the inspector's regularly scheduled tour of duty shall be $21.30. The rate of $26.70 shall be charged for work performed on Sundays or holidays. [47 FR 3345, Jan. 25, 1982] Sec. 160.205 Permit fees for eligible processing plants under licensed inspection. Initial permit fee--$20.00. Annual renewal permit fee--$20.00. Note: The renewal permit fee shall be reduced to $10 per year when the inspection fees paid by the eligible processing plant aggregate $200 or more during the preceding fiscal year ended September 30, and shall be waived when such fees aggregate $400 or more during such fiscal year. Such reduced permit fee shall apply only in case the eligible processing plant has made use of the licensed inspection service. [47 FR 3346, Jan. 25, 1982] [[Page 315]] SUBCHAPTER G_MISCELLANEOUS MARKETING PRACTICES UNDER THE AGRICULTURAL MARKETING ACT OF 1946 PART 170_USDA FARMERS MARKET--Table of Contents Sec. 170.1 To which farmers market does this rule apply? 170.2 Is the USDA Farmers Market a producer-only market? 170.3 What products may be sold at the USDA Farmers Market? 170.4 Who may participate in the USDA Farmers Market? 170.5 Is there a fee to participate in the USDA Farmers Market? 170.6 How are potential market participants identified for the USDA Farmers Market? 170.7 Can I apply if I am not recruited? 170.8 What are the application procedures? 170.9 What type of information does the application require? 170.10 Must a participant in the market have insurance? 170.11 How are farmers and vendors selected for participation in the USDA Farmers Market? 170.12 What are the selection criteria for participation in the USDA Farmers Market? 170.13 What are the operating guidelines for the USDA Farmers Market? 170.14 What circumstances will prevent participation in the USDA Farmers Market? Authority: 5 U.S.C. 301; 7 U.S.C. 1621-1627. Source: 70 FR 76131, Dec. 23, 2005, unless otherwise noted. Sec. 170.1 To which farmers markets does this rule apply? This rule applies only to the USDA Farmers Market at headquarters on the corner of 12th Street & Independence Avenue, SW., Washington, DC. Sec. 170.2 Is the USDA Farmers Market a producer-only market? Yes. A producer-only market is one that does not offer agricultural products that are commercially made, created, or produced, and only allows agricultural products that are grown by a principal farmer. A producer-only market offers raw agricultural products such as fruits, vegetables, flowers, bedding plants, and potted plants. The USDA Farmers Market is a producer-only market since only farmers who may sell products that they grow or produce will be selected for participation. It also allows the sale of value-added products and other specialized non-produce items. Sec. 170.3 What products may be sold at the USDA Farmers Market? Products that may be sold at the market include, but are not limited to, fresh, high-quality fruits, vegetables, herbs, honey, jams and jellies, cheese, vinegars, cider, maple syrup, fish, flowers, bedding plants, and potted plants. USDA inspected meats and poultry items also may be sold. Sec. 170.4 Who may participate in the USDA Farmers Market? Members of three groups may participate in the USDA Farmers Markets: (a) Principal farmers or producers who sell their own agricultural products. The principal farmer must be in full control and supervision of the individual steps of production of crops including tilling, planting, cultivating, fertilizer and pesticide applications (if applicable), harvesting and post-harvest handling on its own farm with its own machinery and labor. (b) Principal farmer or producers who sell their own value-added agricultural products. Value-added products may include agricultural products that have been enhanced through a modification of the product, such as braiding, weaving, hulling, extracting, handcrafting, and the like. It also may result from growing the product in a way that is acknowledged as safer. Farmers and vendors selling these types of products must prepare them predominately with material they have grown or gathered. (c) Nonproduce vendors. A limited number of non-produce vendors may be selected by market management to sell specialized products that enhance the market atmosphere and historically attract customers to a farmers market. These specialized vendors, such as bakers, may be exempted from the reselling restrictions that apply to the farmers and vendors described in paragraphs (a) and (b) of this section. [[Page 316]] Sec. 170.5 Is there a fee to participate in the USDA Farmers Market? No, there are no fees charged to participate in the market. Sec. 170.6 How are potential market participants identified for the USDA Farmers Market? Potential market participants are recruited by AMS market management through local farm organizations in the Washington DC metropolitan area State Departments of Agriculture from the mid-Atlantic region including, Virginia, West Virginia, Maryland, Delaware, and Pennsylvania. Upon receiving a list of potential farmers and vendors from the organizations and the State Departments of Agriculture, an information packet, which includes an application and this rule, will be mailed to each potential participant identified by the contacts. Sec. 170.7 Can I apply if I am not recruited? Yes. Interested persons may call or write USDA to request an information packet even if they are not recruited. Those interested may write USDA/AMS/TM/MSB, Room 2646-South Building, 1400 Independence Avenue, SW., Washington, DC, 20250, or call (202) 720-8317. They may also call the USDA Farmers Market Hotline at 1-800-384-8704 to leave a message to have a packet mailed or faxed. They may also visit the web site at http://www.ams.usda.gov/farmersmarkets/ to review the selection criteria, the operating rules, and to receive an application electronically. Sec. 170.8 What are the application procedures? In January of each year, prospective and returning participants must submit to USDA a completed application for participation in the upcoming market season. Each application will include a copy of this rule, which includes the selection criteria and operating guidelines. Each applicant also will certify that each is the owner or representative of the farm or business submitting the application. Sec. 170.9 What type of information does the application require? The application for participation in the USDA Farmers Market will provide market management with information on contacts, farm location, type of farming operation, types of products grown, and business practices, including insurance coverage. Sec. 170.10 Must a participant in the market have insurance? There is no requirement for a participant to have insurance; however, USDA asks that participants with insurance provide insurance information for our records. Sec. 170.11 How are farmers and vendors selected for participation in the USDA Farmers Market? USDA reviews all applications and selects participants based primarily on the type of farmer or vendor (i.e., fruit, vegetable, herb, baker) and secondly, on the specific types of products to be sold. The selection of the participants is conducted by the market management to ensure a balanced product mix of fruits, vegetables, herbs, value-added products, and baked goods. Sec. 170.12 What are the selection criteria for participation in the USDA Farmers Market? The selection criteria are designed to ensure a consistently high level of quality and diverse products are available at the market, while operating in the constraints of space available at the market site. The criteria are: (a) Member of one of the three participant groups specified in Sec. 170.4 of this part. The participant must be a producer-only farmer or producer, seller of value-added products, or specialized non-produce vendor. (b) Participant offers a product that adds to a product mix. Market management will ensure that a balanced mix of fresh fruits and vegetables will be maintained throughout the season. Final selection of fruit and vegetable producers will be made based on their ability to ensure a wide range of fresh farm products throughout the season. (c) Willingness to Glean. Participants should commit to supporting the USDA food gleaning/food recovery initiative. [[Page 317]] This commitment requires farmers and vendors to donate surplus food and food products at the end of each market day to a local nonprofit organization identified by USDA. Questions about tax deductions for gleaning should be referred to the Internal Revenue Service or a tax advisor. Receipts for donated foods may be obtained from the receiving nonprofit organization. (d) Commitment to market. Participants must commit to the entire market season and be willing to participate on a regular basis. (e) Grandfather provision. Market management reserves the right to select several farmers or vendors based on previous participation in the program, consistency in providing quality products, and compliance with operating guidelines. Sec. 170.13 What are the operating guidelines for the USDA Farmers Market? (a) Market Operation. The Market will be held in parking court 9 of the USDA Headquarters Complex located on the corner of 12th Street and Independence Avenue, SW., Washington, DC. Selling will not begin before 10 a.m. and will end promptly at 2 p.m. each market day. All participants must be in place, setup and ready to sell by 10 a.m. Due to space restrictions at the site, late arrivals will be located at market management's discretion. All vehicles must vacate the market site no later than 3 p.m. (b) Notification of Attendance. Each participant must call USDA within 48 hours of a market day if they cannot attend. Failure to provide proper and timely notification may result in termination of participation in the market. (c) Participant Space. One vehicle is permitted per space; all other vehicles must be removed from the immediate market premises. One space is 16w x 17d feet, and all trucks must fit within that area. There is only room for 15 spaces. (d) Signage. Participants must clearly display the name of their farm/business and post prices for all items being sold. (e) Clean-up. Participants are responsible for cleaning all trash and waste within and around their allotted space. Garbage bins are provided on the market site for this purpose. (f) Cooperative Marketing. Participants are permitted to share space with another participant or sell another's products if the arrangement is deemed by market management as beneficial to the market. A co-op must be pre-approved by market management and will not be accepted if similar products are already sold by existing farmers or vendors. (g) Farm/Business Visits. Market management may visit farm/business locations to verify compliance with market criteria and guidelines. Participants should submit a map and directions to their farm/businesses with their market applications. (h) Conduct on Federal Property: Participants must comply with Subpart 20.3 of the Federal Property Management Regulations, ``Conduct on Federal Property,'' 41 CFR 20.3. Sec. 170.14 What circumstances will prevent participation in the USDA Farmers Market? (a) Efforts will be made to accommodate all who apply to participate in the market. However, market management may deny participation in the market because of insufficient space or excess supply of the products to sell, failure to meet the stated criteria, or the participant's noncompliance with the operating guidelines or regulations. (b) Participants who sell before the 10 a.m. opening time will be restricted from participating in the market following their second violation. A written warning will be given to the participant for the first violation of this guideline. After the second violation occurs, a letter of reprimand will be given to the participant restricting their participation for the next immediate market day. (c) Participants who arrive after the 10 a.m. opening time may be restricted from participating in the market following their second violation. A written warning may be given to the participant for the first violation of this guideline. After the second violation occurs, a letter of reprimand may be given to the participant restricting their participation for the next immediate market day. [[Page 318]] PART 180_CATTLE CONTRACTS LIBRARY PILOT PROGRAM (Eff. 1-6-23)- -Table of Contents Sec. 180.1 General administration. 180.2 Definitions. 180.3 Cattle Contracts Library. 180.4 Monthly cattle volume reporting. Authority: 7 U.S.C. 1621-1627 Source: 87 FR 74955, Dec. 7, 2022, unless otherwise noted. Effective Date Note: At 87 FR 74955, Dec. 7, 2022, part 180 was added; eff. Jan. 6, 2023. Sec. 180.1 General administration. (a) Confidentiality. The Secretary shall make information obtained under this part available to the public only in a manner that ensures that confidentiality is preserved regarding -- (1) The identity of persons, including parties to a contract; and (2) Proprietary business information. (b) Disclosure by Federal Government employees--(1) In general. Subject to paragraph (b)(2) of this section, no officer, employee, or agent of the United States shall, without the consent of the packer or other person concerned, divulge or make known in any manner, any facts or information regarding the business of the packer or other person that was acquired through reporting required under this part. (2) Exceptions. Information obtained by the Secretary under this part may be disclosed-- (i) To agents or employees of the Department of Agriculture in the course of their official duties under this part; (ii) As directed by the Secretary or the Attorney General, for enforcement purposes; or (iii) By a court of competent jurisdiction. (3) Disclosure under Freedom of Information Act. Notwithstanding any other provision of law, no facts or information obtained under this part shall be disclosed in accordance with section 552 of title 5, United States Code. (c) Regional reporting. The Secretary shall make information obtained under this part available to the public only in a manner that ensures that the information is published on a national or regional basis as the Secretary determines to be appropriate. (d) Adjustments. Prior to the publication of any contract information obtained under this part, the Secretary may make reasonable adjustments to address aberrations or other unusual or unique occurrences that the Secretary determines would distort the published information to the detriment of producers, packers, or other market participants. (e) Reporting methods. Information required to be reported under this part shall be reported by electronic means in the manner prescribed by the Secretary. Information may be reported in an alternative manner in emergencies or in cases when an alternative method is agreed to by both the entity required to report and the Secretary. (f) Verification. The Secretary may take such actions as are necessary to verify the accuracy of the information submitted or reported under this part. (g) Noncompliance. The Secretary may refer instances of non- compliance with this part to the appropriate office of the Department for further investigation. Sec. 180.2 Definitions. The following definitions apply to this part. Active contract. The term ``active contract'' means a contract that is currently available between a packer and producer under which fed cattle may be purchased. Base price. The term ``base price'' means the price paid for livestock, before application of any adjustments, premiums or discounts, expressed in dollars per hundred pounds of hot carcass weight or live weight. Base price adjustment. The term ``base price adjustment'' means the positive or negative adjustment to the base price before any premiums or discounts are applied. Business day. The term ``business day'' means a day on which the packer conducts normal business regarding livestock committed to the packer, or livestock purchased or sold by the packer, and the Department of Agriculture is open to conduct business, typically Monday through Friday and excluding Federal holidays. [[Page 319]] Calendar month. The term ``calendar month'' means a timeframe that begins on the first day of the month at midnight and ends on the last day of the month at 11:59 p.m. in the central time zone. Contract. The term ``contract'' means a written or oral agreement concerning the specific terms and conditions under which an unknown volume of fed cattle may be purchased by a packer during a specified time frame, or under which a known volume of cattle is purchased by a packer for a given plant during a specified time frame. Contract method. The term ``contract method'' means the way in which the contract was established, either written or oral. Current month. The term ``current month'' means the present calendar month. Discount. The term ``discount'' means the adjustment, expressed either in dollars per one hundred pound or per head, subtracted from the base price. Fed cattle. The term ``fed cattle'' means a steer or heifer that has been finished on a ration of roughage and feed concentrates, such as grains, protein meal, grass (forage), and other nutrient-rich feeds, prior to slaughter. Inactive contract. The term ``inactive contract'' means a fed cattle contract that is no longer available between a packer and producer for purchase under, or one that is not currently in use. Packer. The term ``packer'' means a packer that has slaughtered during the immediately preceding 5 calendar years an average of not less than 5 percent of the number of fed cattle slaughtered nationally during the immediately preceding 5 calendar years. Person. The term ``person'' means any individual, group of individuals, partnership, corporation, association, or other entity. Premium. The term ``premium'' means the adjustment, expressed either in dollars per one hundred pound or per head, added to the base price. Prior month. The term ``prior month'' means the calendar month immediately preceding the current month. Producer. The term ``producer'' means any person engaged in the business of selling livestock to a packer for slaughter (including the sale of livestock from a packer to another packer). Secretary. The term ``Secretary'' means the Secretary of Agriculture of the United States or any other officer or employee of the Department of Agriculture to whom authority has been delegated or may hereafter be delegated to act in the Secretary's stead. Selling basis. The term ``selling basis'' refers to cattle that are sold on a live, dressed, live converted to dressed, or dressed converted to live weight basis under a contract. Unique identifier. The term ``unique identifier'' means a unique code chosen by the packer for the contract, specific to the contract, and utilized and trackable through the life of the contract. Sec. 180.3 Cattle Contracts Library. (a) Initial contract information submission. On January 6, 2023, each packer shall submit to the Secretary information for each active contract with a unique identifier. The information shall be submitted in accordance with Sec. 180.1(e). The contract information required to be reported includes: (1) The contract method; (2) The contract start and end dates; and (3) All terms associated with: (i) Each base price source and adjustment; (ii) Selling basis; (iii) Premiums and discounts; (iv) Specifications relating to cattle attributes; (v) Delivery and transportation terms and payments; (vi) Financing, risk-sharing, profit-sharing or other financial arrangements; and, (vii) Volume provisions. (b) Reporting deadlines. Within 1 business day of making a new contract available, making a change to an existing contract, or making a contract no longer available, each packer must submit the following: (1) Packers must submit all contract terms in accordance Sec. 108.4(a) for each new active contract for each producer or producers at each plant that it operates or at which it has cattle slaughtered; [[Page 320]] (2) Packers must submit any changes to the terms of a previously submitted active contract and associated schedules or appendices, including the unique identifier for the previously submitted contract it supersedes; and (3) Packers must submit information to remove inactive contracts from the library, including the unique identifier for the now inactive contract. Sec. 180.4 Monthly cattle volume reporting. (a) Initial estimated volume submission. On January 6, 2023, each packer shall submit to the Secretary an initial estimate of the total volume of cattle to be contracted for in the current calendar month in accordance with Sec. 180.1(e). (b) Reporting deadlines. By the close of business on the second Friday of each month, each packer must submit the following information in accordance with Sec. 180.1(e). If the second Friday of a month falls on a non-business day, the deadline is due no later than the close of the next business day following the second Friday of the month: (1) Number of cattle purchased by each base price source under each active contract in the prior month reported by unique identifier and (2) Estimate of the total number of cattle to be purchased under active contracts for delivery to each plant for slaughter within the current calendar month. SUBCHAPTER H [RESERVED] [[Page 321]] SUBCHAPTER K_FEDERAL SEED ACT PART 201_FEDERAL SEED ACT REQUIREMENTS--Table of Contents definitions Sec. 201.1 Meaning of words. 201.2 Terms defined. administration 201.3 Administrator. records for agricultural and vegetable seeds 201.4 Maintenance and accessibility. 201.5 Origin. 201.6 Germination. 201.7 Purity (including variety). 201.7a Treated seed. labeling agricultural seeds 201.8 Contents of the label. 201.9 Kind. 201.10 Variety. 201.11 Type. 201.11a Hybrid. 201.12 Name of kind and variety. 201.12a Seed mixtures. 201.13 Lot number or other identification. 201.14 Origin. 201.15 Weed seeds. 201.16 Noxious-weed seeds. 201.17 Noxious-weed seeds in the District of Columbia. 201.18 Other agricultural seeds. 201.19 Inert matter. 201.20 Germination. 201.21 Hard seed or dormant seed.. 201.22 Date of test. 201.23 Seller and buyer information. 201.24 Code designation. 201.24a Inoculated seed. labeling vegetable seeds 201.25 Contents of the label. 201.26 Kind, variety, and hybrid. 201.26a Vegetable seed mixtures. 201.27 Seller and buyer information. 201.28 Code designation. 201.29 Germination of vegetable seed in containers of 1 pound or less. 201.29a Germination of vegetable seed in containers of more than 1 pound. 201.30 Hard seed. 201.30a Date of test. 201.30b Lot number or other lot identification of vegetable seed in containers of more than 1 pound. 201.30c Noxious-weed seeds of vegetable seed in containers of more than 1 pound. 201.31 Minimum germination standards for vegetable seeds in interstate commerce. labeling in general 201.31a Labeling treated seed. 201.32 Screenings. 201.33 Seed in bulk or large quantities; seed for cleaning or processing. 201.34 Kind, variety, and type; treatment substances; designation as hybrid. 201.35 Blank spaces. 201.36 The words ``free'' and ``none.'' modifying statements 201.36a Disclaimers and nonwarranties. advertising 201.36b Name of kind and variety; designation as hybrid. 201.36c Hermetically-sealed containers. inspection 201.37 Authorization. 201.38 [Reserved] sampling in the administration of the act 201.39 General procedure. 201.40 Bulk. 201.41 Bags. 201.42 Small containers. 201.43 Size of sample. 201.44 Forwarding samples. purity analysis in the administration of the act 201.45 Obtaining the working sample. 201.46 Weight of working sample. 201.47 Separation. 201.47a Seed unit. 201.47b Working samples. 201.48 Kind or variety considered pure seed. 201.49 Other crop seed. 201.50 Weed seed. 201.51 Inert matter. 201.51a Special procedures for purity analysis. 201.51b Purity procedures for coated seed. 201.52 Noxious-weed seeds. germination tests in the administration of the act 201.53 Source of seeds for germination. 201.54 Number of seeds for germination. 201.55 Retests. 201.55a Moisture and aeration of substratum. 201.56 Interpretation. 201.56-1 Goosefoot family, Chenopodiaceae and Carpetweed family Aizoaceae. 201.56-2 Sunflower family, Asteraceae (Compositae). 201.56-3 Mustard family, Brassicaceae (Cruciferae). 201.56-4 Cucurbit family (Cucurbitaceae). [[Page 322]] 201.56-5 Grass family, Poaceae (Gramineae). 201.56-6 Legume or pea family, Fabaceae (Leguminosae). 201.56-7 Lily family, Liliaceae. 201.56-8 Flax family, Linaceae. 201.56-9 Mallow family, Malvaceae. 201.56-10 Spurge family, Euphorbiaceae. 201.56-11 Knotweed family, Polygonaceae. 201.56-12 Miscellaneous plant families. 201.57 Hard seeds. 201.57a Dormant seeds. 201.58 Substrata, temperature, duration of test, and certain other specific directions for testing for germination and hard seed. examinations in the administration of the act 201.58a Indistinguishable seeds. 201.58b Origin. 201.58c Detection of captan, mercury, or thiram on seed. 201.58d Fungal endophyte test. tolerances 201.59 Application. 201.60 Purity percentages. 201.61 Fluorescence percentages in ryegrasses. 201.62 Tests for determination of percentages of kind, variety, type, hybrid, or offtype. 201.63 Germination. 201.64 Pure live seed. 201.65 Noxious-weed seeds in interstate commerce. 201.66 [Reserved] certified seed 201.67 Seed certifying agency standards and procedures. 201.68 Eligibility requirements for certification of varieties. 201.69 Classes of certified seed. 201.70 Limitations of generations for certified seed. 201.71 Establishing the source of all classes of certified seed. 201.72 Production of all classes of certified seed. 201.73 Processors and processing of all classes of certified seed. 201.74 Labeling of all classes of certified seed. 201.75 Interagency certification. 201.76 Minimum Land, Isolation, Field, and Seed Standards. Additional Requirements for the Certification of Plant Materials of Certain Crops 201.77 Length of stand requirements. 201.78 Pollen control for hybrids. Authority: 7 U.S.C. 1592. Note: Approved by the Office of Management and Budget under OMB control number 0581-0026 (47 FR 746, Jan. 7, 1982) Definitions Sec. 201.1 Meaning of words. Words in the regulations in this part in the singular form shall be deemed to import the plural, and vice versa, as the case may demand. [5 FR 28, Jan. 4, 1940] Sec. 201.2 Terms defined. When used in the regulations in this part the terms as defined in section 101 of the Act, unless modified in this section as provided in the Act, shall apply with equal force and effect. In addition, as used in this part: (a) The Act. The term ``Act'' means the Federal Seed Act approved August 9, 1939 (53 Stat. 1275; 7 U.S.C. 1551-1611 as amended); (b) Person. The term ``person'' includes an individual partnership, corporation, company, society, association, receiver, trustee, or agent; (c) Secretary. The term ``Secretary'' means the Secretary of Agriculture of the United States, or any officer or employee of the Department to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead; (d) Hearing Clerk. The term ``Hearing Clerk'' means the Hearing Clerk, United States Department of Agriculture, Washington, DC; (e) Respondent. The term ``respondent'' means a person against whom a complaint is issued; (f) Examiner. The term ``examiner'' means an employee of the Department of Agriculture, designated by the Secretary to conduct hearings under the Act, and this part; (g) Federal Register. The term ``Federal Register'' means the publication provided by the Act of July 26, 1935 (49 Stat. 500), and acts supplementary thereto and amendatory thereof; (h) Agricultural seeds. The term ``agricultural seeds'' means the following kinds of grass, forage, and field crop seeds, that are used for seeding purposes in the United States: Agrotricum-- x Agrotriticum Cif. & Giacom. [[Page 323]] Alfalfa--Medicago sativa L. subsp. sativa Alfilaria--Erodium cicutarium (L.) L'H[eacute]r. Alyceclover--Alysicarpus vaginalis (L.) DC. Bahiagrass--Paspalum notatum Fl[uuml]gg[eacute] Barley--Hordeum vulgare L. subsp. vulgare Barrelclover--Medicago truncatula Gaertn. Bean, adzuki--Vigna angularis (Willd.) Ohwi & H. Ohashi var. angularis Bean, field--Phaseolus vulgaris L. var. vulgaris Bean, mung--Vigna radiata (L.) R. Wilczek var. radiata Beet, field--Beta vulgaris L. subsp. vulgaris Beet, sugar--Beta vulgaris L. subsp. vulgaris Beggarweed, Florida--Desmodium tortuosum (Sw.) DC. Bentgrass, colonial--Agrostis capillaris L. Bentgrass, creeping--Agrostis stolonifera L. Bentgrass, velvet--Agrostis canina L. Bermudagrass--Cynodon dactylon (L.) Pers. var. dactylon Bermudagrass, giant--Cynodon dactylon (L.) Pers. var. aridus J.R. Harlan & de Wet Bluegrass, annual--Poa annua L. Bluegrass, bulbous--Poa bulbosa L. Bluegrass, Canada--Poa compressa L. Bluegrass, glaucantha--Poa glauca Vahl Bluegrass, Kentucky--Poa pratensis L. Bluegrass, Nevada--Poa secunda J. Presl Bluegrass, rough--Poa trivialis L. Bluegrass, Texas--Poa arachnifera Torr. Bluegrass, wood--Poa nemoralis L. Bluejoint--Calamagrostis canadensis (Michx.) P. Beauv. Bluestem, big--Andropogon gerardi Vitman Bluestem, little--Schizachyrium scoparium (Michx.) Nash Bluestem, sand--Andropogon hallii Hack. Bluestem, yellow--Bothriochloa ischaemum (L.) Keng var. ischaemum Bottlebrush-squirreltail--Elymus elymoides (Raf.) Swezey Brome, field--Bromus arvensis L. Brome, meadow--Bromus biebersteinii Roem. & Schult. Brome, mountain--Bromus carinatus var. marginatus (Steud.) Barworth & Anderton Brome, smooth--Bromus inermis Leyss. subsp. inermis Broomcorn--Sorghum bicolor (L.) Moench Buckwheat--Fagopyrum esculentum Moench Buffalograss--Bouteloua dactyloides (Nutt.) Columbus Buffelgrass--Cenchrus ciliaris L. Burclover, California--Medicago polymorpha L. Burclover, spotted--Medicago arabica (L.) Huds. Burnet, little--Sanguisorba minor Scop. Buttonclover--Medicago orbicularis (L.) Bartal. Camelina--Camelina sativa (L.) Crantz subsp. sativa Canarygrass--Phalaris canariensis L. Canarygrass, reed--Phalaris arundinacea L. Carpetgrass--Axonopus fissifolius (Raddi) Kuhlm. Castorbean--Ricinus communis L. Chess, soft--Bromus hordeaceus L. Chickpea--Cicer arietinum L. Clover, alsike--Trifolium hybridum L. Clover, arrowleaf--Trifolium vesiculosum Savi Clover, berseem--Trifolium alexandrinum L. Clover, cluster--Trifolium glomeratum L. Clover, crimson--Trifolium incarnatum L. Clover, Kenya--Trifolium semipilosum Fresen. Clover, ladino--Trifolium repens L. Clover, lappa--Trifolium lappaceum L. Clover, large hop--Trifolium campestre Schreb. Clover, Persian--Trifolium resupinatum L. Clover, red or Red clover, mammoth--Trifolium pratense L. Red clover, medium--Trifolium pratense L. Clover, rose--Trifolium hirtum All. Clover, small hop or suckling--Trifolium dubium Sibth. Clover, strawberry--Trifolium fragiferum L. Clover, sub or subterranean--Trifolium subterraneum L. Clover, white--Trifolium repens L. (also see Clover, ladino) Clover--(also see Alyceclover, Burclover, Buttonclover, Sourclover, Sweetclover) Corn, field--Zea mays L. subsp. mays Corn, pop--Zea mays L. subsp. mays Cotton--Gossypium spp. Cowpea--Vigna unguiculata (L.) Walp. subsp. unguiculata Crambe--Crambe hispanica L. subsp. Abyssinica Crested dogtail--Cynosurus cristatus L. Crotalaria, lance--Crotalaria lanceolata E. Mey. Crotalaria, showy--Crotalaria spectabilis Roth Crotalaria, slenderleaf--Crotalaria brevidens Benth. var. intermedia (Kotschy) Polhill Crotalaria, striped or smooth--Crotalaria pallida Aiton Crotalaria, sunn or sunn hemp--Crotalaria juncea L. Crownvetch--Securigera varia (L.) Lassen Dallisgrass--Paspalum dilatatum Poir. Dichondra--Dichondra repens J.R. Forst. & G. Forst. Dropseed, sand--Sporobolus cryptandrus (Torr.) A. Gray Emmer--Triticum turgidum L. subsp. dicoccon (Schrank) Thell. Fescue, Chewing's--Festuca rubra L. subsp. commutata Gaudin Fescue, hair--Festuca filiformis Pourr. Fescue, hard--Festuca trachyphylla (Hack.) Krajina Fescue, meadow--Festuca pratensis Huds. Fescue, red--Festuca rubra L. subsp. rubra Fescue, sheep--Festuca ovina L. Fescue, tall--Festuca arundinacea Schreb. Flatpea--Lathyrus sylvestris L. Flax--Linum usitatissimum L. Foxtail, creeping--Alopecurus arundinaceus Poir. Foxtail, meadow--Alopecurus pratensis L. [[Page 324]] Galletagrass--Pleuraphis jamesii Torr. Grama, blue--Bouteloua gracilis (Kunth) Griffiths Grama, side-oats--Bouteloua curtipendula (Michx.) Torr. Guar--Cyamopsis tetragonoloba (L.) Taub. Guineagrass--Megathyrsus maximus (Jacq.) B. K. Simon & S. W. L. Jacobs Hardinggrass--Phalaris aquatica L.'', Hemp--Cannabis sativa L. subsp. sativa Indiangrass, yellow--Sorghastrum nutans (L.) Nash Indigo, hairy--Indigofera hirsuta L. Japanese lawngrass--Zoysia japonica Steud. Johnsongrass--Sorghum halepense (L.) Pers. Kenaf--Hibiscus cannabinus L. Kochia, forage--Bassia prostrata (L.) A. J. Scott Kudzu--Pueraria montana (Lour.) Merr. var. lobata (Willd.) Sanjappa & Predeep Lentil--Lens culinaris Medik. subsp. culinaris Lespedeza, Korean--Kummerowia stipulacea (Maxim.) Makino Lespedeza, sericea or Chinese--Lespedeza cuneata (Dum. Cours.) G. Don Lespedeza, Siberian--Lespedeza juncea (L. f.) Pers. Lespedeza, striate--Kummerowia striata (Thunb.) Schindl. Lovegrass, sand--Eragrostis trichodes (Nutt.) Alph. Wood Lovegrass, weeping--Eragrostis curvula (Schrad.) Nees Lupine, blue--Lupinus angustifolius L. Lupine, white--Lupinus albus L. Lupine, yellow--Lupinus luteus L. Manilagrass--Zoysia matrella (L.) Merr. Medic, black--Medicago lupulina L. Milkvetch or cicer milkvetch--Astragalus cicer L. Millet, browntop--Urochloa ramosa (L.) T. Q. Nguyen Millet, foxtail--Setaria italica (L.) P. Beauv. subsp. italica Millet, Japanese--Echinochloa esculenta (A. Braun) H. Scholz Millet, pearl--Cenchrus americanus (L.) Morrone Millet, proso--Panicum miliaceum L. subsp. miliaceum Molassesgrass--Melinis minutiflora P. Beauv. Mustard, black--Brassica nigra (L.) W.D.J. Koch Mustard, India--Brassica juncea (L.) Czern. var. juncea Mustard, white--Sinapis alba L. subsp. alba Napiergrass--Cenchrus purpureus (Schumach.) Morrone Needlegrass, green--Nassella viridula (Trin.) Barkworth Oat--Avena byzantina K. Koch, A. sativa L., A. nuda L. Oatgrass, tall--Arrhenatherum elatius (L.) J. Presl & C. Presl subsp. elatius Orchardgrass--Dactylis glomerata L. Panicgrass, blue--Panicum antidotale Retz. Panicgrass, green--Megathyrsus maximus (Jacq.) B. K. Simon & W. L. Jacobs Pea, field--Pisum sativum L. var. arvense (L.) Poir. Peanut--Arachis hypogaea L. Poa trivialis--(see Bluegrass, rough) Radish--Raphanus sativus L. Rape, annual--Brassica napus L. var. napus Rape, bird--Brassica rapa L. subsp. oleifera Rape, turnip--Brassica rapa L. subsp. oleifera Rape, winter--Brassica napus L. var. napus Redtop--Agrostis gigantea Roth Rescuegrass--Bromus catharticus Vahl var. catharticus Rhodesgrass--Chloris gayana Kunth Rice--Oryza sativa L. Ricegrass, Indian--Achnatherum hymenoides (Roem. & Schult.) Barkworth Roughpea--Lathyrus hirsutus L. Rye--Secale cereale L. subsp. cereale Rye, mountain--Secale strictum (C. Presl) C. Presl subsp. strictum Ryegrass, annual or Italian--Lolium multiflorum Lam. Ryegrass, intermediate--Lolium x hybridum Hausskn. Ryegrass, perennial--Lolium perenne L. Ryegrass, Wimmera--Lolium rigidum Gaudin Safflower--Carthamus tinctorius L. Sagewort, Louisiana--Artemisia ludoviciana Nutt. Sainfoin--Onobrychis viciifolia Scop. Saltbush, fourwing--Atriplex canescens (Pursh) Nutt. Sesame--Sesamum indicum L. Sesbania--Sesbania exaltata (Raf.) A.W. Hill Smilo--Oloptum miliaceum (L.) R[ouml]ser & Hamasha Sorghum--Sorghum bicolor (L.) Moench Sorghum almum--Sorghum x almum L. Parodi Sorghum-sudangrass--Sorghum x drummondii (Steud.) Millsp. & Chase Sorgrass--Rhizomatous derivatives of a johnsongrass x sorghum cross or a johnsongrass x sudangrass cross Southernpea--(See Cowpea) Sourclover--Melilotus indicus (L.) All. Soybean--Glycine max (L.) Merr. Spelt--Triticum aestivum L. subsp. spelta (L.) Thell. Sudangrass--Sorghum x drummondii (Steud.) Millsp. & Chase Sunflower--Helianthus annuus L. Sweetclover, white--Melilotus albus Medik. Sweetclover, yellow--Melilotus officinalis Lam. Sweet vernalgrass--Anthoxanthum odoratum L. Sweetvetch, northern--Hedysarum boreale Nutt. Switchgrass--Panicum virgatum L. Teff--Eragrostis tef (Zuccagni) Trotter Timothy--Phleum pratense L. Timothy, turf--Phleum nodosum L. Tobacco--Nicotiana tabacum L. Trefoil, big--Lotus uliginosus Schkuhr Trefoil, birdsfoot--Lotus corniculatus L. [[Page 325]] Triticale-- x Triticosecale A. Camus (Secale x Triticum) Vaseygrass--Paspalum urvillei Steud. Veldtgrass--Ehrharta calycina Sm. Velvetbean--Mucuna pruriens (L.) DC. var. utilis (Wight) Burck Velvetgrass--Holcus lanatus L. Vetch, common--Vicia sativa L. subsp. sativa Vetch, hairy--Vicia villosa Roth subsp. villosa Vetch, Hungarian--Vicia pannonica Crantz Vetch, monantha--Vicia articulata Hornem. Vetch, narrowleaf or blackpod--Vicia sativa L. subsp. nigra (L.) Ehrh. Vetch, purple--Vicia benghalensis L. Vetch, woollypod or winter--Vicia villosa Roth subsp. varia (Host) Corb. Wheat, common--Triticum aestivum L. subsp. aestivum Wheat, club--Triticum aestivum L. subsp. compactum (Host) Mackey Wheat, durum--Triticum turgidum L. subsp. durum (Desf.) Husn. Wheat, Polish--Triticum turgidum L. subsp. polonicum (L.) Thell. Wheat, poulard--Triticum turgidum L. subsp. turgidum Wheat x Agrotricum--Triticum x Agrotriticum Wheatgrass, beardless--Pseudoroegneria spicata (Pursh) [aacute]. L[ouml]ve Wheatgrass, crested or fairway crested--Agropyron cristatum (L.) Gaertn. Wheatgrass, crested or standard crested--Agropyron desertorum (Link) Schult. Wheatgrass, intermediate--Thinopyrum intermedium (Host) Barkworth & D.R. Dewey subsp. intermedium Wheatgrass, pubescent--Thinopyrum intermedium (Host) Barkworth & D.R. Dewey subsp. barbulatum (Schur) Barkworth & D.R. Dewey Wheatgrass, Siberian--Agropyron fragile (Roth) P. Candargy Wheatgrass, slender--Elymus trachycaulus (Link) Shinners subsp. trachycaulus Wheatgrass, streambank--Elymus lanceolatus (Scribn. & J.G. Sm.) Gould subsp. riparius (Scribn. & J.G. Sm.) Barkworth Wheatgrass, tall--Thinopyrum elongatum (Host) D.R. Dewey Wheatgrass, western--Pascopyrum smithii (Rydb.) Barkworth & D.R. Dewey Wildrye, basin--Leymus cinereus (Scribn. & Merr.) [aacute]. L[ouml]ve Wildrye, Canada--Elymus canadensis L. Wildrye, Russian--Psathyrostachys juncea (Fisch.) Nevski Zoysia japonica--(see Japanese lawngrass) Zoysia matrella--(see Manilagrass) (i) Vegetable seeds. The term ``vegetable seeds'' means the seeds of the following kinds that are or may be grown in gardens or on truck farms and are or may be generally known and sold under the name of vegetable seeds: Artichoke--Cynara cardunculus L. Asparagus--Asparagus officinalis L. Asparagusbean or yard-long bean--Vigna unguiculata (L.) Walp. subsp. sesquipedalis (L.) Verdc. Bean, garden--Phaseolus vulgaris L. var. vulgaris Bean, Lima--Phaseolus lunatus L. Bean, runner or scarlet runner--Phaseolus coccineus L. Beet--Beta vulgaris L. subsp. vulgaris Broadbean--Vicia faba L. var. faba Broccoli--Brassica oleracea L. var. italica Plenck Brussels sprouts--Brassica oleracea L. var. gemmifera Zenker Burdock, great--Arctium lappa L. Cabbage--Brassica oleracea L. var. capitata L. Cabbage, Chinese--Brassica rapa L. subsp. pekinensis (Lour.) Hanelt Cabbage, tronchuda--Brassica oleracea L. var. costata DC. Cantaloupe--(see Melon) Cardoon--Cynara cardunculus L. Carrot--Daucus carota L. subsp. sativus (Hoffm.) Arcang. Cauliflower--Brassica oleracea L. var. botrytis L. Celeriac--Apium graveolens L. var. rapaceum (Mill.) Gaudin Celery--Apium graveolens L. var. dulce (Mill.) Pers. Chard, Swiss--Beta vulgaris L. subsp. vulgaris Chicory--Cichorium intybus L. Chives--Allium schoenoprasum L. Citron melon--Citrullus lanatus (Thunb.) Matsum. & Nakai var. citroides (L.H. Bailey) Mansf. Collards--Brassica oleracea L. var. viridis L. Corn, sweet--Zea mays L. subsp. mays Cornsalad--Valerianella locusta (L.) Laterr. Cowpea--Vigna unguiculata (L.) Walp. subsp. unguiculata Cress, garden--Lepidium sativum L. Cress, upland--Barbarea verna (Mill.) Asch. Cress, water--Nasturtium officinale R. Br. Cucumber--Cucumis sativus L. Dandelion--Taraxacum officinale F.H. Wigg. Dill--Anethum graveolens L. Eggplant--Solanum melongena L. Endive--Cichorium endivia L. subsp. endivia Favabean (see Broadbean) Gherkin, West India--Cucumis anguria L. var. anguria Kale--Brassica oleracea L. var. viridis L. Kale, Chinese--Brassica oleracea L. var. alboglabra (L.H. Bailey) Musil Kale, Siberian--Brassica napus L. var. pabularia (DC.) Rchb. Kohlrabi--Brassica oleracea L. var. gongylodes L. Leek--Allium porrum L. Lettuce--Lactuca sativa L. Melon--Cucumis melo L. subsp. melo Muskmelon--(see Melon). Mustard, India--Brassica juncea (L.) Czern. [[Page 326]] Mustard, spinach--Brassica rapa var. perviridis L.H. Bailey Okra--Abelmoschus esculentus (L.) Moench Onion--Allium cepa L. var. cepa Onion, bunching (see Onion, Welsh) Onion, Welsh--Allium fistulosum L. Pak-choi--Brassica rapa L. subsp. chinensis (L.) Hanelt Parsley--Petroselinum crispum (Mill.) A.W. Hill Parsnip--Pastinaca sativa L. subsp. sativa Pea--Pisum sativum L. subsp. sativum Pepper--Capsicum spp. Pe-tsai--(see Chinese cabbage). Pumpkin--Cucurbita pepo L., C. moschata Duchesne, and C. maxima Duchesne Radicchio (see Chicory) Radish--Raphanus sativus L. Rhubarb--Rheum x hybridum Murray Rutabaga--Brassica napus L. var. napobrassica (L.) Rchb. Sage--Salvia officinalis L. Salsify--Tragopogon porrifolius L. Savory, summer--Satureja hortensis L. Sorrel--Rumex acetosa L. Southernpea--(see Cowpea) Soybean--Glycine max (L.) Merr. Spinach--Spinacia oleracea L. Spinach, New Zealand--Tetragonia tetragonoides (Pall.) Kuntze Squash--Cucurbita pepo L., C. moschata Duchesne, and C. maxima Duchesne Tomato--Solanum lycopersicum L. Tomato, husk--Physalis pubescens L. Turnip--Brassica rapa L. subsp. rapa Watermelon--Citrullus lanatus (Thunb.) Matsum. & Nakai var. lanatus (j) Regulations. The term ``regulations'' means the rules and regulations promulgated by the Secretary of Agriculture and the joint rules and regulations promulgated by the Secretary of the Treasury and the Secretary of Agriculture under the Act. (k) Joint regulations. The term ``joint regulations'' means the joint rules and regulations promulgated by the Secretary of the Treasury and the Secretary of Agriculture. (l) Complete record. (1) The term ``complete record'' means information which relates to the origin, treatment (including but not limited to coating, film coating, encrusting, or pelleting), germination, and purity (including variety) of each lot of agricultural seed transported or delivered for transportation in interstate commerce, or which relates to the treatment (including but not limited to coating, film coating, encrusting, or pelleting), germination, and variety of each lot of vegetable seed transported or delivered for transportation in interstate commerce. Such information includes seed samples and records of declarations, labels, purchases, sales, cleaning, bulking, chemical or biological treatment, handling, storage, analyses, tests, and examinations. (2) The complete record kept by each person for each treatment substance or lot of seed consists of the information pertaining to his own transactions and the information received from others pertaining to their transactions with respect to each treatment substance or lot of seed. (m) Declaration. The term ``declaration'' means a written statement of a grower, shipper, processor, dealer, or importer giving for any lot of seed the kind, variety, type, origin, or the use for which the seed is intended. (n) Declaration of origin. The term ``declaration of origin'' means a declaration of a grower or country shipper in the United States stating for each lot of agricultural seed (1) kind of seed, (2) lot number or other identification, (3) State where seed was grown and the county where grown if to be labeled showing the origin as a portion of a State, (4) quantity of seed, (5) date shipped or delivered, (6) to whom sold, shipped, or delivered, and (7) the signature and address of the grower or country shipper issuing the declaration. If the declaration is issued by a grower and the identity of the person delivering the seed is unknown to the receiver, the motor vehicle license number or other identification of the delivering agency should be entered on the declaration by the receiver. If a country shipper's declaration includes seed shipped or delivered to him by another country shipper, it shall give for each lot the other country shipper's lot number as included in the other country shipper's declaration of origin. (o) Declaration of kind, variety, or type. The term ``declaration of kind, variety, or type'' means a declaration of a grower stating for each lot of seed (1) the name of the kind, variety, or type stated in accordance with Sec. Sec. 201.9 through 201.12, (2) lot number or other identification, (3) place where seed was grown, (4) quantity of seed, (5) date shipped or delivered, (6) to whom sold, [[Page 327]] shipped or delivered, and (7) the signature and address of the grower issuing the declaration. (p) Mixture. The term ``mixture'' means seeds consisting of more than one kind or variety, each present in excess of 5 percent by weight of the whole. A mixture of varieties of a single kind may be labeled as a blend. (q) Coated seed. The term ``coated seed'' means any seed unit covered with a coating material. (r) Grower. The term ``grower'' means any person who produces directly or through a growing contract, or is a seed-crop sharer in seed which is sold, offered for sale, transported, or offered for transportation. (s) Country shipper. The term ``country shipper'' means any person located in a producing area who purchases seed locally for shipment to seed dealers or to other country shippers. (t) Dealer. The term ``dealer'' means any person who cleans, processes, sells, offers for sale, transports, or delivers for transportation seeds in interstate commerce. (u) Consumer. The term ``consumer'' means any person who purchases or otherwise obtains seed for sowing but not for resale. (v) Lot of seed. The term ``lot of seed'' means a definite quantity of seed identified by a lot number, every portion or bag of which is uniform, within permitted tolerances, for the factors which appear in the labeling. (w) Purity. The term ``purity'' means the name or names of the kind, type, or variety and the percentage or percentages thereof; the percentage of other agricultural seed; the percentage of weed seeds, including noxious-weeds seeds; the percentage of inert matter; and the names of the noxious-weed seeds and the rate of occurrence of each. (x) Inoculant. The term ``inoculant'' means a product consisting of microorganisms applied to the seed for the purpose of enhancing the availability or uptake of plant nutrients through the root system. (y) Hybrid. The term ``hybrid'' applied to kinds or varieties of seed means the first generation seed of a cross produced by controlling the pollination and by combining (1) two or more inbred lines; (2) one inbred or a single cross with an open pollinated variety; or (3) two selected clones, seed lines, varieties, or species. ``Controlling the pollination'' means to use a method of hybridization which will produce pure seed which is at least 75 percent hybrid seed. Hybrid designations shall be treated as variety names. (z) Conditioning. For the purpose of section 203 (b)(2)(C) of the Act the term ``conditioning'' means cleaning, scarifying, or blending to obtain uniform quality, and other operations which would change the purity or germination of the seed and therefore require retesting to determine the quality of the seed, but does not include operations such as packaging, labeling, blending together of uniform lots of the same kind or variety without cleaning, or the preparation of a mixture without cleaning, any of which would not require retesting to determine the quality of the seed. (aa) Agricultural Marketing Service means the Agricultural Marketing Service, United States Department of Agriculture. (bb) Breeder seed. Breeder seed is a class of certified seed directly controlled by the originating or sponsoring plant breeding institution, or person, or designee thereof, and is the source for the production of seed of the other classes of certified seed. (cc) Foundation seed. Foundation seed is a class of certified seed which is the progeny of Breeder or Foundation seed and is produced and handled under procedures established by the certifying agency, in accordance with this part, for producing the Foundation class of seed, for the purpose of maintaining genetic purity and identity. (dd) Registered seed. Registered seed is a class of certified seed which is the progeny of Breeder or Foundation seed and is produced and handled under procedures established by the certifying agency, in accordance with this part, for producing the Registered class of seed, for the purpose of maintaining genetic purity and identity. (ee) Certified seed. Certified seed is a class of certified seed which is the progeny of Breeder, Foundation, or Registered seed, except as provided in Sec. 201.70, and is produced and handled [[Page 328]] under procedures established by the certifying agency, in accordance with this part, for producing the Certified class of seed, for the purpose of maintaining genetic purity and identity. (ff) Off-type. The term ``off-type'' means a plant or seed which deviates in one or more characteristics from that which has been described in accordance with Sec. 201.68(c) as being usual for the strain or variety. (gg) Inbred line. The term ``inbred line'' means a relatively true- breeding strain resulting from at least five successive generations of controlled self-fertilization or of backcrossing to a recurrent parent with selection, or its equivalent, for specific characteristics. (hh) Single cross. The term ``single cross'' means the first generation hybrid between two inbred lines. (ii) Foundation single cross. The term ``foundation single cross'' means a single cross used in the production of a double cross, a three- way, or a top cross. (jj) Double cross. The term ``double cross'' means the first generation hybrid between two single crosses. (kk) Top cross. The term ``top cross'' means the first generation hybrid of a cross between an inbred line and an open-pollinated variety or the first-generation hybrid between a single cross and an open- pollinated variety. (ll) Three-way cross. The term ``three-way cross'' means a first generation hybrid between a single cross and an inbred line. (mm) Open-pollination. The term ``open-pollination'' means pollination that occurs naturally as opposed to controlled pollination, such as by detasseling, cytoplasmic male sterility, self-incompatibility or similar processes. (nn) Coating material. The term ``coating material'' means any substance that changes the size, shape, or weight of the original seed. Ingredients such as rhizobia, dyes, polymers, biologicals, and pesticides are not coating material for purposes of this part. (oo) Brand. The term ``brand'' means a name, term, sign, symbol, or design, or a combination of them that identifies the seed of one seller or group of sellers and differentiates that seed from the seed of other sellers. [5 FR 28, Jan. 4, 1940] Editorial Note: For Federal Register citations affecting Sec. 201.2, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. administration Sec. 201.3 Administrator. The Administrator of the Agricultural Marketing Service may perform such duties as the Secretary requires in enforcing the provisions of the Act and of the regulations in this part. [85 FR 40579, July 7, 2020] records for agricultural and vegetable seeds Sec. 201.4 Maintenance and accessibility. (a) Each person transporting or delivering for transportation in interstate commerce agricultural or vegetable seed subject to the Act shall keep for a period of 3 years a complete record of each lot of such seed so transported or delivered, including a sample representing each lot of such seed, except that any seed sample may be discarded 1 year after the entire lot represented by such sample has been disposed of by such person. (b) Each sample of agricultural seed retained shall be at least the weight required for a noxious-weed seed examination as set forth in Sec. 201.46 and each sample of vegetable seed retained shall consist of at least 400 seeds. The record shall be kept in such manner as to permit comparison with the records required to be kept by other persons for the same lot of seed so that the origin, treatment (including, but not limited to, coating, film coating, encrusting, or pelleting), germination, and purity (including variety) of agricultural seed and the treatment (including, but not limited to, coating, film coating, encrusting, or pelleting), germination and variety of vegetable seed may be traced from the grower to the ultimate consumer and so that the lot of seed may be correctly labeled. The record shall be accessible for inspection by the authorized agents of the Secretary [[Page 329]] for purposes of the effective administration of the Act at any time during customary business hours. [24 FR 3951, May 15, 1959, as amended at 32 FR 12778, Sept. 6, 1967; 85 FR 40579, July 7, 2020] Sec. 201.5 Origin. (a) The complete record for any lot of seed of alfalfa, red clover, white clover, or field corn, except hybrid seed corn, shall include a declaration of origin, or information traceable to a declaration of origin or evidence showing that a declaration of origin could not be obtained. (b) Each country shipper shall retain a copy of each declaration which he issues and shall attach thereto a detailed record showing the names and addresses of growers or country shippers from whom the seed was purchased, the quantity of seed purchased from each, and the date on which it was delivered to him. [5 FR 30, Jan. 4, 1940, as amended at 20 FR 7929, Oct. 21, 1955] Sec. 201.6 Germination. The complete record shall include the records of all laboratory tests for germination and hard seed for each lot of seed offered for transportation in whole or in part. The record shall show the kind of seed, lot number, date of test, percentage of germination and hard seeds, and such other information as may be necessary to show the method used. [5 FR 30, Jan. 4, 1940] Sec. 201.7 Purity (including variety). The complete record for any lot of seed shall include (a) records of tests, including statements of weed seeds, noxious weed seeds, inert matter, other agricultural seeds, and of any determinations of kind, variety, or type and a description of the methods used; and (b) for seeds indistinguishable by seed characteristics, records necessary to disclose the kind, variety, or type, including a grower's declaration of kind, variety, or type or an invoice, or other document establishing the kind, variety, or type to be that stated, and a representative sample of the seed. The grower's declaration shall be obtained and kept by the person procuring the seed from the grower. A copy of the grower's declaration and a sample of the seed shall be retained by the grower. [5 FR 30, Jan. 4, 1940, as amended at 20 FR 7929, Oct. 21, 1955; 24 FR 3951, May 15, 1959; 85 FR 40579, July 7, 2020] Sec. 201.7a Treated seed. The complete record for any lot consisting of or containing treated seed shall include records necessary to disclose the name of any substance or substances used in the treatment of such seed, including a label or invoice or other document received from any person establishing the name of any substance or substances used in the treatment to be as stated, and a representative sample of the treated seed. [32 FR 12778, Sept. 6, 1967] labeling agricultural seeds Sec. 201.8 Contents of the label. The label shall contain the required information in any form that is clearly legible and complies with the regulations in this part. The information may be on a tag attached securely to the container, or may be printed in a conspicuous manner on a side or the top of the container. The label may contain information in addition to that required by the Act, provided such information is not misleading. [5 FR 30 Jan. 4, 1940, as amended at 24 FR 3952, May 15, 1959; 85 FR 40579, July 7, 2020] Sec. 201.9 Kind. The name of each kind of seed present in excess of 5 percent shall be shown on the label and need not be accompanied by the word ``kind.'' When two or more kinds of seed are named on the label, the name of each kind shall be accompanied by the percentage of each. When only one kind of seed is present in excess of 5 percent and no variety name or type designation is shown, the percentage of that kind may be shown as ``pure seed'' and such percentage shall apply only to seed of the kind named. [5 FR 30, Jan. 4, 1940] [[Page 330]] Sec. 201.10 Variety. (a) The following kinds of agricultural seeds are generally labeled as to variety and shall be labeled to show the variety name or the words ``Variety Not Stated.'' Alfalfa; Bahiagrass; Barley; Bean, field; Beet, field; Brome, smooth; Broomcorn; Clover, crimson; Clover, red; Clover, white; Corn, field; Corn, pop; Cotton; Cowpea; Crambe; Fescue, tall; Flax; Lespedeza, striate; Millet, foxtail; Millet, pearl; Oat; Pea, field; Peanut; Radish; Rice; Rye; Safflower; Sorghum; Sorghum-sudangrass, Soybean; Sudangrass; Sunflower; Tobacco; Trefoil, birdsfoot; Triticale; Wheat, common; Wheat, durum. (b) If the name of the variety is given, the name may be associated with the name of the kind with or without the words ``kind and variety.'' The percentage in such case, which may be shown as ``pure seed,'' shall apply only to seed of the variety named, except for the labeling of hybrids as provided in Sec. 201.11a. If separate percentages for the kind and the variety or hybrid are shown, the name of the kind and the name of the variety or the term ``hybrid'' shall be clearly associated with the respective percentages. When two or more varieties are present in excess of 5 percent and are named on the label, the name of each variety shall be accompanied by the percentage of each. [32 FR 12778, Sept. 6, 1967, and 33 FR 10840, July 31, 1968, as amended at 35 FR 6108, Apr. 15, 1970; 59 FR 64491, Dec. 14, 1994; 85 FR 40579, July 7, 2020] Sec. 201.11 Type. (a) When type is designated, such designation may be associated with the name of the kind but shall in all cases be clearly associated with the word ``type.'' The percentage, which may be shown as ``pure seed'', shall apply only to the type designated. If separate percentages for the kind and the type are shown, such percentages shall be clearly associated with the name of the kind and the name of the type. (b) If the type designation does not include a variety name, it shall include a name descriptive of a group of varieties of similar character and the pure seed shall be at least 90 percent of one or more varieties all of which conform to the type designation. (c) If the name of a variety is used as a part of the type designation, the seed shall be of that variety and may contain: (1) An admixture of seed of other indistinguishable varieties of the same kind and of similar character; or, (2) an admixture of indistinguishable seeds having genetic characteristics dissimilar to the variety named by reason of cross-fertilization with other varieties. In either case, at least 90 percent of the pure seed shall be of the variety named or upon growth shall produce plants having characteristics similar to the variety named. [5 FR 30, Jan. 4, 1940] Sec. 201.11a Hybrid. If any one kind or kind and variety of seed present in excess of 5 percent is ``hybrid'' seed, it shall be designated ``hybrid'' on the label. The percentage that is hybrid shall be at least 95 percent of the percentage of pure seed shown unless the percentage of pure seed which is hybrid seed is shown separately. If two or more kinds or varieties are present in excess of 5 percent and are named on the label, each that is hybrid shall be designated as hybrid on the label. Any one kind or kind and variety that has pure seed which is less than 95 percent but more than 75 percent hybrid seed as a result of incompletely controlled pollination in a cross shall be labeled to show (a) the percentage of pure seed that is hybrid seed or (b) a statement such as ``Contains from 75 percent to 95 percent hybrid seed.'' No one kind or variety of seed shall be labeled as hybrid if the pure seed contains less than 75 percent hybrid seed. [33 FR 10840, July 31, 1968] Sec. 201.12 Name of kind and variety. The representation of kind or kind and variety shall be confined to the name of the kind or kind and variety determined in accordance with Sec. 201.34. The name shall not have affixed thereto words or terms that create a misleading impression as to the history or characteristics of the kind or variety. [20 FR 7929, Oct. 21, 1955] [[Page 331]] Sec. 201.12a Seed mixtures. Seed mixtures intended for seeding/planting purposes shall be designated as a mixture on the label and each seed component shall be listed on the label in the order of predominance. [85 FR 40579, July 7, 2020] Sec. 201.13 Lot number or other identification. The lot number or other identification shall be shown on the label and shall be the same as that used in the records pertaining to the same lot of seed. [5 FR 30, Jan. 4, 1940, as amended at 59 FR 64491, Dec. 14, 1994] Sec. 201.14 Origin. (a) Alfalfa, red clover, white clover, and field corn (except hybrid seed corn) shall be labeled to show: (1) The origin, if known; or (2) if the origin is not known, the statement ``origin unknown.'' (b) Whenever such seed originates in more than one State, the name of each State and the percentage of seed originating in each State shall be given in the order of its predominance. Whenever such seed originates in a portion of a State, it shall be permissible to label such seed as originating in such portion of a State. (c) Reasonable precautions to insure that the origin of seed is known shall include the maintaining of a record as described in Sec. 201.5. The examination of the seed and any pertinent facts may be taken into consideration in determining whether reasonable precautions have been taken to insure the origin to be that which is represented. [5 FR 31, Jan. 4, 1940, as amended at 20 FR 7929, Oct. 21, 1955; 32 FR 12779, Sept. 6, 1967] Sec. 201.15 Weed seeds. The percentage of weed seeds shall include seeds of plants considered weeds in the State into which the seed is offered for transportation or transported and shall include noxious weed seeds. [5 FR 31, Jan. 4, 1940] Sec. 201.16 Noxious-weed seeds. (a) Except for those kinds of noxious-weed seeds shown in paragraph (b) of this section, the names of the kinds of noxious-weed seeds and the rate of occurrence of each shall be expressed in the label in accordance with, and the rate of occurrence shall not exceed the rate permitted by, the law and regulations of the State into which the seed is offered for transportation or is transported. If in the course of such transportation, or thereafter, the seed is diverted to another State of destination, the person or persons responsible for such diversion shall cause the seed to be relabeled with respect to the noxious-weed seed content, if necessary to conform to the laws and regulations of the State into which the seed is diverted. (b) Seeds or bulblets of the following plants shall be considered noxious-weed seeds in agricultural and vegetable seeds transported or delivered for transportation in interstate commerce (including Puerto Rico, Guam, and the District of Columbia). Agricultural or vegetable seed containing seeds or bulblets of these kinds shall not be transported or delivered for transportation in interstate commerce. Noxious-weed seeds include the following species on which no tolerance will be applied: Aeginetia spp. Ageratina adenophora (Spreng.) King and H.E. Robins. Alectra spp. Alternanthera sessilis (L.) DC. Asphodelus fistulosus L. Avena sterilis L. (including Avena ludoviciana Dur.) Azolla pinnata R. Br. Carthamus oxyacantha M. Bieb Cenchrus caudatus (Schrad.) Kuntze Cenchrus clandestinus Morrone Cenchrus pedicellatus (Trin.) Morrone Cenchrus polystachios (L.) Morrone Chrysopogon aciculatus (Retz.) Trin. Commelina benghalensis L. Crupina vulgaris Cass. Digitaria abyssinica Stapf. (=D. scalarum (Schweinf.) Chiov.) Digitaria scalarum (Schweinfurth) Chiovenda Dinebra chinensis (L.) P. M. Peterson & N. Snow Drymaria arenarioides Roem. and Schult. Eichornia azurea (Sw.) Kunth Galega officinalis L. Heracleum mantegazzianum Sommier & Levier [[Page 332]] Homeria spp. Hydrilla verticillata (L. f.) Royle Hygrophila polysperma T. Anders. Imperata brasiliensis Trin. Imperata cylindrica (L.) Raeusch. Ipomoea aquatica Forsk. Ischaemum rugosum Salisb. Lagarosiphon major (Ridley) Moss Limnophila sessiliflora (Vahl) Blume Lycium ferocissimum Miers Melaleuca quinquenervia (Cav.) Blake Melastoma malabathricum L. Mikania cordata (Burm. f.) B.L. Robins. Mikania micrantha H.B.K. Mimosa invisa Mart. Mimosa pigra L. var. pigra Monochoria hastata (L.) Sloms-Laub. Monochoria vaginalis (Burm. f.) K.B. Presl Nassella trichotoma (Nees) Arechavaleta Opuntia aurantiaca Lindl. Oryza longistaminata A. Cheval. and Roehr. Oryza punctata Steud. Oryza rufipogon Griff. Ottelia alismoides (L.) Pers. Paspalum scrobiculatum L. Prosopis alapataco R.A. Philippi Prosopis argentina Burkart Prosopis articulata S. Watson Prosopis burkartii Munoz Prosopis caldenia Burkart Prosopis calingastana Burkart Prosopis campestris Griseb. Prosopis castellanosii Burkart Prosopis denudans Benth. Prosopis elata (Burkart) Burkart Prosopis farcta (Russell) Macbride Prosopis ferox Griseb. Prosopis fiebrigii Harms Prosopis hassleri Harms Prosopis humilis Hook. and Arn. Prosopis kuntzei Harms Prosopis pallida (Willd.) H.B.K. Prosopis palmeri S. Watson Prosopis reptans Benth. var. reptans Prosopis rojasiana Burkart Prosopis ruizlealii Burkart Prosopis ruscifolia Griseb. Prosopis sericantha Hook. and Arn. Prosopis strombulifera (Lam.) Benth. Prosopis torquata (Lagasca) DC. Rottboellia cochinchinensis (Lour.) Clayton Rubus moluccanus L. Rubus plicatus Weihe & Nees Rumex hypogaeus T.M. Schust & Reveal Rumex spinosus L. Saccharum spontaneum L. Sagittaria sagittifolia L. Salsola vermiculata L. Salvinia auriculata Aubl. Salvinia biloba Raddi Salvinia herzogii de la Sota Salvinia molesta D.S. Mitchell Senecio inaequidens DC. Setaria pallide-fusca (Schumach.) Stapf and Hubb. Solanum tampicense Dunal Solanum torvum Sw. Solanum viarum Dunal Sparaganium erectum L. Spermacoce alata (Aublet) de Candolle Striga spp. Tridax procumbens L. Urochloa panicoides Beauv. [65 FR 1706, Jan. 11, 2000, as amended at 76 FR 31794, June 2, 2011] Sec. 201.17 Noxious-weed seeds in the District of Columbia. (a) Noxious-weed seeds in the District of Columbia are: Quackgrass (Elymus repens), Canada thistle (Cirsium arvense), field bindweed (Convolvulus arvensis), bermudagrass (Cynodon dactylon), giant bermudagrass (Cynodon dactylon var. aridus), annual bluegrass (Poa annua), and wild garlic or wild onion (Allium canadense or Allium vineale). The name and number per pound of each kind of such noxious- weed seeds present shall be stated on the label. (b) [Reserved] [65 FR 1707, Jan. 11, 2000, as amended at 85 FR 40579, July 7, 2020] Sec. 201.18 Other agricultural seeds. Agricultural seeds other than those included in the percentage or percentages of kind, variety, or type may be expressed as ``other crop seeds,'' but the percentage shall include collectively all kinds, varieties, or types not named upon the label. [85 FR 40579, July 7, 2020] Sec. 201.19 Inert matter. The label shall show the percentage by weight of inert matter. [5 FR 31, Jan. 4, 1940] Sec. 201.20 Germination The label shall show the percentage of germination for each kind, kind and variety, kind and type, or kind and hybrid of agricultural seed comprising more than 5 percent of the whole. The label shall show the percentage of germination for each kind, kind and variety, kind and type, or kind and hybrid of agricultural seed comprising 5 percent of the whole or less if the seed is identified individually on the label. [85 FR 40579, July 7, 2020] [[Page 333]] Sec. 201.21 Hard seed or dormant seed. The label shall show the percentage of hard seed or dormant seed, as defined in Sec. 201.57 or Sec. 201.57a, if any is present. The percentages of hard seed and dormant seed shall not be included as part of the germination percentage. [85 FR 40579, July 7, 2020] Sec. 201.22 Date of test. (a) The label shall show the month and year in which the germination test was completed. No more than 5 calendar months shall have elapsed between the last day of the month in which the germination test was completed and the date of transportation or delivery for transportation in interstate commerce, except for seed in hermetically sealed containers as provided in Sec. 201.36c in which case no more than 24 calendar months shall have elapsed between the last day of the month in which the germination test was completed prior to packaging and the date of transportation or delivery for transportation in interstate commerce. (b) In the case of a seed mixture, it is only necessary to state the calendar month and year of such test for the kind or variety or type of agricultural seed contained in such mixture which has the oldest calendar month and year test date among the test conducted on all the kinds or varieties or types of agricultural seed contained in such mixture. (c) The following kinds shall be tested within the indicated time before interstate shipment: ------------------------------------------------------------------------ Months from test Agricultural seeds and mixtures thereof date to shipment ------------------------------------------------------------------------ Bentgrass, Colonial.......................................... 15 Bentgrass, Creeping.......................................... 15 Bluegrass, Kentucky.......................................... 15 Fescue, Chewings............................................. 15 Fescue, Hard................................................. 15 Fescue, Red.................................................. 15 Fescue, Tall................................................. 15 Ryegrass, Annual............................................. 15 Ryegrass, Perennial.......................................... 15 ------------------------------------------------------------------------ [5 FR 31, Jan. 4, 1940, as amended at 32 FR 12779, Sept. 6, 1967; 49 FR 1172, Jan. 10, 1984; 59 FR 64491, Dec. 14, 1994] Sec. 201.23 Seller and buyer information. Consumer packages or containers of agricultural seed for interstate shipment must be labeled as follows: (a) The full name and address of the interstate shipper or a code designation identifying the interstate shipper, pursuant to Sec. 201.24, must be printed on the label. (b) If pursuant to paragraph (a) only a code is used to identify the interstate shipper, the full name and address of the consignee must appear on the label. (c) For purposes of this section and Sec. 201.24, the term shipper means the seller or consignor who puts the seed into interstate commerce, and the term consignee means the buyer or recipient of the seed shipment. [85 FR 40579, July 7, 2020] Sec. 201.24 Code designation. The code designation used in lieu of the full name and address of the interstate shipper pursuant to Sec. 201.23(a) shall be approved by the Administrator of the Agricultural Marketing Service (AMS) or such other person designated by the Administrator for the purpose. When used, the AMS code designation shall appear on the label in a clear and legible manner, along with the full name and address of the consignee. [85 FR 40580, July 7, 2020] Sec. 201.24a Inoculated seed. Seed claimed to be inoculated shall be labeled to show the month and year beyond which the inoculant on the seed is no longer claimed to be effective by a statement such as, ``Inoculant not claimed to be effective after____(Month and year).'' [32 FR 12779, Sept. 6, 1967] labeling vegetable seeds Sec. 201.25 Contents of the label. Vegetable seed in packets and in larger containers shall be labeled with the required information in any form that is clearly legible. Any tag used shall be securely attached to the container. The label may contain information in addition to that required by the [[Page 334]] Act, provided such information is not misleading. [5 FR 31, Jan. 4, 1940, as amended at 85 FR 40580, July 7, 2020] Sec. 201.26 Kind, variety, and hybrid. The label shall bear the name of each kind and variety present as determined in accordance with Sec. 201.34. The name shall not have affixed thereto words or terms that create a misleading impression as to the history or characteristics of kind or variety. If two or more kinds or varieties are present, the percentage of each shall be shown. If any one kind or variety named on the label is ``hybrid'' seed, it shall be so designated on the label. If two or more kinds or varieties are named on the label, each that is hybrid shall be shown as ``hybrid'' on the label. Any kind or variety that is less than 95 percent but more than 75 percent hybrid seed as a result of incompletely controlled pollination in a cross shall be labeled to show (a) the percentage that is hybrid seed or (b) a statement such as ``Contains from 75 percent to 95 percent hybrid seed.'' No one kind or variety of seed shall be labeled as hybrid if it contains less than 75 percent hybrid seed. [33 FR 10841, July 31, 1968, as amended at 59 FR 64491, Dec. 14, 1994] Sec. 201.26a Vegetable seed mixtures. Vegetable seed mixtures for seeding/planting purposes shall be designated as a mixture on the label, and each seed component shall be listed on the label in the order of predominance. [85 FR 40580, July 7, 2020] Sec. 201.27 Seller and buyer information. Consumer packages or containers of vegetable seed for interstate shipment must be labeled as follows: (a) The full name and address of the interstate shipper or a code designation identifying the interstate shipper, pursuant to Sec. 201.28, must be printed on the label. (b) If pursuant to paragraph (a) only a code is used to identify the interstate shipper, the full name and address of the consignee must appear on the label. (c) For purposes of this section and Sec. 201.28, the term shipper means the seller or consignor who puts the seed into interstate commerce, and the term consignee means the buyer or recipient of the seed shipment. [85 FR 40580, July 7, 2020] Sec. 201.28 Code designation. The code designation used in lieu of the full name and address of the interstate shipper pursuant to Sec. 201.27(a) shall be approved by the Administrator of the Agricultural Marketing Service (AMS) or such other person designated by the Administrator for the purpose. When used, the AMS code designation shall appear on the label in a clear and legible manner, along with the full name and address of the consignee. [85 FR 40580, July 7, 2020] Sec. 201.29 Germination of vegetable seed in containers of 1 pound or less. Vegetable seeds in containers of 1 pound or less which have a germination percentage equal to or better than the standard set forth in Sec. 201.31 need not be labeled to show the percentage of germination and date of test. Each variety of vegetable seed which has a germination percentage less than the standard set forth in Sec. 201.31 shall have the words ``Below Standard'' clearly shown in a conspicuous place on the label or on the face of the container in type no smaller than 8 points. Each variety which germinates less than the standard shall also be labeled to show the percentage of germination and the percentage of hard seed (if any). [85 FR 40580, July 7, 2020] Sec. 201.29a Germination of vegetable seed in containers of more than 1 pound. Each variety of vegetable seeds in containers of more than 1 pound shall be labeled to show the percentage of germination and the percentage of hard seed (if any). [32 FR 12779, Sept. 6, 1967] Sec. 201.30 Hard seed. The label shall show the percentage of hard seed, if any is present, for any seed required to be labeled as to the [[Page 335]] percentage of germination, and the percentage of hard seed shall not be included as part of the germination percentage. [32 FR 12779, Sept. 6, 1967] Sec. 201.30a Date of test. When the percentage of germination is required to be shown, the label shall show the month and year in which the germination test was completed. No more than 5 calendar months shall have elapsed between the last day of the month in which the germination test was completed and the date of transportation or delivery for transportation in interstate commerce, except for seed in hermetically sealed containers in which case no more than 24 calendar months shall have elapsed between the last day of the month in which the germination test was completed prior to packaging and the date of transportation or delivery for transportation in interstate commerce. [32 FR 12779, Sept. 6, 1967] Sec. 201.30b Lot number or other lot identification of vegetable seed in containers of more than 1 pound. The lot number or other lot identification of vegetable seed in containers of more than 1 pound shall be shown on the label and shall be the same as that used in the records pertaining to the same lot of seed. [35 FR 6108, Apr. 15, 1970] Sec. 201.30c Noxious-weed seeds of vegetable seed in containers of more than 1 pound. Except for those kinds of noxious-weed seeds shown in Sec. 201.16(b), the names of kinds of noxious-weed seeds and the rate of occurrence of each shall be expressed in the label in accordance with, and the rate shall not exceed the rate permitted by, the law and regulations of the State into which the seed is offered for transportation or is transported. If in the course of such transportation, or thereafter, the seed is diverted to another State of destination, the person or persons responsible for such diversion shall cause the seed to be relabeled with respect to noxious-weed seed content, if necessary, to conform to the laws and regulations of the State into which the seed is diverted. [85 FR 40580, July 7, 2020] Sec. 201.31 Minimum germination standards for vegetable seeds in interstate commerce. The following minimum germination standards for vegetable seeds in interstate commerce, which shall be construed to include hard seed, are determined and established under section 403(c) of the Act: ------------------------------------------------------------------------ Percent ------------------------------------------------------------------------ Artichoke.................................................... 60 Asparagus.................................................... 70 Asparagusbean................................................ 75 Bean, garden................................................. 70 Bean, lima................................................... 70 Bean, runner................................................. 75 Beet......................................................... 65 Broadbean.................................................... 75 Broccoli..................................................... 75 Brussels sprouts............................................. 70 Burdock, great............................................... 60 Cabbage...................................................... 75 Cabbage, tronchuda........................................... 70 Cardoon...................................................... 60 Carrot....................................................... 55 Cauliflower.................................................. 75 Celeriac..................................................... 55 Celery....................................................... 55 Chard, Swiss................................................. 65 Chicory...................................................... 65 Chinese cabbage.............................................. 75 Chives....................................................... 50 Citron....................................................... 65 Collards..................................................... 80 Corn, sweet.................................................. 75 Cornsalad.................................................... 70 Cowpea....................................................... 75 Cress, garden................................................ 75 Cress, upland................................................ 60 Cress, water................................................. 40 Cucumber..................................................... 80 Dandelion.................................................... 60 Dill......................................................... 60 Eggplant..................................................... 60 Endive....................................................... 70 Kale......................................................... 75 Kale, Chinese................................................ 75 Kale, Siberian............................................... 75 Kohlrabi..................................................... 75 Leek......................................................... 60 Lettuce...................................................... 80 Melon........................................................ 75 Mustard, India............................................... 75 Mustard, spinach............................................. 75 Okra......................................................... 50 Onion........................................................ 70 Onion, Welsh................................................. 70 Pak-choi..................................................... 75 Parsley...................................................... 60 Parsnip...................................................... 60 Pea.......................................................... 80 Pepper....................................................... 55 Pumpkin...................................................... 75 Radish....................................................... 75 Rhubarb...................................................... 60 Rutabaga..................................................... 75 [[Page 336]] Sage......................................................... 60 Salsify...................................................... 75 Savory, summer............................................... 55 Sorrel....................................................... 65 Soybean...................................................... 75 Spinach...................................................... 60 Spinach, New Zealand......................................... 40 Squash....................................................... 75 Tomato....................................................... 75 Tomato, husk................................................. 50 Turnip....................................................... 80 Watermelon................................................... 70 ------------------------------------------------------------------------ [59 FR 64491, Dec. 14, 1994, as amended at 85 FR 40580, July 7, 2020] labeling in general Sec. 201.31a Labeling treated seed. (a) Contents of label. Any agricultural seed or any mixture thereof or any vegetable seed or any mixture thereof, for seeding purposes, that has been treated shall be labeled in type no smaller than 8 point to indicate that the seed has been treated and to show the name of any substance or a description of any process (other than application of a substance) used in such treatment, in accordance with this section; for example, Treated with __________ (name of substance or process) or __________ (name of substance or process) treated. If the substance used in such treatment in the amount remaining with the seed is harmful to humans or other vertebrate animals, the seed shall also bear a label containing additional statements as required by paragraphs (c) and (d) of this section. The label shall contain the required information in any form that is clearly legible and complies with the regulations in this part. The information may be on the tag bearing the analysis information or on a separate tag, or it may be printed in a conspicuous manner on a side or top of the container. (b) Name of substance or active ingredient. The name of any active ingredient substance as required by paragraph (a) of this section shall be the commonly accepted coined, chemical (generic), or abbreviated chemical name. The label shall include either the name of the genus and species or the brand name as identified on biological product labels. Commonly accepted coined names are free for general use by the public, are not private trademarks, and are commonly recognized as names of particular substances, such as thiram, captan, lindane, and dichlone. Examples of commonly accepted chemical (generic) names are blue-stone, calcium carbonate, cuprous oxide, zinc hydroxide, hexachlorobenzene, and ethyl mercury acetate. The terms ``mercury'' or ``mercurial'' may be used in labeling all types of mercurials. Examples of commonly accepted abbreviated chemical names are BHC (1,2,3,4,5,6-Hexachlorocyclohexane) and DDT (dichloro diphenyl trichloroethane). (c) Mercurials and similarly toxic substances. (1) Seed treated with a mercurial or similarly toxic substance (Environmental Protection Agency Toxicity Category I), if any amount remains with the seed, shall be labeled to show a representation of a skull and crossbones at least twice the size of the type used for information required to be on the label under paragraph (a) and shall also include in red letters on a background of distinctly contrasting color a statement worded substantially as follows: ``This seed has been treated with Poison,'' ``Treated with Poison,'' ``Poison treated,'' or ``Poison''. The word ``Poison'' shall appear in type no less than 8 point. (2) Mercurials and similarly toxic substances (Environmental Protection Agency Toxicity Category I) include the following: Aldrin, technical Demeton Dieldrin p-Dimethylaminobenzenediazo sodium sulfonate Endrin Ethion Heptachlor Mercurials, all types Parathion Phorate Toxaphene O - O - Diethyl-O-(isopropyl-4-methyl-6-py- rimidyl) thiophosphate O, O-Diethyl-S-2-(ethylthio) ethyl phosphorodithioate Any amount of such substances remaining with the seed is considered harmful within the meaning of this section. [[Page 337]] (d) Other harmful substances. If a substance, other than one which would be classified as a mercurial or similarly toxic substance under paragraph (c) of this section, is used in the treatment of seed, and the amount remaining with the seed is harmful to humans or other vertebrate animals, the seed shall be labeled with an appropriate caution statement in type no smaller than 8 point worded substantially as follows: ``Do not use for food,'' ``Do not use for feed,'' ``Do not use for oil purposes,'' or ``Do not use for food, feed, or oil purposes.'' Any amount of any substance, not within paragraph (c) of this section, used in the treatment of the seed, which remains with the seed is considered harmful within the meaning of this section when the seed is in containers of more than 4 ounces, except that the following substances shall not be deemed harmful when present at a rate less than the number of parts per million indicated: Allethrin--2 p.p.m. Malathion--8 p.p.m. Methoxyclor--2 p.p.m. Piperonyl butoxide--8 p.p.m. on oat and sorghum and 20 p.p.m. on all other seeds. Pyrethrins--1 p.p.m. on oat and sorghum and 3 p.p.m. on all other seeds. [24 FR 3953, May 15, 1959, as amended at 25 FR 8769, Sept. 13, 1960; 30 FR 7888, June 18, 1965; 76 FR 31794, June 2, 2011; 85 FR 40580, July 7, 2020] Sec. 201.32 Screenings. Screenings shipped in interstate commerce, if in containers, shall be labeled in a legible manner with letters not smaller than 18 point type and, if in bulk, shall be invoiced with the words, ``Screenings for processing--not for seeding.'' [5 FR 31, Jan. 4, 1940] Sec. 201.33 Seed in bulk or large quantities; seed for cleaning or processing. (a) In the case of seed in bulk, the information required under sections 201(a), (b), and (i) of the Act shall appear in the invoice or other records accompanying and pertaining to such seed. If the seed is in containers and in quantities of 20,000 pounds or more, regardless of the number of lots included, the information required on each container under sections 201 (a), (b), and (i) of the Act need not be shown on each container; Provided, That: (1) The omission from each container of a label with the required information is with the knowledge and consent of the consignee prior to the transportation or delivery for transportation of such seed in interstate commerce; (2) each container has stenciled upon it or bears a label containing a lot designation; and (3) the invoice or other records accompanying and pertaining to such seed bear the various statements required for the respective seeds. (b) Seed consigned to a seed cleaning or processing establishment, for cleaning or processing for seeding purposes, need not be labeled to show the information required on each container under sections 201 (a), (b), and (i) of the Act if it is in bulk, or in containers and in quantities of 20,000 pounds or more regardless of the number of lots involved, and the invoice or other records accompanying and pertaining to such seed show that it is ``Seed for processing,'' or, if the seed is in containers and in quantities less than 20,000 pounds and each container bears a label with the words ``Seed for processing.'' If any such seed is later to be labeled as to origin and/or variety, the origin and/or variety as the case may be, shall be shown on the invoice if the seed is in bulk, otherwise, on a label, at the time of transportation to such establishment, except that if it is covered by a declaration of origin and/or variety it will be sufficient if the lot designation appearing in the declaration is placed on the invoice if the seed is in bulk, or on a label if the seed is in containers, regardless of the quantity. [24 FR 3953, May 15, 1959, as amended at 85 FR 40580, July 7, 2020] Sec. 201.34 Kind, variety, and type; treatment substances; designation as hybrid. (a) Indistinguishable seed and treatment substances. Reasonable precautions to insure that the kind, variety, or type of indistinguishable agricultural or vegetable seeds and names of any treatment substance are properly stated shall include the maintaining of the records described in Sec. 201.7 or Sec. 201.7a. The examination of the seed [[Page 338]] and any pertinent facts may be taken into consideration in determining whether reasonable precautions have been taken to insure the kind, variety, or type of seed or any treatment substance on the seed is that which is shown. Reasonable precautions in labeling ryegrass seed as to kind shall include making or obtaining the results of a fluorescence test unless (1) the shortness of the time interval between receipt of the seed lot and the shipment of the seed in interstate commerce, or (2) dormancy of the seeds in the lot, or (3) other circumstances beyond the control of the shipper prevent such action before the shipment is made. Reasonable precautions in labeling ryegrass seed as to kind shall also include keeping separate each lot labeled on the basis of a separate grower's declaration, invoice, or other documents. (b) Name of kind. The name of each kind of agricultural or vegetable seed is the name listed in Sec. 201.2 (h) or (i), respectively, except that a name which has become synonymous through broad general usage may be substituted therefor, provided the name does not apply to more than one kind and is not misleading. (c) Hybrid designation. Seed shall not be designated in labeling as ``hybrid'' seed unless it comes within the definition of ``hybrid'' in Sec. 201.2(y). (d) Name of variety. The name of each variety of agricultural or vegetable seed is the name determined in accordance with the following considerations: (1) The variety name shall represent a subdivision of a kind, which is characterized by growth, plant, fruit, seed, or other characters by which it can be differentiated from other sorts of the same kind. (2) Except as otherwise provided in this section, the name of a new variety shall be the name given by the originator or discoverer of the variety, except that in the event the originator or discoverer of a new unnamed variety, at the time seed of the variety is first introduced into channels of commerce of the United States for sale to the public, cannot or chooses not to name the variety, the name of the variety shall be the first name under which the seed is introduced into such commerce. However, if the variety name so provided is in a language not using the Roman alphabet, the variety shall be given a name by the person authorized under this paragraph to name the variety, in a language using the Roman alphabet. (3) The variety name shall not be misleading. The same variety name shall not be assigned to more than one variety of the same kind of seed. (4) The status under the Federal Seed Act of a variety name is not modified by the registration of such name as a trademark. (5) Names of varieties which through broad general usage prior to July 28, 1956 were recognized variety names, except for hybrid seed corn, shall be considered variety names without regard to the principles stated in paragraph (d)(2) of this section. (6) The variety name for any variety of hybrid seed corn first introduced into commercial channels in the United States for sale prior to October 20, 1951, shall be any name used for such variety in such channels prior to that date. The variety name for any variety of hybrid seed corn first introduced into commercial channels in the United States for sale on or after October 20, 1951, shall be the name assigned in accordance with paragraphs (d)(1) through (4) of this section. (e) [Reserved] [20 FR 7928, Oct. 21, 1955] Editorial Note: For Federal Register citations affecting Sec. 201.34, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. Sec. 201.35 Blank spaces. Blank spaces on the label shall be deemed to imply the word ``None,'' when such interpretation is reasonable. [5 FR 32, Jan. 4, 1940] Sec. 201.36 The words ``free'' and ``none.'' The words ``free'' and ``none'' shall be construed to mean that none were found in a test complying with the methods set forth in Sec. Sec. 201.45-201.52. [5 FR 32, Jan. 4, 1940] [[Page 339]] modifying statements Sec. 201.36a Disclaimers and nonwarranties. A disclaimer, nonwarranty, or limited warranty used in any invoice or other labeling, or advertisement shall not directly or indirectly deny or modify any information required by the act or the regulations in this part. [15 FR 2394, Apr. 28, 1950] advertising Sec. 201.36b Name of kind and variety; designation as hybrid. (a) The representation of the name of a kind or kind and variety of seed in any advertisement subject to the Act shall be confined to the name of the kind or kind and variety determined in accordance with Sec. 201.34. The name shall not have associated therewith words or terms that create a misleading impression as to the history or characteristics of the kind or kind and variety. Descriptive terms and firm names may be used in kind or variety names provided the descriptive terms or firm names are a part of the name or variety of seed; for example, Stringless Green Pod, Detroit Dark Red, Black Seeded Simpson and Henderson Bush Lima. Seed shall not be designated as hybrid seed in any advertisement subject to the Act unless it comes within the definition of ``hybrid'' in Sec. 201.2(y). (b) Terms descriptive as to color, shape, size, habit of growth, disease-resistance, or other characteristics of the kind or variety may be associated with the name of the kind or variety provided it is done in a manner which clearly indicates the descriptive term is not a part of the name of the kind or variety; for example, Oshkosh pepper (yellow), Copenhagen Market (round head) cabbage, and Kentucky Wonder (pole) garden bean. (c) Terms descriptive of quality or origin and terms descriptive of the basis for representations made may be associated with the name of the kind or variety: Provided, That the terms are clearly identified as being other than part of the name of the kind or variety; for example, Fancy quality redtop, Idaho origin alfalfa, and Grower's affidavit of variety Atlas sorghum. (d) Terms descriptive of the manner or method of production or processing the seed (for example, certified, registered, delinted, scarified, treated, and hulled), may be associated with the name of the kind or variety of seed, providing such terms are not misleading. (e) Brand names and terms taken from trademarks may be associated with the name of the kind or variety of seed as an indication of source: Provided, That the terms are clearly identified as being other than a part of the name of the kind or variety; for example, Ox Brand Golden Cross sweet corn. Seed shall not be advertised under a trademark or brand name in any manner that may create the impression that the trademark or brand name is a variety name. If seed advertised under a trademark or brand name is a mixture of varieties and if the variety names are not stated in the advertising, a description similar to a varietal description or a comparison with a named variety shall not be used if it creates the impression that the seed is of a single variety. [21 FR 4652, June 27, 1956, as amended at 32 FR 12780, Sept. 6, 1967; 59 FR 64491, Dec. 14, 1994; 85 FR 40580, July 7, 2020] Sec. 201.36c Hermetically-sealed containers. The 5-month limitation on the date of test in Sec. Sec. 201.22 and 201.30a shall not apply when the following conditions have been met: (a) The seed was packaged within 9 months after harvest; (b) The container used does not allow water vapor penetration through any wall, including the seals, greater than 0.05 grams of water per 24 hours per 100 square inches of surface at 100 [deg]F. with a relative humidity on one side of 90 percent and on the other side of 0 percent. Water vapor penetration or WVP is measured by the standards of the U.S. Bureau of Standards as: gm.H2O / 24 hr. / 100 sq. in. / 100 [deg]F. / 90% RH V.0% RH; (c) The seed in the container does not exceed the percentage of moisture, on a wet weight basis, as listed below: [[Page 340]] ------------------------------------------------------------------------ Agricultural seeds Percent ------------------------------------------------------------------------ Beet, field.................................................. 7.5 Beet, sugar.................................................. 7.5 Bluegrass, Kentucky.......................................... 6.0 Clover, crimson.............................................. 8.0 Fescue, red.................................................. 8.0 Mustard, India............................................... 5.0 Ryegrass, annual............................................. 8.0 Ryegrass, perennial.......................................... 8.0 All others................................................... 6.0 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Vegetable seeds Percent ------------------------------------------------------------------------ Bean, garden................................................. 7.0 Bean, lima................................................... 7.0 Beet......................................................... 7.5 Broccoli..................................................... 5.0 Brussels sprouts............................................. 5.0 Cabbage...................................................... 5.0 Cabbage, Chinese............................................. 5.0 Carrot....................................................... 7.0 Cauliflower.................................................. 5.0 Celeriac..................................................... 7.0 Celery....................................................... 7.0 Chard, Swiss................................................. 7.5 Chives....................................................... 6.5 Collards..................................................... 5.0 Corn, sweet.................................................. 8.0 Cucumber..................................................... 6.0 Eggplant..................................................... 6.0 Kale......................................................... 5.0 Kohlrabi..................................................... 5.0 Leek......................................................... 6.5 Lettuce...................................................... 5.5 Melon........................................................ 6.0 Mustard, India............................................... 5.0 Onion........................................................ 6.5 Onion, Welsh................................................. 6.5 Parsley...................................................... 6.5 Parsnip...................................................... 6.0 Pea.......................................................... 7.0 Pepper....................................................... 4.5 Pumpkin...................................................... 6.0 Radish....................................................... 5.0 Rutabaga..................................................... 5.0 Spinach...................................................... 8.0 Squash....................................................... 6.0 Tomato....................................................... 5.5 Turnip....................................................... 5.0 Watermelon................................................... 6.5 All others................................................... 6.0 ------------------------------------------------------------------------ (d) The container is conspicuously labeled in not less than 8 point type to indicate (1) that the container is hermetically sealed, (2) that the seed has been preconditioned as to moisture content, and (3) the calendar month and year in which the germination test was completed. (e) The percentage of germination of vegetable seed at the time of packaging was equal to or above the standards in Sec. 201.31. [32 FR 12780, Sept. 6, 1967, as amended at 59 FR 64491, Dec. 14, 1994] inspection Sec. 201.37 Authorization. When authorized by the Administrator of the Agriculture Marketing Service, or by such other person as may be designated for the purpose, Federal employees and qualified State officials, for the purposes of the Act, may draw samples of, secure information and inspect records pertaining to, and otherwise inspect seeds and screenings subject to the Act. [15 FR 2394, Apr. 28, 1950, as amended at 59 FR 64492, Dec. 14, 1994; 85 FR 40580, July 7, 2020] Sec. 201.38 [Reserved] sampling in the administration of the act Sec. 201.39 General procedure. (a) In order to secure a representative sample, equal portions shall be taken from evenly distributed parts of the quantity of seed or screenings to be sampled. Access shall be had to all parts of that quantity. When more than one trierful of seed is drawn from a bag, different paths shall be followed. When more than one handful is taken from a bag, the handfuls shall be taken from well-separated points. (b) For free-flowing seed in bags or bulk, a probe or trier shall be used. For small free-flowing seed in bags a probe or trier long enough to sample all portions of the bag should be used. (c) Non-free-flowing seed, such as certain grass seed, uncleaned seed, or screenings, difficult to sample with a probe or trier, shall be sampled by thrusting the hand into the bulk and withdrawing representative portions. The hand is inserted in an open position and the fingers are held closely together while the hand is being inserted and the portion withdrawn. (d) As the seed or screenings are sampled, each portion shall be examined. If there appears to be a lack of uniformity, the portions shall not be combined into a composite sample but shall be retained as separate samples or combined to form individual-container samples to determine such lack of uniformity as may exist. [[Page 341]] (e) When the portions appear to be uniform, they shall be combined to form a composite sample. [5 FR 32, Jan. 4, 1940, as amended at 10 FR 9950, Aug. 11, 1945; 25 FR 8769, Sept. 13, 1960; 26 FR 10035, Oct. 26, 1961; 85 FR 40580, July 7, 2020] Sec. 201.40 Bulk. Bulk seeds or screenings shall be sampled by inserting a long probe or thrusting the hand into the bulk as circumstances require in at least seven uniformly distributed parts of the quantity being sampled. At least as many trierfuls or handfuls shall be taken as the minimum which would be required for the same quantity of seed or screenings in bags of a size customarily used for such seed or screenings. [5 FR 32, Jan. 4, 1940, as amended at 26 FR 10035, Oct. 26, 1961] Sec. 201.41 Bags. (a) For lots of six bags or fewer, each bag shall be sampled. A total of at least five trierfuls shall be taken. (b) For lots of more than six bags, five bags plus at least 10 percent of the number of bags in the lot shall be sampled. (Round off numbers with decimals to the nearest whole number, raising 0.5 to the next whole number.) Regardless of the lot size it is not necessary that more than 30 bags be sampled. (c) Samples shall be drawn from unopened bags except under circumstances where the identity of the seed has been preserved. [5 FR 32, Jan. 4, 1940, as amended at 26 FR 10035, Oct. 26, 1961; 76 FR 31794, June 2, 2011] Sec. 201.42 Small containers. In sampling seed in small containers that it is not practical to sample as required in Sec. 201.41, a portion of one unopened container or one or more entire unopened containers may be taken to supply a minimum size sample, as required in Sec. 201.43. [30 FR 7888, June 18, 1965] Sec. 201.43 Size of sample. The following are minimum sizes of samples of agricultural seed, vegetable seed and screenings to be submitted for analysis, test, or examination: (a) Two ounces (57 grams) of grass seed not otherwise mentioned, white or alsike clover, or seeds not larger than these. (b) Five ounces (142 grams) of red or crimson clover, alfalfa, lespedeza, ryegrass, bromegrass, millet, flax, rape, or seeds of similar size. (c) One pound (454 grams) of sudangrass, proso millet, hemp, or seeds of similar size. (d) Two pounds (907 grams) of cereals, sorghum, vetch, or seeds of similar or larger size. (e) Two quarts (2.2 liters) of screenings. (f) Vegetable seed samples shall consist of at least 400 seeds. (g) Coated seed for a purity analysis shall consist of at least 7,500 seed units. Coated seed for noxious-weed seed examination shall consist of at least 30,000 seed units. Coated seed for germination test only shall consist of at least 1,000 seed units. [10 FR 9950, Aug. 11, 1945, as amended at 15 FR 2394, Apr. 28, 1950; 59 FR 64492, Dec. 14, 1994] Sec. 201.44 Forwarding samples. Before being forwarded for analysis, test, or examination, the containers of samples shall be properly sealed and identified in such manner as may be prescribed by AMS. Samples of coated seed shall be forwarded in firmly packed crush-proof and moisture-proof containers. [59 FR 64492, Dec. 14, 1994] purity analysis in the administration of the act Sec. 201.45 Obtaining the working sample. (a) The working sample on which the actual analysis is made shall be taken from the submitted sample in such a manner that it will be representative. (b) The sample shall be repeatedly divided to the weight to be used for the working sample. Some form of efficient mechanical divider should be used. To avoid damaging large seeds and coated seeds, a divider should be used which will prevent the seeds from falling great distances onto hard surfaces. In case the proper mechanical divider cannot be used or is not available, the [[Page 342]] sample shall be thoroughly mixed and placed in a pile and the pile shall be repeatedly divided into halves until a sample of the desired weight remains. [5 FR 32, Jan. 4, 1940, as amended at 20 FR 7929, Oct. 21, 1955; 25 FR 8769, Sept. 13, 1960; 59 FR 64492, Dec. 14, 1994] Sec. 201.46 Weight of working sample. (a) Unmixed seed. The working samples for purity analysis and noxiousweed seed examination of unmixed seed shall be at least the weights set forth in table 1. (b) Mixtures consisting of one predominant kind of seed or groups of kinds of similar size. The weights of the purity and noxious-weed seed working samples in this category shall be determined by the kind or group of kinds which comprise more than 50 percent of the sample. (c) Mixtures consisting of two or more kinds or groups of kinds of different sizes, none of which comprise over 50 percent of the sample. The weights of the purity working samples in this category shall be the weighted averages (to the nearest half gram) of the weights listed in table 1 for each of the kinds which comprise the sample determined by the following method: (1) Multiply the percentage of each component in the mixture (rounded off to the nearest whole number) by the sample sizes specified in column 2, table 1, (2) add all these products, (3) total the percentages of all components of the mixtures, and (4) divide the sum in paragraph (c)(2) of this section by the total in paragraph (c)(3) of this section. If the approximate percentage of the components of a mixture are not known they may be estimated. The weight of the noxious-weed seed working sample shall be determined by multiplying the weight of the purity working sample by 10 or by calculating the weighted average in the same manner described above for the purity working sample. (d) Coated seed. (1) Unmixed coated seed. Due to variation in the weight of coating materials, the size or weight of the working sample shall be determined separately for each lot. The weight of the working sample shall be determined by weighing 100 completely coated units and calculating the weight of 2,500 coated units for the purity analysis and 25,000 coated units for the noxious-weed seed examination. (2) Mixtures of coated seed. The working weight shall be determined in the following manner: (i) Calculate the weight of the working sample to be used for the mixture under consideration as though the sample were not coated by following paragraph (b) or (c) of this section. (ii) Determine the amount of coating material on 100 coated units by weighing the coated units. Remove the coating material using the methods described in Sec. Sec. 201.51b (c) and (d). Calculate the percentage of coating material using the following formulas: Weight of coating material = weight of 100 coated units - weight of 100 de-coated units; The percentage of coating material = weight of the coating material divided by the weight of 100 coated units x 100%. (iii) The weight of the working sample shall be the product of the weight calculated in paragraph (d)(2)(i) of this section multiplied by 100 percent, divided by 100 percent minus the percentage of coating material calculated in paragraph (d)(2)(ii) of this section. Table 1--Weight of Working Sample ------------------------------------------------------------------------ Minimum Minimum weight for Approximate weight for noxious- number of Name of seed purity weed seed seeds per analysis examination gram (grams) (grams) ------------------------------------------------------------------------ Agricultural Seed Agrotricum........................ 65 500 39 Alfalfa........................... 5 50 500 Alfilaria......................... 5 50 440 Alyceclover....................... 5 50 665 Bahiagrass: Var. Pensacola................ 5 50 600 All other vars................ 7 50 365 Barley............................ 100 500 30 Barrelclover...................... 10 100 250 Bean: Adzuki........................ 200 500 11 Field......................... 500 500 4 Mung.......................... 100 500 24 Beet, field....................... 50 500 55 Beet, sugar....................... 50 500 55 Beggarweed, Florida............... 5 50 440 Bentgrass: Colonial...................... 0.25 2.5 13,000 Creeping...................... 0.25 2.5 13,515 Velvet........................ 0.25 2.5 18,180 Bermudagrass...................... 1 10 3,930 Bermudagrass, giant............... 1 10 2,950 Bluegrass: Annual........................ 1 10 2,635 Bulbous....................... 4 40 585 [[Page 343]] Canada........................ 0.5 5 5,050 Glaucantha.................... 1 10 Kentucky...................... 1 10 3,060 Nevada........................ 1 10 2,305 Rough......................... 0.5 5 4,610 Texas......................... 1 10 2,500 Wood.......................... 0.5 5 4,330 Bluejoint......................... 0.5 5 8,461 Bluestem: Big........................... 7 70 320 Little........................ 5 50 525 Sand.......................... 10 100 215 Yellow........................ 1 10 1,945 Bottlebrush-squirreltail.......... 9 90 300 Brome: Field......................... 5 50 465 Meadow........................ 13 130 190 Mountain...................... 20 200 140 Smooth........................ 7 70 315 Broomcorn......................... 40 400 60 Buckwheat......................... 50 500 45 Buffalograss: (Burs)........................ 20 200 110 (Caryopses)................... 3 30 740 Buffelgrass: (Fascicles)................... 6 66 365 (Caryopses)................... 2 20 1,940 Burclover, California: (in bur)...................... 50 500 (out of bur).................. 7 70 375 Burclover, spotted (in bur)...................... 50 500 50 (out of bur).................. 5 50 550 Burnet, little.................... 25 250 110 Buttonclover...................... 7 70 365 Camelina.......................... 4 40 880 Canarygrass....................... 20 200 150 Canarygrass, reed................. 2 20 1,185 Carpetgrass....................... 1 10 2,230 Castorbean........................ 500 500 5 Chess, soft....................... 5 50 555 Chickpea.......................... 500 500 2 Clover: Alsike........................ 2 20 1,500 Arrowleaf..................... 4 40 705 Berseem....................... 5 50 455 Cluster....................... 1 10 2,925 Crimson....................... 10 100 330 Kenya......................... 2 20 Ladino........................ 2 20 1,935 Lappa......................... 2 20 1,500 Large hop..................... 1 10 5,435 Persian....................... 2 20 1,415 Red........................... 5 50 600 Rose.......................... 7 70 360 Small hop..................... 2 20 1,950 Strawberry.................... 5 50 635 Sub........................... 25 250 120 White......................... 2 20 1,500 Corn: Field......................... 500 500 3 Pop........................... 500 500 3 Cotton............................ 300 500 8 Cowpea............................ 300 500 8 Crambe............................ 25 250 Crested dogtail................... 2 20 1,900 Crotalaria: Lance......................... 7 70 375 Showy......................... 25 250 80 Slenderleaf................... 10 100 205 Striped....................... 10 100 215 Sunn.......................... 75 500 35 Crownvetch........................ 10 100 305 Dallisgrass....................... 4 40 620 Dichondra......................... 5 50 470 Dropseed, sand.................... 0.25 2.5 12,345 Emmer............................. 100 500 25 Fescue: Chewings...................... 3 30 900 Hair.......................... 1 10 Hard.......................... 2 20 1,305 Meadow........................ 5 50 495 Red........................... 3 30 900 Sheep......................... 2 20 1,165 Tall.......................... 5 50 455 Flatpea........................... 100 500 25 Flax.............................. 15 150 180 Foxtail, creeping................. 1.5 15 1,736 Foxtail, meadow................... 3 30 893 Galletagrass: (Other than caryopses)........ 10 100 260 (Caryopses)................... 5 50 580 Grama: Blue.......................... 2 20 1,595 Side-oats: (Other than caryopses).... 6 60 350 (Caryopses)............... 2 20 1,605 Guar.............................. 75 500 35 Guineagrass....................... 2 20 2,205 Hardinggrass...................... 3 30 750 Hemp.............................. 50 500 45 Indiangrass, yellow............... 7 70 395 Indigo, hairy..................... 7 70 435 Japanese lawngrass................ 2 20 1,325 Johnsongrass...................... 10 100 265 Kenaf............................. 50 500 Kochia, forage.................... 2 20 1,070 Kudzu............................. 25 250 80 Lentil............................ 120 500 14-23 Lespedeza: Korean........................ 5 50 525 Sericea....................... 3 30 820 Siberian...................... 3 30 820 Striate....................... 5 50 750 Lovegrass, sand................... 1 10 3,585 Lovegrass, weeping................ 1 10 3,270 Lupine: Blue.......................... 500 500 7 White......................... 500 500 7 Yellow........................ 300 500 9 Manilagrass....................... 2 20 Medic, black...................... 5 50 585 Milkvetch......................... 9 90 270 Millet: Browntop...................... 8 80 315 Foxtail....................... 5 50 480 Japanese...................... 9 90 315 Pearl......................... 15 150 180 Proso......................... 15 150 185 Molassesgrass..................... 0.5 5 7,750 [[Page 344]] Mustard: Black......................... 2 20 1,255 India......................... 5 50 625 White......................... 15 150 160 Napiergrass....................... 5 50 Needlegrass, green................ 7 70 370 Oat............................... 75 500 35-50 Oatgrass, tall.................... 6 60 417 Orchardgrass...................... 3 30 945 Panicgrass, blue.................. 2 20 1,370 Panicgrass, green................. 2 20 1,305 Pea, field........................ 500 500 4 Peanut............................ 500 500 1-3 Radish............................ 30 300 75 Rape: Annual........................ 7 70 345 Bird.......................... 7 70 425 Turnip........................ 5 50 535 Winter........................ 10 100 230 Redtop............................ 0.25 2.5 10,695 Rescuegrass....................... 20 200 115 Rhodesgrass....................... 1 10 4,725 Rice.............................. 50 500 65 Ricegrass, Indian................. 7 70 355 Roughpea.......................... 75 500 40 Rye............................... 75 500 40 Rye, mountain..................... 28 280 90 Ryegrass: Annual........................ 5 50 420 Intermediate.................. 8 80 338 Perennial..................... 5 50 530 Wimmera....................... 5 50 Safflower......................... 100 500 30 Sagewort, Louisiana............... 0.5 5 8,900 Sainfoin.......................... 50 500 50 Saltbush, fourwing................ 15 150 165 Sesame............................ 7 70 360 Sesbania.......................... 25 250 105 Smilo............................. 2 20 2,010 Sorghum........................... 50 500 55 Sorghum almum..................... 15 150 150 Sorghum-sudangrass................ 65 500 38 Sorgrass \1\...................... 15 150 135 Sourclover........................ 5 50 660 Soybean........................... 500 500 6-13 Spelt............................. 100 500 25 Sudangrass........................ 25 250 100 Sunflower......................... 100 500 Sweetclover: White......................... 5 50 570 Yellow........................ 5 50 570 Sweet vernalgrass................. 2 20 1,600 Sweetvetch, northern.............. 19 190 130 Switchgrass....................... 4 40 570 Teff.............................. 1 10 3,288 Timothy........................... 1 10 2,565 Timothy, turf..................... 1 10 2,565 Tobacco........................... 0.5 5 15,625 Trefoil: Big........................... 2 20 1,945 Birdsfoot..................... 3 30 815 Triticale......................... 100 500 Vaseygrass........................ 3 30 970 Veldtgrass........................ 4 40 655 Velvetbean........................ 500 500 2 Velvetgrass....................... 1 10 3,360 Vetch: Common........................ 150 500 19 Hairy......................... 75 500 35 Hungarian..................... 100 500 24 Monantha...................... 100 500 Narrowleaf.................... 50 500 60 Purple........................ 100 500 22 Woollypod..................... 100 500 25 Wheat: Common........................ 100 500 25 Club.......................... 100 500 25 Durum......................... 100 500 25 Polish........................ 100 500 25 Poulard....................... 100 500 25 Wheat x Agrotricum................ 65 500 38 Wheatgrass: Beardless..................... 8 80 275 Fairway crested............... 4 40 685 Standard crested.............. 5 50 425 Intermediate.................. 15 150 175 Pubescent..................... 15 150 180 Siberian...................... 5 50 Slender....................... 7 70 295 Streambank.................... 10 50 370 Tall.......................... 15 150 165 Western....................... 10 100 250 Wildrye: Basin......................... 8 80 317 Canada........................ 11 110 190 Russian....................... 6 60 360 Vegetable Seed Artichoke......................... 100 500 24 Asparagus......................... 100 500 25 Asparagusbean..................... 300 500 8 Bean: Garden........................ 500 500 4 Lima.......................... 500 500 2 Runner........................ 500 500 1 Beet.............................. 50 300 60 Broadbean......................... 500 500 Broccoli.......................... 10 50 315 Brussels sprouts.................. 10 50 315 Burdock, great.................... 15 150 Cabbage........................... 10 50 315 Cabbage, Chinese.................. 5 50 635 Cabbage, tronchuda................ 10 100 Cardoon........................... 100 500 Carrot............................ 3 50 825 Cauliflower....................... 10 50 315 Celeriac.......................... 1 25 2,520 Celery............................ 1 25 2,520 Chard, Swiss...................... 50 300 60 Chicory........................... 3 50 940 Chives............................ 5 50 Citron............................ 200 500 11 Collards.......................... 10 50 315 Corn, sweet....................... 500 500 Cornsalad: Vars. Fullhearted and Dark 5 50 Green Fullhearted............ All other vars................ 10 50 380 Cowpea............................ 300 500 8 Cress: Garden........................ 5 50 425 Upland........................ 2 35 1,160 [[Page 345]] Water......................... 1 25 5,170 Cucumber.......................... 75 500 40 Dandelion......................... 2 35 1,240 Dill.............................. 3 50 800 Eggplant.......................... 10 50 230 Endive............................ 3 50 940 Gherkin, West India............... 16 160 153 Kale.............................. 10 50 315 Kale, Chinese..................... 10 50 Kale, Siberian.................... 8 80 325 Kohlrabi.......................... 10 50 315 Leek.............................. 7 50 395 Lettuce........................... 3 50 890 Melon............................. 50 500 45 Mustard, India.................... 5 50 625 Mustard, spinach.................. 5 50 535 Okra.............................. 100 500 19 Onion............................. 7 50 340 Onion, Welsh...................... 10 50 Pak-choi.......................... 5 50 635 Parsley........................... 5 50 650 Parsnip........................... 5 50 430 Pea............................... 500 500 3 Pepper............................ 15 150 165 Pumpkin........................... 500 500 5 Radish............................ 30 300 75 Rhubarb........................... 50 300 60 Rutabaga.......................... 5 50 430 Sage.............................. 25 150 120 Salsify........................... 50 300 65 Savory, summer.................... 2 35 1,750 Sorrel............................ 2 35 1,080 Soybean........................... 500 500 6-13 Spinach........................... 25 150 100 Spinach, New Zealand.............. 200 500 13 Squash............................ 200 500 14 Tomato............................ 5 50 405 Tomato, husk...................... 2 35 1,240 Turnip............................ 5 50 535 Watermelon........................ 200 500 11 ------------------------------------------------------------------------ \1\ Rhizomatous derivatives of a johnsongrass x sorghum cross or a johnsongrass x sudangrass cross. [25 FR 8769, Sept. 13, 1960, as amended at 30 FR 7888, June 18, 1965; 32 FR 12780, Sept. 6, 1967; 35 FR 6108, Apr. 15, 1970; 41 FR 20156, May 17, 1976; 46 FR 53635, Oct. 29, 1981; 59 FR 64492, Dec. 14, 1994; 65 FR 1707, Jan. 11, 2000; 85 FR 40580, July 7, 2020] Sec. 201.47 Separation. (a) The working sample shall be weighed in grams to four significant figures and shall then be separated into four parts: (1) Kind or variety to be considered pure seed, (2) other crop seed, (3) weed seed, and (4) inert matter. The components shall be weighed in grams to the same number of decimal places as the working sample. The percentage of each part shall be determined to two decimal places. (b) Aids for the classification of pure seed, other crop seed, weed seed, and inert matter may include visual examination, use of transmitted light (diaphanoscope), or specific gravity (seed blowers). Specific instructions for classification of the various components are given in Sec. Sec. 201.47a to 201.51, inclusive. (c) The components shall be weighed and percentages calculated as follows: (1) For sample sizes less than 25 grams, all four components shall be weighed; the percentages shall be based on the sum of these weights and not on the original weight. The sum of these weights shall be compared with the original weight of the working sample as a check against the loss of material, or other errors. (2) For sample sizes of 25 grams or more, the components--other crop seed, weed seed, and inert matter--shall be weighed separately and their percentages determined by dividing these weights by the original weight of the working sample. The pure seed need not be weighed; its percentage may be determined by subtracting the sum of the percentages of the other three components from 100. (3) When rounding off the calculated percentages of each component to the second decimal place, round down if the third decimal place is 4 or less and round up if the third decimal place is 5 or more, except that if any component is determined to be present in any amount calculated to be less than 0.015 percent, then that component shall be reported as 0.01 percent. If any component is not found in the purity analysis, then that component shall be reported as 0.00 percent. (4) The total percentage of all components shall be 100.00 percent. If the total does not equal 100.00 percent (e.g. 99.99 percent or 100.01 percent), then add to or subtract from the component with the largest value (usually the pure seed component). (d) When the working sample consists of two or more similar kinds or varieties which would be difficult to separate in the entire sample, it is permissible to weigh the similar kinds or varieties together as one component and [[Page 346]] make the separation on a reduced portion of the sample. At least 400 seeds or an equivalent weight shall be taken indiscriminately from the pure seed component and the separation made on this portion. The proportion of each kind present shall then be determined by weight and from this the percentage in the entire sample shall be calculated. (e) The Uniform Blowing Procedure described in Sec. 201.51a(a) shall be used for the separation of pure seed and inert matter in seeds of Kentucky bluegrass, Canada bluegrass, rough bluegrass, Pensacola variety of bahiagrass, orchardgrass, side-oats grama, and blue grama. (f) Procedures for purity analysis for coated seed are given in Sec. 201.51b. [25 FR 8770, Sept. 13, 1960, as amended at 30 FR 7890, June 18, 1965; 46 FR 53635, Oct. 29, 1981; 59 FR 64497, Dec. 14, 1994; 65 FR 1707, Jan. 11, 2000] Sec. 201.47a Seed unit. The seed unit is the structure usually regarded as a seed in planting practices and in commercial channels. The seed unit may consist of one or more of the following structures: (a) True seeds; (b) For the grass family: (1) Caryopses and single florets; (2) Multiple florets and spikelets in tall oatgrass (Arrhenatherum elatius), oat (Avena spp.), gramas (Bouteloua spp.), rhodesgrass (Chloris gayana), barley (Hordeum vulgare), and bluegrass (Poa spp.); (3) Entire spikelets in bahiagrass, bentgrasses, dallisgrass, guineagrass, browntop millet, foxtail millet, proso millet, panicgrasses, redtop, rice, switchgrass, and vaseygrass. Entire spikelets which may have attached rachis segments, pedicels, and sterile spikelets in big bluestem, little bluestem, sand bluestem, yellow bluestem, bottlebrush-squirreltail, broomcorn, yellow indiangrass, johnsongrass, sorghum, sorghum- sudangrass, sorghum almum, sorgrass, and sudangrass; (4) Spikelet groups: (i) Spikelet groups that disarticulate as a unit in galletagrass; (ii) Spikelet groups that disarticulate as units with attached rachis and internodes in bluestems, side-oats grama, and yellow indiangrass; (5) Fascicles of buffelgrass (Cenchrus ciliaris) consisting of bristles and spikelets; (6) Burs of buffalograss (Bouteloua dactyloides); (7) Bulblets of bulbous bluegrass (Poa bulbosa); (8) Multiple units as defined in Sec. 201.51a(b)(1). (c) Dry indehiscent fruits in the following plant families: Buckwheat (Polygonaceae), sunflower (Asteraceae), geranium (Geraniaceae), goosefoot (Chenopodiaceae), and valerian (Valerianaceae); (d) One- and two-seeded pods of small-seeded legumes (Fabaceae), burs of the burclovers (Medicago arabica, M. polymorpha), and pods of peanuts (Arachis hypogaea). (This does not preclude the shelling of small-seeded legumes for purposes of identification.) Pods of legumes normally containing more than two seeds, when occurring incidentally in the working sample, should be hulled if the kind is hulled when marketed; (e) Fruits or half fruits in the carrot family (Apiaceae); (f) Nutlets in the following plant families: Borage (Boraginaceae), mint (Lamiaceae), and vervain (Verbenaceae); (g) ``Seed balls'' or portions thereof in multigerm beets, and fruits with accessory structures such as occur in other Chenopodiaceae and New Zealand spinach. For forage kochia refer to Sec. 201.48(j) and Sec. 201.51(a)(7). [46 FR 53636, Oct. 29, 1981, as amended at 59 FR 64497, Dec. 14, 1994; 65 FR 1707, Jan. 11, 2000; 85 FR 40581, July 7, 2020] Sec. 201.47b Working samples. The purity working sample is the sample on which the purity analysis is made. The noxious-weed seed working sample is the sample on which the noxious-weed seed examination is made. [20 FR 7930, Oct. 21, 1955] Sec. 201.48 Kind or variety considered pure seed. The pure seed shall include all seeds of each kind or each kind and variety under consideration present in excess of 5 percent by weight of the whole. [[Page 347]] Seeds of kinds or kinds and varieties present to the extent of 5 percent or less of the whole may be considered pure seed if shown on the label as components of a mixture in amounts of 5 percent or less. The following shall be included with the pure seed: (a) Immature or shriveled seeds and seeds that are cracked or injured. For seeds of legumes (Fabaceae) and crucifers (Brassicaceae) with the seed coats entirely removed refer to Sec. 201.51(a)(1); (b) Pieces of seeds which are larger than one-half of the original size. For separated cotyledons of legume seeds refer to Sec. 201.51(a)(2); (c) Insect-damaged seeds, provided that the damage is entirely internal, or that the opening in the seed coat is not sufficiently large so as to allow the size of the remaining mass of tissue to be readily determined. Weevil-infested vetch seeds, irrespective of the amount of insect damage, are to be considered pure seed, unless they are broken pieces one-half or less than the original size. For classification of broken pieces of seed units one-half or less than the original size, refer to Sec. 201.51(a)(2). Refer to Sec. 201.51(a)(3) for chalcid- damaged seeds; (d) Seeds that have started to germinate; (e) Seeds of the cucurbit family (Cucurbitaceae) and the nightshade family (Solanaceae) whether they are filled or empty; (f) Intact fruits, whether or not they contain seed, of species belonging to the following families: Sunflower (Asteraceae), buckwheat (Polygonaceae), carrot (Apiaceae), valerian (Valerianaceae), mint (Laminaceae) and other families in which the seed unit may be a dry, indehiscent one-seeded fruit. For visibly empty fruits, refer to inert matter, Sec. 201.51(a)(6); (g) Seed units of the grass family listed in Sec. 201.47a(b) (1) through (5) if a caryopsis with some degree of endosperm development can be detected in the units, either by slight pressure or by examination over light. Seed units of smooth brome, fairway crested wheatgrass, standard crested wheatgrass, tall wheatgrass, intermediate wheatgrass, pubescent wheatgrass, western wheatgrass, fescues (Festuca spp.), and ryegrasses (Lolium spp.) if the caryopses are at least one-third the length of the palea; the caryopsis is measured from the base of the rachilla. Species in which determination of endosperm development is not necessary are listed in paragraphs (g) (1) and (2) of this section. Refer to Sec. Sec. 201.48(h) and 201.51(a)(5) when nematode galls and fungal bodies have replaced the caryopsis in seed units. The following procedures apply to determine pure seed in the grass families listed below: (1) Intact burs of buffalograss (Bouteloua dactyloides) shall be considered pure seed whether or not a caryopsis is present. Refer to Sec. 201.51(a)(6) for burs which are visibly empty. (2) The Uniform Blowing Procedure described in Sec. 201.51a(a) shall be used to determine classification of florets into pure seed or inert matter for Kentucky bluegrass, Canada bluegrass, rough bluegrass, Pensacola variety of bahiagrass, side-oats grama, blue grama, and orchardgrass. (3) Special purity procedures for smooth brome, fairway crested wheatgrass, standard crested wheatgrass, intermediate wheatgrass, pubescent wheatgrass, tall wheatgrass, and western wheatgrass are listed in Sec. 201.51a(b). (4) For methods of determining pure seed percentages of annual and perennial ryegrass, refer to Sec. Sec. 201.58(b)(10) and 201.58a(a). (h) Seed units with nematode galls, fungal bodies (i.e. ergot, other sclerotia, and smut) and spongy or corky caryopses that are entirely enclosed within the seed unit. Refer to Sec. 201.51(c)(1) for inert matter classification. (i) Seed units of beet and other Chenopodiaceae, and New Zealand spinach. Refer to Sec. 201.47a(g) and Sec. 201.51(a)(6) for definitions of seed units and inert matter, respectively. (j) Seed units of forage kochia that are retained on a 1 mm opening square-hole sieve, when shaken for 30 seconds. For inert matter, refer to Sec. 201.51(a)(7). [46 FR 53636, Oct. 29, 1981, as amended at 59 FR 64497, Dec. 14, 1994; 76 FR 31794, June 2, 2011; 85 FR 40581, July 7, 2020] [[Page 348]] Sec. 201.49 Other crop seed. (a) Seeds of plants grown as crops (other than the kind(s) and variety(ies) included in the pure seed) shall be considered other crop seeds, unless recognized as weed seeds by applicable laws, or regulations, or by general usage. All interpretations and definitions for ``pure seed'' in Sec. 201.48 shall also apply in determining whether seeds are ``other crop seed'' or ``inert matter'' with the following two exceptions which may be applied as acceptable alternatives: (1) Uniform Blowing Procedure in Sec. 201.51a(a) for kinds listed in Sec. 201.47(e) may be disregarded. If disregarded, all seed units (as defined in Sec. 201.47a) for these kinds found in the working sample shall be manually separated into pure seed and inert matter. Only units containing at least one caryopsis with some degree of endosperm development which can be detected either by slight pressure or by examination over light are considered other crop seed. (2) Multiple Unit Procedure in Sec. 201.51a(b) for kinds listed in Sec. 201.48(g)(3) may be disregarded. If disregarded, all multiple units and single units (as defined in Sec. 201.51a(b)) for these kinds found in the working sample shall be manually separated into single florets. Each floret containing a caryopsis with some degree of endosperm development, which can be detected either by slight pressure or examination over light, is considered other crop seed. Empty florets and glumes, if present, are considered inert matter. Refer to Sec. 201.51(a)(4). (b) [Reserved] [59 FR 64498, Dec. 14, 1994; 60 FR 2493, Jan. 10, 1995] Sec. 201.50 Weed seed. Seeds (including bulblets or tubers) of plants shall be considered weed seeds when recognized as weed seeds by the law or rules and regulations of the State into which the seed is offered for transportation or transported; or by the law or rules and regulations of Puerto Rico, Guam, or District of Columbia into which transported, or District of Columbia in which sold; or found by the Secretary of Agriculture to be detrimental to the agricultural interests of the United States, or any part thereof. Damaged weed seeds and immature seedlike structures, as described in Sec. 201.51(b), shall be considered inert matter. Weed seeds, as defined above in this section, requiring further separation into weed seed and inert matter components are as follows: (a) The individual seeds are to be removed from fruiting structures such as pods and heads. The seeds are classified as weed seed and the remaining fruiting structures classified as inert matter. (b) Wild onion and wild garlic (Allium spp.) bulblets that have any part of the husk remaining and are not damaged at the basal end are considered weed seeds regardless of size. Bulblets that are completely devoid of husk, and are not damaged at the basal end, and are retained by a \1/13\-inch (1.9 mm) round-hole sieve are considered weed seeds. For wild onion and wild garlic (Allium spp.) bulblets classed as inert matter, refer to Sec. 201.51(b)(5). [46 FR 53636, Oct. 29, 1981, as amended at 59 FR 64498, Dec. 14, 1994; 65 FR 1707, Jan. 11, 2000] Sec. 201.51 Inert matter. Inert matter shall include seeds and seed-like structures from both crop and weed plants and other material not seeds as follows: (a) Seeds and seed-like structures from crop plants: (1) Seeds of legumes (Fabaceae) and brassica (Brassicaceae) with the seed coats entirely removed. Refer to Sec. 210.48(a) for pure seed classification. (2) Pieces of broken and damaged seed units, including those that are insect damaged, which are one-half the original size or less. If greater than one-half, refer to Sec. 201.48(b) and (c) for pure seed classification. Also included as inert matter are separated cotyledons of legumes, irrespective of whether or not the radicle-plumule axis and/ or more than one-half of the seed coat may be attached. (3) Chalcid-damaged seeds (puffy, soft, or dry and crumbly) of alfalfa, red clover, crimson clover, and similar kinds of small seeded legumes. Refer to Sec. 201.48(c) for pure seed classification. (4) Glumes and empty florets except as stated under pure seed. Refer to [[Page 349]] Sec. 201.48 (g) and (h) for pure seed classification. (5) Seed units with nematode galls or fungal bodies (smut, ergot, and other sclerotia) that are not entirely enclosed within the seed unit. Refer to Sec. 201.48(h) for pure seed classification. (6) Broken seed units of Chenopodiaceae and fruit portions or fragments of monogerm beets, New Zealand spinach, buffalograss, and families in which the seed unit is a dry indehiscent one-seeded fruit that visibly do not contain a seed. Refer to Sec. 201.48 (f), (g)(1), (i), and (j) for pure seed classification. (7) Seed units of forage kochia that pass through a 1 mm opening, square-hole sieve, when shaken for 30 seconds. (8) The thin pericarp (fruit wall), if present on seeds of northern sweetvetch. (9) Immature florets of smooth brome, fairway crested wheatgrass, standard crested wheatgrass, tall wheatgrass, intermediate wheatgrass, pubescent wheatgrass, western wheatgrass, fescues (Festuca spp.), and ryegrasses (Lolium spp.) in which the caryopses are less than one-third the length of the palea; the caryopsis is measured from the base of the rachilla. (b) Seeds and seed-like structures from weed plants, which by visual examination (including the use of light or dissection), can be determined to be within the following categories: (1) Damaged seed (other than grasses) with over one-half of the embryo missing. (2) Grass florets and caryopses classed as inert: (i) Glumes and empty florets of weedy grasses; (ii) Damaged grass caryopses, including free caryopses, with over one-half the root-shoot axis missing (the scutellum excluded); (iii) Immature free caryopses devoid of embryo and/or endosperm; (iv) Immature florets of quackgrass (Elymus repens) in which the caryopses are less than one-third the length of the palea. The caryopsis is measured from the base of the rachilla; (v) Free caryopses of quackgrass (E. repens) that are 2 mm or less in length. (3) Seeds of legumes and species of Brassica with the seed coats entirely removed. (4) Immature seed units, devoid of both embryo and endosperm, such as occur in but not limited to the following plant families: Sedge (Cyperaceae), buckwheat (Polygonaceae), morning glory (Convolvulaceae), nightshade (Solanaceae), puncturevine (Zygophyllaceae) and sunflower (Asteraceae). Cocklebur (Xanthium spp.) burs are to be dissected to determine whether or not seeds are present. (5) Wild onion and wild garlic (Allium spp.) bulblets: (i) Bulblets which are completely devoid of the husk and pass through a 1/13th-inch, round-hole sieve. (ii) Bulblets which show evident damage to the basal end, whether husk is present or absent. Refer to Sec. 201.50(c) for wild onion and wild garlic (Allium spp.) bulblets classed as weed seeds. (6) Dodder (Cuscuta spp.): Seeds devoid of embryos and seeds which are ashy gray to creamy white in color are inert matter. Seeds should be sectioned when necessary to determine if an embryo is present as when seeds have a normal color but are slightly swollen, dimpled or have minute holes. (7) Buckhorn (Plantago lanceolata): Black seeds, with no brown color evident, whether shriveled or plump; the color of questionable seeds shall be determined by use of a stereoscopic microscope with magnification of approximately 10 x and a fluorescent lamp with two 15- watt daylight-type tubes. (8) Ragweed (Ambrosia spp.): Seed with both the involucre and pericarp absent. (c) Other matter that is not seed: (1) Free nematode galls or fungal bodies such as smut, ergot, and other sclerotia. (2) Soil particles, sand, stone, chaff, stems, leaves, flowers, loose coating material, and any other foreign material. [[Page 350]] (3) Coating material removed from coated seed by washing. Refer to Sec. 201.51b(c). [46 FR 53637, Oct. 29, 1981; 46 FR 58059, Nov. 30, 1981, as amended at 59 FR 64498, Dec. 14, 1994; 65 FR 1707, Jan. 11, 2000; 76 FR 31794, June 2, 2011; 85 FR 40581, July 7, 2020] Sec. 201.51a Special procedures for purity analysis. (a) The laboratory analyst shall use the Uniform Blowing Procedure described in this paragraph to separate pure seed and inert matter in the following: Kentucky bluegrass, Canada bluegrass, rough bluegrass, Pensacola variety of bahiagrass, orchardgrass, blue grama, and side-oats grama. (1) Separation of mixtures. Separate seed kinds listed in this section from other kinds in mixtures before using the Uniform Blowing Procedure. (2) Calibration samples. Obtain calibration samples and instructions, which are available on loan through the Seed Regulatory and Testing Division, S&T, AMS, 801 Summit Crossing Place, Suite C, Gastonia, North Carolina 28054. (3) Blowing point. Use the calibration samples to establish a blowing point prior to proceeding with the separation of pure seed and inert matter for these kinds. (i) Refer to the specifications on the calibration samples for Kentucky bluegrass, orchardgrass, and Pensacola variety of bahiagrass to determine their appropriate blowing points for the Uniform Blowing Procedure. (ii) Use the calibration sample for Kentucky bluegrass to determine the blowing points for Canada bluegrass, rough bluegrass, blue grama, and side-oats grama. (A) The blowing point for Canada bluegrass shall be the same as the blowing point determined for Kentucky bluegrass. (B) The blowing point for rough bluegrass shall be a factor of 0.82 (82 percent) of the blowing point determined for Kentucky bluegrass. The 0.82 factor is restricted to the General-type seed blower. (C) The blowing point for blue grama shall be a factor of 1.157 of the blowing point determined for Kentucky bluegrass. Before blowing, extraneous material that will interfere with the blowing process shall be removed. The sample to be blown shall be divided into four approximately equal parts and each blown separately. The 1.157 factor is restricted to the General-type seed blower. (D) The blowing point for side-oats grama shall be a factor of 1.480 of the blowing point determined for Kentucky bluegrass. Before blowing, extraneous material that will interfere with the blowing process shall be removed. The sample to be blown shall be divided into four approximately equal parts and each part blown separately. The 1.480 factor is restricted to the General-type seed blower. (4) Blower calibration. Calibrate and test the blower according to the instructions that accompany the calibration samples before using the blower to analyze the seed sample. Use the anemometer to set the blower gate opening according to the calibration sample specifications. (i) Determine the blowing point using a calibrated anemometer. (ii) Position the anemometer fan precisely over the blower opening, set it at meters per second (m/s), run the blower at the calibrated gate setting, and wait 30 seconds before reading the anemometer. (iii) Use this anemometer reading to determine the blower gate setting whenever the Uniform Blowing Procedure is required. (5) Pure seed and inert matter. Use the calibrated blower to separate the seed sample into light and heavy portions. After completing the initial separation, remove and separate all weed and other crop seeds from the light portion. The remainder of the light portion shall be considered inert matter. Remove all weed and other crop seeds and other inert matter (stems, leaves, dirt) from the heavy portion and add them to the weed seed, other crop seed, or inert matter separations, as appropriate. The remainder of the heavy portion shall be considered pure seed. (b) The Multiple Unit Procedure of determining the pure seed fraction shall be used only for the kinds included in the following table when multiple units are present in a sample. These methods are applicable to the [[Page 351]] kinds listed when they occur in mixtures or singly. Any single unit without attached structures, as described below, shall be considered a single unit. Multiple units and single units for the kinds listed shall remain intact. The attached glumes and fertile or sterile florets shall not be removed from the fertile floret. (1) A multiple unit is a seed unit that includes one or more structures as follows (the length of the awn shall be disregarded when determining the length of a fertile floret or an attached structure): (i) An attached sterile or fertile floret that extends to or beyond the tip of a fertile floret; (ii) A fertile floret with basally attached glume, glumes, or basally attached sterile floret of any length; (iii) A fertile floret with two or more attached sterile and/or fertile florets of any length. (2) Procedure for determination of multiple units: (i) For the single kind: determine the percentage of single units present, based on the total weight of single units and multiple units. Apply the appropriate factor, as determined from the following table, to the weight of the multiple units and add that portion of the multiple unit weight to the weight of the single units. The remaining multiple unit weight shall be added to the weight of the inert matter. (ii) For mixtures that include one or more of the kinds in the following table, determine the percentage of single units, based on the total weight of single units and multiple units, for each kind. Apply the appropriate factor as determined from the following table, to the weight of multiple units of each kind. Table of Factors To Apply to Multiple Units \a\ -------------------------------------------------------------------------------------------------------------------------------------------------------- Crested wheat- Pubescent Intermediate Tall wheat- Western wheat- Percent of single units of each kind grass \b\ wheat-grass wheat-grass grass \c\ grass \c\ Smooth brome -------------------------------------------------------------------------------------------------------------------------------------------------------- 50 or below............................................. 70 66 72 .............. .............. 72 50.01-55.00............................................. 72 67 74 .............. .............. 74 55.01-60.00............................................. 73 67 75 .............. .............. 75 60.01-65.00............................................. 74 67 76 .............. .............. 76 65.01-70.00............................................. 75 68 77 .............. 60 78 70.01-75.00............................................. 76 68 78 .............. 66 79 75.01-80.00............................................. 77 69 79 50 67 81 80.01-85.00............................................. 78 69 80 55 68 82 85.01-90.00............................................. 79 69 81 65 70 83 90.01-100.00............................................ 79 70 82 70 74 85 -------------------------------------------------------------------------------------------------------------------------------------------------------- \a\ The factors represent the percentages of the multiple unit weights which are considered pure seed. The remaining percentage is regarded as inert matter. \b\ Includes both standard crested wheatgrass and fairway crested wheatgrass. \c\ Dashes in table indicate that no factors are available at the levels shown. [59 FR 64498, Dec. 14, 1994, as amended at 85 FR 40581, July 7, 2020] Sec. 201.51b Purity procedures for coated seed. (a) The working sample for coated seed is obtained as described in Sec. 201.46(d) (1) and (2), and weighed in grams to four significant figures. (b) Any loose coating material shall be sieved, weighed, and included with the inert matter component. (c) Coating material is removed from the seed by washing with water or other solvents such as, but not limited to, dilute sodium hydroxide (NaOH). Use of fine mesh sieves is recommended for this procedure, and stirring or shaking the coated units may be necessary to obtain de- coated seed. (d) Spread de-coated seed on blotters or filter paper in a shallow container. Air dry overnight at room temperature. (e) Separation of component parts: (1) Kind or variety considered pure seed. (2) Other crop seed. (3) Inert matter. (4) Weed seed. (f) The de-coated seed shall be separated into four components in accordance with Sec. Sec. 201.48 through 201.51. [[Page 352]] Sec. Sec. 201.51a (a) and (b) shall not be followed. The weight of the coating material is determined by subtracting the sum of the weights of the other four components from the original weight of the working sample. The percentage of coating material shall be included with the inert matter percentage. Calculate percentages of all components based on the original weight of the working sample (see paragraph (a) of this section). [59 FR 64499, Dec. 14, 1994] Sec. 201.52 Noxious-weed seeds. (a) The determination of the number of seeds, bulblets, or tubers of individual noxious weeds present per unit weight should be made on at least the minimum quantities listed in Sec. 201.46 Table 1: Provided, That if the following indicated numbers of a single kind of seed, bulblet, or tuber are found in the pure seed analysis (or noxious-weed seed examination of a like amount) the occurrence of that kind in the remainder of the bulk examined for noxious-weed seeds need not be noted: \1/2\-gram purity working sample, 16 or more seeds; 1-gram purity working sample, 23 or more seeds; 2-gram purity working sample or larger, 30 or more seeds. The seeds per unit weight shall be based on the number of single seeds. The number of individual seeds shall be determined in burs of sandbur (Cenchrus spp.) and cocklebur (Xanthium spp.); in capsules of dodder (Cuscuta spp.); in berries of groundcherry, horsenettle, and nightshade (Solanaceae); and in the fruits of other noxious weeds that contain more than one seed. Refer to Sec. Sec. 201.50 and 201.51(b)(4) for the classification of weed seeds and inert matter, respectively. (b) A noxious-weed seed examination of coated seed samples shall be made by examining approximately 25,000 units obtained in accordance with Sec. 201.46(d) and which have been de-coated by the method described in Sec. 201.51b(c). [59 FR 64499, Dec. 14, 1994] germination tests in the administration of the act Sec. 201.53 Source of seeds for germination. (a) When both purity and germination tests are required, seeds for germination shall be taken from the separation of the kind, variety, or type considered pure seed and shall be counted without discrimination as to size or appearance. (b) When only a germination test is required and the pure seed is estimated or determined to be at least 98 percent, the pure seed for the germination test may be taken indiscriminately from a representative portion of the bulk. (c) When only a germination test is required and the pure seed is found to be less than 98 percent, the seed for the test shall be obtained by separating the sample into two components as follows: (1) Pure seed and (2) other crop seed, weed seed, and inert matter. In making this separation at least \1/4\ of the quantity required for a regular purity analysis shall be used. The whole sample must be well mixed and divided in such a manner as to get a completely representative subsample. [10 FR 9952, Aug. 11, 1945, as amended at 20 FR 7931, Oct. 21, 1955] Sec. 201.54 Number of seeds for germination. At least 400 seeds shall be tested for germination; except that in mixtures, 200 seeds of each of those kinds present to the extent of 15 percent or less may be used in lieu of 400, in which case an additional 2 percent is to be added to the regular germination tolerances. The seeds shall be tested in replicate tests of 100 seeds or less. [59 FR 64500, Dec. 14, 1994] Sec. 201.55 Retests. Retests shall be made as follows: (a) When the range of 100-seed replicates of a given test exceeds the maximum tolerated range in the table appearing in this section. [[Page 353]] Table of Maximum Tolerated Ranges Between 100-Seed Replicates for Use in Connection With Sec. 201.55(A) ------------------------------------------------------------------------ Average percent germinations Maximum allowed between ----------------------------------------------- replicates ------------------------- 4 2 replicates replicates ------------------------------------------------------------------------ 99................................... 2 5 98................................... 3 6 97................................... 4 7 6 96................................... 5 8 6 95................................... 6 9 7 94................................... 7 10 8 93................................... 8 10 8 92................................... 9 11 9 91................................... 10 11 9 90................................... 11 12 9 89................................... 12 12 10 88................................... 13 13 10 87................................... 14 13 11 86................................... 15 14 11 85................................... 16 14 11 84................................... 17 14 11 83................................... 18 15 12 82................................... 19 15 12 81................................... 20 15 12 80................................... 21 16 13 79................................... 22 16 13 78................................... 23 16 13 77................................... 24 17 13 76................................... 25 17 13 75................................... 26 17 14 74................................... 27 17 14 73................................... 28 17 14 72................................... 29 18 14 71................................... 30 18 14 70................................... 31 18 14 69................................... 32 18 14 68................................... 33 18 15 67................................... 34 18 15 66................................... 35 19 15 65................................... 36 19 15 64................................... 37 19 15 63................................... 38 19 15 62................................... 38 19 15 61................................... 40 19 15 60................................... 41 19 15 59................................... 42 19 15 58................................... 43 19 15 57................................... 44 19 15 56................................... 45 19 15 55................................... 46 20 15 54................................... 47 20 16 53................................... 48 20 16 52................................... 48 20 16 51................................... 50 20 16 ------------------------------------------------------------------------ (b) When at the time of the prescribed final count there are indications, such as presence of firm ungerminated seeds, that a satisfactory germination has not been obtained; (c) When there is evidence that the results may not be reliable due to improper test conditions, errors in seedling evaluation, the presence of fungi or bacteria, or inaccuracies in counting or recording results; (d) When a sample shows seedling injury or abnormality as a result of chemical treatment, of exposure to chemicals, or of toxicity from any source. (Retest shall be made in soil or a mixture of soil and sand); (e) When no two satisfactory tests are within tolerance. Note to Sec. 201.55: To find the maximum tolerated range, compute the average percentage of all 100 seed replicates of a given test, rounding off the result to the nearest whole number. The germination is found in the first two columns of the table. When the differences between highest and lowest replicates do not exceed the corresponding values found in the ``4 replicates'' column, no additional testing is required. However, if the differences exceed the values in the ``4 replicates'' column, retesting is necessary. [25 FR 8771, Sept. 13, 1960, as amended at 65 FR 1707, Jan. 11, 2000] Sec. 201.55a Moisture and aeration of substratum. (a) The substratum must be moist enough to supply the needed moisture to the seeds at all times. Excessive moisture which will restrict aeration of the seeds should be avoided. Except as provided for those kinds of seeds requiring high moisture levels of the germination media, the substrata should never be so wet that a film of water is formed around the seeds. For most kinds of seeds blotters or other paper substrata should not be so wet that by pressing, a film of water forms around the finger. (b) The following formula may be used as a guide in the preparation of sand for germination tests: [118.3 cc. (1 gill) sand/Its weight in grams] x 20.2-8.0 = The number of cc. of water to add to each 100 grams of air-dry sand. (c) The amount of water provided by this formula is satisfactory for seeds the size of clovers and will have to be modified slightly, depending on the kind of seed being tested and the kind of sand used. For example, slightly more moisture should be added when the larger seeds are to be tested. (d) In preparing soil tests water should be added to the soil until it can be formed into a ball when squeezed in the palm of the hand but will break [[Page 354]] freely when pressed between two fingers. After the soil has been moistened it should be rubbed through a sieve and put in the seed containers without packing. (e) The addition of water subsequent to placing the seed in test will depend on the evaporation from the substrata in the germination chambers. Since the rate of evaporation will depend upon the relative humidity of the air, it is desirable to keep water in the germination chambers or to provide other means of supplying a relative humidity of approximately 95 percent. Germination tests should be observed at frequent intervals to insure an adequate moisture supply of the substrata at all times. [20 FR 7931, Oct. 21, 1955] Sec. 201.56 Interpretation. (a) A seed shall be considered to have germinated when it has developed those essential structures which, for the kind of seed under consideration, are indicative of its ability to produce a normal plant under favorable conditions. In general, the following are considered to be essential structures necessary for the continued development of the seedling (although some structures may not be visible in all kinds at the time of seedling evaluation). Seedlings possessing these essential structures are referred to as normal seedlings: Root system (consisting of primary, secondary, seminal, or adventitious roots); hypocotyl; epicotyl; cotyledon(s); terminal bud; primary leaves; and coleoptile and mesocotyl (in the grass family). Abnormal seedlings consist of those with defects to these structures, as described in the abnormal seedling descriptions, and are judged to be incapable of continued growth. The seedling descriptions assume that test conditions were adequate to allow proper assessment of the essential seedling structures. (b) Sand and/or soil tests may be used as a guide in determining the classification of questionable seedlings and the evaluation of germination tests made on approved artificial media. This is intended to provide a method of checking the reliability of tests made on artificial substrata when there may be doubt as to the proper evaluation of such tests. (c) Seedlings infected with fungi or bacteria should be regarded as normal if all essential structures are present. A seedling that has been seriously damaged by bacteria or fungi from any source other than the specific seed should be regarded as normal if it is determined that all essential structures were present before the injury or damage occurred. Germination counts should be made on samples where contamination and decay are present at approximately 2-day intervals between the usual first count and the final count. During the progress of the germination test, seeds which are obviously dead and moldy and which may be a source of contamination of healthy seeds should be removed at each count and the number of such dead seeds should be recorded. When symptoms of certain diseases develop which can be readily recognized and identified, their presence should be noted. (d) Seed units containing more than one seed or embryo, such as New Zealand spinach seed, Beta seed, double fruits of the carrot family (Apiaceae), multiple seeds of burnet, and seed units of grasses consisting of multiple florets, shall be tested as a single seed and shall be regarded as having germinated if they produce one or more normal seedlings. (e) Standard guides for seedling interpretation shall include the following descriptions for specific kinds and groups. The ``General Description'' for each group of crop kinds describes a seedling without defects. While such a seedling is clearly normal, seedlings with some defects may also be classified as normal, provided the defects do not impair the functioning of the structure. The ``Abnormal seedling description'' is to be followed when judging the severity of defects. [20 FR 7931, Oct. 21, 1955, as amended at 25 FR 8771, Sept. 13, 1960; 59 FR 64500, Dec. 14, 1994; 85 FR 40582, July 7, 2020] [[Page 355]] Sec. 201.56-1 Goosefoot family, Chenopodiaceae, and Carpetweed family, Aizoaceae. Kinds of seed: Beet, Swiss chard, fourwing saltbush, spinach, New Zealand spinach, and forage kochia. (a) General description. (1) Germination habit: Epigeal dicot. (2) Food reserves: Leaf-like cotyledons and perisperm. (3) Shoot system: The hypocotyl elongates carrying the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. (4) Root system: A primary root; secondary roots may develop within the test period. (5) Seedling: Frequent counts should be made on multigerm beet since the growing seedlings will separate from the cluster making it difficult to identify the source. Any cluster which produces at least one normal seedling is classified as normal; only one normal seedling per cluster is to be counted (see Sec. 201.56(d)). Toxic substances from the clusters of beet and Swiss chard may cause discoloring of the hypocotyl and/or root. Seedlings which are slightly discolored are to be classified as normal; however, if there is excessive discoloration, retest by the method in Sec. 201.58(b)(3). (b) Abnormal seedling description. (1) Cotyledons: (i) Less than half of the original cotyledon tissue remaining attached. (ii) Less than half of the original cotyledon tissue free of necrosis or decay. (2) Epicotyl: (i) Missing. (May be assumed to be present if cotyledons are intact.) (ii) [Reserved] (3) Hypocotyl: (i) Deep open cracks extending into the conducting tissue. (ii) Malformed, such as markedly shortened, curled, or thickened. (iii) Watery. (4) Root: (i) None. (ii) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (iii) For discolored roots of beet and Swiss chard, see Sec. 201.58(b)(3). (5) Seedling: (i) One or more essential structures impaired as a result of decay from primary infection. (For discolored seedlings of beet and Swiss chard, see Sec. 201.58(b)(3).) (ii) Albino. [59 FR 64500, Dec. 14, 1994] Sec. 201.56-2 Sunflower family, Asteraceae (Compositae). Kinds of seed: Artichoke, cardoon, chicory, dandelion, endive, great burdock, lettuce, safflower, salsify, Louisiana sagewort, and sunflower. (a) Lettuce. (1) General description. (i) Germination habit: Epigeal dicot. (ii) Food reserves: Cotyledons which expand and become thin, leaf- like, and photosynthetic. The cotyledons of some varieties develop elongated petioles. (iii) Shoot system: The hypocotyl elongates and carries the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. (iv) Root system: A long primary root. (v) Seedling: The interpretations of lettuce seedlings are made only at the end of the test period. (2) Abnormal seedling description. (i) Cotyledons: (A) Less than half of the original cotyledon tissue remaining attached. (B) Less than half of the original cotyledon tissue free of necrosis or decay. (Remove attached seed coat for evaluation of cotyledons. Physiological necrosis is manifested by discolored areas on the cotyledons and should not be confused with natural pigmentation of some lettuce varieties.) (ii) Epicotyl: (A) Missing. (May be assumed to be present if cotyledons are intact.) (B) Any degree of necrosis or decay. (iii) Hypocotyl: (A) Deep open cracks extending into the conducting tissue. (B) Severely twisted or grainy. (C) Watery. (iv) Root: (A) Stubby or missing primary root. (Secondary roots will not compensate for a defective primary root.) (B) Primary root tip blunt, swollen, or discolored. (Toxic materials in the [[Page 356]] substratum may cause short, blunt roots; see Sec. 201.58(a)(9).) (C) Primary root with splits or lesions. (v) Seedling: (A) Swollen cotyledons associated with extremely short or vestigial hypocotyl and root. (B) One or more essential structures impaired as a result of decay from primary infection. (C) Albino. (b) Other kinds in the sunflower family: Artichoke, cardoon, chicory, dandelion, endive, great burdock, safflower, salsify, Louisiana sagewort, and sunflower. (1) General description. (i) Germination habit: Epigeal dicot. (ii) Food reserves: Cotyledons which expand and become thin, leaf- like, and photosynthetic. (iii) Shoot system: The hypocotyl elongates and carries the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. (iv) Root system: A long primary root with secondary roots usually developing within the test period. (2) Abnormal seedling description. (i) Cotyledons: (A) Less than half of the original cotyledon tissue remaining attached. (B) Less than half of the original cotyledon tissue free of necrosis or decay. (Remove any attached seed coats at the end of the test period for evaluation of cotyledons.) (ii) Epicotyl: (A) Missing. (May be assumed to be present if cotyledons are intact.) (B) [Reserved] (iii) Hypocotyl: (A) Deep open cracks extending into the conducting tissue. (B) Malformed, such as markedly shortened, curled, or thickened. (C) Watery. (iv) Root: (A) None. (B) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (Seedlings with roots bound within tough seed coats should be left in the test until the final count to allow for development.) (v) Seedling: (A) One or more essential structures impaired as a result of decay from primary infection. (B) Albino. [59 FR 64500, Dec. 14, 1994] Sec. 201.56-3 Mustard family, Brassicaceae (Cruciferae). Kinds of seed: Broccoli, brussels sprouts, cabbage, Chinese cabbage, cauliflower, collards, garden cress, upland cress, water cress, kale, Chinese kale, Siberian kale, kohlrabi, mustard, pakchoi, radish, rape, rutabaga, and turnip. (a) General description. (1) Germination habit: Epigeal dicot. (2) Food reserves: Cotyledons which expand and become thin, leaf- like and photosynthetic. In Brassica, Sinapis, and Raphanus, the cotyledons are bi-lobed and folded, with the outer cotyledon being larger than the inner. (3) Shoot system: The hypocotyl elongates and carries the cotyledons above the soil surface; the epicotyl usually does not show any development within the test period. (4) Root system: A long primary root. (b) Abnormal seedling description. (1) Cotyledons: (i) Decayed at point of attachment. (ii) Less than half of the original cotyledon tissue remaining attached. (iii) Less than half of the original cotyledon tissue free of necrosis or decay. (2) Epicotyl: (i) Missing. (May be assumed to be present if the cotyledons are intact.) (ii) [Reserved] (3) Hypocotyl: (i) Deep open cracks extending into the conducting tissue. (ii) Malformed, such as markedly shortened, curled, or thickened. (iii) Watery. (4) Root: (i) Weak, stubby, or missing primary root. (Secondary roots will not compensate for a defective root.) (ii) [Reserved] (5) Seedling: (i) One or more essential structures impaired as result of decay from primary infection. (ii) Albino. [59 FR 64501, Dec. 14, 1994] [[Page 357]] Sec. 201.56-4 Cucurbit family, (Cucurbitaceae). Kinds of seed: Citron, cucumber, West India gherkin, melon, pumpkin, squash, and watermelon. (a) General description. (1) Germination habit: Epigeal dicot. (2) Food reserves: Cotyledons which are large and fleshy; they expand, become photosynthetic, and usually persist beyond the seedling stage. (3) Shoot system: The hypocotyl elongates and the cotyledons are pulled free of the seed coat, which often adheres to a peg-like appendage at the base of the hypocotyl. The epicotyl usually does not show any development within the test period. (4) Root system: A long primary root with numerous secondary roots. (b) Abnormal seedling description. (1) Cotyledons: (i) Less than half of the original cotyledon tissue remaining attached. (ii) Less than half of the original cotyledon tissue free of necrosis or decay. (Remove any attached seed coats at the end of the test period for evaluation of cotyledons.) (2) Epicotyl: (i) Missing. (May be assumed to be present if the cotyledons are intact.) (ii) [Reserved] (3) Hypocotyl: (i) Deep open cracks extending into the conducting tissue. (ii) Malformed, such as markedly shortened, curled, or thickened. (4) Root: (i) None. (ii) Weak, stubby, or missing primary root, with less than two strong secondary or adventitious roots. (5) Seedling: (i) One or more essential structures impaired as a result of decay from primary infection. (ii) Albino. [59 FR 64501, Dec. 14, 1994] Sec. 201.56-5 Grass family, Poaceae (Gramineae). Kinds of seed: Bentgrasses, bluegrasses, bluestems, bromes, cereals, fescues, millets, orchardgrass, redtop, ryegrasses, sorghums, timothy, turf timothy, wheatgrasses, and all other grasses listed in Sec. 201.2(h). (a) Cereals: Agrotricum, barley, oat, rye, mountain rye, wheat, wheat x agrotricum, and triticale. (1) General description. (i) Germination habit: Hypogeal monocot. (ii) Food reserves: Endosperm. The scutellum is a modified cotyledon which is in direct contact with the endosperm. During germination the scutellum remains inside the seed to absorb nutrients from the endosperm and transfer them to the growing seedling. (iii) Shoot system: The shoot consists of the coleoptile, leaves enclosed in the coleoptile, and the mesocotyl. The coleoptile elongates and pushes through the soil surface; the mesocotyl may elongate depending on the variety and light intensity, but may not be discernible. Splitting of the coleoptile occurs naturally as a result of growth and emergence of the leaves. (iv) Root system: A primary root and seminal roots. The primary root is not readily distinguishable from the seminal roots; therefore, all roots arising from the seed are referred to as seminal roots. (2) Abnormal seedling description. (i) Shoot: (A) Missing. (B) No leaf. (C) Leaf extending less than halfway up into the coleoptile. (D) Leaf extensively shredded or split. (E) Spindly or watery. (F) Grainy, spirally twisted, shredded, and weak. (G) Deep open cracks in the mesocotyl. (ii) Root: (A) Less than one strong seminal root. (B) [Reserved] (iii) Seedling: (A) Decayed at point of attachment to the scutellum. (B) One or more essential structures impaired as a result of decay from primary infection. (C) Albino. (D) Endosperm obviously detached from the root-shoot axis (e.g. kernel lifted away by the growing shoot). (E) Thickened and shortened roots and/or shoots. [[Page 358]] (b) Rice. (1) General description. (i) Germination habit: Hypogeal monocot. (ii) Food reserves: Endosperm. The scutellum is a modified cotyledon which is in direct contact with the endosperm. During germination the scutellum remains inside the seed to absorb nutrients from the endosperm and transfer them to the growing seedling. (iii) Shoot system: The shoot consists of the coleoptile, leaves enclosed in the coleoptile, and the mesocotyl. The coleoptile elongates and pushes through the soil or water surface; the mesocotyl may elongate depending on the variety and environmental conditions. Splitting of the coleoptile occurs naturally as a result of growth and emergence of the leaves. (iv) Root system: Strong primary root and seminal roots. Adventitious roots may start to develop from the mesocotyl or coleoptilar node within the test period. If the mesocotyl elongates, the adventitious roots will be carried above the grain. (2) Abnormal seedling description. (i) Shoot: (A) Missing. (B) No leaf. (C) Leaf extending less than halfway up into the coleoptile. (D) Leaf extensively shredded or split. (E) Spindly or watery. (F) Deep open cracks in the mesocotyl. (ii) Root: (A) None. (B) Weak primary root with insufficient seminal or adventitious roots. (iii) Seedling: (A) Decayed at point of attachment to the scutellum. (B) One or more essential structures impaired as a result of decay from primary infection. (C) Albino. (c) Corn. (1) General description. (i) Germination habit: Hypogeal monocot. (ii) Food reserves: Endosperm. The scutellum is a modified cotyledon which is in direct contact with the endosperm. During germination the scutellum remains inside the seed to absorb nutrients from the endosperm and transfer them to the growing seedling. (iii) Shoot system: The shoot consists of the coleoptile, leaves enclosed in the coleoptile, and the mesocotyl. The coleoptile elongates and pushes through the soil surface. The mesocotyl usually elongates. Splitting of the coleoptile occurs naturally as a result of growth and emergence of the leaves. A twisted and curled shoot bound by a tough seed coat may be considered normal, provided the shoot is not decayed. (iv) Root system: Strong primary root and seminal roots. Adventitious roots may start to develop from the mesocotyl or coleoptilar node within the test period. (2) Abnormal seedling description. (i) Shoot: (A) Missing. (B) Thickened and shortened. (C) No leaf. (D) Leaf extending less than halfway up into the coleoptile. (E) Leaf extensively shredded or split. (F) Spindly or watery. (G) Deep open cracks in the mesocotyl. (ii) Root: (A) None. (B) Weak, stubby, or missing primary root with weak seminal roots. (iii) Seedling: (A) Decayed at point of attachment to the scutellum. (B) One or more essential structures impaired as a result of decay from primary infection. (C) Albino. (d) Johnsongrass, sorghum, sorgrass, sorghum almum, sudangrass, and sorghum-sudangrass. (1) General description. (i) Germination habit: Hypogeal monocot. (ii) Food reserves: Endosperm. The scutellum is a modified cotyledon which is in direct contact with endosperm. During germination the scutellum remains inside the seed to absorb nutrients from the endosperm and transfer them to the growing seedling. [[Page 359]] (iii) Shoot system: The shoot consists of the coleoptile, leaves enclosed in the coleoptile, and the mesocotyl. The coleoptile elongates and pushes through the soil surface; the mesocotyl usually elongates. Areas of natural, reddish pigmentation may develop on the mesocotyl and coleoptile. Splitting of the coleoptile occurs naturally as a result of growth and emergence of the leaves. (iv) Root system: A long primary root, usually with secondary roots developing within the test period. Adventitious roots may start to develop from the mesocotyl or coleoptilar node within the test period. Areas of natural, reddish pigmentation may develop on the root. (2) Abnormal seedling description. (i) Shoot: (A) Missing. (B) Thickened and shortened. (C) No leaf. (D) Leaf extending less than halfway up into the coleoptile. (E) Leaf extensively shredded or split. (F) Spindly or watery. (G) Deep open cracks in the mesocotyl. (ii) Root: (A) None. (B) Damaged or weak primary root with less than two strong secondary roots. (iii) Seedling: (A) Decayed at point of attachment to the scutellum. (B) One or more essential structures impaired as a result of decay from primary infection. (C) Albino. (e) Grasses and millets. (1) General description. (i) Germination habit: Hypogeal monocot. (ii) Food reserves: Endosperm. The scutellum is a modified cotyledon which is in direct contact with the endosperm. During germination the scutellum remains inside the seed to absorb nutrients from the endosperm and transfer them to the growing seedling. (iii) Shoot system: The shoot consists of the coleoptile, leaves enclosed in the coleoptile, and the mesocotyl. The coleoptile elongates and pushes through the soil surface. The mesocotyl may or may not elongate significantly, depending on the kind. Splitting of the coleoptile occurs naturally as a result of growth and emergence of the leaves. (iv) Root system: A long primary root. Secondary or adventitious roots may develop within the test period. In certain kinds (e.g. bermudagrass) the primary root may not be readily visible because it is coiled inside the tightly fitting lemma and palea. At the time of evaluation, the glumes should be removed and the root observed. Such seedlings are classified as normal if the primary root has developed. For Kentucky bluegrass, a primary root \1/16\ inch (1.6 mm) or more in length is classified as normal. (2) Abnormal seedling description. (i) Shoot: (A) Missing. (B) Short, thick, and grainy. (C) No leaf. (D) Leaf extending less than halfway up into the coleoptile. (E) Leaf extensively shredded or split. (F) Spindly or watery. (G) Deep open cracks in the mesocotyl. (ii) Root: (A) Missing or defective primary root even if other roots are present. (B) Spindly, stubby, or watery primary root. (iii) Seedling: (A) Decayed at point of attachment to the scutellum. (B) One or more essential structures impaired as a result of decay from primary infection. (C) Albino. (D) Yellow (when grown in light). (E) Endosperm obviously detached from the root-shoot axis (e.g. kernel lifted away by the growing shoot). [59 FR 64501, Dec. 14, 1994, as amended at 65 FR 1708, Jan. 11, 2000] Sec. 201.56-6 Legume or pea family, Fabaceae (Leguminosae). Kinds of seed: Alfalfa, alyceclover, asparagusbean, beans (Phaseolus spp.), Florida beggarweed, black medic, broadbean, burclovers, buttonclover, chickpea, clovers (Trifolium spp.), cowpea, crotalarias, crownvetch, guar, [[Page 360]] hairy indigo, kudzu, lentil, lespedezas, lupines, northern sweetvetch, peas, peanut, roughpea, sainfoin, sesbania, sourclover, soybean, sweetclovers, trefoils, velvetbean, and vetches. (a) Field bean, garden bean, lima bean, mung bean, asparagusbean, and cowpea. (1) General description. (i) Germination habit: Epigeal dicot. (ii) Food reserves: Cotyledons which are large and fleshy. (iii) Shoot system: The hypocotyl elongates and carries the cotyledons above the soil surface. The epicotyl elongates, causing the terminal bud to emerge from between the cotyledons; the primary leaves expand rapidly. (iv) Root system: A long primary root with secondary roots. (2) Abnormal seedling description. (i) Cotyledons: (A) For garden bean (Phaseolus vulgaris in part), remove any attached seed coats at the end of the test period for evaluation of cotyledons: (1) Less than half of the original cotyledon tissue remaining attached. (2) Less than half of the original cotyledon tissue free of necrosis or decay. (B) All other kinds: (1) Both missing and the seedling generally weak. (2) [Reserved] (ii) Epicotyl: (A) Missing. (B) Deep open cracks. (C) Malformed, such as markedly curled or thickened. (D) Less than one primary leaf. (E) Primary leaves too small in proportion to the rest of the seedling, usually associated with visible defects of, or damage to, the main stem of the epicotyl. (F) Terminal bud missing or damaged. (If a few seedlings with total or partial decay to the epicotyl are found, they may be classified as normal, provided the hypocotyl and root are normal. The epicotyl on such seedlings usually does not decay when grown in a fairly dry environment and exposed to light. A retest, preferably in soil or sand, will aid in interpretation of such seedlings.) (iii) Hypocotyl: (A) Deep open cracks extending into the conducting tissue. (A healed break, sometimes referred to as a ``knee,'' is considered normal.) (B) Malformed, such as markedly shortened, curled, or thickened. (Hypocotyl stunting or curling may be caused by seedling orientation or constriction on or in the substratum.) (Hypocotyl collar rot is the breakdown of hypocotyl tissue initially characterized by a watery appearance and collapse of the hypocotyl below the cotyledonary node. The area later becomes discolored, shrivelled, and necrotic. The condition is caused by insufficient calcium available to the seedling. If hypocotyl collar rot is observed on seedlings of garden bean, the sample involved shall be retested in accordance with Sec. 201.58(b)(12).) (iv) Root: (A) None. (B) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (A root bound within a tough seed coat is considered normal.) (v) Seedling: (A) One or more essential structures impaired as the result of decay from primary infection. (Secondary infection is common in towel and blotter tests. Some pathogens, such as Fusarium, Phomopsis, and Rhizoctonia, can spread through the substratum and infect seedlings some distance away from the primary source. Seedlings with secondary infection are to be classified as normal. A retest in sand or soil may be advisable.) (B) Albino. (b) Adzuki bean, broadbean, chickpea, field pea, lentil, pea, roughpea, runner bean, velvetbean, and vetches. (1) General description. (i) Germination habit: Hypogeal dicot. (ii) Food reserves: Cotyledons which are large and fleshy, and remain enclosed within the seed coat beneath the soil surface. They are usually not photosynthetic. (iii) Shoot system: The epicotyl elongates and carries the terminal bud and primary leaves above the soil surface. The stem bears one or more scale leaves and, prior to emergence, is arched near the apex, causing the terminal bud to be pulled through the soil; after emergence, the stem [[Page 361]] straightens. For practical purposes, the hypocotyl is not discernible and is not an evaluation factor. Buds in the axils of each cotyledon and scale leaf usually remain dormant unless the terminal bud is seriously damaged. In this case, one or more axillary buds may start to develop into a shoot. If the axillary shoot is well-developed, it may be considered normal. (iv) Root system: A long primary root with secondary roots. (2) Abnormal seedling description. (i) Cotyledons: (A) Less than half of the original tissue remaining attached. (B) Less than half of the original tissue free of necrosis or decay. (ii) Epicotyl: (A) Missing. (B) Less than one primary leaf. (C) Malformed such as markedly shortened, curled, or thickened. (D) Severely damaged (e.g. terminal bud missing or damaged) with only a weak shoot developing from the axil of a cotyledon or scale leaf. (E) Two weak and spindly shoots. (F) Deep open cracks extending into the conducting tissue. (iii) Root: (A) None. (B) Weak, stubby, or missing primary root with weak secondary roots. (iv) Seedlings: (A) One or more essential structures impaired as a result of decay from primary infection. (Secondary infection is common in towel and blotter tests. Some pathogens can spread through the substratum and infect seedlings some distance away from the primary source. Seedlings with secondary infection are classified as normal. A retest in sand or soil may be advisable.) (B) Albino. (c) Soybean and lupine. (1) General description. (i) Germination habit: Epigeal dicot. (ii) Food reserves: Cotyledons, which are large and fleshy; they expand and become photosynthetic. (iii) Shoot system: The hypocotyl elongates and carries the cotyledons above the soil surface. The primary leaves usually increase in size and the epicotyl may elongate within the test period. (iv) Root system: A long primary root with secondary roots. (2) Abnormal seedling description. (i) Cotyledons: (A) Less than half of the original cotyledon tissue remaining attached. (B) Less than half of the original cotyledon tissue free of necrosis or decay. (ii) Epicotyl: (A) Missing. (B) Less than one primary leaf. (C) Deep open cracks. (D) Terminal bud damaged, missing, or decayed. (If a few seedlings with partial decay of the epicotyl are found, they may be classified as normal, provided the hypocotyl and root are normal. The epicotyl on such seedlings usually does not decay when grown in a fairly dry environment and is exposed to light. A retest, preferably in soil or sand, will aid in interpretation of such seedlings.) (iii) Hypocotyl: (A) Deep open cracks extending into the conducting tissue. (Adventitious roots may occur at the site of injury, particularly on the hypocotyl and near the base of the cotyledons. The seedling is classified as normal if the injury is healed over and other essential structures are normal.) (B) Malformed, such as markedly shortened, curled, or thickened. (Hypocotyl development is slow until the roots start functioning. Caution should be exercised to ensure slow seedlings are not classified as abnormal. Hypocotyl stunting or curling also may be caused by seedling orientation or constriction on or in the substratum.) (iv) Root: (A) None. (B) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (Roots of seedlings on ``Kimpak'' with insufficient moisture may not become established and hypocotyl elongation may appear to be abnormal. There may be curling of the root and hypocotyl. When a number of seedlings are observed with this condition, the sample should be retested.) (v) Seedlings: (A) One or more essential structures impaired as a result of decay from primary infection. (Secondary infection is common in towel and blotter tests. [[Page 362]] Some pathogens, such as Fusarium, Phomopsis, and Rhizoctonia, can spread through the substratum and infect seedlings some distance away from the primary source. Seedlings with secondary infection are to be classified as normal. A retest in sand or soil may be advisable.) (B) Albino. (d) Peanut. (1) General description. (i) Germination habit: Epigeal dicot. (ii) Food reserves: Cotyledons, which are large and fleshy. (iii) Shoot system: The cotyledons are carried to the soil surface by the hypocotyl which is very thick, narrowing abruptly at the root. Elongation of the hypocotyl stops when the epicotyl is exposed to light at the soil surface. The primary leaves are compound and usually expand during the test period. (iv) Root system: A long primary root with secondary roots. Adventitious roots develop from the base of the hypocotyl if the primary root is damaged. (2) Abnormal seedling description. (i) Cotyledons: (A) Less than half of the original cotyledon tissue remaining attached. (B) Less than half of the original cotyledon tissue free of necrosis or decay. (ii) Epicotyl: (A) Missing. (B) Less than one primary leaf. (C) Deep open cracks. (D) Terminal bud damaged, missing, or decayed. (iii) Hypocotyl: (A) Deep open cracks extending into the conducting tissue. (B) Malformed, such as markedly shortened or curled. (Hypocotyls remain somewhat thickened and may appear to be stunted. Light, depth of planting, and substratum moisture all contribute to the length of the hypocotyl. Hypocotyl stunting or curling may be caused by seedling orientation or constriction in the substratum. Seedlings planted in a soil test with the radicle too close to the surface may send roots above the soil and appear to exhibit negative geotropism and a distorted, U- shaped hypocotyl. (iv) Root: (A) None. (B) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (v) Seedling: (A) One or more essential structures impaired as a result of primary infection. (B) Albino. (e) Alfalfa, alyceclover, Florida beggarweed, black medic, burclovers, buttonclover, milkvetch, clovers, crotalarias, crownvetch, guar, hairy indigo, kudzu, lespedezas, northern sweetvetch, sainfoin, sesbania, sourclover, sweetclovers, and trefoils. (1) General description. (i) Germination habit: Epigeal dicot. (ii) Food reserve: Cotyledons, which are small and fleshy; they expand and become photosynthetic. The cotyledons of sub clover develop elongated petioles. (iii) Shoot system: The hypocotyl elongates and carries the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. (iv) Root system: A long, tapering primary root, usually with root hairs. Secondary roots may or may not develop within the test period, depending on the kind. (2) Abnormal seedling description. (i) Cotyledons: (A) Less than half of the original cotyledon tissue remaining attached. (Breaks at the point of attachment of the cotyledons to the hypocotyl are common in seeds which have been mechanically damaged. It is important that seedlings not be removed during preliminary counts unless development is sufficient to allow the conditions of the cotyledons to be determined. If the point of attachment of the cotyledons cannot be seen at the end of the test, the seed coat should be peeled back to determine whether a break has occurred.) (B) Less than half of the original cotyledon tissue free of necrosis or decay. (ii) Epicotyl: (A) Missing. (May be assumed to be present if both cotyledons are intact.) (B) [Reserved] (iii) Hypocotyl: (A) Deep open cracks extending into the conducting tissue. [[Page 363]] (B) Malformed, such as markedly shortened, curled, or thickened. (Seedlings of sainfoin which have been constricted by growing through the netting of the pod, but which are otherwise normal, are classified as normal.) (C) Weak and watery. (iv) Root: (A) None. (B) Primary root stubby. (The roots of sweetclovers may be stubby when grown on artificial substrata due to the presence of coumarin in the seed; since this condition usually does not occur in soil, such seedlings are classified as normal. Roots may appear stubby as a result of being bound by the seed coat; such seedlings are classified as normal. Crownvetch produces phytotoxic effects similar to sweetclovers.) (C) Split extending into the hypocotyl. (v) Seedling: (A) One or more essential structures impaired as a result of decay from primary infection. (B) Albino. [59 FR 64503, Dec. 14, 1994, as amended at 65 FR 1708, Jan. 11, 2000] Sec. 201.56-7 Lily family, Liliaceae. Kinds of seed: Asparagus, chives, leek, onion, and Welsh onion. (a) Asparagus. (1) General description. (i) Germination habit: Hypogeal monocot. (ii) Food reserves: Endosperm which is hard, semi- transparent, and non-starchy; minor reserves in the cotyledon. The endosperm surrounds the entire embryo. (iii) Cotyledon: A single cylindrical cotyledon; following germination, all but the basal end remains embedded in the endosperm to absorb nutrients. (iv) Shoot system: The epicotyl elongates and carries the terminal bud above the soil surface. The epicotyl may bear several small scale leaves. A short hypocotyl is barely distinguishable, joining the root to the basal end of the cotyledon. More than one shoot may arise simultaneously, and the seedling may be considered normal if at least one shoot is well- developed and has a terminal growing point, provided other essential structures are normal. (v) Root system: A long slender primary root. (2) Abnormal seedling description. (i) Cotyledon: (A) Detached from seedling. (B) Deep open cracks at basal end. (ii) Epicotyl: (A) Missing. (B) Terminal bud missing or damaged. (C) Deep open cracks. (D) Malformed, such as markedly shortened, curled, or thickened. (E) Spindly. (F) Watery. (iii) Hypocotyl: (A) Deep open cracks. (B) [Reserved] (iv) Root: (A) No primary root. (B) Stubby primary root with weak secondary roots. (v) Seedling: (A) One or more essential structures impaired as a result of decay from primary infection. (B) Albino. (b) Chives, leek, onion, Welsh onion. (1) General description. (i) Germination habit: Epigeal monocot. (ii) Food reserves: Endosperm which is hard, semi-transparent, and non-starchy; minor reserves in the cotyledon. (iii) Cotyledon: A single cylindrical cotyledon. The cotyledon emerges with the seed coat and endosperm attached to the tip. A sharp bend known as the ``knee'' forms; continued elongation of the cotyledon on each side of this knee pushes it above the soil surface. The cotyledon tip is pulled from the soil and straightens except for a slight kink which remains at the site of the knee. (iv) Shoot system: The first foliage leaf emerges through a slit near the base of the cotyledon, but this does not usually occur during the test period. The hypocotyl is a very short transitional zone between the primary root and the cotyledon, and is not distinguishable for purposes of seedling evaluation. [[Page 364]] (v) Root system: A long slender primary root with adventitious roots developing from the hypocotyl. The primary root does not develop secondary roots. (2) Abnormal seedling description. (i) Cotyledon: (A) Short and thick. (B) Without a definite bend or ``knee''. (C) Spindly or watery. (ii) Epicotyl: (A) Not observed during the test period. (B) [Reserved] (iii) Hypocotyl: (A) Not evaluated. (B) [Reserved] (iv) Root: (A) No primary root. (B) Short, weak, or stubby primary root. (v) Seedling: (A) One or more essential structures impaired as a result of decay from primary infection. (B) Albino. [59 FR 64504, Dec. 14, 1994] Sec. 201.56-8 Flax family, Linaceae. Kind of seed: Flax. (a) General description. (1) Germination habit: Epigeal dicot. (Due to the mucilaginous nature of the seed coat, seedlings germinated on blotters may adhere to the blotter and appear to be negatively geotropic.) (2) Food reserves: Cotyledons which expand and become photosynthetic. (3) Shoot system: The hypocotyl elongates carrying the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. (4) Root system: A primary root, with secondary roots usually developing within the test period. (b) Abnormal seedling description. (1) Cotyledons: (i) Less than half of the original cotyledon tissue remaining attached. (ii) Less than half of the original cotyledon tissue free of necrosis or decay. (2) Epicotyl: (i) Missing. (May be assumed to be present if cotyledons are intact.) (ii) [Reserved] (3) Hypocotyl: (i) Deep open cracks extending into the conducting tissue. (ii) Malformed, such as markedly shortened, curled, or thickened. (4) Root: (i) None. (ii) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (5) Seedling: (i) One or more essential structures impaired as a result of decay from primary infection. (ii) Albino. [59 FR 64505 Dec. 14, 1994] Sec. 201.56-9 Mallow family, Malvaceae. Kinds of seed: Cotton, kenaf, and okra. (a) General description. (1) Germination habit: Epigeal dicot. (2) Food reserve: Cotyledons, which are convoluted in the seed; they expand and become thin, leaf-like, and photosynthetic. (3) Shoot system: The hypocotyl elongates carrying the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. Areas of yellowish pigmentation may develop on the hypocotyl in cotton. (4) Root system: A primary root, with secondary roots usually developing within the test period. Areas of yellowish pigmentation may develop on the root in cotton. (b) Abnormal seedling description. (1) Cotyledons: (i) Less than half of the original cotyledon tissue remaining attached. (ii) Less than half of the original cotyledon tissue free of necrosis or decay. (Remove any attached seed coats at the end of the test period for evaluation of cotyledons.) (2) Epicotyl: (i) Missing. (May be assumed to be present if both cotyledons are intact.) (ii) [Reserved] (3) Hypocotyl: (i) Deep open cracks or grainy lesions extending into the conducting tissue. (ii) Malformed, such as markedly shortened, curled, or thickened. (4) Root: (i) None. [[Page 365]] (ii) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (5) Seedling: (i) One or more essential structures impaired as a result of decay from primary infection. (A cotton seedling with yellowish areas on the root or hypocotyl is classified as normal, provided the cotyledons are free of infection.) (ii) Albino. [59 FR 64505 Dec. 14, 1994] Sec. 201.56-10 Spurge family, Euphorbiaceae. Kind of seed: Castorbean. (a) General description. (1) Germination habit: Epigeal dicot. (2) Food reserves: Cotyledons, which are thin and leaf-like; endosperm (fleshy food-storage organs) usually persisting in the laboratory test. (3) Shoot system: The hypocotyl lengthens, carrying the cotyledons, endosperm, and epicotyl above the soil surface. (4) Root system: A primary root, with secondary roots usually developing within the test period. (b) Abnormal seedling description. (1) Cotyledons: (i) Less than half of the original cotyledon tissue remaining attached. (ii) Less than half of the original cotyledon tissue free of necrosis or decay. (2) Endosperm: (i) Missing. (ii) [Reserved] (3) Epicotyl: (i) Missing. (ii) Damaged or missing terminal bud. (4) Hypocotyl: (i) Deep open cracks extending into the conducting tissue. (ii) Malformed, such as markedly shortened, curled, or thickened. (5) Root: (i) None. (ii) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (6) Seedling: (i) One or more essential structures impaired as a result of decay from primary infection. (ii) Albino. [59 FR 64505 Dec. 14, 1994] Sec. 201.56-11 Knotweed family, Polygonaceae. Kinds of seed: Buckwheat, rhubarb, and sorrel. (a) General description. (1) Germination habit: Epigeal dicot. (2) Food reserves: Cotyledons, starchy endosperm. (3) Shoot system: The hypocotyl elongates carrying the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. (4) Root system: A primary root, with secondary roots developing within the test period for some kinds. (b) Abnormal seedling description. (1) Cotyledons: (i) Less than half of the original cotyledon tissue remaining attached. (ii) Less than half of the original cotyledon tissue free of necrosis or decay. (2) Epicotyl: (i) Missing. (May be assumed to be present if cotyledons are intact.) (ii) [Reserved] (3) Hypocotyl: (i) Deep open cracks or grainy lesions extending into the conducting tissue. (ii) Malformed, such as markedly shortened, curled, or thickened. (iii) Watery. (4) Root: (i) None. (ii) Weak, stubby, or missing primary root with weak secondary or adventitious roots. (5) Seedling: (i) One or more essential structures impaired as a result of decay from primary infection. (ii) Albino. [59 FR 64506, Dec. 14, 1994] Sec. 201.56-12 Miscellaneous plant families. Kinds of seed by family: Carrot family, Apiaceae (Umbelliferae)--carrot, celery, celeriac, dill, parsley, parsnip; Hemp family, Cannabaceae--hemp; Dichondra family, Dichondraceae--dichondra; Geranium family, Geraniaceae--alfilaria; Mint family, Lamiaceae (Labiatae)--sage, summer savory; benne family, Pedaliaceae--sesame; Rose family, Rosaceae--little burnet; [[Page 366]] Nightshade family, Solanaceae--eggplant, tomato, husk tomato, pepper, tobacco; and Valerian family, Valerianaceae--cornsalad. (a) General description. (1) Germination habit: Epigeal dicot. (2) Food reserves: Cotyledons; endosperm may or may not be present, depending on the kind. (3) Shoot system: The hypocotyl elongates, carrying the cotyledons above the soil surface. The epicotyl usually does not show any development within the test period. (4) Root system: A primary root; secondary roots may or may not develop within the test period, depending on the kind. (b) Abnormal seedling description. (1) Cotyledons: (i) Less than half of the original cotyledon tissue remaining attached. (ii) Less than half of the original cotyledon tissue free of necrosis or decay. (2) Epicotyl: (i) Missing. (May be assumed to be present if the cotyledons are intact.) (ii) [Reserved] (3) Hypocotyl: (i) Malformed, such as markedly shortened, curled, or thickened. (ii) Deep open cracks extending into the conducting tissue. (iii) Watery. (4) Root: (i) None. (ii) Missing or stubby primary root with weak secondary or adventitious roots. (5) Seedling: (i) One or more essential structures impaired as a result of decay from primary infection. (ii) Albino. [59 FR 64506, Dec. 14, 1994] Sec. 201.57 Hard seeds. Seeds which remain hard at the end of the prescribed test because they have not absorbed water, due to an impermeable seed coat, are to be counted as ``hard seed.'' If at the end of the germination period provided for legumes, okra, cotton and dichondra in these rules and regulations there are still present swollen seeds or seeds of these kinds which have just started to germinate, all seeds or seedlings except the above-stated shall be removed and the test continued for 5 additional days and the normal seedlings included in the percentage of germination. For flatpea, continue the swollen seed in test for 14 days when germinating at 15-25 [deg]C or for 10 days when germinating at 20 [deg]C. [5 FR 33, Jan. 4, 1940, as amended at 10 FR 9952, Aug. 11, 1945; 20 FR 7936, Oct. 21, 1955; 65 FR 1708, Jan. 11, 2000] Sec. 201.57a Dormant seeds. Dormant seeds are viable seeds, other than hard seeds, which fail to germinate when provided the specified germination conditions for the kind of seed in question. (a) Viability of ungerminated seeds shall be determined by any of the following methods or combinations of methods: a cutting test, tetrazolium test, scarification, or application of germination promoting chemicals. (b) The percentage of dormant seed, if present, shall be determined in addition to the percentage of germination for the following kinds: Bahiagrass, basin wildrye, big bluestem, little bluestem, sand bluestem, yellow bluestem, bottlebrush-squirreltail, buffalograss, buffelgrass, galletagrass, forage kochia, blue grama, side-oats grama, Indian ricegrass, johnsongrass, sand lovegrass, weeping lovegrass, mountain rye, sand dropseed, smilo, switchgrass, veldtgrass, western wheatgrass, and yellow indiangrass. (c) For green needlegrass, if the test result of method 2 is less than the result of method 1, subtract the result of method 2 from method 1 and report the difference as the percentage of dormant seed. Refer to Sec. 201.58(b)(7). [46 FR 53638, Oct. 29, 1981, as amended at 59 FR 64506, Dec. 14, 1994] Sec. 201.58 Substrata, temperature, duration of test, and certain other specific directions for testing for germination and hard seed. Specific germination requirements are set forth in table 2 to which the following paragraphs (a), (b), and (c) are applicable. (a) Definitions and explainations applicable to table 2--(1) Duration of tests. The following deviations are permitted from the specified duration of tests: [[Page 367]] Any test may be terminated prior to the number of days listed under ``Final count'' if the maximum germination of the sample has then been determined. The number of days stated for the first count is approximate and a deviation of 1 to 3 days is permitted. If at the time of the prescribed test period the seedlings are not sufficiently developed for positive evaluation, it is possible to extend the time of the test period two additional days. If the prescribed test period or the allowed extension falls on a weekend or public holiday, the test may be extended to the next working day. (Also, see paragraph (a)(5) of this section and Sec. 201.57.) (2) Light. Cool white fluorescent light shall be provided where light is required in table 2. The light intensity shall be 75 to 125 foot-candles (750-1,250 lux). (The light intensity for nondormant seed and during seedling development may be as low as 25 foot-candles to enable the essential structures to be evaluated with greater certainty.) The seeds shall be illuminated for at least 8 hours every 24 hours except when transferred to a low temperature germinator during the weekend. When seeds are germinated at alternating temperatures they shall be illuminated during high temperature periods. Seeds for which light is prescribed shall be germinated on top of the substratum except for ryegrass fluorescence tests. (3) Moisture-on-dry-side. This term means that the moistened substratum should be pressed against a dry absorbent surface such as a dry paper towel or blotter to remove excess moisture. The moisture content thus obtained should be maintained throughout the germination test period. (4) Potassium nitrate (KNO3). These terms mean a two- tenths (0.2) percent solution of potassium nitrate (KNO3) shall be used in moistening the substratum. Such solution is prepared by dissolving 2 grams of KNO3 in 1,000 ml. of distilled water. The grade of the potassium nitrate shall meet A.C.S. specifications. (5) Prechill. The term ``prechill'' means a cold, moist treatment applied to seeds to overcome dormancy prior to the germination test. The prechill method varies among kinds, but is usually performed by holding imbibed seeds at a low temperature for a specified period of time. The prechill period is not included in the duration of tests given in table 2, unless otherwise specified. (6) Predry. The term ``predry'' means to place the seed in a shallow layer at a temperature of 35[deg] to 40 [deg]C. for a period of 5 to 7 days, with provisions for circulation of the air. (7) Substrata (Kinds). The symbols used for substrata are: B = between blotters TB = top of blotters T = paper toweling, used either as folded towel tests or as roll towel tests in horizontal or vertical position S = sand or soil where soil is an artificial planting mix of shredded peat moss, vermiculite, and perlite TS = top of sand or soil P = covered Petri dishes: with two layers of blotters; with one layer of absorbent cotton; with five layers of paper toweling; with three thicknesses of filter paper; or with sand or soil C = creped cellulose paper wadding (0.3-inch thick Kimpak or equivalent) covered with a single thickness of blotter through which holes are punched for the seed that are pressed for about one-half their thickness into the paper wadding TC = on top of creped cellulose paper without a blotter RB = blotters with raised covers, prepared by folding up the edges of the blotter to form a good support for the upper fold which serves as a cover, preventing the top from making direct contact with the seeds. (8) Temperature. A single numeral indicates a constant temperature. Two numerals separated by a dash indicate an alternation of temperature, the test to be held at the first temperature for approximately 16 hours and at the second temperature for approximately 8 hours per day. The temperature shall be determined at the substratum level and shall be as uniform as possible throughout the germination chamber. (A sharp alternation of temperature, such as obtained by hand transfer, may be beneficial in breaking dormancy.) If tests are not subjected to alternating temperatures over weekends and on holidays, they are to be held at the first-mentioned temperature during this time. In cases where two temperatures are indicated (separated by a semicolon) the first temperature shall [[Page 368]] be regarded as the regular method and the second as an alternate method. (9) Paper substrata must be free of chemicals toxic to germinating seed and seedling growth. If root injury occurs from toxicity of a paper substratum or from the use of potassium nitrate, retests shall be made on soil or on a substratum moistened with water. (10) Ethephon. This term means a 29 parts per million (0.0029 percent) solution of ethephon [(2-chloroethyl) phosphonic acid] which shall be used to moisten the substratum. This solution is prepared by mixing 0.6 ml of a stock solution with 5,000 ml of distilled water. The stock solution contains 24 grams of active material per 100 ml of propylene glycol or two pounds of active material per gallon. A solution which is five times this concentration (5 x 29 ppm) may be used for extremely dormant seeds, provided seeds are transferred to substratum moistened with water after 1 to 3 days. (11) Ethylene. This term means that five (5) ml of ethylene gas per cubic foot (176.57 ml/m\3\) of germinator space is injected into a germinator in which peanut seeds in moist rolled towels have been placed. Following injection of the ethylene, the germinator is kept closed until the first count (5 days). If the germinator door is opened for the purpose of checking or rewetting the samples, another injection of ethylene at the same rate shall be made. (b) Special procedures and alternate methods for germination referred to in table 2--(1) Alyceclover; swollen seeds. At the conclusion of the 21-day test period, carefully pierce the seed coat with a sharp instrument and continue the test for 5 additional days. Alternate method: The swollen seeds may be placed at 20 [deg]C for 48 hours and then at 35 [deg]C for 3 additional days. (2) Bahiagrass; removal of glumes. On all varieties except ``Pensacola,'' remove the enclosing structures (glumes, lemma, and palea) from the caryopsis with the aid of a sharp scalpel. If the seed is fresh or dormant, lightly scratch the surface of the caryopsis. (3) Beet, Swiss chard; preparation of seed for test. Before the seeds are placed on the germination substratum, they shall be soaked in water for 2 hours, using at least 250 ml of water per 100 seeds, then washed in running water and the excess water blotted off. The temperature of the soaking and washing water should be no lower than 20 [deg]C. Samples producing excessive discoloration of the hypocotyl or root should be retested in soil or by washing in running water for 3 hours and testing on ``Kimpak,'' keeping the seed covered with slightly moist blotters. Sugar beets may require 16 hours soaking in water at 25 [deg]C, followed by rinsing and then drying for 2 hours at room temperature. (4) Buffelgrass; alternate method for dormant seed. The caryopses shall be removed from the fascicles and placed on blotters moistened with a 0.2 percent solution of KNO3, in petri dishes. The seeds from a fascicle should be arranged so they will not be confused with seeds from other fascicles during the test. The seeds are then prechilled at 5 [deg]C for 7 days and tested at 30 [deg]C in light for 21 additional days. Firm ungerminated seeds remaining at the conclusion of the test should be scratched lightly and left in test for 7 additional days. (5) Cotton (Gossypium spp.); dormant samples. Samples of cottonseed which do not respond to the usual method should be placed in a closed container with water and shaken until the lint is thoroughly wet. The excess moisture should then be blotted off. (6) Endive (Cichorium endivia); dormant samples. Add about \1/8\ inch of tap water at the beginning of the test and remove excess water after 24 hours. (7) Green needlegrass; two test methods as prescribed in table 2 shall be used on each sample: (i) For method 1, acid scarify 400 seeds for 10 minutes in concentrated sulfuric acid (95 to 98 percent H2 SO4). Rinse seeds and dry on blotters for 16 hours, then place seeds on blotters moistened with a solution of 0.055 percent (500 ppm gibberellic acid GA3) and 0.46 percent (3,000 ppm) thiram and germinate 14 days. (ii) For method 2, plant 400 seeds on blotters moistened with a 0.2 percent solution of KNO3 and germinate 14 days. Refer to Sec. 201.57a(c). (iii) Report the results of method 2 as the percentage germination. If the [[Page 369]] number in method 2 is less than method 1, subtract the results of method 2 from method 1 and report the difference as dormant seed. (8) Rescue grass (Bromus catharticus); dormant samples. Wash for 48 hours in running water, or soak for 48 hours, changing the water and rinsing each morning and night. (9) Rice (Oryza sativa)--Alternate method. Plant the seeds in moist sand. On the seventh day of the test add water to a depth of one-fourth inch above the sand level and leave for the remainder of the test. Only a final count is made. Dormant seeds: Presoak 24 to 48 hours in 40 [deg]C. water. For deeply dormant seeds, presoak 24 hours in 1,000 p.p.m. ethylene chlorohydrin or 5 percent solution of sodium hypochlorite (clorox at bottle strength). (10) Ryegrass; fluorescence test. The germination test for fluorescence of ryegrass shall be conducted in light [not to exceed 100 foot candles (1,076 lux)] with white filter paper as the substratum. The white filter paper should be nontoxic to the roots of ryegrass and of a texture that will resist penetration of ryegrass roots. Distilled or deionized water shall be used to moisten the filter paper. The test shall be conducted in a manner that will prevent the contact of roots of different seedlings. Roots of some seedlings produce fluorescent lines on white filter paper when viewed under ultraviolet light. First counts shall not be made before the eighth day; at that time remove only normal fluorescent seedlings. Evaluation of fluorescence shall be made under F15T8-BLB or comparable ultraviolet tubes in an area where light from other sources is excluded. If there are over 75 percent normal fluorescent seedlings present at the time of the first count, break the contact of the roots of the nonfluorescent seedlings from the substratum and reread the fluorescence at the time of the final count. At the final count, lift each remaining seedling, observing the path of each root since sometimes faint fluorescence will show on the substratum as the root is lifted. Abnormal seedlings and dead seeds are not evaluated for fluorescence. See Sec. 201.58a(a). (11) Trifolium, Medicago, Melilotus, and Vicia faba; temperature requirements. A temperature of 18 [deg]C. is desirable for Trifolium spp., Medicago spp., Melilotus spp., and Vicia faba. (12) Garden bean; use of calcium nitrate. If hypocotyl collar rot is observed on seedlings, the sample involved shall be retested using a 0.3 to 0.6 percent solution of calcium nitrate (CaNO3) to moisten the substratum. (13) Fourwing Saltbush (Atriplex canscens); preparation of seed for test. De-wing seeds and soak for 2 hours in 3 liters of water, after which rinse with approximately 3 liters of distilled water. Remove excess water, air dry for 7 days at room temperature, then test for germination as indicated in Table 2. (c) Procedures for coated seed. (1) Germination tests on coated seed shall be conducted in accordance with methods in paragraphs (a) and (b) of this section. However, kinds for which soaking or washing is specified in paragraph (b) shall not be soaked or washed in the case of coated seed. (i) Coated seed units shall be placed on the substratum in the condition in which they are received without rinsing, soaking, or any other pretreatment. (ii) Coated seed units in mixtures which are color coded or can otherwise be separated by kinds shall be germinated as separate kinds without removing the coating material. (iii) Coated seed units in mixtures which cannot be separated by kinds without removing the coating material shall be de-coated and germinated as separate kinds. The coating material shall be removed in a manner that will not affect the germination capacity of the seeds. (2) The moisture level of the substratum is important. It may depend on the water-absorbing capacity of the coating material. A retest may be necessary before satisfactory germination of the sample is achieved. (3) Phytotoxic symptoms may be evident when germinating coated seeds in paper substrata. In such cases a retest in sand or soil may be necessary. [[Page 370]] Table 2--Germination Requirements for Indicated Kinds ---------------------------------------------------------------------------------------------------------------- Additional directions Temperature First Final --------------------------------- Name of seed Substrata ([deg]C) count count Specific Fresh and days days requirements dormant seed ---------------------------------------------------------------------------------------------------------------- AGRICULTURAL SEED Agrotricum.................. B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days. Alfalfa..................... B, T, S 20.............. 4 \1\7 See ] (b)(11).. Alfilaria................... B, T 20-30........... 3 14 Clip seeds..... Alyceclover................. B, T 35.............. 4 \1\21 See ] (b)(1) for swollen seeds. Bahiagrass: Var. Pensacola.......... P, S 20-35........... 7 28 Light; see ] See Sec. (b)(2). 201.57a All other vars.......... P 30-35........... 3 21 Light; remove Scratch glumes; see ] caryopses; (b)(2). KNO3; see Sec. 201.57a Barley...................... B, T, S 20; 15.......... 4 7 ............... Prechill 5 days at 5 or 10 [deg]C or predry Barrelclover................ B, T 20.............. 4 \1\14 Remove seeds from bur; see ] (b)(11). Bean: Adzuki.................. B, T, S 20-30........... 4 \1\10 Field................... B, T, S, TC 20-30; 25....... 5 \1\8 Mung.................... B, T, S 20-30........... 3 \1\7 Beet, field................. B, T, S 20-30........... 3 14 See ] (b)(3)... Beet, sugar................. B, T, S 20-30; 20....... 3 10 See ] (b)(3)... Beggarweed, Florida......... B, T 30.............. 5 \1\28 Bentgrass: Colonial................ P 15-30; 10-30; 15- 7 28 Light; KNO3.... Prechill at 5 25. or 10 [deg]C for 7 days. Creeping................ P 15-30; 10-30; 15- 7 28 Light; KNO3.... Prechill at 5 25. or 10 [deg]C for 7 days. Velvet.................. P 15-25; 20-30.... 7 21 Light; KNO3.... Bermudagrass................ P 20-35........... 7 21 Light; KNO3; see ] (a)(9). Bermudagrass, giant......... P 20-35........... 7 21 Light; KNO3; Prechill at 10 see ] (a)(9). [deg]C for 7 days and then test at 20-35 [deg]C; continue tests of hulled seed for 14 days and of unhulled seed for 21 days Bluegrass: Annual.................. P 20-30........... 7 21 Light.......... Bulbous................. P, S 10.............. 10 35 KNO3 or soil... Prechill all samples at 5 [deg]C for 7 days. Canada.................. P 15-25; 15-30.... 10 28 Light; KNO3.... 10-30 [deg]C. Glaucantha.............. P 15-25; 15-30.... 10 28 Light; KNO3.... Kentucky................ P 15-25; 15-30.... 10 28 Light; KNO3.... Prechill at 10 [deg]C for 5 days. Nevada.................. P 20-30........... 7 21 Light; KNO3.... Rough................... P 20-30........... 7 21 Light.......... Texas................... P 20-30........... 7 28 Light; KNO3.... Prechill at 5 [deg]C for 2 weeks. Wood.................... P 20-30........... 7 28 Light.......... Bluejoint................... TB, P 15-25........... 10 21 Light and KNO3 Prechill at 5 optional. [deg]C for 5 days Bluestem: Big..................... P, TS 20-30........... 7 14 Light; KNO3.... Prechill at 5 [deg]C for 2 weeks; see Sec. 201.57a. Little.................. P, TS 20-30........... 7 14 Light; KNO3.... Prechill at 5 [deg]C for 2 weeks; see Sec. 201.57a. Sand.................... P, TS 20-30........... 7 14 Light; KNO3.... Prechill at 5 [deg]C for 2 weeks; see Sec. 201.57a. Yellow.................. P, TS 20-30........... 5 14 Light; KNO3.... Prechill at 5 [deg]C for 2 weeks; see Sec. 201.57a. Bottlebrush-squirreltail.... P, B 20; 15.......... 10 14 ............... See Sec. 201.57a. Brome: Field................... P, TB 15-25; 20-30.... 6 14 Light.......... Prechill at 10 [deg]C for 5 days. Meadow.................. B, T, TB 20-30........... 6 14 Light optional. Mountain................ P 20-30........... 6 14 Light.......... [[Page 371]] Smooth.................. P, B, TB 20-30........... 6 14 Light optional. Prechill at 5 or 10 [deg]C for 5 days, then test at 30 [deg]C for 9 additional days. Broomcorn................... B, T, S 20-30........... 3 10 Buckwheat................... B, T 20-30........... 3 6 Buffalograss: (Burs).................. P,TB,TS 20-35........... 7 14 Light;KNO3..... Prechill at 5 [deg]C for 2 weeks; See Sec. 201.57a. (Caryopses)............. P 20-35........... 5 14 Light;KNO3..... Buffelgrass................. S 30.............. 7 28 Light; press See ] (b)(4); fascicles into see Sec. well-packed 201.57a. soil and prechill at 5 [deg]C for 7 days. Burclover, California....... B, T 20.............. 4 \1\ 14 Remove seeds from bur; see ] (b)(11). Burclover, spotted.......... B, T 20.............. 4 \1\ 14 Remove seeds from bur; see ] (b)(11). Burnet, littler............. B, T 15.............. 5 14 Buttonclover................ B, T 20.............. 4 \1\ 10 See ] (b)(11).. 15 [deg]C. Camelina.................... TB 20.............. 4 7 Canarygrass................. B, T 20-30........... 3 7 Canarygrass, reed........... P 20-30........... 5 21 Light; KNO3.... Carpetgrass................. P 20-35........... 10 21 Light.......... KNO3. Castorbean.................. T, S 20-30........... 7 14 Remove caruncle if mold interferes with test. Chess, soft................. P 20-30........... 7 14 Light.......... Prechill at 5 or 10 [deg]C for 7 days. Chickpea.................... T,S 20-30........... 3 \1\ 17 Clover: Alsike.................. B, T, S 20.............. 3 \1\ 7 See ] (b)(11).. 15 [deg]C. Arrowleaf............... B, T 20; 15.......... 4 \1\ 14 See ] (b)(11).. Berseem................. B, T, S 20.............. 3 \1\ 7 See ] (b)(11).. 15 [deg]C. Cluster................. B, T 20.............. 4 \1\ 10 See ] (b)(11).. 15 [deg]C. Crimson................. B, T, S 20.............. 4 \1\ 7 See ] (b)(11).. 15 [deg]C. Kenya................... B, T, S 20.............. 3 17 Ladino.................. B, T, S 20.............. 3 \1\ 7 See ] (b)(11).. 15 [deg]C. Lappa................... B, T 20.............. 3 \1\ 7 See ] (b)(11).. 15 [deg]C. Large hop............... B, T 20.............. 4 \1\ 14 See ] (b)(11).. 15 [deg]C. Persian................. B, T 20.............. 3 \1\ 7 See ] (b)(11).. 15 [deg]C. Red..................... B, T, S 20.............. 4 \1\ 7 See ] (b)(11).. 15 [deg]C. Rose.................... B, T 20.............. 4 \1\ 10 See ] (b)(11).. 15 [deg]C. Small hop............... B, T 20.............. 4 \1\ 14 See ] (b)(11).. 15 [deg]C. Strawberry.............. B, T 20.............. 3 \1\ 7 See ] (b)(11).. 15 [deg]C. Sub..................... B, T 20.............. 4 \1\ 14 See ] (b)(11).. 15 [deg]C. White................... B, T, S 20.............. 3 \1\ 7 See ] (b)(11).. 15 [deg]C. Corn: Field................... B, T, S, TC 20-30; 25....... 4 7 Pop..................... B, T, S, TC 20-30; 25....... 4 7 Cotton...................... B, T, S 20-30; 30....... 4 \1\ 12 Test by alternate method; see ] (b)(5). Cowpea...................... B, T, S 20-30........... 5 \1\ 8 Crambe...................... T,B 20;25........... 4 7 ............... KNO3 Crested dogtail............. P 20-30........... 10 21 Light.......... Prechill at 5[deg] or 10 [deg]C for 3 days. Crotalaria: Lance................... B, T, S 20-30........... 4 \1\ 10 Showy................... B, T, S 20-30........... 4 \1\ 10 Slenderleaf............. B, T, S 20-30........... 4 \1\ 10 Striped................. B, T, S 20-30........... 4 \1\ 10 Sunn.................... B, T, S 20-30........... 4 \1\ 10 Crownvetch.................. B,T,TB,S 20.............. 7 \1\ 14 Dallisgrass................. P 20-35........... 7 21 Light; KNO3.... Dichondra................... B, T 20-30........... 7 \1\ 28 Drop seed, sand............. P 5-35; 15-35..... 5 14 Light; KNO3.... Prechill at 5 [deg]C for 4 weeks; see Sec. 201.57a. Emmer....................... B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days or predry. [[Page 372]] Fescue: Chewings................ P 15-25........... 7 21 Light and KNO3 Prechill at 5 optional. or 10 [deg]C for 5 days. Hair.................... P 10-25........... 10 28 KNO3........... Hard.................... P 15-25........... 7 21 Light and KNO3 optional. Meadow.................. P 15-25; 20-30.... 5 14 Light and KNO3 optional. Red..................... P 15-25........... 7 21 Light and KNO3 optional. Sheep................... P 15-25........... 7 21 Light and KNO3 optional. Tall.................... P 15-25; 20-30.... 5 14 Light and KNO3 Prechill at 5 optional. or 10 [deg]C for 5 days and test for 21 days. Flatpea..................... T 15-25;20........ 14 \1\ 28 Flax........................ B, T, S 20-30........... 3 7 Foxtail, creeping........... P 15-30........... 7 21 Light;KNO3..... Foxtail, meadow............. P 20-30........... 7 14 Light.......... Galletagrass................ P, B 20; 25; 20-30... 4 10 ............... See Sec. 201.57a Grama: Blue.................... P, TB 20-30........... 7 14 Light.......... KNO3; see Sec. 201.57a. Side-oats............... P 15-30........... 7 14 Light; KNO3.... See Sec. 201.57a. Guar........................ B, T, S 30; 20-30....... 5 \1\ 14 Guineagrass................. P 15-35........... 10 28 Light; KNO3 optional. Hardinggrass................ P 10-30........... 7 28 Light.......... KNO3. Alternate method........ P 15-25........... 7 14 Light; presoak at 15 [deg]C for 24 hrs. Hemp........................ B, T 20-30........... 3 7 Indiangrass, yellow......... P, TS 20-30........... 7 14 Light; KNO3.... Prechill at 5 [deg]C for 2 weeks; see Sec. 201.57a. Indigo, hairy............... B, T 20-30........... 5 \1\ 14 Japanese lawngrass.......... P 35-20........... 10 28 Light; KNO3.... Johnsongrass................ P 20-35........... 7 35 Light.......... KNO3; see Sec. 201.57a. Kenaf....................... T, B 20-30........... 4 \1\ 8 Kochia, forage.............. P 20.............. 4 14 ............... See Sec. 201.57a. Kudzu....................... B, T 20-30........... 5 \1\ 14 Lentil...................... B, T 20.............. 5 \1\ 10 Lespedeza: Korean.................. B, T, S 20-35........... 5 \1\ 14 Sericea................. B, T, S 20-35........... 7 \1\ 21 Siberian................ B, T, S 20-35........... 7 \1\ 21 Striate................. B, T, S 20-35........... 7 \1\ 14 Lovegrass, sand............. P 20-30........... 5 14 Light; KNO3.... Prechill at 5 or 10 [deg]C for 6 weeks; see Sec. 201.57a. Lovegrass, weeping.......... P 20-35........... 5 14 Light.......... KNO3; see Sec. 201.57a. Lupine: Blue.................... B, T, S 20.............. 4 \1\ 10 White................... B, T 20.............. 3 \1\ 10 Yellow.................. B, T 20.............. 7 \1\ 10 Manilagrass................. P 35-20........... 10 28 Light; KNO3.... Medic, black................ B, T, S 20.............. 4 \1\ 7 See ] (b)(11).. Milkvetch................... B, T 20.............. 6 \1\ 14 Alternate method........ B, TB, T 15-25........... 10 \1\ 21 Millet: Browntop................ B, P, T 20-30; 30....... 4 14 Light and KNO3 Predry at 35 or optional. 40 [deg]C for 7 days and test at 30 [deg]C. Alternate method...... B, P, T 5-35............ 4 14 Light; KNO3.... Foxtail................. B, T 15-30; 20-30.... 4 10 Japanese................ B, T 20-30........... 4 10 Pearl................... B, T 20-30........... 3 7 Proso................... B, T 20-30........... 3 7 Molassesgrass............... P 20-30........... 7 21 Light.......... Mustard: Black................... P 20-30........... 3 7 Light.......... KNO3 and prechill at 10 [deg]C for 3 days. India................... P 20-30........... 3 7 Light.......... Prechill at 10 [deg]C for 7 days and test for 5 days; KNO3. [[Page 373]] White................... P 20-30........... 3 5 Light.......... Napiergrass................. B, T 20-30........... 3 10 Needlegrass, green: Method 1................ P 15-30........... 7 14 H2 SO4,GA3 and thiram; dark; see ] (b)(7). Method 2................ P 15-30........... 7 14 KNO3; dark; see (b)(7). Oat......................... B, T, S 20; 15.......... 5 10 ............... Prechill at 5 or 10 [deg]C for 5 days and test for 7 days or predry and test for 10 days. Oatgrass, tall.............. P 20-30........... 6 14 Light.......... Orchardgrass................ P, TS 15-25........... 7 21 Light; Prechill at 5 germination or 10 [deg]C more rapid on for 7 days. soil. Panicgrass, blue............ P, TS 20-30........... 7 28 Light.......... Panicgrass, green........... P 15-35........... 10 28 Light; KNO3 optional. Pea, field.................. B, T, S 20.............. 3 \1\8 Peanut...................... B, T, S 20-30; 25....... 5 \1\10 Remove shells.. Ethephon or ethylene; see ] (a) (10) and (11). Radish...................... B, T 20.............. 4 6 Rape: Annual.................. B, T 20-30........... 3 7 Bird.................... P 20-30........... 3 10 Light.......... KNO3. Turnip.................. B, T 20-30........... 3 7 Winter.................. B, T 20-30........... 3 7 Redtop...................... P, TB 20-30........... 5 10 Light.......... KNO3. Rescuegrass................. P, S 10-30........... 7 28 Light; see ] In soil at 15 (b)(8) for [deg]C. alternate method. Rhodesgrass................. P 20-30........... 6 14 Light; KNO3.... Rice........................ T, S 20-30; 30....... 5 14 See ] (b)(9) Presoak; see ] for alternate (b)(9). method. Ricegrass, Indian........... P 15.............. 7 42 ............... Prechill at 5 [deg]C for 4 weeks and test for 21 additional days; see Sec. 201.57a. Alternate method........ S 5-15; 15; 15-25. 7 28 ............... Dark; prechill in soil at 5 [deg]C for 4 weeks; see Sec. 201.57a. Roughpea.................... B, T 20.............. 7 \1\14 Rye......................... B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days or predry. Rye, mountain............... B, T 20; 15.......... 4 7 ............... See Sec. 201.57a. Ryegrass: Annual.................. P, TB 15-25........... 5 14 Light optional; Light; KNO3; see ] (b)(10) prechill at 5 for or 10 [deg]C fluorescence for 5 days and test. test at 15-25 [deg]C; if still dormant prechill for 3 days and continue test at 15-25 [deg]C an additional 4 days. Intermediate............ P, TB 15-25........... 7 14 Light.......... KNO3 and prechill at 5 or 10 [deg]C for 5 days and test at 15-25 [deg]C; if still dormant rechill for 3 days and continue test at 15-25 [deg]C an additional 4 days. Perennial............... P, TB 15-25........... 5 14 Light optional; Light; KNO3; see ] (b)(10) prechill at 5 for or 10 [deg]C fluorescence for 5 days and test. test at 15-25 [deg]C; if still dormant rechill for 3 days and continue test at 15-25 [deg]C an additional 4 days. [[Page 374]] Wimmera................. P, TB 15-25; 20-30.... 5 14 Light optional. Light; KNO3; prechill at 5 or 10 [deg]C for 5 days and test at 15-25 [deg]C; if still dormant rechill for 3 days and continue test at 15-25 [deg]C an additional 4 days. Safflower................... P, B, T, S 15; 20.......... 4 14 Light at 15 [deg]C. Sagewort, Louisiana......... P 15-25........... 7 14 Light.......... Sainfoin.................... B, T 20-30........... 4 \1\ 14 Saltbush, fourwing.......... B 20.............. 5 14 See ] (b)(13).. Prechill at 5 [deg]C for 7 days. Alternate method........ B 15.............. ....... 21 Sesame...................... B, T, TB 20-30........... 3 6 Sesbania.................... B, T 20-30........... 5 \1\ 7 Smilo....................... P 20-30........... 7 42 Light.......... Prechill at 5 [deg]C for 2 weeks; see Sec. 201.57a. Sorghum..................... B, T, S 20-30........... 4 10 ............... Prechill grain vars. at 5[deg] or 10 [deg]C for 5 days; test sweet vars. at 30-45 [deg]C, maintaining 45 [deg]C for 2-4 hours per day. Sorghum almum............... T, S 20-35; 15-35.... 5 21 ............... Prechill at 5 [deg]C for 5 days; on the 10th day of test, clip or pierce the distal end of ungerminated seeds. Sorghum-sudangrass.......... B, T, S 20-30; 25....... 4 10 ............... Prechill at 5 or 10 [deg]C for 5 days. Sorgrass \2\................ B, T, S 15-35; 20-35.... 5 21 ............... Prechill at 5 or 10 [deg]C for 7 days. Sourclover.................. B, T 20.............. 3 \1\ 14 See ] (b)(11).. Soybean..................... B, T, S, TC 20-30; 25....... 5 \1\ 8 Spelt....................... B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Sudangrass.................. B, T, S 20-30; 15-30.... 4 10 ............... Prechill at 10 [deg]C for 5 days. Sunflower................... T,B 20.............. 4 7 Sweetclover: White................... B, T, S 20.............. 4 \1\ 7 See ] (b)(11).. Yellow.................. B, T, S 20.............. 4 \1\ 7 See ] (b)(11).. Sweet vernalgrass........... P 20-30........... 6 14 Light.......... Sweetvetch, northern........ B, TB, T 15-25; 20....... 14 \1\ 28 Switchgrass................. P, TS 15-30........... 7 14 Light; KNO3.... Prechill at 5 [deg]C for 2 weeks; see Sec. 201.57a. Teff........................ TB 20--30.......... 4 7 KNO3........... Timothy..................... P, TB 15-25; 20-30.... 5 10 Light; see ] KNO3 and (a)(9). prechill at 5 or 10 [deg]C for 5 days. Timothy, turf............... P, TB 15-25; 20-30.... 5 10 Light.......... KNO3 and prechill at 5 or 10 [deg]C for 5 days. Tobacco..................... P, TB 20-30........... 7 14 Light.......... Trefoil: Big..................... B, T 20.............. 5 \1\ 12 Birdsfoot............... B, P, T 20.............. 5 \1\ 12 Triticale................... B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Vaseygrass.................. P 20-35........... 7 21 Light.......... KNO3. Veldtgrass.................. P 10-30........... 7 28 Light.......... See Sec. 201.57a. Velvetbean.................. B, T, S, C 20-30........... 3 \1\ 14 Velvetgrass................. P 20-30........... 6 14 Light.......... Vetch: Common.................. B, T 20.............. 5 \1\ 10 Hairy................... B, T 20.............. 5 \1\ 14 Hungarian............... B, T 20.............. 5 \1\ 10 Monantha................ B, T 20.............. 5 \1\ 10 [[Page 375]] Narrowleaf.............. B, T 20.............. 5 \1\ 14 Purple.................. B, T 20.............. 5 \1\ 10 Woollypod............... B, T 20.............. 5 \1\ 14 ............... Prechill at 10 [deg]C for 5 days, test at 15 [deg]C. Wheat: Common.................. B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Club.................... B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Durum................... B, T, S 20; 15.......... 4 10 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Polish.................. B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Poulard................. B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Wheat Agrotricum............ B, T, S 20; 15.......... 4 7 ............... Prechill at 5 or 10 [deg]C for 5 days, or predry. Wheatgrass: Beardless............... P, TB 15-25........... 7 14 Light and KNO3 KNO3 and optional. prechill at 5 or 10 [deg]C for 7 days. Fairway crested......... P, TB 15-25; 20-30.... 5 14 Light and KNO3 KNO3 and optional. prechill at 5 or 10 [deg]C for 7 days. Standard crested........ P, TB 15-25; 20-30.... 5 14 Light and KNO3 KNO3 and optional. prechill at 5 or 10 [deg]C for 7 days. Intermediate............ P 15-25........... 5 28 Light and KNO3 KNO3 and optional. prechill at 5 or 10 [deg]C for 7 days. Alternate method...... P 20-30........... 5 28 Light.......... Pubescent............... P 15-25........... 5 28 Light and KNO3 KNO3 and optional. prechill at 5 or 10 [deg]C for 7 days. Alternate method...... P 20-30........... 5 28 Light.......... Siberian................ P, TB 15-25........... 7 14 Light and KNO3 KNO3 and optional. prechill at 5 or 10 [deg]C for 7 days. Slender................. P, TB 15-25; 10-30.... 5 14 Light and KNO3 Prechill at 5 optional. or 10 [deg]C for 5 days; if still dormant on the 10th day, rechill 2 days, then place at 20-30 [deg]C for 4 days. Streambank.............. P, TB 15-25........... 5 14 Light and KNO3 Prechill at 5 optional. or 10 [deg]C for 5 days. Tall.................... P 15-25........... 5 21 Light and KNO3 Prechill at 5 optional. or 10 [deg]C for 5 days. Alternate method...... P 20-30........... 5 21 Light.......... Prechill at 5 or 10 [deg]C for 5 days. Western................. B, P, T 15-30........... 7 28 Dark........... KNO3 or soil; see Sec. 201.57a. Wildrye: Basin................... P 15-25........... 10 21 ............... See Sec. 201.57a. Canada.................. P 15-30........... 7 21 Light.......... Prechill at 5 [deg]C for 2 weeks. Russian................. P 20-30........... 5 14 Light.......... Prechill at 5 or 10 [deg]C for 5 days. VEGETABLE SEED Artichoke................... B, T 20-30........... 7 21 Asparagus................... B, T, S 20-30........... 7 21 Asparagusbean............... B, T, S 20-30........... 5 \1\ 8 Bean: Garden.................. B, T, S, TC 20-30; 25....... None \1\ 8 ............... See ] (b)(12). Lima.................... B, T, C, S 20-30........... 5 \1\ 9 Runner.................. B, T, S 20-30........... 5 \1\ 9 Beet........................ B, T, S 20-30........... 3 14 See ] (b)(3)... Broadbean................... S, C 20.............. 4 \1\ 14 See ] (b)(11).. Prechill at 10 [deg]C for 3 days. Broccoli.................... B, P, T 20-30........... 3 10 ............... Prechill at 5 or 10 [deg]C for 3 days; KNO3 and light. Brussels Sprouts............ B, P, T 20-30........... 3 10 ............... Prechill 5 days at 5 or 10 [deg]C for 3 days; KNO3 and Light. [[Page 376]] Burdock, great.............. B, T 20-30........... 7 14 Cabbage..................... B, P, T 20-30........... 3 10 ............... Prechill at 5 or 10 [deg]C for 3 days; KNO3 and light. Cabbage, Chinese............ B, T 20-30........... 3 7 Cabbage, tronchuda.......... B, P 20-30........... 3 10 ............... Prechill at 5 or 10 [deg]C for 3 days; KNO3 and light. Cardoon..................... B, T 20-30........... 7 21 Carrot...................... B, T 20-30........... 6 14 Cauliflower................. B, P, T 20-30........... 3 10 ............... Prechill at 5 or 10 [deg]C for 3 days; KNO3 and light Celeriac.................... P 5-25; 20........ 10 21 Light; see ] (a)(9). Celery...................... P 15-25; 20....... 10 21 Light; see ] (a)(9). Chard, Swiss................ B, T, S 20-30........... 3 14 See ] (b)(3)... Chicory..................... P, TS 20-30........... 5 14 Light; KNO3 or soil; see ] (a)(9). Chives...................... B, T 20.............. 6 14 Citron...................... B, T 20-30........... 7 14 Soak seeds 6 Test at 30 hrs. [deg]C. Collards.................... B, P, T 20-30........... 3 10 ............... Prechill at 5 or 10 [deg]C for 3 days; KNO3 and light . Corn, sweet................. B, T, S, TC 20-30; 25....... 4 7 Cornsalad................... B, T 15.............. 7 28 Test at 10 [deg]C.. Cowpea...................... B, T, S 20-30........... 5 \1\ 8 Cress: Garden.................. B, P, T 15.............. 4 10 ............... Light. Upland.................. P, TB 20-35........... 4 7 Light; KNO3.... Water................... P 20-30........... 4 14 Light.......... Cucumber.................... B, T, S 20-30........... 3 7 Keep substratum on dry side; see ] (a)(3). Dandelion................... P, TB 20-30........... 7 21 Light; see ] (a)(9). Dill........................ B, T 20-30........... 7 21 Eggplant.................... P, TB, RB, T 20-30........... 7 14 Light; KNO3.... Endive...................... P, TS 20-30........... 5 14 Light; KNO3 or See ] (b)(6). soil. Gherkin, West India......... B, T, S 20-30........... 3 7 Test at 30 [deg]C.. Kale........................ B, P, T 20-30........... 3 10 ............... Prechill at 5[deg] or 10 [deg]C for 3 days; KNO3 and light. Kale, Chinese............... B, P, T 20-30........... 3 10 ............... Prechill at 5 or 10 [deg]C for 3 days; KNO3 and light. Kale, Siberian.............. B, P, T 20-30; 20....... 3 7 Kohlrabi.................... B, P, T 20-30........... 3 10 ............... Prechill at 5 or 10 [deg]C for 3 days; KNO3 and light. Leek........................ B, T 20.............. 6 14 Lettuce..................... P 20.............. None 7 Light.......... Prechill at 10 [deg]C for 3 days or test at 15 [deg]C. Melon....................... B, T, S 20-30........... 4 10 Keep substratum on dry side; see ] (a)(3). Mustard, India.............. P 20-30........... 3 7 Light.......... Prechill at 10 [deg]C for 7 days and test for 5 additional days; KNO3. Mustard, spinach............ B, T 20-30........... 3 7 Okra........................ B, T 20-30........... 4 \1\ 14 Onion....................... B, T 20.............. 6 10 Alternate method........ S 20.............. 6 12 Onion, Welsh................ B, T 20.............. 6 10 Pak-choi.................... B, T 20-30........... 3 7 Parsley..................... B, T, TS 20-30........... 11 28 Parsnip..................... B, T, TS 20-30........... 6 28 Pea......................... B, T,S 20.............. 5 \1\ 8 Pepper...................... TB, RB, T 20-30........... 6 14 ............... Light and KNO3. [[Page 377]] Pumpkin..................... B, T, S 20-30........... 4 7 Keep substratum on dry side; see ] (a)(3). Radish...................... B, T 20.............. 4 6 Rhubarb..................... TB, TS 20-30........... 7 21 Light.......... Rutabaga.................... B, T 20-30........... 3 14 Sage........................ B, T, S 20-30........... 5 14 Salsify..................... B, T 15.............. 5 10 Prechill at 10 [deg]C for 3 days.. Savory, summer.............. B, T 20-30........... 5 21 Sorrel...................... P, TB, TS 20-30........... 3 14 Light.......... Test at 15 [deg]C. Soybean..................... B, T, S, TC 20-30; 25....... 5 \1\ 8 Spinach..................... TB, T 15;10........... 7 21 Keep substratum on dry side; see ] (a)(3). Spinach, New Zealand........ T 15; 20.......... 5 21 Soak fruits On 21st day overnight (16 scrape fruits hrs), air dry and test for 7 7 hrs; plant additional in very wet days. towels; do not rewater unless later counts exhibit drying out. Alternate method............ B, T 15.............. 5 21 Remove pulp from basal end of fruit. Squash...................... B, T, S 20-30........... 4 7 Keep substratum on dry side; see ] (a)(3). Tomato...................... B, P, RB, T 20-30........... 5 14 ............... Light; KNO3. Tomato, husk................ P, TB 20-30........... 7 28 Light; KNO3.... Turnip...................... B, T 20-30........... 3 7 Watermelon.................. B, T, S 20-30; 25....... 4 14 Keep substratum Test at 30 on dry side; [deg]C. see ] (a)(3). ---------------------------------------------------------------------------------------------------------------- \1\ Hard seeds may be present. (See Sec. 201.57) \2\ Rhizomatous derivatives of a johnsongrass sorghum cross or a johnsongrass sudangrass cross. [20 FR 7928, Oct. 21, 1955] Editorial Note: For Federal Register citations affecting Sec. 201.58, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. examinations in the administration of the act Sec. 201.58a Indistinguishable seeds. When the identification of the kind, variety, or type of seed or determination that seed is hybrid is not possible by seed characteristics, identification may be based upon the seedling, growing plant or mature plant characteristics according to such authentic information as is available. (a) Ryegrass. In determining the pure seed percentage of perennial ryegrass and annual ryegrass, 400 seeds shall be grown on white filter paper and the number of fluorescent seedlings determined under ultraviolet light at the end of the germination period (see Sec. 201.58(b)(10)). (1) Fluorescence results are to be determined as test fluorescence level (TFL) to two decimal places as follows: [GRAPHIC] [TIFF OMITTED] TR14DE94.001 (2) The percentage of perennial ryegrass is calculated as follows: [[Page 378]] [GRAPHIC] [TIFF OMITTED] TR14DE94.002 where VFL = Variety fluorescence level. (3) Using results from the above formula, the percentage of annual ryegrass is calculated as follows: % Annual Ryegrass = % Pure Ryegrass-% Perennial Ryegrass (4) If the test fluorescence level (TFL) of a perennial ryegrass is equal to or less than the variety fluorescence level (VFL) described for the variety, all pure ryegrass is considered to be perennial ryegrass and the formula is not applied. (5) If the test fluorescence level (TFL) of an annual ryegrass is equal to or greater than the variety fluorescence level (VFL) described for the variety, all pure ryegrass is considered to be annual ryegrass and the formula is not applied. (6) A list of variety fluorescence level (VFL) descriptions for perennial ryegrass varieties which are more than 0 percent fluorescent and annual ryegrass varieties which are less than 100 percent fluorescent is maintained and published by the National Grass Variety Review Board of the Association of Official Seed Certifying Agencies (AOSCA). If the variety being tested is not stated or the fluorescence level has not been described, the fluorescence level shall be considered to be 0 percent for perennial ryegrass and 100 percent for annual ryegrass. Both VFL (annual) and VFL (perennial) values must always be entered in the formula. If a perennial ryegrass variety is being tested, the VFL (annual) value is 100 percent. If an annual ryegrass variety is being tested, the VFL (perennial) value is 0 percent. For blends the fluorescence level shall be interpolated according to the portion of each variety claimed to be present. (b) Sweetclover. To determine the presence of yellow sweetclover in samples of white sweetclover, at least 400 seeds shall be subjected to the chemical test as follows: (1) Preparation of test solution: Add 3 grams of cupric sulfate (CuSO4) to 30 ml of household ammonia (NH4 OH, approximately 4.8 percent) in a stoppered bottle to form tetraamminecopper sulfate ([Cu(NH3)4]SO4) solution used for this test. After mixing, a light blue precipitate of cupric hydroxide (Cu(OH)2) should form. If no precipitate forms, add additional CuSO4 until a precipitate appears. Since the strength of household ammonia can vary, formation of a precipitate indicates that a complete reaction has taken place between CuSO4 and NH4 OH; otherwise fumes from excess ammonium hydroxide may cause eye irritation. (2) Preparation of seeds: To insure imbibition, scratch, prick, or otherwise scarify the seed coats of the sweetclover seeds being tested. Soak seeds in water for 2 to 5 hours in a glass container. (3) Chemical reaction: When seeds have imbibed, remove excess water and add enough test solution to cover the seeds. Seeds coats of yellow sweetclover will begin to stain dark brown to black; seed coats of white sweetclover will be olive or yellow-green. Make the separation within 20 minutes, since the seed coats of white sweetclover will eventually turn black also. (4) Calculation of results: Count the number of seeds which stain dark brown or black and divide by the total number of seeds tested; multiply by the pure seed percentage for Melilotus spp.; the result is the percentage of yellow sweetclover in the sample. The percentage of white sweetclover is found by subtracting the percentage of yellow sweetclover from the percentage of Melilotus spp. pure seed. (c) Wheat. In determining varietal purity, the phenol test may be used. From the pure seed sample count four replicates of 100 seeds each. Soak the seed in distilled water for 16 hours; then flush with tap water and remove the excess water from the surface of the seeds. Place two layers of filter paper in a container and moisten with a 1 percent phenol (C6 H5 OH) solution. Place the seed, palea side down, on the two layers of filter paper and cover the [[Page 379]] container. A preliminary observation may be made at 2 hours. At 4 hours, record the number of seeds in each of the following color categories: (1) Ivory. (2) Fawn. (3) Light Brown. (4) Brown. (5) Brown Black. (d) Soybean. In determining the varietal purity, the peroxidase test may be used. Remove and place the dry seed coat from seeds into individual test tubes or suitable containers. Add 10 drops (0.5-1.0 ml) of 0.5 percent guaiacol (C7 H8 O2) to each test tube. After waiting 10 minutes add one drop (about 0.1 ml) of 0.1 percent hydrogen peroxide (H2 O2). One minute after adding hydrogen peroxide, record the seed coat as peroxidase positive (high peroxidase activity) indicated by a reddish-brown solution or peroxidase negative (low peroxidase activity) indicated by a colorless solution in the test tube. Various sample sizes may be used for this test. Test results shall include the sample size tested. (e) Oat. In determining the varietal purity, the fluorescence test may be used. Place at least 400 seeds on a black background under a F15T8-BLB or comparable ultraviolet tube(s) in an area where light from other sources is excluded. Seeds are considered fluorescent if the lemma or palea fluoresce or appear light in color. ``Partially fluorescent'' seeds shall be considered fluorescent. Seeds are considered nonfluorescent if the lemma and palea do not fluoresce and appear dark in color under the ultraviolet light. [59 FR 64514, Dec. 14, 1994] Editorial Note: For Federal Register citations affecting Sec. 201.58a, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. Sec. 201.58b Origin. The presence of incidental weed seeds, foreign matter, or any other existing circumstances shall be considered in determining the origin of seed. [5 FR 35, Jan. 4, 1940. Redesignated at 20 FR 7940, Oct. 21, 1955] Sec. 201.58c Detection of captan, mercury, or thiram on seed. The bioassay method may be used according to the procedure given in Association of Official Seed Analysts, Handbook No. 26, ``Microbiological Assay of Fungicide-treated Seeds'', May 1964. [38 FR 12733, May 15, 1973] Sec. 201.58d Fungal endophyte test. A fungal endophyte test may be used to determine the amount of fungal endophyte (Acremonium spp.) in certain grasses. (a) Method of preparation of aniline blue stain for use in testing grass seed and plant material for the presence of fungal endophyte: (1) Prepare a 1 percent aqueous aniline blue solution by dissolving 1 gram aniline blue in 100 ml distilled water. (2) Prepare the endophyte staining solution of one part of 1 percent aniline blue solution with 2 parts of 85 percent lactic acid (C3 H6 O3). (3) Use stain as-is or dilute with water if staining is too dark. (b) Procedure for determining levels of fungal endophyte in grass seed: (1) Take a sub-sample of seed (1 gram is sufficient) from the pure seed portion of the kind under consideration. (2) Digest seed at room temperature for 12-16 hours in a 5 percent sodium hydroxide (NaOH) solution or other temperature/time combination resulting in adequate seed softening. (3) Rinse thoroughly in running tap water. (4) De-glume seeds and place on a microscope slide in a drop of endophyte staining solution. Slightly crush the seeds. Use caution to prevent carryover hyphae of fungal endophyte from one seed to another. (5) Place coverglass on seed and apply gentle pressure. (6) Examine with compound microscope at 100-400x magnification, scoring a seed as positive if any identifiable hyphae are present. (7) Various sample sizes may be used for this test. Precision changes with sample size; therefore, the test results must include the sample size tested. (c) Procedure for determining levels of fungal endophyte in seedlings from [[Page 380]] seed samples suspected to contain fungal endophyte: (1) Select seeds at random and germinate. (2) Examine seedlings from the sample germinated after growing for a minimum of 48 days. (3) Remove the outermost sheath from the seedling. Tissue should have no obvious discoloration from saprophytes and should have as little chlorophyll as possible. (4) Isolate a longitudinal section of leaf sheath approximately 3-5 mm in width. (5) Place the section on a microscope slide with the epidermis side down. (6) Stain immediately with the endophyte staining solution as prepared in paragraph (a) (2) and (3) of this section. Allow dye to remain at least 15 seconds but no more than one minute. (7) Blot off the excess dye with tissue paper. Sections should remain on the slide, but may adhere to the tissue paper; if so, remove and place in proper position on the slide. (8) Place a coverglass on the sections and flood with water. (9) Proceed with evaluation as described in paragraph (b) (6) and (7) of this section. [59 FR 64515, Dec. 14, 1994] tolerances Sec. 201.59 Application. Tolerances shall be recognized between the percentages or rates of occurrence found by analysis, test, or examination in the administration of the Act and percentages or rates of occurrence required or stated as required by the Act. Tolerances for purity percentages and germination percentages provided for in Sec. Sec. 201.60 and 201.63 shall be determined from the mean of (a) the results being compared, or (b) the result found by test and the figures shown on a label, or (c) the result found by test and a standard. All other tolerances, including tolerances for pure-live seed and fluorescence, and tolerances for purity based on 10 to 1,000 seeds, seedlings, or plants shall be determined from the result or results found in the administration of the Act. [5 FR 34, Jan. 4, 1940, as amended at 20 FR 7940, Oct. 21, 1955; 24 FR 3954, May 15, 1959; 35 FR 6108, Apr. 15, 1970; 85 FR 40583, July 7, 2020] Sec. 201.60 Purity percentages. (a)(1) The tolerance for a given percentage of the purity components is the same whether for pure seed, other crop seed, weed seed, or inert matter. Wider tolerances are provided when 33 percent or more of the sample is composed of seed plus empty florets and/or empty spikelets of the following chaffy kinds: bentgrasses, bermudagrasses, bluegrasses, bluestems, bottlebrush- squirreltail, bromes, buffalograss, buffelgrass, carpetgrass, soft chess, dallisgrass, fescues, foxtails, galletagrass, guineagrass, gramas, molassesgrass, tall oatgrass, orchardgrass, redtop, rescuegrass, rhodesgrass, Indian ricegrass, ryegrasses, sweet vernalgrass, teff, vaseygrass, veldtgrass, wheatgrasses, wildryes, and yellow indiangrass. The wider tolerances do not apply to seed devoid of hulls. (2) To determine the tolerance for any purity percentage found in the administration of the Act, the percentage found is averaged (i) with that claimed or shown on a label or (ii) with a specified standard. The tolerance is found from this average. If more than one test is made, all except any test obviously in error shall be averaged and the result treated as a single percentage. (b) The tolerances found in columns C and D for the respective purity percentages shown in columns A and B of table No. 3 shall be used for (1) unmixed seed and (2) mixtures in which the particle-weight ratio is 1:1 to 1.49:1, inclusive. Tolerances for intermediate percentages not shown in table 3 shall be obtained by interpolation. Table 3--Tolerances for Any Component of a Purity Analysis for (1) Unmixed Seed or (2) Mixed Seed in Which the Particle Weight Ratio Is 1: 1 to 1.49: 1, Inclusive ------------------------------------------------------------------------ Nonchaffy Chaffy Average analysis (A) (B) seeds (C) seeds (D) ------------------------------------------------------------------------ 99.95-100.00........................ 0.00-0.04 0.13 0.16 99.90-99.94......................... .05-.09 .20 .23 [[Page 381]] 99.85-99.89......................... .10-.14 .24 .29 99.80-99.84......................... .15-.19 .28 .34 99.75-99.79......................... .20-.24 .32 .37 99.70-99.74......................... .25-.29 .35 .41 99.65-99.69......................... .30-.34 .37 .45 99.60-99.64......................... .35-.39 .40 .48 99.55-99.59......................... .40-.44 .42 .50 99.50-99.54......................... .45-.49 .44 .53 99.40-99.49......................... .50-.59 .47 .57 99.30-99.39......................... .60-.69 .51 .60 99.20-99.29......................... .70-.79 .54 .64 99.10-99.19......................... .80-.89 .57 .66 99.00-99.09......................... .90-.99 .59 .70 98.75-98.99......................... 1.00-1.24 .64 .75 98.50-98.74......................... 1.25-1.49 .71 .82 98.25-98.49......................... 1.50-1.74 .76 .89 98.00-98.24......................... 1.75-1.99 .82 .95 97.75-97.99......................... 2.00-2.24 .87 1.01 97.50-97.74......................... 2.25-2.49 .92 1.07 97.25-97.49......................... 2.50-2.74 .96 1.12 97.00-97.24......................... 2.75-2.99 1.00 1.17 96.50-96.99......................... 3.00-3.49 1.06 1.24 96.00-96.49......................... 3.50-3.99 1.14 1.34 95.50-95.99......................... 4.00-4.49 1.21 1.41 95.00-95.49......................... 4.50-4.99 1.27 1.49 94.00-94.99......................... 5.00-5.99 1.36 1.60 93.00-93.99......................... 6.00-6.99 1.47 1.73 92.00-92.99......................... 7.00-7.99 1.58 1.85 91.00-91.99......................... 8.00-8.99 1.67 1.96 90.00-90.99......................... 9.00-9.99 1.75 2.06 88.00-89.99......................... 10.00-11.99 1.87 2.19 86.00-87.99......................... 12.00-13.99 2.01 2.36 84.00-85.99......................... 14.00-15.99 2.14 2.51 82.00-83.99......................... 16.00-17.99 2.24 2.64 80.00-81.99......................... 18.00-19.99 2.35 2.76 78.00-79.99......................... 20.00-21.99 2.44 2.86 76.00-77.99......................... 22.00-23.99 2.52 2.96 74.00-75.99......................... 24.00-25.99 2.59 3.04 72.00-73.99......................... 26.00-27.99 2.65 3.12 70.00-71.99......................... 28.00-29.99 2.71 3.19 65.00-69.99......................... 30.00-34.99 2.80 3.29 60.00-64.99......................... 35.00-39.99 2.89 3.40 50.00-59.99......................... 40.00-49.99 2.96 3.48 ------------------------------------------------------------------------ (c) Tolerances calculated by the following formula shall be used for either chaffy or nonchaffy mixtures when the average particle-weight ratio is 1.5:1 to 20:1 and beyond: The symbols used in the formula are as follows: T = tolerance being calculated. A = percent which the weight of the component with the heavier average particle-weight is of the weight of both components. B = percent which the weight of the component with the lighter average particle-weight is of the weight of both components. H = average particle-weight for the component with the heavier average particle-weight. L = average particle-weight for the component with the lighter average particle-weight. R = ratio of the average particle-weight for the component with the heavier average particle-weight to the average particle-weight for the component with the lighter average particle-weight. R = H / L. [GRAPHIC] [TIFF OMITTED] TR14DE94.003 T1 = regular tolerance for the kind of seed (chaffy or nonchaffy) and for (100B)/(B + A/R). In determining the values for A and B in the formula, the sample shall be regarded as composed of two parts: (1) The kind, type, or variety under consideration, and (2) All other components. Values for H and L shall be obtained from the last column of Table 1, Sec. 201.46, or by laboratory tests for inert matter, weed seeds, or other crop seeds where such values are not obtainable from Table 1. In computing tolerances for nonchaffy kinds the values for T1 are taken from column C of Table 3, and for chaffy kinds the values for T1 are taken from column D of Table 3. [26 FR 10036, Oct. 26, 1961, as amended at 59 FR 64515, Dec. 14, 1994; 65 FR 1709, Jan. 11, 2000; 85 FR 40583, July 7, 2020] [[Page 382]] Sec. 201.61 Fluorescence percentages in ryegrasses. Tolerances for 400-seed fluorescence tests shall be those set forth in the following table plus one-half the regular pure-seed tolerance determined in accordance with Sec. 201.60. When only 200 seeds of a component in a mixture are tested, an additional 2 percent shall be added to the fluorescence tolerance. Fluorescence Tolerance, Based on Test Fluorescence (TFL) ------------------------------------------------------------------------ ------------------------------------------------------------------------ 100.............................................................. 99............................................................... 1.0 98............................................................... 1.6 97............................................................... 2.0 96............................................................... 2.3 95............................................................... 2.6 94............................................................... 2.9 93............................................................... 3.2 92............................................................... 3.4 91............................................................... 3.6 90............................................................... 3.8 89............................................................... 4.0 88............................................................... 4.1 87............................................................... 4.3 86............................................................... 4.5 85............................................................... 4.7 84............................................................... 4.8 83............................................................... 4.9 82............................................................... 5.0 81............................................................... 5.2 80............................................................... 5.3 79............................................................... 5.4 78............................................................... 5.5 77............................................................... 5.6 76............................................................... 5.7 75............................................................... 5.8 74............................................................... 5.8 73............................................................... 5.9 72............................................................... 6.0 71............................................................... 6.1 70............................................................... 6.2 69............................................................... 6.2 68............................................................... 6.3 67............................................................... 6.3 66............................................................... 6.4 65............................................................... 6.5 64............................................................... 6.5 63............................................................... 6.5 62............................................................... 6.6 61............................................................... 6.6 60............................................................... 6.7 59............................................................... 6.7 58............................................................... 6.8 57............................................................... 6.8 56............................................................... 6.8 55............................................................... 6.8 54............................................................... 6.9 53............................................................... 6.9 52............................................................... 6.9 51............................................................... 6.9 50............................................................... 6.9 49............................................................... 6.9 48............................................................... 6.9 47............................................................... 6.9 46............................................................... 6.9 45............................................................... 6.9 44............................................................... 6.9 43............................................................... 6.9 42............................................................... 6.9 41............................................................... 6.9 40............................................................... 6.9 39............................................................... 6.8 38............................................................... 6.8 37............................................................... 6.8 36............................................................... 6.8 35............................................................... 6.7 34............................................................... 6.7 33............................................................... 6.7 32............................................................... 6.6 31............................................................... 6.6 30............................................................... 6.5 29............................................................... 6.5 28............................................................... 6.4 27............................................................... 6.4 26............................................................... 6.3 25............................................................... 6.2 24............................................................... 6.2 23............................................................... 6.1 22............................................................... 6.0 21............................................................... 5.9 20............................................................... 5.8 19............................................................... 5.7 18............................................................... 5.6 17............................................................... 5.5 16............................................................... 5.4 15............................................................... 5.3 14............................................................... 5.2 13............................................................... 5.0 12............................................................... 4.9 11............................................................... 4.7 10............................................................... 4.6 9................................................................ 4.4 8................................................................ 4.2 7................................................................ 4.0 6................................................................ 3.7 5................................................................ 3.5 4................................................................ 3.2 3................................................................ 2.8 2................................................................ 2.4 1................................................................ 1.8 0................................................................ 1.0 ------------------------------------------------------------------------ [32 FR 12781, Sept. 6, 1967, as amended at 59 FR 64516, Dec. 14, 1994; 85 FR 40583, July 7, 2020] Sec. 201.62 Tests for determination of percentages of kind, variety, type, hybrid, or offtype. Tolerances for tests for determination of percentages of kind, variety, type, hybrid, or offtype shall be those set forth in the following table, added to one-half the required pure seed tol- erances determined in accordance with Sec. 201.60, except that one-half the pure seed tolerance will not be applied in determining tolerances for hybrids labeled on the basis of the percentage of pure seed which is hybrid. [[Page 383]] Table 4--Tolerances for Purity Tests, When Results Are Based on 10 to 1,000 Seeds, Seedlings, or Plants Used in a Test ---------------------------------------------------------------------------------------------------------------- Number of seeds, seedlings, or plants in tests Seed, seedling, or plant count ---------------------------------------------------------------------------- percent 10 20 30 50 75 100 150 200 400 800 1,000 ---------------------------------------------------------------------------------------------------------------- 100 or 0........................... 0 0 0 0 0 0 0 0 0 0 0 98 or 2............................ 10.3 7.3 6.0 4.6 3.8 3.3 2.7 2.3 1.6 1.2 1.0 96 or 4............................ 14.4 10.2 8.3 6.4 5.3 4.6 3.7 3.2 2.3 1.7 1.5 94 or 6............................ 17.5 12.4 10.1 7.8 6.4 5.5 4.5 3.9 2.9 2.1 1.9 92 or 8............................ 20.0 14.1 11.5 8.9 7.3 6.3 5.2 4.5 3.4 2.4 2.2 90 or 10........................... 22.1 15.7 12.8 9.9 8.1 7.0 5.7 4.9 3.8 2.8 2.4 88 or 12........................... 24.0 17.0 13.8 10.7 8.7 7.6 6.2 5.4 4.1 3.0 2.7 86 or 14........................... 25.7 18.1 14.7 11.4 9.3 8.1 6.6 5.7 4.5 3.2 2.9 84 or 16........................... 26.9 19.0 15.5 12.1 9.8 8.5 7.0 6.0 4.8 3.4 3.0 82 or 18........................... 28.2 20.0 16.4 12.6 10.3 8.9 7.3 6.3 5.0 3.6 3.2 80 or 20........................... 29.5 20.9 16.9 13.2 10.7 9.3 7.6 6.6 5.3 3.8 3.3 78 or 22........................... 30.5 21.6 17.6 13.6 11.0 9.6 7.9 6.8 5.5 3.9 3.5 76 or 24........................... 31.4 22.3 18.2 14.1 11.5 9.9 8.1 7.0 5.7 4.1 3.6 74 or 26........................... 32.3 22.8 18.6 14.4 11.8 10.2 8.3 7.2 5.8 4.2 3.7 72 or 28........................... 33.0 23.4 19.0 14.8 12.1 10.5 8.5 7.4 6.0 4.3 3.8 70 or 30........................... 33.7 23.8 19.5 15.1 12.3 10.7 8.7 7.5 6.2 4.4 3.9 68 or 32........................... 34.3 24.3 19.9 15.4 12.5 10.8 8.9 7.7 6.3 4.5 4.0 66 or 34........................... 35.0 24.7 20.2 15.7 12.7 11.0 9.0 7.8 6.4 4.6 4.0 64 or 36........................... 35.4 25.0 20.5 15.8 12.9 11.2 9.1 7.9 6.5 4.6 4.1 62 or 38........................... 35.5 25.4 20.6 15.9 13.0 11.3 9.2 8.0 6.6 4.7 4.2 60 or 40........................... 36.1 25.7 20.9 16.1 13.2 11.4 9.3 8.1 6.7 4.8 4.2 58 or 42........................... 36.2 25.7 21.0 16.2 13.3 11.5 9.4 8.1 6.8 4.8 4.2 56 or 44........................... 36.5 25.8 21.0 16.4 13.3 11.5 9.4 8.2 6.8 4.8 4.3 54 or 46........................... 36.8 25.8 21.2 16.4 13.4 11.6 9.5 8.2 6.9 4.9 4.3 52 or 48........................... 36.8 25.9 21.2 16.5 13.4 11.6 9.5 8.2 6.9 4.9 4.3 50................................. 36.8 25.9 21.3 16.5 13.4 11.6 9.5 8.2 6.9 4.9 4.3 ---------------------------------------------------------------------------------------------------------------- [32 FR 12781, Sept. 6, 1967, as amended at 33 FR 10841, July 31, 1968; 35 FR 6108, Apr. 15, 1970; 59 FR 64516, Dec. 14, 1994] Sec. 201.63 Germination. The following tolerances are applicable to the percentage of germination and also to the sum of the germination plus the hard seed when 400 or more seeds are tested. ------------------------------------------------------------------------ Mean (See Sec. 201.59) Tolerance ------------------------------------------------------------------------ 96 or over.................................................. 5 90 or over but less than 96................................. 6 80 or over but less than 90................................. 7 70 or over but less than 80................................. 8 60 or over but less than 70................................. 9 Less than 60................................................ 10 ------------------------------------------------------------------------ When only 200 seeds of a component in a mixture are tested 2 percent shall be added to the above germination tolerances. [15 FR 2399, Apr. 28, 1950, as amended at 20 FR 7940, Oct. 21, 1955] Sec. 201.64 Pure live seed. The tolerance for pure live seed shall be determined by applying the respective tolerances to the germination plus the hard seed and dormant seed, and the pure seed. [GRAPHIC] [TIFF OMITTED] TR07JY20.002 [85 FR 40583, July 7, 2020] Sec. 201.65 Noxious-weed seeds in interstate commerce. Tolerances for rates of occurrence of noxious-weed seeds shall be recognized and shall be applied to the number of noxious-weed seeds found by analysis in the quantity of seed specified for noxious-weed seed determinations in Sec. 201.46, except as provided in Sec. 201.16(b). Rates per pound or ounce must be converted to the equivalent number of [[Page 384]] seeds found in Sec. 201.46, Table 1, Minimum weight for noxious-weed seed examination (grams). Some tolerances are listed in the following table. The number found as represented by the label or test (Column X) will be considered within tolerance if not more than the corresponding numbers in Column Y are found by analysis in the administration of the Act. For numbers of seed greater than those in the table, a tolerance based on a degree of certainty of 5 percent (P = 0.05) can be calculated by the formula, Y = X + 1.65[radic]X + 0.03, where X is the number of seeds represented by the label or test and Y is the maximum number within tolerance. ---------------------------------------------------------------------------------------------------------------- Maximum number Number Maximum number Number Maximum number Number represented by label within represented by within represented by within or test tolerances label or test tolerances label or test tolerances (X) (Y) (X)............ (Y) (X)............ (Y) ---------------------------------------------------------------------------------------------------------------- 0........................... 2 34............. 43 68............. 81 1........................... 2 35............. 44 69............. 82 2........................... 4 36............. 45 70............. 83 3........................... 5 37............. 46 71............. 84 4........................... 7 38............. 47 72............. 85 5........................... 8 39............. 49 73............. 86 6........................... 9 40............. 50 74............. 87 7........................... 11 41............. 51 75............. 89 8........................... 12 42............. 52 76............. 90 9........................... 13 43............. 53 77............. 91 10.......................... 14 44............. 54 78............. 92 11.......................... 16 45............. 55 79............. 93 12.......................... 17 46............. 56 80............. 94 13.......................... 18 47............. 58 81............. 95 14.......................... 19 48............. 59 82............. 96 15.......................... 21 49............. 60 83............. 97 16.......................... 22 50............. 61 84............. 98 17.......................... 23 51............. 62 85............. 99 18.......................... 24 52............. 63 86............. 101 19.......................... 25 53............. 64 87............. 102 20.......................... 27 54............. 65 88............. 103 21.......................... 28 55............. 67 89............. 104 22.......................... 29 56............. 68 90............. 105 23.......................... 30 57............. 69 91............. 106 24.......................... 31 58............. 70 92............. 107 25.......................... 32 59............. 71 93............. 108 26.......................... 34 60............. 72 94............. 109 27.......................... 35 61............. 73 95............. 110 28.......................... 36 62............. 74 96............. 111 29.......................... 37 63............. 75 97............. 112 30.......................... 38 64............. 76 98............. 114 31.......................... 39 65............. 78 99............. 115 32.......................... 41 66............. 79 100............ 116 33.......................... 42 67............. 80 ---------------------------------------------------------------------------------------------------------------- [76 FR 31794, June 2, 2011] Sec. 201.66 [Reserved] Certified Seed Sec. 201.67 Seed certifying agency standards and procedures. In order to qualify as a seed certifying agency for purposes of section 101(a)(25) of the Federal Seed Act (7 U.S.C. 1551(a)(25)) an agency must enforce standards and procedures, as conditions for its certification of seed, that meet or exceed the standards and procedures specified in Sec. 201.68 through 201.78. [38 FR 25662, Sept. 14, 1973] Sec. 201.68 Eligibility requirements for certification of varieties. When a seed originator, developer, owner of the variety, or agent thereof requests eligibility for certification, the certification agency shall require the person to provide the following information upon request: (a) The name of the variety. [[Page 385]] (b) A statement concerning the variety's origin and the breeding or reproductive stabilization procedures used in its development. (c) A detailed description of the morphological, physiological, and other characteristics of the plants and seed that distinguish it from other varieties. (d) Evidence supporting the identity of the variety, such as comparative yield data, insect and disease resistance, or other factors supporting the identity of the variety. (e) A statement delineating the geographic area or areas of adaptation of the variety. (f) A statement on the plans and procedures for the maintenance of seed classes, including the number of generations through which the variety may be multiplied. (g) A description of the manner in which the variety is constituted when a particular cycle of reproduction or multiplication is specified. (h) Any additional restrictions on the variety, specified by the breeder, with respect to geographic area of seed production, age of stand or other factors affecting genetic purity. (i) A sample of seed representative of the variety as marketed. [38 FR 25662, Sept. 14, 1973, as amended at 85 FR 40583, July 7, 2020] Sec. 201.69 Classes of certified seed. (a) Classes of certified seed are as follows: (1) Breeder. (2) Foundation. (3) Registered. (4) Certified. [38 FR 25662, Sept. 14, 1973] Sec. 201.70 Limitations of generations for certified seed. The number of generations through which a variety may be multiplied shall be limited to that specified by the originating breeder or owner and shall not exceed two generations beyond the Foundation seed class with the following exceptions which may be made with the permission of the originating or sponsoring plant breeder, institution, or his designee: (a) Recertification of the Certified class may be permitted when no Foundation or Registered seed is being maintained; or (b) The production of an additional generation of the Certified class may be permitted on a 1-year basis only, when an emergency is declared by any official seed certifying agency stating that the Foundation and Registered seed supplies are not adequate to plant the needed Certified acreage of the variety. The additional generation of Certified seed to meet the emergency need is ineligible for recertification. [38 FR 25662, Sept. 14, 1973; 38 FR 26800, Sept. 26, 1973, as amended at 46 FR 53639, Oct. 29, 1981; 86 FR 40853, July 7, 2020] Sec. 201.71 Establishing the source of all classes of certified seed. The certifying agency shall have evidence of the class and source of seed used to plant each crop being considered for certification. [38 FR 25662, Sept. 14, 1973] Sec. 201.72 Production of all classes of certified seed. (a) Each certifying agency shall determine that genetic purity and identity are maintained at all stages of certification including seeding, harvesting, processing, and labeling of the seed. (b) The unit of certification shall be a clearly defined field or fields. (c) One or more field inspections shall be made (1) previous to the time a seed crop of any class of certified seed is to be harvested, and (2) when genetic purity and identity can best be determined. The field shall be in suitable condition to permit an adequate inspection to determine genetic purity and identity. (d) A certification sample shall be drawn in a manner approved by the certifying agency from each cleaned lot of seed eligible for certification. Evidence that any lot of seed has not been protected from contamination which might affect genetic purity, or is not properly identified, shall be cause for possible rejection of certification. [38 FR 25662, Sept. 14, 1973] [[Page 386]] Sec. 201.73 Processors and processing of all classes of certified seed. The following requirements must be met by processors of all classes of certified seed: (a) Facilities shall be available to perform processing without introducing admixtures. (b) Identity of the seed must be maintained at all times. (c) Records of all operations relating to certification shall be complete and adequate to account for all incoming seed and final disposition of seed. (d) Processors shall permit inspection by the certifying agency of all records pertaining to all classes of certified seed. (e) Processors shall designate an individual who shall be responsible to the certifying agency for performing such duties as may be required by the certifying agency. (f) Seed lots of the same variety and class may be blended and the class retained. If lots of different classes are blended, the lowest class shall be applied to the resultant blend. Such blending can only be done when authorized by the certifying agency. [38 FR 25662, Sept. 14, 1973] Sec. 201.74 Labeling of all classes of certified seed. (a) All classes of certified seed when offered for sale shall have an official certification label affixed to each container clearly identifying the certifying agency, the lot number or other identification, the variety name, and the kind and class of seed. (b) In the case of seed sold in bulk, the invoice or accompanying document shall identify the certifying agency, the crop kind, variety, class of seed, and the lot number or other identification. (c) The official certification label may be printed directly on the container when an accounting of the containers is required by the certifying agency. The seed lot number or other identification number, the kind, and variety name shall appear on the official label and/or directly on the container in a position to be viewed in conjunction with the official certification label. (d) Labels other than those printed on the containers shall be attached to containers in a manner that prevents removal and reattachment without tampering being obvious. [38 FR 25662, Sept. 14, 1973, as amended at 46 FR 53639, Oct. 29, 1981; 65 FR 1709, Jan. 11, 2000; 76 FR 31795, June 2, 2011; 85 FR 40583, July 7, 2020] Sec. 201.75 Interagency certification. Interagency certification may be accomplished by participation of more than one official certifying agency in performing the services required to certify a lot of seed. (a) The certifying agency issuing labels for all classes of certified seed shall require the seed on which the labels are used to meet standards at least equal to the minimum genetic standards for the seed in question as specified in Table 5 of this part. (b) Seed to be recognized for interagency certification must be received in containers carrying official certification labels, or if shipped for processing, evidence of its eligibility from another official certifying agency, together with the following information: (1) Variety and kind; (2) Quantity of seed (pounds or bushels); (3) Class of certified seed; (4) Inspection or lot number traceable to the previous certifying agency's records. (c) Each label used in interagency certification shall be serially numbered or carry the certification identity number and clearly identify the certifying agencies involved, the variety, and the kind and class of seed. The seed lot number or other identification number, the kind, and variety name shall appear on the official label and/or directly on the container in a position to be viewed in conjunction with the official certification label. [38 FR 25662, Sept. 14, 1973; 38 FR 26800, Sept. 26, 1973, as amended at 65 FR 1710, Jan. 11, 2000; 76 FR 31795, June 2, 2011; 85 FR 40583, July 7, 2020] Sec. 201.76 Minimum Land, Isolation, Field, and Seed Standards. In the following Table 5 the figures in the ``Land'' column indicate the number of years that must elapse between [[Page 387]] the destruction of a stand of a kind and establishment of a stand of a specified class of a variety of the same kind. A certification agency may grant a variance in the land cropping history in specific circumstances where cultural practices have been proven adequate to maintain genetic purity. The figures in ``Isolation'' column indicate the distance in feet from any contaminating source. The figures in the ``Field'' column indicate the minimum number of plants or heads in which one plant or head of another variety is permitted. The figure in the ``Seed'' column indicate the maximum percentage of seed of other varieties or off-types permitted in the cleaned seed. [[Page 388]] Table 5 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Foundation Registered Certified Crop ----------------------------------------------------------------------------------------------------------------------------------------------- Land Isolation Field Seed Land Isolation Field Seed Land Isolation Field Seed ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Alfalfa: Non hybrid.................................. \1\4 \44 48\ 600 1,000 0.1 \1\ 3 \3\ \44\ 400 0.25 \1 2\ 1 \44 49\ 165 100 1.0 (\59\ 182.88m) \48\ 300 (\59\ (\59\ 50.29m) 91.44m) Hybrid...................................... \1\ 4 \43\ 1,320 \42\ 1,000 0.1 ....... ........... ............ ......... \1 2\ 1 \3\ \43\ \42\ 100 1.0 (\59\ 402.34m) \44\ 165 (\59\ 50.29m) Barley: Non hybrid.................................. \7\ 1 \23\ 0 3,000 0.05 \7\ 1 \23\ 0 2,000 0.1 \7\ 1 \23\ 0 1,000 0.2 Hybrid...................................... \30\ 1 \21 32\ 660 3,000 0.05 \30\ 1 \21 32\ 660 2,000 0.1 \30\ 1 \21 32\ 330 1,000 \55\ 0.2 (\59\ 201.17m) (\59\ (\59\ 201.17m) 100.59m) Hybrid (Chemically assisted)................ ....... .............. ............ ......... ....... ........... ............ ......... \57\ 0 \52 53\ 330 \54\ 1,000 0.2 (\59\ 100.59m) Bean: Field and garden............................ \7\ 1 \23\ 0 2,000 0.05 \7\ 1 \23\ 0 1,000 0.1 \7\ 1 \23\ 0 400 0.2 Mung........................................ \7\ 1 \23\ 0 1,000 0.1 \7\ 1 \23\ 0 500 0.2 \7\ 1 \23\ 0 200 0.5 Broad bean...................................... \7\ 1 \23\ 0 2,000 0.05 \7\ 1 \23\ 0 1,000 0.1 \7\ 1 \23\ 0 500 0.2 Buckwheat....................................... \7\ 1 660 3,000 0.05 \7\ 1 660 2,000 0.1 \7\ 1 660 1,000 0.2 (\59\ 201.17m) (\59\ (\59\ 201.17m) 201.17m) Camelina........................................ \8\ 1 \61\ 50 (\59\ 5,000 0.1 \8\ 1 \61\ 50 2,000 0.2 \8\ 1 \61\ 50 1,000 0.3 15.24m) (\59\ (\59\ 15.24m) 15.24m) Chickpea........................................ \7\ 1 \23\ 0 10,000 0.1 \7\ 1 \23\ 0 2,000 0.2 \7\ 1 \23\ 0 1,000 0.2 Clover all kinds................................ \1 9\ 5 \5\ \18\ \44\ 1,000 0.1 \1\ \9\ \5\ \18\ 400 0.25 \1 9\ 2 \18 44\ 165 100 1.0 600 3 \44\ 300 (\59\ (\59\ 182.88m) (\59\ 50.29) 91.44m) Corn: Foundation back cross....................... 0 \10 11\ 660 \13 46\ \15\ 0.1 (\59\ 201.17m) 1,000 Inbred...................................... 0 \10 11\660 \13 46\ \15\ 0.1 (\59\ 201.17m) 1,000 Foundation single cross..................... 0 \10 11\ 660 \13 46\ \15\ 0.1 (\59\ 201.17m) 1,000 Hybrid...................................... ....... .............. ............ ......... ....... ........... ............ ......... 0 \11 12\ 660 1,000 0.5 (\59\ 201.17m) Open-pollinated............................. ....... .............. ............ ......... ....... ........... ............ ......... 0 \11 12\ 660 200 0.5 (\59\ 201.17m) Sweet....................................... ....... .............. ............ ......... ....... ........... ............ ......... 0 \11 14\ 600 ............ 0.5 (\59\ 201.17m) Cotton.......................................... 0 \19\ 0 10,000 0.03 0 \19\ 0 5,000 0.05 0 \19\ 0 1,000 0.1 Hybrid (Chemically assisted)................ 0 \19\0 10,000 0.03 ....... ........... ............ ......... 0 2,640 1,320 0.1 (\59\ 804.66m) Cowpea.......................................... \7\ 1 \23\ 0 2,000 0.1 \7\ 1 \23\ 0 1,000 0.2 \7\ 1 \23\ 0 500 0.5 [[Page 389]] Crambe.......................................... \7\ 1 660 2,000 0.05 \7\ 1 \24\ 660 1,000 0.1 \7\ 1 \24\ 660 500 0.25 (\59\ 201.17m) (\59\ (\59\ 201.17m) 201.17m) Crownvetch...................................... \1\ 5 \5 44\ 600 1,000 0.1 \1\ 3 \5 44\ 300 400 0.25 \1\ 2 \6 44\ 165 100 1.0 (\59\ 182.88m) (\59\ (\59\ 91.44m) 50.29) Flatpea......................................... \1\ 4 \5 44\ 600 1,000 0.1 \1\ 3 \3\ \5\ 400 0.25 \1 2\ 1 \3 44\ 165 100 1.0 (\59\ 182.88m) \44\ 300 (\59\ (\59\ 50.29m) 91.44m) Flax............................................ \7\ 1 \23\ 0 5,000 0.05 \7\ 1 \23\ 0 2,000 0.1 \7\ 1 \23\ 0 1,000 0.2 Grasses: Cross-pollinated............................ \57\ 5 \4\ \18\ \20\ 1,000 0.1 \8\ \4\ \18\ 100 1.0 \8\ \4\ \18\ 50 \47 50\ 900 \57\ 1 \20\ 300 \57\ 1 \20\ \58\ 2.0 (\59\ 274.32m) (\59\ 165 91.44m) (\59\ 50.29) Strains at least 80 percent apomictic and \57\ 5 \4 18 20\ 60 1,000 0.1 \8\ \4\ \18\ 100 1.0 \9\ \4\ \18\ 50 \16\ 2.0 highly self-fertile species................ \57\ 1 \20\ 30 \57\ 1 \20\ \58\ 15 ....... (\59\ 18.29m) ............ ......... ....... (\59\ ............ ......... ....... (\59\ 9.14m) 4.57m) Hemp............................................ \63\ \63\ \63\ \63\ \63\ \63\ \63\ \63\ \63\ \63\ \63\ \63\ Lespedeza....................................... \1\ 5 \4\ 10 1,000 0.1 \1\ 3 \4\ 10 400 0.25 \1\ 2 \4\ 10 100 1.0 (\59\ 3.05m) (\59\ (\59\ 3.05m) 3.05m) Millet: Cross-pollinated............................ \8\ 1 \40\ 1,320 \27\ 20,000 0.005 \8\ 1 \40\ 1,320 \27\ 10,000 0.01 \8\ 1 \40\ 660 \27\ 5,000 0.02 (\59\ 402.34m) (\59\ (\59\ 402.34m) 201.17m) Self-pollinated............................. \8\ 1 \23\ 0 3,000 0.05 \8\ 1 \23\ 0 2,000 0.1 \8\ 1 \23\ 0 1,000 0.2 Mustard......................................... 4 1,320 2,000 0.05 ....... ........... ............ ......... 2 \24\ 660 500 0.25 (\59\ 402.34m) (\59\ 201.17m) Oat............................................. \7\ 1 \23\ 0 3,000 0.2 \7\ 1 \23\ 0 2,000 0.3 \7\ 1 \23\ 0 1,000 0.5 Okra............................................ \7\ 1 1,320 \27\ 0 0.0 \7\ 1 1,320 \27\ 2,500 0.5 \7\ 1 825 \27\ 1,250 1.0 (\59\ 402.34m) (\59\ (\59\ 402.34m) 251.46m) Onion........................................... \7\ 1 5,280 \22\ 200 0.0 \7\ 1 2,640 \22\ 200 \22\ 0.5 \7\ 1 1,320 \22\ 200 \22\ 1.0 (\59\ (\59\ (\59\ 1,609.36m) 804.66m) 402.34m) Pea, field...................................... \7\ 1 \23\ 0 2,000 0.05 \7\ 1 \23\ 0 1,000 0.1 \7\ 1 \23\ 0 500 0.2 Peanut.......................................... \7\ 1 \23\ 0 1,000 0.1 \7\ 1 \23\ 0 500 0.2 \7\ 1 \23\ 0 200 0.5 Pepper.......................................... \7\ 1 \25\ 200 0 0.0 \7\ 1 \25\ 100 300 0.5 \7\ 1 \25\ 30 150 1.0 (\59\ 60.96m) (\59\ (\59\ 30.48m) 9.14m) Radish.......................................... \60\ 5 1,320 (\59\ 0 0.05 \60\ 5 1,320 (\59\ 1,000 0.1 \60\ 5 660 (\59\ 500 0.25 402.34m) 402.34m) 201.17m) Rape: Cross-pollinated............................ 4 \24\ 1,320 2,000 0.05 ....... ........... ............ ......... 2 \24\ 330 500 0.25 (\59\ 402.34m) (\59\ 100.59m) Self-pollinated............................. 4 \24\ 660 2,000 0.05 ....... ........... ............ ......... 2 \24\ 330 500 0.25 (\59\ 201.17m) (\59\ 100.59m) Rice............................................ \7\ 1 \39\ 10 10,000 0.05 \7\ 1 \39\ 10 5,000 0.1 \7\ 1 \39\ 10 1,000 0.2 (\59\ 3.05m) (\59\ (\59\ 3.05) 3.05m) Rye............................................. \7\ 1 \18\ 660 3,000 0.05 \7\ 1 \18\ 660 2,000 0.1 \7\ 1 \18\ 660 1,000 0.2 (\59\ 201.17m) (\59\ (\59\ 201.17m) 201.17m) Safflower....................................... \7\ 2 1,320 10,000 0.01 \7\ 2 1,320 2,000 0.05 \7\ 2 1,320 1,000 0.1 (\59\ 402.34m) (\59\ (\59\ 402.34m) 402.34m) Sainfoin........................................ \1\ 5 \5 44\ 600 1,000 0.1 \1\ 3 \5 44\ 300 400 0.25 \1\ 2 \6 44\ 165 100 1.0 (\59\ 182.88m) (\59\ (\59\ 91.44m) 50.29m) [[Page 390]] Sorghum: Nonhybrid................................... \7\ 1 900 \27\ 50,000 0.005 \7\ 1 990 \27\ 35,000 0.01 \7\ 1 \29\ 660 \27\ 20,000 0.05 (\59\ 301.76m) (\59\ (\59\ 301.76m) 201.17m) Hybrid seedstock............................ \7\ 1 990 \27\ 50,000 0.005 (\59\ 301.76m) Commercial hybrid........................... ....... .............. ............ ......... ....... ........... ............ ......... \7\ 1 \21\ \29\ \27\ 20,000 0.1 \31\ 660 (\59\ 201.17m) Soybean......................................... \23\ 1 \23\ 0 1,000 0.1 \33\ 1 \23\ 0 500 0.2 \33\ 1 \23\ 0 200 0.5 Sunflower: Nonhybrid................................... 1 \41 45\ 2,640 200 0.02 1 \41\ \45\ 200 0.02 1 \41\ \45\ 200 \34\ 0.1 (\59\ 804.66m) 2,640 2,640 (\59\ (\59\ 804.66m) 804.66m) Hybrid...................................... 1 \41 45\ 2,640 \35\ 250 \56\ 0.02 ....... ........... ............ ......... 1 \41\ \45\ \35\ 250 \34 56\ (\59\ 804.66m) 2,640 0.1 (\59\ 804.66m) Sunn hemp....................................... \7\ 1 1,320 (\59\ \62\ 5,000 0.1 \7\ 1 660 (\59\ \62\ 1,000 0.25 \7\ 1 330 (\59\ \62\ 500 0.5 402.34m) 201.17m) 100.58m) Tomato.......................................... \7\ 1 \25\ 200 0 0 \7\ 1 \25\ 100 300 0.5 \7\ 1 \25\ 30 150 1.0 (\59\ 60.96m) (\59\ (\59\ 30.48m) 9.14m) Tobacco: Nonhybrid................................... \36\ 0 \37\ 150 0 0.01 \36\ 0 \37\ 150 0 0.01 \36\ 0 \37\ 150 0 0.01 (\59\ 45.72m) (\59\ (\59\ 45.72m) 45.72m) Hybrid...................................... ....... .............. ............ ......... ....... ........... ............ ......... \36\ 0 \38\ 150 0 0.01 (\59\ 45.72m) Trefoil, birdsfoot.............................. \1\ 5 \5 44\ 600 1,000 0.1 \1\ 3 \5 44\ 300 400 0.25 \1\ 2 \6 44\ 165 100 1.0 (\59\ 182.88m) (\59\ (\59\ 91.44m) 50.29m) Triticale....................................... \7\ 1 \23\ 0 3,000 0.05 \7\ 1 \23\ 0 2,000 0.1 \7\ 1 \23\ 0 1,000 0.2 Vetch........................................... \1 7\ 5 \17 44\ 10 1,000 0.1 \1 7\ 3 \17 44\ 10 400 0.25 \1 7\ 2 \17 44\ 10 100 1.0 (\59\ 3.05m) (\59\ (\59\ 3.05m) 3.05m) Vetch, milk..................................... \1\ 5 \5 44\ 600 2,000 0.05 \1\ 3 \5 44\ 300 1,000 0.1 \1\ 2 \44\ 165 200 0.5 (\59\ 182.88m) (\59\ (\59\ 91.44m) 50.29m) Watermelon...................................... \7\ 1 \26\ 2,640 \28\ 0 0 \7\ 1 \26\ 2,640 \28\ 0 0.5 \7\ 1 \26\ 1,320 \28\ 500 1.0 (\59\ 804.66m) (\59\ 402.34m) Wheat: Nonhybrid................................... \7\ 1 \23\ 0 3,000 0.05 \7\ 1 \23\ 0 2,000 0.1 \7\ 1 \23\ 0 1,000 0.2 Hybrid...................................... \30\ 1 \21 32\ 660 3,000 0.05 \30\ 1 \21 32\ 660 2,000 0.1 \30\ 1 \21 32\ 330 1,000 0.2 (\59\ 201.17m) (\59\ (\59\ 201.17m) 100.59m) Hybrid (Chemically assisted)................ ....... .............. ............ ......... ....... ........... ............ ......... \51\ 0 \52 53\ 330 \54\ 1,000 \55\ 0.2 (\59\ 100.58m) ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ \1\ The land must be free of volunteer plants of the crop kind during the year immediately prior to establishment and no manure or other contaminating material shall be applied the year previous to seeding or during the establishment and productive life of the stand. \2\ At least 2 years must elapse between destruction of indistinguishable varieties or varieties of dissimilar adaptation and establishment of the stand for the production of the Certified class of seed. \3\ Isolation distance for certified seed production shall be at least 500 feet (152.07m) from varieties of dissimilar adaptation. \4\ Isolation between classes of the same variety may be reduced to 25 percent of the distance otherwise required. [[Page 391]] \5\ This distance applies when fields are 5 acres (2ha) or larger in area. For smaller fields, the distances are 900 feet (274.32m) and 450 feet (137.16m) for the Foundation and Registered classes, respectively. \6\ Fields of less than 5 acres (2ha) require 330 feet (100.59m). \7\ Requirement is waived if the previous crop was grown from certified seed of the same variety. \8\ Requirement is waived if the previous crop was of the same variety and of a certified class equal or superior to that of the crop seeded. \9\ Reseeding varieties of crimson clover may be allowed to volunteer back year after year on the same ground. If a new variety is being planted where another variety once grew, the field history requirements apply. \10\ No isolation is required for the production of hand-pollinated seed. \11\ When the contaminant is the same color and texture, the isolation distance may be modified by (1) adequate natural barriers or (2) differential maturity dates, provided there are no receptive silks in the seed parent at the time the contaminant is shedding pollen. In addition, dent sterile popcorn requires no isolation from dent corn. \12\ Where the contaminating source is corn of the same color and texture as that of the field inspected or white endosperm-corn optically sorted, the isolation distance is 410 feet (124.97m) and may be modified by the planting of pollen parent border rows according to the following table: [[Page 392]] ------------------------------------------------------------------------ Minimum Numbers of Border Rows Required ---------------------------------------- Minimum distance from Field size, 20 contaminant Field size, up to acres (8ha) or 20 acres (8ha) more ------------------------------------------------------------------------ 410 (124.97m).................. 0.................. 0 370 (112.78m).................. 2 (0.8ha).......... 1 (0.4ha) 330 (100.59m).................. 4 (1.6ha).......... 2 (0.8ha) 290 (88.39m)................... 6 (2.4ha).......... 3 (1.2ha) 245 (74.68m)................... 8 (3.2ha).......... 4 (1.6ha) 205 (62.48m)................... 10 (4.0ha)......... 5 (2.0ha) 165 (50.29m)................... 12 (4.8ha)......... 6 (2.4ha) 125 (38.10m)................... 14 (5.6ha)......... 7 (2.8ha) 85 (25.91m).................... 16 (6.4ha)......... 8 (3.2ha) 0.............................. Not permitted...... 10 (4.0ha) ------------------------------------------------------------------------ \13\ Refers to off-type plants in the pollen parent that have shed pollen or to the off-type plants in the see parent at the time of the last inspection. \14\ The required minimum isolation distance for sweet corn is 660 feet (201.17m) from the contaminating source, plus four border rows when the field to be inspected is 10 acres (4.0ha) or less in size. This distance may be decreased by 15 feet (4.57m) for each increment of 4 acres (1.6ha) in the size of the field to a maximum of 40 acres (16ha) and further decreased 40 feet (12.19m) for each additional border row to a maximum of 16 rows. These border rows are for pollen-shedding purposes only. \15\ Refers to off-type ears. Ears with off-colored or different textured kernels are limited to 0.5 percent, or a total of 25 off- colored or different textured kernels per 1,000 ears. \16\ The Merion variety of Kentucky bluegrass is allowed 3 percent. \17\ All cross-pollinating varieties must be 400 feet (121.92m) from any contaminating source. \18\ Isolation between diploids and tetraploids shall be at least 15 feet (4.57m). \19\ Minimum isolation shall be at least 100 feet (30.48m) if the cotton plants in the contaminating source differ by easily observable morphological characteristics from the field to be inspected. Isolation distance between upland and Egyptian types shall be at least 1,320 feet (402.34m), 1,320 feet (402.34m), and 660 feet (182.88m) for Foundation, Registered, and Certified classes, respectively. \20\ These distances apply when there is no border removal. Border removal applies only to fields of 5 acres (2ha) or more. Removal of a 9-foot (2.7m) border (after flowering) decreases the required distance for Foundation, Registered, and Certified seed classes to 600 feet (182.88m), 225 feet (68.58m), and 100 feet (30.48m), respectively, for cross-pollinated species, and to 30 feet (9.14m), 15 feet (4.57m), and 15 feet (4.57m), respectively, for apomictic and self-pollinated species. Removal of a 15 foot (4.57m) border (after flowering) allows a further decrease to 450 feet (136.16m), 150 feet (45.72m), and 75 feet (22.86m), respectively, for cross-pollinated species. \21\ Isolation distances between 2 fields of the same kind may be reduced to a distance adequate to prevent mechanical mixture, if the sum of percentages of plants in bloom in both fields does not exceed 5 percent at a time when more than 1 percent of the plants in either field are in bloom. \22\ Refers to bulbs. \23\ Distance adequate to prevent mechanical mixture is necessary. \24\ Required isolation between classes of the same variety is 10 feet (3.05m). \25\ The minimum distance may be reduced by 50 percent if different classes of the same variety are involved. \26\ The minimum distance may be reduced by 50 percent if the field is adequately protected by natural or artificial barriers. \27\ These ratios are for definite other varieties. The ratios for doubtful other varieties are: ------------------------------------------------------------------------ Foundation Registered Certified ------------------------------------------------------------------------ Millet........................... 1:10,000 1:5,000 1:2,500 Sorghum:......................... Nonhybrid...................... 1:20,000 1:10,000 1:1,000 Hybrid......................... 1:20,000 NA 1:1,000 Okra............................. None 1:750 1:500 ------------------------------------------------------------------------ \28\ Whiteheart fruits may not exceed 1 per 100, 40, and 20 for Foundation, Registered, and Certified classes, respectively. Citron or hard rind is not permitted in Foundation or Registered classes and may not exceed 1 per 1,000 fruits in the Certified class. \29\ This distance applies if the contaminating source does not genetically differ in height from the pollinator parent or has a different chromosome number. If the contaminating source does (genetically) differ and has the same chromosome number the distance shall be 990 feet (301.76m). The minimum isolation from grass sorghum or broomcorn with the same chromosome number shall be 1,320 feet (402.34m). \30\ Requirement is waived for the production of pollinator lines if the previous crop was grown from a certified class of seed of the same variety. Sterile lines and crossing blocks must be on land free of contaminating plants. \31\ If the contaminating source is similar to the hybrid in all important characteristics, the isolation may be reduced by 66 feet (20.12m) for each pair of border rows of the pollinator parent down to a minimum of 330 feet (100.59m). These rows must be located directly opposite or diagonally to the contaminating source. The pollinator border rows must be shedding pollen during the entire time 5 percent or more of the seed parent flowers are receptive. \32\ An unplanted strip at least 2 feet (0.61m) in width shall separate male sterile plants and pollinator plants in inter-planted blocks. \33\ Unless the preceding crop was another kind or unless the preceding soybean crop was planted with a class of certified seed of the same variety, or unless the preceding soybean crop and the variety being planted have an identifiable character difference, in which case, no time need elapse. \34\ May include not more than 0.04 percent purple or white seeds. \35\ Standards apply equally to seed parents and pollen parents which may include up to 1:1,000 plants each of the wild-type branching, purple, or white-seeded plants. \36\ A new plant bed must be used each year unless the bed is properly treated with a soil sterilant prior to seeding. \37\ This distance is applied between varieties of the same type and may be waived if four border rows of each variety are allowed to bloom and set seed between the two varieties but are not harvested for seed. Isolation between varieties of different types shall be 1,320 feet (402.34m) except if protected by bagging or by topping all plants in the contaminating source before bloom. [[Page 393]] \38\ When male sterile and male fertile plants of the same type are planted adjacent in a field, this requirement may be waived; provided, four border rows of male sterile plants are allowed to bloom and set seeds. The seed from these border rows shall not be harvested as part of the certified lot of seed produced by the male sterile plants. When plants are of different types, the distance shall be 1,320 feet (402.34m) except if protected by bagging or by topping all plants in the contaminating source before bloom. \39\ Isolation between varieties or non-certified fields of the same variety shall be 100 feet (30.48m) if aerial seeded and 50 feet (15.24m) if ground broadcast, and 10 feet (3.05m) is ground drilled. \40\ Isolation between millets of different genera shall be 6 feet (1.83m). \41\ Does not apply to Helianthus similes, H. ludens, or H. agrestis. \42\ The ratio of male sterile (A) strains and pollen (B or C) strains shall not exceed 2:1. \43\ Parent lines (A and B) in a crossing block, or seed and pollen lines in a hybrid seed production field, shall be separated by at least 6 feet (1.83m) and shall be managed and harvested in a manner to prevent mixing. \44\ Distance between fields of certified classes of the same variety may be reduced to 10 feet (3.05m) regardless of the class or size of the fields. \45\ An isolation distance of 5,280 feet (1609.36m) is required between oil and non-oil sunflower types and between either type and other volunteers or wild types. \46\ Detasseling, cutting, or pulling of the cytoplasmic male-sterile seed parent is permitted. \47\ All varieties of perennial ryegrass seed are allowed 3.0 percent. \48\ This distance applies for fields over 5 acres (2ha). For alfalfa fields of 5 acres (2ha) or less that produce the Foundation and Registered seed classes, the minimum distance from a different variety or a field of the same variety that does not meet the varietal purity requirements for certification shall be 900 feet (274.32m) and 450 feet (137.16m), respectively. \49\ There must be at least 10 feet (3.05m) or a distance adequate to prevent mechanical mixture between a field of another variety (or non- certified area within the same field) and the area being certified. The 165 feet (50.29m) isolation requirement is waived if the area of the ``isolation zone'' is less than 10 percent of the field eligible for the Certified class. The ``isolation zone'' is that area calculated by multiplying the length of the common border(s) with other varieties of alfalfa by the average width of the field (being certified) falling within the 165 feet (50.29m) isolation. Areas within the isolation zone nearest the contamination source shall not be certified. \50\ Seed of Critana thickspike wheatgrass may contain up to 30 percent slender wheatgrass types. \51\ Crossing blocks must be planted on land free of volunteer contaminating plants. \52\ This distance applies to the seed parent when the contaminating source is wheat of another market class. If the contaminating source is the same market class as the seed parent, the distance may be modified by the planting of pollen parent border according to the following table: ------------------------------------------------------------------------ Minimum distance from contaminant Pollen (parent border) ------------------------------------------------------------------------ Feet Meters Feet Meters ------------------------------------------------------------------------ 330.............................. 100.59 0 0 275.............................. 83.82 15 4.57 215.............................. 65.53 25 7.62 160.............................. 48.77 35 10.67 100.............................. 30.48 50 15.24 ------------------------------------------------------------------------ \53\ Interplanted blocks of seed parent and pollinator shall be separated by an unplanted strip a minimum of one foot (0.31m) in width and be clearly identifiable. \54\ If Foundation or Registered the ratio shall be 1:3000 (Foundation) and 1:2000 (Registered). \55\ Does not include seed of the female parent. \56\ Pre-Control Test Standards: If field inspection shows one or more of the following, the applicant may request that seed certification be based on the results of a pre-certification grow-out test approved by the certification agency: a. inadequate isolation; b. too few male parent plants shedding pollen when female plants are receptive; c. excess off-types not to include wild types. In such cases, at least 2,000 plants must be observed and meet the following standards before seed can be certified from fields with problems listed above: [For non-oil types, seed which contains not more than 15 percent sterile plants may be certified. If it contains 85 percent-95 percent hybrid plants, the percentage of hybrid shall be shown on the certification label] ------------------------------------------------------------------------ Maximum Permitted ------------------------- Factor Hybrid Inbred (percent) (percent) ------------------------------------------------------------------------ Sterile Plants................................ 5.0 Sterile or Fertile Plants..................... ........... 5.0 Morphological Variants........................ 0.5 0.5 Wild Types.............................. 0.2 0.2 ------------------------- Total (including above types)........... 5.0 5.0 ------------------------------------------------------------------------ \57\ Application to establish the pedigree must be made within one year of seeding. The crop will remain under supervision of the certifying agency as long as the field is eligible for certification. \58\ These distances apply when there is no border removal. Varieties that are 95 percent or more apomictic, as defined by the originating breeder, shall have the isolation distance reduced to a mechanical separation only. Varieties less than 95 percent apomictic and all other cross pollinating species that have an ``isolation zone'' of less than 10 percent of the entire field, no isolation is required. (Isolation zone is calculated by multiplying the length of the common border with other varieties of grass by the average width of the certified field falling within the isolation distance required.) \59\ Indicates metric equivalent in meters. \60\ Land must not have grown or been seeded to any cruciferous crops during the previous 5 years. This interval may be reduced to 3 years, if following the same variety and the same or higher certification class. \61\ Field producing any class of certified seed must be at least 50 feet from any other variety or fields of the same variety that do not meet the varietal purity requirement for certification. \62\ No other Crotalaria species allowed in Foundation, Registered and/ or Certified production fields. \63\ Refer to the certifying agency in the production State(s) for certification standards. [59 FR 64516, Dec. 14, 1994, as amended at 65 FR 1710, Jan. 11, 2000; 85 FR 40583, July 7, 2020] [[Page 394]] Additional Requirements for the Certification of Plant Materials of Certain Crops Sec. 201.77 Length of stand requirements. (a) Alfalfa. Limitations on the age of stand and certified seed classes through which a given variety may be multiplied both inside and outside its region of adaptation shall be specified by the originator or his designee. Certified seed production outside the region of adaptation shall not exceed 6 years if not otherwise specified by the originator, or his designee. (b) Red clover. Only two seed crops are permitted of all certified seed classes. (c) White and alsike clover. Only two successive seed crops are permitted following the year of establishment for Foundation and Registered classes, but 2 additional years are permitted if the field is reclassified to the next lower class. Four successive seed crops following seeding are permitted if the first and succeeding crops are of the Certified class, provided the stand of perennial plants is maintained. (d) Sainfoin. All certified seed classes are eligible to produce five successive seed crops following seeding. [38 FR 25664, Sept. 14, 1973] Sec. 201.78 Pollen control for hybrids. (a) Wheat and barley. Shedders in the seed parent, at any one inspection, are limited to 1:200 heads for Foundation A Line and 1:100 heads for Registered A Line, except that when the A Line is increased outside the area of the anticipated A x R production in order to utilize self-fertility produced by environmental effects, only isolation and genetic purity standards will be in effect. (An A Line is a cytoplasmic male sterile female line used to produce hybrid seed. An R Line is a pollinator line used to pollinate an A Line and to restore fertility in the resulting hybrid seed.) (b) Corn. When 5 percent or more of the seed parent plants have receptive silks, shedding tassels in the seed parent plants shall be limited to 1 percent at any one inspection, or a total of 2 percent at any three inspections on different dates. Shedding tassels are those which have 2 inches or more of the central stem or branches, or any combination thereof, shedding pollen. (c) Sorghum. Shedders in the seed parent, at any one inspection, are limited to 1:3,000 plants for Foundation class and 1:1,500 plants for Certified class. (d) Sunflowers. Seed parents flowering and shedding pollen before the male parents are shedding pollen must be removed. At least 50 percent of the male plants must be producing pollen when the seed parent is in full bloom. (e) Hybrid alfalfa. When at least 75 percent of the plants are in bloom and there is no more than 15 percent seed set, 200 plants shall be examined to determine the pollen production index (PPI). Each plant is rated as 1, 2, 3 or 4 with ``1'' representing no pollen, ``2'' representing a trace of pollen, ``3'' representing substantially less than normal pollen, and ``4'' representing normal pollen. The rating is weighted as 0, 0.1, 0.6 or 1.0, respectively. The total number of plants of each rating is multiplied by the weighted rating and the values are totaled. The total is divided by the number of plants rated and multiplied by 100 to determine the PPI. For hybrid production using separate male and female rows, the maximum PPI allowed for 95 percent hybrid seed is 14 for the Foundation class, and 6 for the F1 hybrid. For hybrid production using comingled parent lines, the maximum PPI allowed for 75 percent hybrid Certified class seed is 25, with an allowance for blending to reach a PPI of 25 for fields with a PPI above 25, but no greater than 30. [38 FR 25664, Sept. 14, 1973, as amended at 41 FR 20158, May 17, 1976; 85 FR 40584, July 7, 2020] PART 202_FEDERAL SEED ACT ADMINISTRATIVE PROCEDURES--Table of Contents Subpart A_General Sec. 202.1 Meaning of words. 202.2 Definitions. 202.3 Institution of proceedings. 202.4 Status of applicant. Subpart B [Reserved] [[Page 395]] Subpart C_Provisions Applicable to Other Proceedings 202.40 Proceedings prior to reporting for criminal prosecution. 202.41 Notice and hearing prior to promulgation of rules and regulations. 202.42 Publication of judgments, settlements, and orders. 202.43 Proceedings under section 302(a) to show cause why seed or screenings should be admitted into the United States. 202.44 Proceedings under section 305(b) to determine whether foreign alfalfa or red clover seed is not adapted for general agricultural use in the United States. Authority: Secs. 302, 305, 402, 408, 409, 413, 414, 53 Stat. 1275, as amended; 7 U.S.C. 1582, 1585, 1592, 1598, 1599, 1603, 1604. Source: 36 FR 1314, Jan. 27, 1971, unless otherwise noted. Subpart A_General Sec. 202.1 Meaning of words. As used in this part, words in the singular form shall be deemed to import the plural, and vice versa, as the case may require. Sec. 202.2 Definitions. For the purposes of this part, the following terms shall be construed, respectively, to mean: (a) The term Act means the Federal Seed Act, approved August 9, 1939 (53 Stat. 1275, 7 U.S.C. 1551 et seq.) and any legislation amendatory thereof. (b) Complaint means any formal complaint and notice of hearing or other document by virtue of which a proceeding under the Act is instituted. (c) Complainant means the party upon whose complaint the proceeding is instituted. (d) Decision and Order includes the Secretary's findings, conclusions, order, and rulings on motions, exceptions, statements of objections, and proposed findings, conclusions and orders submitted by the parties not theretofore ruled upon. (e) Director means the Director of the Grain Division, Agricultural Marketing Service, U.S. Department of Agriculture, or any officer or employee of the Department to whom authority is delegated to act in his stead. (f) Administrative Law Judge means an Administrative Law Judge in the Office of Administrative Law Judge, U.S. Department of Agriculture. (g) Administrative Law Judge Recommended Decision means the Administrative Law Judge's report to the Secretary consisting of the proposed: (1) Findings of facts and conclusions with respect to all material issues of fact, law or discretion, as well as the reasons or basis for conclusions and (2) order. (h) The term hearing means that part of a proceeding which involves the submission of evidence and means either an oral or written hearing. (i) Hearing Clerk means the Hearing Clerk, U.S. Department of Agriculture, Washington, DC 20250. (j) The term person includes any individual, partnership, corporation, company, society, association, receiver, or trustee. (k) The term regulations means the regulations promulgated pursuant to the Act (7 CFR part 201). (l) Respondent means the party proceeded against. (m) Secretary means the Secretary of Agriculture of the United States, or any officer or employee of the U.S. Department of Agriculture to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead, including the Judicial Officer. Sec. 202.3 Institution of proceedings. Any person having information of any violation of the Act or of any of the regulations promulgated thereunder may file with the Director an application requesting the institution of such proceedings as may be authorized under the Act. Such application shall be in writing, signed by or on behalf of the applicant, and shall contain a short and simple statement of the facts constituting the alleged violation and the name and address of the applicant and the party complained of. If, after investigation of the matters complained of in the application or after investigation made on his own motion, the Director has reason to believe that any person has violated or is violating any [[Page 396]] of the provisions of the Act or the regulations made and promulgated thereunder, he may institute such proceedings as may be authorized by the Act. Sec. 202.4 Status of applicant. The person filing an application shall not be a party to any proceeding which may be instituted under the Act, unless he be permitted by the Secretary or by the Administrative Law Judge to intervene therein. The Director shall not be required to divulge the name of the applicant and such person will have no legal status in the proceeding which may be instituted, except where allowed to intervene or as such person may be called as a witness. At any time after the institution of the proceeding, and before it has been submitted to the Secretary for final consideration, the Secretary or the Administrator, may upon petition in writing and upon good cause shown, permit any person to intervene. Subpart B [Reserved] Subpart C_Provisions Applicable to Other Proceedings Sec. 202.40 Proceedings prior to reporting for criminal prosecution. The Director shall, before any violation of this act is reported to any U.S. attorney for institution of a criminal proceeding, notify the person against whom such proceeding is contemplated that action is contemplated, inform him regarding the facts involved, and afford him an opportunity to present his views, either orally or in writing, with regard to such contemplated proceeding. Notice shall be served upon such person in the manner provided in Sec. 202.27 of this part. If the person desires to explain the transaction or otherwise to present his views, he shall file with the Director, within 20 days after the service of the notice, an answer, in duplicate, signed by him or by his attorney, or shall request, within the 20 days, an opportunity to express his views orally. The request shall be embodied in a writing signed by the person or by his attorney or agent. Such opportunity to present his views orally shall be afforded at a time and place to be designated by the Director and it shall be given within a time not to exceed 10 days after the date of the filing of the request therefor. Sec. 202.41 Notice and hearing prior to promulgation of rules and regulations. Prior to the promulgation of any rule or regulation contemplated by section 402 of the Act (7 U.S.C. 1592), notice shall be given by publication in the Federal Register of intention to promulgate such rule or regulation and of the time and place of a public hearing to be held with reference thereto. Such hearings shall be conducted by the Director or by such employee or employees of the Department of Agriculture as may be designated to preside thereat, except that hearings with respect to rules or regulations contemplated by section 402(b) of the Act relating to title III of the Act (Foreign Commerce), shall be conducted by the Secretary of the Treasury and the Secretary of Agriculture, acting jointly or separately, or by such employee or employees of the Department of Agriculture or the Department of the Treasury as may be designated to preside thereat. The presiding officer shall conduct the hearing in an orderly and informal manner, according to such procedure as he may announce at the commencement of the hearing. Any rule or regulation promulgated under section 402 of the Act shall become effective on the date fixed in the promulgation, which date shall be not less than 30 days after publication in the Federal Register. Any rule or regulation may be amended or revoked in the same manner as is provided for its promulgation. Sec. 202.42 Publication of judgments, settlements, and orders. After judgment or settlement, or the issuance of a cease and desist order, in any case or proceeding arising under this Act, notice thereof containing any information pertinent to the judgment or settlement or the issuance of the cease and desist order, shall be given by issuing a press release or by such other media as the Administrator of the Agricultural Marketing Service may designate from time to time. [[Page 397]] Sec. 202.43 Proceedings under section 302(a) to show cause why seed or screenings should be admitted into the United States. When seed or screenings have been refused admission into the United States under the Act or the joint regulations promulgated thereunder, the owner or consignee of such seed or screenings may submit a request to the Director for a hearing in which he may show cause, if any he have, why such seed or screenings should be admitted. Request for such hearing shall be embodied in a writing signed by the owner or consignee or by his attorney or agent. The Director shall thereupon fix, and notify the owner or consignee of, the time when and place at which the hearing will be held. The hearing shall be conducted in an orderly and informal manner by the Director or by a presiding officer duly designated by him, and it shall be governed by such rules of procedure as the presiding officer shall announce at the opening of the hearing. The determination as to whether the seed or screenings may be admitted into the United States shall be made by the Administrator of the Agricultural Marketing Service, within a reasonable time after the close of the hearing, and the owner or consignee of the seed or screenings who requested the hearing and the Secretary of the Treasury shall be duly notified as to such determination. Sec. 202.44 Proceedings under section 305(b) to determine whether foreign alfalfa or red clover seed is not adapted for general agricultural use in the United States. The public hearings which shall be held from time to time for the purpose of determining whether seed of alfalfa or red clover from any foreign country or region is not adapted for general agricultural use in the United States shall be conducted by the Director, or by a presiding officer duly designated by him. Such hearings shall be conducted in an orderly and informal manner in accordance with such procedure as the presiding officer shall announce at the opening of each hearing. The Administrator of the Agricultural Marketing Service shall, within a reasonable time after the close of the public hearing, make and publish his determination as to whether the said seed is adapted for general agricultural use in the United States. Publication of the determination shall be made in the Federal Register, and through such other media as the said Administrator may deem appropriate. PARTS 203 204 [RESERVED] SUBCHAPTER L_REQUIREMENTS RELATING TO PURCHASES [RESERVED] [[Page 398]] SUBCHAPTER M_ORGANIC FOODS PRODUCTION ACT PROVISIONS PART 205_NATIONAL ORGANIC PROGRAM--Table of Contents Subpart A_Definitions Sec. 205.1 Meaning of words. 205.2 Terms defined. 205.3 Incorporation by reference. Subpart B_Applicability 205.100 What has to be certified. 205.101 Exemptions and exclusions from certification. 205.102 Use of the term, ``organic.'' 205.103 Recordkeeping by certified operations. 205.104 [Reserved] 205.105 Allowed and prohibited substances, methods, and ingredients in organic production and handling. 205.106-205.199 [Reserved] Subpart C_Organic Production and Handling Requirements 205.200 General. 205.201 Organic production and handling system plan. 205.202 Land requirements. 205.203 Soil fertility and crop nutrient management practice standard. 205.204 Seeds and planting stock practice standard. 205.205 Crop rotation practice standard. 205.206 Crop pest, weed, and disease management practice standard. 205.207 Wild-crop harvesting practice standard. 205.208-205.235 [Reserved] 205.236 Origin of livestock. 205.237 Livestock feed. 205.238 Livestock health care practice standard. 205.239 Livestock living conditions. 205.240 Pasture practice standard. 205.243-205.269 [Reserved] 205.270 Organic handling requirements. 205.271 Facility pest management practice standard. 205.272 Commingling and contact with prohibited substance prevention practice standard. 205.273-205.289 [Reserved] 205.290 Temporary variances. 205.291-205.299 [Reserved] Subpart D_Labels, Labeling, and Market Information 205.300 Use of the term, ``organic.'' 205.301 Product composition. 205.302 Calculating the percentage of organically produced ingredients. 205.303 Packaged products labeled ``100 percent organic'' or ``organic.'' 205.304 Packaged products labeled ``made with organic (specified ingredients or food group(s)).'' 205.305 Multiingredient packaged products with less that 70 percent organically produced ingredients. 205.306 Labeling of livestock feed. 205.307 Labeling of nonretail containers used for only shipping or storage of raw or processed agricultural products labeled as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)).'' 205.308 Agricultural products in other than packaged form at the point of retail sale that are sold, labeled, or represented as ``100 percent organic'' or ``organic.'' 205.309 Agricultural products in other than packaged form at the point of retail sale that are sold, labeled, or represented as ``made with organic (specified ingredients or food group(s)).'' 205.310 Agricultural products produced on an exempt or excluded operation. 205.311 USDA Seal. 205.312-205.399 [Reserved] Subpart E_Certification 205.400 General requirements for certification. 205.401 Application for certification. 205.402 Review of application. 205.403 On-site inspections. 205.404 Granting certification. 205.405 Denial of certification. 205.406 Continuation of certification. 205.407-205.499 [Reserved] Subpart F_Accreditation of Certifying Agents 205.500 Areas and duration of accreditation. 205.501 General requirements for accreditation. 205.502 Applying for accreditation. 205.503 Applicant information. 205.504 Evidence of expertise and ability. 205.505 Statement of agreement. 205.506 Granting accreditation. 205.507 Denial of accreditation. 205.508 Site evaluations. 205.509 Peer review panel. 205.510 Annual report, recordkeeping, and renewal of accreditation. 205.511-205.599 [Reserved] [[Page 399]] Subpart G_Administrative The National List of Allowed and Prohibited Substances 205.600 Evaluation criteria for allowed and prohibited substances, methods, and ingredients. 205.601 Synthetic substances allowed for use in organic crop production. 205.602 Nonsynthetic substances prohibited for use in organic crop production. 205.603 Synthetic substances allowed for use in organic livestock production. 205.604 Nonsynthetic substances prohibited for use in organic livestock production. 205.605 Nonagricultural (nonorganic) substances allowed as ingredients in or on processed products labeled as ``organic,'' or ``made with organic (specified ingredients or food group(s)).'' 205.606 Nonorganically produced agricultural products allowed as ingredients in or on processed products labeled as ``organic.'' 205.607 Amending the National List. 205.608-205.619 [Reserved] State Organic Programs 205.620 Requirements of State organic programs. 205.621 Submission and determination of proposed State organic programs and amendments to approved State organic programs. 205.622 Review of approved State organic programs. 205.623-205.639 [Reserved] Fees 205.640 Fees and other charges for accreditation. 205.641 Payment of fees and other charges. 205.642 Fees and other charges for certification. 205.643-205.649 [Reserved] Compliance 205.660 General. 205.661 Investigation of certified operations. 205.662 Noncompliance procedure for certified operations. 205.663 Mediation. 205.664 [Reserved] 205.665 Noncompliance procedure for certifying agents. 205.666-205.667 [Reserved] 205.668 Noncompliance procedures under State Organic Programs. 205.699 [Reserved] Inspection and Testing, Reporting, and Exclusion from Sale 205.670 Inspection and testing of agricultural products to be sold or labeled as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)).'' 205.671 Exclusion from organic sale. 205.672 Emergency pest or disease treatment. 205.673-205.679 [Reserved] Adverse Action Appeal Process 205.680 General. 205.681 Appeals. 205.682-205.689 [Reserved] Miscellaneous 205.690 OMB control number. 205.691-205.699 [Reserved] Authority: 7 U.S.C. 6501-6524. Source: 65 FR 80637, Dec. 21, 2000, unless otherwise noted. Subpart A_Definitions Sec. 205.1 Meaning of words. For the purpose of the regulations in this subpart, words in the singular form shall be deemed to impart the plural and vice versa, as the case may demand. Sec. 205.2 Terms defined. Accreditation. A determination made by the Secretary that authorizes a private, foreign, or State entity to conduct certification activities as a certifying agent under this part. Act. The Organic Foods Production Act of 1990, as amended (7 U.S.C. 6501 et seq.). Action level. The limit at or above which the Food and Drug Administration will take legal action against a product to remove it from the market. Action levels are based on unavoidability of the poisonous or deleterious substances and do not represent permissible levels of contamination where it is avoidable. Administrator. The Administrator for the Agricultural Marketing Service, United States Departure of Agriculture, or the representative to whom authority has been delegated to act in the stead of the Administrator. Agricultural inputs. All substances or materials used in the production or handling of organic agricultural products. Agricultural product. Any agricultural commodity or product, whether raw or processed, including any commodity or product derived from livestock, that is [[Page 400]] marketed in the United States for human or livestock consumption. Agricultural Marketing Service (AMS). The Agricultural Marketing Service of the United States Department of Agriculture. Allowed synthetic. A substance that is included on the National List of synthetic substances allowed for use in organic production or handling. AMDUCA. The Animal Medicinal Drug Use Clarification Act of 1994 (Pub. L. 103-396). Animal drug. Any drug as defined in section 201 of the Federal Food, Drug, and Cosmetic Act, as amended (21 U.S.C. 321), that is intended for use in livestock, including any drug intended for use in livestock feed but not including such livestock feed. Annual seedling. A plant grown from seed that will complete its life cycle or produce a harvestable yield within the same crop year or season in which it was planted. Area of operation. The types of operations: crops, livestock, wild- crop harvesting or handling, or any combination thereof that a certifying agent may be accredited to certify under this part. Audit trail. Documentation that is sufficient to determine the source, transfer of ownership, and transportation of any agricultural product labeled as ``100 percent organic,'' the organic ingredients of any agricultural product labeled as ``organic'' or ``made with organic (specified ingredients)'' or the organic ingredients of any agricultural product containing less than 70 percent organic ingredients identified as organic in an ingredients statement. Biodegradable. Subject to biological decomposition into simpler biochemical or chemical components. Biodegradable biobased mulch film. A synthetic mulch film that meets the following criteria: (1) Meets the compostability specifications of one of the following standards: ASTM D6400, ASTM D6868, EN 13432, EN 14995, or ISO 17088 (all incorporated by reference; see Sec. 205.3); (2) Demonstrates at least 90% biodegradation absolute or relative to microcrystalline cellulose in less than two years, in soil, according to one of the following test methods: ISO 17556 or ASTM D5988 (both incorporated by reference; see Sec. 205.3); and (3) Must be biobased with content determined using ASTM D6866 (incorporated by reference; see Sec. 205.3). Biologics. All viruses, serums, toxins, and analogous products of natural or synthetic origin, such as diagnostics, antitoxins, vaccines, live microorganisms, killed microorganisms, and the antigenic or immunizing components of microorganisms intended for use in the diagnosis, treatment, or prevention of diseases of animals. Breeder stock. Female livestock whose offspring may be incorporated into an organic operation at the time of their birth. Buffer zone. An area located between a certified production operation or portion of a production operation and an adjacent land area that is not maintained under organic management. A buffer zone must be sufficient in size or other features (e.g., windbreaks or a diversion ditch) to prevent the possibility of unintended contact by prohibited substances applied to adjacent land areas with an area that is part of a certified operation. Bulk. The presentation to consumers at retail sale of an agricultural product in unpackaged, loose form, enabling the consumer to determine the individual pieces, amount, or volume of the product purchased. Certification or certified. A determination made by a certifying agent that a production or handling operation is in compliance with the Act and the regulations in this part, which is documented by a certificate of organic operation. Certified operation. A crop or livestock production, wild-crop harvesting or handling operation, or portion of such operation that is certified by an accredited certifying agent as utilizing a system of organic production or handling as described by the Act and the regulations in this part. Certifying agent. Any entity accredited by the Secretary as a certifying agent for the purpose of certifying a production or handling operation as a certified production or handling operation. Certifying agent's operation. All sites, facilities, personnel, and records used [[Page 401]] by a certifying agent to conduct certification activities under the Act and the regulations in this part. Claims. Oral, written, implied, or symbolic representations, statements, or advertising or other forms of communication presented to the public or buyers of agricultural products that relate to the organic certification process or the term, ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)),'' or, in the case of agricultural products containing less than 70 percent organic ingredients, the term, ``organic,'' on the ingredients panel. Class of animal. A group of livestock that shares a similar stage of life or production. The classes of animals are those that are commonly listed on feed labels. Commercially available. The ability to obtain a production input in an appropriate form, quality, or quantity to fulfill an essential function in a system of organic production or handling, as determined by the certifying agent in the course of reviewing the organic plan. Commingling. Physical contact between unpackaged organically produced and nonorganically produced agricultural products during production, processing, transportation, storage or handling, other than during the manufacture of a multiingredient product containing both types of ingredients. Compost. The product of a managed process through which microorganisms break down plant and animal materials into more available forms suitable for application to the soil. Compost must be produced through a process that combines plant and animal materials with an initial C:N ratio of between 25:1 and 40:1. Producers using an in-vessel or static aerated pile system must maintain the composting materials at a temperature between 131 [deg]F and 170 [deg]F for 3 days. Producers using a windrow system must maintain the composting materials at a temperature between 131 [deg]F and 170 [deg]F for 15 days, during which time, the materials must be turned a minimum of five times. Control. Any method that reduces or limits damage by populations of pests, weeds, or diseases to levels that do not significantly reduce productivity. Crop. Pastures, cover crops, green manure crops, catch crops, or any plant or part of a plant intended to be marketed as an agricultural product, fed to livestock, or used in the field to manage nutrients and soil fertility. Crop residues. The plant parts remaining in a field after the harvest of a crop, which include stalks, stems, leaves, roots, and weeds. Crop rotation. The practice of alternating the annual crops grown on a specific field in a planned pattern or sequence in successive crop years so that crops of the same species or family are not grown repeatedly without interruption on the same field. Perennial cropping systems employ means such as alley cropping, intercropping, and hedgerows to introduce biological diversity in lieu of crop rotation. Crop year. That normal growing season for a crop as determined by the Secretary. Cultivation. Digging up or cutting the soil to prepare a seed bed; control weeds; aerate the soil; or work organic matter, crop residues, or fertilizers into the soil. Cultural methods. Methods used to enhance crop health and prevent weed, pest, or disease problems without the use of substances; examples include the selection of appropriate varieties and planting sites; proper timing and density of plantings; irrigation; and extending a growing season by manipulating the microclimate with green houses, cold frames, or wind breaks. Detectable residue. The amount or presence of chemical residue or sample component that can be reliably observed or found in the sample matrix by current approved analytical methodology. Disease vectors. Plants or animals that harbor or transmit disease organisms or pathogens which may attack crops or livestock. Drift. The physical movement of prohibited substances from the intended target site onto an organic operation or portion thereof. Dry lot. A fenced area that may be covered with concrete, but that has little or no vegetative cover. Dry matter. The amount of a feedstuff remaining after all the free moisture is evaporated out. [[Page 402]] Dry matter demand. The expected dry matter intake for a class of animal. Dry matter intake. Total pounds of all feed, devoid of all moisture, consumed by a class of animals over a given period of time. Emergency pest or disease treatment program. A mandatory program authorized by a Federal, State, or local agency for the purpose of controlling or eradicating a pest or disease. Employee. Any person providing paid or volunteer services for a certifying agent. Excipients. Any ingredients that are intentionally added to livestock medications but do not exert therapeutic or diagnostic effects at the intended dosage, although they may act to improve product delivery (e.g., enhancing absorption or controlling release of the drug substance). Examples of such ingredients include fillers, extenders, diluents, wetting agents, solvents, emulsifiers, preservatives, flavors, absorption enhancers, sustained-release matrices, and coloring agents. Excluded methods. A variety of methods used to genetically modify organisms or influence their growth and development by means that are not possible under natural conditions or processes and are not considered compatible with organic production. Such methods include cell fusion, microencapsulation and macroencapsulation, and recombinant DNA technology (including gene deletion, gene doubling, introducing a foreign gene, and changing the positions of genes when achieved by recombinant DNA technology). Such methods do not include the use of traditional breeding, conjugation, fermentation, hybridization, in vitro fertilization, or tissue culture. Feed. Edible materials which are consumed by livestock for their nutritional value. Feed may be concentrates (grains) or roughages (hay, silage, fodder). The term, ``feed,'' encompasses all agricultural commodities, including pasture ingested by livestock for nutritional purposes. Feed additive. A substance added to feed in micro quantities to fulfill a specific nutritional need; i.e., essential nutrients in the form of amino acids, vitamins, and minerals. Feedlot. A dry lot for the controlled feeding of livestock. Feed supplement. A combination of feed nutrients added to livestock feed to improve the nutrient balance or performance of the total ration and intended to be: (1) Diluted with other feeds when fed to livestock; (2) Offered free choice with other parts of the ration if separately available; or (3) Further diluted and mixed to produce a complete feed. Fertilizer. A single or blended substance containing one or more recognized plant nutrient(s) which is used primarily for its plant nutrient content and which is designed for use or claimed to have value in promoting plant growth. Field. An area of land identified as a discrete unit within a production operation. Forage. Vegetative material in a fresh, dried, or ensiled state (pasture, hay, or silage), which is fed to livestock. Governmental entity. Any domestic government, tribal government, or foreign governmental subdivision providing certification services. Graze. (1) The consumption of standing or residual forage by livestock. (2) To put livestock to feed on standing or residual forage. Grazing. To graze. Grazing season. The period of time when pasture is available for grazing, due to natural precipitation or irrigation. Grazing season dates may vary because of mid-summer heat/humidity, significant precipitation events, floods, hurricanes, droughts or winter weather events. Grazing season may be extended by the grazing of residual forage as agreed in the operation's organic system plan. Due to weather, season, or climate, the grazing season may or may not be continuous. Grazing season may range from 120 days to 365 days, but not less than 120 days per year. Handle. To sell, process, or package agricultural products, except such term shall not include the sale, transportation, or delivery of crops or livestock by the producer thereof to a handler. [[Page 403]] Handler. Any person engaged in the business of handling agricultural products, including producers who handle crops or livestock of their own production, except such term shall not include final retailers of agricultural products that do not process agricultural products. Handling operation. Any operation or portion of an operation (except final retailers of agricultural products that do not process agricultural products) that receives or otherwise acquires agricultural products and processes, packages, or stores such products. Immediate family. The spouse, minor children, or blood relatives who reside in the immediate household of a certifying agent or an employee, inspector, contractor, or other personnel of the certifying agent. For the purpose of this part, the interest of a spouse, minor child, or blood relative who is a resident of the immediate household of a certifying agent or an employee, inspector, contractor, or other personnel of the certifying agent shall be considered to be an interest of the certifying agent or an employee, inspector, contractor, or other personnel of the certifying agent. Inclement weather. Weather that is violent, or characterized by temperatures (high or low), or characterized by excessive precipitation that can cause physical harm to a given species of livestock. Production yields or growth rates of livestock lower than the maximum achievable do not qualify as physical harm. Inert ingredient. Any substance (or group of substances with similar chemical structures if designated by the Environmental Protection Agency) other than an active ingredient which is intentionally included in any pesticide product (40 CFR 152.3(m)). Information panel. That part of the label of a packaged product that is immediately contiguous to and to the right of the principal display panel as observed by an individual facing the principal display panel, unless another section of the label is designated as the information panel because of package size or other package attributes (e.g., irregular shape with one usable surface). Ingredient. Any substance used in the preparation of an agricultural product that is still present in the final commercial product as consumed. Ingredients statement. The list of ingredients contained in a product shown in their common and usual names in the descending order of predominance. Inspection. The act of examining and evaluating the production or handling operation of an applicant for certification or certified operation to determine compliance with the Act and the regulations in this part. Inspector. Any person retained or used by a certifying agent to conduct inspections of certification applicants or certified production or handling operations. Label. A display of written, printed, or graphic material on the immediate container of an agricultural product or any such material affixed to any agricultural product or affixed to a bulk container containing an agricultural product, except for package liners or a display of written, printed, or graphic material which contains only information about the weight of the product. Labeling. All written, printed, or graphic material accompanying an agricultural product at any time or written, printed, or graphic material about the agricultural product displayed at retail stores about the product. Livestock. Any cattle, sheep, goats, swine, poultry, or equine animals used for food or in the production of food, fiber, feed, or other agricultural-based consumer products; wild or domesticated game; or other nonplant life, except such term shall not include aquatic animals for the production of food, fiber, feed, or other agricultural- based consumer products. Lot. Any number of containers which contain an agricultural product of the same kind located in the same conveyance, warehouse, or packing house and which are available for inspection at the same time. Manure. Feces, urine, other excrement, and bedding produced by livestock that has not been composted. Market information. Any written, printed, audiovisual, or graphic information, including advertising, pamphlets, flyers, catalogues, posters, and signs, distributed, broadcast, or made [[Page 404]] available outside of retail outlets that are used to assist in the sale or promotion of a product. Mulch. Any nonsynthetic material, such as wood chips, leaves, or straw, or any synthetic material included on the National List for such use, such as newspaper or plastic that serves to suppress weed growth, moderate soil temperature, or conserve soil moisture. Narrow range oils. Petroleum derivatives, predominately of paraffinic and napthenic fractions with 50 percent boiling point (10 mm Hg) between 415 [deg]F and 440 [deg]F. National List. A list of allowed and prohibited substances as provided for in the Act. National Organic Program (NOP). The program authorized by the Act for the purpose of implementing its provisions. National Organic Standards Board (NOSB). A board established by the Secretary under 7 U.S.C. 6518 to assist in the development of standards for substances to be used in organic production and to advise the Secretary on any other aspects of the implementation of the National Organic Program. Natural resources of the operation. The physical, hydrological, and biological features of a production operation, including soil, water, wetlands, woodlands, and wildlife. Nonagricultural substance. A substance that is not a product of agriculture, such as a mineral or a bacterial culture, that is used as an ingredient in an agricultural product. For the purposes of this part, a nonagricultural ingredient also includes any substance, such as gums, citric acid, or pectin, that is extracted from, isolated from, or a fraction of an agricultural product so that the identity of the agricultural product is unrecognizable in the extract, isolate, or fraction. Nonsynthetic (natural). A substance that is derived from mineral, plant, or animal matter and does not undergo a synthetic process as defined in section 6502(21) of the Act (7 U.S.C. 6502(21)). For the purposes of this part, nonsynthetic is used as a synonym for natural as the term is used in the Act. Nonretail container. Any container used for shipping or storage of an agricultural product that is not used in the retail display or sale of the product. Nontoxic. Not known to cause any adverse physiological effects in animals, plants, humans, or the environment. Organic. A labeling term that refers to an agricultural product produced in accordance with the Act and the regulations in this part. Organic management. Management of a production or handling operation in compliance with all applicable provisions under this part. Organic matter. The remains, residues, or waste products of any organism. Organic production. A production system that is managed in accordance with the Act and regulations in this part to respond to site- specific conditions by integrating cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Organic system plan. A plan of management of an organic production or handling operation that has been agreed to by the producer or handler and the certifying agent and that includes written plans concerning all aspects of agricultural production or handling described in the Act and the regulations in subpart C of this part. Paper-based crop planting aid. A material that is comprised of at least 60% cellulose-based fiber by weight, including, but not limited to, pots, seed tape, and collars that are placed in or on the soil and later incorporated into the soil, excluding biodegradable mulch film. Up to 40% of the ingredients can be nonsynthetic, other permitted synthetic ingredients in Sec. 205.601(j), or synthetic strengthening fibers, adhesives, or resins. Contains no less than 80% biobased content as verified by a qualified third-party assessment (e.g., laboratory test using ASTM D6866 or composition review by qualified personnel). Pasture. Land used for livestock grazing that is managed to provide feed value and maintain or improve soil, water, and vegetative resources. Peer review panel. A panel of individuals who have expertise in organic production and handling methods and certification procedures and who are appointed by the Administrator to assist in evaluating applicants for accreditation as certifying agents. [[Page 405]] Person. An individual, partnership, corporation, association, cooperative, or other entity. Pesticide. Any substance which alone, in chemical combination, or in any formulation with one or more substances is defined as a pesticide in section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136(u) et seq). Petition. A request to amend the National List that is submitted by any person in accordance with this part. Planting stock. Any plant or plant tissue other than annual seedlings but including rhizomes, shoots, leaf or stem cuttings, roots, or tubers, used in plant production or propagation. Practice standard. The guidelines and requirements through which a production or handling operation implements a required component of its production or handling organic system plan. A practice standard includes a series of allowed and prohibited actions, materials, and conditions to establish a minimum level performance for planning, conducting, and maintaining a function, such as livestock health care or facility pest management, essential to an organic operation. Principal display panel. That part of a label that is most likely to be displayed, presented, shown, or examined under customary conditions of display for sale. Private entity. Any domestic or foreign nongovernmental for-profit or not-for-profit organization providing certification services. Processing. Cooking, baking, curing, heating, drying, mixing, grinding, churning, separating, extracting, slaughtering, cutting, fermenting, distilling, eviscerating, preserving, dehydrating, freezing, chilling, or otherwise manufacturing and includes the packaging, canning, jarring, or otherwise enclosing food in a container. Processing aid. (1) Substance that is added to a food during the processing of such food but is removed in some manner from the food before it is packaged in its finished form; (2) a substance that is added to a food during processing, is converted into constituents normally present in the food, and does not significantly increase the amount of the constituents naturally found in the food; and (3) a substance that is added to a food for its technical or functional effect in the processing but is present in the finished food at insignificant levels and does not have any technical or functional effect in that food. Producer. A person who engages in the business of growing or producing food, fiber, feed, and other agricultural-based consumer products. Production lot number/identifier. Identification of a product based on the production sequence of the product showing the date, time, and place of production used for quality control purposes. Prohibited substance. A substance the use of which in any aspect of organic production or handling is prohibited or not provided for in the Act or the regulations of this part. Records. Any information in written, visual, or electronic form that documents the activities undertaken by a producer, handler, or certifying agent to comply with the Act and regulations in this part. Residual forage. Forage cut and left to lie, or windrowed and left to lie, in place in the pasture. Residue testing. An official or validated analytical procedure that detects, identifies, and measures the presence of chemical substances, their metabolites, or degradation products in or on raw or processed agricultural products. Responsibly connected. Any person who is a partner, officer, director, holder, manager, or owner of 10 percent or more of the voting stock of an applicant or a recipient of certification or accreditation. Retail food establishment. A restaurant; delicatessen; bakery; grocery store; or any retail outlet with an in-store restaurant, delicatessen, bakery, salad bar, or other eat-in or carry-out service of processed or prepared raw and ready-to-eat-food. Routine use of parasiticide. The regular, planned, or periodic use of parasiticides. Secretary. The Secretary of Agriculture or a representative to whom authority has been delegated to act in the Secretary's stead. [[Page 406]] Sewage sludge. A solid, semisolid, or liquid residue generated during the treatment of domestic sewage in a treatment works. Sewage sludge includes but is not limited to: domestic septage; scum or solids removed in primary, secondary, or advanced wastewater treatment processes; and a material derived from sewage sludge. Sewage sludge does not include ash generated during the firing of sewage sludge in a sewage sludge incinerator or grit and screenings generated during preliminary treatment of domestic sewage in a treatment works. Shelter. Structures such as barns, sheds, or windbreaks; or natural areas such as woods, tree lines, large hedge rows, or geographic land features, that are designed or selected to provide physical protection or housing to all animals. Slaughter stock. Any animal that is intended to be slaughtered for consumption by humans or other animals. Soil and water quality. Observable indicators of the physical, chemical, or biological condition of soil and water, including the presence of environmental contaminants. Split operation. An operation that produces or handles both organic and nonorganic agricultural products. Stage of life. A discrete time period in an animal's life which requires specific management practices different than during other periods (e.g., poultry during feathering). Breeding, freshening, lactation and other recurring events are not a stage of life. State. Any of the several States of the United States of America, its territories, the District of Columbia, and the Commonwealth of Puerto Rico. State certifying agent. A certifying agent accredited by the Secretary under the National Organic Program and operated by the State for the purposes of certifying organic production and handling operations in the State. State organic program (SOP). A State program that meets the requirements of section 6506 of the Act, is approved by the Secretary, and is designed to ensure that a product that is sold or labeled as organically produced under the Act is produced and handled using organic methods. State organic program's governing State official. The chief executive official of a State or, in the case of a State that provides for the statewide election of an official to be responsible solely for the administration of the agricultural operations of the State, such official who administers a State organic certification program. Synthetic. A substance that is formulated or manufactured by a chemical process or by a process that chemically changes a substance extracted from naturally occurring plant, animal, or mineral sources, except that such term shall not apply to substances created by naturally occurring biological processes. Temporary and Temporarily. Occurring for a limited time only (e.g., overnight, throughout a storm, during a period of illness, the period of time specified by the Administrator when granting a temporary variance), not permanent or lasting. Third-year transitional crop. Crops and forage from land included in the organic system plan of a producer's operation that is not certified organic but is in the third year of organic management and is eligible for organic certification in one year or less. Tolerance. The maximum legal level of a pesticide chemical residue in or on a raw or processed agricultural commodity or processed food. Transitioned animal. A dairy animal converted to organic milk production in accordance with Sec. 205.236(a)(2) that has not been under continuous organic management from the last third of gestation; offspring born to a transitioned animal that, during its last third of gestation, consumes third-year transitional crops; and offspring born during the one-time transition exception that themselves consume third- year transitional crops. Transplant. A seedling which has been removed from its original place of production, transported, and replanted. Unavoidable residual environmental contamination (UREC). Background levels of naturally occurring or synthetic chemicals that are present in the soil or present in organically produced agricultural products that are below established tolerances. [[Page 407]] Wild crop. Any plant or portion of a plant that is collected or harvested from a site that is not maintained under cultivation or other agricultural management. Yards/Feeding pad. An area for feeding, exercising, and outdoor access for livestock during the non-grazing season and a high traffic area where animals may receive supplemental feeding during the grazing season. [65 FR 80637, Dec. 21, 2000, as amended at 72 FR 70484, Dec. 12, 2007; 75 FR 7192, Feb. 17, 2010; 79 FR 58662, Sept. 30, 2014; 80 FR 6429, Feb. 5, 2015; 87 FR 19772, Apr. 5, 2022; 87 FR 68027, Nov. 14, 2022] Sec. 205.3 Incorporation by reference. (a) Certain material is incorporated by reference into this part with the approval of the Director of the Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that specified in this section, we must publish notice of change in the Federal Register and the material must be available to the public. All approved material is available for inspection at the USDA Agricultural Marketing Service, National Organic Program, 1400 Independence Avenue SW., Washington, DC 20250; (202) 720-3252, and is available from the sources listed below. It is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call (202) 741-6030 or go to http://www.archives.gov/federal_register/code_of_federal_regulations/ ibr_locations.html. (b) ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428; phone 1-877-909-2786; http://www.astm.org/. (1) ASTM D5988-12 (``ASTM D5988''), ``Standard Test Method for Determining Aerobic Biodegradation of Plastic Materials in Soil,'' approved May 1, 2012, IBR approved for Sec. 205.2. (2) ASTM D6400-12 (``ASTM D6400''), ``Standard Specification for Labeling of Plastics Designed to be Aerobically Composted in Municipal or Industrial Facilities,'' approved May 15, 2012, IBR approved for Sec. 205.2. (3) ASTM D6866-12 (``ASTM D6866''), ``Standard Test Methods for Determining the Biobased Content of Solid, Liquid, and Gaseous Samples Using Radiocarbon Analysis,'' approved April 1, 2012, IBR approved for Sec. 205.2. (4) ASTM D6868-11 (``ASTM D6868''), ``Standard Specification for Labeling of End Items that Incorporate Plastics and Polymers as Coatings or Additives with Paper and Other Substrates Designed to be Aerobically Composted in Municipal or Industrial Facilities,'' approved February 1, 2011, IBR approved for Sec. 205.2. (c) European Committee for Standardization; Avenue Marnix, 17-B-1000 Brussels; phone 32 2 550 08 11; www.cen.eu. (1) EN 13432:2000:E (``EN 13432''), September, 2000, ``Requirements for packaging recoverable through composting and biodegradation--Test scheme and evaluation criteria for the final acceptance of packaging,'' IBR approved for Sec. 205.2. (2) EN 14995:2006:E (``EN 14995''), December, 2006, ``Plastics-- Evaluation of compostability--Test scheme and specifications,'' IBR approved for Sec. 205.2. (d) International Organization for Standardization, 1, ch. de la Voie-Creuse, CP 56, CH-1211 Geneva 20, Switzerland; phone 41 22 749 01 11; www.iso.org. (1) ISO 17088:2012(E), (``ISO 17088''), ``Specifications for compostable plastics,'' June 1, 2012, IBR approved for Sec. 205.2. (2) ISO 17556:2012(E) (``ISO 17556''), ``Plastics--Determination of the ultimate aerobic biodegradability of plastic materials in soil by measuring the oxygen demand in a respirometer or the amount of carbon dioxide evolved,'' August 15, 2012, IBR approved for Sec. 205.2. [79 FR 58662, Sept. 30, 2014] Subpart B_Applicability Sec. 205.100 What has to be certified. (a) Except for operations exempt or excluded in Sec. 205.101, each production or handling operation or specified portion of a production or handling operation that produces or handles crops, livestock, livestock products, or other agricultural products that are intended to be sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or [[Page 408]] ``made with organic (specified ingredients or food group(s))'' must be certified according to the provisions of subpart E of this part and must meet all other applicable requirements of this part. (b) Any production or handling operation or specified portion of a production or handling operation that has been already certified by a certifying agent on the date that the certifying agent receives its accreditation under this part shall be deemed to be certified under the Act until the operation's next anniversary date of certification. Such recognition shall only be available to those operations certified by a certifying agent that receives its accreditation within 18 months from February 20, 2001. (c) Any operation that: (1) Knowingly sells or labels a product as organic, except in accordance with the Act, shall be subject to a civil penalty of not more than the amount specified in Sec. 3.91(b)(1) of this title per violation. (2) Makes a false statement under the Act to the Secretary, a governing State official, or an accredited certifying agent shall be subject to the provisions of section 1001 of title 18, United States Code. [65 FR 80637, Dec. 21, 2000, as amended at 70 FR 29579, May 24, 2005; 80 FR 6429, Feb. 5, 2015] Sec. 205.101 Exemptions and exclusions from certification. (a) Exemptions. (1) A production or handling operation that sells agricultural products as ``organic'' but whose gross agricultural income from organic sales totals $5,000 or less annually is exempt from certification under subpart E of this part and from submitting an organic system plan for acceptance or approval under Sec. 205.201 but must comply with the applicable organic production and handling requirements of subpart C of this part and the labeling requirements of Sec. 205.310. The products from such operations shall not be used as ingredients identified as organic in processed products produced by another handling operation. (2) A handling operation that is a retail food establishment or portion of a retail food establishment that handles organically produced agricultural products but does not process them is exempt from the requirements in this part. (3) A handling operation or portion of a handling operation that only handles agricultural products that contain less than 70 percent organic ingredients by total weight of the finished product (excluding water and salt) is exempt from the requirements in this part, except: (i) The provisions for prevention of contact of organic products with prohibited substances set forth in Sec. 205.272 with respect to any organically produced ingredients used in an agricultural product; (ii) The labeling provisions of Sec. Sec. 205.305 and 205.310; and (iii) The recordkeeping provisions in paragraph (c) of this section. (4) A handling operation or portion of a handling operation that only identifies organic ingredients on the information panel is exempt from the requirements in this part, except: (i) The provisions for prevention of contact of organic products with prohibited substances set forth in Sec. 205.272 with respect to any organically produced ingredients used in an agricultural product; (ii) The labeling provisions of Sec. Sec. 205.305 and 205.310; and (iii) The recordkeeping provisions in paragraph (c) of this section. (b) Exclusions. (1) A handling operation or portion of a handling operation is excluded from the requirements of this part, except for the requirements for the prevention of commingling and contact with prohibited substances as set forth in Sec. 205.272 with respect to any organically produced products, if such operation or portion of the operation only sells organic agricultural products labeled as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' that: (i) Are packaged or otherwise enclosed in a container prior to being received or acquired by the operation; and (ii) Remain in the same package or container and are not otherwise processed while in the control of the handling operation. [[Page 409]] (2) A handling operation that is a retail food establishment or portion of a retail food establishment that processes, on the premises of the retail food establishment, raw and ready-to-eat food from agricultural products that were previously labeled as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' is excluded from the requirements in this part, except: (i) The requirements for the prevention of contact with prohibited substances as set forth in Sec. 205.272; and (ii) The labeling provisions of Sec. 205.310. (c) Records to be maintained by exempt operations. (1) Any handling operation exempt from certification pursuant to paragraph (a)(3) or (a)(4) of this section must maintain records sufficient to: (i) Prove that ingredients identified as organic were organically produced and handled; and (ii) Verify quantities produced from such ingredients. (2) Records must be maintained for no less than 3 years beyond their creation and the operations must allow representatives of the Secretary and the applicable State organic programs' governing State official access to these records for inspection and copying during normal business hours to determine compliance with the applicable regulations set forth in this part. Sec. 205.102 Use of the term, ``organic.'' Any agricultural product that is sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' must be: (a) Produced in accordance with the requirements specified in Sec. 205.101 or Sec. Sec. 205.202 through 205.207 or Sec. Sec. 205.236 through 205.240 and all other applicable requirements of part 205; and (b) Handled in accordance with the requirements specified in Sec. 205.101 or Sec. Sec. 205.270 through 205.272 and all other applicable requirements of this part 205. [65 FR 80637, Dec. 21, 2000, as amended at 75 FR 7193, Feb. 17, 2010] Sec. 205.103 Recordkeeping by certified operations. (a) A certified operation must maintain records concerning the production, harvesting, and handling of agricultural products that are or that are intended to be sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)).'' (b) Such records must: (1) Be adapted to the particular business that the certified operation is conducting; (2) Fully disclose all activities and transactions of the certified operation in sufficient detail as to be readily understood and audited; (3) Be maintained for not less than 5 years beyond their creation; and (4) Be sufficient to demonstrate compliance with the Act and the regulations in this part. (c) The certified operation must make such records available for inspection and copying during normal business hours by authorized representatives of the Secretary, the applicable State program's governing State official, and the certifying agent. Sec. 205.104 [Reserved] Sec. 205.105 Allowed and prohibited substances, methods, and ingredients in organic production and handling. To be sold or labeled as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)),'' the product must be produced and handled without the use of: (a) Synthetic substances and ingredients, except as provided in Sec. 205.601 or Sec. 205.603; (b) Nonsynthetic substances prohibited in Sec. 205.602 or Sec. 205.604; (c) Nonagricultural substances used in or on processed products, except as otherwise provided in Sec. 205.605; (d) Nonorganic agricultural substances used in or on processed products, except as otherwise provided in Sec. 205.606; (e) Excluded methods, except for vaccines: Provided, That, the vaccines are approved in accordance with Sec. 205.600(a); [[Page 410]] (f) Ionizing radiation, as described in Food and Drug Administration regulation, 21 CFR 179.26; and (g) Sewage sludge. Sec. Sec. 205.106-205.199 [Reserved] Subpart C_Organic Production and Handling Requirements Sec. 205.200 General. The producer or handler of a production or handling operation intending to sell, label, or represent agricultural products as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' must comply with the applicable provisions of this subpart. Production practices implemented in accordance with this subpart must maintain or improve the natural resources of the operation, including soil and water quality. Sec. 205.201 Organic production and handling system plan. (a) The producer or handler of a production or handling operation, except as exempt or excluded under Sec. 205.101, intending to sell, label, or represent agricultural products as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' must develop an organic production or handling system plan that is agreed to by the producer or handler and an accredited certifying agent. An organic system plan must meet the requirements set forth in this section for organic production or handling. An organic production or handling system plan must include: (1) A description of practices and procedures to be performed and maintained, including the frequency with which they will be performed; (2) A list of each substance to be used as a production or handling input, indicating its composition, source, location(s) where it will be used, and documentation of commercial availability, as applicable; (3) A description of the monitoring practices and procedures to be performed and maintained, including the frequency with which they will be performed, to verify that the plan is effectively implemented; (4) A description of the recordkeeping system implemented to comply with the requirements established in Sec. 205.103; (5) A description of the management practices and physical barriers established to prevent commingling of organic and nonorganic products on a split operation and to prevent contact of organic production and handling operations and products with prohibited substances; and (6) Additional information deemed necessary by the certifying agent to evaluate compliance with the regulations. (b) A producer may substitute a plan prepared to meet the requirements of another Federal, State, or local government regulatory program for the organic system plan: Provided, That, the submitted plan meets all the requirements of this subpart. Sec. 205.202 Land requirements. Any field or farm parcel from which harvested crops are intended to be sold, labeled, or represented as ``organic,'' must: (a) Have been managed in accordance with the provisions of Sec. Sec. 205.203 through 205.206; (b) Have had no prohibited substances, as listed in Sec. 205.105, applied to it for a period of 3 years immediately preceding harvest of the crop; and (c) Have distinct, defined boundaries and buffer zones such as runoff diversions to prevent the unintended application of a prohibited substance to the crop or contact with a prohibited substance applied to adjoining land that is not under organic management. Sec. 205.203 Soil fertility and crop nutrient management practice standard. (a) The producer must select and implement tillage and cultivation practices that maintain or improve the physical, chemical, and biological condition of soil and minimize soil erosion. (b) The producer must manage crop nutrients and soil fertility through rotations, cover crops, and the application of plant and animal materials. (c) The producer must manage plant and animal materials to maintain or improve soil organic matter content in [[Page 411]] a manner that does not contribute to contamination of crops, soil, or water by plant nutrients, pathogenic organisms, heavy metals, or residues of prohibited substances. Animal and plant materials include: (1) Raw animal manure, which must be composted unless it is: (i) Applied to land used for a crop not intended for human consumption; (ii) Incorporated into the soil not less than 120 days prior to the harvest of a product whose edible portion has direct contact with the soil surface or soil particles; or (iii) Incorporated into the soil not less than 90 days prior to the harvest of a product whose edible portion does not have direct contact with the soil surface or soil particles; (2) Composted plant and animal materials produced though a process that: (i) Established an initial C:N ratio of between 25:1 and 40:1; and (ii) Maintained a temperature of between 131 [deg]F and 170 [deg]F for 3 days using an in-vessel or static aerated pile system; or (iii) Maintained a temperature of between 131 [deg]F and 170 [deg]F for 15 days using a windrow composting system, during which period, the materials must be turned a minimum of five times. (3) Uncomposted plant materials. (d) A producer may manage crop nutrients and soil fertility to maintain or improve soil organic matter content in a manner that does not contribute to contamination of crops, soil, or water by plant nutrients, pathogenic organisms, heavy metals, or residues of prohibited substances by applying: (1) A crop nutrient or soil amendment included on the National List of synthetic substances allowed for use in organic crop production; (2) A mined substance of low solubility; (3) A mined substance of high solubility: Provided, That, the substance is used in compliance with the conditions established on the National List of nonsynthetic materials prohibited for crop production; (4) Ash obtained from the burning of a plant or animal material, except as prohibited in paragraph (e) of this section: Provided, That, the material burned has not been treated or combined with a prohibited substance or the ash is not included on the National List of nonsynthetic substances prohibited for use in organic crop production; and (5) A plant or animal material that has been chemically altered by a manufacturing process: Provided, That, the material is included on the National List of synthetic substances allowed for use in organic crop production established in Sec. 205.601. (e) The producer must not use: (1) Any fertilizer or composted plant and animal material that contains a synthetic substance not included on the National List of synthetic substances allowed for use in organic crop production; (2) Sewage sludge (biosolids) as defined in 40 CFR part 503; and (3) Burning as a means of disposal for crop residues produced on the operation: Except, That, burning may be used to suppress the spread of disease or to stimulate seed germination. Sec. 205.204 Seeds and planting stock practice standard. (a) The producer must use organically grown seeds, annual seedlings, and planting stock: Except, That, (1) Nonorganically produced, untreated seeds and planting stock may be used to produce an organic crop when an equivalent organically produced variety is not commercially available: Except, That, organically produced seed must be used for the production of edible sprouts; (2) Nonorganically produced seeds and planting stock that have been treated with a substance included on the National List of synthetic substances allowed for use in organic crop production may be used to produce an organic crop when an equivalent organically produced or untreated variety is not commercially available; (3) Nonorganically produced annual seedlings may be used to produce an organic crop when a temporary variance has been granted in accordance with Sec. 205.290(a)(2); (4) Nonorganically produced planting stock to be used to produce a perennial crop may be sold, labeled, or represented as organically produced only [[Page 412]] after the planting stock has been maintained under a system of organic management for a period of no less than 1 year; and (5) Seeds, annual seedlings, and planting stock treated with prohibited substances may be used to produce an organic crop when the application of the materials is a requirement of Federal or State phytosanitary regulations. (b) [Reserved] Sec. 205.205 Crop rotation practice standard. The producer must implement a crop rotation including but not limited to sod, cover crops, green manure crops, and catch crops that provide the following functions that are applicable to the operation: (a) Maintain or improve soil organic matter content; (b) Provide for pest management in annual and perennial crops; (c) Manage deficient or excess plant nutrients; and (d) Provide erosion control. Sec. 205.206 Crop pest, weed, and disease management practice standard. (a) The producer must use management practices to prevent crop pests, weeds, and diseases including but not limited to: (1) Crop rotation and soil and crop nutrient management practices, as provided for in Sec. Sec. 205.203 and 205.205; (2) Sanitation measures to remove disease vectors, weed seeds, and habitat for pest organisms; and (3) Cultural practices that enhance crop health, including selection of plant species and varieties with regard to suitability to site- specific conditions and resistance to prevalent pests, weeds, and diseases. (b) Pest problems may be controlled through mechanical or physical methods including but not limited to: (1) Augmentation or introduction of predators or parasites of the pest species; (2) Development of habitat for natural enemies of pests; (3) Nonsynthetic controls such as lures, traps, and repellents. (c) Weed problems may be controlled through: (1) Mulching with fully biodegradable materials; (2) Mowing; (3) Livestock grazing; (4) Hand weeding and mechanical cultivation; (5) Flame, heat, or electrical means; or (6) Plastic or other synthetic mulches: Provided, That, they are removed from the field at the end of the growing or harvest season. (d) Disease problems may be controlled through: (1) Management practices which suppress the spread of disease organisms; or (2) Application of nonsynthetic biological, botanical, or mineral inputs. (e) When the practices provided for in paragraphs (a) through (d) of this section are insufficient to prevent or control crop pests, weeds, and diseases, a biological or botanical substance or a substance included on the National List of synthetic substances allowed for use in organic crop production may be applied to prevent, suppress, or control pests, weeds, or diseases: Provided, That, the conditions for using the substance are documented in the organic system plan. (f) The producer must not use lumber treated with arsenate or other prohibited materials for new installations or replacement purposes in contact with soil or livestock. Sec. 205.207 Wild-crop harvesting practice standard. (a) A wild crop that is intended to be sold, labeled, or represented as organic must be harvested from a designated area that has had no prohibited substance, as set forth in Sec. 205.105, applied to it for a period of 3 years immediately preceding the harvest of the wild crop. (b) A wild crop must be harvested in a manner that ensures that such harvesting or gathering will not be destructive to the environment and will sustain the growth and production of the wild crop. [[Page 413]] Sec. Sec. 205.208-205.235 [Reserved] Sec. 205.236 Origin of livestock. (a) Livestock products that are to be sold, labeled, or represented as organic must be from livestock under continuous organic management from the last third of gestation or hatching: Except, That: (1) Poultry. Poultry or edible poultry products must be from poultry that has been under continuous organic management beginning no later than the second day of life; (2) Dairy animals. Subject to the requirements of this paragraph, an operation that is not certified for organic livestock and that has never transitioned dairy animals may transition nonorganic animals to organic production only once. After the one-time transition is complete, the operation may not transition additional animals or source transitioned animals from other operations; the operation must source only animals that have been under continuous organic management from the last third of gestation. Eligible operations converting to organic production by transitioning organic animals under this paragraph must meet the following requirements and conditions: (i) Dairy animals must be under continuous organic management for a minimum of 12 months immediately prior to production of milk or milk products that are to be sold, labeled, or represented as organic. Only certified operations may represent or sell products as organic. (ii) The operation must describe the transition as part of its organic system plan. The description must include the actual or expected start date of the minimum 12-month transition, individual identification of animals intended to complete transition, and any additional information or records deemed necessary by the certifying agent to determine compliance with the regulations. Transitioning animals are not considered organic until the operation is certified. (iii) During the 12-month transition period, dairy animals and their offspring may consume third-year transitional crops from land included in the organic system plan of the operation transitioning the animals; (iv) Offspring born during or after the 12-month transition period are transitioned animals if they consume third-year transitional crops during the transition or if the mother consumes third-year transitional crops during the offspring's last third of gestation; (v) Consistent with the breeder stock provisions in paragraph (a)(3) of this section, offspring born from transitioning dairy animals are not considered to be transitioned animals if they are under continuous organic management and if only certified organic crops and forages are fed from their last third of gestation (rather, they are considered to have been managed organically from the last third of gestation); (vi) All dairy animals must end the transition at the same time; (vii) Dairy animals that complete the transition and that are part of a certified operation are transitioned animals and must not be used for organic livestock products other than organic milk and milk products. (3) Breeder stock. Livestock used as breeder stock may be brought from a nonorganic operation onto an organic operation at any time, Provided, That the following conditions are met: (i) Such breeder stock must be brought onto the operation no later than the last third of gestation if their offspring are to be raised as organic livestock; and (ii) Such breeder stock must be managed organically throughout the last third of gestation and the lactation period during which time they may nurse their own offspring. (b) The following are prohibited: (1) Livestock that are removed from an organic operation and subsequently managed or handled on a nonorganic operation may not be sold, labeled, or represented as organic. (2) Breeder stock, dairy animals, or transitioned animals that have not been under continuous organic management since the last third of gestation may not be sold, labeled, or represented as organic slaughter stock. (c) The producer of an organic livestock operation must maintain records [[Page 414]] sufficient to preserve the identity of all organically managed animals, including whether they are transitioned animals, and edible and nonedible animal products produced on the operation. (d) A request for a variance to allow sourcing of transitioned animals between certified operations must adhere to the following: (1) A variance from the requirement to source dairy animals that have been under continuous organic management from the last third of gestation, as stated in paragraph (a)(2) of this section, may be granted by the Administrator to certified operations that are small businesses, as determined in 13 CFR part 121, for any of the following reasons: (i) The certified operation selling the transitioned animals is part of a bankruptcy proceeding or a forced sale; or (ii) The certified operation has become insolvent, must liquidate its animals, and as a result has initiated a formal process to cease its operations; or (iii) The certified operation wishes to conduct an intergenerational transfer of transitioned animals to an immediate family member. (2) A certifying agent must request a variance on behalf of a certified operation, in writing, to the Administrator within ten days of receiving the request of variance from the operation. The variance request shall include documentation to demonstrate one or more of the circumstances listed in paragraph (d)(1) of this section. (3) The Administrator will provide written notification to the certifying agent and to the operation(s) involved as to whether the variance is granted or rejected. [87 FR 19772, Apr. 5, 2022] Sec. 205.237 Livestock feed. (a) The producer of an organic livestock operation must provide livestock with a total feed ration composed of agricultural products, including pasture and forage, that are organically produced and handled by operations certified under this part, except as provided in Sec. 205.236(a)(2)(iii) and (a)(3), except, that, synthetic substances allowed under Sec. 205.603 and nonsynthetic substances not prohibited under Sec. 205.604 may be used as feed additives and feed supplements, Provided, That, all agricultural ingredients included in the ingredients list, for such additives and supplements, shall have been produced and handled organically. (b) The producer of an organic operation must not: (1) Use animal drugs, including hormones, to promote growth; (2) Provide feed supplements or additives in amounts above those needed for adequate nutrition and health maintenance for the species at its specific stage of life; (3) Feed plastic pellets for roughage; (4) Feed formulas containing urea or manure; (5) Feed mammalian or poultry slaughter by-products to mammals or poultry; (6) Use feed, feed additives, and feed supplements in violation of the Federal Food, Drug, and Cosmetic Act; (7) Provide feed or forage to which any antibiotic including ionophores has been added; or (8) Prevent, withhold, restrain, or otherwise restrict ruminant animals from actively obtaining feed grazed from pasture during the grazing season, except for conditions as described under Sec. 205.239(b) and (c). (c) During the grazing season, producers shall: (1) Provide not more than an average of 70 percent of a ruminant's dry matter demand from dry matter fed (dry matter fed does not include dry matter grazed from residual forage or vegetation rooted in pasture). This shall be calculated as an average over the entire grazing season for each type and class of animal. Ruminant animals must be grazed throughout the entire grazing season for the geographical region, which shall be not less than 120 days per calendar year. Due to weather, season, and/or climate, the grazing season may or may not be continuous. (2) Provide pasture of a sufficient quality and quantity to graze throughout the grazing season and to provide all ruminants under the organic system plan with an average of not less than 30 percent of their dry matter intake from grazing throughout the grazing season: Except, That, [[Page 415]] (i) Ruminant animals denied pasture in accordance with Sec. 205.239(b)(1) through (8), and Sec. 205.239(c)(1) through (3), shall be provided with an average of not less than 30 percent of their dry matter intake from grazing throughout the periods that they are on pasture during the grazing season; (ii) Breeding bulls shall be exempt from the 30 percent dry matter intake from grazing requirement of this section and management on pasture requirement of Sec. 205.239(c)(2); Provided, That, any animal maintained under this exemption shall not be sold, labeled, used, or represented as organic slaughter stock. (d) Ruminant livestock producers shall: (1) Describe the total feed ration for each type and class of animal. The description must include: (i) All feed produced on-farm; (ii) All feed purchased from off-farm sources; (iii) The percentage of each feed type, including pasture, in the total ration; and (iv) A list of all feed supplements and additives. (2) Document the amount of each type of feed actually fed to each type and class of animal. (3) Document changes that are made to all rations throughout the year in response to seasonal grazing changes. (4) Provide the method for calculating dry matter demand and dry matter intake. [65 FR 80637, Dec. 21, 2000, as amended at 75 FR 7193, Feb. 17, 2010; 87 FR 19773, Apr. 5, 2022] Sec. 205.238 Livestock health care practice standard. (a) The producer must establish and maintain preventive livestock health care practices, including: (1) Selection of species and types of livestock with regard to suitability for site-specific conditions and resistance to prevalent diseases and parasites; (2) Provision of a feed ration sufficient to meet nutritional requirements, including vitamins, minerals, protein and/or amino acids, fatty acids, energy sources, and fiber (ruminants); (3) Establishment of appropriate housing, pasture conditions, and sanitation practices to minimize the occurrence and spread of diseases and parasites; (4) Provision of conditions which allow for exercise, freedom of movement, and reduction of stress appropriate to the species; (5) Performance of physical alterations as needed to promote the animal's welfare and in a manner that minimizes pain and stress; and (6) Administration of vaccines and other veterinary biologics. (b) When preventive practices and veterinary biologics are inadequate to prevent sickness, a producer may administer synthetic medications: Provided, That, such medications are allowed under Sec. 205.603. Parasiticides allowed under Sec. 205.603 may be used on: (1) Breeder stock, when used prior to the last third of gestation but not during lactation for progeny that are to be sold, labeled, or represented as organically produced; and (2) Dairy animals, as allowed under Sec. 205.603. (3) Fiber bearing animals, as allowed under Sec. 205.603. (c) The producer of an organic livestock operation must not: (1) Sell, label, or represent as organic any animal or edible product derived from any animal treated with antibiotics, any substance that contains a synthetic substance not allowed under Sec. 205.603, or any substance that contains a nonsynthetic substance prohibited in Sec. 205.604. (2) Administer any animal drug, other than vaccinations, in the absence of illness; (3) Administer hormones for growth promotion; (4) Administer synthetic parasiticides on a routine basis; (5) Administer synthetic parasiticides to slaughter stock; (6) Administer animal drugs in violation of the Federal Food, Drug, and Cosmetic Act; or (7) Withhold medical treatment from a sick animal in an effort to preserve its organic status. All appropriate medications must be used to restore an animal to health when methods acceptable to organic production fail. Livestock treated with a prohibited substance must be clearly identified and [[Page 416]] shall not be sold, labeled, or represented as organically produced. [65 FR 80637, Dec. 21, 2000, as amended at 83 FR 66571, Dec. 27, 2018] Sec. 205.239 Livestock living conditions. (a) The producer of an organic livestock operation must establish and maintain year-round livestock living conditions which accommodate the health and natural behavior of animals, including: (1) Year-round access for all animals to the outdoors, shade, shelter, exercise areas, fresh air, clean water for drinking, and direct sunlight, suitable to the species, its stage of life, the climate, and the environment: Except, that, animals may be temporarily denied access to the outdoors in accordance with Sec. Sec. 205.239(b) and (c). Yards, feeding pads, and feedlots may be used to provide ruminants with access to the outdoors during the non-grazing season and supplemental feeding during the grazing season. Yards, feeding pads, and feedlots shall be large enough to allow all ruminant livestock occupying the yard, feeding pad, or feedlot to feed simultaneously without crowding and without competition for food. Continuous total confinement of any animal indoors is prohibited. Continuous total confinement of ruminants in yards, feeding pads, and feedlots is prohibited. (2) For all ruminants, management on pasture and daily grazing throughout the grazing season(s) to meet the requirements of Sec. 205.237, except as provided for in paragraphs (b), (c), and (d) of this section. (3) Appropriate clean, dry bedding. When roughages are used as bedding, they shall have been organically produced in accordance with this part by an operation certified under this part, except as provided in Sec. 205.236(a)(2)(iii), and, if applicable, organically handled by operations certified under this part. (4) Shelter designed to allow for: (i) Natural maintenance, comfort behaviors, and opportunity to exercise; (ii) Temperature level, ventilation, and air circulation suitable to the species; and (iii) Reduction of potential for livestock injury; (5) The use of yards, feeding pads, feedlots and laneways that shall be well-drained, kept in good condition (including frequent removal of wastes), and managed to prevent runoff of wastes and contaminated waters to adjoining or nearby surface water and across property boundaries. (b) The producer of an organic livestock operation may provide temporary confinement or shelter for an animal because of: (1) Inclement weather; (2) The animal's stage of life: Except, that lactation is not a stage of life that would exempt ruminants from any of the mandates set forth in this regulation; (3) Conditions under which the health, safety, or well-being of the animal could be jeopardized; (4) Risk to soil or water quality; (5) Preventive healthcare procedures or for the treatment of illness or injury (neither the various life stages nor lactation is an illness or injury); (6) Sorting or shipping animals and livestock sales: Provided, that, the animals shall be maintained under continuous organic management, including organic feed, throughout the extent of their allowed confinement; (7) Breeding: Except, that, bred animals shall not be denied access to the outdoors and, once bred, ruminants shall not be denied access to pasture during the grazing season; or (8) 4-H, Future Farmers of America and other youth projects, for no more than one week prior to a fair or other demonstration, through the event and up to 24 hours after the animals have arrived home at the conclusion of the event. These animals must have been maintained under continuous organic management, including organic feed, during the extent of their allowed confinement for the event. (c) The producer of an organic livestock operation may, in addition to the times permitted under Sec. 205.239(b), temporarily deny a ruminant animal pasture or outdoor access under the following conditions: (1) One week at the end of a lactation for dry off (for denial of access to pasture only), three weeks prior to parturition (birthing), parturition, and up to one week after parturition; [[Page 417]] (2) In the case of newborn dairy cattle for up to six months, after which they must be on pasture during the grazing season and may no longer be individually housed: Provided, That, an animal shall not be confined or tethered in a way that prevents the animal from lying down, standing up, fully extending its limbs, and moving about freely; (3) In the case of fiber bearing animals, for short periods for shearing; and (4) In the case of dairy animals, for short periods daily for milking. Milking must be scheduled in a manner to ensure sufficient grazing time to provide each animal with an average of at least 30 percent DMI from grazing throughout the grazing season. Milking frequencies or duration practices cannot be used to deny dairy animals pasture. (d) Ruminant slaughter stock, typically grain finished, shall be maintained on pasture for each day that the finishing period corresponds with the grazing season for the geographical location: Except, that, yards, feeding pads, or feedlots may be used to provide finish feeding rations. During the finishing period, ruminant slaughter stock shall be exempt from the minimum 30 percent DMI requirement from grazing. Yards, feeding pads, or feedlots used to provide finish feeding rations shall be large enough to allow all ruminant slaughter stock occupying the yard, feeding pad, or feed lot to feed simultaneously without crowding and without competition for food. The finishing period shall not exceed one-fifth (\1/5\) of the animal's total life or 120 days, whichever is shorter. (e) The producer of an organic livestock operation must manage manure in a manner that does not contribute to contamination of crops, soil, or water by plant nutrients, heavy metals, or pathogenic organisms and optimizes recycling of nutrients and must manage pastures and other outdoor access areas in a manner that does not put soil or water quality at risk. [65 FR 80637, Dec. 21, 2000, as amended at 75 FR 7193, Feb. 17, 2010; 87 FR 19773, Apr. 5, 2022] Sec. 205.240 Pasture practice standard. The producer of an organic livestock operation must, for all ruminant livestock on the operation, demonstrate through auditable records in the organic system plan, a functioning management plan for pasture. (a) Pasture must be managed as a crop in full compliance with Sec. Sec. 205.202, 205.203(d) and (e), 205.204, and 205.206(b) through (f). Land used for the production of annual crops for ruminant grazing must be managed in full compliance with Sec. Sec. 205.202 through 205.206. Irrigation shall be used, as needed, to promote pasture growth when the operation has irrigation available for use on pasture. (b) Producers must provide pasture in compliance with Sec. 205.239(a)(2) and manage pasture to comply with the requirements of: Sec. 205.237(c)(2), to annually provide a minimum of 30 percent of a ruminant's dry matter intake (DMI), on average, over the course of the grazing season(s); Sec. 205.238(a)(3), to minimize the occurrence and spread of diseases and parasites; and Sec. 205.239(e) to refrain from putting soil or water quality at risk. (c) A pasture plan must be included in the producer's organic system plan, and be updated annually in accordance with Sec. 205.406(a). The producer may resubmit the previous year's pasture plan when no change has occurred in the plan. The pasture plan may consist of a pasture/ rangeland plan developed in cooperation with a Federal, State, or local conservation office: Provided, that, the submitted plan addresses all of the requirements of Sec. 205.240(c)(1) through (8). When a change to an approved pasture plan is contemplated, which may affect the operation's compliance with the Act or the regulations in this part, the producer shall seek the certifying agent's agreement on the change prior to implementation. The pasture plan shall include a description of the: (1) Types of pasture provided to ensure that the feed requirements of Sec. 205.237 are being met. (2) Cultural and management practices to be used to ensure pasture of a sufficient quality and quantity is available to graze throughout the grazing season and to provide all ruminants [[Page 418]] under the organic system plan, except exempted classes identified in Sec. 205.239(c)(1) through (3), with an average of not less than 30 percent of their dry matter intake from grazing throughout the grazing season. (3) Grazing season for the livestock operation's regional location. (4) Location and size of pastures, including maps giving each pasture its own identification. (5) The types of grazing methods to be used in the pasture system. (6) Location and types of fences, except for temporary fences, and the location and source of shade and the location and source of water. (7) Soil fertility and seeding systems. (8) Erosion control and protection of natural wetlands and riparian areas practices. [75 FR 7194, Feb. 17, 2010] Sec. Sec. 205.243-205.269 [Reserved] Sec. 205.270 Organic handling requirements. (a) Mechanical or biological methods, including but not limited to cooking, baking, curing, heating, drying, mixing, grinding, churning, separating, distilling, extracting, slaughtering, cutting, fermenting, eviscerating, preserving, dehydrating, freezing, chilling, or otherwise manufacturing, and the packaging, canning, jarring, or otherwise enclosing food in a container may be used to process an organically produced agricultural product for the purpose of retarding spoilage or otherwise preparing the agricultural product for market. (b) Nonagricultural substances allowed under Sec. 205.605 and nonorganically produced agricultural products allowed under Sec. 205.606 may be used: (1) In or on a processed agricultural product intended to be sold, labeled, or represented as ``organic,'' pursuant to Sec. 205.301(b), if not commercially available in organic form. (2) In or on a processed agricultural product intended to be sold, labeled, or represented as ``made with organic (specified ingredients or food group(s)),'' pursuant to Sec. 205.301(c). (c) The handler of an organic handling operation must not use in or on agricultural products intended to be sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)),'' or in or on any ingredients labeled as organic: (1) Practices prohibited under paragraphs (e) and (f) of Sec. 205.105. (2) A volatile synthetic solvent or other synthetic processing aid not allowed under Sec. 205.605: Except, That, nonorganic ingredients in products labeled ``made with organic (specified ingredients or food group(s))'' are not subject to this requirement. Sec. 205.271 Facility pest management practice standard. (a) The producer or handler of an organic facility must use management practices to prevent pests, including but not limited to: (1) Removal of pest habitat, food sources, and breeding areas; (2) Prevention of access to handling facilities; and (3) Management of environmental factors, such as temperature, light, humidity, atmosphere, and air circulation, to prevent pest reproduction. (b) Pests may be controlled through: (1) Mechanical or physical controls including but not limited to traps, light, or sound; or (2) Lures and repellents using nonsynthetic or synthetic substances consistent with the National List. (c) If the practices provided for in paragraphs (a) and (b) of this section are not effective to prevent or control pests, a nonsynthetic or synthetic substance consistent with the National List may be applied. (d) If the practices provided for in paragraphs (a), (b), and (c) of this section are not effective to prevent or control facility pests, a synthetic substance not on the National List may be applied: Provided, That, the handler and certifying agent agree on the substance, method of application, and measures to be taken to prevent contact of the organically produced products or ingredients with the substance used. (e) The handler of an organic handling operation who applies a nonsynthetic or synthetic substance to prevent or control pests must update the operation's organic handling plan to [[Page 419]] reflect the use of such substances and methods of application. The updated organic plan must include a list of all measures taken to prevent contact of the organically produced products or ingredients with the substance used. (f) Notwithstanding the practices provided for in paragraphs (a), (b), (c), and (d) of this section, a handler may otherwise use substances to prevent or control pests as required by Federal, State, or local laws and regulations: Provided, That, measures are taken to prevent contact of the organically produced products or ingredients with the substance used. Sec. 205.272 Commingling and contact with prohibited substance prevention practice standard. (a) The handler of an organic handling operation must implement measures necessary to prevent the commingling of organic and nonorganic products and protect organic products from contact with prohibited substances. (b) The following are prohibited for use in the handling of any organically produced agricultural product or ingredient labeled in accordance with subpart D of this part: (1) Packaging materials, and storage containers, or bins that contain a synthetic fungicide, preservative, or fumigant; (2) The use or reuse of any bag or container that has been in contact with any substance in such a manner as to compromise the organic integrity of any organically produced product or ingredient placed in those containers, unless such reusable bag or container has been thoroughly cleaned and poses no risk of contact of the organically produced product or ingredient with the substance used. Sec. Sec. 205.273-205.289 [Reserved] Sec. 205.290 Temporary variances. (a) Temporary variances from the requirements in Sec. Sec. 205.203 through 205.207, 205.236 through 205.240 and 205.270 through 205.272 may be established by the Administrator for the following reasons: (1) Natural disasters declared by the Secretary; (2) Damage caused by drought, wind, flood, excessive moisture, hail, tornado, earthquake, fire, or other business interruption; and (3) Practices used for the purpose of conducting research or trials of techniques, varieties, or ingredients used in organic production or handling. (b) A State organic program's governing State official or certifying agent may recommend in writing to the Administrator that a temporary variance from a standard set forth in subpart C of this part for organic production or handling operations be established: Provided, That, such variance is based on one or more of the reasons listed in paragraph (a) of this section. (c) The Administrator will provide written notification to certifying agents upon establishment of a temporary variance applicable to the certifying agent's certified production or handling operations and specify the period of time it shall remain in effect, subject to extension as the Administrator deems necessary. (d) A certifying agent, upon notification from the Administrator of the establishment of a temporary variance, must notify each production or handling operation it certifies to which the temporary variance applies. (e) Temporary variances will not be granted for any practice, material, or procedure prohibited under Sec. 205.105. [65 FR 80637, Dec. 21, 2000, as amended at 75 FR 7194, Feb. 17, 2010] Sec. Sec. 205.291-205.299 [Reserved] Subpart D_Labels, Labeling, and Market Information Sec. 205.300 Use of the term, ``organic.'' (a) The term, ``organic,'' may only be used on labels and in labeling of raw or processed agricultural products, including ingredients, that have been produced and handled in accordance with the regulations in this part. The term, ``organic,'' may not be used in a product name to modify a nonorganic ingredient in the product. (b) Products for export, produced and certified to foreign national organic [[Page 420]] standards or foreign contract buyer requirements, may be labeled in accordance with the organic labeling requirements of the receiving country or contract buyer: Provided, That, the shipping containers and shipping documents meet the labeling requirements specified in Sec. 205.307(c). (c) Products produced in a foreign country and exported for sale in the United States must be certified pursuant to subpart E of this part and labeled pursuant to this subpart D. (d) Livestock feeds produced in accordance with the requirements of this part must be labeled in accordance with the requirements of Sec. 205.306. Sec. 205.301 Product composition. (a) Products sold, labeled, or represented as ``100 percent organic.'' A raw or processed agricultural product sold, labeled, or represented as ``100 percent organic'' must contain (by weight or fluid volume, excluding water and salt) 100 percent organically produced ingredients. If labeled as organically produced, such product must be labeled pursuant to Sec. 205.303. (b) Products sold, labeled, or represented as ``organic.'' A raw or processed agricultural product sold, labeled, or represented as ``organic'' must contain (by weight or fluid volume, excluding water and salt) not less than 95 percent organically produced raw or processed agricultural products. Any remaining product ingredients must be organically produced, unless not commercially available in organic form, or must be nonagricultural substances or nonorganically produced agricultural products produced consistent with the National List in subpart G of this part. If labeled as organically produced, such product must be labeled pursuant to Sec. 205.303. (c) Products sold, labeled, or represented as ``made with organic (specified ingredients or food group(s)).'' Multiingredient agricultural product sold, labeled, or represented as ``made with organic (specified ingredients or food group(s))'' must contain (by weight or fluid volume, excluding water and salt) at least 70 percent organically produced ingredients which are produced and handled pursuant to requirements in subpart C of this part. No ingredients may be produced using prohibited practices specified in paragraphs (f)(1), (2), and (3) of Sec. 205.301. Nonorganic ingredients may be produced without regard to paragraphs (f)(4), (5), (6), and (7) of Sec. 205.301. If labeled as containing organically produced ingredients or food groups, such product must be labeled pursuant to Sec. 205.304. (d) Products with less than 70 percent organically produced ingredients. The organic ingredients in multiingredient agricultural product containing less than 70 percent organically produced ingredients (by weight or fluid volume, excluding water and salt) must be produced and handled pursuant to requirements in subpart C of this part. The nonorganic ingredients may be produced and handled without regard to the requirements of this part. Multiingredient agricultural product containing less than 70 percent organically produced ingredients may represent the organic nature of the product only as provided in Sec. 205.305. (e) Livestock feed. (1) A raw or processed livestock feed product sold, labeled, or represented as ``100 percent organic'' must contain (by weight or fluid volume, excluding water and salt) not less than 100 percent organically produced raw or processed agricultural product. (2) A raw or processed livestock feed product sold, labeled, or represented as ``organic'' must be produced in conformance with Sec. 205.237. (f) All products labeled as ``100 percent organic'' or ``organic'' and all ingredients identified as ``organic'' in the ingredient statement of any product must not: (1) Be produced using excluded methods, pursuant to Sec. 205.105(e); (2) Be produced using ionizing radiation, pursuant to Sec. 205.105(f); (3) Be processed using sewage sludge, pursuant to Sec. 205.105(g); (4) Be processed using processing aids not approved on the National List of Allowed and Prohibited Substances in subpart G of this part: Except, That, products labeled as ``100 percent organic,'' if processed, must be processed using organically produced processing aids; (5) Contain sulfites, nitrates, or nitrites added during the production or [[Page 421]] handling process, Except, that, wine containing added sulfites may be labeled ``made with organic grapes''; (6) Be produced using nonorganic ingredients when organic ingredients are available; or (7) Include organic and nonorganic forms of the same ingredient. [65 FR 80637, Dec. 21, 2000, as amended at 80 FR 6429, Feb. 5, 2015] Sec. 205.302 Calculating the percentage of organically produced ingredients. (a) The percentage of all organically produced ingredients in an agricultural product sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)),'' or that include organic ingredients must be calculated by: (1) Dividing the total net weight (excluding water and salt) of combined organic ingredients at formulation by the total weight (excluding water and salt) of the finished product. (2) Dividing the fluid volume of all organic ingredients (excluding water and salt) by the fluid volume of the finished product (excluding water and salt) if the product and ingredients are liquid. If the liquid product is identified on the principal display panel or information panel as being reconstituted from concentrates, the calculation should be made on the basis of single-strength concentrations of the ingredients and finished product. (3) For products containing organically produced ingredients in both solid and liquid form, dividing the combined weight of the solid ingredients and the weight of the liquid ingredients (excluding water and salt) by the total weight (excluding water and salt) of the finished product. (b) The percentage of all organically produced ingredients in an agricultural product must be rounded down to the nearest whole number. (c) The percentage must be determined by the handler who affixes the label on the consumer package and verified by the certifying agent of the handler. The handler may use information provided by the certified operation in determining the percentage. Sec. 205.303 Packaged products labeled ``100 percent organic'' or ``organic.'' (a) Agricultural products in packages described in Sec. 205.301(a) and (b) may display, on the principal display panel, information panel, and any other panel of the package and on any labeling or market information concerning the product, the following: (1) The term, ``100 percent organic'' or ``organic,'' as applicable, to modify the name of the product; (2) For products labeled ``organic,'' the percentage of organic ingredients in the product; (The size of the percentage statement must not exceed one-half the size of the largest type size on the panel on which the statement is displayed and must appear in its entirety in the same type size, style, and color without highlighting.) (3) The term, ``organic,'' to identify the organic ingredients in multiingredient products labeled ``100 percent organic''; (4) The USDA seal; and/or (5) The seal, logo, or other identifying mark of the certifying agent which certified the production or handling operation producing the finished product and any other certifying agent which certified production or handling operations producing raw organic product or organic ingredients used in the finished product: Provided, That, the handler producing the finished product maintain records, pursuant to this part, verifying organic certification of the operations producing such ingredients, and: Provided further, That, such seals or marks are not individually displayed more prominently than the USDA seal. (b) Agricultural products in packages described in Sec. 205.301(a) and (b) must: (1) For products labeled ``organic,'' identify each organic ingredient in the ingredient statement with the word, ``organic,'' or with an asterisk or other reference mark which is defined below the ingredient statement to indicate the ingredient is organically produced. Water or salt included as ingredients cannot be identified as organic. (2) On the information panel, below the information identifying the handler or distributor of the product and preceded by the statement, ``Certified organic by * * *,'' or similar phrase, [[Page 422]] identify the name of the certifying agent that certified the handler of the finished product and may display the business address, Internet address, or telephone number of the certifying agent in such label. Sec. 205.304 Packaged products labeled ``made with organic (specified ingredients or food group(s)).'' (a) Agricultural products in packages described in Sec. 205.301(c) may display on the principal display panel, information panel, and any other panel and on any labeling or market information concerning the product: (1) The statement: (i) ``Made with organic (specified ingredients)'': Provided, That, the statement does not list more than three organically produced ingredients; or (ii) ``Made with organic (specified food groups)'': Provided, That, the statement does not list more than three of the following food groups: beans, fish, fruits, grains, herbs, meats, nuts, oils, poultry, seeds, spices, sweeteners, and vegetables or processed milk products; and, Provided further, That, all ingredients of each listed food group in the product must be organically produced; and (iii) Which appears in letters that do not exceed one-half the size of the largest type size on the panel and which appears in its entirety in the same type size, style, and color without highlighting. (2) The percentage of organic ingredients in the product. The size of the percentage statement must not exceed one-half the size of the largest type size on the panel on which the statement is displayed and must appear in its entirety in the same type size, style, and color without highlighting. (3) The seal, logo, or other identifying mark of the certifying agent that certified the handler of the finished product. (b) Agricultural products in packages described in Sec. 205.301(c) must: (1) In the ingredient statement, identify each organic ingredient with the word, ``organic,'' or with an asterisk or other reference mark which is defined below the ingredient statement to indicate the ingredient is organically produced. Water or salt included as ingredients cannot be identified as organic. (2) On the information panel, below the information identifying the handler or distributor of the product and preceded by the statement, ``Certified organic by * * *,'' or similar phrase, identify the name of the certifying agent that certified the handler of the finished product: Except, That, the business address, Internet address, or telephone number of the certifying agent may be included in such label. (c) Agricultural products in packages described in Sec. 205.301(c) must not display the USDA seal. Sec. 205.305 Multi-ingredient packaged products with less than 70 percent organically produced ingredients. (a) An agricultural product with less than 70 percent organically produced ingredients may only identify the organic content of the product by: (1) Identifying each organically produced ingredient in the ingredient statement with the word, ``organic,'' or with an asterisk or other reference mark which is defined below the ingredient statement to indicate the ingredient is organically produced, and (2) If the organically produced ingredients are identified in the ingredient statement, displaying the product's percentage of organic contents on the information panel. (b) Agricultural products with less than 70 percent organically produced ingredients must not display: (1) The USDA seal; and (2) Any certifying agent seal, logo, or other identifying mark which represents organic certification of a product or product ingredients. Sec. 205.306 Labeling of livestock feed. (a) Livestock feed products described in Sec. 205.301(e)(1) and (e)(2) may display on any package panel the following terms: (1) The statement, ``100 percent organic'' or ``organic,'' as applicable, to modify the name of the feed product; (2) The USDA seal; (3) The seal, logo, or other identifying mark of the certifying agent which certified the production or handling operation producing the raw or processed organic ingredients used in [[Page 423]] the finished product, Provided, That, such seals or marks are not displayed more prominently than the USDA seal; (4) The word, ``organic,'' or an asterisk or other reference mark which is defined on the package to identify ingredients that are organically produced. Water or salt included as ingredients cannot be identified as organic. (b) Livestock feed products described in Sec. 205.301(e)(1) and (e)(2) must: (1) On the information panel, below the information identifying the handler or distributor of the product and preceded by the statement, ``Certified organic by * * *,'' or similar phrase, display the name of the certifying agent that certified the handler of the finished product. The business address, Internet address, or telephone number of the certifying agent may be included in such label. (2) Comply with other Federal agency or State feed labeling requirements as applicable. Sec. 205.307 Labeling of nonretail containers used for only shipping or storage of raw or processed agricultural products labeled as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)).'' (a) Nonretail containers used only to ship or store raw or processed agricultural product labeled as containing organic ingredients may display the following terms or marks: (1) The name and contact information of the certifying agent which certified the handler which assembled the final product; (2) Identification of the product as organic; (3) Special handling instructions needed to maintain the organic integrity of the product; (4) The USDA seal; (5) The seal, logo, or other identifying mark of the certifying agent that certified the organic production or handling operation that produced or handled the finished product. (b) Nonretail containers used to ship or store raw or processed agricultural product labeled as containing organic ingredients must display the production lot number of the product if applicable. (c) Shipping containers of domestically produced product labeled as organic intended for export to international markets may be labeled in accordance with any shipping container labeling requirements of the foreign country of destination or the container labeling specifications of a foreign contract buyer: Provided, That, the shipping containers and shipping documents accompanying such organic products are clearly marked ``For Export Only'' and: Provided further, That, proof of such container marking and export must be maintained by the handler in accordance with recordkeeping requirements for exempt and excluded operations under Sec. 205.101. Sec. 205.308 Agricultural products in other than packaged form at the point of retail sale that are sold, labeled, or represented as ``100 percent organic'' or ``organic.'' (a) Agricultural products in other than packaged form may use the term, ``100 percent organic'' or ``organic,'' as applicable, to modify the name of the product in retail display, labeling, and display containers: Provided, That, the term, ``organic,'' is used to identify the organic ingredients listed in the ingredient statement. (b) If the product is prepared in a certified facility, the retail display, labeling, and display containers may use: (1) The USDA seal; and (2) The seal, logo, or other identifying mark of the certifying agent that certified the production or handling operation producing the finished product and any other certifying agent which certified operations producing raw organic product or organic ingredients used in the finished product: Provided, That, such seals or marks are not individually displayed more prominently than the USDA seal. Sec. 205.309 Agricultural products in other than packaged form at the point of retail sale that are sold, labeled, or represented as ``made with organic (specified ingredients or food group(s)).'' (a) Agricultural products in other than packaged form containing between 70 and 95 percent organically produced ingredients may use the phrase, ``made with organic (specified [[Page 424]] ingredients or food group(s)),'' to modify the name of the product in retail display, labeling, and display containers. (1) Such statement must not list more than three organic ingredients or food groups, and (2) In any such display of the product's ingredient statement, the organic ingredients are identified as ``organic.'' (b) If prepared in a certified facility, such agricultural products labeled as ``made with organic (specified ingredients or food group(s))'' in retail displays, display containers, and market information may display the certifying agent's seal, logo, or other identifying mark. Sec. 205.310 Agricultural products produced on an exempt or excluded operation. (a) An agricultural product organically produced or handled on an exempt or excluded operation must not: (1) Display the USDA seal or any certifying agent's seal or other identifying mark which represents the exempt or excluded operation as a certified organic operation, or (2) Be represented as a certified organic product or certified organic ingredient to any buyer. (b) An agricultural product organically produced or handled on an exempt or excluded operation may be identified as an organic product or organic ingredient in a multiingredient product produced by the exempt or excluded operation. Such product or ingredient must not be identified or represented as ``organic'' in a product processed by others. (c) Such product is subject to requirements specified in paragraph (a) of Sec. 205.300, and paragraphs (f)(1) through (f)(7) of Sec. 205.301. Sec. 205.311 USDA Seal. (a) The USDA seal described in paragraphs (b) and (c) of this section may be used only for raw or processed agricultural products described in paragraphs (a), (b), (e)(1), and (e)(2) of Sec. 205.301. (b) The USDA seal must replicate the form and design of the example in figure 1 and must be printed legibly and conspicuously: (1) On a white background with a brown outer circle and with the term, ``USDA,'' in green overlaying a white upper semicircle and with the term, ``organic,'' in white overlaying the green lower half circle; or (2) On a white or transparent background with black outer circle and black ``USDA'' on a white or transparent upper half of the circle with a contrasting white or transparent ``organic'' on the black lower half circle. (3) The green or black lower half circle may have four light lines running from left to right and disappearing at the point on the right horizon to resemble a cultivated field. [GRAPHIC] [TIFF OMITTED] TR21DE00.001 Sec. Sec. 205.312-205.399 [Reserved] Subpart E_Certification Sec. 205.400 General requirements for certification. A person seeking to receive or maintain organic certification under the regulations in this part must: (a) Comply with the Act and applicable organic production and handling regulations of this part; (b) Establish, implement, and update annually an organic production or handling system plan that is submitted to an accredited certifying agent as provided for in Sec. 205.200; (c) Permit on-site inspections with complete access to the production or handling operation, including noncertified production and handling areas, structures, and offices by the certifying agent as provided for in Sec. 205.403; (d) Maintain all records applicable to the organic operation for not less than [[Page 425]] 5 years beyond their creation and allow authorized representatives of the Secretary, the applicable State organic program's governing State official, and the certifying agent access to such records during normal business hours for review and copying to determine compliance with the Act and the regulations in this part, as provided for in Sec. 205.103; (e) Submit the applicable fees charged by the certifying agent; and (f) Immediately notify the certifying agent concerning any: (1) Application, including drift, of a prohibited substance to any field, production unit, site, facility, livestock, or product that is part of an operation; and (2) Change in a certified operation or any portion of a certified operation that may affect its compliance with the Act and the regulations in this part. [65 FR 80637, Dec. 21, 2000, as amended at 80 FR 6429, Feb. 5, 2015] Sec. 205.401 Application for certification. A person seeking certification of a production or handling operation under this subpart must submit an application for certification to a certifying agent. The application must include the following information: (a) An organic production or handling system plan, as required in Sec. 205.200; (b) The name of the person completing the application; the applicant's business name, address, and telephone number; and, when the applicant is a corporation, the name, address, and telephone number of the person authorized to act on the applicant's behalf; (c) The name(s) of any organic certifying agent(s) to which application has previously been made; the year(s) of application; the outcome of the application(s) submission, including, when available, a copy of any notification of noncompliance or denial of certification issued to the applicant for certification; and a description of the actions taken by the applicant to correct the noncompliances noted in the notification of noncompliance, including evidence of such correction; and (d) Other information necessary to determine compliance with the Act and the regulations in this part. Sec. 205.402 Review of application. (a) Upon acceptance of an application for certification, a certifying agent must: (1) Review the application to ensure completeness pursuant to Sec. 205.401; (2) Determine by a review of the application materials whether the applicant appears to comply or may be able to comply with the applicable requirements of subpart C of this part; (3) Verify that an applicant who previously applied to another certifying agent and received a notification of noncompliance or denial of certification, pursuant to Sec. 205.405, has submitted documentation to support the correction of any noncompliances identified in the notification of noncompliance or denial of certification, as required in Sec. 205.405(e); and (4) Schedule an on-site inspection of the operation to determine whether the applicant qualifies for certification if the review of application materials reveals that the production or handling operation may be in compliance with the applicable requirements of subpart C of this part. (b) The certifying agent shall within a reasonable time: (1) Review the application materials received and communicate its findings to the applicant; (2) Provide the applicant with a copy of the on-site inspection report, as approved by the certifying agent, for any on-site inspection performed; and (3) Provide the applicant with a copy of the test results for any samples taken by an inspector. (c) The applicant may withdraw its application at any time. An applicant who withdraws its application shall be liable for the costs of services provided up to the time of withdrawal of its application. An applicant that voluntarily withdrew its application prior to the issuance of a notice of noncompliance will not be issued a notice of noncompliance. Similarly, an applicant that voluntarily withdrew its application prior to the issuance of a notice of certification denial will not be issued a notice of certification denial. [[Page 426]] Sec. 205.403 On-site inspections. (a) On-site inspections. (1) A certifying agent must conduct an initial on-site inspection of each production unit, facility, and site that produces or handles organic products and that is included in an operation for which certification is requested. An on-site inspection shall be conducted annually thereafter for each certified operation that produces or handles organic products for the purpose of determining whether to approve the request for certification or whether the certification of the operation should continue. (2)(i) A certifying agent may conduct additional on-site inspections of applicants for certification and certified operations to determine compliance with the Act and the regulations in this part. (ii) The Administrator or State organic program's governing State official may require that additional inspections be performed by the certifying agent for the purpose of determining compliance with the Act and the regulations in this part. (iii) Additional inspections may be announced or unannounced at the discretion of the certifying agent or as required by the Administrator or State organic program's governing State official. (b) Scheduling. (1) The initial on-site inspection must be conducted within a reasonable time following a determination that the applicant appears to comply or may be able to comply with the requirements of subpart C of this part: Except, That, the initial inspection may be delayed for up to 6 months to comply with the requirement that the inspection be conducted when the land, facilities, and activities that demonstrate compliance or capacity to comply can be observed. (2) All on-site inspections must be conducted when an authorized representative of the operation who is knowledgeable about the operation is present and at a time when land, facilities, and activities that demonstrate the operation's compliance with or capability to comply with the applicable provisions of subpart C of this part can be observed, except that this requirement does not apply to unannounced on-site inspections. (c) Verification of information. The on-site inspection of an operation must verify: (1) The operation's compliance or capability to comply with the Act and the regulations in this part; (2) That the information, including the organic production or handling system plan, provided in accordance with Sec. Sec. 205.401, 205.406, and 205.200, accurately reflects the practices used or to be used by the applicant for certification or by the certified operation; (3) That prohibited substances have not been and are not being applied to the operation through means which, at the discretion of the certifying agent, may include the collection and testing of soil; water; waste; seeds; plant tissue; and plant, animal, and processed products samples. (d) Exit interview. The inspector must conduct an exit interview with an authorized representative of the operation who is knowledgeable about the inspected operation to confirm the accuracy and completeness of inspection observations and information gathered during the on-site inspection. The inspector must also address the need for any additional information as well as any issues of concern. (e) Documents to the inspected operation. (1) At the time of the inspection, the inspector shall provide the operation's authorized representative with a receipt for any samples taken by the inspector. There shall be no charge to the inspector for the samples taken. (2) A copy of the on-site inspection report and any test results will be sent to the inspected operation by the certifying agent. Sec. 205.404 Granting certification. (a) Within a reasonable time after completion of the initial on-site inspection, a certifying agent must review the on-site inspection report, the results of any analyses for substances conducted, and any additional information requested from or supplied by the applicant. If the certifying agent determines that the organic system plan and all procedures and activities of the applicant's operation are in compliance with the requirements of this part and that the applicant is able to conduct operations in accordance with the plan, [[Page 427]] the agent shall grant certification. The certification may include requirements for the correction of minor noncompliances within a specified time period as a condition of continued certification. (b) The certifying agent must issue a certificate of organic operation which specifies the: (1) Name and address of the certified operation; (2) Effective date of certification; (3) Categories of organic operation, including crops, wild crops, livestock, or processed products produced by the certified operation; and (4) Name, address, and telephone number of the certifying agent. (c) Once certified, a production or handling operation's organic certification continues in effect until surrendered by the organic operation or suspended or revoked by the certifying agent, the State organic program's governing State official, or the Administrator. Sec. 205.405 Denial of certification. (a) When the certifying agent has reason to believe, based on a review of the information specified in Sec. 205.402 or Sec. 205.404, that an applicant for certification is not able to comply or is not in compliance with the requirements of this part, the certifying agent must provide a written notification of noncompliance to the applicant. When correction of a noncompliance is not possible, a notification of noncompliance and a notification of denial of certification may be combined in one notification. The notification of noncompliance shall provide: (1) A description of each noncompliance; (2) The facts upon which the notification of noncompliance is based; and (3) The date by which the applicant must rebut or correct each noncompliance and submit supporting documentation of each such correction when correction is possible. (b) Upon receipt of such notification of noncompliance, the applicant may: (1) Correct noncompliances and submit a description of the corrective actions taken with supporting documentation to the certifying agent; (2) Correct noncompliances and submit a new application to another certifying agent: Provided, That, the applicant must include a complete application, the notification of noncompliance received from the first certifying agent, and a description of the corrective actions taken with supporting documentation; or (3) Submit written information to the issuing certifying agent to rebut the noncompliance described in the notification of noncompliance. (c) After issuance of a notification of noncompliance, the certifying agent must: (1) Evaluate the applicant's corrective actions taken and supporting documentation submitted or the written rebuttal, conduct an on-site inspection if necessary, and (i) When the corrective action or rebuttal is sufficient for the applicant to qualify for certification, issue the applicant an approval of certification pursuant to Sec. 205.404; or (ii) When the corrective action or rebuttal is not sufficient for the applicant to qualify for certification, issue the applicant a written notice of denial of certification. (2) Issue a written notice of denial of certification to an applicant who fails to respond to the notification of noncompliance. (3) Provide notice of approval or denial to the Administrator, pursuant to Sec. 205.501(a)(14). (d) A notice of denial of certification must state the reason(s) for denial and the applicant's right to: (1) Reapply for certification pursuant to Sec. Sec. 205.401 and 205.405(e); (2) Request mediation pursuant to Sec. 205.663 or, if applicable, pursuant to a State organic program; or (3) File an appeal of the denial of certification pursuant to Sec. 205.681 or, if applicable, pursuant to a State organic program. (e) An applicant for certification who has received a written notification of noncompliance or a written notice of denial of certification may apply for certification again at any time with any certifying agent, in accordance with Sec. Sec. 205.401 and 205.405(e). When such applicant submits a new application to a certifying agent other than the agent [[Page 428]] who issued the notification of noncompliance or notice of denial of certification, the applicant for certification must include a copy of the notification of noncompliance or notice of denial of certification and a description of the actions taken, with supporting documentation, to correct the noncompliances noted in the notification of noncompliance. (f) A certifying agent who receives a new application for certification, which includes a notification of noncompliance or a notice of denial of certification, must treat the application as a new application and begin a new application process pursuant to Sec. 205.402. (g) Notwithstanding paragraph (a) of this section, if a certifying agent has reason to believe that an applicant for certification has willfully made a false statement or otherwise purposefully misrepresented the applicant's operation or its compliance with the certification requirements pursuant to this part, the certifying agent may deny certification pursuant to paragraph (c)(1)(ii) of this section without first issuing a notification of noncompliance. Sec. 205.406 Continuation of certification. (a) To continue certification, a certified operation must annually pay the certification fees and submit the following information, as applicable, to the certifying agent: (1) An updated organic production or handling system plan which includes: (i) A summary statement, supported by documentation, detailing any deviations from, changes to, modifications to, or other amendments made to the previous year's organic system plan during the previous year; and (ii) Any additions or deletions to the previous year's organic system plan, intended to be undertaken in the coming year, detailed pursuant to Sec. 205.200; (2) Any additions to or deletions from the information required pursuant to Sec. 205.401(b); (3) An update on the correction of minor noncompliances previously identified by the certifying agent as requiring correction for continued certification; and (4) Other information as deemed necessary by the certifying agent to determine compliance with the Act and the regulations in this part. (b) Following the receipt of the information specified in paragraph (a) of this section, the certifying agent shall within a reasonable time arrange and conduct an on-site inspection of the certified operation pursuant to Sec. 205.403: Except, That, when it is impossible for the certifying agent to conduct the annual on-site inspection following receipt of the certified operation's annual update of information, the certifying agent may allow continuation of certification and issue an updated certificate of organic operation on the basis of the information submitted and the most recent on-site inspection conducted during the previous 12 months: Provided, That, the annual on-site inspection, required pursuant to Sec. 205.403, is conducted within the first 6 months following the certified operation's scheduled date of annual update. (c) If the certifying agent has reason to believe, based on the on- site inspection and a review of the information specified in Sec. 205.404, that a certified operation is not complying with the requirements of the Act and the regulations in this part, the certifying agent shall provide a written notification of noncompliance to the operation in accordance with Sec. 205.662. (d) If the certifying agent determines that the certified operation is complying with the Act and the regulations in this part and that any of the information specified on the certificate of organic operation has changed, the certifying agent must issue an updated certificate of organic operation pursuant to Sec. 205.404(b). Sec. Sec. 205.407-205.499 [Reserved] Subpart F_Accreditation of Certifying Agents Sec. 205.500 Areas and duration of accreditation. (a) The Administrator shall accredit a qualified domestic or foreign applicant in the areas of crops, livestock, wild crops, or handling or any combination thereof to certify a domestic [[Page 429]] or foreign production or handling operation as a certified operation. (b) Accreditation shall be for a period of 5 years from the date of approval of accreditation pursuant to Sec. 205.506. (c) In lieu of accreditation under paragraph (a) of this section, USDA will accept a foreign certifying agent's accreditation to certify organic production or handling operations if: (1) USDA determines, upon the request of a foreign government, that the standards under which the foreign government authority accredited the foreign certifying agent meet the requirements of this part; or (2) The foreign government authority that accredited the foreign certifying agent acted under an equivalency agreement negotiated between the United States and the foreign government. Sec. 205.501 General requirements for accreditation. (a) A private or governmental entity accredited as a certifying agent under this subpart must: (1) Have sufficient expertise in organic production or handling techniques to fully comply with and implement the terms and conditions of the organic certification program established under the Act and the regulations in this part; (2) Demonstrate the ability to fully comply with the requirements for accreditation set forth in this subpart; (3) Carry out the provisions of the Act and the regulations in this part, including the provisions of Sec. Sec. 205.402 through 205.406 and Sec. 205.670; (4) Use a sufficient number of adequately trained personnel, including inspectors and certification review personnel, to comply with and implement the organic certification program established under the Act and the regulations in subpart E of this part; (5) Ensure that its responsibly connected persons, employees, and contractors with inspection, analysis, and decision-making responsibilities have sufficient expertise in organic production or handling techniques to successfully perform the duties assigned. (6) Conduct an annual performance evaluation of all persons who review applications for certification, perform on-site inspections, review certification documents, evaluate qualifications for certification, make recommendations concerning certification, or make certification decisions and implement measures to correct any deficiencies in certification services; (7) Have an annual program review of its certification activities conducted by the certifying agent's staff, an outside auditor, or a consultant who has expertise to conduct such reviews and implement measures to correct any noncompliances with the Act and the regulations in this part that are identified in the evaluation; (8) Provide sufficient information to persons seeking certification to enable them to comply with the applicable requirements of the Act and the regulations in this part; (9) Maintain all records pursuant to Sec. 205.510(b) and make all such records available for inspection and copying during normal business hours by authorized representatives of the Secretary and the applicable State organic program's governing State official; (10) Maintain strict confidentiality with respect to its clients under the applicable organic certification program and not disclose to third parties (with the exception of the Secretary or the applicable State organic program's governing State official or their authorized representatives) any business-related information concerning any client obtained while implementing the regulations in this part, except as provided for in Sec. 205.504(b)(5); (11) Prevent conflicts of interest by: (i) Not certifying a production or handling operation if the certifying agent or a responsibly connected party of such certifying agent has or has held a commercial interest in the production or handling operation, including an immediate family interest or the provision of consulting services, within the 12-month period prior to the application for certification; (ii) Excluding any person, including contractors, with conflicts of interest from work, discussions, and decisions in all stages of the certification process and the monitoring of certified production or handling operations for all entities in which such person has or [[Page 430]] has held a commercial interest, including an immediate family interest or the provision of consulting services, within the 12-month period prior to the application for certification; (iii) Not permitting any employee, inspector, contractor, or other personnel to accept payment, gifts, or favors of any kind, other than prescribed fees, from any business inspected: Except, That, a certifying agent that is a not-for-profit organization with an Internal Revenue Code tax exemption or, in the case of a foreign certifying agent, a comparable recognition of not-for-profit status from its government, may accept voluntary labor from certified operations; (iv) Not giving advice or providing consultancy services, to certification applicants or certified operations, for overcoming identified barriers to certification; (v) Requiring all persons who review applications for certification, perform on-site inspections, review certification documents, evaluate qualifications for certification, make recommendations concerning certification, or make certification decisions and all parties responsibly connected to the certifying agent to complete an annual conflict of interest disclosure report; and (vi) Ensuring that the decision to certify an operation is made by a person different from those who conducted the review of documents and on-site inspection. (12)(i) Reconsider a certified operation's application for certification and, if necessary, perform a new on-site inspection when it is determined, within 12 months of certifying the operation, that any person participating in the certification process and covered under Sec. 205.501(a)(11)(ii) has or had a conflict of interest involving the applicant. All costs associated with a reconsideration of application, including onsite inspection costs, shall be borne by the certifying agent. (ii) Refer a certified operation to a different accredited certifying agent for recertification and reimburse the operation for the cost of the recertification when it is determined that any person covered under Sec. 205.501(a)(11)(i) at the time of certification of the applicant had a conflict of interest involving the applicant. (13) Accept the certification decisions made by another certifying agent accredited or accepted by USDA pursuant to Sec. 205.500; (14) Refrain from making false or misleading claims about its accreditation status, the USDA accreditation program for certifying agents, or the nature or qualities of products labeled as organically produced; (15) Submit to the Administrator a copy of: (i) Any notice of denial of certification issued pursuant to Sec. 205.405, notification of noncompliance, notification of noncompliance correction, notification of proposed suspension or revocation, and notification of suspension or revocation sent pursuant to Sec. 205.662 simultaneously with its issuance; and (ii) A list, on January 2 of each year, including the name, address, and telephone number of each operation granted certification during the preceding year; (16) Charge applicants for certification and certified production and handling operations only those fees and charges for certification activities that it has filed with the Administrator; (17) Pay and submit fees to AMS in accordance with Sec. 205.640; (18) Provide the inspector, prior to each on-site inspection, with previous on-site inspection reports and notify the inspector of its decision regarding certification of the production or handling operation site inspected by the inspector and of any requirements for the correction of minor noncompliances; (19) Accept all production or handling applications that fall within its area(s) of accreditation and certify all qualified applicants, to the extent of its administrative capacity to do so without regard to size or membership in any association or group; and (20) Demonstrate its ability to comply with a State's organic program to certify organic production or handling operations within the State. (21) Comply with, implement, and carry out any other terms and conditions determined by the Administrator to be necessary. [[Page 431]] (b) A private or governmental entity accredited as a certifying agent under this subpart may establish a seal, logo, or other identifying mark to be used by production and handling operations certified by the certifying agent to indicate affiliation with the certifying agent: Provided, That, the certifying agent: (1) Does not require use of its seal, logo, or other identifying mark on any product sold, labeled, or represented as organically produced as a condition of certification and (2) Does not require compliance with any production or handling practices other than those provided for in the Act and the regulations in this part as a condition of use of its identifying mark: Provided, That, certifying agents certifying production or handling operations within a State with more restrictive requirements, approved by the Secretary, shall require compliance with such requirements as a condition of use of their identifying mark by such operations. (c) A private entity accredited as a certifying agent must: (1) Hold the Secretary harmless for any failure on the part of the certifying agent to carry out the provisions of the Act and the regulations in this part; (2) Furnish reasonable security, in an amount and according to such terms as the Administrator may by regulation prescribe, for the purpose of protecting the rights of production and handling operations certified by such certifying agent under the Act and the regulations in this part; and (3) Transfer to the Administrator and make available to any applicable State organic program's governing State official all records or copies of records concerning the person's certification activities in the event that the certifying agent dissolves or loses its accreditation; Provided, That, such transfer shall not apply to a merger, sale, or other transfer of ownership of a certifying agent. (d) No private or governmental entity accredited as a certifying agent under this subpart shall exclude from participation in or deny the benefits of the National Organic Program to any person due to discrimination because of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital or family status. Sec. 205.502 Applying for accreditation. (a) A private or governmental entity seeking accreditation as a certifying agent under this subpart must submit an application for accreditation which contains the applicable information and documents set forth in Sec. Sec. 205.503 through 205.505 and the fees required in Sec. 205.640 to: Program Manager, USDA-AMS-NOP, 1400 Independence Ave. SW., Room 2648 So. Bldg., Ag Stop 0268, Washington, DC 20250-0268. (b) Following the receipt of the information and documents, the Administrator will determine, pursuant to Sec. 205.506, whether the applicant for accreditation should be accredited as a certifying agent. [65 FR 80637, Dec. 21, 2000, as amended at 80 FR 6429, Feb. 5, 2015] Sec. 205.503 Applicant information. A private or governmental entity seeking accreditation as a certifying agent must submit the following information: (a) The business name, primary office location, mailing address, name of the person(s) responsible for the certifying agent's day-to-day operations, contact numbers (telephone, facsimile, and Internet address) of the applicant, and, for an applicant who is a private person, the entity's taxpayer identification number; (b) The name, office location, mailing address, and contact numbers (telephone, facsimile, and Internet address) for each of its organizational units, such as chapters or subsidiary offices, and the name of a contact person for each unit; (c) Each area of operation (crops, wild crops, livestock, or handling) for which accreditation is requested and the estimated number of each type of operation anticipated to be certified annually by the applicant along with a copy of the applicant's schedule of fees for all services to be provided under these regulations by the applicant; (d) The type of entity the applicant is (e.g., government agricultural office, [[Page 432]] for-profit business, not-for-profit membership association) and for: (1) A governmental entity, a copy of the official's authority to conduct certification activities under the Act and the regulations in this part, (2) A private entity, documentation showing the entity's status and organizational purpose, such as articles of incorporation and by-laws or ownership or membership provisions, and its date of establishment; and (e) A list of each State or foreign country in which the applicant currently certifies production and handling operations and a list of each State or foreign country in which the applicant intends to certify production or handling operations. Sec. 205.504 Evidence of expertise and ability. A private or governmental entity seeking accreditation as a certifying agent must submit the following documents and information to demonstrate its expertise in organic production or handling techniques; its ability to fully comply with and implement the organic certification program established in Sec. Sec. 205.100 and 205.101, Sec. Sec. 205.201 through 205.203, Sec. Sec. 205.300 through 205.303, Sec. Sec. 205.400 through 205.406, and Sec. Sec. 205.661 and 205.662; and its ability to comply with the requirements for accreditation set forth in Sec. 205.501: (a) Personnel. (1) A copy of the applicant's policies and procedures for training, evaluating, and supervising personnel; (2) The name and position description of all personnel to be used in the certification operation, including administrative staff, certification inspectors, members of any certification review and evaluation committees, contractors, and all parties responsibly connected to the certifying agent; (3) A description of the qualifications, including experience, training, and education in agriculture, organic production, and organic handling, for: (i) Each inspector to be used by the applicant and (ii) Each person to be designated by the applicant to review or evaluate applications for certification; and (4) A description of any training that the applicant has provided or intends to provide to personnel to ensure that they comply with and implement the requirements of the Act and the regulations in this part. (b) Administrative policies and procedures. (1) A copy of the procedures to be used to evaluate certification applicants, make certification decisions, and issue certification certificates; (2) A copy of the procedures to be used for reviewing and investigating certified operation compliance with the Act and the regulations in this part and the reporting of violations of the Act and the regulations in this part to the Administrator; (3) A copy of the procedures to be used for complying with the recordkeeping requirements set forth in Sec. 205.501(a)(9); (4) A copy of the procedures to be used for maintaining the confidentiality of any business-related information as set forth in Sec. 205.501(a)(10); (5) A copy of the procedures to be used, including any fees to be assessed, for making the following information available to any member of the public upon request: (i) Certification certificates issued during the current and 3 preceding calendar years; (ii) A list of producers and handlers whose operations it has certified, including for each the name of the operation, type(s) of operation, products produced, and the effective date of the certification, during the current and 3 preceding calendar years; (iii) The results of laboratory analyses for residues of pesticides and other prohibited substances conducted during the current and 3 preceding calendar years; and (iv) Other business information as permitted in writing by the producer or handler; and (6) A copy of the procedures to be used for sampling and residue testing pursuant to Sec. 205.670. (c) Conflicts of interest. (1) A copy of procedures intended to be implemented to prevent the occurrence of conflicts of interest, as described in Sec. 205.501(a)(11). (2) For all persons who review applications for certification, perform on-site inspections, review certification documents, evaluate qualifications for [[Page 433]] certification, make recommendations concerning certification, or make certification decisions and all parties responsibly connected to the certifying agent, a conflict of interest disclosure report, identifying any food- or agriculture-related business interests, including business interests of immediate family members, that cause a conflict of interest. (d) Current certification activities. An applicant who currently certifies production or handling operations must submit: (1) A list of all production and handling operations currently certified by the applicant; (2) Copies of at least 3 different inspection reports and certification evaluation documents for production or handling operations certified by the applicant during the previous year for each area of operation for which accreditation is requested; and (3) The results of any accreditation process of the applicant's operation by an accrediting body during the previous year for the purpose of evaluating its certification activities. (e) Other information. Any other information the applicant believes may assist in the Administrator's evaluation of the applicant's expertise and ability. Sec. 205.505 Statement of agreement. (a) A private or governmental entity seeking accreditation under this subpart must sign and return a statement of agreement prepared by the Administrator which affirms that, if granted accreditation as a certifying agent under this subpart, the applicant will carry out the provisions of the Act and the regulations in this part, including: (1) Accept the certification decisions made by another certifying agent accredited or accepted by USDA pursuant to Sec. 205.500; (2) Refrain from making false or misleading claims about its accreditation status, the USDA accreditation program for certifying agents, or the nature or qualities of products labeled as organically produced; (3) Conduct an annual performance evaluation of all persons who review applications for certification, perform on-site inspections, review certification documents, evaluate qualifications for certification, make recommendations concerning certification, or make certification decisions and implement measures to correct any deficiencies in certification services; (4) Have an annual internal program review conducted of its certification activities by certifying agent staff, an outside auditor, or a consultant who has the expertise to conduct such reviews and implement measures to correct any noncompliances with the Act and the regulations in this part; (5) Pay and submit fees to AMS in accordance with Sec. 205.640; and (6) Comply with, implement, and carry out any other terms and conditions determined by the Administrator to be necessary. (b) A private entity seeking accreditation as a certifying agent under this subpart must additionally agree to: (1) Hold the Secretary harmless for any failure on the part of the certifying agent to carry out the provisions of the Act and the regulations in this part; (2) Furnish reasonable security, in an amount and according to such terms as the Administrator may by regulation prescribe, for the purpose of protecting the rights of production and handling operations certified by such certifying agent under the Act and the regulations in this part; and (3) Transfer to the Administrator and make available to the applicable State organic program's governing State official all records or copies of records concerning the certifying agent's certification activities in the event that the certifying agent dissolves or loses its accreditation; Provided, That such transfer shall not apply to a merger, sale, or other transfer of ownership of a certifying agent. Sec. 205.506 Granting accreditation. (a) Accreditation will be granted when: (1) The accreditation applicant has submitted the information required by Sec. Sec. 205.503 through 205.505; (2) The accreditation applicant pays the required fee in accordance with Sec. 205.640(c); and (3) The Administrator determines that the applicant for accreditation [[Page 434]] meets the requirements for accreditation as stated in Sec. 205.501, as determined by a review of the information submitted in accordance with Sec. Sec. 205.503 through 205.505 and, if necessary, a review of the information obtained from a site evaluation as provided for in Sec. 205.508. (b) On making a determination to approve an application for accreditation, the Administrator will notify the applicant of the granting of accreditation in writing, stating: (1) The area(s) for which accreditation is given; (2) The effective date of the accreditation; (3) Any terms and conditions for the correction of minor noncompliances; and (4) For a certifying agent who is a private entity, the amount and type of security that must be established to protect the rights of production and handling operations certified by such certifying agent. (c) The accreditation of a certifying agent shall continue in effect until such time as the certifying agent fails to renew accreditation as provided in Sec. 205.510(c), the certifying agent voluntarily ceases its certification activities, or accreditation is suspended or revoked pursuant to Sec. 205.665. Sec. 205.507 Denial of accreditation. (a) If the Program Manager has reason to believe, based on a review of the information specified in Sec. Sec. 205.503 through 205.505 or after a site evaluation as specified in Sec. 205.508, that an applicant for accreditation is not able to comply or is not in compliance with the requirements of the Act and the regulations in this part, the Program Manager shall provide a written notification of noncompliance to the applicant. Such notification shall provide: (1) A description of each noncompliance; (2) The facts upon which the notification of noncompliance is based; and (3) The date by which the applicant must rebut or correct each noncompliance and submit supporting documentation of each such correction when correction is possible. (b) When each noncompliance has been resolved, the Program Manager will send the applicant a written notification of noncompliance resolution and proceed with further processing of the application. (c) If an applicant fails to correct the noncompliances, fails to report the corrections by the date specified in the notification of noncompliance, fails to file a rebuttal of the notification of noncompliance by the date specified, or is unsuccessful in its rebuttal, the Program Manager will provide the applicant with written notification of accreditation denial. An applicant who has received written notification of accreditation denial may apply for accreditation again at any time in accordance with Sec. 205.502, or appeal the denial of accreditation in accordance with Sec. 205.681 by the date specified in the notification of accreditation denial. (d) If the certifying agent was accredited prior to the site evaluation and the certifying agent fails to correct the noncompliances, fails to report the corrections by the date specified in the notification of noncompliance, or fails to file a rebuttal of the notification of noncompliance by the date specified, the Administrator will begin proceedings to suspend or revoke the certifying agent's accreditation. A certifying agent who has had its accreditation suspended may at any time, unless otherwise stated in the notification of suspension, submit a request to the Secretary for reinstatement of its accreditation. The request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and the regulations in this part. A certifying agent whose accreditation is revoked will be ineligible for accreditation for a period of not less than 3 years following the date of such determination. Sec. 205.508 Site evaluations. (a) Site evaluations of accredited certifying agents shall be conducted for the purpose of examining the certifying agent's operations and evaluating its compliance with the Act and the regulations of this part. Site evaluations shall include an on-site review of the [[Page 435]] certifying agent's certification procedures, decisions, facilities, administrative and management systems, and production or handling operations certified by the certifying agent. Site evaluations shall be conducted by a representative(s) of the Administrator. (b) An initial site evaluation of an accreditation applicant shall be conducted before or within a reasonable period of time after issuance of the applicant's ``notification of accreditation.'' A site evaluation shall be conducted after application for renewal of accreditation but prior to the issuance of a notice of renewal of accreditation. One or more site evaluations will be conducted during the period of accreditation to determine whether an accredited certifying agent is complying with the general requirements set forth in Sec. 205.501. Sec. 205.509 Peer review panel. The Administrator shall establish a peer review panel pursuant to the Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2 et seq.). The peer review panel shall be composed of not less than 3 members who shall annually evaluate the National Organic Program's adherence to the accreditation procedures in this subpart F and ISO/IEC Guide 61, General requirements for assessment and accreditation of certification/ registration bodies, and the National Organic Program's accreditation decisions. This shall be accomplished through the review of accreditation procedures, document review and site evaluation reports, and accreditation decision documents or documentation. The peer review panel shall report its finding, in writing, to the National Organic Program's Program Manager. Sec. 205.510 Annual report, recordkeeping, and renewal of accreditation. (a) Annual report and fees. An accredited certifying agent must submit annually to the Administrator, on or before the anniversary date of the issuance of the notification of accreditation, the following reports and fees: (1) A complete and accurate update of information submitted pursuant to Sec. Sec. 205.503 and 205.504; (2) Information supporting any changes being requested in the areas of accreditation described in Sec. 205.500; (3) A description of the measures implemented in the previous year and any measures to be implemented in the coming year to satisfy any terms and conditions determined by the Administrator to be necessary, as specified in the most recent notification of accreditation or notice of renewal of accreditation; (4) The results of the most recent performance evaluations and annual program review and a description of adjustments to the certifying agent's operation and procedures implemented or to be implemented in response to the performance evaluations and program review; and (5) The fees required in Sec. 205.640(a). (b) Recordkeeping. Certifying agents must maintain records according to the following schedule: (1) Records obtained from applicants for certification and certified operations must be maintained for not less than 5 years beyond their receipt; (2) Records created by the certifying agent regarding applicants for certification and certified operations must be maintained for not less than 10 years beyond their creation; and (3) Records created or received by the certifying agent pursuant to the accreditation requirements of this subpart F, excluding any records covered by Sec. 205.510(b)(2), must be maintained for not less than 5 years beyond their creation or receipt. (c) Renewal of accreditation. (1) The Administrator shall send the accredited certifying agent a notice of pending expiration of accreditation approximately 1 year prior to the scheduled date of expiration. (2) An accredited certifying agent's application for accreditation renewal must be received at least 6 months prior to the fifth anniversary of issuance of the notification of accreditation and each subsequent renewal of accreditation. The accreditation of certifying agents who make timely application for renewal of accreditation will not expire during the renewal process. The accreditation of certifying agents who fail to make timely application for renewal of accreditation will expire as [[Page 436]] scheduled unless renewed prior to the scheduled expiration date. Certifying agents with an expired accreditation must not perform certification activities under the Act and the regulations of this part. (3) Following receipt of the information submitted by the certifying agent in accordance with paragraph (a) of this section and the results of a site evaluation, the Administrator will determine whether the certifying agent remains in compliance with the Act and the regulations of this part and should have its accreditation renewed. (d) Notice of renewal of accreditation. Upon a determination that the certifying agent is in compliance with the Act and the regulations of this part, the Administrator will issue a notice of renewal of accreditation. The notice of renewal will specify any terms and conditions that must be addressed by the certifying agent and the time within which those terms and conditions must be satisfied. (e) Noncompliance. Upon a determination that the certifying agent is not in compliance with the Act and the regulations of this part, the Administrator will initiate proceedings to suspend or revoke the certifying agent's accreditation. (f) Amending accreditation. Amendment to scope of an accreditation may be requested at any time. The application for amendment shall be sent to the Administrator and shall contain information applicable to the requested change in accreditation, a complete and accurate update of the information submitted pursuant to Sec. Sec. 205.503 and 205.504, and the applicable fees required in Sec. 205.640. [65 FR 80637, Dec. 21, 2000, as amended at 80 FR 6429, Feb. 5, 2015] Sec. Sec. 205.511-205.599 [Reserved] Subpart G_Administrative The National List of Allowed and Prohibited Substances Sec. 205.600 Evaluation criteria for allowed and prohibited substances, methods, and ingredients. The following criteria will be utilized in the evaluation of substances or ingredients for the organic production and handling sections of the National List: (a) Synthetic and nonsynthetic substances considered for inclusion on or deletion from the National List of allowed and prohibited substances will be evaluated using the criteria specified in the Act (7 U.S.C. 6517 and 6518). (b) In addition to the criteria set forth in the Act, any synthetic substance used as a processing aid or adjuvant will be evaluated against the following criteria: (1) The substance cannot be produced from a natural source and there are no organic substitutes; (2) The substance's manufacture, use, and disposal do not have adverse effects on the environment and are done in a manner compatible with organic handling; (3) The nutritional quality of the food is maintained when the substance is used, and the substance, itself, or its breakdown products do not have an adverse effect on human health as defined by applicable Federal regulations; (4) The substance's primary use is not as a preservative or to recreate or improve flavors, colors, textures, or nutritive value lost during processing, except where the replacement of nutrients is required by law; (5) The substance is listed as generally recognized as safe (GRAS) by Food and Drug Administration (FDA) when used in accordance with FDA's good manufacturing practices (GMP) and contains no residues of heavy metals or other contaminants in excess of tolerances set by FDA; and (6) The substance is essential for the handling of organically produced agricultural products. (c) Nonsynthetics used in organic processing will be evaluated using the criteria specified in the Act (7 U.S.C. 6517 and 6518). Sec. 205.601 Synthetic substances allowed for use in organic crop production. In accordance with restrictions specified in this section, the following synthetic substances may be used in organic crop production: Provided, That, use of such substances do not contribute to contamination of crops, soil, or water. Substances allowed by this [[Page 437]] section, except disinfectants and sanitizers in paragraph (a) and those substances in paragraphs (c), (j), (k), (l), and (o) of this section, may only be used when the provisions set forth in Sec. 205.206(a) through (d) prove insufficient to prevent or control the target pest. (a) As algicide, disinfectants, and sanitizer, including irrigation system cleaning systems. (1) Alcohols. (i) Ethanol. (ii) Isopropanol. (2) Chlorine materials--For pre-harvest use, residual chlorine levels in the water in direct crop contact or as water from cleaning irrigation systems applied to soil must not exceed the maximum residual disinfectant limit under the Safe Drinking Water Act, except that chlorine products may be used in edible sprout production according to EPA label directions. (i) Calcium hypochlorite. (ii) Chlorine dioxide. (iii) Hypochlorous acid--generated from electrolyzed water. (iv) Potassium hypochlorite--for use in water for irrigation purposes. (v) Sodium hypochlorite. (3) Copper sulfate--for use as an algicide in aquatic rice systems, is limited to one application per field during any 24-month period. Application rates are limited to those which do not increase baseline soil test values for copper over a timeframe agreed upon by the producer and accredited certifying agent. (4) Hydrogen peroxide. (5) Ozone gas--for use as an irrigation system cleaner only. (6) Peracetic acid--for use in disinfecting equipment, seed, and asexually propagated planting material. Also permitted in hydrogen peroxide formulations as allowed in Sec. 205.601(a) at concentration of no more than 6% as indicated on the pesticide product label. (7) Soap-based algicide/demossers. (8) Sodium carbonate peroxyhydrate (CAS -15630-89-4)--Federal law restricts the use of this substance in food crop production to approved food uses identified on the product label. (b) As herbicides, weed barriers, as applicable. (1) Herbicides, soap-based--for use in farmstead maintenance (roadways, ditches, right of ways, building perimeters) and ornamental crops. (2) Mulches. (i) Newspaper or other recycled paper, without glossy or colored inks. (ii) Plastic mulch and covers (petroleum-based other than polyvinyl chloride (PVC)). (iii) Biodegradable biobased mulch film as defined in Sec. 205.2. Must be produced without organisms or feedstock derived from excluded methods. (c) As compost feedstocks--Newspapers or other recycled paper, without glossy or colored inks. (d) As animal repellents--Soaps, ammonium--for use as a large animal repellant only, no contact with soil or edible portion of crop. (e) As insecticides (including acaricides or mite control). (1) Ammonium carbonate--for use as bait in insect traps only, no direct contact with crop or soil. (2) Aqueous potassium silicate (CAS -1312-76-1)--the silica, used in the manufacture of potassium silicate, must be sourced from naturally occurring sand. (3) Boric acid--structural pest control, no direct contact with organic food or crops. (4) Copper sulfate--for use as tadpole shrimp control in aquatic rice production, is limited to one application per field during any 24- month period. Application rates are limited to levels which do not increase baseline soil test values for copper over a timeframe agreed upon by the producer and accredited certifying agent. (5) Elemental sulfur. (6) Lime sulfur--including calcium polysulfide. (7) Oils, horticultural--narrow range oils as dormant, suffocating, and summer oils. (8) Soaps, insecticidal. (9) Sticky traps/barriers. (10) Sucrose octanoate esters (CAS s--42922-74-7; 58064-47-4)--in accordance with approved labeling. (f) As insect management. Pheromones. (g) As rodenticides. Vitamin D3. (h) As slug or snail bait. [[Page 438]] (1) Ferric phosphate (CAS  10045-86-0). (2) Elemental sulfur. (i) As plant disease control. (1) Aqueous potassium silicate (CAS -1312-76-1)--the silica, used in the manufacture of potassium silicate, must be sourced from naturally occurring sand. (2) Coppers, fixed--copper hydroxide, copper oxide, copper oxychloride, includes products exempted from EPA tolerance, Provided, That, copper-based materials must be used in a manner that minimizes accumulation in the soil and shall not be used as herbicides. (3) Copper sulfate--Substance must be used in a manner that minimizes accumulation of copper in the soil. (4) Hydrated lime. (5) Hydrogen peroxide. (6) Lime sulfur. (7) Oils, horticultural, narrow range oils as dormant, suffocating, and summer oils. (8) Peracetic acid--for use to control fire blight bacteria. Also permitted in hydrogen peroxide formulations as allowed in Sec. 205.601(i) at concentration of no more than 6% as indicated on the pesticide product label. (9) Potassium bicarbonate. (10) Elemental sulfur. (11) Polyoxin D zinc salt. (j) As plant or soil amendments. (1) Aquatic plant extracts (other than hydrolyzed)--Extraction process is limited to the use of potassium hydroxide or sodium hydroxide; solvent amount used is limited to that amount necessary for extraction. (2) Elemental sulfur. (3) Humic acids--naturally occurring deposits, water and alkali extracts only. (4) Lignin sulfonate--chelating agent, dust suppressant. (5) Magnesium oxide (CAS  1309-48-4)--for use only to control the viscosity of a clay suspension agent for humates. (6) Magnesium sulfate--allowed with a documented soil deficiency. (7) Micronutrients--not to be used as a defoliant, herbicide, or desiccant. Those made from nitrates or chlorides are not allowed. Micronutrient deficiency must be documented by soil or tissue testing or other documented and verifiable method as approved by the certifying agent. (i) Soluble boron products. (ii) Sulfates, carbonates, oxides, or silicates of zinc, copper, iron, manganese, molybdenum, selenium, and cobalt. (8) Liquid fish products--can be pH adjusted with sulfuric, citric or phosphoric acid. The amount of acid used shall not exceed the minimum needed to lower the pH to 3.5. (9) Vitamins, C and E. (10) Squid byproducts--from food waste processing only. Can be pH adjusted with sulfuric, citric, or phosphoric acid. The amount of acid used shall not exceed the minimum needed to lower the pH to 3.5. (11) Sulfurous acid (CAS  7782-99-2) for on-farm generation of substance utilizing 99% purity elemental sulfur per paragraph (j)(2) of this section. (k) As plant growth regulators. (1) Ethylene gas--for regulation of pineapple flowering. (2) Fatty alcohols (C6, C8, C10, and/or C12)--for sucker control in organic tobacco production. (l) As floating agents in postharvest handling. Sodium silicate--for tree fruit and fiber processing. (m) As synthetic inert ingredients as classified by the Environmental Protection Agency (EPA), for use with nonsynthetic substances or synthetic substances listed in this section and used as an active pesticide ingredient in accordance with any limitations on the use of such substances. (1) EPA List 4--Inerts of Minimal Concern. (2) EPA List 3--Inerts of unknown toxicity--for use only in passive pheromone dispensers. (n) Seed preparations. Hydrogen chloride (CAS  7647-01-0)--for delinting cotton seed for planting. (o) Production aids. (1) Microcrystalline cheesewax (CAS 's 64742-42-3, 8009-03-08, and 8002-74-2)--for use in log grown mushroom production. Must be made without either ethylene-propylene co-polymer or synthetic colors. (2) Paper-based crop planting aids as defined in Sec. 205.2. Virgin or recycled paper without glossy paper or colored inks. [[Page 439]] (p)-(z) [Reserved] [65 FR 80637, Dec. 21, 2000, as amended at 68 FR 61992, Oct. 31, 2003; 71 FR 53302 Sept. 11, 2006; 72 FR 69572, Dec. 10, 2007; 75 FR 38696, July 6, 2010; 75 FR 77524, Dec. 13, 2010; 77 FR 8092, Feb. 14, 2012; 77 FR 33298, June 6, 2012; 77 FR 45907, Aug. 2, 2012; 78 FR 31821, May 28, 2013; 79 FR 58663, Sept. 30, 2014; 80 FR 77234, Dec. 14, 2015; 82 FR 31243, July 6, 2017; 83 FR 66571, Dec. 27, 2018; 84 FR 56677, Oct. 23, 2019; 87 FR 10938, Feb. 28, 2022; 87 FR 16375, Mar. 23, 2022; 87 FR 68027, Nov. 14, 2022] Sec. 205.602 Nonsynthetic substances prohibited for use in organic crop production. The following nonsynthetic substances may not be used in organic crop production: (a) Ash from manure burning. (b) Arsenic. (c) Calcium chloride, brine process is natural and prohibited for use except as a foliar spray to treat a physiological disorder associated with calcium uptake. (d) Lead salts. (e) Potassium chloride--unless derived from a mined source and applied in a manner that minimizes chloride accumulation in the soil. (f) Rotenone (CAS  83-79-4). (g) Sodium fluoaluminate (mined). (h) Sodium nitrate--unless use is restricted to no more than 20% of the crop's total nitrogen requirement; use in spirulina production is unrestricted until October 21, 2005. (i) Strychnine. (j) Tobacco dust (nicotine sulfate). [68 FR 61992, Oct. 31, 2003, as amended at 83 FR 66572, Dec. 27, 2018] Sec. 205.603 Synthetic substances allowed for use in organic livestock production. In accordance with restrictions specified in this section the following synthetic substances may be used in organic livestock production: (a) As disinfectants, sanitizer, and medical treatments as applicable. (1) Alcohols. (i) Ethanol--disinfectant and sanitizer only, prohibited as a feed additive. (ii) Isopropanol-disinfectant only. (2) Aspirin-approved for health care use to reduce inflammation. (3) Atropine (CAS -51-55-8)--federal law restricts this drug to use by or on the lawful written or oral order of a licensed veterinarian, in full compliance with the AMDUCA and 21 CFR part 530 of the Food and Drug Administration regulations. Also, for use under 7 CFR part 205, the NOP requires: (i) Use by or on the lawful written order of a licensed veterinarian; and (ii) A meat withdrawal period of at least 56 days after administering to livestock intended for slaughter; and a milk discard period of at least 12 days after administering to dairy animals. (4) Biologics--Vaccines. (5) Butorphanol (CAS -42408-82-2)--federal law restricts this drug to use by or on the lawful written or oral order of a licensed veterinarian, in full compliance with the AMDUCA and 21 CFR part 530 of the Food and Drug Administration regulations. Also, for use under 7 CFR part 205, the NOP requires: (i) Use by or on the lawful written order of a licensed veterinarian; and (ii) A meat withdrawal period of at least 42 days after administering to livestock intended for slaughter; and a milk discard period of at least 8 days after administering to dairy animals. (6) Activated charcoal (CAS  7440-44-0)--must be from vegetative sources. (7) Calcium borogluconate (CAS  5743-34-0)--for treatment of milk fever only. (8) Calcium propionate (CAS  4075-81-4)--for treatment of milk fever only. (9) Chlorhexidine (CAS  55-56-1)--for medical procedures conducted under the supervision of a licensed veterinarian. Allowed for use as a teat dip when alternative germicidal agents and/or physical barriers have lost their effectiveness. (10) Chlorine materials--disinfecting and sanitizing facilities and equipment. Residual chlorine levels in the water shall not exceed the maximum residual disinfectant limit under the Safe Drinking Water Act. (i) Calcium hypochlorite. (ii) Chlorine dioxide. (iii) Hypochlorous acid--generated from electrolyzed water. (iv) Sodium hypochlorite (11) Electrolytes--without antibiotics. [[Page 440]] (12) Flunixin (CAS -38677-85-9)--in accordance with approved labeling; except that for use under 7 CFR part 205, the NOP requires a withdrawal period of at least two-times that required by the FDA. (13) Glucose. (14) Glycerin--allowed as a livestock teat dip, must be produced through the hydrolysis of fats or oils. (15) Hydrogen peroxide. (16) Iodine. (17) Kaolin pectin--for use as an adsorbent, antidiarrheal, and gut protectant. (18) Magnesium hydroxide (CAS -1309-42-8)--federal law restricts this drug to use by or on the lawful written or oral order of a licensed veterinarian, in full compliance with the AMDUCA and 21 CFR part 530 of the Food and Drug Administration regulations. Also, for use under 7 CFR part 205, the NOP requires use by or on the lawful written order of a licensed veterinarian. (19) Magnesium sulfate. (20) Mineral oil--for treatment of intestinal compaction, prohibited for use as a dust suppressant. (21) Nutritive supplements--injectable supplements of trace minerals per paragraph (d)(2) of this section, vitamins per paragraph (d)(3), and electrolytes per paragraph (a)(11), with excipients per paragraph (f), in accordance with FDA and restricted to use by or on the order of a licensed veterinarian. (22) Oxytocin--use in postparturition therapeutic applications. (23) Parasiticides--prohibited in slaughter stock, allowed in emergency treatment for dairy and breeder stock when organic system plan-approved preventive management does not prevent infestation. In breeder stock, treatment cannot occur during the last third of gestation if the progeny will be sold as organic and must not be used during the lactation period for breeding stock. Allowed for fiber bearing animals when used a minimum of 36 days prior to harvesting of fleece or wool that is to be sold, labeled, or represented as organic. (i) Fenbendazole (CAS 43210-67-9)--milk or milk products from a treated animal cannot be labeled as provided for in subpart D of this part for: 2 days following treatment of cattle; 36 days following treatment of goats, sheep, and other dairy species. (ii) Moxidectin (CAS 113507-06-5)--milk or milk products from a treated animal cannot be labeled as provided for in subpart D of this part for: 2 days following treatment of cattle; 36 days following treatment of goats, sheep, and other dairy species. (24) Peroxyacetic/peracetic acid (CAS -79-21-0)--for sanitizing facility and processing equipment. (25) Phosphoric acid--allowed as an equipment cleaner, Provided, That, no direct contact with organically managed livestock or land occurs. (26) Poloxalene (CAS -9003-11-6)--for use under 7 CFR part 205, the NOP requires that poloxalene only be used for the emergency treatment of bloat. (27) Propylene glycol (CAS 57-55-6)--only for treatment of ketosis in ruminants. (28) Sodium chlorite, acidified--allowed for use on organic livestock as a teat dip treatment only. (29) Tolazoline (CAS 59-98-3)--federal law restricts this drug to use by or on the lawful written or oral order of a licensed veterinarian, in full compliance with the AMDUCA and 21 CFR part 530 of the Food and Drug Administration regulations. Also, for use under 7 CFR part 205, the NOP requires: (i) Use by or on the lawful written order of a licensed veterinarian; (ii) Use only to reverse the effects of sedation and analgesia caused by Xylazine; and, (iii) A meat withdrawal period of at least 8 days after administering to livestock intended for slaughter; and a milk discard period of at least 4 days after administering to dairy animals. (30) Xylazine (CAS 7361-61-7)--federal law restricts this drug to use by or on the lawful written or oral order of a licensed veterinarian, in full compliance with the AMDUCA and 21 CFR part 530 of the Food and Drug Administration regulations. Also, for use under 7 CFR part 205, the NOP requires: (i) Use by or on the lawful written order of a licensed veterinarian; and, (ii) A meat withdrawal period of at least 8 days after administering to livestock intended for slaughter; and a [[Page 441]] milk discard period of at least 4 days after administering to dairy animals. (b) As topical treatment, external parasiticide or local anesthetic as applicable. (1) Copper sulfate. (2) Elemental sulfur--for treatment of livestock and livestock housing. (3) Formic acid (CAS  64-18-6)--for use as a pesticide solely within honeybee hives. (4) Iodine. (5) Lidocaine--as a local anesthetic. Use requires a withdrawal period of 8 days after administering to livestock intended for slaughter and 6 days after administering to dairy animals. (6) Lime, hydrated--as an external pest control, not permitted to cauterize physical alterations or deodorize animal wastes. (7) Mineral oil--for topical use and as a lubricant. (8) Oxalic acid dihydrate--for use as a pesticide solely for apiculture. (9) Sodium chlorite, acidified--allowed for use on organic livestock as teat dip treatment only. (10) Sucrose octanoate esters (CAS s-42922-74-7; 58064-47-4)--in accordance with approved labeling. (11) Zinc sulfate--for use in hoof and foot treatments only. (c) As feed supplements--None. (d) As feed additives. (1) DL-Methionine, DL-Methionine--hydroxy analog, and DL- Methionine--hydroxy analog calcium (CAS 's 59-51-8, 583-91-5, 4857-44- 7, and 922-50-9)--for use only in organic poultry production at the following pounds of synthetic 100 percent methionine per ton of feed in the diet, maximum rates as averaged per ton of feed over the life of the flock: Laying chickens--2 pounds; broiler chickens--2.5 pounds; turkeys and all other poultry--3 pounds. (2) Trace minerals, used for enrichment or fortification when FDA approved. (3) Vitamins, used for enrichment or fortification when FDA approved. (e) As synthetic inert ingredients as classified by the Environmental Protection Agency (EPA), for use with nonsynthetic substances or synthetic substances listed in this section and used as an active pesticide ingredient in accordance with any limitations on the use of such substances. (1) EPA List 4--Inerts of Minimal Concern. (2) [Reserved] (f) Excipients--only for use in the manufacture of drugs and biologics used to treat organic livestock when the excipient is: (1) Identified by the FDA as Generally Recognized As Safe; (2) Approved by the FDA as a food additive; (3) Included in the FDA review and approval of a New Animal Drug Application or New Drug Application; or (4) Approved by APHIS for use in veterinary biologics. (g)-(z) [Reserved] [72 FR 70484, Dec. 12, 2007, as amended at 73 FR 54059, Sept. 18, 2008; 75 FR 51924, Aug. 24, 2010; 77 FR 28745, May 15, 2012; 77 FR 45907, Aug. 2, 2012; 77 FR 57989, Sept. 19, 2012; 80 FR 6429, Feb. 5, 2015; 82 FR 31243, July 6, 2017; 83 FR 66572, Dec. 27, 2018; 84 FR 18136, Apr. 30, 2019; 86 FR 33484, June 25, 2021; 87 FR 10938, Feb. 28, 2022] Sec. 205.604 Nonsynthetic substances prohibited for use in organic livestock production. The following nonsynthetic substances may not be used in organic livestock production: (a) Strychnine. (b)-(z) [Reserved] Sec. 205.605 Nonagricultural (nonorganic) substances allowed as ingredients in or on processed products labeled as ``organic'' or ``made with organic (specified ingredients or food group(s)).'' The following nonagricultural substances may be used as ingredients in or on processed products labeled as ``organic'' or ``made with organic (specified ingredients or food group(s))'' only in accordance with any restrictions specified in this section. (a) Nonsynthetics allowed. (1) Acids (Citric--produced by microbial fermentation of carbohydrate substances; and Lactic). (2) Agar-agar. (3) Animal enzymes--(Rennet--animals derived; Catalase--bovine liver; Animal lipase; Pancreatin; Pepsin; and Trypsin). (4) Attapulgite--as a processing aid in the handling of plant and animal oils. [[Page 442]] (5) Bentonite. (6) Calcium carbonate. (7) Calcium chloride. (8) Calcium sulfate--mined. (9) Carrageenan. (10) Diatomaceous earth--food filtering aid only. (11) Enzymes--must be derived from edible, nontoxic plants, nonpathogenic fungi, or nonpathogenic bacteria. (12) Flavors--nonsynthetic flavors may be used when organic flavors are not commercially available. All flavors must be derived from organic or nonsynthetic sources only and must not be produced using synthetic solvents and carrier systems or any artificial preservative. (13) Gellan gum (CAS  71010-52-1)--high-acyl form only. (14) Glucono delta-lactone--production by the oxidation of D-glucose with bromine water is prohibited. (15) Kaolin. (16) L-Malic acid (CAS  97-67-6). (17) Magnesium chloride. (18) Magnesium sulfate, nonsynthetic sources only. (19) Microorganisms--any food grade bacteria, fungi, and other microorganism. (20) Nitrogen--oil-free grades. (21) Oxygen--oil-free grades. (22) Perlite--for use only as a filter aid in food processing. (23) Potassium chloride. (24) Potassium iodide. (25) Pullulan--for use only in tablets and capsules for dietary supplements labeled ``made with organic (specified ingredients or food group(s)). (26) Sodium bicarbonate. (27) Sodium carbonate. (28) Tartaric acid--made from grape wine. (29) Waxes--nonsynthetic (Wood rosin). (30) Yeast--When used as food or a fermentation agent in products labeled as ``organic,'' yeast must be organic if its end use is for human consumption; nonorganic yeast may be used when organic yeast is not commercially available. Growth on petrochemical substrate and sulfite waste liquor is prohibited. For smoked yeast, nonsynthetic smoke flavoring process must be documented. (b) Synthetics allowed. (1) Acidified sodium chlorite--Secondary direct antimicrobial food treatment and indirect food contact surface sanitizing. Acidified with citric acid only. (2) Activated charcoal (CAS s 7440-44-0; 64365-11-3)--only from vegetative sources; for use only as a filtering aid. (3) Alginates. (4) Ammonium bicarbonate--for use only as a leavening agent. (5) Ammonium carbonate--for use only as a leavening agent. (6) Ascorbic acid. (7) Calcium citrate. (8) Calcium hydroxide. (9) Calcium phosphates (monobasic, dibasic, and tribasic). (10) Carbon dioxide. (11) Cellulose (CAS 9004-34-6)--for use in regenerative casings, powdered cellulose as an anti-caking agent (non-chlorine bleached) and filtering aid. Microcrystalline cellulose is prohibited. (12) Chlorine materials--disinfecting and sanitizing food contact surfaces, equipment and facilities may be used up to maximum labeled rates. Chlorine materials in water used in direct crop or food contact are permitted at levels approved by the FDA or EPA for such purpose, provided the use is followed by a rinse with potable water at or below the maximum residual disinfectant limit for the chlorine material under the Safe Drinking Water Act. Chlorine in water used as an ingredient in organic food handling must not exceed the maximum residual disinfectant limit for the chlorine material under the Safe Drinking Water Act. (i) Calcium hypochlorite. (ii) Chlorine dioxide. (iii) Hypochlorous acid--generated from electrolyzed water. (iv) Sodium hypochlorite. (13) Collagen gel--as casing, may be used only when organic collagen gel is not commercially available. (14) Ethylene--allowed for postharvest ripening of tropical fruit and degreening of citrus. (15) Ferrous sulfate--for iron enrichment or fortification of foods when required by regulation or recommended (independent organization). (16) Glycerides (mono and di)--for use only in drum drying of food. [[Page 443]] (17) Hydrogen peroxide. (18) Low-acyl gellan gum. (19) Magnesium stearate--for use only in agricultural products labeled ``made with organic (specified ingredients or food group(s)),'' prohibited in agricultural products labeled ``organic''. (20) Nutrient vitamins and minerals, in accordance with 21 CFR 104.20, Nutritional Quality Guidelines For Foods. (21) Ozone. (22) Peracetic acid/Peroxyacetic acid (CAS  79-21-0)--for use in wash and/or rinse water according to FDA limitations. For use as a sanitizer on food contact surfaces. (23) Phosphoric acid--cleaning of food-contact surfaces and equipment only. (24) Potassium carbonate. (25) Potassium citrate. (26) Potassium hydroxide--prohibited for use in lye peeling of fruits and vegetables except when used for peeling peaches. (27) Potassium lactate--for use as an antimicrobial agent and pH regulator only. (28) Potassium phosphate--for use only in agricultural products labeled ``made with organic (specific ingredients or food group(s)),'' prohibited in agricultural products labeled ``organic''. (29) Silicon dioxide--Permitted as a defoamer. Allowed for other uses when organic rice hulls are not commercially available. (30) Sodium acid pyrophosphate (CAS  7758-16-9)--for use only as a leavening agent. (31) Sodium citrate. (32) Sodium hydroxide--prohibited for use in lye peeling of fruits and vegetables. (33) Sodium lactate--for use as an antimicrobial agent and pH regulator only. (34) Sodium phosphates--for use only in dairy foods. (35) Sulfur dioxide--for use only in wine labeled ``made with organic grapes,'' Provided, That, total sulfite concentration does not exceed 100 ppm. (36) Tocopherols--derived from vegetable oil when rosemary extracts are not a suitable alternative. (37) Xanthan gum. (c)-(z) [Reserved] [68 FR 61993, Oct. 31, 2003] Editorial Note: For Federal Register citations affecting Sec. 205.605, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov. Sec. 205.606 Nonorganically produced agricultural products allowed as ingredients in or on processed products labeled as ``organic.'' Only the following nonorganically produced agricultural products may be used as ingredients in or on processed products labeled as ``organic,'' only in accordance with any restrictions specified in this section, and only when the product is not commercially available in organic form. (a) Carnauba wax (b) Casings, from processed intestines. (c) Celery powder. (d) Colors derived from agricultural products--Must not be produced using synthetic solvents and carrier systems or any artificial preservative. (1) Beet juice extract color--derived from Beta vulgaris L., except must not be produced from sugarbeets. (2) Beta-carotene extract color--derived from carrots (Daucus carota L.) or algae (Dunaliella salina). (3) Black/purple carrot juice color--derived from Daucus carota L. (4) Chokeberry, aronia juice color--derived from Aronia arbutifolia (L.) Pers. or Aronia melanocarpa (Michx.) Elliott. (5) Elderberry juice color--derived from Sambucus nigra L. (6) Grape skin extract color--derived from Vitis vinifera L. (7) Purple sweet potato juice color--derived from Ipomoea batatas L. or Solanum tuberosum L. (8) Red cabbage extract color--derived from Brassica oleracea L. (9) Red radish extract color--derived from Raphanus sativus L. (10) Saffron extract color--derived from Crocus sativus L. (e) Cornstarch (native). (f) Fish oil (Fatty acid CAS 's: 10417-94-4, and 25167-62-8)-- stabilized with organic ingredients or only with ingredients on the National List, Sec. Sec. 205.605 and 205.606. [[Page 444]] (g) Fructooligosaccharides (CAS  308066-66-2). (h) Gelatin (CAS  9000-70-8). (i) Glycerin (CAS  56-81-5)--produced from agricultural source materials and processed using biological or mechanical/physical methods as described under Sec. 205.270(a). (j) Gums--water extracted only (Arabic; Guar; Locust bean; and Carob bean). (k) Inulin--oligofructose enriched (CAS  9005-80-5). (l) Lecithin--de-oiled. (m) Orange pulp, dried. (n) Orange shellac--unbleached (CAS  9000-59-3). (o) Pectin (non-amidated forms only). (p) Potassium acid tartrate. (q) Seaweed, Pacific kombu. (r) Tamarind seed gum. (s) Tragacanth gum (CAS  9000-65-1). (t) Wakame seaweed (Undaria pinnatifida). (u)--(w) [Reserved] (x) Whey protein concentrate. [72 FR 35140, June 27, 2007, as amended at 75 FR 77524, Dec. 13, 2010; 77 FR 8092, Feb. 14, 2012; 77 FR 33299, June 6, 2012; 77 FR 44429, July 30, 2012; 78 FR 31821, May 28, 2013; 79 FR 58663, Sept. 30, 2014; 80 FR 77234, Dec. 12, 2015; 82 FR 31244, July 6, 2017; 83 FR 66571, Dec. 27, 2018; 84 18136, Apr. 30, 2019; 85 FR 70435, Nov. 5, 2020; 87 FR 10938, Feb. 28, 2022] Sec. 205.607 Amending the National List. (a) Any person may petition the National Organic Standards Board for the purpose of having a substance evaluated by the Board for recommendation to the Secretary for inclusion on or deletion from the National List in accordance with the Act. (b) A person petitioning for amendment of the National List should request a copy of the petition procedures from the USDA at the address in Sec. 205.607(c). (c) A petition to amend the National List must be submitted to: Program Manager, USDA-AMS-NOP, 1400 Independence Ave. SW., Room 2648 So. Bldg., Ag Stop 0268, Washington, DC 20250-0268. [65 FR 80637, Dec. 21, 2000, as amended at 68 FR 61993, Oct. 31, 2003; 80 FR 6429, Feb. 5, 2015] Sec. Sec. 205.608-205.619 [Reserved] State Organic Programs Sec. 205.620 Requirements of State organic programs. (a) A State may establish a State organic program for production and handling operations within the State which produce and handle organic agricultural products. (b) A State organic program must meet the requirements for organic programs specified in the Act. (c) A State organic program may contain more restrictive requirements because of environmental conditions or the necessity of specific production or handling practices particular to the State or region of the United States. (d) A State organic program must assume enforcement obligations in the State for the requirements of this part and any more restrictive requirements approved by the Secretary. (e) A State organic program and any amendments to such program must be approved by the Secretary prior to being implemented by the State. Sec. 205.621 Submission and determination of proposed State organic programs and amendments to approved State organic programs. (a) A State organic program's governing State official must submit to the Secretary a proposed State organic program and any proposed amendments to such approved program. (1) Such submission must contain supporting materials that include statutory authorities, program description, documentation of the environmental conditions or specific production and handling practices particular to the State which necessitate more restrictive requirements than the requirements of this part, and other information as may be required by the Secretary. (2) Submission of a request for amendment of an approved State organic program must contain supporting materials that include an explanation and documentation of the environmental conditions or specific production and handling practices particular to the State or region, which necessitates the proposed amendment. Supporting material also must explain [[Page 445]] how the proposed amendment furthers and is consistent with the purposes of the Act and the regulations of this part. (b) Within 6 months of receipt of submission, the Secretary will: Notify the State organic program's governing State official of approval or disapproval of the proposed program or amendment of an approved program and, if disapproved, the reasons for the disapproval. (c) After receipt of a notice of disapproval, the State organic program's governing State official may submit a revised State organic program or amendment of such a program at any time. Sec. 205.622 Review of approved State organic programs. The Secretary will review a State organic program not less than once during each 5-year period following the date of the initial program approval. The Secretary will notify the State organic program's governing State official of approval or disapproval of the program within 6 months after initiation of the review. Sec. Sec. 205.623-205.639 [Reserved] Fees Sec. 205.640 Fees and other charges for accreditation. Fees and other charges equal as nearly as may be to the cost of the accreditation services rendered under the regulations, including initial accreditation, review of annual reports, and renewal of accreditation, shall be assessed and collected from applicants for initial accreditation and accredited certifying agents submitting annual reports or seeking renewal of accreditation in accordance with the following provisions: (a) Fees-for-service. (1) Except as otherwise provided in this section, fees-for-service shall be based on the time required to render the service provided calculated to the nearest 15-minute period, including the review of applications and accompanying documents and information, evaluator travel, the conduct of on-site evaluations, review of annual reports and updated documents and information, and the time required to prepare reports and any other documents in connection with the performance of service. The hourly rate shall be the same as that charged by the Agricultural Marketing Service, through its Quality Systems Certification Program, to certification bodies requesting conformity assessment to the International Organization for Standardization ``General Requirements for Bodies Operating Product Certification Systems'' (ISO Guide 65). (2) Applicants for initial accreditation and accredited certifying agents submitting annual reports or seeking renewal of accreditation during the first 18 months following the effective date of subpart F of this part shall receive service without incurring an hourly charge for service. (3) Applicants for initial accreditation and renewal of accreditation must pay at the time of application, effective 18 months following February 20, 2001, a nonrefundable fee of $500.00 which shall be applied to the applicant's fees-for-service account. (b) Travel charges. When service is requested at a place so distant from the evaluator's headquarters that a total of one-half hour or more is required for the evaluator(s) to travel to such place and back to the headquarters or at a place of prior assignment on circuitous routing requiring a total of one-half hour or more to travel to the next place of assignment on the circuitous routing, the charge for such service shall include a mileage charge administratively determined by the U.S. Department of Agriculture and travel tolls, if applicable, or such travel prorated among all the applicants and certifying agents furnished the service involved on an equitable basis or, when the travel is made by public transportation (including hired vehicles), a fee equal to the actual cost thereof. Travel charges shall become effective for all applicants for initial accreditation and accredited certifying agents on February 20, 2001. The applicant or certifying agent will not be charged a new mileage rate without notification before the service is rendered. (c) Per diem charges. When service is requested at a place away from the evaluator's headquarters, the fee for [[Page 446]] such service shall include a per diem charge if the employee(s) performing the service is paid per diem in accordance with existing travel regulations. Per diem charges to applicants and certifying agents will cover the same period of time for which the evaluator(s) receives per diem reimbursement. The per diem rate will be administratively determined by the U.S. Department of Agriculture. Per diem charges shall become effective for all applicants for initial accreditation and accredited certifying agents on February 20, 2001. The applicant or certifying agent will not be charged a new per diem rate without notification before the service is rendered. (d) Other costs. When costs, other than costs specified in paragraphs (a), (b), and (c) of this section, are associated with providing the services, the applicant or certifying agent will be charged for these costs. Such costs include but are not limited to equipment rental, photocopying, delivery, facsimile, telephone, or translation charges incurred in association with accreditation services. The amount of the costs charged will be determined administratively by the U.S. Department of Agriculture. Such costs shall become effective for all applicants for initial accreditation and accredited certifying agents on February 20, 2001. Sec. 205.641 Payment of fees and other charges. (a) Applicants for initial accreditation and renewal of accreditation must remit the nonrefundable fee, pursuant to Sec. 205.640(a)(3), along with their application. Remittance must be made payable to the USDA, AMS Livestock Program and mailed to: USDA, AMS Livestock, Poultry and Seed Program, QAD, P.O. Box 790304 St. Louis, MO 63179-0304 or such other address as required by the Program Manager. (b) Payments for fees and other charges not covered under paragraph (a) of this section must be: (1) Received by the due date shown on the bill for collection; (2) Made payable to the Agricultural Marketing Service, USDA; and (3) Mailed to the address provided on the bill for collection. (c) The Administrator shall assess interest, penalties, and administrative costs on debts not paid by the due date shown on a bill for collection and collect delinquent debts or refer such debts to the Department of Justice for litigation. [65 FR 80637, Dec. 21, 2000, as amended at 80 FR 6429, Feb. 5, 2015] Sec. 205.642 Fees and other charges for certification. Fees charged by a certifying agent must be reasonable, and a certifying agent shall charge applicants for certification and certified production and handling operations only those fees and charges that it has filed with the Administrator. The certifying agent shall provide each applicant with an estimate of the total cost of certification and an estimate of the annual cost of updating the certification. The certifying agent may require applicants for certification to pay at the time of application a nonrefundable fee which shall be applied to the applicant's fees-for-service account. The certifying agent may set the nonrefundable portion of certification fees; however, the nonrefundable portion of certification fees must be explained in the fee schedule submitted to the Administrator. The fee schedule must explain what fee amounts are nonrefundable and at what stage during the certification process fees become nonrefundable. The certifying agent shall provide all persons inquiring about the application process with a copy of its fee schedule. Sec. Sec. 205.643-205.649 [Reserved] Compliance Sec. 205.660 General. (a) The National Organic Program's Program Manager, on behalf of the Secretary, may inspect and review certified production and handling operations and accredited certifying agents for compliance with the Act or regulations in this part. (b) The Program Manager may initiate suspension or revocation proceedings against a certified operation: [[Page 447]] (1) When the Program Manager has reason to believe that a certified operation has violated or is not in compliance with the Act or regulations in this part; or (2) When a certifying agent or a State organic program's governing State official fails to take appropriate action to enforce the Act or regulations in this part. (c) The Program Manager may initiate suspension or revocation of a certifying agent's accreditation if the certifying agent fails to meet, conduct, or maintain accreditation requirements pursuant to the Act or this part. (d) Each notification of noncompliance, rejection of mediation, noncompliance resolution, proposed suspension or revocation, and suspension or revocation issued pursuant to Sec. 205.662, Sec. 205.663, and Sec. 205.665 and each response to such notification must be sent to the recipient's place of business via a delivery service which provides dated return receipts. Sec. 205.661 Investigation of certified operations. (a) A certifying agent may investigate complaints of noncompliance with the Act or regulations of this part concerning production and handling operations certified as organic by the certifying agent. A certifying agent must notify the Program Manager of all compliance proceedings and actions taken pursuant to this part. (b) A State organic program's governing State official may investigate complaints of noncompliance with the Act or regulations in this part concerning organic production or handling operations operating in the State. Sec. 205.662 Noncompliance procedure for certified operations. (a) Notification. When an inspection, review, or investigation of a certified operation by a certifying agent or a State organic program's governing State official reveals any noncompliance with the Act or regulations in this part, a written notification of noncompliance shall be sent to the certified operation. Such notification shall provide: (1) A description of each noncompliance; (2) The facts upon which the notification of noncompliance is based; and (3) The date by which the certified operation must rebut or correct each noncompliance and submit supporting documentation of each such correction when correction is possible. (b) Resolution. When a certified operation demonstrates that each noncompliance has been resolved, the certifying agent or the State organic program's governing State official, as applicable, shall send the certified operation a written notification of noncompliance resolution. (c) Proposed suspension or revocation. When rebuttal is unsuccessful or correction of the noncompliance is not completed within the prescribed time period, the certifying agent or State organic program's governing State official shall send the certified operation a written notification of proposed suspension or revocation of certification of the entire operation or a portion of the operation, as applicable to the noncompliance. When correction of a noncompliance is not possible, the notification of noncompliance and the proposed suspension or revocation of certification may be combined in one notification. The notification of proposed suspension or revocation of certification shall state: (1) The reasons for the proposed suspension or revocation; (2) The proposed effective date of such suspension or revocation; (3) The impact of a suspension or revocation on future eligibility for certification; and (4) The right to request mediation pursuant to Sec. 205.663 or to file an appeal pursuant to Sec. 205.681. (d) Willful violations. Notwithstanding paragraph (a) of this section, if a certifying agent or State organic program's governing State official has reason to believe that a certified operation has willfully violated the Act or regulations in this part, the certifying agent or State organic program's governing State official shall send the certified operation a notification of proposed suspension or revocation of certification of the entire operation or a portion of the operation, as applicable to the noncompliance. [[Page 448]] (e) Suspension or revocation. (1) If the certified operation fails to correct the noncompliance, to resolve the issue through rebuttal or mediation, or to file an appeal of the proposed suspension or revocation of certification, the certifying agent or State organic program's governing State official shall send the certified operation a written notification of suspension or revocation. (2) A certifying agent or State organic program's governing State official must not send a notification of suspension or revocation to a certified operation that has requested mediation pursuant to Sec. 205.663 or filed an appeal pursuant to Sec. 205.681, while final resolution of either is pending. (f) Eligibility. (1) A certified operation whose certification has been suspended under this section may at any time, unless otherwise stated in the notification of suspension, submit a request to the Secretary for reinstatement of its certification. The request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and the regulations in this part. (2) A certified operation or a person responsibly connected with an operation whose certification has been revoked will be ineligible to receive certification for a period of 5 years following the date of such revocation, Except, That, the Secretary may, when in the best interest of the certification program, reduce or eliminate the period of ineligibility. (g) Violations of Act. In addition to suspension or revocation, any certified operation that: (1) Knowingly sells or labels a product as organic, except in accordance with the Act, shall be subject to a civil penalty of not more than the amount specified in Sec. 3.91(b)(1) of this title per violation. (2) Makes a false statement under the Act to the Secretary, a State organic program's governing State official, or a certifying agent shall be subject to the provisions of section 1001 of title 18, United States Code. [65 FR 80637, Dec. 21, 2000, as amended at 75 FR 17560, Apr. 7, 2010; 79 FR 6430, Feb. 5, 2015] Sec. 205.663 Mediation. Any dispute with respect to denial of certification or proposed suspension or revocation of certification under this part may be mediated at the request of the applicant for certification or certified operation and with acceptance by the certifying agent. Mediation shall be requested in writing to the applicable certifying agent. If the certifying agent rejects the request for mediation, the certifying agent shall provide written notification to the applicant for certification or certified operation. The written notification shall advise the applicant for certification or certified operation of the right to request an appeal, pursuant to Sec. 205.681, within 30 days of the date of the written notification of rejection of the request for mediation. If mediation is accepted by the certifying agent, such mediation shall be conducted by a qualified mediator mutually agreed upon by the parties to the mediation. If a State organic program is in effect, the mediation procedures established in the State organic program, as approved by the Secretary, will be followed. The parties to the mediation shall have no more than 30 days to reach an agreement following a mediation session. If mediation is unsuccessful, the applicant for certification or certified operation shall have 30 days from termination of mediation to appeal the certifying agent's decision pursuant to Sec. 205.681. Any agreement reached during or as a result of the mediation process shall be in compliance with the Act and the regulations in this part. The Secretary may review any mediated agreement for conformity to the Act and the regulations in this part and may reject any agreement or provision not in conformance with the Act or the regulations in this part. Sec. 205.664 [Reserved] Sec. 205.665 Noncompliance procedure for certifying agents. (a) Notification. When an inspection, review, or investigation of an accredited certifying agent by the Program Manager reveals any noncompliance with the Act or regulations in this [[Page 449]] part, a written notification of noncompliance shall be sent to the certifying agent. Such notification shall provide: (1) A description of each noncompliance; (2) The facts upon which the notification of noncompliance is based; and (3) The date by which the certifying agent must rebut or correct each noncompliance and submit supporting documentation of each correction when correction is possible. (b) Resolution. When the certifying agent demonstrates that each noncompliance has been resolved, the Program Manager shall send the certifying agent a written notification of noncompliance resolution. (c) Proposed suspension or revocation. When rebuttal is unsuccessful or correction of the noncompliance is not completed within the prescribed time period, the Program Manager shall send a written notification of proposed suspension or revocation of accreditation to the certifying agent. The notification of proposed suspension or revocation shall state whether the certifying agent's accreditation or specified areas of accreditation are to be suspended or revoked. When correction of a noncompliance is not possible, the notification of noncompliance and the proposed suspension or revocation may be combined in one notification. The notification of proposed suspension or revocation of accreditation shall state: (1) The reasons for the proposed suspension or revocation; (2) The proposed effective date of the suspension or revocation; (3) The impact of a suspension or revocation on future eligibility for accreditation; and (4) The right to file an appeal pursuant to Sec. 205.681. (d) Willful violations. Notwithstanding paragraph (a) of this section, if the Program Manager has reason to believe that a certifying agent has willfully violated the Act or regulations in this part, the Program Manager shall send a written notification of proposed suspension or revocation of accreditation to the certifying agent. (e) Suspension or revocation. When the accredited certifying agent fails to file an appeal of the proposed suspension or revocation of accreditation, the Program Manager shall send a written notice of suspension or revocation of accreditation to the certifying agent. (f) Cessation of certification activities. A certifying agent whose accreditation is suspended or revoked must: (1) Cease all certification activities in each area of accreditation and in each State for which its accreditation is suspended or revoked. (2) Transfer to the Secretary and make available to any applicable State organic program's governing State official all records concerning its certification activities that were suspended or revoked. (g) Eligibility. (1) A certifying agent whose accreditation is suspended by the Secretary under this section may at any time, unless otherwise stated in the notification of suspension, submit a request to the Secretary for reinstatement of its accreditation. The request must be accompanied by evidence demonstrating correction of each noncompliance and corrective actions taken to comply with and remain in compliance with the Act and the regulations in this part. (2) A certifying agent whose accreditation is revoked by the Secretary shall be ineligible to be accredited as a certifying agent under the Act and the regulations in this part for a period of not less than 3 years following the date of such revocation. Sec. Sec. 205.666-205.667 [Reserved] Sec. 205.668 Noncompliance procedures under State organic programs. (a) A State organic program's governing State official must promptly notify the Secretary of commencement of any noncompliance proceeding against a certified operation and forward to the Secretary a copy of each notice issued. (b) A noncompliance proceeding, brought by a State organic program's governing State official against a certified operation, shall be appealable pursuant to the appeal procedures of the State organic program. There shall be no subsequent rights of appeal to the Secretary. Final decisions of a State may be appealed to the United States District Court for the district in [[Page 450]] which such certified operation is located. (c) A State organic program's governing State official may review and investigate complaints of noncompliance with the Act or regulations concerning accreditation of certifying agents operating in the State. When such review or investigation reveals any noncompliance, the State organic program's governing State official shall send a written report of noncompliance to the Program Manager. The report shall provide a description of each noncompliance and the facts upon which the noncompliance is based. Sec. 205.669 [Reserved] Inspection and Testing, Reporting, and Exclusion from Sale Sec. 205.670 Inspection and testing of agricultural products to be sold or labeled as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)).'' (a) All agricultural products that are to be sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' must be made accessible by certified organic production or handling operations for examination by the Administrator, the applicable State organic program's governing State official, or the certifying agent. (b) The Administrator, applicable State organic program's governing State official, or the certifying agent may require preharvest or postharvest testing of any agricultural input used or agricultural product to be sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s))'' when there is reason to believe that the agricultural input or product has come into contact with a prohibited substance or has been produced using excluded methods. Samples may include the collection and testing of soil; water; waste; seeds; plant tissue; and plant, animal, and processed products samples. Such tests must be conducted by the applicable State organic program's governing State official or the certifying agent at the official's or certifying agent's own expense. (c) A certifying agent must conduct periodic residue testing of agricultural products to be sold, labeled, or represented as ``100 percent organic,'' ``organic,'' or ``made with organic (specified ingredients or food group(s)).'' Samples may include the collection and testing of soil; water; waste; seeds; plant tissue; and plant, animal, and processed products samples. Such tests must be conducted by the certifying agent at the certifying agent's own expense. (d) A certifying agent must, on an annual basis, sample and test from a minimum of five percent of the operations it certifies, rounded to the nearest whole number. A certifying agent that certifies fewer than thirty operations on an annual basis must sample and test from at least one operation annually. Tests conducted under paragraphs (b) and (c) of this section will apply to the minimum percentage of operations. (e) Sample collection pursuant to paragraphs (b) and (c) of this section must be performed by an inspector representing the Administrator, applicable State organic program's governing State official, or certifying agent. Sample integrity must be maintained throughout the chain of custody, and residue testing must be performed in an accredited laboratory. Chemical analysis must be made in accordance with the methods described in the most current edition of the Official Methods of Analysis of the AOAC International or other current applicable validated methodology for determining the presence of contaminants in agricultural products. (f) Results of all analyses and tests performed under this section will be available for public access, unless the testing is part of an ongoing compliance investigation. (g) If test results indicate a specific agricultural product contains pesticide residues or environmental contaminants that exceed the Food and Drug Administration's or the Environmental Protection Agency's regulatory tolerances, the certifying agent must [[Page 451]] promptly report such data to the Federal health agency whose regulatory tolerance or action level has been exceeded. Test results that exceed federal regulatory tolerances must also be reported to the appropriate State health agency or foreign equivalent. [77 FR 67251, Nov. 9, 2012] Sec. 205.671 Exclusion from organic sale. When residue testing detects prohibited substances at levels that are greater than 5 percent of the Environmental Protection Agency's tolerance for the specific residue detected or unavoidable residual environmental contamination, the agricultural product must not be sold, labeled, or represented as organically produced. The Administrator, the applicable State organic program's governing State official, or the certifying agent may conduct an investigation of the certified operation to determine the cause of the prohibited substance. Sec. 205.672 Emergency pest or disease treatment. When a prohibited substance is applied to a certified operation due to a Federal or State emergency pest or disease treatment program and the certified operation otherwise meets the requirements of this part, the certification status of the operation shall not be affected as a result of the application of the prohibited substance: Provided, That: (a) Any harvested crop or plant part to be harvested that has contact with a prohibited substance applied as the result of a Federal or State emergency pest or disease treatment program cannot be sold, labeled, or represented as organically produced; and (b) Any livestock that are treated with a prohibited substance applied as the result of a Federal or State emergency pest or disease treatment program or product derived from such treated livestock cannot be sold, labeled, or represented as organically produced: Except, That: (1) Milk or milk products may be sold, labeled, or represented as organically produced beginning 12 months following the last date that the dairy animal was treated with the prohibited substance; and (2) The offspring of gestating mammalian breeder stock treated with a prohibited substance may be considered organic: Provided, That, the breeder stock was not in the last third of gestation on the date that the breeder stock was treated with the prohibited substance. Sec. Sec. 205.673-205.679 [Reserved] Adverse Action Appeal Process Sec. 205.680 General. (a) Persons subject to the Act who believe they are adversely affected by a noncompliance decision of the National Organic Program's Program Manager may appeal such decision to the Administrator. (b) Persons subject to the Act who believe that they are adversely affected by a noncompliance decision of a State organic program may appeal such decision to the State organic program's governing State official who will initiate handling of the appeal pursuant to appeal procedures approved by the Secretary. (c) Persons subject to the Act who believe that they are adversely affected by a noncompliance decision of a certifying agent may appeal such decision to the Administrator, Except, That, when the person is subject to an approved State organic program, the appeal must be made to the State organic program. (d) All written communications between parties involved in appeal proceedings must be sent to the recipient's place of business by a delivery service which provides dated return receipts. (e) All appeals shall be reviewed, heard, and decided by persons not involved with the decision being appealed. Sec. 205.681 Appeals. (a) Certification appeals. An applicant for certification may appeal a certifying agent's notice of denial of certification, and a certified operation may appeal a certifying agent's notification of proposed suspension or revocation of [[Page 452]] certification to the Administrator, Except, That, when the applicant or certified operation is subject to an approved State organic program the appeal must be made to the State organic program which will carry out the appeal pursuant to the State organic program's appeal procedures approved by the Secretary. (1) If the Administrator or State organic program sustains a certification applicant's or certified operation's appeal of a certifying agent's decision, the applicant will be issued organic certification, or a certified operation will continue its certification, as applicable to the operation. The act of sustaining the appeal shall not be an adverse action subject to appeal by the affected certifying agent. (2) If the Administrator or State organic program denies an appeal, a formal administrative proceeding will be initiated to deny, suspend, or revoke the certification. Such proceeding shall be conducted pursuant to the U.S. Department of Agriculture's Uniform Rules of Practice, 7 CFR part 1, subpart H, or the State organic program's rules of procedure. (b) Accreditation appeals. An applicant for accreditation and an accredited certifying agent may appeal the Program Manager's denial of accreditation or proposed suspension or revocation of accreditation to the Administrator. (1) If the Administrator sustains an appeal, an applicant will be issued accreditation, or a certifying agent will continue its accreditation, as applicable to the operation. (2) If the Administrator denies an appeal, a formal administrative proceeding to deny, suspend, or revoke the accreditation will be initiated. Such proceeding shall be conducted pursuant to the U.S. Department of Agriculture's Uniform Rules of Practice, 7 CFR part 1, Subpart H. (c) Filing period. An appeal of a noncompliance decision must be filed within the time period provided in the letter of notification or within 30 days from receipt of the notification, whichever occurs later. The appeal will be considered ``filed'' on the date received by the Administrator or by the State organic program. A decision to deny, suspend, or revoke certification or accreditation will become final and nonappealable unless the decision is appealed in a timely manner. (d) Where and what to file. (1) Appeals to the Administrator must be filed in writing and addressed to: Administrator, USDA, AMS, c/o NOP Appeals Team, 1400 Independence Avenue SW., Room 2648-So., Stop 0268, Washington, DC 20250-0268. (2) Appeals to the State organic program must be filed in writing to the address and person identified in the letter of notification. (3) All appeals must include a copy of the adverse decision and a statement of the appellant's reasons for believing that the decision was not proper or made in accordance with applicable program regulations, policies, or procedures. [65 FR 80637, Dec. 21, 2000, as amended at 71 FR 53303, Sept. 11, 2006; 80 FR 6430, Feb. 4, 2015] Sec. Sec. 205.682-205.689 [Reserved] Miscellaneous Sec. 205.690 OMB control number. The control number assigned to the information collection requirements in this part by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35, is OMB number 0581-0191. [65 FR 80637, Dec. 21, 2000, as amended at 75 FR 7195, Feb. 17, 2010] Sec. Sec. 205.691-205.699 [Reserved] PARTS 206 209 [RESERVED] [[Page 453]] FINDING AIDS -------------------------------------------------------------------- A list of CFR titles, subtitles, chapters, subchapters and parts and an alphabetical list of agencies publishing in the CFR are included in the CFR Index and Finding Aids volume to the Code of Federal Regulations which is published separately and revised annually. Table of CFR Titles and Chapters Alphabetical List of Agencies Appearing in the CFR List of CFR Sections Affected [[Page 455]] Table of CFR Titles and Chapters (Revised as of January 1, 2023) Title 1--General Provisions I Administrative Committee of the Federal Register (Parts 1--49) II Office of the Federal Register (Parts 50--299) III Administrative Conference of the United States (Parts 300--399) IV Miscellaneous Agencies (Parts 400--599) VI National Capital Planning Commission (Parts 600--699) Title 2--Grants and Agreements Subtitle A--Office of Management and Budget Guidance for Grants and Agreements I Office of Management and Budget Governmentwide Guidance for Grants and Agreements (Parts 2--199) II Office of Management and Budget Guidance (Parts 200-- 299) Subtitle B--Federal Agency Regulations for Grants and Agreements III Department of Health and Human Services (Parts 300-- 399) IV Department of Agriculture (Parts 400--499) VI Department of State (Parts 600--699) VII Agency for International Development (Parts 700--799) VIII Department of Veterans Affairs (Parts 800--899) IX Department of Energy (Parts 900--999) X Department of the Treasury (Parts 1000--1099) XI Department of Defense (Parts 1100--1199) XII Department of Transportation (Parts 1200--1299) XIII Department of Commerce (Parts 1300--1399) XIV Department of the Interior (Parts 1400--1499) XV Environmental Protection Agency (Parts 1500--1599) XVIII National Aeronautics and Space Administration (Parts 1800--1899) XX United States Nuclear Regulatory Commission (Parts 2000--2099) XXII Corporation for National and Community Service (Parts 2200--2299) XXIII Social Security Administration (Parts 2300--2399) XXIV Department of Housing and Urban Development (Parts 2400--2499) XXV National Science Foundation (Parts 2500--2599) XXVI National Archives and Records Administration (Parts 2600--2699) [[Page 456]] XXVII Small Business Administration (Parts 2700--2799) XXVIII Department of Justice (Parts 2800--2899) XXIX Department of Labor (Parts 2900--2999) XXX Department of Homeland Security (Parts 3000--3099) XXXI Institute of Museum and Library Services (Parts 3100-- 3199) XXXII National Endowment for the Arts (Parts 3200--3299) XXXIII National Endowment for the Humanities (Parts 3300-- 3399) XXXIV Department of Education (Parts 3400--3499) XXXV Export-Import Bank of the United States (Parts 3500-- 3599) XXXVI Office of National Drug Control Policy, Executive Office of the President (Parts 3600--3699) XXXVII Peace Corps (Parts 3700--3799) LVIII Election Assistance Commission (Parts 5800--5899) LIX Gulf Coast Ecosystem Restoration Council (Parts 5900-- 5999) LX Federal Communications Commission (Parts 6000--6099) Title 3--The President I Executive Office of the President (Parts 100--199) Title 4--Accounts I Government Accountability Office (Parts 1--199) Title 5--Administrative Personnel I Office of Personnel Management (Parts 1--1199) II Merit Systems Protection Board (Parts 1200--1299) III Office of Management and Budget (Parts 1300--1399) IV Office of Personnel Management and Office of the Director of National Intelligence (Parts 1400-- 1499) V The International Organizations Employees Loyalty Board (Parts 1500--1599) VI Federal Retirement Thrift Investment Board (Parts 1600--1699) VIII Office of Special Counsel (Parts 1800--1899) IX Appalachian Regional Commission (Parts 1900--1999) XI Armed Forces Retirement Home (Parts 2100--2199) XIV Federal Labor Relations Authority, General Counsel of the Federal Labor Relations Authority and Federal Service Impasses Panel (Parts 2400--2499) XVI Office of Government Ethics (Parts 2600--2699) XXI Department of the Treasury (Parts 3100--3199) XXII Federal Deposit Insurance Corporation (Parts 3200-- 3299) XXIII Department of Energy (Parts 3300--3399) XXIV Federal Energy Regulatory Commission (Parts 3400-- 3499) XXV Department of the Interior (Parts 3500--3599) [[Page 457]] XXVI Department of Defense (Parts 3600--3699) XXVIII Department of Justice (Parts 3800--3899) XXIX Federal Communications Commission (Parts 3900--3999) XXX Farm Credit System Insurance Corporation (Parts 4000-- 4099) XXXI Farm Credit Administration (Parts 4100--4199) XXXIII U.S. International Development Finance Corporation (Parts 4300--4399) XXXIV Securities and Exchange Commission (Parts 4400--4499) XXXV Office of Personnel Management (Parts 4500--4599) XXXVI Department of Homeland Security (Parts 4600--4699) XXXVII Federal Election Commission (Parts 4700--4799) XL Interstate Commerce Commission (Parts 5000--5099) XLI Commodity Futures Trading Commission (Parts 5100-- 5199) XLII Department of Labor (Parts 5200--5299) XLIII National Science Foundation (Parts 5300--5399) XLV Department of Health and Human Services (Parts 5500-- 5599) XLVI Postal Rate Commission (Parts 5600--5699) XLVII Federal Trade Commission (Parts 5700--5799) XLVIII Nuclear Regulatory Commission (Parts 5800--5899) XLIX Federal Labor Relations Authority (Parts 5900--5999) L Department of Transportation (Parts 6000--6099) LII Export-Import Bank of the United States (Parts 6200-- 6299) LIII Department of Education (Parts 6300--6399) LIV Environmental Protection Agency (Parts 6400--6499) LV National Endowment for the Arts (Parts 6500--6599) LVI National Endowment for the Humanities (Parts 6600-- 6699) LVII General Services Administration (Parts 6700--6799) LVIII Board of Governors of the Federal Reserve System (Parts 6800--6899) LIX National Aeronautics and Space Administration (Parts 6900--6999) LX United States Postal Service (Parts 7000--7099) LXI National Labor Relations Board (Parts 7100--7199) LXII Equal Employment Opportunity Commission (Parts 7200-- 7299) LXIII Inter-American Foundation (Parts 7300--7399) LXIV Merit Systems Protection Board (Parts 7400--7499) LXV Department of Housing and Urban Development (Parts 7500--7599) LXVI National Archives and Records Administration (Parts 7600--7699) LXVII Institute of Museum and Library Services (Parts 7700-- 7799) LXVIII Commission on Civil Rights (Parts 7800--7899) LXIX Tennessee Valley Authority (Parts 7900--7999) LXX Court Services and Offender Supervision Agency for the District of Columbia (Parts 8000--8099) LXXI Consumer Product Safety Commission (Parts 8100--8199) [[Page 458]] LXXIII Department of Agriculture (Parts 8300--8399) LXXIV Federal Mine Safety and Health Review Commission (Parts 8400--8499) LXXVI Federal Retirement Thrift Investment Board (Parts 8600--8699) LXXVII Office of Management and Budget (Parts 8700--8799) LXXX Federal Housing Finance Agency (Parts 9000--9099) LXXXIII Special Inspector General for Afghanistan Reconstruction (Parts 9300--9399) LXXXIV Bureau of Consumer Financial Protection (Parts 9400-- 9499) LXXXVI National Credit Union Administration (Parts 9600-- 9699) XCVII Department of Homeland Security Human Resources Management System (Department of Homeland Security--Office of Personnel Management) (Parts 9700--9799) XCVIII Council of the Inspectors General on Integrity and Efficiency (Parts 9800--9899) XCIX Military Compensation and Retirement Modernization Commission (Parts 9900--9999) C National Council on Disability (Parts 10000--10049) CI National Mediation Board (Parts 10100--10199) CII U.S. Office of Special Counsel (Parts 10200--10299) Title 6--Domestic Security I Department of Homeland Security, Office of the Secretary (Parts 1--199) X Privacy and Civil Liberties Oversight Board (Parts 1000--1099) Title 7--Agriculture Subtitle A--Office of the Secretary of Agriculture (Parts 0--26) Subtitle B--Regulations of the Department of Agriculture I Agricultural Marketing Service (Standards, Inspections, Marketing Practices), Department of Agriculture (Parts 27--209) II Food and Nutrition Service, Department of Agriculture (Parts 210--299) III Animal and Plant Health Inspection Service, Department of Agriculture (Parts 300--399) IV Federal Crop Insurance Corporation, Department of Agriculture (Parts 400--499) V Agricultural Research Service, Department of Agriculture (Parts 500--599) VI Natural Resources Conservation Service, Department of Agriculture (Parts 600--699) VII Farm Service Agency, Department of Agriculture (Parts 700--799) VIII Agricultural Marketing Service (Federal Grain Inspection Service, Fair Trade Practices Program), Department of Agriculture (Parts 800--899) [[Page 459]] IX Agricultural Marketing Service (Marketing Agreements and Orders; Fruits, Vegetables, Nuts), Department of Agriculture (Parts 900--999) X Agricultural Marketing Service (Marketing Agreements and Orders; Milk), Department of Agriculture (Parts 1000--1199) XI Agricultural Marketing Service (Marketing Agreements and Orders; Miscellaneous Commodities), Department of Agriculture (Parts 1200--1299) XIV Commodity Credit Corporation, Department of Agriculture (Parts 1400--1499) XV Foreign Agricultural Service, Department of Agriculture (Parts 1500--1599) XVI [Reserved] XVII Rural Utilities Service, Department of Agriculture (Parts 1700--1799) XVIII Rural Housing Service, Rural Business-Cooperative Service, Rural Utilities Service, and Farm Service Agency, Department of Agriculture (Parts 1800-- 2099) XX [Reserved] XXV Office of Advocacy and Outreach, Department of Agriculture (Parts 2500--2599) XXVI Office of Inspector General, Department of Agriculture (Parts 2600--2699) XXVII Office of Information Resources Management, Department of Agriculture (Parts 2700--2799) XXVIII Office of Operations, Department of Agriculture (Parts 2800--2899) XXIX Office of Energy Policy and New Uses, Department of Agriculture (Parts 2900--2999) XXX Office of the Chief Financial Officer, Department of Agriculture (Parts 3000--3099) XXXI Office of Environmental Quality, Department of Agriculture (Parts 3100--3199) XXXII Office of Procurement and Property Management, Department of Agriculture (Parts 3200--3299) XXXIII Office of Transportation, Department of Agriculture (Parts 3300--3399) XXXIV National Institute of Food and Agriculture (Parts 3400--3499) XXXV Rural Housing Service, Department of Agriculture (Parts 3500--3599) XXXVI National Agricultural Statistics Service, Department of Agriculture (Parts 3600--3699) XXXVII Economic Research Service, Department of Agriculture (Parts 3700--3799) XXXVIII World Agricultural Outlook Board, Department of Agriculture (Parts 3800--3899) XLI [Reserved] XLII Rural Business-Cooperative Service and Rural Utilities Service, Department of Agriculture (Parts 4200-- 4299) [[Page 460]] L Rural Business-Cooperative Service, and Rural Utilities Service, Department of Agriculture (Parts 5000--5099) Title 8--Aliens and Nationality I Department of Homeland Security (Parts 1--499) V Executive Office for Immigration Review, Department of Justice (Parts 1000--1399) Title 9--Animals and Animal Products I Animal and Plant Health Inspection Service, Department of Agriculture (Parts 1--199) II Agricultural Marketing Service (Fair Trade Practices Program), Department of Agriculture (Parts 200-- 299) III Food Safety and Inspection Service, Department of Agriculture (Parts 300--599) Title 10--Energy I Nuclear Regulatory Commission (Parts 0--199) II Department of Energy (Parts 200--699) III Department of Energy (Parts 700--999) X Department of Energy (General Provisions) (Parts 1000--1099) XIII Nuclear Waste Technical Review Board (Parts 1300-- 1399) XVII Defense Nuclear Facilities Safety Board (Parts 1700-- 1799) XVIII Northeast Interstate Low-Level Radioactive Waste Commission (Parts 1800--1899) Title 11--Federal Elections I Federal Election Commission (Parts 1--9099) II Election Assistance Commission (Parts 9400--9499) Title 12--Banks and Banking I Comptroller of the Currency, Department of the Treasury (Parts 1--199) II Federal Reserve System (Parts 200--299) III Federal Deposit Insurance Corporation (Parts 300--399) IV Export-Import Bank of the United States (Parts 400-- 499) V [Reserved] VI Farm Credit Administration (Parts 600--699) VII National Credit Union Administration (Parts 700--799) VIII Federal Financing Bank (Parts 800--899) IX (Parts 900--999) [Reserved] X Bureau of Consumer Financial Protection (Parts 1000-- 1099) [[Page 461]] XI Federal Financial Institutions Examination Council (Parts 1100--1199) XII Federal Housing Finance Agency (Parts 1200--1299) XIII Financial Stability Oversight Council (Parts 1300-- 1399) XIV Farm Credit System Insurance Corporation (Parts 1400-- 1499) XV Department of the Treasury (Parts 1500--1599) XVI Office of Financial Research, Department of the Treasury (Parts 1600--1699) XVII Office of Federal Housing Enterprise Oversight, Department of Housing and Urban Development (Parts 1700--1799) XVIII Community Development Financial Institutions Fund, Department of the Treasury (Parts 1800--1899) Title 13--Business Credit and Assistance I Small Business Administration (Parts 1--199) III Economic Development Administration, Department of Commerce (Parts 300--399) IV Emergency Steel Guarantee Loan Board (Parts 400--499) V Emergency Oil and Gas Guaranteed Loan Board (Parts 500--599) Title 14--Aeronautics and Space I Federal Aviation Administration, Department of Transportation (Parts 1--199) II Office of the Secretary, Department of Transportation (Aviation Proceedings) (Parts 200--399) III Commercial Space Transportation, Federal Aviation Administration, Department of Transportation (Parts 400--1199) V National Aeronautics and Space Administration (Parts 1200--1299) VI Air Transportation System Stabilization (Parts 1300-- 1399) Title 15--Commerce and Foreign Trade Subtitle A--Office of the Secretary of Commerce (Parts 0--29) Subtitle B--Regulations Relating to Commerce and Foreign Trade I Bureau of the Census, Department of Commerce (Parts 30--199) II National Institute of Standards and Technology, Department of Commerce (Parts 200--299) III International Trade Administration, Department of Commerce (Parts 300--399) IV Foreign-Trade Zones Board, Department of Commerce (Parts 400--499) VII Bureau of Industry and Security, Department of Commerce (Parts 700--799) [[Page 462]] VIII Bureau of Economic Analysis, Department of Commerce (Parts 800--899) IX National Oceanic and Atmospheric Administration, Department of Commerce (Parts 900--999) XI National Technical Information Service, Department of Commerce (Parts 1100--1199) XIII East-West Foreign Trade Board (Parts 1300--1399) XIV Minority Business Development Agency (Parts 1400-- 1499) XV Office of the Under-Secretary for Economic Affairs, Department of Commerce (Parts 1500--1599) Subtitle C--Regulations Relating to Foreign Trade Agreements XX Office of the United States Trade Representative (Parts 2000--2099) Subtitle D--Regulations Relating to Telecommunications and Information XXIII National Telecommunications and Information Administration, Department of Commerce (Parts 2300--2399) [Reserved] Title 16--Commercial Practices I Federal Trade Commission (Parts 0--999) II Consumer Product Safety Commission (Parts 1000--1799) Title 17--Commodity and Securities Exchanges I Commodity Futures Trading Commission (Parts 1--199) II Securities and Exchange Commission (Parts 200--399) IV Department of the Treasury (Parts 400--499) Title 18--Conservation of Power and Water Resources I Federal Energy Regulatory Commission, Department of Energy (Parts 1--399) III Delaware River Basin Commission (Parts 400--499) VI Water Resources Council (Parts 700--799) VIII Susquehanna River Basin Commission (Parts 800--899) XIII Tennessee Valley Authority (Parts 1300--1399) Title 19--Customs Duties I U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury (Parts 0--199) II United States International Trade Commission (Parts 200--299) III International Trade Administration, Department of Commerce (Parts 300--399) IV U.S. Immigration and Customs Enforcement, Department of Homeland Security (Parts 400--599) [Reserved] [[Page 463]] Title 20--Employees' Benefits I Office of Workers' Compensation Programs, Department of Labor (Parts 1--199) II Railroad Retirement Board (Parts 200--399) III Social Security Administration (Parts 400--499) IV Employees' Compensation Appeals Board, Department of Labor (Parts 500--599) V Employment and Training Administration, Department of Labor (Parts 600--699) VI Office of Workers' Compensation Programs, Department of Labor (Parts 700--799) VII Benefits Review Board, Department of Labor (Parts 800--899) VIII Joint Board for the Enrollment of Actuaries (Parts 900--999) IX Office of the Assistant Secretary for Veterans' Employment and Training Service, Department of Labor (Parts 1000--1099) Title 21--Food and Drugs I Food and Drug Administration, Department of Health and Human Services (Parts 1--1299) II Drug Enforcement Administration, Department of Justice (Parts 1300--1399) III Office of National Drug Control Policy (Parts 1400-- 1499) Title 22--Foreign Relations I Department of State (Parts 1--199) II Agency for International Development (Parts 200--299) III Peace Corps (Parts 300--399) IV International Joint Commission, United States and Canada (Parts 400--499) V United States Agency for Global Media (Parts 500--599) VII U.S. International Development Finance Corporation (Parts 700--799) IX Foreign Service Grievance Board (Parts 900--999) X Inter-American Foundation (Parts 1000--1099) XI International Boundary and Water Commission, United States and Mexico, United States Section (Parts 1100--1199) XII United States International Development Cooperation Agency (Parts 1200--1299) XIII Millennium Challenge Corporation (Parts 1300--1399) XIV Foreign Service Labor Relations Board; Federal Labor Relations Authority; General Counsel of the Federal Labor Relations Authority; and the Foreign Service Impasse Disputes Panel (Parts 1400--1499) XV African Development Foundation (Parts 1500--1599) XVI Japan-United States Friendship Commission (Parts 1600--1699) XVII United States Institute of Peace (Parts 1700--1799) [[Page 464]] Title 23--Highways I Federal Highway Administration, Department of Transportation (Parts 1--999) II National Highway Traffic Safety Administration and Federal Highway Administration, Department of Transportation (Parts 1200--1299) III National Highway Traffic Safety Administration, Department of Transportation (Parts 1300--1399) Title 24--Housing and Urban Development Subtitle A--Office of the Secretary, Department of Housing and Urban Development (Parts 0--99) Subtitle B--Regulations Relating to Housing and Urban Development I Office of Assistant Secretary for Equal Opportunity, Department of Housing and Urban Development (Parts 100--199) II Office of Assistant Secretary for Housing-Federal Housing Commissioner, Department of Housing and Urban Development (Parts 200--299) III Government National Mortgage Association, Department of Housing and Urban Development (Parts 300--399) IV Office of Housing and Office of Multifamily Housing Assistance Restructuring, Department of Housing and Urban Development (Parts 400--499) V Office of Assistant Secretary for Community Planning and Development, Department of Housing and Urban Development (Parts 500--599) VI Office of Assistant Secretary for Community Planning and Development, Department of Housing and Urban Development (Parts 600--699) [Reserved] VII Office of the Secretary, Department of Housing and Urban Development (Housing Assistance Programs and Public and Indian Housing Programs) (Parts 700-- 799) VIII Office of the Assistant Secretary for Housing--Federal Housing Commissioner, Department of Housing and Urban Development (Section 8 Housing Assistance Programs, Section 202 Direct Loan Program, Section 202 Supportive Housing for the Elderly Program and Section 811 Supportive Housing for Persons With Disabilities Program) (Parts 800--899) IX Office of Assistant Secretary for Public and Indian Housing, Department of Housing and Urban Development (Parts 900--1699) X Office of Assistant Secretary for Housing--Federal Housing Commissioner, Department of Housing and Urban Development (Interstate Land Sales Registration Program) (Parts 1700--1799) [Reserved] XII Office of Inspector General, Department of Housing and Urban Development (Parts 2000--2099) XV Emergency Mortgage Insurance and Loan Programs, Department of Housing and Urban Development (Parts 2700--2799) [Reserved] [[Page 465]] XX Office of Assistant Secretary for Housing--Federal Housing Commissioner, Department of Housing and Urban Development (Parts 3200--3899) XXIV Board of Directors of the HOPE for Homeowners Program (Parts 4000--4099) [Reserved] XXV Neighborhood Reinvestment Corporation (Parts 4100-- 4199) Title 25--Indians I Bureau of Indian Affairs, Department of the Interior (Parts 1--299) II Indian Arts and Crafts Board, Department of the Interior (Parts 300--399) III National Indian Gaming Commission, Department of the Interior (Parts 500--599) IV Office of Navajo and Hopi Indian Relocation (Parts 700--899) V Bureau of Indian Affairs, Department of the Interior, and Indian Health Service, Department of Health and Human Services (Part 900--999) VI Office of the Assistant Secretary, Indian Affairs, Department of the Interior (Parts 1000--1199) VII Office of the Special Trustee for American Indians, Department of the Interior (Parts 1200--1299) Title 26--Internal Revenue I Internal Revenue Service, Department of the Treasury (Parts 1--End) Title 27--Alcohol, Tobacco Products and Firearms I Alcohol and Tobacco Tax and Trade Bureau, Department of the Treasury (Parts 1--399) II Bureau of Alcohol, Tobacco, Firearms, and Explosives, Department of Justice (Parts 400--799) Title 28--Judicial Administration I Department of Justice (Parts 0--299) III Federal Prison Industries, Inc., Department of Justice (Parts 300--399) V Bureau of Prisons, Department of Justice (Parts 500-- 599) VI Offices of Independent Counsel, Department of Justice (Parts 600--699) VII Office of Independent Counsel (Parts 700--799) VIII Court Services and Offender Supervision Agency for the District of Columbia (Parts 800--899) IX National Crime Prevention and Privacy Compact Council (Parts 900--999) [[Page 466]] XI Department of Justice and Department of State (Parts 1100--1199) Title 29--Labor Subtitle A--Office of the Secretary of Labor (Parts 0--99) Subtitle B--Regulations Relating to Labor I National Labor Relations Board (Parts 100--199) II Office of Labor-Management Standards, Department of Labor (Parts 200--299) III National Railroad Adjustment Board (Parts 300--399) IV Office of Labor-Management Standards, Department of Labor (Parts 400--499) V Wage and Hour Division, Department of Labor (Parts 500--899) IX Construction Industry Collective Bargaining Commission (Parts 900--999) X National Mediation Board (Parts 1200--1299) XII Federal Mediation and Conciliation Service (Parts 1400--1499) XIV Equal Employment Opportunity Commission (Parts 1600-- 1699) XVII Occupational Safety and Health Administration, Department of Labor (Parts 1900--1999) XX Occupational Safety and Health Review Commission (Parts 2200--2499) XXV Employee Benefits Security Administration, Department of Labor (Parts 2500--2599) XXVII Federal Mine Safety and Health Review Commission (Parts 2700--2799) XL Pension Benefit Guaranty Corporation (Parts 4000-- 4999) Title 30--Mineral Resources I Mine Safety and Health Administration, Department of Labor (Parts 1--199) II Bureau of Safety and Environmental Enforcement, Department of the Interior (Parts 200--299) IV Geological Survey, Department of the Interior (Parts 400--499) V Bureau of Ocean Energy Management, Department of the Interior (Parts 500--599) VII Office of Surface Mining Reclamation and Enforcement, Department of the Interior (Parts 700--999) XII Office of Natural Resources Revenue, Department of the Interior (Parts 1200--1299) Title 31--Money and Finance: Treasury Subtitle A--Office of the Secretary of the Treasury (Parts 0--50) Subtitle B--Regulations Relating to Money and Finance [[Page 467]] I Monetary Offices, Department of the Treasury (Parts 51--199) II Fiscal Service, Department of the Treasury (Parts 200--399) IV Secret Service, Department of the Treasury (Parts 400--499) V Office of Foreign Assets Control, Department of the Treasury (Parts 500--599) VI Bureau of Engraving and Printing, Department of the Treasury (Parts 600--699) VII Federal Law Enforcement Training Center, Department of the Treasury (Parts 700--799) VIII Office of Investment Security, Department of the Treasury (Parts 800--899) IX Federal Claims Collection Standards (Department of the Treasury--Department of Justice) (Parts 900--999) X Financial Crimes Enforcement Network, Department of the Treasury (Parts 1000--1099) Title 32--National Defense Subtitle A--Department of Defense I Office of the Secretary of Defense (Parts 1--399) V Department of the Army (Parts 400--699) VI Department of the Navy (Parts 700--799) VII Department of the Air Force (Parts 800--1099) Subtitle B--Other Regulations Relating to National Defense XII Department of Defense, Defense Logistics Agency (Parts 1200--1299) XVI Selective Service System (Parts 1600--1699) XVII Office of the Director of National Intelligence (Parts 1700--1799) XVIII National Counterintelligence Center (Parts 1800--1899) XIX Central Intelligence Agency (Parts 1900--1999) XX Information Security Oversight Office, National Archives and Records Administration (Parts 2000-- 2099) XXI National Security Council (Parts 2100--2199) XXIV Office of Science and Technology Policy (Parts 2400-- 2499) XXVII Office for Micronesian Status Negotiations (Parts 2700--2799) XXVIII Office of the Vice President of the United States (Parts 2800--2899) Title 33--Navigation and Navigable Waters I Coast Guard, Department of Homeland Security (Parts 1--199) II Corps of Engineers, Department of the Army, Department of Defense (Parts 200--399) IV Great Lakes St. Lawrence Seaway Development Corporation, Department of Transportation (Parts 400--499) [[Page 468]] Title 34--Education Subtitle A--Office of the Secretary, Department of Education (Parts 1--99) Subtitle B--Regulations of the Offices of the Department of Education I Office for Civil Rights, Department of Education (Parts 100--199) II Office of Elementary and Secondary Education, Department of Education (Parts 200--299) III Office of Special Education and Rehabilitative Services, Department of Education (Parts 300--399) IV Office of Career, Technical, and Adult Education, Department of Education (Parts 400--499) V Office of Bilingual Education and Minority Languages Affairs, Department of Education (Parts 500--599) [Reserved] VI Office of Postsecondary Education, Department of Education (Parts 600--699) VII Office of Educational Research and Improvement, Department of Education (Parts 700--799) [Reserved] Subtitle C--Regulations Relating to Education XI [Reserved] XII National Council on Disability (Parts 1200--1299) Title 35 [Reserved] Title 36--Parks, Forests, and Public Property I National Park Service, Department of the Interior (Parts 1--199) II Forest Service, Department of Agriculture (Parts 200-- 299) III Corps of Engineers, Department of the Army (Parts 300--399) IV American Battle Monuments Commission (Parts 400--499) V Smithsonian Institution (Parts 500--599) VI [Reserved] VII Library of Congress (Parts 700--799) VIII Advisory Council on Historic Preservation (Parts 800-- 899) IX Pennsylvania Avenue Development Corporation (Parts 900--999) X Presidio Trust (Parts 1000--1099) XI Architectural and Transportation Barriers Compliance Board (Parts 1100--1199) XII National Archives and Records Administration (Parts 1200--1299) XV Oklahoma City National Memorial Trust (Parts 1500-- 1599) XVI Morris K. Udall Scholarship and Excellence in National Environmental Policy Foundation (Parts 1600--1699) Title 37--Patents, Trademarks, and Copyrights I United States Patent and Trademark Office, Department of Commerce (Parts 1--199) II U.S. Copyright Office, Library of Congress (Parts 200--299) [[Page 469]] III Copyright Royalty Board, Library of Congress (Parts 300--399) IV National Institute of Standards and Technology, Department of Commerce (Parts 400--599) Title 38--Pensions, Bonuses, and Veterans' Relief I Department of Veterans Affairs (Parts 0--199) II Armed Forces Retirement Home (Parts 200--299) Title 39--Postal Service I United States Postal Service (Parts 1--999) III Postal Regulatory Commission (Parts 3000--3099) Title 40--Protection of Environment I Environmental Protection Agency (Parts 1--1099) IV Environmental Protection Agency and Department of Justice (Parts 1400--1499) V Council on Environmental Quality (Parts 1500--1599) VI Chemical Safety and Hazard Investigation Board (Parts 1600--1699) VII Environmental Protection Agency and Department of Defense; Uniform National Discharge Standards for Vessels of the Armed Forces (Parts 1700--1799) VIII Gulf Coast Ecosystem Restoration Council (Parts 1800-- 1899) IX Federal Permitting Improvement Steering Council (Part 1900) Title 41--Public Contracts and Property Management Subtitle A--Federal Procurement Regulations System [Note] Subtitle B--Other Provisions Relating to Public Contracts 50 Public Contracts, Department of Labor (Parts 50-1--50- 999) 51 Committee for Purchase From People Who Are Blind or Severely Disabled (Parts 51-1--51-99) 60 Office of Federal Contract Compliance Programs, Equal Employment Opportunity, Department of Labor (Parts 60-1--60-999) 61 Office of the Assistant Secretary for Veterans' Employment and Training Service, Department of Labor (Parts 61-1--61-999) 62--100 [Reserved] Subtitle C--Federal Property Management Regulations System 101 Federal Property Management Regulations (Parts 101-1-- 101-99) 102 Federal Management Regulation (Parts 102-1--102-299) 103--104 [Reserved] 105 General Services Administration (Parts 105-1--105-999) [[Page 470]] 109 Department of Energy Property Management Regulations (Parts 109-1--109-99) 114 Department of the Interior (Parts 114-1--114-99) 115 Environmental Protection Agency (Parts 115-1--115-99) 128 Department of Justice (Parts 128-1--128-99) 129--200 [Reserved] Subtitle D--Federal Acquisition Supply Chain Security 201 Federal Acquisition Security Council (Parts 201-1-- 201-99) Subtitle E [Reserved] Subtitle F--Federal Travel Regulation System 300 General (Parts 300-1--300-99) 301 Temporary Duty (TDY) Travel Allowances (Parts 301-1-- 301-99) 302 Relocation Allowances (Parts 302-1--302-99) 303 Payment of Expenses Connected with the Death of Certain Employees (Part 303-1--303-99) 304 Payment of Travel Expenses from a Non-Federal Source (Parts 304-1--304-99) Title 42--Public Health I Public Health Service, Department of Health and Human Services (Parts 1--199) II--III [Reserved] IV Centers for Medicare & Medicaid Services, Department of Health and Human Services (Parts 400--699) V Office of Inspector General-Health Care, Department of Health and Human Services (Parts 1000--1099) Title 43--Public Lands: Interior Subtitle A--Office of the Secretary of the Interior (Parts 1--199) Subtitle B--Regulations Relating to Public Lands I Bureau of Reclamation, Department of the Interior (Parts 400--999) II Bureau of Land Management, Department of the Interior (Parts 1000--9999) III Utah Reclamation Mitigation and Conservation Commission (Parts 10000--10099) Title 44--Emergency Management and Assistance I Federal Emergency Management Agency, Department of Homeland Security (Parts 0--399) IV Department of Commerce and Department of Transportation (Parts 400--499) [[Page 471]] Title 45--Public Welfare Subtitle A--Department of Health and Human Services (Parts 1--199) Subtitle B--Regulations Relating to Public Welfare II Office of Family Assistance (Assistance Programs), Administration for Children and Families, Department of Health and Human Services (Parts 200--299) III Office of Child Support Enforcement (Child Support Enforcement Program), Administration for Children and Families, Department of Health and Human Services (Parts 300--399) IV Office of Refugee Resettlement, Administration for Children and Families, Department of Health and Human Services (Parts 400--499) V Foreign Claims Settlement Commission of the United States, Department of Justice (Parts 500--599) VI National Science Foundation (Parts 600--699) VII Commission on Civil Rights (Parts 700--799) VIII Office of Personnel Management (Parts 800--899) IX Denali Commission (Parts 900--999) X Office of Community Services, Administration for Children and Families, Department of Health and Human Services (Parts 1000--1099) XI National Foundation on the Arts and the Humanities (Parts 1100--1199) XII Corporation for National and Community Service (Parts 1200--1299) XIII Administration for Children and Families, Department of Health and Human Services (Parts 1300--1399) XVI Legal Services Corporation (Parts 1600--1699) XVII National Commission on Libraries and Information Science (Parts 1700--1799) XVIII Harry S. Truman Scholarship Foundation (Parts 1800-- 1899) XXI Commission of Fine Arts (Parts 2100--2199) XXIII Arctic Research Commission (Parts 2300--2399) XXIV James Madison Memorial Fellowship Foundation (Parts 2400--2499) XXV Corporation for National and Community Service (Parts 2500--2599) Title 46--Shipping I Coast Guard, Department of Homeland Security (Parts 1--199) II Maritime Administration, Department of Transportation (Parts 200--399) III Coast Guard (Great Lakes Pilotage), Department of Homeland Security (Parts 400--499) IV Federal Maritime Commission (Parts 500--599) [[Page 472]] Title 47--Telecommunication I Federal Communications Commission (Parts 0--199) II Office of Science and Technology Policy and National Security Council (Parts 200--299) III National Telecommunications and Information Administration, Department of Commerce (Parts 300--399) IV National Telecommunications and Information Administration, Department of Commerce, and National Highway Traffic Safety Administration, Department of Transportation (Parts 400--499) V The First Responder Network Authority (Parts 500--599) Title 48--Federal Acquisition Regulations System 1 Federal Acquisition Regulation (Parts 1--99) 2 Defense Acquisition Regulations System, Department of Defense (Parts 200--299) 3 Department of Health and Human Services (Parts 300-- 399) 4 Department of Agriculture (Parts 400--499) 5 General Services Administration (Parts 500--599) 6 Department of State (Parts 600--699) 7 Agency for International Development (Parts 700--799) 8 Department of Veterans Affairs (Parts 800--899) 9 Department of Energy (Parts 900--999) 10 Department of the Treasury (Parts 1000--1099) 12 Department of Transportation (Parts 1200--1299) 13 Department of Commerce (Parts 1300--1399) 14 Department of the Interior (Parts 1400--1499) 15 Environmental Protection Agency (Parts 1500--1599) 16 Office of Personnel Management Federal Employees Health Benefits Acquisition Regulation (Parts 1600--1699) 17 Office of Personnel Management (Parts 1700--1799) 18 National Aeronautics and Space Administration (Parts 1800--1899) 19 Broadcasting Board of Governors (Parts 1900--1999) 20 Nuclear Regulatory Commission (Parts 2000--2099) 21 Office of Personnel Management, Federal Employees Group Life Insurance Federal Acquisition Regulation (Parts 2100--2199) 23 Social Security Administration (Parts 2300--2399) 24 Department of Housing and Urban Development (Parts 2400--2499) 25 National Science Foundation (Parts 2500--2599) 28 Department of Justice (Parts 2800--2899) 29 Department of Labor (Parts 2900--2999) 30 Department of Homeland Security, Homeland Security Acquisition Regulation (HSAR) (Parts 3000--3099) 34 Department of Education Acquisition Regulation (Parts 3400--3499) [[Page 473]] 51 Department of the Army Acquisition Regulations (Parts 5100--5199) [Reserved] 52 Department of the Navy Acquisition Regulations (Parts 5200--5299) 53 Department of the Air Force Federal Acquisition Regulation Supplement (Parts 5300--5399) [Reserved] 54 Defense Logistics Agency, Department of Defense (Parts 5400--5499) 57 African Development Foundation (Parts 5700--5799) 61 Civilian Board of Contract Appeals, General Services Administration (Parts 6100--6199) 99 Cost Accounting Standards Board, Office of Federal Procurement Policy, Office of Management and Budget (Parts 9900--9999) Title 49--Transportation Subtitle A--Office of the Secretary of Transportation (Parts 1--99) Subtitle B--Other Regulations Relating to Transportation I Pipeline and Hazardous Materials Safety Administration, Department of Transportation (Parts 100--199) II Federal Railroad Administration, Department of Transportation (Parts 200--299) III Federal Motor Carrier Safety Administration, Department of Transportation (Parts 300--399) IV Coast Guard, Department of Homeland Security (Parts 400--499) V National Highway Traffic Safety Administration, Department of Transportation (Parts 500--599) VI Federal Transit Administration, Department of Transportation (Parts 600--699) VII National Railroad Passenger Corporation (AMTRAK) (Parts 700--799) VIII National Transportation Safety Board (Parts 800--999) X Surface Transportation Board (Parts 1000--1399) XI Research and Innovative Technology Administration, Department of Transportation (Parts 1400--1499) [Reserved] XII Transportation Security Administration, Department of Homeland Security (Parts 1500--1699) Title 50--Wildlife and Fisheries I United States Fish and Wildlife Service, Department of the Interior (Parts 1--199) II National Marine Fisheries Service, National Oceanic and Atmospheric Administration, Department of Commerce (Parts 200--299) III International Fishing and Related Activities (Parts 300--399) [[Page 474]] IV Joint Regulations (United States Fish and Wildlife Service, Department of the Interior and National Marine Fisheries Service, National Oceanic and Atmospheric Administration, Department of Commerce); Endangered Species Committee Regulations (Parts 400--499) V Marine Mammal Commission (Parts 500--599) VI Fishery Conservation and Management, National Oceanic and Atmospheric Administration, Department of Commerce (Parts 600--699) [[Page 475]] Alphabetical List of Agencies Appearing in the CFR (Revised as of January 1, 2023) CFR Title, Subtitle or Agency Chapter Administrative Conference of the United States 1, III Advisory Council on Historic Preservation 36, VIII Advocacy and Outreach, Office of 7, XXV Afghanistan Reconstruction, Special Inspector 5, LXXXIII General for African Development Foundation 22, XV Federal Acquisition Regulation 48, 57 Agency for International Development 2, VII; 22, II Federal Acquisition Regulation 48, 7 Agricultural Marketing Service 7, I, VIII, IX, X, XI; 9, II Agricultural Research Service 7, V Agriculture, Department of 2, IV; 5, LXXIII Advocacy and Outreach, Office of 7, XXV Agricultural Marketing Service 7, I, VIII, IX, X, XI; 9, II Agricultural Research Service 7, V Animal and Plant Health Inspection Service 7, III; 9, I Chief Financial Officer, Office of 7, XXX Commodity Credit Corporation 7, XIV Economic Research Service 7, XXXVII Energy Policy and New Uses, Office of 2, IX; 7, XXIX Environmental Quality, Office of 7, XXXI Farm Service Agency 7, VII, XVIII Federal Acquisition Regulation 48, 4 Federal Crop Insurance Corporation 7, IV Food and Nutrition Service 7, II Food Safety and Inspection Service 9, III Foreign Agricultural Service 7, XV Forest Service 36, II Information Resources Management, Office of 7, XXVII Inspector General, Office of 7, XXVI National Agricultural Library 7, XLI National Agricultural Statistics Service 7, XXXVI National Institute of Food and Agriculture 7, XXXIV Natural Resources Conservation Service 7, VI Operations, Office of 7, XXVIII Procurement and Property Management, Office of 7, XXXII Rural Business-Cooperative Service 7, XVIII, XLII Rural Development Administration 7, XLII Rural Housing Service 7, XVIII, XXXV Rural Utilities Service 7, XVII, XVIII, XLII Secretary of Agriculture, Office of 7, Subtitle A Transportation, Office of 7, XXXIII World Agricultural Outlook Board 7, XXXVIII Air Force, Department of 32, VII Federal Acquisition Regulation Supplement 48, 53 Air Transportation Stabilization Board 14, VI Alcohol and Tobacco Tax and Trade Bureau 27, I Alcohol, Tobacco, Firearms, and Explosives, 27, II Bureau of AMTRAK 49, VII American Battle Monuments Commission 36, IV American Indians, Office of the Special Trustee 25, VII Animal and Plant Health Inspection Service 7, III; 9, I Appalachian Regional Commission 5, IX Architectural and Transportation Barriers 36, XI Compliance Board [[Page 476]] Arctic Research Commission 45, XXIII Armed Forces Retirement Home 5, XI; 38, II Army, Department of 32, V Engineers, Corps of 33, II; 36, III Federal Acquisition Regulation 48, 51 Benefits Review Board 20, VII Bilingual Education and Minority Languages 34, V Affairs, Office of Blind or Severely Disabled, Committee for 41, 51 Purchase from People Who Are Federal Acquisition Regulation 48, 19 Career, Technical, and Adult Education, Office 34, IV of Census Bureau 15, I Centers for Medicare & Medicaid Services 42, IV Central Intelligence Agency 32, XIX Chemical Safety and Hazard Investigation Board 40, VI Chief Financial Officer, Office of 7, XXX Child Support Enforcement, Office of 45, III Children and Families, Administration for 45, II, III, IV, X, XIII Civil Rights, Commission on 5, LXVIII; 45, VII Civil Rights, Office for 34, I Coast Guard 33, I; 46, I; 49, IV Coast Guard (Great Lakes Pilotage) 46, III Commerce, Department of 2, XIII; 44, IV; 50, VI Census Bureau 15, I Economic Affairs, Office of the Under- 15, XV Secretary for Economic Analysis, Bureau of 15, VIII Economic Development Administration 13, III Emergency Management and Assistance 44, IV Federal Acquisition Regulation 48, 13 Foreign-Trade Zones Board 15, IV Industry and Security, Bureau of 15, VII International Trade Administration 15, III; 19, III National Institute of Standards and Technology 15, II; 37, IV National Marine Fisheries Service 50, II, IV National Oceanic and Atmospheric 15, IX; 50, II, III, IV, Administration VI National Technical Information Service 15, XI National Telecommunications and Information 15, XXIII; 47, III, IV Administration National Weather Service 15, IX Patent and Trademark Office, United States 37, I Secretary of Commerce, Office of 15, Subtitle A Commercial Space Transportation 14, III Commodity Credit Corporation 7, XIV Commodity Futures Trading Commission 5, XLI; 17, I Community Planning and Development, Office of 24, V, VI Assistant Secretary for Community Services, Office of 45, X Comptroller of the Currency 12, I Construction Industry Collective Bargaining 29, IX Commission Consumer Financial Protection Bureau 5, LXXXIV; 12, X Consumer Product Safety Commission 5, LXXI; 16, II Copyright Royalty Board 37, III Corporation for National and Community Service 2, XXII; 45, XII, XXV Cost Accounting Standards Board 48, 99 Council on Environmental Quality 40, V Council of the Inspectors General on Integrity 5, XCVIII and Efficiency Court Services and Offender Supervision Agency 5, LXX; 28, VIII for the District of Columbia Customs and Border Protection 19, I Defense, Department of 2, XI; 5, XXVI; 32, Subtitle A; 40, VII Advanced Research Projects Agency 32, I Air Force Department 32, VII Army Department 32, V; 33, II; 36, III; 48, 51 Defense Acquisition Regulations System 48, 2 Defense Intelligence Agency 32, I [[Page 477]] Defense Logistics Agency 32, I, XII; 48, 54 Engineers, Corps of 33, II; 36, III National Imagery and Mapping Agency 32, I Navy, Department of 32, VI; 48, 52 Secretary of Defense, Office of 2, XI; 32, I Defense Contract Audit Agency 32, I Defense Intelligence Agency 32, I Defense Logistics Agency 32, XII; 48, 54 Defense Nuclear Facilities Safety Board 10, XVII Delaware River Basin Commission 18, III Denali Commission 45, IX Disability, National Council on 5, C; 34, XII District of Columbia, Court Services and 5, LXX; 28, VIII Offender Supervision Agency for the Drug Enforcement Administration 21, II East-West Foreign Trade Board 15, XIII Economic Affairs, Office of the Under-Secretary 15, XV for Economic Analysis, Bureau of 15, VIII Economic Development Administration 13, III Economic Research Service 7, XXXVII Education, Department of 2, XXXIV; 5, LIII Bilingual Education and Minority Languages 34, V Affairs, Office of Career, Technical, and Adult Education, Office 34, IV of Civil Rights, Office for 34, I Educational Research and Improvement, Office 34, VII of Elementary and Secondary Education, Office of 34, II Federal Acquisition Regulation 48, 34 Postsecondary Education, Office of 34, VI Secretary of Education, Office of 34, Subtitle A Special Education and Rehabilitative Services, 34, III Office of Educational Research and Improvement, Office of 34, VII Election Assistance Commission 2, LVIII; 11, II Elementary and Secondary Education, Office of 34, II Emergency Oil and Gas Guaranteed Loan Board 13, V Emergency Steel Guarantee Loan Board 13, IV Employee Benefits Security Administration 29, XXV Employees' Compensation Appeals Board 20, IV Employees Loyalty Board 5, V Employment and Training Administration 20, V Employment Policy, National Commission for 1, IV Employment Standards Administration 20, VI Endangered Species Committee 50, IV Energy, Department of 2, IX; 5, XXIII; 10, II, III, X Federal Acquisition Regulation 48, 9 Federal Energy Regulatory Commission 5, XXIV; 18, I Property Management Regulations 41, 109 Energy, Office of 7, XXIX Engineers, Corps of 33, II; 36, III Engraving and Printing, Bureau of 31, VI Environmental Protection Agency 2, XV; 5, LIV; 40, I, IV, VII Federal Acquisition Regulation 48, 15 Property Management Regulations 41, 115 Environmental Quality, Office of 7, XXXI Equal Employment Opportunity Commission 5, LXII; 29, XIV Equal Opportunity, Office of Assistant Secretary 24, I for Executive Office of the President 3, I Environmental Quality, Council on 40, V Management and Budget, Office of 2, Subtitle A; 5, III, LXXVII; 14, VI; 48, 99 National Drug Control Policy, Office of 2, XXXVI; 21, III National Security Council 32, XXI; 47, II Science and Technology Policy, Office of 32, XXIV; 47, II Trade Representative, Office of the United 15, XX States Export-Import Bank of the United States 2, XXXV; 5, LII; 12, IV [[Page 478]] Family Assistance, Office of 45, II Farm Credit Administration 5, XXXI; 12, VI Farm Credit System Insurance Corporation 5, XXX; 12, XIV Farm Service Agency 7, VII, XVIII Federal Acquisition Regulation 48, 1 Federal Acquisition Security Council 41, 201 Federal Aviation Administration 14, I Commercial Space Transportation 14, III Federal Claims Collection Standards 31, IX Federal Communications Commission 2, LX; 5, XXIX; 47, I Federal Contract Compliance Programs, Office of 41, 60 Federal Crop Insurance Corporation 7, IV Federal Deposit Insurance Corporation 5, XXII; 12, III Federal Election Commission 5, XXXVII; 11, I Federal Emergency Management Agency 44, I Federal Employees Group Life Insurance Federal 48, 21 Acquisition Regulation Federal Employees Health Benefits Acquisition 48, 16 Regulation Federal Energy Regulatory Commission 5, XXIV; 18, I Federal Financial Institutions Examination 12, XI Council Federal Financing Bank 12, VIII Federal Highway Administration 23, I, II Federal Home Loan Mortgage Corporation 1, IV Federal Housing Enterprise Oversight Office 12, XVII Federal Housing Finance Agency 5, LXXX; 12, XII Federal Labor Relations Authority 5, XIV, XLIX; 22, XIV Federal Law Enforcement Training Center 31, VII Federal Management Regulation 41, 102 Federal Maritime Commission 46, IV Federal Mediation and Conciliation Service 29, XII Federal Mine Safety and Health Review Commission 5, LXXIV; 29, XXVII Federal Motor Carrier Safety Administration 49, III Federal Permitting Improvement Steering Council 40, IX Federal Prison Industries, Inc. 28, III Federal Procurement Policy Office 48, 99 Federal Property Management Regulations 41, 101 Federal Railroad Administration 49, II Federal Register, Administrative Committee of 1, I Federal Register, Office of 1, II Federal Reserve System 12, II Board of Governors 5, LVIII Federal Retirement Thrift Investment Board 5, VI, LXXVI Federal Service Impasses Panel 5, XIV Federal Trade Commission 5, XLVII; 16, I Federal Transit Administration 49, VI Federal Travel Regulation System 41, Subtitle F Financial Crimes Enforcement Network 31, X Financial Research Office 12, XVI Financial Stability Oversight Council 12, XIII Fine Arts, Commission of 45, XXI Fiscal Service 31, II Fish and Wildlife Service, United States 50, I, IV Food and Drug Administration 21, I Food and Nutrition Service 7, II Food Safety and Inspection Service 9, III Foreign Agricultural Service 7, XV Foreign Assets Control, Office of 31, V Foreign Claims Settlement Commission of the 45, V United States Foreign Service Grievance Board 22, IX Foreign Service Impasse Disputes Panel 22, XIV Foreign Service Labor Relations Board 22, XIV Foreign-Trade Zones Board 15, IV Forest Service 36, II General Services Administration 5, LVII; 41, 105 Contract Appeals, Board of 48, 61 Federal Acquisition Regulation 48, 5 Federal Management Regulation 41, 102 [[Page 479]] Federal Property Management Regulations 41, 101 Federal Travel Regulation System 41, Subtitle F General 41, 300 Payment From a Non-Federal Source for Travel 41, 304 Expenses Payment of Expenses Connected With the Death 41, 303 of Certain Employees Relocation Allowances 41, 302 Temporary Duty (TDY) Travel Allowances 41, 301 Geological Survey 30, IV Government Accountability Office 4, I Government Ethics, Office of 5, XVI Government National Mortgage Association 24, III Grain Inspection, Packers and Stockyards 7, VIII; 9, II Administration Great Lakes St. Lawrence Seaway Development 33, IV Corporation Gulf Coast Ecosystem Restoration Council 2, LIX; 40, VIII Harry S. Truman Scholarship Foundation 45, XVIII Health and Human Services, Department of 2, III; 5, XLV; 45, Subtitle A Centers for Medicare & Medicaid Services 42, IV Child Support Enforcement, Office of 45, III Children and Families, Administration for 45, II, III, IV, X, XIII Community Services, Office of 45, X Family Assistance, Office of 45, II Federal Acquisition Regulation 48, 3 Food and Drug Administration 21, I Indian Health Service 25, V Inspector General (Health Care), Office of 42, V Public Health Service 42, I Refugee Resettlement, Office of 45, IV Homeland Security, Department of 2, XXX; 5, XXXVI; 6, I; 8, I Coast Guard 33, I; 46, I; 49, IV Coast Guard (Great Lakes Pilotage) 46, III Customs and Border Protection 19, I Federal Emergency Management Agency 44, I Human Resources Management and Labor Relations 5, XCVII Systems Immigration and Customs Enforcement Bureau 19, IV Transportation Security Administration 49, XII HOPE for Homeowners Program, Board of Directors 24, XXIV of Housing and Urban Development, Department of 2, XXIV; 5, LXV; 24, Subtitle B Community Planning and Development, Office of 24, V, VI Assistant Secretary for Equal Opportunity, Office of Assistant 24, I Secretary for Federal Acquisition Regulation 48, 24 Federal Housing Enterprise Oversight, Office 12, XVII of Government National Mortgage Association 24, III Housing--Federal Housing Commissioner, Office 24, II, VIII, X, XX of Assistant Secretary for Housing, Office of, and Multifamily Housing 24, IV Assistance Restructuring, Office of Inspector General, Office of 24, XII Public and Indian Housing, Office of Assistant 24, IX Secretary for Secretary, Office of 24, Subtitle A, VII Housing--Federal Housing Commissioner, Office of 24, II, VIII, X, XX Assistant Secretary for Housing, Office of, and Multifamily Housing 24, IV Assistance Restructuring, Office of Immigration and Customs Enforcement Bureau 19, IV Immigration Review, Executive Office for 8, V Independent Counsel, Office of 28, VII Independent Counsel, Offices of 28, VI Indian Affairs, Bureau of 25, I, V Indian Affairs, Office of the Assistant 25, VI Secretary Indian Arts and Crafts Board 25, II Indian Health Service 25, V [[Page 480]] Industry and Security, Bureau of 15, VII Information Resources Management, Office of 7, XXVII Information Security Oversight Office, National 32, XX Archives and Records Administration Inspector General Agriculture Department 7, XXVI Health and Human Services Department 42, V Housing and Urban Development Department 24, XII, XV Institute of Peace, United States 22, XVII Inter-American Foundation 5, LXIII; 22, X Interior, Department of 2, XIV American Indians, Office of the Special 25, VII Trustee Endangered Species Committee 50, IV Federal Acquisition Regulation 48, 14 Federal Property Management Regulations System 41, 114 Fish and Wildlife Service, United States 50, I, IV Geological Survey 30, IV Indian Affairs, Bureau of 25, I, V Indian Affairs, Office of the Assistant 25, VI Secretary Indian Arts and Crafts Board 25, II Land Management, Bureau of 43, II National Indian Gaming Commission 25, III National Park Service 36, I Natural Resource Revenue, Office of 30, XII Ocean Energy Management, Bureau of 30, V Reclamation, Bureau of 43, I Safety and Environmental Enforcement, Bureau 30, II of Secretary of the Interior, Office of 2, XIV; 43, Subtitle A Surface Mining Reclamation and Enforcement, 30, VII Office of Internal Revenue Service 26, I International Boundary and Water Commission, 22, XI United States and Mexico, United States Section International Development, United States Agency 22, II for Federal Acquisition Regulation 48, 7 International Development Cooperation Agency, 22, XII United States International Development Finance Corporation, 5, XXXIII; 22, VII U.S. International Joint Commission, United States 22, IV and Canada International Organizations Employees Loyalty 5, V Board International Trade Administration 15, III; 19, III International Trade Commission, United States 19, II Interstate Commerce Commission 5, XL Investment Security, Office of 31, VIII James Madison Memorial Fellowship Foundation 45, XXIV Japan-United States Friendship Commission 22, XVI Joint Board for the Enrollment of Actuaries 20, VIII Justice, Department of 2, XXVIII; 5, XXVIII; 28, I, XI; 40, IV Alcohol, Tobacco, Firearms, and Explosives, 27, II Bureau of Drug Enforcement Administration 21, II Federal Acquisition Regulation 48, 28 Federal Claims Collection Standards 31, IX Federal Prison Industries, Inc. 28, III Foreign Claims Settlement Commission of the 45, V United States Immigration Review, Executive Office for 8, V Independent Counsel, Offices of 28, VI Prisons, Bureau of 28, V Property Management Regulations 41, 128 Labor, Department of 2, XXIX; 5, XLII Benefits Review Board 20, VII Employee Benefits Security Administration 29, XXV Employees' Compensation Appeals Board 20, IV Employment and Training Administration 20, V Federal Acquisition Regulation 48, 29 Federal Contract Compliance Programs, Office 41, 60 of Federal Procurement Regulations System 41, 50 [[Page 481]] Labor-Management Standards, Office of 29, II, IV Mine Safety and Health Administration 30, I Occupational Safety and Health Administration 29, XVII Public Contracts 41, 50 Secretary of Labor, Office of 29, Subtitle A Veterans' Employment and Training Service, 41, 61; 20, IX Office of the Assistant Secretary for Wage and Hour Division 29, V Workers' Compensation Programs, Office of 20, I, VI Labor-Management Standards, Office of 29, II, IV Land Management, Bureau of 43, II Legal Services Corporation 45, XVI Libraries and Information Science, National 45, XVII Commission on Library of Congress 36, VII Copyright Royalty Board 37, III U.S. Copyright Office 37, II Management and Budget, Office of 5, III, LXXVII; 14, VI; 48, 99 Marine Mammal Commission 50, V Maritime Administration 46, II Merit Systems Protection Board 5, II, LXIV Micronesian Status Negotiations, Office for 32, XXVII Military Compensation and Retirement 5, XCIX Modernization Commission Millennium Challenge Corporation 22, XIII Mine Safety and Health Administration 30, I Minority Business Development Agency 15, XIV Miscellaneous Agencies 1, IV Monetary Offices 31, I Morris K. Udall Scholarship and Excellence in 36, XVI National Environmental Policy Foundation Museum and Library Services, Institute of 2, XXXI National Aeronautics and Space Administration 2, XVIII; 5, LIX; 14, V Federal Acquisition Regulation 48, 18 National Agricultural Library 7, XLI National Agricultural Statistics Service 7, XXXVI National and Community Service, Corporation for 2, XXII; 45, XII, XXV National Archives and Records Administration 2, XXVI; 5, LXVI; 36, XII Information Security Oversight Office 32, XX National Capital Planning Commission 1, IV, VI National Counterintelligence Center 32, XVIII National Credit Union Administration 5, LXXXVI; 12, VII National Crime Prevention and Privacy Compact 28, IX Council National Drug Control Policy, Office of 2, XXXVI; 21, III National Endowment for the Arts 2, XXXII National Endowment for the Humanities 2, XXXIII National Foundation on the Arts and the 45, XI Humanities National Geospatial-Intelligence Agency 32, I National Highway Traffic Safety Administration 23, II, III; 47, VI; 49, V National Imagery and Mapping Agency 32, I National Indian Gaming Commission 25, III National Institute of Food and Agriculture 7, XXXIV National Institute of Standards and Technology 15, II; 37, IV National Intelligence, Office of Director of 5, IV; 32, XVII National Labor Relations Board 5, LXI; 29, I National Marine Fisheries Service 50, II, IV National Mediation Board 5, CI; 29, X National Oceanic and Atmospheric Administration 15, IX; 50, II, III, IV, VI National Park Service 36, I National Railroad Adjustment Board 29, III National Railroad Passenger Corporation (AMTRAK) 49, VII National Science Foundation 2, XXV; 5, XLIII; 45, VI Federal Acquisition Regulation 48, 25 National Security Council 32, XXI; 47, II National Technical Information Service 15, XI National Telecommunications and Information 15, XXIII; 47, III, IV, V Administration [[Page 482]] National Transportation Safety Board 49, VIII Natural Resource Revenue, Office of 30, XII Natural Resources Conservation Service 7, VI Navajo and Hopi Indian Relocation, Office of 25, IV Navy, Department of 32, VI Federal Acquisition Regulation 48, 52 Neighborhood Reinvestment Corporation 24, XXV Northeast Interstate Low-Level Radioactive Waste 10, XVIII Commission Nuclear Regulatory Commission 2, XX; 5, XLVIII; 10, I Federal Acquisition Regulation 48, 20 Occupational Safety and Health Administration 29, XVII Occupational Safety and Health Review Commission 29, XX Ocean Energy Management, Bureau of 30, V Oklahoma City National Memorial Trust 36, XV Operations Office 7, XXVIII Patent and Trademark Office, United States 37, I Payment From a Non-Federal Source for Travel 41, 304 Expenses Payment of Expenses Connected With the Death of 41, 303 Certain Employees Peace Corps 2, XXXVII; 22, III Pennsylvania Avenue Development Corporation 36, IX Pension Benefit Guaranty Corporation 29, XL Personnel Management, Office of 5, I, IV, XXXV; 45, VIII Federal Acquisition Regulation 48, 17 Federal Employees Group Life Insurance Federal 48, 21 Acquisition Regulation Federal Employees Health Benefits Acquisition 48, 16 Regulation Human Resources Management and Labor Relations 5, XCVII Systems, Department of Homeland Security Pipeline and Hazardous Materials Safety 49, I Administration Postal Regulatory Commission 5, XLVI; 39, III Postal Service, United States 5, LX; 39, I Postsecondary Education, Office of 34, VI President's Commission on White House 1, IV Fellowships Presidio Trust 36, X Prisons, Bureau of 28, V Privacy and Civil Liberties Oversight Board 6, X Procurement and Property Management, Office of 7, XXXII Public and Indian Housing, Office of Assistant 24, IX Secretary for Public Contracts, Department of Labor 41, 50 Public Health Service 42, I Railroad Retirement Board 20, II Reclamation, Bureau of 43, I Refugee Resettlement, Office of 45, IV Relocation Allowances 41, 302 Research and Innovative Technology 49, XI Administration Rural Business-Cooperative Service 7, XVIII, XLII, L Rural Development Administration 7, XLII Rural Housing Service 7, XVIII, XXXV, L Rural Utilities Service 7, XVII, XVIII, XLII, L Safety and Environmental Enforcement, Bureau of 30, II Science and Technology Policy, Office of 32, XXIV; 47, II Secret Service 31, IV Securities and Exchange Commission 5, XXXIV; 17, II Selective Service System 32, XVI Small Business Administration 2, XXVII; 13, I Smithsonian Institution 36, V Social Security Administration 2, XXIII; 20, III; 48, 23 Soldiers' and Airmen's Home, United States 5, XI Special Counsel, Office of 5, VIII Special Education and Rehabilitative Services, 34, III Office of State, Department of 2, VI; 22, I; 28, XI Federal Acquisition Regulation 48, 6 Surface Mining Reclamation and Enforcement, 30, VII Office of Surface Transportation Board 49, X Susquehanna River Basin Commission 18, VIII [[Page 483]] Tennessee Valley Authority 5, LXIX; 18, XIII Trade Representative, United States, Office of 15, XX Transportation, Department of 2, XII; 5, L Commercial Space Transportation 14, III Emergency Management and Assistance 44, IV Federal Acquisition Regulation 48, 12 Federal Aviation Administration 14, I Federal Highway Administration 23, I, II Federal Motor Carrier Safety Administration 49, III Federal Railroad Administration 49, II Federal Transit Administration 49, VI Great Lakes St. Lawrence Seaway Development 33, IV Corporation Maritime Administration 46, II National Highway Traffic Safety Administration 23, II, III; 47, IV; 49, V Pipeline and Hazardous Materials Safety 49, I Administration Secretary of Transportation, Office of 14, II; 49, Subtitle A Transportation Statistics Bureau 49, XI Transportation, Office of 7, XXXIII Transportation Security Administration 49, XII Transportation Statistics Bureau 49, XI Travel Allowances, Temporary Duty (TDY) 41, 301 Treasury, Department of the 2, X; 5, XXI; 12, XV; 17, IV; 31, IX Alcohol and Tobacco Tax and Trade Bureau 27, I Community Development Financial Institutions 12, XVIII Fund Comptroller of the Currency 12, I Customs and Border Protection 19, I Engraving and Printing, Bureau of 31, VI Federal Acquisition Regulation 48, 10 Federal Claims Collection Standards 31, IX Federal Law Enforcement Training Center 31, VII Financial Crimes Enforcement Network 31, X Fiscal Service 31, II Foreign Assets Control, Office of 31, V Internal Revenue Service 26, I Investment Security, Office of 31, VIII Monetary Offices 31, I Secret Service 31, IV Secretary of the Treasury, Office of 31, Subtitle A Truman, Harry S. Scholarship Foundation 45, XVIII United States Agency for Global Media 22, V United States and Canada, International Joint 22, IV Commission United States and Mexico, International Boundary 22, XI and Water Commission, United States Section U.S. Copyright Office 37, II U.S. Office of Special Counsel 5, CII Utah Reclamation Mitigation and Conservation 43, III Commission Veterans Affairs, Department of 2, VIII; 38, I Federal Acquisition Regulation 48, 8 Veterans' Employment and Training Service, 41, 61; 20, IX Office of the Assistant Secretary for Vice President of the United States, Office of 32, XXVIII Wage and Hour Division 29, V Water Resources Council 18, VI Workers' Compensation Programs, Office of 20, I, VII World Agricultural Outlook Board 7, XXXVIII [[Page 485]] List of CFR Sections Affected All changes in this volume of the Code of Federal Regulations (CFR) that were made by documents published in the Federal Register since January 1, 2018 are enumerated in the following list. Entries indicate the nature of the changes effected. Page numbers refer to Federal Register pages. The user should consult the entries for chapters, parts and subparts as well as sections for revisions. For changes to this volume of the CFR prior to this listing, consult the annual edition of the monthly List of CFR Sections Affected (LSA). The LSA is available at www.govinfo.gov. For changes to this volume of the CFR prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. The ``List of CFR Sections Affected 1986-2000'' is available at www.govinfo.gov. 2018 7 CFR 83 FR Page Chapter I 66 Added; eff. 2-19-19.............................................65871 205 Notification...................................................14347 205.2 Regulation at 82 FR 7088 withdrawn...........................10775 205.238 Regulation at 82 FR 7089 withdrawn.........................10775 205.238 (b)(2) revised; (b)(3) added; eff. 1-28-19.................66571 205.239 Regulation at 82 FR 7090 withdrawn.........................10775 205.241 Regulation at 82 FR 7091 withdrawn.........................10775 205.242 Regulation at 82 FR 7092 withdrawn.........................10775 205.601 (a)(2)(iii) and (j)(9) redesignated as (a)(2)(iv) and (j)(11); (j)(5) through (8) redesignated as (j)(6) through new (9); new (a)(2)(iii), new (j)(5), and (10) added; new (j)(7) revised; eff. 1-28-19...............................66571 205.602 (f) through (i) redesignated as (g) through (j); new (f) added; eff. 1-28-19........................................66572 205.603 (a), (b)(4), (7), (d)(1), and (f) revised; (b)(8) redesignated as (b)(9); new (b)(8) and (10) added; eff. 1- 28-19......................................................66572 205.605 (a) and (b) amended; eff. 1-28-19..........................66573 205.606 (a) through (f) redesignated as (b) through (g); new (g) through (t) redesignated as (i) through (v); new (d)(1) through (18) revised; new (a) and (h) added; eff. 1-28-19 66573 2019 7 CFR 84 FR Page Chapter I 54.1 Heading revised; section amended..............................48554 54.1 Amended.......................................................49640 54.4 Revised.......................................................48555 54.5 Revised.......................................................48555 54.6 Revised................................................48555, 49640 54.7 Revised.......................................................48555 54.8 Revised.......................................................48556 54.9 Revised.......................................................48556 54.10 Revised......................................................48556 54.11 Heading, (a)(1) introductory text, (i), (ii), (iii), (vii), (x), and (2) revised.......................................48556 54.12 Removed......................................................48556 54.13 Revised......................................................48556 54.14 Removed......................................................48557 54.15 Revised......................................................48557 54.16 Revised......................................................48557 54.17 Revised......................................................48557 54.18 Revised......................................................48562 [[Page 486]] 54.19--54.20 Undesignated center heading removed...................48562 54.19 Revised......................................................48562 54.20 Revised......................................................48563 54.21 Removed......................................................48563 54.22 Removed......................................................48563 54.23 Removed......................................................48563 54.24 Removed......................................................48563 54.25 Removed......................................................48563 54.26 Removed......................................................48563 54.27 (c) revised..................................................49641 54.28 Revised......................................................49641 54.30 Removed......................................................48563 54.31 Revised......................................................48563 56.1 Amended.......................................................49641 56.21 Revised......................................................49641 56.28 Revised......................................................49642 56.45 (a) and (b) revised..........................................49642 56.46 Heading, (a) introductory text, and (c) revised..............49642 56.47 Revised......................................................49642 56.52 Heading, introductory text, and (a) revised..................49642 56.54 Removed......................................................49643 70.1 Amended.......................................................49643 70.29 Redesignated from 70.30......................................49643 70.30 Redesignated as 70.29; new section redesignated from 70.31 and revised................................................49643 70.31 Redesignated as 70.30; new section redesignated from 70.32 49643 70.32 Redesignated as 70.31; new section redesignated from 70.33 49643 70.33 Redesignated as 70.32; new section redesignated from 70.34 49643 70.34 Redesignated as 70.33; new section redesignated from 70.35 49643 70.35 Redesignated as 70.34; new section redesignated from 70.36 49643 70.36 Redesignated as 70.35; new section redesignated from 70.37 49643 70.37 Redesignated as 70.36; new section added.....................49643 70.70 (a) and (b) revised..........................................49644 70.71 Heading, introductory text, and (c) revised..................49644 70.72 Revised......................................................49644 70.76 Removed......................................................49644 70.77 Heading, introductory text, and (a) revised..................49644 205 Notification...................................................53577 205.601 (h) revised; (i)(11) added.................................56677 205.603 (b)(2) through (10) redesignated as (b)(3) through (11); new (b)(2) added...........................................18136 205.605 (b) amended................................................18136 205.605 (a) and (b) amended........................................56677 205.606 (q) through (v) redesignated as (r) through (w); new (q) added......................................................18136 2020 7 CFR 85 FR Page Subtitle A 54.1--54.31 (Subpart A) Heading revised.............................7445 54.17 (i) removed..................................................62937 54.1001--54.1034 (Subpart C) Heading revised........................7445 56.1 Amended.......................................................62937 56.46 (a) and (b)(1)(i) through (iii) revised; (d) removed.........62937 57.1--57.970 (Subpart A) Heading revised............................7445 57.1000 Undesignated center heading revised.........................7445 57.1000 (Subpart B) Heading revised.................................7445 58 Heading revised..................................................7445 58.1--58.64 (Subpart A) Heading revised.............................7445 61.1--61.42 (Subpart A) Heading revised.............................7445 61.5 Heading revised................................................7445 62 Revised.........................................................62937 66 Policy statement................................................40867 70.1 Amended.......................................................62941 70.4 (c) removed...................................................62941 70.71 Revised......................................................62941 75 Heading revised..................................................7445 75.5 Heading revised................................................7445 90 Removed.........................................................62942 91.1 Revised.......................................................62942 91.2 Amended.......................................................62942 91.4 (c) revised...................................................62942 91.5 (a)(6) removed; (a)(8) revised................................62942 97.1 Revised.........................................................430 97.2 Amended.........................................................430 97.5 (c) revised.....................................................430 97.6 (c) and (d)(3) revised; (d)(4) added............................430 97.7 (b) introductory text amended; (c)(5) and (d) revised...........430 97.9 (b) and (c) revised.............................................431 [[Page 487]] 97.12 (a) revised....................................................431 97.14 (d) revised....................................................431 97.19 Introductory text and (c) amended..............................431 97.20 (a) revised....................................................431 97.23 (c) revised; (d) removed.......................................431 97.101 Revised.......................................................431 97.103 (a) revised...................................................432 97.104 Revised.......................................................432 97.141 Revised.......................................................432 97.142 Revised.......................................................432 97.175 Revised.......................................................432 97.177 Revised.......................................................432 97.178 Revised.......................................................432 97.403 (d) revised...................................................432 97.500 Revised.......................................................432 97.600 Heading revised...............................................433 97.800 Revised.......................................................433 110.8 Heading revised...............................................7445 201 Heading revised; undesignated center heading removed...........40578 201.2 (a), (b), (h) through (j), (l)(1), (w), (x), (z), and (mm) amended; (p) and (q) revised; (nn) and (oo) added..........40578 201.3 Revised......................................................40579 201.4 (a) and (b) amended..........................................40579 201.7 Amended......................................................40579 201.8 Amended......................................................40579 201.10 (a) amended.................................................40579 201.12a Revised....................................................40579 201.16 (a) and (b) amended.........................................40579 201.17 Amended.....................................................40579 201.18 Revised.....................................................40579 201.20 Revised.....................................................40579 201.21 Revised.....................................................40579 201.23 Revised.....................................................40580 201.24 Revised.....................................................40580 201.25 Amended.....................................................40580 201.26a Added......................................................40580 201.27 Revised.....................................................40580 201.28 Revised.....................................................40580 201.29 Revised.....................................................40580 201.30c Added......................................................40580 201.31 Heading and introductory text revised.......................40580 201.31a (b) revised................................................40580 201.33 (a) and (b) amended.........................................40580 201.36b (a) amended................................................40580 201.37 Amended.....................................................40580 201.38 Removed.....................................................40580 201.39 (c) amended.................................................40580 201.46 (b) revised; (d)(2)(iii) Table 1 amended....................40580 201.47a (b)(6) and (c) through (f) amended.........................40581 201.48 Introductory text amended; (a), (f), (g)(1), and (3) revised....................................................40581 201.51 (a)(1), (b)(2)(iv), (v), (4) amended........................40581 201.51a (a) and (b)(2)(ii) table revised...........................40581 201.56 (d) amended.................................................40582 201.58 (a)(1) and (b)(13) revised; (c)(3) Table 2 amended..........40582 201.58 (c)(3) Table 2 amended......................................65190 201.59 Amended.....................................................40583 201.60 (a)(1), (2), and (b)(2) amended.............................40583 201.61 Table heading revised.......................................40583 201.64 Revised.....................................................40583 201.68 Introductory text and (b) revised...........................40583 201.70 (a) revised.................................................40583 201.74 (a) through (c) amended.....................................40583 201.75 (b)(1) and (c) amended......................................40583 201.76 Table 5 amended.............................................40583 201.78 (e) revised.................................................40584 202 Heading revised................................................40584 202.40--202.44 (Subpart C) Heading revised.........................40584 205 Authority citation revised.....................................70435 205 Policy statement...............................................27105 205 Notification...................................................57937 205.606 (t) through (w) redesignated as (u) through (x); new (t) added......................................................70435 2021 7 CFR 86 FR Page Chapter I 205 Authority citation revised.....................................33484 205 Policy statement...............................................41699 205.603 (b)(8) through (11) redesignated as (b)(9) through (12); new (b)(8) added...........................................33484 205.605 (a) and (b) amended........................................33484 2022 7 CFR 87 FR Page Chapter I 180 Added; eff. 1-6-23.............................................74955 205.2 Amended...............................................19772, 68027 205.236 Revised....................................................19772 205.237 (a) revised................................................19773 205.239 (a)(3) revised.............................................19773 205.601 (j)(9) revised.............................................10938 [[Page 488]] 205.601 (a)(2)(iv) and (k) revised; (a)(2)(v) added................16375 205.601 Introductory text and (o) revised..........................68028 205.603 (b)(9) removed; (b)(10) through (12) redesignated as (b)(9) through (11)........................................10938 205.605 (b) amended................................................10938 205.605 (a) amended................................................16375 205.605 (a) and (b) amended........................................68028 205.606 (d) through (t) revised; (u) through (w) removed...........10938 [all]

usgpo

2024-10-08T13:26:49.550676

FR

FR-2024-09-09/FR-2024-09-09-FrontMatter

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Contents] [Pages III-VII] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] CONTENTS Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Contents [[Page iii]] Agency for International Development NOTICES Charter Amendments, Establishments, Renewals and Terminations, 73059 Agriculture Department See Food Safety and Inspection Service See Forest Service Alcohol and Tobacco Tax and Trade Bureau PROPOSED RULES Standards of Fill for Wine and Distilled Spirits, 73050-73054 Bureau of Consumer Financial Protection NOTICES Privacy Act; Systems of Records, 73077-73080 Centers for Disease Control and Prevention NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73093-73094 Hearings, Meetings, Proceedings, etc.: Clinical Laboratory Improvement Advisory Committee, 73094-73095 Mine Safety and Health Research Advisory Committee, 73094 Performance Review Board Members, 73096 Requests for Nominations: Board of Scientific Counselors Infectious Diseases, 73095-73096 Board of Scientific Counselors, National Center for Health Statistics, 73096-73097 Centers for Medicare &Medicaid Services RULES Medicare Program: Medicare Prescription Drug Benefit Program; Health Information Technology Standards and Implementation Specifications; Correction, 72998-72999 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73097-73098 Coast Guard RULES Safety Zone: Bay St. Louis, MS, 72989-72990 Missouri River Mile Markers 19-20 Florissant, MO, 72987-72989 PROPOSED RULES Safety Zone: Waterway Training Area, Delaware River, near Eddystone, PA, 73055- 73058 Security Zone: Coast Guard Base Los Angeles-Long Beach on Terminal Island, San Pedro, CA, 73054-73055 Commerce Department See Economic Analysis Bureau See International Trade Administration See National Institute of Standards and Technology See National Oceanic and Atmospheric Administration Commodity Futures Trading Commission NOTICES Meetings; Sunshine Act, 73077 Consumer Product Safety Commission PROPOSED RULES Safety Standard for Toys: Requirements for Water Beads, 73024-73050 Drug Enforcement Administration NOTICES Importer, Manufacturer or Bulk Manufacturer of Controlled Substances; Application, Registration, etc.: Curia New York, Inc., 73124-73125 Economic Analysis Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Benchmark Survey of Financial Services Transactions between U.S. Financial Services Providers and Foreign Persons, 73062- 73063 Quarterly Survey of Insurance Transactions by U.S. Insurance Companies With Foreign Persons, 73061-73062 Quarterly Survey of Transactions in Selected Services and Intellectual Property With Foreign Persons, 73062 Employment and Training Administration NOTICES Labor Surplus Area Classification, 73125-73126 Environmental Protection Agency RULES Pesticide Tolerance; Exemptions, Petitions, Revocations, etc.: Saflufenacil, 72994-72998 NOTICES Funding Availability: Credit Assistance Under the State Infrastructure Financing Authority Water Infrastructure Finance and Innovation Act Program, 73080-73083 Credit Assistance Under the Water Infrastructure Finance and Innovation Act Program, 73083-73086 Export-Import Bank NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for Financial Institution Short-Term, Single-Buyer Insurance, 73088 Beneficiary Certificate and Agreement for Use With Bank Letter of Credit Short Term Export Credit Insurance Policy, or Financial Institution Buyer Credit Insurance Policy, 73087 Commissioned Broker Application Form, 73086-73087 Report of Overdue Accounts Under Short-Term Policies, 73087 [[Page iv]] Federal Aviation Administration RULES Airspace Designations and Reporting Points: Sacramento Mather Airport, Sacramento, CA, 72981-72982 Airworthiness Directives: Airbus SAS Airplanes, 72971-72973 Dassault Aviation Airplanes, 72966-72971, 72974-72976 The Boeing Company Airplanes, 72976-72981 PROPOSED RULES Airspace Designations and Reporting Points: Buckley Space Force Base, Aurora, CO, 73022-73024 Centennial Airport, Denver, CO, 73020-73022 Airworthiness Directives: MHI RJ Aviation ULC (Type Certificate Previously Held by Bombardier Inc.) Airplanes, 73009-73014 The Boeing Company Airplanes, 73003-73009, 73014-73020 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Helicopter Air Ambulance Operator Reports, 73179 Hearings, Meetings, Proceedings, etc.: Aviation Rulemaking Advisory Committee, 73178-73179 Federal Communications Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73089-73090 Information on Sharing in the 18 GHz Band in Connection With the National Spectrum Strategy Implementation Plan, 73088-73089 Federal Deposit Insurance Corporation NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73090-73092 Federal Emergency Management Agency NOTICES Hearings, Meetings, Proceedings, etc.: National Advisory Council, 73103-73104 Federal Highway Administration NOTICES Environmental Impact Statements; Availability, etc.: Nueces and Kleberg Counties, TX, 73179-73181 Federal Motor Carrier Safety Administration NOTICES Exemption Application: Qualification of Drivers; Hearing, 73181-73182 Federal Railroad Administration NOTICES Application: State of Ohio to the Surface Transportation Project Delivery Program, Proposed Memorandum of Understanding Assigning Environmental Responsibilities to the State, 73182-73184 Federal Reserve System NOTICES Proposals To Engage in or To Acquire Companies Engaged in Permissible Nonbanking Activities, 73093 Federal Transit Administration NOTICES Limitation on Claims Against Proposed Public Transportation Project: Operations and Maintenance Facility South, Federal Way, King County, WA, 73184-73185 Proposed Buy America Waiver, 73185-73186 Food and Drug Administration RULES Medical Devices: Clinical Chemistry and Clinical Toxicology Devices; Classification of the Blood Collection Device for Cell-Free Nucleic Acids, 72982-72984 Gastroenterology-Urology Devices; Classification of the Endoscopic Pancreatic Debridement Device, 72984-72986 NOTICES Patent Extension Regulatory Review Period: Pluvicto, 73098-73100 Food Safety and Inspection Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Records To Be Kept by Official Establishments and Retail Stores That Grind Raw Beef Products, 73059-73060 Foreign Assets Control Office RULES Venezuela Sanctions Regulations Web General License 5P, 72986-72987 Forest Service RULES Special Uses: Land Use Fees; Temporary Land Use Fee Reductions for Recreation Residence Permits, 72990-72994 NOTICES Hearings, Meetings, Proceedings, etc.: Land Between the Lakes Advisory Board, 73060-73061 Health and Human Services Department See Centers for Disease Control and Prevention See Centers for Medicare & Medicaid Services See Food and Drug Administration See National Institutes of Health See Substance Abuse and Mental Health Services Administration RULES Medicare Program: Medicare Prescription Drug Benefit Program; Health Information Technology Standards and Implementation Specifications; Correction, 72998-72999 NOTICES Hearings, Meetings, Proceedings, etc.: National Committee on Vital and Health Statistics, 73101-73102 President's Advisory Commission on Asian Americans, Native Hawaiians, and Pacific Islanders, 73100-73101 Homeland Security Department See Coast Guard See Federal Emergency Management Agency [[Page v]] NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Post-Contract Award Information, 73110-73113 Privacy Act; Systems of Records, 73104-73109 Housing and Urban Development Department NOTICES Statutorily Mandated Designation of Difficult Development Areas and Qualified Census Tracts for 2025, 73113-73119 Indian Affairs Bureau NOTICES Hearings, Meetings, Proceedings, etc.: Advisory Board of Exceptional Children, 73119-73120 Interior Department See Indian Affairs Bureau See Land Management Bureau See National Park Service See Ocean Energy Management Bureau Internal Revenue Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Plan-Specific Substitute Mortality Tables for Determining Present Value, 73190-73191 International Trade Administration NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Certain Non-Refillable Steel Cylinders From the People's Republic of China, 73063-73064 Circular Welded Carbon Quality Steel Pipe From the People's Republic of China, 73064-73065 Granular Polytetrafluoroethylene Resin From India, 73065-73066 International Trade Commission NOTICES Investigations; Determinations, Modifications, and Rulings, etc.: Certain Pre-Stretched Synthetic Braiding Hair and Packaging Therefor, 73123-73124 Justice Department See Drug Enforcement Administration Labor Department See Employment and Training Administration Land Management Bureau RULES Travel Management on Public Lands: Montrose, Delta, San Miguel, and Ouray Counties, CO, 72999-73002 NOTICES Hearings, Meetings, Proceedings, etc.: Steens Mountain Advisory Council, Oregon, 73120 Merit Systems Protection Board RULES Organization and Procedures, 72957-72966 Millennium Challenge Corporation NOTICES Candidate Country Report for Fiscal Year 2025, 73126-73129 National Highway Traffic Safety Administration NOTICES Petition for Temporary Exemption: Damon Motors Inc.; Rear Wheel Brake Requirement, 73186-73188 National Institute of Standards and Technology NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Center for Neutron Research Information Management System and Summer School Application, 73066-73067 Manufacturing Extension Partnership Management Information Reporting, 73067-73068 National Institutes of Health NOTICES Hearings, Meetings, Proceedings, etc.: National Institute on Drug Abuse, 73102-73103 National Oceanic and Atmospheric Administration RULES Fisheries of the Exclusive Economic Zone off Alaska: Pacific Ocean Perch in the Western Aleutian District of the Bering Sea and Aleutian Islands Management Area, 73002 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Seafood Inspection and Certification Requirements, 73071 Southeast Region Vessel and Gear Identification Requirements, 73074 Hearings, Meetings, Proceedings, etc.: Fisheries of the Gulf of Mexico; Southeast Data, Assessment, and Review, 73070 Interagency Marine Debris Coordinating Committee, 73074-73075 New England Fishery Management Council, 73076-73077 Permanent Advisory Committee To Advise the U.S. Commissioners to the Western and Central Pacific Fisheries Commission, 73073-73074 Schedules for Atlantic Shark Identification Workshops and Protected Species Safe Handling, Release, and Identification Workshops, 73071-73073 Permits; Applications, Issuances, etc.: Endangered and Threatened Species; File No. 28262, 73069-73070 General Provisions for Domestic Fisheries; Exempted Fishing, 73068- 73069 Request for Information: Data for Marine Spatial Studies in Guam, 73075-73076 National Park Service NOTICES Repatriation of Cultural Items: California State University, Sacramento, Sacramento, CA, 73120- 73121 National Science Foundation NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: National Survey of College Graduates, 73129 [[Page vi]] Hearings, Meetings, Proceedings, etc.: Advisory Committee for Environmental Research and Education, 73129- 73130 Nuclear Regulatory Commission NOTICES Meetings; Sunshine Act, 73130 Ocean Energy Management Bureau NOTICES Environmental Assessments; Availability, etc.: Commercial Wind Lease Issuance, Site Characterization Activities, and Site Assessment Activities on the Atlantic Outer Continental Shelf in the Gulf of Maine offshore of ME, NH, and MA, 73122 Joint Record of Decision: US Wind Inc.'s Proposed Maryland Offshore Wind Project, 73121-73122 Pension Benefit Guaranty Corporation NOTICES Privacy Act; Systems of Records, 73196-73248 Personnel Management Office NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: CyberCorps: Scholarship for Service Registration System, 73130- 73132 Postal Service NOTICES Change in Rates of General Applicability for Competitive Products, 73133-73134 Privacy Act; Systems of Records, 73132-73133 Securities and Exchange Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73136-73137, 73150, 73173-73174 Application: Franklin BSP Capital Corp., et al., 73134-73135 Meetings; Sunshine Act, 73149-73150, 73175 Self-Regulatory Organizations; Proposed Rule Changes: Long-Term Stock Exchange, Inc., 73150-73173 Miami International Securities Exchange, LLC, 73149 MIAX Emerald, LLC, 73148-73149 MIAX PEARL LLC, 73148, 73175 MIAX Sapphire, LLC, 73137-73145 National Securities Clearing Corp., 73145-73148 NYSE Arca, Inc., 73135-73136 Selective Service System NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73175-73176 Small Business Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73176 Disaster Declaration: Texas, 73176-73177 Texas; Public Assistance Only, 73177 State Department NOTICES Culturally Significant Objects Imported for Exhibition: Flight Into Egypt: Black Artists and Ancient Egypt, 1876-Now, 73177-73178 Solid Gold, 73177 Substance Abuse and Mental Health Services Administration NOTICES Supplemental Funding Opportunity: Fiscal Year 2024, 73103 Surface Transportation Board NOTICES Railroad Revenue Adequacy: 2023 Determination, 73178 Transportation Department See Federal Aviation Administration See Federal Highway Administration See Federal Motor Carrier Safety Administration See Federal Railroad Administration See Federal Transit Administration See National Highway Traffic Safety Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73188-73190 Treasury Department See Alcohol and Tobacco Tax and Trade Bureau See Foreign Assets Control Office See Internal Revenue Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 73191-73192 Veterans Affairs Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for VA Education Benefits, 73192-73193 Veterans Mortgage Life Insurance-Change of Address Statement, 73192 ----------------------------------------------------------------------- Separate Parts In This Issue Part II Pension Benefit Guaranty Corporation, 73196-73248 ----------------------------------------------------------------------- Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws. To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/ new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription. CFR PARTS AFFECTED IN THIS ISSUE __________________________________________________________ A cumulative list of the parts affected this month can be found in the Reader Aids section at the end of this issue. Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Contents Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Contents Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Contents [[Page vii]] 5 CFR 1200.................................................72957 1201.................................................72957 1203.................................................72957 1209.................................................72957 14 CFR 39 (5 documents).........72966, 72968, 72971, 72974, 72976 71...................................................72981 Proposed Rules: 39 (3 documents).......................73003, 73009, 73014 71 (2 documents)..............................73020, 73022 16 CFR Proposed Rules: 1112.................................................73024 1250.................................................73024 21 CFR 862..................................................72982 876..................................................72984 27 CFR Proposed Rules: 4....................................................73050 5....................................................73050 19...................................................73050 24...................................................73050 26...................................................73050 27...................................................73050 31 CFR 591..................................................72986 33 CFR 165 (2 documents).............................72987, 72989 Proposed Rules: 165 (2 documents).............................73054, 73055 36 CFR 214..................................................72990 251..................................................72990 40 CFR 180..................................................72994 42 CFR 423..................................................72998 43 CFR 8360.................................................72999 45 CFR 170..................................................72998 50 CFR 679..................................................73002

usgpo

2024-10-08T13:26:16.207055

FR

FR-2024-09-09/2024-19933

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72957-72966] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-19933] ======================================================================== Rules and Regulations Federal Register ________________________________________________________________________ This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. ======================================================================== Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Rules and Regulations [[Page 72957]] MERIT SYSTEMS PROTECTION BOARD 5 CFR Parts 1200, 1201, 1203, and 1209 Organization and Procedures AGENCY: Merit Systems Protection Board. ACTION: Interim final rule. ----------------------------------------------------------------------- SUMMARY: This interim final rule updates adjudicatory and operational regulations of the Merit Systems Protection Board (MSPB or Board) to increase efficiency in processing of MSPB appeals, as well as to address potential flaws in its prior regulations. DATES: This interim final rule is effective October 7, 2024. Comments must be received on or before November 8, 2024. ADDRESSES: Submit your comments concerning this interim final rule by one of the following methods and in accordance with the relevant instructions: Email: [email protected]. Comments submitted by email can be contained in the body of the email or as an attachment in any common electronic format, including word processing applications, HTML, and PDF. If possible, commenters are asked to use a text format and not an image format for attachments. An email should contain a subject line indicating that the submission contains comments concerning the MSPB's interim final rule. The MSPB asks that commenters use email to submit comments if possible. Submission of comments by email will assist the MSPB to process comments and speed publication of a final rule. Fax: (202) 653-7130. Comments submitted by fax should be addressed to Gina K. Grippando, Clerk of the Board, and contain a subject line indicating that the submission contains comments concerning the MSPB's interim final rule. Mail or other commercial delivery: Comments submitted by mail should be addressed to Gina K. Grippando, Clerk of the Board, Merit Systems Protection Board, 1615 M Street NW, Washington, DC 20419. Hand delivery or courier: Comments submitted by hand delivery or courier should be addressed to Gina K. Grippando, Clerk of the Board, Merit Systems Protection Board, 1615 M Street NW, Washington, DC 20419, and delivered to the 5th floor reception window at this street address. Such deliveries are only accepted Monday through Friday, 9 a.m. to 4:30 p.m., excluding Federal holidays. Instructions: As noted above, the MSPB requests that commenters use email to submit comments, if possible. All comments received will be made available online at the Board's website, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information or other information the disclosure of which is restricted by law. Those desiring to submit anonymous comments must submit comments in a manner that does not reveal the commenter's identity, include a statement that the comment is being submitted anonymously, and include no personally identifiable information. The email address of a commenter who chooses to submit comments using email will not be disclosed unless it appears in comments attached to an email or in the body of a comment. FOR FURTHER INFORMATION CONTACT: Gina K. Grippando, Clerk of the Board, Merit Systems Protection Board, 1615 M Street NW, Washington, DC 20419; phone: (202) 653-7200; fax: (202) 653-7130; or email: [email protected]. SUPPLEMENTARY INFORMATION: I. Background The MSPB commenced its last comprehensive review of its regulations in January 2011, which concluded with the issuance of a final rule amending its regulations in October 2012. In May 2019, the MSPB initiated a new review of its regulations to further improve its adjudications and operations. The MSPB's review process began with a solicitation for suggested revisions from its internal offices. The submissions were then reviewed by an internal working group, which worked to develop draft amendments to existing regulations based on the submissions. Following restoration of the Board's quorum of members in March 2022, the draft amendments prepared by the internal working group were then evaluated by the Board members, after which time they were revised in accordance with the processing goals of the Board and prepared for issuance. Finally, while these amendments are being issued immediately as interim final rules, the Board still requests that all stakeholders or other interested individuals provide their views on the amendments. The Board also requests additional comments on any other aspect of its regulations that stakeholders or other interested individuals feel need amending. The Board will thoroughly consider all input and respond to all comments as necessary. II. Summary of Changes Set forth below is a summary of amendments being implemented by the MSPB Part 1200--Board Organization Subpart A--General Section 1200.3 How the Board Members Make Decisions This amendment modifies the authority of Board members or Board staff to take certain actions when the Board is unable to act due to vacancies, recusals, or other reasons. During the Board's inquorate status between 2017 and 2022, the Board encountered numerous scenarios which under existing regulation or policy required Board vote, but which were unable to be processed without a quorum. These included scenarios such as decisions finalizing settlements of appeals reached after an initial decision had issued, or requests for further development of the record by an administrative judge after an initial decision had issued. The Board is implementing this modification in order to expedite processing in certain scenarios in the event that it is again unable to act due to a loss of quorum in the future. Under the new regulation, a lone Board member may be able to perform certain of these tasks, and in the event the Board lacks any confirmed members, MSPB staff may be allowed to perform the tasks to the limited extent necessary to facilitate final decision- [[Page 72958]] making by a future quorum. Additionally, the new regulation addresses the Board's decision-making authority when members of the Board are unable to reach a majority decision due to vacancies, recusals, or other reasons. Section 1200.5 Conduct Policy This addition to the MSPB's Board Organization regulations reflects the Board's need to issue a policy prohibiting abusive conduct and filings from individuals during the pendency or after the conclusion of an appeal. This policy will benefit all parties by ensuring that appeals are adjudicated efficiently and respectfully. Part 1201--Practices and Procedures Subpart A--Jurisdiction and Definitions Section 1201.3 Appellate Jurisdiction This amendment corrects an errant reference to 5 CFR 1201.154. The regulation is intended to instead reference the Board's authority to review grievance decisions pursuant to 5 CFR 1201.155. Subpart B--Procedures for Appellate Cases Section 1201.22 Filing an Appeal and Responses to Appeals This amendment clarifies that the examples listed within the regulation are not meant to be binding interpretations of the regulation, and they are instead only meant to be illustrative of potential applications of the regulation. The Board believes this change will provide flexibility in determinations regarding good cause to waive untimeliness. Section 1201.23 Computation of Time This amendment clarifies the Board's discretion to waive its filing deadlines due to events that broadly affect the ability of parties to file pleadings and/or the Board's ability to serve issuances. The amendment does not otherwise alter the Board's current ability to exercise discretion when determining when to waive filing deadlines in individual appeals, and instead only reflects the Board's intent to potentially alter deadlines for all pending appeals when events transpire that broadly affect the Board's filing systems, such as technical outages or government shutdowns. Section 1201.33 Federal Witnesses This amendment makes a small grammatical modification to the existing regulation. Section 1201.41 Judges This amendment clarifies that MSPB administrative judges may only hold a hearing if requested by an appellant. This modification reemphasizes that the right to request a hearing belongs solely to appellants, and that neither administrative judges nor agencies may order a hearing if the appellant does not wish to have a hearing. Section 1201.56 Burden and Degree of Proof This amendment clarifies which types of Office of Personnel Management decisions may be appealed. The prior version of the regulation incorrectly suggested that appeals may only come from reconsideration decisions from the Office of Personnel Management (OPM), and it did not recognize that pursuant to longstanding Board case law, initial decisions from OPM may also be considered final appealable decisions, when OPM refuses or improperly fails to issue a final decision. This modification reflects the Board's decision in Okello v. Office of Personnel Management, 120 M.S.P.R. 498 (2014). Section 1201.72 Explanation and Scope of Discovery The amendments to this section clarify that discovery during an MSPB appeal may involve individuals who are not parties to the appeal. The amendment further removes reference to the Federal Rules of Civil Procedure, reflecting the Board's desire to establish its own discovery rules and limitations to better align with its statutory and regulatory time limits for processing appeals. Section 1201.73 Discovery Procedures This amendment modifies the Board's discovery procedures with respect to how parties serve discovery requests and responses, as well as how parties resolve discovery disputes. The amendment eliminates the need to request permission to serve discovery responses electronically. It also provides parties with additional time before needing to file a motion to compel, in order to reduce the number of discovery disputes between parties. Finally, it puts limitations on the number of document requests and requests for admission that may be issued, which are also aimed at reducing discovery disputes and expediting the processing of appeals. Section 1201.81 Requests for Subpoenas This amendment provides notice of which requirements must be met to obtain a subpoena. The Board has received multiple requests for the issuance of subpoenas from parties who have not complied with all requirements. The Board is making this amendment to ensure parties are aware of the requirements before making a subpoena request. Section 1201.82 Motions To Quash Subpoenas This amendment modifies the Board's procedures regarding the filing and service of motions to quash a subpoena. The Board is amending its procedures to facilitate the filing of such motions by nonparties, who are not able to otherwise access the Board's electronic filing system to file such motions themselves. Administrative judges will now have discretion to provide methods to nonparties to electronically file motions to quash subpoenas without needing to utilize the Board's electronic filing system. Section 1201.83 Serving Subpoenas This amendment clarifies that any party who desires a non-federal employee to serve as a witness must still comply with Federal statutes governing fees and expenses for the witness. Section 1201.84 Proof of Service This amendment modifies the Board's procedures regarding service of subpoenas to allow service by any method approved by applicable state law. Section 1201.85 Enforcing Subpoenas This amendment modifies the Board's procedures regarding how a party may enforce a subpoena for an individual who fails to comply with its terms. The amendment eliminates the ability to file an oral motion to enforce a subpoena, and it provides a mechanism for allegedly noncomplying parties to file a written response to a motion to enforce a subpoena. The amendment will further develop a written record regarding a subpoena, which will facilitate enforcement of subpoenas in Federal court against noncomplying individuals. Section 1201.113 Finality of Decision This amendment clarifies the finality date of initial decisions after a party requests an extension of the deadline to file a petition for review. Under the current statutory and regulatory scheme, the Board is authorized to extend the deadline for a party to file a petition for review of an initial decision past the 30-day deadline. However, after such a request for extension is granted, a petition for review is not always filed, leading to potential uncertainty as to [[Page 72959]] whether the finality date of an initial decision is the original 35-day date set by the initial decision, or the extended petition for review deadline date granted by the Board. Consistent with current Board practice, the regulation now reflects that, if no petition for review is filed by the granted extension date (assuming the extension request is granted), the initial decision of the judge will become the Board's final decision upon the expiration of the extended time limit, and judicial appeal deadlines likewise run from the date of expiration. Subpart C--Petitions for Review of Initial Decisions Section 1201.114 Petition for Review--Content and Procedure This amendment sets forth multiple changes designed to simplify the processing of petitions for review. It eliminates the ability for parties to file cross petitions for review, which will simplify the petition for review process by encouraging parties to raise all issues that they wish to pursue by the initial petition for review deadline. The amendment also provides further explanation as to when and how parties may file submissions other than an initial petition for review, a response to a petition for review, or a reply to a response. Finally, the amendment imposes a requirement that the parties certify that their pleading lengths comply with the limits imposed in the regulation. The amendments will facilitate the processing of petitions for review by ensuring that all possible issues are put forward for consideration before the Board in an expeditious fashion. Section 1201.115 Criteria for Granting Petition for Review This amendment reflects the elimination of cross petitions for review, referenced in the amended Section 1201.114. Section 1201.116 Compliance With Orders for Interim Relief This amendment simplifies the Board's procedures regarding interim relief. Under the prior version of the regulation, parties were frequently confused by the distinction between a challenge to an agency's certification of compliance with an interim relief order and an allegation of noncompliance with an initial decision that ordered interim relief. The amendment will further simplify the processing of challenges to interim relief by imposing a requirement that the agency provide evidence of interim relief when filing a petition for review. However, the amendment does not alter, contradict, and/or overrule any requirements regarding when interim relief may be required, including, but not limited to, the Board's recent decision in Stewart v. Department of Transportation, 2023 MSPB 18. Section 1201.117 Board Decisions; Procedures for Review or Reopening This amendment reflects the clarification to Section 1201.118 that the Board retains sole discretion to reopen decisions (versus vesting in the parties a right to request reopening). Section 1201.118 Board Reopening of Final Decisions This amendment clarifies that parties do not have the right to request reopening an appeal under the Board's procedures, and further do not have the right to a response from the Board to any request for reopening. This amendment further clarifies that any response to a request for reopening from the Office of the Clerk of the Board does not constitute a final order or decision of the Board. The Board is making this modification in light of recent decisions from the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) that questioned whether letters from the Office of the Clerk of the Board in response to requests to reopen an appeal constituted a final order or decision of the Board subject to judicial review. Subpart E--Procedures for Cases Involving Allegations of Discrimination Section 1201.155 Requests for Review of Final Grievance or Arbitrator's Decisions This amendment is primarily made to the title of the section and is made to clarify that requests for review of decisions arising out of negotiated grievance procedures are not limited to decisions issued by arbitrators. Subpart F--Enforcement of Final Decisions and Orders Section 1201.182 Petition for Enforcement This amendment reflects the longstanding requirement that all submissions related to the issuance of a final Board decision or order issued pursuant to 5 CFR 1201.155 must be filed with the Office of the Clerk of the Board. On occasion, parties send such submissions to other offices within the Board, which can lead to processing delays for the submissions. Section 1201.183 Procedures for Processing Petitions for Enforcement This amendment makes multiple modifications to the Board's procedures for petitions for enforcement to simplify and expedite the processing of petitions for enforcement. The amendment makes clear that only settlement agreements that have been entered into the record for purposes of enforcement will be enforceable by the Board, to dispel any notion that the Board can enforce the terms of a settlement agreement that was not entered into the record before the Board. The amendment also requires agencies to provide the Board with an email address where pleadings can be served, as the Board has been notified on occasion that agencies were not receiving submissions in petitions for enforcement due to the departure of staff. The amendment also clarifies that discovery in petitions for enforcement is limited to issues regarding enforcement, by removing the phrase ``regular discovery procedures,'' which led parties to believe that discovery on issues outside of enforcement could be conducted. The amendment further specifies what a noncomplying party must submit to demonstrate compliance after a finding of noncompliance. Under the prior version of the regulation, parties often submitted evidence of purported compliance without explaining why the evidence demonstrated compliance, making it difficult for the Board to determine whether compliance was reached. Finally, the amendment specifies that petitions seeking attorney fees for work on enforcement proceedings will be governed by the Board's regulation covering attorney fees at 5 CFR 1201.203(d). Subpart H--Attorney Fees (Plus Costs, Expert Witness Fees, and Litigation Expenses, Where Applicable) and Damages (Consequential, Liquidated, and Compensatory) Section 1201.204 Proceedings for Consequential, Liquidated, or Compensatory Damages This amendment primarily rearranges the prior 1201.204 in order to make the process more easily understood. The amendment also eliminates the requirement that parties make a request for consequential, liquidated, or compensatory damages by the end of the pre-hearing conference. The prior requirement that the parties make requests for consequential, liquidated, or compensatory damages by the end of the pre-hearing conference unnecessarily risked precluding the parties from raising such claims, and it created potential confusion about their option to pursue them in addendum proceedings. Finally, the amendment [[Page 72960]] amends the regulation to remain consistent with the modification made to 5 CFR 1201.41 that only appellants may request a hearing for damages, and that an administrative judge cannot force an appellant to have a hearing for damages without the appellant's consent. Part 1203--Procedures for Review of Rules and Regulations of the Office of Personnel Management Section 1203.12 Granting or Denying the Request for Regulation Review This amendment modifies the prior 1203.12 to better communicate what action the Board will take when it grants a request to review an OPM regulation. It is the Board's view that the prior version of the regulation focused too heavily on what the Board includes in its orders, and it did not sufficiently communicate the Board's role and functions during the regulation review process. The amended regulation explains that the Board's role is to determine whether any regulation would require, on its face or as implemented, an individual to commit a prohibited personnel practice. Section 1203.13 Filing Pleadings This amendment reduces the number of filings that must be sent to the Board to properly file a request to review an OPM regulation, and it allows requests to be filed with the Board electronically. Both modifications are being made in order to aid the Board's ongoing transition away from maintenance of paper files. Section 1203.14 Serving Documents This amendment modifies the Board's procedures to allow requests to review OPM regulations to be filed with the Board and served on other parties electronically, in order to aid the Board's ongoing transition away from maintenance of paper files. Section 1203.21 Final Order of the Board This amendment clarifies that, consistent with Federal Circuit case law, the Board's decision in a regulation review case will be considered a final decision of the Board subject to judicial review if the Board grants a request to review a regulation and considers the merits of the request. The Board previously relied on 5 CFR 1201.113 as its authority for the finality of decisions in regulation review matters, but upon further study of the matter, the Board believes that section 1201.113 should not serve as the authority for finality because that section applies to petitions for review in appellate cases, whereas the Board's regulation review procedures arise under its original jurisdiction. The amendment will specify which decisions in regulation review matters can be considered final, appealable decisions of the Board, and will avoid confusion by not treating the matter like a case under the Board's appellate jurisdiction. Part 1209--Practices and Procedures for Appeals and Stay Requests of Personnel Actions Allegedly Based on Whistleblowing or Other Protected Activity Subpart A--Jurisdiction and Definitions Section 1209.2 Jurisdiction This amendment corrects an errant reference to the incorrect statutory section. Section 1209.4 Definitions This amendment corrects an errant reference to the incorrect regulatory definition. III. Effective Date of Amendments The amendments described above will go into effect on October 7, 2024. IV. Procedural Requirements A. Administrative Procedure Act Pursuant to 5 U.S.C. 553(b), MSPB has determined that good cause exists for waiving the general notice of proposed rulemaking and public comment procedures as to these technical amendments. The notice and comment requirements of section 553(b) do not apply to interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice. The Board finds that use of an interim final rule instead of notice and comment rulemaking is appropriate here because the amendments contained herein apply solely to the Board's rules of agency organization, procedure, or practice. All of the amendments solely address how appeals proceed at the Board, and do not affect any substantive rights of parties before the Board or interested stakeholders. No substantive changes in existing law or policy are effected by these amendments. Under these circumstances, notice and comment rulemaking is unnecessary and not required by any public interest. B. Regulatory Impact Analysis: Executive Order 12866 The MSPB has determined that this is not a significant regulatory action under E.O. 12866. Therefore, no regulatory impact analysis is required. C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) requires an agency to prepare a regulatory flexibility analysis for rules unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The RFA applies only to rules for which an agency is required to first publish a proposed rule. See 5 U.S.C. 603(a) and 604(a). As discussed above, notice and comment rulemaking is unnecessary for these changes due to the lack of substantive changes being made to existing law or policy. Thus, the RFA does not apply to this final rule. D. Paperwork Reduction Act This document does not contain information collection requirements subject to the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. Chapter 35). E. Congressional Review Act Pursuant to the Congressional Review Act (5 U.S.C. 801, et seq.), the Office of Information and Regulatory Affairs designated this rule as not a ``major rule'' as defined by 5 U.S.C. 804(2). List of Subjects in 5 CFR Parts 1200, 1201, 1203, and 1209 Administrative practice and procedure. For the reasons set forth above, 5 CFR parts 1200, 1201, 1203, and 1209 are amended as follows: PART 1200--BOARD ORGANIZATION 0 1. The authority citation for part 1200 continues to read as follows: Authority: 5 U.S.C. 1201 et seq., unless otherwise noted. 0 2. Revise Sec. 1200.3 to read as follows: Sec. 1200.3 How the Board members make decisions. (a) The three Board members make decisions in all cases by majority vote except in circumstances described in paragraph (b) of this section or as otherwise provided by law. (b) When there are at least two Board members and, due to a vacancy, recusal or other reasons, the Board members are unable to decide any case by majority vote, the decision, recommendation, or other order under review may be deemed the final decision or order of the Board. The Chairman of the Board may direct the issuance of an order consistent with this paragraph (b). (c) When due to vacancies, recusals, or other reasons, only one Board member is able to act, the Board [[Page 72961]] member may direct the following types of matters to an administrative judge or other official: (1) A party's request to withdraw his/her appeal or petition for review for final disposition; (2) A newly raised claim that was not previously adjudicated in the appeal currently under review for docketing and adjudication; (3) A settlement for possible final disposition, including a determination of whether the parties actually reached a settlement, understood its terms, and agreed whether it is to be enforceable by the Board; or (4) A matter for further development of the record. (d) When due to vacancies, recusals, or other reasons no Board member is able to act, the Clerk of the Board may direct the following types of matters to an administrative judge or other official: (1) A party's request to withdraw his/her appeal or petition for review for final disposition; (2) A newly raised claim that was not previously adjudicated in the appeal currently under review for docketing and adjudication; (3) A settlement for possible final disposition, including a determination of whether the parties actually reached a settlement, understood its terms, and agreed whether it is to be enforceable by the Board; or (4) A matter for further development of the record. (e) Decisions and orders issued pursuant to paragraph (b) of this section shall not be precedential. 0 3. Add Sec. 1200.5 to subpart A to read as follows: Sec. 1200.5 Conduct policy. The Board may issue a policy governing the conduct of the parties for all appeals before the Board and of parties and any other individuals in communications with the Board. Such policy may include rules regarding prohibited conduct and vexatious filing by a party, witness, representative, or other individual, as well as potential sanctions or other consequences for violations of the policy. Any policy established pursuant to this regulation will be made publicly available via the Board's website (www.mspb.gov). PART 1201--PRACTICES AND PROCEDURES 0 4. The authority citation for part 1201 continues to read as follows: Authority: 5 U.S.C. 1204, 1305, and 7701, and 38 U.S.C. 4331, unless otherwise noted. 0 5. In Sec. 1201.3, revise the last sentence in paragraph (c)(3) to read as follows: Sec. 1201.3 Appellate jurisdiction. * * * * * (c) * * * (3) * * * The request must be filed with the Clerk of the Board in accordance with Sec. 1201.155. 0 6. In Sec. 1201.22, revise the last sentence of paragraph (b)(3) introductory text to read as follows: Sec. 1201.22 Filing an appeal and responses to appeals. * * * * * (b) * * * (3) * * * The following examples, while not controlling, illustrate potential application of this rule: * * * * * 0 7. In Sec. 1201.23, redesignate the introductory text as paragraph (a) introductory text and examples 1 and 2 as paragraphs (a)(1) and (2), respectively, add a paragraph (a) heading, and add paragraph (b). The additions read as follows: Sec. 1201.23 Computation of time. (a) Computation of deadlines. * * * * * * * * (b) Changes to the computation of deadlines. At MSPB's discretion, the computation of deadlines may be changed due to events that broadly affect the ability of parties with appeals before MSPB to file pleadings and/or MSPB's ability to serve issuances, such as MSPB system outages or government shutdowns. In these circumstances, any information concerning changes to the computation of deadlines will be addressed by MSPB through a press release posted to MSPB's website. 0 8. In Sec. 1201.33, revise the third sentence of paragraph (a) to read as follows: Sec. 1201.33 Federal witnesses. (a) * * * When a desired witness is employed by an agency that is not a party to the Board proceeding, the requesting party may avail itself of the provisions of Sec. Sec. 1201.81 through 1201.85 regarding subpoenas to ensure the attendance of the witness.* * * * * * * * 0 9. In Sec. 1201.41, revise paragraph (b)(5) and amend paragraph (b)(6) by removing the words ``as appropriate,'' and adding in their place ``by appropriate method,'' and add paragraph (c)(2)(iii). The revision and addition read as follows: Sec. 1201.41 Judges. * * * * * (b) * * * (5) Grant an appellant's request for a hearing; * * * * * (c) * * * (2) * * * (iii) The judge may rescind a settlement agreement and reinstate the underlying matter on appeal in accordance with Sec. 1201.183(a)(8)(ii). 0 10. In Sec. 1201.56, revise paragraph (b)(2)(ii) to read as follows: Sec. 1201.56 Burden and degree of proof. * * * * * (b) * * * (2) * * * (ii) In appeals from final decisions of the Office of Personnel Management (OPM) involving retirement benefits, if the appellant filed the application, the appellant has the burden of proving, by a preponderance of the evidence (as defined in Sec. 1201.4(q)), entitlement to the benefits. * * * * * 0 11. In Sec. 1201.72, revise the first sentence in paragraph (a), the first sentence in paragraph (c), and revise paragraph (d)(2) to read as follows: Sec. 1201.72 Explanation and scope of discovery. (a) * * * Discovery is the process, apart from the hearing, by which a party may obtain relevant information, including the identification of potential witnesses, from a party or nonparty, that the other party or nonparty has not otherwise provided.* * * * * * * * (c) * * * Parties may use one or more of the following methods for obtaining discovery from parties or nonparties: written interrogatories, depositions, requests for production of documents or things for inspection or copying, and requests for admission. * * * (d) * * * (2) The party seeking discovery has had sufficient opportunity through discovery in the action to obtain the information sought; or * * * * * 0 12. In Sec. 1201.73: 0 a. Revise the last sentence of paragraph (b) and revise paragraph (d)(3); 0 b. Redesignate paragraphs (e)(2) and (3) as paragraphs (e)(4) and (5); 0 c. Add new paragraphs (e)(2) and (3); and 0 d. Revise the first sentence of the newly redesignated paragraph (e)(5). The revisions and additions read as follows: Sec. 1201.73 Discovery procedures. * * * * * [[Page 72962]] (b) * * * Parties and nonparties may respond to discovery requests by electronic mail. * * * * * (d) * * * (3)(i) Any motion for an order to compel or to issue a subpoena must be filed with the judge: (A) Within 20 days of the date of service of objections or, if no response is received, within 10 days after the time limit for response has expired; or (B) Within 10 days of notice that a nonmoving party or nonparty provided an evasive or incomplete answer or response to a discovery request. (ii) A party may request an extension of the time limit to file a motion to compel with respect to any discovery dispute pursuant to Sec. 1201.55. Any pleading in opposition to a motion to compel or subpoena discovery must be filed with the judge within 10 days of the date of service of the motion. (e) * * * (2) Absent prior approval by the judge, requests for documents served by parties upon another party or nonparty may not exceed 25 in number, including all discrete subparts. (3) Absent prior approval by the judge, requests for admission served by parties upon another party or nonparty may not exceed 25 in number, including all discrete subparts. * * * * * (5) Requests to exceed the limitations set forth in paragraphs (e)(1) through (4) of this section may be granted at the discretion of the judge.* * * 0 13. In Sec. 1201.81, amend paragraph (a) by revising the first and last sentences and amend paragraph (b) by revising the last sentence to read as follows: Sec. 1201.81 Requests for subpoenas. (a) * * * Parties who have complied with 1201.73(c), as applicable, and wish to obtain subpoenas that would require the attendance and testimony of witnesses, or subpoenas that would require the production of documents or other evidence under 5 U.S.C. 1204(b)(2)(A), should file their motions for those subpoenas with the judge.* * * Subpoenas are not ordinarily required to obtain the attendance of Federal employees as witnesses because Federal agencies and their employees must comply with 5 CFR 5.4 and Sec. 1201.33. (b) * * * Each request must identify specifically the testimony, documents, or other evidence desired. * * * * * 0 14. Revise Sec. 1201.82 to read as follows: Sec. 1201.82 Motions to quash subpoenas. Any person to whom a subpoena is directed, or any party, may file a motion to quash or limit the subpoena. The motion must include reasons why compliance with the subpoena should not be required or the subpoena's scope should be limited. A party must file the motion with the judge and serve it on the other parties. A non-party must file the motion with the judge, who will enter the motion into the record and serve the motion on all parties. For purposes of this section, judges may provide a method by which nonparties may file the motion electronically, including by email, notwithstanding Sec. 1201.14(d). Any party may file a response to the motion within 10 days after the motion has been entered into the record, and the judge will specify the method of service of any such response upon a non-party. 0 15. In Sec. 1201.83, add paragraph (c) to read as follows: Sec. 1201.83 Serving subpoenas. * * * * * (c) A party requesting the presence of a non-federal employee witness must pay that witness' fees and travel expenses in accordance with 5 U.S.C. 1204(b)(3) and 28 U.S.C. 1821. Those fees must be paid or offered to the witness at the time the subpoena is served. 0 16. In Sec. 1201.84, amend paragraph (b) by removing the word ``or'', amend paragraph (c) by removing the period at the end and adding in its place ``, or'', and add paragraph (d). The addition reads as follows: Sec. 1201.84 Proof of service. * * * * * (d) By any other method that is in accordance with applicable State law. 0 17. Revise Sec. 1201.85 to read as follows: Sec. 1201.85 Enforcing subpoenas. (a) If a person who has been served with a Board subpoena fails or refuses to comply with its terms, the party seeking compliance may file a written motion for enforcement with the judge. That party must present the document certifying that the subpoena was served and, except where the witness was required to appear before the judge, must submit an affidavit or sworn statement under 28 U.S.C. 1746 (see appendix IV) describing the failure or refusal to obey the subpoena. A written motion must be served upon the person who is alleged to be in noncompliance. (b) The person who is alleged to be in noncompliance may file a response within 10 days. A party must file the response with the judge and serve it on the other parties. Non-parties must file their response with the judge, who will enter the response into the record. The judge may waive Sec. 1201.14(d) to accept a nonparty's response by email. Any party may file a reply to the response within 10 days after the response has been entered into the record. (c) In ruling on a motion to quash, judges may rely on Fed.R.Civ.P. 45 and applicable case law. Upon a finding by the judge of failure to obey a subpoena, the Board, in accordance with 5 U.S.C. 1204(c), may then ask an appropriate U.S. district court to enforce the subpoena. If the person who has failed or refused to comply with a Board subpoena is located in a foreign country, the U.S. District Court for the District of Columbia will have jurisdiction to enforce compliance, to the extent that a U.S. court can assert jurisdiction over an individual in the foreign country. (d) Upon application by the Special Counsel, the Board may seek court enforcement of a subpoena issued by the Special Counsel in the same manner in which it seeks enforcement of Board subpoenas, in accordance with 5 U.S.C. 1212(b)(3). 0 18. In Sec. 1201.113, revise paragraph (d) to read as follows: Sec. 1201.113 Finality of decision. * * * * * (d) Extensions. The Board may extend the time limit for filing a petition for review for good cause shown as specified in Sec. 1201.114. If no petition for review is filed within the extended time limit, the initial decision of the judge will become the Board's final decision upon the expiration of the extended time limit. * * * * * 0 19. In Sec. 1201.114: 0 a. Revise the section heading and paragraph (a) introductory text; 0 b. Remove paragraph (a)(2); 0 c. Redesignate paragraph (a)(3) as paragraph (a)(2) and revise it; 0 d. Redesignate paragraphs (a)(4) and (5) as paragraphs (a)(3) and (4); 0 e. Revise newly redesignated paragraph (a)(4), paragraph (b), the first sentence of paragraph (c), and paragraphs (e), (g), (h), and (k). The revisions read as follows: Sec. 1201.114 Petition for review--content and procedure. (a) Pleadings allowed. Pleadings allowed on review include a petition for review, which may be filed by either party, a response to a petition for review, and a reply to a response to a petition for review. Each party is limited to filing a single petition for review, [[Page 72963]] response to a petition for review, and reply to a response to a petition for review. * * * * * (2) A response to a petition for review may respond only to the arguments and assertions raised in the petition for review and does not contend that the initial decision was incorrectly decided in whole or in part. A response to another party's petition for review must be filed separately from a party's own petition for review. * * * * * (4) No pleading other than the ones described in this paragraph is permitted unless the party files a motion with and obtains leave from the Clerk of the Board. The motion must briefly describe the nature of and need for the requested pleading, i.e., the motion must identify the requested pleading and briefly explain why the requested pleading is important. If the record is closed, as defined in paragraph (k) of this section, the motion must also show that the requested pleading is new and material, as defined in Sec. 1201.115(a)(1) and (d), and that it was not readily available before the record closed. The party may not submit the requested pleading unless the Board issues an order granting the motion for leave. A filing characterized as a motion for leave that does not adhere to the above requirements will be rejected. (b) Contents of petition for review. A petition for review states a party's objections to the initial decision, including all of the party's legal and factual arguments, and must be supported by references to applicable laws or regulations and by specific references to the record. Any petition for review that contains new evidence or argument must include an explanation of why the evidence or argument was not presented before the record below closed (see Sec. 1201.59). A petition for review should not include documents that were part of the record below, as the entire administrative record will be available to the Board. A petition for review filed by an agency should address the agency's compliance with any interim relief requirements and should contain a certification, as set forth in Sec. 1201.116(a). (c) * * * Any party to the proceeding, the Director of the Office of Personnel Management (OPM), or the Special Counsel (under 5 U.S.C. 1212(c)) may file a petition for review. * * * * * * * * (e) Time for filing. Any petition for review must be filed within 35 days after the date of issuance of the initial decision or, if the petitioner shows that the initial decision was received more than 5 days after the date of issuance, within 30 days after the date the petitioner received the initial decision. For purposes of this section, the date that the petitioner receives the initial decision is determined according to the standard set forth at Sec. 1201.22(b)(3), pertaining to an appellant's receipt of an agency decision. If the petitioner is represented, the 30-day time period begins to run upon receipt of the initial decision by either the representative or the petitioner, whichever comes first. Any response to a petition for review must be filed within 25 days after the date of service of the petition. Any reply to a response to a petition for review must be filed within 10 days after the date of service of the response to the petition for review. For purposes of this section, Sec. 1201.23 governs the computation of time. * * * * * (g) Late filings. Any pleading described in paragraph (a) of this section that is filed late must be accompanied by a motion that shows good cause for the untimely filing, unless the Board has specifically granted an extension of time under paragraph (f) of this section, or unless a motion for extension is pending before the Board. The motion must be accompanied by an affidavit or sworn statement under 28 U.S.C. 1746. (See appendix IV.) The affidavit or sworn statement must include: the reasons for failing to request an extension before the deadline for the submission, and a specific and detailed description of the circumstances causing the late filing, accompanied by supporting documentation or other evidence. Any response to the timeliness motion may be included in the response to the petition for review or may be filed separately. The response to the timeliness motion will not extend the time provided by paragraph (e) of this section to respond to the petition. In the absence of a motion, the Board may, in its discretion, determine on the basis of the existing record whether there was good cause for the untimely filing, or it may provide the party that submitted the pleading with an opportunity to show why it should not be dismissed or excluded as untimely. (h) Length limitations. A petition for review, or a response to a petition for review, whether computer generated, typed, or handwritten, is limited to 30 pages or 7500 words. A reply to a response to a petition for review is limited to 15 pages or 3750 words. A party relying on word count to adhere to the length limitation must include certification of the word count with their pleading. Argument formatted such that the length of the pleading cannot be determined may be rejected. Computer generated and typed pleadings must use no less than 12-point typeface and 1-inch margins and must be double spaced and only use one side of a page. The length limitation is exclusive of any table of contents, table of authorities, attachments, and certificate of service. Length limitations may not be circumvented by including argument in attachments. Failure to comply with the length limitations set forth in this regulation, after sufficient opportunity to comply, may lead to dismissal of the petition for review. A request for leave to file a pleading that exceeds the limitations prescribed in this paragraph must be received by the Clerk of the Board at least 3 days before the filing deadline. Such requests must give the reasons for a waiver as well as the desired length of the pleading and are granted only in exceptional circumstances. The page and word limits set forth above are maximum limits. Parties are not expected or required to submit pleadings of the maximum length. * * * * * (k) Closing the record. The record closes on expiration of the period for filing the last permissible pleading or the date on which the last permissible pleading is filed, whichever is earlier. Once the record closes, no additional argument or evidence may be filed without first requesting and receiving leave from the Clerk of the Board under paragraph (a)(4) of this section. * * * * * 0 20. In Sec. 1201.115, revise the section heading and the introductory text to read as follows: Sec. 1201.115 Criteria for granting petition for review. The Board normally will consider only issues raised in a timely filed petition for review. Situations in which the Board may grant a petition for review include, but are not limited to, a showing that: * * * * * 0 21. Revise Sec. 1201.116 to read as follows: Sec. 1201.116 Compliance with orders for interim relief. (a) Certification of compliance. (1) If the appellant was the prevailing party in the initial decision, and the decision granted the appellant interim relief, any petition for review filed by the agency must be accompanied by a certification [[Page 72964]] that the agency has complied with the interim relief order, either by: (i) Providing the required interim relief; or (ii) Satisfying the requirements of 5 U.S.C. 7701(b)(2)(A)(ii) and (B). (2) Evidence of its compliance must accompany its petition for review. Failure by an agency to provide the certification and evidence required by this section with its petition for review may result in the dismissal of the agency's petition for review. (b) Allegation of noncompliance in petition for review. If an appellant or an intervenor files a petition for review of an initial decision ordering interim relief and such petition includes a challenge to the agency's compliance with the interim relief order, the agency must submit evidence within 25 days of the date of service that it has provided the interim relief required or that it has satisfied the requirements of 5 U.S.C. 7701(b)(2)(A)(ii) and (B). The agency's evidence may be provided with any response to the petition for review or in a separate pleading. (c) Request for dismissal for noncompliance with interim relief order. If the agency files a petition for review and the appellant believes the agency has not provided required interim relief, the appellant may request dismissal of the agency's petition. Any such request must be filed with the Clerk of the Board within 25 days of the date of service of the agency's petition, or within 25 days of the date upon which the appellant becomes aware that the agency has not provided, or has ceased to provide, interim relief. A copy of the request must be served on the agency at the same time it is filed with the Board. The agency may respond with evidence and argument to the appellant's request to dismiss within 15 days of the date of service of the request. If the appellant files a motion to dismiss beyond the time limit, the Board will dismiss the motion as untimely unless the appellant shows that it is based on information not readily available before the close of the time limit. Failure by an agency to provide the certification required by paragraph (a) of this section with its petition for review, or to provide evidence of compliance in response to a Board order, may result in the dismissal of the agency's petition for review. (d) Back pay and attorney fees. Nothing in this section shall be construed to require any payment of back pay for the period preceding the date of the judge's initial decision or attorney fees before the decision of the Board becomes final. 0 22. In Sec. 1201.117, revise paragraph (a) introductory text to read as follows: Sec. 1201.117 Board decisions; procedures for review or reopening. (a) In any case that is reviewed, or reopened at the Board's discretion pursuant to Sec. 1201.118, the Board may: * * * * * 0 23. Revise Sec. 1201.118 to read as follows: Sec. 1201.118 Board reopening of final decisions. Regardless of any other provision of this part, the Board may at any time reopen any appeal in which it has issued a final order or in which an initial decision has become the Board's final decision by operation of law. The Board will exercise its discretion to reopen an appeal only in unusual or extraordinary circumstances and generally within a short period of time after the decision becomes final. The parties have no right to request reopening and no right to a response from the Board on a request for reopening. Any response to a request for reopening from the Office of the Clerk of the Board does not constitute a final order or decision of the Board, and thus is not subject to judicial review under 5 U.S.C. 7703 or Sec. 1201.120. 0 24. In Sec. 1201.155, revise the section heading and add paragraph (g) to read as follows: Sec. 1201.155 Requests for review of final grievance or arbitrator's decisions. * * * * * (g) Petition for enforcement. A petition for enforcement of a final Board decision or order that was issued pursuant to paragraphs (a) through (f) of this section, should be filed with the Office of the Clerk of the Board and should otherwise comply with the requirements set forth in Sec. 1201.182(a). 0 25. In Sec. 1201.182, revise the second sentence of paragraph (a) to read as follows: Sec. 1201.182 Petition for enforcement. (a) * * * The petition must be filed promptly with the regional or field office that issued the initial decision, or with the Office of the Clerk of the Board if the party is requesting enforcement of a final Board decision or order that was issued pursuant to Sec. 1201.155; a copy of it must be served on the other party and that party's representative; and it must describe specifically the reasons the petitioning party believes there is noncompliance.* * * * * * * * 0 26. In Sec. 1201.183, revise paragraphs (a) and (b) and add paragraph (g) to read as follows: Sec. 1201.183 Procedures for processing petitions for enforcement. (a) Initial processing of a petition for enforcement. (1) When a party has filed a petition for enforcement of a final decision or order of the Board, or enforcement of a settlement agreement that has been entered into the Board's record for purposes of enforcement, the alleged noncomplying party must file one of the following within 15 days of the date of service of the petition: (i) Evidence of compliance, including a narrative explanation of the calculation of back pay and other benefits, and supporting documents; (ii) Evidence and/or a statement of the compliance actions that are in process and/or remain to be taken, along with a schedule for accomplishing full compliance within a reasonable period; or (iii) A statement showing good cause for the failure to comply completely with the final decision or order of the Board, or with the terms of an applicable settlement agreement. (2) The party that filed the petition may respond to the alleged noncomplying party's submission within 10 days after the date of service of the submission. The parties must serve copies of their pleadings on each other as required under Sec. 1201.26(b)(2). (3) If a party files a petition for enforcement seeking compliance with a final Board decision or order, the alleged noncomplying party generally has the burden of proving its compliance by a preponderance of the evidence. However, if any party files a petition for enforcement seeking compliance with the terms of a settlement agreement that has been entered into the Board's record for purposes of enforcement, that party has the burden of proving the other party's breach of the settlement agreement by a preponderance of the evidence. (4) If the agency is the alleged noncomplying party, it shall submit the name, title, grade, and address of the agency official charged with complying with the Board's final decision or order, and inform such official in writing of the potential sanction for noncompliance as set forth in 5 U.S.C. 1204(a)(2) and (e)(2)(A), even if the agency asserts that it is has fully complied. The agency must further submit a current initial contact email address that is regularly checked to ensure receipt of all information regarding the allegations of compliance. The agency must advise the Board of [[Page 72965]] any subsequent change to the identity and/or location of the designated agency official during the pendency of any compliance proceeding. In the absence of this information, the Board will presume that the highest-ranking agency official who is not appointed by the President by and with the consent of the Senate, is charged with compliance. (5) Discovery may be pursued in accordance with the procedures set forth at Sec. Sec. 1201.71 through 1201.75, except that unless otherwise directed by the judge, initial discovery requests must be served no later than 15 days after the alleged noncomplying party files a response to the petition for enforcement. (6) The judge may convene a hearing to resolve compliance issues. (7) If the judge finds that the alleged noncomplying party has fully complied with the final Board decision or order at issue, or with the applicable settlement agreement entered into the Board's record for purposes of enforcement, he or she will issue an initial decision to that effect. That decision will be subject to the procedures for petitions for review by the Board under subpart C of this part, and subject to judicial review under Sec. 1201.120. (8) If the judge finds that the alleged noncomplying party has not complied, in whole or in part, with the final Board decision or order at issue, or with the applicable settlement agreement entered into the Board's record for purposes of enforcement, he or she will issue an initial decision: (i) Directing the noncomplying party to take the specific actions required by the final Board decision or order at issue, or required under the applicable settlement agreement entered into the Board's record for purposes of enforcement; or (ii) Upon the request of the party seeking compliance where the judge finds a material breach, rescinding the applicable settlement agreement and reinstating the underlying matter on appeal. (9) An initial decision issued under paragraph (a)(8) of this section will be subject to the procedures for petitions for review by the Board under subpart C of this part, but not subject to judicial review under Sec. 1201.120. (10) A copy of an initial decision finding full or partial noncompliance with a final Board decision or order, or a settlement agreement that has been entered into the Board's record for purposes of enforcement will be served on the designated agency official. (b) Processing after a finding of noncompliance that directs specific action. (1) If an initial decision described under paragraph (a)(8)(i) of this section is issued, the noncomplying party must do the following: (i) To the extent that the noncomplying party agrees to take some or all of the actions required by the initial decision, the party must, within the time limit for filing a petition for review under Sec. 1201.114(e), provide the Clerk of the Board with a statement of compliance certifying that the party has taken the actions identified in the initial decision, along with evidence establishing that the party has taken those actions. The narrative statement must explain in detail why the evidence of compliance satisfies the requirements set forth in the initial decision. The party seeking compliance may file evidence and argument in response to any statement of compliance within 20 days of the date of service of the statement of compliance. (ii) To the extent that the noncomplying party declines to take some or all of the actions required by the initial decision, the party must file a petition for review under the provisions of Sec. Sec. 1201.114 and 1201.115. (iii) A statement of compliance and a petition for review, as described in the two preceding paragraphs, may be filed separately or as part of a single pleading. (2) If an initial decision described under paragraph (a)(8)(i) of this section is issued, the party seeking compliance may also file a petition for review of an initial decision's finding of partial compliance with the Board's final decision or order, or with an applicable settlement agreement entered into the Board's record for purposes of enforcement. * * * * * (g) Requests for attorney fees. A request for attorney fees related to a petition for enforcement will be governed by Sec. 1201.203 and must be made no later than 60 days after issuance of the Board's final decision issued under Sec. 1201.183(c)(1). 0 27. Revise Sec. 1201.204 to read as follows: Sec. 1201.204 Proceedings for consequential, liquidated, or compensatory damages. (a) Addendum proceeding. (1) A request for consequential, liquidated, or compensatory damages will be decided in an addendum proceeding. (2) A judge may, either on their own motion or on the motion of a party, consider a request for damages in a proceeding on the merits when the judge determines that such action is in the interest of the parties and will promote efficiency and economy in adjudication. (b) Initiation of addendum proceeding--(1) Time for making request. A request for consequential, liquidated, or compensatory damages must be filed as soon as possible after a final decision of the Board on the merits of an appeal but no later than 60 days after the date on which such decision becomes final. The judge or the Board, as applicable, may waive the time limit for making such request for good cause shown, and upon a finding that a waiver would not result in undue prejudice to the opposing party. (2) Place of filing. When the initial decision in the proceedings on the merits was issued by a judge in an MSPB regional or field office, the request must be filed with the applicable regional or field office. When the initial decision in the proceedings on the merits was issued by a judge at the Board's headquarters or when the only decision was a final decision issued by the Board itself, the request must be filed with the Clerk of the Board. (3) Form and content of request. A request for consequential, liquidated, or compensatory damages must be made in writing and state the basis for entitlement to an award of such damages, and the amount of damages sought. (4) Service. A copy of the request must be served on the other parties or their representatives at the time of the request. A party may respond to the request within the time limit established by the judge or the Board, as applicable. (5) Hearing; applicability of subpart B. The judge may grant the appellant's request for a hearing on a request for consequential, liquidated, or compensatory damages and may apply appropriate provisions of subpart B of this part to the addendum proceeding. (6) Initial decision; review by the Board. The judge will issue an initial decision in the addendum proceeding, adjudicating the request for damages. The initial decision shall then be subject to the provisions for a petition for review by the Board under subpart C of this part. (7) Request for damages made in proceeding before the Board. Where a request for damages is made in a case which originates before the Board, the Board may: (i) Consider both the merits of the case and the request for damages and issue a final decision; or (ii) Remand the case to a judge for a new initial decision, either on the request for damages only or on both the merits and the request for damages. (8) EEOC review of decision on compensatory damages. A final decision [[Page 72966]] of the Board on a request for compensatory damages pursuant to the Civil Rights Act of 1991 shall be subject to review by the Equal Employment Opportunity Commission as provided under subpart E of this part. PART 1203--PROCEDURES FOR REVIEW OF RULES AND REGULATIONS OF THE OFFICE OF PERSONNEL MANAGEMENT 0 28. The authority citation for part 1203 continues to read as follows: Authority: 5 U.S.C. 1204(a), 1204(f), and 1204(h). 0 29. In Sec. 1203.12, revise paragraph (b) to read as follows: Sec. 1203.12 Granting or denying the request for regulation review. * * * * * (b) If the Board grants a request, it will review the regulation to determine whether any provision, whether on its face or as implemented by the agency, would require any employee to violate 5 U.S.C. 2302(b). 0 30. In Sec. 1203.13: 0 a. Revise the heading and the first and last sentences of paragraph (a); and 0 b. Remove the first and second sentences of paragraph (d) and add one sentence in their place. The revisions and addition read as follows: Sec. 1203.13 Filing pleadings. (a) How to file. A request for regulation review must be filed with the Office of the Clerk, U.S. Merit Systems Protection Board, 1615 M Street NW, Washington, DC 20419. * * * The Office of the Clerk will make all pleadings available for review by the public, including by posting the pleadings to the Board's website. * * * * * (d) * * * An initial filing in a request for review and other pleadings may be filed with the Office of the Clerk by mail, by commercial or personal delivery, by facsimile, or by e-filing in accordance with Sec. 1201.14 of this chapter.* * * * * * * * 0 31. In Sec. 1203.14, revise paragraph (c) to read as follows: Sec. 1203.14 Serving documents. * * * * * (c) Electronic filing. An initial request for a regulation review and other pleadings in a regulation review proceeding may be filed with the Board and served upon other parties by electronic filing, provided the requirements of Sec. 1201.14 of this chapter are satisfied. 0 32. In Sec. 1203.21, add paragraph (d) to read as follows: Sec. 1203.21 Final order of the Board. * * * * * (d) Final decision. The decision of the Board is final and judicially appealable if the Board grants the request to review and addresses the merits of the request. PART 1209--PRACTICES AND PROCEDURES FOR APPEALS AND STAY REQUESTS OF PERSONNEL ACTIONS ALLEGEDLY BASED ON WHISTLEBLOWING OR OTHER PROTECTED ACTIVITY 0 33. The authority citation for part 1209 continues to read as follows: Authority: 5 U.S.C. 1204, 1221, 2302(b)(8) and (b)(9)(A)(i), (B), (C), or (D), and 7701. Sec. 1209.2 [Amended] 0 34. In Sec. 1209.2, remove ``7121(d)'' and add in its place ``7121(b)'' in paragraph (d)(1). 0 35. In Sec. 1209.4, revise the last sentence of paragraph (e) to read as follows: Sec. 1209.4 Definitions. * * * * * (e) * * * It is a higher standard than ``preponderance of the evidence'' as defined in 5 CFR 1201.4(q). * * * * * Gina K. Grippando, Clerk of the Board. [FR Doc. 2024-19933 Filed 9-6-24; 8:45 am] BILLING CODE 7400-01-P

usgpo

2024-10-08T13:26:16.397817

FR

FR-2024-09-09/2024-20163

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72966-72968] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20163] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2024-0457; Project Identifier MCAI-2023-01207-T; Amendment 39-22790; AD 2024-14-09] RIN 2120-AA64 Airworthiness Directives; Dassault Aviation Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The FAA is superseding Airworthiness Directive (AD) 2022-02- 10, which applied to certain Dassault Aviation Model FALCON 7X, FALCON 900EX, and FALCON 2000EX airplanes. AD 2022-02-10 required replacement of certain titanium screws. Since the FAA issued AD 2022-02-10, affected parts have been found in other areas of certain Falcon 7X airplanes as well as in additional Falcon 7X airplanes. This AD continues to require the actions in AD 2022-02-10, adds other locations for screw replacement, and revises the applicability, as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective October 15, 2024. The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of October 15, 2024. ADDRESSES: AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2024-0457; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, the mandatory continuing airworthiness information (MCAI), any comments received, and other information. The address for Docket Operations is U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Material Incorporated by Reference: For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find this material on the EASA website at ad.easa.europa.eu. For Dassault Aviation material identified in this AD, contact Dassault Falcon Jet Corporation, Teterboro Airport, P.O. Box 2000, South Hackensack, NJ 07606; telephone 201-440-6700; website dassaultfalcon.com. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available in the AD docket at regulations.gov under Docket No. FAA-2024-0457. FOR FURTHER INFORMATION CONTACT: Tom Rodriguez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone: 206-231-3226; email: [email protected]. SUPPLEMENTARY INFORMATION: Background The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2022-02-10, [[Page 72967]] Amendment 39-21907 (87 FR 7025, February 8, 2022) (AD 2022-02-10). AD 2022-02-10 applied to certain Dassault Aviation Model FALCON 7X, FALCON 900EX, and FALCON 2000EX airplanes. AD 2022-02-10 was prompted by MCAI originated by EASA, which is the Technical Agent for the Member States of the European Union. EASA issued AD 2021-0047, dated February 16, 2021 (EASA AD 2021-0047), to correct an unsafe condition. AD 2022-02-10 required replacement of certain titanium screws. The FAA issued AD 2022-02-10 to address failure of an affected screw installed in a critical location, possibly resulting in reduced structural integrity of the airplane. The NPRM published in the Federal Register on March 6, 2024 (89 FR 15965). The NPRM was prompted by EASA AD 2023-0207, dated November 21, 2023 (also referred to as the MCAI). The MCAI states that since EASA issued AD 2021-0047, it was determined that affected parts have been installed in production in additional areas of certain Model FALCON 7X airplanes already included in the applicability of EASA AD 2021-0047. Additionally, it was determined that additional Model FALCON 7X airplanes were not included in the applicability of EASA AD 2021-0047. In the NPRM, the FAA proposed to continue to require the actions in AD 2022-02-10, add other locations for screw replacement, and revise the applicability, as specified in EASA AD 2023-0207. The FAA is issuing this AD to address the unsafe condition on these products. You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2024-0457. Discussion of Final Airworthiness Directive Comments The FAA received no comments on the NPRM or on the determination of the cost to the public. Conclusion This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator. Material Incorporated by Reference Under 1 CFR Part 51 EASA AD 2023-0207 specifies procedures for replacing certain Decomatic titanium screws (including an inspection of the bore dimension and corrective actions (oversizing or repair)). The EASA AD also restricts installation of certain Decomatic titanium screws. Dassault Service Bulletin 7X-467, Revision 2, dated March 20, 2023, specifies procedures for additional work. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. Costs of Compliance The FAA estimates that this AD affects 44 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD: Estimated Costs for Required Actions ---------------------------------------------------------------------------------------------------------------- Action Labor cost Parts cost Cost per product Cost on U.S. operators ---------------------------------------------------------------------------------------------------------------- Retained actions from AD 2022- Up to 90 work- $0 Up to $7,650........ Up to $336,600. 02-10. hours x $85 per hour = $7,650. New proposed requirements..... Up to 110 work- 0 Up to $9,350........ Up to $411,400. hours x $85 per hour = $9,350. ---------------------------------------------------------------------------------------------------------------- According to the manufacturer, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. The FAA does not control warranty coverage for affected individuals. As a result, the FAA has included all known costs in the cost estimate. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD: (1) Is not a ``significant regulatory action'' under Executive Order 12866, (2) Will not affect intrastate aviation in Alaska, and (3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows: [[Page 72968]] PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by: 0 a. Removing Airworthiness Directive (AD) 2022-02-10, Amendment 39-21907 (87 FR 7025, February 8, 2022); and 0 b. Adding the following new AD: 2024-14-09 Dassault Aviation: Amendment 39-22790; Docket No. FAA- 2024-0457; Project Identifier MCAI-2023-01207-T. (a) Effective Date This airworthiness directive (AD) is effective October 15, 2024. (b) Affected ADs This AD replaces AD 2022-02-10, Amendment 39-21907 (87 FR 7025, February 8, 2022) (AD 2022-02-10). (c) Applicability This AD applies to Dassault Aviation airplanes identified in paragraphs (c)(1) through (3) of this AD, certificated in any category, as identified in European Union Aviation Safety Agency (EASA) AD 2023-0207, dated November 21, 2023 (EASA AD 2023-0207). (1) Model FALCON 7X airplanes. (2) Model FALCON 900EX airplanes. (3) Model FALCON 2000EX airplanes. (d) Subject Air Transport Association (ATA) of America Code 51, Standard Practices/Structures. (e) Unsafe Condition This AD was prompted by a report of an improper heat treatment process applied during the manufacturing of certain Decomatic titanium screws, and by the determination that affected parts in additional areas on certain airplanes, as well as additional airplanes, are subject to the unsafe condition. The FAA is issuing this AD to address failure of an affected screw installed in a critical location, possibly resulting in reduced structural integrity of the airplane. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Requirements Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, EASA AD 2023-0207. (h) Exceptions to EASA AD 2023-0207 (1) Where EASA AD 2023-0207 refers to its effective date, this AD requires using the effective date of this AD. (2) This AD does not adopt the ``Remarks'' section of EASA AD 2023-0207. (3) Where the ``Ref Publications'' section of EASA AD 2023-0207 specifies ``Dassault SB 7X-467 original issue dated 16 November 2020, Rev. 1 dated 12 December 2022 or Rev. 2 dated 20 March 2023,'' this AD requires replacing that text with ``Dassault Service Bulletin 7X-467, Revision 2, dated March 20, 2023.'' (i) Credit for Previous Actions For Model FALCON 7X airplanes: This paragraph provides credit for the actions specified in paragraph (g) of this AD, if those actions were performed before the effective date of this AD using Dassault Service Bulletin 7X-467, dated November 16, 2020, provided the additional work specified in Dassault Service Bulletin 7X-467, Revision 2, dated March 20, 2023, is accomplished within the applicable compliance time specified in EASA AD 2023-0207. (j) Additional AD Provisions The following provisions also apply to this AD: (1) Alternative Methods of Compliance (AMOCs): The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the International Validation Branch, mail it to the address identified in paragraph (k)(1) of this AD. Information may be emailed to: [email protected]. Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (2) Contacting the Manufacturer: For any requirement in this AD to obtain instructions from a manufacturer, the instructions must be accomplished using a method approved by the Manager, International Validation Branch, FAA; or EASA; or Dassault Aviation's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature. (k) Additional Information (1) For more information about this AD, contact Tom Rodriguez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone: 206-231-3226; email: [email protected]. (2) Material identified in this AD that is not incorporated by reference is available at the address specified in paragraph (l)(4) of this AD. (l) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless this AD specifies otherwise. (i) European Union Aviation Safety Agency (EASA) AD 2023-0207, dated November 21, 2023. (ii) Dassault Service Bulletin 7X-467, Revision 2, dated March 20, 2023. (3) For EASA AD 2023-0207, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find this EASA AD on the EASA website at ad.easa.europa.eu. (4) For Dassault Aviation material identified in this AD, contact Dassault Falcon Jet Corporation, Teterboro Airport, P.O. Box 2000, South Hackensack, NJ 07606; telephone 201-440-6700; website dassaultfalcon.com. (5) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (6) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. Issued on September 3, 2024. Victor Wicklund, Deputy Director, Compliance & Airworthiness Division, Aircraft Certification Service. [FR Doc. 2024-20163 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:16.556322

FR

FR-2024-09-09/2024-20109

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72968-72971] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20109] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2024-1010; Project Identifier MCAI-2024-00079-T; Amendment 39-22792; AD 2024-15-01] RIN 2120-AA64 Airworthiness Directives; Dassault Aviation Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The FAA is superseding Airworthiness Directive (AD) 2023-18- 09, which applied to certain Dassault Aviation Model FALCON 900EX airplanes. AD 2023-18-09 required revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations. Since the FAA issued AD 2023-18- 09, the FAA has determined that new or more restrictive airworthiness limitations are necessary. This AD continues to require certain actions in AD 2023-18-09 and requires revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations; as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. The FAA is [[Page 72969]] issuing this AD to address the unsafe condition on these products. DATES: This AD is effective October 15, 2024. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of October 15, 2024. The Director of the Federal Register approved the incorporation by reference of a certain other publication listed in this AD as of November 2, 2023 (88 FR 66683, September 28, 2023). ADDRESSES: AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2024-1010; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, the mandatory continuing airworthiness information (MCAI), any comments received, and other information. The address for Docket Operations is U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Material Incorporated by Reference: For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find this material on the EASA website ad.easa.europa.eu. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at regulations.gov under Docket No. FAA-2024-1010. FOR FURTHER INFORMATION CONTACT: Tom Rodriguez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3226; email [email protected]. SUPPLEMENTARY INFORMATION: Background The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2023-18-09, Amendment 39-22550 (88 FR 66683, September 28, 2023) (AD 2023-18-09). AD 2023-18-09 applied to certain Dassault Aviation Model FALCON 900EX airplanes. AD 2023-18-09 required revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations. The FAA issued AD 2023-18-09 to address among other things, fatigue cracking and damage in principal structural elements. The NPRM published in the Federal Register on April 25, 2024 (89 FR 31663). The NPRM was prompted by AD 2024-0034, dated January 31, 2024, issued by EASA, which is the Technical Agent for the Member States of the European Union (EASA AD 2024-0034) (also referred to as the MCAI). The MCAI states that new or more restrictive airworthiness limitations have been developed. In the NPRM, the FAA proposed to continue to require certain actions in AD 2023-18-09 and to require revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations, as specified in EASA AD 2024-0034. The FAA is issuing this AD to address among other things, fatigue cracking and damage in principal structural elements. The unsafe condition, if not addressed, could result in reduced structural integrity of the airplane. You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2024-1010. Discussion of Final Airworthiness Directive Comments The FAA received no comments on the NPRM or on the determination of the cost to the public. Conclusion This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator. Material Incorporated by Reference Under 1 CFR Part 51 EASA AD 2024-0034 specifies new or more restrictive airworthiness limitations for airplane structures and safe life limits. This AD also requires EASA AD 2023-0047, dated March 2, 2023, which the Director of the Federal Register approved for incorporation by reference as of November 2, 2023 (88 FR 66683, September 28, 2023). This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. Costs of Compliance The FAA estimates that this AD affects 158 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD: The FAA estimates the total cost per operator for the retained actions from AD 2023-18-09 to be $7,650 (90 work-hours x $85 per work- hour). The FAA has determined that revising the existing maintenance or inspection program takes an average of 90 work-hours per operator, although the agency recognizes that this number may vary from operator to operator. Since operators incorporate maintenance or inspection program changes for their affected fleet(s), the FAA has determined that a per-operator estimate is more accurate than a per-airplane estimate. The FAA estimates the total cost per operator for the new actions to be $7,650 (90 work-hours x $85 per work-hour). Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. [[Page 72970]] For the reasons discussed above, I certify that this AD: (1) Is not a ``significant regulatory action'' under Executive Order 12866, (2) Will not affect intrastate aviation in Alaska, and (3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows: PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by: 0 a. Removing Airworthiness Directive 2023-18-09, Amendment 39-22550 (88 FR 66683, September 28, 2023); and 0 b. Adding the following new airworthiness directive: 2024-15-01 Dassault Aviation: Amendment 39-22792; Docket No. FAA- 2024-1010; Project Identifier MCAI-2024-00079-T. (a) Effective Date This airworthiness directive (AD) is effective October 15, 2024. (b) Affected ADs This AD replaces AD 2023-18-09, Amendment 39-22550 (88 FR 66683, September 28, 2023) (AD 2023-18-09). (c) Applicability This AD applies to Dassault Aviation Model FALCON 900EX airplanes, serial number (S/N) 97 and S/Ns 120 and higher, certificated in any category, with an original airworthiness certificate or original export certificate of airworthiness issued on or before November 15, 2023. (d) Subject Air Transport Association (ATA) of America Code 05, Time Limits/ Maintenance Checks. (e) Unsafe Condition This AD was prompted by a determination that new or more restrictive airworthiness limitations are necessary. The FAA is issuing this AD to address among other things, fatigue cracking and damage in principal structural elements. The unsafe condition, if not addressed, could result in reduced structural integrity of the airplane. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Retained Revision of the Existing Maintenance or Inspection Program, With a New Terminating Action This paragraph restates the requirements of paragraph (j) of AD 2023-18-09, with a new terminating action. For airplanes with an original airworthiness certificate or original export certificate of airworthiness issued on or before November 15, 2022: Except as specified in paragraph (h) of this AD, comply with all required actions and compliance times specified in, and in accordance with, European Union Aviation Safety Agency (EASA) AD 2023-0047, dated March 2, 2023 (EASA AD 2023-0047). Accomplishing the revision of the existing maintenance or inspection program required by paragraph (j) of this AD terminates the requirements of this paragraph. (h) Retained Exceptions to EASA AD 2023-0047, With No Changes This paragraph restates the exceptions specified in paragraph (k) of AD 2023-18-09, with no changes. (1) The requirements specified in paragraphs (1) and (2) of EASA AD 2023-0047 do not apply to this AD. (2) Paragraph (3) of EASA AD 2023-0047 specifies revising ``the approved AMP'' within 12 months after its effective date, but this AD requires revising the existing maintenance or inspection program, as applicable, within 90 days after November 2, 2023 (the effective date of AD 2023-18-09). (3) The initial compliance time for doing the tasks specified in paragraph (3) of EASA AD 2023-0047 is at the applicable ``limitations'' and ``associated thresholds'' as incorporated by the requirements of paragraph (3) of EASA AD 2023-0047, or within 90 days after November 2, 2023 (the effective date of AD 2023-18-09), whichever occurs later. (4) The provisions specified in paragraphs (4) and (5) of EASA AD 2023-0047 do not apply to this AD. (5) The ``Remarks'' section of EASA AD 2023-0047 does not apply to this AD. (i) Retained Restrictions on Alternative Actions and Intervals, With a New Exception This paragraph restates the requirements of paragraph (l) of AD 2023-18-09, with a new exception. Except as required by paragraph (j) of this AD, after the maintenance or inspection program has been revised as required by paragraph (g) of this AD, no alternative actions (e.g., inspections) and intervals are allowed unless they are approved as specified in the provisions of the ``Ref. Publications'' section of EASA AD 2023-0047. (j) New Revision of the Existing Maintenance or Inspection Program Except as specified in paragraph (k) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, EASA AD 2024-0034, dated January 31, 2024 (EASA AD 2024-0034). Accomplishing the revision of the existing maintenance or inspection program required by this paragraph terminates the requirements of paragraph (g) of this AD. (k) Exceptions to EASA AD 2024-0034 (1) This AD does not adopt the requirements specified in paragraphs (1) and (2) of EASA AD 2024-0034. (2) Paragraph (3) of EASA AD 2024-0034 specifies revising ``the approved AMP'' within 12 months after its effective date, but this AD requires revising the existing maintenance or inspection program, as applicable, within 90 days after the effective date of this AD. (3) The initial compliance time for doing the tasks specified in paragraph (3) of EASA AD 2024-0034 is at the applicable ``limitations'' and ``associated thresholds'' as incorporated by the requirements of paragraph (3) of EASA AD 2024-0034, or within 90 days after the effective date of this AD, whichever occurs later. (4) This AD does not adopt the provisions specified in paragraphs (4) and (5) of EASA AD 2024-0034. (5) This AD does not adopt the ``Remarks'' section of EASA AD 2024-0034. (l) New Provisions for Alternative Actions and Intervals After the existing maintenance or inspection program has been revised as required by paragraph (j) of this AD, no alternative actions (e.g., inspections) and intervals are allowed unless they are approved as specified in the provisions of the ``Ref. Publications'' section of EASA AD 2024-0034. (m) Additional AD Provisions The following provisions also apply to this AD: (1) Alternative Methods of Compliance (AMOCs): The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the International Validation Branch, mail it to the address identified in paragraph (n) of this AD. Information may be emailed to: [email protected]. Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (2) Contacting the Manufacturer: For any requirement in this AD to obtain instructions from a manufacturer, the instructions must be accomplished using a method approved by the Manager, International Validation Branch, FAA; or EASA; or Dassault Aviation's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature. (n) Additional Information For more information about this AD, contact Tom Rodriguez, Aviation Safety [[Page 72971]] Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3226; email [email protected]. (o) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless this AD specifies otherwise. (3) The following material was approved for IBR on October 15, 2024. (i) European Union Aviation Safety Agency (EASA) AD 2024-0034, dated January 31, 2024. (ii) [Reserved] (4) The following material was approved for IBR on November 2, 2023 (88 FR 66683, September 28, 2023). (i) EASA AD 2023-0047, dated March 2, 2023. (ii) [Reserved] (5) For EASA AD 2024-0034 and AD 2023-0047, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find these EASA ADs on the EASA website at ad.easa.europa.eu. (6) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (7) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. Issued on July 16, 2024. James D. Foltz, Deputy Director, Compliance & Airworthiness Division, Aircraft Certification Service. [FR Doc. 2024-20109 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:16.599113

FR

FR-2024-09-09/2024-20108

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72971-72973] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20108] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2024-1891; Project Identifier MCAI-2024-00161-T; Amendment 39-22791; AD 2024-14-10] RIN 2120-AA64 Airworthiness Directives; Airbus SAS Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule; request for comments. ----------------------------------------------------------------------- SUMMARY: The FAA is adopting a new airworthiness directive (AD) for certain Airbus SAS Model A350-1041 airplanes. This AD was prompted by a report of a production quality escape that could lead to deficiencies in surface protection on several left-hand and right-hand flap support structures. This AD requires a one-time detailed inspection of the affected parts at certain locations for evidence of corrosion or damage to the surface protection, repetitive detailed inspections of the affected parts at certain other locations for evidence of corrosion, and the accomplishment of applicable corrective actions, as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective September 24, 2024. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of September 24, 2024. The FAA must receive comments on this AD by October 24, 2024. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: Federal eRulemaking Portal: Go to regulations.gov. Follow the instructions for submitting comments. Fax: 202-493-2251. Mail: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2024-1891; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, the mandatory continuing airworthiness information (MCAI), any comments received, and other information. The street address for Docket Operations is listed above. Material Incorporated by Reference: For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find this material on the EASA website at ad.easa.europa.eu. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at regulations.gov under Docket No. FAA-2024-1891. FOR FURTHER INFORMATION CONTACT: Dat Le, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228- 7317; email [email protected]. SUPPLEMENTARY INFORMATION: Comments Invited The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under the ADDRESSES section. Include ``Docket No. FAA-2024-1891; Project Identifier MCAI-2024-00161-T'' at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments. Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this final rule. Confidential Business Information CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as ``PROPIN.'' The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Dat Le, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7317; email [email protected]. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking. [[Page 72972]] Background EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2024-0061, dated March 6, 2024 (EASA AD 2024-0061) (also referred to as the MCAI), to address an unsafe condition for certain Airbus SAS Model A350-1041 airplanes. The MCAI states that a production quality escape has been identified that could lead to deficiencies in surface protection on the left-hand and right- hand flap support structures. These deficiencies include insufficient edge sealing around bushing installations and missing overpaint of the sealant (missing over-coating with elastic varnish to protect against hydraulic fluids). Insufficient surface treatment of areas of aluminum parts could result in corrosion initiation at the bushing location and reduced capability for all impacted areas of the affected parts to sustain ultimate load. This condition, if not addressed, could lead to in-flight detachment of the flap assembly, resulting in reduced control of the airplane. The FAA is issuing this AD to address the unsafe condition on these products. You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2024-1891. Related Material Under 1 CFR Part 51 EASA AD 2024-0061 specifies procedures for a one-time detailed inspection of the affected parts at certain locations for evidence of corrosion or damage to the surface protection, repetitive detailed inspections of the affected parts at certain other locations for evidence of corrosion, and the accomplishment of applicable corrective actions. Corrective actions include restoration of anti-corrosion surface protection and repair. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. FAA's Determination This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this AD after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design. Requirements of This AD This AD requires accomplishing the actions specified in EASA AD 2024-0061 described previously, except for any differences identified as exceptions in the regulatory text of this AD. Explanation of Required Compliance Information In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, EASA AD 2024-0061 is incorporated by reference in this AD. This AD requires compliance with EASA AD 2024-0061 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this AD. Using common terms that are the same as the heading of a particular section in EASA AD 2024-0061 does not mean that operators need comply only with that section. For example, where the AD requirement refers to ``all required actions and compliance times,'' compliance with this AD requirement is not limited to the section titled ``Required Action(s) and Compliance Time(s)'' in EASA AD 2024-0061. Material required by EASA AD 2024-0061 for compliance will be available at regulations.gov under Docket No. FAA-2024-1891 after this AD is published. Justification for Immediate Adoption and Determination of the Effective Date Section 553(b) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq.) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for ``good cause,'' finds that those procedures are ``impracticable, unnecessary, or contrary to the public interest.'' Under this section, an agency, upon finding good cause, may issue a final rule without providing notice and seeking comment prior to issuance. Further, section 553(d) of the APA authorizes agencies to make rules effective in less than thirty days, upon a finding of good cause. There are currently no domestic operators of these products. Accordingly, notice and opportunity for prior public comment are unnecessary, pursuant to 5 U.S.C. 553(b). In addition, for the forgoing reason(s), the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days. Regulatory Flexibility Act (RFA) The requirements of the RFA do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required. Costs of Compliance Currently, there are no affected U.S.-registered airplanes. If an affected airplane is imported and placed on the U.S. Register in the future, the FAA provides the following cost estimates to comply with this AD: Estimated Costs for Required Actions ---------------------------------------------------------------------------------------------------------------- Cost per Action Labor cost Parts cost product ---------------------------------------------------------------------------------------------------------------- One-time inspection........................... 299 work-hours x $85 per hour = $7,160 $32,575 $25,415. Repetitive inspections........................ 199 work-hours x $85 per hour = 7,170 24,085 $16,915. ---------------------------------------------------------------------------------------------------------------- The FAA has received no definitive data on which to base the cost estimates for the on-condition repairs specified in this AD. According to the manufacturer, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. The FAA does not control warranty coverage for affected individuals. As a result, the FAA has included all known costs in the cost estimate. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: [[Page 72973]] Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD: (1) Is not a ``significant regulatory action'' under Executive Order 12866, and (2) Will not affect intrastate aviation in Alaska. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows: PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by adding the following new airworthiness directive: 2024-14-10 Airbus SAS: Amendment 39-22791; Docket No. FAA-2024-1891; Project Identifier MCAI-2024-00161-T. (a) Effective Date This airworthiness directive (AD) is effective September 24, 2024. (b) Affected ADs None. (c) Applicability This AD applies to Airbus SAS Model A350-1041 airplanes, certificated in any category, as identified in European Union Aviation Safety Agency (EASA) AD 2024-0061, dated March 6, 2024 (EASA AD 2024-0061). (d) Subject Air Transport Association (ATA) of America Code 57, Wings. (e) Unsafe Condition This AD was prompted by a report of a production quality escape that could lead to deficiencies in surface protection on several left-hand and right-hand flap support structures. The FAA is issuing this AD to address insufficient surface treatment of areas of aluminum parts. This condition, if not addressed, could result in corrosion at the bushing location and reduced capability for all impacted areas of the affected parts to sustain ultimate load, which could lead to in-flight detachment of the flap assembly, resulting in reduced control of the airplane. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Requirements Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, EASA AD 2024-0061. (h) Exceptions to EASA AD 2024-0061 (1) This AD does not adopt the ``Remarks'' section of EASA AD 2024-0061. (2) Where paragraph (1) of EASA AD 2024-0061 specifies to ``accomplish a DET for evidence of corrosion,'' this AD requires replacing that text with ``accomplish a DET for evidence of corrosion and for damage to the surface protection.'' (3) Where paragraph (4) of EASA AD 2024-0061 specifies if ``any deficiency (as defined in the SB) is found,'' this AD requires replacing that text with if ``any corrosion is found.'' (i) Additional AD Provisions The following provisions also apply to this AD: (1) Alternative Methods of Compliance (AMOCs): The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the International Validation Branch, mail it to the address identified in paragraph (j) of this AD. Information may be emailed to: [email protected]. Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (2) Contacting the Manufacturer: For any requirement in this AD to obtain instructions from a manufacturer, the instructions must be accomplished using a method approved by the Manager, International Validation Branch, FAA; or EASA; or Airbus SAS's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature. (3) Required for Compliance (RC): Except as required by paragraph (i)(2) of this AD, if any material contains procedures or tests that are identified as RC, those procedures and tests must be done to comply with this AD; any procedures or tests that are not identified as RC are recommended. Those procedures and tests that are not identified as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the procedures and tests identified as RC can be done and the airplane can be put back in an airworthy condition. Any substitutions or changes to procedures or tests identified as RC require approval of an AMOC. (j) Additional Information For more information about this AD, contact Dat Le, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7317; email [email protected]. (k) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless this AD specifies otherwise. (i) European Union Aviation Safety Agency (EASA) AD 2024-0061, dated March 6, 2024. (ii) [Reserved] (3) For EASA AD 2024-0061, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find this EASA AD on the EASA website at ad.easa.europa.eu. (4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. Issued on July 12, 2024. Peter A. White, Deputy Director, Integrated Certificate Management Division, Aircraft Certification Service. [FR Doc. 2024-20108 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:16.717435

FR

FR-2024-09-09/2024-20113

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72974-72976] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20113] [[Page 72974]] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2024-1300; Project Identifier MCAI-2024-00081-T; Amendment 39-22793; AD 2024-15-02] RIN 2120-AA64 Airworthiness Directives; Dassault Aviation Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The FAA is superseding Airworthiness Directive (AD) 2023-25- 07, which applied to all Dassault Aviation Model MYSTERE-FALCON 900 airplanes. AD 2023-25-07 required revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations. This AD was prompted by a determination that new or more restrictive airworthiness limitations are necessary. This AD continues to require certain actions in AD 2023- 25-07 and requires revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations, as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective October 15, 2024. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of October 15, 2024. The Director of the Federal Register approved the incorporation by reference of a certain other publication listed in this AD as of February 7, 2024 (89 FR 244, January 3, 2024; corrected January 18, 2024 (89 FR 3342); corrected January 26, 2024 (89 FR 5088)). ADDRESSES: AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2024-1300; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, the mandatory continuing airworthiness information (MCAI), any comments received, and other information. The address for Docket Operations is U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Material Incorporated by Reference: For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find this material on the EASA website at ad.easa.europa.eu. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at regulations.gov under Docket No. FAA-2024-1300. FOR FURTHER INFORMATION CONTACT: Tom Rodriguez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone: 206-231-3226; email [email protected]. SUPPLEMENTARY INFORMATION: Background The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2023-25-07, Amendment 39-22634 (89 FR 244, January 3, 2024; corrected January 18, 2024 (89 FR 3342); corrected January 26, 2024 (89 FR 5088)) (AD 2023-25-07). AD 2023-25-07 applied to all Dassault Aviation Model MYSTERE-FALCON 900 airplanes. AD 2023- 25-07 required revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations. The FAA issued AD 2023-25-07 to address reduced structural integrity of the airplane. The NPRM published in the Federal Register on May 17, 2024 (89 FR 43339). The NPRM was prompted by AD 2024-0036, dated January 31, 2024, issued by EASA, which is the Technical Agent for the Member States of the European Union (EASA AD 2024-0036) (also referred to as the MCAI). The MCAI states that new or more restrictive airworthiness limitations have been developed. In the NPRM, the FAA proposed to continue to require certain actions in AD 2023-25-07 and to require revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations, as specified in EASA AD 2024-0036. The FAA is issuing this AD to address reduced structural integrity of the airplane. You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2024-1300. Discussion of Final Airworthiness Directive Comments The FAA received comments from one individual who supported the NPRM without change. Conclusion This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered the comment received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator. Material Incorporated by Reference Under 1 CFR Part 51 EASA AD 2024-0036 specifies new or more restrictive airworthiness limitations for airplane structures and safe life limits. This AD also requires EASA AD 2023-0046, dated March 2, 2023, which the Director of the Federal Register approved for incorporation by reference as of February 7, 2024 (89 FR 244, January 3, 2024; corrected January 18, 2024 (89 FR 3342); corrected January 26, 2024 (89 FR 5088)). This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. Costs of Compliance The FAA estimates that this AD affects 151 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD: The FAA estimates the total cost per operator for the retained actions from AD 2023-25-07 to be $7,650 (90 work-hours x $85 per work- hour). The FAA has determined that revising the existing maintenance or inspection program takes an average of 90 work-hours per operator, although the agency recognizes that this number may vary from operator to operator. Since operators incorporate maintenance or inspection program changes for their affected fleet(s), the FAA has determined that a per-operator estimate is more accurate than a per-airplane estimate. [[Page 72975]] The FAA estimates the total cost per operator for the new actions to be $7,650 (90 work-hours x $85 per work-hour). Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD: (1) Is not a ``significant regulatory action'' under Executive Order 12866, (2) Will not affect intrastate aviation in Alaska, and (3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows: PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by: 0 a. Removing Airworthiness Directive (AD) 2023-25-07, Amendment 39-22634 (89 FR 244, January 3, 2024; corrected January 18, 2024 (89 FR 3342); corrected January 26, 2024 (89 FR 5088)); and 0 b. Adding the following new AD: 2024-15-02 Dassault Aviation: Amendment 39-22793; Docket No. FAA- 2024-1300; Project Identifier MCAI-2024-00081-T. (a) Effective Date This airworthiness directive (AD) is effective October 15, 2024. (b) Affected ADs This AD replaces AD 2023-25-07, Amendment 39-22634 (89 FR 244, January 3, 2024; corrected January 18, 2024 (89 FR 3342); corrected January 26, 2024 (89 FR 5088)) (AD 2023-25-07). (c) Applicability This AD applies to all Dassault Aviation Model MYSTERE-FALCON 900 airplanes, certificated in any category. (d) Subject Air Transport Association (ATA) of America Code 05, Time Limits/ Maintenance Checks. (e) Unsafe Condition This AD was prompted by a determination that new or more restrictive airworthiness limitations are necessary. The FAA is issuing this AD to address reduced structural integrity of the airplane. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Retained Revision of the Existing Maintenance or Inspection Program, With a New Exception This paragraph restates the requirements of paragraph (j) of AD 2023-25-07, with a new exception. Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, European Union Aviation Safety Agency (EASA) AD 2023-0046, dated March 2, 2023 (EASA AD 2023-0046). Accomplishing the revision of the existing maintenance or inspection program required by paragraph (j) of this AD terminates the requirements of this paragraph. (h) Retained Exceptions to EASA AD 2023-0046, With No Changes This paragraph restates the exceptions specified in paragraph (k) of AD 2023-25-07, with no changes. (1) This AD does not adopt the requirements specified in paragraphs (1) and (2) of EASA AD 2023-0046. (2) Paragraph (3) of EASA AD 2023-0046 specifies revising ``the approved AMP'' within 12 months after its effective date, but this AD requires revising the existing maintenance or inspection program, as applicable, within 90 days after February 7, 2024 (the effective date of AD 2023-25-07). (3) The initial compliance time for doing the tasks specified in paragraph (3) of EASA AD 2023-0046 is at the applicable ``limitations'' and ``associated thresholds'' as incorporated by the requirements of paragraph (3) of EASA AD 2023-0046, or within 90 days after February 7, 2024 (the effective date of AD 2023-25-07), whichever occurs later. (4) This AD does not adopt the provisions specified in paragraphs (4) and (5) of EASA AD 2023-0046. (5) This AD does not adopt the ``Remarks'' section of EASA AD 2023-0046. (i) Retained Restrictions on Alternative Actions or Intervals, With a New Exception This paragraph restates the requirements of paragraph (l) of AD 2023-25-07, with a new exception. Except as required by paragraph (j) of this AD, after the maintenance or inspection program has been revised as required by paragraph (g) of this AD, no alternative actions (e.g., inspections) or intervals are allowed unless they are approved as specified in the provisions of the ``Ref. Publications'' section of EASA AD 2023-0046. (j) New Revision of the Existing Maintenance or Inspection Program Except as specified in paragraph (k) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, EASA AD 2024-0036, dated January 31, 2024 (EASA AD 2024-0036). Accomplishing the revision of the existing maintenance or inspection program required by this paragraph terminates the requirements of paragraph (g) of this AD. (k) Exceptions to EASA AD 2024-0036 (1) This AD does not adopt the requirements specified in paragraphs (1) and (2) of EASA AD 2024-0036. (2) Paragraph (3) of EASA AD 2024-0036 specifies revising ``the approved AMP'' within 12 months after its effective date, but this AD requires revising the existing maintenance or inspection program, as applicable, within 90 days after the effective date of this AD. (3) The initial compliance time for doing the tasks specified in paragraph (3) of EASA AD 2024-0036 is at the applicable ``limitations'' and ``associated thresholds'' as incorporated by the requirements of paragraph (3) of EASA AD 2024-0036, or within 90 days after the effective date of this AD, whichever occurs later. (4) This AD does not adopt the provisions specified in paragraphs (4) and (5) of EASA AD 2024-0036. (5) This AD does not adopt the ``Remarks'' section of EASA AD 2024-0036. (l) New Provisions for Alternative Actions and Intervals After the existing maintenance or inspection program has been revised as required by paragraph (j) of this AD, no alternative actions (e.g., inspections) or intervals are allowed unless they are [[Page 72976]] approved as specified in the provisions of the ``Ref. Publications'' section of EASA AD 2024-0036. (m) Additional AD Provisions The following provisions also apply to this AD: (1) Alternative Methods of Compliance (AMOCs): The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the International Validation Branch, mail it to the address identified in paragraph (n) of this AD. Information may be emailed to: [email protected]. Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (2) Contacting the Manufacturer: For any requirement in this AD to obtain instructions from a manufacturer, the instructions must be accomplished using a method approved by the Manager, International Validation Branch, FAA; or EASA; or Dassault Aviation's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature. (n) Additional Information For more information about this AD, contact Tom Rodriguez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone: 206-231-3226; email [email protected]. (o) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless this AD specifies otherwise. (3) The following material was approved for IBR on October 15, 2024. (i) European Union Aviation Safety Agency (EASA) AD 2024-0036, dated January 31, 2024. (ii) [Reserved] (4) The following material was approved for IBR on February 7, 2024 (89 FR 244, January 3, 2024; corrected January 18, 2024 (89 FR 3342); corrected January 26, 2024 (89 FR 5088)). (i) EASA AD 2023-0046, dated March 2, 2023. (ii) [Reserved] (5) For EASA ADs 2023-0046 and 2024-0036, contact EASA, Konrad- Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email [email protected]; website easa.europa.eu. You may find these EASA ADs on the EASA website at ad.easa.europa.eu. (6) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (7) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/[email protected]">www.archives.gov/federal-register/cfr/[email protected]. Issued on July 16, 2024. James D. Foltz, Deputy Director, Compliance & Airworthiness Division, Aircraft Certification Service. [FR Doc. 2024-20113 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:16.811194

FR

FR-2024-09-09/2024-20110

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72976-72981] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20110] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2023-1879; Project Identifier AD-2023-00286-T; Amendment 39-22794; AD 2024-15-03] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The FAA is superseding Airworthiness Directive (AD) 2019-16- 05, which applied to all The Boeing Company Model 777 airplanes. AD 2019-16-05 required identifying the part number, and the serial number if applicable, of the Captain's and First Officer's seats, and applicable on-condition actions for affected seats. This AD was prompted by reports of uncommanded fore/aft movement of the Captain's and First Officer's seats. This AD retains the requirements of AD 2019- 16-05 and adds an inspection of previously omitted part numbers. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective October 15, 2024. The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of October 15, 2024. The Director of the Federal Register approved the incorporation by reference of a certain other publication listed in this AD as of October 8, 2019 (84 FR 45895, September 3, 2019). ADDRESSES: AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2023-1879; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, any comments received, and other information. The address for Docket Operations is U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Material Incorporated by Reference: For Boeing material identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone 562-797-1717; website myboeingfleet.com. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at regulations.gov under Docket No. FAA-2023-1879. FOR FURTHER INFORMATION CONTACT: Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206- 231-3986; email: [email protected]. SUPPLEMENTARY INFORMATION: Background The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2019-16-05, Amendment 39-19708 (84 FR 45895, September 23, 2019) (AD 2019-16-05). AD 2019-16-05 applied to all The Boeing Company Model 777-200, -200LR, -300, -300ER, and 777F series airplanes. The NPRM published in the Federal Register on September 27, 2023 (88 FR 66310). The NPRM was prompted by reports of uncommanded fore/aft movement of the Captain's and First Officer's seats. In the NPRM, the FAA proposed to continue to require the actions of AD 2019-16-05 and add an inspection of previously omitted part numbers. The FAA is issuing this AD to address uncommanded fore/aft movement of the Captain's and First Officer's seats. Uncommanded fore/ aft seat movement during a critical part of a flight, such as takeoff or landing, could cause a flight control obstruction or unintended flight control input, which could result in the loss of the ability to control the airplane. Discussion of Final Airworthiness Directive Comments The FAA received a comment from Boeing in support of the NPRM without change. The FAA received additional comments from American Airlines and an individual commenter. The following [[Page 72977]] presents the comments received on the NPRM and the FAA's response. Request for Credit for Previous Actions American Airlines and an individual requested credit for the accomplishment of actions required by the previous revision of the service information if it can be shown through maintenance records that the required actions have already been accomplished. The FAA agrees that credit may be granted, under specific conditions. Paragraph (j) of this AD has been added to identify these conditions. Conclusion The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. Except for minor editorial changes, and any other changes described previously, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator. Material Incorporated by Reference Under 1 CFR Part 51 The FAA reviewed Boeing Special Attention Service Bulletin 777-25- 0607, Revision 2, dated January 27, 2023. The material describes procedures for identification of the part number, and the serial number if applicable, of the Captain's and First Officer's seats, and for applicable on-condition actions for affected seats including an inspection of each seat's fore/aft and vertical manual control levers for looseness, installation of serviceable seats, and a seat functional test after any cable adjustment. The FAA also reviewed Boeing Special Attention Service Bulletin 777-25-0619, Revision 2, dated January 27, 2023. This material describes procedures for a detailed inspection and repetitive checks of the horizontal movement system for the Captain's and First Officer's seats for findings (e.g., evidence of cracks, scores, corrosion, dents, deformation, or visible wear; and incorrectly assembled microswitch assemblies, actuators, and limit switches), and applicable on-condition actions. The on-condition actions include clearing the seat tracks of foreign object debris (FOD), overhauling the horizontal movement system, and replacing the horizontal actuator. This material also describes procedures for an optional terminating action for the repetitive checks by installing a serviceable Captain's or First Officer's seat. This AD also requires Boeing Special Attention Service Bulletin 777-25-0619, Revision 1, dated August 8, 2018, which the Director of the Federal Register approved for incorporation by reference as of October 8, 2019 (84 FR 45895, September 3, 2019). This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES. Costs of Compliance The FAA estimates that this AD affects 327 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD: Estimated Costs for Required Actions per Seat -------------------------------------------------------------------------------------------------------------------------------------------------------- Action Labor cost Parts cost Cost per product Cost on U.S. operators -------------------------------------------------------------------------------------------------------------------------------------------------------- Identification, seat (retained 1 work-hour x $85 per $0 $85.................................. $27,795. actions from AD 2019-16-05). hour = $85. Detailed inspection, horizontal 1 work-hour x $85 per 0 $85.................................. $27,795. movement system (retained actions hour = $85. from AD 2019-16-05). Checks, horizontal movement system 2 work-hours x 85 per 0 $170 per check cycle................. $55,590 per check cycle. (retained actions). hour = 170 per check cycle. -------------------------------------------------------------------------------------------------------------------------------------------------------- The FAA estimates the following costs to do any on-condition actions that would be required. The FAA has no way of determining the number of aircraft that might need these on-condition actions: Estimated Costs of On-Condition Actions per Seat * ---------------------------------------------------------------------------------------------------------------- Action Labor cost Parts cost Cost per product ---------------------------------------------------------------------------------------------------------------- Adjustment, control lever 1 work-hour x $0............................. $85. cable. $85 per hour = $85. Overhaul, horizontal movement 11 work-hours x Up to $5,824................... Up to $6,759. system. $85 per hour = $935. Inspection of each seat's 1 work-hour x $0............................. $85. fore/aft and vertical manual $85 per hour = control levers. $85. Installation of serviceable 1 work-hour x $0............................. $85. seats. $85 per hour = $85. Clearing FOD................. 1 work-hour x $0............................. $85. $85 per hour = $85. Replacement of the horizontal 1 work-hour x $7,937 per actuator............ $8,022 per actuator. actuator. $85 per hour = $85, per actuator. Functional test, adjusted 1 work-hour x $0............................. $85. control lever cable. $85 per hour = $85. ---------------------------------------------------------------------------------------------------------------- * The estimated cost for tooling to align an affected seat for adjustment of the control lever cable is up to $46,064. The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected operators. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA [[Page 72978]] with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD: (1) Is not a ``significant regulatory action'' under Executive Order 12866, (2) Will not affect intrastate aviation in Alaska, and (3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows: PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by: 0 a. Removing Airworthiness Directive (AD) 2019-16-05, Amendment 39-19708 (84 FR 45895, September 3, 2019); and 0 b. Adding the following new AD: 2024-15-03 The Boeing Company: Amendment 39-22794; Docket No. FAA- 2023-1879; Project Identifier AD-2023-00286-T. (a) Effective Date This airworthiness directive (AD) is effective October 15, 2024. (b) Affected ADs This AD replaces AD 2019-16-05, Amendment 39-19708 (84 FR 45895, September 3, 2019) (AD 2019-16-05). (c) Applicability This AD applies to all The Boeing Company Model 777-200, -200LR, -300, -300ER, and 777F series airplanes, certificated in any category. (d) Subject Air Transport Association (ATA) of America Code 25, Equipment/ Furnishings. (e) Unsafe Condition This AD was prompted by reports of uncommanded fore/aft movement of the Captain's and First Officer's seats. The FAA is issuing this AD to address uncommanded fore/aft movement of the Captain's and First Officer's seats. Uncommanded fore/aft seat movement during a critical part of a flight, such as takeoff or landing, could cause a flight control obstruction or unintended flight control input, which could result in the loss of the ability to control the airplane. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Seat Part Number Identification and On-Condition Actions Except as specified in paragraphs (i) and (j) of this AD: At the applicable time specified in paragraph 1.E., ``Compliance,'' of Boeing Special Attention Service Bulletin 777-25-0607, Revision 2, dated January 27, 2023, do an inspection to determine the part number, and serial number as applicable, of the Captain's and First Officer's seats, and do all applicable on-condition actions, in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-25-0607, Revision 2, dated January 27, 2023. A review of airplane maintenance records is acceptable in lieu of this inspection if the part number and serial number of the Captain's and First Officer's seats can be conclusively determined from that review. (h) Detailed Inspection and Repetitive Checks of Horizontal Movement System and On-Condition Actions Except as specified in paragraphs (i) and (j) of this AD: At the applicable times specified in paragraph 1.E., ``Compliance,'' of Boeing Special Attention Service Bulletin 777-25-0619, Revision 2, dated January 27, 2023, do all applicable actions identified as ``RC'' (required for compliance) in, and in accordance with, the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-25-0619, Revision 1, dated August 8, 2018, or Revision 2, dated January 27, 2023. As of the effective date of this AD, only Boeing Special Attention Service Bulletin 777-25-0619, Revision 2, dated January 27, 2023, may be used. Actions identified as terminating action in Boeing Special Attention Service Bulletin 777- 25-0619, Revision 1, dated August 8, 2018, or Revision 2, dated January 27, 2023, terminate the applicable required actions of this AD, provided the terminating action is done in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-25-0619, Revision 1, dated August 8, 2018, or Revision 2, dated January 27, 2023. (i) Exceptions to Service Bulletin Specifications (1) Where Boeing Special Attention Service Bulletin 777-25-0619, Revision 2, dated January 27, 2023, uses the phrase ``the Original issue date of this service bulletin,'' this AD requires replacing those words with ``October 8, 2019 (the effective date of AD 2019- 16-05).'' (2) Where Boeing Special Attention Service Bulletin 777-25-0607, Revision 2, dated January 27, 2023, specifies compliance for certain actions ``within 72 months after the Original Issue date of this service bulletin,'' this AD requires replacing those words with ``within 36 months after October 8, 2019 (the effective date of AD 2019-16-05).'' (3) Where Boeing Special Attention Service Bulletin 777-25-0607, Revision 2, dated January 27, 2023, specifies compliance for certain actions ``within 36 months after the Revision 2 date of this service bulletin,'' this AD requires compliance within 36 months after the effective date of this AD. (j) Acceptable Conditions for Compliance If the airplane records show that an Ipeco Captain's or First Officer's seat meets any condition in figure 1 to paragraph (j) of this AD, the actions specified in this AD are not required for that seat. BILLING CODE 4910-13-P Figure 1 to Paragraph (j)--Alternative Acceptable Seats [[Page 72979]] [GRAPHIC] [TIFF OMITTED] TR09SE24.002 [[Page 72980]] [GRAPHIC] [TIFF OMITTED] TR09SE24.003 BILLING CODE 4910-13-C (k) Alternative Methods of Compliance (AMOCs) (1) The Manager, AIR-520, Continued Operational Safety Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (l)(1) of this AD. Information may be emailed to: [email protected]. (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by The Boeing Company Organization Designation Authorization (ODA) that has been authorized by the Manager, AIR- 520, Continued Operational Safety Branch, FAA, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD. (4) AMOCs approved for AD 2019-16-05 are approved as AMOCs for the corresponding provisions of this AD. (5) For material that contains steps that are labeled as Required for Compliance (RC), the provisions of paragraphs (k)(5)(i) and (ii) of this AD apply. (i) The steps labeled as RC, including substeps under an RC step and any figures identified in an RC step, must be done to comply with the AD. If a step or substep is labeled ``RC Exempt,'' then the RC requirement is removed from that step or substep. An AMOC is required for any deviations to RC steps, including substeps and identified figures. (ii) Steps not labeled as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the RC steps, including substeps and identified figures, can still be done as specified, and the airplane can be put back in an airworthy condition. (l) Related Information (1) For more information about this AD, contact Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3986; email: [email protected]. (2) Material identified in this AD that is not incorporated by reference is available at the address specified in paragraph (m)(5) of this AD. (m) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise. (3) The following material was approved for IBR on October 15, 2024. (i) Boeing Special Attention Service Bulletin 777-25-0607, Revision 2, dated January 27, 2023. (ii) Boeing Special Attention Service Bulletin 777-25-0619, Revision 2, dated January 27, 2023. (4) The following material was approved for IBR on October 8, 2019 (84 FR 45895, September 3, 2019). (i) Boeing Special Attention Service Bulletin 777-25-0619, Revision 1, dated August 8, 2018. (ii) [Reserved] (5) For Boeing material identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone 562-797-1717; website myboeingfleet.com. (6) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (7) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, [[Page 72981]] visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. Issued on August 23, 2024. Suzanne Masterson, Deputy Director, Integrated Certificate Management Division, Aircraft Certification Service. [FR Doc. 2024-20110 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:16.862984

FR

FR-2024-09-09/2024-20198

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72981-72982] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20198] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2024-0184; Airspace Docket No. 23-AWP-69] RIN 2120-AA66 Modification of Class D Airspace and Establishment of Class E Airspace; Sacramento Mather Airport, Sacramento, CA AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: This action modifies the Class D airspace extending upward from the surface to and including 2,600 feet mean sea level (MSL) and establishes Class E airspace extending upward from 700 feet above the surface at Sacramento Mather Airport, Sacramento, CA. Additionally, this action makes administrative modifications to update the airport's Class D airspace legal description. These actions support the safety and management of instrument flight rules (IFR) and visual flight rules (VFR) operations at the airport. DATES: Effective date 0901 UTC, December 26, 2024. The Director of the Federal Register approves this incorporation by reference action under 1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11 and publication of conforming amendments. ADDRESSES: A copy of the Notice of Proposed Rulemaking (NPRM), all comments received, this final rule, and all background material may be viewed online at www.regulations.gov using the FAA Docket number. Electronic retrieval help and guidelines are available on the website. It is available 24 hours each day, 365 days each year. FAA Order JO 7400.11H, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at www.faa.gov/air_traffic/publications/. You may also contact the Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267- 8783. FOR FURTHER INFORMATION CONTACT: Nathan A. Chaffman, Federal Aviation Administration, Western Service Center, Operations Support Group, 2200 S. 216th Street, Des Moines, WA 98198; telephone (206) 231-3460. SUPPLEMENTARY INFORMATION: Authority for This Rulemaking The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it modifies Class D and establishes Class E airspace to support IFR operations at Sacramento Mather Airport, Sacramento, CA. History The FAA published an NPRM for Docket No. FAA-2024-0184 in the Federal Register (89 FR 27695; April 18, 2024), proposing to modify Class D and establish Class E airspace at Sacramento Mather Airport, Sacramento, CA. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Differences From the NPRM The Operations Support Group discovered that the proposed Class E5 northeast extension, as described in the NPRM, was from a different measurement point than the airport reference point (ARP). The Class E5 airspace area dimension remain the same. The amended legal description originated from the Mather's airport reference point to avoid misinterpretation of the distance. The amended text will read, ``within 6 miles northwest and 9 miles southeast of the 054[deg] bearing extending from 12.7 miles northeast to 37 miles northeast of the airport.'' Incorporation by Reference Class D and Class E5 airspace designations are published in paragraphs 5000 and 6005, respectively, of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document amends the current version of that order, FAA Order JO 7400.11H, dated August 11, 2023, and effective September 15, 2023. These updates would be published in the next update to FAA Order JO 7400.11. That order is publicly available as listed in the ADDRESSES section of this document. These amendments will be published in the next update to FAA Order JO 7400.11. FAA Order JO 7400.11H lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points. The Rule This action amends 14 CFR part 71 by modifying the Class D airspace and establishing Class E airspace extending upward from 700 feet above the surface at Sacramento Mather Airport, Sacramento, CA. The Class D surface area is comprised of a 4.5-mile radius of the airport, up to and including 2,600 feet MSL. This airspace is modified to include an extension centered on the 061[deg] bearing from the airport, extending 1.8 miles beyond the existing radius. This extension will better contain departing IFR operations while utilizing the Runway (RWY) 4 Left (L) and RWY 4 Right (R) obstacle departure procedures (ODP) until reaching the base of adjacent controlled airspace. Class E airspace extending upward from 700 feet above the surface is established to appropriately contain arriving IFR operations below 1,500 feet above the surface and departing IFR operations until reaching 1,200 feet above the surface at Sacramento Mather Airport. The airport utilizes the Sacramento very high frequency omnidirectional range/tactical air navigation (VORTAC) Class E airspace for some of its procedure containment, but that airspace is not sufficient in containing the Area Navigation (RNAV) (Global Positioning System [GPS]) RWY 22L approach at Sacramento Mather Airport. On the same approach, the point at which an arriving aircraft is expected to descend below 1,500 feet above the surface lies within the hold-in-lieu of procedure turn holding pattern. By rule, that location requires the entirety of the holding area also be contained within Class E airspace extending upward from 700 feet above the surface. Finally, the FAA makes administrative modifications to the airport's Class D airspace legal description. The location of the airspace is incorrect and is changed to read ``Sacramento, CA'' instead of [[Page 72982]] ``Sacramento Mather Airport, CA.'' The geographic coordinates of the airport are updated to match the FAA's database. Lastly, Sacramento Mather Airport has part-time Class D airspace but does not include a part-time statement within the legal description. Part-time verbiage is added to the legal description to properly describe the airspace. Regulatory Notices and Analyses The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a ``significant regulatory action'' under Executive Order 12866; (2) is not a ``significant rule'' under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. Environmental Review The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, ``Environmental Impacts: Policies and Procedures,'' paragraph 5-6.5.a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment. Lists of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). The Amendment In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows: PART 71--DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 0 1. The authority citation for 14 CFR part 71 continues to read as follows: Authority: 49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p.389. Sec. 71.1 [Amended] 0 2. The incorporation by reference in 14 CFR 71.1 of FAA Order JO 7400.11H, Airspace Designations and Reporting Points, dated August 11, 2023, and effective September 15, 2023, is amended as follows: Paragraph 5000 Class D Airspace * * * * * AWP CA D Sacramento, CA [Amended] Sacramento Mather Airport, CA (Lat. 38[deg]33'19'' N, long 121[deg]17'50'' W) That airspace extending upward from the surface to and including 2,600 feet MSL within a 4.5-mile radius of the airport, and within 1.9 miles each side of the 061[deg] bearing from the airport, extending from the 4.5-mile radius to 6.3 miles northeast of the airport. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement. * * * * * Paragraph 6005 Class E Airspace Areas Extending Upward From 700 Feet or More Above the Surface of the Earth. * * * * * AWP CA E5 Sacramento, CA [New] Sacramento Mather Airport, CA (Lat. 38[deg]33'19'' N, long. 121[deg]17'50'' W) That airspace extending upward from 700 feet above the surface within a 6.8-mile radius of the airport from the 075[deg] bearing clockwise to the 210[deg] bearing, and within 2.8 miles northwest and 2.4 miles southeast of the 054[deg] bearing extending from the airport to 12.7 miles northeast, and within 6 miles northwest and 9 miles southeast of the 054[deg] bearing extending from 12.7 miles northeast of the airport to 37 miles northeast, and within 2.8 miles either side of the 234[deg] bearing extending from the airport to 10.9 miles southwest. * * * * * Issued in Des Moines, Washington, on September 3, 2024. B.G. Chew, Group Manager, Operations Support Group, Western Service Center. [FR Doc. 2024-20198 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:16.944377

FR

FR-2024-09-09/2024-20254

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72982-72984] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20254] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 862 [Docket No. FDA-2024-N-4086] Medical Devices; Clinical Chemistry and Clinical Toxicology Devices; Classification of the Blood Collection Device for Cell-Free Nucleic Acids AGENCY: Food and Drug Administration, HHS. ACTION: Final amendment; final order. ----------------------------------------------------------------------- SUMMARY: The Food and Drug Administration (FDA, Agency, or we) is classifying the blood collection device for cell-free nucleic acids into class II (special controls). The special controls that apply to the device type are identified in this order and will be part of the codified language for the blood collection device for cell-free nucleic acids' classification. We are taking this action because we have determined that classifying the device into class II (special controls) will provide a reasonable assurance of safety and effectiveness of the device. We believe this action will also enhance patients' access to beneficial innovative devices, in part by reducing regulatory burdens. DATES: This order is effective September 9, 2024. The classification was applicable on August 7, 2020. FOR FURTHER INFORMATION CONTACT: Lindsey Coe, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 3556, Silver Spring, MD 20993-0002, 240-402-5267, [email protected]. SUPPLEMENTARY INFORMATION: I. Background Upon request, FDA has classified the blood collection device for cell-free nucleic acids as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness. The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as ``postamendments devices'' because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act). FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section [[Page 72983]] 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807). FDA may also classify a device through ``De Novo'' classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (see also 21 CFR part 860, subpart D (21 CFR part 860, subpart D)). Section 207 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115) established the first procedure for De Novo classification. Section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144) modified the De Novo application process by adding a second procedure. A device sponsor may utilize either procedure for De Novo classification. Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2). Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act. Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device. When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application to market a substantially equivalent device (see section 513(i) of the FD&C Act, defining ``substantial equivalence''). Instead, sponsors can use the 510(k) process, when necessary, to market their device. II. De Novo Classification On January 10, 2020, FDA received Streck, Inc.'s request for De Novo classification of the Cell-Free DNA BCT. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act. We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device. Therefore, on August 7, 2020, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 862.1676.\1\ We have named the generic type of device blood collection device for cell-free nucleic acids, and it is identified as intended for medical purposes to collect, store, transport, and handle blood specimens and to stabilize and isolate cell-free nucleic acid components prior to further testing. --------------------------------------------------------------------------- \1\ FDA notes that the ``ACTION'' caption for this final order is styled as ``Final amendment; final order,'' rather than ``Final order.'' Beginning in December 2019, this editorial change was made to indicate that the document ``amends'' the Code of Federal Regulations. The change was made in accordance with the Office of Federal Register's (OFR) interpretations of the Federal Register Act (44 U.S.C. chapter 15), its implementing regulations (1 CFR 5.9 and parts 21 and 22), and the Document Drafting Handbook. --------------------------------------------------------------------------- FDA has identified the following risks to health associated specifically with this type of device and the measures required to mitigate these risks in table 1. Table 1--Blood Collection Device for Cell-Free Nucleic Acids Risks and Mitigation Measures ------------------------------------------------------------------------ Identified risks to health Mitigation measures ------------------------------------------------------------------------ Blood pathogen exposure/Injury............ Certain design verification and validation. Failure to collect and transport sample... Certain design verification and validation. Insufficient sample quantity and quality.. Certain design verification and validation. ------------------------------------------------------------------------ FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. For a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act. III. Analysis of Environmental Impact The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required. IV. Paperwork Reduction Act of 1995 This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in part 860, subpart D, regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910- 0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR parts 801 and 809, regarding labeling, have been approved under OMB control number 0910-0485. List of Subjects in 21 CFR Part 862 Medical devices. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR Part 862 is amended as follows: PART 862--CLINICAL CHEMISTRY AND CLINICAL TOXICOLOGY DEVICES 0 1. The authority citation for part 862 continues to read as follows: Authority: 21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371. 0 2. Add Sec. 862.1676 to subpart B to read as follows: [[Page 72984]] Sec. 862.1676 Blood collection device for cell-free nucleic acids. (a) Identification. A blood collection device for cell-free nucleic acids is a device intended for medical purposes to collect, store, transport, and handle blood specimens and to stabilize and isolate cell-free nucleic acid components prior to further testing. (b) Classification. Class II (special controls). The special controls for this device are: (1) Design verification and validation documentation must include appropriate design inputs and design outputs that are essential for the proper functioning of the device for its intended use, including all of its indications for use, and must include the following: (i) Documentation demonstrating that appropriate, as determined by FDA, measures are in place (e.g., validated device design features and specifications) to ensure that users of blood collection device for cell-free nucleic acids devices are not exposed to undue risk of bloodborne pathogen exposure and operator injury during use of the device, including blood collection, transportation, and centrifugation processes. (ii) Documentation demonstrating that appropriate, as determined by FDA, measures are in place (e.g., validated device design features and specifications) to ensure that the device reproducibly and reliably collects, transports, stabilizes, and isolates cell-free nucleic acids of sufficient yield and quality suitable for downstream applications as appropriate for its intended use. At a minimum, these measures must include: (A) Data demonstrating that blood samples collected in the device have reproducible cell-free nucleic acid yields that are suitable, as determined by FDA, for downstream testing as appropriate for the intended use, including estimates of within-lot, within-device, and lot-to-lot variability; (B) Data demonstrating that cell-free nucleic acid yields isolated from blood specimens collected into the device do not add clinically significant bias to test results obtained using the downstream application(s) described in the intended use. For devices indicated for use with multiple downstream applications, data demonstrating acceptable performance for each type of claimed use or, alternatively, an appropriate, as determined by FDA, clinical justification for why such data are not needed; (C) Data demonstrating that the device appropriately stabilizes cell-free nucleic acids after sample collection, during storage, and during transport over the claimed shelf life of the device; (D) Data demonstrating that samples collected in the device have minimal levels of contamination with other types of nucleic acids present in cells or cellular components, and that these levels of contamination do not interfere with downstream testing; (E) Data from analytical or clinical studies that demonstrate that, when used as intended, the device consistently draws a blood sample volume that is within the indicated fill range; (F) Data from analytical or clinical studies that demonstrate that, when used as intended, cell-free nucleic acid yield, stability, and quality are not significantly impacted by interference due to other parts of the device (such as reduced or excess active ingredient) or specimen collection and processing procedures (such as hemolysis, centrifugation, or mixing of blood with anticoagulant or additives); and (G) Data from analytical studies that demonstrate that the device is suitable for its intended use across all storage and sample handling conditions described in the device labeling, including device shelf life and shipping conditions (e.g., temperature, humidity, duration). (iii) A protocol, reviewed and determined acceptable by FDA, that specifies the verification and validation activities that will be performed for anticipated device modifications to reevaluate performance claims or performance specifications. This protocol must include a process for assessing whether a modification to technology, engineering, performance, materials, specifications, or indications for use, or any combination thereof, could significantly affect the safety or effectiveness of the device. The protocol must include assessment metrics, acceptance criteria, and analytical methods for the performance testing of changes. Dated: September 4, 2024. Lauren K. Roth, Associate Commissioner for Policy. [FR Doc. 2024-20254 Filed 9-6-24; 8:45 am] BILLING CODE 4164-01-P

usgpo

2024-10-08T13:26:17.007526

FR

FR-2024-09-09/2024-20248

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72984-72986] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20248] ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 876 [Docket No. FDA-2024-N-4059] Medical Devices; Gastroenterology-Urology Devices; Classification of the Endoscopic Pancreatic Debridement Device AGENCY: Food and Drug Administration, HHS. ACTION: Final amendment; final order. ----------------------------------------------------------------------- SUMMARY: The Food and Drug Administration (FDA or we) is classifying the endoscopic pancreatic debridement device into class II (special controls). The special controls that apply to the device type are identified in this order and will be part of the codified language for the endoscopic pancreatic debridement device's classification. We are taking this action because we have determined that classifying the device into class II (special controls) will provide a reasonable assurance of safety and effectiveness of the device. We believe this action will also enhance patients' access to beneficial innovative devices. DATES: This order is effective September 9, 2024. The classification was applicable on December 23, 2020. FOR FURTHER INFORMATION CONTACT: Thelma Valdes, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 2610, Silver Spring, MD 20993-0002, 301-796-9621, [email protected]. SUPPLEMENTARY INFORMATION: I. Background Upon request, FDA has classified the endoscopic pancreatic debridement device as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness. The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as ``postamendments devices'' because they were not in commercial distribution prior to the date of enactment of the Medical Device [[Page 72985]] Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act). FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807). FDA may also classify a device through ``De Novo'' classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (see also part 860, subpart D (21 CFR part 860, subpart D)). Section 207 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115) established the first procedure for De Novo classification. Section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144) modified the De Novo application process by adding a second procedure. A device sponsor may utilize either procedure for De Novo classification. Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2). Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act. Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device. When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application to market a substantially equivalent device (see section 513(i) of the FD&C Act, defining ``substantial equivalence''). Instead, sponsors can use the 510(k) process, when necessary, to market their device. II. De Novo Classification On March 16, 2020, FDA received Interscope, Inc's request for De Novo classification of the EndoRotor. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act. We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device. Therefore, on December 23, 2020, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 876.4330.\1\ We have named the generic type of device endoscopic pancreatic debridement device, and it is identified as a device intended to be inserted via an endoscope and placed through a cystogastrostomy fistula into the pancreatic cavity. It is intended for removal of necrotic tissue from a walled off pancreatic necrosis (WOPN) cavity. --------------------------------------------------------------------------- \1\ FDA notes that the ``ACTION'' caption for this final order is styled as ``Final amendment; final order,'' rather than ``Final order.'' Beginning in December 2019, this editorial change was made to indicate that the document ``amends'' the Code of Federal Regulations. The change was made in accordance with the Office of Federal Register's (OFR) interpretations of the Federal Register Act (44 U.S.C. chapter 15), its implementing regulations (1 CFR 5.9 and parts 21 and 22), and the Document Drafting Handbook. --------------------------------------------------------------------------- FDA has identified the following risks to health associated specifically with this type of device and the measures required to mitigate these risks in table 1. Table 1--Endoscopic Pancreatic Debridement Device Risks and Mitigation Measures ------------------------------------------------------------------------ Identified risks to health Mitigation measures ------------------------------------------------------------------------ Adverse tissue reaction........... Biocompatibility evaluation, and Pyrogenicity testing. Infection......................... Sterilization validation, Pyrogenicity testing, Shelf life testing, Package integrity testing, and Labeling. Electrical shock/electromagnetic Electrical safety testing, and interference. Electromagnetic compatibility testing. Injury due to device malfunction Clinical performance testing; or device misuse: Software validation, verification, Injury to pancreas or and hazard analysis; Non-clinical other non-target tissue.. performance testing; Labeling; and Stent dislodgement....... Training. Injury due to procedure or device: Clinical performance testing, Hemorrhage/ Labeling, and Training. gastrointestinal (GI) bleeding.. Pneumoperitoneum......... Sepsis/multiorgan failure.. Morcellation of malignant tissue.. ------------------------------------------------------------------------ FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. For a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act. [[Page 72986]] III. Analysis of Environmental Impact The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required. IV. Paperwork Reduction Act of 1995 This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in part 860, subpart D, regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910- 0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR part 801, regarding labeling, have been approved under OMB control number 0910-0485. List of Subjects in 21 CFR Part 876 Medical devices. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 876 is amended as follows: PART 876--GASTROENTEROLOGY-UROLOGY DEVICES 0 1. The authority citation for part 876 continues to read as follows: Authority: 21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371. 0 2. Add Sec. 876.4330 to subpart E to read as follows: Sec. 876.4330 Endoscopic pancreatic debridement device. (a) Identification. An endoscopic pancreatic debridement device is inserted via an endoscope and placed through a cystogastrostomy fistula into the pancreatic cavity. It is intended for removal of necrotic tissue from a walled off pancreatic necrosis (WOPN) cavity. (b) Classification. Class II (special controls). The special controls for this device are: (1) Clinical performance testing must demonstrate that the device performs as intended under anticipated conditions of use, including evaluation of debridement of walled off pancreatic necrosis and all adverse events. (2) The patient-contacting components of the device must be demonstrated to be biocompatible. (3) Performance data must demonstrate the sterility of the patient- contacting components of the device. (4) The patient-contacting components of the device must be demonstrated to be non-pyrogenic. (5) Performance testing must support the shelf life of device components provided sterile by demonstrating continued sterility, package integrity, and device functionality over the labeled shelf life. (6) Non-clinical performance testing must demonstrate that the device performs as intended under anticipated conditions of use. The following performance characteristics must be tested: (i) Testing of rotational speeds and vacuum pressure; (ii) Functional testing including testing with all device components and the ability to torque the device; and (iii) Functional testing in a relevant tissue model to demonstrate the ability to resect and remove tissue. (7) Performance data must demonstrate the electromagnetic compatibility (EMC) and electrical safety of the device. (8) Software verification, validation, and hazard analysis must be performed. (9) Training must be provided so that upon completion of the training program, the user can resect and remove tissue of interest while preserving non-target tissue. (10) Labeling must include the following: (i) A summary of the clinical performance testing conducted with the device; (ii) Instructions for use, including the creation of a conduit for passage of endoscope and device into a walled off pancreatic necrotic cavity; (iii) Unless clinical performance data demonstrates that it can be removed or modified, a boxed warning stating that the device should not be used in patients with known or suspected pancreatic cancer; (iv) The recommended training for safe use of the device; and (v) A shelf life for any sterile components. Dated: September 4, 2024. Lauren K. Roth, Associate Commissioner for Policy. [FR Doc. 2024-20248 Filed 9-6-24; 8:45 am] BILLING CODE 4164-01-P

usgpo

2024-10-08T13:26:17.051322

FR

FR-2024-09-09/2024-20224

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72986-72987] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20224] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Office of Foreign Assets Control 31 CFR Part 591 Publication of Venezuela Sanctions Regulations Web General License 5P AGENCY: Office of Foreign Assets Control, Treasury. ACTION: Publication of web general license. ----------------------------------------------------------------------- SUMMARY: The Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing one general license (GL) issued pursuant to the Venezuela Sanctions Regulations: GL 5P, which was previously made available on OFAC's website. DATES: GL 5P was issued on August 12, 2024. See SUPPLEMENTARY INFORMATION for additional relevant dates. FOR FURTHER INFORMATION CONTACT: OFAC: Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; or Assistant Director for Compliance, 202-622-2490. SUPPLEMENTARY INFORMATION: Electronic Availability This document and additional information concerning OFAC are available on OFAC's website: https://ofac.treasury.gov. Background On August 12, 2024, OFAC issued GL 5P to authorize certain transactions otherwise prohibited by the Venezuela Sanctions Regulations (VSR), 31 CFR part 591. GL 5P was made available on OFAC's website (https://ofac.treasury.gov) when it was issued. GL 5P supersedes GL 5O, which was issued on April 15, 2024. The text of GL 5P is provided below. OFFICE OF FOREIGN ASSETS CONTROL Venezuela Sanctions Regulations 31 CFR Part 591 GENERAL LICENSE NO. 5P Authorizing Certain Transactions Related to the Petr[oacute]leos de Venezuela, S.A. 2020 8.5 Percent Bond on or After November 12, 2024 (a) Except as provided in paragraph (b) of this general license, on or after [[Page 72987]] November 12, 2024, all transactions related to, the provision of financing for, and other dealings in the Petr[oacute]leos de Venezuela, S.A. 2020 8.5 Percent Bond that would be prohibited by subsection l(a)(iii) of Executive Order (E.O.) 13835 of May 21, 2018, as amended by E.O. 13857 of January 25, 2019, and incorporated into the Venezuela Sanctions Regulations, 31 CFR part 591 (the VSR), are authorized. (b) This general license does not authorize any transactions or activities otherwise prohibited by the VSR, or any other part of 31 CFR chapter V. (c) Effective August 12, 2024, General License No. 5O, dated April 15, 2024, is replaced and superseded in its entirety by this General License No. 5P. Lisa M. Palluconi, Acting Director Office of Foreign Assets Control. Dated: August 12, 2024. Lisa M. Palluconi, Acting Director, Office of Foreign Assets Control. [FR Doc. 2024-20224 Filed 9-6-24; 8:45 am] BILLING CODE 4810-AL-P

usgpo

2024-10-08T13:26:17.104153

FR

FR-2024-09-09/2024-20206

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72987-72989] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20206] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG-2024-0741] RIN 1625-AA00 Safety Zone; Missouri River Mile Markers 19-20 Florissant, MO AGENCY: Coast Guard, DHS. ACTION: Temporary final rule. ----------------------------------------------------------------------- SUMMARY: The Coast Guard is establishing a temporary safety zone for the Missouri River at mile markers (MM) 19 through 20. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by a power line wire crossing near Florissant, MO. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port, Sector Upper Mississippi River. DATES: For the purposes of enforcement, actual notice will be used from September 5, 2024, until September 9, 2024. This rule is effective without actual notice from September 9, 2024 through September 20, 2024. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to https://www.regulations.gov, type USCG- 2024-0741 in the search box and click ``Search.'' Next, in the Document Type column, select ``Supporting & Related Material.'' FOR FURTHER INFORMATION CONTACT: If you have questions about this rule, call or email MST1 Benjamin Conger, Sector Upper Mississippi River Waterways Management Division, U.S. Coast Guard; telephone 314-269- 2573, email [email protected]. SUPPLEMENTARY INFORMATION: I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security FR Federal Register MM Mile marker NPRM Notice of proposed rulemaking Sec. Section U.S.C. United States Code II. Background Information and Regulatory History The Coast Guard is issuing this temporary rule under authority in 5 U.S.C. 553(b)(B). This statutory provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are ``impracticable, unnecessary, or contrary to the public interest.'' The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because of potential hazards created by the power line crossing over the Missouri River that need to be addressed. As such, the Coast Guard lacks sufficient time to provide a reasonable comment period and then consider those comments before issuing the rule. It is impracticable to publish an NPRM because we must establish this safety zone by September 5, 2024. Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register. Delaying the effective date of this rule would be impracticable because immediate action is needed to respond to the potential safety hazards associated with the power line crossing starting September 5, 2024. III. Legal Authority and Need for Rule The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Sector Upper Mississippi (COTP) has determined that potential hazards associated with the power line crossing starting September 5, 2024, will be a safety concern for anyone operating in or transiting the Missouri River from or between MM 19-20. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone while the power line crossing is being conducted. IV. Discussion of the Rule This rule establishes a safety zone during a power line crossing project over the Missouri River on September 5, 2024 through September 20, 2024. The safety zone will cover all navigable waters from MM 19- 20. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while the power line crosses the Missouri River. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative via VHF-FM channel 16, or through USCG Sector Upper Mississippi River at 314-269-2332. Persons and vessels permitted to enter the safety zone must comply with all lawful orders or directions issued by the COTP or designated representative. The COTP or a designated representative will inform the public of the effective period for the safety zone as well as any changes in the dates and times of enforcement, as well as reductions in the size of the safety zone as conditions improve, through Local Notice to Mariners (LNMs), Broadcast Notices to Mariners (BNMs), and/or Safety Marine Information Broadcast (SMIB), as appropriate. V. Regulatory Analyses We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors. A. Regulatory Planning and Review Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a ``significant regulatory action,'' under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB). This regulatory action determination is based on a safety zone located on the Missouri River between MM 19-20 near Florissant, MO. The safety zone will be active only while work associated with the power line crossing is being [[Page 72988]] conducted, from September 5, 2024, until September 20, 2024. B. Impact on Small Entities The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term ``small entities'' comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator. Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. C. Collection of Information This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). D. Federalism and Indian Tribal Governments A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. E. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. F. Environment We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone encompassing the width of the Missouri River between MM 19 through 20. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023- 01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble. G. Protest Activities The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places, or vessels. List of Subjects in 33 CFR Part 165 Harbors, Marine Safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways. For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows: PART 165--REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 0 1. The authority citation for part 165 continues to read as follows: Authority: 46 U.S.C. 70034, 70051, 70124; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.3. 0 2. Add Sec. 165.T08-0741 to read as follows: Sec. 165.T08-0741 Safety Zone; Missouri River, Mile Markers 19-20, Florissant, MO. (a) Location. The following area is a safety zone: all navigable waters within the Missouri River, Mile Markers (MM) 19-20. (b) Enforcement period. This section is subject to enforcement from September 5, 2024, through September 20, 2024. (c) Regulations. (1) In accordance with the general safety zone regulations in subpart C of this part, entry of persons or vessels into this safety zone described in paragraph (a) of this section is prohibited unless authorized by the COTP or a designated representative. A designated representative is a commissioned, warrant, or petty officer of the U.S. Coast Guard (USCG) assigned to units under the operational control of USCG Sector Upper Mississippi River. (2) To seek permission to enter, contact the COTP or a designated representative via VHF-FM channel 16, or through USCG Sector Upper Mississippi River at 314-269-2332. Persons and vessels permitted to enter the safety zone must comply with all lawful orders or directions issued by the COTP or designated representative. (d) Informational broadcasts. The COTP or a designated representative will inform the public of the effective period for the safety zone as well as any changes in the dates and times of enforcement, as well as reductions in size or scope of the safety zone as ice or flood conditions improve, through Local Notice to Mariners (LNMs), Broadcast Notices to Mariners (BNMs), [[Page 72989]] and/or Safety Marine Information Broadcast (SMIB) as appropriate. Dated: September 3, 2024. A.R. Bender, Captain, U.S. Coast Guard, Captain of the Port Sector Upper Mississippi River. [FR Doc. 2024-20206 Filed 9-6-24; 8:45 am] BILLING CODE 9110-04-P

usgpo

2024-10-08T13:26:17.144121

FR

FR-2024-09-09/2024-20211

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72989-72990] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20211] ----------------------------------------------------------------------- DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG-2024-0768] RIN 1625-AA00 Safety Zone; Bay St. Louis, MS AGENCY: Coast Guard, DHS. ACTION: Temporary final rule. ----------------------------------------------------------------------- SUMMARY: The Coast Guard is establishing a temporary safety zone for navigable waters at the opening of St. Louis Bay, extending the entire width of the channel, approximately 1 mile south of the Hwy 90 Bridge in Bay St. Louis, MS. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by the 2024 Swim Across the Bay on September 15, 2024, from 7 to 9:30 a.m. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port, Sector Mobile. DATES: This rule is effective on September 15, 2024, from 7 until 9:30 a.m. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to https://www.regulations.gov, type USCG- 2024-0768 in the search box and click ``Search.'' Next, in the Document Type column, select ``Supporting & Related Material.'' FOR FURTHER INFORMATION CONTACT: If you have questions about this rule, call or email Lieutenant Lawrence J. Schad, Sector Mobile, Waterways Management Division, U.S. Coast Guard; telephone: 251-441-5678, email: [email protected]. SUPPLEMENTARY INFORMATION: I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security FR Federal Register NPRM Notice of proposed rulemaking Sec. Section U.S.C. United States Code II. Background Information and Regulatory History The Coast Guard is issuing this temporary rule under authority in 5 U.S.C. 553(b)(B). This statutory provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are ``impracticable, unnecessary, or contrary to the public interest.'' The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable to publish an NPRM because we must establish this safety zone by September 15, 2024. Also, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register. Delaying the effective date of this rule would be impracticable because prompt action is needed to respond to the potential safety hazards associated with the 2024 Swim Across the Bay. III. Legal Authority and Need for Rule The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Sector Mobile (COTP) has determined that potential hazards associated with the 2024 Swim Across the Bay on September 15, 2024, will be a safety concern for anyone within one mile south of the Hwy 90 Bridge in Bay St. Louis, MS. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone during the 2024 Swim Across the Bay. IV. Discussion of the Rule This rule establishes a safety zone from 7 until 9:30 a.m. on September 15, 2024. The safety zone will cover all navigable waters at the opening of St. Louis Bay, extending the entire width of the channel, approximately one mile south of the Hwy 90 Bridge in Bay St. Louis, MS. The duration of the zone is intended to ensure the safety of life for the maritime public and event participants from potential hazards created by a swim event crossing the navigable channel. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative. V. Regulatory Analyses We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors. A. Regulatory Planning and Review Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a ``significant regulatory action,'' under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB). This regulatory action determination is based on the size, location, and duration, of the safety zone. This safety zone will only restrict navigation for approximately two and a half hours near the opening of St. Louis Bay, approximately one mile south of the Hwy 90 Bridge in Bay St. Louis, MS, extending the entire width of the channel. Moreover, the Coast Guard will issue a Local Notice to Mariners (LNM) about the zone, and the rule allows vessels to seek permission to enter the zone. B. Impact on Small Entities The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term ``small entities'' comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator. Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule affects your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section. [[Page 72990]] Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. C. Collection of Information This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). D. Federalism and Indian Tribal Governments A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. Also, this rule does not have Tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. E. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or Tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. F. Environment We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone that will prohibit mariners and the public near the opening of St. Louis Bay, extending the entire width of the channel approximately 1 mile south of the Hwy 90 Bridge in Bay St. Louis, MS. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble. G. Protest Activities The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places, or vessels. List of Subjects in 33 CFR Part 165 Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways. For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows: PART 165--REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 0 1. The authority citation for part 165 continues to read as follows: Authority: 46 U.S.C. 70034, 70051, 70124; 33 CFR 1.05-1, 6.04- 1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.3. 0 2. Add Sec. 165.T08-0768 to read as follows: Sec. 165.T08-0768 Safety Zone; Bay St. Louis, MS. (a) Location. The following area is a safety zone: All navigable waters of St. Louis Bay, Bay St. Louis, MS, bound by a line connecting the following coordinates beginning at 30[deg]19.133' N, 89[deg]19.317' W, thence to 30[deg]18.967' N, 89[deg]17.417' W, thence to 30[deg]18.367' N, 89[deg]19.650' W, thence to 30[deg]18.300' N, 89[deg]17.567' W, then back to the point of origin. (b) Definitions. As used in this section, designated representative means a Coast Guard Patrol Commander, including a Coast Guard coxswain, petty officer, or other officer operating a Coast Guard vessel and a Federal, State, and local officer designated by or assisting the Sector Mobile Captain of the Port (COTP) in the enforcement of the safety zone. (c) Regulations. (1) Under the general safety zone regulations in subpart C of this part, you may not enter the safety zone described in paragraph (a) of this section unless authorized by the COTP or the COTP's designated representative. No person may anchor, dredge, or trawl in the safety zone unless authorized by the COTP or the COTP's designated representative. (2) To seek permission to enter, contact the COTP or the COTP's designated representative on VHF-CH 16. Those in the safety zone must comply with all lawful orders or directions given to them by the COTP or the COTP's designated representative. (d) Enforcement period. This section will be enforced September 15, 2024, from 7 to 9:30 a.m. The enforcement period will be announced via marine broadcast, local notice to mariners, or by an on-scene oral notice as appropriate. Dated: September 3, 2024. M.O. Vega, Captain, U.S. Coast Guard, Captain of the Port Sector Mobile. [FR Doc. 2024-20211 Filed 9-6-24; 8:45 am] BILLING CODE 9110-04-P

usgpo

2024-10-08T13:26:17.187780

FR

FR-2024-09-09/2024-20239

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72990-72994] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20239] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Forest Service 36 CFR Parts 214 and 251 RIN 0596-AD56 Special Uses; Land Use Fees; Temporary Land Use Fee Reductions for Recreation Residence Permits AGENCY: Forest Service, USDA. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Forest Service (Forest Service or Agency), United States Department of Agriculture, is issuing this final rule to update its special uses regulations, consistent with the requirement in the Cabin Fee Act, to provide for suspension or temporary [[Page 72991]] reduction of the land use fee for a recreation residence permit if access to or occupancy of the recreation residence is significantly restricted. DATES: The final rule is effective October 9, 2024. FOR FURTHER INFORMATION CONTACT: Brandon Smith, Lands, Minerals, and Geology Management Staff, (406) 491-1605 or [email protected]. Individuals who use telecommunications devices for the hearing-impaired may call 711 to reach the Telecommunications Relay Service, 24 hours a day, every day of the year, including holidays. SUPPLEMENTARY INFORMATION: Background The Forest Service administers the use and occupancy of National Forest System lands through issuance of special use authorizations. The Forest Service administers approximately 74,000 special use authorizations, including nearly 14,000 recreation residence permits for use and occupancy of National Forest System lands across 24 states and 114 national forests. Recreation residences are privately owned cabins that have been authorized on National Forest System lands since 1915. Like other types of special use authorizations, permits for recreation residences are subject to an annual land use fee, payable in advance at the beginning of the calendar year. Need for the Final Rule The Cabin Fee Act of 2014 (16 U.S.C. 6214) establishes a tiered fee structure for the use and occupancy of recreation residences on National Forest System lands. Section (f)(3)(A) of the Cabin Fee Act (16 U.S.C. 6214(f)(3)(A)) requires the Forest Service to establish criteria by which the annual land use fee for a recreation residence permit may be suspended or temporarily reduced if access to or occupancy of the recreation residence is significantly restricted. Section (f)(3)(B) of the Cabin Fee Act (16 U.S.C. 6214(f)(3)(B)) requires the determination of whether to suspend or temporarily reduce the annual land use fee for a recreation residence permit to be administratively appealable. Revisions to 36 CFR Part 214 The final rule amends 36 CFR 214.4(c) by adding paragraph (6) to provide for appeal of a decision of whether to temporarily reduce the annual land use fee for a recreation residence permit during significantly restricted access to or occupancy of the recreation residence. Revisions to 36 CFR Part 251, Subpart B The final rule adds a definition to 36 CFR 251.51 for the term ``significantly restricted access to or occupancy of a recreation residence,'' which is defined as when access to or occupancy of a recreation residence is prohibited by law for a period of at least 30 consecutive calendar days (a) by an order issued under 36 CFR part 261, subpart B, closing an area including the National Forest System lands occupied by the recreation residence or closing a National Forest System road providing the sole access to the recreation residence to address public health or safety concerns, such as severe risk of fire or flooding, or (b) by a State or county department of transportation imposing a round-the-clock closure of a State or county road providing the sole access to a recreation residence. The objectivity and simplicity of this definition avoids the need for a detailed factual inquiry or exercise of discretion, thereby facilitating and enhancing consistency in implementation. The definition for ``significantly restricted access to or occupancy of a recreation residence'' does not include other situations where access to or occupancy of the recreation residence is restricted, such as situations where the recreation residence cannot be accessed or occupied because a private access road or the recreation residence has not been adequately maintained or where a private access road or the recreation residence has been destroyed or substantially damaged. The Department believes these situations should be outside the scope of the temporary land use fee reduction, consistent with the risk of loss clause in the term special use permit for recreation residences, which is a standard clause in special use authorizations. The final rule amends 36 CFR 251.57 by adding paragraph (i) to provide for temporarily reducing the annual land use fee for a recreation residence permit during significantly restricted access to or occupancy of the recreation residence. For consistency and ease of implementation, the final rule provides for temporarily reducing the land use fee proportionate to the number of days of significantly restricted access to or occupancy of the recreation residence, rather than for suspending the land use fee after significantly restricted access to or occupancy of the recreation residence has reached a specified number of days. A temporary land use fee reduction will be calculated by dividing the annual land use fee for the recreation residence by 365 to determine the daily land use fee and then multiplying the daily land use fee by the number of days of significantly restricted access to or occupancy of the recreation residence. For ease of administration, if significantly restricted access to or occupancy of a recreation residence includes part of one day, that day would be counted as a whole day. A temporary land use fee reduction during significantly restricted access to or occupancy of a recreation residence will be applied to the annual land use fee for the recreation residence permit for the following year. The final rule has no effect on the risk of loss clause in term special use permits for recreation residences, other than by temporarily reducing the annual land use fee for a recreation residence permit in accordance with the terms of the final rule, consistent with the Cabin Fee Act. The final rule has no effect on any other type of special use or special use authorization. This final rule is entirely within the scope of section (f)(3)(A) and (B) of the Cabin Fee Act (16 U.S.C. 6214(f)(3)(A) and (B)), which is unambiguous. Section (f)(3)(A) requires the Department to promulgate regulations that ``establish criteria pursuant to which the annual fee determined in accordance with this section may be suspended or reduced temporarily if access to, or the occupancy of, the recreational residence is significantly restricted.'' Section (f)(3)(A) thus gives the Department discretion to determine the criteria for suspending or temporarily reducing the annual land use fee if access to or occupancy of a recreation residence is significantly restricted. The final rule establishes those criteria as provided by the Cabin Fee Act. Section (f)(3)(B) of the Cabin Fee Act requires the Department to promulgate regulations that ``grant the cabin owner the right of an administrative appeal of the determination made in accordance with subparagraph (A) whether to suspend or reduce temporarily the annual fee.'' The final rule provides for such an administrative appeal right as required by the Cabin Fee Act. Summary of Comments and Responses Overview The proposed rule was published in the Federal Register on October 2, 2023 (88 FR 67694). The Federal Register notice provided for a 60- day comment period that closed December 1, 2023. The Forest Service received 29 comments during the comment period. One comment was from an organization, and the other comments, which were from individuals, referenced the [[Page 72992]] comment from the organization or incorporated text from that comment with slight modifications. Most of the comments addressed the scope of the criteria for determining when a recreation residence would qualify for a suspension or temporary reduction of the annual land use fee for a recreation residence and the calculation for determining a temporary reduction in the annual land use fee. The comments on the proposed rule and the Department's responses follow. General Comments Comment: Several commenters believed that the requirement in the Cabin Fee Act to provide for suspension or temporary reduction of the annual land use fee for a recreation residence permit if access to or occupancy of the recreation residence is significantly restricted should be interpreted broadly to encompass a wide range of scenarios. These commenters believed that additional scenarios, such as when a recreation residence is destroyed or partially damaged, should trigger a suspension or temporary reduction of the annual land use fee for a recreation residence because of significantly restricted access to or occupancy of the recreation residence. Response: As required by the Cabin Fee Act, the proposed and final rules specify the criteria for when the annual land use fee for a recreation residence permit will be temporarily reduced if access to or occupancy of the recreation residence is significantly restricted. Recreation residence permits contain standard terms to provide for legal and programmatic sufficiency and that are included in special use authorizations for a wide range of uses and activities on National Forest System lands. Comments regarding standard terms in recreation residence permits, including the risk of loss clause, are outside the scope of the proposed and final rules. The Federal Register notices for the proposed and final rules reference the standard risk of loss clause in the recreation residence permit strictly in connection with scenarios that will not trigger a temporary reduction in the annual land use fee because they are risks assumed by the holder under the standard risk of loss clause, and to limit the effect of the rule on the standard risk of loss clause to providing for temporarily reducing the annual land use fee for a recreation residence permit in accordance with the terms of the proposed and final rules, consistent with the Cabin Fee Act. This final rule implements a statutory requirement in the Cabin Fee Act to provide for suspension or temporary reduction of the annual land use fee for a recreation residence because of significantly restricted access to or occupancy of the recreation residence. The Cabin Fee Act requires the rule to specify the criteria for when this requirement is met. The specific criteria in the rule are when access to or occupancy of a recreation residence is prohibited by law for a period of at least 30 consecutive calendar days either (a) by an order issued under 36 CFR part 261, subpart B, closing an area including the National Forest System lands occupied by the recreation residence or closing a National Forest System road providing the sole access to the recreation residence to address public health or safety concerns, such as severe risk of fire or flooding, or (b) by a State or county department of transportation imposing a round-the-clock closure of a State or county road providing the sole access to a recreation residence. The Department does not believe it is appropriate to include other situations where access to or occupancy of a recreation residence is restricted, such as situations where the recreation residence cannot be accessed or occupied because a private access road or the recreation residence has not been adequately maintained or where a private access road or the recreation residence has been destroyed or substantially damaged. The Department believes these situations fall outside the scope of the temporary annual land use fee reduction for a recreation residence because they are risks assumed by the holder of a recreation residence permit under the standard risk of loss clause in form FS- 2700-5a, Term Special Use Permit for Recreation Residences. Comment: Commenters expressed interest in factoring in seasonal and weather-related limitations on access to a recreation residence in calculating a temporary reduction in the annual land use fee for a recreation residence based on significantly restricted access to or occupancy of the recreation residence. Response: Access to recreation residences was considered in and influenced the valuation process that was used to establish the 11 land use fee tiers in the Cabin Fee Act. The methodology in the final rule for calculating the temporary reduction in the annual land use fee for significantly restricted access to or occupancy of a recreation residence allows for a simplified, consistent, and national approach that avoids additional processes and analysis. Annual land use fees for recreation residences are charged for the entire year, and there is nothing in form FS-2700-5a, Term Special Use Permit for Recreation Residences, that limits the use and occupancy for any season. Recreation residences may be used any month of the year and depending on the circumstances may be accessed on foot or by over-snow vehicle, snowshoes, or watercraft, as well as by car. The No Warranty of Access, Site Suitability, or Services clause in Form FS-2700-5a states that the Forest Service does not make any express or implied warranty of access to the permit area, of the suitability of the permit area for the authorized uses, or for the furnishing of road or trail maintenance, water, fire protection services, search and rescue services, or any other services by a government agency, utility, association, or individual. Regulatory Certifications Regulatory Planning and Review (Executive Orders 12866 and 13563) Executive Order 12866 provides that the Office of Information and Regulatory Affairs in the Office of Management and Budget will determine whether a regulatory action is significant and will review significant regulatory actions. The Office of Information and Regulatory Affairs has determined that this final rule is not significant. Executive Order 13563 reaffirms the principles of Executive Order 12866 while calling for improvements in the nation's regulatory system to promote predictability; to reduce uncertainty; and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The Department has developed the final rule consistent with Executive Order 13563. Congressional Review Act Pursuant to subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (known as the Congressional Review Act) (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs has designated this final rule as not a major rule as defined by 5 U.S.C. 804(2). National Environmental Policy Act The final rule updates the Department's regulations consistent with the requirement in the Cabin Fee Act to provide for a suspension or temporary reduction in the annual land use fee for a recreation residence permit if access to or occupancy of the recreational residence is significantly restricted. Forest Service regulations at 36 CFR 220.6(d)(2) exclude from documentation in an environmental assessment or environmental impact statement ``rules, regulations, or policies [[Page 72993]] to establish servicewide administrative procedures, program processes, or instructions.'' The Department's assessment is that this final rule falls within this category of actions and that no extraordinary circumstances exist which would require preparation of an environmental assessment or environmental impact statement. Regulatory Flexibility Act Analysis The Department has considered the final rule under the requirements of the Regulatory Flexibility Act (5 U.S.C. 602 et seq.). The final rule updates the Department's regulations consistent with the requirement in the Cabin Fee Act to provide for a suspension or temporary reduction in the annual land use fee for a recreation residence permit if access to or occupancy of the recreational residence is significantly restricted. This final rule will not have any direct effect on small entities as defined by the Regulatory Flexibility Act. The final rule will not impose recordkeeping requirements on small entities; will not affect their competitive position in relation to large entities; and will not affect their cash flow, liquidity, or ability to remain in the market. Therefore, the Department has determined that this final rule will not have a significant economic impact on a substantial number of small entities pursuant to the Regulatory Flexibility Act. Federalism The Department has considered the final rule under the requirements of Executive Order 13132, Federalism. The Department has determined that the final rule conforms with the federalism principles set out in this executive order; will not impose any compliance costs on the States; and will not have substantial direct effects on the States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, the Department has concluded that the final rule does not have federalism implications. Consultation and Coordination With Indian Tribal Governments Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, requires Federal agencies to consult and coordinate with Tribes on a government-to-government basis on policies that have Tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes. The final rule updates the Department's regulations consistent with the requirement in the Cabin Fee Act to provide for a suspension or temporary reduction in the annual land use fee for a recreation residence permit if access to or occupancy of the recreational residence is significantly restricted. The Department has reviewed this final rule in accordance with the requirements of Executive Order 13175 and has determined that this final rule will not have substantial direct effects on Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes. Therefore, consultation and coordination with Indian Tribal governments is not required for this final rule. Environmental Justice The Department has considered the final rule under the requirements of Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations. The Department has determined that the final rule is not expected to result in disproportionately high and adverse impacts on minority or low- income populations or the exclusion of minority and low-income populations from meaningful involvement in decision-making. Family Policymaking Assessment Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277), requires Federal agencies to issue a Family Policymaking Assessment for a rule that may affect family well- being. The final rule will have no impact on the autonomy or integrity of the family as an institution. Accordingly, the Department has concluded that it is not necessary to prepare a Family Policymaking Assessment for the final rule. No Takings Implications The Department has analyzed the final rule in accordance with the principles and criteria in Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. The Department has determined that the final rule will not pose the risk of a taking of private property. Energy Effects The Department has reviewed the final rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. The Department has determined that the final rule will not constitute a significant energy action as defined in Executive Order 13211. Civil Justice Reform The Department has analyzed the final rule in accordance with the principles and criteria in Executive Order 12988, Civil Justice Reform. After adoption of the final rule, (1) all State and local laws and regulations that conflict with the final rule or that impede its full implementation will be preempted; (2) no retroactive effect will be given to the final rule; and (3) it will not require administrative proceedings before parties may file suit in court challenging its provisions. Unfunded Mandates Pursuant to title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538), the Department has assessed the effects of the final rule on State, local, and Tribal governments and the private sector. The final rule will not compel the expenditure of $100 million or more by any State, local, or Tribal government or anyone in the private sector. Therefore, a statement under section 202 of the Act is not required. Controlling Paperwork Burdens on the Public The final rule does not contain recordkeeping or reporting requirements or other information collection requirements as defined in 5 CFR part 1320 that are not already required by law or not already approved for use. Accordingly, the review provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and its implementing regulations at 5 CFR part 1320 do not apply. List of Subjects 36 CFR Part 214 Administrative practice and procedure, National forests. 36 CFR Part 251 Administrative practice and procedure, Alaska, Electric power, Mineral resources, National forests, Public lands--rights-of-way, Reporting and recordkeeping requirements, Water resources. Therefore, for the reasons set forth in the preamble, the Forest Service amends chapter II of title 36 of the Code of Federal Regulations as follows: [[Page 72994]] PART 214--POSTDECISIONAL ADMINISTRATIVE REVIEW PROCESS FOR OCCUPANCY OR USE OF NATIONAL FOREST SYSTEM LANDS AND RESOURCES 0 1. The authority citation for part 214 continues to read as follows: Authority: 7 U.S.C. 1011(f); 16 U.S.C. 472, 551. 0 2. Amend Sec. 214.4(c) by adding paragraph (c)(6) to read as follows: Sec. 214.4 Decisions that are appealable. * * * * * (c) * * * (6) A decision of whether to temporarily reduce the annual land use fee for a recreation residence permit during a period of significantly restricted access to or occupancy of the recreation residence. * * * * * PART 251--LAND USES Subpart B--Special Uses 0 3. The authority citation for part 251, subpart B, continues to read as follows: Authority: 16 U.S.C. 460l-6a, 460l-6d, 472, 497b, 497c, 551, 580d, 1134, 3210; 30 U.S.C. 185; 43 U.S.C. 1740, 1761-1772. 0 4. Amend Sec. 251.51 by adding in alphabetical order a definition for ``significantly restricted access to or occupancy of a recreation residence'' to read as follows: Sec. 251.51 Definitions. * * * * * Significantly restricted access to or occupancy of a recreation residence--When access to or occupancy of a recreation residence is prohibited by law for a period of at least 30 consecutive calendar days: (1) By an order issued under 36 CFR part 261, subpart B, closing an area including the National Forest System lands occupied by the recreation residence or closing a National Forest System road providing the sole access to the recreation residence to address public health or safety concerns, such as severe risk of fire or flooding, or (2) By a State or county department of transportation imposing a round-the-clock closure of a State or county road providing the sole access to a recreation residence. * * * * * 0 5. Amend Sec. 251.57 by adding paragraph (i) to read as follows: Sec. 251.57 Land use fees. * * * * * (i) The annual land use fee for a recreation residence permit shall be temporarily reduced during periods of significantly restricted access to or occupancy of the recreation residence. A temporary land use fee reduction for significantly restricted access to or occupancy of a recreation residence shall be calculated by dividing the annual land use fee for the recreation residence permit by 365 to determine the daily land use fee and then multiplying the daily land use fee by the number of days of significantly restricted access to or occupancy of the recreation residence. If significantly restricted access to or occupancy of the recreation residence includes part of one day, that day shall be counted as a whole day. A temporary land use fee reduction during significantly restricted access to or occupancy of a recreation residence shall be applied as a credit to the annual land use fee for the recreation residence permit for the following year. Homer Wilkes, Under Secretary, Natural Resources and Environment. [FR Doc. 2024-20239 Filed 9-6-24; 8:45 am] BILLING CODE 3411-15-P

usgpo

2024-10-08T13:26:17.238801

FR

FR-2024-09-09/2024-20256

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72994-72998] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20256] ======================================================================= ----------------------------------------------------------------------- ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 [EPA-HQ-OPP-2023-0080; FRL-12040-01-OCSPP] Saflufenacil; Pesticide Tolerances AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: This regulation establishes new tolerances for residues of saflufenacil in or on Mint, dried leaves and Mint, fresh leaves and crop group expansions for Fruit, citrus, group 10-10; Fruit, pome, group 11-10; Fruit, stone, group 12-12; and Nut, tree, group 14-12. The Interregional Project Number 4 (IR-4) requested these tolerances under the Federal Food, Drug, and Cosmetic Act (FFDCA). DATES: This regulation is effective September 9, 2024. Objections and requests for hearings must be received on or before November 8, 2024, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION). ADDRESSES: The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2023-0080, is available at https://www.regulations.gov or in-person at the Office of Pesticide Programs Regulatory Public Docket (OPP Docket) in the Environmental Protection Agency Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334, 1301 Constitution Ave. NW, Washington, DC 20460-0001. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room and the OPP Docket is (202) 566- 1744. For the latest status information on EPA/DC services, docket access, visit https://www.epa.gov/dockets. FOR FURTHER INFORMATION CONTACT: Charles Smith, Director, Registration Division (7505T), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460- 0001; main telephone number: (202) 566-1030; email address: [email protected]. SUPPLEMENTARY INFORMATION: I. General Information A. Does this action apply to me? You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include: Crop production (NAICS code 111). Animal production (NAICS code 112). Food manufacturing (NAICS code 311). Pesticide manufacturing (NAICS code 32532). B. How can I get electronic access to other related information? You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Office of the Federal Register's e-CFR site at https://www.ecfr.gov/current/title-40/chapter-I/subchapter-E/part-180. C. How can I file an objection or hearing request? Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ- [[Page 72995]] OPP-2023-0080, in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before November 8, 2024. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b). EPA's Office of Administrative Law Judges (OALJ), in which the Hearing Clerk is housed, urges parties to file and serve documents by electronic means only, notwithstanding any other particular requirements set forth in other procedural rules governing those proceedings. See ``Revised Order Urging Electronic Service and Filing'', dated June 22, 2023, which can be found at https://www.epa.gov/system/files/documents/2023-06/2023-06-22%20-%20revised%20order%20urging%20electronic%20filing%20and%20service.pdf. Although EPA's regulations require submission via U.S. Mail or hand delivery, EPA intends to treat submissions filed via electronic means as properly filed submissions; therefore, EPA believes the preference for submission via electronic means will not be prejudicial. When submitting documents to the OALJ electronically, a person should utilize the OALJ e-filing system at https://yosemite.epa.gov/oa/rhc/epaadmin.nsf. In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2023-0080, by one of the following methods: Federal eRulemaking Portal: https://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute. Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001. Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at https://www.epa.gov/dockets/where-send-comments-epa-dockets. Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at https://www.epa.gov/dockets. II. Summary of Petitioned-For Tolerance In the Federal Register of July 5, 2023 (88 FR 42935) (FRL-10579- 05-OCSPP), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 2E9045) by Interregional Project Number 4 (IR-4), North Carolina State University, 1730 Varsity Drive, Venture IV, Suite 210, Raleigh, NC 27606. The petition requested that 40 CFR 180.649 be amended to establish tolerances for residues of the herbicide saflufenacil, including its metabolites and degradates, in or on Barley subgroup 15- 22B at 1 parts per million (ppm); Edible-podded bean subgroup 6-22A at 0.03 ppm; Edible-podded pea subgroup 6-22B at 0.03 ppm; Field corn subgroup 15-22C at 0.03 ppm; Forage and hay of legumes vegetable group 7-22 (except pea, hay) at 0.1 ppm; Forage, hay, stover, and straw of cereal grains group 16-22 (except barley and wheat and chia straw) at 0.1 ppm; Fruit, citrus group 10-10 at 0.03 ppm; Fruit, pome group 11-10 at 0.03 ppm; Fruit, stone group 12-12 at 0.03 ppm; Grain sorghum and millet subgroup 15-22E at 0.03 ppm; Mint, dried leaves at 0.04 ppm; Mint, fresh leaves at 0.04 ppm; Nut, tree, group 14-12 at 0.03 ppm; Pulses, dried shelled bean, except soybean, subgroup 6-22E at 0.3 ppm; Pulses, dried shelled pea subgroup 6-22F at 0.3 ppm; Rapeseed 20A at 0.6 ppm; Rice subgroup 15-22F at 0.03 ppm; Succulent shelled bean subgroup 6-22C at 0.03 ppm; Succulent shelled pea subgroup 6-22D at 0.03 ppm; Sweet corn subgroup 15-22D at 0.03 ppm; and Wheat subgroup 15-22A at 0.7 ppm. Upon the establishment of the tolerances requested above, the petitioner requested that EPA amend 40 CFR 180.649 by removing the tolerances for residues of saflufenacil in or on Barley, grain at 1.0 ppm; Chia, seed at 0.6 ppm; Rapeseed subgroup 20A at 0.45 ppm (identified in the July 5, 2023, Federal Register as ``crop subgroup 20A; rapeseed subgroup at 0.45 ppm); Fruit, citrus, group 10 at 0.03 ppm (identified in the July 5, 2023, Federal Register as ``Fruit, pome, group 10 at 0.03 ppm); Fruit, pome, group 11 at 0.03 ppm; Fruit, stone, group 12 at 0.03 ppm; Grain, cereal, group 15 (except barley and wheat grain) at 0.03 ppm; Nut, tree, group 14 at 0.03 ppm; Pea and bean, dried shelled, except soybean, subgroup 6C at 0.30 ppm; Pea and bean, succulent shelled, subgroup 6B at 0.03 ppm; Pistachio at 0.03 ppm; Vegetable, foliage of legume, group 7 (except pea, hay) at 0.10 ppm; Vegetable, legume, edible podded, subgroup 6A at 0.03 ppm; and Wheat, grain at 0.60 ppm. That document referenced a summary of the petition prepared by IR-4, the petitioner, which is available in the docket, https://www.regulations.gov. There were no comments received in response to the notice of filing. Based upon review of the data supporting the petition and in accordance with its authority under FFDCA section 408(d)(4)(A)(i), EPA is establishing the tolerance for residues of saflufenacil in or on mint at a different level than requested by the petitioner. Additionally, EPA is not establishing some of the petitioned-for tolerances because the request was subsequently withdrawn by the petitioner. The reasons for these changes are explained in Unit IV.C. III. Aggregate Risk Assessment and Determination of Safety Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is ``safe.'' Section 408(b)(2)(A)(ii) of FFDCA defines ``safe'' to mean that ``there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.'' This includes exposure through drinking water and in residential settings but, does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to ``ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .'' Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for saflufenacil including exposure resulting from the tolerance established by this action. EPA's assessment of exposures and risks associated with saflufenacil follows. In an effort to streamline its publications in the Federal Register, EPA is not reprinting sections that repeat what has been previously published for tolerance rulemakings for [[Page 72996]] the same pesticide chemical. Where scientific information concerning a particular chemical remains unchanged, the content of those sections would not vary between tolerance rulemakings, and EPA considers referral back to those sections as sufficient to provide an explanation of the information EPA considered in making its safety determination of the new rulemaking. EPA has previously published a tolerance rulemaking in 2015, for saflufenacil in which EPA concluded, based on the available information, that there is a reasonable certainty that no harm would result from aggregate exposure to saflufenacil and established a tolerance for residues of that chemical. EPA is incorporating previously published sections from that rulemaking as described further in this rulemaking, as they remain unchanged. Toxicological profile. For a discussion of the toxicological profile for saflufenacil, see Unit III.A. of the saflufenacil tolerance rulemaking published in the Federal Register of November 25, 2015 (80 FR 73663) (FRL-9936-71). Toxicological points of departure/Levels of concern. For a summary of the Toxicological Points of Departure/Levels of Concern for saflufenacil used for human health risk assessment, see Unit III.B. of the November 25, 2015, rulemaking. Exposure assessment. Much of the exposure assessment remains unchanged from the November 2015, rulemaking, except as described below. The updates are discussed in this section; for a description of the rest of the EPA approach to and assumptions for the exposure assessment, see Unit III.C of the November 25, 2015, rulemaking. EPA's dietary exposure assessments have been updated to include the additional exposures from the uses associated with the tolerances established since the November 25, 2015, rulemaking and the additional exposure from the new use of saflufenacil on mint and the crop group conversions to fruit, citrus, group 10-10; fruit, pome, group 11-10; fruit, stone, group 12-12; and nut, tree, group 14-12. The dietary exposure assessments were conducted with Dietary Exposure Evaluation Model software using the Food Commodity Intake Database (DEEM-FCID), Version 4.02, which uses the 2005-2010 food consumption data from the United States Department of Agriculture (USDA) National Health and Nutrition Examination Survey, What We Eat in America (NHANES/WWEIA). The assessment used the same assumptions as the November 25, 2015, final rule concerning tolerance-level residues, default processing factors for all processed commodities, and 100 percent crop treated. Drinking water exposure. The drinking water numbers have not changed since the November 25, 2015, rulemaking. Non-occupational exposure. There are no residential (non- occupational) uses proposed or currently registered for saflufenacil. Therefore, a residential risk assessment was not conducted. Cumulative exposure. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider ``available information'' concerning the cumulative effects of a particular pesticide's residues and ``other substances that have a common mechanism of toxicity.'' Unlike other pesticides for which EPA has followed a cumulative risk approach based on a common mechanism of toxicity, EPA has not made a common mechanism of toxicity finding as to saflufenacil and any other substances. For the purposes of this tolerance action, therefore, EPA has not assumed that saflufenacil has a common mechanism of toxicity with other substances. Safety factor for infants and children. EPA continues to conclude that there are reliable data to support the reduction of the Food Quality Protection Act (FQPA) safety factor from 10X to 1X. See Unit III.D. of the November 25, 2015, rulemaking for a discussion of the Agency's rationale for that determination. Aggregate risks and Determination of safety. EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing dietary exposure estimates to the acute population-adjusted dose (aPAD) and the chronic population-adjusted dose (cPAD).Short-, intermediate-, and chronic term aggregate risks are evaluated by comparing the estimated total food, water, and residential exposure to the appropriate points of departure to ensure that an adequate margin of exposure (MOE) exists. Acute dietary risks are below the Agency's level of concern of 100% of the aPAD; they are less than 1% of the aPAD for all infants (less than 1 year old), the population subgroup with the highest exposure estimate. Chronic dietary risks are below the Agency's level of concern of 100% of the cPAD; they are 26% of the cPAD for all infants (less than 1 year old), the population group with the highest exposure estimate. There is no short- or intermediate-term residential exposure expected since there are no proposed or previously registered residential uses of saflufenacil. Therefore, the acute and chronic aggregate risks consist only of the dietary risks from food and water, and as stated above, these are below the Agency's level of concern. Based on the lack of evidence of carcinogenicity in two adequate rodent carcinogenicity studies, saflufenacil is not expected to pose a cancer risk to humans. Therefore, based on the risk assessments and information described above, EPA concludes there is a reasonable certainty that no harm will result to the general population, or to infants and children, from aggregate exposure to saflufenacil residues, including its metabolites and degradates. More detailed information about the Agency's analysis can be found at https://www.regulations.gov in the document titled ``Saflufenacil. Section 3 Human Health Risk Assessment for Proposed New Uses on Mint (Peppermint and Spearmint) and Crop Group Conversions and Expansions'' in docket ID number EPA-HQ-OPP-2023-0080. IV. Other Considerations A. Analytical Enforcement Methodology For a discussion of the available analytical enforcement method, see Unit IV.A. of the February 2, 2024, rulemaking (89 FR 7291) (FRL- 11673-01-OCSPP). B. International Residue Limits In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level. The Codex has not established an MRL for residues of saflufenacil in or on mint. The Codex has established MRLs for saflufenacil in or on Fruit, citrus, group 10-10 at 0.01 ppm; Fruit, pome, group 11-10 at 0.01 ppm; Fruit, stone, [[Page 72997]] group 12-12 at 0.01 ppm; and Nut, tree, group 14-12 at 0.01 ppm. The U.S. tolerance levels are not harmonized with these Codex commodity MRLs. Based on available residue data, use by U.S. growers consistent with approved label instructions would result in residues that exceed the Codex MRL. Harmonizing with these Codex MRLs could put U.S. growers at risk of violative residues despite legal use of saflufenacil according to the label. C. Revisions to Petitioned-For Tolerances EPA is establishing the tolerance for residues of saflufenacil in or on mint at 0.03 ppm instead of the petitioner-proposed 0.04 ppm. As discussed in the Human Health Risk Assessment, the petitioner's proposed tolerance of 0.04 ppm includes the parent compound and three metabolites. However, since EPA determined that the tolerance expression should only include the parent compound and two metabolites, the residue calculation was corrected to reflect these residues. EPA is not establishing some of the petitioned-for tolerances because the petitioner withdrew the requests for tolerances of residues of saflufenacil in or on Barley subgroup 15-22B; Edible-podded bean subgroup 6-22A; Edible-podded pea subgroup 6-22B; Field corn subgroup 15-22C; Forage and hay of legume vegetable group 7-22 (except pea, hay); Forage, hay, stover and straw of cereal grain group 6-22 (except barley, chia, and wheat straw); Grain sorghum and millet subgroup 15- 22E; Pulses, dried shelled bean, except soybean, subgroup 6-22E; Pulses, dried shelled pea, subgroup 6-22F; Rapeseed subgroup 20A; Rice subgroup 15-22F; Succulent shelled pea subgroup 6-22C; Succulent shelled pea subgroup 6-22D; Sweet corn subgroup 15-22D and Wheat subgroup 15-22A. Therefore, EPA is not establishing these tolerances or removing the related tolerances as requested by IR-4. V. Conclusion Therefore, tolerances are established for residues of saflufenacil, including its metabolites and degradates, in or on Fruit, citrus, group 10-10 at 0.03 ppm; Fruit, pome, group 11-10 at 0.03 ppm; Fruit, stone, group 12-12 at 0.03 ppm; Mint, dried leaves at 0.03 ppm; Mint fresh leaves at 0.03 ppm; and Nut, tree, group 14-12 at 0.03 ppm. Upon the establishment of these tolerances, EPA is removing tolerances for residues of saflufenacil, including its metabolites and degradates, in or on fruit, citrus, group 10; fruit, pome, group 11; fruit, stone, group 12; nut, tree, group 14; and pistachio. VI. Statutory and Executive Order Reviews This action establishes tolerances under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled ``Regulatory Planning and Review'' (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled ``Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001), or Executive Order 13045, entitled ``Protection of Children from Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.), nor does it require any special considerations under Executive Order 12898, entitled ``Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations'' (59 FR 7629, February 16, 1994). Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerances in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), do not apply. This action directly regulates growers, food processors, food handlers, and food retailers, not States or Tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or Tribal governments, on the relationship between the National Government and the States or Tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian Tribes. Thus, the Agency has determined that Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 10, 1999), and Executive Order 13175, entitled ``Consultation and Coordination with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq.). This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note). VII. Congressional Review Act Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This action is not a ``major rule'' as defined by 5 U.S.C. 804(2). List of Subjects in 40 CFR Part 180 Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements. Dated: September 3, 2024. Charles Smith, Director, Registration Division, Office of Pesticide Programs. Therefore, for the reasons stated in the preamble, EPA is amending 40 CFR chapter I as follows: PART 180--TOLERANCES AND EXEMPTIONS FOR PESTICIDE CHEMICAL RESIDUES IN FOOD 0 1. The authority citation for part 180 continues to read as follows: Authority: 21 U.S.C. 321(q), 346a and 371. 0 2. In Sec. 180.649, amend the table in paragraph (a)(1) by: 0 a. Removing the entry for ``Fruit, citrus, group 10''. 0 b. Adding in alphabetical order the entry ``Fruit, citrus, group 10- 10''. 0 c. Removing the entry for ``Fruit, pome, group 11''. 0 d. Adding in alphabetical order the entry ``Fruit, pome, group 11-10''. 0 e. Removing the entry for ``Fruit, stone, group 12''. 0 f. Adding in alphabetical order the entries ``Fruit, stone, group 12- 12'', ``Mint, dried leaves'', and ``Mint, fresh leaves''. 0 g. Removing the entry for ``Nut, tree, group 14''. 0 h. Adding in alphabetical order the entry ``Nut, tree, group 14-12''. 0 i. Removing the entry for ``Pistachio.'' [[Page 72998]] The additions read as follows: Sec. 180.649 Saflufenacil; tolerances for residues. (a) * * * (1) * * * Table 1 to Paragraph (a)(1) ------------------------------------------------------------------------ Parts per Commodity million ------------------------------------------------------------------------ * * * * * Fruit, citrus, group 10-10.................................. 0.03 Fruit, pome, group 11-10.................................... 0.03 Fruit, stone, group 12-12................................... 0.03 * * * * * Mint, dried leaves.......................................... 0.03 Mint, fresh leaves.......................................... 0.03 Nut, tree, group 14-12...................................... 0.03 * * * * * ------------------------------------------------------------------------ * * * * * [FR Doc. 2024-20256 Filed 9-6-24; 8:45 am] BILLING CODE 6560-50-P

usgpo

2024-10-08T13:26:17.309930

FR

FR-2024-09-09/2024-20174

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72998-72999] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20174] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 423 Office of the Secretary 45 CFR Part 170 [CMS-4205-CN] RINs 0938-AV24 and 0938-AU96 Medicare Program; Medicare Prescription Drug Benefit Program; Health Information Technology Standards and Implementation Specifications; Correction AGENCY: Centers for Medicare & Medicaid Services (CMS), Office of the National Coordinator for Health Information Technology (ONC), Department of Health and Human Services (HHS). ACTION: Final rule; correction. ----------------------------------------------------------------------- SUMMARY: This document corrects typographical and technical errors in the final rule that appeared in the June 17, 2024, Federal Register, titled ``Medicare Program; Medicare Prescription Drug Benefit Program; Health Information Technology Standards and Implementation Specifications.'' The effective date of the final rule was July 17, 2024. DATES: Effective date: This correction is effective September 9, 2024. Applicability date: This correcting document is applicable to the start of the transition period for use of the National Council for Prescription Drug Programs (NCPDP) SCRIPT standard and NCPDP Formulary and Benefit (F&B) standard versions beginning July 17, 2024. FOR FURTHER INFORMATION CONTACT: Maureen Connors, (410) 786-4132--Part D Standards for Electronic Prescribing. Alexander Baker, (202) 260-2048--Health IT Standards. SUPPLEMENTARY INFORMATION: I. Background In FR Doc. FR 2024-12842 of June 17, 2024 (89 FR 51238), the final rule titled ``Medicare Program; Medicare Prescription Drug Benefit Program; Health Information Technology Standards and Implementation Specifications,'' there were a few typographical and technical errors that are identified and corrected in this correction. The corrections are applicable to the start of the transition period for use of the National Council for Prescription Drug Programs (NCPDP) SCRIPT standard and NCPDP (Formulary and Benefit) F&B standard versions beginning July 17, 2024, as if they had been included in the document that appeared in the June 17, 2024 Federal Register. II. Summary of Errors On page 51252, we made typographical errors in our discussion of the start dates for the transition periods for use of the NCPDP SCRIPT standard and NCPDP F&B standard versions, and in section IV of this document we correct these errors. On page 51255, we made errors in our discussion of how non-NCPDP members may review and inspect NCPDP standards that have been incorporated by reference, and in section IV of this document we correct this error. III. Waivers of Proposed Rulemaking and Delay in Effective Date Under 5 U.S.C. 553(b) of the Administrative Procedure Act (the APA), the agency is required to publish a notice of the proposed rule in the Federal Register before the provisions of a rule take effect. Specifically, 5 U.S.C. 553 requires the agency to publish a notice of the proposed rule in the Federal Register that includes a reference to the legal authority under which the rule is proposed, and the terms and substance of the proposed rule or a description of the subjects and issues involved. Further, 5 U.S.C. 553 requires the agency to give interested parties the opportunity to participate in the rulemaking through public comment on a proposed rule. Similarly, section 1871(b)(1) of the Social Security Act (the Act) requires the Secretary to provide for notice of the proposed rule in the Federal Register and provide a period of not less than 60 days for public comment for rulemaking to carry out the administration of the Medicare program under title XVIII of the Act. In addition, section 553(d) of the APA and section 1871(e)(1)(B)(i) of the Act mandate a 30-day delay in effective date after issuance or publication of a rule. Sections 553(b)(B) and 553(d)(3) of the APA provide for exceptions from the APA notice and comment and delay in effective date requirements. In cases in which these exceptions apply, sections 1871(b)(2)(C) and 1871(e)(1)(B)(ii) of the Act provide exceptions from the notice, 60-day comment period, and delay in effective date requirements of the Act as well. Section 553(b)(B) of the APA and section 1871(b)(2)(C) of the Act authorize an agency to dispense with normal notice and comment rulemaking procedures for good cause if the agency makes a finding that the notice and comment process is impracticable, unnecessary, or contrary to the public interest. In addition, both section 553(d)(3) of the APA and section 1871(e)(1)(B)(ii) of the Act allow the agency to avoid the 30-day delay in effective date where such delay is contrary to the public interest and the agency includes a statement of support. We believe that this correction does not constitute a rule that would be subject to the notice and comment or delayed effective date requirements of the APA or section 1871 of the Act. This document corrects typographical and technical errors in the preamble of the final rule but does not make substantive changes to the policies that were adopted in the final rule. As a result, this correction is intended to ensure that the information in the final rule accurately reflects the policies adopted in that final rule. In addition, even if this were a rule to which the notice and comment procedures and delayed effective date requirements applied, we find that there is good cause to waive such requirements. Undertaking further notice and comment procedures to incorporate the preamble corrections in this document into the final rule or delaying the effective date would be unnecessary, as we are not altering our policies or regulatory changes, but rather, we are simply implementing the policies and regulatory changes that we previously proposed, requested comment on, and subsequently [[Page 72999]] finalized. This final rule correction is intended solely to ensure that the final rule accurately reflects policies and regulatory changes that have been adopted through rulemaking. Furthermore, such notice and comment procedures would be contrary to the public interest because it is in the public's interest to ensure that the final rule accurately reflects our policies and regulatory changes. Therefore, we believe we have good cause to waive the notice and comment and effective date requirements. IV. Corrections In FR Doc. FR 2024-12842 appearing on page 51238, in the Federal Register of Monday, June 17, 2024, make the following corrections: 0 1. On page 51252, third column, first full paragraph-- 0 a. Lines 14 and 15, the date ``July 7, 2024'' is corrected to read ``July 17, 2024''. 0 b. Line 29, the date ``July 7, 2024'' is corrected to read ``July 17, 2024.'' 0 2. On page 51255, second column, sixth full paragraph, lines 4 through 6, the phrase ``Non-NCPDP members may obtain these materials for information purposes by contacting'' is corrected to read ``Non-NCPDP members may arrange to inspect these materials by contacting''. Elizabeth J. Gramling, Executive Secretary to the Department, Department of Health and Human Services. [FR Doc. 2024-20174 Filed 9-6-24; 8:45 am] BILLING CODE 4120-02-P

usgpo

2024-10-08T13:26:17.439442

FR

FR-2024-09-09/2024-20154

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Pages 72999-73002] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20154] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE INTERIOR Bureau of Land Management 43 CFR Part 8360 [BLM_CO_FRN_MO4500179563] Travel Management on Public Lands in Montrose, Delta, San Miguel, and Ouray Counties, CO AGENCY: Bureau of Land Management, Interior. ACTION: Final supplementary rule. ----------------------------------------------------------------------- SUMMARY: The Bureau of Land Management (BLM) is finalizing a supplementary rule to regulate travel management decisions in the Dry Creek Travel Management Plan (TMP) issued December 1, 2009; the Ridgway TMP issued May 10, 2013; and the Norwood-Burn Canyon TMP issued November 14, 2014. The supplementary rule will apply to public lands in Montrose, Delta, San Miguel, and Ouray counties, Colorado, administered by the BLM Uncompahgre Field Office. DATES: The final supplementary rule is effective on October 9, 2024. ADDRESSES: You may send inquiries by mail, electronic mail, or hand- delivery. Mail or hand delivery: Caroline Kilbane, Outdoor Recreation Planner, BLM Uncompahgre Field Office, 2505 S Townsend Ave., Montrose, CO 81401. Electronic mail: [email protected]. FOR FURTHER INFORMATION CONTACT: Caroline Kilbane, Outdoor Recreation Planner, at (970) 240-5300 or by email at [email protected]. Individuals in the United States who are deaf, deafblind, hard of hearing or have a speech disability may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications relay services. Individuals outside the United States should use the relay services offered within their country to make international calls to the point-of- contact in the United States. SUPPLEMENTARY INFORMATION: I. Background The BLM is establishing this supplementary rule under the authority of 43 CFR 8365.1-6, which authorizes BLM State Directors to establish supplementary rules for the protection of persons, property, and public lands and resources. In March 2007, the BLM published in the Federal Register a Notice of Intent to Amend the Uncompahgre Basin and San Juan/San Miguel Resource Management Plans (RMPs) and prepare the Dry Creek Comprehensive Travel Management Plan, Colorado (72 FR 10243). The RMP amendment, approved in June 2010, changed off-highway vehicle designations in identified areas from ``Open or Limited'' to ``Limited to existing routes year-long or with seasonal restrictions'' until further route-by-route planning could be completed. The BLM issued decision records for the Dry Creek TMP on December 1, 2009; the Ridgway TMP on May 13, 2013; and the Norwood-Burn Canyon TMP on November 14, 2014. The BLM approved the TMPs after multiple public comment opportunities and coordination with local government. On April 2, 2020, the BLM approved a revised Uncompahgre RMP that includes the Dry Creek, Ridgway, and Norwood-Burn Canyon travel management areas (TMAs) and brings forward from the TMPs the travel management decisions for these areas. This rule will implement and enforce several key decisions in the TMPs to protect natural resources, enhance public safety, and help improve habitat quality, big-game winter range, and migration corridors. The rule does not affect other existing rules. The rule applies to more than 121,000 acres of public land within the Dry Creek, Ridgway, and Norwood-Burn Canyon TMAs administered by the BLM Uncompahgre Field Office in Montrose, Delta, San Miguel, and Ouray counties, Colorado. This rule is necessary to regulate travel management decisions in the TMPs that restrict certain activities and define allowable uses intended to enhance public safety, protect natural and cultural resources, eliminate non-motorized impacts on sensitive species habitat, and reduce conflicts among public land users. The rule makes enforceable restrictions limiting the operation of mechanized vehicles to designated travel routes identified in the TMPs, with the following exemptions: (1) big game hunters are permitted to use mechanized game carts off designated travel routes outside of designated wilderness and wilderness study areas only when necessary to retrieve big game animals during authorized hunting seasons; (2) mechanized vehicles are permitted to pull off designated travel routes up to one vehicle-width from the edge of a roadway to accommodate parking, dispersed camping, or general recreation; and (3) in the Dry Creek TMA, mechanized vehicles are permitted to pull off within 300 feet of a designated travel route in a designated camping area identified by a BLM sign or map. The rule makes enforceable seasonal restrictions on travel in certain priority big game wintering habitats identified by the BLM Uncompahgre Field Office, in consultation with Colorado Parks and Wildlife, as the most important big game winter use areas within the TMAs. These seasonal restrictions allow for human access during non- restricted periods while closing key areas during critical seasons to preserve the health of big game herds. The rule makes enforceable authorized dispersed camping in the Norwood-Burn Canyon and Dry Creek TMAs unless a BLM sign or map identifies an area as closed to such use, as well as authorized camping in designated campgrounds in the Dry Creek TMA identified by a BLM sign or map. The rule implements and makes enforceable the closure of the Ridgway TMA to overnight use. In the Ridgway TMA, the rule makes enforceable the requirement that pets be leashed in the Uncompahgre Riverway Area and at all trailheads, as identified by BLM signs or maps, and under audible or physical [[Page 73000]] control in all other areas. In the Norwood-Burn Canyon TMA, the rule makes enforceable the requirement that pets be leashed at trailheads, as identified by BLM signs or maps, and under audible or physical control in all other areas. In the Dry Creek TMA, the rule makes enforceable the requirement that pets be under audible or physical control. II. Discussion of Public Comments and Final Supplementary Rule The BLM published a proposed supplementary rule on November 28, 2022 (87 FR 72954), soliciting public comments for 60 days. During the comment period, the BLM received one submission from a conservation organization. The comment supported the proposed rule and expressed support for protecting big game wintering habitat. No changes were made to the final supplementary rule as a result of the public comment. The final rule updates Rule No. 1 under the Ridgway TMA Prohibited Acts section to clarify that the big game seasonal closure applies to trail uses on designated routes only and is not an area closure. III. Procedural Matters Regulatory Planning and Review (Executive Orders (E.O.s) 12866 and 13563) E.O. 12866, as amended by E.O. 14094, provides that the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget will review all significant rules. This rule is not significant under E.O. 12866. The rule will not have an effect of $100 million or more on the economy. The rule does not adversely affect in a material way the economy; productivity; competition; jobs; the environment; public health or safety; or State, local, or Tribal governments or communities. The rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. The rule will not materially alter the budgetary effects of entitlements, grants, user fees, or loan programs, or the rights or obligations of their recipients; nor does it raise novel legal or policy issues. The rule will not affect legal commercial activity; it merely imposes limitations on certain recreational activities on certain public lands to protect natural resources and enhance public safety. E.O. 13563 reaffirms the principles of E.O. 12866 while calling for improvement in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The Executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements. Regulatory Flexibility Act Congress enacted the Regulatory Flexibility Act (RFA) of 1980, as amended (5 U.S.C. 601-612), to ensure that government regulations do not unnecessarily or disproportionately burden small entities. The RFA requires a regulatory flexibility analysis if a rule would have a significant economic impact, either detrimental or beneficial, on a substantial number of small entities. This rule has no effect on business entities of any size and merely imposes reasonable restrictions on certain recreational activities on certain public lands to protect natural resources and the environment and human health and safety. Therefore, the BLM has determined under the RFA this rule does not have a significant economic impact on a substantial number of small entities. Congressional Review Act This supplementary rule does not constitute a ``major rule'' as defined at 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. The rule will not: (a) Have an annual effect on the economy of $100 million or more; (b) Cause a major increase in costs or prices for consumers; individual industries; Federal, State, or local agencies; or geographic regions; or (c) Have significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign- based enterprises in domestic and export markets. This rule merely imposes reasonable restrictions on certain recreational activities on certain public lands to protect natural resources and the environment and human health and safety. Unfunded Mandates Reform Act The rule does not impose an unfunded mandate on State, local, or Tribal governments in the aggregate, or the private sector, of more than $100 million per year; nor does it have a significant or unique effect on small governments. The rule merely imposes reasonable restrictions on certain recreational activities on certain public lands to protect natural resources and the environment and human health and safety. Therefore, the BLM is not required to prepare a statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq.). Takings (E.O. 12630) The rule does not constitute a Government action capable of interfering with constitutionally protected property rights. The rule does not address property rights in any form and does not cause the impairment of constitutionally protected property rights. Therefore, the BLM has determined that the rule does not cause a ``taking'' of private property or require further discussion of takings implications under this Executive order. Federalism (E.O. 13132) The rule does not have a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, the BLM has determined that this rule does not have sufficient federalism implications to warrant preparation of a Federalism Assessment. Civil Justice Reform (E.O. 12988) This rule complies with the requirements of E.O. 12988. Specifically, this rule: (a) Meets the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and (b) Meets the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards. Consultation and Coordination With Indian Tribal Governments (E.O. 13175) The Department of the Interior strives to strengthen its government-to-government relationship with Indian Tribes through a commitment to consultation with Indian Tribes and recognition of their right to self-governance and Tribal sovereignty. [[Page 73001]] In accordance with Executive Order 13175, the BLM has found this rule does not include policies that have Tribal implications and will have no bearing on trust lands or lands for which title is held in fee status by Indian Tribes or U.S. Government-owned lands managed by the Bureau of Indian Affairs. Therefore, consultation under the Department's Tribal consultation policy is not required. Paperwork Reduction Act This final supplementary rule does not contain information collection requirements the Office of Management and Budget must approve under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3521. National Environmental Policy Act (NEPA) The supplementary rule implements key decisions in the TMPs. During the NEPA review for the TMPs, the BLM analyzed the substance of the supplementary rule in three different environmental assessments (EAs): DOI-BLM-CO-SO50-2008-033 EA for the Dry Creek TMP (decision record signed December 1, 2009); DOI-BLM-CO-SO50-2011-0011 EA for the Ridgway TMP (decision record signed May 13, 2013); and DOI-BLM-CO-SO50-2012-019 EA for the Norwood-Burn Canyon TMP (decision record signed November 14, 2014). Electronic copies of the decision records for each TMP are on file at the BLM office at the address specified in the ADDRESSES section above. The BLM completed a determination of NEPA adequacy (DOI- BLM-CO-S050-2021-0045 DNA) confirming that the analyses in the TMP EAs, and the associated public involvement procedures, as well as the Uncompahgre Field Office RMP, are sufficient to support this rulemaking. Effects on the Energy Supply (E.O. 13211) This rule does not comprise a significant energy action and does not have an adverse effect on energy supply, production, or consumption and has no connection with energy policy. Author The principal author of this supplementary rule is Caroline Kilbane, Outdoor Recreation Planner, BLM, Uncompahgre Field Office. IV. Final Rule For the reasons stated in the preamble, and under the authority of 43 U.S.C. 1740 and 43 CFR 8365.1-6, the Colorado State Director, Bureau of Land Management (BLM), establishes supplementary rules for public lands managed by the BLM in the Dry Creek, Ridgway, and Norwood-Burn Canyon Travel Management Areas located in Montrose, Delta, San Miguel, and Ouray counties, Colorado, to read as follows: Definitions Camping means erecting a tent or a shelter of natural or synthetic materials; preparing a sleeping bag or other bedding material for use; or parking a motor vehicle, motor home, or trailer for the purpose or apparent purpose of overnight occupancy. Designated travel routes means roads, primitive roads, and trails open or limited to specified modes of travel and identified on: (1) a BLM sign; or (2) a map of designated roads and trails that is maintained and available for public inspection at the BLM Uncompahgre Field Office, Colorado. Designated routes are open or limited to public use in accordance with any limits and restrictions as are specified in the Uncompahgre Resource Management Plan (RMP), the Dry Creek Travel Management Plan (TMP), the Ridgway TMP, the Norwood-Burn Canyon TMP, in future decisions implementing the RMP, or in this supplementary rule. Restrictions may include signs or physical barriers such as gates, fences, posts, branches, or rocks. Mechanized vehicle means a vehicle using a mechanical device not powered by a motor, such as a bicycle. Pet means any domesticated or tamed animal that is kept as a companion. Prohibited Acts Dry Creek Travel Management Area (TMA) Prohibited Acts (1) You must not operate or possess a mechanized vehicle except on designated travel routes, unless: (a) You are using a mechanized game cart for the purpose of retrieving a large game animal during authorized hunting seasons, outside of congressionally designated wilderness areas and wilderness study areas; (b) You are using a mechanized vehicle for the purpose of parking within one vehicle-width of the edge of a designated travel route for dispersed camping, where allowed, or general recreation; or (c) You are using a mechanized vehicle in a designated camping area as designated by a BLM sign or map and are within 300 feet of the designated travel route. (2) You must not operate or possess a mechanized vehicle on specific routes that cross priority big game wintering habitat from December 1 to April 15 or December 1 to March 31, as designated by a BLM sign or map, except to access private inholdings with proper authorization. (3) Pets must be controlled by physical or audible means. Ridgway TMA Prohibited Acts (1) You must not operate or possess a mechanized vehicle except on designated travel routes, unless you are using a mechanized game cart for the purpose of retrieving a large game animal during authorized hunting seasons. (2) You must not operate or possess a mechanized vehicle or travel by foot or horse on specific routes that cross priority big game wintering habitat from December 1 to April 30, as designated by a BLM sign or map, except to access private inholdings with proper authorization and within the Uncompahgre Riverway Area. (3) Pets must remain on leashes within the Uncompahgre Riverway Area and at trailheads designated by a BLM sign or map. In all other areas, pets must be controlled by physical or audible means. (4) Overnight use is not allowed. (5) Mechanized vehicles must be parked within one vehicle-width of the edge of a designated travel route. Norwood-Burn Canyon TMA Prohibited Acts (1) You must not operate or possess a mechanized vehicle except on designated travel routes, unless: (a) You are using a mechanized game cart for the purpose of retrieving a large game animal during authorized hunting seasons; or (b) You are using a mechanized vehicle for the purpose of parking within one vehicle-width of the edge of a designated travel route for dispersed camping or general recreation. (2) You must not operate or possess a mechanized vehicle on any route that crosses priority big game wintering habitat from December 1 to April 30, as designated by a BLM sign or map, except to access private inholdings with proper authorization. (3) Dispersed camping is allowed unless closed by a BLM sign or map. (4) Pets must remain on leashes at trailheads designated by BLM signs or maps. In all other areas, pets must be controlled by physical or audible means. Exemptions The following persons are exempt from this supplementary rule: any Federal, State, or local officers or employees acting within the scope of [[Page 73002]] their duties; members of any organized law enforcement, military, rescue, or fire-fighting force performing an official duty; and persons, agencies, municipalities, or companies holding an existing special-use permit and operating within the scope of their permit. Enforcement Any person who violates any part of the final supplementary rule may be tried before a United States Magistrate and fined in accordance with 18 U.S.C. 3571, imprisoned no more than 12 months under 43 U.S.C. 1733(a) and 43 CFR 8360.0-7, or both. In accordance with 43 CFR 8365.1- 7, State or local officials may also impose penalties for violations of Colorado and local law. (Authority: 43 U.S.C. 1733, 43 U.S.C. 1740; 43 CFR 8365.1-6) Douglas J. Vilsack, BLM Colorado State Director. [FR Doc. 2024-20154 Filed 9-6-24; 8:45 am] BILLING CODE 4331-16-P

usgpo

2024-10-08T13:26:17.533737

FR

FR-2024-09-09/2024-20223

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Rules and Regulations] [Page 73002] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20223] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 679 [Docket No. 240304-0068; RTID 0648-XD951] Fisheries of the Exclusive Economic Zone Off Alaska; Pacific Ocean Perch in the Western Aleutian District of the Bering Sea and Aleutian Islands Management Area AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Temporary rule; closure. ----------------------------------------------------------------------- SUMMARY: NMFS is prohibiting directed fishing for Pacific ocean perch in the Western Aleutian district (WAI) of the Bering Sea and Aleutian Islands management area (BSAI) by vessels participating in the BSAI trawl limited access sector fishery. This action is necessary to prevent exceeding the 2024 total allowable catch (TAC) of Pacific ocean perch in the WAI allocated to vessels participating in the BSAI trawl limited access sector fishery. DATES: Effective 1200 hours, Alaska local time (A.l.t.), September 4, 2024, through 2400 hours, A.l.t., December 31, 2024. FOR FURTHER INFORMATION CONTACT: Steve Whitney, 907-586-7228. SUPPLEMENTARY INFORMATION: NMFS manages the groundfish fishery in the BSAI exclusive economic zone according to the Fishery Management Plan (FMP) for Groundfish of the BSAI prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). Regulations governing fishing by U.S. vessels in accordance with the BSAI FMP appear at subpart H of 50 CFR parts 600 and 679. The 2024 TAC of Pacific ocean perch in the WAI, allocated to vessels participating in the BSAI trawl limited access sector fishery was established as a directed fishing allowance of 223 metric tons by the final 2024 and 2025 harvest specifications for groundfish in the BSAI (89 FR 17287, March 11, 2024). In accordance with Sec. 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for Pacific ocean perch in the WAI by vessels participating in the BSAI trawl limited access sector fishery. While this closure is effective, the maximum retainable amounts at Sec. 679.20(e) and (f) apply at any time during a trip. Classification NMFS issues this action pursuant to section 305(d) of the Magnuson- Stevens Act. This action is required by 50 CFR part 679, which was issued pursuant to section 304(b), and is exempt from review under Executive Order 12866. Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be impracticable and contrary to the public interest, as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion, and would delay the closure of Pacific ocean perch directed fishery in the WAI for vessels participating in the BSAI trawl limited access sector fishery. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of September 3, 2024. The Assistant Administrator for Fisheries, NOAA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment. Authority: 16 U.S.C. 1801 et seq. Dated: September 4, 2024. Lindsay Fullenkamp, Acting Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. 2024-20223 Filed 9-4-24; 4:15 pm] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:17.563276

FR

FR-2024-09-09/2024-20160

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73003-73009] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20160] ======================================================================== Proposed Rules Federal Register ________________________________________________________________________ This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. ======================================================================== Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Proposed Rules [[Page 73003]] DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2024-2136; Project Identifier AD-2023-00296-T] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). ----------------------------------------------------------------------- SUMMARY: The FAA proposes to supersede Airworthiness Directive (AD) 2019-14-13, which applies to all The Boeing Company Model 767-200, - 300, -300F, and -400ER series airplanes. AD 2019-14-13 was prompted by reports of uncommanded fore and aft movement of the Captain's and First Officer's seats. AD 2019-14-13 requires identifying the part number, and the serial number if applicable, of the Captain's and First Officer's seats, and applicable on-condition actions for affected seats. AD 2019-14-13 also requires a one-time detailed inspection and repetitive checks of the horizontal movement system (HMS) of the Captain's and First Officer's seats, and applicable on-condition actions. AD 2019-14-13 also provides an optional terminating action for the repetitive actions for certain seats. Since the FAA issued AD 2019- 14-13, the FAA has determined that additional seats are affected by the unsafe condition. This proposed AD would retain the actions required by AD 2019-14-13 and adds an inspection of previously omitted part numbers. The FAA is proposing this AD to address the unsafe condition on these products. DATES: The FAA must receive comments on this proposed AD by October 24, 2024. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: Federal eRulemaking Portal: Go to regulations.gov. Follow the instructions for submitting comments. Fax: 202-493-2251. Mail: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2024-2136; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this NPRM, any comments received, and other information. The street address for Docket Operations is listed above. Material Incorporated by Reference: For Boeing material identified in this proposed AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Boulevard, MC 110-SK57, Seal Beach, CA 90740-5600; phone 562-797-1717; website myboeingfleet.com. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at regulations.gov by searching for and locating Docket No. FAA-2024-2136. FOR FURTHER INFORMATION CONTACT: Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone 206-231-3986; email [email protected]. SUPPLEMENTARY INFORMATION: Comments Invited The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES. Include ``Docket No. FAA-2024-2136; Project Identifier AD-2023-00296-T'' at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this proposal because of those comments. Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM. Confidential Business Information CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as ``PROPIN.'' The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone 206-231-3986; email [email protected]. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking. Background The FAA issued AD 2019-14-13, Amendment 39-19691 (84 FR 38855, August 8, 2019) (AD 2019-14-13), for all The Boeing Company Model 767- 200, -300, -300F, and -400ER series airplanes. AD 2019-14-13 was prompted by reports of uncommanded fore and aft movement of the Captain's and First Officer's seats. AD 2019-14-13 requires an identification of the part number, and if applicable the serial number, of the Captain's and First Officer's seats, and applicable on-condition actions. AD 2019-14-13 also requires a one-time detailed inspection and repetitive checks of the HMS of the [[Page 73004]] Captain's and First Officer's seats, and applicable on-condition actions. AD 2019-14-13 also provides an optional terminating action for the repetitive checks of the HMS for certain airplanes. The FAA issued AD 2019-14-13 to address uncommanded fore and aft movement of the Captain's and First Officer's seats. An uncommanded fore or aft seat movement during a critical part of a flight, such as takeoff or landing, could cause a flight control obstruction or unintended flight control input, which could result in the loss of the ability to control the airplane. Actions Since AD 2019-14-13 Was Issued Since the FAA issued AD 2019-14-13, Boeing and the seat supplier (Ipeco) determined that certain seat part numbers were inadvertently omitted from the service information required by AD 2019-14-13. Ipeco subsequently updated their service information to include the additional part numbers, and Boeing updated their service information as well. Based on this, the FAA has determined that additional seats are affected by the unsafe condition. FAA's Determination The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design. Material Incorporated by Reference Under 1 CFR Part 51 The FAA reviewed Boeing Special Attention Service Bulletin 767-25- 0539, Revision 2, dated January 27, 2023. This material describes procedures for identification of the part number, and the serial number if applicable, of the Captain's and First Officer's seats, and applicable on-condition actions. On-condition actions include an inspection of each seat's fore and aft and vertical manual control levers for looseness, installation of serviceable seats, and a seat operational test after any cable adjustment. This material also adds Ipeco seat part numbers 3A258-0007-01-1Z, 3A258-0008-01-1Z, 3A258-0041- 01-1Z, 3A258-0042-01-1Z, and 3A090-0078-04-1. This material also adds Ipeco seat part numbers 3A090-0078-03-1 and 3A090-0078-05-1, that were previously removed in Boeing Special Attention Service Bulletin 767-25- 0539, Revision 1, dated January 9, 2014. The FAA also reviewed Boeing Special Attention Service Bulletin 767-25-0549, Revision 2, dated January 27, 2023. This material describes procedures for a detailed inspection and repetitive checks of the HMS (including for any Artus part and amendment numbers of the horizontal actuator of the HMS) for the Captain's and First Officer's seats for findings (e.g., evidence of cracks, scores, corrosion, dents, deformation, or visible wear; and incorrectly assembled microswitch assemblies, actuators, and limit switches), and applicable on-condition actions. The on-condition actions include clearing the seat tracks of foreign object debris (FOD), overhauling the HMS, and replacing the horizontal actuator. The material also describes procedures for an optional terminating action for the repetitive checks by installing a serviceable Captain's or First Officer's seat. The service information adds Ipeco seat part number 3A090-0078-03-1, 3A090-0078-04-1, and 3A090-0078-05-1. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES section. Proposed AD Requirements in This NPRM Although this proposed AD does not explicitly restate the requirements of AD 2019-14-13, this proposed AD would retain all of the requirements of AD 2019-14-13. Those requirements are referenced in the service information identified previously, which, in turn, is referenced in paragraphs (g) and (h) of this proposed AD. This proposed AD would require accomplishing the actions specified in the service information already described, except for any differences identified as exceptions in the regulatory text of this proposed AD. For information on the procedures and compliance times, see this service information at regulations.gov under Docket No. FAA- 2024-2136. Acceptable Methods of Compliance The FAA has determined that the actions required by paragraphs (g) and (h) of this AD are not required, under specific conditions, e.g., if it can be shown through maintenance records that the required actions have already been accomplished by the previous revision of the service information and specific conditions have been met. Paragraph (j) of this AD identifies these conditions. Complying with these conditions adequately addresses the unsafe condition identified in this proposed AD. Costs of Compliance The FAA estimates that this AD, if adopted as proposed, would affect 694 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD: Estimated Costs for Required Actions per Seat ---------------------------------------------------------------------------------------------------------------- Cost on U.S. Action Labor cost Parts cost Cost per product operators ---------------------------------------------------------------------------------------------------------------- Identification, seat (retained 1 work-hour x $85 $0 $85................ $117,980. actions from AD 2019-14-13). per hour = $85. Detailed inspection, HMS 1 work-hour x $85 $0 $85................ Up to $117,980. (retained actions from AD 2019- per hour = $85. 14-13). Checks, HMS (retained from AD 2 work-hours x $85 0 $170, per check Up to $235,960, per 2019-14-13). per hour = $170, cycle. check cycle. per check cycle. Identification, seat (new 1 work-hour x $85 0 $85................ Up to $117,980. proposed actions). per hour = $85. ---------------------------------------------------------------------------------------------------------------- The FAA estimates the following costs to do any necessary on- condition actions that will be required. The FAA has no way of determining the number of aircraft that might need these on-condition actions: [[Page 73005]] Estimated Costs of On-Condition Actions * ---------------------------------------------------------------------------------------------------------------- Action Labor cost Parts cost Cost per product ---------------------------------------------------------------------------------------------------------------- Adjustment, control lever cable...... 1 work-hour x $85 per $0..................... $85. hour = $85. Overhaul, HMS........................ 11 work-hours x $85 per Up to $5,824........... Up to $6,759. hour = $935. Inspection of each seat's fore/aft 1 work-hour x $85 per $0..................... $85 per seat. and vertical manual control levers. hour = $85 per seat. Installation of serviceable seats.... 1 work-hour x $85 per $0..................... $85 per seat. hour = $85 per seat. Clearing FOD......................... 1 work-hour x $85 per $0..................... $85 per seat. hour = $85 per seat. Replacement of the horizontal 1 work-hour x $85 per $7,937 per actuator.... $8,022 per actuator. actuator. hour = $85 per actuator. Operational test, adjusted control 1 work-hour x $85 per $0..................... $85 per seat. lever cable. hour = $85 per seat. ---------------------------------------------------------------------------------------------------------------- * The estimated cost for tooling to align an affected seat for adjustment of the control lever cable is up to $46,064. The FAA has received no definitive data that would enable the FAA to provide cost estimates for the optional terminating action for the repetitive checks specified in this proposed AD. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify this proposed regulation: (1) Is not a ``significant regulatory action'' under Executive Order 12866, (2) Would not affect intrastate aviation in Alaska, and (3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by: 0 a. Removing Airworthiness Directive 2019-14-13, Amendment 39-19691 (84 FR 38855, August 8, 2019), and 0 b. Adding the following new Airworthiness Directive: The Boeing Company: Docket No. FAA-2024-2136; Project Identifier AD- 2023-00296-T. (a) Comments Due Date The FAA must receive comments on this airworthiness directive (AD) by October 24, 2024. (b) Affected ADs This AD replaces AD 2019-14-13, Amendment 39-19691 (84 FR 38855, August 8, 2019) (AD 2019-14-13). (c) Applicability (1) This AD applies to all The Boeing Company Model 767-200, - 300, -300F, and -400ER series airplanes, certificated in any category. (2) Installation of Supplemental Type Certificate (STC) ST01920SE does not affect the ability to accomplish the actions required by this AD. Therefore, for airplanes on which STC ST01920SE is installed, a ``change in product'' alternative method of compliance (AMOC) approval request is not necessary to comply with the requirements of 14 CFR 39.17. (d) Subject Air Transport Association (ATA) of America Code 25, Equipment/ furnishings. (e) Unsafe Condition This AD was prompted by reports of uncommanded fore and aft movement of the Captain's and First Officer's seats. The FAA is issuing this AD to address uncommanded fore and aft movement of the Captain's and First Officer's seats. The unsafe condition, if not addressed, could result in an uncommanded fore or aft seat movement during a critical part of a flight, such as takeoff or landing, and could cause a flight control obstruction or unintended flight control input, which could result in the loss of the ability to control the airplane. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Seat Part Number Identification and On-Condition Actions Except as specified in paragraphs (i) and (j) of this AD: At the applicable time specified in the ``Compliance,'' paragraph of Boeing Special Attention Service Bulletin 767-25-0539, Revision 2, dated January 27, 2023, do an inspection to determine the part number, and serial number as applicable, of the Captain's and First Officer's seats, and all applicable on-condition actions, in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 767-25-0539, Revision 2, dated January 27, 2023. A review of airplane maintenance records is acceptable in lieu of this inspection if the part number and serial number of the Captain's and First Officer's seats can be conclusively determined from that review. [[Page 73006]] (h) Detailed Inspection, and Repetitive Checks of Horizontal Movement System and On-Condition Actions Except as specified by paragraphs (i) and (j) of this AD: At the applicable times specified in the ``Compliance,'' paragraph of Boeing Special Attention Bulletin 767-25-0549, Revision 2, dated January 27, 2023, do all applicable actions identified as ``RC'' (required for compliance) in, and in accordance with, the Accomplishment Instructions of Boeing Special Attention Bulletin 767-25-0549, Revision 2, dated January 27, 2023. Actions identified as terminating action in Boeing Special Attention Bulletin 767-25- 0549, Revision 2, dated January 27, 2023, terminate the applicable required actions of this AD, provided the terminating action is done in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 767-25-0549, Revision 2, dated January 27, 2023. (i) Exceptions to Service Information Specifications (1) Where the ``Compliance'' paragraph of Boeing Special Attention Bulletin 767-25-0549, Revision 2, dated January 27, 2023, refers to the original issue date of the service bulletin, this AD requires using September 12, 2019 (the effective date of AD 2019-14- 13). (2) Where the ``Compliance'' paragraph of Boeing Special Attention Bulletin 767-25-0549, Revision 2, dated January 27, 2023, refers to the Revision 2 date of the service bulletin, this AD requires using the effective date of this AD. (3) Where the ``Compliance'' paragraph of Boeing Special Attention Service Bulletin 767-25-0539, Revision 2, dated January 27, 2023, refers to within 72 months after the original issue date of the service bulletin, this AD requires using within 36 months after September 12, 2019 (the effective date of AD 2019-14-13). (4) Where the ``Compliance'' paragraph of Boeing Special Attention Bulletin 767-25-0539, Revision 2, dated January 27, 2023, refers to the Revision 2 date of the service bulletin, this AD requires using the effective date of this AD. (j) Acceptable Conditions for Compliance If the airplane records show that an Ipeco Captain's or First Officer's seat meets all criteria specified in any row in figure 1 to paragraph (j) of this AD, the actions specified in paragraphs (g) and (h) of this AD are not required for that seat. Figure 1 to Paragraph (j)--Alternative Acceptable Seats [[Page 73007]] [GRAPHIC] [TIFF OMITTED] TP09SE24.004 [[Page 73008]] [GRAPHIC] [TIFF OMITTED] TP09SE24.005 (k) Alternative Methods of Compliance (AMOCs) (1) The Manager, AIR-520, Continued Operational Safety Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (l) of this AD. Information may be emailed to: [email protected]. (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by The Boeing Company Organization Designation Authorization (ODA) that has been authorized by the Manager, AIR- 520, Continued Operational Safety Branch, FAA, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD. (4) AMOCs approved for AD 2019-14-13 are approved as AMOCs for the corresponding provisions of Boeing Special Attention Service Bulletin 767-25-0539, Revision 2, dated January 27, 2023, and Boeing Special Attention Service Bulletin 767-25-0549, Revision 2, dated January 27, 2023, that are required by paragraphs (g) and (h) of this AD. (5) For service information that contains steps that are labeled as Required for Compliance (RC), the provisions of paragraphs (k)(5)(i) and (ii) of this AD apply. (i) The steps labeled as RC, including substeps under an RC step and any figures identified in an RC step, must be done to comply with the AD. If a step or substep is labeled ``RC Exempt,'' then the RC requirement is removed from that step or substep. An AMOC is required for any deviations to RC steps, including substeps and identified figures. (ii) Steps not labeled as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the RC steps, including substeps and identified figures, can still be done as specified, and the airplane can be put back in an airworthy condition. (l) Related Information For more information about this AD, contact Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des [[Page 73009]] Moines, WA 98198; phone 206-231-3986; email [email protected]. (m) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise. (i) Boeing Special Attention Service Bulletin 767-25-0539, Revision 2, dated January 27, 2023. (ii) Boeing Special Attention Service Bulletin 767-25-0549, Revision 2, dated January 27, 2023. (3) For Boeing material identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Boulevard, MC 110-SK57, Seal Beach, CA 90740-5600; phone 562-797-1717; website myboeingfleet.com. (4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. Issued on August 26, 2024. Suzanne Masterson, Deputy Director, Integrated Certificate Management Division, Aircraft Certification Service. [FR Doc. 2024-20160 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:17.653439

FR

FR-2024-09-09/2024-20244

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73009-73014] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20244] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2024-1896; Project Identifier MCAI-2023-00978-T] RIN 2120-AA64 Airworthiness Directives; MHI RJ Aviation ULC (Type Certificate Previously Held by Bombardier Inc.) Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). ----------------------------------------------------------------------- SUMMARY: The FAA proposes to adopt a new airworthiness directive (AD) for certain MHI RJ Aviation ULC Model CL-600-2B19 (Regional Jet Series 100 and 440), CL-600-2C10 (Regional Jet Series 700, 701, and 702), CL- 600-2C11 (Regional Jet Series 550), CL-600-2D15 (Regional Jet Series 705), CL-600-2D24 (Regional Jet Series 900), and CL-600-2E25 (Regional Jet Series 1000) airplanes. AD 2023-10-02 was prompted by the determination that radio altimeters cannot be relied on to perform their intended function if they experience interference from wireless broadband operations in the 3.7-3.98 GHz frequency band (5G C-Band). This AD was prompted by the determination that this interference can also result in certain failure messages being inhibited longer than intended. This proposed AD would require installing a new radio frequency (RF) bandpass filter on the coaxial line between the radio altimeter and the receive antenna in the aft equipment compartment. The FAA is proposing this AD to address the unsafe condition on these products. DATES: The FAA must receive comments on this proposed AD by October 24, 2024. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: Federal eRulemaking Portal: Go to regulations.gov. Follow the instructions for submitting comments. Fax: 202-493-2251. Mail: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2024-1896; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this NPRM, the mandatory continuing airworthiness information (MCAI), any comments received, and other information. The street address for Docket Operations is listed above. Material Incorporated by Reference: For MHI RJ material identified in this proposed AD, contact MHI RJ Aviation Group, Customer Response Center, 3655 Ave. des Grandes-Tourelles, Suite 110, Boisbriand, Qu[eacute]bec J7H 0E2 Canada; North America toll-free telephone 833-990-7272 or direct-dial telephone 450-990-7272; fax 514-855-8501; email mhirj.com">thd.crj@mhirj.com; website mhirj.com. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. FOR FURTHER INFORMATION CONTACT: Steven Dzierzynski, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; email [email protected]. SUPPLEMENTARY INFORMATION: Comments Invited The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES. Include ``Docket No. FAA-2024-1896; Project Identifier MCAI-2023-00978-T'' at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend the proposal because of those comments. Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM. Confidential Business Information CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as ``PROPIN.'' The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Steven Dzierzynski, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; email [email protected]. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking. [[Page 73010]] Background The FAA issued AD 2023-10-02, Amendment 39-22438 (88 FR 34065, May 26, 2023) (AD 2023-10-02) to address the effect of interference from wireless broadband operations in the 5G C-Band on all transport and commuter category airplanes equipped with a radio altimeter. AD 2023- 10-02 was prompted by a determination that radio altimeters cannot be relied upon to perform their intended function if they experience interference from wireless broadband operations in the 5G C-Band. AD 2023-10-02 requires revising the limitations section of the existing airplane flight manual to incorporate limitations prohibiting transport and commuter category airplanes from performing certain low-visibility landing operations at any airport unless they have upgraded their radio altimeters. Transport Canada, which is the aviation authority for Canada, issued corresponding Transport Canada AD CF-2023-46, dated June 30, 2023, to require similar limitations on flight operations requiring radio altimeter data in U.S. airspace affected by 5G C-Band wireless signals. Additionally, Transport Canada has issued Transport Canada AD CF- 2023-62R1, dated November 21, 2023 (referred to as ``the MCAI''), for certain serial-numbered MHI RJ Aviation ULC Model CL-600-2B19 (Regional Jet Series 100 and 440), CL-600-2C10 (Regional Jet Series 700, 701, and 702), CL-600-2C11 (Regional Jet Series 550), CL-600-2D15 (Regional Jet Series 705), CL-600-2D24 (Regional Jet Series 900), and CL-600-2E25 (Regional Jet Series 1000) airplanes. The MCAI states that, in addition to the effects of 5G C-Band broadband interference identified in FAA AD 2023-10-02, MHI RJ has determined that 5G C-Band broadband interference can result in certain failure messages and aural alerts being inhibited longer than intended. Specifically, this can result in the inhibition of hydraulic system #3 and wing anti-ice overheat failure messages such that flightcrew are unable to perform appropriate airplane flight manual (AFM) procedures in the time needed to prevent loss of elevator control due to hydraulic system overheat and wing structural damage due to wing anti-ice system overheat. This condition, if not corrected, could result in delayed flightcrew response leading to loss of continued safe flight and landing. The MCAI requires the installation of a new RF bandpass filter on the coaxial line between the radio altimeter and the receive antenna in the aft equipment compartment. For airplanes with a dual radio altimeter configuration, the MCAI requires a filter to be installed on both systems or on one system provided the second system is deactivated. When the airplane is modified as specified in the MCAI, the configuration with the RF bandpass filter installed has been determined to be ``radio altimeter tolerant.'' The actions of the MCAI apply only to airplanes operating within the contiguous U.S. airspace. The FAA is proposing this AD because radio altimeter anomalies can result in the inhibition of certain failure messages such that the flightcrew are unable to perform appropriate AFM procedures in the time needed to prevent loss of elevator control due to hydraulic system overheat and wing structural damage due to wing anti-ice system overheat, possibly resulting in delayed flightcrew response leading to loss of continued safe flight and landing. You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2024-1896. Material Incorporated by Reference Under 1 CFR Part 51 The FAA reviewed MHI RJ Service Bulletins 601R-34-152, Revision D, dated May 11, 2023, and 670BA-34-054, dated February 20, 2023. This material specifies procedures for installing a new RF bandpass filter on the coaxial line between the radio altimeter and the receive antenna in the aft equipment compartment. These documents are distinct since they apply to different airplane models. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. FAA's Determination This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the material referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design. Proposed AD Requirements in This NPRM This proposed AD would require accomplishing the actions specified in the material already described. This AD would not apply to airplanes that have been modified to be a radio altimeter tolerant airplane under the requirements of AD 2023-10-02. Differences Between the MCAI and This NPRM Although the actions of the MCAI apply only to Canadian-registered airplanes operating within the contiguous U.S. airspace, this proposed AD would apply to U.S.-registered airplanes operating in any airspace. The FAA has determined that the expansion of 5G C-band has occurred in other countries, such as Canada and Brazil, in which 5G C-band interference is expected. Costs of Compliance The FAA estimates that this AD, if adopted as proposed, would affect up to 873 airplanes of U.S. registry. However, many of these airplanes may already have a bandpass filter installed in compliance with AD 2023-10-02 and would not have any costs because of this proposed AD. The FAA estimates the following costs to comply with this proposed AD: Estimated Costs ---------------------------------------------------------------------------------------------------------------- Cost per Labor cost Parts cost product Cost on U.S. operators ---------------------------------------------------------------------------------------------------------------- 58 work-hours x $85 per hour = $4,930........ $53,647 $58,577 Up to $51,137,721. ---------------------------------------------------------------------------------------------------------------- Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in [[Page 73011]] Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify this proposed regulation: (1) Is not a ``significant regulatory action'' under Executive Order 12866, (2) Would not affect intrastate aviation in Alaska, and (3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by adding the following new airworthiness directive: MHI RJ Aviation ULC (Type Certificate Previously Held by Bombardier Inc.): Docket No. FAA-2024-1896; Project Identifier MCAI-2023-00978- T. (a) Comments Due Date The FAA must receive comments on this airworthiness directive (AD) by October 24, 2024. (b) Affected ADs None. (c) Applicability This AD applies to the MHI RJ Aviation ULC (Type Certificate previously held by Bombardier Inc.) airplanes identified in paragraphs (c)(1) through (6) of this AD, certificated in any category, that are equipped with a radio altimeter and not determined to be a radio altimeter tolerant airplane as defined in paragraph (g) of this AD. (1) Model CL-600-2B19 (Regional Jet Series 100 and 440) airplanes, serial number (S/N) 7002 through 8113. (2) Model CL-600-2C10 (Regional Jet Series 700, 701, and 702) airplanes, S/N 10002 through 10999. (3) Model CL-600-2C11 (Regional Jet Series 550) airplanes, S/N 10002 through 10999. (4) Model CL-600-2D15 (Regional Jet Series 705) airplanes, S/N 15001 through 15990. (5) Model CL-600-2D24 (Regional Jet Series 900) airplanes, S/N 15001 through 15990. (6) Model CL-600-2E25 (Regional Jet Series 1000) airplanes, S/N 19013 through 19990. (d) Subject Air Transport Association (ATA) of America Code 34, Navigation. (e) Unsafe Condition This AD was prompted by the determination that radio altimeters cannot be relied upon to perform their intended function if they experience interference from wireless broadband operations in the 3.7-3.98 GHz frequency band (5G C-Band). The FAA is issuing this AD because radio altimeter anomalies can result in the inhibition of certain failure messages such that the flightcrew are unable to perform appropriate airplane flight manual procedures in the time needed to prevent loss of elevator control due to hydraulic system overheat and wing structural damage due to wing anti-ice system overheat, possibly resulting in delayed flightcrew response leading to loss of continued safe flight and landing. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Definitions For purposes of this AD, a ``radio altimeter tolerant airplane'' is one for which the radio altimeter, as installed, demonstrates the tolerances specified in paragraphs (g)(1) and (2) of this AD, using a method approved by the FAA. No actions are required by this AD for radio altimeter tolerant airplanes. (1) Tolerance to radio altimeter interference, for the fundamental emissions (3.7-3.98 GHz), at or above the power spectral density (PSD) curve threshold specified in figure 1 to paragraph (g)(1) of this AD. Figure 1 to Paragraph (g)(1)--Fundamental Effective Isotropic PSD at Outside Interface of Airplane Antenna [[Page 73012]] [GRAPHIC] [TIFF OMITTED] TP09SE24.006 (2) Tolerance to radio altimeter interference, for the spurious emissions (4.2-4.4 GHz), at or above the PSD curve threshold specified in figure 2 to paragraph (g)(2) of this AD. Figure 2 to Paragraph (g)(2)--Spurious Effective Isotropic PSD at Outside Interface of Airplane Antenna [[Page 73013]] [GRAPHIC] [TIFF OMITTED] TP09SE24.007 (h) Filter Installation: Model CL-600-2B19 For Model CL-600-2B19 airplanes: Within 2,300 flight hours or 12 months after the effective date of this AD, whichever occurs first, install a radio frequency (RF) bandpass filter on each radio altimeter in accordance with the applicable parts of the Accomplishment Instructions in MHI RJ Service Bulletin 601R-34-152, Revision D, dated May 11, 2023. Alternatively, airplanes with a dual radio altimeter configuration may comply with this paragraph by installing an RF bandpass filter on one radio altimeter and deactivating the second radio altimeter in accordance with the applicable parts of the Accomplishment Instructions in MHI RJ Service Bulletin 601R-34-152, Revision D, dated May 11, 2023. (i) Filter Installation: Model CL-600-2C10, CL-600-2C11, CL-600-2D15, and CL-600-2D24 For Model CL-600-2C10, CL-600-2C11, CL-600-2D15, and CL-600-2D24 airplanes: Within 2,100 flight hours or 12 months after the effective date of this AD, whichever occurs first, install an RF bandpass filter on each radio altimeter in accordance with the applicable parts of the Accomplishment Instructions in MHI RJ Service Bulletin 670BA-34-054, dated February 20, 2023. Alternatively, airplanes with a dual radio altimeter configuration may comply with this paragraph by installing an RF bandpass filter on one radio altimeter and deactivating the second radio altimeter in accordance with the applicable parts of the Accomplishment Instructions in MHI RJ Service Bulletin 670BA-34-054, dated February 20, 2023. (j) Filter Installation: Model CL-600-2E25 For Model CL-600-2E25 airplanes: Before the next flight in the contiguous U.S. airspace after the effective date of this AD, install an RF bandpass filter on each radio altimeter in accordance with the applicable parts of the Accomplishment Instructions in MHI RJ Service Bulletin 670BA-34-054, dated February 20, 2023. [[Page 73014]] (k) Credit for Previous Actions For Model CL-600-2B19 airplanes: This paragraph provides credit for the actions required by paragraph (h) of this AD, if those actions were performed before the effective date of this AD using the material in paragraphs (k)(1) through (4) of this AD, provided the electrical idents for coax cables are installed using Part G of the Accomplishment Instructions in MHI RJ Service Bulletin 601R-34- 152, Revision D, dated May 11, 2023, within the compliance time specified in paragraph (h) of this AD. (1) MHI RJ Service Bulletin 601R-34-152, dated February 14, 2023. (2) MHI RJ Service Bulletin 601R-34-152, Revision A, dated February 28, 2023. (3) MHI RJ Service Bulletin 601R-34-152, Revision B, dated March 28, 2023. (4) MHI RJ Service Bulletin 601R-34-152, Revision C, dated April 20, 2023. (l) Additional AD Provisions The following provisions also apply to this AD: (1) Alternative Methods of Compliance (AMOCs): The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the International Validation Branch, mail it to the address identified in paragraph (m) of this AD. Information may be emailed to: 9-AVS- [email protected]. Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (2) Contacting the Manufacturer: For any requirement in this AD to obtain instructions from a manufacturer, the instructions must be accomplished using a method approved by the Manager, International Validation Branch, FAA; or Transport Canada; or MHI RJ Aviation ULC's Transport Canada Design Approval Organization (DAO). If approved by the DAO, the approval must include the DAO-authorized signature. (m) Additional Information For more information about this AD, contact Steven Dzierzynski, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; email [email protected]. (n) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless this AD specifies otherwise. (i) MHI RJ Service Bulletin 601R-34-152, Revision D, dated May 11, 2023. (ii) MHI RJ Service Bulletin 670BA-34-054, dated February 20, 2023. (3) For MHI RJ material identified in this AD, contact MHI RJ Aviation Group, Customer Response Center, 3655 Ave. des Grandes- Tourelles, Suite 110, Boisbriand, Qu[eacute]bec J7H 0E2 Canada; North America toll-free telephone 833-990-7272 or direct-dial telephone 450-990-7272; fax 514-855-8501; email mhirj.com">thd.crj@mhirj.com; website mhirj.com. (4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/[email protected]">www.archives.gov/federal-register/cfr/[email protected]. Issued on August 28, 2024. Victor Wicklund, Deputy Director, Compliance & Airworthiness Division, Aircraft Certification Service. [FR Doc. 2024-20244 Filed 9-5-24; 11:15 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:17.839673

FR

FR-2024-09-09/2024-20159

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73014-73020] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20159] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2024-2137; Project Identifier AD-2023-00297-T] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). ----------------------------------------------------------------------- SUMMARY: The FAA proposes to supersede Airworthiness Directive (AD) 2019-22-02, which applies to all The Boeing Company Model 747-200B, 747-200C, 747-200F, 747-300, 747-400, 747-400D, 747-400F, 747-8F, and 747-8 series airplanes. AD 2019-22-02 was prompted by reports of uncommanded fore and aft movement of the Captain's and First Officer's seats. AD 2019-22-02 requires identifying the part number, and the serial number if applicable, of the Captain's and First Officer's seats, and applicable on-condition actions for affected seats. AD 2019- 22-02 also requires a one-time detailed inspection and repetitive checks of the horizontal movement system (HMS) of the Captain's and First Officer's seats, and applicable on-condition actions. AD 2019-22- 02 also provides an optional terminating action for the repetitive actions for certain seats. Since the FAA issued AD 2019-22-02, the FAA has determined that additional seats are affected by the unsafe condition. This proposed AD would retain the actions required by AD 2019-22-02 and adds an inspection of previously omitted part numbers. The FAA is proposing this AD to address the unsafe condition on these products. DATES: The FAA must receive comments on this proposed AD by October 24, 2024. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: Federal eRulemaking Portal: Go to regulations.gov. Follow the instructions for submitting comments. Fax: 202-493-2251. Mail: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. AD Docket: You may examine the AD docket at regulations.gov under Docket No. FAA-2024-2137; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this NPRM, any comments received, and other information. The street address for Docket Operations is listed above. Material Incorporated by Reference: For Boeing material identified in this proposed AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Boulevard, MC 110-SK57, Seal Beach, CA 90740-5600; phone 562-797-1717; website myboeingfleet.com. You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at regulations.gov by searching for and locating Docket No. FAA-2024-2137. FOR FURTHER INFORMATION CONTACT: Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone 206-231-3986; email [email protected]. SUPPLEMENTARY INFORMATION: Comments Invited The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES. Include ``Docket No. FAA-2024-2137; Project Identifier AD-2023-00297-T'' at the beginning of your comments. The most helpful comments [[Page 73015]] reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this proposal because of those comments. Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM. Confidential Business Information CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as ``PROPIN.'' The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone 206-231-3986; email [email protected]. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking. Background The FAA issued AD 2019-22-02, Amendment 39-19781 (84 FR 67854, December 12, 2019) (AD 2019-22-02), for all The Boeing Company Model 747-200B, 747-200C, 747-200F, 747-300, 747-400, 747-400D, 747-400F, 747-8F, and 747-8 series airplanes. AD 2019-22-02 was prompted by reports of uncommanded fore and aft movement of the Captain's and First Officer's seats. AD 2019-22-02 requires an identification of the part number, and if applicable the serial number, of the Captain's and First Officer's seats, and applicable on-condition actions. AD 2019-22-02 also requires a one-time detailed inspection and repetitive checks of the HMS of the Captain's and First Officer's seats, and applicable on- condition actions. AD 2019-22-02 also provides an optional terminating action for the repetitive checks of the HMS for certain airplanes. The FAA issued AD 2019-22-02 to address uncommanded fore and aft movement of the Captain's and First Officer's seats. An uncommanded fore or aft seat movement during a critical part of a flight, such as takeoff or landing, could cause a flight control obstruction or unintended flight control input, which could result in the loss of the ability to control the airplane. Actions Since AD 2019-22-02 Was Issued Since the FAA issued AD 2019-22-02, Boeing and the seat supplier (Ipeco) determined that certain seat part numbers were inadvertently omitted from the service information required by AD 2019-22-02. Ipeco subsequently updated their service information to include the additional part numbers, and Boeing updated their service information as well. Based on this, the FAA has determined that additional seats are affected by the unsafe condition. FAA's Determination The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design. Material Incorporated by Reference Under 1 CFR Part 51 The FAA reviewed Boeing Special Attention Service Bulletin 747-25- 3644, Revision 2, dated January 27, 2023. The material describes procedures for identification of the part number, and the serial number if applicable, of the Captain's and First Officer's seats, and applicable on-condition actions. On-condition actions include an inspection of each seat's fore and aft and vertical manual control levers for looseness, installation of serviceable seats, and a seat operational test after any cable adjustment. This material also adds Ipeco seat part numbers 3A258-0041-01-1Z and 3A258-0042-01-1Z. The FAA also reviewed Boeing Special Attention Service Bulletin 747-25-3653, Revision 2, dated January 27, 2023. This material describes procedures for a detailed inspection and repetitive checks of the HMS (including for any Artus part and amendment numbers of the horizontal actuator of the HMS) for the Captain's and First Officer's seats for findings (e.g., evidence of cracks, scores, corrosion, dents, deformation, or visible wear; and incorrectly assembled microswitch assemblies, actuators, and limit switches), and applicable on-condition actions. The on-condition actions include clearing the seat tracks of foreign object debris (FOD), overhauling the HMS, and replacing the horizontal actuator. This material also describes procedures for an optional terminating action for the repetitive checks by installing a serviceable Captain's or First Officer's seat. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES section. Proposed AD Requirements in This NPRM Although this proposed AD does not explicitly restate the requirements of AD 2019-22-02, this proposed AD would retain all of the requirements of AD 2019-22-02. Those requirements are referenced in the service information identified previously, which, in turn, is referenced in paragraphs (g) and (h) of this proposed AD. This proposed AD would require accomplishing the actions specified in the service information already described, except for any differences identified as exceptions in the regulatory text of this proposed AD. For information on the procedures and compliance times, see this service information at regulations.gov under Docket No. FAA- 2024-2137. Acceptable Methods of Compliance The FAA has determined that the actions required by paragraphs (g) and (h) of this AD are not required under specific conditions, e.g., if it can be shown through maintenance records that the required actions have already been accomplished by the previous revision of the service information and specific conditions have been met. Paragraph (j) of this AD identifies these conditions. Complying with these conditions adequately addresses the unsafe condition identified in this proposed AD. Costs of Compliance The FAA estimates that this AD, if adopted as proposed, would affect 162 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD: [[Page 73016]] Estimated Costs for Required Actions per Seat ---------------------------------------------------------------------------------------------------------------- Cost on U.S. Action Labor cost Parts cost Cost per product operators ---------------------------------------------------------------------------------------------------------------- Identification, seat (retained 1 work-hour x $85 $0 $85................ $27,540. actions from AD 2019[dash]22-02). per hour = $85. Detailed inspection, HMS 1 work-hour x $85 0 $85................ $27,540. (retained actions from AD per hour = $85. 2019[dash]22-02). Checks, HMS (retained actions 2 work-hours x $85 0 $170 per check $55,080 per check from AD 2019-22-02). per hour = $170 cycle. cycle. per check cycle. Identification, seat (new 1 work-hour x $85 0 $85................ Up to $117,980. proposed actions). per hour = $85. ---------------------------------------------------------------------------------------------------------------- The FAA estimates the following costs to do any necessary on- condition actions that will be required. The FAA has no way of determining the number of aircraft that might need these on-condition actions: Estimated Costs of On-Condition Actions * ---------------------------------------------------------------------------------------------------------------- Action Labor cost Parts cost Cost per product ---------------------------------------------------------------------------------------------------------------- Adjustment, control lever cable...... 1 work-hour x $85 per $0..................... $85. hour = $85. Overhaul, HMS........................ 11 work-hours x $85 per Up to $5,824........... Up to $6,759. hour = $935. Inspection of each seat's fore/aft 1 work-hour x $85 per $0..................... $85 per seat. and vertical manual control levers. hour = $85 per seat. Installation of serviceable seats.... 1 work-hour x $85 per $0..................... $85 per seat. hour = $85 per seat. Clearing FOD......................... 1 work-hour x $85 per $0..................... $85 per seat. hour = $85 per seat. Replacement of the horizontal 1 work-hour x $85 per $7,937 per actuator.... $8,022 per actuator. actuator. hour = $85 per actuator. Operational test, adjusted control 1 work-hour x $85 per $0..................... $85 per seat. lever cable. hour = $85 per seat. ---------------------------------------------------------------------------------------------------------------- * The estimated cost for tooling to align an affected seat for adjustment of the control lever cable is up to $46,064. The FAA has received no definitive data that would enable the FAA to provide cost estimates for the optional terminating action for the repetitive checks specified in this proposed AD. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority. The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify this proposed regulation: (1) Is not a ``significant regulatory action'' under Executive Order 12866, (2) Would not affect intrastate aviation in Alaska, and (3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39--AIRWORTHINESS DIRECTIVES 0 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. Sec. 39.13 [Amended] 0 2. The FAA amends Sec. 39.13 by: 0 a. Removing Airworthiness Directive 2019-22-02, Amendment 39-19781 (84 FR 67854, December 12, 2019), and 0 b. Adding the following new Airworthiness Directive: The Boeing Company: Docket No. FAA-2024-2137; Project Identifier AD- 2023-00297-T. (a) Comments Due Date The FAA must receive comments on this airworthiness directive (AD) by October 24, 2024. (b) Affected ADs This AD replaces AD 2019-22-02, Amendment 39-19781 (84 FR 67854, December 12, 2019) (AD 2019-22-02). (c) Applicability This AD applies to all The Boeing Company Model 747-200B, 747- 200C, 747- [[Page 73017]] 200F, 747-300, 747-400, 747-400D, 747-400F, 747-8F, and 747-8 series airplanes, certificated in any category. (d) Subject Air Transport Association (ATA) of America Code 25, Equipment/ furnishings. (e) Unsafe Condition This AD was prompted by reports of uncommanded fore and aft movement of the Captain's and First Officer's seats. The FAA is issuing this AD to address uncommanded fore and aft movement of the Captain's and First Officer's seats. The unsafe condition, if not addressed, could result in an uncommanded fore or aft seat movement during a critical part of a flight, such as takeoff or landing, and could cause a flight control obstruction or unintended flight control input, which could result in the loss of the ability to control the airplane. (f) Compliance Comply with this AD within the compliance times specified, unless already done. (g) Seat Part Number Identification and On-Condition Actions Except as specified by paragraphs (i) and (j) of this AD: At the applicable times specified in the ``Compliance'' paragraph of Boeing Special Attention Service Bulletin 747-25-3644, Revision 2, dated January 27, 2023, do an inspection to determine the part number, and serial number as applicable, of the Captain's and First Officer's seats, and all applicable on-condition actions identified in, and in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 747-25-3644, Revision 2, dated January 27, 2023. A review of airplane maintenance records is acceptable in lieu of this inspection if the part number and serial number of the Captain's and First Officer's seats can be conclusively determined from that review. (h) Detailed Inspection, and Repetitive Checks of Horizontal Movement System and On-Condition Actions Except as specified by paragraph (i) and (j) of this AD: At the applicable times specified in the ``Compliance'' paragraph of Boeing Special Attention Bulletin 747-25-3653, Revision 2, dated January 27, 2023, do all applicable actions identified as ``RC'' (required for compliance) in, and in accordance with, the Accomplishment Instructions of Boeing Special Attention Bulletin 747-25-3653, Revision 2, dated January 27, 2023. Actions identified as terminating action in Boeing Special Attention Service Bulletin 747- 25-3653, Revision 2, dated January 27, 2023, terminate the applicable required actions of this AD, provided the terminating action is done in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 747-25-3653, Revision 2, dated January 27, 2023. (i) Exceptions to Service Information Specifications (1) Where the ``Compliance'' paragraph of Boeing Special Attention Bulletin 747-25-3653, Revision 2, dated January 27, 2023, refers to the original issue date of this bulletin, this AD requires using January 16, 2020 (the effective date of AD 2019-22-02). (2) Where the ``Compliance'' paragraph of Boeing Special Attention Bulletin 747-25-3644, Revision 2, dated January 27, 2023, refers to 72 months after the original issue date of this service bulletin, this AD requires using 36 months after January 16, 2020 (the effective date of AD 2019-22-02). (3) Where the ``Compliance'' paragraph of Boeing Special Attention Bulletin 747-25-3644, Revision 2, dated January 27, 2023, refers to the Revision 2 date of this service bulletin, this AD requires using the effective date of the AD. (j) Acceptable Conditions for Compliance If the airplane records show that an Ipeco Captain's or First Officer's seat meets all criteria specified in any row in figure 1 to paragraph (j) of this AD, the actions specified in paragraphs (g) and (h) of this AD are not required for that seat. Figure 1 to Paragraph (j)--Alternative Acceptable Seats BILLING CODE 4910-13-P [[Page 73018]] [GRAPHIC] [TIFF OMITTED] TP09SE24.000 [[Page 73019]] [GRAPHIC] [TIFF OMITTED] TP09SE24.001 BILLING CODE 4910-13-C (k) Alternative Methods of Compliance (AMOCs) (1) The Manager, AIR-520, Continued Operational Safety Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (m) of this AD. Information may be emailed to: [email protected]. (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office. (3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by The Boeing Company Organization Designation Authorization (ODA) that has been authorized by the Manager, AIR- 520, Continued Operational Safety Branch, FAA, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD. [[Page 73020]] (4) AMOCs approved for AD 2019-22-02 are approved as AMOCs for the corresponding provisions of Boeing Special Attention Service Bulletin 747-25-3644, Revision 2, dated January 27, 2023, and Boeing Special Attention Service Bulletin 747-25-3653, Revision 2, dated January 27, 2023, that are required by paragraphs (g) and (h) of this AD. (5) For service information that contains steps that are labeled as Required for Compliance (RC), the provisions of paragraphs (k)(5)(i) and (ii) of this AD apply. (i) The steps labeled as RC, including substeps under an RC step and any figures identified in an RC step, must be done to comply with the AD. If a step or substep is labeled ``RC Exempt,'' then the RC requirement is removed from that step or substep. An AMOC is required for any deviations to RC steps, including substeps and identified figures. (ii) Steps not labeled as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the RC steps, including substeps and identified figures, can still be done as specified, and the airplane can be put back in an airworthy condition. (l) Related Information For more information about this AD, contact Courtney Tuck, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone 206-231-3986; email [email protected]. (m) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise. (i) Boeing Special Attention Service Bulletin 747-25-3644, Revision 2, dated January 27, 2023. (ii) Boeing Special Attention Service Bulletin 747-25-3653, Revision 2, dated January 27, 2023. (3) For Boeing material identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Boulevard, MC 110-SK57, Seal Beach, CA 90740-5600; phone 562-797-1717; website myboeingfleet.com. (4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. (5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. Issued on August 26, 2024. Suzanne Masterson, Deputy Director, Integrated Certificate Management Division, Aircraft Certification Service. [FR Doc. 2024-20159 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:17.983975

FR

FR-2024-09-09/2024-20194

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73020-73022] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20194] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2023-1477; Airspace Docket No. 19-ANM-27] RIN 2120-AA66 Modification of Class D Airspace; Revocation of Class E Airspace; Centennial Airport, Denver, CO AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). ----------------------------------------------------------------------- SUMMARY: This action proposes to modify Class D airspace and revoke Class E airspace designated as an extension to a Class D or Class E surface area at Centennial Airport (APA), Denver, CO. Additionally, this action would amend administrative texts with Centennial Airport's legal description. This action would support instrument flight rules (IFR) and visual flight rules (VFR) operations at the airport. DATES: Comments must be received on or before October 24, 2024. ADDRESSES: Send comments identified by FAA Docket No. FAA-2023-1477 and Airspace Docket No. 19-ANM-27 using any of the following methods: * Federal eRulemaking Portal: Go to www.regulations.gov and follow the online instructions for sending your comments electronically. * Mail: Send comments to Docket Operations, M-30; U.S. Department of Transportation, 1200 New Jersey Avenue SE, Room W12-140, West Building Ground Floor, Washington, DC 20590-0001. * Hand Delivery or Courier: Take comments to Docket Operations in Room W12-140 of the West Building Ground Floor at 1200 New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. * Fax: Fax comments to Docket Operations at (202) 493-2251. Docket: Background documents or comments received may be read at www.regulations.gov at any time. Follow the online instructions for accessing the docket or go to the Docket Operations in Room W12-140 of the West Building Ground Floor at 1200 New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FAA Order JO 7400.11H, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at www.faa.gov/air_traffic/publications/. You may also contact the Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267- 8783. FOR FURTHER INFORMATION CONTACT: Keith T. Adams, Federal Aviation Administration, Western Service Center, Operations Support Group, 2200 S 216th Street, Des Moines, WA 98198; telephone (206) 231-2428. SUPPLEMENTARY INFORMATION: Authority for This Rulemaking The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify Class D airspace and revoke Class E airspace designated as an extension to a Class D or Class E surface area to support IFR and VFR operations at Centennial Airport, Denver, CO. Comments Invited The FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should submit only one time if comments are filed electronically, or commenters should send only one copy of written comments if comments are filed in writing. The FAA will file in the docket all comments it receives, as well as a report [[Page 73021]] summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, the FAA will consider all comments it receives on or before the closing date for comments. The FAA will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. The FAA may change this proposal in light of the comments it receives. Privacy: In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to www.regulations.gov, as described in the system of records notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy. Availability of Rulemaking Documents An electronic copy of this document may be downloaded through the internet at www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at www.faa.gov/air_traffic/publications/airspace_amendments/. You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Operations office (see ADDRESSES section for address, phone number, and hours of operations). An informal docket may also be examined during normal business hours at the office at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 2200 S 216th Street, Des Moines, WA 98198. Incorporation by Reference Class D airspace and Class E4 airspace designations are published in paragraph 5000 and 6004 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document proposes to amend the current version of that order, FAA Order JO 7400.11H, dated August 11, 2023, and effective September 15, 2023. These updates would be published in the next update to FAA Order JO 7400.11. That order is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11H lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points. Background Centennial Airport's airspaces are concurrently being evaluated with the Class D and Class E airspaces associated with Buckley Space Force Base (BKF), Aurora, CO. APA and BKF Category D aircraft's instrument approach procedures (IAP)-approved radius for conducting a circling maneuver overlaps in Class E airspace. APA's Category D aircraft conducting a circling maneuver to Runway 17 Left flight pattern extends beyond the airport's Class D airspace lateral boundary. Additionally, APA and BKF Class D airspaces are separated by less than .30 nautical miles (NM). This narrow airspace area is comprised of controlled and uncontrolled airspaces; this creates an unfavorable passage as VFR aircraft navigate between the two airports' surface areas. The Proposal The FAA is proposing an amendment to 14 CFR part 71 to modify the Class D airspace and revoke the Class E airspace designated as an extension to a Class D or Class E surface area at Centennial Airport, Denver, CO, to support IFR and VFR operations at the airport. The airport's Class D airspace lateral boundary should be modified to extend 3.9 NM northwest and 4.6 NM southeast from the airport's 038[deg] bearing extending 4.6 NM northeast. This expansion along with the proposed airspace modification associated with BKF would merge both airport's surface areas, which would require transiting VFR aircraft to utilize 500 feet of Class E airspace area between the tops of BKF Class D airspace and the floor of the Denver Class B airspace. Additionally, the Class D should be expanded from a 4.4 NM radius to a 6.4 NM radius between the airports 083[deg] bearing clockwise to the 201[deg] bearing. Due to rising terrain, this modification would better contain instrument departures as the aircraft reaches 700 feet above the surface of the earth. The Class D should also extend from a 4.4 NM radius to a 4.9 NM radius between the airport's 201[deg] bearing clockwise to the 347[deg] bearing to better contain aircraft conducting a circling maneuver at the airport. The Class E airspace designated as an extension to a Class D or Class E surface area should be revoked. The airport's proposed Class D new lateral dimension would contain all obligated IFR requirements that would be necessary in the continuation of the airport's Class E airspace. Lastly, the FAA is proposing a few administrative amendments to the airport's legal description. The city's name should be amended from Englewood to Denver. The airport's geographic coordinates should be amended to 39[deg]34'12'' N, long 104[deg]50'57'' W. The part-time language should be removed as the facility operates 24 hours daily. Regulatory Notices and Analyses The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a ``significant regulatory action'' under Executive Order 12866; (2) is not a ``significant rule'' under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. Environmental Review This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, ``Environmental Impacts: Policies and Procedures,'' prior to any FAA final regulatory action. List of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). The Proposed Amendment In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows: PART 71--DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 0 1. The authority citation for 14 CFR part 71 continues to read as follows: Authority: 49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389. Sec. 71.1 [Amended] 0 2. The incorporation by reference in 14 CFR 71.1 of FAA Order JO 7400.11H, Airspace Designations and Reporting Points, dated August 11, 2023, and [[Page 73022]] effective September 15, 2023, is amended as follows: Paragraph 5000 Class D Airspace * * * * * ANM CO D Denver, CO [Amended] Centennial Airport, CO (Lat. 39[deg]34'12'' N, long. 104[deg]50'57'' W) That airspace extending upward from the surface to but not including 8,000 feet MSL within 3.9 miles northwest and 4.6 miles southeast of the airport's 038[deg] bearing extending to 4.6 miles northeast, within a 6.4-mile radius from the airport's 083[deg] bearing clockwise to 201[deg] bearing, and within a 4.9-mile radius from the airport's 201[deg] bearing clockwise to the 347[deg] bearing. * * * * * Paragraph 6004 Class E Airspace Designated as an Extension to a Class D or Class E Surface Area. * * * * * ANM CO E4 Englewood, CO [Removed] * * * * * Issued in Des Moines, Washington, on September 3, 2024. B.G. Chew, Group Manager, Operations Support Group, Western Service Center. [FR Doc. 2024-20194 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:18.164725

FR

FR-2024-09-09/2024-20197

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73022-73024] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20197] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2024-1857; Airspace Docket No. 19-ANM-99] RIN 2120-AA66 Modification of Class D and Class E Airspace; Revocation of Class E Airspace; Buckley Space Force Base, Aurora, CO AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). ----------------------------------------------------------------------- SUMMARY: This action proposes to modify the Class D and Class E airspace designated as a surface area and revoke the Class E airspace designated as an extension to a Class D or Class E surface area at Buckley Space Force Base (BKF), Aurora, CO. Additionally, this action proposes administrative amendments to update the airport's legal description to match the FAA database. These actions would support the safety and management of instrument flight rules (IFR) and visual flight rules (VFR) operations at the airport. DATES: Comments must be received on or before October 24, 2024. ADDRESSES: Send comments identified by FAA Docket No. FAA-2024-1857 and Airspace Docket No. 19-ANM-99 using any of the following methods: * Federal eRulemaking Portal: Go to www.regulations.gov and follow the online instructions for sending your comments electronically. * Mail: Send comments to Docket Operations, M-30; U.S. Department of Transportation, 1200 New Jersey Avenue SE, Room W12-140, West Building Ground Floor, Washington, DC 20590-0001. * Hand Delivery or Courier: Take comments to Docket Operations in Room W12-140 of the West Building Ground Floor at 1200 New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. * Fax: Fax comments to Docket Operations at (202) 493-2251. Docket: Background documents or comments received may be read at www.regulations.gov at any time. Follow the online instructions for accessing the docket or go to the Docket Operations in Room W12-140 of the West Building Ground Floor at 1200 New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FAA Order JO 7400.11H, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at www.faa.gov/air_traffic/publications/. You may also contact the Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267- 8783. FOR FURTHER INFORMATION CONTACT: Keith T. Adams, Federal Aviation Administration, Western Service Center, Operations Support Group, 2200 S. 216th Street, Des Moines, WA 98198; telephone (206) 231-2428. SUPPLEMENTARY INFORMATION: Authority for This Rulemaking The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify Class D and Class E airspace designated as a surface area and revoke Class E airspace designated as an extension to a Class D and Class E surface area to support IFR and VFR operations at Buckley Space Force Base, Aurora, CO. Comments Invited The FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should submit only one time if comments are filed electronically, or commenters should send only one copy of written comments if comments are filed in writing. The FAA will file in the docket all comments it receives, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, the FAA will consider all comments it receives on or before the closing date for comments. The FAA will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. The FAA may change this proposal in light of the comments it receives. Privacy: In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to www.regulations.gov, as described in the system of records notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy. Availability of Rulemaking Documents An electronic copy of this document may be downloaded through the internet at www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at www.faa.gov/air_traffic/publications/airspace_amendments/. You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Operations office (see ADDRESSES section for address, phone number, and hours of [[Page 73023]] operations). An informal docket may also be examined during normal business hours at the office at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 2200 S. 216th Street, Des Moines, WA 98198. Incorporation by Reference Class D, E2, and E4 airspace designations are published in paragraphs 5000, 6002, and 6004, respectively, of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document proposes to amend the current version of that order, FAA Order JO 7400.11H, dated August 11, 2023, and effective September 15, 2023. These updates would be published in the next update to FAA Order JO 7400.11. That order is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11H lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points. Background Buckley Space Force Base (BKF) is located south of Denver International Airport (DEN) and is separated by United States Interstate 70. Centennial Airport (APA) is located nearby, approximately 9.1 nautical miles (NM) southeast of BKF. APA and BKF airports have instrument approach procedures (IAP) that involve conflicting and overlapping circling maneuver patterns. The circling maneuver patterns of category D and E aircraft landing Runway (RWY) 32 at BKF extend beyond the airport's surface area to the west and northwest of the airport. Additionally, APA and BKF Class D airspaces are separated by less than 0.30 NM. This area is comprised of controlled and uncontrolled airspace, which creates an unfavorable passage as VFR aircraft navigate between the two airports' surface areas. Lastly, IFR departures from BKF's RWY 14 occur underneath the floor of controlled airspace and outside the lateral boundaries of the BKF airport; this is due to rising terrain south-through-southeast of the airport, and the need to size the surface area airspace based on a climb rate of 200 feet per NM. The Proposal The FAA is proposing an amendment to 14 CFR part 71 that would modify Class D airspace, modify Class E airspace designated as a surface area, and revoke Class E airspace designated as an extension to a Class D or surface area at Buckley Space Force Base, CO. The lateral boundaries of the airport's Class D and Class E surface areas are insufficiently sized and should be modified to better contain IFR arrivals when less than 1,000 feet above the surface of the earth and departing IFR aircraft until reaching the next adjacent airspace. Additionally, an approximately 0.30 NM gap of Class E and Class G airspaces exists between the BKF and APA surface areas. As such, the airport's Class D and Class E surface areas should be re-sized to be within a 4.4-mile radius of the airport, within 2 miles northeast and 4 miles southwest of the airport's 151[deg] bearing extending to 7.1 miles southeast, and within 4 miles south and 4.4 miles north of the airport's 270[deg] bearing extending to 4.7 miles west, excluding that airspace within the DEN Class B and APA Class D airspace areas. Closing this gap would redirect some VFR aircraft to transition a 500-foot vertical Class E airspace area between the vertical limits of BKF's Class D airspace and the floor of DEN Class B Area E airspace. The FAA is proposing to revoke BKF's Class E airspace, which is designated as an extension to the Class D and E surface area. The Class E airspace area extension is no longer required due to the proposed modification of BKF's surface area airspace. Finally, the FAA is proposing administrative actions to BKF's airspace legal descriptions. The airport's name on line 2 of both legal descriptions should state ``Buckley Space Force Base, CO.'' Additionally, line four of both surface area legal descriptions should include ``Denver International Airport, CO'' and ``Centennial Airport, CO'' as references, as they are used to define BKF's surface areas. Regulatory Notices and Analyses The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a ``significant regulatory action'' under Executive Order 12866; (2) is not a ``significant rule'' under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. Environmental Review This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, ``Environmental Impacts: Policies and Procedures,'' prior to any FAA final regulatory action. List of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). The Proposed Amendment In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows: PART 71--DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 0 1. The authority citation for 14 CFR part 71 continues to read as follows: Authority: 49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389. Sec. 71.1 [Amended] 0 2. The incorporation by reference in 14 CFR 71.1 of FAA Order JO 7400.11H, Airspace Designations and Reporting Points, dated August 11, 2023, and effective September 15, 2023, is amended as follows: Paragraph 5000 Class D Airspace. * * * * * ANM CO D Aurora, CO [Amended] Buckley Space Force Base, CO (Lat. 39[deg]42'06'' N, long. 104[deg]45'07'' W) Denver International Airport, CO (Lat. 39[deg]51'42'' N, long. 104[deg]40'23'' W) Centennial Airport, CO (Lat. 39[deg]34'12'' N, long. 104[deg]50'57'' W) That airspace extending upward from the surface to but not including 7,500 feet MSL within a 4.4-mile radius of the airport, within 2 miles northeast and 4 miles southwest of the airport's 151[deg] bearing extending to 7.1 miles southeast, and within 4 miles south and 4.4 miles north of the airport's 270[deg] bearing extending to 4.7 miles west, excluding that airspace within the Denver International Airport, CO, Class B and Centennial Airport, CO, Class D airspace areas. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement. * * * * * [[Page 73024]] Paragraph 6002 Class E Airspace Areas Designated as a Surface Area. * * * * * ANM CO E2 Aurora, CO [Amended] Buckley Space Force Base, CO (Lat. 39[deg]42'06'' N, long. 104[deg]45'07'' W) Denver International Airport, CO (Lat. 39[deg]51'42'' N, long. 104[deg]40'23'' W) Centennial Airport, CO (Lat. 39[deg]34'12'' N, long. 104[deg]50'57'' W) That airspace extending upward from the surface to but not including 7,500 feet MSL within a 4.4-mile radius of the airport, within 2 miles northeast and 4 miles southwest of the airport's 151[deg] bearing extending to 7.1 miles southeast, and within 4 miles south and 4.4 miles north of the airport's 270[deg] bearing extending to 4.7 miles west, excluding that airspace within the Denver International Airport, CO, Class B and Centennial Airport, CO, Class D airspace areas. This Class E airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement. * * * * * Paragraph 6004 Class E Airspace Areas Designated as an Extension to a Class D or Class E Surface Area. * * * * * ANM CO E4 Aurora, CO [Removed] Aurora, Buckley ANG Base, CO (Lat. 39[deg]42'06'' N, long. 104[deg]45'07'' W) * * * * * Issued in Des Moines, Washington, August 30, 2024. B.G. Chew, Group Manager, Operations Support Group, Western Service Center. [FR Doc. 2024-20197 Filed 9-6-24; 8:45 am] BILLING CODE 4910-13-P

usgpo

2024-10-08T13:26:18.229922

FR

FR-2024-09-09/2024-19286

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73024-73050] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-19286] ======================================================================= ----------------------------------------------------------------------- CONSUMER PRODUCT SAFETY COMMISSION 16 CFR Parts 1112 and 1250 [CPSC Docket No. CPSC-2024-0027] Safety Standard for Toys: Requirements for Water Beads AGENCY: Consumer Product Safety Commission. ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: The Consumer Product Safety Improvement Act of 2008 (CPSIA) mandates that ASTM F963 shall be a mandatory toy safety standard. This safety standard sets forth requirements for water bead toys and toys that contain water beads. The U.S. Consumer Product Safety Commission (CPSC) proposes to establish additional performance and labeling requirements for these products. The Commission also proposes to amend CPSC's list of notice of requirements (NORs) to include water bead toys and toys that contain water beads. DATES: Submit comments by November 8, 2024. ADDRESSES: Submit all comments, identified by Docket No. CPSC-2024- 0027, by any of the following methods: Electronic Submissions: Submit electronic comments to the Federal eRulemaking Portal at: https://www.regulations.gov. Follow the instructions for submitting comments. Do not submit through this website: confidential business information, trade secret information, or other sensitive or protected information that you do not want to be available to the public. CPSC typically does not accept comments submitted by email, except as described below. Mail/Hand Delivery/Courier/Confidential Written Submissions: CPSC encourages you to submit electronic comments by using the Federal eRulemaking Portal. You may, however, submit comments by mail, hand delivery, or courier to: Office of the Secretary, Consumer Product Safety Commission, 4330 East-West Highway, Bethesda, MD 20814; telephone: (301) 504-7479. If you wish to submit confidential business information, trade secret information, or other sensitive or protected information that you do not want to be available to the public, you may submit such comments by mail, hand delivery, or courier, or you may email them to: [email protected]. Instructions: All submissions must include the agency name and docket number. CPSC may post all comments without change, including any personal identifiers, contact information, or other personal information provided, to https://www.regulations.gov. Do not submit through this website: Confidential business information, trade secret information, or other sensitive or protected information that you do not want to be available to the public. If you wish to submit such information, please submit it according to the instructions for mail/ hand delivery/courier/confidential written submissions. Docket: For access to the docket to read background documents or comments received, go to: https://www.regulations.gov, and insert the docket number, CPSC-2024-0027, into the ``Search'' box, and follow the prompts. FOR FURTHER INFORMATION CONTACT: Matthew Kresse, Project Manager, Division of Mechanical Engineering, Directorate for Laboratory Sciences, Consumer Product Safety Commission, 5 Research Place, Rockville, MD 20850; Telephone 301-987-2222; email: [email protected]. SUPPLEMENTARY INFORMATION: I. Background and Statutory Authority Section 106(a) of the Consumer Product Safety Improvement Act of 2008 (CPSIA) made ASTM International's (ASTM) voluntary standard for toys, ASTM F963-07, Standard Consumer Safety Specification for Toy Safety (except section 4.2 and Annex 4), a mandatory safety standard for toys beginning 180 days after the enactment date of the CPSIA. 15 U.S.C. 2056b(a). The CPSIA states that ASTM F963 shall be considered a consumer product safety standard issued by the Commission under section 9 of the Consumer Product Safety Act (15 U.S.C. 2058). Since 2009, CPSC has enforced ASTM F963 as a mandatory standard for toys.1 2 In 2017, the Commission established 16 CFR part 1250, Safety Standard Mandating ASTM F963 for Toys, and it incorporated by reference the newly revised ASTM standard at that time, ASTM F963-16. 82 FR 8989 (Feb. 2, 2017). Most recently, on January 18, 2024, the Commission updated part 1250 to incorporate by reference a 2023 revision, ASTM F963-23. 89 FR 3344. --------------------------------------------------------------------------- \1\ Since 2009, ASTM revised F963 five times: ASTM F963-08, ASTM F963-11, ASTM F963-16, ASTM F963-17, and ASTM F963-23 (approved August 1, 2023). \2\ Section 3.1.91 of ASTM F963-23 (Toy): ``Any object designed, manufactured, or marketed as a plaything for children under 14 years of age.'' --------------------------------------------------------------------------- Section 4.40 of ASTM F963-23 includes requirements for toys, including but not limited to water beads, that are made of ``Expanding Materials.'' \3\ However, the requirements currently in ASTM F963-23 for this category of toys appear insufficient to address all known water bead hazards. Potential hazards for ``Expanding Materials'' in general include gastrointestinal tract blockage if a child ingests a product comprised of expanding materials. Hazard mitigation provisions in ASTM F963-23 include performance requirements, but do not include warnings or instructional literature specifically tailored to the [[Page 73025]] ``Expanding Materials'' requirements. While sections 5, 6, and 7 of ASTM F963-23 provide ``Labeling Requirements,'' ``Instructional Literature'' requirements, and ``Producer's Markings'' requirements generally for toys under the standard, none of these requirements is directed to water beads specifically. Thus, the generalized warnings and instructional literature requirements do not address all known hazards. --------------------------------------------------------------------------- \3\ Under ASTM F963, ``Expanding Materials'' are defined as ``any material used in a toy which expands greater than 50% in any dimension from its as-received state.'' --------------------------------------------------------------------------- Incident data, described in section III of this preamble, demonstrate that children ingest water beads, aspirate and choke on them, or insert them into the nose or ear, and subsequently suffer injury or death. Staff's testing of water beads, described in section IV of this preamble, further demonstrates that tested water beads that pass the performance requirements in ASTM F963-23 can still pose safety hazards. Accordingly, this notice of proposed rulemaking (NPR) under section 106 of the CPSIA proposes additional requirements in part 1250 to establish mandatory requirements specifically for water beads.\4\ Further, this NPR proposes revising the title of part 1250 from ``Safety Standard Mandating ASTM F963 for Toys'' to ``Safety Standard for Toys,'' to reflect the inclusion of proposed requirements that do not incorporate by reference existing requirements in ASTM F963.5 6 --------------------------------------------------------------------------- \4\ https://www.cpsc.gov/content/FY-2024-Operating-Plan. \5\ On August 21, 2024, the Commission voted unanimously (5-0) to publish this NPR. \6\ The information in this proposed rule is based in part on information and analysis in the July 31, 2024 Memorandum, Staff's Draft Proposed Rule for Safety Standard for Toys: Requirements for Water Beads, available at: https://www.bing.com/ck/a?!&&p=fcf3dff1c5f81972JmltdHM9MTcyNDI4NDgwMCZpZ3VpZD0wMDlhOTVlYi01OTI3LTYwZDYtMzEzYy04MTY1NTg2ODYxNGMmaW5zaWQ9NTIwNA&ptn=3&ver=2&hsh=3&fclid=009a95eb592760d6313c81655868614c&psq=Staff%e2%80%99s+Draft+Proposed+Rule+for+Safety+Standard+for+Toys%3a+Requirements+for+Water+Beads&u=a1aHR0cHM6Ly93d3cuY3BzYy5nb3YvczNmcy1wdWJsaWMvTm90aWNlLW9mLVByb3Bvc2VkLVJ1bGVtYWtpbmctUmVxdWlyZW1lbnRzLWZvci1XYXRlci1CZWFkcy5wZGY_VmVyc2lvbklkPTNreHZnemVNcElSSEphS1Eza25BNEczNnFWWjZFeVNp&ntb=1. --------------------------------------------------------------------------- The Commission is authorized to issue this NPR pursuant to both section 106(c) and (d) of the CPSIA, 15 U.S.C. 2056b(c) and (d). Section 106(c) requires the Commission to periodically review and revise its mandatory toy safety standards to ensure that such standards provide the highest level of safety for toys that is feasible. Section 106(d) further requires the Commission to examine and assess the effectiveness of its mandatory toy safety standards in protecting children from safety hazards, and then it must promulgate consumer product safety rules that are more stringent than the existing standards if the Commission determinates that more stringent standards would further reduce the risk of injury associated with such toys. Consistent with the consultation requirement in section 106(d)(1) of the CPSIA, staff has worked with the ASTM F15.22 subcommittee task group since 2009 to update the toy standard and discuss hazards associated with water beads. This consultation, including sharing staff's assessment of hazards and suggested additional performance and labeling requirements, continued through revision and publication of ASTM F963-23. Building on staff's continued collaboration with ASTM and in consideration of the incident data, the Commission is issuing this NPR to address four identified hazard patterns associated with water beads that are not adequately addressed by the current mandatory standard provisions addressing Expanding Materials: (1) ingestion of water beads, (2) insertion of water beads into the nose or ear, (3) aspiration due to water beads, and (4) choking due to water beads. The Commission proposes adding additional performance requirements to part 1250 to better address these risks. The NPR also proposes establishing acrylamide level limits for water beads, which may contain this toxic chemical, and implementing new testing for water beads under part 1250 to limit acrylamide in water beads in response to toxicity hazards when they enter the body. Finally, the Commission proposes labeling requirements for water beads under part 1250, including mandating warnings on products and instructional literature within scope of the rule. This NPR provides an overview of staff's assessment and analysis, and it includes the Commission's basis for issuing the proposed rule. For the reasons explained here, the Commission preliminarily determines that the proposed water bead requirements comply with section 106 of the CPSIA because they are more stringent than the current requirements in ASTM F963-23, would further reduce the risk of injury and death associated with products within the scope of the NPR, and would provide the highest level of safety that is feasible for such products. The Commission seeks comment on these issues. II. The Product A. Description of the Product Water beads are various shaped, multi-colored or clear beads composed of water absorbing polymers, such as polyacrylamides and polyacrylates, which expand when soaked in liquid such as water. When first purchased, water beads are small and dehydrated, typically no larger than 7.0 mm diameter. The beads are often sold in large quantity packages that may contain up to thousands of beads (depending on original size) in one package. While in the dehydrated state, with all water content removed, water beads are typically either hard, solid beads, or soft-gelled beads. Water beads are designed to be soaked in water, which allows the beads to absorb the water and expand. After being soaked in water for periods as short as a few hours for smaller water beads or two to three days for larger water beads, water beads multiply in size, as demonstrated in Figure 1. Some water beads can expand, for example, from 2.0 mm diameter in their dehydrated state to 16.0 mm diameter when fully expanded (shown on the left in Figure 1), or from 7.0 mm diameter in the dehydrated state to 50.0 mm diameter when fully expanded (shown on the right in Figure 1). Thus, water beads have the potential to expand up to 800 percent of their original size. Once expanded, water beads remain moist even if removed from water but do not appear to have any adhesive properties that would cause them to stick together. When broken apart by hand or squeezing, expanded water beads tend to break into small, fragmented pieces (shown in Figure 2). [[Page 73026]] [GRAPHIC] [TIFF OMITTED] TP09SE24.008 Water beads are often sold in bulk or as part of other children's toys, such as experiment kits and sensory kits, or can be contained within toy squeeze balls or stress balls. Some water beads are not marketed as children's toys and are outside of the scope of this proposed rule. As noted, CPSC currently regulates water beads under section 4.40 of ASTM F963-23, Expanding Materials, and 16 CFR 1250.2(a). ASTM F963- 23 does not define the term ``water beads,'' but it defines an ``Expanding Material'' in section 3.1.28 as ``any material used in a toy which expands greater than 50% in any dimension from its as- received state when tested in accordance with 8.30.'' Section 8.30 directs that the toy must be submerged in deionized water maintained at 37 [deg]C 2 [deg]C for a duration of 72 hours, with the toy dimensions measured at 6-, 24-, 48- and 72-hour intervals in order to determine if the toy is an expanding material. CPSC proposes establishing a definition for ``water bead(s)'' under part 1250 as ``various shaped, water absorbent polymers, such as, but not limited to polyacrylamides and polyacrylates, which expand when soaked in water.'' CPSC proposes to incorporate ASTM's process for conditioning water bead in the proposed rule test procedures. B. Scope of Products Within the NPR This NPR would apply both to water bead toys and toys that contain water beads. A toy is ``any object designed, manufactured, or marketed as a plaything for children under 14 years of age.'' 16 CFR 1250.2(a); section 3.1.92 of ASTM F963-23. Water bead toys therefore are water beads marketed as a plaything for children under 14 years of age (consistent with the definition of a ``toy'' in 16 CFR 1250.2(a)), while toys that contain water beads are toys that encompass water beads within the toy and the water beads are not intended to be accessed, such as a squeeze ball (Figure 5). Commonly, water beads are included in a variety of toy products, such as toy experiment kits (Figure 3), toy sensory kits (Figure 4), toy squeeze/sensory balls filled with water beads (Figure 5), and toy water pellet guns designed to shoot water bead projectiles (Figure 6). Each product would be subject to the proposed rule and would need to meet the requirements of a final rule. [[Page 73027]] [GRAPHIC] [TIFF OMITTED] TP09SE24.009 Examples of products outside of the scope of this proposed rule are water beads that are not toys or are not contained in toys and are for various non-toy uses, such as water beads used for decorative purposes (e.g., placement in candle holders), in vases or gardens for plant hydration, as air freshener products or deodorizers for cat litter, and in first-aid cold packs. [[Page 73028]] III. Incident Data and Hazard Patterns CPSC staff searched two CPSC-maintained databases to identify incidents and hazard patterns associated with water beads: the Consumer Product Safety Risk Management System (CPSRMS) \7\ and the National Electronic Injury Surveillance System (NEISS).8 9 Due to data availability, the CPSRMS incidents occurred between January 1, 2017, and December 31, 2023, while the NEISS incidents occurred between January 1, 2017, and December 31, 2022. --------------------------------------------------------------------------- \7\ CPSRMS includes data primarily from three groups of sources: incident reports, death certificates, and in-depth follow-up investigation reports. A large portion of CPSRMS consists of incident reports from consumer complaints, media reports, medical examiner or coroner reports, retailer or manufacturer reports (incident reports received from a retailer or manufacturer involving a product they sell or make), safety advocacy groups, law firms, and federal, state, or local authorities, among others. It also contains death certificates that CPSC purchases from all 50 states, based on selected external cause of death codes (ICD-10). The third major component of CPSRMS is the collection of in-depth follow-up investigation reports. Based on the incident reports, death certificates, or NEISS injury reports, CPSC field staff conduct in- depth investigations (on-site, telephone, or online) of incidents, deaths, and injuries, which are then stored in CPSRMS. \8\ NEISS is the source of the injury estimates; it is a statistically valid injury surveillance system. NEISS injury data are gathered from emergency departments of a sample of hospitals, with 24-hour emergency departments and at least six beds, selected as a probability sample of all U.S. hospitals. The surveillance data gathered from the sample hospitals enable CPSC to make timely national estimates of the number of injuries associated with specific consumer products. \9\ CPSC staff performed multiple searches consisting of a combination of product codes and narrative or manufacturer/model keyword searches to find water bead incidents. Staff extracted data coded under 1381 (Toys, not elsewhere classified), 1395 (Toys, not specified), 1413 (Greenhouse supplies or gardening supplies [excluding plant stands, tools, hoses, sprayers and chemicals]), 1616 (Jewelry [excluding watches]), 1682 (Hair curlers, curling irons, clips & hairpins), 5016 (Balls, other or not specified), 5020 (Pretend electronics, tools, housewares, and appliances), 9101 (No clerical coding--retailer report), and 9102 (No clerical coding-- retailer report). --------------------------------------------------------------------------- A. CPSRMS Data From 2017 through 2023, CPSC identified 64 incidents in CPSRMS associated with the use of water beads. One incident resulted in a fatality, while 27 incidents led to hospitalization; 15 incidents led to emergency department (ED) treatment; and seven incidents led to care by a medical professional. The remaining 14 incident reports noted possible but uncertain medical treatment, or the level of care was unreported. Of the reported incidents that indicate a child's age, children's ages range from 9 months old to 11 years old, with one incident involving a 22-year-old woman with special needs. Staff identified the following incident data hazard patterns. 1. Ingestion In 52 reported incidents, a child ingested or likely ingested at least one water bead.\10\ Of those reports, 47 incidents involved a child ingesting at least one water bead, while five incidents involved a likely ingestion. Where reported, children between the ages of 9 months old and 5 years old ingested or likely ingested the water beads. Incidents included one death, 23 hospitalizations, 12 ED treatments, four visits to a medical professional, and 12 instances where the level of care was uncertain. The fatality involved a child swallowing at least one water bead. Specifically, in CPSC In-Depth Investigation (IDI) \11\ 230727CBB1846, a 10-month-old female was discovered unresponsive after consuming at least one water bead. The medical examiner determined that the child died from complications after a water bead expanded and caused a small intestine obstruction.\12\ --------------------------------------------------------------------------- \10\ In several cases where a child likely ingested water beads, a caregiver saw a child put a water bead in his or her mouth, yet the presumably ingested water bead was not found. The water bead could have passed naturally, or the child never swallowed the water bead. Still, medical intervention had been sought in some incidents. \11\ IDIs are CPSC-generated investigation summaries of events surrounding product-related injuries or incidents. Based on victim/ witness interviews, the reports provide details about incident sequence, human behavior, and product involvement. \12\ Water bead obstruction was measured to be ``approximately 2.8 x 2.8 x 2.8 cm [or 28 x 28 x 28 mm].'' --------------------------------------------------------------------------- In 22 reported incidents, an ingested water bead caused a bowel obstruction because the water bead expanded to a size that did not naturally pass through the gastrointestinal tract. After ingestion, water beads do not remain in the stomach for an extended period, which limits the potential for the water bead to expand in the stomach. Water beads can expand fully once they pass from the stomach and into the small intestine because water beads remain in the small intestine for a longer period and are able to absorb liquid like the water in which they are designed to absorb and expand. After expansion, water beads can become too large to pass from the small intestine to the large intestine and instead form a bowel obstruction. Swallowing a water bead presents different hazards than swallowing a smooth, solid object such as a marble because an object like a marble will not grow after being swallowed. Marbles and other smooth, solid objects can frequently also be located and identified by x-ray due to their density, unlike water beads, as discussed further below. Once located, marbles can be removed endoscopically if reported early enough, especially if they appear to be too large to pass through the stomach or the remainder of the digestive track, whereas water beads can remain small within the stomach and then grow larger, then causing a small bowel obstruction. Vomiting and coughing are commonly reported initial symptoms that occur after a water bead is first ingested.\13\ Lethargy, distress, dehydration, loss of appetite, fever, fatigue, and abdominal pain are also reported when an expanded water bead blocks the small intestine. --------------------------------------------------------------------------- \13\ Forrester MB. Pediatric Orbeez Ingestions Reported to Texas Poison Centers. Pediatr Emerg Care. 2019 Jun;35(6):426-427. doi: 10.1097/PEC.0000000000001227. PMID: 28697162. --------------------------------------------------------------------------- Medical providers may misdiagnose water bead ingestion symptoms because the symptoms are ambiguous and may be attributable to medical conditions or sources other than water bead ingestion, such as gastrointestinal illness. Further, caregivers may be unaware a child ingested a water bead and, therefore, are unable to report the ingestion. Children commonly visit medical care providers multiple times before diagnosis of a water bead ingestion. For example, in IDI 220511HCC3859, a 14-month-old female was initially diagnosed with gastrointestinal illness after episodes of vomiting. The child was taken first to a pediatrician and then to a local ED where she was treated with intravenous fluids and released. Only after the child was taken to a second ED once her condition worsened was it discovered that she had ingested a water bead.\14\ --------------------------------------------------------------------------- \14\ Size of expanded water bead not provided. Samples of the product showed full expansion being between 45 mm and 50 mm in diameter. --------------------------------------------------------------------------- In some cases, small water beads pass naturally, as can be the case when other small foreign objects are ingested, such as coins and small toy parts.\15\ For example, in IDI 230707CBB1698, a 3-year-old female ingested approximately 1,200 small water beads (approximately 1 tablespoon before expansion). The child successfully passed all water beads through her digestive system with the aid of a mineral oil enema.\16\ --------------------------------------------------------------------------- \15\ Mehmeto[gbreve]lu F. A Retrospective 10-Year Analysis of Water Absorbent Bead Ingestion in Children. Emerg Med Int. 2018 May 6;2018:5910527. doi: 10.1155/2018/5910527. PMID: 29854461; PMCID: PMC5960561. \16\ Size of expanded water beads not provided. However, samples of the product that staff collected for testing shows full expansion being between 9.32 mm and 15.20 mm in diameter. --------------------------------------------------------------------------- Medical providers may also not know that ingested water beads can cause [[Page 73029]] bowel obstructions. Therefore, although a medical provider is aware that a child ingested a water bead, they may send a patient home to digest or naturally pass the water bead, not knowing that may be impossible and the ingestion may result in injury or death. Water beads that do not pass naturally through the digestive tract can sometimes be removed by endoscopy or colonoscopy. However, such medical procedures routinely require sedation or general anesthesia, which carry risks of side effects and complications. For example, in IDI 230613CBB1591, a 2- year-old male swallowed at least two water beads and was examined and released from an ED without intervention. The child was later admitted to a different hospital where a water bead was removed via endoscopy. The child required a third hospital visit to remove a second water bead via colonoscopy.\17\ --------------------------------------------------------------------------- \17\ Size of expanded water beads not provided. --------------------------------------------------------------------------- Water beads that do not pass naturally or cannot be removed can result in small bowel obstructions. Children experiencing a small bowel obstruction have required invasive exploratory laparotomy with small intestine enterotomy \18\ under general anesthesia to remove any ingested water beads. For example, in IDI 170802CCC3140, a 13-month-old female became ill after ingesting a water bead. The water bead expanded in her small intestine, causing a blockage. She was transported to a hospital where the water bead was surgically removed under general anesthesia with an exploratory laparotomy and enterotomy.\19\ --------------------------------------------------------------------------- \18\ An exploratory laparotomy is a general surgical operation where a surgeon opens the abdomen and examines the abdominal organs. This is coupled with a small intestine enterotomy, which is a surgical incision to the intestine wall to remove the foreign body. \19\ Size of expanded water bead not provided. Samples of the product that staff collected for testing shows full expansion being between 13.0 mm and 17.50 mm in diameter. --------------------------------------------------------------------------- A delay between the time a caregiver or medical provider discovers that a child has ingested a water bead and when the child receives appropriate medical treatment may increase the risk of severe injury or death. Prompt recognition that a child has ingested a water bead enables swift medical treatment and removal of the water bead before the water bead expands, causing gastrointestinal blockages. However, due to the small size of individual water beads, caregivers may not know that a child has swallowed a water bead, so early intervention may not be possible. Even after a child begins to receive medical care, medical providers may have difficulty locating an ingested water bead inside the body because water beads are radiolucent.\20\ Radiolucent water beads are not easily identified using routine x-ray radiography because they are not dense, appearing dark or black and almost entirely transparent when the x-ray beam passes through the bead. Incident data and medical literature report children requiring serial x-rays, computer tomography (CT) scans, and ultrasounds to accurately diagnose a water bead bowel obstruction.\21\ --------------------------------------------------------------------------- \20\ Radiolucent is defined as being transparent to x-rays. \21\ Kim HB, Kim YB, Ko Y, Choi YJ, Lee J, Kim JH. A case of ingested water beads diagnosed with point-of-care ultrasound. Clin Exp Emerg Med. 2020 Dec;7(4):330-333. doi: 10.15441/ceem.20.041. Epub 2020 Dec 31. PMID: 33440112; PMCID: PMC7808832. --------------------------------------------------------------------------- Other possible medical outcomes that can occur from a child ingesting water beads include surgery site infection, sepsis, extended hospital stays, and follow up surgeries. For example: In IDI 221107CFE0002, a 9-month-old child required five surgeries to remove the small bowel obstruction and treat complications from the initial surgery.\22\ --------------------------------------------------------------------------- \22\ The IDI confirms that ``[m]edical imaging revealed a 2.4 cm [or 24 mm] foreign object blockage.'' --------------------------------------------------------------------------- In IDI 220701HFE0002, a 14-month-old child required a second surgery and a small bowel resection at the site of the previous enterotomy after the initial surgery failed to remove all ingested water beads.\23\ --------------------------------------------------------------------------- \23\ Size of expanded water beads not provided. --------------------------------------------------------------------------- When reviewing the incident data and conducting laboratory testing, CPSC staff has not identified evidence of water beads sticking together once fully expanded within the gastrointestinal tract to form a congealed water bead mass that is more difficult to pass than individual beads. In an effort to diligently address all potential water bead ingestion hazards, though, CPSC is requesting comment on whether any toy water bead products present adhesive properties that would allow water beads to stick together. 2. Ear Insertion CPSRMS contains five reports of victims presenting with water beads in the ear canal. All five of the incidents required medical intervention, while two of the five incidents required hospitalization. When reported, children's ages ranged from 3 years old to 9 years old. One incident involved a 22-year-old woman with special needs. Ear canal insertions are not uncommon for healthcare providers to treat in hospital EDs. Common inserted objects include plastic beads, small toy parts, pebbles, and pieces of food. Many such cases are evaluated, then treated with irrigation or suction of the ear canal, or using surgical instrumentation, such as forceps or hooks.\24\ However, it is uniquely challenging to remove water beads from the ear canal.\25\ For example, water beads should not be removed using irrigation because exposure to water may cause the beads to expand. Medical providers may attempt to remove water beads with tools, but water beads can break during a removal attempt or if a removal attempt fails. Under those circumstances, surgery under sedation or general anesthesia may be necessary to remove water bead fragments. Further, because water beads are radiolucent (i.e., transparent to x-rays) and thus difficult for medical providers to locate and identify, confirmation that a water bead is in the ear canal before attempting removal is difficult. Although medical providers can typically see that something is in the ear canal, x-ray or other imaging technology such as a CT scan are often used to attempt to confirm the object in the ear canal is in fact a water bead, as opposed to a cyst or other object. Because water beads can be difficult to identify on x-rays and the symptoms are ambiguous, cases of insertions into the ear canal have been misdiagnosed as ear infections and treated with topical antibiotics, which can lead to enlargement of the bead and further damage to the ear canal. For similar reasons regarding enlargement, irrigation efforts should be avoided. --------------------------------------------------------------------------- \24\ Lotterman S, Sohal M. Ear Foreign Body Removal. [Updated 2022 Nov 28]. In: StatPearls [internet]. Treasure Island (FL): StatPearls Publishing; 2024 Jan-. Available from: https://www.ncbi.nlm.nih.gov/books/NBK459136/; Svider PF, Vong A, Sheyn A, et al. What are we putting in our ears? a consumer product analysis of aural foreign bodies. Laryngoscope. 2015;125(3):709-714. doi:10.1002/lary.24935.PubMedGoogle ScholarCrossref. \25\ Ramgopal S, Ramprasad V, Manole M, Maguire R. Expansile Superabsorbent Polymer Ball Foreign Body in the Ear. The Journal of Emergency Medicine, ISSN: 0736-4679, Vol: 56, Issue: 6, Page: e115- e117. 2019; Sterling M, Murnick J, Mudd P. Destructive Otologic Foreign Body: Dangers of the Expanding Bead. JAMA Otolaryngol Head Neck Surg. 2016;142(9):919-920. doi:10.1001/jamaoto.2016.1870; Zalzal HG, Ryan M, Reilly B, Mudd P. Managing the Destructive Foreign Body: Water Beads in the Ear (A Case Series) and Literature Review. Annals of Otology, Rhinology & Laryngology. 2023;132(9):1090-1095. doi:10.1177/00034894221133768. --------------------------------------------------------------------------- Early diagnosis of a suspected water bead insertion is critical for a good health outcome because water beads are highly damaging when they expand into middle ear structures.\26\ Young children or patients with certain special needs may not be able to communicate well [[Page 73030]] enough to explain that a water bead is lodged in their ear, which leads to delayed diagnosis and a poor treatment outcome. For example, in I2410042A, a 22-year-old female with special needs visited multiple healthcare facilities before diagnosis of a water bead ear insertion.\27\ Once a water bead expands into the middle ear structure, children can experience ear pain, damage to ear structures, and hearing loss. For example, in IDI 210421HCC1751, a 5-year-old female's ear drum was injured after a water bead expanded in her ear canal.\28\ Similarly, a case report identifies a 4-year-old female who sustained a small ear drum perforation. The perforation was subsequently repaired during a follow up operation.\29\ --------------------------------------------------------------------------- \26\ The middle ear is the portion of the ear that is responsible for transferring acoustic energy to the inner ear. \27\ Size of expanded water bead not provided. \28\ Size of expanded water bead not provided. \29\ Ramgopal S, Ramprasad V, Manole M, Maguire R. Expansile Superabsorbent Polymer Ball Foreign Body in the Ear. The Journal of Emergency Medicine, ISSN: 0736-4679, Vol: 56, Issue: 6, Page: e115- e117. 2019. --------------------------------------------------------------------------- Long-term or permanent hearing loss is possible after a water bead is inserted into the ear canal. For example, in IDI 230613CBB1590, a 3- year-old female reported ear pain for several days. She was initially presumed to have an ear infection and was treated with antibiotics. Thereafter, she began having seizures and was hospitalized. A water bead was removed from her middle ear after it expanded and ruptured the right ear drum.\30\ The child experienced ongoing seizures, hearing loss, and ear pain at least 14 months after the incident. Another case report describes a 10-year-old female who suffered permanent hearing loss after a water bead remained in her ear canal for at least 10 weeks.\31\ --------------------------------------------------------------------------- \30\ The IDI confirms that the ``[g]randmother described the extracted water bead as being the size of a pea.'' \31\ Schulze SL, Kerschner J, Beste D. Pediatric external auditory canal foreign bodies: a review of 698 cases. Otolaryngol Head Neck Surg. 2002 Jul;127(1):73-8. doi: 10.1067/mhn.2002.126724. PMID: 12161734. --------------------------------------------------------------------------- 3. Nose Insertion Four injury incident reports identify children presenting with water beads in the nasal passage. One incident involved a required hospitalization. When a child's age was reported, ages ranged from 3 years old to 11 years old. Water beads can cause severe tissue damage to the nasal mucosa \32\ if left in the nasal cavity for prolonged periods of time, such as days or weeks.\33\ While it is not uncommon for children to insert foreign bodies into nasal cavities, children may display significant symptoms from water beads that are not experienced after inserting other objects, such as pieces of food, into the nose. Water bead nasal cavity insertion symptoms include nasal congestion, bleeding, fever, runny nose, and nasal swelling. Because these symptoms can be related to many other causes, caregivers or doctors may not realize that they are due to water beads. --------------------------------------------------------------------------- \32\ The tissue that lines the nasal cavity. \33\ Han S, Chen Y, Xian X, Teng Y. BMC Pediatrics (2021) 21:273 https://doi.org/10.1186/s12887-021-02740-x. --------------------------------------------------------------------------- While it may be possible to remove a water bead from a nasal cavity without professional medical intervention or for a water bead to pass naturally, children may still experience symptoms and negative side effects after water beads expand in the nose. For example, in I18C0277A, a 3-year-old male was eventually able to blow out a water bead that had been in his nose for up to two weeks.\34\ The child had not told his parents he had inserted the water bead into his nose, but the parents later described the child as having had a nosebleed, trouble sleeping, congestion, a small tear in the nasal cavity, and a low-grade fever lasting three days. --------------------------------------------------------------------------- \34\ Size of expanded water bead not provided. --------------------------------------------------------------------------- Some water bead nose insertions require medical intervention to remove the water bead, sometimes using nasal endoscopy under general anesthesia or sedation.\35\ For example, in IDI 180104CBB1236, a 4- year-old male was placed under general anesthesia at a local hospital and underwent a nasal endoscopy. The child inserted an unknown number of water beads into his nose. He was successful in blowing out most of the water beads, but a nasal endoscopy revealed a single water bead in the nasal passages. Removal was unsuccessful due to bleeding, so the child was placed under general anesthesia to remove the remaining water bead.\36\ --------------------------------------------------------------------------- \35\ Id. \36\ Size of expanded water bead not provided. --------------------------------------------------------------------------- 4. Aspiration Aspiration is the entry of a foreign body, excess saliva, food, or stomach contents from the upper respiratory tract into the lower respiratory tract, which includes the trachea, bronchi, bronchioles, and lungs. Two reported incidents of aspiration involved a child swallowing and inhaling a water bead that then entered and blocked the child's airway. One incident required ED treatment and the other required hospitalization. Sudden inhalation of small objects can cause aspiration into the respiratory tract.\37\ Depending on the object's size, aspirated foreign bodies tend to pass through the trachea and bronchi mainstream and lodge in areas of the tracheobronchial tree.\38\ If a water bead becomes lodged in a child's upper airway, particularly after expansion, the child may experience airway obstruction or acute respiratory distress, which may be fatal. Examples of aspirations include: --------------------------------------------------------------------------- \37\ Abdulmajid, O., Ebeid, A.M, Motaweh, M.M., Kleibo, I.S. Aspirated foreign bodies in the tracheobronchial tree. Thorax 31:365-640, 1976; Aytac, A. Ikizler, C. Inhalation of foreign bodies in children. J. Thoracic & Cardiovasc. Surgery 74(1):145-151, 1977; Blazer, S. Naveh, Y., Friedman, A. Foreign body in the airway--a review of 200 cases. Am. J. Diseases of Children 134(1):68-71, 1980; Cohen, S.R., Herbert, W.I. Lewis, G.B. Geller, K.A. Foreign bodies in the airway--five-year retrospective study with special reference to management. Ann. Otol. 89:437-442, 1980. \38\ The tracheobronial tree is composed of the trachea, the bronchi, and the bronchioles that transport air from the environment to the lungs for gas exchange. --------------------------------------------------------------------------- In I2310047A, a 20-month-old male aspirated a water bead, which obstructed his airway, necessitating medical intervention.\39\ --------------------------------------------------------------------------- \39\ Size of expanded water bead not provided. --------------------------------------------------------------------------- In IDI 201130CCC3196, an 18-month-old male aspirated water beads, which led to an airway obstruction. The child was admitted to the hospital for a bronchoscopy \40\ under general anesthesia, where several water beads were removed from his airway.\41\ --------------------------------------------------------------------------- \40\ A bronchoscopy is an endoscopic technique to visualize the inside of the airways for diagnostic and therapeutic purposes. \41\ IDI included a photo of an expanded water bead from the toy alongside a dime coin to reflect the bead's approximate size. While the expanded sizes of the removed beads are unknown, the mother provided a photo of before and after expansion in water. The photo shows an expanded bead with a diameter about the size of a dime, and much larger than an unexpanded bead next to it. As discussed in section IV of this preamble below, limiting the expansion potential of water bead toys to no more than 50 percent of the original size will help reduce damage from aspiration. --------------------------------------------------------------------------- When a child aspirates a water bead, the initial symptoms range from minor initial choking spells, coughing, or wheezing, to unconsciousness as the water bead obstructs more of the airway for a longer period of time, resulting in the child being unable to breathe and transmit oxygen to the brain. Death versus injury to the child after a water bead aspiration is dependent upon the degree of bronchial obstruction and the time interval between inhalation and extraction of the water bead. Early diagnosis of water bead aspiration allows for a greater likelihood of successful removal and better potential treatment outcome because the water bead may not have yet expanded. Because water beads are radiolucent, they can be difficult to locate within the body and thus difficult to remove, [[Page 73031]] particularly when the airway obstruction is not complete. 5. Choking One reported incident identified that a child had choked on a water bead. Choking occurs when a foreign body fully or partially obstructs the airway to compromise oxygen supply to the lungs.\42\ Physical characteristics of objects that pose a choking hazard include, for example, large size, round shape, and smooth texture. --------------------------------------------------------------------------- \42\ Baker, S.P. Childhood asphyxiation by choking or suffocation. JAMA 244(12):1343-1346, 1980. --------------------------------------------------------------------------- The hazard pattern for choking does not depend upon expansion after the water bead enters the body. Caregivers commonly place water beads in water for prolonged periods of time so the beads can fully expand in advance of a child's playtime. For example, in IDI 180104CBB1236, the child's father placed a number of water beads in water so that they ``would grow and be ready to use in the morning.'' Children may then attempt to swallow the expanded beads. Large, expanded water beads pose a significant choking hazard because they are spherical objects, which can easily roll to the back of the throat and form an air-tight seal with the elastic lining of the airway, thereby causing a complete blockage of the air way and inability to breath.\43\ The throat muscles can contract and tightly grip a water bead, which can make removal difficult without medical intervention. If an object completely obstructs the airway at or above the level of the trachea, the rapid loss of oxygen to body tissues can cause irreversible brain damage or death within minutes. If the airway is not completely blocked, the gag reflex will force the object to the back of the throat (the opposite of swallowing) and the cough reflex will bring in air to force the object from the airway in response to choking. --------------------------------------------------------------------------- \43\ Chang DT, Abdo K, Bhatt JM, Huoh KC, Pham NS, Ahuja GS. Persistence of choking injuries in children. Int J Pediatr Otorhinolaryngol. 2021 May;144:110685. doi: 10.1016/ j.ijporl.2021.110685. Epub 2021 Mar 21. PMID: 33819896; Hayes NM, Chidekel A. Pediatric choking. Del Med J. 2004 Sep;76(9):335-40. PMID: 15510972. --------------------------------------------------------------------------- B. National Injury Estimates From NEISS Based on NEISS data, CPSC estimates 6,300 injuries (sample size = 250, coefficient of variation = 0.27) related to water beads were treated in U.S. hospital EDs over the six-year period from 2017 through 2022.\44\ Of the 250 sample NEISS cases, none were fatal. About 42 percent of the estimated injuries involved children ages 2 through 4 years old, while about 15 percent of the estimated injuries involved children under the age of 2 years old. The youngest child was 7 months old. Forty-one (41) percent of those injured were male, while 59 percent were female. Regarding patient disposition, 95 percent were treated at the hospital ED and released; 3 percent were held for observation; 2 percent were admitted for hospitalization; and less than 1 percent left the hospital without care. The following hazard patterns were identified: --------------------------------------------------------------------------- \44\ The estimated injuries for this NPR are less than the estimate presented in the public guidance on water beads that can be found on the Commission's website at https://www.cpsc.gov/Safety- Education/Safety-Education-Centers/Water-Beads-Information- Center#:~:text=CPSC%20urges%20parents%20and%20caregivers, seek%20medical%20treatment%20right%20away. The difference is mainly due to the NPR excluding incidents with hazard patterns related to rashes or other allergic reactions and incidents involving water bead gel blaster projectiles, which commonly involve eye injury and some of which may not involve children's toys in the scope of this proposed rule. --------------------------------------------------------------------------- Ingestion (48 percent): the reports stated that the child ingested or swallowed a water bead, possibly ingested a water bead, or had put a water bead in his or her mouth. In all sample cases, the youngest child was 7 months old. Three (3) percent of all estimated injuries due to water bead ingestion involved hospitalizations. Ear insertion (36 percent): the reports stated that the child either inserted a water bead into their ear or presented with a water bead stuck in the ear with uncertainty as to how the water bead became inserted. In all sample cases, the child was between the ages of two and 15 years old. Nose insertion (15 percent): the reports stated that the child either inserted the water bead into their nose or presented with the water bead stuck in the nose with uncertainty as to how the water bead became inserted. In all sample cases, the child was between the ages of two and 10 years old. Other (<1 percent): the remaining reports identified one injury from aspiration and one from eye insertion. C. Overview of Hazards in Relation to Child Supervision and Behavior Water bead ingestion, nasal and ear insertion, choking and aspiration can occur in seconds. Many incidents are not witnessed because the caregiver was not directly looking at the child when the ingestion, insertion, initial choking or aspiration occurred. Research indicates that toddlers and preschoolers (ages 2 years old through 5 years old) are out of view of a supervisor for about 20 percent of their awake time at home and are not within visual or hearing range for about 4 percent of awake time at home.\45\ A study of 100 parents found that the mean amount of time parents were willing to leave a child unsupervised in low-risk areas, such as a living room, was six minutes before the child was old enough to crawl and four minutes after the child was old enough to crawl, before the child was 2 years old.\46\ Consumers reasonably may not know water beads are hazardous, particularly because they are marketed for children's play. --------------------------------------------------------------------------- \45\ Morrongiello, B. A., Corbett, M., McCourt, M., & Johnston, N. (2006). Understanding unintentional injury-risk in young children I. The nature and scope of caregiver supervision of children at home. Journal of Pediatric Psychology, 31(6): 529-539. \46\ Garzon, D.L., Lee, Dr. R.K., and Homan, S.M. (2007) ``There's No Place Like Home: A Preliminary Study of Toddler Unintentional Injury.'' Journal of Pediatric Nursing, 22, 368--375. --------------------------------------------------------------------------- Research demonstrates that infants and toddlers are likely to mouth objects within reach. Mouthing of non-food items is a normal part of children's exploratory behavior that contributes to incidents of choking and poisoning.\47\ This behavior is part of the reason for the ban on small parts for toys intended for children younger than 3 years of age, for example, and the mandatory small-parts warning for toys and games intended for children ages 3 years old to 6 years old. 16 CFR part 1501. Mouthing non-food items tends to decrease as a child's age increases; however, it is not uncommon for children over the age of 3 years old to experience choking or ingestion episodes with objects other than food.\48\ Children are prone to ingest or insert small, smooth, colorful objects, like water beads or toy parts.\49\ Unintentional foreign body ingestion is a leading causes for nonfatal ED visits in children younger than 9 years old.\50\ [[Page 73032]] Management and treatment for childhood accidental ingestion is well documented in pediatric medical literature.\51\ --------------------------------------------------------------------------- \47\ Tulve, N., Suggs, J., McCurdy, T., Cohen-Hubal, E., & Moya, J. (2002). Frequency of mouthing behavior in young children. Journal of Exposure Analysis and Environmental Epidemiology. 12, 259-264. \48\ A-Kader. (2010) Foreign body ingestion: children like to put objects in their mouth. World J Pediatrics, Vol 6 No 4 . November 15, 2010. www.wjpch.com; Orsagh-Yentis D, McAdams RJ, Roberts KJ, et al. (2019). Foreign-Body Ingestions of Young Children Treated in US Emergency Departments: 1995-2015. Pediatrics. 143(5):e20181988; Reilly, J. (1992, Fall). Airway Foreign Bodies: Update and Analysis. Int Anesthesiol Clin.30(4):49-55; Altman, A., Ozanne-Smith, J. (1997). Non-fatal asphyxiation and foreign body ingestion in children 0-14 years. Injury Prevention. 3:176-182. \49\ Svider, P.F., Vong, A., Sheyn, A., Bojrab, D.I., Hong, R. S., Eloy, J.A., and Folbe, A.J. (2015). What are we putting in our ears? A consumer product analysis of aural foreign bodies. The Laryngoscope. 125, 709-714; Heim, SW, & Maughan, K.L. (2007). Foreign Bodies in the ear, nose, and throat. American Academy of Family Physicians, 76, p.1186-1189. \50\ Centers for Disease Control and Prevention. Web-based Injury Statistics Query and Reporting System (WISQARS) [Online]. (2003). National Center for Injury Prevention and Control, Centers for Disease Control and Prevention. Available from: URL: www.cdc.gov/ncipc/wisqars. [10/1/2022]. \51\ Kay, M., & Wyllie, R. (2005). Pediatric foreign bodies and their management. 7(3):212-8; Lee, J.H., (2018) Foreign Body Ingestion in Children. Clinical Endoscopy, 51:129-136; Kramer et al., 2015; Conners GP,& Mohseni M. Pediatric Foreign Body Ingestion. [Updated 2021 Jul 18]. In: StatPearls [internet]. Treasure Island (FL): StatPearls Publishing; 2022 Jan-. Available from: https://www.ncbi.nlm.nih.gov/books/NBK430915/--(accessed 4/12/22) Pediatric Foreign Body Ingestion--StatPearls--NCBI Bookshelf (nih.gov). --------------------------------------------------------------------------- D. Availability of Incident Data Upon publication of this NPR in the Federal Register, CPSC staff will make available for review and comment the CPSRMS and NEISS incident reports relied upon and discussed in the NPR, to the extent allowed by applicable law, along with the associated IDIs. The data will be made available by submitting a request to: https://forms.office.com/g/gSZi1gHic8. You will then receive a website link to access the data at the email address you provided. If you do not receive a link within two business days, please contact [email protected]. E. Recalls From December 2012 through March 2024, the Commission's Office of Compliance and Field Operations conducted five recalls and issued two unilateral press release warnings \52\ regarding water bead products. Table 1 below summarizes the seven announcements, including the announcement date, firm/brand, hazard(s), approximate number of units affected, number of reported incidents/injuries, and press release number. The announcements involved one death and five reported injuries, and affected approximately 166,000 units. --------------------------------------------------------------------------- \52\ A unilateral press release is a product-related safety warning issued by CPSC that is not issued jointly with a recalling company. \53\ When the press release delineates the approximate number of recalled units, number of incidents, or number of injuries by country, this summary only includes the reported United States values. \54\ https://www.cpsc.gov/Recalls/2012/dunecraft-recalls-water-balz-skulls-orbs-and-flower-toys-due-to-serious-ingestion. \55\ https://www.cpsc.gov/Recalls/2013/Be-Amazing-Toys-Recalls-Monster-Science-and-Super-Star-Science-Colossal-Water-Balls. \56\ https://www.cpsc.gov/Recalls/2013/Eco-Novelty-Recalls-Jumbo-Size-and-Jumbo-Multipurpose-Cosmo-Beads-Toys. \57\ https://www.cpsc.gov/Recalls/2014/Doodlebutt-Recalls-Jelly-BeadZ-Jumbo-BeadZ-and-Magic-Growing-Fruity-Fun-Toys. \58\ https://www.cpsc.gov/Recalls/2023/Buffalo-Games-Recalls-Chuckle-Roar-Ultimate-Water-Beads-Activity-Kits-Due-to-Serious-Ingestion-Choking-and-Obstruction-Hazards-One-Infant-Death-Reported-Sold-Exclusively-at-Target. Table 1--Summary of Water Bead Announcements -------------------------------------------------------------------------------------------------------------------------------------------------------- Number of Announcement date Firm/brand Hazard affected Number of incidents Press release units (injuries & deaths) \53\ No. -------------------------------------------------------------------------------------------------------------------------------------------------------- December 17, 2012..................... Dunecraft Inc............ Serious Ingestion Hazard...... 94,799 1 incident (1 injury, 0 \54\ 13-071 deaths). July 31, 2013......................... Be Amazing! Toys......... Serious Ingestion Hazard...... 14,200 None Reported........... \55\ 13-254 September 10, 2013.................... Eco-Novelty Corp......... Serious Ingestion Hazard...... 3,500 None Reported........... \56\ 13-278 December 12, 2013..................... Doodlebutt............... Serious Ingestion Hazard...... 1,500 None Reported........... \57\ 14-056 September 14, 2023.................... Buffalo Games, Inc....... Serious Ingestion, Choking and 52,000 2 incidents (1 injury, 1 \58\ 23-286 Obstruction Hazards. death). March 19, 2024........................ Jangostor Brand.......... Chemical Toxicity Hazard-- Unknown 2 incidents (2 injuries, \59\ 24-163 Violation of Federal Ban of 0 deaths). Hazardous Substances. March 19, 2024........................ Tuladuo Brand............ Chemical Toxicity Hazard-- Unknown 1 incident (1 injury, 0 \60\ 24-162 Violation of Federal Ban of deaths). Hazardous Substances. -------------------------------------------------------------------------------------------------------------------------------------------------------- IV. Review of Voluntary Standards--ASTM F963 and EN 71-1 --------------------------------------------------------------------------- \59\ https://www.cpsc.gov/Newsroom/News-Releases/2024/CPSC-Warns-Consumers-to-Immediately-Stop-Using-Jangostor-Water-Beads-Due-to-Chemical-Toxicity-Hazard-Violation-of-Federal-Ban-of-Hazardous-Substances-Sold-on-Amazon-com. \60\ https://www.cpsc.gov/Newsroom/News-Releases/2024/CPSC-Warns-Consumers-to-Immediately-Stop-Using-Tuladuo-Water-Bead-Sets-Due-to-Chemical-Toxicity-Hazard-Violation-of-Federal-Ban-of-Hazardous-Substances-Sold-on-Amazon-com. --------------------------------------------------------------------------- ASTM F963 includes performance requirements and test methods for toys, as well as requirements for warning labels and instructional literature, to reduce or prevent injury to children or death of children from mechanical, chemical, and other hazards associated with toy use. Toys must comply with this standard pursuant to 16 CFR part 1250. ASTM F963 defines ``Expanding Materials'' as ``any material used in a toy which expands greater than 50% in any dimension from its as- received state.'' Section 4.40 of ASTM F963-23 addresses potential hazards associated with expanding materials by requiring that toys and removable components of toys composed of expanding materials which, first, fit entirely within a small parts cylinder while in the toy's as-received size condition, then must, after expansion, completely pass through a 20.0 mm diameter gauge while applying a force of up to 4.5 lbf (pound-force). Water beads that expand up to 20.0 mm diameter would meet the ASTM F963-23 ``Expanding Material'' requirements because they would pass through the gauge, but water beads larger than 20.0 mm diameter would likely fail the requirements because the water beads would fragment once force is applied, as described below in more detail. Yet, as explained in section III of this preamble, incident data show that water beads both larger and smaller than 20.0 mm diameter are hazardous. Another voluntary standard used primarily in the European Union, EN 71-1, Safety of Toys--Part 1: Mechanical and Physical Properties, also provides requirements for expanding materials. Section 3.24 of EN 71-1 defines an ``expanding material'' as a ``material, the volume of which expands when exposed to water.'' Section 4.6 of EN 71-1 establishes performance requirements for expanding materials in toys or components of toys which fit entirely in a 31.7 mm diameter small parts cylinder, the same size as CPSC's small parts cylinder reflected in Figure 9 below, and states they shall not expand more than 50 percent in any dimension when measured after being submerged in demineralized water for 24, 48 and 72 hours. If the expansion in any dimension is more than 50 percent, then the toy does not comply with the expanding material requirement. For example, water beads with an unexpanded diameter of 2.0 mm and expand larger than 3.0 mm diameter would pass through the small parts cylinder in their dehydrated state but expand by more than 50 percent, thus failing the EN 71-1 requirements. Additionally, EN 71- 9, Safety of Toys-- [[Page 73033]] Part 9: Organic Chemical Compounds--Requirement \61\ provides a test method and a concentration limit for a potentially hazardous chemical, called acrylamide, in toys. The EN standard states that the acrylamide concentration limit has been ``calculated based on long-term licking, sucking and chewing of toys that are intended or likely to be mouthed for a significant amount of time. Examples are teethers, rattles and other hand-held soft plastic toys for young children.'' --------------------------------------------------------------------------- \61\ EN 71-9 provides requirements and test methods for organic chemical compounds, such as acrylamide. Previously cited EN 71-1 provides requirements and test methods for mechanical and physical properties, such as expansion limits. Both are part of the standard EN 71. --------------------------------------------------------------------------- Acrylamide limitations in EN 71-9 were developed to address acrylamide exposure following long-term licking, sucking and chewing of toys that are intended to be mouthed. In contrast, water bead toys addressed in this NPR are not intended to be mouthed, nor are they likely to be mouthed for a significant amount of time. The hazards this NPR works to address are ingestion, insertion, choking, and aspiration, not mouthing. Therefore, CPSC staff proposes mandating a different acrylamide limit and test method, intended to address the hazards outlined in the NPR, which is discussed in section V of this preamble. A. Assessment of Current ASTM F963-23 Performance Requirements The test method for ``Expanding Materials'' described in section 8.30, Expanding Materials--Test Method of ASTM F963-23 requires that an expanding material, such as a water bead, first be submerged in deionized water for up to 72 hours in order to reach its largest expansion size. The product is then tested to check whether, at its largest expanded size, the water bead can pass through a gauge with a 20.0 mm (+0.0/-0.1 mm) diameter hole, as is seen in Figure 7, when applying a force of 4.5 lbf (pound-force) to the water bead in the direction of the hole via a rod having a hemispherical end diameter of 10.0 mm. --------------------------------------------------------------------------- \62\ Reprinted, with permission, from ASTM F963-23 Standard Consumer Safety Specification for Toy Safety, copyright ASTM International, 100 Barr Harbor Drive, West Conshohocken, PA 19428. A copy of the complete standard may be obtained from ASTM International, www.astm.org. A free, read-only copy of the standard is available for viewing on the ASTM website at https://www.astm.org/READINGLIBRARY/. [GRAPHIC] [TIFF OMITTED] TP09SE24.010 CPSC staff assessed the current ASTM test method in section 8.30 of ASTM F963-23 and found that using a rod to apply force to an expanded water bead to determine whether the water bead can fit through a test gauge does not realistically represent the compression forces exerted on a water bead when it is swallowed. The use of a 10.0 mm diameter rod to apply a force when conducting the test causes fragmentation of the water bead (Figure 8), which would be considered a ``pass'' pursuant to the ASTM test standard. Yet, incident data confirms water beads remain whole after being swallowed, thus creating a gastrointestinal tract blockage.\63\ Because the force that the rod exerts can damage the expanded water bead and cause fragmentation, Commission staff has assessed that the current ASTM test method is inadequate to effectively test water beads for an ingestion hazard. --------------------------------------------------------------------------- \63\ Examples include the following IDIs: 230727CBB1846, 230707CBB1698, 230613CBB1591, 170802CCC3140 and 221107CFE0002. --------------------------------------------------------------------------- [[Page 73034]] [GRAPHIC] [TIFF OMITTED] TP09SE24.011 Staff also analyzed the 20.0 mm (+0.0/-0.1 mm) diameter gauge specified in section 4.40 of ASTM F963-23 and determined that in light of incident data demonstrating how ingestion hazards occur, the gauge diameter should be reduced. The 20.0 mm diameter gauge used in ASTM F963 was selected based on the dimension of the pyloric sphincter \64\ within the gastrointestinal tract of an 18-month-old child because, at the time the ``Expanding Materials'' requirements were created, the pyloric sphincter was thought by the drafters to be the most likely site where the gastrointestinal blockage would occur. As explained below, however, objects that can cause a gastrointestinal blockage are more likely to occur at either the gastric outlet part of the stomach or the ileocecal valve at the end of the small intestine.\65\ --------------------------------------------------------------------------- \64\ The pyloric sphincter is the valve located at the bottom of the stomach which opens to allow food to pass from stomach to the small intestine. \65\ The ileocecal valve is a sphincter muscle situated at the junction of the ileum (last portion of the small intestine) and the colon (first portion of the large intestine). --------------------------------------------------------------------------- Water beads, like other foreign bodies and food, do not remain in the stomach for long. Therefore, water beads generally do not expand fully in the stomach but pass through the pyloric sphincter and into the small intestine. Water beads continue to expand in the small intestine, where they spend more time and are exposed to liquid that facilitates expansion. After the water beads expand fully in the small intestine, they are unable to pass through the ileocecal valve and into the large intestine, therefore causing a gastrointestinal blockage. CPSC staff evaluated the relevant recent incident data and advises that because the ileocecal valve is often the site of the gastrointestinal blockage when a child ingests a water bead, the ileocecal valve is a more appropriate anatomical structure on which to base the diameter of the funnel test gauge than the pyloric sphincter. Literature on ileocecal valve size indicates valve size will vary based on age and natural variation within the population, 66 67 but the Commission has not identified reliable authorities providing ileocecal valve sizes for children between the ages of 9 months old and 3 years old. Accordingly, as explained in section V below, the Commission has based this proposed rule on incident data. --------------------------------------------------------------------------- \66\ Tang SJ, Wu R. Ilececum: A Comprehensive Review. Can J Gastroenterol Hepatol. 2019 Feb 3;2019:1451835. doi: 10.1155/2019/ 1451835. PMID: 30854348; PMCID: PMC6378086. \67\ Silva AC, Beaty SD, Hara AK, Fletcher JG, Fidler JL, Menias CO, Johnson CD. Spectrum of normal and abnormal CT appearances of the ileocecal valve and cecum with endoscopic and surgical correlation. Radiographics. 2007 Jul-Aug;27(4):1039-54. doi: 10.1148/rg.274065164. PMID: 17620466. --------------------------------------------------------------------------- Section 4.40 of ASTM F963-23 also requires that ``[t]oys, and removable components of toys, which fit entirely inside the small parts cylinder in their as-received condition, and which are composed of an expanding material, shall completely pass through the gauge when tested.'' The referenced small parts cylinder is from 16 CFR 1501.4 and section 4.6.1, Small Objects of ASTM F963-23, which provides general safety requirements. Under section 4.6.1, toys intended for children under 36 months of age, ``including removable [components], liberated components, or fragments of toys[,] shall [not] be small enough without being compressed to fit entirely within [the small parts cylinder].'' This requirement is to minimize choking, ingestion, or inhalation hazards. Most water bead products are intended for children older than 36 months of age, however, and therefore are not subject to requirements in section 4.6.1 of ASTM F963-23. Finally, to address the potential presence of toxic chemicals in toys, section 4.3 of ASTM F963-23 requires that all toys must comply with the Federal Hazardous Substances Act (FHSA) toxicity and hazardous substances standards. Though there is this generalized FHSA compliance requirement for all of ASTM F963-23, section 4.40, Expanding Materials of ASTM F963-23 does not specifically mandate testing for hazardous chemicals. Water beads are composed of absorbent polymers, which can contain acrylamide monomer--a chemical that can be hazardous when ingested.\68\ ASTM F963-23 does not have any test methods or limits for acrylamide monomer in water beads. Therefore, the current ASTM standard is inadequate to provide the highest level of safety feasible to ensure that the chemicals in water beads are non-toxic. Because water beads containing high levels of acrylamide monomer are toxic, the NPR proposes to establish content limits and test methods to address the toxicity hazard. --------------------------------------------------------------------------- \68\ Per the Federal Hazardous Substances Act (FHSA) (16 CFR 1500.3(c)(2)(i)(A)), a substance with a median lethal dose (LD50) between 50 and 5000 mg/kg in rats is ``toxic'' for acute toxicity. The reported oral LD50 values for undiluted acrylamide in rats range from 150 to 413 mg/kg. See ATSDR Toxicological Profile for Acrylamide, available at https://www.atsdr.cdc.gov/ToxProfiles/tp203.pdf. --------------------------------------------------------------------------- B. Assessment of Current EN 71-1 Expanding Materials Requirements The test method for ``Expanding Materials'' described in section 8.14 of EN 71-1 requires that an expanding material, such as a water bead, that fits entirely in a small parts cylinder first be measured, using calipers,\69\ to determine its original size in each dimension. Next, the expanding material must be submerged in demineralized water for up to 72 hours to reach its largest expansion size. After expansion, the water bead must be measured again to determine if it has expanded more than 50 percent of its original size in any dimension. If the water bead has expanded more than 50 percent, the expanding material requirements are not met. --------------------------------------------------------------------------- \69\ An instrument used to measure the dimensions of an object. --------------------------------------------------------------------------- The Commission preliminarily determines that the current EN 71-1 expanding material requirement is inadequate as a stand-alone requirement. Staff assesses that an additional maximum size requirement is [[Page 73035]] necessary because as currently written, for example, the standard would allow for a water bead having a diameter of 9.0 mm to expand to 13.5 mm diameter. While this expansion would not be more than 50 percent of the water bead's original size, therefore meeting the EN 71-1 expanding material requirements, the expanded water bead would likely cause a gastrointestinal block if a child ingested it. Indeed, as described in section III of this preamble,\70\ a water bead with 13.0 mm diameter is known to have caused a gastrointestinal block in a 13-month-old female. If the only limitation on compliant water beads was that they do not expand more than 50 percent, the ingestion hazard would still be present. --------------------------------------------------------------------------- \70\ IDI 170802CC3140. --------------------------------------------------------------------------- The 50 percent expansion limit is, however, a beneficial additional safety provision when combined with staff's proposed diameter limit for fully expanded beads. In particular, requiring a reduction in the maximum expansion of water beads reduces the potential damage to inner ear structures or nasal tissue if a child inserts a water bead into their ear or nose because more damage occurs when the water beads are intended to expand to bigger sizes and therefore exert more pressure on the body parts that contain them. Reducing expansion potential will also reduce the degree of bronchial obstruction created when a water bead is aspirated. C. Assessment of Current ASTM F963-23 Labeling Requirements Section 5.0, Labeling Requirements of ASTM F963-23 contains general labeling requirements that apply to toys, including water beads or toys containing water beads. Still, the requirements in section 5.0 are not specifically referenced in section 4.40, Expanding Materials. Only broad warning statements for small part choking hazards and small ball hazards are required for ``Expanding Materials.'' While the warning statements address general choking hazards, they do not address or inform about injuries (e.g., gastrointestinal blockage and nasal tissue damage) and deaths that have occurred when water beads expand after being swallowed or inserted. D. 2024 Proposed Draft Revisions to ASTM F963 On January 22, 2024, and March 25, 2024, CPSC staff met with the ASTM F15.22 Emerging Hazards Task Group to discuss a possible revision of ASTM F963 to include specific requirements for water beads. CPSC staff and ASTM discussed incident information and the ASTM 20.0 mm diameter test gauge compared to CPSC's proposed funnel test gauge shown below in Figure 10 and Figure 11. On July 9, 2024, ASTM shared a draft proposal to revise section 4.40 of ASTM F963-23 to include water bead- specific requirements. On July 18, 2024, ASTM submitted a ballot for vote on the proposal, which is available until August 19, 2024. CPSC staff has reviewed the 2024 draft proposal, finding that it is inadequate to address all known water bead hazards. In the proposed revision, the draft would define a water bead as a ``spherical or spheroid water-absorbent object, intended to expand in size when immersed in a liquid.'' This draft revision would apply to water beads intended to be accessible in dehydrated state and water beads in the expanded state. If the water bead is already expanded, the water bead would be given time to dehydrate before testing. These draft requirements would not apply to water beads that are not intended to be accessible, such as water beads within a squeeze ball. ASTM's draft performance test proposal requires first measuring the diameter of a dehydrated water bead and then measuring the maximum amount of expansion after soaking the water bead in deionized water at 37 [deg]C. If the maximum expansion is greater than 50 percent in diameter, then the water bead will be placed in a funnel gauge like that in Figure 10 to determine whether it can pass through the gauge under a certain external pressure. If the maximum expansion of the water bead is less than or equal to 50 percent in diameter, no further testing is required. Based on incident data, the ASTM draft proposes use of a funnel test gauge with a 12.0 mm diameter (+0.0/-0.1 mm) as a performance requirement. When attempting to pass an expanded water bead, the proposed test includes applying a force of 0.1 lbf to the water bead in the direction of the 12.0 mm diameter hole with a 10.0 mm diameter rod having a flat end. The ASTM draft states that ``a water bead material which breaks or loses integrity during this test is considered to be acceptable,'' and therefore if the fragmented pieces pass through the funnel, the product still would meet the draft requirement even if the unbroken water bead was larger than 12.0 mm. The draft does not include acrylamide limits or revised labeling requirements. CPSC staff has reviewed the draft ASTM proposal and finds that a gauge size of 12.0 mm is inadequate to address known hazards from water beads. The draft proposes 12.0 mm in consideration of one incident,\71\ which describes a 13-month-old female who was unable to pass a water bead presumed to be as small as 13.0 mm diameter. However, while staff knows a 13.0 mm sized bead can cause a blockage in a child, this incident does not establish the size of the largest water bead that can safely pass. Further, the draft ASTM requirements leave the potential for a dehydrated water bead of 13.0 mm diameter capable of expanding to 19.5 mm diameter without requiring testing because the water bead would not expand to more than 50 percent of its original size. As explained elsewhere in this preamble, fragmentation of the water bead during testing is not representative of incident data, and testing of water beads within toys, such as squeeze balls, appears necessary to address accessibility incidents. Therefore, while the draft ASTM proposal may be an improvement beyond the current ``Expanding Materials'' requirements, it would not adequately address known water bead hazards even if adopted. --------------------------------------------------------------------------- \71\ IDI 170802CCC3140. --------------------------------------------------------------------------- V. NPR Description of Proposed Provisions and Justification Based on incident data described in section III of this preamble and CPSC staff's engineering, health sciences, and human factors assessments, the NPR proposes creating a new section 1250.4 to 16 CFR part 1250, Safety Standard Mandating ASTM F963 for Toys, adding performance and labeling requirements for water beads to better address the known water bead hazards and to provide the highest level of safety feasible for such products. Further, this NPR proposes revising the title of part 1250 from ``Safety Standard Mandating ASTM F963 for Toys'' to ``Safety Standard for Toys,'' to reflect the inclusion of proposed requirements that do not incorporate by reference existing requirements in the ASTM F963 voluntary standard. A. Performance Requirements To Address Ingestion, Choking, Aspiration, and Insertion Hazards Under the proposed rule, water beads in the pre-expanded state that fit entirely inside the small part cylinder from 16 CFR 1501.4 (Figure 9) must then, after full expansion, not grow more than 50 percent in any dimension and must remain whole while completely passing through the funnel test gauge depicted in Figure 10 and Figure 11. Instead of using the rod test in ASTM F963-23, the NPR proposes requiring the water bead to pass through [[Page 73036]] a 9.0 mm (+0.0/-0.1 mm) diameter funnel test gauge under its own weight to better reflect the lower range of the compression forces a water bead would experience while passing through a child's gastrointestinal tract. In the absence of conclusive anatomical evidence, the Commission relies on incident data and CPSC staff's analysis to propose that the funnel test gauge have a 9.0 mm diameter. IDI 170802CCC3140 describes a 13-month-old female who was unable to pass a water bead presumed to range from 13.0 mm to 17.5 mm diameter. Staff purchased a separate sample of the same product that the 13-month-old female ingested and tested the water beads according to the section 4.40 requirements. After testing, the water beads had a dehydrated, as-received diameter ranging between 2.0 mm and 2.50 mm. After hydration and expansion, the size ranged from between 13.0 mm to 17.5 mm diameter. IDI 230707CBB1698 describes a 3-year-old female who ingested but successfully passed approximately 1,200 water beads. The child successfully passed approximately 200 of the water beads naturally and then passed the remaining water beads with the aid of a mineral oil enema. Staff purchased a separate sample of the same product that the 3-year-old female ingested and tested the water beads according to the requirements in section 4.40. After the testing was completed, the water beads had a dehydrated, as-received diameter ranging between 2.20 mm and 2.40 mm. After hydration and expansion, the diameter of the water beads ranged from between 9.32 mm and 15.20 mm diameter. Based on these investigations, the NPR proposes requiring the use of a 9.0 mm diameter funnel test gauge to ensure the test methods provide the highest level of safety feasible by limiting the gauge size to the size of the smallest water bead that was known to pass through the body without causing an intestinal obstruction. The proposed 9.0 mm diameter funnel test gauge also would reduce the hazards associated with water beads that are inserted into children's noses and ears. While nose and ear insertion incident data do not indicate the expanded water bead sizes, larger beads can grow further into the nasal cavity and middle ear, causing severe injuries and requiring invasive surgery with sedation and/or general anesthesia to completely remove. The larger water beads are more likely to be removable only in pieces, as opposed to as a whole, because the bead has expanded deeper into the nasal cavity or inner ear. Removal of smaller water beads tends to be less invasive because they can be removed in one piece by health care professionals, similar to removal efforts of other inserted small objects, like marbles, toy parts, and food. [GRAPHIC] [TIFF OMITTED] TP09SE24.012 [[Page 73037]] [GRAPHIC] [TIFF OMITTED] TP09SE24.013 The NPR proposes including the ``Expanding Materials'' test method from section 8.30 of ASTM F963-23, with modifications, in the proposed rule for water beads under Sec. 1250.4. The NPR proposes conditioning the water bead or toy containing the water bead at 20 5 [deg]C (68 9 [deg]F) and at a relative humidity of 40-65 percent for a minimum of seven hours prior to the test. This mirrors the ASTM test method but adds a requirement that if the water bead is partially expanded, or contained within a toy and partially expanded, the water bead should be removed and dehydrated before testing. This simulates the hazard that occurs when a water bead dislodges from the product and then dehydrates. Pursuant to the ASTM test method, the NPR proposes that the water bead should next be submerged in a test bath of deionized water maintained at 37 [deg]C 2 [deg]C (98.6 [deg]F 3.6 [deg]F) for the duration of immersion, without agitation.\72\ For water beads that exhibit positive buoyancy, the test requires placing weight(s) with mass just sufficient to achieve complete submersion on top of the water bead. The test requires that test labs be careful to minimize contact of the test water bead with the sides or bottom of the container to minimize any interference with expansion. To ensure the water bead is fully expanded, the test requires submersion for 72 hours and to measure the bead's expansion after 6 hours, 24 hours, 48 hours and then 72 hours. If the greatest expansion was observed at 72 hours, then the testing should proceed. If greatest expansion was observed at another time interval, then a new sample should be conditioned for the time interval when greatest expansion was observed. --------------------------------------------------------------------------- \72\ The largest expansion usually occurs in deionized water; therefore, the water bead can grow to its largest potential in deionized water when testing the product in a laboratory. This is a conservative approach, as beads may expand less in digestive fluids. --------------------------------------------------------------------------- Next, the NPR proposes adding a test step based on the ``Expanding Materials'' requirement from section 4.6 of EN 71-1, which limits water bead expansion to no more than 50 percent in any dimension. After the required period of submersion to reach greatest expansion, the water bead will be measured with calipers to determine whether it has expanded more than 50 percent. Setting this expansion limit will address potential damage to nasal passages and ear cavities, as well as prevent choking or aspiration hazards by limiting water bead growth. Thereafter, returning to the ASTM framework but instead of using the ASTM F963 rod test, the proposed test in the NPR would require placing the expanded water bead at the top surface of the 9.0 mm diameter gauge's upper opening (Figure 11) in the orientation least likely to pass through, and releasing the bead to allow it to travel [[Page 73038]] down until it reaches the lower opening, then observing if the expanded water bead is able to remain whole and completely pass through the lower opening. By testing to observe if the water bead can completely pass through the 9.0 mm diameter funnel test gauge without external force, the test can simulate what occurs in a child's gastrointestinal tract to determine whether the bead will or will not cause a blockage in a child's gastrointestinal tract or, specifically, at the child's ileocecal valve located at the end of the small intestines. B. Acrylamide Limits and Testing Water beads are composed of absorbent polymers, such as polyacrylamide and/or polyacrylate polymers. Polyacrylamide is a chemical compound composed of acrylamide monomer units linked together. The polymer form, polyacrylamide, is relatively non-toxic; however, acrylamide monomer alone can be toxic.\73\ Residual acrylamide monomer can remain after production of polyacrylamide, which can stay in water beads after manufacturing. Human exposure to acrylamide monomer is known to cause negative health effects depending on the amount and duration of exposure.\74\ Chronic, long-term exposure can adversely affect the nervous, gastrointestinal, and reproductive systems and is suspected to be a human carcinogen. Even short-term or one-time exposures has caused acute negative effects in the nervous system.\75\ --------------------------------------------------------------------------- \73\ Per FHSA (16 CFR 1500.3(c)(2)(i)(A)), a substance with a median lethal dose (LD50) between 50 and 5000 mg/kg in rats is ``toxic'' for acute toxicity. The reported oral LD50 values for undiluted acrylamide in rats range from 150 to 413 mg/kg (source: ATSDR Toxicological Profile for Acrylamide, available at https://www.atsdr.cdc.gov/ToxProfiles/tp203.pdf). \74\ ATSDR Toxicological Profile for Acrylamide, available at https://www.atsdr.cdc.gov/ToxProfiles/tp203.pdf; Internationally Peer Reviewed Chemical Safety Information (INCHEM) Acrylamide Review, available at https://inchem.org/documents/pims/chemical/pim652.htm; U.S. Environmental Protection Agency (EPA) Hazard Summary of Acrylamide, available at https://www.epa.gov/sites/default/files/2016-09/documents/acrylamide.pdf; U.S. FDA Process Contaminants in Food--acrylamide, available at https://www.fda.gov/food/process-contaminants-food/acrylamide. \75\ Agency for Toxic Substances and Disease Registry (ATSDR) Toxicological Profile for Acrylamide, available at https://www.atsdr.cdc.gov/ToxProfiles/tp203.pdf. --------------------------------------------------------------------------- The United States Food and Drug Administration (FDA) limits the amount of residual acrylamide monomer allowed in polyacrylamide used in food production (21 CFR 176.170, 176.180), processing (21 CFR 173.5, 173.10, 173.315), and packaging (21 CFR 176.110). The FDA has also published guidance on reducing the amount of acrylamide in foods.\76\ Polyacrylamide is commonly used in water and wastewater treatment, and the EPA limits the amount of acrylamide permitted in drinking water.\77\ --------------------------------------------------------------------------- \76\ U.S. FDA Guidance for Industry Acrylamide in Foods, available at https://www.fda.gov/media/87150/download. \77\ U.S. EPA National Primary Drinking Water Regulations, available at https://www.epa.gov/ground-water-and-drinking-water/national-primary-drinking-water-regulations. --------------------------------------------------------------------------- No CPSC mandatory standard sets acrylamide limits for water beads or any other product; however, toys subject to ASTM F963, including water beads, are subject to the toxicology safety requirements in section 4.3.1, Hazardous Substances of ASTM F963-23. Section 4.3.1 stipulates that ``[t]oys or materials used in toys shall conform to the FHSA and to the regulations promulgated under that act . . . The regulations define limits for substances that are toxic, corrosive, [or] an irritant . . . .'' Section 8.2, Testing for Hazardous Substance Content in ASTM F963-23 directs readers to review the FHSA to determine whether a product is comprised of hazardous substances. Depending on exposure, acrylamide could be a hazardous substance per 16 CFR 1500.3(b)(4)(i), which defines a hazardous substance as ``any substance or mixture of substances which is toxic . . . .'' Per 16 CFR 1500.3(b)(5), the term `toxic' refers to ``any substance (other than a radioactive substance) which has the capacity to produce personal injury or illness to man through ingestion, inhalation, or absorption through any body surface.'' While CPSC does not have incident data reflecting acrylamide poisoning from water beads,\78\ the presence of acrylamide monomers in several water bead products that staff tested demonstrates a potential chemical hazard. CPSC has made efforts to address the potential chemical hazard outside of rulemaking. For example, in March 2024 CPSC announced unilateral warnings for two water bead products that contained levels of acrylamide in violation of the FHSA.\79\ If one of those water beads was ingested, it could pose a risk of acute toxicity to children from the acrylamide exposure. --------------------------------------------------------------------------- \78\ CPSC has not yet received data demonstrating chronic exposure to acrylamide from water beads. \79\ https://www.cpsc.gov/Newsroom/News-Releases/2024/CPSC-Warns-Consumers-to-Immediately-Stop-Using-Jangostor-Water-Beads-Due-to-Chemical-Toxicity-Hazard-Violation-of-Federal-Ban-of-Hazardous-Substances-Sold-on-Amazon-com; https://www.cpsc.gov/Newsroom/News-Releases/2024/CPSC-Warns-Consumers-to-Immediately-Stop-Using-Tuladuo-Water-Bead-Sets-Due-to-Chemical-Toxicity-Hazard-Violation-of-Federal-Ban-of-Hazardous-Substances-Sold-on-Amazon-com. --------------------------------------------------------------------------- Children's possible exposures to acrylamide after ingesting water beads would likely be a single, infrequent event (possibly including multiple beads in a single event). Therefore, the exposure scenario would be acute rather than chronic. The Agency for Toxic Substances and Disease Registry (ATSDR) \80\ created and published an acute-duration oral minimal risk level (MRL) of 0.01 mg/kg-day for acrylamide.\81\ The MRL is an acute exposure level at which an exposed person (including a child) is unlikely to experience an adverse health effect. --------------------------------------------------------------------------- \80\ ATSDR is a federal public health agency within the United States Department of Health and Human Services. More information about ATSDR is available at https://www.atsdr.cdc.gov. \81\ ATSDR Toxicological Profile for Acrylamide, available at https://www.atsdr.cdc.gov/ToxProfiles/tp203.pdf. --------------------------------------------------------------------------- The Commission proposes that acrylamide limits be set to ensure that if a child ingests multiple water beads, the child's exposure levels would not exceed the acute duration oral MRL for children aged 6 months old.\82\ The NPR proposes that the limit be set to 65 [micro]g acrylamide extractable from 100 small water beads (defined as <4 mm across the smallest diameter of the bead prior to hydration) or one large water bead (defined as >=4 mm across the smallest diameter of the bead prior to hydration). The quantities of small and large beads assumed to be ingested are based on water bead ingestion incidents and published case reports. Incident data indicate that children tend to ingest only one or two large beads. CPSC therefore proposes an exposure scenario in which a 6-month-old child ingests one large water bead. --------------------------------------------------------------------------- \82\ Six months is the most sensitive age in this range by having the lowest body weights, so the proposed limit of extractable acrylamide from water beads is based on children of this age. --------------------------------------------------------------------------- Less information is available for incidents of children ingesting small beads. If small beads do not expand enough after ingestion to cause a blockage, a child may not receive medical care. However, two case reports describe a 12-month-old who ingested 12 small water beads \83\ and a 2-year-old who ingested approximately 100 small beads.\84\ A review of 21 water bead ingestion cases over a 10-year period [[Page 73039]] (2008 to 2017) reported that the number of water beads swallowed ranged from one to ``a handful.\85\ Although IDI 230707CBB1698 describes a 3- year-old who ingested approximately 1,200 small water beads, this scenario appears to be an extreme occurrence. CPSC therefore proposes for this NPR an exposure scenario in which a 6-month-old child ingests 100 small water beads. The 100 count is within the range of documented ingestion incidents, and it is consistent with the number of small beads that staff uses in the acrylamide extraction test method described below. --------------------------------------------------------------------------- \83\ Kim HB, Kim YB, Ko Y, Choi YJ, Lee J, Kim JH. A case of ingested water beads diagnosed with point-of-care ultrasound. Clin Exp Emerg Med. 2020 Dec;7(4):330-333. doi: 10.15441/ceem.20.041. Epub 2020 Dec 31. PMID: 33440112; PMCID: PMC7808832. \84\ Jackson J, Randell KA, Knapp JF. Two Year Old With Water Bead Ingestion. Pediatr Emerg Care. 2015 Aug;31(8):605-7. doi: 10.1097/PEC.0000000000000520. PMID: 26241717. \85\ Mehmeto[gbreve]lu F. A Retrospective 10-Year Analysis of Water Absorbent Bead Ingestion in Children. Emerg Med Int. 2018 May 6;2018:5910527. doi: 10.1155/2018/5910527. PMID: 29854461; PMCID: PMC5960561. --------------------------------------------------------------------------- An acrylamide exposure limit from ATSDR's acute-duration oral MRL of 0.01 mg/kg would mean that a child should not be exposed to more than 0.01 mg of acrylamide for each kg of the child's body weight. When assessing the appropriate limit, staff used the fifth percentile body weight for the youngest female child according to the National Center for Health Statistics.\86\ The fifth percentile body weight of a 6- to 8-month-old female is 6.5 kg. By multiplying the acute-duration oral MRL by the body weight, staff recommends an exposure limit for acrylamide from water beads is 0.065 mg, which is equal to 65 [micro]g of extractable arylamide. The calculation are: --------------------------------------------------------------------------- \86\ U.S. Centers for Disease Control and Prevention (CDC) Anthropometric Reference Data for Children and Adults: United States, 2015-2018, available at https://www.cdc.gov/nchs/data/series/sr_03/sr03-046-508.pdf. 1. Calculate Acrylamide Exposure Limit: 0.01 mg/kg x 6.5 kg = 0.065 mg 2. Convert mg unit to [micro]g: 0.065 mg x 1000 [micro]g/mg = 65 [micro]g The amount of extractable acrylamide shall be tested in accordance with the test procedure specified in the proposed 16 CFR 1250.4(c)(2).\87\ The proposed 65 [micro]g acrylamide exposure limit applies to an assumed ingestion of one large bead (defined as >=4 mm across the smallest diameter of the bead prior to hydration) or 100 small beads (defined as <4 mm across the smallest diameter of the bead prior to hydration). Under the proposal, CPSC would consider less than 65 [micro]g acrylamide extractable from water beads safe in children as young as 6 months old, while water beads containing more than 65 [micro]g pose a risk of acute toxicity. Staff in CPSC's Division of Chemistry and Directorate for Health Sciences developed a test method to determine the levels of extractable acrylamide in water beads. The NPR proposes the following extraction method: --------------------------------------------------------------------------- \87\ Because the volume of the extraction fluid may be variable, the 65 [micro]g acrylamide limit is the total mass of acrylamide extracted in 24 hours and not a concentration. --------------------------------------------------------------------------- Perform an extraction test on water beads to determine the amount of acrylamide that leaches from the water beads over a 24-hour period. Place dehydrated water beads in a container with pH neutral deionized water and place the container in a shaker bath that heats the water beads to 37 [deg]C while shaking them at 30 RPM for 24 hours. For each water bead product, perform three separate extraction trials, or repetitions, concurrently to ensure that all results are reasonably consistent, given any bead-to-bead variation. For large water beads (defined as >=4 mm across the smallest diameter of the bead prior to hydration), perform three trials using one large bead per trial. For small beads (defined as <4 mm across the smallest diameter of the bead prior to hydration), perform three trials using 100 small beads per trial. If a product contains different sizes of water beads, perform extraction testing for each size. Use an appropriate extraction container and volume of deionized water so that all water beads remain covered by water for the duration of the extraction period. Because water beads absorb different volumes of water depending on their size, conduct additional tests before performing final acrylamide extractions, to determine what volume of water best allows for full bead growth without unnecessarily diluting the concentration of extracted acrylamide. Choose containers that will not compress the water beads at any point during the 24-hour extraction period. To prevent water evaporation during the extraction, cover the containers during the extraction. Following the extraction period, determine the volume of remaining water for each trial, then analyze the water to determine the mass of acrylamide present using an instrument that is able to quantitate acrylamide at levels equal to or less than the proposed limit. Staff used a liquid chromatography-tandem mass spectrometer (LC- MS/MS) system,\88\ but other instruments may accurately quantify acrylamide at levels equal to or less than the proposed limit. --------------------------------------------------------------------------- \88\ LC-MS/MS is an analytical chemistry technique that allows for the physical separation and subsequent identification and quantification of analytes of interest within a solution. --------------------------------------------------------------------------- C. Marking, Labeling, and Instructional Literature Requirements The ASTM F963-23 standard does not contain marking, warning, or labeling requirements specifically for water beads. While the standard provides broad warning requirements under section 5 of ASTM F963-23, such warnings do not adequately address the hazards associated with water beads. The Commission proposes requiring the following marking, labeling, and instructional literature requirements for all products within scope of the NPR and seeks comment on format, location, and content requirements of proposed warnings. 1. Packaging and Container Marking and Labeling Warning about a hazard is a less effective method of addressing the hazard, contrasted with either designing the hazard out of a product or guarding consumers from the hazard.\89\ Therefore, when a standard relies on warnings to address a hazard, it is particularly important that the warning statements are noticeable, understandable, and motivational. The primary U.S. voluntary consensus standard for product safety signs and labels, ANSI Z535.4, American National Standard for Product Safety Signs and Labels,\90\ recommends that on-product warnings include content that addresses the following three elements: --------------------------------------------------------------------------- \89\ Laughery, K.R., & Wogalter, M.S. (2011). The Hazard Control Hierarchy and its Utility in Safety Decisions about Consumer Products. In W. Karwowski, M.M. Soares, & N.A. Stanton (Eds.), Human Factors and Ergonomics in Consumer Product Design: Uses and Applications (pp. 33-39). Boca Raton, FL: CRC Press; Williams, D.J., & Noyes, J.M. (2011). Reducing the Risk to Consumers: Implications for Designing Safe Consumer Products. In W. Karwowski, M.M. Soares, & N.A. Stanton (Eds.), Human Factors and Ergonomics in Consumer Product Design: Uses and Applications (pp. 3-21). Boca Raton, FL: CRC Press; Vredenburgh, A.G., & Zackowitz, I.B. (2006). Expectations. In M.S. Wogalter (Ed.), Handbook of warnings (pp. 345- 354). Mahwah, NJ: Lawrence Erlbaum Associates. \90\ ANSI Z535.4, American National Standard for Product Safety Signs and Labels is the primary US. voluntary consensus standard for the design, application, use, and placement of on-product warning labels when developing or assessing the adequacy of warning labels. --------------------------------------------------------------------------- a description of the hazard; information about the consequences of exposure to the hazard; and instructions regarding appropriate hazard-avoidance behaviors. Providing explicit or detailed information in a warning can increase its effectiveness \91\ by enhancing perception of injury severity and perceived hazard.\92\ Vividness of [[Page 73040]] message content can increase message salience by triggering motivation to act in consideration of the warning.\93\ --------------------------------------------------------------------------- \91\ Laughery, Sr., K.R., & Smith, D.P. (2006). Explicit Information in Warnings. In M.S. Wogalter (Ed.), Handbook of Warnings (pp. 419-428). Mahwah, NJ: Lawrence Erlbaum Associates. \92\ DeJoy, D.M. (1999). Motivation. In M.S. Wogalter, D.M. DeJoy, & K.R. Laughery (Eds.), Warnings and Risk Communication (pp. 221-243). Philadelphia: Taylor & Francis. \93\ Murray-Johnson, L., & Witte, K. (2003). Looking Toward the Future: Health Message Design Strategies. In T.L. Thompson, A. Dorsey, K. I. Miller, & R. Parrott (Eds.), Handbook of Health Communication (pp. 473-495). New York: Routledge. --------------------------------------------------------------------------- The Commission proposes including the following warnings on water bead toys and packaging of toys that contain water beads. Specifically, packaging would be required to include the warning as shown in Figure 12: [GRAPHIC] [TIFF OMITTED] TP09SE24.014 Packaging of toys with contained water beads, such as squeeze balls filled with water beads, would be required to include the warnings as shown in Figure 13: [GRAPHIC] [TIFF OMITTED] TP09SE24.015 The Commission further proposes that toys containing water beads that are not individually packaged (e.g., multiple squeeze balls sold in a bin/box) would be required to have a hangtag or sticker label affixed on each individual product with the warning shown in Figure 13. Because CPSC is aware of one death in the U.S. and additional deaths outside of the U.S.,\94\ both warnings labels state, ``Children have DIED after swallowing water beads because the beads blocked their intestines. Your child can die too.'' The purpose of this statement is to communicate to consumers the consequences of swallowing water beads, as well as clarify that once a water bead enters the body, water beads pose a danger by expanding inside the body. The additional statements advise consumers how to avoid hazards and what to do if the consumer suspects a child has swallowed or inserted a water bead. The warning for toys with contained water beads (Figure 13) includes the wording, ``This product contains water beads that grow larger. Discard if beads are coming out[,]'' to ensure consumers are aware that water beads are within the toy, and that exposed water beads are hazardous. Incident data confirm that caregivers may be unaware that toy products purchased contain hazardous water beads.\95\ --------------------------------------------------------------------------- \94\ https://www.consumerreports.org/babies-kids/toys/water-beads-pose-a-serious-safety-risk-to-children-a6431187819/. \95\ Such as incident 20230601-3657B-2147347238 found on saferproducts.gov. A 2-year-old child bit into a stress ball and swallowed the contents requiring medical treatment. The consumer claims to have been unaware that there were water beads inside. --------------------------------------------------------------------------- When developing or assessing the adequacy of a warning, one must consider not only the content of a warning, but also its design or form.\96\ CPSC commonly uses ANSI Z535.4 as a reference for warning formatting requirements. Human factors experts and warnings literature regularly cite ANSI Z535.4 when discussing the design and evaluation of on-product warning labels and generally consider the ANSI Z535 series of requirements as the state-of-the-art, benchmark standards against which warning labels should be evaluated for adequacy.\97\ The scope of ANSI Z535.4 is broad enough to encompass nearly all consumer [[Page 73041]] products, including children's products and toys.\98\ --------------------------------------------------------------------------- \96\ Laughery, Sr., K.R., & Wogalter, M.S. (2006). The Warning Expert in Civil Litigation. In M.S. Wogalter (Ed.), Handbook of Warnings (pp. 605-615). Mahwah, NJ: Lawrence Erlbaum Associates; Madden, M.S. (1999). The Law Relating to Warnings. In M.S. Wogalter, D.M. DeJoy, & K.R. Laughery (Eds.), Warnings and Risk Communication (pp. 315-330). Philadelphia: Taylor & Francis; Madden, M.S. (2006). The Duty to Warn in Products Liability. In M.S. Wogalter (Ed.), Handbook of Warnings (pp. 583-588). Mahwah, NJ: Lawrence Erlbaum Associates. \97\ Vredenburgh, A.G., & Zackowitz, I.B. (2005). Human Factors Issues to be Considered by Product Liability Experts. In Y.I. Noy & W. Karwowski (Eds.), Handbook of Human Factors in Litigation (Chapter 26). Boca Raton, FL: CRC Press; Wogalter, M.S., & Laughery, K.R. (2005). Effectiveness of Consumer Product Warnings: Design and Forensic Considerations. In Y.I. Noy & W. Karwowski (Eds.), Handbook of Human Factors in Litigation (Chapter 31). Boca Raton, FL: CRC Press. \98\ Kalsher, M.J., & Wogalter, M.S. (2008). Warnings: Hazard Control Methods for Caregivers and Children. In R. Lueder & V.J.B. Rice (Eds.), Ergonomics for Children: Designing Products and Places for Toddlers to Teens (pp. 509-539). New York: Taylor & Francis; Rice, V.J.B. (2012). Designing for Children. In G. Salvendy (Ed.), Handbook of Human Factors and Ergonomics (4th ed.) (pp. 1472-1483). Hoboken, NJ: Wiley. --------------------------------------------------------------------------- Signal words, colors, graphics, and placement all increase conspicuity. The salience of a visual warning can be enhanced using large and bold print, high contrast, color, borders, pictorial symbols, and special effects like flashing lights. Therefore, the NPR proposes warning label design requirements for water bead toys and toys containing water beads that reflect the current recommendations from ASTM's Ad Hoc Language Task Group (Ad Hoc Task Group).\99\ The recommendations provide permanent, conspicuous, and consistently formatted warning labels across juvenile products. Warnings that meet the recommendations address numerous format issues related to capturing consumer attention, improving readability, and increasing hazard perception and avoidance behavior. Such recommendations include requiring that the proposed warnings conform to ANSI NEMA Z535.4--2023, American National Standard for Product Safety Signs and Labels, sections 6.1-6.4, 7.2-7.6.3, and 8.1, with the following changes to the ANSI standard: --------------------------------------------------------------------------- \99\ ASTM Ad Hoc Wording Task Group (Ad Hoc TG) consists of members of various durable nursery product voluntary standards committees, including CPSC staff. The Ad Hoc TG's purpose is to harmonize the wording of common sections (e.g., introduction, scope, protective components) and warning label requirements across nursery product voluntary standards. The latest version of the Ad Hoc- approved recommended language is published in the ``Committee Documents'' section of the Committee F15 ASTM website. --------------------------------------------------------------------------- In sections 6.2.2, 7.3, 7.5, and 8.1.2, replace the word ``should'' with ``shall;'' In section 7.6.3, replace the phrase ``should (when feasible)'' with the word ``shall;'' and Strike the word ``safety'' when used immediately before a color (e.g., replace ``safety white'' with ``white''). Further, certain text in the message panel must be in bold and in capital letters as shown in the example warning labels in Figure 12 and Figure 13, to provide emphasis and capture the reader's attention. The signal word ``WARNING'' must appear in sans serif letters in upper case only, be at least \1/8\ inch (3.2 mm) in height, and be center- or left-aligned. The height of the exclamation point inside the safety alert symbol must be at least half the height of the triangle and be centered vertically inside the triangle, as shown in the example warnings. The message panel text capital letters are no less than \1/ 16\'' (1.6mm) \100\ and the message panel text is center- or left- aligned, in sans serif letters. Consistent with Ad Hoc, the text in each column should be arranged in list or outline format, with precautionary statements preceded by bullet points. Precautionary statements must be separated by bullet points if paragraph formatting is used. --------------------------------------------------------------------------- \100\ 1.6mm is the size dimension from the toy standard, 16 CFR part 1250, Safety Standard Mandating ASTM F963 for Toys, not from the Ad Hoc Task Group. --------------------------------------------------------------------------- Warnings that are placed directly on a product and/or the packaging have a higher noticeability rate \101\ because consumers are more likely to see such warnings when examining the product prior to purchase. ANSI Z535.4 provides general guidance on warning placement, stating that warnings must be ``readily visible to the intended viewer'' and will ``alert the viewer to the hazard in time to take appropriate action.'' \102\ Similarly, both the Ad Hoc Task Group and section 5.3.6 of ASTM F963-23 require conspicuous warnings. The NPR proposes warning labels be placed on the principal display panel as defined in section 3.1.62 of ASTM F963-23. --------------------------------------------------------------------------- \101\ Wogalter, M.S., Godfrey, S.S., Fontenelle, G.A., Desaulniers, D.R., Rothstein, P., & Laughery, K.R. (1987). Effectiveness of warnings. Human Factors 29(5), 599-612; Frantz, J.P.; Rhoades, T.P. (1993). A Task-Analytic Approach to the Temporal and Spatial Placement of Product Warnings. Human Factors: The Journal of the Human Factors and Ergonomics Society, 35(4), pp. 719- 730. \102\ American National Standards Institute. (2011). ANSI Z535.4. American national standard: Product safety signs and labels. Rosslyn, VA: National Electrical Manufacturers Association, Section 9.1. --------------------------------------------------------------------------- 2. Instructional Literature Some water bead toys or toys containing water beads provide instructional literature, such as manuals for use. Instructions or other literature accompanying a water bead product, when provided, shall include directions for use, including the relevant warnings from Figure 12 or Figure 13. The NPR proposes that instructional literature shall include the same warning labels that the NPR proposes for product packaging, with similar formatting requirements, though the literature does not need to be in color.\103\ Still, the Commission proposes that the signal word and safety alert symbol shall contrast with the background of the signal word panel, and the warnings shall contrast with the background of the instructional literature.\104\ --------------------------------------------------------------------------- \103\ ANSI Z535.6, Product Safety Information in Product Manuals, Instructions and Other Collateral Materials, allows warning labels to be black and white whereas the NPR mandates color for warning labels packaging. \104\ Ad Hoc section Y.6, Instructional Literature. --------------------------------------------------------------------------- VI. Feasibility of Proposed Requirements Pursuant to section 106(c) of the CPSIA, Congress directed the Commission to ``periodically review and revise the rules set forth under this section to ensure that such rules provide the highest level of safety for such products that is feasible.'' 15 U.S.C. 2056b(c). The Commission's statutory obligation is to ensure that toys have the highest level of safety that the producers are capable of achieving, considering technological and economic ability. Based on the staff's analysis provided in this NPR, the Commission preliminarily determines that the NPR is technically and economically feasible, and requests comment on this determination. A. Technological Feasibility A proposed rule is technically feasible if it is capable of being done. For example, compliant products might already be on the market; or the technology to comply with requirements might be commercially available; or existing products could be made compliant; or alternative practices, best practices, or operational changes would allow manufacturers to comply. See, e.g., 15 U.S.C. 1278a(d) (discussing lead limits). The Commission believes the NPR's proposals meet technical feasibility criteria. For instance, products currently available on the market are within the proposed rule's 9.0 mm size limitation, and there should be multiple means of producing and packaging water bead toys that expand by less than 50 percent. With respect to demonstrating compliance, the proposed funnel test gauge test does not require tools, like a push rod, to determine whether a water bead can pass through the gauge. Further, several testing tools in the NPR (e.g., a small parts cylinder) are already included in CPSC mandatory standards or come from the ASTM F963 standard. Accordingly, much of the technology is already used when testing to section 4.40 of ASTM F963-23 and is commercially available. B. Economic Feasibility The draft proposed rule is economically feasible because non- compliant toy products can be redesigned to be compliant, or be repurposed for non-toy uses. Based on CPSC staff's analysis, the Commission expects manufacturers would, to comply with the proposed rule, incur [[Page 73042]] material costs to redesign their product and retool their manufacturing processes to produce a compliant product. Staff expect the redesign and retooling costs to be significant for small firms involved in the water bead toy market, with the exception of the labeling requirements, which are negligible (i.e., less than $0.01 per product). A decline in sales is expected, as many currently available water bead toys would not be compliant with the draft proposed rule. However, while the impact of the proposed rule may be significant, firms could sell compliant water bead toys or sell non-compliant water beads for non-toy purposes, such as agricultural purposes. VII. Incorporation by Reference Proposed Sec. 1250.4 would incorporate by reference ANSI Z535.4-- 2023. The Office of the Federal Register (OFR) has regulations regarding incorporation by reference. 1 CFR part 51. Under these regulations, agencies must discuss, in the preamble to a final rule, ways in which the material the agency incorporates by reference is reasonably available to interested parties, and how interested parties can obtain the material. In addition, the preamble to the final rule must summarize the material. 1 CFR 51.5(b)(3). In accordance with the OFR regulations, section V of this preamble summarizes the major provisions of ANSI Z535.4--2023 that the Commission proposes to incorporate by reference into proposed Sec. 1250.4. The standard itself is reasonably available to interested parties. By permission of ANSI, the standard can be viewed as a read- only document during the comment period for this NPR, at: https://ibr.ansi.org/Standards/nema.aspx. Interested parties can also schedule an appointment to inspect a copy of the standard at CPSC's Office of the Secretary, U.S. Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814, telephone: (301) 504-7479; email: [email protected]. Alternatively, interested parties can purchase a copy of the standard from ANSI, 1899 L Street NW, 11th Floor, Washington, DC 20036. VIII. Effective Date The Administrative Procedure Act (APA) generally requires that the effective date of a rule be at least 30 days after publication of the final rule. 5 U.S.C. 553(d). The Commission proposes a 90-day effective date for this rule. The rule would apply to all water beads manufactured after the effective date. 15 U.S.C. 2058(g)(1). Although the NPR proposes to add new requirements, most of the test methods and test equipment are not unique, in that the current ASTM toy standard utilizes several similar methods and equipment. For example, as of July 12, 2024, 81 third-party laboratories were already CPSC- accepted to test expanding materials as provided in section 4.40 of ASTM F963-23, as incorporated into part 1250 on January 18, 2024. Additionally, as of July 12, 2024, 153 third-party laboratories were CPSC-accepted to test expanding materials as provided in section 4.40 of ASTM F963-17. While these third-party laboratories may not yet be CPSC-accepted for testing for acrylamide, CPSC expects that these laboratories are competent to conduct the required testing and can have their International Organization for Standardization (ISO) accreditation and CPSC-acceptance updated quickly in the normal course. Additionally, a 90-day effective date allows the proposed standard to coincide with the third-party testing requirements for children's products under section 14(a)(3) of the CPSA, as an NOR date must be no later than 90 days before such rules or revisions take place. 15 U.S.C. 2063(a)(3). The Commission invites comments, particularly from small businesses, regarding the proposed testing and the amount of time needed to come into compliance with a final rule. IX. Regulatory Flexibility Act (RFA) The RFA requires that agencies review a proposed rule for the rule's potential economic impact on small entities, including small businesses. Section 603 of the RFA generally requires that agencies prepare an initial regulatory flexibility analysis (IRFA) and make the analysis available to the public for comment when the agency publishes an NPR, unless the rule would not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 603, 605(b). The IRFA must describe the impact of the proposed rule on small entities and identify significant alternatives that accomplish the statutory objectives and minimize any significant economic impact of the proposed rule on small entities. This proposed rule would have a significant economic impact on a substantial number of small U.S. entities, primarily from redesign costs in the first year that the final rule would be effective. A significant impact would occur for small companies whose products do not meet the proposed requirements. Third-party testing costs should not be a new significant cost for most small firms, given suppliers should already test to the current mandatory standard in part 1250. A. Reason for Action, NPR Objectives, Product Description, and Market Description Section I of this preamble explains why the Commission proposes to establish a mandatory rule for water bead toys and provides a statement of the objectives of, and legal basis for, the proposed rule. Section II of this preamble describes the types of products within the scope of the NPR, the market for water beads, and the use of water beads in the U.S. The proposed requirements in the NPR are more stringent than ASTM F963-23, which the Commission incorporated into the mandatory rule 16 CFR part 1250, Safety Standard Mandating ASTM F963 for Toys, as described in sections IV and V of this preamble. CPSC staff has not identified any other Federal rules that duplicate, overlap, or conflict with the draft proposed rule. The NPR addresses the known hazards presented by water beads, discussed in section III of this preamble, that the current rule does not adequately address. B. Small Entities To Which the Rule Would Apply Section II of this preamble describes the products within the scope of the rule and an overview of the market for water beads. This section provides additional details on the market for products within the scope of the rule. CPSC staff has found that a majority of the firms that sell water bead toys are wholesalers of hobby goods, toys, and plastic products.\105\ Retailers of water bead toy products are hobby and toy stores, department stores, and warehouse stores and supercenters.\106\ Some of these products may be sold by convenience stores, but staff estimates the number of units sold from such stores is negligible. Water bead toys are [[Page 73043]] small, novelty products which can easily be stored and sold in varying retail channels and, therefore, the described retailers, importers, and manufacturers are not all inclusive but represent the most prominent sources for water bead toys. --------------------------------------------------------------------------- \105\ The North American Industry Classification System (NAICS) defines product codes for U.S. firms. Firms advertise water bead products as toys and therefore water beads may be categorized under many NAICS product codes. These firms could be listed in NAICS code 339930 Doll, Toy, and Game Manufacturing but some may also be listed in code 326199 All Other Plastic Product Manufacturing. Importers of these products could also vary among different NAICS codes. A majority of the firms should be listed in the following NAICS codes as wholesalers; 423920 Toy and Hobby Goods and Supplies Merchant Wholesalers, and 424610 Plastics Materials and Basic Forms and Shapes Merchant Wholesalers. \106\ Retailers consist of NAICS codes 459120 Hobby, Toy, and Game Stores, 455110 Department Stores, and 455211 Warehouse Clubs and Supercenters. --------------------------------------------------------------------------- Currently, over 30 firms supply water bead toys to the U.S. market. Most of the U.S.-based manufacturers and importers are small companies based on Small Business Administration (SBA) size standards.\107\ The SBA size standards for small entities are based on the number of employees or the annual revenue of the firm, and there is a specific size standard for each 6-digit North American Industry Classification Series (NAICS) category.\108\ The U.S. Census Bureau conducts an annual survey of small businesses in the U.S. and counts how many large and small businesses are in each NAICS category.\109\ There is no NAICS category specifically for water bead manufacturing or importing. Companies that manufacture water bead toy products may be categorized as doll, toy, and game manufacturing or under the category ``All Other Plastic Product Manufacturing.'' Importers are generally considered a type of merchant wholesaler. As seen in the tables below of applicable NAICS categories, the SBA small entity threshold for manufactures is generally 150 to 750 employees. --------------------------------------------------------------------------- \107\ Under SBA standards, a manufacturer, importer, and retailer of a product is categorized as a small entity based on their associated NAICS code. SBA uses the number of employees to determine if a manufacturer or importer is a small entity while SBA uses the amount of annual revenues for retailers. \108\ The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. For more information, see https://www.census.gov/naics/. Some programs use 6-digit NAICS codes, which provide more specific information than programs that use more general 3- or 4-digit NAICS codes. \109\ https://www.census.gov/programs-surveys/susb/data/tables.html. Table 2--Estimate of Number of Small Manufacturers and Importers ---------------------------------------------------------------------------------------------------------------- SBA size standard Number of firms that NAICS code Description for firms (# of meet size standard employees) (based on SUSB data) ---------------------------------------------------------------------------------------------------------------- 339930............................ Doll, Toy, and Game 700 7 Manufacturing. 326199............................ All Other Plastic Product 750 1 Manufacturing. 424610............................ Plastics Materials and Basic 150 4 Forms and Shapes Merchant Wholesalers. 423920............................ Toy and Hobby Goods and 175 19 Supplies Merchant Wholesalers. ---------------------------------------------------------------------------------------------------------------- Table 3--Estimate of Number of Small Retailers ---------------------------------------------------------------------------------------------------------------- SBA size standard for firms (annual Number of firms that NAICS code Description revenue) millions meet size standard $ (based on SUSB data) ---------------------------------------------------------------------------------------------------------------- 452210............................ Department Stores.............. $40.0 15 452310............................ General Merchandise Stores, 47.0 8,006 Including Warehouse Clubs and Supercenters. 451120............................ Hobby, Toy, and Game Stores.... 35.0 4,660 ---------------------------------------------------------------------------------------------------------------- Based on the Census Bureau's 2021 Statistics of U.S. Businesses (SUSB) data and a review of publicly available data on annual revenues, staff estimates the number of firms classified as small for the aforementioned NAICS codes to be seven manufacturers, 23 importers, and 12,681 retailers. These firms could be considered small and supply water bead products. C. Compliance, Reporting, Paperwork, and Recordkeeping Requirements of the Proposed Rule The proposed rule would require suppliers (manufacturers and importers) of water bead toys to meet performance, warning label, and user instruction requirements, and to conduct third-party testing to demonstrate compliance. This section discusses the reporting and paperwork requirements. Compliance costs are analyzed in detail in section IX.E of this preamble. Manufacturers must demonstrate that they have met the performance requirements of the rule by providing a children's product certificate. As specified in 16 CFR part 1109, suppliers who are not the original manufacturer, such as importers, may rely on the testing or certification suppliers provide, as long as the requirements in part 1109 are met. Manufacturers and importers are required to furnish certificates to retailers and distributors (section 14(g)(3) of the CPSA); retailers are not required to third-party test the children's products that they sell unless they are also the manufacturer or importer. Under section 14 of the CPSA, manufacturers, importers, and private labelers of water bead products will be required to certify, based on a test of each product conducted by third-party conformity assessment body, that their products comply with the requirements of the proposed rule. Each children's product certificate must identify the third-party conformity assessment body that conducted the testing upon which the certificate depends. D. Potential Impact on Small Entities Water beads that expand to larger than 9.0 mm or to more than 50 percent greater than their original size in diameter when tested pursuant to section 8.30, Expanding Materials Test Method of ASTM F963- 23, with modifications proposed in the NPR, would require modification to meet the proposed rule or be taken off the market. Additionally, water beads toys that do not meet the proposed acrylamide limit would require modification or discontinuation. The Commission assesses it is likely that a substantial number of firms will incur significant costs from redesign, retooling, loss of sales, or the purchase and installation of new components. While some water bead toys are produced at sizes under the proposed maximum water bead diameter limit of 9.0 mm, CPSC staff has not identified [[Page 73044]] water bead products that currently conform to the 50-percent-or-less growth limitation specified in the proposed rule. CPSC staff reviewed product descriptions for popular water bead retail packages and found that most are sold in mixed sizes with water beads that are both under and over the maximum size limit of the proposed rule. Staff estimates that water beads over the size limit are less than 5 percent of the market based on the range of sizes in these descriptions and an assumed distribution. Staff assesses water beads over the established limit can easily be replaced with sizes smaller than the limit to comply with the proposed rule. However, the 50 percent growth limitation requirement is expected to result in all or nearly all water bead toys needing to be redesigned. Given this requirement, and the likelihood that all currently available water bead toys would not be compliant, staff expects some small firms to no longer package and advertise their products as toys but instead as agricultural or decorative home products (although firms may be able to redesign toys with water beads that expand to less than 9.0 mm and/or be packaged at a size closer to the desired expanded size). Due to the uncertainty related to redesigning these products, CPSC staff cannot generate an estimate of the potential costs of the proposed rule. CPSC staff seeks comment on the number of water beads designated as toys that currently meet the requirements of the proposed rule, and on the technical feasibility of the proposed requirements and potential redesign/retooling costs. Firms might incur a small one-time additional cost from updating existing labels and/or adding labels. Generally, the costs associated with modifying or adding warning labels are low on a per unit basis because all manufacturers of children's products are already required to provide labels with their product pursuant to section 14(a)(5) of the CPSA. The additional costs related to updating labels are less than $0.01 per unit of product sold, therefore, staff expect the incremental cost related to the labeling provision to be negligible. E. Impact on Small Manufacturers CPSC staff considers 1 percent of revenue to be a ``significant'' economic impact, consistent with other federal government agencies. Staff expect that small manufacturers would incur significant costs from redesign, retooling, loss of product sales, and material change to comply with the proposed rule. However, the labeling costs per product are negligible (less than $0.01) and would have a de minimis impact on small firms. Overall, staff assess that a substantial number of small manufacturing firms will incur a significant cost from the proposed rule, although sale losses would be mitigated to the extent that manufacturers repurpose non-compliant water beads for non-toy uses (e.g., agricultural or decorative). F. Third-Party Testing Costs The NPR would require manufacturers and importers of water bead toys to comply with performance requirements and demonstrate compliance by required third-party testing. As specified in 16 CFR part 1109, entities that are not manufacturers of children's products, such as importers, may rely on the certificate of compliance provided by others. Water bead manufacturers could incur some additional costs for certifying compliance with the proposed rule. The certification must be based on a test of each product performed by a third-party conformity assessment body. Based on quotes from testing laboratories for ASTM F963 mechanical services and chemistry testing services, the cost of certification testing would range from $300 to $500 per product sample. Some labs currently not performing acrylamide testing in other contexts may incur retooling costs to perform the necessary testing, which could result in higher prices per product sample. However, testing of products is already a requirement and only the incremental increase in expected price would be considered a cost for the proposed rule. CPSC staff do not expect a significant price increase for these testing services as a result of the proposed rule, particularly because they assess that laboratories tend to price testing by category (i.e., chemical testing vs. mechanical testing) and, therefore, such testing already has a price assigned that likely will not increase. G. Efforts To Minimize Impact, Alternatives Considered The Commission considered three alternatives to the proposed rule that could reduce the impact on small entities: (1) not establishing a mandatory standard for water beads, (2) establishing an information and education campaign, or (3) setting a later effective date. 1. Not Establishing a Mandatory Standard Section 106 of the CPSIA requires CPSC to periodically review and revise ASTM F963 to ensure that such standards provide the highest level of safety for such products that is feasible. Given CPSC's statutory mandate, and continuing incidents associated with water bead toys as described in section III of this preamble, the Commission has determined that it must address the safety of children using water bead toys to ensure that the risks of ingestion and insertion into the body are mitigated. While failing to promulgate a mandatory standard for water beads would have no direct impact on U.S. small businesses, it would allow hazardous products to remain on the market and do nothing to reduce known hazards associated with water beads. This option might be selected if it were believed that the risk associated with these products is acceptable and that agency warning efforts have resulted or will result in the necessary market changes to address these injuries. As discussed immediately below, however, that is not the case. In addition, while there are no direct costs associated with this alternative, this alternative is unlikely to directly address the fatal and non-fatal injuries identified from water bead toys. 2. Information and Education Campaign CPSC could expand its information and education campaigns concerning the ingestion hazard associated with water bead toys. This would require consumer outreach efforts like advertising and marketing related to the hazards. This alternative could be implemented independent of regulatory action. Public awareness is a crucial component in making safe purchasing decisions and safely using water beads. CPSC issued the first warning about ingesting water beads in 2012 with a recall. Since then, there have been many announcements from government bodies, healthcare professionals and the media.\110\ Given the continuing [[Page 73045]] incidents associated with water beads, CPSC assesses that information and education campaigns have limited effectiveness in adequately addressing the hazard. Therefore, the Commission preliminarily finds that while an information campaign might be helpful, it would be inadequate to address water bead toy hazards. --------------------------------------------------------------------------- \110\ Dunecraft Recalls Water Balz, Skulls, Orbs and Flower Toys Due to Serious Ingestion Hazard [verbar] CPSC.gov (2012) https://www.cpsc.gov/Recalls/2012/dunecraft-recalls-water-balz-skulls-orbs-and-flower-toys-due-to-serious-ingestion; ACCC warns of dangers of water expanding balls to kids [verbar] ACCC (2015) https://www.accc.gov.au/media-release/accc-warns-of-dangers-of-water-expanding-balls-to-kids; Are Water Beads Toxic?--poisonhelp.org https://www.poisonhelp.org/2024/03/26/water-beads-toxic/; How High- Powered Magnetic Toys Can Harm Children--HealthyChildren.org (2023) https://www.healthychildren.org/English/safety-prevention/at-home/Pages/Dangers-of-Magnetic-Toys-and-Fake-Piercings.aspx?ampnfstatus=401&ampnftoken=00000000-0000-0000-0000-000000000000&ampnfstatusdescription=ERROR%252525252525253A%252525252525252BNo%252525252525252Blocal%252525252525252Btoken; Water Beads: A Danger to Young Children & Can Be Deadly if Swallowed [verbar] CPSC.gov (2023) https://www.cpsc.gov/Safety-Education/Safety-Guides/Toys-Crafts-Water-Beads/Water-Beads-A-Danger-to-Young-Children-Can-Be-Deadly-if-Swallowed; Water Beads: Harmful if Swallowed, Put in Ears--HealthyChildren.org (2024) https://www.healthychildren.org/English/safety-prevention/at-home/Pages/Water-Beads-Harmful.aspx?gad_source=1; Water Beads [verbar] CPSC.gov (2024) https://www.cpsc.gov/Safety-Education/Safety-Education-Centers/Water-Beads-Information-Center?language=en. --------------------------------------------------------------------------- 3. Later Effective Date The Commission could propose a later effective date that would reduce the burden on entities of all sizes by allowing more time to remove products from the market, repackage, and test products. In addition, testing laboratories need to become accredited to the proposed rule before any product can be tested to the proposed rule. Smaller companies are less likely to have the resources to quickly come into compliance with the proposed rule than larger ones, and a minority of the small U.S. companies that have products in scope of this proposed rule have multiple products that do not appear to meet the new performance requirements. However, the Commission preliminarily finds that providing a longer effective date would allow the hazards of water bead toys to be unaddressed for a later period of time resulting in more deaths and injuries, and thus would unreasonably delay addressing the ingestion hazard associated with water beads. X. Environmental Consideration The Commission's regulations address whether the agency is required to prepare an environmental assessment or an environmental impact statement. Under these regulations, certain categories of CPSC actions normally have ``little or no potential for affecting the human environment,'' and therefore do not require an environmental assessment or an environmental impact statement. Safety standards providing performance and labeling requirements for consumer products come under this categorical exclusion. 16 CFR 1021.5(c)(1). The NPR falls within the categorical exclusion. XI. Paperwork Reduction Act This proposed rule for water beads contains information collection requirements that are subject to public comment and review by the Office of Management and Budget (``OMB'') under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). In this document, pursuant to 44 U.S.C. 3507(a)(1)(D), we set forth: Title for the collection of information; Summary of the collection of information; Brief description of the need for the information and the proposed use of the information; Description of the likely respondents and proposed frequency of response to the collection of information; Estimate of the burden that shall result from the collection of information; and Notice that comments may be submitted to the OMB. Title: Safety Standard for Toys: Requirements for Water Beads Description: As described in section V of this preamble, the proposed rule would require new labeling for water bead toys. CPSC will seek a new OMB control number for this rule in the next PRA update for Third Party Testing of Children's Products. The NPR proposes that water bead toys meet the proposed requirements of Sec. 1250.4, which are summarized in section V of this preamble. Section 5 of ASTM F963-23 contains requirements for marking, labeling, and instructional literature of children's toys in general. These requirements fall within the definition of ``collection of information,'' as defined in 44 U.S.C. 3502(3). Description of Respondents: Persons who manufacture or import water bead toys or toys that contain water beads. Estimated Burden: We estimate the burden of this collection of information as follows: Table 4--Estimated Annual Reporting Burden ---------------------------------------------------------------------------------------------------------------- Number of Frequency of Total annual Hours per Total burden Burden type respondents responses responses response hours ---------------------------------------------------------------------------------------------------------------- Labeling and instructions......... 30 1 30 2 60 ---------------------------------------------------------------------------------------------------------------- This estimate is based on the following: CPSC estimates there are 30 suppliers that would respond to this collection annually, and that the majority of these entities would be considered small businesses. CPSC assumes that on average each respondent that reports annually would respond once, as product models for water beads are brought to market and new labeling and instruction materials are created, for a total of 30 responses annually (30 respondents x 1 responses per year). CPSC assumes that on average it will take 1 hour for each respondent to create the required label and one hour for them to create the required instructions, for an average response burden of 2 hours per response. Therefore, the total burden hours for the collection are estimated to be 60 hours annually (30 responses x 2 hours per response = 60 total burden hours). CPSC estimates the hourly compensation for the time required to create and update labeling and instructions is $41.55.\111\ Therefore, the estimated annual cost of the burden requirements is $2,493 ($41.55 per hour x 60 hours = $2,493). No operating, maintenance, or capital costs are associated with the collection. Based on this analysis, the proposed revisions to the standard would impose a burden to industry of 60 hours at a cost of $2,493 annually. --------------------------------------------------------------------------- \111\ U.S. Bureau of Labor Statistics, ``Employer Costs for Employee Compensation,'' September 2023, Table 4, total compensation for all sales and office workers in goods-producing private industries: https://www.bls.gov/news.release/archives/ecec_12152023.pdf. --------------------------------------------------------------------------- In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), CPSC has requested OMB approval of new information collection and recordkeeping requirements related to this proposed rule. CPSC invites comments on this new information collection. All comments received on this information collection will be summarized and included in the final request for OMB approval. Interested persons are requested to submit comments regarding information collection by November 8, 2024 (see the ADDRESSES section at the beginning of [[Page 73046]] this notice). Pursuant to 44 U.S.C. 3506(c)(2)(A), we invite comments on: Whether the collection of information is necessary for the proper performance of the CPSC's functions, including whether the information will have practical utility; The accuracy of the CPSC's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; Ways to enhance the quality, utility, and clarity of the information to be collected; Ways to reduce the burden of the collection of information on respondents, including the use of automated collection techniques, when appropriate, and other forms of information technology; and The estimated burden hours to create and update labeling and instructions, including any alternative estimates. XII. Preemption Section 26(a) of the CPSA, 15 U.S.C. 2075(a), states that when a consumer product safety standard is in effect and applies to a product, no state or political subdivision of a state may either establish or continue in effect a standard or regulation that prescribes requirements for the performance, composition, contents, design, finish, construction, packaging, or labeling of such product dealing with the same risk of injury unless the state requirement is identical to the federal standard. Section 106(f) of the CPSIA deems rules issued under that provision ``consumer product safety standards.'' Therefore, once a rule issued under section 106 of the CPSIA takes effect, it will have preemptive effect in accordance with section 26(a) of the CPSA. XIII. Certification and Notice of Requirements Section 14(a) of the CPSA imposes the requirement that products subject to a consumer product safety rule under the CPSA, or to a similar rule, ban, standard, or regulation under any other act enforced by the Commission, must be certified as complying with all applicable CPSC-enforced requirements. 15 U.S.C. 2063(a). Section 14(a)(2) of the CPSA requires that certification of children's products subject to a children's product safety rule be based on testing conducted by a CPSC- accepted third-party conformity assessment body. Section 14(a)(3) of the CPSA requires the Commission to publish an NOR for the accreditation of third-party conformity assessment bodies (or laboratories) to assess conformity with a children's product safety rule to which a children's product is subject. The proposed rule would create a new 16 CFR 1250.4 as part of 16 CFR part 1250. If issued as a final rule, the proposed rule would be a children's product safety rule that requires the issuance of an NOR. 16 CFR part 1112 establishes requirements for accreditation of third-party conformity assessment bodies to test for conformity with a children's product safety rule in accordance with section 14(a)(2) of the CPSA. Part 1112 also codifies all of the NORs issued previously by the Commission. To meet the requirement that the Commission issue an NOR for the proposed standard, the Commission proposes to add water beads to the list of children's product safety rules for which CPSC has issued an NOR. Testing laboratories applying for acceptance as a CPSC-accepted third-party conformity assessment body to test to the new standard for water beads would be required to meet the third-party conformity assessment body accreditation requirements in part 1112. When a laboratory meets the requirements as a CPSC-accepted third-party conformity assessment body, the laboratory can apply to CPSC to have 16 CFR 1250.4, Safety Standard for Toys: Requirements for Water Beads, included within the laboratory's scope of accreditation of CPSC safety rules listed for the laboratory on the CPSC website at: https://www.cpsc.gov/cgi-bin/labsearch/. Testing laboratories should not be adversely impacted as a result of this rule. Approximately 67 third-party testing laboratories are CPSC-accepted to test compliance with ASTM F963-23. CPSC staff expects that these labs will become accredited and CPSC-accepted to test to this new standard in the normal course of business. CPSC expects that these laboratories will be able to test to a new rule in a short time period. Furthermore, no laboratory is required to provide testing services. The only laboratories that are expected to provide such services are those that anticipate receiving sufficient revenue from the mandated testing to justify procuring the testing equipment and obtaining accreditation. XIV. Request for Comments The Commission requests comments on the proposed rule to promulgate a mandatory standard for water beads under section 106 of the CPSIA. During the comment period, ASTM F963-23 is available as a read-only document at: http://www.astm.org/cpsc.htm. Comments should be submitted in accordance with the instructions in the ADDRESSES section at the beginning of this document. CPSC requests comments on all aspects of this rulemaking and specifically requests comment on the following topics: A. Water Bead Definition The proposed rule defines ``water bead(s)'' as ``various shaped, water absorbent polymers, such as, but not limited to polyacrylamides and polyacrylates, which expand when soaked in water.'' Should the proposed rule use a different definition of water beads? B. NPR Scope 1. Which, if any, water pellet guns designed to shoot water bead projectiles are not children's toys within the scope of the NPR? Please provide rationale supporting your comment. 2. How, if at all, should color(s) of the water beads factor into the determination of whether they are toys, and therefore within the scope of the proposed rule? Please provide support for your recommendation. C. Proposed Requirements To Address Ingestion Hazards 1. Are the proposed 9.0 mm diameter funnel test gauge and the 50 percent expansion limit adequate to address the hazards associated with ingestion of the product? If 9.0 mm diameter is not adequate, what size is adequate and why? If a 50 percent expansion limit is not adequate, what expansion limit is adequate and why? 2. Are there any other performance requirements CPSC should consider to address the hazards associated with water bead ingestion? D. Proposed Requirements To Address Ear Insertion Hazards 1. Is the proposed 9.0 mm diameter funnel test gauge along with the 50 percent expansion limit adequate to address the hazards associated with ear insertion? If 9.0 mm diameter is not adequate, what size is adequate and why? If a 50 percent expansion limit is not adequate, what percentage is adequate and why? 2. What size dehydrated bead is most attractive to children regarding the risk of ear insertions and why? 3. Are there any other performance requirements CPSC should consider to address the hazards associated with ear insertion? E. Proposed Requirements To Address Nose Insertion Hazards 1. Is the proposed 9.0 mm diameter funnel test gauge along with the 50 [[Page 73047]] percent expansion limit adequate to address the hazards associated with nose insertion? If 9.0 mm diameter is not adequate, what size is adequate and why? If a 50 percent expansion limit is not adequate, what percentage is adequate and why? 2. What size dehydrated bead is most attractive to children regarding the risk of nose insertions and why? 3. Are there any other performance requirements CPSC should consider to address the hazards associated with nose insertion? F. Proposed Requirements To Address Aspiration Hazards 1. Is the proposed 9.0 mm diameter funnel test gauge along with the 50 percent expansion limit adequate to address the hazards associated with aspiration of the product? If the 9.0 mm diameter is not adequate, what size is adequate and why? If a limit of 50 percent expansion is not adequate, what percentage is adequate and why? 2. Are there any other performance requirements CPSC should consider to address the hazards associated with water bead aspiration? G. Water Beads Sticking Together 1. Is there evidence of water beads sticking together or are there specific water bead products that have tendency to stick together before, during, or after expansion? If so, please provide further details. 2. Is there an environment or scenario that has successfully caused expanded water beads to aggregate with themselves and/or any other substances, like food or mucus, to cause an obstruction? If so, please provide details. H. Proposed Acrylamide Limit and Test Method 1. Is the proposed limit of 65 [mu]g extractable acrylamide monomer from 100 small water beads or from one large water bead appropriate to adequately address the hazard of acute toxicity for children who ingest water beads? 2. The 4.0 mm demarcation between the ``small'' and ``large'' designations for water beads was selected based on CPSC staff's observations of water bead samples prior to hydration, which tended to have diameters of equal to or less than 3.0 mm, or equal to or greater than 5.0 mm. Is another metric or method more appropriate to distinguish small and large water beads? 3. Is there an alternative, more appropriate, acute oral toxicity reference value than ATSDR's the acute-duration oral minimal risk level that is based on valid test methods, relevant health endpoint(s), and appropriate safety factors? 4. The chosen test value of 100 small water beads when testing for extractable acrylamide was within the range noted in incident case reports of children ingesting water beads. Is another test value for small water beads more appropriate? 5. Is CPSC's acrylamide limit test method sufficient to evaluate extractable acrylamide in water beads? Are there other tests methods that CPSC should consider? I. Proposed Warning Label Requirements for Water Beads 1. Are the proposed warnings adequate to address hazards associated with water beads? Should other warnings be considered? Should other warning formats be considered? 2. Regarding the proposed warning for toys that contain water beads, will consumers know what ``water beads'' are when warned of the dangers of ``water beads'' that became dislodged from the toy? Is there another term aside from ``water bead'' that would help consumers better identify what part of the toy is a water bead? 3. Regarding the proposed warning for toys that contain water beads, will consumers know what the warning ``Discard if beads are coming out'' means? Is there another term aside from ``coming out'' that would help consumers understand the warning? J. Initial Regulatory Flexibility Analysis and Other Topics 1. Significant impact. Is CPSC's estimated cost of redesign to achieve compliance accurate? If not, please provide additional information and support for your proposed correction. Also, do the estimated costs represent more than one percent of annual revenue for individual small U.S. manufacturers and importers? 2. Testing costs. Will third-party testing costs for water beads increase as a result of the requirements in this NPR, and if so, by how much? Are test labs that are currently accredited to test for ASTM F963-23 equipped to use LC-MS-MS to test for acrylamide in water beads? What other analytical test methods and equipment are appropriate for quantifying acrylamide content in the levels discussed in the NPR? 3. Effective date. How much time is required to come into compliance with a final rule (including product compliance and third- party testing), particularly for small businesses? Please provide supporting data with your comment. 4. Alternatives to reduce the impact on small businesses. Are there any alternatives to the rule that could reduce the impact on small businesses without reducing safety? Please provide supporting data with your comment, particularly addressing small businesses. K. Feasibility Are the proposed requirements in this NPR feasible, both technically and economically? L. Water Bead Manufacturing Are manufacturers able to limit the growth of water beads to a specific diameter or specific percentage of growth? If so, what is the process of adjusting growth potential? List of Subjects 16 CFR Part 1112 Administrative practice and procedure, Audit, Consumer protection, Reporting and recordkeeping requirements, Third-party conformity assessment body. 16 CFR Part 1250 Consumer protection, Incorporation by reference, Infants and children, Labeling, Law enforcement, Toys. For the reasons discussed in the preamble, the Commission proposes to amend 16 CFR parts 1112 and 1250 as follows: PART 1112--REQUIREMENTS PERTAINING TO THIRD PARTY CONFORMITY ASSESSMENT BODIES 0 1. The authority citation for part 1112 is revised to read as follows: Authority: 15 U.S.C. 2063. 0 2. Amend Sec. 1112.15 by adding paragraph (b)(32)(ii)(LL) to read as follows: Sec. 1112.15 When can a third-party conformity assessment body apply for CPSC acceptance for a particular CPSC rule and/or test method? * * * * * (b) * * * (32) * * *. (ii) * * * (LL) 16 CFR 1250.4, Requirements for Water Beads. * * * * * PART 1250--SAFETY STANDARD FOR TOYS 0 3. Revise the heading of part 1250 to read as set forth above. 0 4. The authority citation for part 1250 is revised to read as follows: Authority: 15 U.S.C. 2056b. [[Page 73048]] 0 5. Revise Sec. 1250.1 to read as follows: Sec. 1250.1 Scope. This part establishes a consumer product safety standard for toys. 0 6. Add Sec. 1250.4 to read as follows: Sec. 1250.4 Requirements for water beads. (a) Scope and purpose. This section establishes performance and labeling requirements for water bead toys and toys containing water beads to minimize the risk of children ingesting, inserting, aspirating, and choking on water beads. The provisions of this part are intended to eliminate or adequately reduce the risk of injury and death to children from water bead toy hazards. This section adds requirements for water bead toys in addition to the requirements of Sec. 1250.2. (b) Definitions. In addition to the definitions incorporated by reference in Sec. 1250.2(a), the following definitions apply for purposes of this section: Aspiration hazard mean a hazard caused by a child inhaling a water bead whereby the water bead can become lodged in the respiratory tract and can potentially cause death or injury. Choking hazard means a hazard cause by a child attempting to swallow a water bead whereby the water bead can become lodged in the throat and can potentially cause death or injury. Ingestion hazard means a hazard caused by a child swallowing a water bead whereby the water bead can become lodged in the digestive tract and can potentially cause death or injury. Insertion hazard means a hazard caused by a child putting a water bead in the ear canal or nasal passage of the body and can potentially cause injury or death. Water bead means a various shaped water absorbent polymer, such as, but not limited to, polyacrylamide and polyacrylate, which expands when soaked in water. (c) Performance requirements. In addition to the requirements of Sec. 1250.2, all water bead toys and toys containing water beads within the scope of the rule must meet the performance requirements in this section to minimize the risk of children ingesting, inserting, aspirating, and choking on water beads. (1) Water beads as received or water beads removed from a toy, which fit entirely inside the small parts cylinder in their dehydrated (pre-expanded) state as shown in Figure 1 to paragraph (c)(1) (16 CFR 1501.4) shall not expand more than 50 percent in any dimension and shall remain whole while also completely passing through the funnel test gauge as shown in Figure 2 to paragraph (c)(1), under its own weight after expansion, when tested in accordance with the following test procedure: Figure 1 to Paragraph (c)(1)--Small Parts Cylinder. [GRAPHIC] [TIFF OMITTED] TP09SE24.016 Figure 2 to Paragraph (c)(1)--Funnel Test Gauge. Material: Polytetrafluorethylene (PTFE). [GRAPHIC] [TIFF OMITTED] TP09SE24.017 (i) Test method. Condition the water bead or toy containing the water bead, at 20 5 [deg]C (68 9 [deg]F) and at a relative humidity of 40-65 percent for a minimum of seven hours prior to the test. (ii) If the water bead is partially expanded, or contained within a toy and partially expanded, remove the water bead for testing and allow 120 hours to dehydrate. (iii) Measure the bead using calipers to determine the dehydrated dimensions. If not spherical, measure in all dimensions. When measuring with calipers, do not compress the bead in a manner that will change its shape. (iv) Submerge the water bead under a test bath of deionized water maintained at 37 2 [deg]C (98.6 3.6 [deg]F) for the duration of immersion, without agitation. For water beads that exhibit positive buoyancy, place weight(s) (with mass just sufficient to achieve complete submersion) atop the water bead. Care should be taken to minimize contact of the test water bead with the sides or bottom of the container. (v) Maintain submersion for 72 hours, measuring the water bead dimensions at 6 hours, 24 hours, 48 hours and 72 hours duration. If the greatest expansion was observed at 72 hours of submersion, proceed to immediately test the expanded water bead. If the greatest expansion was observed at another time interval, condition and submerge a new water bead per paragraph (c)(1)(i)-(iv) for the time interval at which the greatest expansion was observed. Then immediately test the expanded water bead. (vi) Remove the expanded water bead and using calipers, calculate the expansion amount in all dimensions as a percentage of the dehydrated dimensions and determine whether the bead has expanded more than 50 percent in any dimension. When measuring with calipers, do not compress the bead in a manner that will change its expanded shape. (vii) Place the expanded water bead at the top surface of the gauge's upper opening in the orientation least likely to pass through, and release allowing it to travel down until it reaches the lower opening. The expanded water bead shall remain whole and completely pass through the lower opening. (2) Acrylamide Limit Requirements. Water beads shall not have more than 65 [micro]g acrylamide extractable from 100 small water beads (defined as <4 mm across the smallest diameter of the bead prior to hydration) or from one large water bead (defined as >=4 mm across the smallest diameter of the bead prior to hydration) in the test procedure described below: (i) Acrylamide test procedure. To determine the amount of extractable acrylamide in water beads, first place the water beads (one large water bead or 100 small water beads) as received in a container with pH neutral deionized water. (ii) Situate the container(s) in a shaker bath that can heat the water beads to 37 [deg]C and shake them at a rate of 30 RPM. Leave the water beads untouched for 24 hours. (iii) Multiple concurrent trials, or sequential repetitions, must be performed to ensure that results are reasonably consistent, given any bead-to-bead variation. For large water beads, perform three trials with one large bead per trial. For small water beads, perform [[Page 73049]] three trials with 100 small beads per trial. (iv) Use an extraction container and volume of deionized water so that all water beads remain covered by water for the duration of the extraction period. Because water beads absorb water differently depending on their various sizes, additional tests may need to be conducted before starting the extractions to determine a volume of water that allows for full growth and coverage of the water beads without unnecessarily diluting the concentration of extracted acrylamide. Select containers that will not compress the water beads at any point during the 24-hour extraction period. (v) Cover the containers to prevent evaporation of the water during the extraction. (vi) Following the extraction, determine the volume of remaining water for each trial. Analyze the remaining water to determine the mass of acrylamide present using an instrument that can quantitate acrylamide at levels equal to or less than the limit. (d) Labeling requirements. All water bead toys and packaging of toys containing water beads within the scope of the rule must meet the marking, labeling, and instructional literature requirements in this section to minimize the risk of children ingesting, inserting, aspirating, and choking on water beads. (1) Requirements for Marking and Labeling. (i) Water bead toys, packaging of water bead toys, and the container of water beads, if provided, must include the safety alert symbol, signal word, and word message as shown in Figure 3 to paragraph (d)(1)(i). Figure 3 to Paragraph (d)(1)(i)--Warning for Water Bead Toys and Packaging. [GRAPHIC] [TIFF OMITTED] TP09SE24.018 (ii) Products with contained water beads, such as balls filled with water beads, and the packaging must include the safety alert symbol, signal word, and word message as shown in Figure 4 to paragraph (d)(1)(ii): Figure 4 to Paragraph (d)(1)(ii)--Toys That Contain Water Beads. [GRAPHIC] [TIFF OMITTED] TP09SE24.019 (iii) Products with contained water beads that do not have packaging must have a hangtag or sticker label with the full warnings. Multiple products sold in a package or bin must be individually labeled with a hangtag or sticker. (iv) The warnings shall be in the English language at a minimum. (v) The warnings shall be conspicuous and permanent on the principal display panel as defined in section 3.1.62 of the version of ASTM F963 incorporated by reference in Sec. 1250.2(a) and in a distinct color contrasting to the background on which it appears. (vi) The warnings shall conform to ANSI Z535.4-2023, sections 6.1- 6.4, 7.2-7.6.3, and 8.1, with the following changes: (A) In sections 6.2.2, 7.3, 7.5, and 8.1.2, of ANSI Z535.4-2023 replace the word ``should'' with the word ``shall.'' (B) In section 7.6.3 of ANSI Z535.4-2023, replace the phrase ``should (when feasible)'' with the word ``shall.'' (C) In section X of ANSI Z535.4-2023, strike the word ``safety'' when used immediately before a color (for example, replace safety white'' with ``white''). (vii) Certain text in the message panel must be in bold and in capital letters as shown in the example warning labels in figures 3 and 4 to paragraph (d)(1)(ii). Text must use black lettering on a white background or white lettering on a black background. (viii) The message panel text shall appear in sans serif letters and be center or left aligned. Text with precautionary (hazard avoidance) statements shall be preceded by bullet points. (ix) Multiple precautionary statements shall be separated by bullet points if paragraph formatting is used. [[Page 73050]] [GRAPHIC] [TIFF OMITTED] TP09SE24.020 (xi) The safety alert symbol, an exclamation mark in a triangle, when used with the signal word, must precede the signal word. The base of the safety alert symbol must be on the same horizontal line as the base of the letters of the signal word. The height of the safety alert symbol must equal or exceed the signal word letter height. The exclamation mark must be at least half the size of the triangle centered vertically. (2) Requirements for Instructional Literature. Instructions shall have the same warning labels that must appear on the product packaging, with similar formatting requirements, but without the need to be in color. However, the signal word and safety alert symbol shall contrast with the background of the signal word panel, and the warnings shall contrast with the background of the instructional literature. (e) Incorporation by reference. The Director of the Federal Register approves the incorporation by reference of ANSI Z535.4-23, American National Standard for Product Safety Signs and Labels (approved December 14, 2023) in paragraph (d) of this section in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. This material is available for inspection at the U.S. Consumer Product Safety Commission and at the National Archives and Records Administration (NARA). Contact the U.S. Consumer Product Safety Commission at: the Office of the Secretary, U.S. Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814, telephone (301) 504-7479, email: [email protected]. For information on the availability of this material at NARA, email [email protected], or go to: www.archives.gov/federal-register/cfr/ibr-locations.html. A free, read-only copy of the standard is available for viewing on the ANSI website at https://ibr.ansi.org/Standards/nema.aspx. You may also obtain a copy from American National Standards Institute (ANSI), 1899 L Street NW, 11th Floor, Washington, DC 20036, www.ansi.org. Alberta E. Mills, Secretary, Consumer Product Safety Commission. [FR Doc. 2024-19286 Filed 9-6-24; 8:45 am] BILLING CODE 6355-01-P

usgpo

2024-10-08T13:26:18.432464

FR

FR-2024-09-09/2024-20237

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73050-73054] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20237] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Alcohol and Tobacco Tax and Trade Bureau 27 CFR Parts 4, 5, 19, 24, 26, and 27 [Docket No. TTB-2022-0004; Notice No. 210A, Ref: Notice No. 210] RIN 1513-AC86 Standards of Fill for Wine and Distilled Spirits AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury. ACTION: Supplemental notice of proposed rulemaking; reopening of comment period. ----------------------------------------------------------------------- SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) is reopening the comment period for a proposed rule (Notice No. 210) published on May 25, 2022, which proposed changes to the authorized standards of fill for wine and distilled spirits, to solicit comments on additional suggestions raised in public comments made in response to Notice No. 210 that go beyond the scope of the original proposal. In Notice No. 210, TTB proposed to add 10 authorized standards of fill to those already authorized for wine, and alternatively, eliminating all but a minimum standard of fill for wine containers and all but a minimum and maximum for distilled spirits containers. TTB did not propose any specific standards of fill for distilled spirits as an alternative to generally eliminating them. TTB received a number of comments in response to the notice of proposed rulemaking requesting that TTB add specific new standards of fill for distilled spirits, as well as for wine, and also requesting that TTB consider eliminating the distinction between the standards of fill for distilled spirits in cans and those for distilled spirits in containers other than cans. TTB is now reopening the public comment period based on these suggestions, to provide notice to stakeholders that TTB is considering these additional requests for potential inclusion in the final rule and to also provide an opportunity for stakeholders to submit additional information to assist TTB in assessing whether to incorporate some, all, or none of these proposals into the final rule. DATES: The comment period for the proposed rule published on May 25, 2022 (87 FR 31787), is reopened. TTB must receive your comments on or before October 9, 2024. ADDRESSES: You may electronically submit comments to TTB on this document, and view copies of this document, the original notice of proposed rulemaking, supporting materials, and any comments TTB receives on it within Docket No. TTB-2022-0004 as posted at https://www.regulations.gov. A direct link to that docket is available on the TTB website at https://www.ttb.gov/laws-regulations-and-public-guidance/laws-and-regulations/all-rulemaking under Notice No. 210A. Alternatively, you may submit comments via postal mail to the Director, Regulations and Ruling Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005. Please see the Public Participation section of this document for further information on the comments requested regarding this proposal and on the submission, confidentiality, and public disclosure of comments. FOR FURTHER INFORMATION CONTACT: Caroline Hermann, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005; phone 202-453-1039, ext. 175. SUPPLEMENTARY INFORMATION: I. Background A. Authority The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers regulations setting forth standards of fill for containers of beverage distilled spirits and wine products distributed within the United States. The authority to establish these standards is based on two provisions of law: (1) Section 5301(a) of the Internal Revenue Code of 1986 (IRC), codified at 26 U.S.C. 5301(a) in the case of distilled spirits,\1\ and (2) section 105(e) of the Federal Alcohol Administration Act (FAA Act), codified at 27 U.S.C. 205(e), for both distilled spirits and wine. [[Page 73051]] Section 5301(a) of the IRC authorizes the Secretary of the Treasury to prescribe regulations ``to regulate the kind, size, branding, marking, sale, resale, possession, use, and reuse of containers (of a capacity of not more than 5 wine gallons) designed or intended for use for the sale of distilled spirits . . .'' when the Secretary determines that such action is necessary to protect the revenue. The FAA Act at 27 U.S.C. 205(e) authorizes the Secretary of the Treasury to prescribe regulations relating to the ``packaging, marking, branding, and labeling and size and fill'' of alcohol beverage containers ``as will prohibit deception of the consumer with respect to such products or the quantity thereof . . . .'' The FAA Act at 27 U.S.C. 206 generally prohibits the sale to consumers of distilled spirits in containers over one wine gallon. --------------------------------------------------------------------------- \1\ Sections 5041(e) and 5368 of the IRC also provide the Secretary the authority to set forth tax tolerances for containers of wine products. --------------------------------------------------------------------------- TTB administers the IRC and FAA Act pursuant to section 1111(d) of the Homeland Security Act of 2002, as codified at 6 U.S.C. 531(d). In addition, the Secretary of the Treasury has delegated certain administrative and enforcement authorities to TTB through Treasury Department Order 120-01. B. Current Standards of Fill for Distilled Spirits The term ``standard of fill'' is used in the TTB regulations and in this document to refer to the authorized amount of liquid in the container, rather than the size or capacity of the container itself. For better readability, however, this document sometimes uses the terms ``size'' or ``container size'' and ``standard of fill'' interchangeably. The standards of fill for distilled spirits are contained in subpart K of part 5 of the TTB regulations (27 CFR part 5). Within subpart K, paragraph (a)(1) of Sec. 5.203 (27 CFR 5.203(a)(1)) specifies the following metric standards of fill for containers other than those described in paragraph (a)(2) of that section: 1.8 Liters. 1.75 Liters. 1 Liter. 900 mL. 750 mL. 720 mL. 700 mL. 375 mL. 200 mL. 100 mL. 50 mL. In the case of distilled spirits in metal containers that have the general shape and design of a can, that have a closure which is an integral part of the container, and that cannot be readily reclosed after opening, paragraph (a)(2) of Sec. 5.203 authorizes the use of the following metric standards of fill: 355 mL. 200 mL. 100 mL. 50 mL. For better readability this document will refer to the containers referenced in 27 CFR 5.203(a)(1) as ``containers other than cans'' and those referenced in Sec. 5.203(a)(2) as ``cans.'' In addition to the metric standards specified above, Sec. 5.203 contains provisions regarding tolerances (discrepancies between actual and stated fill), unreasonable shortages in fill, and distilled spirits bottled or imported before January 1, 1980, and marketed or released from customs custody on or after that date (the date on which the U.S. volumetric standards were replaced by the Sec. 5.203 metric standards). C. Current Standards of Fill for Wine The standards of fill for wine are contained in subpart H of part 4 of the TTB regulations (27 CFR part 4). Within subpart H, paragraph (a) of Sec. 4.72 (27 CFR 4.72(a)) authorizes the use of the following metric standards of fill for containers, in addition to those described in paragraph (b) which are discussed further below: 3 liters; 1.5 liters; 1 liter; 750 milliliters; 500 milliliters; 375 milliliters; 355 milliliters; 250 milliliters; 200 milliliters; 187 milliliters; 100 milliliters; and 50 milliliters. Paragraph (b) of Sec. 4.72 states that wine may be bottled or packed in containers of 4 liters or larger if the containers are filled and labeled in quantities of even liters (4 liters, 5 liters, 6 liters, etc.). II. Notice No. 210 On May 25, 2022, TTB published a notice of proposed rulemaking, Notice No. 210, in the Federal Register (87 FR 31787) proposing to add 10 authorized standards of fill for wine and, as an alternative, to eliminate all but a minimum standard of fill for wine containers and all but a minimum and maximum for distilled spirits containers. The 10 standards of fill proposed for wine are: 2.25 and 1.8 liters; and 720, 700, 620, 550, 360, 330, 300, and 180 milliliters. The proposed rule followed, and took into consideration, a Department of the Treasury report on competition in the markets for beer, wine, and distilled spirits that recommended rulemaking to ``again consider eliminating the standards of fill requirements.'' See Treasury Report on Competition in the Markets for Beer, Wine, and Spirits (February 9, 2022), available at https://home.treasury.gov/system/files/136/Competition-Report.pdf. That report, produced in response to Executive Order 14036, ``Promoting Competition in the American Economy'' (published in the Federal Register on July 9, 2021, at 86 FR 36987), noted that ``[c]ontainer size requirements can be a barrier to innovation and competition, insofar as producers must conform their packaging to the Treasury-mandated sizes.'' Further, TTB had received questions regarding standards of fill from industry members noting difficulty in sourcing compliant containers during certain periods. In response to Notice No. 210, TTB received 76 comments. Commenters included national trade associations, the European Union (EU), congressional representatives, individuals, and alcohol beverage companies. Most of the comments addressed the proposals, providing support for or opposition to them. However, many commenters requested that TTB consider adding certain additional authorized standards of fill for distilled spirits and wine that were not included in Notice No. 210, as either a preferred alternative to generally eliminating the standards of fill or, even if their preference was to eliminate the standards of fill, as an option for consideration in the event that the standards of fill were not eliminated. Several commenters also suggested TTB eliminate the distinction between standards of fill that apply to distilled spirits in cans and those that apply to distilled spirits in containers other than cans, which was also not proposed in Notice No. 210. III. Additional Proposals TTB is still considering the proposed amendments contained in Notice No. 210 and all comments it received in response. However, because of the comments that TTB received that requested amendments beyond the scope of the original proposal and, recognizing that the requested amendments should be considered in the context of those already proposed, TTB is now requesting comments on whether to authorize additional standards of fill for distilled spirits and for wine and to eliminate the distinction between the standards of fill authorized for distilled spirits in cans and those for distilled spirits in containers other than [[Page 73052]] cans. TTB has grouped together and summarized the comments below. The grouping is merely for readability, and TTB may incorporate some, all, or none of the proposed sizes into the final rule, regardless of the groupings. A. Additional Authorized Standards of Fill for Distilled Spirits TTB received 17 comments requesting the approval of additional authorized standards of fill for distilled spirits, either as an alternative to TTB generally eliminating all standards of fill for distilled spirits or in the event that TTB did not eliminate standards of fill for distilled spirits. Commenters requested that TTB authorize the following: For both cans and containers other than cans 3.75, 3, 2, and 1.5 liters and 500, 350, 250, and 187 milliliters; for cans, 945, 710, 700, 570, 475, and 331 milliliters; and for containers other than cans, 355 milliliters. Some commenters requested approval of additional standards of fill above 3.785 liters, and TTB is not raising those requests for additional comment, as such standards would exceed sizes allowed by law. As noted above, the FAA Act at 27 U.S.C. 206 generally prohibits the sale to consumers of distilled spirits in containers over one wine gallon. One commenter also requested approval of a size below 50 milliliters, which we are also not specifically raising for additional comment at this time. The agency has previously opined that a minimum size of 50 milliliters is needed to ensure sufficient space on the container for required labeling,\2\ and TTB explained in the Spring 2024 Unified Agenda of Federal Regulatory and Deregulatory Actions that it intends to continue its rulemaking work to obtain comment on additional required labeling on alcohol beverages, for disclosures of major food allergens, nutritional and alcohol content, and ingredients. TTB believes any further consideration of new minimum sizes should occur after the conclusion of rulemaking that may affect the amount or type of required information that must appear on labels. --------------------------------------------------------------------------- \2\ See T.D. TTB-165, Addition of New Standards of Fill for Wine and Distilled Spirits; Amendment of Distilled Spirits and Malt Beverage Net Contents Labeling Regulations, published on December 29, 2020, at 85 FR 85514. --------------------------------------------------------------------------- 1. Both Cans and Containers Other Than Cans--3.75, 3, 2, and 1.5 Liters and 500, 350, 250, and 187 Milliliters 3.75 and 3 Liters TTB received two comments, from the Distilled Spirits Council of the United States (DISCUS) and Milestone Brands, requesting authorization of a size ``such as a 3 L or 3.75 L standard or the maximum size prescribed by law'' saying that it would enable producers to provide kegged cocktails and other consumer-desired formats to showcase their products and meet consumer demand. 2 Liters TTB received one comment, from the EU, suggesting that a size of 2 liters should be added, along with other authorized sizes (listed separately) that reflect the EU standards for spirit drinks. 1.5 Liters TTB received two comments, from the EU and DISCUS, requesting authorization of a 1.5-liter size. DISCUS stated it would allow industry members to further streamline and harmonize sizes for certain products across different global markets and increase operational efficiencies, such as waste reduction from producing multiple SKU sizes for different markets. The EU suggested adding a size of 1.5 liters to align with EU standards which also provide for that size. 500 Milliliters Six commenters requested that TTB authorize a 500-milliliter standard of fill. DISCUS and Milestone Brands noted that this size would fill a ``large gap ``between the 375 and 700 milliliter authorized sizes, and Milestone Brands stated that its approval would provide size parity with wine and malt beverage-based ready-to-drink (RTD) products. DISCUS added that the 500-milliliter size would allow industry members to further streamline and harmonize sizes for certain products and increase operational efficiencies, such as waste reduction from producing multiple SKU sizes for different markets. One commenter, Soley Beverage, noted in support of authorizing a 500-milliliter standard of fill for distilled spirits that the wine standards of fill provide an authorized size of 500 milliliters. The EU also noted in support of this size that the EU standards for spirit drinks include the 500-milliliter size. 350 Milliliters Two commenters, the EU and DISCUS, suggested that TTB consider authorizing a 350-milliliter standard of fill. DISCUS suggested that TTB consider common sizes in markets around the world, such as 350 milliliters, to allow industry members to streamline and harmonize sizes for certain products and increase operational efficiencies, such as waste reduction from producing multiple SKU sizes for different markets. The EU suggested that the 350-milliliter size should be added, noting that it is authorized as an EU standard for spirit drinks. 250 and 187 Milliliters TTB received comments--from the Glass Packaging Institute, O-I Glass, The Can Van, and an individual--requesting that TTB authorize a standard of fill of 250 milliliters for distilled spirits, the latter two referencing 250-milliliter cans. The commenters stated that the 250-milliliter can is one of the more popular can sizes for RTD spirit beverages, and not having it authorized limits experimentation with new brands. The Glass Packaging Institute and O-I Glass also supported authorizing a 187-milliliter size for containers other than cans. According to the commenters, the shift to smaller packaging formats continues to grow, so authorizing the 187-milliliter size and the 250- milliliter size would provide additional options for distillers and consumers within the market for smaller packaging sizes, reflect packaging options available to other beverage categories, and increase competition. 2. Cans--945, 710, 700, 570, 475, and 331 Milliliters 945, 710, 475, and 331 Milliliters DISCUS requested that TTB authorize sizes equivalent to 945, 710, 475, and 331 milliliters (equivalent to 32, 24, 16, and 11.2 ounces respectively) for cans, saying that large and small producers of RTD distilled spirits products, many of which are sold in cans, could benefit from greater competitive market access in this space by being able to provide their products in these sizes that consumers want and that are allowed for other products. 700 Milliliters TTB received one comment, from Suave Spirits Inc., requesting authorization of a 700-milliliter size for distilled spirits, saying it would help industry members establish uniformity in packaging sizes with European and worldwide customers that demand 700-milliliter sizes, and further reduce the number of SKUs to manage. Because 700 milliliters is already authorized for distilled spirits containers other than cans, we are considering this comment as a request for approval of that standard of fill for cans. 570 and 475 Milliliters TTB received one comment, from WISEACRE Brewing Co. (Wiseacre), requesting that TTB authorize 570 and 475 milliliters (19.2 and 16 ounces [[Page 73053]] respectively) for distilled spirits in cans. Wiseacre stated that the consumption of RTD spirits cocktails is growing, and most of the growth in the industry for RTD spirits cocktails is with 16-ounce and sometimes 19.2-ounce cans. The commenter suggested that most canning lines use a 12 ounce can diameter, and the 19.2-ounce size is the largest volume a can is safely able to hold using the 12 ounce can diameter. Wiseacre also stated that ``the rules only allow use of 12 oz and 24 oz cans.'' TTB notes that the regulations at 27 CFR 5.203 do not currently authorize 24-ounce cans as a distilled spirits standard of fill; however, they do authorize 355-milliliter cans, which is equivalent to 12 ounces. 3. Containers Other Than Cans--355 Milliliters Four commenters urged TTB to approve the 355-milliliter size for glass bottles (which would require TTB to amend the standards of fill for containers other than cans). These commenters were Representative Glenn ``GT'' Thompson, Representative Austin Scott, the Glass Packaging Institute, and O-I Glass. The commenters generally noted that the 355- milliliter size is currently approved for distilled spirits, but only for cans. Commenters expressed their views that this limitation restricts competition and customer choice in a growing market. One commenter stated that, given the ongoing shortage of 355-milliliter cans, having a 355-milliliter size for glass bottles would provide greater packaging flexibility to allow companies to react to supply issues while it would also support innovative packaging (including for environmental purposes). They further urged that other beverage categories have introduced new package formats and sizes, particularly in the non-alcoholic beverage market, and the shift to smaller packaging formats continues to grow. Two commenters expressed concern that glass bottle manufacturers are being harmed by their inability to use a 355-milliliter size, as they are unable to compete on a level playing field with other container manufacturers. B. Harmonization of Authorized Standards of Fill Across Distilled Spirit Container Types Three commenters representing glass manufacturers (Representative Austin Scott, Representative Glen ``GT'' Thompson, and O-I Glass) stated that removing the distinction between cans and other containers would result in greater competition, consumer choice, and a consistency of regulation, without adding to consumer confusion. The distinction between distilled spirits in cans and distilled spirits in containers other than cans resulted from rulemaking in the early 1990s. On September 27, 1991, TTB's predecessor, the Bureau of Alcohol, Tobacco, and Firearms (ATF), proposed differentiating between cans and containers other than cans in ATF Notice No. 725 published in the Federal Register at 56 FR 49152). There, ATF explained its view at that time that approving both 375 and 355 milliliter containers for distilled spirits would be misleading for consumers because of how close together the sizes were. However, ATF also recognized that because 355 milliliters was not an approved size, it prevented utilization of one of the most common can sizes. ATF proposed to create mutually exclusive categories of distilled spirits containers, cans and containers other than cans, with separate standards of fill authorized for each, ``. . .based on the belief that cans are sufficiently distinct from other types of [distilled spirits containers], in both shape and design, so that a different standard of fill would not be confusing to the consumer.'' This proposal was adopted in the final rule published in the Federal Register on July 14, 1992, at 57 FR 31126. TTB is soliciting comments on whether it should maintain a distinction between cans and containers other than cans. In particular, TTB is interested in comments on whether the distinction serves a purpose consistent with the conclusions drawn in the 1991 rulemaking, that is, that, in some instances, the size in combination with the type of container (can versus containers other than can) serves the purpose of preventing consumer deception, and the distinction is needed to prevent consumer deception regarding the product or quantity of the product in the container, consistent with TTB's mandate under the FAA Act described above in the Authority section. C. Additional Authorized Standards of Fill for Wine TTB received several comments requesting the approval of six standards of fill for wine that were not proposed in Notice No. 210, including 600, 545.5, and 473 milliliter sizes. These standards of fill are discussed below.\3\ --------------------------------------------------------------------------- \3\ If any of these sizes are added, conforming edits would be made to the tax tolerances in 27 CFR 24.255(b) in line with the proposals made for other the wine sizes in Notice No. 210, as follows: 2 percent for 600 milliliters, 2 percent for 545.5 milliliters; and 2.5 percent for 473 milliliters. For greater readability, TTB proposed in Notice No. 210 to provide the tax tolerances in ranges of sizes as opposed to discrete sizes, so these would appear in the regulations within those ranges, for example, 2 percent for 600 milliliters would appear within the range proposed in Notice No. 210 as ``2.0 percent for 750 mL to 550 mL.'' --------------------------------------------------------------------------- One commenter also asked for the approval of wine in 1/6-barrel, 50-liters, and 1/2-barrel sizes. Regarding these sizes, TTB notes that the TTB regulations do not define a specific volume for a ``barrel'' of wine and that wine containers exceeding 18 liters need not conform to the standards of fill. See 27 CFR 4.70(b)(2). Moreover, the regulations at 27 CFR 4.72(b) provide that wine may be packaged in containers of 4 liters or more if the containers are filled in quantities of even (or whole) liters (for example 4, 5, or 6 liters). 600 Milliliters TTB received a comment from an individual winemaker noting that some wines produced in foreign countries are required to be exported in 600 [milliliter] containers and that ``. . .consumers are missing out on exploring [these] wines. . .'' 545 and 473 Milliliters The American Cider Association (ACA) requested approval of 545 and 473 milliliter sizes (equivalent to 19.2 and 16 ounces respectively), noting that both are already commonly used for similar products that are not required to conform to TTB standards of fill. These include ciders under 7 percent alcohol by volume and apple-flavored malt beverages sold in cans. The ACA also noted that these additional sizes would increase packaging options for industry members faced with container sourcing challenges. The ACA also points to aspects of cider making that lead to levels of alcohol by volume very near to thresholds for determining compliance with the standards of fill (that is, very near the threshold of 7 percent alcohol by volume). That complication can affect planned packaging as a producer may not know whether their product will be under the 7 percent alcohol by volume threshold until it is ready to be bottled. Public Participation Comments Invited TTB invites comments from interested members of the public on the additional distilled spirits and wine standards of fill and the removal of the distinction between standards of fill for distilled spirits in cans and those in containers other than cans, as submitted through comments on Notice No. 210 and described in this document. TTB also [[Page 73054]] welcomes comments on any other aspect of the proposals under consideration, including all amendments proposed in Notice No. 210. TTB would be particularly interested in any comments from consumers or others providing evidence of relevant consumer understanding in order to consider the extent of potential consumer deception with respect to distilled spirits and wine products and the quantities of the products, as contemplated by the statutory bases for the standards of fill. Please provide any specific information in support of your comments. Please note that those who previously submitted comments to Notice No. 210 do not need to resubmit those comments for consideration. TTB is still considering all comments received in response to Notice No. 210, not only those summarized in this document, and will address all comments in any subsequent final rule. Submitting Comments You may submit comments on this proposal as an individual or on behalf of a business or other organization via the Regulations.gov website or via postal mail, as described in the ADDRESSES section of this document. Your comment must reference Notice No. 210A and must be submitted or postmarked by the closing date shown in the DATES section of this document. You may upload or include attachments with your comment. You also may submit a comment requesting a public hearing on this proposal. The TTB Administrator reserves the right to determine whether to hold a public hearing. If TTB schedules a public hearing, it will publish a notice of the date, time, and place for the hearing in the Federal Register. Confidentiality and Disclosure of Comments All submitted comments and attachments are part of the rulemaking record and are subject to public disclosure. Do not enclose any material in your comments that you consider confidential or that is inappropriate for disclosure. TTB will post, and you may view, copies of this document, the original notice of proposed rulemaking, supporting materials, and any comments TTB receives about this proposal within the related Regulations.gov docket, TTB-2022-0004. In general, TTB will post comments as submitted, and it will not redact any identifying or contact information from the body of a comment or attachment. Please contact TTB's Regulations and Rulings Division by email using the web form available at https://www.ttb.gov/contact-rrd, or by telephone at 202-453-2265, if you have any questions regarding how to comment on this proposal or to request copies of this document, its supporting materials, or the comments received in response. Regulatory Analysis and Notices Regulatory Flexibility Act TTB certifies that this proposed regulation, if adopted, would not have a significant economic impact on a substantial number of small entities. If adopted, the amendments would provide bottlers and importers of wine and distilled spirits with additional flexibility to use new bottle sizes if they so choose. The proposed regulation would impose no new reporting, recordkeeping, or other administrative requirement. Therefore, no regulatory flexibility analysis is required. Paperwork Reduction Act The collection of information in this proposed rule has been previously approved by the Office of Management and Budget (OMB) under the title ``Labeling and Advertising Requirements Under the Federal Alcohol Administration Act,'' and assigned control number 1513-0087. This proposed regulation would not result in a substantive or material change in the previously approved collection action, since the nature of the mandatory information that must appear on labels affixed to the container remains unchanged. Executive Order 12866 This proposed rule is not a significant regulatory action as defined by Executive Order 12866. Therefore, it requires no regulatory assessment. Signed: August 29, 2024. Mary G. Ryan, Administrator. Approved: September 3, 2024. Aviva R. Aron-Dine, Acting Assistant Secretary (Tax Policy). [FR Doc. 2024-20237 Filed 9-6-24; 8:45 am] BILLING CODE 4810-31-P

usgpo

2024-10-08T13:26:18.667022

FR

FR-2024-09-09/2024-20187

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73054-73055] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20187] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG-2024-0083] Security Zone; Coast Guard Base Los Angeles-Long Beach on Terminal Island, San Pedro, CA AGENCY: Coast Guard, DHS. ACTION: Notification of inquiry; request for comments; notice of meeting. ----------------------------------------------------------------------- SUMMARY: We are requesting your comments on the proposed establishment of a security zone for navigable waters within a 50-yard radius of Base Los Angeles-Long Beach on Terminal Island within the main channel of Los Angeles Harbor. This proposed action would provide for the security of Coast Guard personnel, vessels, and property. We seek your comments on the proposed security zone and consideration of the proposed radius. We also plan to host a public meeting on September 23, 2024. DATES: Your comments and related material must reach the Coast Guard on or before October 4, 2024. A public meeting will be held 10 a.m. September 23, 2024. See the ``Public Participation and Request for Comments'' portion of the SUPPLEMENTARY INFORMATION section for further details. ADDRESSES: You may submit comments identified by docket number USCG- 2024-0083 using the Federal portal at https://www.regulations.gov. See the ``Public Participation and Request for Comments'' portion of the SUPPLEMENTARY INFORMATION section for further instructions on submitting comments. The public meeting held on September 23, 2024, will be held virtually. Please contact the person listed in the FOR FURTHER INFORMATION CONTACT section for call-in information. FOR FURTHER INFORMATION CONTACT: If you have questions about this notice of inquiry, call or email LCDR Kevin Kinsella, Waterways Management Division, U.S. Coast Guard; telephone 310-521-3860, email [email protected]. SUPPLEMENTARY INFORMATION: I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security U.S.C. United States Code [[Page 73055]] II. Background, and Purpose In the past twelve months, there have been two suspicious activities that required immediate response actions to safeguard the personnel and property of the Base Los Angeles-Long Beach on Terminal Island within the main channel of Los Angeles Harbor (Coast Guard base). To help address this threat in a proactive manner, we are requesting comments on establishing a security zone. This proposed security zone could enable adequate response activities and limit unnecessary introduction of security hazards to U.S. Government property and personnel. The Coast Guard is considering proposing a security zone extending alongside Terminal Island within the bounds of the Coast Guard Base with a 50-yard radius within the Los Angeles Main Channel in San Pedro Bay, CA. No vessels will be able to loiter or anchor within this area, if established. IV. Information Requested To appropriately secure the Coast Guard Base while considering public use of the surrounding area, we are requesting your comments prior to publishing a proposed rule. We request comments on the proposed establishment of a security zone for navigable waters within a 50-yard radius of Base Los Angeles-Long Beach on Terminal Island within the main channel of Los Angeles Harbor. This proposed action would provide for the security of Coast Guard personnel, vessels, and property. We seek your comments on establishment of a proposed security zone and the proposed 50-yard radius. Do you agree or disagree with the proposed radius and location of the zone? If not, what is your proposed distance of the zone from shore? Do you have any suggested alternatives? V. Public Participation and Request for Comments We encourage you to submit comments in response to this notice of inquiry through the Federal Decision Making portal at https://www.regulations.gov. To do so, go to https://www.regulations.gov, type USCG-2024-0083 in the search box and click ``Search.'' Next, look for this document in the Search Results column, and click on it. Then click on the Comment option. In your submission, please include the docket number for this notice of inquiry and provide a reason for each suggestion or recommendation. If your material cannot be submitted using https://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions. Public comments will also be placed in our online docket and can be viewed by following instructions on the https://www.regulations.gov Frequently Asked Questions web page. We review all comments received, but we may choose not to post off-topic, inappropriate, or duplicate comments that we receive. We accept anonymous comments. Comments we post to https://www.regulations.gov will include any personal information you have provided. For more about privacy and submissions in response to this document, see DHS's eRulemaking System of Records notice (85 FR 14226, March 11, 2020). We plan to hold one public meeting virtually. The public meeting will take place at 10 a.m. on September 23, 2024. For information on facilities or services for individuals with disabilities or to request special assistance at the public meeting, contact the person named in the FOR FURTHER INFORMATION CONTACT section, above. This document is issued under authority of 5 U.S.C. 552(a). Dated: August 21, 2024. S.L. Crecy, Captain, U.S. Coast Guard, Captain of the Port Los Angeles--Long Beach. [FR Doc. 2024-20187 Filed 9-6-24; 8:45 am] BILLING CODE 9110-04-P

usgpo

2024-10-08T13:26:18.792291

FR

FR-2024-09-09/2024-20358

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Proposed Rules] [Pages 73055-73058] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20358] ----------------------------------------------------------------------- DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG-2024-0680] RIN 1625-AA00 Safety Zone; Waterway Training Area, Delaware River, Near Eddystone, PA AGENCY: Coast Guard, DHS. ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: The Coast Guard is proposing to establish a safety zone for certain waters of the Delaware River. This action is necessary to provide for the safety of life on the navigable waters on a portion of the Delaware River near Eddystone, PA, during non-lethal signaling and warning device training conducted from onboard U.S. Coast Guard vessels. This proposed rulemaking would prohibit persons and vessels from being in the safety zone unless authorized by the Captain of the Port (COTP), Sector Delaware Bay or a designated representative. We invite your comments on this proposed rulemaking. DATES: Comments and related material must be received by the Coast Guard on or before October 9, 2024. ADDRESSES: You may submit comments identified by docket number USCG- 2024-0680 using the Federal Decision-Making Portal at https://www.regulations.gov. See the ``Public Participation and Request for Comments'' portion of the SUPPLEMENTARY INFORMATION section for further instructions on submitting comments. This notice of proposed rulemaking with its plain-language, 100-word-or-less proposed rule summary will be available in this same docket. FOR FURTHER INFORMATION CONTACT: If you have questions about this proposed rulemaking, call or email MST1 Dylan Caikowski, Waterways Management Division, U.S. Coast Guard Sector Delaware Bay; (215) 271- 4814, [email protected]. SUPPLEMENTARY INFORMATION: I. Table of Abbreviations CFR Code of Federal Regulations COTP Captain of the Port DHS Department of Homeland Security FR Federal Register NM Nautical mile NPRM Notice of proposed rulemaking Sec. Section U.S.C. United States Code II. Background, Purpose, and Legal Basis The U.S. Coast Guard is charged with numerous responsibilities to protect inland and coastal waterways. Missions include maritime law enforcement, search and rescue, marine environmental response, protection of marine sanctuaries, alien migration interdiction, drug interdiction, boating safety, port safety and security, and military support. One of the tools the Coast Guard uses to help execute these missions when encountering a non-compliant vessel is the LA51. The LA51 is a non-lethal signaling and warning device Coast Guard personnel use during law enforcement operations for getting the attention of vessels which do not respond to orders from the Coast Guard. The LA51 is a two-part (flash bang) ammunition round fired from a 12-gauge military shotgun to produce a visible signal at a range of 100 meters. The explosive pyrotechnic flash is a bright, white light lasting less than one second with a loud report (170 decibels at the source). To maintain ports, waterways, and coastal security mission readiness, Coast Guard personnel within the Sector [[Page 73056]] Delaware Bay COTP Zone must conduct LA51 device training. At the present time, Coast Guard personnel within the Sector Delaware Bay COTP Zone must transit beyond the 12 NM baseline to conduct LA51 device training. This is a logistical and financial burden for the units within Sector Delaware Bay COTP Zone and it limits training opportunities. To better accommodate the Sector's training needs, the COTP Sector Delaware Bay is proposing to establish a safety zone shoreward of the 12 nautical miles (NM) baseline for use as a waterway training area. Although the LA51 has a low risk of significant injury, there is some risk of injury or death resulting from near or actual contact among training vessels and waterway users. This risk would increase if normal vessel traffic were to interfere with a training event. As training vessels would be operating near designated navigation channels, as well near approaches to local public boat ramps, private marinas and yacht clubs, and waterfront businesses, the chance of such contact cannot be discounted. The COTP Sector Delaware Bay has therefore determined that potential hazards associated with the LA51 device trainings would be a safety concern for anyone within the waterway training areas. The purpose of this rulemaking is to ensure the safety of vessels and the navigable waters within the waterway training area before, during, and after the training events. The proposed safety zone waterway training area would only be used to conduct LA51 device training as needed for Coast Guard Law Enforcement training requirements. And the COTP Sector Delaware Bay would only activate the safety zone, making subject to enforcement, during periods when training was being conducted. If this permanent Coast Guard waterway training area safety zone was not established, the COTP Sector Delaware Bay would need to establish a temporary safety zone multiple times for LA51 training. The Coast Guard is proposing this rulemaking under authority in 46 U.S.C. 70034. III. Discussion of Proposed Rule The COTP Sector Delaware Bay is proposing to establish a safety zone for use as a waterway training area. The safety zone would only be subject to enforcement for periods when training was to take place. The waterway training area includes all navigable waters, on a portion of the Delaware River, encompassed by a line connecting the following points beginning at latitude 39[deg]51'05.4'' N, longitude 075[deg]20'17.4'' W; thence east to latitude 39[deg]51'42.0'' N, longitude 075[deg]18'39.6'' W; thence south to latitude 39[deg]50'38.4'' N, longitude 075[deg]18'09.0'' W; thence west to latitude 39[deg]50'05.4'' N, longitude 075[deg]19'37.2'' W; and thence north back to the beginning point. These coordinates are based on Datum WGS 84. The waterway training area is located near Eddystone, PA, west of Little Tinicum Island and east of Chester Island. The safety zone is a square in shape measuring approximately 2,500 yards in length and approximately 2,500 yards in width. The proposed waterway training area would be located within a portion of the main navigable channel in the Delaware River. Although this safety zone encompasses a portion of the main navigational channel in the Delaware River that is used by the commercial and recreational vessels, vessel traffic in this area would be able to safely transit through the safety zone, after obtaining permission from the COTP Sector Delaware Bay or a designated representative. The Coast Guard would ensure appropriate monitoring of the waterway while the safety zone is activated. The Coast Guard anticipates that the proposed safety zone would be activated for approximately two hours on six separate occasions annually--a total of approximately 12 annual enforcement hours for the zone. The Coast Guard anticipates that it would activate the zone at various times of the year during daylight hours only. Whenever a LA51 device training event is planned, the COTP Sector Delaware Bay would notify the maritime community of the enforcement dates and times of the safety zone as the training event dictates. Such notification would be made by broadcast or local notice to mariners, on-scene oral notice, or other appropriate means in accordance with 33 CFR 165.7. The duration and enforcement of the zone is intended to ensure the safety of vessels and these navigable waters before, during, and after these training events. Except for training participants, no vessel or person would be permitted to enter the safety zone without obtaining permission from the COTP Sector Delaware Bay or a designated representative. The regulatory text we are proposing appears at the end of this document. IV. Regulatory Analyses We developed this proposed rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors. A. Regulatory Planning and Review Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This NPRM has not been designated a ``significant regulatory action,'' under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB). This regulatory action determination is based on the size, duration, and location of the safety zone. It is anticipated that the safety zone will be activated for six separate events annually. Vessel traffic will be able to safely transit through the safety zone while being enforced, with permission from the COTP Sector Delaware Bay or a designated representative by telephone at (215) 271-4807 or on VHF-FM radio channel 16. The impact to the Delaware River would be for approximately 2 hours or less. Moreover, the Coast Guard will release the details of the zone via a Broadcast Notice to Mariners on VHF-FM radio channel 16 and publish in the Local Notice to Mariners. B. Impact on Small Entities The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term ``small entities'' comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section IV.A above, this proposed rule would not have a significant economic impact on any vessel owner or operator. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it [[Page 73057]] qualifies and how and to what degree this rule would economically affect it. Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard. C. Collection of Information This proposed rule would not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501- 3520). D. Federalism and Indian Tribal Governments A rule has implications for federalism under Executive Order 13132 (Federalism), if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. Also, this proposed rule does not have tribal implications under Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments) because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section. E. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule would not result in such an expenditure, we do discuss the potential effects of this proposed rule elsewhere in this preamble. F. Environment We have analyzed this proposed rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves a safety zone lasting approximately two hours on six separate occasions annually for LA51 device training. Normally such actions are categorically excluded from further review under paragraph L60(a) of appendix A, table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A preliminary Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule. G. Protest Activities The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places, or vessels. V. Public Participation and Request for Comments We view public participation as essential to effective rulemaking and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. Submitting comments. We encourage you to submit comments through the Federal Decision-Making Portal at https://www.regulations.gov. To do so, go to https://www.regulations.gov, type USCG-2024-0680 in the search box and click ``Search.'' Next, look for this document in the Search Results column, and click on it. Then click on the Comment option. If you cannot submit your material by using https://www.regulations.gov, call or email the person in the FOR FURTHER INFORMATION CONTACT section of this proposed rule for alternate instructions. Viewing material in docket. To view documents mentioned in this proposed rule as being available in the docket, find the docket as described in the previous paragraph, and then select ``Supporting & Related Material'' in the Document Type column. Public comments will also be placed in our online docket and can be viewed by following instructions on the https://www.regulations.gov Frequently Asked Questions web page. Also, if you click on the Dockets tab and then the proposed rule, you should see a ``Subscribe'' option for email alerts. The option will notify you when comments are posted, or a final rule is published. We review all comments received, but we will only post comments that address the topic of the proposed rule. We may choose not to post off-topic, inappropriate, or duplicate comments that we receive. Personal information. We accept anonymous comments. Comments we post to https://www.regulations.gov will include any personal information you have provided. For more about privacy and submissions to the docket in response to this document, see DHS's eRulemaking System of Records notice (85 FR 14226, March 11, 2020). List of Subjects in 33 CFR Part 165 Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways. For the reasons discussed in the preamble, the Coast Guard is proposing to amend 33 CFR part 165 as follows: PART 165--REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 0 1. The authority citation for part 165 continues to read as follows: Authority: 46 U.S.C. 70034, 70051, 70124; 33 CFR 1.05-1, 6.04- 1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.3. 0 2. Add Sec. 165.523 to read as follows: Sec. 165.523 Safety Zone; Waterway Training Area, Sector Delaware Bay Captain of the Port Zone (a) Location. All navigable waters, on a portion of the Delaware River, encompassed by a line connecting the following points beginning at latitude [[Page 73058]] 39[deg]51'05.4'' N, longitude 075[deg]20'17.4'' W; thence east to latitude 39[deg]51'42.0'' N, longitude 075[deg]18'39.6''W; thence south to latitude 39[deg]50'38.4'' N, longitude 075[deg]18'09.0'' W; thence west to latitude 39[deg]50'05.4'' N, 075[deg]19'37.2'' W; and thence north back to the beginning point. (WGS 84) (b) Definitions. As used in this section, designated representative means a Coast Guard Patrol Commander, including a Coast Guard petty officer, warrant or commissioned officer onboard a Coast Guard vessel or onboard a federal, state, or local law enforcement vessel assisting the Captain of the Port (COTP), Sector Delaware Bay in the enforcement of the safety zone. (c) Regulations. (1) Under the general safety zone regulations in subpart C of this part, you may not enter or remain in the safety zone described in paragraph (a) of this section unless authorized by the COTP or the COTP's designated representative. (2) To seek permission to enter or remain in the zone, contact the COTP or the COTP's representative via VHF-FM channel 16 or (215) 271- 4807. Those in the safety zone must comply with all lawful orders or directions given to them by the COTP or the COTP's designated representative. (3) No vessel authorized to enter or remain in the zone may take on bunkers or conduct lightering operations within the safety zone during its enforcement period. (4) This section applies to all vessels except those engaged in law enforcement, aids to navigation servicing, and emergency response operations. (d) Enforcement. (1) The safety zone created by this section will be enforced only upon issuance of a Broadcast Notice to Mariners (BNM) by the COTP or the COTP's representative, as well as on-scene notice or other appropriate means in accordance with Sec. 165.7. (2) The U.S. Coast Guard may be assisted in the patrol and enforcement of the safety zone by Federal, State, and local agencies. Dated: September 3, 2024. Kate F. Higgins-Bloom, Captain, U.S. Coast Guard, Captain of the Port, Sector Delaware Bay. [FR Doc. 2024-20358 Filed 9-6-24; 8:45 am] BILLING CODE 9110-04-P

usgpo

2024-10-08T13:26:18.906553

FR

FR-2024-09-09/2024-20178

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Page 73059] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20178] ======================================================================== Notices Federal Register ________________________________________________________________________ This section of the FEDERAL REGISTER contains documents other than rules or proposed rules that are applicable to the public. Notices of hearings and investigations, committee meetings, agency decisions and rulings, delegations of authority, filing of petitions and applications and agency statements of organization and functions are examples of documents appearing in this section. ======================================================================== Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Notices [[Page 73059]] AGENCY FOR INTERNATIONAL DEVELOPMENT Notice of Advisory Committee Charter Re-Establishment AGENCY: U.S. Agency for International Development (USAID). ACTION: Notice. ----------------------------------------------------------------------- SUMMARY: In accordance with the Federal Advisory Committee Act (FACA), the U.S. Agency for International Development is hereby giving notice that the Advisory Committee on Voluntary Foreign Aid (ACVFA) is being re-established. ADDRESSES: To view additional information related to ACVFA please visit http://www.usaid.gov/who-we-are/organization/advisory-committee. FOR FURTHER INFORMATION CONTACT: Karen Vargas, Designated Federal Officer for ACVFA, at [email protected] or 202-705-5769. SUPPLEMENTARY INFORMATION: ACVFA brings together USAID and representatives from private voluntary organizations (PVO), universities, nongovernmental organizations (NGOs), and multilateral and private organizations to foster understanding, communication, and cooperation in the area of foreign aid. The Administrator of USAID is re-establishing the committee for two years, effective on the date of filing of its renewed charter. Karen Vargas, ACVFA Designated Federal Officer. [FR Doc. 2024-20178 Filed 9-6-24; 8:45 am] BILLING CODE 6116-01-P

usgpo

2024-10-08T13:26:19.016491

FR

FR-2024-09-09/2024-20238

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73059-73060] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20238] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Food Safety and Inspection Service [Docket No. FSIS-2024-0017] Notice of Request To Renew an Approved Information Collection: Records To Be Kept by Official Establishments and Retail Stores That Grind Raw Beef Products AGENCY: Food Safety and Inspection Service (FSIS), U.S. Department of Agriculture (USDA). ACTION: Notice and request for comments. ----------------------------------------------------------------------- SUMMARY: In accordance with the Paperwork Reduction Act of 1995 and Office of Management and Budget (OMB) regulations, FSIS is announcing its intention to renew an approved information collection regarding records to be kept by official establishments and retail stores that grind raw beef products. There are no changes to the existing information collection. The approval for this information collection will expire on February 28, 2025. DATES: Submit comments on or before November 8, 2024. ADDRESSES: FSIS invites interested persons to submit comments on this Federal Register notice. Comments may be submitted by one of the following methods: Federal eRulemaking Portal: This website provides commenters the ability to type short comments directly into the comment field on the web page or to attach a file for lengthier comments. Go to https://www.regulations.gov. Follow the on-line instructions at that site for submitting comments. Mail: Send to Docket Clerk, U.S. Department of Agriculture, Food Safety and Inspection Service, 1400 Independence Avenue SW, Mailstop 3758, Washington, DC 20250-3700. Hand- or courier-delivered submittals: Deliver to 1400 Independence Avenue SW, Jamie L. Whitten Building, Room 350-E, Washington, DC 20250-3700. Instructions: All items submitted by mail or electronic mail must include the Agency name and docket number FSIS-2024-0017. Comments received in response to this docket will be made available for public inspection and posted without change, including any personal information, to https://www.regulations.gov. Docket: For access to background documents or comments received, call 202-720-5046 to schedule a time to visit the FSIS Docket Room at 1400 Independence Avenue SW, Washington, DC 20250-3700. FOR FURTHER INFORMATION CONTACT: Gina Kouba, Office of Policy and Program Development, Food Safety and Inspection Service, USDA, 1400 Independence Avenue SW, Mailstop 3758, South Building, Washington, DC 20250-3700; 202-720-5046. SUPPLEMENTARY INFORMATION: Title: Records to be Kept by Official Establishments and Retail Stores that Grind Raw Beef Products. OMB Number: 0583-0165. Type of Request: Renewal of an approved information collection. Abstract: FSIS has been delegated the authority to exercise the functions of the Secretary (7 CFR 2.18, 2.53), as specified in the Federal Meat Inspection Act (FMIA) (21 U.S.C. 601, et seq.). This statute mandates that FSIS protect the public by verifying that meat products are safe, wholesome, and properly labeled. FSIS is requesting renewal of an approved information collection regarding records to be kept by official establishments and retail stores that grind raw beef products. There are no changes to the existing information collection. The approval for this information collection will expire on February 28, 2025. All official establishments and retail stores that grind raw beef products for sale in commerce, including products ground at a customer's request, are required to maintain certain records. The required records include the following information: (A) the establishment numbers of the establishments supplying the materials used to prepare each lot of raw ground beef product; (B) all supplier lot numbers and production dates; (C) the names of the supplied materials, including beef components and any materials carried over from one production lot to the next; (D) the date and time each lot of raw ground beef product is produced; and (E) the date and time when grinding equipment and other related food contact surfaces are cleaned and sanitized (9 CFR 320.1(b)(4)(i)). [[Page 73060]] FSIS has made the following estimates based upon an information collection assessment: Estimate of Burden: FSIS estimates that it would take about 25 hours per respondent annually. Respondents: Official establishments and retail stores that grind raw beef products. Estimated Number of Respondents: 65,911. Estimated Total Annual Recordkeeping Burden on Respondents: 1,658,650 hours. All responses to this notice will be summarized and included in the request for OMB approval. All comments will also become a matter of public record. Copies of this information collection assessment can be obtained from Gina Kouba, Office of Policy and Program Development, Food Safety and Inspection Service, USDA, 1400 Independence Avenue SW, Mailstop 3758, South Building, Washington, DC 20250-3700; 202-720-5046. Comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of FSIS' functions, including whether the information will have practical utility; (b) the accuracy of FSIS' estimate of the burden of the proposed collection of information, including the validity of the method and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques, or other forms of information technology. Comments may be sent to both FSIS, at the addresses provided above, and the Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Washington, DC 20253. Additional Public Notification Public awareness of all segments of rulemaking and policy development is important. Consequently, FSIS will announce this Federal Register publication online through the FSIS web page located at: https://www.fsis.usda.gov/federal-register. FSIS will also announce and provide a link to this Federal Register publication through the FSIS Constituent Update, which is used to provide information regarding FSIS policies, procedures, regulations, Federal Register notices, FSIS public meetings, and other types of information that could affect or would be of interest to our constituents and stakeholders. The Constituent Update is available on the FSIS web page. Through the web page, FSIS can provide information to a much broader, more diverse audience. In addition, FSIS offers an email subscription service that provides automatic and customized access to selected food safety news and information. This service is available at: https://www.fsis.usda.gov/subscribe. The available information ranges from recalls to export information, regulations, directives, and notices. Customers can add or delete subscriptions themselves and have the option to password protect their accounts. USDA Non-Discrimination Statement In accordance with Federal civil rights law and USDA civil rights regulations and policies, USDA, its Mission Areas, agencies, staff offices, employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident. Program information may be made available in languages other than English. Persons with disabilities who require alternative means of communication to obtain program information (e.g., Braille, large print, audiotape, American Sign Language) should contact the responsible Mission Area, agency, or staff office; the USDA TARGET Center at (202) 720-2600 (voice and TTY); or the Federal Relay Service at (800) 877-8339. To file a program discrimination complaint, a complainant should complete a Form AD-3027, USDA Program Discrimination Complaint Form, which can be obtained online at https://www.usda.gov/forms/electronic-forms, from any USDA office, by calling (866) 632-9992, or by writing a letter addressed to USDA. The letter must contain the complainant's name, address, telephone number, and a written description of the alleged discriminatory action in sufficient detail to inform the Assistant Secretary for Civil Rights (ASCR) about the nature and date of an alleged civil rights violation. The completed AD-3027 form or letter must be submitted to USDA by: (1) Mail: U.S. Department of Agriculture Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 20250-9410; (2) Fax: (833) 256-1665 or (202) 690-7442; or (3) Email: [email protected] USDA is an equal opportunity provider, employer, and lender. Paul Kiecker, Administrator. [FR Doc. 2024-20238 Filed 9-6-24; 8:45 am] BILLING CODE 3410-DM-P

usgpo

2024-10-08T13:26:19.115883

FR

FR-2024-09-09/2024-17444

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73060-73061] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-17444] ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Forest Service Land Between the Lakes Advisory Board AGENCY: Forest Service, Agriculture (USDA). ACTION: Notice of meeting. ----------------------------------------------------------------------- SUMMARY: The Land Between the Lakes Advisory Board will hold a public meeting according to the details shown below. The board is authorized under the Charter for the Land Between the Lakes Advisory Board and operates in compliance with the Federal Advisory Committee Act. The purpose of the board is to advise the Secretary of Agriculture on means of promoting public participation for the land and resource management plan for the Land Between the Lakes National Recreation Area; environmental education; an annual work plan for recreation and environmental education areas in the recreation area, including the heritage program, with the non-appropriated amounts in the Land Between the Lakes Management Fund; an annual forest management and harvest plan for the recreation area; and the Land Between the Lakes Management Fund. DATES: An in-person and virtual meeting will be held on September 24, 2024, 9 a.m. to 4 p.m., Central Daylight Time. Written and Oral Comments: Anyone wishing to provide in-person oral comments must pre-register by 11:59 p.m., Central Daylight Time, on September 16, 2024. Written public comments will be accepted by 11:59 p.m., Central Daylight Time, September 17, 2024. Comments submitted after this date will be provided by the Forest Service to the board, but the board members may not have adequate time to consider those comments prior to the meeting. All board meetings are subject to cancellation. For status of the meeting prior to attendance, please contact the [[Page 73061]] person listed under FOR FURTHER INFORMATION CONTACT. ADDRESSES: This meeting will be held in-person at the Administration Building, located at 100 Van Morgan Drive, Golden Pond, Kentucky 42211. The public may also join the meeting virtually via webcast at: https://landbetweenthelakes.us/upcomingmeetinginfo. Board information and meeting details can be found online at https://landbetweenthelakes.us/advisoryboard or by contacting the person listed under FOR FURTHER INFORMATION CONTACT. Written Comments: Written comments must be sent by email to [email protected]v or via mail (postmarked) to Land Between the Lakes National Recreation Area, Christine Bombard, 100 Van Morgan Drive, Golden Pond, Kentucky 42211. The Forest Service strongly prefers comments be submitted electronically. Oral Comments: Persons or organizations wishing to make oral comments must pre-register by 11:59 p.m., Central Daylight Time, September 16, 2024, and speakers can only register for one speaking slot. Oral comments must be sent by email to [email protected]v via mail (postmarked) to Land Between the Lakes National Recreation Area, Christine Bombard, 100 Van Morgan Drive, Golden Pond, Kentucky 42211. FOR FURTHER INFORMATION CONTACT: James McCoy, Designated Federal Officer, by phone at 870-214-0934 or email at [email protected]v; or Christine Bombard, Board Coordinator, by phone at 270-540-1889 or email at [email protected]v. SUPPLEMENTARY INFORMATION: The purpose of the meeting is to: 1. Discuss old business/updates 2. Discuss environmental education 3. Discuss natural resource management The agenda will include time for individuals to make oral statements of three minutes or less. Individuals wishing to make an oral statement should make a request in writing at least 7 days prior to the meeting date to be scheduled on the agenda. Written comments may be submitted to the Forest Service up to 7 days after the meeting date listed under DATES. Please contact the person listed under FOR FURTHER INFORMATION CONTACT, by or before the deadline, for all questions related to the meeting. All comments, including names and addresses when provided, are placed in the record and are available for public inspection and copying. The public may inspect comments received upon request. Meeting Accommodations: The meeting location is compliant with the Americans with Disabilities Act, and the USDA provides reasonable accommodation to individuals with disabilities where appropriate. If you are a person requiring reasonable accommodation, please make requests in advance for sign language interpretation, assistive listening devices, or other reasonable accommodation to the person listed under the FOR FURTHER INFORMATION CONTACT section or contact USDA's TARGET Center at 202-720-2600 (voice and TTY) or USDA through the Federal Relay Service at 800-877-8339. Additionally, program information may be made available in languages other than English. USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident. Equal opportunity practices in accordance with USDA's policies will be followed in all appointments to the board. To ensure that the recommendations of the Committee have taken into account the needs of the diverse groups served by the Department, membership shall include, to the extent practicable, individuals with demonstrated ability to represent the many communities, identities, races, ethnicities, backgrounds, abilities, cultures, and beliefs of the American people, including underserved communities. USDA is an equal opportunity provider, employer, and lender. Dated: August 1, 2024. Cikena Reid, USDA Committee Management Officer. [FR Doc. 2024-17444 Filed 9-6-24; 8:45 am] BILLING CODE 3411-15-P

usgpo

2024-10-08T13:26:19.299228

FR

FR-2024-09-09/2024-20263

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73061-73062] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20263] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE Bureau of Economic Analysis Agency Information Collection Activities; Submission to the Office of Management and Budget (OMB) for Review and Approval; Comment Request; Services Surveys: BE-45, Quarterly Survey of Insurance Transactions by U.S. Insurance Companies With Foreign Persons The Department of Commerce will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance, in accordance with the Paperwork Reduction Act of 1995 (PRA) on or after the date of publication of this notice. We invite the general public and other Federal agencies to comment on proposed and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. Public comments were previously requested via the Federal Register on June 6, 2024, during a 60-day comment period. This notice allows for an additional 30 days for public comments. Agency: Bureau of Economic Analysis, Department of Commerce. Title: Quarterly Survey of Insurance Transactions by U.S. Insurance Companies with Foreign Persons. OMB Control Number: 0608-0066. Form Number(s): BE-45. Type of Request: Regular submission. Estimated Number of Respondents: 2,200 annually (550 filed each quarter; 515 reporting mandatory data, and 35 that would file exemption claims or voluntary responses). Estimated Time Per Response: 9 hours is the average for the 515 respondents filing mandatory data and 1 hour for those filing an exemption claim or other response. Hours may vary considerably among respondents because of differences in company size and complexity. Estimated Total Annual Burden Hours: 18,680. Needs and Uses: The data are needed to monitor U.S. trade in insurance services, to analyze the impact of these cross-border services on the U.S. and foreign economies, to compile and improve the U.S. economic accounts, to support U.S. commercial policy on trade in services, to conduct trade promotion, and to improve the ability of U.S. businesses to identify and evaluate market opportunities. The data are used in estimating the trade in insurance services component of the U.S. international transactions accounts [[Page 73062]] (ITAs) and national income and product accounts (NIPAs). Affected Public: Business or other for-profit organizations. Frequency: Quarterly. Respondent's Obligation: Mandatory. Legal Authority: International Investment and Trade in Services Survey Act (Pub. L. 94-472, 22 U.S.C. 3101-3108, as amended). This information collection request may be viewed at www.reginfo.gov. Follow the instructions to view the Department of Commerce collections currently under review by OMB. Written comments and recommendations for the proposed information collection should be submitted within 30 days of the publication of this notice on the following website www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting ``Currently under 30-day Review--Open for Public Comments'' or by using the search function and entering either the title of the collection or the OMB Control Number 0608-0066. Sheleen Dumas, Departmental PRA Clearance Officer, Office of the Under Secretary for Economic Affairs, Commerce Department. [FR Doc. 2024-20263 Filed 9-6-24; 8:45 am] BILLING CODE 3510-06-P

usgpo

2024-10-08T13:26:19.355965

FR

FR-2024-09-09/2024-20262

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Page 73062] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20262] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE Bureau of Economic Analysis Agency Information Collection Activities; Submission to the Office of Management and Budget (OMB) for Review and Approval; Comment Request; Services Surveys: BE-125, Quarterly Survey of Transactions in Selected Services and Intellectual Property With Foreign Persons The Department of Commerce will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance, in accordance with the Paperwork Reduction Act of 1995 (PRA) on or after the date of publication of this notice. We invite the general public and other Federal agencies to comment on proposed and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. Public comments were previously requested via the Federal Register on June 6, 2024, during a 60-day comment period. This notice allows for an additional 30 days for public comments. Agency: Bureau of Economic Analysis, Department of Commerce. Title: Quarterly Survey of Transactions in Selected Services and Intellectual Property with Foreign Persons. OMB Control Number: 0608-0067. Form Number(s): BE-125. Type of Request: Regular submission. Estimated Number of Respondents: 11,200 annually (2,800 filed each quarter; 2,200 reporting mandatory data by country and affiliation, and 600 that would file exemption claims or voluntary responses). Estimated Time per Response: 21 hours is the average for the 2,200 respondents filing data by country and affiliation and 1 hour for those filing an exemption claim or voluntary response. Hours may vary considerably among respondents because of differences in company size and complexity. Estimated Total Annual Burden Hours: 187,200. Needs and Uses: The data are needed to monitor U.S. trade in services and intellectual property, to analyze the impact of these cross-border services on the U.S. and foreign economies, to compile and improve the U.S. economic accounts, to support U.S. commercial policy on trade in services, to conduct trade promotion, and to improve the ability of U.S. businesses to identify and evaluate market opportunities. The data are used in estimating the trade in services and intellectual property component of the U.S. international transactions accounts (ITAs) and national income and product accounts (NIPAs). Affected Public: Business or other for-profit organizations. Frequency: Quarterly. Respondent's Obligation: Mandatory. Legal Authority: International Investment and Trade in Services Survey Act (Pub. L. 94-472, 22 U.S.C. 3101-3108, as amended). This information collection request may be viewed at www.reginfo.gov. Follow the instructions to view the Department of Commerce collections currently under review by OMB. Written comments and recommendations for the proposed information collection should be submitted within 30 days of the publication of this notice on the following website www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting ``Currently under 30-day Review--Open for Public Comments'' or by using the search function and entering either the title of the collection or the OMB Control Number 0608-0067. Sheleen Dumas, Department PRA Clearance Officer, Office of the Under Secretary of Economic Affairs, Commerce Department. [FR Doc. 2024-20262 Filed 9-6-24; 8:45 am] BILLING CODE 3510-06-P

usgpo

2024-10-08T13:26:19.399028

FR

FR-2024-09-09/2024-20261

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73062-73063] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20261] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE Bureau of Economic Analysis Agency Information Collection Activities; Submission to the Office of Management and Budget (OMB) for Review and Approval; Comment Request; Services Surveys: BE-180, Benchmark Survey of Financial Services Transactions Between U.S. Financial Services Providers and Foreign Persons The Department of Commerce will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance, in accordance with the Paperwork Reduction Act of 1995 (PRA) on or after the date of publication of this notice. We invite the general public and other Federal agencies to comment on proposed and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. Public comments were previously requested via the Federal Register on April 29, 2024, during a 60-day comment period. This notice allows for an additional 30 days for public comments. Agency: Bureau of Economic Analysis, Department of Commerce. Title: Benchmark Survey of Financial Services Transactions between U.S. Financial Services Providers and Foreign Persons. OMB Control Number: 0608-0062. Form Number(s): BE-180. Type of Request: Regular submission. Estimated Number of Respondents: 6,000 annually (4,500 reporting mandatory data and 1,500 that would file exemption claims or voluntary responses). Estimated Time per Response: 11 hours is the average for the 2,000 respondents filing data by country and affiliation; 2 hours for the 2,500 respondents filing data by transaction type only, and 1 hour for those filing an exemption claim or other response. Hours may vary considerably among respondents because of differences in company size and complexity. [[Page 73063]] Estimated Total Annual Burden Hours: 28,500. Needs and Uses: The data are needed to monitor U.S. trade in financial services, to analyze the impact of these cross-border services on the U.S. and foreign economies, to compile and improve the U.S. economic accounts, to support U.S. commercial policy on trade in services, to conduct trade promotion, and to improve the ability of U.S. businesses to identify and evaluate market opportunities. The data are used in estimating the trade in financial services component of the U.S. international transactions accounts (ITAs) and national income and product accounts (NIPAs). Affected Public: Business or other for-profit organizations. Frequency: Every fifth year, for reporting years ending in ``4'' and ``9''. Respondent's Obligation: Mandatory. Legal Authority: International Investment and Trade in Services Survey Act (Pub. L. 94-472, 22 U.S.C. 3101-3108, as amended) and Section 5408 of the Omnibus Trade and Competitiveness Act of 1988. This information collection request may be viewed at www.reginfo.gov. Follow the instructions to view the Department of Commerce collections currently under review by OMB. Written comments and recommendations for the proposed information collection should be submitted within 30 days of the publication of this notice on the following website www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting ``Currently under 30-day Review--Open for Public Comments'' or by using the search function and entering either the title of the collection or the OMB Control Number 0608-0062. Sheleen Dumas, Departmental PRA Clearance Officer, Office of the Under Secretary for Economic Affairs, Commerce Department. [FR Doc. 2024-20261 Filed 9-6-24; 8:45 am] BILLING CODE 3510-06-P

usgpo

2024-10-08T13:26:19.467432

FR

FR-2024-09-09/2024-20204

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73063-73064] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20204] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [C-570-127] Certain Non-Refillable Steel Cylinders From the People's Republic of China: Rescission of Countervailing Duty Administrative Review; 2023 AGENCY: Enforcement and Compliance, International Trade Administration, Department of Commerce. SUMMARY: The U.S. Department of Commerce (Commerce) is rescinding the administrative review of the countervailing duty order on certain non- refillable steel cylinders (non-refillable cylinders) from the People's Republic China (China), covering the period of review (POR) January 1, 2023, though December 31, 2023, because, as explained below, there are no reviewable suspended entries for the company subject to this review. DATES: Applicable September 9, 2024. FOR FURTHER INFORMATION CONTACT: Peter Zukowski, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-0189. SUPPLEMENTARY INFORMATION: Background On May 2, 2024, Commerce published in the Federal Register a notice of opportunity to request an administrative review of the countervailing duty order on non-refillable cylinders from China, covering the period January 1, 2023, though December 31, 2023.\1\ On May 28, 2024, Sanjian Kai Yuan Co., Ltd. (SKY) timely requested that Commerce conduct an administrative review.\2\ We received no other requests for review. --------------------------------------------------------------------------- \1\ See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review and Join Annual Inquiry Service List, 89 FR 35778, 35780 (May 2, 2024). \2\ See SKY's Letter, ``Request for Administrative Review,'' dated May 28, 2024. --------------------------------------------------------------------------- On July 5, 2024, Commerce published in the Federal Register a notice of initiation of an administrative review with respect to SKY, in accordance with section 751(a) of the Tariff Act of 1930, as amended (the Act).\3\ On July 10, 2024, Commerce released a memorandum indicating that there were no entries of subject merchandise during the POR based on a U.S. Customs and Border Protection (CBP) entry data query.\4\ Commerce provided parties an opportunity to submit comments on the data query results.\5\ No party submitted comments to Commerce. --------------------------------------------------------------------------- \3\ See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 89 FR 55567, 55578 (July 5, 2024). \4\ See Memorandum, ``Release of U.S. Customs and Border Protection Query,'' dated July 10, 2024. \5\ Id. --------------------------------------------------------------------------- On August 8, 2024, Commerce issued a notice of intent to rescind the 2023 administrative review and provided parties with an opportunity to comment.\6\ No party submitted comments to Commerce. --------------------------------------------------------------------------- \6\ See Memorandum, ``Notice of Intent to Rescind the 2023 Administrative Review,'' dated August 8, 2024. --------------------------------------------------------------------------- Rescission of Review Pursuant to 19 CFR 351.213(d)(3), it is Commerce's practice to rescind an administrative review of a countervailing duty order where it concludes that there were no reviewable entries of subject merchandise during the POR for an exporter or producer.\7\ Normally, upon completion of an administrative review, the suspended entries are liquidated at the countervailing duty assessment rate for the review period.\8\ Therefore, for an administrative review to be conducted, there must be a reviewable, suspended entry that Commerce can instruct CBP to liquidate at the calculated countervailing duty assessment rate for the review period.\9\ As noted above, there were no entries of subject merchandise from SKY during the POR. Accordingly, in the absence of reviewable, suspended entries of subject merchandise during the POR, we are rescinding this administrative review, in its entirety, in accordance with 19 CFR 351.213(d)(3). --------------------------------------------------------------------------- \7\ See, e.g., Certain Softwood Lumber Products from Canada: Final Results and Final Rescission, in Part, of the Countervailing Duty Administrative Review, 2020, 87 FR 48455 (August 9, 2022); see also Certain Non-Refillable Steel Cylinders from the People's Republic of China: Rescission of Countervailing Duty Administrative Review; 2020-2021, 87 FR 64008 (October 21, 2022). \8\ See 19 CFR 351.212(b)(2). \9\ See 19 CFR 351.213(d)(3). --------------------------------------------------------------------------- Cash Deposit Requirements As Commerce has proceeded to a final rescission of this administrative review, no cash deposit rates will change. Accordingly, the current cash deposit requirements shall remain in effect until further notice. Assessment Rates Commerce will instruct CBP to assess countervailing duties on all appropriate entries. Countervailing duties shall be assessed at rates equal to the cash deposit of estimated countervailing duties required at the time of entry, or withdrawal from warehouse, for consumption, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue assessment instructions to CBP no earlier than 35 days after the date of publication of this rescission notice in the Federal Register. Administrative Protective Order This notice serves as a final reminder to parties subject to an administrative [[Page 73064]] protective order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3), which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return or destruction of the APO materials, or conversion to judicial protective order is hereby requested. Failure to comply with regulations and terms of an APO is a violation, which is subject to sanction. Notification to Interested Parties This notice is issued and published in accordance with sections 751(a)(1) and 777(i)(l) of the Act, and 19 CFR 351.213(d)(4). Dated: September 3, 2024. Scot Fullerton, Acting Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations. [FR Doc. 2024-20204 Filed 9-6-24; 8:45 am] BILLING CODE 3510-DS-P

usgpo

2024-10-08T13:26:19.791187

FR

FR-2024-09-09/2024-20205

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73064-73065] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20205] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [C-570-911] Circular Welded Carbon Quality Steel Pipe From the People's Republic of China: Final Results of the Expedited Third Sunset Review of the Countervailing Duty Order AGENCY: Enforcement and Compliance, International Trade Administration, Department of Commerce. SUMMARY: The U.S. Department of Commerce (Commerce) finds that revocation of the countervailing duty (CVD) order on circular welded carbon quality steel pipe from the People's Republic of China (China) would be likely to lead to the continuation or recurrence of countervailable subsidies at the levels indicated in the ``Final Results of Sunset Review'' section of this notice. DATES: Applicable September 9, 2024. FOR FURTHER INFORMATION CONTACT: Christopher Hargett AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 481-4161. SUPPLEMENTARY INFORMATION: Background On July 22, 2008, Commerce published in the Federal Register the CVD order on circular welded carbon quality steel pipe from China.\1\ On August 21, 2012, Commerce implemented its revised countervailable subsidy rates pursuant to the findings in the section 129 proceeding of the Uruguay Round Agreements Act.\2\ On May 1, 2024, Commerce published the notice of initiation of the third sunset review of the Order, pursuant to section 751(c) of the Tariff Act of 1930, as amended, (the Act).\3\ --------------------------------------------------------------------------- \1\ See Circular Welded Carbon Quality Steel Pipe from the People's Republic of China: Notice of Amended Final Affirmative Countervailing Duty Determination and Notice of Countervailing Duty Order, 73 FR 42545 (July 22, 2008) (Order). \2\ See Implementation of Determinations Under Section 129 of the Uruguay Round Agreements Act: Certain New Pneumatic Off-the-Road Tires; Circular Welded Carbon Quality Steel Pipe; Laminated Woven Sacks; and Light-Walled Rectangular Pipe and Tube from the People's Republic of China, 77 FR 52683 (August 30, 2012) (Section 129 Implementation). \3\ See Initiation of Five-Year (Sunset) Reviews, 89 FR 35073 (May 1, 2024). --------------------------------------------------------------------------- On May 16, 2024, within the deadline specified in 19 CFR 351.218(d)(1)(i) and section 771(9)(C) of the Act, Commerce received timely notices of intent to participate from Bull Moose Tube Company, Maruichi American Corporation, and Zekelman Industries,\4\ and from Nucor Tubular Products Inc.\5\ (collectively, the domestic interested parties). Each of the companies claimed to be a domestic interested party as producers of a domestic like product (circular welded carbon quality steel pipe) in the United States. --------------------------------------------------------------------------- \4\ See Bull Moose Tube Company, Maruichi American Corporation, and Zekelman Industries' Letter, ``Notice of Intent to Participate,'' dated May 16, 2024. \5\ See Nucor Tubular Products Inc.'s Letter, ``Notice of Intent to Participate in Sunset Review,'' dated May 16, 2024. --------------------------------------------------------------------------- On May 31, 2024, the domestic interested parties submitted a timely substantive response within the 30-day deadline specified in 19 CFR 351.218(d)(3)(i).\6\ Commerce did not receive a substantive response from the Government of China, a respondent, or any other interested party to this proceeding. As a result, pursuant to section 751(c)(3)(B) of the Act and 19 CFR 351.218(e)(1)(ii)(C)(2), Commerce conducted an expedited (120-day) sunset review of the Order. On July 22, 2024, Commerce tolled certain deadlines in this administrative proceeding by seven days.\7\ The deadline for the final results is now September 5, 2024. --------------------------------------------------------------------------- \6\ See Domestic Interested Parties' Letter, ``Substantive Response to Notice of Initiation,'' dated May 31, 2024. \7\ See Memorandum, ``Tolling of Deadlines for Antidumping and Countervailing Duty Proceedings,'' dated July 22, 2024. --------------------------------------------------------------------------- On June 21, 2024, Commerce notified the U.S. International Trade Commission that it did not receive an adequate substantive response from respondent interested parties.\8\ --------------------------------------------------------------------------- \8\ See Commerce's Letter, ``Sunset Reviews Initiated on May 1, 2024,'' dated May 1, 2024. --------------------------------------------------------------------------- Scope of the Order The scope of this Order covers certain welded carbon quality steel pipes and tubes, of circular cross-section. For a full description of the scope of this Order, see the Issues and Decision Memorandum.\9\ --------------------------------------------------------------------------- \9\ See Memorandum, ``Decision Memorandum for the Final Results of the Expedited Third Sunset Review of the Countervailing Duty Order on Circular Welded Carbon Quality Steel Pipe from the People's Republic of China,'' dated concurrently with, and hereby adopted by, this notice (Issues and Decision Memorandum). --------------------------------------------------------------------------- Analysis of Comments Received All issues raised in this sunset review are addressed in the Issues and Decision Memorandum.\10\ A list of topics discussed in the Issues and Decision Memorandum is included as an appendix to this notice. The Issues and Decision Memorandum is a public document and is on file electronically via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at https://access.trade.gov. A complete version of the Issues and Decision Memorandum can be accessed directly at https://access.trade.gov/public/FRNotices/ListLayout.aspx. --------------------------------------------------------------------------- \10\ Id. --------------------------------------------------------------------------- Final Results of Sunset Review Pursuant to sections 751(c)(1) and 752(b) of the Act, Commerce determines that revocation of the Order would likely lead to the continuation or recurrence of countervailable subsidies at the rates listed below: ------------------------------------------------------------------------ Subsidy rate Exporter/manufacturer (percent ad valorem) ------------------------------------------------------------------------ Weifang East Steel Pipe Co., Ltd. (East Pipe)........... 29.83 Zhejiang Kingland Pipeline and Technologies Co., Ltd.; 48.18 Kingland Group Co., Ltd; Beijing Kingland Century Technologies Co.; Zhejiang Kingland Pipeline Industry Co., Ltd.; and Shanxi Kingland Pipeline Co., Ltd. (collectively, Kingland Companies)..................... [[Page 73065]] Tianjin Shuangjie Steel Pipe Co., Ltd.; Tianjin 620.08 Shuangjie Steel Pipe Group Co., Ltd.; Tianjin Wa Song Imp. & Exp. Co., Ltd.; and Tianjin Shuanglian Galvanizing Products Co., Ltd. (collectively, Shuangjie)............................................. All Others.............................................. 39.01 ------------------------------------------------------------------------ Administrative Protective Order This notice serves as the only reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a). Timely notification of the return or destruction of APO materials or conversion to judicial protective orders is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction. Notification to Interested Parties Commerce is issuing and publishing these final results and this notice in accordance with sections 751(c), 752(b), and 777(i)(1) of the Act and 19 CFR 351.218. Dated: September 3, 2024. Ryan Majerus, Deputy Assistant Secretary for Policy and Negotiations, performing the non-exclusive functions and duties of the Assistant Secretary for Enforcement and Compliance. Appendix--List of Topics Discussed in the Issues and Decision Memorandum I. Summary II. Background III. Scope of the Order IV. History of the Order V. Legal Framework VI. Discussion of the Issues 1. Likelihood of Continuation or Recurrence of Countervailable Subsidies 2. Net Countervailable Subsidy Rates Likely to Prevail 3. Nature of the Subsidies VII. Final Results of Expedited Sunset Review VIII. Recommendation [FR Doc. 2024-20205 Filed 9-6-24; 8:45 am] BILLING CODE 3510-DS-P

usgpo

2024-10-08T13:26:19.959494

FR

FR-2024-09-09/2024-20267

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73065-73066] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20267] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [C-533-900] Granular Polytetrafluoroethylene Resin From India: Final Results of the Countervailing Duty Administrative Review; 2021-2022 AGENCY: Enforcement and Compliance, International Trade Administration, Department of Commerce. SUMMARY: The U.S. Department of Commerce (Commerce) determines that countervailable subsidies were provided to Gujarat Fluorochemicals Limited (GFCL), a producer and exporter of granular polytetrafluoroethylene (PTFE) resin from India. The period of review (POR) is July 6, 2021, through December 31, 2022. DATES: Applicable September 9, 2024. FOR FURTHER INFORMATION CONTACT: Shane Subler or Bob Palmer, AD/CVD Operations, Office VIII, Enforcement and Compliance, International Trade Administration, Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-6241 or (202) 482-9068, respectively. SUPPLEMENTARY INFORMATION: Background On April 8, 2024, Commerce published the Preliminary Results.\1\ For a detailed description of the events that occurred subsequent to the Preliminary Results, see the Issues and Decision Memorandum.\2\ On July 17, 2024, we extended the deadline for these final results to August 27, 2024.\3\ On July 22, 2024, Commerce tolled certain deadlines in this administrative proceeding by seven days.\4\ The deadline for these final results is now September 3, 2024. --------------------------------------------------------------------------- \1\ See Granular Polytetrafluoroethylene Resin from India: Preliminary Results and Partial Recission of Countervailing Duty Administrative Review; 2021-2022, 89 FR 24428 (April 8, 2024) (Preliminary Results), and accompanying Preliminary Decision Memorandum. \2\ See Memorandum, ``Issues and Decision Memorandum for the Final Results of the Administrative Review of the Countervailing Duty Order on Granular Polytetrafluoroethylene Resin from India; 2021-2022,'' dated concurrently with, and hereby adopted by, this notice (Issues and Decision Memorandum). \3\ See Memorandum, ``Extension of Deadline for Final Results of Countervailing Duty Administrative Review,'' dated July 17, 2024; see also 19 CFR 351.213(h)(2). \4\ See Memorandum, ``Tolling of Deadlines for Antidumping and Countervailing Duty Proceedings,'' dated July 22, 2024. --------------------------------------------------------------------------- Scope of the Order \5\ --------------------------------------------------------------------------- \5\ See Granular Polytetrafluoroethylene Resin from India and the Russian Federation: Countervailing Duty Orders, 87 FR 14509 (March 15, 2022) (Order), as amended in Granular Polytetrafluoroethylene Resin from India: Notice of Court Decision Not in Harmony With the Final Determination of Countervailing Duty Investigation; Notice of Amended Final Determination and Amended Countervailing Duty Order, 88 FR 74153 (October 30, 2023) (Amended Final Determination and Order). --------------------------------------------------------------------------- The product covered by this Order is granular PTFE resin. A full description of the scope of the Order is contained in the Issues and Decision Memorandum. Analysis of Comments Received All issues raised by interested parties in briefs are addressed in the Issues and Decision Memorandum. A list of the issues addressed in the Issues and Decision Memorandum is provided in an appendix to this notice. The Issues and Decision Memorandum is a public document and is on file electronically via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at https://access.trade.gov. In addition, a complete version of the Issues and Decision Memorandum can be accessed directly at https://access.trade.gov/public/FRNoticesListLayout.aspx. Changes Since the Preliminary Results Based on our analysis of comments from interested parties and the evidence on the record, we have not made any changes to the Preliminary Results. The reasons for this conclusion are explained in the Issues and Decision Memorandum. Accordingly, we made no changes to the countervailable subsidy rate calculations from the Preliminary Results for mandatory respondent GFCL.\6\ --------------------------------------------------------------------------- \6\ See Preliminary Results, 89 FR at 24428. --------------------------------------------------------------------------- Methodology Commerce conducted this review in accordance with section 751(a)(1)(A) of the Tariff Act of 1930, as amended (the Act). For each of the subsidy programs found to be countervailable, we find that there is a subsidy, i.e., a government-provided financial contribution that gives rise to a benefit to the recipient, and that the subsidy is specific.\7\ The Issues and Decision Memorandum contains a full description of the methodology underlying Commerce's conclusions, [[Page 73066]] including any determination that relied upon the use of adverse facts available pursuant to sections 776(a) and (b) of the Act. --------------------------------------------------------------------------- \7\ See sections 771(5)(B) and (D) of the Act regarding financial contribution, section 771(5)(E) of the Act regarding benefit, and section 771(5A) of the Act regarding specificity. --------------------------------------------------------------------------- Final Results of Review As a result of this review, we determine the following net countervailable subsidy rates for the POR of July 6, 2021, through December 31, 2022: --------------------------------------------------------------------------- \8\ This subsidy rate applies to the period July 6, 2021, to December 31, 2021. \9\ This subsidy rate applies to the period January 1, 2022, to December 31, 2022. \10\ As stated in the Preliminary Results, Commerce found Inox Leasing and Finance Limited to be cross-owned with GFCL. See Preliminary Results, 89 FR at 24428. ------------------------------------------------------------------------ Subsidy rate Subsidy rate (percent ad (percent ad Company valorem) 2021 valorem) 2022 \8\ \9\ ------------------------------------------------------------------------ Gujarat Fluorochemicals Limited \10\.... 4.89 4.70 ------------------------------------------------------------------------ Assessment Rates Pursuant to section 751(a)(2)(C) of the Act and 19 CFR 351.212(b), Commerce has determined, and U.S Customs and Border Protection (CBP) shall assess, countervailing duties on all appropriate entries of subject merchandise in accordance with the final results of this review, for the above-listed company at the applicable ad valorem assessment rates listed for the corresponding time periods (i.e., July 6, 2021, to December 31, 2021, and January 1, 2022, to December 31, 2022). For entries made during the gap period (i.e., on or after November 3, 2021, through March 10, 2022), we will continue to instruct CBP to liquidate the entries without regard to countervailing duties pursuant to section 703(d) of the Act. Commerce intends to issue assessment instructions to CBP no earlier than 35 days after the date of publication of the final results of this review in the Federal Register. If a timely summons is filed at the U.S. Court of International Trade, the assessment instructions will direct CBP not to liquidate relevant entries until the time for parties to file a request for a statutory injunction has expired (i.e., within 90 days of publication). Cash Deposit Requirements In accordance with section 751(a)(1) of the Act, Commerce intends, upon publication of the final results, to instruct CBP to collect cash deposits of estimated countervailing duties in the amount shown for GFCL (and its cross-owned affiliate) listed above for 2022, the second year covered by the period of review, on shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this administrative review. For all non-reviewed firms, we will instruct CBP to continue to collect cash deposits at the most recent company- specific, or all others rate (i.e., 5.39 percent),\11\ applicable to the company. These cash deposit requirements, when imposed, shall remain in effect until further notice. --------------------------------------------------------------------------- \11\ See Amended Final Determination and Order, 88 FR at 74154. --------------------------------------------------------------------------- Administrative Protective Order (APO) This notice also serves as a reminder to parties subject to an APO of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3), which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction. Notification to Interested Parties We are issuing and publishing these final results of administrative review and notice in accordance with sections 751(a)(1) and 777(i) of the Act and 19 CFR 351.221(b)(5) and 19 CFR 351.213(h)(2). Dated: September 3, 2024. Ryan Majerus, Deputy Assistant Secretary for Policy and Negotiations, performing the non-exclusive functions and duties of the Assistant Secretary for Enforcement and Compliance. Appendix List of Topics Discussed in the Issues and Decision Memorandum I. Summary II. Background III. Scope of the Order IV. Use of Facts Otherwise Available and Application of Adverse Inferences V. Subsidies Valuation Information VI. Interest Rate Benchmarks and Benchmarks for Measuring the Adequacy of Remuneration VII. Analysis of Programs VIII. Discussion of the Issues Comment 1: Whether the Remission of Duties and Taxes on Export Products (RODTEP) Program Provides a Countervailable Benefit Comment 2: Whether GFCL Received a Benefit Under the RODTEP Program Prior to September 6, 2021 Comment 3: Whether Commerce Should Rely on the Petitioner's Proposed Benchmark for the Gujarat Industrial Development Corporation's (GIDC) Provision of Land for Less Than Adequate Remuneration (LTAR) IX. Recommendation [FR Doc. 2024-20267 Filed 9-6-24; 8:45 am] BILLING CODE 3510-DS-P

usgpo

2024-10-08T13:26:20.021295

FR

FR-2024-09-09/2024-20217

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73066-73067] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20217] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Institute of Standards and Technology Agency Information Collection Activities; Submission to the Office of Management and Budget (OMB) for Review and Approval; Comment Request; National Institute for Standards and Technology NIST Center for Neutron Research (NCNR) Information Management System (IMS) and Summer School Application AGENCY: National Institute of Standards and Technology (NIST), Commerce. ACTION: Notice of information collection, request for comment. ----------------------------------------------------------------------- SUMMARY: The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB. DATES: To ensure consideration, comments regarding this proposed information collection must be received on or before November 8, 2024. ADDRESSES: Interested persons are invited to submit written comments by [[Page 73067]] mail to Maureen O'Reilly, Management Analyst, NIST, at [email protected]. Please reference OMB Control Number 0693-0081 in the subject line of your comments. Do not submit Confidential Business Information or otherwise sensitive or protected information. FOR FURTHER INFORMATION CONTACT: Requests for additional information or specific questions related to collection activities should be directed to Siddharth Khosla, IT Specialist, NIST, 100 Bureau Drive, Stop 6100, Gaithersburg, MD 20899, 301-975-4640, [email protected]. SUPPLEMENTARY INFORMATION: I. Abstract The NIST Center for Neutron Research (NCNR) Information Management System (IMS) is a public facing, web-based application to collect, manage and report operational data related to NCNR's role as a unique national user facility which was chartered to serve the nation's scientific community by providing unique experimental apparatus for scientific studies using neutron scattering. In order to fulfill that mission, NCNR established a complex business process to fairly distribute available scientific resources to prospective external users, outlined by the following steps: Registration of NCNR users Collection of scientific experiment proposals Regularly scheduled peer review of said proposals Merit-based award of available experimental resources Experiment date scheduling for selected projects (instrument scheduling) Collection and management of data required by the NCNR site access protocol Managing the Health Physics training of arriving scientists Coordination of administrative data Collection of data in support of related activities such as NCNR Summer School for facility users Management of the research results such as collected data, and subsequent publications Numerous reporting functions used to evaluate and manage the NCNR activities. II. Method of Collection Information will be collected electronically through the internet. III. Data OMB Control Number: 0693-0081. Form Number(s): None. Type of Review: Regular submission, extension of a current information collection. Affected Public: Individuals or households. Estimated Number of Respondents: 2,000. Estimated Time Per Response: 1 hour. Estimated Total Annual Burden Hours: 2,000 hours. Estimated Total Annual Cost to Public: $0. Respondent's Obligation: Voluntary. IV. Request for Comments We are soliciting public comments to permit the Department/Bureau to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment--including your personal identifying information--may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. Sheleen Dumas, Departmental PRA Clearance Officer, Office of the Under Secretary for Economic Affairs, Commerce Department. [FR Doc. 2024-20217 Filed 9-6-24; 8:45 am] BILLING CODE 3510-13-P

usgpo

2024-10-08T13:26:20.130198

FR

FR-2024-09-09/2024-20266

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73067-73068] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20266] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Institute of Standards and Technology Agency Information Collection Activities; Submission to the Office of Management and Budget (OMB) for Review and Approval; Comment Request; Manufacturing Extension Partnership Management Information Reporting AGENCY: National Institute of Standards and Technology (NIST), Commerce. ACTION: Notice of information collection, request for comment. ----------------------------------------------------------------------- SUMMARY: The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB. DATES: To ensure consideration, comments regarding this proposed information collection must be received on or before November 8, 2024. ADDRESSES: Interested persons are invited to submit written comments by mail to Maureen O'Reilly, Management Analyst, NIST, by email to [email protected]. Please reference OMB Control Number 0693-0032 in the subject line of your comments. Do not submit Confidential Business Information or otherwise sensitive or protected information. FOR FURTHER INFORMATION CONTACT: Requests for additional information or specific questions related to collection activities should be directed to Melissa Davis, NIST, Manufacturing Extension Partnership, 100 Bureau Drive, Gaithersburg, MD 20899, MS4800, 240-277-0269, [email protected]. SUPPLEMENTARY INFORMATION: I. Abstract Manufacturing Extension Partnership (assist a national network of locally based manufacturing extension centers that assists small- and medium-sized manufacturers to improve their productivity, improve profitability, and enhance their economic competitiveness. The information collected will provide the MEP with information regarding MEP Center performance regarding the delivery of technology, and business solutions to U.S.-based manufacturers. The collected [[Page 73068]] information will assist in determining the performance of the MEP Centers at both local and national levels, provide information critical to monitoring and reporting on MEP programmatic performance and assist management in policy decisions. Responses to the collection of information are mandatory per the regulations governing the operation of the MEP Program (15 CFR parts 290, 291, 292, and H.R. 1274--section 2). The information collected will include center inputs and activities including services delivered, clients served, center staff, expenses and revenues that are reported annually, semi-annually, and quarterly, partners, strategic plans, operation plans, and client success stories. No confidentiality for information submitted is promised or provided. In order to reflect new initiatives and new data needs, NIST MEP has identified a need to revise its existing reporting processes by modifying existing reporting elements that will enable NIST MEP to better monitor and assess the extent to which the Centers are meeting program goals and milestones. II. Method of Collection The information will be collected from the MEP Centers through the MEP Enterprise Information System (MEIS), https://meis.nist.gov. III. Data OMB Control Number: 0693-0032. Form Number(s): None. Type of Review: Regular submission, extension of a current information collection. Affected Public: Business or other for-profit organizations. Estimated Number of Respondents: 51. Estimated Time Per Response: Recipients of NIST MEP Base awards should anticipate an additional burden based on the requirements of the cooperative agreement as follows, 22 Hours for Quarterly Review, 6 Hours for Semi-Annual Review, 30 hours for the Annual Review; 80 hours for Panel Review. Estimated Total Annual Burden Hours: 6,120 hours for quarterly, semi-annual, and annual Review; and 1,360 hours for Panel Review. Estimated Total Annual Cost to Public: $0. Respondent's Obligation: Mandatory. IV. Request for Comments We are soliciting public comments to permit the Department/Bureau to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment--including your personal identifying information--may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. Sheleen Dumas, Department PRA Clearance Officer, Office of the Under Secretary for Economic Affairs, Commerce Department. [FR Doc. 2024-20266 Filed 9-6-24; 8:45 am] BILLING CODE 3510-13-P

usgpo

2024-10-08T13:26:20.177263

FR

FR-2024-09-09/2024-20156

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73068-73069] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20156] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [RTID 0648-XE257] Magnuson-Stevens Act Provisions; Atlantic Coastal Fisheries Cooperative Management Act Provisions; General Provisions for Domestic Fisheries; Application for Exempted Fishing Permits AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notice; request for comments. ----------------------------------------------------------------------- SUMMARY: The Assistant Regional Administrator for Sustainable Fisheries, Greater Atlantic Region, NMFS, has made a preliminary determination that an Exempted Fishing Permit (EFP) application contains all of the required information and warrants further consideration. The EFP would allow federally permitted fishing vessels to fish outside fishery regulations in support of exempted fishing activities proposed by the Maine Department of Marine Resources (ME DMR). Regulations under the Magnuson-Stevens Fishery Conservation and Management Act and the Atlantic Coastal Fisheries Cooperative Management Act require publication of this notification to provide interested parties the opportunity to comment on applications for proposed EFPs. DATES: Comments must be received on or before September 24, 2024. ADDRESSES: You may submit written comments by email to [email protected]. Include in the subject line ``ME DMR Ventless Trap EFP.'' FOR FURTHER INFORMATION CONTACT: Christine Ford, Fishery Management Specialist, [email protected], (978) 281-9185. SUPPLEMENTARY INFORMATION: ME DMR submitted a complete application for an EFP to conduct commercial fishing activities that the regulations would otherwise restrict. The EFP would provide distribution, abundance, and biological data on juvenile lobsters and Jonah crabs from times and areas with low coverage from traditional surveys. This EFP would exempt the participating vessels from the following Federal regulations: Table 1--Requested Exemptions ------------------------------------------------------------------------ CFR citation Regulation Need for exemption ------------------------------------------------------------------------ 50 CFR 697.21(c).............. Gear To allow for closed specification escape vents and requirements. smaller trap mesh and entrance heads. Sec. 697.19................. Trap limit To allow for 3 requirements. additional traps per fishing vessel, for a total of up to 60 additional traps. [[Page 73069]] Sec. 697.19(j).............. Trap tag To allow for the use requirements. of untagged traps (though each modified trap will have the participating fisherman's identification attached). Sec. Sec. 697.20(a), Possession To allow for onboard 697.20(d), 697.20(g), and restrictions. biological sampling 697.20(h)(1)-(2). of undersized, v- notched, and egg- bearing lobsters and undersized and egg- bearing Jonah crabs. ------------------------------------------------------------------------ Table 2--Project Summary ------------------------------------------------------------------------ ------------------------------------------------------------------------ Project title................ Maine lobster fishery dependent offshore ventless and commercial trap research program. Project start................ 11/04/2024. Project end.................. 11/03/2025. Project objectives........... To develop a new survey, in partnership with Commercial Fisheries Research Foundation (CFRF), to provide distribution, abundance, and biological data on juvenile lobsters and Jonah crabs from times and areas in Federal waters with low coverage from traditional surveys. Project location............. Gulf of Maine: Statistical Areas 511, 512, and 513. Number of vessels............ Up to 20. Number of trips.............. Up to 36 per vessel; up to 720 total. Trip duration (days)......... Up to 3. Total number of days......... Up to 108 per vessel; up to 2,160 total. Gear type(s)................. Trap. Number of tows or sets....... 1 per trip. Duration of tows or sets..... 7-10 days. ------------------------------------------------------------------------ Project Narrative This project would contribute to the ongoing effort by the CFRF to collect data on juvenile lobster and Jonah crab abundance and distribution in areas and times of the year with low or no coverage by traditional surveys. This project would include up to 20 federally permitted Maine lobster vessels. Each vessel would fish with 3 modified, ventless traps designed to catch juvenile lobsters, totaling up to 60 modified traps. The ventless trap configuration is as follows: 40-inch length x 21-inch width x 14-inch height (101.6-centimeter (cm) length x 53.34-cm width x 35.56-cm height), single parlor, 1-inch (2.54-cm) square rubber-coated 12-gauge wire, standard shrimp mesh netting, cement runners, and 4- by 6-inch (10.16- by 15.24-cm) disabling door. The modified traps would adhere to the standard coastwide survey gear for lobster and Jonah crab set by the Atlantic States Marine Fisheries Commission and would be fished with standard Atlantic Large Whale Take Reduction Plan-compliant trawls. This study would take place during regular fishing activity of the participating vessels, but catch from the modified traps would remain separate from that of standard gear. Operators would collect data on size, sex, presence of eggs, and shell hardness for lobsters and Jonah crabs, and v-notch and shell disease for lobsters. Operators would return all specimens from modified gear to the ocean once sampling is complete. The study is designed to inform management by addressing questions about changing reproduction and recruitment dynamics of lobster and to develop a foundation of knowledge for the data-deficient Jonah crab fishery. All data collected by the participants using the CFRF data collection app would be sent to ME DMR for processing. ME DMR would then share final datasets with CFRF, to further share with the Atlantic Coastal Cooperative Statistics Program, the Northeast Fisheries Science Center, and the Atlantic States Marine Fisheries Commission. If approved, the applicant may request minor modifications and extensions to the EFP throughout the year. EFP modifications and extensions may be granted without further notice if they are deemed essential to facilitate completion of the proposed research and have minimal impacts that do not change the scope or impact of the initially approved EFP request. Any fishing activity conducted outside the scope of the exempted fishing activity would be prohibited. All comments received are a part of the public record and may be posted for public viewing without change. All personal identifying information (e.g., name, address), confidential business information, or otherwise sensitive information submitted voluntarily by the sender will be publicly accessible. NMFS will accept anonymous comments (enter ``anonymous'' as the signature if you wish to remain anonymous). Authority: 16 U.S.C. 1801 et seq. Dated: September 3, 2024. Lindsay Fullenkamp, Acting Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. 2024-20156 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.208584

FR

FR-2024-09-09/2024-20229

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73069-73070] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20229] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [RTID 0648-XE268] Endangered Species; File No. 28262 AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notice; receipt of application. ----------------------------------------------------------------------- SUMMARY: Notice is hereby given that Kori Johnsen, 1792 Harrison Avenue, Melbourne, FL 32935, has applied in due form for a permit to take green (Chelonia mydas), hawksbill (Eretmochelys imbricata), and Kemp's ridley (Lepidochelys kempii) sea turtles for purposes of scientific research. DATES: Written comments must be received on or before October 9, 2024. ADDRESSES: The application and related documents are available for review by selecting ``Records Open for Public Comment'' from the ``Features'' box on the Applications and Permits for Protected Species home page, https://apps.nmfs.noaa.gov, and then selecting File No. 28262 from the list of available applications. These documents are also [[Page 73070]] available upon written request via email to [email protected]. Written comments on this application should be submitted via email to [email protected]. Please include File No. 28262 in the subject line of the email comment. Those individuals requesting a public hearing should submit a written request via email to [email protected]. The request should set forth the specific reasons why a hearing on this application would be appropriate. FOR FURTHER INFORMATION CONTACT: Erin Markin, Ph.D., or Malcolm Mohead, (301) 427-8401. SUPPLEMENTARY INFORMATION: The subject permit is requested under the authority of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq.) and the regulations governing the taking, importing, and exporting of endangered and threatened species (50 CFR parts 222-226). The applicant proposes research on juvenile, subadult, and adult sea turtle populations in southeast Florida, including Indian River, St. Lucie, Martin, Palm Beach, Broward, Miami-Dade, and Monroe counties. Researchers would investigate population abundance, distribution, health, habitat use, and behavioral ecology of sea turtles. Up to 50 green, 50 hawksbill, and 30 Kemp ridley sea turtles may be located by unmanned aircraft systems (UAS) or vessels and captured by hand or dip net, marked (flipper and passive integrated transponder tag), measured, weighed, and photographed/videoed, annually. A subset of 10 turtles of each species may receive a video tag attached via a suction cup. Additionally, green sea turtles may be biologically sampled (blood, skin biopsy). Annually, up to 750 green, 250 hawksbill, and 250 Kemp's ridley may be harassed by vessel and UAS surveys. The permit would be valid for 5 years. Dated: September 4, 2024. Julia M. Harrison, Chief, Permits and Conservation Division, Office of Protected Resources, National Marine Fisheries Service. [FR Doc. 2024-20229 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.235665

FR

FR-2024-09-09/2024-20273

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Page 73070] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20273] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [RTID 0648-XE255] Fisheries of the Gulf of Mexico; Southeast Data, Assessment, and Review (SEDAR); Public Meeting AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notice of SEDAR 87 Assessment Webinar I for Gulf of Mexico White, Pink, and Brown Shrimp. ----------------------------------------------------------------------- SUMMARY: The SEDAR 87 assessment process of Gulf of Mexico white, pink, and brown shrimp will consist of a Data Workshop, and a series of assessment webinars, and a Review Workshop. See SUPPLEMENTARY INFORMATION. DATES: The SEDAR 87 Assessment Webinar I will be held September 26, 2024, from 9 a.m. to 1 p.m., Eastern Time. ADDRESSES: Meeting address: The meeting will be held via webinar. The webinar is open to members of the public. Those interested in participating should contact Julie A. Neer at SEDAR (see FOR FURTHER INFORMATION CONTACT) to request an invitation providing webinar access information. Please request webinar invitations at least 24 hours in advance of each webinar. SEDAR address: 4055 Faber Place Drive, Suite 201, North Charleston, SC 29405. FOR FURTHER INFORMATION CONTACT: Julie A. Neer, SEDAR Coordinator; (843) 571-4366; email: [email protected]. SUPPLEMENTARY INFORMATION: The Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils, in conjunction with NOAA Fisheries and the Atlantic and Gulf States Marine Fisheries Commissions have implemented the Southeast Data, Assessment and Review (SEDAR) process, a multi-step method for determining the status of fish stocks in the Southeast Region. SEDAR is a multi-step process including: (1) Data Workshop, (2) a series of assessment webinars, and (3) A Review Workshop. The product of the Data Workshop is a report that compiles and evaluates potential datasets and recommends which datasets are appropriate for assessment analyses. The assessment webinars produce a report that describes the fisheries, evaluates the status of the stock, estimates biological benchmarks, projects future population conditions, and recommends research and monitoring needs. The product of the Review Workshop is an Assessment Summary documenting panel opinions regarding the strengths and weaknesses of the stock assessment and input data. Participants for SEDAR Workshops are appointed by the Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils and NOAA Fisheries Southeast Regional Office, HMS Management Division, and Southeast Fisheries Science Center. Participants include data collectors and database managers; stock assessment scientists, biologists, and researchers; constituency representatives including fishermen, environmentalists, and NGO's; International experts; and staff of Councils, Commissions, and state and federal agencies. The items of discussion during the Assessment Webinar I are as follows: Participants will review the assessment modeling work to date and provide recommendations to the analytic team. Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically identified in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency. Special Accommodations The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to the Council office (see ADDRESSES) at least 5 business days prior to each workshop. Note: The times and sequence specified in this agenda are subject to change. Authority: 16 U.S.C. 1801 et seq. Dated: September 4, 2024. Rey Israel Marquez, Acting Deputy Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. 2024-20273 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.261793

FR

FR-2024-09-09/2024-20219

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Page 73071] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20219] [[Page 73071]] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration Agency Information Collection Activities; Submission to the Office of Management and Budget (OMB) for Review and Approval; Comment Request; Seafood Inspection and Certification Requirements AGENCY: National Oceanic & Atmospheric Administration (NOAA), Commerce. ACTION: Notice of information collection, request for comment. ----------------------------------------------------------------------- SUMMARY: The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB. DATES: To ensure consideration, comments regarding this proposed information collection must be received on or before November 8, 2024. ADDRESSES: Interested persons are invited to submit written comments to Adrienne Thomas, NOAA PRA Officer, at [email protected]. Please reference OMB Control Number 0648-0266 in the subject line of your comments. All comments received are part of the public record and will generally be posted on https://www.regulations.gov without change. Do not submit Confidential Business Information or otherwise sensitive or protected information. FOR FURTHER INFORMATION CONTACT: Requests for additional information or specific questions related to collection activities should be directed to Jeff Weir, Director, Operations and Administration Division (OMI), Office of International Affairs and Seafood Inspection, 1315 East West Hwy., Bldg. SSMC3, Silver Spring, MD 20910-3282, (301) 427-8377 or [email protected]. SUPPLEMENTARY INFORMATION: I. Abstract This request is for a revision and extension of an approved information collection. The National Marine Fisheries Service (NMFS) operates a voluntary fee-for- service seafood inspection program (Program) under the authorities of the Agricultural Marketing Act of 1946, as amended, the Fish and Wildlife Act of 1956, and the Reorganization Plan No. 4 of 1970. The regulations for the Program are contained in 50 CFR part 260. The program offers inspection grading and certification services, including the use of official quality grade marks which indicate that specific products have been federally inspected. Those wishing to participate in the program must request the services and submit specific compliance information. This collection is being revised to include the Surety Bond form, which has been in use for decades, but was inadvertently omitted in previous information collection requests. II. Method of Collection Respondents have a choice of either electronic or paper forms. Methods of submittal include email and online portal submission of electronic forms, and mail and facsimile transmission of paper forms. III. Data OMB Control Number: 0648-0266. Form Numbers: 89-800, 89-801, 89-814. Type of Review: Regular submission (revision and extension of a current information collection). Affected Public: Business or other for-profit organizations; Not- for-profit institutions; State, Local, or Tribal government. Estimated Number of Respondents: 1,012. Estimated Time per Response: Contract Request, 5 minutes; Surety Bond, 5 minutes; Inspection Request, 5 minutes. Estimated Total Annual Burden Hours: 23,067. Estimated Total Annual Cost to Public: $4,809 in recordkeeping/ reporting costs. Respondent's Obligation: Required to Obtain or Retain Benefits. Legal Authority: Agricultural Marketing Act of 1946, as amended, the Fish and Wildlife Act of 1956, and the Reorganization Plan No. 4 of 1970. IV. Request for Comments We are soliciting public comments to permit the Department/Bureau to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this Information Collection Request. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment--including your personal identifying information--may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. Sheleen Dumas, Departmental PRA Clearance Officer, Office of the Under Secretary for Economic Affairs, Commerce Department. [FR Doc. 2024-20219 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.411568

FR

FR-2024-09-09/2024-20230

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73071-73073] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20230] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [RTID 0648-XE262] Schedules for Atlantic Shark Identification Workshops and Protected Species Safe Handling, Release, and Identification Workshops AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notice of public workshops. ----------------------------------------------------------------------- SUMMARY: Free Atlantic Shark Identification Workshops and Safe Handling, Release, and Identification Workshops will be held in October, November, and December of 2024. Certain fishermen and shark dealers are required to attend a workshop to meet regulatory requirements and to maintain valid permits. Specifically, the Atlantic Shark Identification Workshop is mandatory for all federally permitted Atlantic shark dealers. The Safe Handling, Release, and Identification Workshop is mandatory for vessel owners and operators who use bottom longline, pelagic longline, or gillnet gear, and who have also been issued shark or swordfish limited access permits. Additional free workshops will be conducted in 2025 and will be announced in a future notice. In [[Page 73072]] addition, NMFS has implemented online recertification workshops for persons who have already taken an in-person training. DATES: The Atlantic Shark Identification Workshops will be held on October 17, 2024, and November 14, 2024. The Safe Handling, Release, and Identification Workshops will be held on October 11, 2024, November 11, 2024, and December 6, 2024. ADDRESSES: The Atlantic Shark Identification Workshops will be held in Mount Pleasant, SC and Largo, FL. The Safe Handling, Release, and Identification Workshops will be held in Providence, RI, Kitty Hawk, NC, and Manahawkin, NJ. FOR FURTHER INFORMATION CONTACT: Elsa Gutierrez by email at [email protected] or by phone at 301-427-8503. SUPPLEMENTARY INFORMATION: Atlantic highly migratory species (HMS) fisheries are managed under the 2006 Consolidated HMS Fishery Management Plan (FMP) and its amendments pursuant to the Magnuson- Stevens Fishery Conservation and Management Act (16 U.S.C. 1801 et seq.) and consistent with the Atlantic Tunas Convention Act (16 U.S.C. 971 et seq.). HMS implementing regulations are at 50 CFR part 635. Section 635.8 describes the requirements for the Atlantic Shark Identification Workshops and Safe Handling, Release, and Identification Workshops. The workshop schedules, registration information, and a list of frequently asked questions regarding the Atlantic Shark Identification and Safe Handling, Release, and Identification workshops are available online at: https://www.fisheries.noaa.gov/atlantic-highly-migratory-species/atlantic-shark-identification-workshops and https://www.fisheries.noaa.gov/atlantic-highly-migratory-species/safe-handling-release-and-identification-workshops. Atlantic Shark Identification Workshops Since January 1, 2008, Atlantic shark dealers have been prohibited from receiving, purchasing, trading, or bartering for Atlantic sharks unless a valid Atlantic Shark Identification Workshop certificate is on the premises of each business listed under the shark dealer permit that first receives Atlantic sharks (71 FR 58057, October 2, 2006). Dealers who attend and successfully complete a workshop are issued a certificate for each place of business that is permitted to receive sharks. These certificate(s) are valid for 3 years. Thus, certificates that were initially issued in 2021 will expire in 2024. Currently, permitted dealers may send a proxy to an Atlantic Shark Identification Workshop. However, if a dealer opts to send a proxy, the dealer must designate a proxy for each place of business covered by the dealer's permit that first receives Atlantic sharks. Only one certificate will be issued to each proxy. A proxy must be a person who is currently employed by a place of business covered by the dealer's permit; is a primary participant in the identification, weighing, and/ or first receipt of fish as they are offloaded from a vessel; and who fills out dealer reports. Atlantic shark dealers are prohibited from renewing a Federal shark dealer permit unless a valid Atlantic Shark Identification Workshop certificate for each business location that first receives Atlantic sharks has been submitted with the permit renewal application. Additionally, a copy of a valid dealer or proxy Atlantic Shark Identification Workshop certificate must be in any trucks or other conveyances that are extensions of a dealer's place of business. Workshop Dates, Times, and Locations October 17, 2024, 12 p.m.-4 p.m. (local time), Holiday Inn Express Mount Pleasant, 1104 Stockade Lane, Mount Pleasant, SC 29466. November 14, 2024, 12 p.m.-4 p.m. (local time), Hampton Inn Largo, 100 E Bay Drive, Largo, FL 33770. Registration To register for a scheduled Atlantic Shark Identification Workshop, please contact Eric Sander at [email protected] or at 386-852- 8588. Pre-registration is highly recommended, but not required. Registration Materials To ensure that workshop certificates are linked to the correct permits, participants will need to bring the following specific items to the workshop: Atlantic shark dealer permit holders must bring proof that the attendee is an owner or agent of the business (such as articles of incorporation), a copy of the applicable permit, and proof of identification; and Atlantic shark dealer proxies must bring documentation from the permitted dealer acknowledging that the proxy is attending the workshop on behalf of the permitted Atlantic shark dealer for a specific business location, a copy of the appropriate valid permit, and proof of identification. Workshop Objectives The Atlantic Shark Identification Workshops are designed to reduce the number of unknown and improperly identified sharks reported in the dealer reporting form and increase the accuracy of species-specific dealer-reported information. Reducing the number of unknown and improperly identified sharks will improve quota monitoring and the data used in stock assessments. These workshops will train shark dealer permit holders or their proxies to properly identify Atlantic shark carcasses. Safe Handling, Release, and Identification Workshops Since January 1, 2007, shark limited access and swordfish limited access permit holders who fish with longline or gillnet gear have been required to submit a copy of their Safe Handling, Release, and Identification Workshop certificate in order to renew either permit (71 FR 58057, October 2, 2006). These certificate(s) are valid for 3 years. Certificates issued in 2021 will expire in 2024. As such, vessel owners who have not already attended a workshop and received a NMFS certificate, or vessel owners whose certificate(s) will expire prior to the next permit renewal, must attend a workshop to fish with, or renew, their swordfish and shark limited access permits. Additionally, new shark and swordfish limited access permit applicants who intend to fish with longline or gillnet gear must attend a Safe Handling, Release, and Identification Workshop and submit a copy of their workshop certificate before either of the permits will be issued. In addition to vessel owners, at least one operator on board vessels issued a limited access swordfish or shark permit that uses longline or gillnet gear is required to attend a Safe Handling, Release, and Identification Workshop and receive a certificate. Vessels that have been issued a limited access swordfish or shark permit and that use longline or gillnet gear may not fish unless both the vessel owner and operator have valid workshop certificates on board at all times. Vessel operators who have not already attended a workshop and received a NMFS certificate, or vessel operators whose certificate(s) will expire prior to their next fishing trip, must attend a workshop to operate a vessel with swordfish and shark limited access permits on which longline or gillnet gear is used. [[Page 73073]] Workshop Dates, Times, and Locations October 11, 2024, 9 a.m.-2 p.m. (local time), Hilton Garden Inn, 1 Thunder Street, Warwick, RI 02886. November 11, 2024, 9 a.m.-2 p.m. (local time), Hilton Garden Inn/Outer Banks-Kitty Hawk, 5353 North Virginia Dare Trail, Kitty Hawk, NC 27949. December 6, 2024, 9 a.m.-2 p.m. (local time), The Mainland/Holiday Inn, 151 Route 72, East Manahawkin, NJ 08050. Registration To register for a scheduled Safe Handling, Release, and Identification Workshop, please contact Angler Conservation Education at 386-682-0158. Pre-registration is highly recommended, but not required. Registration Materials To ensure that workshop certificates are linked to the correct permits, participants will need to bring the following specific items with them to the workshop: Individual vessel owners must bring a copy of the appropriate swordfish and/or shark permit(s), a copy of the vessel registration or documentation, and proof of identification; Representatives of a business-owned or co-owned vessel must bring proof that the individual is an agent of the business (such as articles of incorporation), a copy of the applicable swordfish and/ or shark permit(s), and proof of identification; and Vessel operators must bring proof of identification. Workshop Objectives The Safe Handling, Release, and Identification Workshops are designed to teach the owner and operator of a vessel that fishes with longline or gillnet gear the required techniques for the safe handling and release of entangled and/or hooked protected species, such as sea turtles, marine mammals, smalltooth sawfish, Atlantic sturgeon, and prohibited sharks. In an effort to improve reporting, the proper identification of protected species and prohibited sharks will also be taught at these workshops. Additionally, individuals attending these workshops will gain a better understanding of the requirements for participating in these fisheries. The overall goal of these workshops is to provide participants with the skills needed to reduce the mortality of protected species and prohibited sharks, which may prevent additional regulations on these fisheries in the future. Online Recertification Workshops NMFS implemented an online option for shark dealers and owners and operators of vessels that fish with longline and gillnet gear to renew their certificates in December 2021. To be eligible for online recertification workshops, dealers and vessel owners and operators need to have previously attended an in-person workshop. Information about the courses is available online at https://www.fisheries.noaa.gov/atlantic-highly-migratory-species/atlantic-shark-identification-workshops and https://www.fisheries.noaa.gov/atlantic-highly-migratory-species/safe-handling-release-and-identification-workshops. To access the course please visit: https://hmsworkshop.fisheries.noaa.gov/start. Authority: 16 U.S.C. 1801 et seq. Dated: September 4, 2024. Lindsay Fullenkamp, Acting Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. 2024-20230 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.459652

FR

FR-2024-09-09/2024-20231

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73073-73074] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20231] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [RTID 0648-XE155] Permanent Advisory Committee To Advise the U.S. Commissioners to the Western and Central Pacific Fisheries Commission; Meeting Announcement AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notice of public meeting. ----------------------------------------------------------------------- SUMMARY: NMFS announces a public meeting of the Permanent Advisory Committee (PAC) to advise the U.S. Commissioners to the Commission for the Conservation and Management of Highly Migratory Fish Stocks in the Western and Central Pacific Ocean (WCPFC) on October 21-23, 2024. Meeting topics are provided under the SUPPLEMENTARY INFORMATION section of this notice. DATES: The meeting of the PAC will be held on October 21, 22, and 23, 2024 from 10 a.m. to 1 p.m. Hawaii standard time (HST) (or until business is concluded). Members of the public may submit written comments on meeting topics or materials; comments must be received by October 7, 2024. ADDRESSES: The public meeting will be conducted via web conference. For details on how to call in to the web conference or to submit comments, please contact Katrina Poremba, NMFS Pacific Islands Regional Office; telephone: (808) 725-5096; email: [email protected]. Documents to be considered by the PAC will be sent out via email in advance of the meeting. Please submit contact information to Katrina Poremba (808) 725-5096; email: [email protected] at least 4 days in advance of the meeting to receive documents via email. This meeting may be audio recorded for the purposes of generating notes of the meeting. As public comments will be made publicly available, participants and public commenters are urged not to provide personally identifiable information (PII) at this meeting. Participation in the meeting by web conference or by telephone constitutes consent to the audio recording. FOR FURTHER INFORMATION CONTACT: Katrina Poremba, NMFS Pacific Islands Regional Office; 1845 Wasp Blvd., Bldg. 176, Honolulu, HI 96818; (808) 725-5096; email: [email protected]. SUPPLEMENTARY INFORMATION: In accordance with the Western and Central Pacific Fisheries Convention Implementation Act (16 U.S.C. 6901 et seq.), the PAC has been formed to advise the U.S. Commissioners to the WCPFC. The PAC is composed of: (i) not less than 15 nor more than 20 individuals appointed by the Secretary of Commerce in consultation with the U.S. Commissioners to the WCPFC; (ii) the chair of the Western Pacific Fishery Management Council's Advisory Committee (or the chair's designee); and (iii) officials from the fisheries management authorities of American Samoa, Guam, and the Northern Mariana Islands (or their designees). The PAC supports the work of the U.S. National Section to the WCPFC in an advisory capacity. The U.S. National Section is made up of the U.S. Commissioners and the Department of State. NMFS Pacific Islands Regional Office provides administrative and technical support to the PAC in cooperation with the Department of State. More information on the WCPFC, established under the Convention on the Conservation and Management of Highly Migratory Fish Stocks in the Western and Central Pacific Ocean, can be found on the WCPFC website: http://www.wcpfc.int. Meeting Topics The PAC meeting topics may include the following: (1) outcomes of the 2024 WCPFC subsidiary body meetings; (2) outcomes of WCPFC working groups [[Page 73074]] and other meetings, (3) issues to be considered in the WCPFC 2024 annual session and (4) input and advice from the PAC on issues that may arise at the WCPFC 2024 annual session. Special Accommodations The meeting is accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Katrina Poremba at (808) 725-5096 or [email protected] by October 7, 2024. Authority: 16 U.S.C. 6902 et seq. Dated: September 4, 2024. Lindsay Fullenkamp, Acting Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. 2024-20231 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.498607

FR

FR-2024-09-09/2024-20269

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Page 73074] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20269] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration Agency Information Collection Activities; Submission to the Office of Management and Budget for Review and Approval; Comment Request; Southeast Region Vessel and Gear Identification Requirements The Department of Commerce will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. We invite the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. Public comments were previously requested via the Federal Register on May 9th, 2024 during a 60-day comment period. This notice allows for an additional 30 days for public comments. Agency: National Oceanic and Atmospheric Administration, Commerce. Title: Southeast Region Vessel and Gear Identification Requirements. OMB Control Number: 0648-0358. Form Number(s): None. Type of Request: Regular submission--extension of a current information collection. Number of Respondents: 10,031. Estimated Time per Response: Vessel marking: 75 minutes. Gear marking: aquacultured live rocks, 10 seconds each; golden crab traps, 2 minutes each; spiny lobster traps and buoys, 7 minutes each; black sea bass pots, buoys, and buoy lines, 16 minutes each; and Spanish mackerel gillnet buoys, 20 minutes each; and buoy gear, 10 minutes each. Total Annual Burden Hours: 40,335. Needs and Uses: The NMFS Southeast Region manages domestic fisheries in the U.S. exclusive economic zone of the Caribbean, Gulf of Mexico, and South Atlantic regions under multiple fishery management plans (FMPs). The regional fishery management councils prepared the FMPs pursuant to the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). NMFS implements the FMPs through located at 50 CFR part 622. The regulations located at 50 CFR part 622 form the basis for the information collection requirements that are currently approved under OMB Control Number 0648-0358, Southeast Region Vessel and Gear Identification Requirements. NMFS has no immediate plans to change identification requirements for fishing vessels or gear in 50 CFR part 622. Accordingly, NMFS proposes to extend to the information collections under OMB Control Number 0648-0358 without change. Regulations at 50 CFR part 622 require that all federally permitted fishing vessels must be marked with some form of identification. A vessel's official number, under most regulations, must be displayed on the port and starboard sides of the deckhouse or hull, and on the weather deck. In addition, regulations for certain fisheries also require the display of the assigned color code for the vessel. The official number and color code identify each vessel and should be visible at distance from the sea and in the air. These markings provide law enforcement personnel with a means to monitor fishing, at-sea processing, and other related activities, and to determine whether observed activities on the vessel are in accordance with those authorized for that vessel. NMFS, the United States Coast Guard, and other marine agencies use the identifying official number in monitoring compliance, issuing violations, prosecutions, and other enforcement actions. Vessels that are permitted for particular fisheries are readily identified and gear violations are more readily prosecuted, thereby enabling for more cost-effective enforcement. In addition to vessel marking, requirements that fishing gear be marked are essential to facilitate enforcement. The ability to link fishing gear to the vessel owner is crucial to enforcement of regulations issued under the authority of the Magnuson-Stevens Act. The marking of fishing gear is also valuable in actions concerning damage, loss, and civil proceedings. The requirements imposed on U.S. fisheries in the southeast region apply to aquacultured live rock; golden crab traps; spiny lobster traps and buoys; black sea bass pots, buoys, and buoy lines; Spanish mackerel gillnet buoys; and buoy gear. Affected Public: Business or other for-profit organizations. Frequency: As needed. Respondent's Obligation: Mandatory. Legal Authority: 16 U.S.C. 1801 et seq. This information collection request may be viewed at https://www.reginfo.gov. Follow the instructions to view the Department of Commerce collections currently under review by OMB. Written comments and recommendations for the proposed information collection must be submitted within 30 days of the publication of this notice on the following website https://www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting ``Currently under 30-day Review--Open for Public Comments,'' or by using the search function and entering either the title of the information collection or the OMB Control Number 0648-0358. Sheleen Dumas, Departmental PRA Clearance Officer, Office of the Under Secretary for Economic Affairs, Commerce Department. [FR Doc. 2024-20269 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.529749

FR

FR-2024-09-09/2024-20240

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73074-73075] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20240] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration Interagency Marine Debris Coordinating Committee Meeting AGENCY: National Ocean Service, National Oceanic and Atmospheric Administration (NOAA), Department of Commerce. ACTION: Notice of open meeting. ----------------------------------------------------------------------- SUMMARY: Notice is hereby given of a virtual public meeting of the Interagency Marine Debris Coordinating Committee (IMDCC). IMDCC members will discuss Federal marine debris activities, with a particular emphasis on the topics identified in the section on Matters to Be Considered. DATES: The virtual public meeting will be held on September 24, 2024, from 2 p.m. to 3 p.m. eastern time (ET). [[Page 73075]] ADDRESSES: The meeting will be held virtually using GoTo Webinar. Registration is required to attend the meeting. You can register for the meeting using the link provided: https://attendee.gotowebinar.com/register/3855954734540627291. Attendance will be limited to the first 500 individuals to join the virtual meeting room. Refer to the IMDCC website at https://marinedebris.noaa.gov/our-work/IMDCC for the most up-to-date information on the agenda and how to participate. FOR FURTHER INFORMATION CONTACT: Ya'el Seid-Green, Executive Secretariat, IMDCC, Marine Debris Program; Phone 240-622-5910; Email [email protected] or visit the IMDCC website at https://marinedebris.noaa.gov/our-work/IMDCC. SUPPLEMENTARY INFORMATION: The IMDCC is a multi-agency body responsible for coordinating a comprehensive program of marine debris research and activities among Federal agencies, in cooperation and coordination with non-governmental organizations, industry, academia, States, Tribes, and other nations, as appropriate. Representatives meet to share information, assess and promote best management practices, and coordinate the Federal Government's efforts to address marine debris. The Marine Debris Act establishes the IMDCC (33 U.S.C. 1954). The IMDCC submits biennial progress reports to Congress with updates on activities, achievements, strategies, and recommendations. NOAA serves as the Chairperson of the IMDCC. The meeting will be open to public attendance on September 24, 2024, from 2 p.m. to 3 p.m. ET. There will not be a public comment period. The meeting will not be recorded. Matters To Be Considered The open meeting will include a presentation from the Executive Director of the Marine Debris Foundation and a presentation from a National Aeronautics and Space Administration summer intern on relevant marine debris research. The agenda topics described are subject to change. The latest version of the agenda will be posted at https://marinedebris.noaa.gov/our-work/IMDCC. Special Accommodations The meeting is accessible to people with disabilities. Closed captioning will be available. Requests for other auxiliary aids should be directed to Ya'el Seid-Green, Executive Secretariat at [email protected] or 240-622-5910 by September 10, 2024. Scott Lundgren, Director, Office of Response and Restoration, National Ocean Service, National Oceanic and Atmospheric Administration. [FR Doc. 2024-20240 Filed 9-6-24; 8:45 am] BILLING CODE 3510-JS-P

usgpo

2024-10-08T13:26:20.560000

FR

FR-2024-09-09/2024-20196

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73075-73076] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20196] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [RTID NOAA-NOS-2024-0104] Request for Information; Data for Marine Spatial Studies in Guam AGENCY: National Centers for Coastal Ocean Science (NCCOS), National Ocean Service (NOS), National Oceanic and Atmospheric Administration (NOAA), Department of Commerce (DOC). ACTION: Notice; Request for information. ----------------------------------------------------------------------- SUMMARY: NOAA's National Ocean Service (NOS) National Centers for Coastal Ocean Science (NCCOS), hereafter NOAA, in partnership with the Bureau of Ocean Energy Management (BOEM), is working to build spatial planning capacity in Guam. Through this Request for Information, NOAA is seeking public input to identify coastal and marine spatial data or other critical information to inform marine spatial analyses in Guam. The input we receive from the data development workshop meeting, as well as the responses to the items listed in the SUPPLEMENTARY INFORMATION section of this document, will be used to inform potential coastal and ocean development activities in Guam, such as renewable energy development. DATES: Interested persons are invited to provide input in response to this Request for Information through September 30, 2024. Late-filed input will be considered to the extent practicable. Verbal input will be accepted during a public meeting to be held in Guam on September 12-13, 2024. ADDRESSES: Interested persons are invited to provide input using one of the following methods: Electronic Submission: Submit electronic written public comments via the Federal e-Rulemaking Portal. Go to https://www.regulations.gov and enter NOAA-NOS-2024-0104 in the Search box. Click on the ``Comment'' icon, complete the required fields, and enter or attach your comments. All comments received are a part of the public record and will generally be posted for public viewing on www.regulations.gov without change. All personal identifying information (e.g., name, address, etc.), confidential business information, or otherwise sensitive information submitted voluntarily by the sender will be publicly accessible. NOAA will accept anonymous comments (enter ``N/A'' in the required fields if you wish to remain anonymous). Verbal submission: NOAA will accept verbal input at a data development workshop. The meeting will be held at The Guam Museum on Thursday September 12, 2024 from 8:30 a.m. to 4 p.m. Chamorro Standard Time (ChST) and Friday, September 13, 2024 from 8:30 a.m. to 4 p.m. (ChST. There will be a registration window from 8:30 a.m. to 9 a.m. (ChST) each day before the start of the meeting. Advanced registration is required for the meeting by completing the registration form at https://forms.gle/rRSUervCfyZXkyeG7 or by providing an RSVP to Jessica Carlton at [email protected]. The registration deadline is Friday, August 30, 2024. Reports of meeting results will also be published and made available to the public in the weeks following the meeting. If you are unable to provide electronic written comments or participate in the meeting, please contact Jessica Carlton at [email protected] or (919) 219-5960 for alternative submission methods. FOR FURTHER INFORMATION CONTACT: James Morris ([email protected]), (252) 666-7433. SUPPLEMENTARY INFORMATION: I. Background NOAA is an agency of the United States Federal Government that works to conserve and manage coastal and marine ecosystems and resources. NOAA works to make fisheries sustainable and productive, provide safe seafood to consumers, conserve threatened and endangered species and other protected resources, and maintain healthy ecosystems. NOAA has jurisdiction and responsibility for its marine trust resources in the Pacific as well as significant interest in supporting the resilience of coastal and marine-dependent communities and promoting equity and environmental justice. For these reasons, it is important for NOAA to invest in research that informs marine spatial studies in the Pacific region, including socioeconomic research that ensures meaningful participation of local communities and supports equitable processes for planning and [[Page 73076]] siting of new and existing marine industries and conservation areas. NOAA has been engaged with the Bureau of Ocean Energy Management (BOEM) to support siting and environmental review for offshore wind energy areas in U.S. Federal waters (https://www.boem.gov/renewable-energy) to ensure protection of trust resources in any offshore development activities. II. Purpose of This Request for Information The purpose of this Request for Information is to promote data development to inform marine spatial studies in Guam, with an emphasis on data needs for offshore wind energy. In addition to input received from the public through the electronic and verbal submissions, NOAA aims to inform the public about its coastal and ocean planning processes and capabilities, discuss the current data available for each ocean sector (e.g., national security, fisheries, industry, natural resources, cultural and historical resources), and gather ideas for other data sources. NOAA hopes to come out of the meetings with a strengthened relationship with the public and a list of best available data and data gaps. III. Specific Information Requested To Inform Marine Spatial Studies in Guam Through this Request for Information, NOAA seeks written public input to inform marine spatial studies in Guam. NOAA is particularly interested in receiving input concerning the items listed below. Responses to this Request for Information are voluntary, and respondents need not reply to items listed. When providing input, please specify if you are providing general feedback on marine spatial studies and/or if you are responding to one of the specific item number(s) below: (1) Specific datasets related to ocean sectors, natural resources, and/or human activities you recommend NOAA use in marine spatial studies. (2) Major concerns you have related to use of any specific datasets that may be used in marine spatial studies. (3) Major concerns you have related to gaps in scientific knowledge or data that could impact marine spatial planning efforts. (4) Specific data or information you recommend NOAA or other partners collect, if it is not currently available or has not been previously collected. (5) Ways in which NOAA can better engage and collaborate with the public and local communities to promote economic, social, and ecological resilience as well as protect trust resources. Dated: September 3, 2024. Sean Corson, Director, National Centers for Coastal Ocean Science, National Ocean Service, National Oceanic and Atmospheric Administration. [FR Doc. 2024-20196 Filed 9-6-24; 8:45 am] BILLING CODE 3510-JE-P

usgpo

2024-10-08T13:26:20.580676

FR

FR-2024-09-09/2024-20274

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73076-73077] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20274] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [RTID 0648-XE261] New England Fishery Management Council; Public Meeting AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notice of public meeting. ----------------------------------------------------------------------- SUMMARY: The New England Fishery Management Council (Council, NEFMC) will hold a three-day hybrid meeting with both in-person and remote participation to consider actions affecting New England fisheries in the exclusive economic zone (EEZ). DATES: The meeting will be held on Tuesday, September 24, 2024 through Thursday, September 26, 2024, beginning at 9 a.m. all three days. ADDRESSES: Meeting address: The meeting will take place at the Beauport Hotel, 55 Commercial Street, Gloucester, MA 01930; telephone: (978) 282-0008; online at https://www.beauporthotel.com. Join the webinar at https://attendee.gotowebinar.com/register/244255849872817749. Council address: New England Fishery Management Council, 50 Water Street, Mill 2, Newburyport, MA 01950; telephone (978) 465-0492; www.nefmc.org. FOR FURTHER INFORMATION CONTACT: Cate O'Keefe, Executive Director, New England Fishery Management Council; telephone: (978) 465-0492, ext. 113. SUPPLEMENTARY INFORMATION: Agenda Tuesday, September 24, 2024 After brief announcements, a representative from the Greater Atlantic Regional Fisheries Office (GARFO) will swear in new and reappointed Council members. Then, the Council will hold its annual election of officers before receiving reports on recent activities from its Chair and Executive Director, the GARFO Regional Administrator's representative, the Northeast Fisheries Science Center (NEFSC) Director, the NOAA Office of General Counsel, the Mid-Atlantic Fishery Management Council liaison, and representatives from the Atlantic States Marine Fisheries Commission (ASMFC), the U.S. Coast Guard, NOAA's Office of Law Enforcement, and the NMFS Highly Migratory Species Advisory Panel. Next, the Council will receive three 2024 monitoring reports, which will be plan development team (PDT) overviews of the 2023 skate, small-mesh multispecies (whiting), and monkfish fisheries respectively. Following the monkfish monitoring report, the Council will receive a presentation on improvements to the Monkfish Research Set-Aside (RSA) Program as recommended by 2023 Monkfish RSA Working Group. The Council then will engage in a discussion and determine how it intends to address future monitoring and/or fishery performance reports. Following the lunch break, members of the public will have the opportunity to speak during an open comment period on issues that relate to Council business but are not included on the published agenda for this meeting. The Council asks the public to limit remarks to 3-5 minutes. These comments will be received both in person and through the webinar. A guide for how to publicly comment through the webinar is available on the Council website at https://s3.amazonaws.com/nefmc.org/NEFMC-meeting-remote-participation_generic.pdf. Next, the chair of a subpanel of the Council's Scientific and Statistical Committee (SSC) will present the subpanel's review of a potential new method for determining scallop dredge survey sampling design and strata. Following this presentation, the Scallop Committee will provide a progress report on Framework Adjustment 39 to the Atlantic Sea Scallop Fishery Management Plan, including a preliminary overview of the 2024 scallop survey season. Framework 39 is being developed to set 2025 scallop fishing year specifications and 2026 default specifications, revise flatfish accountability measures (AMs), and provide measures to allow Northern Gulf of Maine (NGOM) permit holders fishing on directed scallop trips in the NGOM Management Area to possess scallops south of 42[deg] 20'. The Council also will receive an update on 2024 scallop work priorities. Lastly, the Northeast Trawl Advisory Panel (NTAP) will report on NTAP's full panel meeting in July and an August working [[Page 73077]] group meeting covering industry-based trawl surveys, including contingency plans for the NOAA Ship Henry B. Bigelow, as well as restrictor rope and offshore wind issues. Following the adjournment of official business, the Council will host a public outreach session to foster open lines of communication among Council members, staff, industry, and all meeting attendees. This event will be held in the same hotel as the meeting itself--the Beauport Hotel in Gloucester, MA. Wednesday, September 25, 2024 The Council will begin the second day of its meeting with a report from its Risk Policy Working Group. The Council is scheduled to approve a revised Risk Policy statement and concept at this meeting. The Northeast Fisheries Science Center then will provide an overview of the June 2024 Management Track Stock Assessments for Atlantic herring, four Atlantic cod stock units, Georges Bank yellowtail flounder, black sea bass, surfclams, butterfish, and tilefish. Following the lunch break, the Scientific and Statistical Committee (SSC) chair will provide the SSC's overfishing limit (OFL) and acceptable biological catch (ABC) recommendations for Atlantic herring, the four new Atlantic cod stock units, and Georges Bank yellowtail flounder. The report also will cover the SSC's review of methods for apportioning the biomass of Georges Bank cod and Georges Bank haddock into the Eastern Georges Bank Management Area. The Groundfish Committee report will follow with four items. The Council first will take final action on Amendment 25, which was developed to incorporate the four new cod stock units into the Northeast Multispecies (Groundfish) Fishery Management Plan. Then, the Council will receive a progress report on Framework Adjustment 69, which is an action to set specifications for several groundfish stocks for fishing years 2025-2027, U.S./Canada total allowable catches (TACs) for shared resources on Georges Bank for 2025-2026, incorporate revisions to flatfish sub-annual catch limits (sub-ACLs) and accountability measures (AMs), and address other measures. The Council next will receive updates on its Atlantic Cod Management Transition Plan and 2024 groundfish work priorities before adjourning for the day. Thursday, June 26, 2024 The Council will lead off the third day of its meeting with the Atlantic Herring Committee report. The Council will either take final action on 2025-2027 specifications for the Atlantic herring fishery or provide direction on the development of additional measures, which may include the potential initiation of a framework adjustment or consideration of in-season adjustments. A report from the Council's On- Demand Fishing Gear Conflict Working Group will follow. This report contains three components: (1) a GARFO update on the status of Atlantic Large Whale Take Reduction Plan modifications; (2) a NEFSC summary of on-demand fishing gear trials; and (3) Council review and discussion of the On-Demand Fishing Gear Conflict Working Group's input on its terms of reference, as well as a gear marking/gear interaction white paper and possible regulatory and management measures. Following the lunch break, the Council will discuss ecosystem, climate, and Inflation Reduction Act (IRA) initiatives, which will cover: (1) a report on the establishment of the Council's new Climate and Ecosystem Steering Committee and a decision on the status of the Council's existing Ecosystem-Based Fishery Management Committee (EBFM) and EBFM Plan Development Team; (2) a report on the August 2024 Climate, Ecosystems, and Fisheries Initiative coordination meeting, which was hosted by the East Coast Climate Coordination Group; and (3) an update on the status of the Council's IRA-funded projects. The Council then will engage in its initial discussion on 2025 Council Priorities before closing out the meeting with other business. Although non-emergency issues not contained on this agenda may come before the Council for discussion, those issues may not be the subject of formal action during this meeting. Council action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the Council's intent to take final action to address the emergency. The public also should be aware that the meeting will be recorded. Consistent with 16 U.S.C. 1852, a copy of the recording is available upon request. Special Accommodations This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Executive Director Cate O'Keefe (see ADDRESSES) at least 5 days prior to the meeting date. Authority: 16 U.S.C. 1801 et seq. Dated: September 4, 2024. Rey Israel Marquez, Acting Deputy Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. 2024-20274 Filed 9-6-24; 8:45 am] BILLING CODE 3510-22-P

usgpo

2024-10-08T13:26:20.602002

FR

FR-2024-09-09/2024-20339

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Page 73077] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20339] ======================================================================= ----------------------------------------------------------------------- COMMODITY FUTURES TRADING COMMISSION Sunshine Act Meetings TIME AND DATE: 9:00 a.m. EDT, Friday, September 13, 2024. PLACE: Virtual meeting. STATUS: Closed. MATTERS TO BE CONSIDERED: Enforcement matters. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission's website at https://www.cftc.gov/. CONTACT PERSON FOR MORE INFORMATION: Christopher Kirkpatrick, 202-418- 5964. Authority: 5 U.S.C. 552b. Dated: September 4, 2024. Christopher Kirkpatrick, Secretary of the Commission. [FR Doc. 2024-20339 Filed 9-4-24; 4:15 pm] BILLING CODE 6351-01-P

usgpo

2024-10-08T13:26:20.647293

FR

FR-2024-09-09/2024-20222

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73077-73080] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20222] ======================================================================= ----------------------------------------------------------------------- CONSUMER FINANCIAL PROTECTION BUREAU [Docket No: CFPB-2024-0042] Privacy Act of 1974; System of Records AGENCY: Consumer Financial Protection Bureau. ACTION: Notice of a new system of records. ----------------------------------------------------------------------- SUMMARY: In accordance with the Privacy Act of 1974, the Consumer Financial Protection Bureau (CFPB) proposes to modify, rename, and reissue a current Privacy Act System of Records titled ``CFPB.002-- Depository Institution Supervision Database.'' In the course of its supervisory work, the CFPB collects, uses, and maintains information on covered individuals associated with depository institutions (e.g., banks, savings associations, credit unions) and non-depository institutions (herein collectively referred to as supervised institutions), and their affiliates and service providers subject to the authority of the CFPB. This SORN [[Page 73078]] addresses information collected through the CFPB's supervisory and examination authorities under Federal consumer financial law. The CFPB is updating the name of this system of records and expanding the scope of the categories of individuals and records to account for the incorporation of information collected and maintained under another system of records, ``CFPB.003--Non-Depository Supervision Database.'' Upon publication of this modified System of Records Notice (SORN), the CFPB.003--Non-Depository Supervision Database SORN will be rescinded. DATES: Comments must be received no later than October 9, 2024. The new system of records will be effective October 9, 2024 unless the comments received result in a contrary determination. ADDRESSES: You may submit comments, identified by the title and docket number (see above Docket No. CFPB-2024-0042), by any of the following methods: Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. Email: [email protected]. Include Docket No. CFPB-2024-0042 in the subject line of the email. Mail/Hand Delivery/Courier: Kathryn Fong, Chief Privacy Officer, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552. Because paper mail in the Washington, DC area and at CFPB is subject to delay, commenters are encouraged to submit comments electronically. All submissions must include the agency name and docket number for this notice. In general, all comments received will be posted without change to https://www.regulations.gov. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. You should submit only information that you wish to make available publicly. Sensitive personal information, such as account numbers or Social Security numbers, should not be included. FOR FURTHER INFORMATION CONTACT: Kathryn Fong, Chief Privacy Officer, (202) 435-7058. If you require this document in an alternative electronic format, please contact [email protected]. Please do not submit comments to this email box. SUPPLEMENTARY INFORMATION: In accordance with the Privacy Act of 1974, 5. U.S.C. 552a, the CFPB is modifying, renaming, and reissuing a CFPB system of records titled, ``CFPB.002--Depository Institution Supervision Database,'' to ``CFPB.002--Supervision and Examination Records.'' The CFPB update to CFPB.002--Depository Institution Supervision Database, now CFPB.002--Supervision and Examination Records, includes several changes. First, the system of records is being renamed to account for the incorporation of information collected and maintained under another system of records titled, ``CFPB.003--Non-Depository Supervision Database,'' and better align with the purpose(s) of the system(s). ``CFPB.003--Non-Depository Supervision Database'' will be rescinded under separate notice. Second, the legal authorities for this system of records has been updated to clarify that it covers the CFPB's supervisory work pursuant to Federal consumer financial law. Third, the categories of individuals and categories of records has been expanded to account for the information collected on covered individuals associated with non-depository institutions and their affiliates and services providers subject to the authority of the CFPB. Fourth, this update seeks to clarify the types of individuals whose information is contained in this system of records and sources of records contained in the system of records. Some items in these sections have been reorganized and edited to more clearly identify the individuals whose records may be present in this system of records, including contact information for Federal, State, local and other government regulators associated with an action or matter. Finally, the CFPB will be making non-substantive revisions to this SORN to align with the Office of Management and Budget's recommended model in Circular A-108, appendix II. The report of the revised system of records has been submitted to the Committee on Oversight and Government Reform of the House of Representatives, the Committee on Homeland Security and Governmental Affairs of the Senate, and the Office of Management and Budget (OMB), in accordance with to OMB Circular A-108, ``Federal Agency Responsibilities for Review, Reporting, and Publication under the Privacy Act'' (Dec. 2016), and the Privacy Act of 1974, 5 U.S.C. 552a(r). SYSTEM NAME AND NUMBER: CFPB.002--Supervision and Examination Records. SECURITY CLASSIFICATION: This information system does not contain any classified information or data. SYSTEM LOCATION: Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552. SYSTEM MANAGER(S): Program Director, Systems and Registrations, Office of Supervision, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552; (202) 435-9633. AUTHORITY FOR MAINTENANCE OF THE SYSTEM: Public Law 111-203, title X, sections 1011, 1012, 1021, 1024, 1025, 1026, and 1061, codified at 12 U.S.C. 5491, 5492, 5511, 5514, 5515, 5516, and 5581. PURPOSE(S) OF THE SYSTEM: The purpose of this system of records is to enable the CFPB to carry out its responsibilities with respect to supervised entities to ensure compliance with Federal consumer protection laws and identify unfair, deceptive, or abusive acts and practices in connection with consumer financial products and services. The CFPB's use of records covered by this system of records are for the following purposes: (1) To conduct and coordinate examinations and reports, supervisory evaluations and analyses, and enforcement actions (including both CFPB activities and collaborations with other financial regulatory agencies); (2) To track and store examination and inspection documents created during the performance of CFPB's statutory duties; and (3) For administrative purposes to ensure quality control, performance, and improving management processes. CATEGORIES OF INDIVIDUALS COVERED BY THE SYSTEM: The CFPB collects and maintains information on the following categories of individuals: (1) Individuals who are current or former directors, officers, employees, agents, shareholders, and independent contractors of covered persons or service providers subject to the supervision of the CFPB; (2) Customers, prospective customers, or similar individuals who have been contacted by covered persons or service providers or are the subject of a consumer financial product or service; (3) Federal, State, local and other government regulators involved in an action or matter; and (4) CFPB staff assigned to monitor supervised institutions. [[Page 73079]] CATEGORIES OF RECORDS IN THE SYSTEM: Categories of records in the system may include: (1) Information regarding customers, prospective customers, or similar individuals who have been contacted by covered persons or service providers or are the subject of a consumer financial product or service, including but not limited to full name, date of birth (DOB); contact information (e.g., address, phone number, email address), and account information (e.g., account numbers, information collected regarding consumer products and services) and demographic information (e.g., gender) associated with an individual; (2) Contact information for officials of institutions including, without limitation, name, address, phone number, and email address; (3) Contact information for staff of Federal, State, local and other government regulators, including, without limitation, name, address, phone number, and email address; (4) Information about CFPB employees assigned to supervision tasks, including, without limitation, name, address, phone number, and email address, and other employment information; and (5) Confidential Supervision Information or Personal Information, including information relating to individuals that is derived from Confidential Supervisory Information or from consumer complaints. RECORD SOURCE CATEGORIES: Information maintained in records is obtained directly from individuals; from Federal, State, local and other regulatory authorities, including State regulatory associations acting on behalf of State regulators, from entities subject to the CFPB's authority, and from CFPB staff. ROUTINE USES OF RECORDS MAINTAINED IN THE SYSTEM, INCLUDING CATEGORIES OF USERS AND PURPOSES OF SUCH USES: In addition to those disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act, and consistent with the CFPB's Disclosure of Records and Information Rules, promulgated at 12 CFR part 1070, all or a portion of the records or information contained in this system may be disclosed outside of the CFPB as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows: (1) To appropriate agencies, entities, and persons when (a) the CFPB suspects or has confirmed that there has been a breach of the system of records; (b) the CFPB has determined that as a result of the suspected or confirmed breach there is a risk of harm to individuals, the CFPB (including its information systems, programs, and operations), the Federal Government, or national security; and (c) the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the CFPB's efforts to respond to the suspected or confirmed breach or to prevent, minimize, or remedy such harm. (2) Another Federal agency or Federal entity, when the CFPB determines that information from this system of records is reasonably necessary to assist the recipient agency or entity in (a) responding to a suspected or confirmed breach or (b) preventing, minimizing, or remedying the risk of harm to individuals, the recipient agency or entity (including its information systems, programs, and operations), the Federal Government, or national security, resulting from a suspected or confirmed breach. (3) Another Federal or State agency to: (a) permit a decision as to access, amendment, or correction of records to be made in consultation with or by that agency, or (b) verify the identity of an individual or the accuracy of information submitted by an individual who has requested access to or amendment or correction of records. (4) The Office of the President in response to an inquiry from that office made at the request of the subject of a record or a third party on that person's behalf. (5) Congressional offices in response to an inquiry made at the request of the individual to whom the record pertains. (6) Contractors, agents, or other authorized individuals performing work on a contract, service, cooperative agreement, job, or other activity on behalf of the CFPB or Federal Government and who have a need to access the information in the performance of their duties or activities. (7) The DOJ for its use in providing legal advice to the CFPB or in representing the CFPB in a proceeding before a court, adjudicative body, or other administrative body, where the use of such information by the DOJ is deemed by the CFPB to be relevant and necessary to the advice or proceeding, and in the case of a proceeding, such proceeding names as a party in interest: (a) The CFPB; (b) Any employee of the CFPB in his or her official capacity; (c) Any employee of the CFPB in his or her individual capacity where DOJ has agreed to represent the employee; or (d) The United States, where the CFPB determines that litigation is likely to affect the CFPB or any of its components. (8) Appropriate Federal, State, local, foreign, Tribal, or self- regulatory organizations or agencies responsible for investigating, prosecuting, enforcing, implementing, issuing, or carrying out a statute, rule, regulation, order, policy, or license if the information may be relevant to a potential violation of civil or criminal law, rule, regulation, order, policy, or license; (9) To the National Archives and Records Administration (NARA) or other Federal government agencies pursuant to records management inspections being conducted under the authority of 44 U.S.C. 2904 and 2906; (10) Any authorized agency or component of the Department of Treasury, the Department of Justice (DOJ), the Federal Reserve System, the Federal Deposit Insurance Corporation or other law enforcement authorities including disclosure by such authorities: (a) To the extent relevant and necessary in connection with litigation in proceedings before a court or other adjudicative body, where (i) The United States is a party to or has an interest in the litigation, including where the agency, or an agency component, or an agency official or employee in his or her official capacity, or an individual agency official or employee whom the DOJ or the CFPB has agreed to represent, is or may likely become a party, and (ii) the litigation is likely to affect the agency or any component thereof; or (b) To outside experts or consultants when considered appropriate by CFPB staff to assist in the conduct of agency matters. (11) A grand jury pursuant either to a Federal or State grand jury subpoena, or to a prosecution request that such record be released for the purpose of its introduction to a grand jury, where the subpoena or request has been specifically approved by a court. In those cases where the Federal Government is not a party to the proceeding, records may be disclosed if a subpoena has been signed by a judge. (12) A court, magistrate, or administrative tribunal in the course of an administrative proceeding or judicial proceeding, including disclosures to opposing counsel or witnesses (including expert witnesses) in the course of discovery or other pre- hearing exchanges of information, litigation, or settlement negotiations, where relevant or potentially relevant to a proceeding, or in connection with criminal law proceedings. (13) Appropriate agencies, entities, and persons, including but not limited to potential expert witnesses or witnesses in the course of investigations, to the extent necessary to secure information relevant to the investigation; and [[Page 73080]] (14) An entity or person that is the subject of supervision or enforcement activities including examinations, investigations, administrative proceedings, and litigation, and the attorney or non- attorney representative for that entity or person. POLICIES AND PRACTICES FOR STORAGE OF RECORDS: Paper and electronic records. POLICIES AND PRACTICES FOR RETRIEVAL OF RECORDS: Records may be retrieved by a variety of fields including, but not limited to, the individual's name, complaint/inquiry case number, address, account number, transaction number, phone number, date of birth, or by some combination thereof. POLICIES AND PRACTICES FOR RETENTION AND DISPOSAL OF RECORDS: The CFPB manages and dispositions records identified in this SORN in accordance with the NARA approved records schedule DAA-0587-2013- 0011 and the corresponding items provided within. ADMINISTRATIVE, TECHNICAL, AND PHYSICAL SAFEGUARDS: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Other records are maintained in locked file cabinets or rooms with access limited to those personnel whose official duties require access. RECORD ACCESS PROCEDURES: Individuals seeking notification and access to any record contained in this system of records may inquire in writing in accordance with instructions in 12 CFR 1070.50 et seq. Address such requests to: Chief Privacy Officer, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552. Instructions are also provided on the CFPB website: https://www.consumerfinance.gov/foia-requests/submit-request/. CONTESTING RECORD PROCEDURES: See ``Access Procedures'' above. NOTIFICATION PROCEDURES: See ``Access Procedures'' above. EXEMPTIONS PROMULGATED FOR THE SYSTEM: Portions of the records in this system are compiled for law enforcement purposes and are exempt from disclosure under CFPB's Privacy Act regulations and 5 U.S.C. 552a(k)(2). Federal criminal law enforcement investigatory reports maintained as part of this system may be the subject of exemptions imposed by the originating agency pursuant to 5 U.S.C. 552a(j)(2). HISTORY: 7 6 FR 45761 (Aug. 1, 2011); 76 FR 45765 (Aug. 1, 2011); 83 FR 23435 (May 21, 2018); 85 FR 3649 (Jan. 22, 2020); 85 FR 3659 (Jan. 22, 2020). Kathryn Fong, Chief Privacy Officer, Bureau of Consumer Financial Protection. [FR Doc. 2024-20222 Filed 9-6-24; 8:45 am] BILLING CODE 4810-AM-P

usgpo

2024-10-08T13:26:20.679101

FR

FR-2024-09-09/2024-20221

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73080-73083] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20221] ======================================================================= ----------------------------------------------------------------------- ENVIRONMENTAL PROTECTION AGENCY [FRL 12140-01-OW] Notice of Funding Availability for Credit Assistance Under the State Infrastructure Financing Authority Water Infrastructure Finance and Innovation Act Program AGENCY: Environmental Protection Agency (EPA). ACTION: Notice of funding availability. ----------------------------------------------------------------------- SUMMARY: The purpose of this notice of funding availability (NOFA) is to solicit letters of interest (LOIs) from prospective state infrastructure financing authority borrowers seeking credit assistance from the U.S. Environmental Protection Agency (EPA) under the State Infrastructure Financing Authority Water Infrastructure Finance and Innovation Act (SWIFIA) program. EPA estimates that it may lend approximately $1 billion to help finance approximately $2 billion in water infrastructure investment. DATES: LOIs submitted on or after October 1, 2024, will be reviewed using the scoring criteria outlined in this NOFA. ADDRESSES: Prospective borrowers should submit all LOIs electronically via EPA's SharePoint site. To be granted access to the SharePoint site, prospective borrowers should contact [email protected] and request a link to the SharePoint site, where they can securely upload their LOIs and then email [email protected] once the complete LOI package has been uploaded to the SharePoint site. EPA will notify prospective borrowers that their LOI has been received via a confirmation email. Prospective borrowers can access additional information, including the WIFIA program handbook and application materials, on the WIFIA website: https://www.epa.gov/wifia. FOR FURTHER INFORMATION CONTACT: Amelia Letnes, Office of Water, Environmental Protection Agency; telephone number: (202) 564-5627; or email: [email protected] (preferred). SUPPLEMENTARY INFORMATION: Table of Contents I. Background II. Program Funding III. Eligibility Requirements IV. Budgetary Scoring Determination for Non-Federal Projects V. Types and Amount of Credit Assistance VI. Letters of Interest and Applications VII. Fees VIII. Selection Criteria IX. Federal Requirements I. Background Congress enacted the Water Infrastructure Finance and Innovation Act (WIFIA) as part of the Water Resources Reform and Development Act of 2014 (WRRDA). Codified at 33 U.S.C. 3901-3915, WIFIA authorizes a Federal credit program for water infrastructure projects to be administered by EPA. WIFIA authorizes EPA to provide Federal credit assistance in the form of secured (direct) loans or loan guarantees for eligible water infrastructure projects. Congress amended WIFIA in America's Water Infrastructure Act of 2018 (AWIA) to authorize Federal credit assistance exclusively for state infrastructure financing authority borrowers. The WIFIA program's mission is to accelerate investment in our nation's water, wastewater, and stormwater infrastructure by providing long-term, low-cost, supplemental credit assistance under customized terms to creditworthy water infrastructure projects of national and regional significance. Additionally, the WIFIA program is implementing five key Administration priorities in this 2024 NOFA: A. Increasing Investment in Economically Stressed Communities EPA encourages the submission of projects that address the ever- increasing needs of economically stressed and disadvantaged communities to ensure they benefit from investments in water infrastructure, and therefore improve the public health and livability of these communities. B. Making Rapid Progress on Lead Service Line Replacement Many drinking water systems still have lead service lines. EPA encourages the submission of drinking water infrastructure projects that will help make rapid progress on replacing lead service lines to reduce exposure to lead and improve public health. There is no safe level of lead in drinking water. Full [[Page 73081]] lead service line replacement can be an effective method to reduce drinking water lead levels. Because of this, WIFIA-funded projects involving lead service line replacement should include a plan to conduct full lead service line replacement. C. Addressing PFAS and Emerging Contaminants EPA encourages the submission of projects that focus on reducing exposure to perfluoroalkyl and polyfluoroalkyl substances (PFAS) and other emerging contaminants through drinking water and/or projects that help address discharges of emerging contaminants from wastewater and/or stormwater systems. D. Strengthening Climate Resilience in the Water Sector EPA supports long-term strategies to create a more resilient water infrastructure to address the increasing impacts of extreme weather. This includes projects that protect against drought through conserving water, promoting water efficiency and reuse, and protecting and diversifying communities' sources of water. Additionally, this includes projects that address areas seeing sustained or intermittent increases in water flow, such as projects that address flood risks due to stormwater, projects that address the impacts of combined sewer overflows, and septic to sewer efforts where septic systems are undermined by rising groundwater. Taken together, these efforts can help communities address water quantity and quality concerns. E. Supporting One Water Innovation and Resilience One of the defining features of WIFIA is the broad range of eligible projects that EPA can fund to flexibly support priority needs. EPA encourages borrowers to submit applications for water infrastructure projects that are new and innovative in regard to energy efficiency, such as onsite wind or solar energy as well as methane digesters or similar projects that work to reduce overall greenhouse gas emissions and may also support energy independence at the system level. In addition, EPA encourages the submission of water infrastructure projects that are more resilient to all threats--whether they are natural disasters or threats such as bioterrorism and cyber- attacks. II. Program Funding A. WIFIA Program Appropriation Congress appropriated $5 million in funding to cover the subsidy cost of providing SWIFIA credit assistance. The subsidy cost covers the Federal Government's risk that the loan may not be paid back. EPA anticipates that the average subsidy cost for SWIFIA-funded projects will be relatively low; therefore, this funding can be leveraged into a much larger amount of credit assistance. EPA estimates that this appropriation will allow it to provide approximately $1 billion \1\ in long-term, low-cost financing to water infrastructure projects and accelerate approximately $2 billion in infrastructure investment around the country. --------------------------------------------------------------------------- \1\ This estimated loan volume is provided for reference only. Consistent with the Federal Credit Reform Act of 1990 and the requirements of the Office of Management and Budget, the actual subsidy cost of providing credit assistance is based on individual project characteristics and calculated on a project-by-project basis. Thus, actual lending capacity may vary. --------------------------------------------------------------------------- B. Funding Availability Period LOIs may be submitted by prospective borrowers and will be received by EPA on a rolling basis. LOIs shall be submitted using the SWIFIA LOI form found at https://www.epa.gov/wifia. Under the rolling process, LOIs will continually be reviewed and selected based on available funds. The publication of this NOFA does not impact LOIs previously submitted to EPA, which continue to be reviewed based on the applicable requirements at the time of submission. LOIs received on or after October 1, 2024, will be evaluated as described in section VIII of this document. This NOFA provides guidance on all SWIFIA funding authority available including funding from previous years. Any funding authority not obligated in the fiscal year for which it is authorized remains available for obligation in subsequent years. III. Eligibility Requirements The WIFIA statute and implementing rules set forth eligibility requirements for prospective borrowers, projects, and project costs. The requirements outlined below are described in greater detail in the WIFIA program handbook found at https://www.epa.gov/wifia/wifia-program-handbook. A. Eligible Applicants Prospective borrowers must be a state infrastructure financing authority to be eligible for SWIFIA credit assistance. EPA defines state infrastructure financing authority as the state entity established or designated by the governor of a state to receive a capitalization grant provided by, or otherwise carry out the requirements of, title VI of the Federal Water Pollution Control Act (33 U.S.C. 1381 et. seq.) or section 1452 of the Safe Drinking Water Act (42 U.S.C. 300j-12). B. Eligible Projects To be eligible for SWIFIA credit assistance, the SWIFIA project must be a combination of projects, each of which is eligible for assistance under section 603(c) of the Federal Water Pollution Control Act (33 U.S.C. 1383(c)) or section 1452(a)(2) of the Safe Drinking Water Act (42 U.S.C. 300j-12(a)(2)), for which a state infrastructure financing authority submits to the Administrator a single application. C. Eligible Costs As defined under 33 U.S.C. 3906 and described in the WIFIA program handbook, eligible project costs are costs for the SWIFIA project associated with the following activities: (i) Development-phase activities, including planning, feasibility analysis (including any related analysis necessary to carry out an eligible project), revenue forecasting, environmental review, permitting, preliminary engineering and design work, and other preconstruction activities; (ii) Construction, reconstruction, rehabilitation, and replacement activities; (iii) The acquisition of real property or an interest in real property (including water rights, land relating to the project, and improvements to land), environmental mitigation (including acquisitions pursuant to 33 U.S.C. 3905(8)), construction contingencies, and acquisition of equipment; and (iv) Capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction. Capitalized interest on WIFIA credit assistance may not be included as an eligible project cost. IV. Budgetary Scoring Determination for Non-Federal Projects To comply with Public Law 116-260, a project selected for WIFIA financing using funding appropriated in FY2024 will be assessed using two initial screening questions and sixteen scoring factors. These questions will help the Office of Management and Budget (OMB) determine compliance with budgetary scoring rules, a process that will be conducted in parallel to EPA's LOI evaluation process outlined in this NOFA. The questions may be found in the Federal Register publication titled ``Water Infrastructure Finance and Innovation Act Program (WIFIA) [[Page 73082]] Criteria Pursuant to the Further Consolidated Appropriations Act, 2020'' (85 FR 39189, June 30, 2020). These questions are also published in the WIFIA program handbook and further information about the scoring process may be referenced therein. EPA encourages project applicants to review the scoring criteria and provide sufficient information in the LOI or as an attachment to the LOI to facilitate EPA and OMB review of the prospective project considering the scoring criteria. V. Types and Amount of Credit Assistance Under SWIFIA, EPA is offering senior loans, on parity with a state infrastructure financing authority's other senior capital market debt of the same credit quality, to help the state infrastructure financing authority lend to multiple projects throughout the state. A. Minimum Project Costs A SWIFIA project must have eligible project costs that are reasonably anticipated to equal or exceed $20 million. B. Maximum Amount of SWIFIA Credit Assistance The maximum amount of SWIFIA credit assistance to a state infrastructure financing authority is 49 percent of estimated eligible total costs of the eligible projects that are included in the SWIFIA project. C. SWIFIA Loan Structures Prospective SWIFIA borrowers may request one the following loan structures: (i) EPA accepts the state infrastructure financing authority's existing capital market debt indenture (to the extent the terms are permissible under Federal law and regulation and WIFIA program policies); or (ii) The state infrastructure financing authority accepts EPA's standard terms. More information on EPA's standard terms is available at www.epa.gov/wifia. VI. Letters of Interest and Applications Each prospective borrower will be required to submit an LOI and, if invited, an application to EPA to be considered for approval. This section describes the LOI submission and application submission. A. Letter of Interest (LOI) Prospective borrowers seeking a SWIFIA loan must submit an LOI describing the SWIFIA project fundamentals and addressing the SWIFIA selection criteria. The primary purpose of the LOI is to provide adequate information to EPA to validate the eligibility and creditworthiness of the prospective borrower and the prospective SWIFIA project and determine the extent to which the SWIFIA project meets the statutory selection criteria. Based on its review of the information provided in the LOI, EPA will invite prospective borrowers to submit applications for their projects. Prospective borrowers are encouraged to review the WIFIA program handbook to help create the best justification possible for the project and a cohesive and comprehensive LOI submittal. Prospective borrowers should utilize the LOI form on the WIFIA website and ensure that sufficient detail about the project is provided for EPA's review. EPA will notify a prospective borrower if its SWIFIA project is deemed ineligible as described in section IV of this document. Below is guidance on what EPA recommends be included in the LOI. 1. Loan Information: The prospective borrower provides information about its legal name, business address, program website, employer/ taxpayer identification number, Unique Entity ID from SAM.gov, requested SWIFIA loan amount and SWIFIA project cost amount, type of SRF loans (clean water, drinking water, or both), and requested loan structure. 2. Supporting Documents: The prospective borrower provides the most recent version of the following documents: Intended Use Plan (IUP), SRF Operating Agreements with EPA Regional Office, documentation of the priority setting system, and bond indenture (if applicable). 3. Contact Information: The prospective borrower identifies the points of contact with whom the WIFIA program should communicate regarding the LOI. To complete EPA's evaluation, the WIFIA program staff may contact a prospective borrower regarding specific information in the LOI. 4. Certifications: The prospective borrower certifies that it will abide by all applicable laws and regulations, if selected to receive funding. B. Application After EPA concludes its evaluation of a complete LOI package, a selection committee will invite the prospective borrower to apply based on satisfaction of the eligibility requirements. So long as budget authority remains available, EPA expects that all eligible state infrastructure financing authority prospective borrowers will be invited to apply for a SWIFIA loan. An invitation to apply for WIFIA credit assistance does not guarantee EPA's approval, which remains subject to a project's continued eligibility, including creditworthiness, the successful negotiation of terms acceptable to EPA, and the availability of funds at the time at which all necessary recommendations and evaluations have been completed. However, the purpose of EPA's LOI review is to pre- screen prospective borrowers to the extent practicable. It is expected that EPA will only invite prospective borrowers to apply if it anticipates that those prospective borrowers are able to obtain WIFIA credit assistance. Detailed information needs for the application are listed in the application form and described in the WIFIA program handbook. VII. Fees There is no fee to submit an LOI. For information about application and post-closing costs, please refer to the WIFIA fee rule, ``Fees for Water Infrastructure Project Applications under WIFIA'' (40 CFR 35.10080). VIII. Selection Criteria This section specifies the criteria and process that EPA will use to evaluate LOIs and award applications for SWIFIA assistance. The selection criteria described are the statutory selection criteria for state infrastructure financing authority borrowers. Following its eligibility determination, EPA will determine the extent to which the SWIFIA project meets the statutory selection criteria. They are as follows: (i) The extent to which the project financing plan includes public or private financing in addition to assistance under [WIFIA]. 33 U.S.C. 3907(b)(2)(B); 40 CFR 35.10055(a)(10). (ii) The likelihood that assistance under [WIFIA] would enable the project to proceed at an earlier date than the project would otherwise be able to proceed. 33 U.S.C. 3907(b)(2)(C); 40 CFR 35.10055(a)(2). (iii) The extent to which the project uses new or innovative approaches. 33 U.S.C. 3907(b)(2)(D); 40 CFR 35.10055(a)(3). (iv) The amount of budget authority required to fund the Federal credit instrument made available under [WIFIA]. 33 U.S.C. 3907(b)(2)(E). (v) The extent to which the project (1) protects against extreme weather events, such as floods or hurricanes; or (2) helps maintain or protect the environment. 33 U.S.C. 3907(b)(2)(F); 40 CFR 35.10055(a)(4); 40 CFR 35.10055(a)(5). [[Page 73083]] (vi) The extent to which the project serves regions with significant energy exploration, development, or production areas. 33 U.S.C. 3907(b)(2)(G); 40 CFR 35.10055(a)(6). (vii) The extent to which a project serves regions with significant water resource challenges, including the need to address: (1) water quality concerns in areas of regional, national, or international significance; (2) water quantity concerns related to groundwater, surface water, or other water sources; (3) significant flood risk; (4) water resource challenges identified in existing regional, state, or multistate agreements; or (5) water resources with exceptional recreational value or ecological importance. 33 U.S.C. 3907(b)(2)(H); 40 CFR 35.10055(a)(7). (viii) The extent to which the project addresses identified municipal, state, or regional priorities. 33 U.S.C. 3907(b)(2)(I); 40 CFR 35.10055(a)(8). (ix) The readiness of the project to proceed toward development, including a demonstration by the obligor that there is a reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after the date on which a Federal credit instrument is obligated for the project under [WIFIA]. 33 U.S.C. 3907(b)(2)(J); 40 CFR 35.10055(a)(9). (x) The extent to which assistance under [WIFIA] reduces the contribution of Federal assistance to the project. 33 U.S.C. 3907(b)(2)(K); 40 CFR 35.10055(a)(11). IX. Federal Requirements All projects receiving WIFIA assistance must comply with the applicable Federal requirements. Compliance with Federal requirements is not required for submitting a letter of interest, being invited to apply for a WIFIA loan, or submitting an application. The WIFIA program will review selected projects for compliance with Federal requirements once they have submitted an application. Additional information about Federal compliance requirements is available in the WIFIA program handbook and at https://www.epa.gov/wifia/wifia-federal-compliance-requirements. Authority: 33 U.S.C. 3901-3915; 40 CFR part 35. Michael S. Regan, Administrator. [FR Doc. 2024-20221 Filed 9-6-24; 8:45 am] BILLING CODE 6560-50-P

usgpo

2024-10-08T13:26:20.729442

FR

FR-2024-09-09/2024-20220

Federal Register Volume 89 Issue 174 (September 9, 2024)

United States National Archives and Records Administration Office of the Federal Register

[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)] [Notices] [Pages 73083-73086] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-20220] ----------------------------------------------------------------------- ENVIRONMENTAL PROTECTION AGENCY [FRL 12139-01-OW] Notice of Funding Availability for Credit Assistance Under the Water Infrastructure Finance and Innovation Act (WIFIA) Program AGENCY: Environmental Protection Agency (EPA). ACTION: Notice of funding availability. ----------------------------------------------------------------------- SUMMARY: The purpose of this notice of funding availability (NOFA) is to solicit letters of interest (LOIs) from prospective borrowers seeking credit assistance from the U.S. Environmental Protection Agency (EPA) under the Water Infrastructure Finance and Innovation Act (WIFIA) program. EPA estimates that it may lend approximately $6.5 billion to help finance approximately $13 billion in water infrastructure investment. DATES: LOIs submitted on or after October 1, 2024, will be reviewed using the scoring criteria outlined in this NOFA. ADDRESSES: Prospective borrowers should submit all LOIs electronically via EPA's SharePoint site. To be granted access to the SharePoint site, prospective borrowers should contact [email protected] and request a link to the SharePoint site, where they can securely upload their LOIs and then email [email protected] once the complete LOI package has been uploaded to the SharePoint site. EPA will notify prospective borrowers that their LOI has been received via a confirmation email. Prospective borrowers can access additional information, including the WIFIA program handbook and application materials, on the WIFIA website: https://www.epa.gov/wifia/. FOR FURTHER INFORMATION CONTACT: Amelia Letnes, Office of Water, Environmental Protection Agency; telephone number: (202) 564-5627; or email: [email protected] (preferred). SUPPLEMENTARY INFORMATION: Table of Contents I. Background II. Program Funding III. Eligibility Requirements IV. Budgetary Scoring Determination for Non-Federal Projects V. Type and Amount of Credit Assistance VI. Letters of Interest and Applications VII. Fees VIII. Selection Criteria IX. Federal Requirements I. Background Congress enacted the Water Infrastructure Finance and Innovation Act (WIFIA) as part of the Water Resources Reform and Development Act of 2014 (WRRDA). Codified at 33 U.S.C. 3901-3915, WIFIA authorizes a Federal credit program for water infrastructure projects to be administered by EPA. WIFIA authorizes EPA to provide Federal credit assistance in the form of secured (direct) loans or loan guarantees for eligible water infrastructure projects. The WIFIA program's mission is to accelerate investment in our nation's water, wastewater, and stormwater infrastructure by providing long-term, low-cost, supplemental credit assistance under customized terms to creditworthy water infrastructure projects of national and regional significance. Additionally, the WIFIA program is implementing five key Administration priorities in this 2024 NOFA: A. Increasing Investment in Economically Stressed Communities EPA encourages the submission of projects that address the ever- increasing needs of economically stressed and disadvantaged communities to ensure they benefit from investments in water infrastructure, and therefore improve the public health and livability of these communities. B. Making Rapid Progress on Lead Service Line Replacement Many drinking water systems still have lead service lines. EPA encourages the submission of drinking water infrastructure projects that will help make rapid progress on replacing lead service lines to reduce exposure to lead and improve public health. There is no safe level of lead in drinking water. Full lead service line replacement can be an effective method to reduce drinking water lead levels. Because of this, WIFIA-funded projects involving lead service line replacement should include a plan to conduct full lead service line replacement. C. Addressing PFAS and Emerging Contaminants EPA encourages the submission of projects that focus on reducing exposure to perfluoroalkyl and polyfluoroalkyl substances (PFAS) and other emerging contaminants through drinking water and/or projects that help address discharges of emerging contaminants from wastewater and/or stormwater systems. [[Page 73084]] D. Strengthening Climate Resilience in the Water Sector EPA supports long-term strategies to create a more resilient water infrastructure to address the increasing impacts of extreme weather. This includes projects that protect against drought through conserving water, promoting water efficiency and reuse, and protecting and diversifying communities' sources of water. Additionally, this includes projects that address areas seeing sustained or intermittent increases in water flow, such as projects that address flood risks due to stormwater, projects that address the impacts of combined sewer overflows, and septic to sewer efforts where septic systems are undermined by rising groundwater. Taken together, these efforts can help communities address water quantity and quality concerns. E. Supporting One Water Innovation and Resilience One of the defining features of WIFIA is the broad range of eligible projects that EPA can fund to flexibly support priority needs. EPA encourages borrowers to submit applications for water infrastructure projects that are new and innovative in regard to energy efficiency, such as onsite wind or solar energy as well as methane digesters or similar projects that work to reduce overall greenhouse gas emissions and may also support energy independence at the system level. In addition, EPA encourages the submission of water infrastructure projects that are more resilient to all threats--whether they are natural disasters or threats such as bioterrorism and cyber- attacks. II. Program Funding A. WIFIA Program Appropriation In the Consolidated Appropriations Act, 2024, signed by the President on March 09, 2024, Congress appropriated $64.6 million in funding to cover the subsidy cost of providing WIFIA credit assistance. EPA estimates that this appropriation will allow the Agency to provide approximately $6.5 billion \1\ in long-term, low-cost financing to water infrastructure projects and accelerate approximately $13 billion in infrastructure investment around the country. --------------------------------------------------------------------------- \1\ This estimated loan volume is provided for reference only. Consistent with the Federal Credit Reform Act of 1990 and the requirements of the Office of Management and Budget, the actual subsidy cost of providing credit assistance is based on individual project characteristics and calculated on a project-by-project basis. Thus, actual lending capacity may vary. --------------------------------------------------------------------------- B. Funding Availability Period LOIs may be submitted by prospective borrowers and will be reviewed by EPA on a rolling basis. LOIs shall be submitted using the LOI form found at https://www.epa.gov/wifia. LOIs will be reviewed based on the scoring guide applicable at the time of submission. The publication of this NOFA does not impact LOIs previously submitted to EPA, which continue to be reviewed based on the applicable requirements at the time of submission. LOIs submitted on or after October 1, 2024, will be reviewed using the scoring criteria outlined in this NOFA. This NOFA provides guidance on all WIFIA funding authority available including funding from previous years. Any funding authority not obligated in the fiscal year for which it is authorized remains available for obligation in subsequent years. III. Eligibility Requirements The WIFIA statute and implementing rules provide eligibility requirements for prospective borrowers, projects, and project costs. In general, the WIFIA program can provide loans to public and private borrowers for a wide variety of water infrastructure projects. Detailed information on WIFIA eligibility requirements for prospective borrowers, projects, and project costs can be found in the WIFIA program handbook at https://www.epa.gov/wifia/wifia-program-handbook. A. Eligible Applicants Prospective borrowers must be an eligible entity to receive WIFIA credit assistance. Eligible entities include: corporations, partnerships, joint ventures and trusts; state, local, and Tribal governments; and state infrastructure financing authorities. Public sponsorship is required for projects undertaken by an entity that is not a state or local government or agency or instrumentality of a state or local government, or a Tribal government or consortium of Tribal governments. B. Eligible Projects The WIFIA statute authorizes EPA to provide credit assistance for a wide variety of creditworthy drinking water, wastewater, and stormwater infrastructure projects. The non-exhaustive list below includes several examples of projects eligible for WIFIA credit assistance. For detailed project eligibility information, review the WIFIA program handbook at https://www.epa.gov/wifia/wifia-program-handbook. A wide range of wastewater, stormwater, and nonpoint source projects that are eligible under the Clean Water State Revolving Fund (CWSRF). More detailed CWSRF eligibility information can be found at https://www.epa.gov/cwsrf; A wide range of drinking water infrastructure projects-- including treatment, transmission and distribution, source, storage, consolidation/partnerships, and the creation of new systems--that are eligible under the Drinking Water State Revolving Fund (DWSRF). More detailed DWSRF eligibility information can be found at https://www.epa.gov/dwsrf; Repair, rehabilitation, or replacement of drinking water, wastewater, or stormwater infrastructure; Energy efficiency enhancements for a public water system or publicly owned treatment works; Desalination, aquifer storage and recovery, water recycling, or other projects to provide an alternative water supply and reduce aquifer depletion; Drought prevention, reduction, or mitigation projects; Acquisition of real property or an interest in real property, in certain circumstances; A combination of drinking water and wastewater projects submitted by a state infrastructure financing authority; and A combination of eligible projects, secured by a common security pledge, for which a single entity, or a combination of eligible entities, submits a single application. C. Eligible Costs Eligible project costs are costs associated with the following activities: (i) Development-phase activities, including planning, feasibility analysis (including any related analysis necessary to carry out an eligible project), revenue forecasting, environmental review, permitting, preliminary engineering and design work, and other preconstruction activities; (ii) Construction, reconstruction, rehabilitation, and replacement activities; (iii) The acquisition of real property or an interest in real property (including water rights, land relating to the project, and improvements to land), environmental mitigation, construction contingencies and acquisition of equipment; and (iv) Capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance [[Page 73085]] expenses, and other carrying costs during construction. Capitalized interest on WIFIA credit assistance may not be included as an eligible project cost. IV. Budgetary Scoring Determination for Non-Federal Projects To comply with Public Law 116-260, a project selected for WIFIA financing using funding appropriated in FY2024 will be assessed using two initial screening questions and sixteen scoring factors. These questions will help the Office of Management and Budget (OMB) determine compliance with budgetary scoring rules, a process that will be conducted in parallel to EPA's LOI evaluation process outlined in this NOFA. The questions may be found in Federal Register publication titled ``Water Infrastructure Finance and Innovation Act Program (WIFIA) Criteria Pursuant to the Further Consolidated Appropriations Act, 2020'' (85 FR 39189, June 30, 2020). These questions are also published in the WIFIA program handbook and further information about the scoring process may be referenced therein. EPA encourages project applicants to review the scoring criteria and provide sufficient information in the LOI or as an attachment to the LOI to facilitate EPA and OMB review of the prospective project considering the scoring criteria. V. Type and Amount of Credit Assistance Under this NOFA, EPA will provide credit assistance in the form of direct loans or loan guarantees. Each prospective borrower should list the estimated total capital costs of the project broken down by activity type. A. Minimum Project Costs Projects must have eligible costs that are reasonably anticipated to be equal to or exceed $20 million, or for small communities (serving not more than 25,000 individuals), project costs that are reasonably anticipated to equal or exceed $5 million. B. Maximum Amount of WIFIA Credit Assistance The maximum amount of WIFIA credit assistance to a project is 49 percent of eligible project costs in almost all instances. EPA may offer small community prospective borrowers credit assistance up to 80 percent of the eligible project costs. C. Appropriation Set-Aside for Small Communities EPA will endeavor to use 15 percent of its budget authority for small communities. Recognizing the need that exists in both small and large communities to invest in infrastructure, the WIFIA statute requires that EPA set aside 15 percent of the budget authority appropriated each year for small communities, defined as systems that serve a population of 25,000 or less. Of the funds set aside, any amount not obligated by June 1 of the fiscal year for which budget authority is set aside may be used for any size community. VI. Letters of Interest and Applications Each prospective borrower will be required to submit an LOI and, if invited, an application to EPA to be considered for approval. This section describes the LOI submission and application submission. A. Letter of Interest (LOI) Prospective borrowers seeking a WIFIA loan must submit an LOI describing the project fundamentals and addressing the WIFIA selection criteria. Prospective borrowers can find more information on the LOI at https://www.epa.gov/wifia. The primary purpose of the LOI is to provide adequate information to EPA to: (i) determine the eligibility of the prospective borrower and the prospective project, (ii) perform a preliminary creditworthiness assessment, (iii) perform a preliminary engineering feasibility assessment, and (iv) evaluate the project against the selection criteria. Based on its review of the information provided in the LOI, EPA will invite prospective borrowers to submit applications for their projects. Prospective borrowers are encouraged to review the WIFIA program handbook at https://www.epa.gov/wifia/wifia-program-handbook to help create the best justification possible for the project and a cohesive and comprehensive LOI submittal. Prospective borrowers must utilize the WIFIA LOI form and follow the guidelines contained on the WIFIA program website: https://www.epa.gov/wifia. Prospective borrowers should provide the LOI and any attachments as Microsoft Word documents or searchable PDF files, whenever possible, to facilitate EPA's review. Additionally, prospective borrowers must ensure that financial information, including the pro forma financial statement, is in a formula-based Microsoft Excel document. Prospective borrowers should provide sufficient detail about the project for EPA's review. EPA will notify a prospective borrower if its project is deemed ineligible as described in section III of this document or if additional information is needed to assess the LOI package. B. Application After EPA concludes its evaluation of a complete LOI package, a selection committee will invite the prospective borrower to apply based on review and scoring, as applicable, of the selection criteria and satisfaction of the eligibility requirements. The selection committee may choose to combine multiple LOIs or separate projects from a prospective borrower based on the creditworthiness review and may offer an alternative amount of WIFIA assistance than requested in the LOI. Final applications should be received by EPA within 365 days of the invitation to apply, but EPA may extend the deadline on a case-by-case basis if the LOI schedule signals additional time may be needed. An invitation to apply for WIFIA credit assistance does not guarantee EPA's approval, which remains subject to a project's continued eligibility, including creditworthiness, the successful negotiation of terms acceptable to EPA, and the availability of funds at the time at which all necessary recommendations and evaluations have been completed. However, the purpose of EPA's LOI review is to pre- screen prospective borrowers to the extent practicable. It is expected that EPA will only invite prospective borrowers to apply if it anticipates that those prospective borrowers are able to obtain WIFIA credit assistance. Detailed information needs for the application are listed in the application form at https://www.epa.gov/wifia and described in the WIFIA program handbook. VII. Fees There is no fee to submit an LOI. For information about application and post-closing costs, please refer to the WIFIA program handbook. VIII. Selection Criteria This section specifies the criteria and process that EPA will use to evaluate LOIs and award applications for WIFIA assistance. EPA will evaluate and select proposed projects described in the LOIs using the selection criteria established in the statute and regulation, and the Administration priorities identified in section I of this document. EPA's priorities reflect water sector challenges that require innovative tools to assist borrowers in managing and adapting to our most pressing public health and environmental challenges. These priorities are reflected in the scoring methodology of the selection criteria below and described in greater detail in the WIFIA program handbook. [[Page 73086]] The WIFIA selection criteria are divided into three categories: Project Readiness, Borrower Creditworthiness, and Project Impact. Each LOI will be evaluated for the extent to which the project satisfies the criteria listed below for each category. To satisfy the overall category review, it is not necessary to satisfy all criteria for each category. For the Project Impact category, WIFIA staff will score LOIs based on the points indicated below. All projects that satisfy category-level review for all three categories will be selected for funding, assuming sufficient funds are still available. The criteria are as follows: Project Readiness: (i) The readiness of the project to proceed toward development, including a demonstration by the obligor that there is a reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after the date on which a Federal credit instrument is obligated for the project under WIFIA. (ii) Preliminary engineering feasibility analysis. Borrower Creditworthiness: (i) The likelihood that assistance under WIFIA would enable the project to proceed at an earlier date than the project would otherwise be able to proceed. (ii) The extent to which the project financing plan includes public or private financing in addition to assistance under WIFIA. (iii) The extent to which assistance under WIFIA reduces the contribution of Federal assistance to the project. (iv) The amount of budget authority required to fund the Federal credit instrument made available under WIFIA. (v) Preliminary determination of prospective borrower and project creditworthiness. Project Impact: (i) 10 points: The extent to which the project is nationally or regionally significant, with respect to the generation of economic and public benefits, such as (1) the reduction of flood risk; (2) the improvement of water quality and quantity, including aquifer recharge; (3) the protection of drinking water, including source water protection; and (4) the support of international commerce. (ii) 15 points: The extent to which the project (1) protects against extreme weather events, such as floods, hurricanes or drought; or (2) helps maintain or protect the environment, including Priority D. (iii) 5 points: The extent to which the project serves regions with significant energy exploration, development, or production areas. (iv) 10 points: The extent to which a project serves regions with significant water resource challenges, including the need to address: (1) water quality concerns in areas of regional, national, or international significance; (2) water quantity concerns related to groundwater, surface water, or other water sources; (3) significant flood risk; (4) water resource challenges identified in existing regional, state, or multistate agreements; or (5) water resources with exceptional recreational value or ecological importance. (v) 5 points: The extent to which the project addresses identified municipal, state, or regional priorities. (vi) 10 points: The extent to which the project addresses needs for repair, rehabilitation or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system. (vii) 15 points: The extent to which the project serves economically stressed communities, or pockets of economically stressed rate payers within otherwise non-economically stressed communities, including Priority A. (viii) 15 points: The extent to which the project reduces exposure to lead in the nation's drinking water systems or addresses emergent contaminants, including Priorities B and C. (ix) 15 points: The extent to which the project uses new or innovative approaches, including Priority E. The scoring scales and guidance used to evaluate each project against the selection criteria are available in the WIFIA program handbook. Prospective borrowers considering WIFIA should review the WIFIA program handbook and discuss how the project addresses each of the selection criteria in the LOI submission. IX. Federal Requirements All projects receiving WIFIA assistance must comply with the applicable Federal requirements. Compliance with Federal requirements is not required for submitting a letter of interest, being invited to apply for a WIFIA loan, or submitting an application. The WIFIA program will review selected projects for compliance with Federal requirements once they have submitted an application. Additional information about Federal compliance requirements is available in the WIFIA program handbook and at https://www.epa.gov/wifia/wifia-federal-compliance-requirements. X. Opportunities To Learn More About the WIFIA Program EPA hosts regular outreach events and monthly office hours to provide further information about submitting an LOI. The outreach schedule and registration instructions can be found on the WIFIA program website: www.epa.gov/wifia. Prospective borrowers with questions about the program or interest in meeting with the WIFIA program staff may send a request to [email protected]. EPA will meet with all prospective borrowers interested in discussing the program prior to submission of an LOI. Authority: 33 U.S.C. 3901-3915; 40 CFR part 35. Michael S. Regan, Administrator. [FR Doc. 2024-20220 Filed 9-6-24; 8:45 am] BILLING CODE 6560-50-P

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